[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
         AN EXAMINATION OF COMPETITION IN THE WIRELESS INDUSTRY

=======================================================================

                                HEARING

                               BEFORE THE

      SUBCOMMITTEE ON COMMUNICATIONS, TECHNOLOGY, AND THE INTERNET

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 7, 2009

                               __________

                           Serial No. 111-37


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov



                  U.S. GOVERNMENT PRINTING OFFICE
72-886                    WASHINGTON : 2012
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202ï¿½09512ï¿½091800, or 866ï¿½09512ï¿½091800 (toll-free). E-mail, [email protected].  


                    COMMITTEE ON ENERGY AND COMMERCE

    HENRY A. WAXMAN, California      JOE BARTON, Texas
              Chairman                 Ranking Member
JOHN D. DINGELL, Michigan            RALPH M. HALL, Texas
  Chairman Emeritus                  FRED UPTON, Michigan
EDWARD J. MARKEY, Massachusetts      CLIFF STEARNS, Florida
RICK BOUCHER, Virginia               NATHAN DEAL, Georgia
FRANK PALLONE, Jr., New Jersey       ED WHITFIELD, Kentucky
BART GORDON, Tennessee               JOHN SHIMKUS, Illinois
BOBBY L. RUSH, Illinois              JOHN B. SHADEGG, Arizona
ANNA G. ESHOO, California            ROY BLUNT, Missouri
BART STUPAK, Michigan                STEVE BUYER, Indiana
ELIOT L. ENGEL, New York             GEORGE RADANOVICH, California
GENE GREEN, Texas                    JOSEPH R. PITTS, Pennsylvania
DIANA DeGETTE, Colorado              MARY BONO MACK, California
  Vice Chairman                      GREG WALDEN, Oregon
LOIS CAPPS, California               LEE TERRY, Nebraska
MICHAEL F. DOYLE, Pennsylvania       MIKE ROGERS, Michigan
JANE HARMAN, California              SUE WILKINS MYRICK, North Carolina
TOM ALLEN, Maine                     JOHN SULLIVAN, Oklahoma
JANICE D. SCHAKOWSKY, Illinois       TIM MURPHY, Pennsylvania
HILDA L. SOLIS, California           MICHAEL C. BURGESS, Texas
CHARLES A. GONZALEZ, Texas           MARSHA BLACKBURN, Tennessee
JAY INSLEE, Washington               PHIL GINGREY, Georgia
TAMMY BALDWIN, Wisconsin             STEVE SCALISE, Louisiana           
MIKE ROSS, Arkansas                  
ANTHONY D. WEINER, New York          
JIM MATHESON, Utah                   
G.K. BUTTERFIELD, North Carolina     
CHARLIE MELANCON, Louisiana          
JOHN BARROW, Georgia                 
BARON P. HILL, Indiana               
DORIS O. MATSUI, California          
DONNA M. CHRISTENSEN, Virgin         
    Islands                          
KATHY CASTOR, Florida                
JOHN P. SARBANES, Maryland           
CHRISTOPHER MURPHY, Connecticut      
ZACHARY T. SPACE, Ohio               
JERRY McNERNEY, California           
BETTY SUTTON, Ohio                   
BRUCE BRALEY, Iowa                   
PETER WELCH, Vermont                 

      Subcommittee on Communications, Technology, and the Internet

                         RICK BOUCHER, Virginia
                                 Chairman
EDWARD J. MARKEY, Massachusetts      FRED UPTON, Michigan
BART GORDON, Tennessee                 Ranking Member
BOBBY L. RUSH, Illinois              J. DENNIS HASTERT, Illinois
ANNA G. ESHOO, California            CLIFF STEARNS, Florida
BART STUPAK, Michigan                NATHAN DEAL, Georgia
DIANA DeGETTE, Colorado              BARBARA CUBIN, Wyoming
MICHAEL F. DOYLE, Pennsylvania       JOHN SHIMKUS, Illinois
JAY INSLEE, Washington               HEATHER WILSON, New Mexico
ANTHONY D. WEINER, New York          CHARLES W. ``CHIP'' PICKERING, 
G.K. BUTTERFIELD, North Carolina         Mississippi
CHARLIE MELANCON, Louisiana          VITO FOSELLA, New York
BARON P. HILL, Indiana               GEORGE RADANOVICH, California
DORIS O. MATSUI, California          MARY BONO MACK, California
DONNA M. CHRISTENSEN, Virgin         GREG WALDEN, Oregon
    Islands                          LEE TERRY, Nebraska
KATHY CASTOR, Florida                MIKE FERGUSON, New Jersey
CHRISTOPHER S. MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY McNERNEY, California
PETER WELCH, Vermont
JOHN D. DINGELL, Michigan (ex 
    officio)
  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Rick Boucher, a Representative in Congress from the 
  Commonwealth of Virginia, opening statement....................     1
Hon. Cliff Stearns, a Representative in Congress from the State 
  of Florida, opening statement..................................     3
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, opening statement.................................     4
Hon. John Shimkus, a Representative in Congress from the State of 
  Illinois, opening statement....................................     5
Hon. Edward J. Markey, a Representative in Congress from the 
  Commonwealth of Massachusetts, opening statement...............     6
Hon. George Radanovich, a Representative in Congress from the 
  State of California, opening statement.........................     7
Hon. Michael F. Doyle, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     8
Hon. Donna M. Christensen, a Representative in Congress from the 
  Virgin Islands, opening statement..............................     9
Hon. Anna G. Eshoo, a Representative in Congress from the State 
  of California, opening statement...............................    11
Hon. Peter Welch, a Representative in Congress from the State of 
  Vermont, opening statement.....................................    13
Hon. Roy Blunt, a Representative in Congress from the State of 
  Missouri, prepared statement...................................   148
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, prepared statement.........................   150

                               Witnesses

Paul Schieber, Vice President, Access and Roaming, Sprint........    14
    Prepared statement...........................................    17
    Answers to submitted questions...............................   215
Robert J. Irving, Jr., Senior Vice President and General Counsel, 
  Leap Wireless International, Inc., Cricket Communications, Inc.    35
    Prepared statement...........................................    37
    Answers to submitted questions...............................   236
Victor H. ``Hu'' Meena, President, Cellular South................    50
    Prepared statement...........................................    52
    Answers to submitted questions...............................   240
Ravi Potharlanka, Chief Operating Officer, Fiber Tower Corp......    66
    Prepared statement...........................................    68
Chris Murray, Senior Counsel, Consumers Union....................    85
    Prepared statement...........................................    88
George S. Ford, Chief Economist, Phoenix Center for Advanced 
  Legal and Economic Public Policy Studies.......................    99
    Prepared statement...........................................   102

                           Submitted material

Article entitled ``Best cell-phone service,'' Consumer Reports, 
  January, 2009, submitted by Mr. Walden.........................   152
Prepared statement of AT&T.......................................   158
    Answers to submitted questions...............................   243
Prepared statement of Verizon....................................   168
    Answers to submitted questions...............................   246


         AN EXAMINATION OF COMPETITION IN THE WIRELESS INDUSTRY

                              ----------                              


                         THURSDAY, MAY 7, 2009

              House of Representatives,    
Subcommittee on Communications, Technology,
                                  and the Internet,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:08 a.m., in 
Room 2123, Rayburn House Office Building, Hon. Rick Boucher 
[chairman of the subcommittee] presiding.
    Present: Representatives Boucher, Markey, Rush, Eshoo, 
Doyle, Inslee, Christensen, Castor, Space, McNerney, Welch, 
Waxman (ex officio), Dingell, Stearns, Upton, Shimkus, Shadegg, 
Blunt, Buyer, Radanovich, Walden, Terry, and Barton (ex 
officio).
    Staff Present: Roger Sherman, Chief Counsel; Pat Delgado, 
Chief of Staff for Representative Waxman; Tim Powderly, 
Counsel; Shawn Chang, Counsel; Greg Guice, Counsel; Sarah 
Fisher, Special Assistant; Amy Levine, Counsel; Neil Fried, 
Minority Counsel; Amy Bender, Minority Counsel; and Sam 
Costello, Minority Assistant.

  OPENING STATEMENT OF HON. RICK BOUCHER, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF VIRGINIA

    Mr. Boucher. The committee will come to order.
    The movement of personal communications to mobile services 
is dramatic and accelerating. Just this week, it was announced 
that, for the first time, the number of homes having only a 
cell phone and no landline service now exceeds the number of 
homes having only a landline and no cellular service. Daily, 
new, attractive, and useful applications are coming to wireless 
services, and data rates continue to increase, ensuring that 
consumers can obtain faster access to mobile applications.
    Today the subcommittee is beginning its examination of 
possible ways in which Federal telecommunications policy may be 
adjusted in light of these developments, with the goal of 
enhancing the consumer experience and facilitating the future 
growth of mobile services. Our goal is to develop on a 
bipartisan basis legislation that will make timely needed 
policy changes respecting mobile services, and as we construct 
the measure, we intend to consult with both consumer 
representatives and cellular telephone companies.
    This morning, we begin this process by surveying possible 
areas in which policy changes may be needed. Today most 
Americans can choose among wireless service providers that 
offer a truly nationwide service. It is not uncommon for people 
to live in one State, work in another State, and travel to many 
other States, all while using their cellular telephones. These 
consumers expect and deserve the same useful features and 
quality of service to be provided no matter where in our Nation 
they may be using mobile services.
    Today, State governments have authority over consumer 
protection for wireless services, including such matters as 
customer billing information and practices. With a highly 
mobile Nation using an inherently mobile service with a truly 
national footprint, I think it is hard to argue that for 
millions of mobile users, one State's consumer protection 
standards are particularly relevant to that user to the 
exclusion of others.
    The mobile industry presents a compelling example where a 
uniform national set of consumer protection standards would be 
more relevant to today's patterns of living, work and travel. 
In exchange for meaningful national standards, the States would 
be preempted from standard setting but, as a practical matter, 
should have enrolled in dispute resolution and standard 
enforcement.
    Another clear need is for the identification of additional 
spectrum that can be made available in the future for 
commercial wireless services. As more people use wireless 
devices and as advanced applications require ever higher data 
rates over time, additional spectrum will be needed in order to 
accommodate projected growth. Our legislation should direct 
that NTIA undertake a survey of possible new spectrum that 
could be auctioned in the future for that future growth.
    Other possible subjects of interest may include 
modifications to the rules relating to cellular tower siting, 
particularly where the application is to place transmitters on 
existing structures that already have transmitters attached.
    We should also examine whether the rules relating to 
roaming agreements should include data as well as voice 
services, which are covered by roaming agreement requirements 
presently.
    We should examine whether policy adjustments are needed to 
assure the adequate availability of backhaul in order to 
accommodate the growing volume of cellular traffic, and whether 
any policy adjustment is appropriate to assure that the newest 
handsets are available to a wider group of cellular providers.
    One relevant question would be whether a wider use of the 
requirements that the Commission imposed last year on the 
auction of the C-block could be a creative and perhaps helpful 
way of addressing that need.
    The testimony of today's witnesses on these and other 
legislative avenues we may consider pursuing will be very 
welcomed.
    And I want to say thank you to our witnesses for taking 
part in our discussion this morning.
    Members will note the presence at the table of a variety of 
consumer representatives and also cellular telephone companies. 
Perhaps members have noted the absence of the two largest 
cellular telephone providers, AT&T and Verizon, from our 
conversation today. I want to note that invitations were 
extended to both of those carriers. Both wanted to attend, but 
the witnesses who they wanted to testify were not available 
because of other previously scheduled company events that 
required those witnesses' attendance. Both companies have been 
invited to submit their comments for this record, and I do 
anticipate their being a part of the record of today's hearing 
accordingly and of also being a part of any future 
conversations that we have on the subject of structuring 
provisions for legislation addressing local services.
    At this time, I am pleased to recognize the ranking 
Republican member of the subcommittee, the gentleman from 
Florida, Mr. Stearns, for his opening statement.

 OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    Mr. Stearns. Good morning, and thank you, Mr. Chairman, for 
holding this hearing.
    As you pointed out, the wireless industry has become one of 
the fastest growing and most competitive sectors of the United 
States economy because Congress has allowed consumers to rule 
the market.
    Now, the way in which consumers use wireless services 
varies widely from person to person, and thus, obviously, we 
should resist imposing a one-size-fits-all regulation that 
would likely reduce choice and innovation.
    The industry has transformed from an all-analog duopoly to 
almost an all-digital, multi-carrier industry where consumers 
can choose from four national providers and over 100 regional 
or local providers with a variety of plans and devices at a 
range of prices to meet the consumers' needs.
    Indeed, more than 99 percent of the consumers have one or 
more wireless carriers to choose from, while 90 percent have 
four or more choices. So, obviously, consumers are the big 
winners here.
    Between 1993 and 2008, the cost per minute has dropped to 4 
cents from 44 cents, and the number of wireless subscribers 
increased from 11 million to 270 million, an increase of over 
2,000 percent.
    Wireless technology will, obviously, transform our lives 
from health and education to banking and transportation. 
Imagine if an EMT at an accident site can send images of the 
scene to the ER so that trauma teams can be preparing 
themselves instantaneously, or if teachers could stream live 
video from a zoo instead of reading about animals in an 
elementary school textbook?
    Applications in mobile banking could eventually mean that 
our wireless devices will replace our wallets, and airlines are 
already experimenting with electronic boarding passes that are 
shipped directly to one's handheld wireless device, saving time 
and saving money. We are limited by our imagination and, of 
course, by our temptation to regulate.
    The purpose of this hearing is to focus on a variety of 
issues, such as handset exclusivity, wireless net neutrality, 
special access, and maintaining a national regulatory 
framework.
    On the issue of handset exclusivity, some say it is 
anticompetitive and limits consumer choice. However, when the 
iPhone was introduced, consumers flocked to AT&T, challenging 
Verizon, T-Mobile and Sprint to offer their own improved 
devices, services, and rate plans to remain competitive.
    On the other hand, I sometimes hear from constituents that 
they would like to use their iPhone on any network that they 
wish. I hope our witnesses can address both sides of this very 
complicated issue.
    Wireless net neutrality is another important issue. I have 
already expressed concern that wireless net neutrality can 
jeopardize investments in innovation. This is especially true 
in the wireless context since capacity constraints make the 
need for flexibility and traffic management all that more 
critical.
    Also, I hope our witnesses will address special access. In 
1999, the FCC allowed limited deregulation of the special 
access market where providers could demonstrate evidence of 
competition. Some now argue that the market is no longer 
competitive, and we should consider re-regulating. Both sides 
assert that the evidence proves their position. If that is the 
case, then perhaps we need to get all the data and resolve the 
issue once and for all.
    Innovation is occurring because carriers are looking for 
ways to drive usage on their networks in this competitive 
environment, not because of any government mandates. For 
example, without any government intervention, the application 
market is exploding. iPhone users have the choice of more than 
35,000 apps with more than 1 billion downloads in the 9 months 
that they have been live. It is important to point out that 
this occurred without a government mandate on AT&T. Therefore, 
instead of imposing new mandates, we should remove existing 
regulatory barriers, such as the disparate, costly State 
regulation of service plans and fees.
    In 1993, we preempted State regulation of wireless rates 
and entry. That decision has fueled the tremendous growth. 
Since then, States have created a patchwork of regulations on 
service and billing practices that threaten their growth. So 
now is the time to create a national consumer protection 
framework.
    Finally, I would also like to request that the committee 
start the process of identifying where the next allocation of 
spectrum for commercial use will come from. These inventory 
efforts generally have a long life between the start of the 
process and when the spectrum actually comes to market. Thus, 
the time to start is before America's carriers are spectrum 
constrained. Identifying spectrum will help ensure that the 
U.S. wireless market continues to be the world leader.
    So, Mr. Chairman, I thank you for holding the hearing, and 
I welcome our witnesses, and I look forward to their testimony.
    Mr. Boucher. Thank you very much, Mr. Stearns.
    The gentleman from Michigan, Mr. Dingell, chairman emeritus 
of the full Energy and Commerce Committee, is recognized for 5 
minutes.

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Dingell. Thank you, Mr. Chairman, and I commend you for 
holding today's hearing on competition in the wireless 
industry, a very important subject.
    Although the Organization for Economic Cooperation and 
Development, OECD, recognizes the United States as having one 
of the most competitive wireless industries in the 
industrialized world, the continued consolidation of that 
industry in this country behooves us to remain vigilant in 
ensuring robust wireless competition.
    Indeed, the fact the two largest domestic carriers, AT&T 
and Verizon, control 60 percent of the market alone naturally 
leads one to question the veracity of several conclusions 
reached in the Wireless Telecommunications Bureau's January 16, 
2009, report; most notably that consumers continue to reap 
significant benefits from competition in the Commercial Mobile 
Radio Services, CMRS, marketplace.
    As you are all aware, I have long maintained that greater 
competition is beneficial to consumers. Today's debate on 
issues related to handset availability, voice and data roaming, 
and special access must not lose sight of their potential to 
increase competition in the marketplace. I welcome the opinions 
of witnesses assembled here today concerning these matters, but 
I would like to offer a few observations of my own before 
engaging in that discussion.
    With regard to handset availability, I continue to question 
why a consumer is constrained to using a single particular 
handset, for example, an iPhone on only one wireless provider's 
network. Although I understand this is due to contractual 
obligations, I wonder if a consumer would not benefit from 
greater choice in the networks available to his handset. I also 
wonder what it is that the Congress ought to do about this 
matter. Clearly, this is a matter into which the committee 
should go today and at other times.
    Further, given the profusion of so-called smartphones in 
the marketplace, I feel it is imperative that we expand roaming 
requirements to include not only voice services but also data 
services.
    Lastly, with regard to special access, I would reiterate my 
insistence from the 110th Congress that competitive carriers, 
CLECs, should make the same disclosure about their facilities 
as must incumbent local exchange carriers, the ILECs. I think 
this is a very important matter into which the committee should 
go.
    I look forward to a lively discussion of these matters and 
others this morning, Mr. Chairman. I want to thank you not only 
for your courtesy but for your vigor in addressing these 
questions.
    I yield back the balance of my time.
    Mr. Boucher. Thank you very much, Chairman Dingell.
    The gentleman from Illinois, Mr. Shimkus, is recognized for 
2 minutes.

  OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Shimkus. Sorry, Mr. Chairman. I am talking about energy 
up here. I got distracted.
    Let me just highlight the issue on the competitive nature 
of the cell phone industry. It is highly competitive, and the 
simple example I would use is that my 2-year contract expired 
in December. So, in my local community, there is a development 
called Collinsville Crossing, new, and part of that development 
is part of a strip of buildings which are like 10 businesses. 
And as I researched, in 10 of those office sections, three are 
full-time national carriers who are selling their products, and 
a fourth one is in the Radio Shack.
    So what I was able to do was to visit four competitive cell 
phone companies within less than a tenth of a mile, and not 
only visit them and figure out the deal and their products and 
the services, but I was able to walk back and forth, comparing 
prices, comparing models, comparing options, until I found the 
provider and the equipment that not only I wanted to do at my 
price but also that my 16-year-old son wanted. And nowhere 
else, in no other industry, in that short amount of space, not 
even in a big mall where you may have two wireless carriers or 
maybe three in the little subsections, but this is in 
Collinsville, Illinois.
    So I reject the premise that there is not a highly 
competitive nature to the cell phone industry. It is what makes 
this committee great, and it is what makes this industry so 
exciting for conservative capitalist Republicans, because you 
move too fast for us to regulate, and I am going to stand and 
make sure that we don't.
    Mr. Boucher. Thank you very much, Mr. Shimkus.
    The gentleman from Massachusetts, Mr. Markey, is recognized 
for 2 minutes.

OPENING STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN 
        CONGRESS FROM THE COMMONWEALTH OF MASSACHUSETTS

    Mr. Markey. Thank you, Mr. Chairman, and thank you for 
having this extremely important hearing today.
    Last year, when I chaired the subcommittee, we held a 
legislative hearing on a draft consumer protection and 
broadband bill, with your support and with the support of many 
of our colleagues. That draft bill proposed a strong nationwide 
consumer protection policy for wireless subscribers. It had 
effective Federal and State enforcement, the promotion of 
community broadband deployment and a plan for Federal agencies 
to assess their spectrum inventory and to utilize frequencies 
using spectrum-efficient and cost-effective technologies. This 
last issue holds great promise for our future innovation and 
job creation.
    I congratulate you, Mr. Chairman, for your leadership in 
this area.
    The wireless industry has suggested that Congress should 
preempt States from regulating the terms and conditions of 
wireless service, as it did over a decade ago, with respect to 
the price for wireless services. Many States have initiated 
attempts to take action to provide consumer protection policies 
for their residents, particularly with respect to regulation 
aimed at wireless contract terms, early termination fees, 
privacy issues, and others.
    To the extent that wireless service is, by its nature, an 
interstate service, this hearing will provide an opportunity 
for us to explore whether further preemption is advisable, how 
consumer protection can be enhanced if regulatory treatment is 
nationalized, and how best to ensure rigorous enforcement of 
consumer protection.
    Since the subcommittee's hearings last year, problems posed 
by the current marketplace and regulatory structure have 
persisted with roaming arrangements among carriers; with a lack 
of devices available to smaller regional carriers; with respect 
to the portability of devices to other carriers, remaining 
limited or nonexistent; with a lack of clarity and uniformity 
with respect to billing terms and conditions; and with an 
inability for consumers to effectively compare plans; and for 
many consumers to sometimes feel trapped after buying an 
expensive device or for getting locked into long-term contracts 
with significant penalties for switching.
    This is a very important hearing. I thank you for your 
continuing leadership, Mr. Chairman.
    I yield back the balance of my time.
    Mr. Boucher. Well, thank you very much, Mr. Markey.
    You did excellent work on this general subject during the 
last Congress. We are using the legislative draft that you 
assembled as the foundation for our consideration this year, 
and I want to thank you and commend you for that outstanding 
work.
    The gentleman from Indiana, Mr. Buyer, is recognized for 2 
minutes.
    Mr. Buyer. I reserve my time for questions.
    Mr. Boucher. The gentleman reserves his time and will have 
his time added to his question time for this panel.
    The gentleman from Illinois, Mr. Rush, is recognized for 2 
minutes.
    Mr. Rush. Thank you, Mr. Chairman, for holding this very 
important hearing.
    In all of my years on this subcommittee, I have always been 
concerned with the lack of diversity and competition in the 
telecommunications market. I have found the lack of diversity 
in the wireless marketplace to be particularly disturbing 
because the spectrum used by wireless companies is a public 
asset, owned by all of the American people and not by just 
these companies. I continue to be dismayed over the fact that 
women and minority businesses have little, if any, presence in 
the wireless industry.
    Given that the market for advanced wireless services is 
rapidly growing and will likely soon displace traditional 
wireline telecommunication services, it is vital that we ensure 
diversity in the market now and not kick the can down the road 
for another day.
    As such, Mr. Chairman, I hope that these fine witnesses who 
are gathered here can comment on this longstanding interest of 
mine, and I further hope that, with the new administration, we 
will finally find some public commitment to ensure that all 
Americans can partake in the multimillion dollar wireless 
industry.
    Mr. Chairman, with that, I yield back the balance of my 
time.
    Mr. Boucher. Thank you very much, Mr. Rush.
    The gentleman from California, Mr. Radanovich, is 
recognized for 2 minutes.

 OPENING STATEMENT OF HON. GEORGE RADANOVICH, A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Radanovich. Thank you, Mr. Chairman, for holding this 
hearing and for examining the competition in the wireless 
industry. I appreciate the effort on this.
    As cochair of the Wireless Caucus with Mr. Inslee, I 
appreciate the opportunity to explore the ways we can work 
together to ensure that the wireless customers will have the 
most innovative, best quality services at competitive prices.
    One area I believe that is hindering effective competition 
is tower siting. The ability to deploy wireless systems and 
expand services, thereby increasing competition for customers, 
relies on the ability to construct and place towers and 
transmitters. Yet 3,300 wireless siting applications are 
pending before local jurisdictions awaiting a decision. 
Approximately 760 have been pending final action for more than 
a year, while 180 of those have been waiting for more than 3 
years.
    The problem is that the Communications Act is very 
ambiguous about the time in which a decision on these 
applications has to be made, requiring only that it be done 
within a reasonable time frame. This potential for delaying 
action discourages investment and prevents consumers from 
receiving the full benefits that come from increased service 
and competition.
    I am sympathetic to the demands that zoning authorities 
must be given enough time to properly review these 
applications. However, this process must have an end to it so 
that carriers are not continuing to be left wondering whether 
they will get an answer at all.
    I look forward to working with the interested parties and 
with the committee toward a resolution to this matter.
    I am also aware that there is an effort to have the FCC 
reset price caps for special access, and I do not believe that 
this is possible or should be possible until the FCC has all 
the relevant data on the full scope of high-capacity services.
    Nevertheless, I am thrilled that this hearing is taking 
place, and I look forward to the testimony from the witnesses.
    Thank you, Mr. Chairman.
    Mr. Boucher. Thank you, Mr. Radanovich.
    The gentleman from Pennsylvania, Mr. Doyle, has just 
returned, and is recognized for 2 minutes.

OPENING STATEMENT OF HON. MICHAEL F. DOYLE, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Doyle. Thank you, Mr. Chairman. I apologize.
    Thanks for holding this hearing.
    Mr. Chairman, you know, some people who have my cell phone 
number are very interested in my car. I just want to say for 
the record that my car warranty is not about to expire. I am 
not really happy that they call my cell phone, and I am not 
happy that they keep calling me, even though I am on a ``do not 
call'' list and even though calling my cell phone is blatantly 
illegal. And even though I have tried to get on these 
companies' ``do not call'' lists, they still keep calling me, 
so I just want to say: Stop doing that.
    I hope the FTC and the FCC hunt each and every one of you 
down and make a lesson out of you by interrupting every one of 
your meals that you eat for the rest of your lives with a 
telemarketing call. OK. I feel better now.
    Now on to more happy topics.
    Since we last looked at the wireless industry, we have seen 
dramatically improved customer service. Consumers generally 
better understand the contracts they sign and the services that 
are available to them.
    That is not to say it is all perfect. In fact, many of us 
up here have had problems with our bills, and I do agree with 
those who say that text messages are still priced way above 
cost. For example, if you were to send enough text messages to 
fill this 1.5-megabyte floppy diskette at 20 cents a message, 
you would have to pay over $2,000. If you were to send enough 
text messages to equal the size of an MP3 song, that would cost 
almost $6,000.
    But I think most of the companies have improved. One 
example: Verizon Wireless has successfully sued several 
companies for illegal telemarketing and for text message spam. 
I am glad to see that the company, the FTC, and the FCC are 
working on this problem, and I am glad to see that most of the 
carriers have clearer bills and prorated contracts.
    Mr. Chairman, if you decide to move a national framework 
bill, I look forward to seeing that. It will give consumers 
across America peace of mine with a baseline of reliable 
consumer protections. Thanks for your patience, and I yield 
back my time.
    Mr. Boucher. Thank you very much, Mr. Doyle.
    The gentleman from Oregon, Mr. Walden, is recognized for 2 
minutes.
    Mr. Walden. Thank you very much, Mr. Chairman. I appreciate 
this hearing as well.
    A lot has already been said about the positive competitive 
nature of the wireless marketplace.
    I would like to ask unanimous consent to put in the record 
a Consumer Reports story I found very interesting on this 
issue, dated January of 2009, which our colleagues may find of 
interest.
    Mr. Boucher. Without objection.
    [The information appears at the conclusion of the hearing.]
    Mr. Walden. I am one of those people who, you know, has 
three cell phones, Mr. Chairman, one official, one personal, 
one campaign, so I get experience on a lot of them.
    Fortunately, I have not been called about a car warranty 
yet. I suppose I should not admit that, but I am not going to 
give out the number either.
    I know that this marketplace has changed dynamically and 
rapidly in a way that is very positive. As rates have come 
down, service has been expanded, and options have increased, 
and so I look forward to seeing where we can help this very 
mature industry move forward and keep the competition going 
that drives down prices and that makes these devices available.
    With that, Mr. Chairman, I yield back.
    Mr. Boucher. Thank you, Mr. Walden.
    The gentlelady from the Virgin Islands, Mrs. Christensen, 
is recognized for 2 minutes.

       OPENING STATEMENT OF HON. DONNA M. CHRISTENSEN, A 
       REPRESENTATIVE IN CONGRESS FROM THE VIRGIN ISLANDS

    Mrs. Christensen. Thank you, Mr. Chairman and Ranking 
Member Stearns, for holding this hearing to examine issues 
related to wireless competition in our country.
    The wireless industry has a tremendous impact on the U.S. 
economy. It includes about 600 companies with a combined annual 
revenue of over $110 billion. It is projected that, by 2016, 
this revenue will increase to $427 billion annually.
    However, some argue that the industry is highly 
concentrated with four national wireless carriers earning about 
85 percent of the industry revenue and two controlling 90 
percent of special access. It is important to preserve 
competition within the wireless industry in order to ensure the 
consumers, especially in rural areas and in places like the 
U.S. Virgin Islands, that I represent, have access to 
reasonable rates and to the best of services.
    Competitive local exchange carriers, such as the ones 
testifying today, rely heavily on the incumbents for services 
like special access. Yet they are limited in options for 
service providers. This inevitably raises prices for the CLECs 
and makes it difficult for them to remain competitive.
    Mergers also can pose a significant threat to competition, 
especially if the conditions are not imposed and then 
implemented. The wireless industry is thriving and steadily 
growing at an enormous rate, but for some carriers, it is still 
difficult or virtually impossible to compete in this industry.
    So I look forward to hearing from our witnesses on this 
issue and on the recommendations for keeping the industry 
competitive, and I thank them for being here.
    Mr. Boucher. Thank you very much, Mrs. Christensen.
    The gentleman from Nebraska, Mr. Terry, has waived his 
opening statement and will have additional question time added.
    The gentleman from Michigan, Mr. Upton, is recognized for 2 
minutes.
    Mr. Upton. Well, thank you, Mr. Chairman.
    I just want to say that I noticed today the same stats that 
you apparently cited in your opening statement that, for the 
first time, there are more American families with wireless 
phones than with hardline phones, and we know that all families 
are really struggling, that all American families are really 
struggling in these very tough economic times. They are looking 
for any savings that they can in their household budgets.
    And thanks to more competition, providing more spectrum, 
something that this committee did in lifting many of the 
burdensome regulations, the cost to families has gone down, and 
we can congratulate many in this room for seeing that happen.
    I would just say to Mr. Doyle, who has stepped away, maybe 
he is listening until the anteroom, there is a provision in 
most contracts, at least with mine. I have two teenagers. There 
is such a provision as an ``unlimited text message'' section, 
and I think it is about 4 bucks a month. I would suggest it, as 
it has saved me a lot of money after the first abuse of my son, 
Stephen.
    Thank you. I yield back my time.
    Mr. Boucher. Thank you very much, Mr. Upton.
    The gentleman from California, Mr. McNerney, is recognized 
for 2 minutes.
    Mr. McNerney. Thank you, Mr. Chairman, for holding this 
important hearing.
    I am interested in today's hearing because of how dynamic 
the industry is. We have seen a tremendous transformation in 
the last decade or so. I would like to see that competition 
continue, and I want to make sure that Federal regulation is 
not part of the problem and that it is part of the solution. 
So, right now, there does seem to be a consolidation going on 
in the industry, and I am looking forward to seeing what you 
have to say about what that is doing to the competition.
    In particular, the handset exclusivity or tower siting, are 
those issues that are part of the problem or do we need to look 
at how those are being regulated right now?
    So, with that, I yield back.
    Mr. Boucher. Thank you, Mr. McNerney.
    The ranking member of the full committee, the gentleman 
from Texas, Mr. Barton, is recognized for 5 minutes.
    Mr. Barton. Well, Mr. Chairman, I will not take that time. 
I am going to submit my full statement for the record.
    I am a three-cell-phone person if you count BlackBerrys. In 
my immediate family, there are seven. We contributed to that 
$75 billion of revenue fairly substantially last year, and we 
enjoy it. I am told that there are about 280 million cell phone 
customers, which is almost one per person. This is obviously an 
industry that is thriving. There is consolidation going on. 
That is not necessarily a bad thing. We have two market 
participants that each have, I think between them, the top two 
have about 60 percent of the market.
    The thing that I would bring to the committee's attention 
is this issue of States regulating terms and conditions. If you 
want to call it a loophole, we left that open several years 
ago. I think this subcommittee would be wise to take a look at 
that and to see if we do now need to set up a national 
regulatory framework for terms and conditions. That might help 
continue the growth of the industry that is thriving.
    With that, I am glad we are having a hearing where we are 
not arguing over free allowances for C02. So this is a good 
hearing, and I look forward to listening to our witnesses.
    Mr. Boucher. Thank you very much, Mr. Barton. We will have 
a discussion later on that very subject.
    Mr. Barton. Yes, I know. That is what I am afraid of, Mr. 
Chairman.
    Mr. Boucher. The gentlelady from Florida, Ms. Castor, is 
recognized for 2 minutes.
    Ms. Castor. Thank you, Mr. Chairman. I will waive my 
opening.
    Mr. Boucher. Thank you, Ms. Castor.
    The gentlelady from California, Ms. Eshoo, is recognized 
for 2 minutes.

 OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Ms. Eshoo. Thank you, Mr. Chairman.
    And, welcome, to the panel of witnesses.
    Compared to much of the telecommunications industry, the 
wireless sector might look like it is wildly competitive. Most 
consumers actually have some degree of choice for service, 
unlike the broadband sector, where 90 percent of Americans have 
two or fewer choices for service, or the wireline industry, 
where the choices are largely nonexistent.
    Wireless technologies are bridging some of these gaps and 
are improving the competitive landscape, but there remain major 
choke points and anticompetitive practices that inhibit true 
competition and tilt the playing field steeply in favor of a 
pair of dominant carriers.
    I think my colleagues are aware of whom I speak, and I am 
disappointed that Verizon and AT&T are not here today. I hope 
that they will decide to come in the future. After all, the top 
three wireless firms control nearly 80 percent of the wireless 
phone business in America. That is a real stronghold.
    A particular concern I have in the wireless industry is the 
market for special access services. Special access is the high-
speed middle-mile between the Internet backbone for wireless 
phone and data towers, hospitals, banks, retailers, and other 
medium and large businesses. For wireless carriers, the cost of 
special access carriage is up to a third of the expense of 
running a wireless tower. Special access is a significant choke 
point in the telecommunications system since Verizon and AT&T 
control 80 to 90 percent of the special access market 
nationwide.
    In 1999, the FCC moved to deregulate special access, and 
not surprisingly, with such limited competition, prices have 
skyrocketed. Recent data indicate that, for the three large, 
regional Bell companies, the rates of return on special access 
range from 15 to 38 percent.
    In 2005, the FCC initiated a proceeding to review special 
access rates. Four years later, the Commission's review is 
still pending.
    In November 2006, the GAO issued a report entitled, right 
here, ``FCC Needs to Improve Its Ability to Monitor and 
Determine the Extent of Competition and Dedicated Access 
Services.'' I think Chairman Martin must have missed that one.
    So I am pleased that the Senate has finally scheduled 
hearings to confirm a new chairman of the FCC. I hope the 
Commission, and I would urge them, pursues this proceeding 
aggressively and determines where there is actual competition 
and fair pricing in this important market.
    I also want to mention one other important competitive 
issue in the wireless industry, access to spectrum. In the most 
recent major auction of wireless spectrum, the 700 megahertz 
auction last year, 84 percent of the winning bids went to 
Verizon and AT&T. Again, it is difficult to see how the 
wireless sector can be competitive when two players dominate in 
so many respects. There are new entrants trying to break up 
this dominance, and some of them happily are on the panel 
today, and we look forward to hearing from you.
    I think another avenue for a disruptive new entrant would 
be the auction of the AWS-3 spectrum now lying fallow. So, 
again, I hope the FCC proceeds on this matter. It has been 
pending for over 2 years, and I hope it will finally be taken 
up.
    So, welcome, to all of you. I look forward to hearing your 
testimony.
    Thank you, Mr. Chairman.
    Mr. Boucher. Thank you very much, Ms. Eshoo.
    The gentleman from Arizona, Mr. Shadegg, is recognized for 
2 minutes.
    Mr. Shadegg. Mr. Chairman, other than to thank you for 
holding this hearing and to thank our witnesses, I will waive 
my opening statement.
    Mr. Boucher. Thank you very much, Mr. Shadegg.
    The gentleman from Vermont, Mr. Welch, is recognized for 2 
minutes.

