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



 
              WHERE THE JOBS ARE: THERE'S AN APP FOR THAT

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


                                HEARING

                               BEFORE THE

           SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 12, 2012

                               __________

                           Serial No. 112-174



      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
                                 Chairman

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

                                 _____

           Subcommittee on Commerce, Manufacturing, and Trade

                       MARY BONO MACK, California
                                 Chairman
MARSHA BLACKBURN, Tennessee          G.K. BUTTERFIELD, North Carolina
  Vice Chairman                        Ranking Member
CLIFF STEARNS, Florida               CHARLES A. GONZALEZ, Texas
CHARLES F. BASS, New Hampshire       JIM MATHESON, Utah
GREGG HARPER, Mississippi            JOHN D. DINGELL, Michigan
LEONARD LANCE, New Jersey            EDOLPHUS TOWNS, New York
BILL CASSIDY, Louisiana              BOBBY L. RUSH, Illinois
BRETT GUTHRIE, Kentucky              JANICE D. SCHAKOWSKY, Illinois
PETE OLSON, Texas                    JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia     HENRY A. WAXMAN, California (ex 
MIKE POMPEO, Kansas                      officio)
ADAM KINZINGER, Illinois
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)

                                  (ii)



                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Mary Bono Mack, a Representative in Congress from the State 
  of California, opening statement...............................     1
    Prepared statement...........................................     4
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     7
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     8
    Prepared statement...........................................    10
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................    12

                               Witnesses

Peter Farago, Vice President, Marketing, Flurry, Inc.............    13
    Prepared statement...........................................    15
Stephanie Hay, Co-Founder, Fast Customer, and Resident Mentor, 
  500 Startups...................................................    32
    Prepared statement...........................................    34
Rey Ramsey, President and Chief Executive Officer, TechNet.......    39
    Prepared statement...........................................    41
Morgan Reed, Executive Director, Association for Competitive 
  Technology.....................................................    48
    Prepared statement...........................................    50


              WHERE THE JOBS ARE: THERE'S AN APP FOR THAT

                              ----------                              


                     WEDNESDAY, SEPTEMBER 12, 2012

                  House of Representatives,
Subcommittee on Commerce, Manufacturing, and Trade,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:50 a.m., in 
room 2322 of the Rayburn House Office Building, Hon. Bono Mack 
(chairman of the subcommittee) presiding.
    Members present: Representatives Bono Mack, Blackburn, 
Stearns, Bass, Harper, Cassidy, Guthrie, Kinzinger, Upton (ex 
officio), Markey, and Waxman (ex officio).
    Staff present: Paige Anderson, Commerce, Manufacturing, and 
Trade Coordinator; Charlotte Baker, Press Secretary; Matt 
Bravo, Professional Staff Member; Kirby Howard, Legislative 
Clerk; Brian McCullough, Senior Professional Staff Member, 
Commerce, Manufacturing, and Trade; Gib Mullan, Chief Counsel, 
Commerce, Manufacturing, and Trade; Andrew Powaleny, Deputy 
Press Secretary; Shannon Weinberg Taylor, Counsel, Commerce, 
Manufacturing, and Trade; Michelle Ash, Democratic Chief 
Counsel; Felipe Mendoza, Democratic Senior Counsel; and Will 
Wallace, Democratic Policy Analyst.

 OPENING STATEMENT OF HON. MARY BONO MACK, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mrs. Bono Mack. Good morning.
    One of the most promising areas of the U.S. economy 
involves the development, marketing and sale of mobile and 
online applications, commonly known as apps. Today we are going 
to take a close look at how the apps economy is shaping our 
future as individuals as well as a nation, and the Chair now 
recognizes herself for an opening statement.
    When it comes to mobile application software, I'm reminded 
of the hit song by country star Loretta Lynn: ``We've come a 
long way, baby.'' From the 1970s ``cave age'' concept of 
conducting banking or paying your utility bill by telephone, 
mobile apps have exploded in number and in sophistication. 
Today, there are apps to lose weight, quit smoking, examine 
your stock portfolio, review restaurants, watch videos, check 
up-to-date scores of your favorite sports team, witness 
breaking-news events worldwide, post on Facebook, Tweet to the 
world in 140-character bursts, and on and on.
    According to a recent New York Times article, there were 
nearly 8,000 mobile apps in 2008. Today, there are more than 
1.3 million, and they are multiplying rapidly. Consider this: 
it is estimated that nearly 100 movies and about 250 books get 
released worldwide every week. That compares to nearly 15,000 
apps.
    The health industry is a good example of this astonishing 
growth. The Baltimore Sun recently reported that there are now 
more than 40,000 mobile health apps contributing to an $800 
million global business. And experts say we are only beginning 
to scratch the surface of a brand-new industry.
    Apps, of course, are software programs, small in size, that 
users load onto their mobile devices or use layered on top of a 
platform such as Facebook. But times have changed in a hurry, 
thanks to increasingly more powerful mobile devices and higher 
quality networks. Today, apps are purchased typically through 
an app store associated with a particular platform. The main 
platforms in today's app economy are Apple iOS, Google Android, 
RIM Blackberry, Microsoft Windows, Amazon Kindle and Facebook.
    Approximately one-third of all apps are created by 
individuals or businesses with fewer than five employees. But 
both blue chip companies and traditional brick-and-mortar 
stores now have an app presence as well, developed either in-
house or outsourced to a contractor. App developers range in 
size from one-person shops to large developers such as Zynga, 
with nearly 3,000 employees.
    The revenues generated by apps include the purchase of the 
app, in-app purchases like game credits, in-app advertising, 
and app-enabled commerce, such as the purchase of goods and 
services through an app. As a result, a new term, the ``apps 
economy'', encompassing all such commercial activity, has now 
become a part of mainstream America.
    Apple first launched the iPhone in 2007 and followed with 
the introduction of its App Store in 2008, which opened with 
500 available apps. Four years later, Apple says its stores 
offer an astonishing 600,000 apps. And according to its Web 
site, Google's Play store offers a similar number.
    Today, an estimated 90 million U.S. consumers spend 
approximately 60 minutes per day accessing the Internet on 
their smartphones, while another 24 million U.S. consumers 
spend 75 minutes a day accessing the Internet on their tablets, 
much of this access being gained through the use of mobile 
apps.
    And if you think all of that sounds pretty impressive, 
well, consider this. Last Christmas, on December 24 and 
December 25, consumers downloaded a staggering 392 million 
apps. So as smartphone and tablet ownership continue to rapidly 
expand, current projections indicate the app economy will soon 
become a $100-billion-a-year business.
    In addition to the explosive growth of the apps economy in 
the United States, the outlook for apps as an export looks 
bright as well. More than 20 percent of all apps downloaded in 
China last year were created by U.S. developers.
    Clearly, this tremendous innovation offers high hopes for 
our economy. According to a study commissioned by TechNet about 
a year ago, there were over 44,000 app-related positions open 
in the United States at the time. And here's another 
interesting finding of that survey: researchers found that app 
jobs, while located in predictable places like New York and 
Silicon Valley, are actually dispersed throughout the country 
with an estimated two-thirds of all app-related employment 
falling outside of New York or California.
    So with that as a background, I am very anxious to hear 
from today's panel. What have been the keys to the explosive 
growth and job creation in the mobile app economy? Are there 
Federal policies that present a roadblock to the sector's 
growth and ability to create jobs? Are there policies the 
Federal Government should consider to foster further growth and 
job creation? And what is the outlook for both the immediate 
and long-term future?
    And while we are on the subject of roadblocks, we should 
remember how critically important wireless spectrum is in 
driving innovation in the mobile app sector. Mobile is the 
fastest area of broadband connectivity, and Congress must 
continue to explore ways to free up additional spectrum. I 
commend Chairman Walden for the important work he has already 
done on this issue, and I look forward to his spectrum hearing 
tomorrow.
    As for today's hearing, it could not be more appropriately 
entitled: ``Where the Jobs Are: There's an App for that.'' 
Because increasingly through American innovation and ingenuity 
we are rapidly becoming a world where there is literally an app 
for everything.


    [The prepared statement of Mrs. Bono Mack follows:]

    [GRAPHIC] [TIFF OMITTED] 85134.001
    
    [GRAPHIC] [TIFF OMITTED] 85134.002
    
    [GRAPHIC] [TIFF OMITTED] 85134.003
    
    Mrs. Bono Mack. And with that, I now recognize my good 
friend and my colleague from Los Angeles, Beverly Hills area--
what is your name? Mr. Waxman--just kidding--for 5 minutes.

