[Senate Hearing 112-]
[From the U.S. Government Publishing Office]



 
  FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL 
                               YEAR 2013

                              ----------                              


                         WEDNESDAY, MAY 9, 2012

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 3:48 p.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Richard J. Durbin (chairman) 
presiding.
    Present: Senators Durbin, Moran, and Lautenberg.

                   FEDERAL COMMUNICATIONS COMMISSION

STATEMENT OF JULIUS GENACHOWSKI, CHAIRMAN

             OPENING STATEMENT OF SENATOR RICHARD J. DURBIN

    Senator Durbin. My apologies. What can I say? There is no 
excuse. I'm sorry. Let me just put my opening statement in the 
record.
    Thanks to those for attending this hearing of the 
Appropriations Subcommittee on Financial Services and General 
Government. Thank you, Senator Moran. Thank you, Senator 
Lautenberg, and Chairman of the Federal Communications 
Commission (FCC), Julius Genachowski.
    And, let me at this point, defer to Senator Moran. I'll put 
my opening statement in the record.

                    STATEMENT OF SENATOR JERRY MORAN

    Senator Moran. Mr. Chairman, I'll just have a brief opening 
statement. I want to do that because I requested that you have 
this hearing, and I appreciate your honoring my request.
    This is the first time that the FCC Chairman has appeared 
before this subcommittee since 2002, and incredible 
advancements in technology and communications have occurred in 
the past decade. And I'm thankful to have this opportunity to 
explore some of those topics with the Chairman.
    As we all know, our country faces many challenges, the 
greatest of which is we have a crippling debt. In my view, 
there are two steps to get our fiscal house in order, and the 
Congress must make some responsible decisions to rein in 
Government spending. And, of course, in the appropriations 
process, we have that opportunity.
    But, second, we need to grow our economy, and because when 
more people are working, more revenue is generated. And one of 
the best ways we can do that is to encourage entrepreneurship 
and certainly our Nation's communications policies are critical 
to creating a platform for that entrepreneurial innovation that 
grows the economy.
    Economic growth is central to both addressing our debt and 
providing our children with a bright future. One of the fastest 
growing sectors of our economy is technology, and much of that 
growth is dependent upon advanced telecommunications 
infrastructure.
    I recently met a former National Aeronautics and Space 
Administration (NASA) engineer, now in the technological world, 
who described the principles of getting a rocket to launch or 
an airplane to fly. And he described two forces--thrust and 
drag.
    And we often spend lots of time in the Congress talking 
about thrust, how to make things happen, and spend more money, 
create programs. But, it's also important that we eliminate the 
drag, and our regulatory environment has a lot to do with how 
much drag that rocket or that airplane experiences.
    So much of the focus of Government and the Congress is 
about generating thrust. I want to make sure that we're 
reducing all the drag that we can and our economy can grow and 
people can earn a living and our children can experience the 
American dream.
    So I look forward to exploring a number of issues with the 
Chairman. I'm very interested in spectrum, and I appreciate 
you, Mr. Chairman, coming to my office and having a 
conversation about that, as well as a recent FCC order related 
to broadband deployment and the Universal Service Fund (USF).
    And I have some concerns about the consequences of that 
order on particularly small and rural providers of broadband 
services.
    So, Mr. Chairman, I thank you for the opportunity that we 
have to learn more about these topics.
    Senator Durbin. Thank you, Senator Moran. Senator 
Lautenberg, do you have an opening statement?

                STATEMENT OF SENATOR FRANK R. LAUTENBERG

    Senator Lautenberg. Yes, and I'll try to be short, Mr. 
Chairman.
    I am pleased to see Chairman Genachowski here. He was in 
New Jersey a few weeks ago at a technology conference on apps 
making at one of our universities, and we learned something. 
That therein lies a major area of interest in innovation and 
that is with the ``Apps''.
    And so we went through innovation, a cornerstone of our 
economic development, and I introduced new legislation that's 
going to invest in America's technology innovators.
    The American Innovates Act will create a bank to provide 
capital for researchers and companies to turn their discovery 
into marketable products. But we will also make sure that our 
science and technology students get practical training in areas 
like business development.
    And we think that this bill will help support and expand 
our Nation's innovation economy in which the FCC plays an 
important role. FCC also plays a vital part as one of the 
guardians of our democracy.
    Increasingly, fewer and fewer companies control what 
Americans see and hear in the media, and one of those companies 
was recently found to have misled the British Parliament in 
order to cover up its wrongdoing.
    So it's never been more important to have a strong FCC 
acting in the public interest to make sure that broadcasters 
are held to high standards, are held accountable to their 
communities they are supposed to serve.
    And as Chairman Genachowski knows, local service has been 
an ongoing problem in New Jersey, and I look forward to 
discussing this issue further. And, we also want to help 
provide access to communications technology and the opportunity 
that comes with it.
    But it must be done efficiently. And I'm pleased to see the 
FCC moving the USF reforms. As the FCC updates the funds for 
the digital age, one of the agency's primary goals would be 
bringing relief to States like New Jersey where consumers 
contribute significantly more than we get back.
    And I applaud FCC's work on this important issue. I look 
forward to seeing additional reforms. And, finally, after years 
of hard work, the Congress has authorized the FCC to devote 
resources and spectrum to the creation of a public safety 
network. The 9/11 terrorist attack demonstrated the need to 
provide our police, firefighters, and rescue personnel with 
dedicated lines of communication.
    And I look forward to hearing more about FCC's progress in 
ensuring that our first responders are our first priority. So I 
thank Chairman Genachowski for being here, and I look forward 
to hearing his testimony.
    Thanks, Mr. Chairman.
    Senator Durbin. Thank you, Senator Lautenberg.
    Once again, Mr. Chairman, and all those in the audience, I 
apologize for my tardiness. Please proceed.

                SUMMARY STATEMENT OF JULIUS GENACHOWSKI

    Chairman Genachowski. Chairman Durbin, thank you, Ranking 
Member Moran, and Senator Lautenberg. I appreciate this 
opportunity to be the first FCC Chairman to appear before you 
since 2002.
    I'm proud to say that few, if any, Federal agencies deliver 
a higher return on investment than the FCC. Spectrum auctions 
have raised more than $50 billion for the U.S. Treasury in the 
past two decades.
    And economists place the economic value created by FCC 
auctions as being about 10 times that number, about $500 
billion in economic value.
    Shortly after FCC delivered its budget, the Congress 
authorized the Commission to create, develop, and conduct 
voluntary incentive auctions--a new market-based mechanism to 
repurpose underutilized spectrum for flexible use such as 
mobile broadband.
    Incentive auctions are an opportunity to unleash vitally 
needed additional spectrum for mobile broadband and create 
tremendous value for American consumers while raising billions 
of dollars for deficit reduction.
    It's a key part of the puzzle to unleashing the mobile 
broadband opportunity. And, it's a privilege for the FCC to be 
entrusted with this responsibility which of course will require 
a great deal of work and effort by the agency.
    Incentive auctions are unprecedented. The United States 
will be the first country in the world to conduct them. It will 
be a complex task affecting major parts of our economy and 
involving many challenging questions of economics and 
engineering.
    FCC staff is hard at work planning for the challenges 
ahead. We recently announced steps to begin implementing the 
law which are outlined in my written statement.
    Incentive auctions are part of our overall agenda to 
unleash the opportunities of modern communications technology, 
to benefit our economy, create jobs, bring opportunity to all 
Americans.
    Just yesterday at the wireless industries annual conference 
I presented FCC's mobile action plan. This plan will help 
ensure that America maintains the position it has now regained 
as the global leader in mobile.
    It includes incentive auctions, but recognizes that we must 
have an all-of-the-above strategy that includes removing 
barriers to spectrum use, harnessing emerging technologies like 
small cells and accelerating spectrum sharing between 
Government and commercial users.
    On the latter, I was pleased to announce that we're moving 
ahead in partnership with National Telecommunications and 
Information Administration (NTIA) at the Commerce Department to 
test spectrum sharing between commercial and Government users 
in the 1755 to 1780 megahertz band, a band that's of particular 
interest to commercial carriers.
    This work reflects FCC's focus on broadband communications, 
wired and wireless. In 2009, we developed America's first 
national broadband plan which identified key challenges and 
opportunities throughout the broadband ecosystem and proposed 
solutions to ensure that the United States lead the world in 
broadband access and innovation.
    In fact, one of those proposed solutions was incentive 
auctions. We've been working hard on implementing the broadband 
plan. Together with my colleagues at FCC, we've made tremendous 
progress in the past 3 years taking many steps to unleash 
investment, innovation, and job creation.
    These include freeing spectrum for both licensed and 
unlicensed use, modernizing and reforming major programs like 
the USF and removing barriers to broadband buildout. Indeed, 
investment, job creation and innovation are up across the 
broadband economy.
    These metrics are up both when looking at the broadband 
applications and services and when looking at broadband 
providers and networks.
    Our work is helping create jobs across the country, from 
workers constructing broadband infrastructure, to agents at new 
broadband enabled customer contact centers, to employees of 
small businesses using broadband to expand to new markets, to 
engineers and other innovators inventing the new digital 
future.
    And, in the past 3 years, the United States has regained 
global leadership in mobile innovation. American-designed apps 
and services are being adopted faster than any other. Our 
mobile innovation economy has become the envy of the world.
    We're also now ahead of the world in deploying 4G mobile 
broadbanded scale with 64 percent of the world's 4G LTE 
subscribers, the next generation of mobile broadband, here in 
the United States.
    These next-generation networks are projected to add more 
than $150 billion in gross domestic product growth over the 
next 4 years, creating an estimated 770,000 new American jobs.
    The health of our broadband economy would be enhanced by 
closing broadband gaps. My written statement highlights FCC's 
progress addressing the broadband deployment and adoption gaps.
    Public safety, as was mentioned, is a core mission of FCC, 
and the agency is working to harness the power of 
communications to make our communities safer.
    As part of our longstanding role in helping ensure the 
security and reliability of our communications networks, an 
FCC-led panel recently issued a series of recommendations to 
address three critical threats to our cyber security: botnets; 
Internet route hijacking; and domain name fraud.
    Internet service providers serving roughly 90 percent of 
all U.S. broadband subscribers will implement these proposals. 
FCC also provides value by protecting and empowering consumers.
    For example, smart phone theft is on the rise and poses a 
real threat to consumers. Last month, together with the 
wireless industry and law enforcement from around the country, 
we announced the launch of a new database that will allow 
consumers and carriers to disable stolen smart phones, 
dramatically reducing their value on the black market.
    We've also made progress tackling consumer issues like bill 
shock and cramming, which are highlighted in my written 
statement. At the FCC, we're committed to smart, responsible 
Government, and we have taken steps to modernize our programs 
and insure that they are efficient and fiscally responsible, 
saving billions of dollars.
    In addition to our programmatic reforms, we've also 
reviewed the agency's rules and processes asking tough 
questions to make sure FCC is operating efficiently and 
effectively.
    In connection with this review, we've already eliminated 
dozens of outdated rules and five unnecessary data collections. 
We've identified two dozen more data collections for 
elimination, and we've done everything I've listed and more 
with the lowest number of full-time employees (FTEs) in 10 
years.
    Maximizing the ability of 21st century communications 
technology to deliver value to the American people, and doing 
so in a smart and responsible way. That's FCC's record in the 
past 3 years, and that's our plan for the year ahead as 
reflected in our fiscal year 2013 request in budget.
    To implement our responsibilities under the Communications 
Act, the budget requested a 2 percent more than the previous 
year level from about $340 million to about $347 million, 
essentially flat adjusting for inflation.
    As in previous years, this amount will be derived entirely 
from fee collections. The budget reflects savings in several 
areas and includes a few new initiatives, primarily, technology 
investments designed to save money, and public safety 
investments aimed at saving lives.
    The budget also provides a flat number of FTEs, despite 
increasing workloads in many areas.