  OPENING STATEMENT OF HON. PETER WELCH, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF VERMONT

    Mr. Welch. Thank you, Mr. Chairman and Ranking Member 
Stearns.
    Thank you to the witnesses.
    Vermont is a very rural State, and it has had some 
experience in trying to deal with some of the issues that we 
are going to be dealing with as a committee, tower siting, 
roaming, a lack of competition. Most Vermonters are actually 
pretty pleased with the wireless service that they get, but it 
is incredibly critical to our economy to have wireless service 
everywhere.
    The Vermont legislature has passed legislation calling on 
doing whatever it is we can do to extend wireless throughout 
the State, and our goal is to achieve 90 percent of coverage. 
Some of us think it ought to be 100 percent. We are in the 
process of installing tower sites and of using some of our 
barns and silos to actually help us along the way. We are 
working on streamlining the permitting process for new 
telecommunication towers and antennas that will facilitate our 
reaching our goals, but there are many issues remaining:
    The cost of wireless backhaul is obviously a big one. 
Roaming rates are an enormous problem for many of our users. 
Vermont has not been able to attract the interest of some of 
these larger national carriers to serve some of our most rural 
areas. So they are kind of skimming the good economic 
opportunities and are ignoring where we need a lot of help.
    The progress in my State has been largely as a result of 
local efforts, so we would have some significant concern about 
this balance between a national plan and a freezing out of the 
ability of States to actually play a very aggressive role in 
trying to extend the benefits of wireless to their citizens.
    Thank you, Mr. Chairman and Ranking Member, for convening 
this subcommittee hearing. I yield back the balance of my time.
    Mr. Boucher. Thank you very much, Mr. Welch.
    Mr. Inslee was here earlier. I do not see him now. Unless 
he is planning to appear momentarily, we are going to turn to 
our first panel of witnesses. We will turn to our first panel 
of witnesses.

    STATEMENTS OF PAUL SCHIEBER, VICE PRESIDENT, ACCESS AND 
 ROAMING, SPRINT; ROBERT J. IRVING, JR., SENIOR VICE PRESIDENT 
AND GENERAL COUNSEL, LEAP WIRELESS INTERNATIONAL, INC., CRICKET 
   COMMUNICATIONS, INC.; VICTOR H. ``HU'' MEENA, PRESIDENT, 
  CELLULAR SOUTH; RAVI POTHARLANKA, CHIEF OPERATING OFFICER, 
  FIBER TOWER CORP.; CHRIS MURRAY, SENIOR COUNSEL, CONSUMERS 
  UNION; GEORGE S. FORD, CHIEF ECONOMIST, PHOENIX CENTER FOR 
       ADVANCED LEGAL AND ECONOMIC PUBLIC POLICY STUDIES

    Mr. Boucher. I want to welcome the attendance of each here 
this morning. I will say a brief word of introduction.
    Mr. Paul Schieber is vice president for Access and Roaming 
for Sprint. Mr. Robert Irving is senior vice president and 
general counsel for Leap Wireless. Mr. Victor Meena is 
president of Cellular South. Mr. Ravi Potharlanka is chief 
operating officer for FiberTower. Mr. Chris Murray is senior 
counsel for Consumers Union. Dr. George Ford is chief economist 
of the Phoenix Center.
    We welcome each of our witnesses this morning, and we thank 
you for sharing your views with us.
    Without objection, your prepared written statements will be 
made a part of our record, and we would now welcome your oral 
summaries and would ask that you keep those summaries to 
approximately 5 minutes so that we have ample time for 
questions.
    Mr. Schieber, we will be happy to begin with you.
    If you will turn your microphone on, we will hear you 
better.

                   STATEMENT OF PAUL SCHIEBER

    Mr. Schieber. Thank you.
    Good morning, Chairman Boucher, Congressman Stearns, and 
members of the subcommittee.
    I am Paul Schieber, vice president of Access and Roaming at 
Sprint Nextel Corporation. Thank you for the opportunity to 
testify today about competition in the wireless industry in the 
United States.
    For years, Sprint has been a leader in the development and 
deployment of data services, including a 3G mobile broadband 
platform throughout most of its network as well as the 
development of 4G technology. In recent years, Sprint has spent 
billions of dollars to deploy its 3G EVDO network, improve its 
performance capabilities, and increase the array of advanced 
services that are available to consumers through its mobile 
broadband platform.
    Through our investment in Clearwire, we are also committed 
to maintaining our leadership role in making 4G broadband 
services widely available to U.S. consumers and businesses. 
These mobile broadband services will undoubtedly fuel 
significant economic development and job growth.
    Unfortunately, there continue to be several impediments to 
Sprint and to other wireless and wireline provider efforts to 
make broadband services ubiquitously accessible and reasonably 
priced for all Americans.
    In Sprint's view, the biggest of these impediments is the 
failed special access market, but I want the members of the 
subcommittee to know that Sprint is also supportive of efforts 
to reform the Nation's cell-siting laws. We need laws which 
make it easier for wireless carriers to collocate facilities 
and to share the timely approval of cell site construction.
    I focus my testimony on special access reform, however, 
because Sprint believes that should be a top priority of the 
FCC and this subcommittee.
    Special access is the lifeblood of the telecommunications 
industry. It touches virtually every communications product and 
is a critical part of the services consumers use every day. 
When consumers make wireless calls, access the Internet, send 
e-mails, swipe their credit cards at stores, or use automated 
teller machines, they are using services that rely on special 
access.
    The importance of middle-mile facilities to the wider 
deployment of broadband was underscored by Susan Crawford, a 
member of President Obama's National Economic Council, who 
recently stated, and I quote, ``Investments in backhaul or 
middle-mile networks, particularly in rural communities, will 
likely be particularly useful.''
    When Sprint and other carriers provide mobile broadband 
services, we need other providers to link together into a 
seamless network our facilities. In the simplest configuration, 
a broadband provider must interconnect three segments of an 
end-to-end service: A local network, middle-mile facilities and 
a backbone network.
    In Sprint's case, its local wireless broadband facilities 
connect a caller or a laptop user to a nearby cell site. Sprint 
then needs middle-mile transmission circuits to transport the 
customer's traffic from a Sprint cell site, between a mobile 
telephone switching office and, from there, to Sprint's 
Internet backbone network.
    As has been repeatedly demonstrated by Sprint and other 
wireless and wireline broadband service providers as well as by 
reports issued by the GAO and the National Regulatory Research 
Institute, we are overwhelmingly dependent on special access 
facilities provided by incumbent LECs.
    Despite the central role of special access in mobile and 
fixed broadband deployment and the benefits that would come 
from robust competition, incumbents control 91.7 percent of the 
special access market, and two dominant carriers, AT&T and 
Verizon alone, receive 81 percent of all special access 
revenues nationwide, generating a rate of return of up to 138 
percent on these revenues in the case of AT&T. This is 
obviously not a competitive market.
    The monthly payments for middle-mile special access Sprint 
incurs in its wireless business represents about one-third of 
the cost of operating a cell site. In most cases, Sprint simply 
has no competitive alternatives to the incumbent LEC for these 
facilities.
    Today, Sprint buys access from vendors other than the LEC 
at only 4 percent of its cell sites. The excessive prices that 
incumbent LECs charge for these middle-mile connections harm 
consumers, cost us jobs and divert needed jobs from Sprint's 
broadband network and services.
    Fortunately, the FCC has the legal authority and the 
evidentiary record to fix the problem and spur broadband 
deployment. Reform of special access will promote mobile and 
fixed broadband growth by freeing resources that can be used to 
invest in new facilities, create new jobs and contribute to the 
Nation's economic recovery.
    I respectfully ask this subcommittee to urge the FCC to act 
now. The special access rulemaking, now pending for more than 6 
years, must be completed now to rein in anticompetitive special 
access prices and practices by incumbent LECs, allowing Sprint 
and other competitive providers to accelerate the deployment of 
mobile and fixed broadband. Stimulating broadband deployment in 
this way will generate economic growth and will expand consumer 
access to broadband communications, and it will do so without 
spending a dime of taxpayers' money.
    Thank you.
    [The prepared statement of Mr. Schieber follows:]

    [GRAPHIC] [TIFF OMITTED] T2886A.001
    
    [GRAPHIC] [TIFF OMITTED] T2886A.002
    
    [GRAPHIC] [TIFF OMITTED] T2886A.003
    
    [GRAPHIC] [TIFF OMITTED] T2886A.004
    
    [GRAPHIC] [TIFF OMITTED] T2886A.005
    
    [GRAPHIC] [TIFF OMITTED] T2886A.006
    
    [GRAPHIC] [TIFF OMITTED] T2886A.007
    
    [GRAPHIC] [TIFF OMITTED] T2886A.008
    
    [GRAPHIC] [TIFF OMITTED] T2886A.009
    
    [GRAPHIC] [TIFF OMITTED] T2886A.010
    
    [GRAPHIC] [TIFF OMITTED] T2886A.011
    
    [GRAPHIC] [TIFF OMITTED] T2886A.012
    
    [GRAPHIC] [TIFF OMITTED] T2886A.013
    
    [GRAPHIC] [TIFF OMITTED] T2886A.014
    
    [GRAPHIC] [TIFF OMITTED] T2886A.015
    
    [GRAPHIC] [TIFF OMITTED] T2886A.016
    
    [GRAPHIC] [TIFF OMITTED] T2886A.017
    
    [GRAPHIC] [TIFF OMITTED] T2886A.018
    
    Mr. Boucher. Thank you very much, Mr. Schieber.
    Mr. Irving.

               STATEMENT OF ROBERT J. IRVING, JR.

    Mr. Irving. Chairman Boucher, Ranking Member Stearns, and 
members of the subcommittee, thank you for allowing me to 
testify today on behalf of Leap Wireless and its subsidiary, 
Cricket Communications. I would also like to thank you and the 
Congress for your leadership in appropriating stimulus funds to 
expand broadband services and to improve access to broadband by 
public safety agencies.
    While you are addressing many important issues today, I 
would like to offer Cricket's perspective on one of them, the 
importance of automatic voice and data roaming to ensure 
effective competition in the wireless industry.
    First, I would like to note for you where Cricket fits in 
the industry and briefly explain why small- and mid-sized 
carriers like Cricket promote innovation and competition. 
Cricket and its joint venture partners have built digital 
networks covering almost 84 million individuals in 32 States, 
and we are continuing to grow steadily. In fact, we will launch 
service in Washington, D.C., and in Baltimore in the next 
several months.
    Cricket's services are specifically tailored to bring 
wireless communication to consumers who have been left behind 
by other providers. We offer consumers unlimited voice and data 
wireless services for a flat monthly rate with no fixed-term 
contracts, no credit check and no early termination fees. We 
also recently introduced an affordable wireless broadband 
product at $35 to $40 per month for unlimited service. Our 
customer base reflects our commitment to the underserved. A 
majority of our customers are Hispanics, African Americans and 
other minorities, and our customers tend to be younger and less 
affluent than our competitors' customers.
    We recently partnered with the nonprofit group, One 
Economy, to provide very low-income families in Portland, 
Oregon, with computers, modems and free Cricket wireless 
broadband for 2 years. This pilot program has been tremendously 
successful in promoting broadband access and in increasing the 
Internet savvy of program participants. One participant 
reported to us that he is now enrolled in an online English 
class. Another said that she now uses e-mails to apply for 
jobs. Cricket hopes to expand this program to reach other very 
low-income families who can benefit from affordable broadband 
service.
    Our growth and our commitment to a diverse customer base 
illustrate the type of competition that Congress and the FCC 
has tried to promote, and our success demonstrates those 
innovative, pro-consumer benefits that small- and mid-sized 
carriers bring to the wireless marketplace. We show that being 
pro-consumer can be good for business. We discipline prices in 
every market that we enter, and our presence prompts other 
carriers to offer a wide range of choices, including flat rate 
and unlimited usage plans like the plans we pioneered.
    In recent years, we have been concerned with the increasing 
consolidation of spectrum and market share into the hands of 
the Nation's largest carriers and of the consequence of this 
trend for small- and mid-sized carriers and, more importantly, 
for consumers.
    Cricket and other small, rural and regional carriers 
increasingly face anticompetitive business practices, such as 
the largest carriers' refusal to provide wholesale roaming on 
reasonable, nondiscriminatory rates and terms. Automatic 
roaming agreements play a critical role in the wireless 
industry. They plug coverage holes that exist in every 
carrier's network.
    Reliable service is not simply a marketing tool. Whether we 
are trying to get emergency text message alerts, seek help if 
we have car trouble, or contact family members in the wake of a 
hurricane or of a terrorist attack, consumers should not suffer 
dropped calls when they travel away from home.
    Unfortunately, the Nation's largest carriers have 
institutionalized policies of charging very high wholesale 
rates or of denying roaming services all together to other 
carriers' customers in the areas where the requesting customer 
can theoretically provide service. These behaviors weaken 
emerging competitors' service offerings, in spite of the fact 
that the largest carriers, themselves, have relied on roaming 
agreements for over 30 years to expand their own networks and 
to improve service.
    These anticompetitive practices harm all consumers by 
reducing competition, but they disproportionately burden 
disadvantaged and rural populations, many of whom cannot afford 
or qualify for wireless service provided by the Nation's 
largest carriers.
    In my written testimony, I have described several 
proceedings in which the FCC has an opportunity to improve its 
current policies with regard to automatic roaming. I urge 
Congress to monitor these proceedings closely, to encourage the 
FCC to adopt a pro-consumer, pro-competitive approach to 
roaming and, if necessary, to consider legislative solutions 
that ensure all consumers have access to affordable, nationwide 
wireless coverage.
    Thank you very much.
    [The prepared statement of Mr. Irving follows:]

    [GRAPHIC] [TIFF OMITTED] T2886A.019
    
    [GRAPHIC] [TIFF OMITTED] T2886A.020
    
    [GRAPHIC] [TIFF OMITTED] T2886A.021
    
    [GRAPHIC] [TIFF OMITTED] T2886A.022
    
    [GRAPHIC] [TIFF OMITTED] T2886A.023
    
    [GRAPHIC] [TIFF OMITTED] T2886A.024
    
    [GRAPHIC] [TIFF OMITTED] T2886A.025
    
    [GRAPHIC] [TIFF OMITTED] T2886A.026
    
    [GRAPHIC] [TIFF OMITTED] T2886A.027
    
    [GRAPHIC] [TIFF OMITTED] T2886A.028
    
    [GRAPHIC] [TIFF OMITTED] T2886A.029
    
    [GRAPHIC] [TIFF OMITTED] T2886A.030
    
    [GRAPHIC] [TIFF OMITTED] T2886A.031
    
    Mr. Boucher. Thank you, Mr. Irving.
    Mr. Meena.

              STATEMENT OF VICTOR H. ``HU'' MEENA

    Mr. Meena. Good morning, Mr. Chairman and members of the 
subcommittee. Thank you for allowing me this opportunity to 
testify before you today.
    I have been in the wireless industry for over 20 years with 
Cellular South, the Nation's largest, privately held wireless 
carrier, serving all of Mississippi and four other southeastern 
States.
    In my years in the wireless industry, I have seen the 
duopolistic role of the early cellular licenses when there were 
two, and only two, carriers in each market. The rise in 
wireless competition is a result of the later spectrum options 
and of the growth and innovation throughout the industry as a 
result of the Telecommunications Act of 1996.
    However, today I am convinced that, unless things change 
quickly, the industry is coming full circle and is progressing 
or is, rather, regressing into a duopoly once again.
    Today, AT&T Wireless and Verizon Wireless have almost 65 
percent of the national market. Over 90 percent of the wireless 
market is in the hands of those two, plus Sprint and T-Mobile. 
This should come as no surprise after the parade of 
acquisitions over the past several years.
    One of the effects of the market concentration, of this 
market concentration, is that the largest carriers now use 
their market power to demand and receive long-term, exclusive 
agreements with device manufacturers for the latest and 
greatest technological handsets. Exclusivity agreements prevent 
other carriers from acquiring these devices, and they are 
particularly harmful to wireless consumers. The practice has 
worked so well for the large carriers that they are now using 
the same formula for the emerging netbook market as well.
    What would happen if merchants sold computers that only 
worked with one Internet service provider? For example, imagine 
a world in which Macintosh computers only worked on AT&T DSL. 
That, of course, is exactly the world we live in with iPhone 
and Apple's exclusivity agreement with AT&T Wireless. If a 
consumer wants that handheld computer, he or she must subscribe 
to that service through AT&T.
    This battle among the industry titans has left consumers as 
collateral damage because device manufacturers are prohibited 
from offering cutting-edge devices to the smaller carriers who 
many times serve rural areas.
    Even in the areas that are served by the largest carriers, 
consumers are not free to choose the latest devices without 
being forced into accepting services from a specific carrier. 
If you live in New York City and want an iPhone, then you are 
obligated to be an AT&T Wireless customer. If you live in 
Washington, D.C., and want a BlackBerry Storm, then you will be 
a Verizon Wireless customer, whether you want to be or not.
    The situation with exclusivity agreements is bad and is 
only getting worse. Cellular South and customers like us have 
tried to find solutions to this problem without resorting to 
help from policymakers. We have attempted several solutions 
within the industry, including direct talks with device 
manufacturers, industry association working groups, and 
consolidating purchasing power through buying grids, but all of 
these efforts have been fruitless. Without legislation from 
Congress or action from the FCC, there will be no solution to 
this issue.
    On the topic of roaming, far and away the most important 
issue is that of automatic roaming for data services, 
specifically roaming for broadband. When I began in this 
industry, roaming agreements could be negotiated in a matter of 
an afternoon and usually finalized within a week. Today, the 
largest carriers use their market power to dictate unreasonable 
roaming terms or they refuse data roaming agreements all 
together; 700 megahertz licensees not named AT&T or Verizon 
cannot build out their next generation networks without high-
speed data roaming agreements. This is increasingly important 
as carriers deploy new data technologies that provide services 
anywhere, any time, such as telemedicine applications and Voice 
services over Internet Protocol, somewhat better known as VoIP.
    I ask you, is VoIP voice roaming or is it data roaming? 
Better yet, why should it matter?
    We are at a critical period in the wireless industry. 
Although the wireless industry may no longer be in its infancy, 
it is no more mature than an awkward adolescent. There is much 
innovating left to be done. There are many people of all 
socioeconomic backgrounds and of geographic locales who have 
yet to benefit fully from the wireless experience.
    Before it is too late, Congress must step in and put an end 
to the largest carriers' anticompetitive stranglehold on 
devices as well as ensure full roaming access. The future of 
free markets in our industry and the delivery of wireless 
broadband services to rural America depends on it. A light 
regulatory touch today will prevent the reemerging duopoly in 
which two companies will control all of the customers, all of 
the best devices, all of the prime spectrum, and will become 
too big to fail.
    Thank you.
    [The prepared statement of Mr. Meena follows:]

    [GRAPHIC] [TIFF OMITTED] T2886A.032
    
    [GRAPHIC] [TIFF OMITTED] T2886A.033
    
    [GRAPHIC] [TIFF OMITTED] T2886A.034
    
    [GRAPHIC] [TIFF OMITTED] T2886A.035
    
    [GRAPHIC] [TIFF OMITTED] T2886A.036
    
    [GRAPHIC] [TIFF OMITTED] T2886A.037
    
    [GRAPHIC] [TIFF OMITTED] T2886A.038
    
    [GRAPHIC] [TIFF OMITTED] T2886A.039
    
    [GRAPHIC] [TIFF OMITTED] T2886A.040
    
    [GRAPHIC] [TIFF OMITTED] T2886A.041
    
    [GRAPHIC] [TIFF OMITTED] T2886A.042
    
    [GRAPHIC] [TIFF OMITTED] T2886A.043
    
    [GRAPHIC] [TIFF OMITTED] T2886A.044
    
    [GRAPHIC] [TIFF OMITTED] T2886A.045
    
    Mr. Boucher. Thank you very much, Mr. Meena.
    Mr. Potharlanka.

