[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]





             THE EVOLUTION OF WIRED COMMUNICATIONS NETWORKS

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

                                HEARING

                               BEFORE THE

             SUBCOMMITTEE ON COMMUNICATIONS AND TECHNOLOGY

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 23, 2013

                               __________

                           Serial No. 113-86



      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov




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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

RALPH M. HALL, Texas                 HENRY A. WAXMAN, California
JOE BARTON, Texas                      Ranking Member
  Chairman Emeritus                  JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky               FRANK PALLONE, Jr., New Jersey
JOHN SHIMKUS, Illinois               BOBBY L. RUSH, Illinois
JOSEPH R. PITTS, Pennsylvania        ANNA G. ESHOO, California
GREG WALDEN, Oregon                  ELIOT L. ENGEL, New York
LEE TERRY, Nebraska                  GENE GREEN, Texas
MIKE ROGERS, Michigan                DIANA DeGETTE, Colorado
TIM MURPHY, Pennsylvania             LOIS CAPPS, California
MICHAEL C. BURGESS, Texas            MICHAEL F. DOYLE, Pennsylvania
MARSHA BLACKBURN, Tennessee          JANICE D. SCHAKOWSKY, Illinois
  Vice Chairman                      JIM MATHESON, Utah
PHIL GINGREY, Georgia                G.K. BUTTERFIELD, North Carolina
STEVE SCALISE, Louisiana             JOHN BARROW, Georgia
ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington   DONNA M. CHRISTENSEN, Virgin 
GREGG HARPER, Mississippi            Islands
LEONARD LANCE, New Jersey            KATHY CASTOR, Florida
BILL CASSIDY, Louisiana              JOHN P. SARBANES, Maryland
BRETT GUTHRIE, Kentucky              JERRY McNERNEY, California
PETE OLSON, Texas                    BRUCE L. BRALEY, Iowa
DAVID B. McKINLEY, West Virginia     PETER WELCH, Vermont
CORY GARDNER, Colorado               BEN RAY LUJAN, New Mexico
MIKE POMPEO, Kansas                  PAUL TONKO, New York
ADAM KINZINGER, Illinois             JOHN A. YARMUTH, Kentucky
H. MORGAN GRIFFITH, Virginia
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Ohio
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina

                                 _____

             Subcommittee on Communications and Technology

                          GREG WALDEN, Oregon
                                 Chairman
ROBERT E. LATTA, Ohio                ANNA G. ESHOO, California
  Vice Chairman                        Ranking Member
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
LEE TERRY, Nebraska                  MICHAEL F. DOYLE, Pennsylvania
MIKE ROGERS, Michigan                DORIS O. MATSUI, California
MARSHA BLACKBURN, Tennessee          BRUCE L. BRALEY, Iowa
STEVE SCALISE, Louisiana             PETER WELCH, Vermont
LEONARD LANCE, New Jersey            BEN RAY LUJAN, New Mexico
BRETT GUTHRIE, Kentucky              JOHN D. DINGELL, Michigan
CORY GARDNER, Colorado               FRANK PALLONE, Jr., New Jersey
MIKE POMPEO, Kansas                  BOBBY L. RUSH, Illinois
ADAM KINZINGER, Illinois             DIANA DeGETTE, Colorado
BILLY LONG, Missouri                 JIM MATHESON, Utah
RENEE L. ELLMERS, North Carolina     G.K. BUTTERFIELD, North Carolina
JOE BARTON, Texas                    HENRY A. WAXMAN, California (ex 
FRED UPTON, Michigan (ex officio)        officio)

                                  (ii)
                                  
                                  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     1
    Prepared statement...........................................     2
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................     3
Hon. Robert E. Latta, a Representative in Congress from the State 
  of Ohio, opening statement.....................................     3
Hon. Anna G. Eshoo, a Representative in Congress from the State 
  of California, opening statement...............................     6
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................    10
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................    10
Hon. Peter Welch, a Representative in Congress from the State of 
  Vermont, opening statement.....................................    68
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, prepared statement...................................   200

                               Witnesses

James W. Cicconi, Senior Executive Vice President, External and 
  Legislative Affairs, AT&T, Inc.................................    68
    Prepared statement...........................................    71
    Answers to submitted questions...............................   201
Mark Iannuzzi, President, TelNet Worldwide, Inc..................    82
    Prepared statement...........................................    85
Harold Feld, Senior Vice President, Public Knowledge.............    98
    Prepared statement...........................................   100
    Answers to submitted questions...............................   208
John D. Burke, Commissioner, Public Service Board, State of 
  Vermont, On Behalf of the National Association of Regulatory 
  Utility Commissioners..........................................   123
    Prepared statement...........................................   125
    Answers to submitted questions...............................   250
Randolph J. May, President and Founder, Free State Foundation....   138
    Prepared statement...........................................   140

                           Submitted Material

Chart, undated, ``ILEC Switched Share of Households Is Declining 
  Sharply,'' U.S. Telecom, submitted by Mr. Latta................     5
Letter of October 23, 2013, from Steven K. Berry, President and 
  Chief Executive Officer, Competitive Carriers Association, to 
  Mr. Upton, et al., submitted by Ms. Eshoo......................     8
Draft, dated September 2013, ``No Dialtone: The End of the Public 
  Switched Telephone Network,'' Kevin Werbach, submitted by Mr. 
  Waxman.........................................................    12
Article, dated October 22, 2013, ``Rivals Protest AT&T Rate 
  Shift,'' Ryan Knutson, The Wall Street Journal, submitted by 
  Mr. Doyle......................................................   170
Ex Parte Communication, dated October 18, 2013, from Ad Hoc 
  Telecommunications Users Committee, et al., to Marlene H. 
  Dortch, Secretary, Federal Communications Commission, submitted 
  by Mr. Doyle...................................................   172

 
             THE EVOLUTION OF WIRED COMMUNICATIONS NETWORKS

                              ----------                              


                      WEDNESDAY, OCTOBER 23, 2013

                  House of Representatives,
     Subcommittee on Communications and Technology,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:34 a.m., in 
room 2123, Rayburn House Office Building, Hon. Greg Walden 
(chairman of the subcommittee) presiding.
    Members present: Representatives Walden, Latta, Shimkus, 
Terry, Blackburn, Scalise, Lance, Guthrie, Gardner, Pompeo, 
Kinzinger, Long, Ellmers, Barton, Upton (ex officio), Eshoo, 
Doyle, Matsui, Welch, Dingell, Pallone, DeGette, Butterfield, 
and Waxman (ex officio).
    Staff present: Gary Andres, Staff Director; Ray Baum, 
Senior Policy Advisor/Director of Coalitions; Andy Duberstein, 
Deputy Press Secretary; Kelsey Guyselman, Counsel, 
Communications and Technology; Grace Koh, Counsel, 
Communications and Technology; David Redl, Chief Counsel, 
Communications and Technology; Charlotte Savercool, Legislative 
Coordinator; Jessica Wilkerson, Staff Assistant; Roger Sherman, 
Democratic Chief Counsel; Shawn Chang, Democratic Senior 
Counsel; Margaret McCarthy, Democratic Professional Staff 
Member; Kara van Stralen, Democratic Policy Analyst; and 
Patrick Donovan, Democratic FCC Detailee.
    Mr. Walden. We will call the Subcommittee on Communications 
and Technology to order and begin our hearing on the evolution 
of wired communications networks.

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

    Wired communications networks have come a long way since 
the days of the telegraph or the rotary phone. It is getting 
harder and harder to remember a time when if you wanted to 
reach out and touch someone, Ma Bell's pair of twisted copper 
wires were the only option. Today's consumers have so many more 
options. Cable, wireless, satellite, and, yes, even the 
telephone companies are all offering Americans the connectivity 
to communicate with the world.
    As all of the services consumers have grown to love as 
standalone networks, like voice and video, are increasingly 
just data applications, completion between network providers 
has never been more vigorous, and over-the-top providers like 
Skype, Apple, Apple's Facetime, Netflix, and Hulu are bringing 
a new facet to competition for consumers' communications 
dollars. But while their competitors have gone through 
successive generations of technological improvements, wired 
communications networks have languished. This isn't because of 
a lack of innovation, but rather because of a declining user 
base. High costs and unique regulatory mandates have conspired 
to make the economics of upgrade untenable.
    Today, however, we stand on the cusp of two transitions in 
the wires network: the IP transition and the upgrade of the 
networks to fiber. Now, these transitions are a natural 
evolution as technology advances, greater capabilities develop, 
prices drop, and competition forces the market to respond.
    While some of the costs of upgrade have changed, and wire 
line providers are increasingly branching out beyond their 
voice service roots, the outdated regulations once enacted to 
break up a monopoly remain. Consumers have come to expect, as 
well as they should, competition among providers in the 
innovation--innovative offerings that result from that 
competition. The question we face today is this: What is the 
appropriate role for the Federal Government in this transition?
    We should be looking not only on the theoretical impact of 
competition policies on the market as they exist today, but 
also to the practical impact of the rules in an uncertain 
future. ILECs looking to invest in future technologies should 
be able to do so without the specter of maintaining legacy 
networks. Those in the competitive community should be able to 
look to the future with the certainty that they have the 
opportunity to serve their customers. And consumers should be 
able to embrace this transition without an interruption in the 
services they already enjoy.
    We must strike the appropriate balance between protecting 
consumers, promoting competition, and not slowing the pace of 
needed innovation. The Internet and wireless worlds have 
thrived without heavy regulation. The last thing we want do is 
stifle the unprecedented growth in innovation of the Internet 
by subjecting it to complicated, outdated, government-imposed 
rules of the plain, old telephone networks.
    It is time to take a hard look at the role of regulation in 
the modern wired communications network marketplace, and our 
witnesses are here to help us do just that.
    [The prepared statement of Mr. Walden follows:]

                 Prepared statement of Hon. Greg Walden

    Wired communications networks have come a long way since 
the days of the telegraph or the rotary phone. It's getting 
harder and harder to remember a time when if you wanted to 
``reach out and touch someone,'' Ma Bell's pair of twisted 
copper wires was the only option. Today's consumers have so 
many more options. Cable, wireless, satellite and, yes, even 
the telephone companies, are all offering Americans the 
connectivity to communicate with the world. As all of the 
services consumers have grown to love as stand alone networks--
like voice and video--are increasingly just data applications, 
competition between network providers has never been more 
vigorous, and over-the-top providers, like Skype, Apple's 
FaceTime, Netflix and Hulu are bringing a new facet to 
competition for consumers' communications dollars.
    But while their competitors have gone through successive 
generations of technological improvements, wired communications 
networks have languished. This isn't because of a lack of 
innovation, but rather because a declining user base, high 
costs, and unique regulatory mandates have conspired to make 
the economics of upgrade untenable. Today, however, we stand on 
the cusp of two transitions in the wires network: the IP 
transition and the upgrade of networks to fiber. These 
transitions are a natural evolution as technology advances, 
greater capabilities develop, prices drop and competition 
forces the market to respond.
    While some of the costs to upgrade have changed and 
wireline providers are increasingly branching out beyond their 
voice service roots, the outdated regulations once enacted to 
break up a monopoly remain. Consumers have come to expect, as 
well they should, competition among providers and the 
innovative offerings that result. The question we face today is 
this: what is the appropriate role for the Federal Government 
in this transition?
    We should be looking not only on the theoretical impact of 
competition policies on the market as it exists today, but also 
to the practical impact of the rules in an uncertain future. 
ILECs looking to invest in future technologies should be able 
to do so without the specter of maintaining legacy networks; 
those in the competitive community should be able to look to 
the future with the certainty that they have the opportunity to 
serve their customers; and consumers should be able to embrace 
this transition without an interruption in the services they 
already enjoy. We must strike the appropriate balance between 
protecting consumers, promoting competition, and not slowing 
the pace of needed innovation.
    The Internet and wireless worlds have thrived without heavy 
regulation. The last thing we want to do is stifle the 
unprecedented growth and innovation of the Internet by 
subjecting it to complicated, outdated, government-imposed 
rules of the plain old telephone network. It's time to take a 
hard look at the role of regulation in the modern wired 
communications network marketplace, and our witnesses are here 
to help us do just that.

    Mr. Walden.I thank the witnesses for their testimony, and 
now I would yield to my colleague from Texas, Mr. Barton, for 1 
minute.

   OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Barton. Thank you, Mr. Chairman. That is perfect 
timing; I just walked in.
    I want to thank you for holding this hearing on the 
transition of the Internet Protocol. It is a topic that we have 
not discussed, but we need to discuss in this Congress.
    I was actually serving on this subcommittee and the full 
committee back in 1996 and participated in many conversations, 
debates, hearings, and markups regarding that act. I remember 
discussing how we could make the marketplace more competitive. 
And at that time AT&T did basically have monopoly, and we 
believed that creating the incumbent local exchange, the ILECs, 
and then the competitive local exchange, was a good solution to 
spur competition.
    That marketplace then and the marketplace today, Mr. 
Chairman, as you know, are not the same. I do question now 
whether we need the Title 2 protections of the CLECs that we 
put in place back in 1996, and I think this hearing is a good 
start to answering that question.
    Mr. Walden. Thank you.
    And I now recognize the gentleman from Ohio, Mr. Latta, for 
42 seconds.