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

    Mr. Waxman. Thank you, Madam Chair. There is an app to give 
you my name and the description of the cities that I represent. 
I want to thank you for holding this hearing.
    As we in Congress look for ways to accelerate job growth, 
it is essential to highlight growth industries and examine what 
makes them successful contributors to the national economic 
recovery.
    Although they barely existed 5 years ago, mobile apps have 
emerged as a particularly innovative part of the information 
technology sector in the United States and they now play a 
major role in American life. More than half of Americans with 
cell phones own a smartphone, giving them the advanced 
capabilities necessary to download and utilize some of the 
several hundred thousand apps that exist for work, education, 
organization, e-commerce and entertainment. These apps produce 
many benefits, like making us more productive by being able to 
edit documents on the run, keeping us in contact with friends 
and family through social media, or even allowing us to carry 
around a whole library of good books on a single device. Mobile 
apps also can have life-saving functions, particularly in the 
area of health IT, where there exist apps that help individuals 
check their blood pressure and/or their glucose levels.
    One notable benefit of the booming mobile apps industry is 
its impact on employment. A February study commissioned by 
TechNet estimated that mobile app development supported 460,000 
jobs nationwide, including computer and mathematical jobs in 
tech companies, non-tech jobs in the same companies, and jobs 
created outside the tech industry through spillover effects.
    These jobs have been critical to our home State of 
California, which has over 20 percent of the total jobs 
estimated by the TechNet study. I am pleased to see that mobile 
apps jobs are quite geographically dispersed, with benefits for 
many States and regions.
    With smartphone adoption expected to keep rising both here 
and abroad, U.S. app developers have the opportunity to 
continue to grow, and continued growth in the mobile app sector 
should lead to more jobs.
    This hearing can help us understand what is needed to 
ensure this continued growth. But one step is essential: we 
must continue to emphasize technical and foreign-language 
education so that existing and future companies in this sector 
have the personnel needed to be successful.
    A recent study concludes that emerging markets like Brazil, 
Russia, India and China will drive demand for the next 10 
million apps. Our app developers need to be able to develop 
products for these markets. At the same time, it is important 
to remember that although the app economy is a bright spot, our 
goal as policymakers must be enduring prosperity across all 
economic sectors. We must promote growth that restores middle-
class security and improves economic mobility for the poor. 
While we in Congress work to control the Federal deficit, we 
also must continue to make targeted investments in education, 
innovation and infrastructure that can benefit all sectors of 
the economy.
    On a day when Apple is announcing its new iPhone and 
Samsung is getting the benefit of the spillover from its legal 
victory and more people are looking to see what is going to be 
available for Christmas shopping, it is appropriate that today 
is the day we are holding this hearing, and I thank you, Madam 
Chair, for convening the hearing. Thank you so much.
    Mrs. Bono Mack. Thank you, Mr. Waxman, and I will look for 
the ``Where's Waxman'' app later today in the App Store.
    The Chair now recognizes----
    Mr. Waxman. It is close to ``Where is Waldo.''
    Mrs. Bono Mack. I set you up good for that one.
    The Chair recognizes 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.
    You know, there are not a lot of bright spots perhaps in 
our overall economy, but one of the brightest is the birth and 
the growth of the app marketplace. It is one of the most 
exciting areas of technology with tremendous growth in recent 
years, growth that experts agree we can continue to see.
    It is hard to imagine life before the iPhone appeared 5 
years ago, or the iPad which debuted just 2 years ago. Now 
these devices and the apps we use are an essential part of our 
lives for sure. The Apple store launched with only 500 apps in 
2008 but now offers over 600,000, while the Android store 
offers over 600,000 apps as well. That is growth of 240,000 
percent, and folks continue to buy these apps in staggering 
numbers. According to one industry group, there were more than 
11 billion downloads of mobile apps in 2010 with projections 
that downloads are going to grow to nearly 77 billion worth $35 
billion by 2014.
    What is more exciting than the explosive proliferation of 
these apps are the jobs that are being created. Everyone from 
large companies to small businesses, to the stay-at-home mom 
are developing these apps and generating income. Furthermore, 
the wealth being generated by apps isn't locked into one or two 
particular geographic areas. The highest concentrations of app 
developers are in California and New York, but there is an app 
developer in nearly every town in between with approximately 
two-thirds of app-related employment falling outside of those 
two regions. So if you have the talent and you have a computer, 
you can develop an app and compete in the marketplace.
    Without a doubt, this is an area of exceptional promise, 
but it is not without fragility. Innovation and job creation 
can be as easily stifled by regulations in this field as any 
other, if not more so. So it is in that vein that I look 
forward to hearing from our witnesses today. Are there any 
policies you would like Congress to consider? Are there any 
policies currently in place or under consideration that are 
stumbling blocks to further growth and innovation? How can we 
as policymakers maintain an environment that fosters the 
innovation, creativity, growth and economic success that this 
sector currently enjoys?
    So I look forward to your testimony, and I yield the 
balance of my time to Marsha Blackburn.
    [The prepared statement of Mr. Upton follows:]
    [GRAPHIC] [TIFF OMITTED] 85134.004
    
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OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF TENNESSEE

    Mrs. Blackburn. I thank the chairman for that, and Madam 
Chairman, I thank you for the hearing today. I think this is 
absolutely so timely and is an area where there is agreement, 
and I am pleased that we are putting some focus on this.
    I think that from what you have heard today, you all know 
and we know that the growth of the apps economy, if you will, 
is truly dependent on free enterprise, the private sector. It 
is looking for that individual initiative for how you solve a 
problem, whether it is the Where's Waxman? app or the What's 
New for Christmas app that he may want to pull down and see 
what he can find for Christmas. The thing is, this entire 
economy was not born at the altar of big government. It was 
borne out by individuals that have a great idea and are looking 
for a way to pull that through to the marketplace.
    Now, what we do have to realize that in order to have a 
productive apps economy, we have got to have spectrum and be 
able to launch these applications whether they are for consumer 
shopping or for consumer health or safety, any number of 
things. This entire marketplace is young, it is revolutionary, 
it is disruptive to traditional business processes, and I think 
it is very exciting.
    So thank you all for being with us. Madam Chairman, thank 
you for turning our attention to the issue. Yield back.
    Mrs. Bono Mack. I thank the gentlelady, and the Chair now 
turns our attention to the panel. We have one panel of 
witnesses joining us for today's hearing. Included on the panel 
are Peter Farago, Vice President of Marketing at Flurry, Inc.; 
Stephanie Hay, Co-Founder of Fast Customer, and Resident 
Mentor, 500 Startups; Rey Ramsey, President and CEO of TechNet; 
and Morgan Reed, Executive Director of the Association for 
Competitive Technology.
    Each of our witnesses has prepared an opening statement. 
They will be placed in the record. Each of them will have 5 
minutes to summarize their statement in their remarks.
    So good morning, and thank you all very much for coming and 
for being here. To help you keep track of time, if you are not 
familiar with it already, there should be a timing clock on the 
table. When the light turns yellow, you will have 1 minute to 
come to a conclusion--or behind us. Thank you for pointing that 
out. So all you have to do is make sure that you push the 
``on'' button on your microphone before you start to make sure 
the audience at home can hear you as well.
    So with that, Mr. Farago, you are recognized for 5 minutes.

STATEMENTS OF PETER FARAGO, VICE PRESIDENT, MARKETING, FLURRY, 
 INC.; STEPHANIE HAY, CO-FOUNDER, FAST CUSTOMER, AND RESIDENT 
MENTOR, 500 STARTUPS; REY RAMSEY, PRESIDENT AND CHIEF EXECUTIVE 
    OFFICER, TECHNET; AND MORGAN REED, EXECUTIVE DIRECTOR, 
             ASSOCIATION FOR COMPETITIVE TECHNOLOGY

                   STATEMENT OF PETER FARAGO

    Mr. Farago. Thank you, and good morning.
    Chairwoman Bono Mack, Ranking Member Butterfield and 
distinguished members of the subcommittee, thank you for the 
opportunity to appear before you this morning. My name is Peter 
Farago and I am the head of marketing for Flurry, a high-tech 
startup based in Silicon Valley, specifically San Francisco.
    In 2007, when I joined the company, I was its eighth 
employee. We now have over 100 employees in multiple offices. 
Flurry helps mobile developers build, measure, advertise and 
monetize their applications in the new app economy. One way to 
think of us is that we don't make the apps that everyone uses; 
we help make the apps that everyone uses better.
    Flurry has over 75,000 customers, most of which are 
entrepreneurs and startups. Because of that broad customer base 
and the over 200,000 apps using our services, Flurry has unique 
insight into the state of the current app economy as well as 
where it is headed.
    While my written report provides numerous trends and 
insights about the app economy, I would like to highlight three 
of them. First, we are moving faster than any industry ever 
before; second, there are real opportunities for job growth; 
and third, the United States has significant opportunities to 
increase exports.
    The new app economy represents the greatest, fastest 
adoption of any new consumer technology in the history of 
mankind. Smart devices are being adopted 10 times faster than 
the PC revolution of the 1980s, two times faster than the 
Internet boom of the 1990s, and three times faster than the 
most recent social network phenomenon. This rate of adoption 
outpaces that of all other notable technologies any of us can 
think of including electricity, radio, television, VCRs, 
microwaves, cell phones, dishwashers and even stoves. And 
Flurry estimates that the world is only about a quarter of the 
way into the adoption cycle of this new consumer technology.
    Our study found that 60 percent of app startups have the 
majority of their employees in the United States, and a recent 
Kaufman study concluded that the main driver of all new jobs 
comes from startups in their first year. There is unprecedented 
opportunity for America to capitalize on exploding 
international markets. The United States has 315 million active 
wireless devices of which 170 million are smart devices. 
However, the last year, while the United States has added 30 
million smart devices, China has added 100 million. From our 
study, 70 percent of all companies surveyed already generate 
some revenue outside the United States and 94 percent strongly 
agree that the app economy will be increasingly international.
    So how do we turn these trends into opportunities? To 
capitalize on these trends, Flurry believes the ecosystem needs 
robust infrastructure, access to an educated technology 
workforce, and maintained low barriers to entry. Of these, I 
would like to highlight access to talent.
    At Flurry, we literally cannot find the talent we need fast 
enough to fill all the open positions we have. While we have 
100 employees now, we have 50 open positions. Additionally, our 
survey shows that our customers share our pain. Only 24 percent 
of respondents believe that their company can recruit enough 
skilled software developers. Eighty-four percent of respondents 
strongly agree that their company's success is dependent on 
software development talent. Unless we solve this problem, 
America will not be positioned to fully capitalize on this 
unique moment in time.
    We in the tech industry as well as policymakers need to 
work hard to find creative solutions to fully realize the 
potential we have before us. This should include partnering to 
ensure better university education, better professional 
retraining, continuing education and easing the ability to 
bring and keep international talent in the United States. At 
Flurry, we look forward to continuing to play our role in 
making applications even better, help our customers grow their 
businesses, and provide the consumer with the best possible 
experience.
    I thank you for your time, and I look forward to your 
questions.
    [The prepared statement of Mr. Farago follows:]
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    Mrs. Bono Mack. Thank you very much.
    Ms. Hay, you are recognized for 5 minutes.

