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


 
                         REFORMING FCC PROCESS

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

                                HEARING

                               BEFORE THE

             SUBCOMMITTEE ON COMMUNICATIONS AND TECHNOLOGY

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 22, 2011

                               __________

                           Serial No. 112-66


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov



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                    COMMITTEE ON ENERGY AND COMMERCE

       FRED UPTON, Michigan          HENRY A. WAXMAN, California
              Chairman                 Ranking Member
JOE BARTON, Texas                    JOHN D. DINGELL, Michigan
  Chairman Emeritus                  EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               EDOLPHUS TOWNS, New York
ED WHITFIELD, Kentucky               FRANK PALLONE, Jr., New Jersey
JOHN SHIMKUS, Illinois               BOBBY L. RUSH, Illinois
JOSEPH R. PITTS, Pennsylvania        ANNA G. ESHOO, California
MARY BONO MACK, California           ELIOT L. ENGEL, New York
GREG WALDEN, Oregon                  GENE GREEN, Texas
LEE TERRY, Nebraska                  DIANA DeGETTE, Colorado
MIKE ROGERS, Michigan                LOIS CAPPS, California
SUE WILKINS MYRICK, North Carolina   MICHAEL F. DOYLE, Pennsylvania
  Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
JOHN SULLIVAN, Oklahoma              CHARLES A. GONZALEZ, Texas
TIM MURPHY, Pennsylvania             JAY INSLEE, Washington
MICHAEL C. BURGESS, Texas            TAMMY BALDWIN, Wisconsin
MARSHA BLACKBURN, Tennessee          MIKE ROSS, Arkansas
BRIAN P. BILBRAY, California         ANTHONY D. WEINER, New York
CHARLES F. BASS, New Hampshire       JIM MATHESON, Utah
PHIL GINGREY, Georgia                G.K. BUTTERFIELD, North Carolina
STEVE SCALISE, Louisiana             JOHN BARROW, Georgia
ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington   DONNA M. CHRISTENSEN, Virgin 
GREGG HARPER, Mississippi                Islands                      
LEONARD LANCE, New Jersey            
BILL CASSIDY, Louisiana              
BRETT GUTHRIE, Kentucky              
PETE OLSON, Texas                    
DAVID B. McKINLEY, West Virginia     
CORY GARDNER, Colorado               
MIKE POMPEO, Kansas                  
ADAM KINZINGER, Illinois             
H. MORGAN GRIFFITH, Virginia         
                                     
                                     

                                  (ii)
             Subcommittee on Communications and Technology

                          GREG WALDEN, Oregon
                                 Chairman
LEE TERRY,                           ANNA G. ESHOO, California
  Vice Chairman                      EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               MICHAEL F. DOYLE, Pennsylvania
JOHN SHIMKUS, Illinois               DORIS O. MATSUI, California
MARY BONO MACK, California           JOHN BARROW, Georgia
MIKE ROGERS, Michigan                DONNA M. CHRISTENSEN, Virgin 
BRIAN P. BILBRAY, California             Islands
CHARLES F. BASS, New Hampshire       EDOLPHUS TOWNS, New York
MARSHA BLACKBURN, Tennessee          FRANK PALLONE, Jr., New Jersey
PHIL GINGREY, Georgia                BOBBY L. RUSH, Illinois
STEVE SCALISE, Louisiana             DIANA DeGETTE, Colorado
ROBERT E. LATTA, Ohio                JOHN D. DINGELL, Michigan
BRETT GUTHRIE, Kentucky              HENRY A. WAXMAN, California, ex 
ADAM KINZINGER, Illinois                 officio
JOE BARTON, Texas
FRED UPTON, Michigan, ex officio
  


                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     1
    Prepared statement...........................................     3
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, prepared statement.........................     5
Hon. Anna G. Eshoo, a Representative in Congress from the State 
  of California, opening statement...............................     5
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     7
    Prepared statement...........................................     7
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     8
Hon. Cliff Stearns, a Representative in Congress from the State 
  of Florida, prepared statement.................................    96

                               Witnesses

John Sununu, Honorary Co-chair, Broadband for America............    10
    Prepared statement...........................................    13
    Answers to submitted questions...............................   130
Kathleen Abernathy, Chief Legal Officer and Executive Vice 
  President, Frontier Communications.............................    19
    Prepared statement...........................................    21
    Answers to submitted questions...............................   132
Brad Ramsay, National Association of Regulatory Utility 
  Commissioners..................................................    24
    Prepared statement...........................................    26
    Answers to submitted questions...............................   138
Mark Cooper, Research Director, Consumer Federation of America...    40
    Prepared statement...........................................    42
    Answers to submitted questions...............................   153
Ronald M. Levin, William R. Orthwein Distinguished Professor of 
  Law, Washington University School of Law.......................    48
    Prepared statement...........................................    50
    Answers to submitted questions...............................   154
Randolph J. May, President, Free State Foundation................    67
    Prepared statement...........................................    69
    Answers to submitted questions...............................   163

                           Submitted Material

Article entitled, ``FCC Reform and the Future of 
  Telecommunications Policy,'' Philip J. Weiser, University of 
  Colorado at Boulder............................................    98

 
                         REFORMING FCC PROCESS

                              ----------                              


                        WEDNESDAY, JUNE 22, 2011

                  House of Representatives,
     Subcommittee on Communications and Technology,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:32 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Greg 
Walden (chairman of the subcommittee) presiding.
    Members present: Representatives Walden, Terry, Shimkus, 
Bono Mack, Bilbray, Bass, Blackburn, Scalise, Latta, Guthrie, 
Kinzinger, Barton, Upton (ex officio), Eshoo, Doyle, Barrow, 
Christensen, Dingell, and Waxman (ex officio).
    Staff present: Gary Andres, Staff Director; Ray Baum, 
Senior Policy Advisor/Director of Coalitions; Michael 
Beckerman, Deputy Staff Director; Paul Cancienne, Policy 
Coordinator, CMT; Nicholas Degani, Detailee, FCC; Andy 
Duberstein, Special Assistant to Chairman Upton; Neil Fried, 
Chief Counsel, C&T Debbee Keller, Press Secretary; Carly 
McWilliams, Legislative Clerk; Jeff Mortier, Professional Staff 
Member; David Redl, Counsel, Telecom; Shawn Chang, Democratic 
Counsel; Jeff Cohen, FCC Detailee; Sarah Fisher, Democratic 
Policy Analyst; and Roger Sherman, Democratic Chief Counsel, 
Communications and Technology.

  OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. Walden. Good morning and welcome. Before I begin my 
opening statement regarding FCC process reform that brings us 
together here today, I just wanted to update our members of the 
committee on the ongoing efforts on our top issue, which is 
related to spectrum auctions and public safety networks. Key 
staff on both sides of the aisle, along with Ms. Eshoo and 
myself, have been meeting regularly for several weeks to see if 
we can come together on a bipartisan agreement on spectrum 
legislation. These talks continue to make progress, and I 
appreciate the good faith effort on both sides and especially 
where the real work gets done--at the staff level.
    And I think we all know and are keenly aware that time is 
of the essence and we need to move to a conclusion at an 
appropriate time given the needs of public safety and the 
anniversary of 9/11. Meanwhile, though, our subcommittee can 
walk and chew gum at the same time so we have many other issues 
before us, including FCC process reform, which is the subject 
of today's hearing.
    We have before us a diverse panel of experts representing 
industry, think tanks, consumer groups, academia, and the 
States to testify on ways to improve the transparency and 
accountability of the FCC. To keep our discussion grounded, I 
have also circulated to my colleagues on the subcommittee and 
these experts a discussion draft of legislation. Again, I point 
out it is a discussion draft. That is what we are going to have 
today.
    I view that legislative language as a starting point for 
today's conversation, and I thank all of you for your 
thoughtful analysis of the draft legislation and your 
testimony. I have heard from many who track these issues that 
they appreciate actually having a ``draft'' document to review 
from which to make more informed comments, perhaps a process we 
could institute in certain independent agencies. This is the 
kind of process I would like to see used more often at the FCC. 
I look forward to you sharing your thoughts and ideas about 
best practices for this Agency.
    Now, at our last hearing, we heard from the FCC Chairman 
and his fellow commissioners. They testified on what was 
working at the FCC, recent improvements in the FCC's processes, 
and what could still be improved. The hearing has made me an 
optimist. Chairman Genachowski explained the Agency has already 
improved the transparency of the Commission in several 
regards--by publishing the specific text of proposed rules, by 
releasing orders shortly after adoption, and by proposing to 
eliminate unnecessary and outdated regulations. But all of this 
is discretionary.
    Congress has the authority and I believe the responsibility 
to ensure that the Agency--which is conducting the public's 
business--does so with transparency and accountability, 
regardless of who is currently the chairman. It is not asking 
too much to have the FCC actually codify a set of best 
practices and then operate by them.
    One idea in this mold is to ask the FCC to establish shot 
clocks so that parties know how quickly they can expect action 
in certain proceedings. Another is to ask the FCC to establish 
a means for the public to know the status of the rulemakings 
and other proceedings pending before the Commission. And 
another is to ask the FCC to establish procedures for a 
bipartisan majority of commissioners to actually be able to 
initiate a proceeding. By asking the FCC to regulate itself, we 
can give the Agency the flexibility it needs to act while 
guarding against a lapse in the Commission's practices. It is 
not my intent to micromanage every decision and this 
legislation does not do that.
    In considering other reforms, we must balance the need for 
congressional and public oversight of the Commission with the 
flexibility the Commission needs to promote competition in the 
marketplace. For example, the Administrative Conference of the 
United States recently recommended 60-day comment periods for 
``significant regulatory actions,'' as well as reply comment 
periods ``where appropriate.'' One idea is to strike a middle 
ground, requiring comment and reply comment periods of 30 days 
apiece but only when the APA already requires the Commission to 
issue a NPRM.
    Another idea is to extend to the FCC the cost-benefit 
analyses currently required of executive agencies and endorsed 
just this year in President Obama's Executive Order on 
regulatory reform. Cost-benefit analyses are valuable because 
they require an agency to squarely address the cost of 
regulation, determine whether other methods may be less costly, 
and make a reasoned determination that the benefits outweigh 
the costs. If the President's requirement is good enough for 
the Department of Education and the Environmental Protection 
Agency, why not the FCC?
    And trust me, the old argument that such a requirement will 
bog down the agency just doesn't cut it. I have never met an 
agency that didn't use this argument, yet they always seem to 
find money to buy new vehicles and buildings.
    Finally, it may be possible to tighten the FCC's 
transaction review standards to harms that directly arise from 
the transaction before it. Such a requirement is not meant to 
displace the standard of review but to focus the Commission's 
enquiry. If the Commissions Act empowers the FCC to review a 
transfer of broadcast licenses but not other aspects of a 
transaction, the FCC should review that transfer of broadcast 
licenses and not other aspects of the transaction. That is what 
their underlying statute says.
    These ideas are not the end of the discussion but the 
beginning, and I look forward to the thoughts of my colleagues 
and the panelists on moving forward.
    As I said at the outset, this is a discussion draft, and I 
am open to the input of our panelists--that is why you are 
here--and to the input of the public and my colleagues. When it 
comes to improving the transparency, accountability, and 
efficiency of the FCC, I am convinced we can find common 
ground.
    With that, I would yield to Ms. Blackburn for the remainder 
of time she may consume.
    [The prepared statement of Mr. Walden follows:]