OPENING STATEMENT OF HON. ROBERT E. LATTA, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF OHIO

    Mr. Latta. Thank you very much, Mr. Chairman. And thank you 
very much for holding this hearing today, and I appreciate our 
witnesses for being here today.
    Within the last three decades, we have entered a digital 
age of communications and witnessed the emergence of multimodal 
competition and a dynamic Internet ecosystem that is replacing 
the public switched telephone network and time-division 
multiplex technologies with Internet Protocol-based platforms.
    As we continue to see the convergence and evolution of our 
telecommunications marketplace, the future of regulation is a 
topic that must be addressed so that it does not thwart future 
investment, innovation, or economic growth. We need to ensure 
that current laws and regulations reflect the technologies and 
competitive dynamics of today's marketplace, while protecting 
consumers' ability to access the communications services of 
their choice and safeguarding the reliability and security of 
those services.
    I would also ask to submit this chart, Mr. Chairman, for 
the record, showing the declining share of U.S. households with 
ILEC switched landline service as their primary line service 
over the last 10 years.
    Look forward to hearing from our witnesses today, and I 
yield back.
    Mr. Walden. And, without objection, the chart you reference 
will be submitted for the record.

    [The chart follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Walden. We now turn to my friend and colleague from 
California Ms. Eshoo for an opening statement.

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

    Ms. Eshoo. Thank you, Mr. Chairman. And welcome to all of 
the witnesses and packed hearing room.
    Seventeen years ago, the 1996 act stated its intention, 
quote, ``to promote competition and encourage the rapid 
development or deployment of new telecommunication 
technologies.'' In the years that have followed, hundreds of 
new entrants have emerged, and with their creativity and 
ingenuity, billions of dollars have been invested, and 
thousands of new jobs have been created. So there have been a 
lot of good things that have come from that.
    As the title of today's hearing suggests, an evolution--and 
I underscore the word ``evolution''--in wired communication 
networks is under way, creating new ways of delivering a 
familiar service, a phone call. For over a decade 
communications companies have been making the transition to IP. 
And so I think it is incumbent upon all of us here to decide 
why we would remove rules that have helped pave the way for 
greater competition and innovation in the marketplace, and it 
is a worthy examination.
    Changes in technology and infrastructure do not alter the 
national goals that have always guided our communications 
policies. As Commissioner Rosenworcel and Public Knowledge have 
both articulated, our conversation should begin by laying out 
the core values or principles that will guide the transition to 
all IP voice networks.
    Fundamentally the FCC must ensure universal service to all 
Americans and the rules of the road for competition, as well as 
strong consumer protections and access to 911. Consumers and 
businesses have to have confidence in the reliability and the 
functionality of these services, particularly during times of 
emergency. And I am sure it is an area that we are going to 
hear about and concentrate on today.
    The reality is is that consumers don't consider whether a 
phone call is delivered through a traditional switched network 
or via IP. They just expect their phone call to connect as it 
always has.
    We all support investments that enable companies to offer 
their consumers new and innovative services and do so more 
efficiently and reliably, but changes in technology don't 
automatically--don't automatically--make markets more 
competitive. I look forward to our witnesses' perspectives on 
how we can ensure that the IP transition results in more 
competitive choices.
    And finally it is important that the investment in job 
creation--to remember that the investments in job creation do 
not come from just two or three companies, but rather an 
ecosystem, and we are blessed to have that in our country, that 
includes hundreds of communications companies both small, 
medium, and large. Earlier this year a study found that updated 
procompetition policies would stimulate the hiring of up to 
650,000 new employees in the telecom sector over the next 5 
years and $184 billion of private funds into U.S. 
telecommunications networks.
    So, Mr. Chairman, the topic of today's hearing raises--
first of all, it is an important topic. It also raises 
important questions that it is our responsibility to have 
thoroughly answered. As the migration to all-IP networks 
continues, the testimony of our witnesses--and we have a 
sterling panel here today--will help ensure that our laws and 
regulations promote new investment, competition and consumer 
choice.
    And I would like to ask unanimous consent, Mr. Chairman, 
that this letter from the Competitive Carriers Association 
reiterating the importance of long-standing, tech-neutral 
interconnection requirements be submitted for the record.
    Mr. Walden. Without objection.
    
    [The letter follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Ms. Eshoo. Thank you. And I yield back.
    Mr. Walden. Gentlelady yields back the balance of her time. 
The chair now recognizes the vice chair of the full committee, 
the gentlelady from Tennessee, Mrs. Blackburn.

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF TENNESSEE

    Mrs. Blackburn. Thank you, Mr. Chairman. And I want to 
thank you for holding this hearing. It is important. It is 
timely. And we want to welcome our witnesses. And thank you for 
being here.
    As you have heard, each of us talk about competition and 
looking at how that has changed in the communications 
marketplace. And today we have that intermodal competition 
among the ILECs, the CLECs, VoIP, cable, satellite, others. But 
these competitive services are subject to different rules based 
on outdated assumptions. And I think that it is not easy for 
regulators in the Federal Government and here in DC to change 
how they think about the treatment toward communications in 
today's marketplace. And I do feel that it is our 
responsibility to look at how we create the appropriate 
environment, put some regulatory certainty in place, and then 
encourage that private capital and investment and focus on 
creating jobs.
    There are three things that I want to drill down on a 
little bit on today with you all. Number one, is it fair to 
tell someone who wants to invest in tomorrow's technology that 
they need to slow down in order to maintain an old network that 
they don't want to invest in anymore? Number two, does it still 
make sense for the old rotary-dial regulatory model--and, yes, 
some of us do remember that model--to hold back the 
communications revolution that is before us now? And, number 
three, how can we make the transition to the Internet Protocol 
as seamless and dependable as possible? Those are questions 
worthy of discussion.
    I thank you all for your time, and at this time I will 
yield to any other Member--I do not have anyone in the queue.
    Mr. Walden. Anyone else on the Republican side want to make 
any comments? If not, the gentlelady yields back.
    Now recognize my friend, the gentleman from California Mr. 
Waxman, for 5 minutes.

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

    Mr. Waxman. Thank you very much, Mr. Chairman.
    Since the days of a black rotary phone, Americans have been 
able to count on the phone network to call friends and family, 
conduct business, and reach emergency services when needed. 
Today, thanks to innovation and competition, consumers can 
connect to the phone network in more ways than ever before, but 
when we pick up a wireless smartphone or dial a number over 
Voice over Internet Protocol service, few of us pause to 
consider the technology involved. We simply expect our phone 
calls to go through.
    The ongoing transition from traditional circuit-switched 
networks, the Internet Protocol or IP-based networks is the 
technical backdrop for today's hearing, but our phone network 
is more than a system of wires, switches, and technical 
protocols. It is an essential part of the social and economic 
fabric of the United States. As we consider this next network 
evolution, we must continue to protect the core values that 
have guided our communications policy for nearly a century. 
Many of today's witnesses have articulated some version of 
these values, and there is widespread agreement on these 
principles.
    Our commitment to universal service is a recognition that 
all of us benefit when everyone is connected. We protect 
competition because it is the most efficient way to generate 
new products and lower prices, with the added benefits of 
limiting regulation. We have rules for consumer protection, 
because the marketplace needs oversight to ensure that services 
like 911 are provided even if the market is not yet demanding 
them. This is a mandate Congress has entrusted to the FCC, and 
it does not change with new generation of technology.
    I think we all recognize the transition to IP-based 
networks is already happening, and this is a good thing. The 
transition means more investment and opportunities for economic 
growth and new services that can improve everything from 
healthcare delivery to energy efficiency. The challenge we face 
is how to manage this transition in a way that does not disrupt 
businesses and consumers that rely on traditional services 
today.
    I agree with Mr. Cicconi that we need the FCC as an expert 
agency to help guide the evolution to an all-IP network, but I 
caution against using the advent of IP-based services as a 
vehicle to try to undermine the FCC's authority to preserve 
competition and protect the public. Whether addressing 
complaints about rural call completion or ensuring network 
reliability during disasters, we need the FCC to address the 
impacts of the IP transition. A vibrant and vital FCC is 
critical to ensuring that the transition ultimately achieves 
the goal we all share, which is a world-class network that 
delivers greater benefits for consumers and our economy.
    And I thank Chairman Walden for holding this important 
hearing and working with us to assemble a balanced panel.
    Mr. Chairman, I would like to ask unanimous consent to 
enter into the record a paper by Professor Kevin Werbach titled 
``No Dialtone: The End of the Public Switched Telephone 
Network.''
    Mr. Walden. Without objection.
    [The information follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Waxman. And, Mr. Chairman, I wish at this time to yield 
the balance of my time to the gentleman from Vermont, Mr. 
Welch.

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

    Mr. Welch. Thank you very much.
    I have the privilege of introducing John Burke, a Vermonter 
from Castleton, Vermont, graduate of Dartmouth College, and 12-
year member of the Public Service Board, which is our public 
utility commission. And John has served on the Committee on 
Telecommunications with the National Association of Rural 
Utility Commissioners, and one of the things that he is so good 
at is talking about the impact on rural areas of telecom 
policies. And Congressman Latta and I, as you know, started a 
Rural Caucus to try take a specific look at how the policies 
that we have to implement are going to be affecting rural 
areas, and there is no person with more experience and wiser 
counsel than the person that we are going to hear from, John 
Burke from the great town of Castleton, Vermont. Thank you, 
John.
    Thank you, Mr. Chairman. I yield back.
    Mr. Walden. The gentleman yields back his time, and the 
gentleman from California yields back the balance of his time. 
So now we are ready to move forward with our distinguished 
panel of witnesses.
    We thank you all for your testimony. It is most 
enlightening, even if there is a little conflict here and there 
among you, which is why you are all here.
    So with that, we will start off with Jim Cicconi, who is 
the senior executive vice president for external and 
legislative affairs for AT&T. Mr. Cicconi, thank you for being 
with us. And we look forward to hearing your comments.

     STATEMENTS OF JAMES W. CICCONI, SENIOR EXECUTIVE VICE 
 PRESIDENT, EXTERNAL AND LEGISLATIVE AFFAIRS, AT&T, INC.; MARK 
   IANNUZZI, PRESIDENT, TELNET WORLDWIDE, INC.; HAROLD FELD, 
    SENIOR VICE PRESIDENT, PUBLIC KNOWLEDGE; JOHN D. BURKE, 
COMMISSIONER, PUBLIC SERVICE BOARD, STATE OF VERMONT, ON BEHALF 
       OF THE NATIONAL ASSOCIATION OF REGULATORY UTILITY 
COMMISSIONERS; AND RANDOLPH J. MAY, PRESIDENT AND FOUNDER, FREE 
                        STATE FOUNDATION

                 STATEMENT OF JAMES W. CICCONI

    Mr. Cicconi. Thank you, Chairman.
    Mr. Walden. And we are still on an old wired copper 
network, so if you could turn on that microphone.
    Mr. Cicconi. Boy, that is embarrassing.
    Anyway, Chairman Walden, Ranking Member Eshoo, 
distinguished members of the subcommittee, thanks for the 
opportunity to testify with you today, and thank you for 
holding this hearing.
    Four years ago, as you know, the FCC issued the National 
Broadband Plan, as directed by you. That plan concluded that 
bringing modern broadband services to all Americans is vital, 
and that to do so we must have communications policies rooted 
in the future, not the past.
    In my testimony today, I want to focus on four key points 
concerning this very important IP transformation. First, 
transition to all-IP networks is happening today, and I think 
the chart that you have up here demonstrates that. That is over 
a 10-year period, and the smallest part of that at the end of 
that is----
    Ms. Eshoo. Is that chart for you to see or for us to see?
    Mr. Cicconi. Well, I had hoped that the committee would 
have it, but----
    Mr. Walden. We got it covered. Go ahead.
    Mr. Cicconi. And this is based on government data. But it 
shows that by the end of this year, only about 25 percent of 
Americans will actually be taking advantage of the legacy 
wireline services. Three-quarters of Americans would have moved 
to alternatives. The National Broadband Plan, I think, 
recognizes that this IP transition is well under way. It is 
happening today. And I posit that all my fellow panelists 
recognize this as well.
    Communications marketplace has changed dramatically, and so 
has my company in response to that. Today we provide broadband 
and communications services in robustly competitive markets 
where consumers have an almost overwhelming array of choices. 
And, believe me, they exercise those choices on a daily basis. 
They, consumers and businesses, are abandoning the old circuit-
switched wireline network in droves and are moving to IP and 
mobile services offered by a host of different providers. In 
fact, it is estimated that what we lovingly call POTS, which is 
``plain old telephone services,'' as I mentioned earlier and 
the chart demonstrates, would be confined to only 25 percent of 
U.S. households. In fact, in Florida and Michigan, two States 
that are in our wireline footprint, only about 15 percent of 
homes are still connected to the legacy wireline network today.
    Second point: This transition to an all-IP network is a 
good thing, and it should be embraced. This is a huge and 
crucial undertaking for our country. We are replacing the 
networks that served us well for 100 years with far more 
advanced and capable networks, networks he hope will serve us 
well for the next 100 years.
    National Broadband Plan correctly concluded that these new 
smart networks are vital to our Nation's economic development 
and to maintaining our global competitiveness, but these 
networks don't happen by themselves. They have to be built, and 
to build them companies need the right incentives to invest. 
Most important, companies must be able to retire old 
infrastructure in order to make the investments in new 
infrastructure, just like any other business would do. To do 
otherwise makes little sense and would impede what the National 
Broadband Plan rightly has made a national imperative.
    Third point: We have the time to do this right. This is not 
a flash cut. The transition to all-IP networks will take place 
over the course of this decade, but we have to use that 
timewisely. The FCC's Technical Advisory Committee suggested 
that the old legacy networks be retired by 2018, but the FCC 
should in any event set a date certain for their retirement. My 
company believes it will actually take us until 2020 to 
accomplish that, and even then it will require a maximum effort 
on our part.
    In the meantime, we have asked the FCC to conduct 
industrywide trials. In our case, we suggested converting two 
pilot wire centers out of some 4,700 wire centers in our 
footprint to all-IP. We feel trials are critical. As careful as 
our planning is, no one can anticipate every issue that may 
arise when we actually transition off the legacy wireline 
infrastructure. Trials will help us learn while we still have a 
safety net in place, and as we learn, all of us, industry, 
government, customers, and stakeholders, can then work together 
over the coming years to address any problems we find.
    This leads to my final point, which is the importance of an 
overall framework of values and principles to guide us during 
this transition to all-IP networks. In that regard some of our 
friends in the public interest community, including one of my 
colleagues on the panel here today, have, I think, served us 
very well. They have stressed that this transition from the old 
to the new should consider things we have all come to see as 
fundamental: universal connectivity, consumer protection, 
reliability, public safety, interconnection.
    We know that an all-IP world will not be a regulatory-free 
zone, nor are we seeking that, but we do feel that any 
regulation should be rooted in the problems of today, not the 
problems of a bygone era.
    Regulations should also recognize and give deference to the 
choices of consumers in what are now highly competitive markets 
and treat all providers equally regardless of technology or 
their company's lineage.
    This is not the first time the U.S. has helped plan for 
that communications transition. As noted by the National 
Broadband Plan, we will need wise government policies to ensure 
that legacy regulations do not impede the investments our 
country needs, and that the interests of consumers are 
protected as these new technologies are deployed.
    Thank you again for holding this hearing today, and I will 
look forward to your questions.