                           PREPARED STATEMENT

    In conclusion, the wired and wireless broadband sectors are 
critically important to our economy and global competitiveness. 
I look forward to working with the subcommittee on implementing 
the new incentive auction law and unleashing the opportunities 
of communication technology for our economy and the American 
people.
    Thank you.
    [The statement follows:]

                Prepared Statement of Julius Genachowski

    Chairman Durbin, Ranking Member Moran, and other members of the 
subcommittee, I appreciate this opportunity to appear before you on the 
Federal Communication Commission (FCC) fiscal year 2013 budget.
    I'm proud to say that few, if any, Federal agencies deliver a 
higher return on investment than the FCC.
    Spectrum auctions have raised more than $50 billion for the U.S. 
Treasury in the past two decades, and economists regard the economic 
value created by FCC auctions as being about 10 times that number, or 
$500 billion in value. FCC has conducted 80 auctions, granting more 
than 30,000 licenses. A few months ago, a group of 112 leading 
economists from across the ideological spectrum wrote, ``The original 
simultaneous, multiple-round auction system implemented in 1994 was 
novel, but the FCC was able to implement the path-breaking auctions 
that were the basis for successful auctions around the world.''
    Shortly after FCC delivered its budget, the Congress authorized the 
Commission to create, develop, and conduct voluntary incentive 
auctions--a new market-based mechanism to repurpose spectrum for 
flexible use such as mobile broadband.
    Incentive auctions are an opportunity to unleash vitally needed 
additional spectrum for mobile broadband and create tremendous value 
for American consumers, while raising billions of dollars for deficit 
reduction. It's a key part of the puzzle to unleashing the mobile 
broadband opportunity.
    At FCC, we're focused on faithfully implementing this new 
legislation and maximizing the opportunities of the new law for our 
economy and all Americans.
    It's a privilege for FCC to be entrusted with this responsibility, 
which of course will require a great deal of work and effort by FCC.
    Incentive auctions are unprecedented. The United States will be the 
first country in the world to conduct them. It will be a multifaceted 
task affecting major parts of our economy, involving many challenging 
questions of economics and engineering.
    FCC staff is analyzing the complex incentive auction law, assessing 
the challenges ahead, and last week we announced steps to begin 
implementing the law.
    We will run a process that is open, inclusive, fact-based, and 
guided by economics and engineering. We have already formed an FCC 
incentive auctions task force that has brought in staff from across the 
Commission.
    FCC's work will be assisted by world-leading experts, including 
some of the world's most distinguished auction-design experts.
    The work of our task force and staff will feed into a robust public 
process, which will include webinars, workshops, public notices, and 
rulemaking proceedings.
    In 2 days, FCC will take up its first policy action to put the law 
into effect--an order establishing a framework for broadcaster 
participation in a channel-sharing agreement with another station in 
conjunction with an incentive auction.
    We are aiming for Notices of Proposed Rulemaking under the new law 
by the fall of this year.
    Incentive auctions are part of our overall agenda to unleash the 
opportunities of modern communications technology to benefit our 
economy and all Americans.
    We have focused the agency on broadband communications--wired and 
wireless. In 2009, we developed America's first National Broadband 
Plan, which identified key challenges and opportunities throughout the 
broadband ecosystem, and proposed solutions to ensure the United States 
leads the world in broadband infrastructure and innovation. In fact, 
one of those proposed solutions was incentive auctions.
    Since the plan's release, we have been working on its 
implementation. Together with my colleagues at the FCC, we have made 
tremendous progress in the past 3 years, taking many steps to unleash 
investment, innovation, and job creation. These include freeing 
spectrum for both licensed and unlicensed use, modernizing and 
reforming major programs like the Universal Service Fund (USF), and 
removing barriers to broadband buildout.
    And indeed, investment, job creation, and innovation are up across 
the broadband economy. These metrics are up both when looking at 
broadband applications and services, and when looking at broadband 
providers and networks.
    In 2011, the U.S. information and communications technology sector 
grew three times faster than the overall economy. Broadband is helping 
create new jobs all across the country--and not just for engineers 
(although it's vitally important that we lead the world in engineering 
talent), but also for salespeople, construction workers, and small 
business owners increasingly using the Internet to boost sales and 
lower costs.
    The apps economy, which barely existed in early 2009, has already 
created almost 500,000 new jobs, according to expert estimates.
    And similar reports estimate that over the past several years 
wireless innovation and investment are responsible for more than 1.5 
million new jobs.
    In the past 3 years, the United States has regained global 
leadership in mobile innovation. American-designed apps and services 
are being adopted faster than any others. Our mobile innovation economy 
is the envy of the world.
    We are also now ahead of the world in deploying 4G mobile broadband 
at scale--with 64 percent of the world's 4G LTE subscribers here in the 
United States and these next-generation networks are projected to add 
$151 billion in GDP growth over the next 4 years, creating an estimated 
770,000 new American jobs.
    In 2011, overall investment in network infrastructure was up 24 
percent from 2010, with broadband providers investing tens of billions 
of dollars in wired and wireless networks.
    Internet start-ups attracted $7 billion in venture capital in 2011, 
almost double the 2009 level and the most investment since 2001.
    In today's hyperconnected, flat world, the success of American 
companies, as well as global prosperity, depends on a dynamic and open 
global Internet. And so we are working to preserve the Internet as a 
free-market globally, and oppose international proposals that could 
stifle Internet innovation. Working with our colleagues in government 
and stakeholders outside government, we are seeking to head off 
barriers to the global expansion of cloud computing, and encouraging 
free flows of data worldwide.
    And we are working to oppose proposals from some countries that 
could undermine the longstanding multi-stakeholder governance model 
that has enabled the Internet to flourish as an open platform for 
communication, innovation, and economic growth.
    If adopted, these proposals would be destructive to the future of 
the Internet, including the mobile Internet, and the U.S. Government 
has consistently and strongly opposed such proposals.
    This is why at the Organisation for Economic Co-operation and 
Development last year, I worked with my colleagues in the U.S. 
Government and in other countries to respond to significant threats to 
Internet-driven growth by adopting a broadly supported communique that 
emphasized the need for continued support of the multi-stakeholder 
model which has fostered innovation and opportunity worldwide.
    The health of our broadband economy would be enhanced by closing 
broadband gaps, and so the FCC has focused on bringing universal 
service into the broadband era.
    Today, millions of rural Americans live in areas with no broadband 
infrastructure. Our plan, adopted unanimously in October, to modernize 
the USF will spur wired and wireless broadband buildout to hundreds of 
thousands of rural homes in the near term, and puts us on the path to 
universal broadband by the end of the decade--while keeping the fund on 
a budget. Together with my colleagues, we crafted a set of reforms that 
honor fiscal responsibility and help bring broadband to unserved 
Americans around the country, in every State.
    In addition to the broadband deployment gap, we are making strides 
on the broadband adoption gap.
    Nearly one-third of Americans--100 million people--haven't adopted 
broadband. The Connect to Compete Initiative enlists government, 
nonprofit, and private sector leaders to tackle the barriers to 
adoption--one of several public-private initiatives driven by the 
Commission to promote solutions to major challenges.
    FCC's successful E-Rate program has already helped connect 
virtually every library and classroom in America, and in 2010 we 
adopted several important modernizations of the program, including 
removing barriers to wireless use, and removing barriers to schools 
opening their computer labs as hot spots for community Internet use 
when students aren't in school.
    Public safety is a core mission of FCC, and the agency is working 
to harness the power of communications to make our communities safer.
    We are working with multiple stakeholders to advance next-
generation 9-1-1. And we accelerated the launch of Wireless Emergency 
Alerts that allows local, State, and Federal authorities to send 
targeted alerts to mobile devices of people who are in the vicinity of 
an emergency.
    As the Nation's expert agency on communications networks and 
technology, the FCC has always had as a fundamental part of our mission 
the security and reliability of communications networks. In early 2011, 
I charged a panel of stakeholders from across the broadband ecosystem 
with developing practical, nonregulatory solutions to three critical 
threats to our cybersecurity:
  --botnets;
  --Internet route hijacking; and
  --domain name fraud.
    This past month, the team issued a series of recommendations to 
tackle these challenges in a meaningful way. Internet service providers 
serving nearly 90 percent of all U.S. broadband subscribers have agreed 
to implement these recommendations that will promote greater security 
in our communications networks.
    Working with government, private-sector, and nonprofit partners, we 
also developed a Small Business Cyber Planner to help small businesses 
guard against cyber attacks, which are estimated to cost targeted small 
businesses an average of $200,000 in damages.
    FCC also provides value by protecting and empowering consumers.
    Smartphone theft is on the rise, and poses a real threat to 
consumers. In Washington, DC, New York, and other major cities roughly 
40 percent of all robberies now involve cell phones. Two weeks ago, 
together with the wireless industry and law enforcement from around the 
country, we announced the launch of a new database that will allow 
consumers and carriers to disable stolen smartphones and tablets 
dramatically reducing their value on the black market.
    Working with wireless providers, we found a common-sense solution 
to bill shock, a problem that has cost millions of consumers tens, 
hundreds, and sometimes thousands of dollars in unexpected charges, and 
just last week we introduced a new online tool to help consumers track 
implementation of the commitments made by wireless carriers to provide 
usage alerts.
    This coming Friday, FCC will consider an order to put an end to 
abusive, third-party charges on phone bills, what's commonly known as 
``cramming''. Previously, FCC's Enforcement Bureau issued $12 million 
in fines against four companies that had engaged in widespread 
cramming, part of a record-breaking year for our Enforcement Bureau, 
which logged $67.2 million in monetary penalties and settlements on 
behalf of consumers in fiscal year 2011.
    I want to highlight not only what FCC has accomplished, but how we 
conduct our work. FCC is committed to smart, responsible government, 
and we have taken significant steps to modernize our programs and 
ensure that they are efficient and fiscally responsible--saving 
billions of dollars.
    Our work to modernize the USF and Intercarrier Compensation will 
not only spur broadband buildout, it also eliminates billions of 
dollars in hidden subsidies from consumers' phone bills.
    Our work to reform the Lifeline program is expected to save up to 
$2 billion over the next 3 years. Even before this order was adopted, 
we made changes that eliminated 270,000 duplicate subscriptions, saving 
$35 million.
    We reformed our Video Relay Service Program, which provides vital 
communications for people who are deaf or hard-of-hearing, saving $250 
million per year without reducing availability of service.
    In addition to our programmatic changes, we have also reviewed 
FCC's rules and processes--asking tough questions to make sure the 
agency is operating efficiently and effectively.
    In connection with this review, we've already eliminated more than 
200 outdated rules and five unnecessary data collections. We have 
identified two dozen more data collections for elimination.
    We estimate that internal reforms like consolidated information 
technology maintenance and new financial system have already saved the 
agency almost $8 million.
    And we've done everything I've listed and more with the lowest 
number of full-time employees (FTEs) in 10 years.
    Maximizing the ability of 21st century communications technology to 
deliver value to the American people, and doing so in a smart and 
responsible way. That's the FCC's record the past 3 years, and that's 
our plan for the year and years ahead, as reflected in our fiscal year 
2013 fiscal year budget request.
    To implement our responsibilities under the Communications Act, 
FCC's budget requests a 2-percent increase more than the previous year 
level, from $339,844,000 to $346,782,000. This proposal is essentially 
flat adjusting for inflation.
    As in previous years, this amount will be derived entirely from fee 
collections. These funds will ensure the successful operation of FCC's 
core activities, including the strategic goals outlined in the 
Performance Plan submitted with FCC's budget.
    The requested amount is based on internal cost savings applied to 
essential ongoing projects, and necessary adjustments to our baseline.
    The budget includes a few new initiatives--primarily technology 
investments designed to save money, and public safety investments aimed 
at saving lives.
    The budget also provides a flat number of FTEs, which represents 
the lowest number of FTEs in 10 years, despite increasing workloads in 
many areas. Last year, a senior Apple executive wrote FCC advocating 
for additional staffing for FCC's Office of Engineering and Technology 
(OET). This office certifies that wireless devices use spectrum 
efficiently and don't create harmful interference, among other things. 
The number of applications for certified devices has grown at an annual 
rate of nearly 12 percent each year--from 3,671 in 2001 to 13,645 in 
2011--and the explosive growth of complex devices like smartphones has 
significantly increased demands on OET staff in recent years. Apple's 
executive wrote, ``If OET can complete its work efficiently, companies 
building innovative devices can get those new products to customers 
quickly. But if applications for innovative devices are delayed because 
OET staff are overtaxed, consumers are the losers.''
    In conclusion, the wired and wireless broadband sectors are 
critically important to our economy and global competitiveness. I look 
forward to working with the subcommittee on implementing the new 
incentive auctions law, and unleashing the opportunities of 
communications technology for our economy and the American people.
    Thank you.

