[Senate Hearing 113-630]
[From the U.S. Government Publishing Office]



 
  FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL 
                               YEAR 2015

                              ----------                              


                        THURSDAY, MARCH 27, 2014

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:02 a.m. in room SD-138, Dirksen 
Senate Office Building, Hon. Tom Udall (chairman) presiding.
    Present: Senators Udall, Johanns, and Moran.

                   FEDERAL COMMUNICATIONS COMMISSION

STATEMENT OF HON. TOM WHEELER, CHAIRMAN
ACCOMPANIED BY: HON. AJIT PAI, COMMISSIONER

                 OPENING STATEMENT OF SENATOR TOM UDALL

    Senator Udall. Good morning. I am pleased to convene this 
hearing of the Appropriations Subcommittee on Financial 
Services and General Government.
    First, I want to welcome my ranking member, Senator Mike 
Johanns. We don't have anybody else here, but we expect a few 
to show up. But great to be here with you and share this 
opportunity to learn from our Federal Communications Commission 
(FCC) members that are here. I also want to----
    Senator Johanns. Mr. Chairman, sometimes it is about 
quality, not quantity.
    Senator Udall. Yes, that is right. That is very, very well 
put. Yes. We have got real quality here. There is no doubt 
about it.
    And I also want to welcome our witnesses. Chairman Tom 
Wheeler, who recently was confirmed as the new chairman of the 
FCC. I want to thank you for your service and look forward to 
your testimony today. And also with us is Commissioner Ajit 
Pai. Really good to have you with us again and look forward to 
your testimony as well.
    The FCC has been very busy on a number of initiatives, 
initiatives that are critical to many Americans. And these are 
initiatives that I strongly support.
    The FCC is modernizing the almost $9 billion Universal 
Service Fund to expand access to vital communications systems 
for everyone in America.
    The United States invented the Internet, but now we lag 
behind many countries in broadband access. This is especially 
so in rural parts of New Mexico. So I am pleased to see new 
broadband and wireless investments in my home State and on 
tribal lands. And that is all thanks to universal service 
reforms.
    The FCC is also updating and streamlining the E-Rate 
program to support Internet access at schools. In New Mexico, 
E-Rate already makes a big difference, benefiting over 350 
schools and libraries and more than 370,000 school children.
    There is no doubt, as you both know, that we live in an 
Internet age. And as Chairman Wheeler has noted, every student 
in America should have access to state-of-the-art tools for 
education. E-Rate helps make that possible.
    In 2012, Congress authorized the FCC to conduct spectrum 
auctions to make more spectrum available for mobile broadband 
use. This fuels innovation in wireless technologies. It helps 
build FirstNet, our Nation's public safety broadcast network 
for first responders. And it will generate significant revenue 
for the U.S. Treasury.
    The FCC also has a crucial safety and security role. Our 
Nation's communications networks do more than just keep us in 
touch with friends and family. In emergency situations, these 
networks save lives. This committee explored these issues at a 
hearing I chaired last fall in how we can improve emergency 
communications. So I look forward to an update from you about 
the progress that is being made there.
    The FCC request for this fiscal year is--in 2015 funding is 
$375 million. This is a modest increase from the fiscal year 
2014 enacted level. FCC spending is fully offset, as we all 
know, by regulatory fees and from spectrum auctions.
    This committee has an important oversight responsibility, 
ensuring that the FCC uses that money wisely for the American 
people. There are two basic questions. What are the resource 
needs of the FCC, and what are the consequences of the 
shortfalls?
    I have the honor of chairing this subcommittee and serving 
with Senator Johanns, and I look forward to working with him to 
advance these critical FCC initiatives. So now I would turn to 
my ranking member for any opening statement that he would make.