                 STATEMENT OF RAVI POTHARLANKA

    Mr. Potharlanka. Good morning, Chairman Boucher, Ranking 
Member Stearns and members of the subcommittee.
    Thank you for the opportunity today to testify about the 
importance of middle and last mile backhaul services in the 
context of competition in the wireless industry.
    My name is Ravi Potharlanka. I am the Chief Operating 
Officer of FiberTower Corporation.
    Formed in 2000, FiberTower is the Nation's leading 
alternative carrier for middle and last mile backhaul. 
FiberTower operates hybrid fiber microwave networks in 13 U.S. 
markets. The top eight mobile carriers and the government are 
amongst our largest customers. We have a national scope of 24-
gigahertz and 38-gigahertz spectrum licenses and access to over 
100,000 towers. We also offer fixed wireless services across 
the Nation. We have been offering backhaul services for the 
last 6 years and are in a position to offer a unique 
perspective. Let me explain.
    Backhaul connects last mile end users, including those who 
serve first responders, Homeland Security, municipal buildings, 
medical facilities, schools, and libraries to the Internet and 
to other network-switching centers.
    Absent backhaul infrastructure, broadband networks cannot 
operate. Also, backhaul and transport infrastructure must be 
built before end users can fully realize the benefits of 
broadband. In fact, backhaul is often considered the Achilles' 
heel to achieving broadband connectivity.
    This lack of development in unserved and in underserved 
areas has inhibited the growth of broadband services. Our 
modular network is relatively inexpensive to deploy when 
compared to fiber and can often be up and running in a matter 
of days.
    I want to applaud the subcommittee on its leadership in 
producing the broadband stimulus programs. This subcommittee 
and the committee have identified middle mile and last mile 
backhaul appropriately as a critical piece in achieving 
broadband expansion. We see the access to this capital as a 
unique opportunity to capitalize on the expansion.
    For example, we could build in the western half of Virginia 
backhaul networks similar to those that have been built 
elsewhere. In just months, we could get people working 
throughout the unserved and underserved communities and make 
broadband accessible. This will create long-term jobs while 
permanently enhancing the economy. This model can most 
definitely be deployed in other areas of the Nation. I would 
now like to draw your attention to four important matters.
    First, mapping of unserved and underserved areas must 
include middle and last mile backhaul. The FCC, NTIA and RUS 
should consider an area with an adequate backhaul or transport 
coverage as underserved. Even if such an area has an end user 
broadband service provider, an area without backhaul is unable 
to support multiple broadband networks that drive the economy.
    Second, ensure that multiple-use backhaul platforms, which 
are called MuniFrames, are accessible to all end users. Doing 
this truly brings broadband to the area while greatly reducing 
costs. It is important to ensure that all parties have the 
ability to access these platforms in a nondiscriminatory 
manner.
    Third, reinforce the existing Federal preemptions or 
burdensome zoning and permitting restrictions for fixed 
wireless antenna placements. Restrictions that impair the 
installation of small antennas for fixed wireless are not 
permitted under a very specific FCC rule. Zoning and permitting 
requirements often add substantial delays in costs of 
deployments.
    Fourth, make a limited number of the numerous, vacant TV 
white space channels available for point-to-point licensing. 
The recently completed FCC TV white space order is a first step 
in unleashing broadband deployments to unserved and underserved 
areas. The lack of backhaul and transport services is 
particularly problematic in rural areas when great costs and 
great distances slow or prevent connections to switch locations 
of the Internet.
    However, white space channels make long range promulgation 
possible, thereby reducing the number of required towers to 
reach the same distance. There is no Member of this Congress 
more committed than you, Mr. Chairman, to bringing high speed 
broadband to America. I submit to you today that should FCC 
grant point to point licensed use for limited number of TV 
white space channels, it could stimulate rural broadband. This 
proposal involves a small number of numerous vacant rural 
channels and only in a fashion that protects incumbents and 
promotes plentiful and healthy sustained growth for unlicensed 
devices.
    100-mile connection using white spaces would typically cost 
less than $200,000 to deploy, while the same connection using 
some proposed bands like in six or 3.65 gigahertz spectrum 
would likely cost more than $3 million, almost 15 times as 
much. Similarly, a new transfiber build in the same distance 
would normally cost at least 20 or 30 times more expensive and 
be slow to deploy.
    In conclusion, making a limited number of TV white space 
channels available before the initial stimulus grant filing 
deadline is very critical. Finally, we strongly recommend the 
following: Continued reinforcement of FCC rules that preempt 
burdensome zoning and permitting restrictions for small fixed 
wireless antennas, comprehensive mapping of middle mile and 
last mile backhaul, and an express eligibility for backhaul and 
transport projects under the BTOP and RUS programs. This now 
concludes my oral testimony, and I thank you for the 
opportunity.
    Mr. Boucher. Thank you very much, Mr. Potharlanka.
    [The prepared statement of Mr. Potharlanka follows:]

    [GRAPHIC] [TIFF OMITTED] T2886A.046
    
    [GRAPHIC] [TIFF OMITTED] T2886A.047
    
    [GRAPHIC] [TIFF OMITTED] T2886A.048
    
    [GRAPHIC] [TIFF OMITTED] T2886A.049
    
    [GRAPHIC] [TIFF OMITTED] T2886A.050
    
    [GRAPHIC] [TIFF OMITTED] T2886A.051
    
    [GRAPHIC] [TIFF OMITTED] T2886A.052
    
    [GRAPHIC] [TIFF OMITTED] T2886A.053
    
    [GRAPHIC] [TIFF OMITTED] T2886A.054
    
    [GRAPHIC] [TIFF OMITTED] T2886A.055
    
    [GRAPHIC] [TIFF OMITTED] T2886A.056
    
    [GRAPHIC] [TIFF OMITTED] T2886A.057
    
    [GRAPHIC] [TIFF OMITTED] T2886A.058
    
    [GRAPHIC] [TIFF OMITTED] T2886A.059
    
    [GRAPHIC] [TIFF OMITTED] T2886A.060
    
    [GRAPHIC] [TIFF OMITTED] T2886A.061
    
    [GRAPHIC] [TIFF OMITTED] T2886A.062
    
    Mr. Boucher. Mr. Murray.

                   STATEMENT OF CHRIS MURRAY

    Mr. Murray. Good morning, Mr. Chairman, Mr. Ranking Member 
and members of the committee. I appreciate the opportunity to 
appear before you once again on behalf of consumers and on 
behalf of Consumers Union, the publisher of Consumer Reports 
Magazine.
    I am pleased to report that this year the satisfaction of 
consumers in the cell phone industry does seem to be headed 
upwards. You may remember last year it was bottom of the 
barrel. It was 18th out of 20 services that we rate. But this 
year it seems to be moving closer to average, and we are happy 
about that. Fewer consumers are complaining about automatic 
contract extension, and fewer consumers are complaining about 
early termination penalties as vociferously, although we still 
believe that, because these fees are starting from a very high 
level, we agree with State courts that are finding they may be 
illegal, so we think that scrutiny is warranted.
    But we have a new top concern of consumers this year, and 
that is the high price of cell phone service. And you may 
recall the last time I was here I said that U.S. consumers pay 
more than consumers around the world for cell phone service. 
Now, on a per-minute basis, as the industry is quick to note, 
because U.S. consumers talk an awful lot, we pay a little bit 
less. But if you look at just the dollars, the amount of money 
that people spend every year, U.S. consumers spend more on cell 
phone service than in any other industrialized nation.
    We also see that SMS text revenues are up for the carriers 
over 150 percent per texting subscriber. That is not overall 
over the whole network, that is just for the people who text. 
It is up 150 percent over the last 4 years.
    We see this year the rage is consumer overcharges for data 
plans. And we see one subscriber--I had an account of somebody 
who bought a netbook and got a data plan from AT&T. Five 
gigabytes is what she got for $60. She exceeded that plan by 
five gigabytes. And guess what the bill came back? $5,000. It 
is astonishing to me that the first five gigabytes somehow cost 
$60 and then the second five gigabytes cost about as much as a 
pretty decent used car.
    So what is going on here?
    I saw a McKenzie report that was fascinating, which 
basically said this industry is moving very quickly towards 
duopoly or towards a quasi-duopoly, and that concerns us. 
Basically, in sum, what I would like to say is that if we want 
competition to work better in this market, and I believe it 
can, is this market more competitive than some of the other 
rather monopolistic sectors of telecom? Well, yes. But that is 
sort of like saying a horse and buggy is a much better way to 
get around than a unicycle. We can do better than that.
    So if you want competition we need to reduce switching 
costs for consumers. That includes things like number 
portability, allowing consumers to take their phone numbers 
with them. We initially, when we first started talking about 
this 4 years ago, the cell phone industry said this is going to 
cost billions of dollars, and nobody wants it, and nobody will 
use it. Well, that wasn't the truth. The truth was people use 
this every day. They have been very happy with it, and it not 
only didn't cost so much, but it has actually allowed some 
carriers to really win in the marketplace.
    So the FCC is considering a proposal to reduce the interval 
from 4 days to one. We obviously support that, and we hope that 
the agency will recognize the arguments of the carriers as 
relatively transparent protectionism.
    The other thing, if we want competition, switching costs 
need to come down. And early termination fees are still a major 
concern for us. I will note that we are talking about a 
national model, but we do a have a national model in the 
uniform commercial code, which is the law in 50 States. And 
what that says is that if you want subscribers for actual 
damages, that is ok. But if you are charging them a penalty 
that is designed to prevent them from switching, that is 
illegal, right? The law of contracts says you can't do that 
because we want competition to work as vigorously as possible.
    So now the cell phone companies are up here saying we want 
a national model. Exempt us from the law of contracts in 50 
States. I hope that the Congress will not go for that 
opportunity.
    As we look at a national model, we have to look at what is 
the price of preemption. If we think that we can put in very 
strong national consumer standards, it is not totally anathema 
to consumers, but I do worry when I hear Members of Congress 
discussing how little this industry needs oversight and then, 
in the next breath, talking about a national consumer 
protection model. That seems to me to be code for we are going 
to eliminate some strong consumer protections in States.
    The last thing I want to briefly touch on--I apologize I 
don't have time to talk about roaming and data roaming and 
special access. But I am very concerned about anti-competitive 
behavior I see in the industry, and I really would beg this 
committee for more oversight.
    Recently we saw AT&T saying they would not allow Skype to 
be used by users on the 3G radio. They will allow to use it on 
WiFi but you can't use it on the 3G radio. And the top public 
policy executive for AT&T says, we absolutely expect our 
vendors not to facilitate the services of our competitors.
    This is the Internet. It is supposed to be different. This 
is what is supposed to bring us competition. And if what we are 
saying is we are just going to treat all these Internet 
companies as competitors and we are not going to let them use 
our Internet connections, well, we have fundamentally broken 
the Internet.
    So I am not stepping up today saying regulate the Internet. 
What I am saying is, let's get some oversight. When we have 
clear examples of anti-competitive behavior we need action.
    The last thing I will say is on access to consumer devices 
handset exclusivities, I will note that Ranking Member Barton 
has a bill which aims to eliminate exclusives for automotive 
diagnostic software in an industry which is, arguably, more 
competitive than this one. And I think that is good, because 
you are breaking the stranglehold of automotive dealers, and 
allowing smaller repair shops to get in on a game that would 
otherwise be a complete monopoly for the dealerships.
    Well, similarly, here we have some carriers who are 
absolutely too small to have the market power to get the 
devices that consumers are demanding. And if we want 3G to be 
built out in rural areas, I am telling you we have to look at 
this problem.
    So I thank you again for the opportunity to appear before 
you today. And I hope that we can engage in further oversight. 
Thank you.
    [The prepared statement of Mr. Murray follows:]

    [GRAPHIC] [TIFF OMITTED] T2886A.063
    
    [GRAPHIC] [TIFF OMITTED] T2886A.064
    
    [GRAPHIC] [TIFF OMITTED] T2886A.065
    
    [GRAPHIC] [TIFF OMITTED] T2886A.066
    
    [GRAPHIC] [TIFF OMITTED] T2886A.067
    
    [GRAPHIC] [TIFF OMITTED] T2886A.068
    
    [GRAPHIC] [TIFF OMITTED] T2886A.069
    
    [GRAPHIC] [TIFF OMITTED] T2886A.070
    
    [GRAPHIC] [TIFF OMITTED] T2886A.071
    
    [GRAPHIC] [TIFF OMITTED] T2886A.072
    
    [GRAPHIC] [TIFF OMITTED] T2886A.073
    
    Mr. Boucher. Thank you very much, Mr. Murray.
    Dr. Ford.

                  STATEMENT OF GEORGE S. FORD

    Mr. Ford. Mr. Chairman and Ranking Member Stearns and 
members of the subcommittee, good morning, and thank you for 
the invitation. My name is Dr. George Ford. I am the chief 
economist of the Phoenix Center, a nonprofit 501(c)(3) 
organization that focuses on the publishing of academic quality 
research on the law and economics of telecommunications and 
high tech industries.
    Our research is consistently targeted at providing 
policymakers information about the important role that pro-
entry policies must play in the communications industry. Our 
substantial research production has been published in academic 
journals, and several of our papers cover many of the topics 
discussed in this hearing today.
    The Phoenix Center makes it a policy not to endorse or 
support any particular piece of Federal or State legislation or 
proposed regulation. Our mission is not to tell policymakers 
what to think, but more how to think about it.
    By most accounts, the wireless industry today is workably 
competitive. The statistics have been cited here today by many 
members of the subcommittee and many of the panelists. But it 
is not perfectly competitive. No industry is. Workably 
competitive means that competitiveness is effective enough at 
sustaining good performance, even if not matching the textbook 
concept of perfect competition.
    Regulation is unlikely to improve market performance in a 
workably competitive market. Nor is the industry static, but it 
is constantly changing. The dynamic nature of the industry 
requires constant reformulation and testing of pricing plans, 
product offerings and network capabilities. Some changes are 
successful. Some not. That is the nature of the business.
    You mentioned earlier, Mr. Chairman, that most Americans 
have access to four or so wireless carriers, and some feel that 
this makes it a concentrated market, and by some definitions it 
would. But the relatively concentrated nature of wireless 
communications is natural and to be expected, given the large 
amounts of capital expenditures required to participate in the 
industry. The industry incurs about $20 billion in capital 
expenditures annually. Economics teaches us that in industry 
with such large capital costs relative to retail expenditures, 
only a relatively few number of firms will be able to survive 
and continue to offer service. The industry structure is, for 
the most part, pre-ordained by its cost and demand structure.
    While it is often assumed that observing that there are 
only a few firms implies that there is little competition, 
there is no unambiguous theoretical support for this position. 
Duopoly is not a dirty word.
    In the 1992 Cable Act, rate regulation was abandoned with 
the presence of 1\1/2\ firms, and that was in the statute. OK. 
That is an HHI of 8,600, according to the rules.
    I do not mean to imply that industry concentration is 
irrelevant, but it must be placed in the correct context. 
Recognizing that the industry is driven by its underlying cost 
and demand conditions is vital for good policymaking.
    Let me give you a few examples. Take spectrum caps. 
Contrary to widely held beliefs, it is not possible to increase 
a sustainable number of firms in the wireless industry by 
increasing the amount of spectrum. Whether there are two or 10 
firms the cost to deploy and upgrade a wireless network is 
roughly the same. Dividing the market into smaller pieces by 
divvying up spectrum into smaller pieces will not increase the 
number of carriers that can survive. What it will do is cause a 
nonsustainable industry structure and, inevitably, result in 
mergers, bankruptcies or both.
    On the other hand, in a world of limited spectrum, having a 
few firms may actually be a very good thing for society. The 
more spectrum a firm has, the higher bandwidth services it can 
offer. If we cut the spectrum into little pieces to make more 
firms, we might get a little more price competition for low 
bandwidth services, but we lose the enormous value offered by 
higher bandwidth innovative services like mobile broadband. 
There is a tradeoff between lots of guys with a little, and a 
few guys with a lot.
    My research has also shown that, given the relatively 
concentrated nature of telecommunications markets, regulators 
must be very careful not to exacerbate the factors that 
generate that outcome. However well-intentioned, regulatory 
driven open access or wireless card phone proposals do exactly 
that. They both are likely to spark further industry 
concentration and increase prices for mobile handsets, without 
necessarily benefiting consumers.
    There could be some benefits to such proposals, but all 
regulation comes at a cost. And my research leads me to believe 
that the costs are likely to outweigh the benefits.
    In a recent paper using auction results show that 
Carterfone style open access obligations could reduce industry 
profitability by 32 percent and reduce industry investment by 
$50 billion over the next 10 years. This large reduction in 
profitability could literally mean the difference between the 
survival or demise of weaker wireless providers. Open access 
regulations would, in fact, reduce the number of carriers in 
the industry and possibly result in significantly less 
competition and choice for consumers.
    Moreover, regulations that control handset equipment, a 
common feature of wireless Carterfone policies invariably leads 
to higher handset prices but not necessarily lower service 
prices. And many of the people who propose those rules 
recognize this outcome, but ignore its implications. This would 
not be good for the average American, not the high user 
American, but the average American, and would be particularly 
harmful to those with low incomes who are prolific users of 
mobile technology and are more likely to be cord cutters.
    Another feature of the wireless industry that is typically 
forgotten, policy debates that is multi product industry. The 
typical wireless carrier offers local calling, national 
calling, international calling, e-mail, text messaging, picture 
messaging; they will even fix your flat tire. The economic 
implications of this are important.
    The wireless firm doesn't offer a price and a service. It 
offers a set of prices and a set of services. All these 
services are interrelated. The price of one goes up. The price 
of the other goes down. The quantity of one goes up, the price 
of the other ones may change. You cannot take one thing, text 
messaging or phones, and focus on that one thing and say, oh, 
there is market power in this market because a high price in 
one service may sustain a low price in the other service. We 
are not in here talking about restaurants who mark up wine 
three or four times and give you water and bread. But it is the 
same kind of argument that people are making.
    Finally, we have a paper here that we recently published on 
the national framework for wireless regulation. What is a 
little different about our approach is that we are not, we 
allow the state regulator to make efficient decisions for its 
people. It is acting in the interest of its people. It is not 
acting incompetently or anything like that. But even still, it 
makes sense, if those decisions in one State spill over into 
another, whether it be cost or prices, that the regulation move 
up to the national level. So it is not a debate about the 
competence of regulation. It is a debate about how the industry 
and how a particular regulation in one location could impact 
another. And that is what I am driving at. Thank you for your 
time.
    [The prepared statement of Mr. Ford follows:]