                   STATEMENT OF STEPHANIE HAY

    Ms. Hay. Thank you. Thank you for having me here. Good 
morning.
    My name is Stephanie Hay and I have been an enthusiastic 
leader in the tech community since moving to Alexandria from 
Ohio nearly 10 years ago. In 2003, while working in 
communications at George Mason University, I began building Web 
sites and creating templates to simplify how 30 departments 
managed their content online. Imagine being able to publish 
content on the Internet instantaneously from anywhere. The 
speed and flexibility had me hooked. I left Mason for World 
Championship Sports Network where I got my first taste of 
startup life which included 2 a.m. working sessions from my 
couch, coordinating with remote teams in Manhattan and Los 
Angeles, changing priorities fast.
    In 2010, after several years in project management at 
agencies, I started my own consultancy. I also became more 
involved locally, taking board positions at the Art Directors 
Club, speaking at DC Tech and RefreshDC, and co-organizing the 
DC Lean Startup Circle, which today includes 1,200 
entrepreneurs.
    In short, tech is my livelihood job and I have created jobs 
because of it too. For example, in 2010 alone, my first year in 
business, I hired five people as subcontractors. I co-launched 
Workspace Design Magazine. This monthly online publication is 
about the evolution of work and it now employs three people. I 
also founded NovaCowork, a group of nearly 150 entrepreneurs 
who meet each Wednesday at Iota Cafe in Clarendon where 
companies have been launched, jobs created and partnerships are 
formed. You are welcome to attend.
    In fact, the startup I co-founded in 2011, Fast Customer, 
came from one of those meet-ups. Paul Singh, Aaron Dragushan 
and I built a mobile app that with a single tap connects you 
directly with a human in customer service at more than 3,000 
companies. We are using mobile technology to change customer 
service calls for the better, and we have hired eight people to 
help us.
    When we decided to raise money, 500 Startups, an 
accelerator and fund in Silicon Valley, led our seed round. I 
am now a resident mentor there as well, coaching startups on 
everything from positioning to pitching. I mention 500 Startups 
because it is deploying smaller sums of cash faster and it is 
actively working to involve more women, two characteristics 
that are atypical within the traditional venture capital world. 
Plus nearly a third of its portfolio includes women-led 
startups, three of the six partners at 500 are women, and they 
launched a campaign in July to bring more women into the angel 
investing community through coaching and educational programs.
    These organizations like 500 Startups are committed to 
taking on this challenge of supporting female founders with 
useful apps and that I can be a part of influencing that future 
is invigorating. Plus with more women like Facebook Sheryl 
Sandberg and Yahoo's new CEO Marissa Mayer leading the way, I 
further my own resolve to catapult other smart women into 
decision-making positions within tech.
    Of course, I am here today because I believe you can help 
too. Earlier this year, I spoke with Jennifer Boss, a tech-
savvy woman whose job with the DC Mayor's office is to identify 
new innovations fit for public-sector applications. Fast 
Customer is a DC-founded company that already connects callers 
to agencies such as the IRS, which generates thousands of calls 
annually. Surely we could not only help agencies better connect 
with their people but politicians with their constituents. 
Again, the possibilities are endless. However, we, like 
Instagram, which just sold for $1 billion, operate without a 
dedicated enterprise sales staff so after a few promising 
conversations about how we could modify Fast Customer for real-
world pilots in the public sector, we were then placed into the 
standard procurement process required of any vendor who wants 
to do business with the government. This was startling because 
they had approached us yet we and they were hampered by 
procurement rules that couldn't accommodate new products like 
ours. We couldn't demo an out-of-the-box product with clear 
public-sector features because it didn't exist so we were 
forced to end discussions.
    The contrasting reality is that we already were in talks 
with telecom giants in the public sector including Verizon, 
Comcast and Telstra. These companies recognized that innovation 
and agile process in which we mobile startups work, which meant 
we could continue building, learning and iterating at the speed 
of mobile, the speed of our world today. That we might expand 
internationally before we could meet rigid expectations in our 
own backyard is discouraging but we believe there are massive 
opportunities to be realized if government removes barriers 
that hinder our tech companies and brilliant people from 
engaging with the public sector.
    What can we do together to find compromise and more quickly 
bring tech innovations into our government? Thank you.
    [The prepared statement of Ms. Hay follows:]
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    Mrs. Bono Mack. Thank you very much, Ms. Hay.
    Mr. Ramsey, you are recognized for 5 minutes.

                    STATEMENT OF REY RAMSEY

    Mr. Ramsey. Thank you very much. Madam Chairwoman and the 
committee, I applaud you for having this session and it is very 
important.
    My name is Rey Ramsey. I am the CEO of TechNet. I 
appreciate you all mentioning the study that we put out last 
year. That study has sparked a lot of conversation looking at 
the amount of jobs. I mean, the headline from that study is 
that almost 500,000 jobs have been created since 2007. And so 
what I want to do is, since my testimony has already been 
submitted, I just want to talk to you about a few things that I 
think are really important and highlight those issues.
    We have gotten to this place, which is a pretty good place 
for the country to have this number of jobs and growing. We 
have gotten here because it has been a wonderful confluence of 
several things happening. One, you have the technology itself, 
much of which has been proudly invented in the United States. 
You also have this consumer demand for ease of transaction 
where consumers in so many different ways are saying make this 
easy for me and meet me where I am, this sort of mobile 
sensitivity. We now have 50 percent of all the phones are 
smartphones. That is up from 17 percent just a few years ago, 
so explosive growth. And so with this confluence and with 
entrepreneurs like Ms. Hay and others that are out there 
inventing and looking for economic activity, we have got 
several great benefits: jobs at the top of the list, economic 
activity. But when you look at all the advantages, you step 
back and you say there are two things from a policy perspective 
we need to focus on. One is, how do we continue to maximize 
what is happening, how do we continue to take advantage of 
this, are there things that policymakers can do. And then with 
your other set of eyes, take a look at, are there any threats 
to this, and you say to yourself, what do we need to do to 
mitigate potential threats, and I just want to comment on a few 
things.
    One is, and I think the way to look at this from my 
perspective is from a policy perspective, there are two things. 
One would be focus on the necessary infrastructure to keep this 
going and then the second issue I would say is an issue of 
access. So I just reduce it to that. If I am in an elevator 
with you, I would say it is infrastructure and it is access.
    Under infrastructure--and you have heard part of it--and it 
all revolves around capital. You have human capital, which you 
heard earlier, which is the workforce issue. One of the things 
that will impede the growth even in the apps economy--because 
people tend to think of the apps economy as only the little 
guys, the small companies. Well, they have a need for workforce 
but so do large companies as well. So we are in a human-capital 
crunch being able to get the kind of workforce that we need and 
that is a string policies all the way from our school systems 
all the way through to college, how many engineers, how many 
systems programmers and even some of our targeted training 
programs. So I think it creates an opportunity to take a look 
at that human-capital ecosystem and say how is it working for 
this, how are we utilizing community colleges, are there 
training programs that could be targeted. Look at existing 
agencies and ask ourselves whether it is the SBA and others, 
have they caught up with the apps economy and then ask the 
fundamental question: if there is an entrepreneur out there and 
she is sitting at home and she is thinking I can get into this 
too, and that is one of the beauties of this, where could she 
go in our communities or in our society to get in the game, and 
that gets to the access issue.
    There are segments of the population that could join this 
job explosion, create additional income for their homes and for 
their families if they knew about what existed or if we had 
programs that were targeted to get to them. We still need to 
see more women participating in this workforce and in these 
opportunities, so that is just a question of outreach.
    Back to the issue of infrastructure, without getting into 
all the details, Congresswoman Blackburn started off by saying 
``spectrum.'' That is crucial. Broadband, crucial. We still 
have too many rural areas of the country where people aren't 
able to take advantage because they don't have the broadband 
connections, the issue of broadband adoption. So there are some 
infrastructure issues that from a policy perspective we need to 
make sure are in place along with workforce issues. There are 
some other issues like previously and other sorts of things. 
Just making sure that when we look at any of these policies 
that we look at them through the prism of will this continue 
this movement toward job creation and economic activity or will 
there be unintended consequences.
    The last thing I will say is, what is exciting about this 
app economy is that it is not only having great benefits in the 
commercial sector, it is having terrific benefits from a social 
innovation perspective where it is helping with health care, 
issues like diabetes and people's drug regimens and other 
things like that. So it is a double win for society.
    Thank you very much.
    [The prepared statement of Mr. Ramsey follows:]
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    Mrs. Bono Mack. Thank you, Mr. Ramsey.
    And Mr. Reed, welcome back to the subcommittee. It is nice 
to have you back. You are recognized for 5 minutes.