                 Prepared statement of Hon. Greg Walden

    (Good morning. Before I begin my opening statement 
regarding FCC process reform, I wanted to update members of the 
committee on the ongoing efforts on our top issue: spectrum 
auctions and public safety networks. Key staff on both sides of 
the aisle, along with Ms. Eshoo and I, have been meeting 
regularly for several weeks to see if we can come to a 
bipartisan agreement on spectrum legislation. These talks 
continue to make progress, and I appreciate the good faith 
commitment of the staffs to this work and know that all 
involved are keenly aware of the need to move toward a 
conclusion soon, given the needs of our public safety community 
and the anniversary of 9/11. Meanwhile, our subcommittee has 
other work it can and must also undertake, including our 
continuing efforts to modernize and standardize the processes 
of the FCC, which is the focus of today's hearing.)
    We have before us a diverse panel of experts-representing 
industry, think tanks, consumer groups, academia, and the 
states-to testify on ways to improve the transparency and 
accountability of the FCC. To keep our discussion grounded, I 
have also circulated to my colleagues on the Subcommittee and 
these experts a Discussion Draft of legislation; I view that 
legislative language as a starting point for today's 
conversation, I thank all of you for your thoughtful analysis 
of the draft legislation and your testimony. I've heard from 
many who track these issues that they appreciate actually 
having a ``draft'' document to review and from which to make 
more informed comments. This is the kind of process I'd like to 
see used more often at the FCC. I look forward to you sharing 
your thoughts and ideas about best practices for the agency.
    At our last hearing, we heard the FCC Chairman and his 
fellow Commissioners testify on what was working at the FCC, 
recent improvements in the FCC's processes, and what could 
still be improved. That hearing has made me an optimist. 
Chairman Genachowski explained that the agency has already 
improved the transparency of the Commission in several regards-
by publishing the specific text of proposed rules, by releasing 
orders shortly after adoption, and by proposing to eliminate 
unnecessary and outdated regulations. But all of this is 
discretionary. Congress has the authority and the 
responsibility to ensure that the agency--conducting the 
public's business--does so with transparency and 
accountability. It's not asking too much to have the FCC 
actually codify a set of best practices and operate by them.
    One idea in this mold is to ask the FCC to establish shot 
clocks so that parties know how quickly they can expect action 
in certain proceedings. Another is to ask the FCC to establish 
a means for the public to know the status of rule makings and 
other proceedings pending before the Commission. And another is 
to ask the FCC to establish procedures for a bipartisan 
majority of commissioners to initiate action in a proceeding. 
By asking the FCC to regulate itself, we can give the agency 
the flexibility it needs to act while guarding against a lapse 
in the Commission's practices. It's not my intent to micro-
manage every decision and this legislation does not do that.
    In considering other reforms, we must balance the need for 
congressional and public oversight of the Commission with the 
flexibility the Commission needs to promote competition in the 
marketplace. For example, the Administrative Conference of the 
United States recently recommended 60-day comment periods for 
``significant regulatory actions'' as well as reply comment 
periods ``where appropriate.'' One idea is to strike a middle 
ground, requiring comment and reply comment periods of 30-days 
apiece, but only when the Administrative Procedures Act already 
requires the Commission to issue an NPRM.
    Another idea is to extend to the FCC the cost-benefit 
analyses currently required of executive agencies, and endorsed 
just this year in President Obama's Executive Order on 
regulatory reform. Cost-benefit analyses are valuable because 
they require an agency to squarely address the cost of 
regulation, determine whether other methods may be less costly, 
and make a reasoned determination that the benefits outweigh 
the costs. If the President's requirement is good enough for 
the Department of Education and the Environmental Protection 
Agency, why not the FCC?
    And trust me, the old argument that such a requirement will 
bog down the agency just doesn't cut it. I've never met an 
agency that didn't use this argument, yet they always seem to 
find money to buy new vehicles and buildings.
    Finally, it may be possible to tighten the FCC's 
transaction review standards to harms that directly arise from 
the transaction before it. Such a requirement is not meant to 
displace the standard of review but to focus the Commission's 
enquiry: If the Communications Act empowers the FCC to review a 
transfer of broadcast licenses but not other aspects of a 
transaction, the FCC should review that transfer of broadcast 
licenses and not other aspects of the transaction.
    These ideas are not the end of the discussion but the 
beginning. I look forward to the thoughts of my colleagues and 
the panelists on moving forward.
    As I said at the outset, this is a discussion draft and I 
am open to the input of our panelists-that's why you're 
here.and to the input of the public and my colleagues. When it 
comes to improving the transparency, accountability and 
efficiency of the FCC, I'm convinced we can find common ground.
    On that note, I yield my remaining time to Mrs. Blackburn.

    Mrs. Blackburn. Thank you, Mr. Chairman. I appreciate the 
legislation that you are bringing forward. I do believe it is a 
starting point for us to address the crisis of confidence that 
many now have with the FCC. But we need to move the Agency away 
from being an institution driven by activists pursuing social 
outcomes to one grounded in regulatory humility and statutory 
obedience.
    Congress should slam the FCC's regulatory backdoor shut, 
lock it, and return the keys to the free market. And any new 
regulations must require concrete examples of market failure 
and true consumer harm, because there is no room for additional 
burdens on American industries and consumers without showing 
just cause.
    We need stronger accountability and transparency of the 
Agency to ensure that it operates within its legal boundaries. 
I thank you for the time, and I yield back.
    [The prepared statement of Mrs. Blackburn follows:]

              Prepared statement of Hon. Marsha Blackburn

    Thank you Mr. Chairman. I appreciate the legislation you 
are bringing forward. I do believe it is a starting point for 
us to address the crisis of confidence that many now have in 
the FCC.
    But, we need to move the agency away from an institution 
driven by activists pursuing social outcomes to one grounded in 
regulatory humility and statutory obedience. Congress should 
slam the FCC's regulatory back-door shut, lock it, and return 
the keys to the free market.
    Any new regulations must require concrete examples of 
market failure and true consumer harm because there is no room 
for additional burdens on American industries and consumers 
without showing just cause.
    We need stronger accountability and transparency of the 
agency to ensure it operates within its legal boundaries.

    Mr. Shimkus. Will the gentleman yield for just one second?
    Mr. Walden. Yes.
    Mr. Shimkus. I would like the time to welcome my former 
classmate, former Senator John Sununu. He is at the panel and 
it is good to see him on that side.
    Mr. Sununu. Thank you very much, Congressman Shimkus. It is 
very nice to be here. You know, I could never get on a Commerce 
Committee when I was in the House. That is part of the reason I 
ran for the Senate. But I did notice that I am at the kids' 
table here, a little sweet, but I am grateful to be here 
nonetheless.
    Mr. Shimkus. Thank you, Mr. Chairman.
    Mr. Walden. That is fine. And we have always wanted to have 
you before us and John has a lot of questions for you, Senator.
    I now turn to the ranking member of the subcommittee, my 
friend and colleague from California who is nursed back to 
health after her surgery, Ms. Eshoo.

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

    Ms. Eshoo. Thank you, Mr. Chairman. And good morning to 
you, to all of the members and thank you to all the witnesses 
that are here today.
    Today's hearing continues our discussion of FCC process 
reform, and I think that it is important for us to keep 
pressing ahead on this, examine the suggestions that have been 
made, and hear from a variety of witnesses about their ideas 
and their comments on what we are considering.
    Last month's subcommittee hearing highlighted that the 
Commission has really taken some proactive steps to increase 
openness, transparency, and accountability. And these efforts 
should be applauded as we examine legislative measures that 
might help to enhance the FCC's effectiveness.
    I want to thank Chairman Walden for incorporating the FCC 
Collaboration Act into the draft legislation under discussion 
today. This is bipartisan reform which was introduced with 
Representative Shimkus and Doyle earlier this year and it would 
promote greater collaboration by allowing three or more 
commissioners to talk to each other outside of an official 
public meeting.
    As part of this Sunshine reform, I am very pleased that the 
discussion draft also incorporates federal/state joint boards. 
During last month's hearing, Commissioner Clyburn described how 
commissioners have to rotate in and out of these meetings and 
how a modification of the Sunshine Act would enhance joint 
board recommended decisions. Allowing FCC commissioners to 
collaborate more freely as part of their participation on 
federal/state joint boards makes sense. And I think it serves 
to strengthen our original legislation.
    As I noted in last month's hearing, though, I think that we 
need to be cautious of legislative proposals which might or 
could diminish the Commission's ability to protect the public 
interest and preserve competition. I think those are two very, 
very important values that need to be retained. I fully support 
reforms that will better serve the public good, but they 
shouldn't be done at the expense of overly prescriptive rules 
that limit the FCC's flexibility and decision-making process.
    Our witnesses today come from many backgrounds, including 
industry, the public interest, and academia. You bring years of 
experience working with the FCC both inside and outside the 
Agency. And so I especially look forward to hearing your 
thoughts on the draft legislation. So we have a lot of work to 
do. We have the spectrum legislation that really needs to move 
forward that will usher in a new era of telecommunications, its 
applications in the 21st century, and we have reforms to make. 
And I look forward to hearing from our witnesses today. And 
thank you, Mr. Chairman, for holding this.
    I would like to yield the remainder of my time to 
Congressman Doyle.
    Mr. Doyle. Thank you very much.
    Mr. Chairman, thank you for holding this hearing. And we 
want to thank the distinguished panel of witnesses and our 
former colleague, John Sununu, for being here this morning to 
educate us about the important issue of FCC process reform. Mr. 
Chairman, while I appreciate your hard work to examine ways to 
update FCC process, I am somewhat concerned about certain 
aspects of the draft bill before us and look forward to working 
with you on that.
    The most troubling part is two things that concern me is 
one that we would limit the power of the Commission to impose 
conditions or voluntary commitments on the transactions it 
reviews. While conditions shouldn't serve as excuses for the 
FCC to permit a transaction if it fails to serve the public 
interest, if a merger is approved, the FCC should impose 
conditions it deems necessary to meet its public interest 
standard.
    It also concerns me that we would require a Notice of 
Inquiry before every single NPRM. I think that this can be 
burdensome and I think this is something that is better left to 
the FCC.
    I do want to thank you for including the language of the 
Sunshine Reform bill that Congressman Shimkus and Congresswoman 
Eshoo and I have put forward. We think that would increase 
transparency and improve communication within the Agency. I 
look forward to hearing the testimony of all the witnesses 
today. Mr. Chairman, I look forward to working with you.
    And I yield back.
    Mr. Walden. The gentleman yields back his time. I now 
recognize the chairman of the full committee, the gentleman 
from Michigan, Mr. Upton, for 5 minutes.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Well, thank you, Mr. Chairman. And I certainly 
want to welcome our great friend Mr. Sununu as well.
    The communications and tech sector is one of the largest 
drivers of our economy. And at a time when overall job creation 
remains weak and burdensome rules and red tape are keeping job 
creators on the sidelines, we should be doing everything that 
we can to unleash the creativity and innovative potential of 
this sector. Eliminating outmoded rules, removing regulatory 
barriers, and refraining from imposing new ones on this segment 
of our economy could do a lot to help spur jobs and help pull 
us out of our fiscal doldrums.
    Chairman Genachowski appears to recognize this. While the 
proof will be in the pudding, he is at least saying he plans to 
abide by the President's Executive Order on regulatory reform 
even though independent agencies are not required to do so. And 
my hope is that he will submit to us and the administration the 
formal plan requesting OIRA to implement the Executive Order.
    If we want to improve the regulatory environment, process 
reform is an obvious place to start. The FCC's decisions can 
only be as good as its process. And while the FCC has taken 
steps to improve the way that it conducts its business, more 
can be done. Today, we will examine a draft proposal, a good 
one, to set statutory baselines to ensure this and all future 
commissions address all the issues with the same minimum sound 
practices.
    Consistency and transparency not only produce better 
decisions, they help create confidence and certainty that will 
promote investment, innovation, and jobs. An expert, 
independent agency should also be engaging in objective 
analyses. And if it looks like the FCC is prejudging an issue 
and justifying predetermined outcomes after the fact, the 
Agency looks political and the public loses faith in its 
objectivity and expertise.
    It is important to recognize that this staff draft 
preserves much of the Agency's flexibility. Indeed, in most 
cases, it simply directs the FCC to set its own rules on these 
matters. My sense is that it does strike the right balance, but 
I of course welcome input from my colleagues and witnesses. Our 
hope is that we can produce strong bipartisan legislation.
    And I yield the balance of my time to Mr. Terry.
    [The prepared statement of Mr. Upton follows:]

                 Prepared statement of Hon. Fred Upton

    The communications and technology sector is one of the 
largest drivers of our economy. At a time when overall job 
creation remains weak and burdensome rules and red tape are 
keeping job creators on the sidelines, we should be doing 
everything we can to unleash the creativity and innovative 
potential of this sector. Eliminating outmoded rules, removing 
regulatory barriers, and refraining from imposing new ones on 
this segment of our economy could do a lot to help spur jobs 
and help pull us out of our fiscal doldrums.
    Chairman Genachowski appears to recognize this. While the 
proof will be in the pudding, he is at least saying he plans to 
abide by the president's Executive order on regulatory reform, 
even though independent agencies are not required to do so. My 
hope is that he will submit to us and the administration the 
formal plan requested by the Office of Information and 
Regulatory Affairs to implement the Executive order.
    If we want to improve the regulatory environment, process 
reform is an obvious place to start. The FCC's decisions can 
only be as good as its process. While the FCC has taken steps 
to improve the way it conducts its business, more can be done. 
Today, we will examine a draft proposal to set statutory 
baselines to ensure this and all future commissions address all 
issues with the same minimum sound practices.
    Consistency and transparency not only produce better 
decisions, they help create confidence and certainty that will 
promote investment, innovation, and jobs. An expert, 
independent agency should also be engaging in objective 
analyses. If it looks like the FCC is prejudging an issue and 
justifying predetermined outcomes after the fact, the agency 
looks political and the public loses faith in its objectivity 
and expertise.
    It is important to recognize that this staff draft 
preserves much of the agency's flexibility. Indeed, in most 
cases, it simply directs the FCC to set its own rules on these 
matters. My sense is it strikes the right balance, but I of 
course welcome input from my colleagues and the witnesses. My 
hope is that we can produce strong legislation that enjoys 
bipartisan support.
    I thank the witnesses and look forward to their testimony. 
I yield the balance of my time to Mr. Terry.