                   STATEMENT OF SENATOR MIKE JOHANNS

    Senator Johanns. Mr. Chairman, thank you very much for 
holding the hearing today on the fiscal year 2015 budget 
request for the FCC.
    Let me also say welcome, Chairman Wheeler and Commissioner 
Pai. We are glad to have you both here.
    This is an important hearing as the policies and actions of 
the FCC reverberate across our economy and impact our Nation's 
international competitiveness. The hearing is also significant 
as it is our first this year and serves as the kickoff for the 
fiscal year 2015 appropriations cycle.
    I very much appreciate the work of the chair of the 
Appropriations Committee, Senator Mikulski, and Ranking Member 
Shelby and other committee members to try to restore regular 
order to the congressional appropriations process. However, it 
is no secret that I opposed the decision last fall to amend the 
Budget Control Act to escalate Federal discretionary spending 
back over a $1 trillion.
    The changes Congress made to the Budget Control Act simply 
raise more money to spend more money. I did not object to 
replacing the sequester cuts, but we should have included 
targeted cuts that addressed waste or fraud or achieved long-
term savings through structural changes. Unfortunately, in my 
judgment, the agreement reached last year just didn't meet the 
standard.
    Given my concern, I did not support the omnibus 
appropriations bill for fiscal year 2014 enacted earlier this 
year. There were numerous provisions in that bill that I 
supported and would vote for without reservation, but the 
package was all or nothing, and the good was unfortunately 
outweighed by the trillion dollar price tag.
    Because last year's budget agreement increased the spending 
caps for fiscal year 2015 as well, I am concerned we are on the 
same path for this fiscal year.
    I was disappointed that the President's budget for fiscal 
year 2015 proposed $56 billion in new spending this year and 
$791 billion in spending increases over the next decade, paid 
for with tax hikes on American families.
    With soaring annual deficits and nearly $18 trillion in 
debt hovering over our economy, our country is in need of 
serious budgeting that spends responsibly.
    As we begin the process of reviewing agency budget requests 
for fiscal year 2015, I intend to work with my colleagues on 
the committee to ensure we make the difficult decisions 
necessary to get our spending under control.
    We must also be mindful of the need to clear the way for 
economic opportunity and for international competitiveness. The 
FCC plays an important role in ensuring that the United States 
continues to lead the world in digital innovation and 
communications infrastructure. Its policies and actions can 
have an enormous impact on our country's economic growth.
    I am eager to hear more today about the Commission's 
efforts to promote economic growth, reduce regulatory burdens, 
and promote greater transparency, predictability, and 
accountability in its regulatory process.
    So, again, I thank the two of you for being here. I look 
forward to your testimony today and to working with you to 
address the challenges before us and to clear the way for 
continued U.S. leadership in communications, and I look forward 
to working with you in the future.
    Mr. Chairman, thank you.
    Senator Udall. Thank you very much, Senator Johanns. Really 
appreciate your opening comments.
    And Chairman Wheeler, at this point, I invite you now to 
present your remarks on behalf of the FCC, followed by 
Commissioner Pai.

                 SUMMARY STATEMENT OF HON. TOM WHEELER

    Mr. Wheeler. Thank you very much, Mr. Chairman, and Ranking 
Member Johanns. We appreciate the opportunity to be here.
    This is my first time presenting before you. But it is not 
the first time in my life that I have presented a budget. So 
let me revert to some of my business experience and try and go 
to the core of what the issues are.
    As you pointed out, Mr. Chairman, we have a reasonable $35 
million increase that we are requesting, but it deserves 
explanation and discussion. You can really think of it in three 
parts.
    About a third of that goes for technology upgrades that 
produce cost savings and efficiency increases. About a third 
goes to universal service reform in the form of both expanded 
enforcement and new rules. And about a third is essentially for 
two things. One, those mandated costs of inflation--salaries, 
benefits, et cetera--that happen, as I say, by mandate. And 
second, the movement of the National Broadband Map from the 
National Telecommunications and Information Administration 
(NTIA) to the FCC and our need to pick up that expense.
    Let me see if I can unpack each of those. First, let us 
look at information technology (IT), which is about $13.5 
million. Our IT systems are old, inefficient, and insecure. Let 
me give you a couple of examples.
    Forty percent of our IT systems are more than 10 years old. 
This means that most of them aren't even supported by their 
vendors anymore, and they are costly to maintain. Worse, we 
have 207 different systems that are a hodgepodge of 
incompatible and inefficient. For instance, we cannot build a 
consumer database that works across the entire agency because 
we have so many different incompatible systems.
    But worst of all, these are insecure systems. I would be 
happy to explain in a less public setting some of my concerns 
about that, but let me give you one example. We are still using 
Windows XP in many of our computers, and it is well known that 
it is the access point of hackers worldwide. But we don't have 
the money to get out of it.