    [GRAPHIC] [TIFF OMITTED] T2886A.074
    
    [GRAPHIC] [TIFF OMITTED] T2886A.075
    
    [GRAPHIC] [TIFF OMITTED] T2886A.076
    
    [GRAPHIC] [TIFF OMITTED] T2886A.077
    
    [GRAPHIC] [TIFF OMITTED] T2886A.078
    
    [GRAPHIC] [TIFF OMITTED] T2886A.079
    
    [GRAPHIC] [TIFF OMITTED] T2886A.080
    
    [GRAPHIC] [TIFF OMITTED] T2886A.081
    
    [GRAPHIC] [TIFF OMITTED] T2886A.082
    
    [GRAPHIC] [TIFF OMITTED] T2886A.083
    
    [GRAPHIC] [TIFF OMITTED] T2886A.084
    
    [GRAPHIC] [TIFF OMITTED] T2886A.085
    
    [GRAPHIC] [TIFF OMITTED] T2886A.086
    
    [GRAPHIC] [TIFF OMITTED] T2886A.087
    
    [GRAPHIC] [TIFF OMITTED] T2886A.088
    
    [GRAPHIC] [TIFF OMITTED] T2886A.089
    
    [GRAPHIC] [TIFF OMITTED] T2886A.090
    
    [GRAPHIC] [TIFF OMITTED] T2886A.091
    
    [GRAPHIC] [TIFF OMITTED] T2886A.092
    
    [GRAPHIC] [TIFF OMITTED] T2886A.093
    
    [GRAPHIC] [TIFF OMITTED] T2886A.094
    
    [GRAPHIC] [TIFF OMITTED] T2886A.095
    
    Mr. Boucher. And we now have a recorded vote pending on the 
House floor. I am going to ask my questions, and then we will 
declare a brief recess, and we will ask our witnesses to stay 
with us pending the return of members. It shouldn't take very 
long. We just have one recorded vote to respond to.
    Let me ask any of the witnesses who want to respond, 
because several of you mentioned this during the course of your 
testimony. Several of you have talked about your reliance on 
the major carriers, Verizon and AT&T, for the special access 
lines that connect facilities, and you depend upon those lines 
to connect your facilities. And you have talked about various 
ways that that problem might be addressed. One possible way to 
address it is to apply for stimulus funds under the Economic 
Recovery Act. And there is language in that Act that 
specifically makes middle mile services eligible as a target 
for grantmaking under the law.
    So my question to those who have that concern is, are you 
planning to apply for stimulus funding for these middle mile 
links? Mr. Schieber, let's begin with you.
    Mr. Schieber. Yes, thank you, Mr. Chairman. Sprint's 
position is, you know, we are closely monitoring that 
legislation as the terms in that legislation are defined and 
if, depending on how those terms are defined, unserved, 
underserved rural backhaul, etc., we may very well apply for 
those funds. It is unclear at this point until there is more 
clarification.
    Mr. Boucher. Well, let's assume that the criteria make it 
possible for you to apply and, should you be awarded the 
grants, would enable those grants to be useful in addressing 
your middle mile needs. Would you then apply?
    Mr. Schieber. We may very well. And I will tell you that 
our friends from FiberTower on the panel here are the experts 
in providing wireless backhaul services. In all honesty, we may 
look to someone like FiberTower.
    Mr. Boucher. All right. Well, let's ask Mr. Potharlanka 
that same question.
    Mr. Potharlanka. Thanks for the question, Mr. Chairman. 
Special access, or middle mile as we have called it, in terms 
of creating alternatives there, we have to build other types of 
facilities-based networks. We cannot resell the stuff. You have 
to actually invest capital to actually build networks so that 
various end users networks actually have options, much like, 
you know, we talked about options.
    Mr. Boucher. Well, but Mr. Potharlanka, would you rely to 
some extent if it is available on stimulus funds in order to 
help you make that investment?
    Mr. Potharlanka. Absolutely. Our technology and what we do 
is very well suited to actually building these types of 
networks, and we fully expect that, you know, depending on the 
rules, we would actually apply.
    Mr. Boucher. OK. That is good. One of the subjects that 
interests me is possible barriers that might exist to the 
siting of additional transmitters by carriers on structures 
that are already in existence, to which transmitters are 
already attached. And within the general category of tower 
siting, where I understand there are a number of tensions 
between the local governments that have decisionmaking 
authority with regard to this and the carriers that want to 
site towers, it strikes me that that is one discrete area in 
which, if it truly is a problem, we might be able to offer some 
ready solutions.
    And so let me just ask the question. Where you have got a 
circumstance where there is an effort and an application to 
attach an additional transmitter to a tower, to which other 
transmitters are already attached, is there resistance on the 
part of local governments today to rapidly processing those 
applications? Are you experiencing that problem? Mr. 
Potharlanka or others.
    Mr. Potharlanka. Sure. I mean, we certainly experience, you 
know, zoning or permitting delays and cost associated with----
    Mr. Boucher. That specific example, if you could answer 
that, please.
    Mr. Potharlanka. With a specific example?
    Mr. Boucher. Yes. That specific example.
    Mr. Potharlanka. Sure. I mean, we have several instances in 
the northeastern States where our applications do take a long 
time.
    Mr. Boucher. This is an example, and let me state it again, 
where a tower already exists, transmitters are already attached 
to that tower. The application is to attach an additional 
transmitter to that tower already containing other 
transmitters. In that instance, do you know of instances where 
delays are being experienced and those applications are not 
being rapidly processed?
    Mr. Potharlanka. Absolutely. We attach transmitters to 
existing sites, existing towers. We don't install new towers, 
and so that is exactly what we face.
    Mr. Boucher. All right. Do others have examples? Mr. 
Schieber?
    Mr. Schieber. Mr. Chairman, we experience the same thing at 
Sprint that, whether it is a new site or an existing site, 
there are often delays in getting zoning approvals from the 
local authorities.
    Mr. Boucher. What is the appropriate remedy for that, in 
your mind?
    Mr. Schieber. From our perspective, I think something like 
a shot clock that encourages local zoning authorities to make a 
decision quickly and not stretch the time frame out over many, 
many years, which is what we experience sometimes would be 
very, very helpful.
    Mr. Boucher. All right. I have some additional questions, 
but I am going to interrupt those so that we can respond to our 
recorded vote on the floor. And this subcommittee will stand in 
recess.
    I would encourage Members to come back as quickly as they 
have voted so we can continue our questioning. And we will ask 
for the patience of our witnesses until we return.
    [Recess.]
    Mr. Boucher. The subcommittee will reconvene. I thank the 
witnesses for their patience. And we are missing Mr. Murray, 
but I suppose he will join us in due course.
    I was interested in the testimony that was asked by--that 
was provided by a number of the witnesses regarding the current 
roaming rules, and I would like to just ask each of you, if you 
want, to comment on this.
    Given the importance of the growing use of mobile data, and 
the fact that so many people are now relying on their mobile 
devices as a major Internet access and e-mail application, in 
fact, I have got an iPhone. I guess I probably shouldn't 
advertise particular products, but I like it a lot. And I am 
probably using that for e-mail more now than anything that sits 
on a desk. And I am sure that there are millions of other 
people having similar experiences with that device or other 
similar kinds of portable devices.
    And so, given the growing importance of mobile data uses, 
has the time come, in your opinion, for us to provide automatic 
roaming rights for data, similar to the automatic roaming 
rights that exist for voice services today?
    Mr. Murray, you have joined us, and we will ask you first 
if you would like to comment.
    Mr. Murray. I think absolutely the answer to that is yes. 
We value competition and we value rural consumers being served 
as robustly as urban. That is part of the promise of universal 
service. And unquestionably, these smaller carriers will tell 
you they can't get data roaming. It is not that it has been 
taken away, it has just never been there. So I think we have 
absolutely come to the point where this is essential. If we 
want to not hit a brick wall and see consolidation really 
accelerate, I think data roaming is essential.
    Mr. Boucher. Others care to comment very briefly? My time 
really has expired. Mr. Meena.
    Mr. Meena. Yes, sir. I wanted to comment on that because it 
is such an important issue. Yes, we, all carriers need access 
to automatic data roaming. The VOIP example I gave in my 
testimony is a perfect example. In the future with 4G, is VOIP 
voice or is it data? Why would it matter? And there are 
countless telemedicine and other applications that customers 
need to use in their home footprint, as well as their travel 
anywhere throughout the country, and that is a goal of ours, to 
provide the type of services that customers want, no matter 
where they go.
    Mr. Boucher. All right. Anyone else want to offer a view? 
Mr. Irving.
    Mr. Irving. I would agree that now is the time for data 
roaming to also be included in carriers, common carrier 
obligations. We have begun entering into data roaming 
agreements generally with smaller and mid size carriers who 
tend to be more receptive to those roaming agreements.
    I would add one clarification. You asked whether we should 
enter into data roaming agreements or data roaming obligations 
similar to the voice roaming obligations. We would like to see 
the voice roaming obligations and the data roaming obligations 
improved.
    Mr. Boucher. I understand that. Mr. Schieber.
    Mr. Schieber. Yes. Sprint spent billions of dollars on a 
DVDO network and as we have seen competition unfold, we are 
increasingly open to considering people who want to roam on our 
ABDO network. Whether we need automatic roaming, as we have 
with voice or not, is an open issue, I think. I will say though 
that, you know, if we have to have something like that, the in 
market exception really needs to be addressed so that we were 
all on the same level playing field. The in market exception 
precludes us from getting roaming from folks if we have 
spectrum in a particular market, so addressing that issue in 
that context would be very helpful.
    Mr. Boucher. This would be spectrum you have in that market 
that you haven't built out in yet presumably.
    Mr. Irving. That is correct.
    Mr. Boucher. All right. Mr. Upton, you are recognized for 5 
minutes.
    Mr. Upton. Well, thank you, Mr. Chairman.
    Dr. Ford, I have the results of the Consumer Reports most 
recent wireless survey which was published in January of this 
year. They concluded that, 1, overall cell phone service has 
become significantly better service. Two, contract terms for 
cell phone services are less onerous, and there were fewer 
problems with call quality in this year's survey, which 
obviously 2008. There was substantial improvement over the 2007 
survey results, and that there has been a surge in 
satisfaction. Those are their words.
    In your testimony you stated that the wireless industry is, 
in fact, workably competitive. And I know that as an economist 
and consumer satisfaction surveys may not be the tools of your 
trade. But would you agree that these positive consumer 
satisfaction surveys results are consistent with what we might 
expect from consumers enjoying the benefits of a competitive 
marketplace?
    Mr. Ford. Oh, sure. I mean, I think, to some extent, that 
the progression of the industry is part of the dynamic 
competitive nature of it, and you would expect things to change 
and improve over time. And with the advent of new services and 
broadband and new telephones, people are going to get 
increasingly happy. And we are looking at nearly 20 percent of 
the people falling off the wire line network. Mobile service 
would have to get better for that to happen. So sure, it is 
very consistent with that outcome.
    Mr. Upton. Thank you. Mr. Schieber, AT&T and Verizon claim 
that see CLEX and other proponents of special access reform 
have not provided comprehensive data on the networks as the 
Bell companies have. Are you willing to provide the FCC with 
the same data that the Bell companies have given the FCC?
    Mr. Schieber. Congressman, we respectfully disagree with 
AT&T and Verizon. We feel like the FCC has a strong record of 
evidence. The FCC has what they need to act on this. However, 
if there is additional information that we can provide that 
will help the FCC get better clarity in the State of 
competition and special access we will be more than happy to 
provide that. But we would like the FCC to act on that and act 
on it quickly though.
    Mr. Upton. So the FCC, do they have any outstanding 
requests in for more information at this point or not?
    Mr. Schieber. I am not aware of any outstanding requests at 
this point. I think that they are working on something at this 
point, a request for information.
    Mr. Upton. Thank you. Mr. Potharlanka, in my view, we 
squandered an opportunity to make sure that backhaul capacity 
was available when we gave the white spaces away, rather than 
auction them off. Do we still have an opportunity to correct 
that mistake in the FCC's reconsideration of the white spaces 
order?
    Mr. Potharlanka. Our general opinion about white spaces, 
the channels available in the white spaces, in rural areas is 
that we could actually have multiple uses for it. I think 
several applications can coexist. And we are not sure that 
limiting options is the right way to do it, either through an 
auction process or----
    Mr. Upton. But if they are valuable, wouldn't we all 
benefit if they had been auctioned off rather than parts of it 
given away?
    Mr. Potharlanka. We are not disagreeing whether there would 
be enhanced value out of it. All we are saying is there are 
some parts of the spectrum, I think, which are best served by 
set asides for certain types of applications which, where you 
would be able to enable broadband over extended distances. And 
I think what we have proposed is we want to have multiple 
applications coexist at the same time. And I think different 
types of approaches could be used to putting that spectrum to 
work.
    Mr. Upton. Well, do you think that they ought to be used 
for unlicensed parts? Should those white spaces be allowed to 
be unlicensed?
    Mr. Potharlanka. Sure. Yes. We believe that our proposal--
and let me touch on that specifically. Our proposal 
specifically states that we would like a few channels in the 
rural areas to be allocated for point-to-point licensing in a 
manner that they can coexist with income bands as well as allow 
for unlicensed devices to operate. And there is a way to do it. 
There are lots of rural areas where you have 15 sometimes, all 
the way up to 40, 45 channels. And I think the trick is to 
figure out a mechanism where you can actually have a lot of 
these things coexist, and it is possible, given the amount of 
spectrum that is available.
    Mr. Upton. Thank you. Yield back.
    Mr. Boucher. Thank you very much, Mr. Upton.
    The gentlelady from California, Ms. Eshoo, is recognized 
for 5 minutes.
    Ms. Eshoo. Thank you, Mr. Chairman. And thank you to all of 
the witnesses. I think it has been a terrific panel, and I 
think that you have built a very strong case around the whole 
issue of whether we have real competition and what the outcomes 
are if we don't and the state of affairs that we are in.
    Dr. Ford, I don't have a question for you. But there are 
two things that really take my breath away about what you said; 
and that is that a duopoly is natural. I just, I have to tell 
you, that just flies in the face of what I think America is 
about and what our whole system and belief in competition. I 
just don't buy into that. And so I needed to comment because I 
still can't get it out of my head.
    But at any rate, I want to talk, I focused on special 
access in my opening comments. And while I think that, you 
know, much of the focus on special access has been the 
competitive issues that result from wireless companies who, due 
to a lack of competition and choice, have to pay largely 
whatever the incumbent Bell company decides. What I want to 
touch on is the broader impact of this bottleneck in the middle 
mile.
    Now, for years I worked very hard on HIT legislation, on 
getting the legislation passed here. We were successful in 
getting substantial funding, so we got the policy, then we got 
significant funding in the stimulus package. And that is going 
to create jobs. It is going to build an infrastructure to 
reduce health care costs. It is going to help reach people who 
don't have immediate access to hospitals.
    But my question is, in listening to the panel and examining 
this issue, how are these hospitals and other providers who 
don't have immediate access to the network to transmit large 
amounts of health care data, health records, MRIs, x-rays and 
the rest, how are they going to get this to providers and to 
patients?
    I mean, we use, you know, we kind of dive down into a whole 
alphabet soup of the telecom industry here, and yet members 
need to really understand that because of these bottlenecks, 
the work that we have already done and we are congratulating 
ourselves for, how is this going to work? So I pose that 
question to you. I mean, it is special access services. And now 
we are preparing ourselves for an energy bill. The smart grid 
has to be a part of it. The data transmission requirements to 
monitor, to send information, control the flow of energy 
access, energy across the grid, has to be in a very intelligent 
and efficient manner. And it will be substantial. And again, we 
bump up against special access fees.
    So, and I just want to put my own personal example on the 
table and that is, last year, I explored the possibility of 
installing Cisco's telepresence technology in both my D.C. and 
Palo Alto office. And while it was fairly expensive, it was 
going to really do a lot for us and my constituents. But what 
we couldn't afford, what we couldn't afford out of our budget 
was the monthly cost of the special access lines that were 
needed. They were in the range of 2,000 bucks a month. So, you 
know, I mean, I just start with my own operation on that.
    So I open it up to the entire panel on the special access 
fees and the exploration of these very key areas that we need, 
you not only need, but we need to operate to transmit 
information.
    And we have the information technology. But in the 21st 
century, with these fees, I think that we are in real trouble. 
We are saying, on the one hand, congratulations Congress, we 
did all of this. But look what these special access fees are 
doing.
    So whoever would like to comment. Dr. Ford's not going to 
agree with me, so the rest of you can chime in. But 
congratulations, Dr. Ford. There aren't too many people that 
leave a few words with me that will remain just about forever.
    Mr. Meena. Yes, ma'am. I would like to try to answer that. 
Any time you have two carriers that have a disproportionate 
power, then the prices that you experience are going to be 
prevalent. And the way to solve that is introduce, allow more 
competition, or maybe a light touch of regulation. That will 
stimulate those duopolistic providers to do what they need to 
do. We had that same issue in the handset arena. The larger 
carriers are coalescing and bringing together market power to 
acquire the largest, a significant number of the most 
attractive handsets, and we are not able to provide those to 
our customers because of this market power that they exert. So 
that is why it is so important that Congress step in and 
require that companies like us can sell the handsets we want, 
that other companies can get into the special access business 
and do what they need to do to provide services at the rates 
that are competitive.
    Ms. Eshoo. Now, the chairman said something earlier, which 
was a very good question, asking about the stimulus funds and 
making use of them in order to, if I heard it right, to 
accomplish the goal of what some of us would like to see in 
policy. I think, straightaway, we need a new policy. I want the 
companies to make good use of the stimulus funds. And I am 
proud that we did what we did for underserved and unserved 
areas, and it is a good place to start. But I don't think that 
takes the place of a policy.
    But anyway, I think others of you wanted to weigh in on 
what I raised.
    Mr. Potharlanka. If I may add something to this. In terms 
of a specific example of a hospital needing access to bandwidth 
is a great one. The key is to create alternatives so that these 
costs go down. That is the key. Having, trying to regulate so 
much from the medium to long term actually serves the purpose, 
so we need to create alternatives by, you know, enabling 
investment. And so our thought is, and this is what I think we, 
as a company, having been doing for some time is make sure that 
we invest capital where we create broadband hot spots, places 
across the nation where various entities can have equal access 
to bandwidth. It could be hospitals, it could be a government 
facility, frankly, it could be any of the wireless carriers 
which is who we focus on today. But frankly it could be anybody 
else.
    And I think under the stimulus problem and the BTOP 
program, I think we have a unique opportunity to direct some of 
those funds to creating broadband hot spots so that we get the 
multiplier effect of opening broadband up to a larger community 
of users and not focused on just one segment of the 
marketplace.
    And we also believe that, you know, approaches like this 
could be expanded on an ongoing basis, much beyond the stimulus 
program.
    Mr. Murray. I will just add briefly that I think Mr. 
Potharlanka is right. We need alternatives. But at the same 
time, when we say data that show that in some places we have 
got profit margins exceeding 125 percent on these services, we 
have to acknowledge that there will be some places where there 
will not be alternatives, whether that is rural areas, whether 
that is just areas of the country that get left behind for 
whatever reason. And for those areas, the question is are we 
just going to orphan them?
    Ms. Eshoo. Not a natural duopoly. It is hope for a lack of 
that somewhere.
    Mr. Schieber. And I will tell you, 96 percent of our cell 
sites are served by the ILEC. 96 percent of the special access 
we buy on our wire----
    Ms. Eshoo. 96 percent are?
    Mr. Schieber. 96 percent of the wire line special access we 
pay for is paid to the ILEC.
    In all honesty, in the interim and the short-term, I would 
be happy with a duopoly. It is not a duopoly, it is a monopoly 
today. We need to have more competition. And the broadband 
stimulus funding may be an option down the road. It may be an 
opportunity.
    But, in all honesty, we have a short-term issue. And I 
don't think that we can predict that that will necessarily 
solve the special access problem. It is an operating expense 
problem we have. The broadband dollars are spent on capital. 
That is great. I support that. But we have an operating expense 
problem in this nation with respect to special access. And it 
is a monopoly right now. We have extremely difficult terms and 
conditions we have to put up with with the LECS, and I support 
that.
    Ms. Eshoo. Thank you very much. I think you have been a 
terrific panel. Thank you, Mr. Chairman, for allowing them to 
answer the questions.
    Mr. Boucher. Thank you very much, Ms. Eshoo.
    The gentleman from Florida, Mr. Stearns, is recognized for 
5 minutes.
    Mr. Stearns. Thank you, Mr. Chairman. And I will probably 
take a little bit different approach than the gentlelady from 
California. She goes on to talk about the state of affairs that 
we are in and these bottlenecks. But if you look across the 
world and you see the concentration, the United States is more 
competitive than almost all the other countries. Isn't that 
true, Dr. Ford that, I think out of all the OEC countries, the 