    Mr. Terry. Thank you, Mr. Chairman.
    And during our last hearing on this subject on May 25, we 
heard from the current FCC chairman and commissioners 
themselves, many of whom spoke in favor of the concepts 
contained in our draft before us today. Chairman Genachowski 
recognized that shot clocks could be an ``effective tool'' 
going forward. Commissioners Copps and McDowell agreed there 
should be a mechanism for a bipartisan majority of 
commissioners to put items on the agenda meetings. And 
Commissioners Copps and Clyburn spoke of the need to reform the 
Sunshine rules to allow the commissioners to deliberate more 
efficiently.
    Now, as we work through here today, we are going to get our 
witnesses' input to see how we can improve, continue working 
with our friends on the other side to make this bipartisan. 
Frankly, these are issues that the commissioners, past and 
present, have brought forward needing change. Some they can do 
on their own; some need our assistance. And we want to continue 
to work with everybody.
    So I welcome the testimony from our witnesses and look 
forward to moving this legislation.
    Do any other members on the Republican side seek time? 
There is a minute and a half left.
    Then I yield back.
    Mr. Walden. The gentleman yields back his time. I now 
recognize the ranking member of the full committee, Mr. Waxman, 
for 5 minutes.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you, Mr. Chairman.
    Today, the subcommittee will return to the topic of FCC 
reform and I commend Chairman Walden for working with us to put 
together a balanced panel of expert witnesses. We need to hear 
from diverse voices, and Chairman Walden has worked with us 
Democrats and Republicans together to assemble balanced witness 
panels.
    I also wish to commend the chairman for the draft 
legislation we will be considering today. Unfortunately, it has 
serious defects. It would make the FCC less efficient and more 
bureaucratic in my opinion, the exact opposite of what we 
should be doing.
    I am a proponent of strong congressional oversight over the 
agencies within our jurisdiction. An engaged Congress can help 
agencies perform at a higher level and serve the American 
public better. In some instances, it is appropriate for 
Congress to legislatively modify the authority or practices of 
an agency to enhance agency operations and the public interest. 
At our first hearing on this topic, I asked basic questions 
that will guide me in determining whether we are promoting 
smart regulation and this bill does not provide reassuring 
answers.
    The first problem is that this legislation will create an 
undue burden on the FCC. It requires that the Commission 
perform a cost-benefit analysis for every rule that might 
impose a burden on industry. This will be costly and time 
consuming. Cost-benefit analyses might be appropriate for a 
limited set of major rules, but in no circumstances should they 
become a basis for years of litigation in court.
    Second, the legislation undermines the flexibility of the 
Agency to act quickly and efficiently in the public interest. 
If we put new prescriptive process requirements in statute, we 
can end up promoting slower, not faster, decision-making. For 
example, the requirement that the FCC conduct a Notice of 
Inquiry prior to moving to rulemaking could restrict the 
Agency's ability to move more expeditiously in the public 
interest.
    Third, some of the requirements in the draft legislation 
appear to be about process for the sake of process. Provisions 
in the rulemaking reform section and the transparency reform 
section impose practices that the Commission already follows. 
Chairman Genachowski's tenure has been marked by greater 
transparency, expanded opportunities for public input, and 
improved information-sharing with other commissioners and the 
public. He has shown that the FCC can reform itself without the 
need for action by Congress.
    And finally, I am concerned that we are making procedural 
changes in an attempt to address outcomes with which we don't 
agree. Chairman Walden and others have criticized the voluntary 
commitments Comcast agreed to during review of its combination 
with NBC Universal. That appears to be why the current draft 
legislation radically alters the FCC's authority under the 
Communications Act and could eviscerate the public interest 
standard. Before we take steps that could prevent combinations 
like Comcast/NBC, we need to examine whether they are in the 
interest of promoting public benefits or even in the interest 
of the companies they are intended to protect.
    There are some promising aspects of the legislation in 
particular I want to join my colleagues in support of the 
provisions that allow commissioners to collaborate more 
directly, but overall, I cannot support the draft in its 
current form. The chairman has said he wants to work together 
in a bipartisan way to improve this bill. I hope we do that and 
produce a bill that earns broad bipartisan support.
    I look forward to hearing from our panel to address these 
issues into receiving their advice about how to improve the 
FCC. Thank you, Mr. Chairman, and yield back the balance of my 
time, unless, Ms. Christensen, would you like any of my time? I 
yield back.
    Mr. Walden. Thank you. The gentleman yields back his time, 
and now we will proceed with the hearing. And we would like to 
welcome all of our witnesses. And we will start with the 
Honorable John E. Sununu, Honorary Co-Chair, Broadband for 
America. And I would just advise the witnesses, these 
microphones, you have to get pretty close to and the button 
turns them on and off. And then we have the red light buttons 
there that control the time.
    And with that we welcome our friend and colleague, Mr. 
Sununu.

  STATEMENTS OF JOHN SUNUNU, HONORARY CO-CHAIR, BROADBAND FOR 
AMERICA; KATHLEEN ABERNATHY, CHIEF LEGAL OFFICER AND EXECUTIVE 
VICE PRESIDENT, FRONTIER COMMUNICATIONS; BRAD RAMSAY, NATIONAL 
 ASSOCIATION OF REGULATORY UTILITY COMMISSIONERS; MARK COOPER, 
 RESEARCH DIRECTOR, CONSUMER FEDERATION OF AMERICA; RONALD M. 
  LEVIN, WILLIAM R. ORTHWEIN DISTINGUISHED PROFESSOR OF LAW, 
   WASHINGTON UNIVERSITY SCHOOL OF LAW; AND RANDOLPH J. MAY, 
                PRESIDENT, FREE STATE FOUNDATION

                    STATEMENT OF JOHN SUNUNU

    Mr. Sununu. Thank you very much, Chairman Walden, Ranking 
Member Eshoo. It really is a pleasure to be here.
    As you indicated, I am, along with Harold Ford, a co-chair 
of Broadband for America, an organization of 300 members, 
equipment manufacturers, broadband providers, applications 
providers, consumer advocate groups, economic development 
groups. And the focus is really on deployment and investment in 
the broadband industry and identifying public policy that can 
really ensure that it continues to be a driver of growth and 
prosperity in America.
    I certainly commend you for looking at the topic and your 
pursuit of improving the way the FCC operates. Without 
question, the focus of the discussion draft is on process and 
process matters. Process is the mechanism by which we ensure 
better transparency, fairness, certainty, clearer timelines, 
and all of those help to allow investors to make investments 
with a greater certainty of return and that is what promotes 
economic development and job creation.
    I do also, however, want to take the opportunity to talk in 
a little bit more broad terms about changes that we would like 
to see the committee look at within the statutory framework 
because in many regards, the obsolete premises of the existing 
statutory framework doesn't match the structure and the 
competition that we see in the marketplace today. And that is, 
I think, a view that is shared on a bipartisan basis. Chairman 
Genachowski recently acknowledged that the statute isn't 
perfect and said ``it would make sense to update it.'' The 
President's State of the Union address talked about the fact 
that, you know, we live in a business and information age, but 
the last major reorganization of government happened in the age 
of black-and-white TV. So these issues--and I think the 
comments of the committee recognize--aren't directed at any 
commission, any chair, or any administration. It is a matter of 
making sure that the policies reflect the modern age in which 
we live.
    We do have a very vibrant, competitive communications base 
that is more vibrant and competitive than ever. There are 
always going to be aspects that we want to see operate better 
or even more competitive that would bring down prices even 
faster, but it is more vibrant and competitive than ever 
before, across the entire spectrum of voice, video, data, and 
other emerging internet-based services.
    Over the last 3 years within the broadband industry, we 
have seen $250 billion in capital investment. This is during a 
period of a very sharp and significant economic downturn. I 
don't think we can find many areas of the economy that have 
made that level of capital investment. And again, there are 
always going to be areas where we want to see access improved 
or accelerated even more, but $250 billion is real money even 
to the United States Congress.
    The Communications Act of 1934 is built on the assumption 
of a natural monopoly. And I think if there is one point that I 
want to make it is that that is the default presumption. And 
unfortunately, that is not the world in which we live right 
now. I think legislative reform should dispense with antiquated 
presumptions about natural monopolies in the communications 
marketplace, and we should move away from industry-specific 
anticipatory regulation and instead treat communications 
companies like other businesses throughout the economy that are 
disciplined in the first instance by competition, not 
regulation.
    Second, Congress should affirmatively require that the FCC 
account for actual competition among emergent substitutable 
offerings in a consistent way. The statute can't work properly 
without acknowledging that all the constituent parts of the 
broadband space, including web-based services and their 
implications for competition and consumers.
    Third, Congress should consider structural inefficiencies 
that sometimes bring an already sluggish regulatory process to 
a screeching halt. In particular, we need to recognize that the 
multi-commissioner structure itself can breed interagency 
conflict and belabor decision-making.
    Second, the FCC rarely produces timely decisions when 
measured against the pressing decisional demands of the 
internet era.
    Third, the FCC asserts authorities that duplicate the work 
of other agencies, most notable in the context of reviewing 
mergers. Given the role played by expert antitrust agencies, 
there is no legitimate reason for the FCC to also assume 
responsibility for reviewing the competitive effects of a 
merger because the transaction happens to require a license 
transfer.
    And finally, the well-intended Sunshine laws have the 
perverse effect of slowing the deliberative process by 
requiring things like open meetings any time more than two 
commissioners wish to discuss official business. Some of these 
are addressed in the discussion draft, and I think that is 
important.
    But again, I come back to the premise that we need to 
reconsider the presumption of a monopoly that is written into 
both the '34 act and even the 1996 amendments that carried the 
same premise. Again, this isn't about any one commissioner or 
any one administration. I think we really do need to reconsider 
the FCC's purpose and their role in a competitive, 21st Century 
environment so that we can be mindful and accomplish reform.
    I certainly appreciate the opportunity to testify and look 
forward to answering your questions.
    [The prepared statement of Mr. Sununu follows:]

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    Mr. Walden. Thank you, Senator. We appreciate your being 
here as well. We thank you for your testimony. We will now turn 
to Ms. Kathleen Q. Abernathy, former Federal Communications 
Commissioner and now with Frontier Communications as chief 
legal officer and executive vice president for governmental 
affairs. You have worn many hats. We look forward to your 
testimony here, and thank you for participating.

                STATEMENT OF KATHLEEN ABERNATHY

    Ms. Abernathy. Thank you very much. Good morning Chairman 
Walden, Ranking Member Eshoo, and members of the subcommittee. 
It is truly a privilege and an honor to appear before you this 
morning to talk about what is very, very important--process 
reform at the FCC.
    I am chief legal officer and executive VP of regulatory and 
government affairs for Frontier. We are the largest provider of 
broadband, voice, and video services to rural America. And as a 
wireline provider, Frontier is subject to regulatory oversight 
by the FCC and, just over this past year, we have engaged in a 
number of proceedings in front of the FCC, so we have current 
experience working with the current regulatory processes.
    I am pleased to be here today to discuss your proposed 
reforms and some of the ways it might impact the FCC. My 
testimony is informed by my career in the telecommunications 
industry, and as you mentioned, that has included stints at the 
FCC, both as a commissioners, as well as legal advisor, as well 
as working in the general counsel's office. And with every 
position, I gained further insight into the processes that go 
on there.
    In addition to this work in the public sector and, of 
course, my current position at Frontier, I have worked at law 
firms and in-house wireless, wireline, CLECs. This collective 
experience provides me with a unique perspective on how the FCC 
serves the public. I have experienced both the privilege and 
challenge of serving as a regulator, as well as the opportunity 
to work in the private sector. And the draft legislation 
proposes many reform actions that I think could make a major 
and significant improvement on the processes and I am pleased 
to talk about them today.
    I made public statements during my tenure as an FCC 
commissioner and thereafter that relate to some of the 
proposed. For example, I have stated and I continue to believe 
that the Sunshine Act is overly restrictive in prohibiting 
communication among three or more commissioners outside of a 
public meeting. It is perverse, but it actually works contrary 
to the notion of an improved collaborative spirit, it 
discourages creative problem-solving, and it creates hurdles to 
timely and effective decision-making process. And I think if 
you do nothing else, if you reform that one rule, then these 
other concerns that you have would be immediately addressed 
because you would have an actual dialogue between the parties 
who are running the agency.
    When it comes to transaction review and approval, Congress 
has conferred on the FCC a statutory obligation to review 
license transfers and to either reject, approve, or if 
necessary approve it with conditions. And these conditions 
should be designed to ensure that the transaction at issue 
complies with the Commission's rules, as well as being 
consistent with the public interest. As a commissioner, I 
always believed that the Commission owed it to the parties to 
act promptly on license transfers--there is a lot of cost 
associated with the delays in transfers--and to impose 
conditions when necessary to address merger-specific harm that 
impact the public interest.
    Merger reviews shouldn't be seen by third parties as an 
opportunity to impose obligations unrelated to the mergers, 
especially if it has the unintended consequence of advantaging 
or disadvantaging a company as compared to its competitors. My 
belief is that general obligations not designed to address 
merger-specific harm, there is a vehicle for that. You should 
consider and review them in the context of rulemaking process, 
and that is subject to notice and comment.
    I have also noted before that I think there is a time and 
place for timelines and shot clocks. It is difficult to 
implement a uniform timeline for all proceedings. For example, 
with a particularly complex process, the FCC has to do a 
complex balancing between moving expeditiously to adopt a 
timely decision, as well as gathering the data necessary. But 
shot clocks are very, very beneficial because it is an action-
forcing event. And the challenge with the numerous issues in 
front of the FCC and with the statute that many would agree is 
somewhat outdated is that these issues are very, very 
difficult. There is many times no good answer. And when there 
is no good answer, you sometimes don't work ahead to a 
resolution. You kind of kick the can down the road because you 
are very frustrated. A shot clock would force you to just sort 
of address that issue and try and resolve it.
    I applaud Chairman Walden and the subcommittee for focusing 
on FCC process reform. Process and procedure--just as much as 
substance itself--have a direct impact on industry participants 
and consumers. And given the critical role of 
telecommunications in our daily lives and our global 
competitiveness, it is appropriate for Congress to consider 
updating and improving the framework for the FCC's deliberative 
process.
    Thank you for having this important discussion and I look 
forward to your comments and questions.
    [The prepared statement of Ms. Abernathy follows:]

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    Mr. Walden. Ms. Abernathy, thank you. We appreciate your 
counsel.
    Now, we are going to hear from Brad Ramsey, who is the 
general counsel for the National Association of Regulatory 
Utility Commissioners. And thank you for being here. We look 
forward to your testimony as well.

