[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
                 ENSURING COMPETITION ON THE INTERNET: 
                      NET NEUTRALITY AND ANTITRUST

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                         INTELLECTUAL PROPERTY,
                     COMPETITION, AND THE INTERNET

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 15, 2011

                               __________

                           Serial No. 112-13

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov



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                       COMMITTEE ON THE JUDICIARY

                      LAMAR SMITH, Texas, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        HOWARD L. BERMAN, California
HOWARD COBLE, North Carolina         JERROLD NADLER, New York
ELTON GALLEGLY, California           ROBERT C. ``BOBBY'' SCOTT, 
BOB GOODLATTE, Virginia                  Virginia
DANIEL E. LUNGREN, California        MELVIN L. WATT, North Carolina
STEVE CHABOT, Ohio                   ZOE LOFGREN, California
DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
MIKE PENCE, Indiana                  MAXINE WATERS, California
J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona                  Georgia
LOUIE GOHMERT, Texas                 PEDRO PIERLUISI, Puerto Rico
JIM JORDAN, Ohio                     MIKE QUIGLEY, Illinois
TED POE, Texas                       JUDY CHU, California
JASON CHAFFETZ, Utah                 TED DEUTCH, Florida
TOM REED, New York                   LINDA T. SANCHEZ, California
TIM GRIFFIN, Arkansas                DEBBIE WASSERMAN SCHULTZ, Florida
TOM MARINO, Pennsylvania
TREY GOWDY, South Carolina
DENNIS ROSS, Florida
SANDY ADAMS, Florida
BEN QUAYLE, Arizona

      Sean McLaughlin, Majority Chief of Staff and General Counsel
       Perry Apelbaum, Minority Staff Director and Chief Counsel
                                 ------                                

  Subcommittee on Intellectual Property, Competition, and the Internet

                   BOB GOODLATTE, Virginia, Chairman

              HOWARD COBLE, North Carolina, Vice-Chairman

F. JAMES SENSENBRENNER, Jr.,         MELVIN L. WATT, North Carolina
Wisconsin                            JOHN CONYERS, Jr., Michigan
STEVE CHABOT, Ohio                   HOWARD L. BERMAN, California
DARRELL E. ISSA, California          JUDY CHU, California
MIKE PENCE, Indiana                  TED DEUTCH, Florida
JIM JORDAN, Ohio                     LINDA T. SANCHEZ, California
TED POE, Texas                       DEBBIE WASSERMAN SCHULTZ, Florida
JASON CHAFFETZ, Utah                 JERROLD NADLER, New York
TOM REED, New York                   ZOE LOFGREN, California
TIM GRIFFIN, Arkansas                SHEILA JACKSON LEE, Texas
TOM MARINO, Pennsylvania             MAXINE WATERS, California
SANDY ADAMS, Florida
BEN QUAYLE, Arizona

                     Blaine Merritt, Chief Counsel

                   Stephanie Moore, Minority Counsel


                            C O N T E N T S

                              ----------                              

                           FEBRUARY 15, 2011

                                                                   Page

                           OPENING STATEMENTS

The Honorable Bob Goodlatte, a Representative in Congress from 
  the State of Virginia, and Chairman, Subcommittee on 
  Intellectual Property, Competition, and the Internet...........     1
The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, and Ranking Member, Committee on 
  the Judiciary..................................................     3
The Honorable F. James Sensenbrenner, Jr., a Representative in 
  Congress from the State of Wisconsin, and Member, Subcommittee 
  on Intellectual Property, Competition, and the Internet........     4
The Honorable Judy Chu, a Representative in Congress from the 
  State of California, and Member, Subcommittee on Intellectual 
  Property, Competition, and the Internet........................     4

                               WITNESSES

Larry Downes, Senior Adjunct Fellow, TechFreedom
  Oral Testimony.................................................     7
  Prepared Statement.............................................     9
Laurence Brett (``Brett'') Glass, Owner and Founder, LARIAT
  Oral Testimony.................................................    54
  Prepared Statement.............................................    57
Gigi B. Sohn, President and Co-Founder, Public Knowledge
  Oral Testimony.................................................    61
  Prepared Statement.............................................    64

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Prepared Statement of Parul P. Desai, Policy Counsel, Consumers 
  Union, submitted by the Honorable Zoe Lofgren, a Representative 
  in Congress from the State of California, and Member, 
  Subcommittee on Intellectual Property, Competition, and the 
  Internet.......................................................    84
Statement of the U.S. Department of Justice, submitted by the 
  Honorable Maxine Waters, a Representative in Congress from the 
  State of California, and Member, Subcommittee on Intellectual 
  Property, Competition, and the Internet........................    95
Letter to the Federal Communications Commission (FCC), submitted 
  by the Honorable Maxine Waters, a Representative in Congress 
  from the State of California, and Member, Subcommittee on 
  Intellectual Property, Competition, and the Internet...........   143

                                APPENDIX
               Material Submitted for the Hearing Record

Prepared Statement of Randolph J. May, President, The Free State 
  Foundation.....................................................   155
Letter from Lisa R. Youngers, Vice President, External Affairs, 
  XO Communications, and Others..................................   170


   ENSURING COMPETITION ON THE INTERNET: NET NEUTRALITY AND ANTITRUST

                              ----------                              


                       TUESDAY, FEBRUARY 15, 2011

              House of Representatives,    
         Subcommittee on Intellectual Property,    
                     Competition, and the Internet,
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 1:30 p.m., in 
room 2141, Rayburn House Office Building, the Honorable Bob 
Goodlatte (Chairman of the Subcommittee) presiding.
    Present: Representatives Goodlatte, Smith, Coble, 
Sensenbrenner, Chabot, Issa, Jordan, Poe, Chaffetz, Reed, 
Griffin, Marino, Adams, Quayle, Watt, Conyers, Berman, Chu, 
Sanchez, Lofgren, Waters, and Jackson Lee.
    Staff Present: (Majority) Holt Lackey, Counsel; Olivia Lee, 
Clerk; and Stephanie Moore, Minority Counsel.
    Mr. Goodlatte. Good afternoon. The Subcommittee will come 
to order. I will now give my opening statement.
    Welcome to this hearing of the Intellectual Property, 
Competition, and the Internet Subcommittee entitled: Ensuring 
Competition on the Internet: Net Neutrality and Antitrust.
    The Judiciary Committee's jurisdiction over the antitrust 
laws in the Telecommunications Act of 1996 and our long history 
overseeing the Department of Justice's decades of litigation 
with the AT&T monopoly, endowed this Committee with a special 
duty to ensure that the communications and information markets 
of the United States operate in a free, fair, and legal 
fashion.
    This Committee has long been concerned on a bipartisan 
basis about allegations and fears that the incumbent telephone 
and cable companies who provide a majority of this country's 
Internet service could abuse their power in the Internet 
service market to discriminate against certain website content 
or platforms to anticompetitive effect.
    Today marks the House Judiciary Committee's third hearing 
in the past 5 years exploring the net neutrality issue. After 
hearings in 2006, the Committee adopted bipartisan legislation 
that would have amended the Clayton Act to enshrine certain net 
neutrality principles. The Judiciary Committee's bipartisan 
commitment to protecting competition and freedom online 
continued under Democratic control, and the Committee visited 
the issue once again in a 2008 hearing entitled: Net Neutrality 
and Free Speech on the Internet.
    This newly formed Subcommittee on Intellectual Property, 
Competition and the Internet will continue this tradition of 
protecting the competition and innovation that has marked the 
Internet era.
    But it is the FCC's recent open Internet order that makes 
today's hearing both necessary and urgent. That widely 
criticized order seeks to entrench a one-size-fits-all 
regulatory approach to net neutrality that circumvents 
Congress' law making authority and that threatens to stifle 
innovation on the Internet in a morass of bureaucratic rules.
    The FCC is pushing this order notwithstanding the D.C. 
Circuit's Comcast decision which squarely held that Congress 
has never given the FCC the broad authority it claims to 
regulate Internet services.
    Today's hearing is a first step in reasserting that under 
our constitutional system, it is the role of Congress, the 
people's elected representatives, to make the laws. Most agree 
that those who provide access to the Internet should not be 
able to discriminate against certain online content or engage 
in other anticompetitive behaviors that restrict access to 
online services.
    The question presented by today's hearing is whether 
potential anticompetitive conduct by Internet service providers 
is better addressed by the FCC's proposed industry-wide 
regulations or by a more flexible, antitrust-based regime that 
targets bad behaviors. I believe that the right approach is a 
light touch that focuses on punishing anticompetitive behavior, 
enforcing antitrust laws, and even potentially tweaking those 
laws to ensure that they still operate as intended in the 
digital age. Antitrust law will better balance the need for 
innovation and competition than an FCC regulatory regime 
possibly can.
    Regulatory approaches often result in regimes where 
innovators must seek permission before rolling out new products 
or services. However, the Internet is simply too dynamic for 
that kind of heavy-handed, top-down regime. An antitrust 
approach would allow the private sector to move forward with 
innovation subject to being held to account if and when it 
became anticompetitive.
    The FCC's regulations would hinge on a vague standard of 
whether or not a particular innovation was reasonableness in 
the eyes of the Commission. Antitrust law would judge that 
reasonableness and legality of actions according to objective 
economic principles and more than a century of case law.
    FCC regulations would be enforced and interpreted according 
to the whims of D.C.-based regulators who too often are subject 
to capture by special interests and repeat players. Antitrust 
law would be enforced by the independent judiciary in 
courtrooms throughout our Nation. Furthermore, as Ronald Reagan 
once said: A government bureau is the nearest thing to eternal 
life we will ever see on this Earth.
    Once the door is opened to FCC regulation of the Internet, 
it will be hard to both turn back those regulations and prevent 
the regulations from expanding to reach other online 
industries, including online content providers.
    Both sides of the aisle on this Committee have long agreed 
that a court-based antitrust approach is preferable to the 
bureaucratic approach proposed by the FCC.
    As Ranking Member Conyers pointed out when the Committee 
reported an antitrust-based net neutrality bill in 2006, the 
FCC is like a moss pit, there is nothing that can happen there.
    The Internet must be allowed to grow and innovate and 
continue to deliver the astounding new products and services 
that have come to characterize it. We must not allow the 
Internet to be mired in a regulatory moss pit. I look forward 
to today's hearing and to the light that our distinguished 
panel of witnesses can shine on this important subject.
    It is now my pleasure to yield to the Ranking Member of the 
full Committee for a further elaboration of the definition of 
``moss pit,'' the gentleman from Michigan, Mr. Conyers.
    Mr. Conyers. Thank you, Mr. Goodlatte, Mr. Chairman. I wish 
you would be more critical in selecting quotes to read back 
that I said. I can't deny that I said that, but I can tell you 
that I have modified my view somewhat and I will not use that 
kind of terminology today.
    And I wanted to thank you and Chairman emeritus 
Sensenbrenner and even Darrell Issa who have all been people 
who have been working on this very important subject of how we 
ensure competition on the Internet. The considerations of the 
FCC, of antitrust law, and using our own legislative 
jurisdiction are all things that I would like to continue to 
work with you and all of the Members of the Committee on.
    You have been working on this issue, and, by the way, 
Howard Berman of California has been on this, too, for quite 
awhile.
    Now, the question that concerns me the most is that the 
Internet is now a function of free speech in this country and 
in the world. As a matter of fact, many of the uprisings in the 
Middle East are all based on--and as a matter of fact they are 
called Twitter riots. It is a new mode of us talking to one 
another, not just in this country but everywhere.
    In some countries, like China, there are very severe limits 
on what is acceptable, and we have had cases even in this 
country where service providers have arbitrarily terminated the 
services of their customers because they didn't like what they 
were doing.
    So we come here today to consider how we can make sure that 
this commonly referred to net neutrality, that it is open, that 
it doesn't turn on what classification you get or how much you 
pay, but that lawful, legal, content should be available to 
everybody in as fair and democratic a manner as possible. So we 
continue these hearings.
    The American job market hinges on a dynamic, open Internet. 
That is how we get innovation and create new ideas that are 
translated into business and commercial and industrial 
activity. So we in this country must and do remain committed to 
technological innovation, including the universal access to 
broadband technology in order to keep American workers 
competitive.
    But as people watch live sporting events from their cell 
phones, and bloggers update the world in real-time events, we 
must remember that most people in the United States can only 
choose between one, and, sometimes if they are lucky, two 
Internet service providers for high-speed Internet access. 
Therein lies the problem. Recent proposed business plans give 
telecommunication companies favored treatment to some Internet 
content and disfavored treatment to other content. So I think 
that is an important part of what we are here for today. This 
is an important hearing.
    It is now my view, since you have quoted me so accurately 
in a previous hearing, for me to say that the FCC rulings on 
net neutrality are weak. They are not overarching or strong. 
They don't meet up to standards. I am looking forward soon to 
have hearings in your Committee to make certain that we can 
deal in a more fulsome way with this subject matter.
    I thank you for this opportunity.
    Mr. Goodlatte. I thank you, Mr. Conyers.
    We will now stand in recess. There are a series of votes 
and we will resume the hearing after we return from the votes.
    [Recess.]
    Mr. Goodlatte. The Subcommittee will reconvene. And it is 
now my pleasure to recognize the Chairman emeritus of the 
Committee, the gentleman from Wisconsin, Mr. Sensenbrenner, who 
has done a lot of work in this area.
    Mr. Sensenbrenner. Thank you very much, Mr. Chairman. And I 
want to commend you for holding this hearing so early in this 
Congress.
    The whole issue of access to the Internet--net neutrality, 
or however it is described--I think is a very important one 
because the Internet and its expansion has been the principle 
driving force behind technological innovation, not just in the 
United States, but worldwide.
    I am concerned that the type of regulation approved by the 
Federal Communications Commission ends up picking winners and 
losers. And frankly, it is not the job of the government to 
pick winners and losers, it is the job of the government to 
protect people against anticompetitive and monopolistic 
practices. That is why I believe that the proper thing for the 
Congress to do would be to set aside the FCC's order and make 
whatever amendments to the antitrust law that are necessary so 
that antitrust provisions can be effectively enforced.
    The other thing is that antitrust laws are supervised by 
judges, and that is the way it has been for 100 years. That 
seems to have worked out fairly well in dealing with these 
issues, rather than either having the Congress do it or the 
commissioners of the FCC to do it. And I am just convinced, and 
have been for a while, that the road the FCC has gone down is 
not good for the Internet, not good for the people, and not 
good for competition. So I would hope that we would continue 
vigorously pursuing this issue, and I yield back the balance of 
my time.
    Mr. Goodlatte. I thank the gentleman.
    And I am now pleased to yield to the gentlewoman from 
California, Ms. Chu.
    Ms. Chu. Thank you, Mr. Chair. And I would like to thank 
Mr. Goodlatte for holding this hearing.
    Mr. Watt, the Ranking Member, could not be here today, but 
he sends his regards. I am just temporarily taking over the 
Ranking Chair position at this point.
    While today it is estimated that more than one-quarter of 
our world's population, or nearly 2 billion people, use the 
Internet, from social working to political campaigns, the 
Internet is now the leading tool for speech and action. We need 
only to look at the role that the Internet has played during 
democratic demonstrations across the globe. Journalists named 
uprisings in Moldova and Iran during 2009 the ``Twitter 
revolutions,'' and the Web has played a critical role in 
disseminating information and rallying crowds as Hosni 
Mubarak's rule has ended in Egypt.
    Furthermore, the future of the American job market hinges 
on a dynamic, open, and lawful Internet. The United States must 
remain committed to technological information and investment, 
including universal access to broadband technology, in order to 
keep American workers competitive.
    But as people watch live sporting events from their cell 
phones, and bloggers update the world in real-time events in 
Tahrir Square, we must remember that more than 90 percent of 
U.S. Consumers can choose only between one or two Internet 
service providers for high-speed Internet access.
    Recent proposed business plans from telecommunication 
companies would give favored treatment to some Internet content 
and disfavored treatment to others. What treatment you get 
could be determined by how much you pay or potentially whether 
the Internet service provider approves of the content or has a 
financial interest in it. The problem is that many of the 
innovations we have enjoyed on the Internet may never have 
occurred if some of the proposed regimes were left unchecked. 
We would never have had a Google search engine or eBay auctions 
or Huffington Post blogs if pay-to-play had been our national 
policy.
    I am concerned that if the U.S. Government stands by and 
does nothing, we will find that only a handful of companies 
dictate where and how people access information on the 
Internet. So as we delve into this issue, we must remember that 
Congress and the executive branch must tread lightly. Nothing 
less than free speech and millions of jobs are at stake.
    I do want to emphasize that an Open Internet can and must 
be a lawful Internet. Digital piracy has ravaged U.S. companies 
and cost America countless jobs. The Internet has also afforded 
anonymity for criminals who steal identities and exploit 
children. Network neutrality does not mean safe havens for 
piracy, child exploitation, or other Internet crimes. Network 
neutrality fosters fairness.
    Our colleague, John Lewis, and esteemed poet, Maya Angelou, 
a native of Mr. Watt's district, along with several others, are 
receiving the Presidential Medal of Freedom at a ceremony at 
the White House at this time, and this is why Ranking Member 
Watt cannot be here today. He regrets that he cannot attend and 
will submit his questions to the witnesses in writing. And he 
looks forward to additional hearings on net neutrality with 
officials from the FCC.
    I look forward to hearing from our witnesses today and to a 
meaningful discussion on today's topic.
    Mr. Goodlatte. I thank the acting Ranking Member. And 
without objection, other Members' opening statements will be 
made a part of the record.
    And before we introduce our witnesses, I would ask that 
they please stand and take an oath.
    [Witnesses sworn.]
    Mr. Goodlatte. Thank you. Please be seated.
    Our first witness is Larry Downes, a senior adjunct fellow 
at the newly formed think tank, TechFreedom. He is the author 
of three books and has held faculty positions at Northwestern 
University Law School, the University of Chicago Graduate 
School of Business, and the University of California at 
Berkeley, where we was associate dean of the School of 
Information and a senior lecturer at the Haas School of 
Business. After graduating magna cum laude from the University 
of Chicago Law School, Mr. Downes served as law clerk to the 
Honorable Richard A. Posner, Chief Judge of the United States 
Court of Appeals for the Seventh Circuit.
    Mr. Downes is an Internet industry analyst and consultant 
who works primarily with technology companies to integrate 
emerging technologies into business strategy, with a special 
emphasis on legal and regulatory constraints. His clients have 
included startups as well as leading global technology 
providers. His expertise in the legal business and regulatory 
environment of the Internet industry strongly qualify him to 
testify at this hearing.
    After him, we will hear from Mr. Brett Glass. All too often 
the conversation in the Beltway, whether in Congress or at 
regulatory agencies like the FCC, becomes dominated by large 
interest groups with permanent D.C.-based lawyers and lobbyists 
to advocate for them. There is a tendency to think about these 
issues in terms of big businesses, but as FCC Commissioner 
Robert McDowell observed in his dissent from the Open Internet 
Order, many broadband providers are not large companies, many 
are small businesses. The same is true of content providers and 
hardware companies. Many of the businesses who will be affected 
by the Open Internet Order are small.
    It is fundamentally important when settling policy to 
always bear in mind the effect of the rules made in Washington 
and what they will have on ordinary Americans and the small 
businesses that are the primary job creators throughout the 
country. That's why I am pleased to introduce our next witness, 
Brett Glass of Laramie, Wyoming, to testify about the effect 
that he believes the FCC's Open Internet Order will have on his 
small business and other small businesses like his.
    Our final witness will be Gigi Sohn, President and Co-
founder of Public Knowledge, a nonprofit organization that 
seeks to promote openness, access, and the capacity to create 
and compete in all three layers of our communication system: 
the physical infrastructure, the systems, and the content. Ms. 
Sohn is the senior adjunct fellow at the Silicon Flat Iron 
Center for Law, Technology and Entrepreneurship at the 
University of Colorado, and a senior fellow at the University 
of Melbourne Faculty of Law, Graduate Studies Program in 
Australia. She has been a nonresident fellow at the University 
of Southern California Annenberg Center and an adjunct 
professor at Georgetown University and the BenjaminN. Cardozo 
School of Law at Yeshiva University.
    We will begin with Mr. Downes. Welcome.