    Senator Durbin. Thanks, Mr. Chairman. Senator Moran had 
requested this hearing. Let me yield my opening round of 
questions to him.
    Senator Moran. Mr. Chairman, thank you very much.

                            SPECTRUM CRUNCH

    Let me start first with spectrum. You covered that in your 
written and oral testimony. But let me reiterate what I think 
is called out there, the crunch, the spectrum crunch. The 
demand is significant.
    And my question, Mr. Chairman is, are there any proceedings 
or options FCC can consider to more quickly address the need of 
spectrum in the private marketplace?
    Chairman Genachowski. It is a central focus of ours. It's 
why we push so hard for incentive auction legislation, and 
we've moved quickly to begin to implement it.
    There are other proceedings we have opened now that will 
free up additional spectrum. We have a proceeding that would 
eliminate unnecessary regulations on certain satellite spectrum 
so that could be made available for terrestrial use. It's 
called the S-band.
    We have other proceedings to open up new spectrum. I think 
one of the biggest opportunities is if we can move forward with 
Federal users of spectrum quickly to accelerate sharing between 
Federal users and commercial users.
    And I'd be happy to talk further about any of those topics.

                        UNIVERSAL SERVICE REFORM

    Senator Moran. Let me then raise the topic of USF, and the 
recent order on it and the Intercarrier Compensation Reform.
    We have the circumstance, Mr. Chairman, in my view, in 
which many companies have relied upon grant programs from the 
Rural Utility Services (RUS), from the stimulus funds, in which 
they have made significant investments in regard to deploying 
broadband in rural areas across the country.
    In my view, the order now handicaps, significantly, the 
revenue necessary for them to repay those loans and grants. And 
you and I had a conversation about this in my office in which 
you indicated that the waiver process would be an option for 
those companies.
    If they had the need, the waiver process would work in 
their benefit to see that they had the capacity to continue to 
deploy broadband, but also to pay for the loans and grants, to 
repay the loans and grants.
    It seems to me, first of all, that the threshold for a 
waiver being granted is a very high threshold.
    Because the words of the order say that, we permit any 
carrier negatively affected by USF reforms may file a petition 
for waiver that clearly demonstrates that good cause exists for 
exempting the carrier from some or all of those reforms, and 
that waiver is necessary and in the public interest to ensure 
that consumers in the area continue to receive voice services.
    And that threshold about voice services, that would be a 
pretty high threshold, in my view, for a waiver to be granted. 
And so, I'm concerned that while you indicated that waivers 
would be an option, my guess is that's not a practical option 
for most companies.
    Because voice is always, or almost always, going to be 
available. Am I missing something?
    Chairman Genachowski. Well, a few points, Senator. One----
    Senator Moran. You're polite not to say I'm missing 
something.
    Chairman Genachowski. Reforming the USF and intercarrier 
compensation was one of the hardest things that the agency has 
tackled. And we were able to do it on a bipartisan basis, and 
take a program that was wasting Government dollars, focus it on 
its central mission of getting broadband to people in rural 
America who are unserved.
    Across the country, there are about 18 million people who 
live in areas that are unserved. In Kansas, I think the number 
is about 90,000. And we made the commitment as a Commission to 
do that by reducing inefficiencies, waste in the existing 
program, operating within a budget, and funding new service out 
of that.
    It turns out that reining in Government spending, being 
serious about fiscal responsibility is hard work. We all know 
that. And we have the job now of implementing this in a way 
that's consistent with the three core principles we had when we 
put in place the order.
    One was getting broadband to rural Americans who don't have 
it. And the second was fiscal responsibility. And the third was 
being cognizant of business realities of existing companies.
    And there are existing companies that for whom this is 
challenging. And we have been and we will continue to work with 
them because we recognize that flash cuts don't make sense. 
That a waiver process is important. We have several waivers in 
front of us that we're considering.
    We've already adopted some modifications to our rules. My 
instruction to our staff was let's listen very carefully when 
we hear concerns and respond to all of the ones that are 
appropriate.
    Senator Moran. Mr. Chairman, is a waiver available even 
though voice services continue to be received?
    Chairman Genachowski. Well, the fundamental service that we 
thought was critical to preserve was voice service. And, 
certainly, anything that we did that would inadvertently shut 
off voice service to a local community is something that we 
wanted to make clear that's something that we will stop.
    We do think that in order to accomplish our goals, get 
broadband to unserved Americans consistent with fiscal 
responsibility, it will require flexibility on our part to deal 
with real legitimate issues and address them.
    Flexibility on the part of RUS in thinking about its loans. 
And, in my view, as long as we all focus together on these core 
objectives, getting broadband to people that don't have it, 
fiscal responsibility, and cognizance of business realities, 
we'll work through implementation and individual hard cases one 
by one, and we'll get them right.
    Senator Moran. I assume we'll have another round of 
questions.
    But I would indicate that Commissioner McDowell stated on 
March 19 here in Washington, DC that if your company looks like 
it won't survive, there's a waiver process.
    I still want to explore with you the threshold by which, 
what a company has to demonstrate, because I think there are 
serious issues here with the ability to continue to deploy 
broadband.
    And, the other fiscal aspect of this is the ability for a 
company to continue to repay its loans to RUS or others. And I 
want to explore with you the relationship that you've developed 
with the Department of Agriculture and the RUS program.
    So, thank you, Mr. Chairman.
    Senator Durbin. Senator Lautenberg.