                    STATEMENT OF BRAD RAMSAY

    Mr. Ramsay. Thank you, sir. And Chairman Walden and Ranking 
Member Eshoo and other members of the panel, I really 
appreciate the opportunity to testify today, and I commend Mr. 
Walden and the rest of you for holding this hearing.
    I represent NARUC, as Mr. Walden pointed out. I have been 
there 20 years. NARUC, for those of you that don't know, is the 
group that represents all of the stake public service 
commissions that oversee telecommunications, energy, and other 
utilities in your jurisdictions. If you want to know what the 
potential impact of these process reforms are for state 
commissions, you know, protecting your constituents in state-
specific preemption, pleadings that get filed at the FCC, and 
in the broader universal service and inter-compensation reform 
items that they consider from year to year, you want to talk to 
your state commission. They will tell you what the impact is in 
terms of their opportunity to protect the citizens of your 
individual States. And I am happy for those of you--and I don't 
see very many in this room that I don't think I already know 
their state commissioners. But if you don't know your state 
commissioners, I am happy to provide a gateway for you.
    What is the hearing about today from my perspective? Well, 
I don't think there is any question that reform is needed, and 
I also don't think that there is any question that a number of 
the proposals included in this discussion draft will 
definitively improve transparency at the FCC and will 
definitely improve the ability to create a better record for 
decision-making at the FCC.
    NARUC has a technical position on every section, but we 
have been pushing some of these reforms for over 10 years. The 
draft that came out, I think it is an excellent starting point 
for a bipartisan bill that could pass in this Congress. So for 
me, this hearing, this draft is all about opportunity. You have 
an opportunity to finally correct the stilted application of 
Sunshine laws that does nothing but shed additional light on 
agency procedures. And all it does--and I know this from 
personal experience--is muck things up and slow things down. 
You have an opportunity. There are actually two or three 
provisions that make sure that everybody gets a realistic 
opportunity to comment on what the Agency is actually going to 
do, not just the people that have the most money, not just the 
people that have the most staff resources.
    You have an opportunity here to formally adopt some of the 
highly lauded--Ms. Eshoo mentioned the fact that the Commission 
deserves a lot of credit for a lot of the transparency measures 
that they have put into place. There were a couple measures 
that came in the last administration. I agree. You have an 
opportunity here to lock those into law and make sure that 
future commissions do not discard them.
    You also have an opportunity to normalize expectations. 
This is a shot clock idea that is in the bill. I actually think 
that that is wonderful idea. The Agency gets to set the 
approximate time frame that they want to shoot for. And this is 
much better than an item languishing there for 10 years, or, in 
my case, and I end up languishing there for 5 or 6 years, and 
the next time I hear about it from the Agency is they are 
putting a notice out that says, you know, we would like to 
terminate your proceeding because the record is stale. A shot 
clock gives them something to shoot at. It is a good idea.
    But perhaps the most important opportunity that is 
presented in this item are the pieces that help the Agency 
build a better record upon which to base its decision. The 
decision can only be as good as the record that they are basing 
their decision upon. If you shortchange the decision, if you 
shortchange the process, you are shortchanging the American 
people. It is one of the reasons why when we are talking about, 
great, we are finally going to have some definitive deadlines 
or a minimum deadline that allows the state commissions who 
have this complicated process of perusing comments to actually 
file comments. But another good part of this bill is it says 
you are going to put the text of the dadgum rule out so that I 
actually know what to write my comments about. NARUC has 
endorsed that for some time. I commend the current chairman for 
doing it 85 percent of the time. I don't understand why it 
can't be done 100 percent of the time.
    You have ensured an opportunity here to make a real 
difference in the FCC decision-making process. It is long 
overdue. It is an opportunity that can only make better 
decisions come out of the--it is not going to make the process 
perfect, but it is going to make the decisions better, which 
can only benefit your constituents. The consumers across the 
country and the industry as a whole, it is an opportunity I 
hope you take.
    Thank you, and I look forward to your questions.
    [The prepared statement of Mr. Ramsay follows:]

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    Mr. Walden. Thank you, Mr. Ramsay. We appreciate your 
testimony and we look forward to offering up some questions.
    We go now to Dr. Mark Cooper, Research Director at Consumer 
Federation of America. Dr. Cooper, we are delighted you are 
with us today and we look forward to your comments.

                    STATEMENT OF MARK COOPER

    Mr. Cooper. Thank you, Mr. Chairman, members of the 
committee.
    In the past 30 years, I have seen the good and bad of 
regulation up close and personal. In 300 appearances as an 
expert witness on behalf of public interest groups in 50 
jurisdictions in the United States and Canada, Brad represents 
NARUC. I have testified before 95 percent of the NARUC members.
    In my testimony, I outline areas where the regulatory 
process at the Federal Communications Commission should be 
improved. We need reform of the ex parte communications. We 
need greater reliance on independent and peer reviewed 
research. We need to provide notice on the specific details of 
rules to afford the public the opportunity to comment on those 
rules. We should enhance public participation in rulemaking 
process by use of multi-stakeholder groups, regulatory 
negotiations, and participatory enforcement. Other agencies do 
it. The FCC should get with that kind of program to expand 
input from the public and the industry in a formal way rather 
than the backdoor way of the current ex parte process.
    The discussion draft, however, causes me great concern. I 
look at the center of the Communications Act as the public 
interest standard, which is a principle on which it stands. And 
the language that imposes a harm-based standard I believe will 
undermine the ability of the FCC to protect the consumer and 
promote the public interest.
    The word ``harm'' occurs exactly twice in the statute, both 
times in a section that worries about incumbent local exchange 
carriers who could abuse information service providers. The 
words ``public interest'' occur 103 times. That is the standard 
at the center of the act.
    Now, others will tell you why the Agency does not have to 
adhere to the executive branch order on cost-benefit analysis. 
Let me explain to you why it should not. A harm-based standard 
is inadequate to protect the public interest in the 
communications sector for several reasons. First, a substantial 
part of the Communication Act involves noneconomic democratic 
values of access to communication and freedom of speech, which 
are virtually impossible to evaluate in now-economic terms. The 
antitrust laws do not do democracy.
    Second, universal service is a critical goal of the 
Communications Act that is non-amenable to a narrow cost-
benefit analysis. The value of connecting households to a 
network is an externality that is difficult to measure but 
extremely important as a political, social, and economic 
accomplishment. No other agency does universal service.
    Third, consumer privacy, over which the FCC has a 
significant authority in proprietary network information, is 
not readily amenable to a harms standard.
    Fourth, in a dynamic network industry, a public interest 
approach is much more appropriate for interconnection and 
nondiscriminatory carriage. Under a harms standard, it would 
have been impossible to value the Carterphone decision, the 
Computer Inquiries, or the 802.11 WiFi rules, which were 
forward-looking and are key elements of creating the rich 
communication environment we have today. This is an industry 
with massive positive externalities.
    I believe this criticism also applies with equal force to 
the merger review. Mergers create unique challenges to the 
public interest that are best dealt with during the merger 
review process. The problem in contemporary markets like 
telecommunications is not too much regulation but too little 
competition. However, the lack of competition is not the result 
of nefarious business practices or lacks antitrust enforcement.
    These industries, so strong economies of scale and scope, 
which mean that very few competitors can achieve minimum 
efficient scale, they show strong economies of demand side 
known at network effects, which make them winner-take-most 
industries. The challenge in these industries is small numbers 
providing critical infrastructure and platforms that support 
massive amounts of other activity. The challenge is to make 
sure that they are profitable and innovative but check their 
tendency to use vertical leverage or market power to undermine 
competition. That is a very, very difficult proposition to 
evaluate with a narrow harm-based standard. That is a 
proposition that is easy to address in a merger, which creates 
the very problem of vertical leverage. That is what we have 
suffered in this industry.
    As always, I look forward to working with the committee to 
develop any legislation that is needed. I urge you to take the 
attack on the public interest standard out and focus on those 
areas where the Commission does not have the ability to act on 
its own. Most of the changes that we need in process can be 
done internally. Establish the norms for transparent, swift-
enforced regulation, and once those norms are established, it 
will be difficult for future commissions to abandon them. The 
Commission should do what it can. This committee should help it 
where it can.
    [The prepared statement of Mr. Cooper follows:]

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    Mr. Walden. Dr. Cooper, thank you for your testimony.
    We will now go to Professor Ronald M. Levin with the 
William R. Orthwein Distinguished Professor of Law, Washington 
University School of Law. We welcome you today and look forward 
to your testimony, sir.

                  STATEMENT OF RONALD M. LEVIN

    Mr. Levin. Thank you, Mr. Chairman and members of the 
committee.
    I hope to provide a little different perspective on this 
bill from those of the other panelists because my 
specialization is not in communications law. It is in 
administrative law--in other words, the manner in which the 
legal system deals with regulatory cases in general, regardless 
of the agency. Now, I don't think that perspective gives you 
all the answers you need for this bill, but I think it will 
provide some helpful insights on some of its provisions.
    For example, as the Sunshine Act reform, I think that 
perspective will tend to support the thrust of what you are 
doing. I know you have heard from the FCC veterans that the 
Sunshine Act often interferes with collaborative decision-
making, forces agency heads to rely on staff intermediaries 
rather than talk to each other. But I think it is worth 
pointing out here that that critique is shared by numerous 
agency officials and practitioners and scholars who specialize 
in other fields of regulation. So I think if you go forward 
with the experiment in this bill, you would get strong support 
from much of the administrative law community.
    On the other hand, I want to raise some warning flags about 
parts of the bill that would reshape FCC rulemaking procedures. 
Many students of the administrative process will tell you that 
agency rulemaking has become progressively more complicated 
over the past few decades, and this happens largely because 
Congress and presidents keep adding refinements to the process. 
Each of those refinements, they look appealing when considered 
in isolation, but in the aggregate, they make it progressively 
more difficult for agencies to carry out the tasks that 
Congress has told them to perform. So you really ought to think 
twice about provisions in the bill that would make it even 
harder for the FCC to complete a rulemaking proceeding. My 
statement goes into this in some depth, but I will just focus 
on three areas of concern in these remarks.
    First, some of the new duties are ones you probably 
shouldn't impose at all. I really doubt that in every 
rulemaking proceeding that might be perceived as putting 
forward a burdensome rule, you should require the Commission to 
speculate about what performance measures to use to evaluate 
that rule sometime in the future. And I don't think the FCC 
should routinely have to specify what market failure, a new 
rule would resolve because market failure is not the only valid 
reason the FCC may have for issuing a rule.
    Secondly, the bill provides some practices that the 
Commission should want to do much of the time but not 
necessarily all the time. And so you need to build in some 
flexibility. For instance, should the FCC have to solicit 
public comments twice during every rulemaking proceeding? Well, 
often that is very useful, especially when they didn't exactly 
tell you what they were planning to do the first time. But at 
other times, a single round satisfies all the purposes of 
notice and comment and it should be enough.

    Likewise, should they always provide a reply comment period 
after the traditional comment period? Well, sometimes they 
should, especially when some group that dumps these lengthy and 
controversial comments on the last day of the comment period, 
there should be a chance to reply. But that is not always the 
situation, and so you need to build in some room for the 
Commission to say, here, we don't need a reply and we should 
avoid the delay and move forward.
    Finally, I think the committee should take another look at 
and rewrite the section that provides for the Commission to 
prepare a cost-benefit analysis to accompany any rule that 
would be burdensome. The intent here, as I understand it, is to 
put the FCC on par with executive agencies which now prepare 
cost-benefit analyses under the President Executive order, and 
the FCC isn't subject to that order. But the problem is that 
the scope of the Executive order is much more limited than your 
provision because that order provides for cost-benefit analysis 
in only a small fraction of law rulemaking and it provides the 
agency compliance with that order is not judicially reviewable.
    If you were to allow broad judicial review under this bill, 
you would be inviting strenuous opposition to the bill. That 
was one of the main worries that led to the demise of APA 
reform in the mid-'90s. So if you want the bill to remain 
relatively noncontroversial, you need to avoid or limit 
judicial review and also narrow the scope of the cost-benefit 
requirement.
    And with that, I will conclude my oral presentation. I hope 
it is helpful and I will be happy to respond to any questions.
    [The prepared statement of Mr. Levin follows:]

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    Mr. Walden. Professor, it is very helpful and we thank you 
for your testimony and your counsel.
    We will go now to our final witness on the panel, Mr. 
Randolph J. May, President of the Free State Foundation. Mr. 
May, we are delighted to have you with us and we look forward 
to your testimony.