 TESTIMONY OF LARRY DOWNES, SENIOR ADJUNCT FELLOW, TECHFREEDOM

    Mr. Downes. Mr. Chairman and Subcommittee Members, thank 
you for inviting me here today.
    I commend this Subcommittee for its prompt attention to the 
dangerous and illegal rulemaking of the FCC on December 23, 
2010.
    The agency's Report and Order on Preserving the Open 
Internet, passed by a bare majority of commissioners, just as 
the 2010 lame duck Congress was about to adjourn, created new 
regulations for some broadband Internet access providers. These 
new rules entomb into law one view of what some refer to as the 
``net neutrality principle.''
    Now as an early Internet entrepreneur, I share the 
enthusiasm of all five commissioners--not just the three who 
voted to approve the new rules--for the Open Internet. I just 
don't believe there is any need for regulatory intervention to 
save this robust ecosystem or that Congress ever granted the 
FCC authority to do so.
    As the report itself makes clear, the premise of looming 
threats to the Open Internet that motivated these proceedings 
proved chimerical. The rulemaking process is unduly political 
and disappointingly obtuse. The order rests on a legal 
foundation the agency cannot seriously expect will hold up in 
court or in Congress. The result: regulations that no one, 
other than FEC Chairman Julie Genachowski, publicly supported.
    The Report and Order is deeply flawed. And as with any 
regulation involving disruptive technologies, the risk of 
unintended consequences is high. In its haste to pass something 
before the new Congress convened, the FCC has interfered with 
the continued evolution of this vital technology, preserving 
Open Internet principles in the same way that amber preserves 
prehistoric insects--by killing them.
    I want to highlight just a few of the fatal defects of the 
Report and Order.
    Number one, there was no need for new regulation. Despite 
thousands of pages of comments from parties on all sides of the 
issue, in the end the majority could only identify four 
incidents in the last 10 years of what it believed to be non-
neutral behavior. All four were quickly resolved outside the 
agency's adjudication processes, yet these four incidents 
provide the majority's sole evidence of the need to regulate 
now.
    With no hint of market failure, the majority instead issued 
what it calls ``prophylactic rules'' it hopes will deter any 
future problems. But it's worth noting that the rules, as 
adopted, would, at most, only apply to one of the four 
incidents which involved a small ISP alleged in 2005 to have 
blocked its customers' access to Voice Over Internet Protocol 
telephone service. If anticompetitive practices do emerge, 
existing antitrust enforcement mechanisms are in place to 
correct them. Indeed, these laws already provide adequate 
deterrence.
    Therefore, to justify their new rules, the majority 
preemptively and recklessly rejects the idea that a violation 
of the new rules requires proof of anticompetitive practices or 
demonstrable consumer harms--hallmarks of modern antitrust 
practice.
    All one can say charitably is that the majority is 
reserving to its future discretion a determination of what 
practices actually violate the spirit of the new rules. It's 
hard to think of a better example of an arbitrary and 
capricious decision.
    Number two, exceptions reveal a profound misunderstanding 
of the Open Internet. The Report and Order detail at least 16 
significant exceptions, caveats, and exemptions for current 
non-neutral network management practices, practices the 
majority acknowledges are ``inconsistent'' with the Open 
Internet first principles.
    In most cases, the inconsistent practices are exempted only 
because they have become entrenched and vital features of the 
online experience for consumers, with no harm to the Open 
Internet. The long list should have made clear to the majority 
that network engineering has evolved beyond simplistic slogans 
of an open and neutral network. The evolution of these network 
practices is far from over, but the majority's ``these and no 
more'' list condemn future innovations to the relatively 
glacial pace of FCC approval. This will unintentionally skew, 
slow, or stunt the next-generation Internet ecosystem in ways 
that threaten U.S. competitiveness in this most global of all 
markets.
    The majority have promised to review the rules no later 
than 2 years from now, but in Silicon Valley, where I come 
from, 2 years might as well be forever.
    Number three, the FCC lacked authority to issue the rules, 
and likely knew it. Despite promises that the agency's very 
smart lawyers had unearthed legal support for their new rules 
beyond arguments rejected by the D.C. Circuit in the Comcast 
decision, the Report and Order largely repeated those 
arguments. This half-hearted effort suggests the agency has 
little expectation the rules will survive court challenges that 
have already begun, and issued them solely to get the messy 
proceedings off its docket.
    I have submitted a report examining these and other 
concerns in detail, and I look forward to your questions. Thank 
you.
    Mr. Goodlatte. Thank you, Mr. Downes.
    [The prepared statement of Mr. Downes follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
                               __________

    Mr. Goodlatte. Mr. Glass, welcome.