                            LICENSE RENEWALS

    Senator Lautenberg. Mr. Genachowski, I know that you are 
aware of the fact that News Corporation controls 27 local 
television stations in the United States.
    And last week, I mentioned earlier, a British parliamentary 
committee found that News Corp. misled the committee in order 
to cover up the illegal activity.
    And its chairman and CEO Robert Murdoch, is, ``. . . not 
fit to run an international company.''
    Now, how do these findings affect your analysis of News 
Corp.'s license renewals in the United States?
    Chairman Genachowski. Well, Senator, a couple of points, if 
I may.
    As a general matter, it's not appropriate for me to comment 
on specific adjudications that might come before FCC. But here 
is how the law works, the Communications Act, and the FCC.
    Licensees do have to meet certain qualifications to be 
licensees. Those qualifications include technical, financial 
qualifications, and character qualifications.
    FCC has issued over the years policy statements and 
precedents that lay out what that entails. And, of course, if 
any issues arise, FCC has an obligation. We would take this 
very seriously. To look at the record, look at the facts, apply 
the precedent, apply the law.
    Senator Lautenberg. So that doesn't pass without notice by 
FCC? The British response.
    Chairman Genachowski. We're certainly aware of the serious 
issues that have been raised in the United Kingdom, the ongoing 
process that's going on there.
    Senator Lautenberg. And the code by which FCC functions, it 
does say, measure of the character of the applicant though, is 
to be considered.
    Chairman Genachowski. Character is one of the 
qualifications, and there are FCC policy statements that spell 
that out.
    Senator Lautenberg. Okay. So I assume, therefore, I won't 
get your word, but I'll take the intent, of the position that 
FCC has to have, and that is, that character flaw, a character 
flaw, will be in consideration of any decisions that are made, 
affecting new or renewal--brand new or renewal applications for 
license.
    Chairman Genachowski. FCC has serious responsibilities that 
it applies across the board consistent with our policy 
statements and our precedent.

                        UNIVERSAL SERVICE REFORM

    Senator Lautenberg. New Jersey is a net contributor of 
close to $200 million a year to the USF. As the USF has grown, 
the burden on New Jersey and other donor States has gotten 
bigger and bigger.
    And I applaud the FCC for recognizing the need for the 
reform of the Fund. Now, will these reforms bring some balance 
to donor states like New Jersey?
    Chairman Genachowski. Well, and thank you for that. The USF 
is comprised of a high cost fund that's focused on rural areas. 
The E-rate fund which is focused on schools and libraries 
across the country.
    A lifeline fund which is focused on low-income Americans. 
One by one, we have been modernizing each of these programs for 
the broadband era, in each case, bringing accountability and 
fiscal responsibility to the programs and making sure that they 
tightly and effectively meet their mission.
    There is a compact in this country. We need to make sure 
that everyone, wherever they live, has a chance to benefit from 
the opportunities of the communications revolution.
    Whether it's someone in rural America. Someone in an urban 
center. Whether its seniors or small business owners. And 
that's the challenge that we've taken up.

                  FUNDING FOR RESEARCH AND DEVELOPMENT

    Senator Lautenberg. The too-often scientific breakthroughs 
sit on a shelf for the lack of investment. Last month, I 
introduced the American Innovation Fund which would provide 
funds for researchers to turn their discoveries into product.
    And has the early stage investment affected the 
telecommunications industry?
    Chairman Genachowski. The core idea behind new legislation, 
Senator, is something that's very, very important, and it's 
related to what Senator Moran said in his opening remarks.
    Innovation and entrepreneurship is at the core of how we'll 
create jobs in the United States. How we will lead the world 
globally. We have a series of challenges to meet in order to 
sustain our leadership position.
    Your legislation identifies one, which is, that we have in 
some cases research going on that is underfunded. In some cases 
research that's going on where some help is needed to 
commercialize a product that could be commercialized.
    And so I certainly applaud the focus on entrepreneurs, 
innovation, and look forward to working with you on the 
legislation and on these issues.
    Senator Lautenberg. And thank you.
    Because the cry that we hear from many would be company 
developments, and that is, that lack of funding slows things 
down. And perhaps then even diverts them from ever taking 
place. And we shouldn't be in that condition.

                         PUBLIC SAFETY NETWORK

    I'm proud that the Congress passed legislation to provide 
our first responders the spectrum and the resources needed to 
develop the public safety network.
    Since the 9/11 Commission report revealed an enormous 
communication problem 8 years ago, we fought to get the job 
done. And now, we finally have it. And we look at the FCC, look 
to the FCC, to implement the network.
    When can we expect our first responders to have the public 
safety network that they must have in order to function 
efficiently?
    Chairman Genachowski. As soon as possible. The Congress' 
action in passing that provision was extremely important and 
something that we'd been calling on for quite some time.
    And as you point out, the 9/11 Commission recommended it 
many years ago. The statute gives much of the responsibility to 
NTIA for implementation. FCC has responsibilities with respect 
to setting standards.
    We've already begun working very closely with NTIA. There 
are some early deadlines in the statute that have already been 
met in terms of setting up boards and processes and 
proceedings.
    It's extremely important, and I know that Assistant 
Secretary Strickling at NTIA and I are very committed to moving 
forward on the legislation and to getting our first responders 
what they need in terms of modern communications.
    Senator Lautenberg. It's essential that we press on with 
that because we knew, we learned unfortunately the worst that 
could happen. And for that not to be corrected by this time 
seems awfully slow.
    And so I look to you to make sure that we're moving at a 
faster pace.

                            LICENSE RENEWALS

    Last, in November 2007, FCC held a hearing in Newark on the 
license renewal of WWOR, which is one of the Murdoch-owned 
stations.
    New Jerseyans testified about the station's failure to 
cover New Jersey and events. Now, 4 years later, the station is 
still operating under an expired license. And there's evidence 
that its service to New Jersey has gotten even worse.
    And I certainly don't think that it ought to take that long 
to make a decision about whether or not we ought to close this 
out. And I would ask when we might expect FCC to make a 
decision on the WWOR license renewal application?
    Chairman Genachowski. Well, today, the staff is working on 
that as you know, and we talked about this. There's a complex 
history involving the station, and the issues of its particular 
obligations to provide service to New Jersey and moves the 
station facilities, et cetera.
    And so it's complex in a number of different ways, but the 
staff is working on it, and there will be a decision as soon as 
possible.
    Senator Lautenberg. Well, there are not many things that 
are easy to accomplish, and your structure of responsibilities. 
This one we ought to be able to get on with, and I look forward 
to hearing from you about where we stand with this.
    Thank you. Thanks, Mr. Chairman.