                  STATEMENT OF RANDOLPH J. MAY

    Mr. May. Thank you, Mr. Chairman and members of the 
committee. Thank you for inviting me to testify. I am president 
of the Free State Foundation, a nonpartisan research and 
educational foundation. The Free State Foundation is a free 
market-oriented think tank that focuses its research in the 
communications law and policy area. By way of background, I 
should note that I am a past chair of the ABA's Section of 
Administrative Law, and I am currently a member of the 
Administrative Conference of the United States and a Fellow at 
the National Academy of Public Administration. So today's 
hearing on FCC process reform is at the core of my expertise in 
communications law and policy, as well as administrative law.
    As a frame of reference for my testimony, I want to recite 
statements made over a decade ago by two different FCC 
commissioners, one Democrat and one Republican. FCC Chairman 
William Kennard in August 1999 released a strategic plan 
entitled, ``A New FCC for the 21st Century.'' The plan begins, 
``In 5 years, we expect communications markets to be 
characterized predominately by vigorous competition that will 
greatly reduce the need for direct regulation. As a result, 
over the next 5 years, the FCC must wisely manage the 
transition from an industry regulator to a market facilitator. 
The FCC as we know it today will be very different in both 
structure and mission.'' That was in 1999.
    In December 2000, then-FCC Commissioner--soon-to-be 
Chairman--Michael Powell said, ``Our bureaucratic process is 
too slow to respond to the challenges of internet time. One way 
to do so is to clear away the regulatory underbrush to bring 
greater certainty and greater simplicity to the market.'' These 
statements provide a useful frame of reference for considering 
FCC reform.
    I support many of the reforms proposed in the draft bill, 
and I do discuss them at greater length in the testimony. Right 
now I just want to highlight a few of the provisions and then 
talk briefly about one additional provision.
    I endorse the provision that would require the Agency with 
respect to the adoption of any new rule that may impose 
additional burdens, to analyze the market failure and actual 
consumer harm the rule addresses, to perform cost-benefit 
analysis, and to include measures for evaluating the 
effectiveness of the rules.
    The FCC has had a pronounced tendency over the years--and 
certainly this tendency was evident with respect to the 
adoption late last year of new net neutrality regulations--to 
adopt rules without engaging in meaningful analysis that would 
be required by the proposal. The requirement to analyze any 
claimed market failure and consumer harm before adopting new 
rules should force the FCC to engage in more rigorous economic 
analysis than it often does when it relies on the indeterminate 
public interest standard for authority.
    I am not going to probably agree with much that Mark Cooper 
said here today possibly, but he is correct that the public 
interest standard that is found in over 100 provisions in the 
Communications Act. I wholeheartedly endorse the proposed 
changes to the Sunshine Act. They have been noted and I won't 
dwell on those here, but I support those.
    The provision reforming the Commission's transaction review 
process is as important as any other provision in the draft 
bill. In light of the continued abuses--and I think they have 
increased over the past decade--in the merger review process. 
The Agency often imposes extraneous conditions after they are 
``volunteered at the last minute by transaction applicants 
anxious to get their deal done.'' And this is after the 
transactions have been subject to reviews already lasting a 
year or more.
    The requirement that any condition imposed be narrowly 
tailored to remedy a transaction-specific harm coupled with the 
provision that the Commission may not consider a voluntary 
commitment offered by a transaction applicant unless the Agency 
can adopt a rule to the same effect will go a long way to 
reforming the review process.
    My own preference would be to go even further and reduce 
the substantial overlap that now occurs between the Department 
of Justice and the FCC and have the Department of Justice 
primarily responsible for assessing the competitive impact of a 
transaction.
    As I said early in my testimony, the reality is that most 
segments of the communications marketplace are not effectively 
competitive. When Congress passed the Telecom Act of 1996, it 
anticipated the development of a competitive marketplace 
stating in the statute's preamble that it intended for the FCC 
to ``promote competition and reduce regulation.'' The FCC has 
not done nearly enough in the 15 years since the passage of the 
'96 act to reduce regulation.
    Whatever the reason, the point is that a fix is needed and 
the draft bill, while commendable in many respects, does not 
directly address the problem of reducing existing regulations. 
I don't have time to address it at any length now, but I hope 
you will consider adopting a proposal that I have made that 
would amend the forbearance provision of the act and the 
regulatory review provision in the act that were both included 
in the 1996 act to be used as clearly the regulatory tools that 
have been used only sparingly. And they could be amended very 
simply to allow those provisions to be much more effective in 
achieving less regulation and getting rid of unnecessary 
regulations that are on the books now.
    Thank you very much for inviting me here today, and I look 
forward to your questions. Thank you.
    [The prepared statement of Mr. May follows:]