        TESTIMONY OF LAURENCE BRETT (``BRETT'') GLASS, 
                   OWNER AND FOUNDER, LARIAT

    Mr. Glass. Thank you, Chairman Goodlatte, Ranking Member 
Chu, Members of the Committee, thank you very much for inviting 
me to testify. It's a great honor for me to be the first of my 
relatively young industry to speak before Congress.
    To stay as close as I can to my allotted time, I would like 
to offer you an abridged version of my prepared testimony, 
which I hope you will enter into the record in full.
    First, some background. I'm an electrical engineer. I 
received my bachelor's of science from the Case Institute of 
Technology in 1981 and my master's at Stanford in 1985. I have 
designed computer chips, written popular computer software, and 
penned more than 2,500 published articles. In the early 1990's, 
I moved from Palo Alto, California, to the beautiful small 
college town of Laramie, Wyoming.
    Laramie is roughly the size of Stanton, Virginia. When I 
arrived, I discovered there was no ready access to the Internet 
outside of the University of Wyoming campus, so I founded 
LARIAT, the world's first fixed Wireless Internet Service 
Provider, or WISP. LARIAT began as a nonprofit cooperative 
whose purpose was to teach, promote, and facilitate the use of 
the Internet.
    Fast forward 11 years to 2003, the Internet was well 
established and the membership decided they no longer wanted to 
be members of a co-op, they simply wanted to buy good Internet 
service from a responsible local provider. So the board 
prevailed upon me and my wife, who had served as caretakers of 
the network, to take it private.
    We did, and we've been running LARIAT as a small, 
independent Internet service provider ever since. We have very 
slim margins. Our net profit is less than $5 per customer per 
month, but we're not doing it to get rich, we're doing it 
because we love to do it and want to help our community.
    We at LARIAT have always been the strongest possible 
advocates for consumer choice, of free speech, and of 
inexpensive, high-quality Internet access. It's our mission and 
it's our passion. And while I now have more help, I still climb 
rooftops and towers to install Internet with my own hands, to 
train my employees, and to check the quality of every job.
    Now, since LARIAT has started, the cable and telephone 
companies have also gotten into the broadband business. We 
compete gamely with them within the city limits, but our 
services, unlike theirs, extend far into the countryside. Other 
WISPs were started and set up shop in our town, forcing us to 
compete harder and innovate more. We estimate that there are 
now between 4,000 and 5,000 WISPs, as shown on the map in the 
written version of my testimony. WISPs now serve more than 2 
million people and reach approximately 70 percent of all U.S. 
homes and businesses, including many with no access to DSL or 
cable. We create local, high-tech jobs and we stimulate the 
development of other businesses. We can cost effectively serve 
areas where there is no business case for any other form of 
terrestrial broadband.
    We also provide vigorous competition where other kinds of 
broadband do exist. For example, a WISP called D.C. Access 
serves homes and businesses here on Capitol Hill. It even 
provides the free Wi-Fi on the Supreme Court steps. 
Unfortunately, I'mhere to tell you today that the network 
neutrality rules enacted by the FCC will put WISPs' efforts to 
provide competitive broadband and to deploy to rural and urban 
areas who do not have access or competition at risk.
    Firstly, the rules address prospective harms rather than 
any actual problem. Contrary to what advocates of regulation 
say, ISPs have never censored legal, third-party Internet 
content. Secondly, even before the rules were issued, the 
Commission's notice of proposed rulemaking created uncertainty 
which drove away investors. The final rules are vague, 
permitting reasonable network management, but not fully 
defining what the word ``reasonable'' means. As Commissioner 
Robert McDowell pointed out in his well-written dissent, this 
lays the groundwork for protracted, expensive, legal wrangling 
that no small business can afford.
    The rules also allow anyone, whether or not he or she has 
service from a particular provider, to file a formal complaint 
alleging violations. Even, now before the rules have taken 
effect, groups here in D.C. have filed complaints against 
MetroPCS for offering a great, affordable Smart phone service 
plan which prohibits a few bandwidth-hogging activities. My own 
company could suffer a similar fate. Our most popular 
residential service plan comes with a minor restriction; it 
does not allow the operation of servers.
    Now, Mr. Chairman, most Internet users would not know what 
a server was if it bit them, and they have no problem uploading 
content to a Web site such as YouTube for distribution. This 
means customers that do need to operate a server could obtain 
that capability by paying a bit more to cover the additional 
cost. But if the FCC decides against MetroPCS, we will almost 
certainly be forced to shift everyone to the more expensive 
plan. We will therefore be less competitive, offer less value 
to consumers, and especially less value to economically 
disadvantaged ones.
    We will also hesitate to roll out innovative services for 
fear that the Commission could find fault with some aspect of 
them. For example, selling priority delivery of data, even for 
a new high-tech service such as Telepresence, is strongly 
disfavored by the rules. This is like telling UPS or FedEx that 
they cannot offer shippers overnight delivery because it's 
somehow unfair to those who use ground service.
    Now in my FCC filings, I urged the Commission to promote 
competition rather than requiring us to ask permission to 
innovate, but the majority rejected this approach in favor of 
onerous regulations which address a problem that does not 
exist.
    I therefore urge Congress--which is the ultimate source of 
the FCC's authority--to set things right. Rather than the 
excessive regulation which would extinguish small competitors 
like WISP and create a duopoly that did require constant 
oversight, we should facilitate competition, crack down on 
anticompetitive tactics, and then allow markets to do the rest. 
Only by adopting this approach can we allow American small 
businesses to create jobs, innovate, and prosper while solving 
a very real problem, providing ubiquitous broadband access to 
our Nation.
    Thank you.
    Mr. Goodlatte. Thank you, Mr. Glass.
    [The prepared statement of Mr. Glass follows:]

    
    
    
    
    
    
    
    
    
    
                               __________

    Mr. Goodlatte. Ms. Sohn, welcome.

  TESTIMONY OF GIGI B. SOHN, PRESIDENT AND CO-FOUNDER, PUBLIC 
                           KNOWLEDGE

    Ms. Sohn. Chairman Goodlatte, Members of the Subcommittee, 
thank you for the opportunity to discuss the importance of 
network neutrality to protect consumers and competition on the 
Internet.
    An Open Internet is vitally important to political and 
social discourse, commerce, innovation, and job creation in the 
U.S. Past actions by incumbent broadband Internet access 
providers have threatened the Open Internet, requiring the FCC 
to set enforceable baseline rules.
    Contrary to assertions by incumbents that consumers enjoy 
competition when it comes to broadband Internet access and can 
simply switch providers, the FCC's national broadband plan 
reported that nearly 91 percent of all Americans reside either 
within a monopoly or duopoly broadband market. Given this 
reality, it is important that the Subcommittee work to promote 
net neutrality to ensure competition on the Internet.
    In its Competitive Impact Statement in a Comcast-NBCU 
merger, the Justice Department laid out how the competitive 
harms presented by the merger were matters of antitrust and how 
they warranted clear network neutrality protections. The DOJ 
recognized that online videos distributors, OVDs, represent an 
emerging class of competitors to traditional multichannel video 
service providers, MVPDs, like Comcast. Although new MVPDs have 
endured nationally, incumbent video service providers like 
Comcast remain dominant in their regions.
    Because OVDs are able to provide service in any geographic 
area, they are a source of direct competition to cable in the 
geographic area in which it is dominant. At the same time, 
because the profit margins from subscription video are far 
greater than that of program distribution, Comcast and other 
traditional MVPDs have a strong incentive to interfere with 
nascent OVD competitors. Thus, the DOJ found that Comcast had a 
much greater incentive to prevent the emergence of rival video 
services such as OVDs than it does to cultivate them as 
customers for video service. Comcast simply cannot hope to make 
up lost revenue caused by cable subscribers cutting the cord 
through the sale of programming to OVDs.
    Network neutrality rules, such as the conditions imposed by 
the DOJ and Comcast, work against this anticompetitive danger. 
While the DOJ was specifically addressing Comcast, these 
antitrust concerns apply across the broadband market. A 
customer may wish to cut the cord and drop the video 
subscription, but the monopoly or duopoly broadband Internet 
access provider, also offering a video package, will have the 
incentive and ability to prevent this by interfering with the 
delivery of online video.
    That same harmful incentive exists in the market for 
telephony. Just as the incumbent cable provider has a strong 
incentive to interfere with broadband delivery of competing 
video, the incumbent telephone provider has a strong incentive 
to degrade competing voice traffic. These harms are not 
speculative. There is a documented history of anticompetitive 
actions taken by broadband access providers.
    Aside from the Madison River and Comcast/BitTorrent cases, 
AT&T has blocked several applications, such as SlingBox video 
streaming and VoIP applications like Skype, from its mobile 
network while permitting similar products to use its network. 
Cox and RCN both admitted to slowing or degrading Internet 
traffic, and despite claims that these practices were designed 
to handle congestion, neither provider disclosed their traffic 
management practices to subscribers.
    Despite proclaiming that they have no intention of ever 
actually blocking or degrading content, broadband Internet 
access providers include within their terms of service 
provisions that allow them to engage in precisely these 
practices. And let me emphasize, these are only the cases we 
know about. Organizations like mine don't have the kind of 
money to track everything that ISPs do.
    Now, I want to make clear that while I believe that 
antitrust law has a role to play in ensuring an Open Internet, 
it cannot do the job alone. Broadband providers can 
discriminate against applications of service providers without 
that discrimination rising to the level of an antitrust 
violation. And as the Judiciary Committee recognized when it 
introduced Open Internet-related legislation in 2006, the 
Supreme Court's Trinko decision severely limits the 
applicability of antitrust laws to regulated industries like 
cable and telephone companies. Thus, the recently enacted FCC 
rules are crucial to preserving an Open Internet.
    Public Knowledge is deeply concerned about recent decisions 
in Congress to invoke the Congressional Review Act to repeal 
those rules. Should Congress enact a CRA repeal, the FCC's 
power to protect an Open Internet and not just the recently 
enacted rules, would be virtually eliminated.
    Mr. Chairman, through the years, the Judiciary Committee 
and this Subcommittee have played a vital role in making 
certain that American consumers were protected by the vigilant 
enforcement of antitrust laws. This mission is now more 
critical than ever. As a DOJ analysis shows, anticompetitive 
activities by large carriers have the potential to affect 
millions of consumers in what may be net neutrality issues or 
may not. We urge the Subcommittee to keep a close watch on 
today's communications markets and to be alert to the kind of 
abusive market power that can affect consumers, companies, and 
the economy as a whole.
    I thank you and look forward to your questions.
    Mr. Goodlatte. Thank you, Ms. Sohn.
    [The prepared statement of Ms. Sohn follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
                               __________