United States has more, I mean, we have AT&T, Verizon, Sprint 
is in the mix and so is T Mobile.
    So isn't it true that, contrary to what the gentlelady 
said, there is, the United States has more competition than 
almost any other country in the world? Is that true.
    Mr. Ford. That is true.
    Mr. Stearns. And Dr. Murray, I know you are talking about 
these 125 percent, and that is probably access, and Sprint is 
probably very aware of that. And I think Sprint makes a very 
good point. You know, the other side of the evidence shows that 
the market is competitive. You know, the real larger question 
is, can you have a large wireless market with 12 carriers, or 
is it going to come down to three or four? And I think there 
seems to be some quantitative law here that, when you get this 
kind of market, to have the capital to invest, and to have the 
innovations required, you probably can't have 12.
    So Dr. Ford, you might want to just touch on that, because 
it appears to me that if we are the most competitive in the 
world, there is a quantitative rule that says you have got to 
have at least maybe just two or three that can carry the load.
    Mr. Ford. Absolutely. I mean, we regulated the electricity 
business. We regulated the telephone, local telephone business 
for years because it was a natural monopoly. Only one firm 
could survive. And as technology has developed, we have created 
opportunities to get costs down and to have more firms. Markets 
grow, costs go down, we can have more firms. So, yes, I mean, 
our policy paper 21 sort of lays out the economics of what 
these industries are going to look like, using formulas. I 
mean, basically, there is formula to tell you what this 
industry is going to look like.
    Mr. Stearns. Recently, the FCC came without a report and 
this is what they said. They are talking about the commercial 
and mobile radio services. They said, ``the metrics indicate 
that there is an effective competition in the wireless market 
and demonstrate the increasingly significant role that the 
wireless services play in the lives of American consumers.'' So 
the FCC sort of agrees with you, Dr. Ford, and this is a recent 
report this year which indicates the competition.
    Notwithstanding that fact, Mr. Schieber, Mr. Upton asked 
you the question about advocating increased special access 
regulation. You know that U.S. Telecom indicated, sent a letter 
to the FCC outlining a lot of questions; and you have seen this 
report, have you?
    Mr. Schieber. Yes, I have.
    Mr. Stearns. OK. So they are indicating that the evidence 
shows the market is competitive. You are indicating the market 
isn't. So they, the incumbent phone companies submitted this 
filing with the FCC listing the type of information that needs 
to be collected to answer this question, which is a fundamental 
question for this hearing today. Do you agree that these 
questions are relevant? You obviously have read them. Do you 
think they are pertinent and would provide us an answer whether 
the market is competitive or not?
    Mr. Schieber. I think it is very relevant to determine 
whether the market is competitive. I can speak from personal 
experience in managing access on a day-to-day basis, 
Congressman, that it is, it is very difficult with, to find 
alternatives to the incumbent LECs. You have to look at the 
complete circuit that is being provided, the whole middle mile 
facility. There are certain portions of the middle mile 
facilities where there is more competition than the others. But 
for that very last mile in the middle market facilities there 
is very little competition.
    Mr. Stearns. OK. So we have these questions from the 
incumbents and others, and they submitted them. And you say 
these questions are pertinent. By and large you agree with 
these questions. And I guess a real question is, if the FCC 
answered this question, could they make an objective decision 
whether there is enough competition in the market?
    Mr. Schieber. We believe that the FCC----
    Mr. Stearns. Just a yes or no on this. On these questions 
that are in here that you have read, would you say yes, these 
are sufficient to answer your concern about whether there's 
market competition or not?
    Mr. Schieber. No, sir.
    Mr. Stearns. OK. And would you also, your group and others, 
provide another list of questions that you think are more 
pertinent so we can solve this question from the FCC's 
standpoint, because I think, as Members of Congress, this is so 
difficult for us to regulate. I think the gentlelady from 
California mentioned possibly we should step in. But I think 
many of us are sort of, you know, trying to sort this out. And 
maybe the FCC can do this instead of the government, the United 
States Congress coming in and mandating this thing. So we are 
trying to say, look, the U.S. Telecom has these list of 
questions. You don't think they are pertinent. Do you have your 
own set of questions that you and your group could submit so 
that the FCC could make an objective analysis?
    Mr. Schieber. We would be happy to. Congressman, as I said 
earlier, we honestly believe that the FCC has all the 
information necessary to make this determination. But if there 
is additional information that we can provide, we would be 
happy to. If there are additional questions that we think they 
need to be asking, we will happy to provide those questions. 
With all due respect, what we would really like is for the FCC 
to act. This issue has been with them for six years.
    Mr. Stearns. So the FCC, in your opinion, does not need 
these questions from the U.S. Telecom association to bring 
bearing and answer to this because they already have the 
information.
    Mr. Schieber. I think there are questions that are relevant 
besides the ones that the ILECs have.
    Mr. Stearns. Do you think these are self-serving then? Is 
that what you are saying?
    Mr. Schieber. Without question, sir.
    Mr. Stearns. OK. Dr. Ford, what is your feeling? Can the 
FCC determine this, based upon the information they have 
without these questions?
    Or you probably haven't seen these questions. But I think 
many of us would just like the FCC to act. And all respect to 
Sprint, they have got a good point. If the information is 
there, why isn't the FCC acting?
    Or are you going back on your original statement is that 
there is sufficient competition that the FCC does not have to 
act.
    Mr. Ford. I don't know how much competition there is in 
special access, and nobody knows how much competition there is 
in special access. They keep doing these huge studies. The NRI 
just did a study. The GAO has done studies. And every time they 
come back with these studies, they say, well, the data is 
really bad and we need to do something else. The FCC needs to 
collect more data. The evidence, you know, I don't know, but 
the evidence for regulating special access is really pathetic. 
I mean, if there was a 138 percent rate of returning on special 
access I wouldn't be sitting here talking to you. I would be 
building a special access plant.
    Mr. Stearns. Mr. Murray says it is 125 percent. Isn't that 
what you said, Mr. Murray?
    Mr. Ford. I mean, it is just insane. These are regulatory 
books that the FCC has rejected as being relevant to this 
proceeding. The FCC, they collect the data and present it to 
people, and they said this is not relevant. I mean, a 138 
percent rate of return? I mean, we would all be building 
plants. We would be nuts not to. It just doesn't make any 
sense. But that doesn't say that they don't have a point, OK? 
The point is that somebody needs to get in there and do a 
really serious job and get data from everybody because if there 
is going to be two or three people providing service, OK, you 
can't miss one. If you don't have data from one guy, you have 
missed everything.
    Mr. Stearns. Madam Chairman, I have asked my question. Is 
there anybody else on the panel that would like to tackle this, 
in addition to Dr. Ford and Mr. Schieber? Anybody else?
    Mr. Murray. I guess I just want to challenge the economics 
for a brief second. I will humbly do so since I am not a tenth 
of the economist that Dr. Ford is. But the classic monopoly 
behavior is not, hey, let's figure out how much output we can 
get out there. Let's produce the maximum amount. It is quite 
the opposite. Classic monopoly behavior is let's reduce output 
so we can raise price on the services that we have. And, you 
know, we are seeing, like, I mean, I guess would anybody deny 
that in more than 90 percent of U.S. markets there is only one 
choice for special access? Is anybody going to deny that fact? 
Because I don't think anybody will challenge that. And that 
looks like a really concentrated market to me.
    Mr. Ford. Look, we have--95 percent of the people in this 
country have a telephone, and it was served by a monopoly. So 
restricting output is kind of silly in this business. Carriers 
are required to provide service to people. OK? It is not a 
choice of restricting output. And if there is an output level 
that has been chosen, then the pricing is a little bit tricky, 
OK? Because you are not just going to put it out there and then 
not do anything with it. I mean, it is sunk. If he could make a 
marginal profit, a monopolist would make a marginal profit on 
it. So the argument is not correct.
    Mr. Stearns. Thank you.
    Ms. Eshoo. [presiding.] Too bad Judge Black isn't still 
alive to come and testify.
    Let's see. Just exercising the prerogative of the Chair, 
which I very, very seldom have ever had, I think that just to 
set something down for the record, in terms of competition and 
the foreign markets have been referred to, they do regulate. 
They do regulate the top. They also insist that that there is 
regulation of the wholesale market. And there is a difference, 
Mr. Stearns. And I think that that needs to be taken into 
consideration.
    I would like to recognize the gentleman from Pennsylvania, 
Mr. Doyle, for 5 minutes.
    Mr. Doyle. Thank you very much. As I have said before, the 
debate over special access should really be called critical 
access because these special access lines are critical to 
broadband deployment and competition. These lines allow 
America's businesses to bring innovation and development to 
far-flung areas, and they allow us to stay connected to our 
data and the world around us. These are not small issues with 
funny names. They are our link to the broadband future, and we 
can't get this one wrong.
    The FCC deregulated special access in 1999, anticipating 
new competition driving down prices. I probably would have 
supported deregulation then. But since then, competition has 
grown, then decimated with MCI and the old AT&T getting 
purchased by incumbents, then grown again a little bit, but it 
does not appear to have flourished.
    The GAO in the Bush administration said that, where the FCC 
has completely deregulated special access prices, special 
access prices have gone up. NARUP commissioned a study that 
concluded, ``overall, the market concentration data portray 
special access as one firm such as the ILEC dominates, and 
other providers, both individually and collectively, have a 
small market share and little influence on price.''
    The report also said that the time is ``certainly ripe for 
reform.''
    Now, the incumbents say that the markets are highly 
competitive, and that these reports aren't relying on the right 
data. I suppose I shouldn't be surprised, but these independent 
analysis are interesting.
    I would like to ask Mr. Schieber, Mr. Meena and Mr. Irving, 
can you provide me any examples where a Bell company doesn't 
hold at least 90 percent of the market?
    Mr. Schieber. Sir, I can't provide any such example. As I 
have already stated in my testimony, and then question and 
answers here, 96 percent of our special access circuits are 
with--I can't think of a single market where they don't have 
more than 90 percent.
    Your comments about this being critical access, as I said 
in my oral testimony, it is the lifeblood of the industry. And 
we, in fact, see access rates going up, as you discussed.
    A specific example, we have a situation where we have had a 
9-year contract with an ILEC. We had to renew that just last 
week, and I had two choices. I could renew under a new plan 
that was made available to me at a 28 percent increase for 
those circuits, or alternatively, I could elect not to renew 
under a term, volume and term plan, and I would have to pay 108 
percent more than I had been paying for the last 9 years.
    Mr. Doyle. Mr. Irving.
    Mr. Irving. We at Cricket have been following the debate 
carefully. Special access is, in fact, as has been discussed, 
going to become increasingly important as we move to greater 
capacity and greater data. We are, at Cricket, very interested 
in seeing increasing competition in this field. But I am not 
specifically aware of our own experience with middle access 
providers.
    Mr. Doyle. Mr. Meena, are you aware of any Bell company 
that doesn't hold at least 90 percent of the market?
    Mr. Meena. No, sir. I am not familiar with exactly what the 
percentages are, but I do know that a free market is defined by 
willing buyers----
    Mr. Boucher. Pull the microphone up so everyone can hear 
you because I think everything you are saying is important, and 
especially so because I agree with you. So we want you right in 
the microphone.
    Mr. Meena. Appreciate that. Yes. I don't know specifically 
what the percentages are. But I do know that a free market is 
defined by willing buyers and willing sellers, not seller. And 
that is what is seen to be a bottleneck for my cohorts here. 
Our big issue is related to devices and roaming, and special 
access doesn't matter if our customers can't get the devices 
they need, can't get access to data roaming nationwide.
    Mr. Doyle. Mr. Irving, in your testimony your mentioned 
several proceedings pending at the FCC that deal with roaming. 
Can you explain to the committee your understanding of the 
roaming conditions of the Verizon Wireless Alltel merger? And 
in your opinion, do you think those merger conditions have been 
violated?
    Mr. Irving. I do. In connection with the merger, the 
wireless merger proceedings and, in fact, with all major 
wireless merger proceedings in the last several years, the 
issue of roaming has been raised to the FCC. And the reason it 
has been raised is because mergers of major companies eliminate 
one of few roaming partners that are available in the industry. 
The issues with respect to Alltel and Verizon merging, roaming 
came up. Verizon has a policy of carving out large geographic 
areas from competitors where they prohibit roaming, and there 
was concern that the elimination of an Alltel partner would 
further exacerbate that problem.
    So, in connection with the roaming, with the merger 
proceeding, Congress, excuse me, the FCC imposed a condition 
that said that small and midsize carriers who dealt with 
Verizon and Alltel could choose either the Alltel agreement or 
the Verizon agreement to cover their roaming traffic. Verizon 
is known for having large geographic carve-outs in which they 
prohibit roaming. The Alltel agreements didn't have that. And 
so this merger condition insured that roaming would be 
available.
    Although the condition has been in place, and although the 
merger has occurred, Verizon is taking the position that not 
only can they use geographic carve-outs for their own markets, 
but they are free to do that with Alltel markets also. So I 
believe that they are violating the condition that the FCC put 
in place. They are not violating it. They are making--they are 
reserving the right to violate it. They are putting competitors 
like Lieb in a difficult position. We have asked the FCC to 
clarify and we hope the FCC will clarify rapidly.
    Mr. Doyle. I see my time has expired. I thank the Chair.
    Ms. Eshoo. Thank you. The gentleman from Illinois, Mr. 
Shimkus, is recognized for 5 minutes.
    Mr. Shimkus. Thank you Madam Chairman.
    Steve, do you want to go?
    OK. Thank you, Madam Chairman. Thank you for sitting in the 
Chair, and you all for waiting through the votes, and I am 
sorry about missing some of the testimony.
    Let me just ask a simple question. Do you believe the 
auction of more spectrum with fewer conditions will benefit the 
consumer? Yes or no. And maybe why, if you have got a short 
answer. Mr. Schieber.
    Mr. Schieber. Sir, I am not a spectrum expert. I am not 
sure that I am qualified to answer.
    Mr. Shimkus. OK. That is fine. Mr. Irving.
    Mr. Irving. Absolutely. I think the answer is yes. I was 
prepared to tell the committee that spectrum was the lifeblood 
of the wireless industry. Special access apparently is the 
lifeblood. And spectrum also. But we would like to see 
additional spectrum auctioned off with few conditions so that 
small and mid size carrier can continue to compete.
    Mr. Shimkus. Great.
    Mr. Meena. Yes. I don't think the name of the game in our 
industry is necessarily access to any kind of spectrum. Access 
to low band is particularly important. When I say low band 
spectrum, I mean 800 megahertz, 700 megahertz. Last year we 
were able to acquire 700 megahertz spectrum that we are not 
able to actually build out because of the issue related to 
handsets and not having access to automatic roaming, auto data 
roaming.
    Mr. Shimkus. Let me ask because the question really is 
about if we place additional conditions on the spectrum that we 
are auctioning off, would that make it more difficult to you 
and to your decision to purchase or to bid on it.
    Mr. Meena. It just depends on what those special conditions 
are.
    Mr. Shimkus. So, if we added conditions without a 
definition, that does change your parameters a little bit?
    Mr. Meena. Well, let me give you an example for 
specifically what you are asking.
    We were hoping there would be special conditions tied into 
the 700 auction that would require automatic data roaming for 
those who bought, I believe it was, the C-Block spectrum last 
year. That did not occur. If that special condition had been in 
place--and we would have been supportive of it--we would have 
been very pleased if that would have come about.
    Mr. Shimkus. OK. Sir.
    Mr. Potharlanka. We really were not qualified to talk about 
spectrum as it relates to middle mile. Our opinion is making 
more spectrum available for middle mile, I think, will create 
more options, and actually targeting----
    Mr. Shimkus. OK. I have limited time, so let me just go to 
Mr. Murray and then to Dr. Ford.
    Mr. Murray. So more spectrum would clearly benefit 
consumers, but the central tragedy of the last 10 years of 
policymaking, I would say, is the fact that we had the best 
opportunity of a swath of spectrum coming up. Who got it? The 
same two dominant carriers that were trying to create 
competition----
    Mr. Shimkus. But the question is: If we put restrictions on 
spectrum, do you like that?
    Mr. Murray. Well, you are referencing, I guess, the C-Block 
openness conditions, and I see--you know, if those conditions 
help the marketplace to move towards more openness and to get 
more devices and more applications out there for consumers, I 
think that is a net win for consumers, and I actually think----
    Mr. Shimkus. But, obviously, the return on investment from 
the government on some of the auctions, because of 
restrictions, was less?
    Mr. Murray. Well, let us remember that this is the public's 
spectrum; it is actually not the government's spectrum. What is 
the value of a public park, you know? Could we presumably earn 
a little bit more revenue if we sold that land for the public 
park? Well, sure.
    Mr. Shimkus. But you also have to remember that people have 
to put in a lot of capital to make that spectrum worth 
anything. Otherwise, it is worth nothing.
    Mr. Murray. Right. But some would actually argue the 
opposite--that in some cases, by putting on certain kinds of 
conditions, you may actually increase the number of bidders who 
get into it.
    Mr. Shimkus. Does anyone agree with that? Those of you who 
cannot debate this issue, I understand that.
    Mr. Irving, do you agree that adding additional conditions 
will bring in more bidders or less bidders?
    Mr. Irving. You know, there are conditions that could bring 
in more bidders. Right now, we have--so it is hard to----
    Mr. Shimkus. Does it restrict the ability of us to get a 
better return on the investment of spectrum, if we view it as a 
public asset, that we do so?
    Mr. Irving. I am sorry. I apologize. I did not hear your 
question.
    Mr. Shimkus. Well, I mean, if we put in conditions, does it 
inhibit our ability to raise the revenue from the bidders as we 
specify what goes on there? Let me just move on to another 
question because I am----
    Mr. Meena. Could I take a shot at that, please?
    Mr. Shimkus. No. Actually, I just need to go. I have got 
about four questions, and I have only dealt with one.
    So let me just go to Mr. Schieber. How would Carterphone 
rules, requiring all wireless networks to support all devices, 
impact your ability to manage your network?
    Mr. Schieber. It would have a significant impact. I am not 
a network engineer; but, you know, we are very cognizant of 
managing traffic to ensure that all of our customers have equal 
access to our network, and putting other devices----
    Mr. Shimkus. And let me just, if I may, Madam Chair, finish 
with this: Would service quality be affected?
    Mr. Schieber. It very well could be. Yes, sir.
    Mr. Shimkus. Thank you, Madam Chair.
    Ms. Eshoo. [presiding.] Thank you, Mr. Shimkus.
    The gentleman from California, Mr. McNerney, is recognized 
for 5 minutes.
    Mr. McNerney. Thank you, Madam Chair.
    I want to thank the panel for your testimony this morning. 
I have learned a lot, and I find it especially helpful, 
especially regarding special access and backhaul. I know it is 
not easy to testify, so I appreciate your coming up here.
    I would like to see a competitive marketplace in which the 
little guy has a chance to become a big guy, and that is kind 
of what we are talking about here. I particularly liked your 
comments, Mr. Murray, that it is not necessarily about 
overregulating but that we need to use our oversight authority 
to haul noncompetitive players in here and to make them explain 
themselves in front of us. That is something that I hope the 
committee can follow up with.
    My first question goes to you, Mr. Murray, and to you, Dr. 
Ford. I definitely appreciate your economic perspective on 
this, but there are a few large telecom players that dominate 
the field, especially regarding the spectrum, while several 
smaller companies are clawing it out for the scraps, for the 
crumbs.
    How do you propose to run the next auction so that it is 
more competitive for the little guys to get a part of it?
    Mr. Murray, could you take that first?
    Mr. Murray. I think, frankly, we just need to look at rules 
that perhaps have a filter which looks at dominant carriers. If 
you have already got a ton of spectrum, if you are already 
massively dominant in the industry, you know, it is possible 
that we should consider a spectrum block, which is a 
competitive spectrum block.
    Mr. McNerney. So, by its very nature, that would get more 
people to bid if you were blocking?
    Mr. Murray. Exactly.
    Mr. McNerney. Dr. Ford.
    Mr. Ford. You can hope for some things that you can never 
have, and this industry is very costly to be in, and you can 
try to force somebody in it, but that does not mean they are 
going to survive, OK? They are going to have to spend billions 
of dollars every year to keep that network running. If they 
cannot generate the business, then all you are doing is waiting 
for some bigger guy to gobble him up, and you have created a 
massive inefficiency, OK?
    What we have to have in this industry is a dramatic rise in 
either the market size--the expenditures, and maybe broadband 
will help with that--or a significant reduction in the cost of 
the network. I have not seen either of those really happen.
    I mean we are really at the point now where we are about to 