    [The prepared statement of Mr. Cicconi follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Walden. Mr. Cicconi, thank you for your testimony. We 
appreciate your participation in the hearing.
    We will now go to Mark Iannuzzi, who is president of TelNet 
Worldwide. We are thankful that you are here today to represent 
the industry and yourself. And please turn on that microphone, 
pull it up close, and we will--look forward to your comments as 
well, sir. Thank you for joining us.

                   STATEMENT OF MARK IANNUZZI

    Mr. Iannuzzi. Chairman Walden, Chairman Upton, Ranking 
Member Eshoo, Ranking Member Waxman, and to each of the members 
of the committee, thank you very much for an opportunity to 
speak to you today. I am Mark Iannuzzi. I am president and 
founder of TelNet Worldwide. We are a competitive facilities-
based carrier providing telecommunications and broadband 
services. We are headquartered in Troy, Michigan. We are also 
very privileged and proud to be the communications service 
provider to Chairman Upton's district offices in Kalamazoo and 
St. Joseph/Benton Harbor, Michigan.
    TelNet offers the complete range of essential 
communications services for small to middle-size businesses, 
including classic voice, IP telephony, hosted IP applications, 
and advanced data and networking services. In this increasingly 
connected world, we help unify and simplify all the ways that 
businesses communicate and collaborate, providing them big-
business solutions to small businesses at prices that they can 
afford.
    Today I am pleased to appear on behalf of COMPTEL. It is 
the Competitive Communications Association. Nearly two-thirds 
of the COMPTEL members are small and middle-size businesses, a 
majority of which have $10 million or less in revenues and 
fewer than 100 employees. However, the DNA of these companies 
is about entrepreneurs serving entrepreneurs.
    A little background about myself. I was born and raised in 
Detroit. I am an American engineer and entrepreneur. I built 
TelNet with my brothers 15 years ago from the dirt out of the 
basement of our home. To this day, though, however, since that 
time, we have invested upward of $100 million, employing now 
over 100 career associates in our company, and we also are very 
proud to have created the first network in the State of 
Michigan which integrates the vast majority of the State with a 
service area greater than AT&T and Frontier combined.
    One of the things that is indelible upon me was a 
conversation I had with my father when I was about 5 years old 
when I had to do a book report on poverty. I asked my father, 
``What is poverty?'' And my father paused, and he told me it 
is--``Poverty is about persons without choice.'' Now, at 10 
years old, I didn't quite grasp what that meant because I 
thought it was all about not having a lot of money. But it was 
his pride of being an Italian immigrant, a U.S. citizen, to be 
a part of this great land of opportunity, that he had choice 
for himself and our family.
    So with that as a backdrop, I want to make it clear that as 
we have these debates, I or the competitive community, we are 
not against AT&T, we are not against the ILECs. AT&T is a proud 
American company. We want all companies to do well. It is in 
our interests. When they raise themselves, they raise the 
entire industry, and we have the ability to serve customers 
better. So it is not about what we are against; it is about 
what we are for.
    We are for robust competition, for merit over might, for 
much as things change in this technological age, some things 
never change, one of which is the enduring truth of free-
functioning, competitive markets to bring about the greatest 
good for the widest array of people the world has ever seen.
    We are for the rule of law, which means trust. It means 
certainty in keeping our collective promises, including those 
to the capital markets which have invested theirselves in our 
endeavors.
    And, finally, we are for ensuring that there are no 
artificial barriers to progress not only for those of us who 
are currently in the market today, but for all those who are 
yet to be born who will take up the mantle that we have set 
forth.
    So let us begin from the--let us start at the beginning, 
the 1996 act. The 1996 act unleashed the greatest advancements 
in communication history since the history of history. 
Improvements to our capabilities today in terms of the 
capabilities, the competitive position and the productivity in 
this country are mind-boggling. And to that extent, I would 
like to extend my sincere salute to Chairman Upton, to 
Congressman Dingell and all the Members here who were 
participatory in that '96 act because your leadership was 
instrumental in forging a bipartisan team for this landmark 
legislation which has revolutionized the industry of 
communications.
    At the very soul of that act, the very soul was designed 
specifically to open up competition, including the ability for 
the incumbent dominant companies to expand their service 
offerings, and they have done very well. They entered the LD 
market and ultimately the Baby Bells bought Ma Bell.
    Now, there are some here that would say that there are 
technical limitations in the act. I say to them as I say to 
you, the act is not and cannot be about technological 
limitations. It is rather about technology inspiration through 
a simple framework for free-functioning, competitive markets to 
exist.
    Why this matters. We understand small businesses, I 
believe, and that is why TelNet came into being. This is where 
we thrive. Small businesses seek to be relevant in what they 
do, not necessarily experts in technology. Small businesses 
cannot afford to go out and pay for the consultants to sort out 
the alphabet soup of technology. Rather, it is often where it 
is their next-door neighbor's nephew's cousin that comes in and 
tries to help them figure out some of the things going on here.
    The competitive industry can touch these small businesses. 
We sit across the table, we examine their needs, we establish 
solutions tailored to those needs and help them go from crawl, 
walking, to run. You know, God bless them, but this is not the 
AT&T's forte. Our goal, in fact our promise, to our customer is 
to be the last service provider that they ever need, because we 
want them for life. We do--to do this, we must ensure that we 
can futureproof their investments and deliver ongoing value.
    So let us get to the heart of the matter. There are three 
things that are key to what this conversation here about the 
next-generation networks. The last mile is the essential 
business building block for function and competitive markets, 
regardless of technology. Our network is the best in the world, 
but it is only at good as its weakest link, and that is last 
mile.
    It is--secondly, it is important that these networks are 
interconnected, that we can exchange traffic at just and 
reasonable rates and our terms and conditions regardless of 
technology.
    And, third, we need to make sure that the business 
agreements and pricing between the dominant and competitive--
pair are negotiated and adjudicated with the firewall backstop 
of our local public utilities commissions.
    Mr. Walden. Mr. Iannuzzi, I am going to have you wrap up. 
You are about 2 \1/2\ minutes over.
    Mr. Iannuzzi. Thank you.
    In conclusion, I came into this business 15 years ago with 
a driving desire to make things better, to make things less 
expensive through business process improvement and technology 
advancement. If I ever had any doubt that there was a--going to 
be a technological limitation in a tech business, that would 
have been a nonstarter.
    The TelNets of the world may come and go, but should 
never--must never perish from this great Nation is that we do 
not erect barriers which impoverish, but we stay true to our 
competitive spirit as Americans for those ingredients that 
promote prosperity and well-being for all.

    Thank you very much for the opportunity to testify today.
    [The prepared statement of Mr. Iannuzzi follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Walden. Mr. Iannuzzi, thank you for your comments, and 
we appreciate your testimony.
    We will go now to Harold Feld, who is the senior vice 
president of Public Knowledge. We welcome you back before our 
subcommittee, and we look forward to your summary of your 
testimony as well. Mr. Feld, go ahead.

                    STATEMENT OF HAROLD FELD

    Mr. Feld. Thank you. Chairman Walden, Ranking Member Eshoo, 
thank you for inviting me to testify today.
    The transition of our wireline networks to Internet 
Protocol-based services is a tremendous opportunity for our 
Nation, but we must make sure the transition results in an 
actual upgrade in technology without a downgrade in the 
services upon which Americans depend.
    For decades our country has used the reasonable rules based 
on fundamental principles to build a phone network that became 
the envy of the world. We are the country that brought a phone 
to every farm, the country that built a network you count on. 
We accomplished this by moving certain fundamental values with 
us as our networks evolved. As we now face the opportunities 
and challenges of implementing the next generation of 
communications technology, we must continue to leave no one 
behind.
    Americans are so used to relying on the protections of the 
phone network, they often don't even notice them. We conduct 
our business and personal communications as if we can always 
trust the phone network will just work, because it has. During 
emergencies we can always call for help from police, 
firefighters and hospitals. When someone calls a friend on 
another phone network, that call will always go through, 
regardless of which carriers they subscribe to or where they 
live.
    In the rare instance that any part of the system breaks 
down, government authorities at the local, State, and Federal 
levels move swiftly to act as if our lives depended on it, 
because they do.
    Every one of these benefits is the result of deliberate 
policy choices that serve specific basic values. Our phone 
network became the envy of the world because our policymakers 
valued what Public Knowledge calls the five fundamental 
principles: One, service to all Americans; two, competition and 
interconnection; three, consumer protection; four, network 
reliability; and, five, public safety.
    There are some who believe the IP transition should be a 
glidepath to eliminate FCC oversight, but as carriers begin the 
transition, we have concrete examples that many of the 
essential services we take for granted are at risk in rural and 
not so rural areas, for individuals and for small businesses. 
One of the worst problems is the continuing inability of rural 
residents to receive telephone calls reliably. As carriers 
switch to IP technology, they can route calls through least-
cost router systems, creating latency, and sometimes trapping 
calls in perpetual loops. In a world where we simply allow the 
marketplace to work, this doesn't get fixed. As one carrier 
told the complaining subscriber, due to living in a rural area, 
you will experience service issues.
    The FCC will address this at the open meeting next Monday, 
but in a world where the FCC could only regulate based on 
market power or in response to unfair or deceptive practices, 
as some have urged, rural America would be out of luck.
    Which brings me to my larger point: IP technology brings 
the potential for new services, but it also brings the 
potential for new ways to crash the system. IP doesn't work 
with a lot of legacy equipment or services. It brings in all of 
the cybersecurity issues, like malware and cyber attacks, 
without any of the existing defenses. I am not alone in 
worrying that things could go very wrong. The Department of 
Defense and the Federal Aviation Administration have both filed 
with the FCC to express concerns that the IP transition, if not 
handled properly, could interfere with vital government 
operations.
    As with rural call completion, we may find we actually need 
the FCC to use its legacy authority to solve these problems. 
Rather than thinking of the FCC as an obstacle that stands in 
the way, we should think of it as our last defense against the 
total train wreck, because at the end of the day, the measure 
of success for the transition will not be how many regulations 
did you kill, but does the phone network still work for 
everyone.
    For all these reasons, I am very glad to hear Jim Cicconi 
acknowledge the importance of doing this right, of avoiding any 
kind of flash cut that could cause major disruption, and for 
acknowledging this will not be a regulatory-free zone. To 
everyone's surprise, Public Knowledge and AT&T agree on a lot 
because we want the same thing: a competitive, modern network 
for all Americans. Unfortunately we still debate this as if we 
were for or against upgrading our phone system or even for or 
against AT&T.
    This is absurd. We want AT&T and every other carrier to 
invest in its network. No one is seriously suggesting that AT&T 
or any other carrier should preserve copper to the end of time. 
While we will fiercely disagree on how to make this work, we 
all want to make this work, and we know that the stakes are 
high.
    Most importantly, we need to stop thinking of this as 
AT&T's transition, where AT&T proposes something, and everyone 
else reacts. We need to plan out a transition that reflects our 
values. This is the transition of the phone system of the 
United States of America on which 300 million people depend 
every single day. We need to recognize we all have a shared 
benefit from making this network reach everyone, and therefore 
a shared responsibility to make it work for everyone.
    Thank you.
    
    [The prepared statement of Mr. Feld follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Walden. Thank you, Mr. Feld.
    Maybe we can create a government Web site they could all 
work through. Never mind. Just kidding.
    Mr. Feld. We all learn from our mistakes.
    Mr. Walden. Yes, hopefully.
    We go now to Mr. John Burke, who is back before our 
subcommittee. We appreciate your participation. He is a Board 
member and Public Service Board of the State of Vermont. Mr. 
Burke, we are delighted to have you here again, and thanks for 
your testimony. And please go ahead.