    Mr. Goodlatte. I will now recognize myself to begin 
questions.
    Let me ask each of you, how do you anticipate the Open 
Internet Order of the FCC affecting the ability of startup 
companies that you advise to raise capital--I guess we are 
directing this to you, Mr. Downes--and have you already seen 
any effect?
    Mr. Downes. I have not seen any effect yet. Of course the 
rules are very new and there is already, as you know, two legal 
challenges as well as discussions in Congress about potentially 
disapproving of the order. But in general I think it's quite 
accurate to say that the ability of my clients, particularly in 
the hardware business, to raise capital will be affected by 
these orders. The problem, of course, is there is a great deal 
of uncertainty. There was a lot of--the rules themselves are 
fairly vague, but of course all the exceptions and exemptions I 
mentioned in my opening statement make it very difficult to 
tell what is and isn't allowed as far as a network management 
practice, techniques for optimizing certain kinds of content or 
certain kinds of media. We don't know if in the future if I 
invent some new network management technique--and of course 
they're being invented all the time--it would be much more 
difficult for me to raise capital, or for my clients to raise 
capital, to pursue those kind of techniques. I think it's safe 
to say particularly early-stage investors will want--the way 
they currently ask for patent stuff, they'll ask for approval 
from the FCC.
    Mr. Goodlatte. Is it fair to say that while there's always 
risk in investing in a business--particularly a new business--
that with antitrust laws you know the rules of the road and you 
can consult an attorney, you can take into account what you 
think those rules are as you move forward; but with FCC 
regulation, you can look at a set of regulations, begin down 
that path, and while you are substantially invested in this new 
technology, this new idea, suddenly those regulations can be 
changed and you're in a situation where you are no longer a 
profitable investment?
    Mr. Downes. Yes. I think that's absolutely correct, Mr. 
Chairman. And it is also, I think, worth mentioning that the 
way the FCC implemented the enforcement provisions of its 
order, very, very broad. Any party has standing to bring a 
complaint, formal complaint before the FCC about any practice 
that it believes may or may not violate the net neutrality 
rules, even non-customers. And it's very difficult, of course, 
for anyone to know. You know, if the Internet goes slow one 
day, you don't know if that means somebody is doing a net 
neutrality violation or if it's slow because something is 
broken. But under the enforcement provisions of the order, the 
FCC will file essentially a full legal case, with discovery and 
everything that goes with it, for any time a formal complaint 
is filed. And that, of course, is potentially disastrous.
    Mr. Goodlatte. And the ability to raise capital as well as 
the ability to incentivize the development of new technologies 
would be affected the same way by the uncertainty created by 
FCC regulations.
    Mr. Downes. Yes, I believe that is so.
    Mr. Goodlatte. Let me turn to Mr. Glass. Would you say that 
you are able to be more flexible and customer oriented than 
your competitors in your capacity as a small ISP? And if you 
agree with that statement, will the FCC regulations make it 
harder for you to remain as flexible and customer oriented?
    Mr. Glass. Mr. Chairman, let's see; as Mr. Downes said, we 
do not know exactly how the FCC regulations are going to be 
enforced. It may be at the whims of these commissioners or at 
some future sitting commissioners that may have different 
opinions. They are vague enough that we're not exactly sure. So 
I can't tell you exactly how they might affect our ability to 
provide innovative services, but we do provide innovative 
services now that are unique.
    For example, we have doctors on our network, some of whom 
live fairly far out of town; and what we do, when someone goes 
into the emergency room and they get a CAT scan or an MRI, we 
go ahead and we prioritize the traffic so that that doctor can 
immediately--or as least as fast as possible--view the CAT scan 
and determine what's wrong, give an opinion to the hospital, 
dash to the hospital if he needs to do so. That sort of 
priority could arguably be in violation of the FCC's rules. We 
don't know, but they presumptively discriminate against that 
prioritization. So we really don't know where things are going, 
but we are very concerned.
    Mr. Goodlatte. Ms. Sohn, I appreciate your attention to 
antitrust laws, but I have a concern about your suggestion that 
antitrust laws and FCC regulations will work well together in 
this regard. My reading of the Trinko decision is different 
than yours. Quite frankly, my understanding of that decision is 
that if you have an industry that is regulated like the cable 
industry is regulated, like the telephone industry is 
regulated, then the Supreme Court said that in the Trinko case 
that you look less to antitrust laws.
    But here the point, is that the FCC is not regulating the 
Internet now and should not be, and therefore the vitality of 
our antitrust laws would be stronger and more effective if we 
do not have additional FCC regulation of the Internet, which I 
am very concerned is simply kicking the door open for the FCC 
to regulate this incredibly innovative development in our 
society and in our economy that I think has grown tremendously 
and become such a huge part of our economy because it has not 
become heavily regulated.
    Do you want to respond to that?
    Ms. Sohn. Sure. Network neutrality it is not regulation of 
the Internet, it is regulation of the companies that provide 
the on-ramps to the Internet--telephone and cable companies. 
And the FCC does regulate them, and that's why I'm very 
concerned that the Trinko decision really guts antitrust law, 
and that's why former Chairman Sensenbrenner introduced that 
law in 2006.
    Mr. Goodlatte. Sure. But that law was designed to tweak our 
antitrust laws to make them more effective. And I would freely 
acknowledge that we need to look at what we need to do with our 
antitrust laws to make them effective in addressing what's 
going on on the Internet, but not turn this over to a 
regulatory process that is very different than antitrust, 
which, as we just discussed with Mr. Downes, creates a lot more 
certainty in terms of investment, in terms of developing new 
technologies, than having the uncertainty of ever-expanding 
regulatory powers for the FCC, which I think, as I stated at 
the outset, are in violation of Congress' intent to begin with.
    Ms. Sohn. Look, I share your concern. I'm not for big FCC 
regulating everything, regulating the Internet. My 
organization, probably to your dismay, brought the case that 
struck down the FCC's authority to implement the broadcast 
flags, so I share those concerns. But the problem is even if--
let's set the Trinko case aside--and I would point you to 
testimony that Howard Shelansky of the FTC did about the effect 
of the Trinko case on antitrust enforcement in this area. And 
Howard Shelansky is no fan of network neutrality.
    But setting that aside, there are places that are of 
concern to consumers and concern to edge companies, like 
Facebook and Twitter and Netflix and Google that just won't be 
touched by antitrust law. For example, let's say Verizon or 
Comcast wants Google to pay for faster service or better 
quality of service, that's not something necessarily that is 
going to be covered by antitrust law. It's not as easy as a 
situation where AT&T blocked Skype, where you know that AT&T 
has a competitive interest in disfavoring VoIP. So there can be 
instances of discrimination that the FCC rules cover that 
antitrust law just does not.
    Mr. Goodlatte. Mr. Downes, would you care to respond, or 
Mr. Glass?
    Mr. Downes. Well, Mr. Chairman, it is possible that, of 
course, the broadband provider may ask a company to pay more 
for more service.That's sort of the nature of competitive 
industries. It isn't necessarily a violation of net neutrality 
in principle, and it's certainly not necessarily anything that 
would be considered anticompetitive or demonstrable consumer 
harm. That's the standard for antitrust. I think that's a good 
standard.
    And the problem, as I said, with the FCC is that they 
didn't give us any standard at all. They said we reject that as 
the standard by which we're going to enforce the 
antidiscrimination rule, but we don't know what standard 
they're going to apply instead. They just don't want people to 
be picking winners and losers on the Internet. But I don't want 
to leave that to the discretion of the FCC.
    Mr. Goodlatte. Thank you.
    Mr. Glass.
    Mr. Glass. Yes. I would really like--it would be really 
wonderful for me, because I do experience a lot of 
anticompetitive tactics, especially at the hands of the local 
incumbent--local exchange carrier to have some recourse under 
antitrust law. Right now, I am forced to operate as if I don't. 
And actually, because of that, the best thing that I can ask 
the government to do is enable competition and at least don't 
keeping me from competing. I would like to see the antitrust 
law fixed, however.
    Mr. Goodlatte. Thank you.
    The gentleman from Michigan, Mr. Conyers.
    Mr. Conyers. Thank you, Mr. Chairman.
    I am in the process, lady and gentlemen, of separating out 
three considerations: One, the concept of net neutrality; two, 
the role of the Federal Communications Commission; and three, 
antitrust law. And so I have come to this hearing with the view 
that the FCC has probably not exercised its fullest authority 
in this area before this is all over.
    Contrary to those who think the FCC has exceeded its 
authority and it's not what Congress intended, I think that a 
case could be made for the FCC becoming stronger. So let me 
question you in this respect: We all agree on the validity and 
significance of net neutrality as a telecommunications concept; 
is that true? Yes. Blank. Blank.
    Okay. Do you have reservations about net neutrality? Do you 
think it's dangerous, or are you worried about where it's 
going, or what?
    Mr. Downes. Well, as I said in my statement, Mr. Conyers, I 
am not against net neutrality. I am in favor of the Open 
Internet, I've been a beneficiary of the Open Internet. My 
concern is principally with the idea that the FCC, as a 
regulatory body, is the one to decide what it actually means 
and to enforce it.
    Mr. Conyers. Well, I'm not talking about the FCC. That's 
number two on my list. I'll get to that. But you seem reluctant 
to just come out and say that you are for net neutrality.
    Mr. Downes. No, I've said it. I have written that I am in 
favor of net neutrality in principle.
    Mr. Conyers. Fine. But I've had to kind of tease it out of 
you.
    What about you, can I get a straight, okay, yes, I'm for it 
answer?
    Mr. Glass. Mr. Conyers, I would love to be able to give 
that sort of a response. The problem is even if you look at 
Wikipedia, there are three or four definitions of net 
neutrality under that one heading.
    Mr. Conyers. Well, you take the one that you want. Would 
you like net neutrality as you would define it?
    Mr. Glass. I would like to see net neutrality if it means 
freedom from anticompetitive tactics. I would not like to see 
it if it means onerous regulation or micromanagement of 
innovative companies that are trying to do things.
    Mr. Conyers. Well, I'm talking about the concept itself, 
I'm not talking about who's running it and how it's being 
managed. I don't mean to put words in your mouth, for goodness 
sake, heaven forbid, but from you two witnesses I seem to sense 
that there is some hesitation about just coming out and saying 
net neutrality is a good thing and I'm glad it's here.
    I mean, you start telling me about the FCC and who's 
regulating, I'm just asking you about net--everybody isn't for 
net neutrality. And I suspect that--I'm not a psychiatrist, but 
deep down do you have some reservations about net neutrality? 
You can say yes if you want to.
    Mr. Glass. I think I do have reservations----
    Mr. Conyers. All right. Very good. Now that's what I'm 
trying to get at.
    Now Professor Downes, deep down, don't you have some 
reservations about net neutrality?
    Mr. Downes. No. Look, if net neutrality is a political 
term, yes; if it's an engineering term, no.
    Mr. Conyers. Well, let's see. Okay. Now let me ask the 
gentlelady witness, where do you come out on this net 
neutrality?
    Ms. Sohn. I am a stalwart supporter of net neutrality. My 
organization does not think that the FCC's rules went far 
enough, although we are willing to live with them. They are 
rules of the road. We believe, as the Commission does, that the 
companies that provide the on-ramps to the Internet--they are 
either a monopoly or duopoly in 90 percent of this country--
should not be able to pick winners and losers.
    Mr. Conyers. Well, now let me raise this, since my time is 
just about gone--you fellows did a good job on making me work 
so hard to get a yes or no answer.
    But the last question, Mr. Chairman, if I might, on the 
question of antitrust, do all of you agree with me that 
antitrust is a very difficult thing to prosecute? There are 
certain standards and levels. And antitrust in the Department 
of Justice has been going down for decades. We don't get much 
of that anymore. Does that statement ring positive with you?
    Mr. Downes. Well, I don't think if you asked companies like 
Microsoft and Intel if they think antitrust has gone down, they 
would say no.
    Mr. Conyers. Yeah, but I'm asking you.
    Mr. Downes. I think, certainly in terms of the technology 
industry, antitrust has been applied more than it had been 
before, and often I think with dangerous consequences.
    Mr. Conyers. Well, there wasn't any industry before.
    What do you say, sir?
    Mr. Glass. From the point of view of a small business 
person, I don't know if I will ever have recourse to antitrust, 
but I would love to be able to avail myself of such remedies.
    Mr. Conyers. Yes, ma'am.
    Ms. Sohn. Well, I agree with you 100 percent. And 
particularly when it comes to regulated industries like 
broadband Internet access providers, the Trinko and Credit 
Suisse cases have completely eviscerated antitrust enforcement.
    Mr. Conyers. Thank you, Mr. Chairman.
    Mr. Goodlatte. I thank the gentleman.
    The Chair recognizes the gentleman from Pennsylvania, Mr. 
Marino.
    Mr. Marino. Mr. Chairman, I have someone that I have to 
meet here shortly. Could I reserve my time and when I get back, 
if I have questions, ask them?
    Mr. Goodlatte. Absolutely. We will do that.
    And now the Chair turns to the gentlewoman from California 
for her questions.
    Ms. Chu. Thank you, Mr. Chairman.
    Well, some would suggest that current antitrust law is 
sufficient to protect consumers with regard to access to 
broadband. Ms. Sohn, you seem to imply that both the Department 
of Justice and the FCC have a role to play in protecting net 
neutrality.
    If the FCC were stripped of its ability to enforce net 
neutrality principles, would the Department of Justice have the 
ability to prevent broadband providers from discriminating 
among Internet content?
    Ms. Sohn. Within the context of a merger like Comcast, yes. 
And I think the Justice Department did an outstanding job in 
doing that. However, if it comes to plain old antitrust 
enforcement, that kind of enforcement has been severely limited 
by Supreme Court decisions in the Trinko case and the Credit 
Suisse case. So I think it would be very difficult without some 
legislation. And I would encourage this Subcommittee to think 
about it.
    And particularly if you're concerned about the competition 
in the application space between search engines or between 
social networks, there is nothing in antitrust law that would 
allow you to move forward on that either. So I would encourage 
this Subcommittee to think about how do we repair the damage 
done by the Supreme Court in the Trinko and Credit Suisse 
cases.
    Ms. Chu. And why is it important to have the FCC involved?
    Ms. Sohn. Because the FCC, first of all, in light of those 
Supreme Court cases, there is very little that an antitrust 
authority can do when it comes to regulated companies like 
broadband Internet access providers. And secondly, there are 
activities that broadband Internet access providers can do that 
discriminate, that hurt an Open Internet, that do not rise to 
an antitrust violation. So there are gaps there that the FCC, 
with its public interest mandate, can fill.
    Ms. Chu. Let me ask about the authority of the FCC. There 
has been significant debate about the Commission's authority to 
regulate broadband, and in particular Verizon has appealed the 
Commission's Open Internet Order, alleging that the FCC has 
acted outside the bonds of its statutory authority. Do you 
believe the FCC does have the authority to develop net 
neutrality rules?
    Ms. Sohn. Well, we would have preferred that the FCC 
reclassified broadband Internet access as a telecommunications 
service, just as Justice Scalia suggested in the Brand X case. 
Unfortunately, they did not do that. The FCC believes that it 
has threaded the needle that the D.C. Circuit gave it, the hole 
that the D.C. Circuit gave it in the Comcast decision, and the 
court will decide that. Again, we would have preferred that 