                         UNIVERSAL SERVICE FUND

    The second leg of this three-legged stool is Universal 
Service Fund reform, which is $10.8 million. We have an $8.4 
billion program going through big changes with big challenges. 
The lifeline program has been abused. We will save $160 million 
this year by stopping some of the duplicate payments and the 
inappropriate participation that was there. But we are also 
dealing with companies, not just consumers, and we have had 
inefficient enforcement.
    I said from day one, when I came in, I want heads on pikes. 
I want to find out who the miscreants are and deal with them. 
We have insufficient resources to do that.
    Our High-Cost Rural Fund, we are shifting from voice to 
broadband, and we are putting out new trial programs. But our 
resources in the Wireline Competition Bureau are constrained in 
many other directions.
    And the E-Rate program, as you pointed out, Mr. Chairman, 
is an 18-year-old program, built around 18-year-old ideas and 
priorities. We have to change that to reorient it to high-speed 
broadband. We are in the process of a rulemaking to modernize 
that right now.
    But let me talk a little bit about management. We need more 
muscular enforcement. I am standing up a strike force on waste, 
fraud, and abuse in the Universal Service Program. But it 
doesn't make sense that on an $8.4 billion program, we have 25 
full-time equivalents (FTEs) for enforcement. It is 
insufficient.
    And so, what we ask for here are new employees, and let me 
be clear--we need investigators. We need auditors. We need 
financial enforcement folks. We need to expand by 15 the folks 
that we have in our Enforcement Bureau. That is almost doubling 
the current FTEs. We need to expand by 10 the folks that we 
have doing audits in our Office of Managing Director. That is 
doubling the numbers. We need to expand the Office of Inspector 
General by 6, and we need to put 14 more in the Wireline 
Competition Bureau for rules and enforcement appeals and things 
like this.
    And I would just say the last third are things that we are 
mandated for, for $5.7 million in Consumer Price Index (CPI) 
and other increases and $4 million for the broadband map.

                                AUCTION

    One quick observation. We also, as you know and you pointed 
out, Mr. Chairman, are responsible for auctions. And while that 
is paid for out of the auctions themselves, we are asking for 
an additional $7 million there. We have generated $53 billion 
from auctions and have spent less than 2 percent of that to run 
them, a 98 percent return. I think that is a pretty good return 
on investment for America.
    We have had many auctions recently, in the last 5 years or 
so, that haven't had a very high profile. But in the last 5 
years, we have had 10 auctions that have auctioned off more 
than 16,000 new licenses. And we are now dealing with a mandate 
that we have from you given in 2012 to conduct the world's 
first incentive auction, which is literally inventing things as 
we go.
    As you pointed out, Mr. Chairman, the FCC pays its own way. 
It has no impact on deficit or taxes, and we take our 
responsibility at the heart of 21st century economies 
seriously. And that responsibility is multifold.
    One, we need to make sure that we are going away from the 
``regulator knows best'' approach. We can't be as smart as the 
Internet. We need to make sure that we are providing stability 
for those who invest and create jobs.
    And two, we need to make sure that we are fulfilling our 
responsibility for consumer protection.
    And three, we need to make sure that we are fulfilling our 
responsibility to deliver about two-thirds of our program, 
about $8.4 billion to assist the development of 21st century 
communications in rural America.