lose possibly another wireless carrier, and it is not because 
of some malfeasance or government incompetence in regulating 
the industry. It is just that it is too competitive for four or 
five people. It is just too competitive. It is just the nature 
of the business, man.
    Mr. McNerney. Like Ms. Eshoo, I have trouble stomaching 
that geez, we need to let the bigger players get bigger so that 
they can spend the money they need to spend.
    Mr. Ford. Well, you are going to have to subsidize them----
    Mr. McNerney. From the market.
    Mr. Ford. That is the only choice because they are going to 
lose money. If you have five of them beating their brains out, 
they are going to lose money. They have a debt to pay when they 
build that network. They have to have revenue to cover that 
cost. That is the only point, right? That is the only point. 
The costs are exceedingly high in this business.
    Mr. McNerney. I have a technical question. I want to move 
on to a technical question.
    Mr. Murray. California alone is the ninth largest economy 
in the world. Are we seriously suggesting that that cannot 
support an independent, strong carrier? I think Leap is a 
testament to that is just not true. If it were so damned 
competitive, why is that its profit margins keep creeping up in 
the midst of a recession? We have got these guys making 
gangbuster profits in the midst of a time when the rest of the 
country is really struggling it out.
    That, to me, says market power. We have got evidence of 
market power left to right in this industry. We have got 
anticompetitive behavior, blocking applications. You cannot 
get, you know, exclusive contracts on handsets.You know, you 
cannot get special access. What more evidence do we need that 
this market needs some oversight?
    Mr. McNerney. Thank you. I would like to move on to a 
technical question, actually.
    Mr. Schieber, you said you are not a technical person 
regarding the spectrum, but you are about to make massive 
investments in G4, I understand; is that correct?
    Mr. Schieber. I am sorry. G4?
    Mr. McNerney. Yes.
    Mr. Schieber. Oh, 4G.
    Mr. McNerney. Oh, 4G. Excuse me.
    Mr. Schieber. I am sorry. Yes. Yes.
    Mr. McNerney. I am a little dyslexic.
    Mr. Schieber. Through a company, Clearwire, that we own a 
portion of, yes.
    Mr. McNerney. So is there a problem with 4G in regard to 
the interference between neighboring portions of the spectrum?
    Mr. Schieber. In all honesty, I believe anytime that you 
have spectrum that butts up against itself, that you always run 
the risk that there is some sort of interference. I know that 
it is something that our engineers deal with on a regular 
basis.
    Mr. McNerney. Is that a particular problem? I mean 4G has a 
tremendous amount of bandwidth and content. There must be some 
spillover that exceeds that of prior generations of technology.
    Mr. Schieber. I have not heard anything that indicates that 
the engineers cannot manage the spectrum appropriately to 
ensure that there is not interference.
    Mr. McNerney. Does anyone else on the panel have a comment 
on that question?
    Mr. Meena. I think Mr. Schieber is right.
    You have that in any spectrum band. You could have bleed-
over and interference if it is not managed properly. I do not 
know of any special situations with 4G other than incumbent 
broadcast TV stations at the 700-megahertz level that there 
might be some interference with when companies like ourselves 
offer 4G services at the 700-megahertz band.
    Mr. McNerney. OK. Thank you. My time has expired.
    Ms. Eshoo. All right. Thank you, Mr. McNerney.
    The Chair recognizes the gentleman from Oregon, Mr. Walden, 
for 5 minutes.
    Mr. Walden. Thank you, Madam Chair. I appreciate that.
    Mr. Schieber, my understanding is that more than half of 
all the backhaul in Europe and in Asia is wireless. If wireless 
backhaul is successful elsewhere, why doesn't Sprint use it 
more comprehensively in the U.S. given your partial ownership 
of Clearwire? What is the issue behind that?
    Mr. Schieber. The majority of the cell sites where we do 
have an alternative vendor is, in fact, a wireless backhaul. It 
is technology that we are seeing an increasing amount of. I 
mentioned earlier that we work with FiberTower to bring 
wireless backhaul to our own cell sites.
    One of the single biggest issues that we are faced with in 
migrating to wireless backhaul or to any other alternative 
access vendor is the fact that we are subject to very onerous 
terms and conditions associated with the special access and the 
middle mile facilities we buy from the ILEC today. We have 
situations where if we buy too much we are penalized; where if 
we buy too little, we are penalized. If we want to migrate a 
circuit from the ILEC to an alternative vendor, we have to pay 
in excess of $900 in some cases. It is very, very difficult and 
very onerous to move, and so we have to be very cautious to 
avoid incurring termination liabilities.
    Unfortunately, we were forced to sign up for those 
contracts because, without signing up for those contracts, we 
would have had to have paid even higher rates above and beyond 
what we are paying today, which, as we heard today, we are 
already seeing exorbitant rates of return on special access and 
ILECs.
    Mr. Walden. So it is not because T1 lines are so cheap?
    Mr. Schieber. No, sir, T1 lines are not cheap. One-third of 
our operating costs associated with operating a cell site are 
for T1s and for the middle mile facilities.
    Mr. Walden. OK. Because your CTO, Barry West--I guess in 
2008--made some comment about that, that T lines are cheap and 
that that is part of the reason, so I was just wondering.
    Mr. Schieber. In certain parts of the country--in very 
dense, urban areas--if there is a relatively short distance 
between a cell site and a LEC central office, you may very well 
see some less expensive T1s, but it is not a cheap technology 
for us to buy.
    Mr. Walden. OK. Dr. Ford, you were making some comments 
about just the extraordinary cost of whoever is building this 
out over time and about the need to get return on that. Mr. 
Murray, I think, had a little different perspective on that in 
terms of--I think your line was ``the gangbuster profits right 
now.''
    I am curious, Dr. Ford, if you want to respond to that.
    Mr. Ford. Well, I mean I do not see any evidence of 
gangbuster profits. I mean, you know, you could say, well, 
there are gangbuster profits in special access. Well, I thought 
we were talking about the wireless industry. There are four or 
five wireless carriers in California. I mean there is enough 
market in places for that to exist, and there are areas--we 
heard earlier from members of the subcommittee--where they do 
not have enough wireless, right? They are rural areas where the 
markets are very small but where the cost of deploying the 
network is not that much different or is even higher in rural 
areas. So the economics drives this thing. I mean you cannot 
just say, ``I want more competition.'' The economics are going 
to tell you whether or not you can have what you want.
    So, you know, firm profits are the only reasonable measure 
of how competitive the business is, because any given product 
may be above cost or any given product may be below cost. So it 
is across the whole scheme of the business venture from which 
you have to measure the competitiveness or the profitability of 
the business.
    Mr. Walden. I will tell you that it seems like this 
Congress and administration certainly have an attitude of 
nationalizing everything, once it is broke. So I hope we do not 
create something else to go after.
    I think I read in some testimony that 99 percent of America 
has access to cellular coverage right now. I must be the 
winner, then, of that 1 percent, because up until a year ago, 
at least two county seats--well, at least one that I know of 
for sure--in my district did not have cellphone coverage. U.S. 
Cellular came in there, and I know they are considering another 
town in my district. There are still lots of these rural areas 
where we do not even have one carrier.
    It would not be fair, Mr. Murray, if I did not let you 
respond now to what Dr. Ford said.
    Mr. Murray. There is a lot to respond to there, sir.
    One thing I would say is I do not see this at all as moving 
away from a market economy. In fact, this is quite the 
opposite. This is, how can we maintain free markets? How can we 
maintain competition? That is what I am saying.
    My perspective has always been that I prefer competition to 
regulation, and in this market, while we do have some 
competition, there are really clear indicators that they are a 
market power. You know, the Department of Justice uses things 
like four firm concentration ratios, like HHI indices. The fact 
of the matter is those numbers have been creeping steadily up 
in this industry, and to complement that consolidation trend we 
see evidence of abuse.
    So all I am saying is in order so that we can have a free 
market and have these companies stay strong and thrive, what we 
need to do is make sure that the dominant carriers are not 
abusing their market power. This has been the story of 
competition for more than a century.
    Mr. Walden. Mr. Irving, do you want to respond?
    Mr. Irving. Yes. Very quickly, I would just like to point 
out that, I think, small and medium carriers help make the 
industry vibrant, innovative and competitive.
    What I would like to see is--I would like to make sure, to 
the extent that there are forces essentially tending toward 
elimination or toward the marginalization of small and medium 
carriers, that we act to address those forces so that we can 
continue to be innovative driving forces in the industry.
    Mr. Walden. All right. Thank you.
    Thank you, Madam Chair, for your indulgence on the time.
    Ms. Eshoo. I thank the gentleman who is always so 
thoughtful and well-prepared.
    Dr. Ford, you talked about California. You mentioned this. 
I want to set something down for the record here.
    Now, according to the GAO report on special access, in 
Silicon Valley--most specifically in San Jose, California, 
perhaps the most data-hungry area of the world--competitors 
have access to only 6.2 percent of all buildings. To put it 
another way, the incumbent provider, AT&T, is the only provider 
of access in 93.8 percent of all buildings. So, if you think 
that is competitive, I will eat my hat. This is so worthwhile 
to drill down into this, but I just wanted to get that on the 
record.
    Mr. Ford. Is that a question?
    Ms. Eshoo. No.
    I am going to recognize now the gentleman from Indiana, Mr. 
Buyer, for 7 minutes.
    Mr. Buyer. Actually, I have to go back, Mr. Meena, and look 
at your testimony again.
    Your word ``duopoly'' has sort of stuck in my mind, and so 
I was trying to think of other industries in our country that 
have that type of system. I was thinking about the tire 
industry, perhaps. There are industries out there that have 
really dominant players. You might want to call them 
``duopolies,'' but they really are not. So you have got Coke 
and Pepsi, right? Then there are a whole bunch of others.
    Mr. Meena. Right.
    Mr. Buyer. That is exactly what you have here, too. I don't 
know, I don't want to be a lawyer and be nitpicking at your 
testimony here.
    Mr. Meena. Well, I do not agree with that.
    Mr. Buyer. You can't say ``duopoly'' and then can't count, 
OK? So whoever wrote that for you can't count. So don't call it 
a ``duopoly.'' That is the only point I would like to make. It 
is an easy thing to----
    Mr. Meena. I would like an opportunity to respond.
    Mr. Buyer. Fine. It is an easy thing to throw out there. I 
am just being very cautious to you.
    Sure, go ahead.
    Mr. Meena. Yes. Well, what I am saying is that when I was 
in college, I walked out to play football at Ole Miss. There 
were two scholarship quarterbacks and five walk-ons. Were there 
really seven quarterbacks or two?
    Mr. Buyer. Seven.
    Mr. Meena. No. I tell you, there were two because there 
were only two who got to go to the scrimmages and two who got 
to put the game jerseys on and those types of things. Yes, you 
could count one, two, three, four, five, six, and seven.
    Mr. Buyer. Oh, I see. So the other five did not make the 
other two better players?
    Mr. Meena. No, sir. Here is why. Here is the example.
    Mr. Buyer. Where did you go to school?
    Mr. Meena. I went to the University of Mississippi, but let 
me finish, please, sir.
    The two who are duopolistic in our industry have built 
their companies on low-band spectrum--850 megahertz--and they 
have put together licenses throughout the Nation on the most 
attractive beachfront property spectrum. When the auctions 
occurred last year and when more of that low-band spectrum was 
let, or was auctioned, they were able to acquire more and more 
of that. That allowed them to continue to build their 
businesses on the best spectrum possible in the wireless 
industry. That is the best advantage they have.
    Mr. Buyer. Let me reclaim my time, then, because I am 
getting a sense that you would believe that all wireless 
carriers should have equal access to precisely the same type of 
wireless headset regardless of who made it.
    Is that what you believe?
    Mr. Meena. What is that?
    Mr. Buyer. Is that what you believe?
    Mr. Meena. I do believe that every wireless user should 
have----
    Mr. Buyer. I am trying to figure out what you believe.
    Mr. Meena. OK.
    Mr. Buyer. Then, if that is the belief and if you are 
asking us to adopt that belief, where is the incentive to 
collaborate and to innovate and to create differentiating 
products?
    Mr. Meena. I will tell you where the incentive is. It is in 
competition. These manufacturers want to sell every device they 
possibly can. For example, the iPhone. The iPhone today is 
limited to just selling to AT&T customers. Manufacturers desire 
to sell their products just like we desire to sell our 
products.
    Mr. Buyer. Well, if in fact we had a paradigm--actually, 
strike the word ``paradigm.''
    If we had a predicate of your belief, where is the 
incentive for someone to adjoin and to put at-risk capital into 
the marketplace to create anew? That is the iPhone. So, when 
you have someone who actually wants to innovate and to do 
something new and different and to create something new and 
different, it excites the consumer, and then everybody goes 
chasing after the mark.
    Mr. Meena. Sure. All smartphones----
    Mr. Buyer. Would you agree with that?
    Mr. Meena. I do agree with that, and I can even add onto 
that.
    Mr. Buyer. Well then, if you agree to that, explain to me 
how that is congruent to your predicate?
    Mr. Meena. Here is how it is congruent. All users want 
access to the latest and greatest devices, especially 
smartphones, this day. We are seeing a great migration from the 
plain old cellular phones to smartphones, including iPhones. 
BlackBerries are another example of that.
    Our average revenue per user in smartphones is $10 less 
than other companies' average revenue per user. If you have one 
company that has one device, they do not have that opportunity 
to take advantage of the price differential that we might offer 
and that others might offer.
    Mr. Buyer. You know, I could use your same analogy in the 
pharmaceutical market. We deal with these exclusivity 
arrangements. When someone goes to the marketplace and they 
take the risk--meaning they are willing to also accept the loss 
of the marketplace--and when they have a blockbuster drug or 
when they have a blockbuster product, then everyone dives for 
the product. They want access to it, and they demand their 
access, and then they demand their subjective belief under an 
objective standard called ``fairness,'' and they want us or the 
FCC to determine it.
    Mr. Meena. OK.
    Mr. Buyer. The reality is that--I suppose King Solomon, so 
long ago, said: When it comes to human vice--in particular, 
greed--that there is nothing new under the sun.
    Now, let us be pretty doggone honest with each other. That 
is what this is about. It is about money. It is about how we 
gain access to that dollar. We want to chase it. We want to 
benefit from somebody else's investment. So would we be just as 
equally willing to pay for their loss for products that do not 
make it on the market? The answer is no. That is the reality. 
The answer is no.
    Mr. Meena. Let me tell you----
    Mr. Buyer. So let me--no. Time out. I understand your 
predicate. Respectfully, I disagree with your philosophy. I 
want to protect the marketplace is what I want to protect.
    So as you look out there and you say, OK, not only does 
AT&T have an exclusivity with the iPhone, Sprint with the Palm 
Pre, Verizon with the BlackBerry Storm, T-Mobile now hooking up 
in an agreement with Google, but if these companies want to do 
this and if they are creating products which consumers like and 
they are new and innovative, I think it is pretty healthy, that 
is what I look at. I think of it as something that is very 
healthy.
    I want to ask this question to--let me turn to Dr. Ford. 
Help me here.
    If Congress were to say that we would ban exclusivity--do a 
prohibition of exclusivity agreements--what would be the impact 
upon innovation and true competitiveness in the marketplace?
    Mr. Ford. The wireless industry--a lot of the competition 
in the wireless industry occurs in the device. I mean most of 
the commercials you see on television are talking about the 
device. So the device is a very important component of 
competition in that industry. Plus, they are giving it to you a 
lot of times, and they are giving it to you for a very low 
price, so that is a very important piece. They want to be able 
to differentiate in that piece to attract business.
    Necessity is the mother of invention. When AT&T came out 
with the iPhone, every single manufacturer was working 
exceedingly hard to try to match the quality of that product. 
And Apple drove this. It wasn't the wireless industry, OK? This 
was Apple's decision. Whether or not that was a wise decision 
for Apple, I don't know. You could go either way. AT&T had to 
upgrade its network significantly to handle that in terms that 
maybe they didn't put in as much investment as they needed to, 
given the enormous demands that that device puts on the 
network. I think, unquestionably in this industry, if you 
prohibit that kind of arrangement, you are going to reduce 
competition.
    I think their points may be a little different in the sense 
that I am out here in this rural area, and I am not really 
competing in that space.
    You know, I do not think that--I mean, there is the issue 
also of whether or not a carrier would say, I am going to make 
a device for you, if you can't sell 5 million of them. It may 
not be efficient for the manufacturer to sell to very small 
firms, so it might not necessarily be an issue with the big 
carriers in trying to keep other people from their goodies.
    Mr. Murray. Congressman, if I may----
    Mr. Buyer. I only have one comment. My time has expired. So 
if the Chair would indulge me, I would note that, out of the 
Organization of Economic Cooperation and Development, of all of 
the countries, the United States has the most minutes of use, 
the lowest revenue per minute and the least concentrated market 
of, and, what I would say, the most efficient use of spectrum 
of any of the countries.
    Mr. Murray. And consumers pay more in this country than in 
any other country, right?
    Mr. Buyer. Geez. If we use more, we pay more. Hello. Hello.
    Mr. Ford. Thank you.
    Mr. Murray. Sir, here is my question for you.
    Mr. Buyer. If you want the best and if you get the most 
efficient use out of the spectrum and if you use it a lot, you 
are going to pay more. It is a free market enterprise system.
    Mr. Murray. And that is why we are all moving towards 
unlimited----
    Mr. Buyer. Wow.
    Ms. Eshoo. Wow. This really did something for the volume. I 
have a bill on advertising volume----
    Mr. Ford. I am all for that.
    Ms. Eshoo. --that blows people out of the room.
    Thank you, Mr. Buyer.
    I just want to make a comment about what is tied to what. 
We have many successful companies in the country that really 
are not tied to other services. TiVo? How many people in the 
room use TiVo? How about IMAX? Slingbox? Xbox?
    So the notion that there has to be a nexus between the two 
is something I do not necessarily buy into, and we have got 
some very good examples of that.
    Mr. Murray, you started to say something, and I would like 
to give you time to answer and anyone else who is on the panel. 
There is not any other member to call on, so we have got a few 
minutes here, and then we will adjourn.
    Mr. Murray. Briefly, I wanted to address Mr. Buyer's point, 
which was that the network is not the innovator here. It is the 
handset company who is doing the innovation. I challenge the 
premise--that is, a free market--that we are going to maximize 
returns to that handset manufacturer by telling them to limit 
the universe of people with whom you can contract. That is just 
fundamentally wrong.
    If we want to maximize the incentive for people to build 
sexy new devices, let them sell it to everybody. The only 
reason that manufacturers have not come out against these 
exclusive deals is because they are scared of the retribution 
that they will get back from the carriers. The carriers are not 
innovating here; it is the handset manufacturers. It is just 
wrong if we say we are going to maximize their incentives by 
limiting the universe of people that they can sell to.
    Mr. Buyer. Were they working together?
    Ms. Eshoo. Well, the gentleman has not been recognized.
    Mr. Meena. Most of the innovation is coming from the 
manufacturers. Most of it is coming from the manufacturers.
    Ms. Eshoo. Does anyone else want to chime in on this?
    Mr. Meena. Can I speak to the pharmaceutical issue?
    Ms. Eshoo. Quickly.
    Mr. Meena. In a rural area, what if there were just one--
let us just say there was a Walgreens and not a CVS, and that 
CVS had access to a lifesaving drug. Is it not fair for those 
who live in the rural area to have access to that lifesaving 
drug? That is what we are dealing with here. Is it not fair 
that those who live in rural areas do not have access to the 
latest and greatest devices?
    Ms. Eshoo. Well, I think that today's hearing has been 
highly instructive and that there obviously are divergent views 
on the committee, but I think that we have not just skirted 
along the surface but that we have really dipped our wings into 
the important issues here. I think the area of special access 
is something that deserves a great deal of attention, not only 
by the Congress but by the FCC.
    I hope again that the new composition of the FCC will come 
together soon. There is an enormous amount of work to be done 
there and some very clear thinking about what the state of 
competition is in the United States of America. We are all for 
competition. I mean it is in the DNA of every American, but--
well, I will not editorialize that.
    So I want to thank the audience. You have been a patient 
one. I do not know if we have so mesmerized you by the great 
content of the hearing or if you are employed by some of the 
interests here; but whatever, it is nice to see that the room 
remained full.
    I want to ask for unanimous consent to keep the record open 
for 10 days for members to submit their opening statements and 
follow-up questions.
    Ms. Eshoo. Also, not the Acting Chairwoman, but the 
Chairman has also included AT&T and Verizon to submit 
statements for the record, which I find very interesting, but 
that is what he would like to do. They did not testify today, 
but they are going to be allowed to submit statements for the 
record.
    [The information appears at the conclusion of the hearing.]
    Ms. Eshoo. So that is the unanimous consent request. Not 
hearing any objections, so be the order. And the subcommittee 
will now adjourn. Thank you, everyone.
    [Whereupon, at 12:55 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:] 