they had gone to Title 2. They decided to go a different way, 
and the courts will decide.
    Ms. Chu. I have to admit that this all seems academic to me 
because the FCC can clearly regulate this area if they decide 
to reclassify broadband under the Telecommunications Act. In 
your view, why has the Commission held off on reclassifying 
broadband?
    Ms. Sohn. I think it's just fear. It's fear of the 
political blowback that would have happened. Yes, it would have 
been a controversial decision, but it would have been the most 
legally sustainable. It's unfortunate. I think the FCC's 
general counsel was quite correct that not reclassifying not 
only would have affected net neutrality, but would affect 
universal service, would affect privacy, would affect any 
number of important consumer protections that the FCC might 
undertake, but I think it's all about politics.
    Ms. Chu. Thank you. I yield back.
    Mr. Goodlatte. I thank the gentlewoman.
    The gentlewoman from Florida, Ms. Adams, is recognized.
    Mrs. Adams. Thank you, Mr. Chairman.
    Commissioner McDowell's dissent that said that reasonable 
standards set out in the Open Internet Order is one of the most 
subjective and litigated standards in the legal system, do you 
agree with that statement?
    Ms. Sohn. Could you repeat that? I didn't quite understand 
that.
    Mrs. Adams. The observation in Commissioner McDowell's 
dissent that the reasonable standard set out in the Open 
Internet Order is one of the most subjective and litigated 
standards in our legal system?
    Ms. Sohn. That is absolutely correct, because under Title 2 
of the Communications Act--again, the place where I would have 
preferred the FCC to go--what is prohibited is unjust and 
unreasonable discrimination. So the good thing about, had they 
decided to go there, is that you have years and years of 
precedent. Now they have set this new standard, ``reasonable 
network management,'' which I don't think is as onerous as my 
colleagues but, however, is going to have to undergo a whole 
new set of adjudications.
    So yes, I agree with Commissioner McDowell, but perhaps we 
disagree that that would have been the better way to go because 
there is precedent, and because telecommunications providers 
know how to behave under that precedent. And in fact, there are 
over 800 telecommunication providers who choose to be regulated 
under Title 2. And wireless telephone service--not broadband 
service, is also regulated under Title 2. So it's something we 
know.
    Mrs. Adams. So, would you agree that a standard that 
determines a behavior's reasonableness by a majority vote of 
FCC commissioners, is harder to predict than either a bright-
line rule or a rule of reason constrained by over a century of 
antitrust law?
    Ms. Sohn. Well, I mean, that's an interesting question. But 
as I said before, antitrust law doesn't really apply here 
because of Supreme Court precedent. So it's hard for me to say 
which is better and which is not. But let me say something 
about reasonable----
    Mrs. Adams. Let me ask you something. Let's get a little 
bit clearer. Would you rather have something under an antitrust 
law that has been century tested, or a reasonableness law that 
is subject to the five--I think it was five--commissioners' 
discretion?
    Ms. Sohn. Well, I would say the reasonable standard in 
Telecom was also time tested. It's also 70 years old. So I 
guess to me it's a wash.
    Mrs. Adams. I'm asking you, would you rather have one or 
the another?
    Ms. Sohn. I think you have to have both. It's a false 
choice, you cannot choose. You have to have both.
    Mrs. Adams. So you think that the antitrust law, if not 
amended to quell your concerns, would be a better route than--
or the reasonableness law would be a better route than the 
antitrust law?
    Ms. Sohn. No. The problem is that even if the antitrust law 
is vigorously enforced, there are still gaps that it doesn't 
reach when it comes to preserving an Open Internet. The gap 
where, for example, an Internet service provider wants to 
charge a Facebook or a Google for speedier service, okay; not 
because it has its own search engine, but just because, because 
it wants the money, that isn't really covered by antitrust law. 
Okay. And that's something that can come under the FCC's public 
interest standard.
    So the problem is the gap, and that's why I can't--it's not 
fair for me to say I like one better than the other because you 
have to have both.
    Mrs. Adams. Mr. Glass, you look like you would like to 
answer that.
    Mr. Glass. Well, I guess what I'm concerned about is there 
are five commissioners on the FCC. The appointments are usually 
political and partisan. The organization is far more 
politically driven than it should be, and this is something 
that we need to fix. I honestly believe that the FCC has 
structural problems that Congress should eventually address.
    But as it stands right now, it really has been capricious. 
And I really do believe the definition of ``reasonable'' is 
going to float, depending on who is sitting on the Commission 
at the moment. It's very difficult to conduct business in an 
industry where you have that sort of uncertainty.
    Mrs. Adams. Mr. Downes, would you like to comment.
    Mr. Downes. Yeah. I mean, I think it's worth noting that 
what they did end up with in the end was not as strict and not 
as onerous as what they started with, which was a 
nondiscrimination rule. And I think what's interesting is in 
the year and couple months' process by which the FCC was taking 
comments and having testimony on the net neutrality proceeding, 
I think one of the things they realized was there are a lot of 
discriminatory practices in the network's design, some of them 
very recent, some of them there to optimize certain kinds of 
content or certain kinds of media or certain kinds of services. 
And that those practices are not harmful to consumers, they 
were not intended to be anticompetitive, and in fact they're 
necessary to have an Internet today that looks like what it 
does, not what it looked like back in 1996.
    So I'm actually pleased that the FCC stepped back from the 
brink in terms of how far it went with the anti-discrimination 
rule. Obviously, I would have preferred them not to have any 
rule at all, but the one they had is not as bad as what they 
started with.
    Mrs. Adams. Thank you. I yield back my time.
    Mr. Goodlatte. I thank the gentlewoman.
    The gentlewoman from California, Ms. Sanchez, is 
recognized.
    Ms. Sanchez. Thank you, Mr. Chairman.
    Mr. Glass, I would like to start with you.
    In your written testimony you state that Internet service 
providers have never censored third-party content. So I want to 
ask you a very simple yes-or-no question. Are you familiar with 
AT&T's 2007 admission that they did censor part of a 2007 Pearl 
Jam concert that was critical of then-President George W. Bush? 
Are you familiar with that?
    Mr. Glass. Yes, I am. However, they were the publishers of 
the content, and therefore they had a First Amendment right to 
edit it.
    Ms. Sanchez. They were also the Internet service provider, 
the ISP; correct or not correct?
    Mr. Glass. As far as I know, you didn't need to use just 
their service in order to access the content. So I'm not sure 
if they qualify as the ISP in the same sense.
    Ms. Sanchez. Well, don't you agree that that type of 
precedent allows for the possibility that an ISP could censor 
content?
    Mr. Glass. There is always that possibility, but as an ISP 
who has worked my whole life to give people access, I 
amfervently in favor of not doing so.
    Ms. Sanchez. I just was asking about whether or not the 
possibility existed there. And I think, if I'm not mistaken, 
you answered yes, that that possibility does exist.
    So without net neutrality, what is to stop a rival ISP from 
blocking access to Web sites, for example, promoting LARIAT 
service, in effect blocking potential customers from knowing 
that there are alternative services?
    Mr. Glass. The market has generally taken care of that. We 
have more than 10 facilities based and even more nonfacilities-
based providers in our area. Customers are easily outraged by 
such tactics, and they will switch.
    Ms. Sanchez. That is my next question. In your written 
testimony, you argued that consumers will ``move quickly to 
competitors if they dared to try censoring content.'' However, 
as the FCC's national broadband plan notes, 13 percent of 
Americans have only one broadband access provider and 78 
percent of Americans have only two broadband options.
    So what would you say to the citizens of both of those 
groups who have very limited options with regard to who their 
providers are going to be, that hey, if you are outraged at the 
censorship, if that occurs from your Internet service provider, 
and you don't have another provider to go to, what is the 
recourse? And even maybe where there are two providers that are 
present, what if both are engaging in that activity, what is 
the recourse there?
    Mr. Glass. Well, I'm not sure where that figure came from 
because, again, wireless ISPs reach 70 percent of U.S. Homes 
and businesses right now, and they are continuing to expand.
    Ms. Sanchez. That is businesses. That is not necessarily 
individuals.
    Mr. Glass. Homes and businesses. But I am hoping we will 
certainly work to resolve that problem.
    Also, I have here, and we may want to enter it into the 
record, a white paper from the FCC which was published in 
December 2010 where they surveyed customers, and two-thirds of 
them thought it would be easy to switch providers if they 
wanted to.
    Ms. Sanchez. But those two-thirds may be under the mistaken 
impression that they have more than one provider available in 
their area, and what if they don't?
    Mr. Glass. Actually, Ms. Sanchez, I would be inclined to 
think that it is the reverse. What we find is that most people 
don't know that wireless ISPs like myself are an option, and we 
are working to correct that by advertising as hard as we can. 
Many people do not realize that we do offer a real alternative, 
and will offer more of one as time goes by.
    Ms. Sanchez. Ms. Sohn, do you agree with what Mr. Glass has 
to say about censorship and recourse for consumers?
    Ms. Sohn. AT&T engaged in blatant censorship when they 
wouldn't allow Sling Media to be on their platform, even though 
they allowed MLB streaming video. That was censorship as well.
    I am not a First Amendment law expert, but I can tell you I 
don't know of any case, Supreme Court or otherwise, that says 
that a telecommunications provider, like AT&T, has absolute 
First Amendment rights that don't get balanced against the 
First Amendment rights of people like you and I.
    Let me say something about WISPs because I love them. I 
love Brett's company. I think they are terrific. But by nature, 
they are niche players. They are enterprise oriented, and they 
operate mostly where there aren't spectrum congestion problems. 
In many places they serve as hot spots. And if you look at Mr. 
Glass's own Web site, it shows you the guaranteed downstream 
capacity. And for residential areas, it is 256 K, 384 K, 384 K, 
512 K, 768 K. That doesn't even meet the definition of 
broadband that the FCC has put out. So I admire his service. I 
would love to see him compete and compete and compete; but to 
say that they measure up to a Comcast or to an AT&T or even a 
broadband wireless service is just not the case.
    Ms. Sanchez. Thank you for your answer.
    Mr. Chairman, I will submit my additional questions in 
writing in the interest of time.* I yield back.
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    *The material referenced was not submitted to the witness.
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    Mr. Goodlatte. I thank the gentlewoman.
    I am now pleased to recognize the gentleman from 
California, Mr. Issa.
    Mr. Issa. Mr. Glass, sometimes being around here for awhile 
actually has a benefit besides sitting on the top row. Wasn't 
it roughly 8 years ago that the world gold standard for high 
bandwidth was 256, set by Korea when they came out with 
universal 256 broadband? So how many years are you behind the 
leading edge of broadband typically? When will you be at T1 
speeds in your rollout?
    Mr. Glass. Mr. Issa, we are not behind T1 speeds now. The 
only reason why we offer lower tiers, and by the way, the FCC 
standard for broadband until recently was 200 K, meaning that 
every one of our services met the old standard.
    Mr. Issa. Thank you.
    Mr. Glass. They moved goalposts. In any case, we can do far 
more. However, due to anticompetitive behaviors relative to 
special access, in other words the way we get our bandwidth 
from the Internet, our bandwidth is very, very expensive. The 
reasons you see those rates on our page going down to those 
levels is simply the bandwidth is so expensive that people 
don't want to pay more to get more. We would love to give them 
cheaper broadband, and we are working on it. But unfortunately 
right now, due to those anticompetitive tactics, that is what 
we can offer for that price.
    Mr. Issa. Let me go through a line of questioning.
    Mr. Glass, today with the bandwidth you have available, if 
I have a small- to medium-sized business and no other access 
and I wanted to run VoIP enterprise system at my business, you 
would by definition, I assume, be prepared to just treat me 
like any other bandwidth and interrupt me all the time and have 
me have voice go up and down; or would you give me assured 
service and priority so that my voice traffic was reliable and 
predictable and quality?
    Mr. Glass. Actually, this is one thing, Mr. Issa, that we 
do differently from other ISPs. Other ISPs don't give you a 
guaranteed minimum speed on your connection. Our company does 
that for every customer, whether it is residential or business. 
And we can go to quite high speeds as long as the customer is 
willing to purchase the bandwidth.
    I have right here----
    Mr. Issa. Okay, so you don't have a bandwidth limitation as 
earlier was said off of that sheet. That is some sort of a 
misunderstanding? You can deliver high bandwidth, assured 
service, and you do?
    Mr. Glass. Absolutely.
    Mr. Issa. Ms. Sohn, going back to you, with the FCC 
sticking in the middle of something that has been growing 
virtually exponentially, providing services such as hundreds or 
thousands of simultaneous VoIP connections, something that 
wasn't even thought of outside of a Cisco in your building 
system a few years ago, what is it that the FCC brings 
incrementally to this process in your opinion? What is that 
they are going to do better than what has been happening the 
last decade?
    Ms. Sohn. They are going to provide clear rules of the road 
to ensure that consumers are protected, that they can access 
any Web site, any application, any content they want. They will 
be bring certainty, and not just certainty for consumers.
    Mr. Issa. Okay, I will assume that is exactly what they are 
going to provide. Are they going to guarantee me that I can 
take all of the bandwidth available at the maximum speed, that 
it is given to me by the carriers? In other words, if I have 15 
MIP download, they are going to guarantee that I can take all 
15 at all times; right?
    Ms. Sohn. No, I don't think so.
    Mr. Issa. Okay, so right now--and I don't want to sound 
like O'Reilly, but let me be a little bit here.
    Ms. Sohn. Be my guest. You are doing a great job.
    Mr. Issa. Right now, if everybody wants to take the maximum 
speed, of course, the system crashes or it slows down. So 
assured bandwidth, with some sort of metering or prioritizing, 
in your opinion, wouldn't you say that is in the interest of 
the consumer? In other words, if I need my voice traffic to 
actually keep going, even while somebody else is trying to 
download 10 movies simultaneously, don't I have an interest; 
and how is the FCC going to do a better job than what was 
already in place?
    Ms. Sohn. First of all, what the FCC is doing is keeping 
the status quo in place. And I think that is really, really 
important here when people talk about the FCC is imposing net 
neutrality.
    Mr. Issa. Okay, I will take your answer as the status quo.
    Mr. Downes, since I only have a few moments left, if they 
are keeping the status quo and the growth has been exponential 
and it has been done throughout the FCC, how am I from the dais 
to understand what the benefit is to this grab by the FCC 
during a recess?
    Mr. Downes. Frankly, Mr. Issa, I see no benefit to what the 
FCC is doing. I see only harm, and the harm is the potential 
for them to slow down the process by which these things will 
continue to improve. And new services and new network 
management engineering will be introduced into the network over 
time. The only thing that is going to happen is that will slow 
down or worse.
    Mr. Issa. Thank you.
    Thank you, Mr. Chairman. I yield back.
    Mr. Goodlatte. It is now my pleasure--this is a California-
centric thing here. This is the third woman from California I 
am pleased to recognize.
    Mr. Issa. We are going to give you a lot more. This is 
important to California.
    Mr. Goodlatte. It sure is. The rest of the country, too. We 
are glad to hear from Californians, including the gentlewoman 
from Silicon Valley, Ms. Lofgren.
    Ms. Lofgren. Thank you. Before I ask my questions, I ask 
unanimous consent to make some testimony from Consumers Union a 
part of the record.
    Mr. Goodlatte. Without objection.
    [The information referred to follows:]