                           PREPARED STATEMENT

    I appreciate the opportunity to be here and look forward to 
discussing these issues with you.
    [The statement follows:]
                 Prepared Statement of Hon. Tom Wheeler
    Chairman Udall, Ranking Member Johanns, and members of the 
subcommittee, I am pleased to appear before you today, alongside my 
colleague Commissioner Pai, to present the Federal Communications 
Commission's (FCC's) fiscal year 2015 budget request.
    Although I have testified before a number of other congressional 
committees during my career, this is my first appearance before a 
Senate Appropriations subcommittee. I see this as an important 
opportunity to update you on the FCC's activities while providing you 
with information essential to developing the Commission's funding 
levels.
    When I assumed the Chairmanship of the FCC last November, I was 
impressed by the Commission's moderate budget levels and the 
extraordinary work that this agency has accomplished during the past 
few decades. The Commission has raised more than $53 billion for the 
Treasury in auctions revenues since 1994--$1.56 billion of that just 
last month. We are on course to raise billions more in the next few 
years to fund, among other things, the deployment of an interoperable 
broadband network for our Nation's first responders, as well as to 
reduce the deficit. The Commission supports an industry that is 
essential to our Nation's economy and stimulates ever-higher levels of 
financial growth. We have repurposed and re-engineered significant 
amounts of spectrum to fuel these industries--including spectrum that 
would have been considered almost useless barely a decade ago. During 
the past 3 years, the Commission has reformed the Universal Service 
Fund (USF)--a massive undertaking designed to take this 20th century 
program into the next decades of the 21st century--and now we are 
building on that reform with a sharpened enforcement focus.
    The Commission's activities are entirely funded by those it 
regulates. In other words, there is a zero relationship between 
Commission expenditures and the Federal deficit. We have no direct 
appropriation, and we work hard to raise funds to put money back into 
the Treasury. In fact, the industries that we regulate contributed $17 
million to sequestration since that money was derived from their 
licensing fees. Auctions revenues cover auctions costs, and the USF 
funds cover USF program costs.
    The FCC's fiscal year 2015 budget request is $375,380,313, 
including $11,090,000 specifically allocated to the Office of Inspector 
General. Our auctions cap request is $106,200,000. Adopting this 
request will allow us to follow through on important priorities 
identified by your committee and our authorizers: the continued reform 
of USF programs to combat waste, fraud, and abuse and enhanced 
enforcement to put teeth into those reforms; as well as internal agency 
reform designed to make our processes responsive to consumers and the 
industry in a cost-effective fashion. Importantly, the auctions funds 
will support spectrum auctions identified in the 2012 Spectrum Act, 
which will make additional spectrum worth tens of billions of dollars 
available for commercial licensed services as well as providing 
nationwide spectrum for unlicensed use, and will support FirstNet.
    Although it is important to keep costs down in the current budget 
environment, let me give you a snapshot of the Commission's recent 
budget restraints. The FCC's spending levels decreased after fiscal 
year 2009 from $341 million to $335 million, and hovered just at that 
mark for 2 years, finally hitting $339 million during the next 3 
years--with $17 million of that number going toward sequestration in 
fiscal year 2013. During fiscal year 2013, the FCC cut its programming 
to the bone and worked hard to find cost savings, often delaying 
lifecycle replacements and improvements for facilities and equipment. 
In fiscal year 2011, the FCC had 1,776 employees. Today, we are down to 
1,725, which is a 30-year low in full-time equivalents (FTEs). The 
number of FCC contracting personnel also has steadily decreased from a 
high of 959 in fiscal year 2009 to a current level of 470.
    These cost reductions had real consequences. We have been unable to 
replace our Office of Engineering's Equipment Authorization System, and 
at this year's Consumer Electronics Show, I heard complaints about how 
sequestration's impact had slowed the approval of new products before 
last year's holiday shopping season. Cuts in employees left us 
chronically understaffed in enforcement, for example, so that our work 
to police pirate radio activities suffered--a big concern among some 
broadcasters--as we focused all available resources on public safety 
and homeland security activities. Likewise, we never replaced or 
upgraded our enforcement equipment. In fact, we have more than 200 
relic information technology (IT) systems that are costing the agency 
more to service than they would to replace over the long term.
    An effective and well-resourced FCC is critical, because we oversee 
the networks that power our information economy. The Commission's 
policies to unleash spectrum, promote competition, and provide 
regulatory certainty can help spur innovation and investment in a vital 
sector that drives economic growth and job creation. And the 
information and communications technology sector continues to be one of 
the leading lights of our economy and a key to our global 
competitiveness. For example:
  --American firms account for 84 percent of global profits in the 
        computer hardware and software industries.
  --In 2010, the Information and Communication Technology (ICT) sector 
        accounted for 24 percent of real gross domestic product (GDP) 
        growth.
  --Each year, the ICT sector generates more than $300 billion in free 
        goods and services that are not captured by GDP statistics.
  --The mobile apps economy, which didn't exist at the start of 2008, 
        has created more than 750,000 U.S. jobs.
  --Since 2009, more than $250 billion has been invested by private 
        companies to expand, extend and upgrade broadband networks, 
        which exceeds investment by the major oil and gas or auto 
        companies.
  --Annual investment in U.S. wireless networks grew more than 40 
        percent between 2009 and 2012.