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    Mr. Walden. Thank you very much, Mr. May, and thank you to 
all of our panelists who have given us great counsel here 
today. We appreciate it. Some I appreciate more than others. 
No, I am just kidding. That is why we had you here. We needed 
the honest assessment of what works and what doesn't work in 
this bill.
    Mr. May, I think when we get into this discussion of what 
is in the public interest, it really is what any three 
commissioners decide at the time as they are reaching some 
agreement. It is pretty broadly determined, is that not 
correct?
    Mr. May. It is about as indeterminate, I think, as any 
other phrase could be. And I have to confess I have used that, 
whatever three commissioners say it is on any given day many 
times myself. But it absolutely is and, in fact, I wrote a law 
review article about 10 years ago in which I counted up those 
provisions. That is why I know Mr. Cooper is correct. But the 
point is that it provides no guidance to the Commission and it 
does need changing.
    Mr. Walden. I seek unanimous consent to enter into the 
record an article by Phil Weiser, who just left the White House 
as National Economic Council to return to the University of 
Boulder. Without objection, we will put this in the record.
    [The information appears at the conclusion of the hearing.]
    Mr. Walden. In the article, he notes that frequently the 
FCC seeks to leverage its authority to approve mergers, to 
obtain concessions that often have little or nothing to do with 
the competitive issues raised in the transaction. And I think 
that is at the heart of the matter of what I, at least, and I 
think many members on this committee are trying to get at. It 
is not that you ignore or eviscerate the public interest 
standard; it is when it is used as an excuse to go do something 
you don't have the authority to do through your own organic 
statute.
    Commissioner Abernathy, do you agree the Commission should 
not leverage merger reviews to obtain concessions that have 
little or nothing to do with the transaction's specific harms?
    Ms. Abernathy. I have said that previously in speeches and 
I do agree. Now, just to be clear, in transactions where I was 
involved with other commissioners, you do have disagreements 
about a public interest issue associated with the transaction, 
so I may think a particular condition isn't required. But this 
still leaves, I think, a tremendous amount of ability for the 
commissioners to address the issues that are raised by the 
transaction. You may have disagreements about whether it is 
really a problem or not, but I think it does leave a tremendous 
amount of discretion to the commissioners.
    Mr. Walden. As I listened to your testimony and read it in 
advance, it seems like there is concurrence, that having the 
text proposed rules available to the public and to other 
commissioners is something you all agree on. Does anybody 
disagree with that?
    Mr. May. Could I just respond?
    No, I don't disagree. You know, in theory----
    Mr. Walden. Let me get an answer. Does anybody disagree 
with having the text made available prior to the votes in the 
Commission? Mr. Levin?
    Mr. Levin. Only to the extent that as a non-specialist in 
this area, it occurred to me there might be a wide range of 
situations where that wouldn't work because it is urgent, 
because it is a very minor matter where you are just talking 
about a factual dispute and in an adjudication, the public has 
nothing to say about it. There might be feasibility 
limitations. I do agree with it as a general proposition.
    Mr. Cooper. I would go one step further and I would like 
that kind of provision to apply to merger reviews as well so 
that at the end of the process when--so we have that under the 
antitrust laws. The public should be allowed to comment on the 
conditions that were adopted. Now, that may or may not address 
some of the concern about extraneous issues----
    Mr. Walden. Right.
    Mr. Cooper [continuing]. But in that further review, if 
things were truly extraneous, people would have a chance to 
comment on that and the Agency could, in fact, be informed by 
that process. But full comment on an actual rule is the essence 
of democracy.
    Mr. Walden. Mr. May?
    Mr. May. I think the provision you are referring to here is 
the one that would require that the text that the Commission is 
considering at a meeting be made available to the public, and 
in response to Professor Levin's concern, I don't think your 
draft specifies the time before the meeting that it has to be 
available, so my understanding is it could be very shortly 
before.
    But in other agencies, this might not be deemed perhaps as 
necessary, but as I point out in my testimony, what happens at 
the FCC in a public meeting, as you may know, is that at the 
presentation of an item, the staff before every item says, 
``Mr. Chairman, we request editorial privileges.'' And the 
chairman says ``granted.'' And then no one has the text and 
sometimes it is weeks before the item is ultimately released to 
the public. And you really don't know what is going on. Because 
of the delay in the release of the item, you don't know whether 
that was----
    Mr. Walden. Right.
    Mr. May [continuing]. Editorial or not. And that is why it 
is useful.
    Mr. Walden. And my time has run out.
    Ms. Abernathy, did you want to make a quick comment?
    Ms. Abernathy. Well, the way the actual process works is 
that you have the text of the item that you are voting on that 
day and then you are writing separate statements. Many of the 
commissioners are writing separate statements. And so I had 
never seen a situation where editorial privilege changed 
anything of significance in the item. But there are procedures 
that still need to be recognized, and I think that is part of 
the reasons for today's hearing is to understand that it is not 
as simple as just kicking the order out the door. You still 
need to review it one last time, get separate statements from 
the commissioners. It shouldn't take a long time but there is 
that process.
    Mr. Walden. Thank you. I now recognize the gentlewoman from 
California, Ms. Eshoo, for 5 minutes.
    Ms. Eshoo. Thank you, Mr. Chairman, and thank you again to 
all the witnesses. I think that you have been highly 
instructive to us.
    First off, I don't think I heard anyone say that they were 
opposed to the FCC Collaboration Act, is that correct? Anyone 
opposed? No. I think there was a consensus on that, which 
pleases me.
    To Commissioner Abernathy, thank you again for your 
testimony. As you know as part of the Verizon/Frontier 
transaction, Frontier offered voluntary commitments to build 
out broadband deployment and meeting broadband needs of anchor 
institutions which I salute you for. I wish Congresswoman 
Matsui were here because she has worked very hard on the whole 
issue of serving anchor institutions.
    At any rate, those anchor institutions are within the areas 
to be served by Frontier. Now, none of these voluntary 
conditions directly address merger-specific harms, yet they 
confer, I think, important public interest benefits. So first, 
would you comment on whether Frontier would be able to offer 
these voluntary commitments if this draft legislation were in 
place as law?
    Ms. Abernathy. I think if you spoke with Commissioner 
Copps, for example, with regard to these commitments, he would 
argue they were merger-specific. I might say maybe not but the 
way the analysis would go is that the whole reason for the 
acquisition from a Frontier perspective was for greater scale 
and scope. The public interest benefit was for greater 
broadband deployment throughout rural America.
    Ms. Eshoo. Yes.
    Ms. Abernathy. And so some of the commissioners, even 
though we said that is what we are going to do, they wanted 
more specific commitments associated with that broadband 
deployment, which we had said from day one was part of our 
reason for engaging in the acquisition.
    Ms. Eshoo. Well, I support what you did. I think it is 
terrific. I just was trying to compare and contrast what you 
did with what is being proposed. Did what is being proposed get 
in the way of what you did or was it----
    Ms. Abernathy. I am sorry to interrupt, but I don't think 
in the context of our specific merger that it would have 
changed any of the conditions.
    Ms. Eshoo. Do you believe in that instance that the public 
interest standard is preferable to a harms standard?
    Ms. Abernathy. As opposed to does not create harm to the 
public?
    Ms. Eshoo. Yes.
    Ms. Abernathy. Versus benefits the public?
    Ms. Eshoo. Yes.
    Ms. Abernathy. I think it is not a huge difference.
    Ms. Eshoo. OK. For all of the witnesses, I generally agree 
that publishing the specific language of proposed rules is a 
good idea, and as you know, Chairman Genachowski is making this 
a best practice at the FCC. This now occurs in 83 percent of 
rulemakings, which is a very significant increase over a 
previous chairman.
    But I am concerned that requiring this in all instances 
could inadvertently undermine the goals of transparency and 
efficiency underlying the draft bill. So to all of the 
witnesses, does this requirement make sense when the Commission 
places a proposal from outside parties out for comment in a 
Notice of Proposed Rulemaking?
    Mr. Sununu. I really think it would depend on the 
circumstance and the scope of the proposal. Any time you, you 
know, require a publication or even establish a shot clock, by 
definition you are requiring another step, you are extending 
the time frame, and someone is always going to be able to argue 
that that is making the process more cumbersome.
    Ms. Eshoo. Yes.
    Mr. Sununu. But you have got to balance the need and the 
desire for transparency with the need or the desire for 
expediency.
    I would also make the observation that any process burden 
that you establish, whether it is in the name of transparency 
or fairness or certainty, which are all good things, is going 
to be as much of a burden for a deregulatory effort as it is 
for a regulatory effort, at least as far as it is constructed 
here.
    Ms. Eshoo. Thank you. Ms. Abernathy? I don't have very much 
time left so I do have to speed through the witnesses. Yes, Dr. 
Cooper?
    Mr. Cooper. Well, I want to offer an observation about this 
question of the opportunity to comment on the actual rules, 
because I believe that is--in fact, one of the really good 
definitions of democracy is the opportunity to write the rules 
under which you live. And in a representative democracy, 
participation in the process is really important.
    The thing that strikes me--and I have said this before in 
public--is that the problem here is not with the Communications 
Act or the FCC. It is with the Administrative Procedure Act. 
This is such a fundamental part of democracy that the 
implementation of the Administrative Procedure Act has 
deteriorated to the point where we let agencies deny people the 
right to speak. And so I would like this problem to be solved. 
And I said this in my testimony in two ways. One, I think we 
ought to look at the Administrative Procedures Act and figure 
out how to make sure that the citizenry gets a chance to 
participate in the rulemaking.
    Second of all, if we want more participation, if we want 
more flexible and quicker rules--I believe as a veteran of some 
reg-negs and other multi-stakeholder groups--that the agency 
needs to reach out and create formal transparent processes 
where industry and public interest come together to help it. 
Other people do it. EPA does it, DOE does it, OSHA does it. 
There is no reason why the FCC can't do it.
    Ms. Eshoo. Thank you. Thank you very much.
    Mr. Terry [presiding]. Mr. Shimkus, you are recognized for 
5 minutes.
    Mr. Shimkus. Thank you, Mr. Chairman. My mic is really loud 
so I apologize. I don't usually need it this loud.
    For Mr. Sununu, just aside, you mentioned that Congressman 
Harold Ford was with you. Is that senior or junior? It may 
dictate how we feel about your testimony. Junior.
    Mr. Sununu. Junior, another classmate.
    Mr. Shimkus. Send him our regards, will you?
    Mr. Sununu. Will do.
    Mr. Shimkus. I pulled up the organizational chart of the 
FCC because I always believe that a lot of times structure 
dictates process. And that even though the structure is 
determined by the commissioner--in a lot of your opening 
statements, I don't think you were asked to look at structure--
but I would ask you after this hearing if you have comments on 
structure to get back to us because I do believe that some of 
these bureaus are established as the Senator said, you know, 
when there was a quasi-monopoly, 1934, and then we have kind 
of--like building a home you take out walls, you put a 
different roof on, you extend. And I have always been amazed at 
how, with the convergence of technology, that we don't have a 
convergence of regulation.
    And I will give you an example, I think, hopefully. We have 
no internet bureau. There is no internet bureau so if you are 
overseas and you are going to call on Skype on a WiFi system, 
you have no Universal Service Fund, you have no inter-carrier 
compensation, you have no local taxes, you have last mile 
issues that aren't compensated for. It just seems to me that if 
someone doesn't talk about structure, then the policy 
applications of the regulations--and I don't want to get into 
big detail because a lot of you didn't talk about structure, 
and I want to lay that out if you would be some structure--but 
Mr. May, you have signaled?
    Mr. May. Well, I would just say briefly I appreciate your 
concerns. I actually recommended several years ago that the 
Commission create a broadband bureau, even if it would have 
subdivisions that still dealt as it would with wireline and so 
forth. Now, that might be useful. But I just would take the 
opportunity to say quickly that ultimately to address the issue 
that you are talking about, Senator Sununu----
    Mr. Shimkus. Quickly. I am running out of time.
    Mr. May [continuing]. You need to actually change the act 
to get rid of the silos that are presently----
    Mr. Shimkus. I have always been concerned about the silos.
    Let me go to Dr. Cooper. I want to confirm that when my 
colleague, Ms. Eshoo, asked about on the Sunshine applications 
that you agree that the Sunshine applications in the draft you 
would support?
    Mr. Cooper. I am OK with the Sunshine application as a 
general proposition. I have two caveats. One, the reporting of 
those partial meetings, I want transcripts, not summaries. And 
I want transcripts of ex parte communications, too, because 
those ought to be fully part of that----
    Mr. Shimkus. OK. I read your written statement----
    Mr. Cooper. Yes.
    Mr. Shimkus [continuing]. And so when she asked that and 
you didn't object, I wanted to get----
    Mr. Cooper. And I also----
    Mr. Shimkus. That is fine. I need to go to the next--I have 
a lot of my friends in--I have been really involved in the 
presidential Executive order on jobs, which he did in January 
2011 and I really would focus this on the EPA, that there 
should be a cost-benefit analysis and a job on new rules and 
regulations. The Blue Dog Coalition sent a letter to Chairman 
Genachowski asking him to at least voluntarily comply with the 
President's Executive order.
    Mr. May, what are your comments on the Blue Dog letter? 
Have you seen this and do you think that the FCC should do a 
cost-benefit analysis and a projection of possible job creation 
activities in the rules and regs?
    Mr. May. I think it is useful that it does those things, 
and I think the recent Executive order and President Obama's 
op-ed suggested as much generally. But I appreciate there may 
be some exceptions for minor rules and so forth, but in 
general, it is a useful thing. And here is why just in sum. 
Because the FCC for most of its history has been oriented 
around this public interest standard, which is, as we discussed 
earlier, completely indeterminate, means whatever three 
commissioners say on any given day. This type of requirement, 
Congressman, would get the FCC oriented in today's competitive 
environment to doing the type of more rigorous economic 
analysis it just hasn't had a history to do or the inclination 
to do. So it is a useful thing.
    Mr. Shimkus. Mr. Chairman, my time has expired.
    Mr. Terry. The gentleman from California, Ranking Member 
Waxman, you are recognized for 5 minutes.
    Mr. Waxman. Thank you, Mr. Chairman.
    Mr. Levin, I wanted to ask you some questions. I think it 
was very helpful to have you hear because you are in a unique 
position looking at these issues from an administrative 
procedures point of view. You don't come here with any biases 
about how the FCC has performed and you don't have an agenda 
before the FCC, so your position is unique and it is, I think, 
very helpful.
    You raise a number of concerns and caution about the 
potential inflexibility, burdens, and unintended consequences 
of this bill, and I want to ask you to elaborate a bit on those 
concerns. What are the risks of moving forward with the 
approach outlined in the bill?
    Mr. Levin. With what?
    Mr. Waxman. The risks. What are the risks of moving forward 
with the approach outlined in the bill itself?
    Mr. Levin. Well, I think on particular provisions, it could 
be too confining to say you have to have an advanced Notice of 
Inquiry before every proposed rule or Notice of Proposed Rule. 
You need two of something because sometimes the agency has a 
pretty good idea of what it is going to do. Rather than have 
two rounds of discussion with the delay that that would cause, 
you give the public at least one shot to comment on what the 
Commission wants to do and that may well be enough. You don't 
need to build in an automatic second round.
    Likewise, you don't necessarily need a reply period if 
there was no real opposition in the first period or if all the 
comments came in early in the period. People will have had 
plenty of chances to reply during the regular comment period. 
To have a mandatory second period means you are building in a 
delay for no practical benefit.
    Mr. Waxman. Let me ask you about the cost-benefit analysis 
that is required under this proposal.
    Mr. Levin. Right.
    Mr. Waxman. You concluded that this kind of scrutiny prior 
to issuance of highly expensive or consequential regulations 
may be appropriate, but for routine regulations, such a 
requirement would not be cost-justified. Expand on that.
    Mr. Levin. Sure. So compare this with the presidential 
Executive order, which is the model I think for what the 
committee intends to do. They say that for all rules you should 
make a reasoned assessment of the benefits and the costs. Now, 
in that sense it is just saying think about the plusses and the 
minuses and I think that is simple. But a true cost-benefit 
analysis, as we usually use that term, is a rigorous, 
sophisticated, and expensive analysis with a qualified policy 
analyst, and the Executive orders limit that to situations 
where you have a very consequential rule. For a minor rule, it 
is an overinvestment of resources that agencies can ill afford 
to squander. And so to that extent I think you have a 
disproportion between the Executive order model and what the 
bill contemplates.
    Mr. Waxman. What do you think about the ability of the 
Administrative Procedure Act to allow the FCC or any other 
agency to evaluate the plusses and the minuses, the cost and 
the benefits?
    Mr. Levin. Well, one thing to keep in mind--and I think 
this gets to the thrust of your question--is that an agency 