    
    
    
    
    
    
    
    
                               __________

    Ms. Lofgren. I am glad we are having this hearing. As we 
have listened to the testimony, I think it is important to 
recall that something like 96 percent of Americans have a 
choice of only two wire-line ISPs. If that were not the case, 
we probably would have a very different set of circumstances 
that face us. And when we talk about true broadband Internet, 
really fast enough to allow Americans to enjoy next-generation 
applications such as high-quality video, the market for true 
broadband is really even smaller for most Americans.
    Most of us have no alternative but our cable company which, 
of course, is facing competition for content on the Internet 
which raises all kinds of other potential concerns.
    Now, Ms. Sohn, thank you so much for being here today. You 
have been a witness many times before the Judiciary Committee. 
You have described in your testimony the concern about the 
monopolies and duopolies. I am wondering, can you give us a 
comparison on what we are facing here with, say, another First 
World area, say Europe; do they have greater competition there?
    Ms. Sohn. Yes. In almost every international comparison 
that you see, the U.S. is 15th, 25th as far as speed and value 
is concerned. That is because we took our regulatory system 
that we had in the 1990's and the early aughts and we got rid 
of it when the FCC reclassified broadband Internet access as an 
information service instead of telecommunication service. And 
so those countries that are beating us--and it is not just 
countries in Europe, it is countries in Asia, it is even 
countries like Iceland and some of the Nordic countries as 
well--they either require dominant telecommunications providers 
to open up their networks so competitors can use them, or they 
heavily subsidize their system. The government does that.
    I am not necessarily a big fan of the second one since I am 
a taxpayer, but I am a huge fan of the first one. If we were to 
go back to Title 2, we could go there. And I think it would be 
a great boon to American consumers because prices would go down 
and choices would go up. I remember the narrow band world, 
dial-up world. I am old enough to remember that.
    Ms. Lofgren. Me too.
    Ms. Sohn. In that era, American consumers had a choice of 
13 Internet providers; 13. And now you are lucky if you have 
two. Even here in D.C., I only have a choice of three.
    Ms. Lofgren. I am still waiting for Verizon FIOS to hit my 
street.
    Ms. Sohn. It is wonderful.
    Ms. Lofgren. Maybe that is an invitation if anyone from 
Verizon is listening. Now, the competition in other countries 
that have true broadband, how did they get it?
    Ms. Sohn. The regulatory scheme is different. We decided 
here that we are going to let the free market flourish, and 
what happened is competition has sunk to where it is right now 
where you have monopolies and duopolies.
    Ms. Lofgren. I think it's even been discussed here today 
that some of the issues are not amenable to antitrust remedies, 
and I think somebody said you might be able to charge Google, 
for example, a special fee for traveling on your network. 
Frankly, Google could afford it. But I'm more worried about not 
the Googles who are sitting financially very happily, but the 
guy in the garage who doesn't have that, and that we would have 
the ability really to stifle innovation without some guarantee 
of access.
    Ms. Sohn. That is absolutely right. Chairman Goodlatte 
talked about what kind of investment would there be under net 
neutrality rules. I think investment, where you are from, 
Congresswoman Lofgren, would be enormous. Investment in the 
next Twitter, the next NetFlix, the next Facebook, that is who 
we really care about here. You are right, Google can take care 
of itself. But imagine if 10 years ago Larry Page and Sergey 
Brin had gone to a venture capitalist and said, I would like 
you to fund this new crazy search engine idea I have; but, you 
know, AT&T/Verizon are asking me to pay for transport. The VC 
would say, See you later, I will invest in something else.
    So it is really the next great innovation, like the ones 
that were used in Egypt to stir democracy. That is what I am 
really concerned about.
    Ms. Lofgren. I would just note that it is necessary, 
especially with the growth of video on the network, there is 
going to be some crunch time here as we catch up. But my 
understanding is that the rule does not forbid reasonable 
network management or nondiscriminatory pro-competitive 
management of the resources. I guess what I am hearing is that 
is not as well defined as it needs to be. It may be correct. We 
may need to have some closer definition so everybody knows what 
that means. If that is the take-away from this hearing, I think 
we will have achieved something.
    Mr. Goodlatte. I thank the gentlewoman.
    Ms. Lofgren. I thank the Chairman for yielding.
    Mr. Goodlatte. The gentleman from New York, Mr. Reed is 
recognized.
    Mr. Reed. Thank you, Mr. Chairman, and to each and every 
one of the witnesses here today.
    Being relatively new to this body and to this Committee, I 
will say that I have a preference for witnesses that come from 
the front line, the people that are out there day in and day 
out--not to mean any disrespect to the think tanks and the 
academic world, we listen to them and enjoy their information--
but I would like to have a conversation from you, Mr. Glass, 
because you are out there.
    Since I am on the other side of the coast from California 
to New York, but rural New York, western New York, in your 
testimony you provided to us it talks about--I think there's a 
clause here, ``Unfortunately, I am here to tell you today that 
the net neutrality rules enacted by the FCC will put wireless 
ISPs' efforts to provide competitive broadband and to deploy it 
to the rural and urban areas that do not have access or 
competition at risk.''
    I want to clearly understand what brings you to that 
conclusion. Can you summarize that for me?
    Mr. Glass. Well, Mr. Reed, there are several reasons why it 
would cause problems for us. First, it would discourage 
investment. Even when the notice of proposed rulemaking came 
out way before the rules were issued, we had investors who were 
very concerned. One fellow actually, very dramatically, clapped 
me on the back and said: The Feds are here. Small businesses 
like you aren't going to be able to play anymore. Why don't you 
go sell your business instead of asking for capital from me?
    The second problem is the uncertainty of what we were 
allowed to do and what we can't do. We don't have freedom to 
innovate anymore without asking permission.
    The third thing is the potential for censure by the FCC and 
serious penalties, if someone who isn't even our customer comes 
along and complains, and we have to either defend ourselves and 
buy expensive lawyer time or potentially be fined.
    Mr. Reed. Well, as a lawyer, I can understand that bill and 
that concern. And I always go after the frivolous lawyers 
because they give us all a bad name. And the defense cost, 
being a small business developer myself, that is a risk of 
business. So I appreciate that firsthand information.
    Mr. Downes, in your testimony you indicated something about 
the risk of unintended consequences on this report ordered out 
of the FCC are high. What are those unintended consequences? 
Can you articulate those for me?
    Mr. Downes. Well, it is difficult to articulate unintended 
consequences, but we essentially have a lot of history, not 
just with the FCC and not just with the Federal Government, 
State governments as well, who passed laws trying to regulate 
certain problems, sometimes very specific problems--say child 
pornography or indecent speech or other kinds of identify theft 
or spam and so on--where the legislation, because the process 
of legislating is relatively slow to the speed with which 
things change in terms of technology, and especially the 
Internet, by the time the legislation is passed, even with the 
best of intentions, it winds up certainly not solving the 
problem it intended to solve, and in fact opening up the door 
for unintended types of uses where regulatory agencies or local 
prosecutors would use that law to prosecute or try to interfere 
with behavior that they don't like, but which was not actually 
what the law was intending.
    So my concern, particularly with this rule, is again that 
because the FCC has said these are the only exceptions that we 
are going to allow to the neutrality principle, these are the 
only network engineering practices that we think are 
acceptable, even though they're inconsistent, that the 
unintended consequence here will be a slowdown in the 
innovation of new techniques that we desperately need to keep 
the growth that we have.
    Mr. Reed. Thank you very much.
    Ms. Sohn, do you see any unintended consequences on the 
horizon? I understand unintended consequence are hard to 
identify and articulate, but we have been regulating many 
industries for long periods of time. Do you see any similar 
situations where the unintended consequences could flow out of 
these types of actions?
    Ms. Sohn. Well, look, you can always have unintended 
consequences. But I do think my fellow panelists are 
exaggerating, and let me tell you why. First of all, both of 
them say there have been hardly any documented instances of 
discrimination, so what is the problem? If that is the case, 
then you will not have hundreds of complaints.
    My organization was one of the organizations that brought 
the complaint against Comcast for throttling back BitTorrent. 
That took an awful lot of work, okay, and the FCC rules say you 
have to make a prima facie case. So even if you give standing 
to everybody, not everybody has the expertise. And I can say in 
my organization, they don't have the resources to represent 
everybody. So I think that unintended consequence is a little 
overwrought because it is really, really hard to bring a 
legitimate complaint.
    And would you rather have class action suits? Would you 
rather have the States take care of it? I mean, class action 
suits were brought against Comcast in California and in 
Florida. So in some ways this process is even better
    Mr. Reed. I am a States' rights guy, so I would tread 
lightly there because the Federal Government, in my opinion, 
should be a limited Federal Government. So I would defer to the 
States.
    Mr. Chairman, my time has expired so I will yield back.
    Mr. Goodlatte. I thank the gentleman. Now I proceed to 
recognize another Californian, the gentleman from Los Angeles, 
Mr. Berman.
    Mr. Berman. Thank you, Mr. Chairman. It is good to be here. 
On medical malpractice, I am a States' rights guy.
    We need to be on this whole subject, I think we need to be 
careful; at least my view is net neutrality means neutral as in 
anti-discriminatory and not necessarily a totally open net. If 
the FCC is going to regulate, there needs to be allowances for 
reasonable network management to stem the flow of infringing 
works, child pornography, unlawful content not in the American 
sense of unlawful, not in the Mubarak sense of unlawful. And 
why do I say that? Because I really think, ultimately, without 
the incentives for legitimate content, the Internet is never 
going to reach its full potential, which I think is a goal of 
the FCC, and it is therefore critical that policy makes it 
clear that steps can be taken to protect content from being 
stolen and that the existing rules do not prohibit ISPs from 
taking reasonable steps to do so.
    I would like to ask one question. Ms. Sohn, how the heck 
are you?
    Ms. Sohn. I am shocked you are asking me that question.
    Mr. Berman. I thought you were going to say, Why don't you 
go back to Foreign Affairs?
    In your testimony, you cite to the Comcast decision as one 
which illustrates a claim for why a provider may block access, 
and I will quote you here: Both providers deny wrongdoing and 
claim that these practices were designed to handle congestion, 
but in neither case did providers disclose their traffic 
management practices to subscribers. It is ironic that 
providers which publicly proclaim they have no intention of 
ever actually blocking or degrading content routinely include 
statements in their terms of service that would allow them to 
engage in precisely these practices and without prior notice to 
consumers.
    I would like to get a little better handle on what concern 
you are expressing. Do you disagree there may be an appropriate 
situation in which access is denied or blocked and is the issue 
notices to subscribers? From your testimony, there is an 
acknowledgement that subscribers were informed in their terms 
of service, so is it something else that you are seeking here?
    Ms. Sohn. So both former E&C Chairman Waxman and the FCC, I 
think wisely, decided to take matters of network management--
that is, making the network flow properly--they took copyright 
infringement and pornography enforcement out of that standard, 
and I think that was the right choice. But what the FCC did do, 
and I agreed with this, it said there should be nothing in the 
net neutrality rules that prevents Internet service providers 
from taking reasonable measures to protect against copyright 
infringement. And it also says that nothing in the net 
neutrality rules should prevent the enforcement of intellectual 
property laws.
    So the point there is ISPs, if they engage in reasonable 
measures to enforce copyright, would be well within the net 
neutrality rules. And as I understand it today, content 
providers and ISPs are talking about what those reasonable 
measures should be.
    So it is not network management in my mind, because that is 
about making sure that there is no congestion, but nothing in 
the FCC's rule would prohibit something like that happening. I 
am not a fan of blocking. I am certainly not a fan of ISPs 
throwing customers off the network, although they do have that 
ability to do that under the Digital Millennium Copyright Act 
if they are adjudged to be infringers, but I am not concerned 
that the network neutrality rules would prohibit reasonable 
measures to ensure that copyright.
    Mr. Berman. So you are telling me that if my concern about 
net neutrality rules is that it will be interpreted to 
essentially prohibit ISPs from getting involved in efforts, 
reasonable steps to stop infringing material, I shouldn't be 
concerned because you are not seeking that?
    Ms. Sohn. It is right there in the order. I don't want to 
be boastful, but I helped to negotiate that language. I guess I 
am being boastful. No, you should not worry.
    Mr. Berman. That is the kind of thing that you can boast 
about any time for my purposes. Thank you.
    I yield back.
    Mr. Goodlatte. The gentleman from Pennsylvania, Mr. Marino 
is recognized for 25 minutes.
    Mr. Marino. I guess I am going to pose this question to all 
three of you; but, Ms. Sohn, I will start with you. If the FCC 
gets involved here, would you agree with me that it needs an 
entirely additional level of administration?
    Ms. Sohn. Well, I might agree that it could probably use 
one or two more administrative law judges to the extent there 
may be more adjudication. But the point I want to make, there 
is also this body called the Broadband Internet Technology 
Advisory Group, and I sit on its board along with Verizon, 
AT&T, Comcast, Google and others. That is going to be a place, 
a nongovernmental, multi-stakeholder forum where ISPs and 
others can go to get predeterminations as to whether something 
is reasonable network management.
    I think that is going to take the load off the FCC from 
having to have layers and layers of new bureaucracy. They will 
still have to have some.
    Mr. Marino. If it is going to take the load off, then why 
have the FCC--and we are in a position here in this country 
where spending is out of control. Government is way too big, 
and we are talking about creating another administrative 
branch, even if it is a branch of the FCC, to come in and 
regulate.
    Now, in my research concerning the FCC, it has been having 
a tough time regulating television and other matters. I see 
this as, in addition to an impingement of perhaps 
constitutional rights violations, free speech, we have an 
entirely new, additional branch of government that we have to 
pay and it is something that we can't afford at this point.
    Ms. Sohn. Well, look, the BITAG cannot enforce rules. It is 
not a government entity. It is a multi-stakeholder group that's 
only purpose is to tell ISPs whether, according to good 
engineering technique, or common engineering technique, 
something is reasonable network management or not. You still 
need a government agency to enforce rules of the road.
    So you need both. I don't disagree with you. We don't want 
to bloat government bigger than it is already; however, they 
may need to shift some resources. They only have one or two 
administrative law judges, which is crazy. They have 
adjudications in other places. So they will need to add a few 
people, but I don't see it becoming more bloated.
    Mr. Marino. I have heard that before with the Federal 
Government. Let's start out with 2, and a year later it is 222. 
If we are going to hire more administrative law judges, I would 
be forced to argue there are other areas where we need 
administrative law judges, you and I disagree on that. Mr. 
Glass and then Mr. Downes, would you care to respond?
    Mr. Glass. Mr. Marino, I have actually expressed this in 
writings earlier that I made online. One of my concerns is that 
the push for network neutrality regulations at the FCC has 
diverted it from other pursuits which are more important. The 
FCC, after it published the national broadband plan, laid out a 
calendar that said certain things are going to be done in 2010. 
And because it was spending so much time and energy and money 
on addressing net neutrality, there were goals that it set for 
the third quarter of 2010 that it has not yet gotten to. So I 
am very concerned that it wasted a lot of the Commission's 
resources.
    Mr. Downes. I certainly agree with that, particularly in 
terms of spectrum reform, which is another matter altogether. I 
think it is important to understand that the FCC has been out 
of the business of regulating the Internet in any respect since 
1996. One of the things that is clear from the proceedings of 
the last year is that the FCC, and I don't mean any disrespect 
to the very hardworking staff over there, but they just don't 
understand technologically what happened in that intervening 
period. If they are going to start enforcing reasonable network 
managing practices, the engineering expertise will have to come 
up significantly from where it is.
    I agree with Ms. Sohn that BITAG has great potential to 
assist them if they listen to the recommendations of BITAG. But 
in order for them to actually enforce these provisions, they 
are going to have to do things we don't necessarily like, which 
is look very closely at a lot of Internet traffic to see if in 
fact discrimination is happening, or if the speed is happening 
because the speed is happening.
    Mr. Marino. Just quickly, Mr. Downes, first, I want you to 
address the constitutionality or lack thereof, particularly 
pertaining to free speech, how do you see FCC, if it does have 
control and authority, drawing that line between the two?
    Mr. Downes. The Report and Order sort of hedges its bets 
and contradicts itself in some sense, because the FCC does 
recognize under the Constitution and section 230 of the 
Communications Act, Internet service providers have the ability 
to shape content in many meaningful ways. So they haven't 
outright said they are going to stop that practice. But on the 
other hand, they said we don't see ISPs as typically being 
speakers. And at the same time, they recognize that under the 
Constitution and 230, they do have certain rights.
    Mr. Glass. Mr. Marino, I don't believe it is a First 
Amendment issue. There may be some Fifth Amendment issues, I 
think, possibly here, in that if conforming to these rules 
cripples our network, it may be considered regulatory taking.
    Ms. Sohn. I am not sure what kind of speech a broadband 
Internet access provider actually is engaging in.
    Mr. Marino. That is my point.
    Ms. Sohn. Well, no court that I know of has ever said that 
the owner of the infrastructure has an absolute First Amendment 
right. And to the extent that the courts have addressed it, it 
always has been balanced against the rights of the public to 
receive information. The classic case is the Turner case. It is 
an old case, but it still is the leading precedent in this area 
which said that cable operators had to carry over-the-air 
broadcast stations because the public had the right to see free 
over-the-air broadcast TV.
    Mr. Marino. Don't you see an onslaught of additional 
litigation?
    Ms. Sohn. There already is.
    Mr. Marino. I mean more?
    Ms. Sohn. Look, if Verizon and Metro PCS want to drop their 
lawsuit against the FCC, I would be all for it.
    Mr. Marino. That is an issue not before us, but that is my 
concern of, again, the additional litigation involved here plus 
the fact that the cost, that it is going to be to the American 
taxpayers.
    Mr. Goodlatte. If the gentleman would yield, the issue in 
that lawsuit is the very topic of the discussion here today 
being approached from a different vantage point, and that is, 
is the FCC under the laws passed by Congress entitled to do 
what they are trying to do?
    It is now my pleasure to yield to the fourth woman from 
California, Ms. Waters.
    Ms. Waters. Thank you very much, Mr. Chairman.
    Before I begin my questions, I ask unanimous consent to 
submit for the record the Department of Justice's competitive 
impact statement prepared by the agency's antitrust division in 
connection to the Comcast-NBC merger approval.
    Mr. Goodlatte. Without objection.
    [The information referred to follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
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    Ms. Waters. I have another submission and that is from a 
group of economists sent to the FCC discussing the importance 
of net neutrality rules.
    Mr. Goodlatte. Without objection, so ordered.
    [The information referred to follows:]
    