                                PRIVACY

    Senator Durbin. Thank you very much, Senator Lautenberg.
    I'd like to address a couple issues of privacy. About every 
other week when I log into iTunes, they tell me I need to have 
a new agreement with them. A lot of terms and conditions.
    And I scroll through page after page after page until I get 
to the bottom where it says accept, decline, punch accept, go 
on about my business.
    I'm worried that I may have signed off all of my rights to 
any royalties from music that I produce in the future. I'm not 
sure what I've done here.
    So, tell me, is this your responsibility, to make sure that 
this kind of a thing is put in simple language and the most 
important parts of it are highlighted so consumers know what 
they're actually waiving or giving up in terms of privacy?
    Chairman Genachowski. The Federal Trade Commission (FTC) 
has taken the lead on the kind of issue you're raising, but it 
is an issue that we've been engaged with and interested in as 
well.
    One is, consumer protection with respect to communications 
providers, is part of our statutory mission, number one.
    Number two, in addition to the kind of core confusion and 
privacy issues that you raise, another concern is that the more 
that people distrust the Internet, the slower broadband 
adoption will be, which then undermines the economic 
opportunities of broadband.
    And so whether you look at this as just a basic privacy and 
rights issue, or whether you look at it as an economic issue, 
you get to the same place.
    Senator Durbin. So is FTC the cop on the beat here? Should 
they be deciding what should be highlighted, what's important 
for me to know if I'm about to sign off on something?
    Chairman Genachowski. And they've been doing excellent 
work.
    Senator Durbin. This isn't your bailiwick?
    Chairman Genachowski. Our statutory responsibility extends 
to the communications providers, and not to the applications.
    Senator Durbin. Let's talk about Google. They have quite an 
operation. One of the Fortune 500 companies. One of the top 20, 
I guess. And they invited me in several times to their 
headquarters in Chicago. Very impressive.
    And in one of the visits I made several years ago talked 
about how they were mapping America. They literally had 
vehicles driving all over the streets of America and they were 
gathering images. They were deployed everywhere.
    And they were gathering data and video and putting it into 
the Google map information and so forth. Turns out they were 
gathering even more. European and Canadian regulators found 
these Google vehicles were collecting and storing personal data 
from unencrypted home networks of private citizens without 
permission.
    The New York Times described the data as personal email 
messages, instant messages, chat sessions, conversations 
between individuals, and Web addresses revealing sexual 
orientation that could be linked by Google to specific street 
addresses.
    So they were collecting all of this as they were cruising. 
So FCC completed an investigation and came to the conclusion 
that Google had deliberately impeded and delayed the 
investigation. And you decided to impose a fine of $25,000 on a 
company worth $111 billion.
    So I would say that is somewhere short of a tap on the 
wrist. And could you tell me if you thought that what they had 
done was not that serious. You concluded, I think, that they 
didn't violate the Wiretap Act.
    It turns out a court in California reached the opposite 
conclusion. So how are you protecting our privacy with a 
$25,000 fine for that kind of collection?
    Chairman Genachowski. So there are two points. We launched 
an investigation because in this case there were concerns about 
using communications networks, Wi-Fi, to get access to 
personal, private information.
    And we did have an obligation to determine whether or not 
that violated any of our rules and laws. That was the reason 
for the investigation.
    The conclusion of our enforcement bureau and our general 
counsel's office was that as a legal matter, because it was 
unencrypted Wi-Fi that information was being obtained from, it 
wasn't a violation of the law as it was written.
    And we suggested that the Congress look at that and that 
consumers look at that because everyone should encrypt their 
Wi-Fi. And so as a matter of that issue, the career staff found 
that it wasn't a violation of law, but encouraged congressional 
action.
    The fine itself was for serious concerns that our staff had 
about the process itself. The investigation process itself. And 
the fine that the bureau imposed was one that's consistent with 
precedent in this area for companies that act improperly during 
our process.
    Clearly for the company, compared to its revenue and market 
cap, it's a small amount. On the other hand, the educational 
purposes that have been served by this, educating them and 
other companies, educating the Congress, educating consumers, 
certainly important benefits of the process that we ran.
    Senator Durbin. I guess what puzzles me, and maybe this 
really does come down to the Congress not doing its job as 
we're often reminded of that whenever we find fault with 
agencies and individuals, is the notion that my Internet 
activity out of my home, if it is not encrypted, is not 
protected.
    And that virtually anyone can tap into it for any purpose, 
commercial or otherwise, with impunity. It appears if they had 
cooperated with your investigation, you might not have even 
fined them in this circumstance.
    Now, this California court saw it quite differently, and 
said that they believe that it was at least analogous to a 
wiretap for them to be gathering this personal information 
about street addresses.
    So your legal counsel kind of leaned the other way and 
said, no, you have no rights for privacy if you're not 
encrypted.
    Can you tell me as a former Supreme Court clerk and such, I 
mean, is that the starting point on your investigation, that 
there is no protection if it is a close call?
    Chairman Genachowski. Well, I have great confidence in our 
general counsel, the chief of our enforcement bureau, who are 
both very experienced lawyers, former prosecutors, who take 
this as they take all matters, very seriously.
    So this was a serious effort, run by serious people, and I 
have complete confidence in their legal conclusions. I do look 
forward to working with the Congress on a way to address this 
because your central point no one can disagree with.
    People should, the law should protect people even if they 
have unencrypted Wi-Fi.
    Senator Durbin. I find it hard to believe that encryption 
is the threshold, and how in the world would the average person 
know that or be able to protect themselves.
    So, is it possible for you to share the legal memorandum 
that was the basis for your conclusion that this was not a 
violation of the Wiretap Act?
    Chairman Genachowski. We will share whatever we can share. 
So I would be more than happy to provide you with whatever you 
would like and whatever you would need.
    Senator Durbin. I appreciate it. Let's take a look at it 
because I think it's something that if it requires change in 
the law, I'd like to consider that.
    [The information follows:]


    For more information please access http://transition.fcc.gov/foia/
Updated-Release-of-NAL.pdf.

    Senator Durbin. Senator Moran.
    Senator Moran. Mr. Chairman, thank you.

                        UNIVERSAL SERVICE REFORM

    A threshold seems to be the operative word. I want to go 
back to what we were talking about earlier, Mr. Chairman.
    The order published on November 18 clearly states, and then 
I quoted what the criteria were for a waiver. And it seems to 
me that there's three components to that. The carrier must be 
first, negatively affected by the USF reforms.
    I assume that's a standard that could be met. It clearly 
demonstrates that good cause exists for exempting the carrier 
from some or all of the reforms.
    So, number two, there's good cause. And then number three 
is, that the waiver is necessary in the public interest to 
ensure that consumers continue to receive voice services. 
That's the one I want to again focus on.
    Because it seems to me you could meet the first two, 
assuming that I am analyzing the words of your order correctly. 
A carrier could be negatively affected. It could show good 
cause.
    But still, in most instances, provide voice services. Is 
that true?
    Chairman Genachowski. Well, I'd want to go back and look at 
the language myself. I certainly understand that you're looking 
at it there. If I could, let me explain what we're trying to 
accomplish.
    The kinds of steps that we think we need to take for fiscal 
responsibility, and emphasize again our openness to companies 
that have issues to come in and to continue to work with us on 
how to fine tune our reforms so that we can achieve our goals 
of serving unserved Americans and being fiscally responsible.
    So one of the things that the program had supported, for 
example, there might be an area where USF subsidies, money that 
comes from consumers, Government programs, were subsidizing a 
telephone company in an area that was also being served by 
another unsubsidized company.
    And the decision that we had to make is, can a Government 
program continue to support those kinds of subsidies? And we 
answered that unanimously at FCC, no.
    And we have to back away from that kind of funding. We had 
a principle of no flash cuts, and we don't want to turn off 
anything in a day. But some of the examples that you might be 
getting at might fit into that bucket.
    There are many different kinds of examples where it is 
simply impossible to justify under any theory of fiscal 
responsibility the Government supporting these.
    And what we tried to do very thoughtfully was say, okay, we 
can't support these anymore. Let's wind this down in a way that 
recognizes that some of the companies have loans, some of the 
companies have made decisions based on certain assumptions.
    We recognize that. Those are business realities, but we 
also have to recognize that these do have to change. We have 
said we have and we will continue to work with those companies 
to moderate the impact while we get as fast as possible 
broadband to the 18 million Americans who don't have it, the 
90,000 people in Kansas who don't have it.
    Senator Moran. I don't think you've said anything that I 
disagree with, but that's the point I'm trying to get to when 
you tell me that you will work with those companies to get the 
right result.
    My assumption is that you work with those companies through 
a waiver process, and I'm worried that the waiver process is at 
least worded in your order that nearly almost no company would 
qualify for a waiver because there will always be voice 
services.
    We can continue this discussion as you would like. But your 
point about fiscal responsibility, and I'm certainly not 
arguing for anything other than that. I particularly agree with 
your sentiments that you expressed about competition when 
there's already service provided and one receives USF support 
and one doesn't.
    There's many reasons in which the USF justifiably needed to 
be reformed, but I'm worried about the consequences. And, 
again, you tell me, no, I don't know what the words are. No 
flash.
    Chairman Genachowski. Flash cuts.
    Senator Moran. Flash cuts.
    But I'm worried about how a company who's trying to make 
investment decisions, borrow money, make decisions about 
whether to invest in additional plant and equipment, expand 
their business, is going to have the certainty that they're not 
going to have a flash cut.
    Because there's a waiver process that prohibits, that 
allows them relief. You have, as I understand it, some 
petitions for reconsideration pending. I think some of those 
petitions at least are a request for change in that threshold 
related to waivers.
    And, again, on fiscal responsibility, I want to go back to 
the USF, and its consequences, the alteration of the universal 
service funds, consequences on another Government agency, RUS, 
part of the Department of Agriculture.
    And what I experienced in our State and we had the 
administration in many instances following passage of the 
Stimulus Act encouraging companies to invest in broadband. 
Again, a noble cause.
    Many companies chose to finance that expansion of 
broadband, their investments, through grants and loan programs 
using the American Recovery and Reinvestment Act, as well as 
loans from the USDA's RUS.
    RUS telecom portfolio has more than $4 billion in loans. I 
don't know exactly what percentage of those loans are expected 
to be repaid by funds generated from the USF that may no longer 
be there because of your order.
    And can you assure me, and I've had this conversation in an 
Appropriations subcommittee with Secretary Vilsack, and he 
indicates that he is working with FCC and others within the 
administration to make certain that we don't have a major 
default because of a decision by the FCC affecting the ability 
of a private company to repay another Federal agency--RUS.
    Chairman Genachowski. And for that reason, from early in 
our process, we worked closely with RUS because we were aware 
that this would be an issue. And we both agree that both the 
FCC and RUS and potentially the Congress will have to show 
flexibility to solve this problem the right way.
    The easy solution would be no change. And even in areas 
where we look at it from the fiscal responsibility perspective 
and say how can we justify Government money going to that, 
well, it's too late to make any changes for many, many years.
    That result would be unfair to the people who are paying 
into the fund. Similarly, a result that says, as a result of 
these rules, you have to end service tomorrow. That also would 
be unfair.
    So flexibility from us, from RUS, there may be actions that 
will collectively need the Congress to take, will be important, 
so we can get the balance right between the legitimate concerns 
that businesses have, the legitimate concerns that consumers 
who live in those areas have, and the legitimate concerns that 
the consumers have who are putting money into the Fund that are 
funding things that are hard to justify.
    And so I look forward to working together on that path 
through.
    Senator Moran. That flexibility, and again, I would point 
out, you said it may take flexibility on the Congress maybe to 
do something that RUS may need to do something, flexibility is 
required of FCC, and I still would be interested in knowing how 
that flexibility is going to be granted except through a waiver 
process.
    And in regard to the waiver, if you are granted a waiver. 
If a company is granted a waiver, where does the money come 
from to compensate them to be able to, for example, repay the 
loan? Or the flexibility that you're saying will be there, or 
may be there, where does that flexibility come from as far as 
the revenue stream to allow them to repay the loan?
    Chairman Genachowski. It's the right question. It comes 
from other companies who would use that money to build out 
broadband to people who don't have it. Because we're committed 
to a budget.
    So getting this balance right, a company that really needs 
help, will get the help it needs, but that will slow down 
broadband to other parts of America, other parts of Kansas.
    So this is the hard job that we have to make sure that 
we're turning the dial to the place where we're doing right by 
consumers wherever they live, right by businesses, whether 
they're in areas, you know, in this part of the State or that 
part of the State.
    It's a hard challenge, and we'd be happy to take you 
through a deeper level of detail on it. And, you know, we'd 
made a suggestion in our national broadband plan that some of 
these hard issues could be softened by an appropriation for a 
one-time capital infusion into the USF that would allow us both 
to turn the dial down over here on spending that's hard to 
justify, while simultaneously turning the dial up faster over 
here to parts of Kansas and the rest of America that don't have 
service.
    I continue to think that would be a good idea. I understand 
the various issues. In the absence of that, we'll work within a 
budget and we'll do the best we can.
    Senator Moran. Chairman Durbin, I think Chairman 
Genachowski has once again said the Congress could solve this 
problem.
    Are there waiver requests pending?
    Chairman Genachowski. Yes.
    Senator Moran. And by the numbers?
    Chairman Genachowski. Single digits so far. We issued some 
clarifications in the last few weeks. It's certainly possible 
that we'll get more waiver requests in.
    We've set aside staff to take the waiver requests 
seriously, and we understand----
    Senator Moran. How long would the process take to be 
granted a waiver, if one is justified?
    Chairman Genachowski. We have a shot clock that we've 
imposed on ourselves. I don't remember the length so I don't 
want to get that wrong.
    We found that in order for us to make a decision in the 
shot clock, it requires getting certain information from the 
companies. And so there's a little bit of a cat and mouse where 
in some cases we stopped the shot clock until we get the 
information we need.
    Again, this is the blood and guts of trying to make this 
work, and meet these big objectives of broadband to unserved 
America, fiscal responsibility and recognizing business 
reality.
    Senator Moran. You're dealing with the macro and the micro.
    Chairman Genachowski. Every day.
    Senator Moran. Mr. Chairman, thank you.