                   STATEMENT OF JOHN D. BURKE

    Mr. Burke. Thank you, Mr. Chairman, and Ranking Member 
Eshoo, and members of the subcommittee. Thank you for allowing 
me to testify on the topic of IP transition.
    In recent months, under Acting Chairwoman Clyburn, the FCC 
has greatly increased its interaction with the States. We are 
particularly pleased with the outreach from the internal FCC 
task force to NARUC's own Federalism Task Force. Chairwoman 
Clyburn is to be applauded for her leadership and for her 
outreach.
    In my home State of the Vermont, we face many challenges. 
Very little fiber is being deployed to the home, and there are 
many areas without broadband access. There is limited 
competition even in urban areas. Wireless coverage leaves much 
to be desired even where it exists. And yet, even in Vermont, 
transition to the IP-based voice network is occurring. In this 
latest evolution, which has been under way for quite a few 
years now, networks are migrating away from circuit-switched 
voice and data services to IP-based services.
    During the transition, like the previous ones, it is 
crucial for policymakers to focus on the right issues. No 
regulator or legislator should intervene in the market to put a 
thumb on the scale in favor of one technology over another. The 
market should make those choices.
    The reason public service commissions and agencies like the 
FCC were created and regulate remains the same. First, we 
regulate where competition is not vigorous enough to adequately 
protect consumers. Secondly, we intervene to impose public-
interest obligations.
    Regardless of the level of competition, some oversight will 
always be necessary to provide what the market will not, 
including consumer protection, local number portability, 
interconnection, prioritization of service restoration, 911 
service, disabled access, and universal service.
    The AT&T requests for the wire center trials raises some 
questions of why trials are needed now. The AT&T--AT&T and 
other providers have no significant problems rolling out IP-
based service today. The transition is well under way, and 
major reason why issues remain is because the FCC has focused 
on the wrong issues.
    The transition is not about regulation or deregulation. The 
FCC has ample tools in the 1996 act to eliminate unneeded 
regulation. Nor should the debate be technology-focused. 
Congress established a technology-neutral framework in the 1996 
act and incorporated the core values of consumer protection, 
universal service, and competition. The FCC should just follow 
this framework, but for over 10 years the agency has followed 
what Congress has set out, but not in exact terms. Instead the 
agency has been unable, under both Democratic and Republican 
Chairmen, to provide needed certainty by classifying VoIP 
services either as a telecommunications service or as an 
information service, which has undermined the communications 
market.
    Leaving this question unresolved has created the regulatory 
arbitrage that undermined intercarrier compensation system and 
is at the reason and the very base for the call-completion 
problems Mr. Feld mentioned. It has also left some consumers 
who chose IP-based services with fewer protections than they 
might have had with the circuit-switched service, despite voice 
services being exactly the same from a consumer's point of 
view.
    The States and industries stakeholders continue to waste 
significant resources at ultimate expense of taxpayers and 
ratepayers on proceedings that would be unnecessary if the FCC 
acted.
    The FCC-blessed real-world VoIP interconnection trials will 
not necessarily help the Commission clarify the statutory basis 
for the incumbent LEC's duty to provide VoIP interconnection. 
The clarification begins and ends with an interpretation of the 
States--of the statute.
    There is no question that the interconnection is 
technically feasible. AT&T and Verizon manage that on a daily 
basis on their own networks. Rather than inventing new legal 
theories with no statutory support specifically to avoid 
classifying VoIP telephony, as the FCC did in the November 2011 
transformation order, the agency should just classify the 
service.
    Oversight of VoIP services has absolutely nothing to do 
with either the Internet or peering arrangements. Verizon and 
AT&T assure their customers that their VoIP services are not 
Internet services on their Web sites daily.
    If the FCC continues along to consider technology trials, 
Congress should encourage the agency to first seek the benefit 
of a fact-based recommendation from an adequately funded 
Federal-State-USF joint board. Any proposed trials can only 
benefit from the significant State involvement.
    In conclusion, while technologies change, the expectations 
of our consumers do not. Consumers expect the same level of 
service and protections they have been accustomed to, and it is 
up to us all to ensure that those expectations continue to be 
met.
    Thank you for your attention. I look forward to your 
questions.
    [The prepared statement of Mr. Burke follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Walden. Thank you very much, Mr. Burke. We appreciate 
your counsel today.
    We will go now to our final witness on this panel, Mr. 
Randolph May, who is president and founder of Free State 
Foundation. Mr. May, it is good to have you back, and we look 
forward to your comments as well.

                  STATEMENT OF RANDOLPH J. MAY

    Mr. May. Chairman Walden, Ranking Member Eshoo, and 
distinguished members of the committee, thank you for inviting 
me to testify. I am president of Free State Foundation, a 
nonpartisan, free-market-oriented think tank that focuses its 
work primarily in the communications policy area. I have been 
involved for 35 years in communications policy in various 
capacities, including having served as Associate General 
Counsel at the FCC.
    I appreciated the opportunity to testify in July before 
this committee regarding FCC process reform. That hearing was 
very important, but, frankly, the topic at this hearing may be 
even more important. As the transition away from narrowband 
communications services to digital broadband services 
continues, the fundamental question confronting policymakers is 
this: Will the existing public-utility-style framework that 
still largely governs communication service providers be 
replaced by a free-market-oriented paradigm that accelerates 
the ongoing broadband digital transition; or, instead, will the 
regulatory framework be an impediment to progress?
    The answer has important implications for the Nation's 
economic and social well-being because there is widespread 
agreement that the transition to IP services, which 
indisputably is leading to dramatic marketplace changes, will 
be completed at some point. And there is also widespread 
agreement that completion of the transition is a positive good, 
because IP-based services provide consumers with more 
functionalities in less costly ways than do copper-based TDM 
services.
    There is no doubt that the digital revolution has enabled 
increasing competition among broadband providers for the 
provision of voice, high-speed data, and video services, 
whether these providers offer their services over wireline, 
cable, wireless, satellite, fiber, or whatever technology. The 
relevant point is not that all of the services offered by all 
of the competitors are perfectly substitutable, or that they 
meet every consumer's desire at all times. The relevant point 
for policymakers is that for an increasingly large number of 
consumers, these various competitors provide a choice of 
service providers offering a choice of attractive service 
options.
    Note that I said above the IP transition almost certainly 
will be completed at some point in time, but the FCC's actions, 
and possibly Congress's, too, will affect the timing of the 
transition's completion and whether the regulatory regime that 
emerges is a proper one going forward.
    My testimony explains why, in order to benefit consumers 
and in order to promote investment in new networks and 
innovation, the legacy regulatory framework, which is based on 
assumptions of a monopolistic marketplace that no longer 
exists, should be replaced in a timely fashion by a free-
market-oriented model. Requiring telecom companies to continue 
to maintain their TDM networks past when they are economically 
viable drains investment dollars from deployment for new IP 
networks, and economists agree that burdening any service 
provider, regardless of the platform used, with unnecessary 
costly regulation does deter investment and innovation. So in 
the IP world, the FCC's regulatory intervention should be tied 
closely to findings of market failure and consumer harm.
    The FCC may well possess the authority under the 
Communications Act to implement most of the regulatory changes 
necessary to facilitate completion of the digital transition, 
while at the same time safeguarding certain basic public safety 
and universal service interests, which I recognize are 
important interests to be safeguarded, but to the extent such 
authority either is lacking, or the FCC fails to properly 
exercise such authority in a timely fashion, then Congress 
should be ready to step in.
    For example, Congressman Latta's recently introduced bill, 
H.R. 2649, which requires the FCC to presume forbearance relief 
should be granted absent clear and convincing evidence to the 
contrary, would be a useful tool in enabling the agency to act 
more quickly, especially if forbearance relief is made 
available for all entities subject to the Commission's 
jurisdiction, as I think it should be.
    In any event, aside from any near-term legislation that may 
be desirable to ensure the benefits resulting from the digital 
revolution are fully realized, ultimately Congress should adopt 
a comprehensive overhaul of the current Communications Act 
along the lines of the Digital Age Communications Act model 
that I have long advocated, and which I describe in my 
testimony.
    Finally, Mr. Chairman, I mentioned I served as Associate 
General Counsel at the FCC. That was in the late 1970s and 
early 1980s under the Carter administration. At that time 
traditional economic regulation of the various transportation 
markets was largely eliminated, and this deregulation initiated 
by President Carter's administration was accomplished on a 
mostly bipartisan basis, and the Congress and the agencies 
cooperated productively. The agencies generally initiated 
deregulatory changes through the administrative process, while 
Congress engaged in oversight. And Congress eventually 
legislated to put in place deregulatory regimes that relied for 
the most part on marketplace competition rather than regulation 
to protect consumers. I believe that a similar opportunity for 
positive change now exists.
    Again, thank you for inviting me to testify today, and I 
will be pleased to answer your questions.