    
    
    
                               __________

    Ms. Waters. Thank you very much, Mr. Chairman.
    I would like to thank our panelists for being here today. I 
find this discussion very engaging, and I am particularly 
interested, since I spent so much time on the Comcast-NBC 
merger and learned so much about the power of a huge 
organization with a lot of resources.
    And I want to know, and I would like to ask Ms. Sohn, what 
challenges will exist for online content providers in light of 
mergers that will follow the Comcast-NBC merger? How can an ISP 
like LARIAT, for example, compete against an ISP like Comcast-
NBC?
    Ms. Sohn. First, Congresswoman Waters, I really want to 
thank you for the work you did, really bringing the public's 
attention to that merger, because it was a merger of 
unprecedented proportions. I was disappointed that nobody--few 
people in the government, save you and perhaps Mr. Cole and Mr. 
Frank and the Senate, had the guts to say, How can we even 
consider this? But, unfortunately, you guys were really sole 
practitioners in that regard.
    So, you know, I don't think Larry can compete. There is no 
way. I mean, Comcast now has this vertical merger of one of the 
most popular broadcast networks in the country. And also, it is 
the biggest Internet service provider and the biggest cable 
operator. I think the Justice Department did the best it could 
within the limits that it had. Again, in fear of Trinko, I will 
say they didn't want to push too far because they were 
concerned about these precedents that really limit antitrust 
law.
    So the good news about the competitive impact statement 
that you just submitted for the record is that it says that 
online video distributors, what I call OVDs, are competitors. 
They are part of the market, and that big ISPs like Comcast 
cannot discriminate against them, cannot withhold programming 
from them, and cannot throttle their traffic when they provide 
online service.
    Ms. Waters. Thank you very much.
    Let me just ask in what ways can Internet service providers 
impede access to content, products, services available on the 
Internet, and what options do Internet users have if they find 
they cannot access certain content, products, or services?
    Ms. Sohn. They can either slow an application for a service 
provider's service. They can block it. Or they can slow it so 
much that it is almost like blocking it. That is what we were 
challenging in the Comcast-BitTorrent case.
    So there are many different ways that Internet access 
providers can hurt consumers' access to the things they want to 
access over the Internet.
    What is the recourse? Well, that is what the FCC rules are 
all about. They are about providing rules of the road so that 
consumers, if they do see that they are being unlawfully 
blocked or degraded from the content, services, and 
applications that they want to access, that they can go 
somewhere and have some recourse. And if these rules are 
overturned, either in court or by the Congress, through the 
Congressional Review Act or by any other method, then consumers 
will not have that. They will basically be out in the cold.
    Ms. Waters. You are basically saying there will be no 
options?
    Ms. Sohn. Absolutely. Again, as I mentioned before you were 
here, antitrust law has been so neutered for regulated 
industries like broadband Internet access providers, that right 
now without some kind of law being passed by this Subcommittee 
and the Judiciary Committee, there is no recourse there either 
for consumers.
    Ms. Waters. If I have time left, do you have an opinion 
about what you saw happening in the Congress of the United 
States? I found, in talking with Members, that many Members 
were confused or misled as to what net neutrality is or should 
be, and so many of them didn't even know--of the 74 who signed 
on to that letter, didn't realize. What is the confusion, and 
do you have any ideas how we can help people clear up what net 
neutrality is and what it isn't?
    Ms. Sohn. Net neutrality, quite simply, prohibits telephone 
and cable operators who are the two main, who provide the two 
main on-ramps to the Internet, from picking winners and losers, 
from deciding that Microsoft is going to win over Google. Or 
deciding that LinkedIn is going to win over Facebook. So that's 
what it is about.
    It is really no different than the telecommunications 
regulation we have had in this country for 100 years that said 
that telephone companies cannot decide whether your phone call 
is going to go faster than my phone call, or whether Mr. 
Glass's phone call is going to be a better quality than my 
phone call. It is that simple.
    Ms. Waters. Thank you very much.
    I yield back the balance of my time.
    Mr. Goodlatte. It is now my pleasure to recognize the 
gentleman from Arizona, Mr. Quayle, for 5 minutes.
    Mr. Quayle. Thank you, Mr. Chairman.
    Ms. Sohn, I am going to get back to some of the beginning 
testimony because I am trying to figure out the numbers. The 92 
percent of people who live in areas where broadband is only a 
monopoly or duopoly, does that include wireless providers in 
that number as well?
    Ms. Sohn. To the extent that wireless providers are 
providing what the FCC now says is broadband, so the FCC's 
definition of broadband is 4 megabits down and one megabit up, 
and a lot of wireless providers are not providing those kinds 
of speeds. That may change soon, but it is not the case today.
    Mr. Quayle. So that is only wired?
    Ms. Sohn. To the extent that there are any wireless, I 
don't know of any wireless providers that are providing those 
kinds of speed. So the answer is yes.
    Mr. Quayle. So as wireless continues to evolve and 
innovation continues to evolve on the wireless front with the 
expansion of 4G and then 5G, won't that alleviate any of the 
competition concerns that you have going forward, because there 
will be enough competition via wireless carriers, via phone, 
via cable, via probably other avenues where you can actually 
address this with the market system rather than having the FCC 
regulate this on this basis?
    Ms. Sohn. I am afraid not, particularly because the two 
largest landline providers, AT&T and Verizon, are also the two 
largest wireless providers. Everybody else is struggling for 
air. I mean, T-Mobile, Leap, Sprint, they are struggling to 
compete against AT&T and Verizon. So, no. I wish it was the 
case, but it is not at all the case that as--and again, in so 
many issues that I work on in Public Knowledge, we are always 
told the next great thing is around the corner, so why 
regulate? I am still waiting for broadband over power lines. 
Clearwire just abandoned residential service. That is a 
wireless home service. They just abandoned it to go to 
enterprise.
    Mr. Quayle. Mr. Downes, can you address that question? Do 
you agree with Ms. Sohn's assessment?
    Mr. Downes. Only in part. It is true that the statistics 
that Ms. Sohn and some of the other members have cited from the 
national broadband plan, that was a reference to wire-line 
broadband. There is a separate set of statistics that are in 
the plan to talk about wireless competition. And, of course as 
we know, wireless competition is much more robust. There are 
many more providers.
    I think it is absolutely the case that as 4G networks and 
later networks get rolled out, assuming that we can solve our 
spectrum issues, and we know this as consumers, we are moving 
away from the sort of fixed computer experience of the Internet 
and moving to a mobile Internet. It is app-based. It is an app-
based economy. As that happens and as we get the 4G speeds and 
the kinds of capacity, yes, it will provide more options and 
more competition.
    It is true that one of the most promising technologies, 
particularly for the rural areas that may today have no 
options, is broadband over powerline. And I would reference my 
written testimony where I point out that the FCC has been 
delaying and interfering with the ability of VPL providers to 
do experiments. So if what the FCC wants is more competition, 
they really ought to be more supportive of new technologies 
rather than holding them up.
    Mr. Quayle. Mr. Glass, Ms. Sohn was talking earlier about 
innovation within Internet companies, Facebook, Twitter. Now, 
how would the Open Internet Order deter other companies like 
yours from expanding and upgrading their services, because it 
seems like there would be a lot of capital-intensive 
improvements that you do that could fall by the wayside to 
somebody else?
    Mr. Glass. Mr. Quayle, actually we are involved right now 
in some very capital-intensive upgrades. This radio I have here 
in my hand, we are deploying these. These allow access to the 
Internet at 54 million bits per second. We can attach these to 
an antennae, put it on your house, and you can get up to that 
speed. There is a question of cost still, but we are working on 
that very heavily.
    The big problem we see is being able to raise capital, as I 
mentioned before. If people believe that we are a little guy 
and we are unduly impacted by regulation, that is what is going 
to hurt.
    When we recently expanded our network, and as a matter of 
fact, we are in the process of completing the expansion now. We 
went to our customers and we asked them if they would invest in 
us by paying ahead for a year of service. Now, that is a 
Faustian bargain because it kills your cash flow. You get a lot 
of money up front, a lot of capital up front, but you also have 
a huge liability at that point. We had to do that because we 
could not get conventional investors to invest in our company.
    Mr. Quayle. Mr. Downes, there has been a lot of talk about 
antitrust laws and how some people believe they are not 
effective for this area. Do you believe the antitrust laws can 
adequately account for any misbehavior by Internet service 
providers and monopolistic opportunities they may have?
    Mr. Downes. Yes. It is theoretical because we have not 
tested them, and we have not tested them because there haven't 
been any serious cases that require testing them. I don't 
necessarily read the Trinko opinion the same way as Ms. Sohn 
does. I have every reason to believe that between the FTC and 
the Justice Department, if there were serious anticompetitive 
problems that had demonstrable consumer harms, the effect of 
which was to reduce the Open Internet, I am quite confident 
that our existing antitrust laws and enforcement mechanisms 
would take care of the problem.
    Mr. Quayle. Thank you very much. I yield back.
    Mr. Goodlatte. I thank you. I am now pleased to recognize 
the gentlewoman from Texas, Ms. Jackson Lee.
    Ms. Jackson Lee. Mr. Chairman, my interest in this 
Committee is about creating jobs and competitiveness. I am 
going to kick the football in your direction, Ms. Sohn. Do you 
think that the Justice Department--and in this instance I think 
you said the FTC--the FTC are sufficient and have taken note 
enough to determine whether or not they need to file action and 
whether or not there is an anticompetitive impact on some of 
the entities that you are suggesting are negatively impacted, 
and is there a reason why they haven't acted?
    Ms. Sohn. I believe that the Supreme Court has effectively 
gutted antitrust enforcement when it comes to regulated 
companies like the telephone and cable companies that provide 
broadband Internet access service. The Trinko case and the 
Credit Suisse case--and it is not just me saying this--Howard 
Shelanski, I mentioned him before, he testified in front of the 
Subcommittee on Courts in June, and he basically said that the 
Trinko and Credit Suisse cases have made it virtually 
impossible to apply antitrust.
    Ms. Jackson Lee. What would you offer as a remedy?
    Ms. Sohn. I think Congress has to reverse those decisions 
and revivify antitrust law. I think it will be helpful in a lot 
of different ways.
    Ms. Jackson Lee. And that would be overall, because I think 
the antitrust laws are weak, period.
    Ms. Sohn. Absolutely.
    Ms. Jackson Lee. We just recently saw a merger dealing with 
Continental and United, and it is almost as if the Justice 
Department said we have no teeth, we have no ability to 
respond. So you are suggesting a legislative fix?
    Ms. Sohn. Absolutely. That is the only way you are going to 
be able to overturn a Supreme Court precedent like that.
    Ms. Jackson Lee. Mr. Downes, if you have large 
telecommunications companies who also operate as Internet 
service providers, and they might be perceived as unfairly 
thwarting competition by slowing down the Internet speed of 
access for customers who access the Web sites, do you see a 
solution for them? What solution would you offer?
    Mr. Downes. So you are talking about telecommunication 
companies who also are service providers?
    Ms. Jackson Lee. And someone is trying to access, and 
because you have another provider, you might be slow in having 
access. Do you see a remedy for that?
    Mr. Downes. Obviously, one remedy is to switch. You don't 
have to buy the whole bundle of services from the same 
provider. If you have more than one choice, you can have cable 
from Comcast and telephone from AT&T and Internet from Verizon 
if it is mobile. So you have your choice of providers in many 
areas.
    In the areas you don't, I think one of the things to 
recognize is that--and we see it quite dramatically in what 
happened in Egypt over the last month. The very tools that have 
made the Internet so powerful in the last few years in 
particular allow consumers really to exercise their 
dissatisfaction and unhappiness with governments or with 
companies much more easily and effectively and quickly than 
ever before.
    Ms. Jackson Lee. What I am trying to say, they try to 
access these giants from their Web site, from a competitor 
Internet service. That is the question. And they feel that they 
are not getting the access as quickly as possible. It can't be 
that they can go to Verizon. They are talking about those 
particular entities.
    Mr. Downes. I'm not clear what you are asking. You're a 
Comcast customer and you want to go to Verizon?
    Ms. Jackson Lee. No. You are a small consumer and you are 
trying to go to AT&T or Verizon, and you are not able to access 
as quickly as you would like; it is a slow process. Do you 