                                CRAMMING

    Senator Durbin. I'd like to talk to you about cramming. In 
the 1990s, this became a more serious problem on consumer phone 
bills.
    When telephone companies open their billing up to third- 
party vendors who were selling satellite services and long 
distance services, many vendors took advantage of it to put 
fees on our phone bills that we'd never seen before.
    And some people didn't question, just automatically paid it 
and found out later on that some of these things were not 
warranted at all.
    The Senate Commerce Committee found third-party billing on 
wire line bills generated $2 billion a year. Much of that was 
from cramming. The industry voluntarily worked to curb 
cramming, and FCC adopted Truth in Billing rules to improve 
disclosure.
    Yet, third-party billing was not outlawed and continues to 
be a problem. Now the crammers are targeting wireless phones 
for obvious reasons. Cramming complaints on wireless bills as a 
percentage of total cramming complaints has increased from 16 
percent in 2008 to 2010 and now up to 30 percent in 2011.
    However, wireless billing is more complicated due to 
legitimate downloads for videos and apps. FCC approved a 
rulemaking requiring wire line phone companies to provide 
consumers a clear opt out of third-party billing.
    And both Verizon and AT&T announced in March they would no 
longer permit unwanted billing by third-party vendors on wire 
line accounts, not wireless, wire line accounts.
    So why did you choose the weaker opt-out provision rather 
than protecting the consumer with an opt in provision?
    Chairman Genachowski. Well, there were some other things 
that we did as part of that order too. Cramming clearly is a 
serious issue, particularly on wire line based on the record 
that we had.
    In addition to the clear opt out, we also required that 
phone companies separate out third-party billing charges so 
that it's easy for a consumer to determine whether a third-
party charge on their bill was something they ordered or 
something that they didn't.
    The record that we had before us, our conclusion was that 
if we did that, that would empower consumers, deter crammers. 
The other thing we'd been doing is increasing our enforcement 
efforts for crammers.
    We issued fines totaling I believe $11 million for 
crammers. And we continue to monitor this very closely because 
you're right. It's a very serious issue.
    On wireless, the record that we had suggested that there 
may be a problem, but it wasn't clear. And so when we adopted 
the new rules for wire line, we launched a proceeding on 
wireless. We are gathering data. We made it very clear that if 
there's a problem, we will act in wireless as we did in wire 
line.
    On the wire line side, we made it very clear that if the 
separate disclosures don't work in eliminating cramming, the 
next option is opt in.
    Senator Durbin. So what are you waiting for? The percentage 
of total cramming complaints has almost doubled in 3 years on 
wireless.
    Chairman Genachowski. I'd have to, if I could, Sir, I'd 
have to get back to you on the data that we had before us when 
we did our proceeding. I don't recall what was in the record.
    But it was clear to our staff that there is potentially an 
issue on wireless. We didn't have enough of a record nor to 
proceed with rules just then.
    We didn't close the proceeding. We issued what in our 
parlance is a further notice of proposed rulemaking so that we 
can gather more information and put us in a position to act.
    It's important for us to have the evidence we need. There's 
no point in us adopting rules that we'll lose in court. And 
again, I trust our staff on making sure that if the record is 
there and we can justify this kind of consumer protection 
action, we'll do it.
    We've done it in many other areas.
    Senator Durbin. Well, and let me go back to the earlier 
point. Please make this intelligible to ordinary consumers so 
they know what they're getting into here. And that's why the 
opt out thing really leaves me cold.
    I really think, an opt in, most people will say, why in the 
world would I do that? And they won't. And that's why the 
companies beg for the opt out because they think they can just 
kind of slide in there.

          POSTING BROADCASTERS' PUBLIC INSPECTION FILES ONLINE

    Let me, if I can, ask a question here. After Citizens 
United, we virtually have no rules when it comes to money being 
spent on campaigns. I lived through the McCain-Feingold era 
where we applauded ourselves for restricting soft money, taking 
it out of the process.
    We're down to hard money, baby, and you report every buck 
of it, and we're going to have accountability. Then came 
Citizens United and said, none of this counts anymore.
    And a Las Vegas casino magnate can dump $15, $20 million 
into a Presidential campaign for his favorite and nothing can 
stop him. I mean Citizens United has opened the gate wide.
    I wish a couple Supreme Court justices had stood for office 
at some point in their life, maybe they would understand this 
issue a little more.
    One of the last sources of information about what's 
happening is end user, and that relates to the broadcasters 
file, that they keep the records that they keep.
    And, historically, I know because I used to walk into radio 
and TV stations, and they'd push a questionnaire in front of 
me, a consumer survey, community survey, which was being 
collected in the old, old days.
    But I know that at most of these stations there is a 
written record that is kept that includes a lot of basic 
information. In part of that record that is available in 
written form is information on political advertising, the 
amount that's being spent on that.
    It's physically available at the station, public comment, 
political files and so forth. Now, you recently approved a rule 
that takes this into the 21st century and says the entire file 
for all broadcasters has to be posted on the FCC's Web site in 
searchable format.
    So no longer does it require a physical visit. You can pick 
up this information online. And it's searchable for the first 
time. It increases transparency on political ad buys. It 
educates the public on which candidates and groups are using 
the public's airtime.
    And it is the public's airtime. This is important because 
of the rise in anonymous, large political donations through 
Super PACs and things like that. We have tried to pass a 
DISCLOSE Act here in the Congress so that the Super PAC folks 
would have to say, actually say on the ad, I paid for this, or 
I'm not a foreign national.
    Things like that. But we can't get that through. That's 
considered radical thinking. So how do citizens access the 
political file now? Is there any information that will be newly 
available to the public under this rulemaking? And is the FCC 
considering the same requirement for cable and satellite 
providers?
    Chairman Genachowski. So until we adopted this rule as you 
said, the information that the Congress required broadcasters 
to put in public files, was only available at a station. You 
had to physically go and you could get it that way.
    As part of our general effort to move all of our filing 
requirements, disclosure requirements into the 21st century, we 
proposed and now we have in fact required that those political 
files and everything else in broadcasters' public files be 
placed on line.
    That will go into effect in the first tranche over the next 
6 months. In full, over the next 2 years. And then that 
information will be available to anyone who has access to the 
Internet.
    Senator Durbin. So has there been a complaint that you've 
got another Federal mandate here, imposing another expense on a 
private company, and it's a hardship that some stations won't 
be able to meet? Have you heard that?
    Chairman Genachowski. We heard those complaints. We took 
them seriously. We went and did some investigation ourselves. 
We learned some interesting things.
    Our staff went to one station, asked for the public file 
and it was said, okay, you know, if you wait and sit here for a 
while, we'll bring it out to you. You can look at it here, but 
it's going to take some time.
    And, eventually, the person came back and said to our 
staffer, you know what, here it is in a thumb drive, why don't 
you just take this.
    And we concluded that the arguments about burden really 
weren't realistic. We're in an era where all of our licensees 
are increasingly doing everything with the FCC on an electronic 
basis.
    They're submitting their applications, their modifications 
for engineering. Everything is online. The question for us is 
should this be the one thing that doesn't go online?
    And we concluded that it just didn't make any sense.
    Senator Durbin. So what about the argument that somehow you 
are forcing disclosure of sensitive pricing data that otherwise 
would not be disclosed?
    Chairman Genachowski. The data that will be disclosed is 
data that's already disclosed. It's available already to anyone 
in the market with an economic interest.
    We found in our work that either other ad buyers are 
interested and they can get the information locally. It's very 
easy. In some cases, we learned that they did. Or they've 
concluded that it really doesn't affect the market. They don't 
need the information because of how ad deals ultimately get 
negotiated.
    The Congress made the decision that this information, and 
it was explicit, that this information should be made public, 
including the rate. It was upheld by the Supreme Court 
explicitly over similar arguments about burden and about the 
negative effects of disclosure.
    But in this case, the Supreme Court said, no, we reject the 
arguments. This is okay. And our action was completely 
consistent with the Congress' directive and with the Supreme 
Court upholding those provisions of the 2002 law.
    Senator Durbin. May I ask one last question if I can, and 
then I'll turn it over to Senator Moran for whatever he would 
like to ask.