    [The prepared statement of Mr. May follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Walden. Mr. May, thank you. And thanks for your in-
depth testimony, which we all have.
    I am going to start off with questions. And, Mr. Iannuzzi, 
in your testimony you said, and I quote, the prepared 
testimony, ``As incumbents replace their legacy TDM-based 
technology with IP technology, competitive carriers will lose 
access to the last-mile connections that have enabled them to 
push deployment of innovative business broadband services to 
American businesses.'' That is kind of the crux of the argument 
you represent today, correct, that if they abandon--if AT&T or 
other companies abandon their copper networks, then you are not 
going to have the ability to get to that last mile, correct?
    Mr. Iannuzzi. Correct.
    Mr. Walden. Now, Mr. Cicconi, from your perspective, what 
does that mean in terms of--is that accurate? Will you--will 
AT&T and other companies still make last-mile connection 
available? And then I want to go to Mr. May on this as well.
    And again, hit that microphone button, if you would.
    Mr. Cicconi. Short answer is of course we would make them 
available, and there is nothing we have proposed that would 
take that away.
    Mr. Walden. Under the same interconnection, reasonable 
rates, terms and conditions?
    Mr. Cicconi. I think if we are talking about copper loops, 
you know, there is nothing in our proposal that would change 
the treatment of that as a ``uni.''
    Mr. Walden. But in terms of an advanced network, fiber?
    Mr. Cicconi. I think when you are talking about, you know, 
Ethernet, for example, the FCC has concluded the Ethernet is a 
competitive service. So I think if we are rolling out Ethernet 
services in replacement for TDM facilities--you know, and to 
give you the sense of that, a TDM facility is not classed as a 
broadband-level facility by the FCC currently. So for placing 
TDM with a broadband facility, for example, and backhaul to a 
cell tower, you know, I think the FCC has concluded Ethernet 
is, in fact, very competitive.
    And I think, you know--in fact, I think Sprint CTO just 
stated recently that for the same price he pays for a T-1 to a 
cell tower, he can get 20 times the capacity by running 
Ethernet to the same cell tower. And so, obviously, if it is a 
competitive market, we wouldn't feel that regulation, per se, 
is needed in that area in order to provide an alternative 
capacity.
    Mr. Walden. All right. Mr. Burke, what is your reaction to 
all of that?
    Mr. Burke. Well, I think that one of the things you look at 
when you look at the potential for interconnection is that 
there are supposed to be agreements. The idea is that they are 
supposed to agree. That doesn't necessarily mean that all the 
players have an equal bargaining power. It doesn't always work 
that way. If that is the case, it may well be necessary for 
somebody to take a look at those agreements. And the 1996 act 
clearly said, and wisely so, in my estimation, the States can 
look at that and arbitrate that. And it also defined the 
service to include advanced services.
    So 1996 actually had--in my estimation, had it right and 
gave a methodology so you would be able to handle arbitration 
of these issues if, in fact, Mr. Cicconi and Mark couldn't 
agree. And I think that is another point that exists in the 
States' position here and what they would have to do in this 
brave new world moving forward.
    Mr. Walden. All right. Mr. May, from your perspective?
    Mr. May. Thank you, Mr. Chairman.
    I think part of the premise of your question was based on 
the continuation of offering of copper-based loops from Mr. 
Iannuzzi.
    Mr. Walden. Well, and just the ability, regardless of the 
underlying infrastructure, to have a competitive marketplace 
for these alternative competitors.
    Mr. May. Right. You know, there is a transition going on, 
which is why you called the hearing.
    Mr. Walden. Right.
    Mr. May. You know, from my perspective, over time, as I 
said in my oral testimony, it is important that we not require 
the maintenance by regulatory fiat of older technologies that 
are less efficient and more costly. So eventually--I am not in 
favor of requiring AT&T or anyone else to maintain in existence 
a technology in a competitive environment that we are moving to 
that is not efficient.
    But I want to say one other thing, if I could. In Mr. 
Iannuzzi's testimony, he is talking both about the ability to 
access facilities of others and to use those last-mile 
facilities, and he is also talking about interconnection of 
facilities. And as we talk about this today, those are really--
they are actually two different things. In 251 and 252, without 
getting too technical, they involve both of those things. And, 
from my perspective, in terms of where public policy wants to 
go, I am much--I am more receptive to arguments that have some 
regulatory backstop for interconnection, saying, you know, I 
have to interconnect my network with Mr. Burke's network or Mr. 
Cicconi's, than I am about regulation which continues to 
require that if I build a facility, that I have to provide 
access under regulated terms and prices, you know, ad infinitum 
for someone else to use those facilities.
    And the simple reason, and this is important, I think, to 
understand, is when you require that type of sharing of 
facilities and access that he talks about, and he does say he 
has some facilities of his own, but----
    Mr. Walden. Right.
    Mr. May [continuing]. When you do that, it discourages 
either him from building his own facilities, or it discourages 
me, if I am the one that has to provide access, from actually 
investing more to build more facilities.
    Mr. Walden. All right. My time has expired. And I now turn 
to the gentlelady from California Ms. Eshoo for 5 minutes.
    Ms. Eshoo. Thank you, Mr. Chairman. And thank you to all 
the witnesses.
    We will start over here with the Italian part of the table, 
who don't agree with each other despite their shared background 
ethnically.
    Mr. Cicconi, you stated in your testimony that modern IP 
networks are both more dynamic and cost-efficient than the TDM-
based voice telephone networks that we have depended on over 
the last century.
    How does a new network technology change the state of 
competition? Because I think that that really goes to the heart 
of a lot of what we are talking about here and some of the 
testimony that we have heard from others.
    In your view, shouldn't the--the rules to preserve and 
promote competition be technology neutral? I mean, I have 
always favored technology being neutral in whatever legislation 
we do. It has always been something that I thought was like a 
hot stove; don't go and touch it. It should be neutral.
    Mr. Cicconi. Well, first of all, I don't think the Telecom 
Act itself makes the rules technology neutral. It put most of 
those rules in Title 2, which is entitled common carriage, and 
it doesn't apply to our wireless service. In fact, you have an 
expressed provision in Title 3 that it can't be applied to 
wireless service. It doesn't apply to cable. It applies 
uniquely to the wireline TDM services provided by a legacy 
wireline carrier.
    So they are not technology neutral in that sense. They are 
uniquely imposed on this part of the business. And as you saw 
from the chart earlier, it is a declining part of the business. 
At the current time AT&T has fewer than 14 million customers 
using traditional wireline services. By contrast, the number 
four wireless carrier has double that.
    So I would argue that today these services are competitive, 
Congresswoman, and that you all when you wrote the act--or 
rewrote the act--in 1996 I think did something fairly unique. I 
think you recognized in there that there were major 
transformations that were underway and that I think augured 
well for competition, and you gave the FCC some fairly unique 
powers there----
    Ms. Eshoo. So are you agreeing that the rules going forward 
should promote competition, but you don't agree they should be 
technology neutral?
    Mr. Cicconi. I certainly would argue that it is an 
appropriate mission for the FCC to continue doing, but I would 
disagree that all the rules that were needed in 1996 and 1934--
--
    Ms. Eshoo. We are not in my office. I have to get to Mr. 
Iannuzzi, OK? Thank you.
    Mr. Iannuzzi, you gave great testimony. I loved what you 
said. And it is uncommon for people to come here and speak 
about what their father said, how that remained with you, what 
you do, what you are for. It is not what you are against, but 
where you want to go and why. And I just think you gave 
terrific testimony.
    Without a regulatory backstop, what incentive do you think 
that the largest incumbent providers have to reach a commercial 
interconnection agreement with you?
    Mr. Iannuzzi. Thank you very much, Congresswoman, for your 
kind remarks.
    Ms. Eshoo. Turn the microphone on so everybody can hear you 
say, thank you for your kind words, Congresswoman.
    Mr. Iannuzzi. When I got my CLEC license they asked me 
three questions. One was do you have the technical acumen, do 
you have the financial wherewithal, do you have the business 
know-how. I would have flunked that test if I was going to go 
into a business to compete against an 800-pound gorilla without 
some type of firewall, some type of framework that allowed a 
competitive marketplace to exist. Because our ability to go and 
negotiate a commercial agreement, the incentives, just 
economics 101 concepts here, the economic incentives of the 
incumbent provider, they control the connectivity to the 
customer. It is in their interest not to provide connectivity 
to other people because they would like to keep that customer. 
So without that firewall there to make sure that we did have 
fair and equitable access to the customer, the business case 
would fall. It would just not be there.
    Ms. Eshoo. Thank you very much. I think I am out of time. 
Thank you.
    I will submit the rest of my questions for the record. I do 
have them for Mr. Feld and other witnesses. Thank you.
    Mr. Walden. We will now go to Mr. Barton for 5 minutes.
    Mr. Barton. Thank you, Mr. Chairman.
    Last weekend I finally got to go home to Texas after the 
government shutdown. And I hadn't been there. It is the first 
time in the 29 years I have been in the Congress that I had 
spent two consecutive weekends in Washington, DC. So obviously 
I was glad to get home. And when I got home I walked into my 
house and decided to make a phone call and I didn't have a dial 
tone. And the phone was provided by AT&T, a legacy carrier.
    So I got the phonebook out and I went through the protocol 
on page 9, you know, dial 1-800 and we will be happy to help 
you, and said, now, if the problem is on your phone in the 
house, it is 99 bucks. If it is not, we will come out and fix 
it for free.
    So, anyway, I went through that and I finally self-reported 
a problem and I did all the things you are supposed to do, and 
they called back and said we will be out tomorrow by 8 p.m. 
Well, the next day by 8 p.m. they weren't out. So I picked up 
my cell phone, which was provided by Verizon, and called and 
hit OOO and I finally got a sweet lady in Houston, Texas, and I 
said my phone is not working in my home and I still haven't got 
the serviceman, and she agreed with me and she said, we will be 
here tomorrow. And, by golly, they were, and they fixed it. 
Boom. And the guy could not have been nicer. Could not have 
been nicer. But the moral of that story is I had to use a 
wireless provider to get my hard line phone fixed.
    In 1996 CLECs, they were competitive, and we wanted the 
CLECs to compete with the ILECs, the incumbents. Now, since 
1996 my congressional district has changed four times, but we 
are still operating under rules that we put in place for an old 
system. And it is time, just like our congressional districts 
change every 10 years--in the case of Texas we changed 2 times 
in addition to those 10-year changes--we really need to relook 
at this. And I love AT&T and I love Verizon and I love the 
CLECs and all the independents out there, but what I really 
love is consumer choice and market efficiency and competition 
that works.
    So my question to Mr. Cicconi, who I have known since way 
back when, even before I was a Congressman I knew Jim, would 
the group that you represent guarantee access if we did away 
with some of the regulatory protections under Title 2?
    Mr. Cicconi. Well, first, Congressman, I am sorry for your 
service problems.
    Mr. Barton. Well, we have had rain problems.
    Mr. Cicconi. But I think you made an important point, and 
that is there are alternatives out there and wireless has 
become an alternative for wireline phone service, and there are 
many, many competitive carriers offering wireless services. 
Cable offers phone service today, I am not sure in your area or 
not. But there are an array of choices out there. And so I 
think that consumers have those choices today.
    Now, is it a legitimate function of government to ensure 
that everybody is connected and has the ability to communicate? 
Absolutely. Our company has always stood behind the principle 
of universal service, and I think that is an important function 
of the government, to ensure that the choices are there and 
that they are available to all Americans.
    Mr. Barton. Well, to the average consumer, a consumer 
doesn't care whether they are serviced by an ILEC or a CLEC. 
What they want is service. What they want is something that 
works, that is efficient, and that is cost competitive. So our 
job on the committee is not to protect an existing market 
segment. Our job is to do the very best we can to give our 
consumers choices.
    And I want the CLECs to stay in business. I am not anti-
CLEC. What we passed in 1996, it might have worked for 1996, 
but that world doesn't exist today, so let's figure out what 
exists today and in the future and go that way.
    And with that, Mr. Chairman, thank you for the hearing and 
I yield back.
    Mr. Walden. The gentleman yields back.
    We turn now to the gentleman from California, Mr. Waxman.
    Mr. Waxman. Thank you, Mr. Chairman.
    Based on some of the testimony we heard today, one might 
think that we are evaluating a new network being built across 
the country, an IP network that runs on fiber lines and 
wireless airwaves. Others suggest that this is no new network, 
but that new electronics that have been added to the copper and 
fiber infrastructure that has been transporting voice and data 
throughout the country for years.
    Why are these distinctions important? If what we really 
care about are basic values like protecting consumers and 
competition, universal service and public safety, why does it 
matter what kind of infrastructure communications runs over?
    Mr. Feld, it is my understanding that Google is currently 
planning to offer extremely fast Internet access over new fiber 
networks being deployed in three communities. Although 
consumers can sign up for video service to complement their 
Internet access service, Google is not offering a voice 
product. Google has not been shy about stating that it is not 
offering voice at least in part due to the complex rules 
associated with providing telephone service.
    What do you think of Google's argument that a company like 
Google be saddled with regulations if it decided to add voice 
to its video and broadband offering?
    Mr. Feld. I think that there are a couple of points that 
need to be very clear. First is that when Google talks about 
the regulations that they found too burdensome, they are not 
talking about the 251/252 kind of regulations that have been 
the focus of the debate here. They are talking about the things 
that we all agree ought to stay in system, like 911, like 
consumer protection and privacy protections, all of these 
things that we have said, yes, that is very important.
    Mr. Waxman. Well, what are they talking about? Give me 
examples of what they are concerned about?
    Mr. Feld. Well, it is expensive to maintain the 911 system. 
It is expensive to contribute to the Universal Service Fund 
system to ensure that all Americans are connected.
    Now, we believe that it is very important to maintain these 
things. We believe that it is very important. Google likes to 
collect the information of the people who use its services. 
They aggregate it. They have one level of privacy protection 
for that. Their business model is based on a couple of 
different things.
    In the phone world we treat this very differently and you 
cannot treat phone call information the same way that you would 
treat a Facebook status update, that people hold that very 
closely. And I understand for Google to say we don't want to 
get into that business. But if we were to say, well, OK, we 
want to encourage Google to get into this business so we want 
to eliminate these kind of vital consumer protections, I think 
that would be a very grave mistake.
    Mr. Waxman. So even if they choose not to offer telephone 
service, that doesn't lead you to the conclusion that we ought 
to eliminate the rules for all telephone services.
    Mr. Feld. Oh, not at all. And, in fact, I would point out 
any business looking to enter a market figures out what the 
tradeoff is and what their business model is. We have a thing 
that is very valuable in a network that goes everywhere and 
uses telephone numbers. And I will point out that when we have 
companies that are VoIP providers, pure VoIP providers that 
want to use those telephone numbers, we impose certain 
obligations on them already, and businesses make the evaluation 
of whether the benefits of getting into that business are worth 
the expense.
    Mr. Waxman. That is their decision for themselves.
    Mr. Feld. Yes.
    Mr. Waxman. Now, for the rest of public policy and for 
everybody else, given the importance and complexity of 
transitioning voice services to an all-IP network, wouldn't it 
make sense to have a trial overseen by the FCC to help collect 
data based on real world experience and challenges? This past 