will have to analyze the plusses and minuses of the bill anyway 
because it has to survive a pretty hard look on judicial 
review. There is also oversight such as this committee 
provides. They will have to answer the questions. And as far as 
the APA itself is concerned, they have to write a statement of 
basis and purpose to explain what they are doing. So to that 
extent, there is an expectation that they have to address the 
merits seriously. I don't think you necessarily need to add on 
to that with an FCC process provision.
    Mr. Waxman. Yes. What are your thoughts about the idea of 
this legislation is just focused on one agency? Should we be 
taking a broader approach with reform proposals where they are 
needed?
    Mr. Levin. Well, I have endorsed an experiment with respect 
to the Sunshine Act, so I don't want to rule out categorically 
that you might do something agency-specific and see how it 
works. However, I think if you are going to think about issues 
of that kind, you should not do something just to improvise. At 
least you should be very attentive to developed understandings 
in the administrative law field. And if you are about to do 
something that departs from it, you should be very cautious and 
rethink what you contemplate.
    Mr. Waxman. And then lastly, how does this legislation 
compare with related recommendations adopted by the 
Administrative Conference just last week?
    Mr. Levin. I think in some ways it is parallel but it also, 
I think, probably is a little stricter. And the final text 
hasn't been released, but my general understanding of what ACUS 
will say is that reply comments are good where appropriate, 
that at least 30 days or 60 days of comments should usually be 
available but doesn't provide that it should be 100 percent of 
the time.
    Mr. Waxman. Thank you.
    Thank you, Mr. Chairman.
    Mr. Walden. Thank you. And I am going to exercise the 
prerogative of the chair with unanimous consent so we could all 
recognize one of our staff people, David Rettle, whose wife 
last week gave birth to their first child, Benjamin David 
Rettle. We have asked David to submit a photo for the record 
for this hearing.
    Mr. Waxman. Reserving the right to object.
    Mr. Walden. We would hope on at least this matter we could 
have--no. With that, thank you, and congratulations to David 
and his wife and the arrival of Benjamin David. There will be 
other announcements later in the year.
    Mr. Barton, we recognize you now for 5 minutes.
    Mr. Barton. Thank you, Mr. Chairman. We hope that was not 
an open and transparent process.
    Mr. Walden. No, it was streamed on video.
    Mr. Barton. Right. Right. Anyway, we want to welcome former 
Congressman and Senator Sununu, good colleague, good friend, 
and I also think an engineer before this committee.
    I have long been a proponent of FCC reform. I had a bill 
with several other members of the committee in the last 
Congress, I have a bill in this Congress, and I plan to be a 
cosponsor of the draft that Chairman Walden has circulated for 
comments, so I think this is a good thing, a good day. And I 
think it is high time. I have a few questions I am going to ask 
for specific witnesses, but if anybody has a specific comment, 
feel free to chip in.
    The Section 5A, Subparagraph (b), transparency reform that 
would require the Commission to establish internal procedures 
to provide adequate deliberation over and review of pending 
orders, publication of draft orders before open meetings, 
minimum public comment periods, Mr. Sununu, are you supportive 
of that?
    Mr. Sununu. I am.
    Mr. Barton. Is there anybody on the witness dais that is 
not supportive of that, the transparency issues? Let the record 
show that everybody seems to be supportive.
    What about 5A, Subsection (c), Sunshine reform that would 
allow three commissioners to meet for collaborative discussions 
if they do so in a bipartisan manner, which means that it has 
to be at least one member of each political party in 
consultations? And they also have to have the Office of the 
General Counsel to do oversight. Is anybody opposed to that? 
Mr. Cooper?
    Mr. Cooper. I would like a full transcript of any of those 
meetings as opposed to summary.
    Mr. Barton. OK. I don't have a problem with that. And by 
the way, Mr. Cooper, it is good to have you back. You probably 
have enough standing to get a pension from this committee as 
many times as you have testified, so we are glad that you are 
back.
    Let us see. Let us look at the Section 5A, Subsection (g) 
refers to shot clocks, which would require the Commission to 
establish shot clocks for each type of proceeding. Is that 
generally approved by everybody? OK. It looks like you are 
doing good, Mr. Chairman.
    Mr. Cooper. By shot clocks I have one concern. I want the 
shot clock to run when the record is complete.
    Mr. Barton. When the record is----
    Mr. Cooper. We have had a problem in merger review in which 
the companies aren't forthcoming into providing the data, and 
months and months after the shot clock starts we all of a 
sudden get a big data dump and we get them screaming about how 
it is taking too long. So I think the Commission should be 
allowed to build the record first and be comfortable that it 
has the complete record and then this shot clock should start.
    Mr. Barton. My last question, last minute is Section 5A, 
Subparagraph (j), the transaction review reform. This would 
preserve the Commission's ability to review transaction but 
would require conditions for those transaction reviews to be 
narrowly tailored to remedy harms that arise as a direct result 
of the transaction. What is the general review of that?
    Mr. Cooper. Well, my testimony I criticized that as 
unnecessarily undermining the ability of the agency to deal 
with this dynamic market where mergers change the structure----
    Mr. Barton. So you want to tweak it, you want to eliminate 
it, you----
    Mr. Cooper. I don't believe the standard needs to be 
changed.
    Mr. Barton. You don't think it needs to be changed?
    Mr. Cooper. I don't think it needs to be changed.
    Mr. Barton. This gentleman next to you, Mr. Ramsay, what is 
your view on that?
    Mr. Ramsay. I just wanted to pipe in here and say I am a 
government lawyer. I am not allowed to take positions that 
disagree with my clients, and in this particular case, my 
clients haven't come to any consensus on that provision, so I 
haven't either.
    Mr. Barton. Your clients are the----
    Mr. Ramsay. State Public Utility Commissioners, yes, sir.
    Mr. Barton. OK. Mr. Sununu? I mean Senator Sununu?
    Mr. Sununu. I answer to just about everything.
    I think the real issue is the one with regard to the 
voluntary considerations. And people are frustrated by the fact 
that at times the Commission seems to have sought out and 
imposed voluntary considerations--we all know what that means--
that are outside their jurisdiction. So this is really as much 
a question of how to ensure that the Commission stays within 
its jurisdiction as it is to determine whether or not there 
should ever be a voluntary consideration or whether the public 
interest standard is or isn't being misused. It is a question 
of finding language and finding a process that is consistent 
and that ensures that the Commission stays within its 
jurisdictional boundaries. And I think that is what the 
intention is of this section.
    Mr. Barton. Mr. Cooper, before----
    Mr. Cooper. I have proposed a way to deal with that, which 
is that those conditions should be subject to comment and 
review, which would expose abuses. And I think that is the way 
to get at the abuses but also preserve the authority to really 
deal with the issues that the merger proposes.
    Mr. Barton. OK. Mr. Chairman, I think you have got a winner 
here. It obviously needs to be tweaked some, but you have 
worked hard on this and you have listened to a lot of people. I 
only have a few minor technical changes I wish to suggest, but 
I hope we can introduce a new bill and move expeditiously to 
move it through subcommittee into full committee. This is 
something whose time has come. And I yield back.
    Mr. Walden. Thank you, Mr. Chairman. I appreciate the good 
work you and others in this committee have done for many years 
in this area, and I think we are on the cusp of having good 
legislation here that does need some tweaks. And we intend to 
work as best we can in a bipartisan way to get that done.
    So with that, now, I would like to recognize the gentleman 
from Michigan, my friend and esteemed colleague Mr. Dingell, 
for 5 minutes.
    Mr. Dingell. I thank my dear friend the chairman for this 
recognition, and I also express my thanks to my dear friend Mr. 
Doyle who is always kind and generous in his dealings with me. 
And I would like to welcome back Senator Sununu. Welcome back.
    Mr. Sununu. Thank you.
    Mr. Dingell. It is good to see you again.
    These questions to Professor Levin and Ms. Abernathy. They 
will require yes or no.
    The draft bill requirement says that the Commission will 
complete an identification and analysis of the market failure 
that prompted a given rulemaking seems to be a little much. 
Does the Commission engage in rulemakings that are not prompted 
by market failures? Yes or no?
    Ms. Abernathy. Yes.
    Mr. Dingell. Professor?
    Mr. Levin. Well, I am not an FCC specialist, but I would 
expect the answer is no----
    Mr. Dingell. Thank you.
    Mr. Levin [continuing]. That some of them should not relate 
to market----
    Mr. Dingell. The next question indicates to me that the 
draft bill's failure analysis requirement has been at least 
superfluous, or worse, unnecessary in many cases. Am I correct 
in that feeling?
    Mr. Levin. The cost-benefit analysis? You are correct.
    Mr. Dingell. Ma'am?
    Ms. Abernathy. It would be necessary in some situations.
    Mr. Dingell. All right. Now, again, to Professor Levin and 
Ms. Abernathy, the draft bill seems to require that the 
Commission perform a cost-benefit analysis on every rule that 
may impose additional burdens on industry or consumers, is that 
correct?
    Mr. Levin. I think that is what it says, yes.
    Ms. Abernathy. I believe that is what the bill says.
    Mr. Dingell. Now, again, to Professor Levin and Ms. 
Abernathy, I believe the requirements are, again, overbroad and 
would require the Commission to devote many of its finite 
resources to performing such analysis. Do you agree? Yes or no?
    Mr. Levin. I agree.
    Ms. Abernathy. I agree. It is overbroad.
    Mr. Dingell. Now, again, to Professor Levin and Ms. 
Abernathy, further, is it reasonable to assume that the 
Commission has neither adequate staff nor funding with which to 
complete the cost-benefit analysis of every rule that imposes 
additional burdens on industry or consumers? Yes or no?
    Mr. Levin. It is reasonable to assume the answer is yes.
    Ms. Abernathy. I don't know.
    Mr. Dingell. OK. Now, if this be the case, it would appear, 
then, that the Commission would require additional funds in 
order to comply with the draft bill's requirements, is that 
correct?
    Mr. Levin. Presumably.
    Mr. Dingell. OK. Or we might assume that the FCC will be 
doing more to accomplish less at greater cost, is that an 
unfair assumption?
    Mr. Levin. So I would assume.
    Mr. Dingell. OK. Now, this again to the last two witnesses. 
Finally, I come to the matter of personal interest. In the 
Congress in the past I have introduced legislation to amend 
Section 10 of the Federal Communications Act to require the 
Commission act on a forbearance petition within a year's time. 
Forbearance as a result of Commission inaction and action that 
takes place as a result of Commission inaction appears to me to 
be very bad policy. Now, to all of our witnesses here starting 
with Senator Sununu, would you support amending Section 10 of 
the Communications Act as I have just described to eliminate 
the forbearance that is practiced by the Commission leading to 
decisions being made by a simple inaction on the part of the 
Commission?
    Mr. Sununu. To eliminate the forbearance or to set a time 
limit of 1 year?
    Mr. Dingell. Well, tell me what you feel. Should we do it 
where we have to act on it within a year's time?
    Mr. Sununu. I think any time you can set a clear time frame 
for action, it is going to add certainty to the regulatory 
process. I don't know if 1 year is the right amount of time, 
but certainty in the regulatory process is likely to be a good 
thing.
    Mr. Dingell. Thank you. Ms. Abernathy, yes or no?
    Ms. Abernathy. I agree with the additional clarity around 
the forbearance process.
    Mr. Dingell. Mr. Ramsay?
    Mr. Ramsay. We are on record with agreeing with the concept 
of shot clock, so I guess the answer is yes.
    Mr. Dingell. Mr. Cooper?
    Mr. Cooper. Justice delayed is justice denied but it needs 
to be worked both ways. So when complaints are pending at the 
Commission, they languish for years. If you are going to have a 
shot clock, it ought to be both to the favor of the public and 
the----
    Mr. Dingell. Well, maybe we ought to fire the damned 
Commission if they can't come to a decision on these matters or 
give them more money.
    Let us see. Mr. Levin?
    Mr. Levin. Well, I don't do FCC law but administrative law 
authorities generally are skeptical about Congress imposing too 
many statutory deadlines because the upshot may be that those 
deadlines will drive the process more fully than----
    Mr. Dingell. Well, let us not debate that but it seems like 
poor sense to have the Commission just simply saying we haven't 
acted so it is going to become the rule or it is going to 
become law or it is going to become the regulation. That 
appears to me to be very bad. Do you agree?
    Mr. Levin. I am sorry. Could you repeat that?
    Mr. Dingell. Well, the Commission just sits around and 
twiddles its thumbs, nothing happens, and then all of a sudden, 
we have a new rule. It doesn't seem like good sense to me. Does 
it make sense to you?
    Mr. Levin. I think they should proceed expeditiously. I 
think the idea of establishing deadlines for themselves is 
good, but if we are talking about legally enforceable 
deadlines, you often have too much control by outsiders.
    Mr. Dingell. Thank you. My time is limited. Next witness?
    Mr. May. I disagree with your proposal because it shifts 
the whole forbearance thing around. It was included in the act 
to be deregulatory and that is why the provision says if----
    Mr. Dingell. Thank you very much.
    So Mr. Chairman, I say this with respect. If our intention 
here is to focus on process reform, I would urge you to be done 
deliberately, transparently, and with adequate participation of 
all affected parties. And after all, we should avoid the 
mistakes of the agency that we seek to reform. Mr. Chairman, 
your courtesy is appreciated and I thank you.
    Mr. Walden. I thank the gentleman from Michigan and now I 
turn to the gentleman from Ohio, Mr. Latta, for questions. I 
made a mistake. Ms. Blackburn.
    Mrs. Blackburn. That is quite all right. I know I am hard 
to see over here.
    I want to stay on this issue of forbearance. And Mr. May, I 
want to come to you because you have talked about the reforms 
that are needed in Section 10 and then regulatory review, the 
periodic reviews that are needed in Section 11. And I 
appreciated your comments. And so why don't you elaborate a 
little bit on how including evidentiary presumption to 
forbearance, how it would enhance the likelihood of the 
Commission in reaching a deregulatory decision? Because I think 
that as we look at reform, this is going to be a key nugget for 
us.
    Mr. May. Thank you, Representative Blackburn. Here is the 
deal in a nub. These two provisions--forbearance and regulatory 
review, if you look at them--were clearly put into the '96 Act 
to be used as deregulatory tools. That is evident on the face 
of those provisions. The fact is they have only been used very 
sparingly by the Commission. They haven't accomplished much 
deregulation, even as the market has become much more 
competitive. So I think the Congress through a pretty modest 
fix could address that situation in this way, not by changing 
the substantive criteria that are in the forbearance and 
regulatory review provisions. But again, when you look at them, 
they are addressed to the development of a competitive market. 
It doesn't change the substantive criteria.
    But I would add a sentence that essentially says that 
enacting on a petition or in doing the regulatory review 
proceeding, unless the Commission can find by clear and 
convincing evidence that the criteria have not been met, that 
it shall presume that the rules should go away. So again you 
are not changing the criteria but you are adding an evidentiary 
presumption.
    Because you ought to wonder why these two provisions, which 
are unique--I think even Professor Levin, who has looked at 
other agency statutes, for many years I have challenged anyone 
to find another forbearance provision like this in another 
statute and no one has done that like this. It seems me if the 
provision is there, you ought to make it useful. And you could 
do it by just that shifting an evidentiary burden.
    And to me this is the most important thing the committee 
could do. And it does fall in the realm--it is sort on the line 
between substance and process in a way, but it should be done, 
I think, if the committee wants to address the situation of 
existing regulations because your draft principally addresses 
regulations going forward.
    Thank you.
    Mrs. Blackburn. Thank you. Let me reclaim my time. And I 
have got a couple of yes or no questions that I want to give to 
each of you.
    Commissioner McDowell gave quite a hefty statement calling 
for a ``full and public operation financial and ethics audit'' 
of everything connected to the FCC. Mr. Sununu, starting with 
you, yes or no, do you support having that full audit, all the 
way down the line?
    Mr. Sununu. I think as a matter of fact it is good policy.
    Mrs. Blackburn. OK.
    Ms. Abernathy. I agree. It is good policy.
    Mrs. Blackburn. OK.
    Mr. Ramsay. NARUC has no position.
    Mrs. Blackburn. Pardon me?
    Mr. Ramsay. My association has not taken a position on 
that.
    Mrs. Blackburn. No position, OK.
    Mr. Cooper. As far as I can tell, the FCC is no better or 
worse than any other agency. The inspector general and the laws 
of the United States cover the problems, so I say no.
    Mrs. Blackburn. So you would say two wrongs make a right? 
OK. Professor?
    Mr. Levin. I am not an FCC authority. If I had to stake out 
a guess I would probably give an answer like Mr. Cooper's.
    Mrs. Blackburn. OK. Mr. May?
    Mr. May. I think it is a good thing to do. Not every year 
necessarily but it wouldn't be a bad thing to do.
    Mrs. Blackburn. OK. One ``no'' position, two waffled and 
three ``yes,'' so I will take that. But remember, these are 
yes-and-no questions. All right. One more, yes or no. OK.
    Do you think that Congress should be in the position of 
defining the role for the FCC and telling the FCC what to do or 
should the FCC continue doing what they are doing right now, 
which is trying to tell Congress what to do? Mr. Sununu, yes or 
no?
    Mr. Sununu. Well, it is absolutely a congressional 
prerogative----
    Mrs. Blackburn. OK.
    Mr. Sununu [continuing]. And again, in my opening 
statement, I think that in addition to this draft legislation, 
we need to look more broadly about the underlying premise of 
the '34 Act, the '96 amendments, and view this as a competitive 
world first and not as a natural monopoly.
    Mrs. Blackburn. OK.
    Ms. Abernathy. Yes, Congress defines the scope of the FCC's 