                    STATEMENT OF MORGAN REED

    Mr. Reed. Thank you, and I have to say before I even get to 
my time which is that don't steal all our people for your big 
companies. Us small folks still need employees. We have to be 
able to compete.
    Chairman Bono Mack, Ranking Member Butterfield, 
distinguished members of the committee, my name is Morgan Reed 
and I am the Executive Director of the Association for 
Competitive Technology, a trade association representing over 
5,000 app makers from around the world. Our members are on the 
forefront of the most exciting tech sectors to emerge in a 
generation. You may have already heard these numbers but they 
bear repeating. We are a $20 billion industry today that didn't 
exist 4 years ago, and analysts expect us to hit $100 billion 
by 2015.
    Now, we all know about the rise of smartphones, and I have 
already seen several of you checking your email, and we know 
about reading maps and looking at sharing photos and managing 
everyday activities through wireless devices. But what we are 
seeing now is an apps economy that is moving beyond games and 
consumer tools to become a critical part of enterprise, health 
and financial services.
    In order to provide the committee with new insights, we 
conducted a study we called Apps Across America in preparation 
for the hearing, and I thank several of you for quoting us on 
some of the numbers that we have gotten out of here, but to 
focus on a couple, we all know that small businesses are the 
engine of job creation occupying over 70 percent of the top-
selling apps, and we found this is even more pronounced in 
highly innovative activities where large revenue sources are 
available. This is a phenomenon happening outside of Silicon 
Valley, and with all due respect to California, I love the fact 
that we have got developers in Louisiana, in Mississippi, in 
Michigan, and I like the fact that we are seeing the spread 
move around.
    In your briefing folder, you will find a set of baseball 
cards that we created to underscore this point. There is one 
for every district represented, and I couldn't find any of that 
horrible gum we all had as kids, but I tried. You know, Marsha 
Blackburn was here, and I want to focus on the way that these 
folks are looking at it. You know, from her district, we have a 
true MVP. They have had over 30 million downloads on apps that 
they have created. This company in her district, Mercury 
Intermedia, huge success. This is a MVP, a perennial all-star. 
In New Hampshire, we have Police Pad. Zco is building an 
enterprise app that puts iPads in police cars and replaces all 
of those laptops that you see in cars--better battery life, 
more efficient, all sorts of new sensors, great tool. These 
guys are definitely an all-star. In Bono Mack's district, we 
have got a rookie card, and with Apps 111, this is a company 
that I am looking forward to becoming more successful. And just 
like any rookie card, I don't just want the card to become 
successful, I want the business to become successful. I would 
love for members to be able to trade that card. I remember when 
they started. Now they are 100,000 people or there are 50,000 
people. So when you look at this deck of cards in front of you, 
this is your MVPs, this is your starting lineup of your small 
business community today.
    Now, we all now about Apple's innovation and the ubiquity 
of Android but, you know, it is worth mentioning that it is not 
just those two. BlackBerry is the go-to platform for security-
focused customers and earns more frankly for our developers per 
app than any other platform, and of course, just last week 
Microsoft and Nokia kind of upped the game, unveiling the Lumia 
920, which featured wireless charging, which I am so happy for, 
and of course had near field communications so that you can 
actually purchase goods and services directly from your phone 
without having to pull out your credit card at all. And of 
course, today after this hearing, we will see what Apple does 
to up the game again. They have got Passbook on there that 
allows mobile payments to pay for coffee at Starbucks, but what 
I love is it features an app that allows you to check in at the 
airport directly built into a secure feature on the phone.
    So what is next? Mobile health care apps are going to 
change the way doctors interact with patients. Companies like 
AirStrip have built an app that allows doctors to monitor fetal 
heart rates in women in labor directly on their iPad. 
Enterprise will use phones and tablets at every level. Aegis 
Software has built an app that allows them to monitor an entire 
factory floor directly from the iPad.
    And I brought this. This is July's Fortune magazine cover, 
and it has declared the death of cash. Well, you would say, how 
is that possible? But PayPal, Intuit and Square have turned a 
mobile phone or an iPad into a point of sale and a cash 
register. See those little things on the top? Swipe your card 
and away you go. That is your cash register.
    You know, in the movie Princess Bride, the protagonist 
famously responded to the word ``inconceivable'' with the 
retort ``You keep using that word. I do not think it means what 
you think it means.'' But for the future of the apps economy, 
``inconceivable'' is the most appropriate word. Industry and 
government cannot yet conceive of the ways that apps will 
become part of our lives. From basic consumer uses to health, 
travel, education and even talking to one another, our app 
economy built by small businesses seeing and meeting a specific 
need has endless and inconceivable possibilities. We hope to 
keep creating never before conceived of products and we hope 
the government can be a partner where needed, take advantage of 
products where they help service the public, and take a light-
touch approach everywhere else.
    Thank you for your interest, and I look forward to your 
questions.
    [The prepared statement of Mr. Reed follows:]
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    Mrs. Bono Mack. Thank you very much to the panel, and the 
Chair will now recognize herself for the 5 minutes for 
questions, and I will also point out to anybody standing that 
there are plenty of seats available. If they say ``reserved'' 
they were reserved for you, so welcome.
    I just wanted to start with something kind of shameless, 
and that is showing everybody this amazing photograph of my 
grandson, Little Sonny, and the only reason I am doing this is, 
I was babysitting him a few nights ago and he decided to have a 
crying fit, so I did anything any good grandmother would do is, 
I went right to the App Store and downloaded a baby soother. It 
didn't really work, but my point was that we are becoming 
habituated. You have a problem; you go to the App Store and you 
find a solution to any problem you might have.
    Now, not unique to babysitting, you know, guys should baby-
sit their grandbabies too, but I am going to start with you, 
Ms. Hay. What is the key to getting more women involved in this 
area of tech?
    Ms. Hay. I think it is outreach. I think most women I have 
met have almost always had another woman or a man mentor them, 
myself included, bringing them into the tech scene. There are a 
lot of women in tech groups in DC I know of. It is a matter of 
that sort of grassroots effort on the ground and at the same 
time making some programs that help to educate women on the 
opportunities that exist out there for them in tech. There is a 
general, I think, fear that women have that it is almost a 
badge of honor that men wear in Silicon Valley that they are 
going to be an entrepreneur, and if they fail, that is OK, and 
women generally tend to be more conservative. They take a more 
strategic approach to ensuring that they are building a 
business that is going to last and it is going to be fruitful. 
So I think, you know, balancing the programs that are available 
to them so that they can move a little more quickly and 
comfortably into the tech space I think would be a great step 
in the right direction.
    Mrs. Bono Mack. All right. Thank you. Others have testified 
that apps jobs do not require being located in specific 
geographic locations and in fact are being created all across 
the United States. This is again to you, Ms. Hay. Do you see 
any future risk to the ability of app developers not located in 
the major cities producing apps because they are not part of a 
technology cluster?
    Ms. Hay. I don't, no. In fact, Fast Customer, we have an 
entirely distributed team so I have a developer in Reston and 
then we have staff in Florida, Arizona, Hawaii and one right 
now walking around Cambodia somewhere. So for us to be 
successful, I think, in the mobile economy because of its speed 
requires a smart team, requires resources, doesn't require a 
specific geographic location, and it doesn't mean that we don't 
get together as we do in fact every quarter some amount of time 
to get together because, you know, getting together in person, 
great ideas can happen in a way that is more organic than what 
you can accomplish on line but that is also not a prerequisite 
to success.
    Mrs. Bono Mack. Thank you.
    Mr. Farago, a number of observes have compared the growth 
of the app field to the tech bubble of the 1990s. Would you 
agree with that, and do we face a danger of a burst here, and 
if so, are there any steps the industry or policymakers should 
take to avoid that?
    Mr. Farago. Yes, we talked about this a bit. We don't feel 
there is a direct comparison to the Internet era and that we 
don't face a bubble for several reasons. I would say first if 
you think about the amount of broadband-connected consumers at 
that time, there were about, I believe, 30 million. Now there 
is over 1 billion, so we have a totally different size market, 
to begin with. Secondly, you know, in that era, the real way to 
make money was to collect a bunch of eyeballs and then hope 
that advertising revenue would follow. In this era, advertising 
really hasn't kicked in as a revenue model and we are already 
seeing, you know, by our estimations, app developers last year 
made about $5 billion worldwide directly to them, 80 percent of 
which was made from what we call premium sales selling an app, 
you pay $2 before you get it, or in-app purchase or 
microtransaction, you buy add-on content afterward. This year 
we are forecasting developers directly will make about $10 
billion, double that again around 80 percent or plus. 
Advertising will take off and add a layer and so that will 
certainly help.
    Also, if you compare the economic climates, you know, 
really, arguably, the app economy was built--you know, flowers 
have bloomed on top of the rubble of the largest worldwide 
financial collapse any of us can remember, and whereas, you 
know, it was pretty much the go-go time in the 1990s where 
there was a lot of venture capital flowing. So you have almost 
what has been proven to be a really recession-proof business 
model to begin with, or economy, really.
    And finally, customers are able to pay and not just willing 
to pay, they have demonstrated they can. Every one of these 
devices has a credit card or gift card associated with it on 
average whereas, you know, back in the Internet days, you know, 
products, you know, all the services people assumed would be 
free and there wasn't that kind of payment-enabled market.
    Mrs. Bono Mack. Thank you, and my time is expired so the 
Chair now recognizes Mr. Harper for 5 minutes.
    Mr. Harper. Thank you, Madam Chair, and thank you to each 
of you folks for taking time out of your busy schedule to be 
here, and Mr. Reed, thank you for pointing out the cards, 
particularly Mississippi State University athletics. I don't 
think you had time in your testimony to say anything about 
State beating Auburn 28-10 Saturday, but perhaps we can cover 
that. Perhaps we can find some statistics on the game on that 
app.
    I also want to say, Ms. Hay, thank you for the work you are 
doing. I have a 20-year-old daughter. I have made it a point to 
make sure that she has opportunities to meet with successful 
women. It helps her in that regard and so thank you for that 
effort. I think that you may be getting a call from her some 
time in the future when she is visiting.
    I do want to talk to you if I can for just a second, Mr. 
Farago, if I may. You said in your testimony, you mentioned the 
recent survey that was done by Flurry which found that 71 
percent of the companies polled agreed with the statement that 
they needed more employees with technical training, and I 
wanted to bring to your attention the work that Mississippi 
State University has been doing in the app field. Over the past 