May the FCC issued a public notice seeking comment on trials 
related to the IP transition. Then Chairman Julius Genachowski 
stated at the time, quote, ``Trials are a smart approach that 
the FCC has deployed before.''
    In the public notice the FCC invited carriers interested in 
pursuing a geographic trial, like AT&T, and they proposed to 
submit a more detailed, comprehensive plan, including the 
design of the trial, that data that would be collected, the 
rules that would need to be waived, and the role of the States 
and the tribes. It seems to me that the FCC is approaching this 
issue methodically and thoughtfully.
    So let me ask in the short time I have left to anybody on 
the panel that wants to jump in on this, do you believe that 
the FCC is moving ahead in a diligent and responsible manner in 
exploring potential trials on the IP transition? And if you 
don't, what would you do differently?
    Mr. Feld. I would say that, yes, I think the FCC is 
behaving exactly appropriately. They have invited further 
comment. I think that we cannot treat conversion of an entire 
wire center as something----
    Mr. Waxman. Let me hear if there is somebody with a 
contrary position? Mr. Cicconi?
    Mr. Cicconi. I don't think I would be directly contrary. 
But I think there are a couple fundamental points here. I 
think, first of all, when the FCC put out its additional 
questions, I think we all recognized that the FCC was going 
through the leadership change from the former chairman to a 
chairman not yet confirmed by the Senate, and I don't think, 
honestly, Chairman Waxman, they were prepared yet to answer the 
question.
    But I don't think they should be leaving open the question 
of whether we should have trials. I think when we filed the 
petition almost a year ago we asked them to actually set up the 
trials. This isn't an AT&T project. As somebody said earlier, 
it involves government, it involves the entire industry, and it 
involves consumers and stakeholders, and it shouldn't be up to 
AT&T to come up with the plan. We actually proposed industry-
wide trials to the FCC that the FCC would actually help put 
together in a collaborative way working with everybody.
    And so I think they have at least to this point punted on 
that decision. I don't think not having trials is an acceptable 
answer because I think it would in essence be the government 
saying, we are not going to plan for this. And when you did the 
DTV transition----
    Mr. Waxman. Your point is the trials are not methodical and 
they are not fully thought through?
    Mr. Cicconi. Right. The FCC actually planned the DTV 
transition, conducted the trials, learned from them, and it 
went fairly smoothly, and I think that is what needs to happen 
here and that is what I still am very hopeful will happen.
    Mr. Waxman. Thank you.
    My time has expired. It is up to the chairman if you want 
to let anybody else respond.
    Mr. Iannuzzi. May I comment please?
    Mr. Walden. Mr. Iannuzzi, real quick.
    Mr. Iannuzzi. With all due respect, the concept of a trial, 
in my opinion, is a boondoggle. The reason behind it is that we 
do IP all over the place today in interior of networks and how 
we connect with other cooperative parties. We have got smart 
people. We know how to do this stuff right now. We are losing 
ground in terms--do you want to try to make the revolution of 
IP even more profound? Then let's get going with it.
    Are there things that we have to attend to, to tweak stuff? 
Sure. But in terms of the mechanics of it, it is making it 
sound like water is hard, if you want to make it seem 
complicated. You could take anything and make it sound more 
difficult. It is done today all over the place.
    Mr. Walden. All right. We are going to have to move on. We 
go now to Mr. Latta for 5 minutes.
    Mr. Latta. Thank you, Mr. Chairman. Again, thanks very much 
for holding the hearing today.
    And thanks to everyone who is testifying today. We really 
appreciate hearing your testimony.
    If I could start with Mr. Cicconi, if I may. As the 
gentleman from Vermont mentioned, he and I have worked on 
different issues, especially concerning rural call completion. 
It is big for both of us. And I have a very unique district. I 
go from urban to suburban to very rural. And one of the things 
that--I have met with a lot of my rural telecoms out there, is 
that they have had problems with dropped calls. This is a 
serious issue for folks out there, because again if you have 
family members that are elderly and you are trying to call them 
and all of a sudden they are not picking up that phone, then 
your next recourse is you call the local law enforcement or the 
fire department, hey, can you go out and check on a family 
member.
    In the same way it really hits small businesses or any 
businesses out in these areas, because again I have a lot of 
businesses that are located way out and all of a sudden if all 
of their calls are getting dropped, if somebody can't make that 
call they lose business and pretty soon they are out of 
business. So as we are looking at what is happening out there, 
as the networks, especially the rural providers, transition to 
IP, how do you think this will affect the call completions in 
the future?
    Mr. Cicconi. Well, notwithstanding Mr. Barton's earlier 
service problems, I am not aware that AT&T itself has a rural 
call completion problem, but I am very aware that there is a 
problem there. The FCC has a proceeding underway right now to 
try to deal with it and to deal with it in a way that applies 
across all technologies and across all providers, and that is 
the way it should be. And I think it is an example of what an 
appropriate role of government should be.
    Mr. Latta. But do you think as we go forward with the IP, 
especially the rural providers, do you think it will help them 
to make sure that they don't have the dropped calls in the 
future?
    Mr. Cicconi. I would be hopeful. But, again, I think that 
is one of the reasons you have trials, to test these things, 
make sure they work properly, make sure the replacement 
technologies are just as reliable as the others.
    And just in response to what Mr. Iannuzzi said a minute 
ago, too, we can't go out and convert a wire center today from 
TDM to IP without permission from the FCC. So while a lot of IP 
investment is going on, we can't do the fundamental investment. 
There are 20,000 wire centers in the country that have to be 
converted to IP and not a single one of them can be converted 
without permission from the FCC today.
    So that is why we need the trials, to take two of those 
wire centers, it is all we have proposed out of 20,000 
nationally, conduct the trials and see if we can accomplish 
this without the kind of problems that you have experienced in 
the rural areas and ensure, frankly, that the replacement 
services and technologies are actually better and don't have 
those issues.
    Mr. Latta. Thank you.
    Mr. May, in reviewing your testimony, in your section 
number three it says, ``Ultimately, Congress needs to replace 
the current Communications Act with a New Digital Age 
Communications Act,'' and you state that ``because of the 
extent of the dramatic marketplace changes wrought by the IP 
transition that has already been described, it seems to me that 
Congress ultimately needs to comprehensively overhaul the 
Communications Act by adopting a new free market-oriented model 
that breaks thoroughly with the past.''
    Could you elaborate on that, please?
    Mr. May. Yes. Thank you, Congressman Latta.
    One of the reasons why ultimately Congress should pass a 
new act, it really goes to a lot of the discussion we have had 
today back and forth talking about technology, whether policies 
are technology neutral or not and how that relates to 
competition.
    The reality is the current act is not technology neutral 
really at its core. We talk so much, those who are in this area 
talk about the smokestack or stovepipe regime, because in 
essence the act establishes different types of regulation based 
on different types of technical or functional constructs, and 
that is not the most efficient or most sound way for regulation 
to go forward.
    So what should happen really in the future is competition 
is obviously important, as Mrs. Eshoo has talked about. We all 
want competition. But what we want to have really is an 
environment, and in fact the digital revolution is enabling 
more competition. That is why we have these, that we have cable 
and wireless and fiber and all of these things are part of the 
digital revolution.
    But ultimately in a new act what we would like to have in 
my view would be a standard that ties the regulatory activity 
of the agency closely to an analysis of the competitive 
marketplace, and then only if there is a market failure or 
consumer harm, and I recognize if there is consumer harm there 
is a place for regulation.
    I am not, like Mr. Cicconi, I am not advocating no 
regulation. But we need in a new act to tie regulatory activity 
much more closely to an analysis of the marketplace. And that 
really gets away from all this discussion about this technology 
and that technology and that type of thing. But the fact that 
technology is changing and it enables competition, that is a 
reason for policy changes. It is not a reason to do nothing.
    Mr. Latta. Thank you.
    Mr. Chairman, my time has expired and I yield back.
    Mr. Walden. The gentleman yields back.
    We turn now to the gentleman from Pennsylvania, Mr. Doyle, 
for 5 minutes.
    Mr. Doyle. Thank you, Mr. Chairman.
    Mr. Chairman, this morning I read in the newspaper that 
AT&T recently notified many of its special access customers 
that it will eliminate certain long-term discount price plans, 
effectively increasing rates by as much as 24 percent. 
Competitive carriers argue that they have no alternatives to 
gain last mile access to business customers and must simply 
accept the higher prices.
    Mr. Chairman, I would like to ask unanimous consent to 
place a copy of that article that appeared in the Wall Street 
Journal this morning and a copy of the ex parte filing that 
several companies made to the FCC in regard to those rate 
hikes.
    Mr. Walden. Without objection.
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    Mr. Doyle. Thank you.
    Let me ask Mr. Feld and Mr. Iannuzzi, how can AT&T 
institute up to 24 percent price increases if these markets are 
competitive? And do you find fault in claims by some that 
competition today eliminates the need for a regulatory 
backstop, particularly in light of AT&T's action to effectively 
raise special access prices?
    Mr. Iannuzzi. Sure. Only a dominant market player can go 
and raise prices ad hoc and to that level of magnitude. It was 
quite shocking to see that take place where those network 
elements are very vital to run the connectivity within our 
network. So if there was true ability to shop and pick, then 
they would be foreclosing those sales and those revenue 
streams. And AT&T is in the business to make profit, and to 
then just raise prices, if the market was working and there is 
an equal service, you would go pick the next lowest provider, 
provided they had equivalent capabilities.
    Mr. Feld. I would add that we often have a confusion 
between the underlying infrastructure and the things that ride 
on top of the underlying infrastructure. And we look at the 
number of wireless carriers, the number of carriers that offer 
service through that underlying infrastructure, and looking at 
just the surface of that we say, wow, there is a lot of 
competition. But when you actually get below the surface to the 
infrastructure on which all of that competition rides, you have 
still the same kind of network problems, still the same kind of 
infrastructure monopolies that you have to worry about.
    So I think that what we have seen in special access--and 
this is not a new problem, this has been going on for many 
years--is that there was a lot of hope and anticipation when we 
set up criteria about how we were going to tell whether there 
was competition. Some of that did not happen, but also the 
criteria were, frankly, too optimistic and did not take into 
account the difference between people offering retail service 
or people offering different kinds of commercial service and 
the critical infrastructure that you have to get to in order to 
reach the customers to offer that.
    Mr. Doyle. Thank you.
    Mr. Cicconi, would you like to respond?
    Mr. Cicconi. Yes, sir.
    First of all, let's be clear. When we are talking about the 
special access facilities mentioned here, we are not talking 
about services that are broadband. The FCC has not classed 
these services as broadband.
    I think one of the reasons, Mr. Doyle, that you read the 
Wall Street Journal article that we are not offering service 
contracts out 5 and 7 years is because we plan as part of the 
IP transition, the reason we are here today, to be replacing 
these old facilities with modern broadband fiber-based 
facilities, including ethernets. So naturally we don't want to 
be offering long-term contracts on a facility if we are going 
to be replacing it with an alternative facility.
    There is a proceeding underway on special access currently 
at the FCC that is designed to gather facts on what alternative 
facilities are available for other providers like TelNet to 
use. We think that the data the FCC collects from all 
providers, including cable, is going to show that there are 
ample alternative facilities there.
    And one of the alternatives, by the way, is for a CLEC to 
build its own facilities. We right now have a project underway, 
and hopefully within 2 years we will have run fiber to 1 
million businesses in our 22-State footprint. And I think any 
other carrier out there is free to do the same thing.
    Mr. Doyle. Mr. Cicconi, listen, I understand that you are 
transitioning and that it probably makes sense that you are not 
going to do 7-year contracts. I think the concern is not so 
much that you are discontinuing the long-term contracts, but 
that you are raising the rates, you are not passing down the 
discounts. And if this were truly a competitive market, I don't 
know how you could get away with doing that.
    Mr. Cicconi. Mr. Doyle, I have to go back and check on the 
rates. But I don't think we have raised prices. I think we have 
eliminated some rate plans. But I don't think prices have gone 
up.
    Mr. Doyle. I would like to see that.
    Let me just--well, Mr. Chairman, I see my time has expired. 
I will just wait for another time. Thank you.
    Mr. Latta [presiding]. The gentleman yields back.
    And at this time the chair would recognize the gentlelady 
from Tennessee, the vice chair of the full committee, Mrs. 
Blackburn.
    Mrs. Blackburn. Thank you, Mr. Chairman.
    And I want to go back to Mr. Waxman's question, talking 
about the peering agreements. Mr. May, let me come to you, and 
then, Mr. Feld, I am going to want to hear from you. Do you 
think the FCC should do a pilot project and test some of the IP 
networks to figure out how to make the transition easier for 
consumers, for businesses? Where are you on a pilot project?
    Mr. May. I am in favor of one, but I have to say I probably 
don't need to be as delicate as Mr. Cicconi may need to be. I 
think the FCC has been a little slow, I would say, in getting 
these trials off the ground, so I would like to see them move 
quickly. And I think they would yield useful information. But I 
don't want to see them used--over a long time of watching the 
FCC, sometimes I know when you start things like this they can 
be used in ways that delay ultimately the ultimate decision 
making. That shouldn't be allowed to happen with these 
projects.
    You started out by mentioning the interconnection, I think, 
in the IP transition. And I just want to say, and I said this 
in my testimony with regard to IP-to-IP interconnection, I 
don't think that--and I am just assuming we will have the trial 
or not--but ultimately I don't think the FCC should presume 
that it is going to regulate these interconnection agreements 
in the same way that it did in the TDM world. It is likely that 
there won't be many interconnection problems. That hasn't been 
the case with pure IP-to-IP connection. Thus far they have been 
very rare that there have been disputes. They have ultimately 
have been worked out really in a voluntary marketplace way.
    So my counsel would be for the FCC to just presume that it 
is not going to intervene, that we watch the situation. If it 
does turn out that there is a real problem with 
interconnection, I said in my testimony that there could be a 
regulatory backstop. But it shouldn't look anything like the 
current 251/252 process that basically really resembles more of 
a public utility style regulatory regime. It should be a 
dispute resolution process that ultimately depends on 
mediation, and perhaps ultimately baseball-style arbitration or 
something like that.
    Mrs. Blackburn. OK. Mr. Feld, anything?
    Mr. Feld. First, we support having well-constructed trials. 
I do think that the FCC has been behaving responsibly, however. 
What AT&T has put in so far is much more akin to a phase-in or 
a beta test, which you get to at the end, rather than time-
delineated trials with suitable safeguards, which are really 
where we are now. We saw what happened when you tried to flip a 
wire center on Fire Island this summer, and I am very glad to 
hear AT&T say we don't want to do a flash cut like that.
    The issue here is, as the FCC properly said in its proper 
notice, is that while the trial is voluntary for the carrier, 
it is not voluntary for the customers. And the other point I 
would make is that in a network if something goes really wrong 
and the wire center starts to go down, it can take down other 
portions of the network with it.
    So we believe in being cautious, but we think that, as with 
any other kind of trial, there needs to be appropriate safeties 
in place and that those need to be described and settled before 
we initiate any trials rather than after we get into it.
    Mrs. Blackburn. All right. Thanks.