  BUDGET REQUEST FOR THE FEDERAL COMMUNICATIONS COMMISSION INSPECTOR 
                                GENERAL

    Let's discuss your inspector general's appropriation, the 
amount that's being requested. You're asking for an overall 2-
percent plus increase for the FCC. But you've cut the inspector 
general's budget by about 10 percent.
    Inspectors general around here are a little more popular 
since the General Services Administration mess, and why would 
you want to cut back on your inspector general's capacity?
    Chairman Genachowski. I believe that those aren't the 
correct facts. Our practice has been, is and will be to pass 
through the inspector general's request for a budget and to 
support their budget.
    The work of the inspector general is incredibly important. 
The independence of the inspector general is important. There 
may have been a mistake somewhere in the process.
    Senator Durbin. The fiscal year 2013 request is $8.75 
million for the inspector general. The fiscal year 2012 enacted 
level is $9.75 million.
    Chairman Genachowski. We will work on that with you, but I 
want to be very clear on this. Our policy is to pass through 
the inspector general's request and to support him.
    Senator Durbin. Thank you.
    Senator Moran. Mr. Chairman, thank you.
    I think this should be able to conclude my questions of the 
Chairman. Thank you for your patience.

          POSTING BROADCASTERS' PUBLIC INSPECTION FILES ONLINE

    In regard to the political broadcasting issue that the 
chairman raised, I just want to ask one question. Does FCC 
envision going beyond what is currently included in the 
political file to require the collection of any additional 
information?
    And what I heard you saying is that this is what the 
Congress authorized to be collected and retained. It's what the 
Supreme Court said was fine.
    So, I assume the answer to that is, ``No'', but I wanted to 
make certain that I gave you the opportunity to say that.
    Chairman Genachowski. I think you're right. The steps that 
we put in place simply said, we've already worked out what 
should be the disclosures. Let's move them from paper to 
online.
    They're many people with many different views who think 
that disclosure should be done differently. That's a discussion 
that could be had including broadcasters who have proposed some 
ideas on how to modify the disclosures.
    We'll be open to those suggestions, but the default is, 
what has been disclosed is what will continue to be disclosed.
    Senator Moran. Do you have the statutory authority? Are you 
able to do what you did because of the law you indicated the 
Congress has passed? Do you have the authority to collect more 
information?
    Chairman Genachowski. I would presume that we do. There's a 
long history as part of----
    Senator Moran. I guess collect and disclose.
    Chairman Genachowski. Collect and disclose. As part of 
broadcasters' public trustee obligations, which go back many, 
many decades, I would presume we have that authority.
    There have been a few instances where the Congress said to 
FCC, whatever you do, make sure you do this, and this is one of 
those cases. But I think most people would agree that our 
authority with respect to information from spectrum licensees 
is pretty broad.

                        UNIVERSAL SERVICE REFORM

    Senator Moran. I want to just as a final, a couple of 
questions related to the regression model that the order 
outlined.
    The order incorporated a regression model to evaluate when 
companies are perhaps not being as efficient with resources as 
possible. The regression model has raised concerns, I assume to 
you and certainly to me.
    It was brought to my attention that FCC may have entered 
incorrect data into the regression analysis used to set the 
upper limits of high cost loop paid to incumbent rate of 
return, local exchange carriers.
    This is an important aspect for future broadband 
investment. The other criticism that I've heard is that the 
outcomes will change, the regression model's outcomes will 
change from year to year as companies choose whether or not to 
make investments.
    And the concern here is that companies may be fearful to 
invest because if they choose to but other companies don't, the 
regression model may return results that indicate the company 
is an outlier in the model and therefore not eligible for 
recovery of their investment.
    Are either one of those concerns legitimate and something 
that you're attempting to address?
    Chairman Genachowski. I'm not certain about the status of 
that back and forth with our staff. But, again, any issues like 
that that get raised, we have a professional staff that's been 
directed to take them very seriously.
    The kinds of things we're trying to do, and the direction 
they've received from FCC, if I could be at a macro level for a 
minute, we want to distinguish instances like the following.
    A company is receiving Federal funds who set up multiple 
subsidiaries with the same CEO at each subsidiary, paying 
themselves multiple times, using what in effect is taxpayer 
money. Well, we want to stop that.
    We don't want to stop the perfectly honorable company in 
small town America that's doing the best it can under difficult 
circumstances to provide communications infrastructure in areas 
that have low population density.
    And our charge, and not just mine, but FCC on a bipartisan 
basis to the staff, has been let's get this right. Let's 
distinguish those cases where we can't defend the outflow of 
money from the ones where they're legitimate businesses doing 
the right things.
    Let's take these cases like what I mentioned before, where 
there's an overlap and phase them out in a reasonable way. 
Let's work with RUS to make sure that there's flexibility there 
on the loans as that's appropriate.
    So these are all legitimate issues that you're raising, and 
I want you to know that we care about any negative effects that 
we have in places where we don't want to have negative effects.
    And it's a hard job, and I'm just so proud of our staff for 
taking this seriously. The easier thing for us to do would have 
been to leave the program just the way it was, and not try to 
reform it, and not try to get broadband to people in rural 
America who don't have it, and not deal with these problems.
    But we took on the challenge. I'm proud of FCC for having 
done it on a bipartisan, unanimous basis. I look forward to 
working with you on this, but I'd ask that if we can receive 
bipartisan support to keep on doing the hard work of reform and 
fiscal responsibility in meeting these goals, I think we can do 
great things for the country in moving this program forward.
    Senator Moran. Chairman Durbin, thank you very much for 
this hearing today and thank you for the opportunity I've had 
to visit, to question, to have a conversation with Chairman 
Genachowski.
    Mr. Chairman, Chairman Genachowski, I don't think you 
volunteered to come to Kansas. But, Chairman, in the 
conversation that you and I had, you indicated a willingness to 
accept an invitation. I would like to extend that again.
    We'd love to have you come spend some time with folks in 
rural America, and in the interim, I would ask your commitment 
that your staff work with me and my staff, the subcommittee 
staff, as we try to sort out the questions that I've raised and 
some others, to give some additional information to those who 
are trying to make decisions about what to do next.
    Chairman Genachowski. I would be happy to do that.
    Senator Moran. Thank you very much. Thank you.
    Senator Durbin. I would consider it an honor to come to 
Kansas and----
    Senator Moran. Chairman Durbin, I would invite you to come 
to Kansas, but----
    Senator Durbin. As long as it's Norfolk, Kansas.
    Mr. Chairman, thank you for being here today. Thanks for 
your testimony. Senator Moran, thank you too.
    Senator Moran. Thank you.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Durbin. We are going to keep the file open for a 
week, if there are any questions or comments to be added. You 
may get a question in the mail, please take it seriously.
    [The following questions were not asked at the hearing, but 
were submitted to the Commission for response subsequent to the 
hearing:]

               Questions Submitted by Senator Jerry Moran

                                 WAIVER

    Question. In our previous discussions about Universal Service Fund 
(USF) reform, you have cited the ``waiver process'' as a remedy for 
companies who may experience severe financial challenges as a result of 
lost USF support. The order published on November 18 clearly states, 
``We permit any carrier negatively affected by the universal service 
reforms we take today to file a petition for waiver that clearly 
demonstrates that good cause exists for exempting the carrier from some 
or all of those refunds, and that waiver is necessary and in the public 
interest to ensure that consumers in the area continue to receive voice 
service.'' The threshold you have established for the waiver is related 
to a consumer's loss of access to voice service. This is an extremely 
low threshold of service to consumers particularly in the transition to 
a broadband world.
    At the March 19 event here in Washington, Federal Communications 
Commission (FCC) Commissioner Robert McDowell stated, ``If your company 
looks like it won't survive, there is a clear waiver process.'' Later 
the day, when questioned at an appropriations hearing, Commissioner 
McDowell said ``We also looked at a waiver process that is very frugal 
. . . if indeed there is a carrier experiencing undue hardship because 
of the reform they can file a waiver with the FCC where they will have 
to open their books in a very detailed fashion so we know exactly what 
is going on with the money but they can get a waiver.''
    Can you explain to me how can we make certain waivers will be 
granted to those companies who might have to walk away from their 
current networks?
    Answer. In reforming the USF, FCC unanimously agreed that, as a 
matter of fiscal responsibility and accountability, and to protect 
consumers and small businesses paying into the USF, a thorough, but 
fair waiver process was necessary for any company seeking a waiver. Any 
carrier facing reduced support as a result of FCC's universal service 
reforms may file a petition for waiver clearly demonstrating that good 
cause exists for exempting the carrier from some or all of those 
reforms, and that the waiver is necessary and in the public interest to 
ensure that consumers in the area continue to receive service.
    Waivers will be granted where an eligible telecommunications 
carrier can demonstrate that, without additional universal service 
funding, its support would not be ``sufficient to achieve the purposes 
of section 254 of the Act.'' In particular, a carrier seeking such a 
waiver must demonstrate that it needs additional support in order for 
its customers to continue receiving service in areas where there is no 
terrestrial alternative. Several weeks ago, I circulated a draft order 
to my colleagues to clarify that waivers can be granted to prevent loss 
of broadband service, not just loss of voice service.
    A full discussion of FCC's waiver process is available in the 
Connect America Fund order beginning at page 177 (available at http://
hraunfoss.fcc.gov/edocspublic/attachmatch/FCC-11-161Al.pdf).
    Question. Additionally, assume a waiver is granted. What rules will 
companies who are granted a waiver fall under?
    Answer. The waiver process is structured to address the specific 
relief needed by the company and to grant tailored relief to address 
its needs. Otherwise, the generally applicable rules for the USF will 
apply. Careful, tailored relief is consistent with fiscal 
responsibility and accountability and to protect consumers and small 
businesses paying into the fund.
    Question. Will there be increased reporting requirements?
    Answer. That is a possible condition for granting a waiver. As FCC 
stated in the order, we intend to subject such requests to a fair and 
thorough review and will take appropriate measures to both ensure 
consumers do not lose service and protect public funds from waste, 
fraud, or abuse. This is consistent with our commitment to fiscal 
responsibility to consumers and businesses paying into the USF.
    Question. Will companies receive more support to help fund their 
networks? If so, what money will be used to pay for companies who are 
granted waivers?
    Answer. Any money used to grant a waiver will necessarily come from 
funds that could otherwise be used to support deployment of broadband 
to unserved areas. In the order, to address concerns about growth in 
the USF and to protect consumers and small businesses paying into the 
fund, we adopted an overall budget for the USF.
    Question. Is it possible rural Americans could lose broadband 
service which is currently available to them today?
    Answer. FCC's framework will ensure that consumers who have access 
to broadband will continue to have access to broadband.
    Question. What is the timeframe within which the FCC will respond 
to waiver requests from companies?
    Answer. The Bureau is reviewing each petition individually and will 
make final decisions as expeditiously as possible. To expedite review 
of waivers, FCC delegated to the Wireline Competition and Wireless 
Telecommunications Bureaus the authority to approve or deny all or part 
of requests for waivers of phase-downs in support. We required that the 
Bureaus initiate the process for public comment within 45 days of 
receipt of a waiver petition.