authority.
    Mrs. Blackburn. Thank you.
    Mr. Ramsay. Yes, Congress defines the scope of the FCC's 
authority and can tell it to a justice----
    Mrs. Blackburn. Thank you.
    Mr. Cooper. Congress did that in the '96 Act.
    Mrs. Blackburn. OK.
    Mr. Levin. Yes, Congress should set the bounds of the 
Commission's actions but it should give discretion to the 
Commission for things that require more flexibility than 
Congress can get around to addressing in specific terms.
    Mrs. Blackburn. OK. Mr. May?
    Mr. May. Yes.
    Mrs. Blackburn. OK. So we have got four that say ``yes,'' 
one that gives a little bit more--one I think is uncertain. So 
I thank you all. Remember, yes or no, you did fairly well for 
being here in Washington and limiting your words even though 
you couldn't give me a yes or a no.
    And I yield back.
    Mr. Walden. I thank the gentlelady for her questions. And I 
turn now to the gentleman from Pennsylvania, Mr. Doyle.
    Mr. Doyle. Thank you, Mr. Chairman.
    I am very concerned about this section of the draft that 
requires the Commission to issue a Notice of Inquiry for every 
single proceeding. I think in some cases this could cause 
serious harm to consumers and the public safety, and I would 
urge my colleagues to think back, for example, to the 
proceedings a few years ago when VoIP customers couldn't make 
9-1-1 calls, and the FCC needed to act quickly to enact E-9-1-1 
rules. This is just one example. Another might be the rules 
required to implement the legislation we just passed to expand 
low power FM radio, which the Commission is currently working 
on.
    And I know that Professor Levin has already voiced his 
opinion on this, but I would just ask for the rest of the 
panelists, given these concerns, is there a strong enough 
reason to require NOIs for every single proposed rulemaking? 
Why not just leave this up to the FCC? If we could just go down 
the line.
    Mr. Sununu. I have to believe there is an in between. I 
think as a matter of policy, the Notice of Inquiry is a good 
idea. There certainly may be examples either in the past or 
hypothetical where it might not be the ideal situation, but it 
is important if you are going to make exceptions to define 
those circumstances and those exceptions as clearly as 
possible. I mean you defeat the whole purpose if you just say, 
well, the FCC can decide because you are going to have less 
clarity and less definition in the process.
    Mr. Doyle. Ms. Abernathy?
    Ms. Abernathy. I think an NOI as written is overly broad 
and so it should be circumscribed to some degree so that you 
don't waste resources and create delays. But I think in concept 
it is a good idea for many proceedings.
    Mr. Doyle. Mr. Ramsay?
    Mr. Ramsay. I agree with actually the statements of both of 
the people that preceded me. I believe that, you know, 
typically a rush to judgment means you ran too fast, so I like 
the concept of having a Notice of Inquiry in most instances. I 
would note that in emergency circumstances, the APA allows the 
Commission to bypass even a Notice of Proposed Rulemaking. So 
in those circumstances, there is already a mechanism. But the 
question is how to set the standard as Mr. Sununu said for when 
you don't have to do the NOI, which is not an easy thing to 
address.
    Mr. Walden. Will the gentleman yield for a second?
    Mr. Doyle. Yes, sure.
    Mr. Walden. On page 3 of the draft, we incorporate that APA 
emergency exemption. So I would draw your attention to that. 
And on the second page, if they have done an NOI, and NPRM or a 
Notice or Petition for Rulemaking within the last 3 years, that 
qualifies.
    Mr. Ramsay. But it still requires two rounds of comment?
    Mr. Walden. No, you don't require----
    Mr. Cooper. There is an ``or'' in that paragraph. The first 
paragraph says ``or'' as far as I can tell. And so maybe I have 
misread it. And it is really important that we get this right 
because I believe in the opportunity to comment. But I don't 
think it is necessary for two rounds of comment. If the agency 
proposes a rule and builds a record, then that meets this. And 
I see that ``or.'' It says ``one or the other,'' so it doesn't 
say a Notice of Inquiry and these others. It says ``or.'' Now, 
maybe there is someplace else in here where we get the 
impression of the ``and,'' but it is an ``or.''
    Mr. Walden. Yes. Mr. Levin?
    Mr. Levin. Well, the chairman is correct that the bill as 
written exempts the true emergency situations where you can 
proceed with no notice and comment. But that having been said, 
we should also think about situations where there is some 
urgency about getting just the basic notice and comment done 
and having two rounds of comment is unwarranted. So you should 
leave some flexibility to say we don't need advanced notice in 
this particular situation. The public still gets one shot at 
commenting and saying it is a bad idea, change it, et cetera. 
But you don't need the extra round and sometimes that would be 
imprudent.
    Mr. Doyle. But I guess the trick is how do you write that 
into the bill? Mr. Sununu brings this up that, you know, do we 
just leave this at the discretion to the FCC or is there a way 
to create some language that would allow it to happen what you 
have just suggested?
    Mr. Levin. I think it needs some consideration, but one 
idea I suggested in my draft is that you might set up the 
procedure and say the agency can, for good cause, bypass it. 
And that term is usually read to me--and a very good cause, not 
because you feel like it.
    Mr. Doyle. Sure. Mr. May?
    Mr. May. Yes, just briefly. This is a provision I am 
generally not in favor of in the draft for a lot of the reasons 
that Professor Levin talked about. But here is what should 
happen. The reason it is here I think is because the FCC, 
especially in recent years over all commissions, it started to 
draft Notice of Proposed Rulemakings in a much more open-ended 
way than it used to back when I was at the Commission a long 
time ago. And it is, I guess, responding to that. But it is 
likely to increase the time that the FCC could act on things 
that it does need to act on.
    Remember I talked about Chairman Powell saying that the 
Commission needs to be able to act in internet time. So this is 
I am not sure the right way to get at that. Maybe just if your 
oversight would get the FCC focused on drafting rulemaking 
proposals that actually propose specific things, if not precise 
rule language.
    Mr. Doyle. Sure. Thank you, Mr. Chairman.
    Mr. Walden. Thank you, Mr. Doyle.
    We go now to Mr. Scalise for 5 minutes.
    Mr. Scalise. Thank you, Mr. Chairman.
    It was brought up earlier that a lot of us have concerns. I 
want to put some real structure in place for the FCC, not just 
for clarity in the industry, but also to move it away from what 
many of us view as an agency that is starting to implement 
their own political agenda as opposed to an agency that should 
be focused on regulations as it applies to existing law.
    I want to ask--and I want to start with Mr. May--when we 
look at some of the mergers that have come through recently, 
and of course there are still mergers pending for the FCC, 
there is a provision here in Section J of this draft that says, 
``The Commission may not consider voluntary commitment of a 
party to such transfer or transaction unless the Commission 
could adopt that voluntary commitment as a condition under 
Paragraph 1.'' Let me ask you, you know, in your experiences 
from what you have seen with some of these conditions that have 
been placed on mergers at a time where companies really are 
very vulnerable to some of the pressures that would be put in 
place to agree to something that they might not otherwise 
support in those preconditions place as a condition of a 
merger, if you can address that in general but also as it 
relates to what you are seeing here in the language in the 
draft?
    Mr. May. Well, I think the language in the draft is good 
and I am enthusiastic about this provision. I said in my 
opening statement I would actually like to see the merger 
review process reformed even further. But this is useful 
because what it does is at least try and put some constraints 
on the FCC from going too far afield by tying the FCC's 
extraction of voluntary commitments to conditions that are 
narrowly tailored to remedy a harm that arises as a direct 
result of specific transfer or specific transaction. Now, there 
can still be disputes about that, but you know, at least that 
does confine it and that is a useful thing.
    The problem right now--and this is why this is so 
important--the only constraint right now is the public interest 
standard. And the public interest standard, of course, is 
completely indeterminate. And I can think of mergers where the 
FCC has imposed a condition or there has been a voluntary 
commitment offered not to outsource jobs overseas, for example, 
in one merger. Well, that might be a nice thing to happen as a 
policy but it didn't have anything at all to do with that 
particular merger at all. And there had been examples like 
that. And it gives the process an unseemly flavor when at the 
last minute, 2 days before a merger, you see, you know, 
voluntary commitments offered up like this.
    Mr. Scalise. And how about as it relates to the entire 
industry, too, because there are some conditions that, you 
know, maybe currently or in the past that have been placed that 
don't just affect the entities involved in the merger but also 
could be impacted industry-wide?
    Mr. May. Well, that is true and it also, of course, happens 
the other way around sort of perversely that you can have a 
condition imposed extracted by the FCC--and I am using the word 
extracted because, again, these things generally happen at the 
last minute--where a condition that ought to be industry-wide, 
imposed on an industry-wide basis if at all if it is going to 
be imposed--one party, the party to the merger is now subject 
to it and that seems not to be really equitable.
    But then what happens is often that condition sometimes is 
then used going forward by the FCC as a proposal then to apply 
to the whole industry so it becomes a bit of a precedent if not 
a legally-binding----
    Mr. Scalise. Right. And I think again that is a good 
condition because it is a problem we have seen, we have heard 
about, but it has actually been implemented and is probably 
still being used today in some of the others.
    I want to ask Ms. Abernathy a question as it relates to the 
annual reports. We have heard a number of complaints that the 
annual reports at the FCC has to comply with today, by the time 
they are filed, they are outdated. It takes a whole lot of work 
to put in and then they are filed and really not that useful. 
This draft and its Section K really lays out a different 
process of putting a communications marketplace report in place 
that might be a little more conducive to the changing 
technologies. If you can maybe address both what you are seeing 
in the draft but also as it relates to the current practice of 
these annual reports and whether or not they are even useful.
    Ms. Abernathy. I think if you implement new reporting 
obligations and eliminate some of the old ones, then that makes 
a lot of sense because, again, some of the reports were built 
around the old silos. And so the information, it takes a lot of 
time and money to gather the information, and yet it probably 
isn't providing a great deal of beneficial competitive analysis 
for Congress. So I think there has got to be a better reporting 
way, and this is a proposal that I think would start you in the 
right direction.
    Mr. Scalise. Mr. Sununu?
    Mr. Sununu. I am sorry. If I could make an observation on 
that point, though. The language that is here in the 
Communications Marketplace section identifying challenges and 
opportunities in the marketplace, the jobs, and economy, 
frankly it begins to make the FCC sound like an economic 
development group and that is simply not what it is. I think 
perhaps what we are trying to get at here is that the 
Commission should be more focused on evaluating the competitive 
state of the marketplace, the number of players, price trends, 
new products, innovation in the space, and taking that into 
consideration in their regulatory and rulemaking process. So I 
might encourage you to look a little bit more carefully at that 
language in order to (a) avoid unintended consequences and 
avoid creating new areas for the FCC to engage in regulation 
and instead focus it on making sure that we have got a 
regulatory authority focused on the current competitive state 
of the marketplace.
    Mr. Walden. We appreciate that.
    Mr. Scalise. We appreciate your comments and yield back, 
Mr. Chairman.
    Mr. Walden. Thank you. We do have a vote on in the House 
floor but we should have time for Mr. Latta for 5 minutes.
    And as he prepares, I would really appreciate as you have 
heard the discussion among yourselves and with us, if you have 
specific recommendations for improving the language in the bill 
that are not referenced in your own testimony, it would be most 
helpful to get that to us as soon as possible. Thank you.
    Mr. Latta?
    Mr. Latta. Well, thank you, Chairman. I really appreciate 
you holding the hearing today and all the panelists for being 
here. We really appreciate your time. And I also appreciate the 
chairman's discussion draft that I think is very, very 
important.
    We all have lots of folks coming through our office all the 
time talking about what is happening out there. And you know, 
the FCC is no different from what I have heard from a lot of 
different folks in that we have to really go in and look what 
is happening there because it could be stifling businesses out 
there. And one of the things I have done--I have also got a 
bill out there for cost-benefit analysis for the FCC when they 
are promulgating rules and at the very beginning and also at 
the final rule.
    And the things that we have heard that they are looking at 
across--either with those cost-benefits would be that either 
would or should the FCC consider the costs--or largely the 
costs of businesses of complying with the new regulatory 
regime, i.e., creating new compliance regime, training 
employees, changing, billing other back-office systems, the 
lost revenue that businesses could be--would be lost for the 
new prohibited--engaging in particular business models that 
would be prohibited under the new regulation and the cost of 
productivity in the businesses.
    And one of the things, if I may, Ms. Abernathy, if I could 
ask you first is in your unique role as a former FCC 
commissioner and also at Frontier what you would see would be 
able to comment on this idea from, you know, the FCC's 
perspective and also from Frontier if they would have to do a 
cost-benefit analysis.
    Ms. Abernathy. I think it is appropriate for a number of 
proceedings to engage in a cost-benefit analysis because at the 
end of the day if the costs drive up our cost to consumers and 
the overall incremental information that is potentially 
provided to the FCC is de minimis, that makes no sense. And 
sometimes what happens in the context of looking at various 
rules and regs is the commissioners have the best of intentions 
but they haven't really thought through the costs and the 
burdens on the industry. And it is backwards. And so I think it 
would make a big difference.
    Mr. Latta. Let me ask you this. Looking at what has 
happened in the recent past with the FCC, could you comment on 
any more recent rules that would have benefitted from a cost-
benefit analysis?
    Ms. Abernathy. I could get back to you in writing 
afterwards just because I need to look back.
    Mr. Latta. I appreciate that.
    Mr. May, I know in your testimony that you have addressed 
on page 2, your last paragraph there that, you know, you said 
in there taking them generally in order that they appear in the 
bill draft, and especially those provisions that would require 
the agency--you go on to also state to perform a cost-benefit 
analysis. If could just get your read on that a little bit 
farther on the cost-benefit analysis.
    Mr. May. I think generally this would be a good requirement 
to impose on the FCC. I take Professor Levin's point that it is 
worth thinking about whether it should be for every rule, and 
the answer is it may not be. But there is a lot of economically 
significant rules that the FCC proposes. Now, I think of Bill 
Shock, Net Neutrality, you know, the Data Roaming bill it just 
did. All of those are the types of rules that have cost and 
benefits and I think the FCC--obviously it does some of this 
now, but as I said earlier, because historically it has tended 
to focus, you know, again, in 103 places it has authority to 
act in the public interest. And because that is so 
indeterminate, it has, in my view, a bit of--with respect to 
all past commissioners--it has got a bit of a mindset, to think 
of things in a way that is not economically as rigorous as it 
should be in today's environment, which is at least 
increasingly competitive, fast-changing marketplace 
environment.
    Mr. Latta. In my remaining time, Mr. Ramsay, I know on page 
7 of your testimony today that you state that ``Still, 
logically, an analysis of a rule's potential benefits and 
costs, as well as milestones for its review, could focus 
available resources and expertise on the efficacy of any 
proposed rule.'' And just any other comment on cost-benefit 
analysis?
    Mr. Ramsay. The only thing I said on my testimony is true 
is that the nature of regulation and the nature of regulatory 
oversight is a balance of competing interests. The APA already 
requires agencies to specify the basis and explain why they are 
doing things. We haven't taken a specific position on the 
application of a strict cost-benefit test, so I can't speak to 
that. But I think I also noted in my testimony that it is 
certainly consistent with Executive orders dating back to, I 
think, Gerald Ford.
    Mr. Latta. Thank you very much, Mr. Chairman. I see my time 
has expired, and I yield back.
    Mr. Walden. Mr. Latta, thank you for your participation in 
the hearing. I want to thank all of our subcommittee members 
for their participation, especially thank our panelists. You 
have been most enlightening for all of us as we work to improve 
this draft. And as I said, I really would appreciate any 
specific recommendations on how to make this better and more 
workable.
    So with that, we thank you again and this hearing is 
adjourned.
    [Whereupon, at 12:30 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                Prepared statement of Hon. Cliff Stearns

    Here we are 15 years after the '96 telecom act and 
technology has advanced beyond what any one of us could have 
possibly imagined. Yet the laws governing these industries have 
lagged way behind and many are no longer relevant to the new 
services and technologies that have arisen over the past few 
years. That is why I believe this draft legislation is an 
important first step.
    This draft is quite similar to a bill Mr. Barton and I 
introduced in the previous Congress. Since then, I have 
introduced H.R. 2102, the FCC Commissioners' Technical Resource 
Enhancement Act, to allow each Commissioner to hire an 
electrical engineer or computer scientist.
    Equipping the FCC with both legal and technical advisors 
should provide Commissioners with the necessary staff 
experience to tackle increasingly complex technical matters. I 
hope my colleagues will join me with this initiative and that 
this bill can be apart of the reform discussion.

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