    I am going to yield my time back, Mr. Chairman.
    Mr. Latta. The gentlelady yields back. And at this time the 
Chair recognizes the chairman emeritus of the full committee, 
Mr. Dingell, 5 minutes.
    Mr. Dingell. Mr. Chairman, I thank you for your courtesy 
and I commend you for this hearing. I also wish to express my 
thanks to Mr. Welch for his courtesy to me. Thank you.
    I would like to begin by welcoming a fellow citizen of 
Michigan, Mr. Mark Iannuzzi, this morning. His company, TelNet 
Worldwide, offers valuable services to the businesses of 
Michigan.
    At issue this morning is the transition to IP-based 
communications networks. As some of our witnesses have noticed, 
this transition is already underway and has the potential to 
confer significant economic and technological benefits on our 
people. But we need to learn more about what that transition 
means for the future of communications in this industry and 
particularly as to how it will affect the consumers.
    Incumbent carriers make the very valid point that they are 
required to maintain TDM networks at great cost despite the 
fact that only 30 percent of all Americans used ILEC switched 
networks in 2012. It is my view that the billions spent to 
maintain legacy networks can be more efficiently based and 
invested in IP-based networks that will be the backbone of the 
21st century telecommunications. This part will help advance 
the goals of the 2010 National Broadband Plan.
    With that said, I understand that AT&T has petitioned the 
Federal Communications Commission for forbearance from certain 
regulations in order to establish two geographically limited 
IP-based test projects. I think there is real value in this 
approach. It will provide an invaluable case study to 
consumers, businesses, policymakers, and to the government 
about what the transition to IP-based networks will entail. I 
encourage the Commission to work with AT&T to set these 
projects in motion, making certain that there are mechanisms in 
place for monitoring and effectively resolving consumer 
complaints.
    In addition to the lessons that we can learn from AT&T's 
potential trial projects, I suggest that policymakers also keep 
in mind several fundamental principles when considering the 
role of government vis-a-vis IP-based communications. As Public 
Knowledge has wisely suggested, our focus should be on ensuring 
universal connectivity, interconnection and competition, 
consumer protection, network reliability, and public safety. 
Those are very important principles to be kept in mind as we go 
forward.
    I firmly believe that there still exists a need for certain 
ex-ante obligations because the Communications Act's purpose is 
to make available insofar as possible to all--and I emphasize 
all people of the United States--the benefits of our 
communications system. That presumption and that comment is as 
valid today as it was 79 years ago.
    Mr. Chairman, I thank you for your courtesy. I am yielding 
back a minute and 24 seconds. And I thank Mr. Welch, and I will 
be happy to yield to the gentlelady.
    Ms. Eshoo. I appreciate it, Mr. Dingell.
    Can I just pursue this issue of the trial? It seems to me 
that there is kind of a chicken-and-egg thing going on between 
the FCC--maybe it is because we don't have a full Commission 
yet--but it seems to me the following. And I could be wrong, 
so, Jim, you just jump in and tell me if you think I am wrong. 
You will do that anyway.
    But anyway, you want the trials, you want the FCC to 
approve, give you the green light to go ahead with a trial. It 
seems to me that the FCC is saying we will do a trial but we 
want the following things in it, and there is not an agreement. 
Does that look anything like how you see reality? Because time 
is going on.
    Mr. Cicconi. Right.
    Ms. Eshoo. And I think what Mr. Dingell said is it is just 
on the mark. We need to get going.
    Mr. Cicconi. I honestly think it may just be a function of 
our timing on this, as one chairman is on his way out and 
another chairman isn't yet in there. The questions actually 
issued were fairly recent, I mean, and they waited until 6 
months after we filed the petition to actually ask the 
questions. And, frankly, I mean, like a lot of you, I have been 
around the town a while and I took the questions as a way of 
the FCC saying we are not ready to answer this yet.
    But I do take comfort in the fact that we have Democratic 
and Republican Commissioners both on the FCC who have said, 
yes, we should have trials. Mr. Pai said that, Commissioner 
Rosenworcel has said that, categorically go forward. The 
principal author of the National Broadband Plan, Blair Levin, 
has said, absolutely, he would have said yes to the trials on 
day one.
    I think the key, Congresswoman, is this isn't about us 
exclusively, it is industry-wide and it is nationwide. And I 
for one have been reluctant to put in the FCC a, quote/unquote, 
AT&T plan for conducting the trials. I think it is really the 
job of the FCC to work with all of industry and all 
stakeholders and, frankly, State-level government as well to 
design those trials, much like was done during the DTV, and I 
am pretty confident that once Chairman Wheeler gets there that 
that is what will happen.
    Ms. Eshoo. Great. Thank you.
    Thank you, Mr. Dingell.
    Mr. Latta. The gentlelady yields back her time to the 
gentleman whose time has expired.
    And the Chair now recognizes the gentleman from Illinois, 
Mr. Shimkus, for 5 minutes.
    Mr. Shimkus. Thank you, Mr. Chairman. Great hearing. I have 
learned a lot. And I love trying to stay as long as I can 
because you really do hear the point-counterpoint. But you 
never miss the opportunity to hear a member bring up a personal 
story. So, Mr. Cicconi, I am sure your staff prepared you for 
that personal story, and if they didn't then you might need to 
look for other staff members.
    Mr. Cicconi. I wish, Mr. Shimkus.
    Mr. Shimkus. But let me address, and I always get concerned 
when I start agreeing with Mr. Waxman every now and then. I 
have to check the data file on that. But I do agree we need to 
move on a test. We just need to move forward.
    And to his comments on Google, they are probably out here 
or they are listening, I would encourage them to come in, 
because my guess it is 251/252, is why they are not into voice. 
That is what my guess is.
    Now, if you have talked to them, Mr. Feld, and they have 
given you that data. But I think there is interconnection 
issues. It is very informative that they are not doing that, 
and I think that is a lesson we should learn and find out.
    So having said that, just a blanket statement, and I know 
the FCC is looking into this, these dropped calls in rural 
areas are an issue. And that talks about a backstop. I mean, 
that also reinforces an issue of having some type of backstop. 
So I want to raise that.
    But to Mr. Feld and Mr. Cicconi, public safety is a big 
issue for all of us here. Anna and I work very closely on this. 
In this move, how do you envision public safety being 
positively, or maybe--hopefully not negative--we won't accept a 
negative, obviously, response on public safety. So how do we 
deal with that? Why don't we start with Mr. Cicconi and then we 
will go to Mr. Feld.
    Mr. Cicconi. I mean, I hate, Mr. Shimkus, to sound like it 
is circular reasoning here, but I think this is one of the 
reasons we need to have the trials out there. We are fairly 
confident that we can design these systems in a way that takes 
account of public safety. Moreover, we fully accept that they 
have to work well for public safety. You simply can't have a 
new technology deployed where 911 doesn't work or other public 
safety features don't work. So I think we all recognize this is 
imperative, and I think we need to stress test it to ensure 
that it does work and that we can transition it accordingly. 
But I think we all accept the obligation has to be there and we 
simply can't replace the old technology with new technology 
unless 911 works.
    Mr. Shimkus. Thank you.
    Mr. Feld.
    Mr. Feld. Two things. One, planning precedes trials rather 
than trials preceding planning. And the thing that has been 
troubling to me is I get that we will need to have some 
information that we will gather in the trials, that is the 
point of doing trials, but before we say let's throw a switch 
and see what happens to public safety on this stuff, I want to 
know what the recovery mechanisms are, I want them to have 
limited tests first before you move on to full tests.
    The other important factor is we need to start thinking of 
how we make a more robust public safety system in our 
competitive and differently enabled technology universe. There 
is virtue in redundancy. So maybe we don't have to put 
everything on every network the same way if we have ways in 
which the networks will work together that are for public 
safety.
    We have seen some things coming out the Hurricane Sandy 
hearings that the FCC has been conducting where we have seen 
how different technologies have different strengths and 
weaknesses and have responded in a different way. And I think 
that one of the exciting advantages of the IP transition is 
that it allows us to start thinking about how to take advantage 
of the structures of the Internet which rely on redundancy and 
flexibility for stability rather than requiring 59 liability 
from every single network that is participating.
    The last thing I will just mention is we do have to be wary 
of new issues that are coming up. I mentioned in my testimony 
the problem of swatting, which is caller ID spoofing, which 
allows people as a joke to send SWAT teams to other people's 
houses. That is not a particularly funny joke. And while 
obviously these are challenges that need to be resolved, we 
need to be accumulating this checklist of what needs to work as 
we move forward.
    Mr. Shimkus. Yes, and let me finish on this. I have been 
really involved with trying to raise this issue with the FCC 
with the convergence of technology and I have given up. I don't 
think we will ever change the FCC and the bureaus that it has.
    The last thing, the question is, Mr. Iannuzzi, have you 
seen in the business sector the cutting of the cord from 
landline to cell for the business community as we have seen in 
residential services?
    Mr. Iannuzzi. Mr. Congressman, an excellent question. In 
the business community it is a distinctly landline-oriented 
business. While mobile phones are part of the workforce for the 
common employee, the way that businesses communicate and 
collaborate is inherently a landline type of function. It is 
because there is group capabilities going on. You are 
continually interacting with a wide variety of locations 
perhaps, and so forth, which is not conducive to how cellular 
technology has been deployed, which is more about the 
individual and how that connects together.
    If I may on your very important item here about security 
and public safety, the competitive energies already have 
migrated for the most part to IP-based 911 service. It is a far 
superior solution than currently the legacy TDM one. Why? 
Because when we are trying to get our customers' calls to an 
emergency authority, the IP network allows us to make sure that 
if there is any bottleneck to get to the public safety point, 
we have alternate routes to alternate safety points to get to 
them or answer it even through our own operators to make sure 
that we connect the dots.
    Furthermore, we have added in cool technology where if 
somebody picks up the phone and they dial 911, we not only send 
the call to the public safety organization, but we can then 
send it to the building supervisor, the provost of the 
university, or if you are a residential user you could go to--
you are out at the show and somebody calls 911 from your home, 
we will sent it to your cell phone so that you know that 911 
call was made from your home. So we have already made that 
move.
    And this thing about the IP-to-IP interconnection, yes, do 
you have to do things in a measured fashion? Certainly. But 
when it comes to network center connecting and peering at the 
IP basis, that is different than how you are talking to the end 
user, and that IP-to-IP interconnection goes on right now.
    Mr. Latta. Thank you very much. The gentleman's time has 
expired.
    And the chair now recognizes the gentleman from Vermont, 
Mr. Welch, for 5 minutes.
    Mr. Welch. Thank you very much, Mr. Chairman.
    Mr. Burke, thank you for being here. Your testimony 
mentions a few carriers in Vermont are investing in fiber, and 
my question is what policy decisions would change carrier 
incentives to invest in rural areas and are there regulations 
that are imposing unnecessary costs that are hindering any of 
that investment?
    Mr. Burke. Thank you for the question, Congressman. I think 
that it is a very tricky question when you get to how do we 
move out into a better business plan in more rural areas. I 
mean, dollars are dollars. And I guess to call on a predecessor 
of my own, I will go back to my grandfather. He was a dairy 
farmer, and I can remember when I was little he said, you know 
why this stool has three legs, Johnny? And I said, no, sir, I 
don't. He said, because if it had two it would just fall over.
    And I think that is actually what we may be dealing with 
here. I think we actually have a potential as we move forward 
into an IP world, and we are moving there, to be able to do it 
in a better and more focused way if in fact we use a stool with 
three legs; the Federal leg that obviously is your 
responsibility and the FCC's; industry's leg and how we get out 
there to make ubiquity part of the process here, because if it 
is not ubiquitous it doesn't really work the way we want it to 
work; and last but not least is the States' responsibility and 
the States' ability, be it with their own USF funds to help 
manage to get this stuff out there, or be it their policies to 
help make the move-out for industry itself more seamless, 
easier, and more attractive to their business plan. The States 
are a vital part of this. And without three legs to that stool, 
I am not so sure that it has got any chance of succeeding.
    Mr. Welch. Thank you.
    For Mr. Cicconi and Mr. Iannuzzi, just quickly, what 
actions are required by the FCC in order to ensure that 
competition will continue and actually thrive in an all-IP 
world? I would appreciate it if it was quick and ABC, because I 
don't have that much time. I will start with you, Mr. Cicconi.
    Mr. Cicconi. Well, I think you have competition today, Mr. 
Welch, and I think as the FCC moves forward with the IP 
transition it certainly ought to take a look at what 
regulations are needed going forward to help preserve the 
competition that is there today. I would certainly grant that. 
But I would also suggest that on a going-forward basis that it 
would be a mistake to assume that the problems of the present 
and the future are necessarily the same as they were in 1996 or 
1934.
    So I think the notion of taking legacy rules and applying 
them to new technology is something the National Broadband Plan 
actually spoke to, and it talked about how applying legacy 
rules could actually retard the investments that were necessary 
and could have unintended consequences of siphoning investments 
away from the new technologies that were needed. So I think 
that would be our main concern, is that we not overcorrect here 
and assume there are problems until we actually know what those 
problems are.
    Mr. Welch. Thank you.
    Mr. Iannuzzi?
    Mr. Iannuzzi. It is very simple. In terms of the FCC, we 
just need the clarity that removes, that if there is any 
technological implication in the way the act works, it is 
technically neutral. Communication systems are by their design 
technical, so if there is not technical advancements, then what 
were we trying to do in terms of trying to get where we are at, 
if we weren't trying to make things better, faster, cheaper, 
smarter.
    So my point here is that the key thing to ensure 
competition is to eviscerate. Take out the eraser on the spot 
that we have the technology underpinning to the act, because it 
was about creating competition. It was a framework to correct a 
market-based structure so that we could compete.
    Mr. Welch. Thank you very much.
    Back to Mr. Burke, we have got a real epidemic of rural 
call completion, and as far as my constituents and the people 
you serve as well, our concern, fixing that problem, can't come 
fast enough. How can IP transition help to address the issue of 
incomplete calls, particularly in rural areas?
    Mr. Burke. Well, I think that obviously you have to take a 
look as you move forward here with where the problems lie. And 
if you take a look at what we will see I think in call 
completion, the order comes out next Monday, I believe, is the 
date that the FCC is actually going to issue it. The fact of 
the matter is that call completion is probably a methodology 
that grew from terminating access charges, and as least-cost 
routers sensed heavy terminating access charges, they decided 
that they would not complete the call. Least-cost routers are 
innovation, too, and we can't get carried away with innovation. 
Certainly it has given us a lot of good things, but I suspect 
the idle innovator like the idle hands can be the devil's work 
thing, too, when it wants to be, and in fact that may have been 
the case here.
    How we go forward is to try to make sure that there is a 
regulatory touch as well that keeps an eye on moving forward in 
this transition. Mr. Cicconi hasn't said that that isn't the 
right idea. I would point out, too, that with call completion, 
that began, and the answer to that began through the States.
    When the problems occurred, I know that you got them, 
Congressman. You said that you did, and I believe that you did. 
But the fact of the matter is most of the time your public 
service commission or your AG's office probably got them first 
as people became unhappy with what they were getting and what 
they weren't getting in rural America. And hopefully keeping 