several years, Dr. Rodney Pearson, who is a professor at 
Mississippi State in the Department of Management and 
Information Systems, I know he has worked diligently to develop 
courses in programming as well as business and entrepreneurial 
classes to prepare students for a job in the app sector or at 
least for an interest in the app field. Dr. Pearson and 
Mississippi State have been seen by many as a business and app 
incubator. So a few questions I have. One, is Mississippi State 
a special case or do you see many other universities offering 
similar courses at this time?
    Mr. Farago. Well, you know, I don't have specific anecdotes 
about other universities but those kinds of innovative programs 
are exactly what we need. I think it is a supply-and-demand 
issue. I think that, you know, mostly when you grow up in the 
United States, you think about being a doctor or a lawyer, you 
know, maybe go to business but the technology field, growing 
the awareness of technology, encouraging those to get involved, 
K-12, making sure the foundation of fundamentals is there 
enables, I think, you know, great programs like the one Dr. 
Pearson is leading at Mississippi State to be possible. By the 
time that student comes to that university, they can and will 
be able to take advantage of, you know, what is a great, 
lucrative job field.
    Mr. Harper. How do you see this playing into the future 
growth of the app sector, this being offered in this university 
and perhaps others? Where do you see that taking the future, 
meeting those needs that you see in the app sector?
    Mr. Farago. Yes, if I understand your question correctly, 
you know, I see it inside the United States as enabling a 
concept we call stake shoring. You know, it was mentioned that 
California and New York are the two main hubs for technology 
innovation and clustering of technology workforce talent. At 
the same time, I believe the median house costs about half a 
million dollars in each of those markets. You know, much like 
you have a match program for folks coming out of medical 
universities to go to all kinds of places around the United 
States to offer the same level of care, I think that the 
concept of stake shoring can really help, and as universities 
look to become more competitive in the education market, a lot 
of universities like Mississippi State can and should invest in 
the kinds of programs to attract that talent, and that will 
keep more talent in the local economy and allow that 
entrepreneurship to basically spread across the United States.
    Mr. Harper. How do we encourage other universities to be 
involved in this field and to move in that direction?
    Mr. Farago. You know, I think there is probably a couple 
ways. I mean, I think education of educators is a good start. I 
mean, I think a hearing such as this one, sharing those 
statistics, the educational field from my experience is pretty 
connected as a cohort, as a group. I think that government 
could definitely help with maybe partnering with the private 
sector, for example, and there could be matching programs to 
create more endowments and, you know, education, you know, 
basically paying for a student's education. You could 
creatively after the fact help--you know, if you have a company 
that is investing in an area local to a university and they 
have a partnership with that university, for example, you know, 
there could be some sort of increased modest taxation of that 
developer's salary to pay back, you know, what was a gift 
basically for the cost of education and so on. There are a 
number of ways I think those who have skin in the game, private 
sector and university, can get together and figure those things 
out.
    Mr. Harper. I want to thank each of you for being here. 
With that, I yield back, Madam Chair.
    Mrs. Bono Mack. Thank you very much, and the Chair 
recognizes Dr. Cassidy for 5 minutes.
    Mr. Cassidy. I had a really nice conversation yesterday 
with a couple of app developers from my own State, and just a 
couple things that I would like your perspective on, not that 
there will be necessarily be an answer, but clearly we are 
coming to you for your perspective, which is key. One of the 
things we have had several hearings on is privacy. They kind of 
alerted me to the fact that is really an issue: who owns the 
data? If I put a picture up, do I own the picture or does the 
app developer or does the server? Who owns the data? So any 
thoughts on the privacy? Because, again, when I get a 50-page 
document and I click ``I agree'' at the very bottom, I have not 
read those 50 pages, I have just clicked ``I agree'' and I 
almost think that might be a strategy by the attorneys to get 
me to agree; they just overwhelm me. Once I actually read it, 
and it was so redundant, some of the pages were literally cut 
and pasted multiple times and we are thinking this is just a 
strategy to overwhelm me, and it frankly works all the time.
    So that said, what are your thoughts as to who should own 
that data? How personalized should we allow it be? Because that 
is something that we have pursued in this committee, that 
discussion.
    Mr. Morgan. Well, I think it is kind of two questions in 
one. You have a question of who owns what, and that is an 
important question. We have always in this country had a kind 
of a pretty straightforward attitude towards information that I 
willingly provide. If you think of this way, if you had a 13-
year-old daughter and she walks into Forever 21, or I guess I 
should say 16-year-old daughter walking into Forever 21 and 
they get her information and her email address to send her 
information, it had nothing to do with online, it didn't have 
anything to do with a mobile app, but Forever 21 now has 
information. They have the store that she bought at, what she 
purchased, her email address, and Forever 21 considers that 
part of their information, and again, she didn't read through a 
50-page click memo or anything, she just signed up right there 
in the store. So we have had a pretty good tradition in this 
country of allowing folks to enter into those kinds of 
agreements freely because they benefit from it.
    So you have that question of, you know, who owns the data 
and how do they collect it, but I think the other side is, what 
we are focusing on is, how do we do a good job of being 
transparent, which you pointed out wasn't done well in the 
example you cited. A 50-page document is not transparent. So 
what we are working with developers on, and in fact this 
Friday, I will be speaking to an audience of about 500 
developers at Mo Def Tablet here on the East Coast and I will 
be talking about ways to increase transparency to build better 
trust. So on the trust aspect, we need to do a better job. We 
are working on it, and in fact, we are participating with the 
White House as part of the NTIA multi-stakeholder process to 
find best practices and common ground between the entire 
stakeholder community to find ways to take a small device and 
present a 50-page chunk of information in a way that is 
absorbable, understandable and usable by consumers. And I think 
once we get there, we will be able to help your person who 
commented about 50 pages have a better sense of what is 
happening and be more comfortable with it.
    Mr. Ramsey. I would like to comment on that. Obviously, it 
is a complex issue and, you know, as my colleague here, Mr. 
Reed, said, you know, you have got the transparency issue and 
you have got the consent issue, and they are interwoven. What 
is important while we are trying to sort through how to get to 
a common understanding of consent and transparency is to keep a 
few things in mind that we need to do along the way. One is, we 
need to make sure that everybody understands what the business 
models are and how these business models rely on certain data. 
They are not mutually exclusive, but we need to understand that 
because there are unintended consequences. So all this growth 
that we are describing, whether it is small businesses or 
larger businesses, are all part of this ecosystem of mobility, 
and that is really what the issue is. I mean, we are having 
this conversation about apps but it is really all about the 
mobile revolution, and apps are a part of the mobile 
revolution.
    The other issue would be, we have got to do more to have 
citizens understand, consumers understand not only what their 
rights are but what their responsibilities are and that they 
are leaving behind a digital footprint all the way from----
    Mr. Cassidy. So you are suggesting that indeed the 
developer or the server does own the data. If there is a 
digital footprint, you are suggesting that footprint is no 
longer mine?
    Mr. Ramsey. It is data that exists, and the question is 
where that data will reside, so I am not using the word 
``ownership.'' It is about where the data resides.
    Mr. Cassidy. So that picture that she just showed us, could 
that be used by the person where she stores it as a Gerber baby 
commercial without her permission? Do you follow what I am 
saying? So is that picture of her grandchild--by the way, she 
is the best-looking grandmother I have ever seen. With that 
said, that picture of her grandchild, could that in turn--do 
her daughter and son-in-law or whatever, or does the person on 
whom it is stored get to sell it to Gerber as the next image?
    Mr. Ramsey. I can't comment on whether or not they are 
going to sell her--the Congresswoman owns her picture. The 
question is where that resides, and it resides in multiple 
places so it is not a question of who owns it, it is more about 
what the data is being used for and understanding for the 
Congresswoman in this example what does she know, which means, 
you know, in favor of her knowing what the basis of the bargain 
is, and that is the transparency that I am talking about, what 
her rights and responsibilities are. That is what I am trying 
to sort out. It is not about that another company would own the 
picture.
    Mr. Cassidy. I am still not sure that we know that the 
company could not use that picture, but I am way out of time, 
and I had another question but I will yield back.
    Mrs. Bono Mack. We will do a second round after we go 
through everybody the first time, and thank you very much for 
the questions, and the Chair recognizes Mr. Kinzinger for 5 
minutes.
    Mr. Kinzinger. Well, thank you, Madam Chair, and I thank 
you all for coming out. I think this is a very important issue 
we are discussing.
    You know, one of the concerns as we have seen apps develop, 
we obviously see and many of you have testified that it is 
really going to be generating GDP growth. It is kind of the 
next generation of where we are seeing a lot of jobs come in. I 
have a lot of cool apps on my phone that I use for a lot of 
various things, and you know, if you ever find yourself with 
the need for any kind of data or any kind of organizational 
tool, you will find it on your phone somewhere. Somebody has 
created it. So I think it is an outstanding obviously driver of 
the future.
    First question to Ms. Hay. What areS the chief barriers as 
you look at the environment out there? What would you say is 
the chief barrier for somebody who wants to develop an app to 
enter or to expand their business and what do you hear from 
some of these entrepreneurs as far as what are their 
frustrations, where are their concerns, what is their wish list 
for the future of this?
    Ms. Hay. Well, I think it depends on the scope of the kind 
of project they want to work on, so in talking to some app 
developers who are prototyping a small idea to really solve a 
very niche problem, there are relatively few barriers. Being 
able to ask Google the right question to get the answers is 
really the barrier. But I think for the larger companies that 
are trying to solve more widespread educational, health care 
types of problems where there are embedded relationships with 
big guys like Google, Microsoft, I think the barrier to entry 
is having the skill set in the case I was talking about with 
Fast Customer, having the skill set to be able to have the--
build the relationship, be able to survive long enough, a long 
enough financial runway to be able to develop those 
relationships over time and really be able to influence change. 
So I think that that barrier is a much more social, even 
economic one than technical for sure.
    Mr. Kinzinger. I guess I will ask the rest of you maybe the 
same question to see if you are all in agreement or if any of 
you have an idea in mind of saying hey, here is how we make it 
easier without, you know, I guess the wild West of it. Mr. 