                            REGRESSION MODEL

    Question. That regression model outline in the USF/Intercarrier 
Compensation (ICC) reform order has raised concerns. It was brought to 
my attention that the FCC may have entered incorrect data into the 
quantile regression analysis used to set the upper limit of the high-
cost loop paid to incumbent rate-of-return local exchange carriers. 
This is important for future broadband investment. Another criticism of 
the regression model is that the outcomes will change from year to year 
as companies choose whether or not to make investments. I have been 
told companies are fearful to invest because if they choose to and 
other companies do not, the regression model may return results that 
indicate the company is an outlier in the model and therefore will not 
eligible for recovery of the investment.
    Can you comment on the regression model and potential incorrect 
inputs and what the FCC is doing to address this issue?
    Answer. FCC created a streamlined, expedited process to correct any 
problems. So far, the Wireline Competition Bureau has received two 
petitions to correct data, and both of the petitioners received 
responses within 2 weeks. FCC also launched a process to collect a full 
set of updated data from companies before benchmarks take full effect.
    Question. How is FCC determining what caps for support should be in 
various areas?
    Answer. The caps are based on comparing carriers to other similarly 
situated providers based on a range of criteria. For instance, the 
benchmarks take account of local conditions like population density, 
soil type, climate, as well as any recent investment by the company. In 
some cases, carriers spend almost three times as much per customer as 
smaller carriers right next door.
    Question. How is FCC able to tell companies they should invest in 
serving their areas if the regression caps are changing year to year?
    Answer. The reforms adopted by FCC will make support more 
predictable for carriers spending efficiently. In response to concerns 
about the timing of changes to the benchmarks, the Wireline Competition 
Bureau's order determined that the benchmarks should initially remain 
in effect until 2014. In the interim, FCC will consider whether 
benchmarks should subsequently be set for multiple years.
    Question. How are you responding to companies who have asked about 
the regression model?
    Answer. FCC has an open-door policy--Commission staff takes all 
meeting or call requests from companies to address any questions that 
come up, and has made all aspects of the regressions available for 
public inspection.
                                 ______
                                 
                Questions Submitted by Senator Mark Kirk

    Question. I strongly support the deployment of fixed and mobile 
broadband to increase economic development, productivity and America's 
global competitiveness. One analysis estimates the productivity gains 
from the deployment and use of wireless broadband will generate almost 
$860 billion in additional GDP by 2016. Spectrum auctions and rural 
broadband development are key tools to accomplishing our ambitious 
goals and ensuring economic success. However, I am concerned about the 
administration's execution of these programs and have the following 
questions.
    The administration recently announced its support for spectrum 
sharing in order to accelerate broadband development throughout the 
Nation.
    Given that the National Telecommunications and Information 
Administration (NTIA) recently reported that moving Federal users off 
the Federal Exclusive Band airwaves will take more than a decade and 
cost $18 billion, how does the Federal Communications Commission (FCC) 
intend to work with NTIA to ensure that the mutually beneficial short-
term goal of spectrum sharing occurs, while at the same time balancing 
longer-term spectrum reallocation and incentive auction plans?
    Answer. FCC's Mobile Action Plan employs an ``all-of-the-above'' 
approach to the spectrum crunch which includes more spectrum, but also 
more efficient use of spectrum and new ways to manage spectrum, both in 
the near-term and in the long-term. FCC is working now with NTIA and 
other stakeholders on near-term sharing and small cell opportunities in 
the 1755 MHz and 3.5 GHz bands. We are moving expeditiously forward 
with incentive auctions in a parallel process. We will continue to work 
with all stakeholders to meet the Nation's spectrum needs.
    Question. How long will it take to complete the testing process 
with NTIA before spectrum sharing can be implemented?
    Answer. I am hopeful that testing of sharing in the 1755 MHz band 
can be completed in a timeframe that would allow it to be paired with 
the 2155 MHz band for auction, as required by statute. FCC intends to 
initiate a 3.5 GHz rulemaking this year.
    Question. How does FCC intend to handle the costs of Federal 
spectrum relocation?
    Answer. FCC will follow the direction of the Congress, as set forth 
in the statute with respect to reimbursing relocation costs.
    Question. What assurances does the FCC have from Government 
spectrum users that they will participate in spectrum sharing and that 
such sharing can be implemented in a timely manner?
    Answer. FCC will continue to engage in discussions with NTIA and 
other Federal agencies, particularly the Department of Defense, to find 
solutions that meet commercial spectrum needs, while also enabling 
vital Government operations to continue.
    Question. I have introduced legislation to establish a process 
nearly identical to the successful Base Realignment and Closure (BRAC) 
process to determine which Federal spectrum should be auctioned for 
sole or shared use by the private sector. I believe this is a key model 
for spectrum relocation because it forces the relocation process to 
move forward unless the Congress passes legislation to block it. What 
is the FCC's position on using a BRAC-like approach to addressing our 
spectrum crunch and providing the telecommunications industry with a 
certain path forward to reliably clear spectrum for wireless 
advancements?
    Answer. This is an intriguing approach and I am interested in 
discussing all potential methods for identifying and deploying Federal 
spectrum. We should consider a broad range of solutions to the spectrum 
crunch and ensure that we have not left any concept off the table.
    In the meantime, FCC has moved ahead to work with its counterparts 
to deploy Federal spectrum as soon as possible. The National Broadband 
Plan recommended a number of approaches to increase the availability of 
spectrum for commercial mobile and fixed wireless use, including 
working with NTIA to develop a roadmap to identify opportunities to 
make Federal spectrum available for exclusive, shared, licensed and/or 
unlicensed use. FCC continues to collaborate with NTIA on this approach 
and we will work with our Federal partners to develop plans for 
identifying and freeing up this valuable resource.
    Question. I am concerned about the overlap in programmatic goals 
and implementation of the Universal Service Fund (USF) and the 
Department of Agriculture's (USDA) Rural Utility Service (RUS). 
Additionally, carriers use USF funds, that would otherwise have been 
used to build out broadband, to repay their RUS loans. What are the 
default criteria mechanisms in place that the FCC will use to enforce 
repayment of RUS loans?
    Answer. RUS administers its loan program and has a better 
understanding of its default criteria. That said, as I mentioned at the 
hearing, we have worked closely with RUS throughout the USF reform 
process and our waiver criteria specifically consider debt, including 
RUS loans.
    Question. How is the FCC working with USDA's RUS to ensure that 
taxpayer dollars are not diluted through duplicative projects that are 
also funded under USF?
    Answer. RUS loans and USF support serve complementary purposes. USF 
provides ongoing support, while RUS provides low-cost loans. More 
generally, our USF reform was designed to ensure that USF support only 
goes where it's needed, and includes new accountability and safeguards 
for all USF spending.
    Question. A recent study conducted by a Georgetown University 
researchers found that, based on the analysis of previous FCC auctions, 
the success of spectrum auctions depends greatly on whether or not 
conditions are placed on the auction. The study found that the full 
auction potential of broadcast spectrum with no conditions imposed 
could generate as much as $91 billion in revenue, whereas the same 
auction which carries heavy conditions, such as net neutrality 
requirements. A free auction could raise 250 percent more funds than an 
unconditioned one.
    What, if any, kinds of conditions will FCC place on the spectrum 
auctions authorized by Public Law 112-96? Will any restrictions be 
placed on participants?
    Answer. FCC's incentive auctions team currently is preparing 
rulemaking notices for the incentive auction process. FCC will comply 
with all statutory requirements, and our process will be open, 
inclusive, fact-based, and guided by economics and engineering.
    Question. How will FCC ensure that the value of the spectrum will 
be upheld throughout the auction process?
    Answer. FCC has a long history of raising revenue through the 
auctions process, generating $50 billion to the United States Treasury 
since 1993. Spectrum value goes beyond direct payments to the Treasury 
for spectrum licenses--spectrum deployment supports technological 
development, job creation and economic growth. FCC will consider these 
factors as well as all relevant statutory mandates as it initiates the 
incentive auctions process.

                          SUBCOMMITTEE RECESS

     Senator Durbin. This meeting stands in recess.
    [Whereupon, at 4:55 p.m., Wednesday, May 9, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
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