think there would be any slowing down of the utilization of 
those services?
    Mr. Downes. Well, it depends on what is causing the 
slowdown. A lot of times you experience slowdowns because of 
technical----
    Ms. Jackson Lee. You don't think it would be purposeful and 
you don't think that small companies should have some 
protection?
    Mr. Downes. It could be purposeful.
    Ms. Jackson Lee. What would you perceive to be a remedy for 
that?
    Mr. Downes. The antitrust enforcement mechanisms that 
already exist for anticompetitive behaviors that have 
demonstrable consumer harms.
    Ms. Jackson Lee. You feel comfortable that they are 
sufficient?
    Mr. Downes. Yes. As I say, since we haven't tested them, we 
don't know. And we haven't tested them because we haven't 
needed to.
    Ms. Jackson Lee. Let me go to Mr. Glass. Let me ask you the 
same question. Do you believe that the current laws which 
protect against monopolies or duopolies in Internet service 
providers and broadband providers are sufficient? Do you 
believe antitrust laws can protect small companies?
    Mr. Glass. Ms. Jackson Lee, I think the law needs fixing. I 
am especially concerned about what will happen if the FCC rules 
stand, because as Ms. Sohn sort of alluded, when we become a 
regulated entity, then suddenly Trinko kicks in and we lose 
remedies under the laws.
    Ms. Jackson Lee. What do you want to see strengthened under 
the antitrust laws?
    Mr. Glass. I would like to have the ability to take action 
under antitrust to deal with the problem I am having right 
now--anticompetitive pricing of the inputs to my business by 
the telephone company.
    Let me explain. I rent leased lines from the telephone 
company to connect me to the Internet. They charge me more per 
megabit per second for wholesale connections to the Internet 
than they do to retail consumers who are buying DSL from them. 
As a result, they are trying to make it impossible for me to be 
competitive and also be profitable. I would like to be able to 
take action about that.
    Ms. Jackson Lee. Do they argue that you are in an area that 
is difficult to serve? Do you make that kind of argument?
    Mr. Glass. Actually, there is no rational justification. 
The physical plant, the wires, have been fully depreciated for 
decades. There is no reason why they could sell me that access 
at a very low cost, except they want to prevent me from being a 
better competitor.
    Ms. Jackson Lee. Mr. Chairman, to conclude, we have had the 
privilege of serving on this Committee in past Congresses and, 
frankly, have had these hearings. I would make the argument 
that we want to see competitiveness. We like large companies 
and small companies. But I wonder whether or not we in the 
Judiciary Committee are going to be the only ones who will 
raise this concern and whether our collaborators on Energy and 
Commerce will not, and whether or not we will be able to move 
forward in trying to answer some of the concerns and still 
balancing the commitment to competitiveness and providing jobs 
that our large companies do provide.
    I yield back.
    Mr. Goodlatte. I thank the gentlewoman for her comments, 
and look forward to working with her on that very objective.
    It is now my pleasure to yield to the Ranking Member of the 
Subcommittee, the gentleman from North Carolina, Mr. Watt.
    Mr. Watt. Thank you, Mr. Chairman.
    I apologize to the Chairman and the witnesses for not being 
here earlier, and I thank Mr. Conyers and Ms. Chu for 
substituting for me. I had to go over to the White House to the 
Presidential Medal of Freedom presentation. One of my 
constituents, or somebody who lives just outside my 
congressional district was being honored, so I needed to be 
there, along with John Lewis and Stan Musial and Yo-Yo Ma and 
Warren Buffett and some other people. I didn't need to be there 
for those reasons, but I needed to be there for my constituent.
    I thought I would not ask questions, but just sitting here 
listening to the questions that got asked, I got provoked to 
ask a couple of questions. Somebody was talking about somebody 
providing broadband over power lines. Who in the world is doing 
that, and who would have the incentive to do that in today's 
market? Is anybody actually doing that?
    Mr. Downes. Yes. It's a technology that has been in 
development for quite some time.
    Mr. Watt. Is anybody doing it?
    Mr. Downes. There are a number of companies that are doing 
trials with it. It is very attractive for rural customers 
because the infrastructure is already in place. They already 
have electricity, where they may not have high-speed Internet 
connections, or they can't get mobile for obvious reasons. So 
it is, in fact, a very appealing technology, but so far it has 
not been commercially successful.
    Mr. Watt. And would the FCC's order have some impact on 
that one way or another? I mean, would it disincentivize it or 
would it have any impact on it at all.
    Mr. Downes. Well, the BPL providers would be subject to the 
same rules as any other Internet provider, assuming they're 
offering broadband speeds, which is what they are doing. My 
point was just that up until now, the FCC has not been 
particularly helpful in encouraging this new technology, and in 
fact has been criticized by the courts for rulings that have 
slowed down the deployment of that technology. There is a 
concern that it interferes with hand radio operators.
    Mr. Watt. I thought you all wanted the FCC to get out of 
the way.
    Mr. Downes. Get out of the way of the broadband power line, 
yes.
    Mr. Watt. You want them in in some things and out of other 
things. Okay. All right, I got you. That's what most people 
want. They want what they want, and then they want them out of 
the way when they don't want what they want.
    Let me just ask a general question to all three of you. I 
don't know how you promote competition in a capital-intensive, 
cost-prohibitive industry. I mean, you know, you're ending up 
with two major carriers here, Verizon and AT&T. I mean, a lot 
of our private enterprise is becoming more and more 
concentrated just because, I mean, there's just--these in many 
ways are utilities, and the capital costs are so heavy. I'm 
just trying to figure out how do we promote competition in 
these areas?
    Ms. Sohn, and then we will just go down the line, and then 
I will yield back, Mr. Chairman.
    Ms. Sohn. Ranking Member Watt, I mean, you are absolutely 
correct; there are very high barriers to entry. Not everybody 
can get spectrum. And T-Mobile and Sprint are begging the 
Federal Government to perhaps put limits on what AT&T and 
Verizon has, so they can get some more. Not everybody can lay 
lines, coaxial cable. You have to get permission from the State 
government, so the barriers to entry are huge.
    So what do you do? I think the answer is to do what the 
countries in Europe, Scandinavian countries, and in Asia are 
doing and beating us at broadband value and speed. You have to 
go back to the way we regulated these entities in the nineties 
and the early aughts. You have to require the dominant 
telecommunications and cable providers to open up their 
networks so competitors can use them as well, what we call line 
sharing--some call line sharing, unbundling, there are 
different ways. But the notion is the countries that have 
dozens of Internet service providers are those that have 
required the big guys--the British telecoms, the French 
telecoms, to open up their networks to competitor----
    Mr. Watt. So how do you responded to their argument that 
they paid for that and therefore shouldn't give it away, or 
give it away at reduced cost after they've developed it?
    Ms. Sohn. Well, without public rights of way, there would 
be no cable industry, there would be no telephone industry. I 
mean, they are----
    Mr. Watt. And basically you're using this as a public 
utility argument.
    Ms. Sohn. Exactly.
    Mr. Watt. Okay. Mr. Glass and Mr. Downs, and then I'll 
yield back.
    Mr. Glass. Yes, Ranking Member Watt. The best way to 
promote competition, I think, is to do several things. The 
capital cost of the kind of wireless that I provide is actually 
within reach. It's not insurmountable. It's never easy to raise 
capital, but it certainly is possible. What we need to do is 
encourage investors to bring that capital to the table, and in 
order to do that we need to be very careful about deterring 
them using regulation.
    We need to reduce barriers to entry--and again, regulation 
is potentially a barrier to entry in this arena. We need to 
come down hard on anticompetitive tactics. We've already talked 
a little bit about special access as being one of the barriers 
to rural broadband deployment.That is an anticompetitive 
tactic. It's not asking to use something for free, it's asking 
to get something at a reasonable price.
    We also need to deal with spectrum. The preemptive bids by 
the large incumbents so as to lock out competition are 
something which the FCC hasn't addressed and really does need 
to address.
    But mainly I guess I need to come back to the point that 
I've been making throughout the hearing. As Henry David Thoreau 
once said, ``Government never furthered any enterprise but the 
alacrity with which it got out of the way.'' What we need is 
simply to remove the barriers, and then the market will 
encourage investment and will encourage deployment.
    Mr. Downes. I think for many reasons the most attractive 
option for more competition, particularly with broadband 
Internet access, is in the mobile space. With more wireless 
providers, that's where the technology is going, and also 
that's where the consumers are going as well. The most 
effective thing we can do then to promote more competition 
would be to do a better job of managing the existing spectrum. 
That was a goal the FCC had last year. They didn't really work 
on it because of the net neutrality proceeding. We'd like to 
see them go back to that and actually start with an inventory 
just of who has what spectrum in the first place, and then see 
if we can find ways to manage it more effectively so we can 
speed up the competition offered by broadband mobile providers.
    Mr. Watt. My time is up, but it just seems ironic that 
you're saying on one side get the FCC out of the way, and then 
saying on the other side put the FCC back in and let them do 
this. I mean, I don't know how you can have it both ways. I 
mean, I understand what you're saying, it just seems--but now 
is not the place to pursue it.
    I appreciate the Chairman's indulgence.
    Mr. Goodlatte. I appreciate the gentleman's comments as 
well. And I will just close by saying that it was over 10 years 
ago that I introduced legislation--probably the first net 
neutrality legislation introduced in the Congress--along with 
Congressman Rick Boucher in 1999, I think. We didn't call it 
``net neutrality,'' we called it ``open access.'' It was 
designed to make sure that there was open competition on the 
Internet, but it was antitrust-based. And it never got to the 
finish line because the various interested parties in this kept 
shifting sides, and the sands underneath our legislation kept 
shifting. Some of the companies that were supporting our 
legislation back then are now looking in a different direction. 
Some that were opposing our legislation back then would very 
much support the idea today.
    I very much agree with Mr. Downes' comment; the principle 
purpose of the FCC is to allocate spectrum and to try to find 
the most efficient way to do that; that spectrum is public 
property, if you will, and therefore it is the reason for the 
existence of the FCC.
    I think the FCC has been on mission creep for decades now. 
And we need to be very, very careful that we don't put 
ourselves in a situation where we think that it is a great idea 
to have the FCC regulate the Internet the same way they have 
regulated the telecommunications industry and others. This is a 
rapidly changing, dynamic environment, and all kinds of 
decisions are made by all kinds of companies based upon what's 
going to be available in terms of capital, what's going to be 
available in terms of new technology and new ideas.
    And I don't think it's going to happen if we empower the 
FCC in a way that they have clearly not been empowered in the 
past. They've been rebuffed by the courts in this area. They 
have chosen to take a different route that I think is very 
spurious in what they are attempting to do, and I hope the 
courts will rebuff them again. But failing that, I think that 
Congress should act, and I agree that it shouldn't just be a 
negative act to stop the FCC; it should be a positive act to 
look at our antitrust laws and see if they give appropriate 
access to small actors like Mr. Glass, and to look to see 
whether laws written 100 years ago are responsive to this 
dynamic environment.
    But if they are clear rules of the road that exist before a 
decision is made to develop a product or to come up with the 
finances for it, we will be better served than to go down a 
path where we set about trying to find the capital, find the 
people to take the risks, and then have the rules changed in 
the middle of the game, which is where I fear the FCC will lead 
us.
    So I thank everyone for their participation. It has been a 
very, very good discussion.
    And without objection, all Members will have 5 legislative 
days to submit to the Chair additional written questions for 
witnesses, which we will forward and ask the witnesses to 
respond as promptly as they can so that their answers may be 
made a part of the record.
    And without objection, all Members will have 5 legislative 
days to submit any additional materials for inclusion in the 
record.
    And with that, I again thank our great witnesses, and this 
hearing is adjourned.
    [Whereupon, at 4:20 p.m., the Subcommittee was adjourned.]


                            A P P E N D I X

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               Material Submitted for the Hearing Record


































                                

    Letter from Lisa R. Youngers, Vice President, External Affairs, 
                     XO Communications, and Others










                                 
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