    [GRAPHIC] [TIFF OMITTED] T2886A.096
    
    [GRAPHIC] [TIFF OMITTED] T2886A.097
    
    [GRAPHIC] [TIFF OMITTED] T2886A.098
    
    [GRAPHIC] [TIFF OMITTED] T2886A.099
    
    [GRAPHIC] [TIFF OMITTED] T2886A.100
    
    [GRAPHIC] [TIFF OMITTED] T2886A.101
    
    [GRAPHIC] [TIFF OMITTED] T2886A.102
    
    [GRAPHIC] [TIFF OMITTED] T2886A.103
    
    [GRAPHIC] [TIFF OMITTED] T2886A.104
    
    [GRAPHIC] [TIFF OMITTED] T2886A.105
    
    [GRAPHIC] [TIFF OMITTED] T2886A.106
    
    [GRAPHIC] [TIFF OMITTED] T2886A.107
    
    [GRAPHIC] [TIFF OMITTED] T2886A.108
    
    [GRAPHIC] [TIFF OMITTED] T2886A.109
    
    [GRAPHIC] [TIFF OMITTED] T2886A.110
    
    [GRAPHIC] [TIFF OMITTED] T2886A.111
    
    [GRAPHIC] [TIFF OMITTED] T2886A.112
    
    [GRAPHIC] [TIFF OMITTED] T2886A.113
    
    [GRAPHIC] [TIFF OMITTED] T2886A.114
    
    [GRAPHIC] [TIFF OMITTED] T2886A.115
    
    [GRAPHIC] [TIFF OMITTED] T2886A.116
    
    [GRAPHIC] [TIFF OMITTED] T2886A.117
    
    [GRAPHIC] [TIFF OMITTED] T2886A.118
    
    [GRAPHIC] [TIFF OMITTED] T2886A.119
    
    [GRAPHIC] [TIFF OMITTED] T2886A.120
    
    [GRAPHIC] [TIFF OMITTED] T2886A.121
    
    [GRAPHIC] [TIFF OMITTED] T2886A.122
    
    [GRAPHIC] [TIFF OMITTED] T2886A.123
    
    [GRAPHIC] [TIFF OMITTED] T2886A.124
    
    [GRAPHIC] [TIFF OMITTED] T2886A.125
    
    [GRAPHIC] [TIFF OMITTED] T2886A.126
    
    [GRAPHIC] [TIFF OMITTED] T2886A.127
    
    [GRAPHIC] [TIFF OMITTED] T2886A.128
    
    [GRAPHIC] [TIFF OMITTED] T2886A.129
    
    [GRAPHIC] [TIFF OMITTED] T2886A.130
    
    [GRAPHIC] [TIFF OMITTED] T2886A.131
    
    [GRAPHIC] [TIFF OMITTED] T2886A.132
    
    [GRAPHIC] [TIFF OMITTED] T2886A.133
    
    [GRAPHIC] [TIFF OMITTED] T2886A.134
    
    [GRAPHIC] [TIFF OMITTED] T2886A.135
    
    [GRAPHIC] [TIFF OMITTED] T2886A.136
    
    [GRAPHIC] [TIFF OMITTED] T2886A.137
    
    [GRAPHIC] [TIFF OMITTED] T2886A.138
    
    [GRAPHIC] [TIFF OMITTED] T2886A.139
    
    [GRAPHIC] [TIFF OMITTED] T2886A.140
    
    [GRAPHIC] [TIFF OMITTED] T2886A.141
    
    [GRAPHIC] [TIFF OMITTED] T2886A.142
    
    [GRAPHIC] [TIFF OMITTED] T2886A.143
    
    [GRAPHIC] [TIFF OMITTED] T2886A.144
    
    [GRAPHIC] [TIFF OMITTED] T2886A.145
    
    [GRAPHIC] [TIFF OMITTED] T2886A.146
    
    [GRAPHIC] [TIFF OMITTED] T2886A.147
    
    [GRAPHIC] [TIFF OMITTED] T2886A.148
    
    [GRAPHIC] [TIFF OMITTED] T2886A.149
    
    [GRAPHIC] [TIFF OMITTED] T2886A.150
    
    [GRAPHIC] [TIFF OMITTED] T2886A.151
    
    [GRAPHIC] [TIFF OMITTED] T2886A.152
    
    [GRAPHIC] [TIFF OMITTED] T2886A.153
    
    [GRAPHIC] [TIFF OMITTED] T2886A.154
    
    [GRAPHIC] [TIFF OMITTED] T2886A.155
    
    [GRAPHIC] [TIFF OMITTED] T2886A.156
    
    [GRAPHIC] [TIFF OMITTED] T2886A.157
    
    [GRAPHIC] [TIFF OMITTED] T2886A.158
    
    [GRAPHIC] [TIFF OMITTED] T2886A.159
    
    [GRAPHIC] [TIFF OMITTED] T2886A.160
    
    [GRAPHIC] [TIFF OMITTED] T2886A.161
    
    [GRAPHIC] [TIFF OMITTED] T2886A.162
    
    [GRAPHIC] [TIFF OMITTED] T2886A.163
    
    [GRAPHIC] [TIFF OMITTED] T2886A.164
    
    [GRAPHIC] [TIFF OMITTED] T2886A.165
    
    [GRAPHIC] [TIFF OMITTED] T2886A.166
    
    [GRAPHIC] [TIFF OMITTED] T2886A.167
    
    [GRAPHIC] [TIFF OMITTED] T2886A.168
    
    [GRAPHIC] [TIFF OMITTED] T2886A.169
    
    [GRAPHIC] [TIFF OMITTED] T2886A.170
    
    [GRAPHIC] [TIFF OMITTED] T2886A.171
    
    [GRAPHIC] [TIFF OMITTED] T2886A.172
    
    [GRAPHIC] [TIFF OMITTED] T2886A.173
    
    [GRAPHIC] [TIFF OMITTED] T2886A.174
    
    [GRAPHIC] [TIFF OMITTED] T2886A.175
    
    [GRAPHIC] [TIFF OMITTED] T2886A.176
    
    [GRAPHIC] [TIFF OMITTED] T2886A.177
    
    [GRAPHIC] [TIFF OMITTED] T2886A.178
    
    [GRAPHIC] [TIFF OMITTED] T2886A.179
    
    [GRAPHIC] [TIFF OMITTED] T2886A.180
    
    [GRAPHIC] [TIFF OMITTED] T2886A.181
    
    [GRAPHIC] [TIFF OMITTED] T2886A.182
    
    [GRAPHIC] [TIFF OMITTED] T2886A.183
    
    [GRAPHIC] [TIFF OMITTED] T2886A.184
    
    [GRAPHIC] [TIFF OMITTED] T2886A.185
    
    [GRAPHIC] [TIFF OMITTED] T2886A.186
    
    [GRAPHIC] [TIFF OMITTED] T2886A.187
    
    [GRAPHIC] [TIFF OMITTED] T2886A.188
    
    [GRAPHIC] [TIFF OMITTED] T2886A.189
    
    [GRAPHIC] [TIFF OMITTED] T2886A.190
    
    [GRAPHIC] [TIFF OMITTED] T2886A.191
    
    [GRAPHIC] [TIFF OMITTED] T2886A.192
    
    [GRAPHIC] [TIFF OMITTED] T2886A.193
    
    [GRAPHIC] [TIFF OMITTED] T2886A.194
    
    [GRAPHIC] [TIFF OMITTED] T2886A.195
    
    [GRAPHIC] [TIFF OMITTED] T2886A.196
    
    [GRAPHIC] [TIFF OMITTED] T2886A.197
    
    [GRAPHIC] [TIFF OMITTED] T2886A.198
    
    [GRAPHIC] [TIFF OMITTED] T2886A.199
    
    [GRAPHIC] [TIFF OMITTED] T2886A.200
    