  --Venture capital financing of ``Internet-specific'' businesses has 
        doubled in the past 4 years, from $3.5 billion in 2009 to $7.1 
        billion in 2013.
    During the next year, the FCC will be hard at work on activities 
that will deliver significant benefits to consumers, businesses and our 
economy. We will be developing and licensing spectrum resources to spur 
innovation in new communications devices; upgrading, enhancing and 
securing our internal systems to better serve consumers and the 
industries that rely on us; and modernizing and enforcing our USF 
programs. That is really what the Commission's fiscal year 2015 budget 
is designed to support--another boom year of communications services 
for the American consumer and another year of growth for the industries 
that we support.
    During that same year, the FCC, like the technology and 
telecommunications industries, needs to adapt to keep pace with the 
exploding marketplace. The FCC needs the basic tools to sustain and 
encourage industry growth; to protect licensees; and ensure the 
reliability and safety of the systems that we use. We need to do so in 
a way that fosters solid management practices that support, sustain and 
enhance the industries that we regulate.
    One of the primary reasons that I initiated a process reform review 
upon assuming the FCC Chairmanship was because of my commitment to 
create an agency that is highly efficient, as well as responsive to the 
needs of all Americans. Instituting reform at this level will require 
the expenditure of resources that support essential programmatic 
changes. To support these efforts, the Commission is requesting a total 
of 1,790 FTEs for fiscal year 2015, which includes an additional 10 
FTEs for Information Technology (IT) programming and 45 FTEs for USF 
modernization and oversight. These numbers are projections over the 
current low number of FTEs, and they represent an increase of only 14 
FTEs over fiscal year 2011 levels.
    The FCC carefully considered the need to hire additional employees 
prior to submitting its fiscal year 2015 budget request. We have far 
fewer personnel in IT than comparable agencies, and, as I mentioned 
earlier, we have more than 200 incompatible, aging computer systems 
that, because they cannot talk to one another, act to increase the cost 
of doing business. We must overhaul, upgrade, secure and replace IT 
systems that are antiquated relics--costly to maintain and harmful to 
agency productivity. The Process Reform report that I commissioned 
draws a direct line between inefficient and unreliable IT systems and 
sluggish administrative and regulatory activities. Certainly, the FCC, 
of all agencies, must be able to communicate effectively inside and 
outside the Commission. The failure to invest in IT now will keep us 
from achieving many of the reform goals that Congress has set--from 
transparency to timeliness.
    Our other major spending target is USF modernization and oversight. 
The need here is urgent and resource-intensive. I intend to place a 
heavy--but not heavy-handed--emphasis on modernization and enforcement 
to ensure that USF adheres to Congress' vision and provides essential 
access to telecommunications services to all Americans--whether they 
live in a remote area of Alaska, in one of our American territories, or 
on an Indian reservation in North Dakota. On that note, I would 
emphasize that closing the infrastructure gaps in Indian country is an 
agency-wide priority, and I am committed to greater consultation with 
tribal leaders to promote broadband deployment and adoption in their 
communities.
    We envision hiring a broad range of USF specialists with the 
regulatory, enforcement, economic, legal, accounting and auditing 
skills necessary to provide oversight of the USF programs in multiple 
offices and bureaus. Although our budget estimates for fiscal year 2015 
indicate that most hires for USF would be targeted in the Wireline 
Competition Bureau (WCB), our new Managing Director currently is 
reviewing and revising the individual bureau staffing levels in 
accordance with the Commission's mission objectives. While the final 
recommendation has not yet been made, the USF employees will likely be 
distributed among WCB, the Enforcement Bureau (EB), Office of Inspector 
General (OIG), and the Office of the Managing Director (OMD). Every 
time I read or hear a news story about someone who tries to game the 
USF system, I recommit myself to the goal of dedicating qualified staff 
to reducing fraud.
    Our requested auctions spending bump will support current auctions 
activities as well as the complex process of developing the Incentive 
Auction Program. Since 1994, the auctions expenses have been 
approximately 2 percent of our total auctions revenues. The Commission 
operated the auctions program for 10 years under a cap without 
inflationary adjustments, only receiving an increase in fiscal year 
2013 to fund the start-up for the Incentive Auctions program.
    The Commission welcomed the statutory authority to initiate and 
operate Incentive Auctions because of its benefits to consumers and 
stakeholders, as well as the Treasury. We are grateful that you 
recognized the need to ensure that this program is properly funded and 
that you provided us with the necessary resources to move ahead with 
our work, even as other programs were facing sequestration. The 
importance of this auction to the public safety community and the boost 
it will provide for nationwide interoperable communications will 
benefit all Americans. We also see this auction as a significant 
financial opportunity for many broadcasters--it will enhance the 
ability of broadcasters retaining their spectrum to continue providing 
the public with diverse, local, free over-the-air television service.
    At the same time, the reclaimed spectrum will promote economic 
growth and enhance America's global competitiveness. More spectrum 
means more speed, capacity and ubiquity of mobile broadband services 
such as 4G LTE and Wi-Fi networks. These benefits will be magnified by 
another auction scheduled for the next year, AWS-3, which will provide 
access to reclaimed Federal spectrum.
    I appreciate this subcommittee's attention to the Commission's 
funding needs during the next fiscal year, and I look forward to 
working with you to fulfill our statutory mission efficiently and 
effectively. Thank you.