those regulations in place will allow for consumers to get the 
kind of protection that they have learned to expect in their 
old network as we move through to a new one.
    Mr. Welch. My time has expired. I yield back. Thank you.
    Mr. Latta. Thank you very much. The gentleman yields back.
    And the chair now recognizes the gentleman from Louisiana, 
Mr. Scalise, for 5 minutes.
    Mr. Scalise. Thank you, Mr. Chairman. I appreciate your 
having this hearing.
    And I want to thank all of the witnesses for coming and 
testifying and giving your perspective on the changes in 
technology. I am excited by it, when you see the things that 
people are able to do now as we have this transition to 
Internet protocol. You also have coupled with that the upgrades 
that are being made from copper to fiber optics. And, of 
course, that brings billions of dollars of investment. It gives 
consumers a lot more options to do things with voice and video 
and sending larger packets of data.
    Of course, the investments that go with it, I know, Mr. 
Cicconi, your company and other incumbents are investing 
billions of dollars to help build out these new networks, to 
use this new technology in better ways even with the current 
regulatory environment. I want to ask your take, because some 
would say that the fact you are investing these billions of 
dollars proves that there is no need to change the regulatory 
structure. How would you answer that?
    Mr. Cicconi. Well, I think that the first thing I would do 
is kind of refer back to the chart, Congressman, that opened 
the hearing here that talks about the way the market is set up 
today, where by the end of this year we will have three-
quarters of Americans using either wireless only or VoIP 
providers as opposed to the circuit-switched provider. As I 
said earlier, we have fewer than 14 million circuit-switched 
telephone customers at AT&T at the present time, which is a 
small fraction of the numbers that any other provider has out 
there in these competitive markets. So I think that would be 
the first point that I would make.
    The second point is that the investment that has occurred 
over the last few years in wireless and IP technologies is, of 
course, I think it is related to the fact that these are the 
least regulated areas of technology. It is not accurate that 
the 1996 act is technology neutral. In fact, it penalizes 
wireline technologies uniquely by imposing a lot of extra 
requirements on them. And I think that is one of the reasons 
that Google has decided not to offer VoIP service in a city 
like Kansas City.
    Mr. Scalise. And that is a good point. I want to ask you 
about that, because the 1996 Telecommunications Act does impose 
some ILEC-specific rules. How does that actually affect your 
investment decisions?
    Mr. Cicconi. Well, I think on a going-forward basis with 
IP, I think we hear what Google hears, which is some companies 
advocating that we simply take the common carriage model in 
Title 2 and apply it as if nothing has changed to modern 
competitive IP services. And I certainly think that is not what 
the act envisioned. I also think it would be a big mistake. But 
it creates regulatory overhang for a company like Google or a 
company like AT&T in deciding to make a wireline investment 
decision.
    Now, to the final point, we have gone ahead anyway here 
recently and decided to invest in this area. And, quite 
honestly, it was a difficult decision for us, running fiber to 
these buildings and expanding our user services to millions 
more Americans, including in a lot of rural areas. But I think 
it is a leap of faith on AT&T's part in terms of the regulatory 
environment. We have read the National Broadband Plan. We take 
comfort in the fact that it speaks to these issues, it has been 
endorsed by the President, it has been endorsed by the Congress 
on a bipartisan basis, and I think it gives us confidence going 
forward that these regulatory issues and uncertainties will get 
settled in the proper manner. And, of course, I think one the 
reasons we filed for the trials is to kind of spur that along.
    Mr. Scalise. I appreciate that.
    I want to ask Mr. May, because I am running out of time, 
you have been advocating for an updated Telecommunications Act 
to reflect the digital age. If you can share with me some of 
the principles that you would envision. And I left my brick 
telephone at home because I didn't want to get into that here, 
but since I have got you here, you might even want to mention 
something about the 1992 Cable Act, which is probably also very 
outdated and needs to be updated.
    Mr. May. Thank you, Congressman. That is outdated, for 
sure, the 1992 act. And, frankly, the 1996 act is as well, 
although at the time it was adopted it, you know, was a 
transitional piece of legislation that was good.
    You know, here are the basic fundamental principles going 
forward. And you have to think about it really in the larger 
sense, because, obviously, I have talked about some regulatory 
backstops and safeguarding universal service and so forth. But 
in a large sense a new act should get rid of the silos that are 
in the present act, the stovepipes. And they are not technology 
neutral, they are based on technology constructs, the different 
titles. And it should replace the public interest standard that 
now is in the act in 110 different places, delegates authority 
to the FCC just to act in the public interest, that 
indeterminate standard, with a competition-based standard that 
is antitrust-like. I am not suggesting that you are going to 
import all of antitrust jurisprudence. But it is going to focus 
on the competitive marketplace and regulation; therefore, 
shouldn't be adopted unless there is a market failure or proof 
of consumer harm.
    Then, finally, what a new act should do is circumscribe 
somewhat the FCC's general rulemaking authority, which now, as 
you know, operates in what we would call an ex-ante, 
anticipatory fashion. When you engage in that process what you 
do by definition is conjecture harms that may occur in the 
future because you are trying to conceive of all potential 
harms.
    What happens is generally those types of rulemakings are 
overly broad, broader than they need to be. So you want to get 
the FCC to act more in a post hoc capacity, acting on 
individual complaints that say there is a specific problem. You 
know, Mr. Iannuzzi says with this carrier in this place there 
is a market failure for some reason, I have got an 
interconnection problem. You take it into an adjudicatory 
context and you try and address that specific problem rather 
than proscribing a lot of conduct that otherwise might be 
beneficial to the country otherwise.
    Mr. Scalise. I appreciate the answers. And I yield back.
    Mr. Latta. Thank you very much. The gentleman's time has 
expired.
    And the chair now recognizes the gentleman from New Jersey, 
Mr. Pallone, for 5 minutes.
    Mr. Pallone. Thank you, Mr. Chairman.
    I think we can all agree that the IP transition already 
underway is good for American consumers, the economy, and the 
country as a whole. So I welcome this conversation.
    However, we must work with industry, public interest 
groups, and consumers to ensure that as it progresses these 
technological advances do not come at the expense of consumer 
choice and access, public safety, or competition.
    I think some of you know that nearly a year ago, October 
29th is next week, my district and the State of New Jersey were 
hit hard by Hurricane Sandy, and one of the many impacts of 
that devastation was the loss of communication services. Power 
outages and floods disrupted many types of communications, 
including wireless, television, telephone, and Internet 
services. In fact, yesterday, I was with Congressman Leonard 
Lance and Yvette Clarke and Congressman Holt and Congressman 
Payne in Newark, and we were talking about this, you know, on a 
bipartisan, regional basis.
    So I wanted to ask, I know some of this has been touched 
upon. I am going to try not to be repetitive. But I understand 
that traditional copper networks operate even when power lines 
go down. So my question of Mr. Cicconi is, because AT&T has a 
large legacy copper communications network and significant 
plans to deploy new fiber infrastructure, how will the new 
fiber networks handle natural disasters like hurricanes? We 
know that the copper continued to operate. But what happens now 
with the new fiber networks and, you know, dealing with that 
issue? How you going to deal with it?
    Mr. Cicconi. There is, unfortunately, no IP technology, 
Congressman, that allows you to power the line. You know, you 
cannot put power over a fiber connection. Fiber has many other 
advantages in addition, though, to its Internet capacity and 
one of them that I think is relevant in a hurricane or a 
flooding zone or in a Sandy-type situation is that seawater 
will destroy copper and make it unrepairable. Fiber is very 
resilient in that type of situation, and, frankly, so are our 
wireless networks. They are very resilient. We get them back up 
and running very quickly after these storms. And I say that, 
knock on wood, because we are still in hurricane season.
    Mr. Pallone. Now, again, I think that we all agree that 
these communities should not lose services they rely on simply 
because they are unlucky enough to be in the path of a storm. 
So if there are, you know, different consequences from these 
replacement services with fiber, you know, why--again, I guess 
this goes back to the trial, but what else can we do? Is there 
anything else we can do? And what are you going to do with 
these real world trials so we can--how do they relate to the 
problem that I just discussed?
    Mr. Cicconi. Well, sir, I mean, I don't want to second-
guess, you know, a decision made by other carriers, but I think 
that what trials and proper planning for the IP transition 
would allow is for us to test the capabilities of these 
services, not have people surprised if you deploy a service and 
a fax machine doesn't work the same way, things of that nature.
    I do think it is iterative, though. I think the technology 
will evolve. And, frankly, we can help it evolve if we know 
what we are trying to do. For example, in our wireless home 
phone service, we have actually asked the manufacturers to add 
a data capability. That came online this summer. So we actually 
have that in our wireless home phone product.
    But I think as we go forward over the years I would expect 
that the wireless capabilities will evolve and change to meet 
those needs so that, frankly, it could be more robust and more 
reliable and provide all of the same services and more that our 
copper line facilities do.
    Mr. Pallone. Do you have your hand up? Go ahead.
    Mr. Feld. Yes, thank you. One of the things that we have 
asked the FCC to do, and to put priority on this, is to 
initiate a separate proceeding for disaster guidance. We have, 
as you know, a situation in Mantoloking, New Jersey, also Fire 
Island, where Verizon did not know what they were supposed to 
do. They didn't want to rebuild their copper network, but they 
also needed, had no guidance for what they should be doing 
instead.
    We think that the FCC, in order to address this problem of 
public safety, needs to get out there and start a proceeding 
right now, first thing, as we are doing this transition. And we 
know that carriers are going to want to put in new 
infrastructure as they rebuild after storms like Sandy. What 
are their responsibilities? What are they supposed to do and 
what can the people in those communities rely on in order to be 
able to rebuild their lives?
    We have asked that. We have had 17 other public interest 
organizations join us in asking the FCC to begin a proceeding 
on this, and hopefully we will see action on that as soon as 
Chairman Wheeler is confirmed.
    Mr. Pallone. Go ahead. With the chairman's approval, go 
ahead.
    Mr. Iannuzzi. May I comment?
    Mr. Latta. Just briefly.
    Mr. Iannuzzi. I would like to point out one key thing here, 
is that make sure we embrace the small, middle-size business 
market. A lot of conversation here focuses on residential, and 
it is certainly important. The charts that I see on the side 
here talk about a degradation in copper-based usage at the 
residential level. That is not the case at the business level. 
That is typically the only connection into there, is copper 
facility. That copper facility can handle the power line backup 
requirement you need. So we often deploy where they are working 
in parallel; we have the next-generation IP technology taking 
care of all those ones and then we have the copper-based lit 
services, which are taking care of all those other critical 
functions and allowing that to work its place out as time goes 
on.
    Mr. Latta. Thank you.
    Mr. Pallone. Thank you, Mr. Chairman.
    Mr. Latta. The gentleman's time has expired.
    And the chair now recognizes the gentleman from Missouri, 
Mr. Long, for 5 minutes.
    Mr. Long. Thank you, Mr. Chairman.
    And thank you all for being here today. And given your 
testimony, I am kind of the cleanup hitter here. Well, they 
should have started with me. We would have been done a long 
time ago.
    But, Mr. Cicconi, you made mention earlier in the 
questioning portion of this hearing that you have read the 
FCC's National Broadband Plan. And being that you have read 
that, I will remind you that they came to a conclusion, the 
FCC's National Broadband Plan, to, quote, ``Regulations require 
certain carriers to maintain plain old telephone service.'' And 
they highlight a requirement that is not sustainable and lead 
to investments in assets that could be stranded.
    So if FCC believes that maintaining legacy telephone 
service is not sustainable, and that investments are at risk of 
being stranded, shouldn't the FCC change its policies that have 
caused this problem?
    Mr. Cicconi. Well, Mr. Long, I do think it is appropriate 
for the FCC to move forward. It put together an excellent plan 
at your direction, at the Congress' direction. It has been 
widely endorsed. It anticipated this very issue, the words you 
quoted. And, you know, and unfortunately, we are 4 years along 
here, and I don't think we have seen the implementation of some 
of the things that they recommended. But I remain very hopeful 
that once the Commission is back up to full strength that they 
will do so. And, again, our petition last year for the IP 
trials was designed in part to spur along the very process you 
just highlighted, sir.
    Mr. Long. OK. Again, when you are the last guy at bat, some 
of this you have touched on before. But let me ask you to 
elaborate, if you will, on the types of services that would be 
available through these Internet protocols that are unavailable 
on the copper networks.
    Mr. Cicconi. Well, I think the IP transition--and I am at 
risk of oversimplifying, I am a liberal arts major, not an 
engineer--but it by and large is about voice becoming simply 
another application riding on an Internet pipeline. OK? So as 
we build out fiber, we are building out Internet capability and 
voice then becomes just another application.
    And so I think what that provides, obviously, is 
competitive opportunities for a lot of people. But it also 
provides much more accessibility. It allows people to design 
and innovate based on IP. And so you may bring to voice 
services through this IP transition some of the same 
innovations you are seeing, you know, in every other form of 
Internet service. And, you know, if you pull out an iPhone and 
you go through the app store, I think you can get a sense of 
the innovation that is available. And I think as we transition 
these networks toward IP, I think we will see the same types of 
innovation there. And I think it is obviously important for the 
country from every standpoint of economic activity, but also I 
think from a consumer standpoint too.
    Mr. Long. OK. I represent Missouri 7, which is Springfield, 
Joplin, Branson area, down southwest corner of the State. And I 
think that we can all agree, out of the 435 Congressional 
districts, that I have the best one in the United States. And 
in that area, there are 11 counties, part of 11 counties, 10 
full counties, part of an 11th county. So I have a lot of rural 
areas along with Springfield, Joplin, Branson. And a lot of my 
constituents don't have ready access to the latest medical 
technology, and even the number of doctors that you would find 
in urban areas. And that is another topic. But can you 
elaborate on the types of telemedicine and mobile health 
applications that would be available to my constituents in the 
best congressional district in the United States if they did 
have the IP services?
    Mr. Cicconi. Well, sir, I think, again, I think if we are 
able to get the broadband connections into those areas, and 
they are fulsome and they are both wired and wireless, I think 
you have an infinite variety of services that are available 
that are being actually put together by innovators today. I 
think our entire healthcare system, notwithstanding the current 
difficulties, is actually innovating quite well in terms of 
making records available and things of this nature.
    Mr. Long. Can you give me any more specifics or anything on 
telemedicine?
    Mr. Cicconi. We can certainly pull together something for 
you, Mr. Long, and get it to you. I don't have anything 
specific I could lay out in the hearing here today, though.
    Mr. Long. OK. I have zero seconds. So with that, if I had 
any time I would yield it back.
    Mr. Latta. The gentleman yields back, and his time has 
expired.
    Seeing no other members wishing to ask questions this 
afternoon, I want to thank you for this excellent panel. And I 
am sure that the chairman would also want me to extend his 
heartfelt thanks for you all being here today.
    And without anything else coming before the committee 
today, we will stand adjourned.

    [Whereupon, at 12:43 p.m., the subcommittee was adjourned.]
    
    [Material submitted for inclusion in the record follows:]
    
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