Ramsey, do you have any input on that question about any 
barriers that exist?
    Mr. Ramsey. Yes, Mr. Congressman, I think, you know, as was 
mentioned earlier, you think of the barriers sort of fall into 
their demographics, geographic demographics, demographics based 
on gender, demographics based on race, and so what we have to 
do from a policy perspective is make information more available 
so that there are women, minorities and others who but for not 
knowing what is available to them could be in business. And so 
one of the things is just making information available. If 
there are programs like the Congressman from Mississippi was 
saying at the college, we need from an access perspective to 
make sure that women would know about that program. And so what 
I find, and I have done work in inner cities and other places 
where people just don't know about what is out there. And then 
I think the second thing is just making sure the basic 
infrastructure is in place so when we look at the broadband 
maps, you can't do this if you don't have the right access. You 
can't do this if spectrum is an issue, you know, in your area. 
So from a broad policy perspective, you have big infrastructure 
issues to make sure in place, and then from an access outreach, 
a big part of that is comfort and information, having people 
feel comfortable.
    Mr. Kinzinger. So if you had your wish list, it would be 
marrying the ability to get to the Internet with the skill set 
to do what is important to present this app of course with the 
folks who may have the idea. So somebody that may not have 
access to spectrum may have a great idea and they have no idea 
how to get that out of their head into action.
    Mr. Ramsey. That is exactly right, and this just mirrors 
what happens in the offline world when someone is just sort of 
living their life, they view an opportunity and they go, oh, 
well, there is a need here, I am going to open up a laundromat, 
oh, there is a need here, I am going to----
    Mr. Kinzinger. And how do I get there.
    Mr. Ramsey. And so it is how do you get there, and a lot of 
people are still learning that there is not the barrier to 
entry that there might have otherwise been and so this access 
to information is really important.
    Mr. Kinzinger. And I just have 40 seconds left. I want to 
ask Mr. Reed and Mr. Farago if you guys have input on that as 
well.
    Mr. Reed. Well, I want to follow up with what Rey said, and 
I think there are some characteristics. I want to look a little 
further into the future. Spectrum is a huge part of it. If I 
can't get my app into an enterprise--and I want to remind you 
that I think the big areas--we are moving away from 99-cent 
apps into where we are talking about critical applications for 
business, for health, for financial services. So the problem 
is, if I don't have the infrastructure, I can't get in there. 
The second thing is, if I'm new in mobile health, I need to 
make sure that the FDA moves quickly and that they do a fast 
approval process. And finally, as I look down the roadmap, I 
need to make sure that when I get my app into the marketplace, 
that it doesn't get stolen. So we have all those issues, and 
those are places where the government can play a role.
    Mr. Kinzinger. Mr. Farago, did you have anything to add? 
Just a handful of seconds.
    Mr. Farago. Yes. I mean, I think the issues we see are 
probably more business-oriented. Smaller companies don't have 
the resources. That is why I think there is a lot of third-
party service providers like ours who can basically put a small 
company on equal footing with a much larger company that has 
resources. So many of the services will basically augment the 
developer's activity. They can focus on creating great content.
    But there is a significant problem on the larger side of 
the spectrum with big companies where they don't think mobile 
first. They are not as nimble and fast as companies. They are 
kind of suffering from what we call the innovator's dilemma, 
and they don't, you know, sort of appreciate all the 
possibilities. So companies on average that do better in the 
mobile ecosystem are doing a better, smarter job of leveraging 
what is on the phone. Open Table restaurant reservation uses 
location to immediately give you a reservation, for example, in 
the area you are now, and it is companies who think like that 
who are doing better.
    Mr. Kinzinger. Well, thank you, and I am over my time and I 
appreciate it and yield back.
    Mrs. Bono Mack. Thank you. The Chair recognizes Mr. Guthrie 
for 5 minutes.
    Mr. Guthrie. Thank you, Madam Chairwoman. Thank you for 
being here today. I was at another meeting on spectrum, so I am 
sorry I missed some of the testimony but something important to 
what you guys are talking about today as well. And I know in 
the written testimony, Mr. Ramsey, and I will open this to 
everybody, you used the term ``freedom to innovate,'' and so I 
guess my question would be, what restrictions are--we need to 
maintain the freedom to innovate or you are going to have less 
innovation is what you are saying, and what is actually--I 
mean, what restrictions are you concerned about, particularly? 
I think you just said the FDA process and medical apps. What 
things could government do intentionally or unintentionally--
and I can start with Mr. Ramsey or any of you--to restrict your 
ability to innovate in the app world?
    Mr. Ramsey. Again, I think it is more of making sure 
barriers are not in place and so as both----
    Mr. Guthrie. Such as?
    Mr. Ramsey. So if there is no broadband available, if there 
is not adoption in your community, if you run into spectrum 
where you can't get on, these types of barriers--and then over 
time if you can't acquire a workforce, and so it is more about 
making sure barriers aren't in place than it is about let us 
push something, you know, toward you, and the area of push 
would be making sure human capital is available, making sure 
there are training programs, making sure people know what is 
available at the community college, at the university, and 
those sorts of things, but a lot of this is making sure we 
remove barriers.
    Mr. Guthrie. That is a good question, and I was going to 
ask Mr. Farago something along that line since we already got 
there. Are most people in the app world, are they engineer 
graduates from Stanford or in Silicon Valley? What do you find 
talent? Because this is something that, you know, most States 
want to have jobs that people can do to make living. Where do 
you find talent?
    Mr. Farago. Yes, I mean, you know, I think from anywhere. 
The bar is pretty high at our company, you know, the core. You 
know, it is not--in the startup world, it is also about risk 
tolerance. I mean, there is a certain kind of person. I carry 
my school debt. You know, I didn't go to certain big companies 
because I really wanted to be an entrepreneur so I am eating my 
debt still. So, you know, there are enough people who are 
passionate in the startup space but probably the population is 
more on the business side. The technical side is where we 
struggle to fill enough of the open positions we need. They 
traditionally come from the best universities in the world. In 
the United States, you have MIT, Cal Tech, Cal, Carnegie 
Mellon. I am sure I am leaving out some fantastic 
universities--Stanford. We have a lot of graduates from a lot 
of those places. And on average, I would say we are getting 
ours from probably the cream of the crop, the universities of 
the world, and a lot of people with advanced degrees. That is 
primarily who we end up hiring on average. That is a lot of 
where they are coming from.
    Mr. Guthrie. So there is not, in your space, the technical 
degree? You are looking for degreed engineers from the best 
schools in the world?
    Mr. Farago. That is true, but I should also say, you know, 
Flurry is a little bit of a unique business. We are a business-
to-business company, and we build a lot of very highly scalable 
technical infrastructure which requires people who have a lot 
of what we call backend experience, infrastructure experience, 
and it is very different than someone conceiving of a very 
useful entertaining kind of consumer experience who can 
leverage all that infrastructure. So I would say, you know, we 
are atypical in that we are building a lot more scalable 
systems that we have to imagine tens of thousands of other 
companies leveraging seamlessly that we provide to them so we 
have a little bit of a different nut to crack.
    Mr. Guthrie. Ms. Hay?
    Ms. Hay. Thank you. I have two comments. Number one, around 
your first question, I think one of the fears in a lot of app 
developers is that they are going to be sued by the big guys 
who have a lot more money, big legal counsel, ready to when 
they are innovating just pounce on them immediately and squash 
that.
    Mr. Guthrie. Are there examples of that? Has that happened?
    Ms. Hay. Oh, yes, absolutely. So on anything, somebody 
might be on their way up and then someone they don't know 
exists comes along with a lot more money and says hey, that is 
infringing on this thing that we did 7 years ago and therefore 
now you are dead. So that is, I think, an issue that will 
continue to get more and should get more attention.
    And the second part is, I think, when it comes to finding 
people, the computer science major that may have 10 years ago 
been all the rage is a dime a dozen. It is not about finding 
people, it is about--because most of these people, who are very 
talented technically, want to be entrepreneurs because of the 
app economy. So they are not trying to go get hired, they are 
trying to hire people. So now you have got a scenario where 
folks like Living Social are really capitalizing on this here 
locally because they were having a hard time finding developers 
in the specialized programming that they have so they created a 
program, a 3- to 4-month-long program called Hungry Academy and 
brought people in, many of whom were women who had no technical 
skills, had never actually built anything before and paid them 
to learn how to build on their program, and the early results 
just a couple weeks ago that they finished was that these 
people could walk right into their jobs and work on the program 
in a way that people who were hired and had to be onboarded 
could not.
    Mr. Guthrie. So you are talking about people coming in, are 
they coming in with some degree or are they coming in like high 
school graduate?
    Ms. Hay. Apprenticeship style.
    Mr. Guthrie. But they are showing up with just the base 
skill?
    Ms. Hay. Correct.
    Mr. Guthrie. That is great.
    Ms. Hay. They don't have a technical skill otherwise.
    Mr. Guthrie. That is wonderful. That is absolutely 
wonderful. Thanks.
    Mrs. Bono Mack. Thank you. The Chair recognizes Mr. Bass 
for 5 minutes.
    Mr. Bass. Thank you, Madam Chairman. Apps are intellectual 
property. They are patented or copyrighted?
    Mr. Reed. Some. It depends. Trademarks, the full panoply of 
law applies. Some of their ideas are copyrighted. Some of it is 
copyright, some of it is patent, some of it is trademark.
    Mr. Bass. So when Ms. Hay talks about getting slammed down, 
that is the basis of the problem, basically you're copying 
somebody?
    Mr. Reed. Well, I think it is actually worth noting that it 
is a double-edge sword. She is right. Sometimes the big 
companies come in and slam us down. But the other problem we 
have is when a big company bigfoots us, which is the reverse 
problem, which is, we do something truly innovative and then a 
large company essentially copies what the small guy has done 
but he has the marketing power and the wherewithal to really 
just own that space. And so on one hand we need to watch out 
for the guy who comes behind us but we also need to make sure 
that we have got covered our ability to go to the big guy and 
say hey, don't crowd us out, we want an opportunity to compete.
    Mr. Bass. Is there any role for us in dealing with that 
issue?
    Mr. Reed. Yes, I will start and then I will hand it over to 
Rey, but we definitely have needs when it comes to improving 
the quality within the patent and trademark system. Patents can 
be useful but the quality is from time to time questionable, 
and with pendency at 2 years, you know, that was halfway 
through the beginning of the app economy and they are still 
working on patents.
    Mr. Guthrie. Go ahead.
    Mr. Ramsey. Mr. Congressman, I would just say, you know, I 
don't want to turn this into a discussion of sort of the 
patent, you know, laws.
    Mr. Bass. Because it is in the jurisdiction.
    Mr. Ramsey. Right, and it is also very complex, and I just 
want to again urge that we continue to look at the apps economy 
as part of a broader ecosystem that builds on mobility, that 
includes the entrepreneurs, big, small, codependent ecosystem 
where they exist on each other's platforms, each other's 
marketing ability, you know, etc. We have got about a dozen app 
stores. Those stores reside with so-called large companies who 
then work with big carriers. We are all part of this ecosystem 
and it is important to remember that. We at TechNet represent 
both small companies and entrepreneurs. We have many startups 
and we also have large companies, and we focus on policies that 
will create an ecosystem where they will both thrive, and that 
is important to the U.S. economy.
    Mr. Bass. Is the app economy going to go like the economies 
of all industrial produces--engines, autos, computers and so 
forth--and become consolidated and commoditized?
    Mr. Ramsey. Yes, I think what--again, I don't have the 
crystal ball, Congressman, but what is happening when we look 
at the apps economy right now is we are segregating off a 
number of different specific jobs and small businesses but what 
is happening is, over time there will be this ubiquity that all 
companies will basically be transacting in some mobile 
application way. So as this continues, it will be seamless so 
big companies that you think of will have apps, little 
companies have apps. It is just the way to reach the consumer. 
This is being driven by consumers saying meet me where I am and 
give me a service in a way that I want that service. So it 
creates opportunities for anyone in business. That is the way 
this is moving.
    Mr. Reed. Congressman Bass, it is worth noting that the 
largest app development shop on the East Coast is actually in 
your district. Zco is incredibly successful. Now, you haven't 
heard of it, but I promise you that apps that are used by 
Members of Congress here and that are probably on whatever 
smart device you have were actually made by Zco. So on one 
level, there is going to be consolidation, but on the other 
level, as Peter talked about earlier, the low barrier to entry 
means that the apps that you might see branded with a big name 
are actually written by a little guy, and I think that is 
important to remember as we do this consolidation, that low 
barrier means I can build it even while consolidation is 
happening.
    Mr. Bass. We are going to have a spectrum hearing tomorrow 
in another subcommittee. To what extent is access to spectrum 
or insufficient spectrum a major factor in this industry?
    Mr. Ramsey. We are together. Mr. Reed and I are both going 
big. It is a big issue, and it would be one of those things 
that would circumvent this growth in this area if we don't 
solve that issue.
    Mr. Bass. I don't have any further questions, Madam 
Chairman.
    Mrs. Bono Mack. Thank you, Mr. Bass. The Chair is pleased 
to recognize Mr. Markey for 5 minutes.
    Mr. Markey. Thank you, Madam Chair, very much.
    I will just throw this in because, you know, apps very 
commonly access our sensitive information, our location, our 
phone books, photos, web browsing history, and apps often do 
this without prior notice and even when the app isn't actively 
being used, and this morning I introduced legislation, the 
Mobile Device Privacy Act, that requires app sellers to 
disclose if monitoring software is installed when a consumer 
downloads an app. Mr. Cassidy is concerned about this. This is 
a bipartisan concern. And the bill also requires consumers to 
affirmatively consent before the monitoring software begins 
collecting and transmitting information so they should know 
what is happening. Otherwise there really are significant 
societal issues that have to be discussed, have to be debated 
on this committee. We have to understand it. That is something 
where you don't need to have a degree in computer science. You 
are saying gathering all this information about a 13-year-old 
girl, you know, and to be used for what purpose, and what 
notice was given. So all of this absolutely has to be 
discussed. Those are just the values that are our grandparents 
passed down, you know, and keep getting passed down. This is 
not anything that is more complicated than that.
    Mr. Reed, I worked with Kevin Martin, the Chairman of the 
FCC, to make sure that when we were doing the 700 megahertz 
auction that we set aside a certain percent of it that could be 
bid for but only by a company that had an open architecture so 
that any app could get on board, and that wound up being the 
Android. So what role did that play in opening up the app 
market knowing now that there was no gateway whatsoever, that 
you had an aperture through which you sitting at home, you 
know, your own little company, your own little idea? Did that 
really propel this revolution, in your mind?
    Mr. Reed. I think that you have to look at the ecosystem in 
its entirety. While there is some interesting things that 
happened because of the 700 megahertz auction, I think what 
really--if you really look at it, what the change that occurred 
that really propelled us was the ability of our product to get 
in front of a consumer.
    Mr. Markey. No, I know that. What I am saying is, if you 
were just a smaller person, you didn't know how to negotiate 
with Apple and you just wanted to get your app out there, 
didn't that make it simpler for you to do so and increase by 
maybe 100,000 the numbers of them that could get out there 
almost immediately without having a gateway.
    Mr. Reed. I guess the reason that I would touch on that is, 
I think that it is worth noting for this committee a really 
important part about how the platforms play a role because the 
problem you are describing is--we didn't have a problem getting 
our app out. There was the Internet. I could put anything out 
anywhere. It was finding a way to actually get it in front of 
people. So I understand your point but I----
    Mr. Markey. Do you understand what I am saying, Ms. Hay? 
Mr. Ramsey, could you comment on that?
    Mr. Ramsey. Yes, Congressman. I would say unequivocally 
that the principles of openness were important and continue to 
be important for this sector and moving forward, and that was 
one of the key elements. As you well know, there have been 
other issues connected to the notion of openness that continue 
to be important.
    Mr. Markey. And I appreciate that. That is my concept. Open 
architecture is important and the iPhone was a closed 
architecture. So that is just the bottom line. It gets more 
open as they see competition, they see all these apps going 
over to the other devices. Do you agree with that, Mr. Farago?
    Mr. Farago. I mean, as far as I understand the question, 
you know, I agree that it's easier than it has ever been for 
small entrepreneur----
    Mr. Markey. That was the goal of moving over to 700 
megahertz.
    Mr. Farago. No, no, it has been great. It has reduced 
barrier to entry and I would say if you compare it to the 
manufacturing world where you have to pay for manufacturing and 
distribution, you have to have a professional sales force that 
negotiates with Best Buy or whomever and----
    Mr. Markey. How many jobs do you think the 700 megahertz 
created? How many jobs, do you think?
    Mr. Reed. I think it is too hard to parse that.
    Mr. Markey. Is it, like, 25 jobs? Give us a magnitude, an 
order of magnitude. What do you think it did? This is a 
committee hearing on jobs and you are here testifying saying, 
you know, you want to create more jobs. So what did the 700 
megahertz do in terms of creating more jobs so we have some 
basis for knowing what our goals should be or what the 
objective should be.
    Mr. Reed. I am happy to take that question back, and we 
will sit down with smart people and come up with some numbers.
    Mr. Markey. I think that is important. I think we should 
answer that question because obviously that was the goal that 
was presented to me by your counterparts 5 years ago in terms 
of moving over that spectrum and making sure it was open for an 
architecture that would invite hundreds of thousands of people 
who otherwise might never have been able to get through the 
maze of working in corporate America.
    Mr. Ramsey?
    Mr. Ramsey. Yes, I would say, Congressman, again, there 
hasn't been a study of that, which I think it would be 
worthwhile looking at, but I would add, in keeping with that, 
that every time the FCC does an auction, it has a job 
implication connected to it and so it is crucial and so that 
was crucial spectrum to get out as well as some of the next in 
line spectrum as well.
    Mr. Markey. All I am saying is, it might have created 50 or 
100,000 jobs because of the openness of that architecture, and 
it is scattered in 50 States and 435 Congressional districts 
because it is obviously----
    Ms. Hay. I can say that people have moved from iOS 
development to Android development because of the innovation 
that is possible on that open architecture.
    Mr. Markey. And I appreciate you telling us that, and that 
is really what this is all about. It is about job creation, and 
we have always operated in a bipartisan basis here, you know, 
in order to accomplish that goal, thinking it through and 
trying to be smart as we go forward, and Mr. Cassidy and I and 
I think others also have privacy concerns as we get into this 
world deeper and deeper as well.
    I thank you, Madam Chair.
    Mrs. Bono Mack. I thank the gentleman, and I also look 
forward to seeing the text of your bill and working with you, 
and remind the gentleman that years ago I introduced an anti-
spyware effort which was very much along the same lines of what 
you are talking about.
    Mr. Markey. No, I do. I appreciate that.
    Mrs. Bono Mack. So I look forward to seeing your bill and 
working on it. The Chair recognizes myself for 5 minutes for a 
second round of questioning.
    But just to follow on Mr. Markey's line of questioning, I 
am an Apple person. It took a long time for me to convert from 
PC to Apple. I mean, once I got to Apple, I couldn't go back. 
But I have chosen to be an Apple person and I have chosen to 
use iTunes, and a lot of my friends are Droid people. I mean, 
we had that choice. But to sort of counter what Mr. Markey is 
saying, I knew that there was sort of a walled garden approach 
in the App Store for Apple yet I figured that they knew what 
they were doing, that they were protecting both the growth of 
their platform, that my apps somehow had the stamp of approval 
from Apple and I felt I wasn't shopping in the wild, wild West 
of the open source. So I chose that, and that was my choice, my 
decision, and like everybody else, I guess we all play Words 
with Friends on different platforms but I think it is important 
to note that people make a choice and I had that opportunity.
    But I just want to turn a little bit to spectrum. Clearly, 
that is very important to all of us. I was wondering if anybody 
wants to comment on the thinking of whether we need more 
licensed or unlicensed spectrum and should it be in big blocks 
and what should guide our thinking tomorrow? Do you have some 
questions and thoughts you'd like to see tomorrow for our 
hearing?
    Mr. Ramsey. Madam Chairwoman, just a couple of quick things 
and maybe I will stop in now for this hearing tomorrow on 
spectrum. But I think it is clear that we need both licensed 
and unlicensed. They both play a role in this ecosystem and the 
FCC's proposals around incentive auctions, in my opinion, is an 
innovative way of taking a look at how we can better aggregate 
larger blocks of spectrum and more efficiently get it out there 
into the marketplace. Obviously that requires some give and 
take with other folks.
    And I just want to go back to what Mr. Markey had brought 
up because it is too easy to commingle the words ``open'' and I 
don't think--I can't speak for the Congressman because he just 
walked out, you know, or myself when I was talking about 
openness. The principles of openness were not to say that Apple 
wasn't open because they are adhering to net neutrality 
principles and so I think all these platforms give consumers 
choice like the choice that you have exercised. So I don't want 
sort of the old fight of net neutrality and openness to be 
commingled with the terminology. The principles of openness 
have continued to be adhered to by all these platforms we are 
describing whether it is Facebook and Google and Apple, so they 
have all been doing I think a very good job in that regard.
    Mrs. Bono Mack. Mr. Reed, would you care to comment on 
spectrum?
    Mr. Reed. I will be really short and echo what he said and 
say I want more and I want it now, and unlicensed and licensed 
are things that we need to work on. Licensed is really 
important because, bluntly put, I need guys in hardhats digging 
trenches, pulling fiber and putting up towers, and so 
ultimately that means that I need companies that are willing to 
spend the money to build the infrastructure that I will be on 
top of, so get me there and get me there now because that is 
what we are going to need.
    Mrs. Bono Mack. Would either of you like to comment on 
competitiveness with Europe and what Europe is doing, and if we 
might lose sort of this race in this area? I guess a number of 
European and Asian countries are being substantial amounts of 
spectrum to market for commercial use. If we fail to keep pace, 
will we lose our leadership role in this area?
    Mr. Ramsey. Madam Chairwoman, I would say there are a 
couple of things we have to look at. One is obviously 
government itself has a lot of spectrum and we have got to look 
at how efficiently that is being organized, how much the 
government needs so we can get that online. Then we have got 
the issue of making sure we can acquire inefficiently used 
spectrum that broadcasters are utilizing or not utilizing, and 
that is where the auctions come into play, so we have got to 
get that back on online. And then lastly, we will not--even 
with the most efficient allocation of spectrum from the 
government, let us say the government does everything perfect, 
with this explosive growth in the use of these devices, which 
are all using greater and greater amounts of spectrum, 
innovation and technology itself is going to be one of the ways 
we are going to get through this. Spectrum sharing, other sorts 
of forms of technology like that are going to help us get 
through this problem. So we are going to--this is where the 
private sector will continue to be important. The very 
companies--and this is why I was emphasizing early--that do not 
have this distinction between big and small, these so-called 
small are going to be relying on some of these other companies 
to continue to create innovation around spectrum that is going 
to enable them to flourish. So at the end of the day, we are 
all in this together. So better allocation from the Federal 
Government, the use of technology to get that out, taking 
spectrum that is not being used smartly by the broadcasters, 
the all-of-the-above approach will keep America competitive 
with that.
    Mrs. Bono Mack. Thank you.
    Dr. Cassidy, you are recognized for 5 minutes.
    Mr. Cassidy. Again, Madam Chair just spoke of how I would 
choose to use Apple if I choose to use Apple. Another thought I 
had though is that clearly Apple can censor what is placed upon 
their App Store. There were some social conservatives put 
something up there, boom, Apple took it off. It disagreed with 
their philosophy. On the flip side, I gather they don't allow 
pornography. And so there is a certain censorship that takes 
place. Now, you could argue this is a private company but at 
some point if their market share becomes so great, then does it 
begin to have a responsibility beyond that of a private 
company? And so I toss that again because you guys think about 
this, and I am just----
    Ms. Hay. Apple has very detailed guidelines for what it 
accepts in the store. It is a 1- to 2-week-long review process 
for most of us developers. So if we find out that something we 
have done inadvertently is violating some terms and conditions, 
which they consistently update as well, then it is back to the 
drawing board, it is changing whatever the offending feature 
is. So, you know, doing business in the App Store with Apple is 
a more detailed process versus Android where you are able to 
sort of explore whatever the operating system is put it up 
there and people can then choose to download it in the wild, 
wild West.
    Mr. Cassidy. Now, do you see a concern, though, because, 
again, I forget it was but some social conservative group put 
something up and it was struck down. It offended somebody. Now, 
they may take everything that is Republican theoretically or 
everything that is Democrat. Now, they say of course that 
wouldn't happen, but again, there is one group at least that 
felt like it happened to them, and do they become a quasi-
public entity?
    Mr. Reed. Well, I think it is important to note that 
Android in fact is rising to the level of having the largest 
market share, and they have a true wild, wild West. In fact, 
some of the apps that are on there are problematic for us and 
we have talked to other folks about how do we deal with apps 
that might be doing something illegal or how do we get apps 
that are on the completely wide open atmosphere in a place that 
we can deal with them. I think, though, the reverse side is, I 
am going to be very coldly logical about this from my own 
perspective. My folks make more money on the curated store 
model because of what the chairman said, and that is, they find 
the trust relationship at the curated store whether it be Apple 
or the Xbox platform----
    Mr. Cassidy. But that is not really my concern.
    Mr. Reed. Right, but I mean, we--so from our own 
perspective, I like it. I like the curated store because 
small----
    Mr. Cassidy. But I am not arguing curated versus non-
curated. What is the obligation in terms of allowing free 
speech for something which again has maybe not dominant market 
share but 49 percent or something like that, pretty 
substantial?
    Mr. Reed. Actually, at this point in time, Apple--the 
Android has actually a larger market share globally.
    Mr. Cassidy. But I am saying, if it is 40 percent, I mean, 
it is still substantial.
    Mr. Reed. I think we are so far away from Apple being a 
public entity that I am not quite sure. I think a private 
industry has the right to keep pornography or other material 
off their----
    Mr. Cassidy. And what about socially conservative views?
    Mr. Reed. So far, I think that is something that if there 
was a major issue around that, that is something that I am sure 
Congress would bring to the attention and I am sure the 
Democrats would do likewise if their apps were kept off the 
platform as well, and I think let us take that on a case by 
case. When it happens, let us address it. But overall, I do 
think I want to preserve the right for private industry to make 
decisions about what they put in front of my kids and in front 
of adults.
    Mr. Cassidy. Mr. Farago?
    Mr. Farago. Yes, I mean, I don't have a lot to add to what 
has already been said. I think the way we view it or I view it 
as Apple and Amazon and Google are running stores like a 
retailer. This just happens to have a digitally distributed 
product on a virtual store shelf. So if I go into Macy's or 
Bloomingdale's or Safeway grocery stores on the West Coast, I 
expect that there has been a buyer, there has been a review----
    Mr. Cassidy. It is only a little bit of a difference, if I 
may I interrupt, because it isn't as if you can go to one Apple 
Store versus another Apple Store. There is only one Apple 
Store. And so the paradigm is a little bit different than 
Dillard's versus Macy's versus Sachs.
    Mr. Farago. I might respectfully point out, if I use an 
Xbox home console, Xbox Live Arcade, which is their digital 
platform is run by them, and if I am a Microsoft Xbox user, 
that is the only store from which I can purchase goods.
    Mr. Cassidy. A little less pervasive. The pervasiveness is 
the issue.
    Mr. Farago. Well, I think that, you know, a store if it is 
successful and has a lot of customers coming into its large 
like Walmart sized or even bigger, you know, I still think they 
are fundamentally a private entity running a store and they 
have a right to decide which goods get on the shelf.
    Mr. Cassidy. I am out of time. I agree. Yield back. Thank 
you.
    Mrs. Bono Mack. Thank you, Doctor.
    Mr. Bass, you are recognized. No further questions?
    All right. Well, I am just going to ask one brief question 
of the panel in lieu of a third round, if I might, and nobody 
really touched on cloud technologies and its importance, and I 
would just like to open up briefly if we can keep this last 
round to 2 minutes or so if anybody wants to talk about--I 
think Mr. Farago, you specifically talked about, what you said, 
the nearly endless storage cloud technology offers and how it 
contributes to the handheld devices now being super devices. 
How important is the cloud to the app world and how important 
is security of the cloud to ensure consumer confidence. So the 
last question of the day.
    Mr. Farago. At a high level they are both fundamentally, I 
mean, deeply important. They are critical. You know, this 
device has limited storage. I mean, they are really 
supercomputers in your pocket now, but what makes--one of the 
many things that make this kind of experience special for 
consumers is that not only is there a lot of data that one--you 
know, your picture for example, of your grandchild could 
probably be accessed from several different devices. It lives 
somewhere for you, and that is a real convenience for 
customers. That requires storage. If you can't fit enough 
things in your house, then you may go get a public storage 
locker somewhere locally. And so it is just a place to hold 
more things universally for consumers and then they like to 
access those.
    The other piece obviously in between the device and the 
cloud is the sort of the highway, the bandwidth and spectrum we 
have been talking about that is also critically important. 
Security of that data is highly important and consumers need to 
have trust that Apple with iCloud and many other cloud 
services. Box is a very popular company for enterprise now, 
Drop Box, places where you can place something and then get it 
later or place something for someone else to get, a file or a 
picture or whatever. You know, you want to believe that your 
property, a picture of your grandchild, is safe and secure, so 
it is critically important.
    Mrs. Bono Mack. Thank you. Anybody care to chime in?
    Ms. Hay. Yes. I think the cloud has been monumental to the 
app marketplace. The safety that comes from being able to use 
Amazon web services versus trying to come up with some sort of 
encrypted way of handling credit card numbers as an independent 
app developer or business owner, I mean, there is just no 
comparison. So now as an independent or small business owner, I 
am able to leverage cloud services like this, particularly in 
e-commerce, I think, that are safe, that conform to all the 
guidelines that are required of protecting that sort of data, 
and at the same time costing very little so I am able to 
actually launch more products, I am actually able to innovate 
more. So I think the cloud has been absolutely monumental in 
the economy here.
    Mrs. Bono Mack. All right.
    Mr. Reed. I think the only part I would add to bring it 
back to policy for a moment is, we need your help, and I know 
this isn't the committee of jurisdiction that deals with it but 
we need all Members of Congress to help us on some of the 
antiquated laws that govern our electronic privacy in the cloud 
because unfortunately they go back to the era where things 
stored in the cloud were less valuable than stuff stored on 
your desktop, and the problem that it creates for us from a 
business perspective is when I go to a risk-averse company and 
I say buy my small-business-created product because you can 
trust the cloud storage that we are using at Amazon AWS or 
anyone else, their answer is, yes, but what is our legal 
responsibilities, is it the 6th Circuit Court, is it ECBA, and 
they don't buy our product, not because our product wasn't 
awesome, it was because our product--they couldn't have the 
legal risk that exists right now around some of our privacy 
protection laws. So we ask all Members of Congress to help us 
as an industry with ECBA reform and making sure that we have 
clear, concise ways to speak to risk-averse lawyers about why 
the cloud is a safe, logical place to store their data.
    Mrs. Bono Mack. Thank you very much. That is going to 
conclude our hearing for the day, so I want to thank the entire 
panel for being with us today. You have been very gracious. We 
look forward to working with all of you moving forward.
    At this point I am going to remind members that they have 
10 business days to submit questions for the record. I ask the 
witnesses to please respond promptly to any questions they may 
receive.
    And with that, thank you again very much and the hearing is 
now adjourned.
    [Whereupon, at 11:19 a.m., the subcommittee was adjourned.]

                                 
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