    Senator Udall. Thank you very much for your testimony.
    And Commissioner Pai, good to see you here, and please 
proceed with your testimony.

                   SUMMARY STATEMENT OF HON. AJIT PAI

    Mr. Pai. Thank you, Mr. Chairman.
    Chairman Udall, Ranking Member Johanns, Senator Moran, 
thank you for inviting me to testify this morning on the work 
of the Federal Communications Commission.
    This morning, I would like to focus my opening remarks on 
two critical issues: Reforming the Universal Service Fund (USF) 
and modernizing the agency's processes.
    First, USF. The Communications Act makes an important 
promise in the very first sentence: Congress created the FCC 
``to make available, so far as possible, to all the people of 
the United States'' communication services.
    We at the FCC take this promise seriously. And that is one 
reason why the Commission reoriented USF support away from 
telephone service and toward next-generation broadband networks 
in 2011.
    And, of course, not every reform of the Universal Service 
Transformation Order has worked out as intended. Chairman 
Wheeler and I were not yet at the Commission when that order 
was adopted. So we can take a fresh look and reexamine whether 
any aspects of that order have actually deterred rural 
investment and harmed rural consumers.
    Fortunately, it appears the Commission will soon cross one 
such aspect off the books--the Quantile Regression Analysis, or 
QRA, benchmarks. For over a year, I and many others have warned 
that the QRA benchmarks have increased regulatory uncertainty, 
chilled the investment climate, and impeded the deployment of 
broadband to rural Americans.
    That said, the benchmarks were unanimously adopted. So it 
was no small matter when Chairman Wheeler announced a change of 
course in December. I applaud him for that decision. Ending 
regulatory uncertainty was the right thing to do, especially 
given that the QRA benchmarks did not save the Fund a single 
dollar.
    There is another aspect of the Universal Service 
Transformation Order I hope the Commission will reexamine soon, 
and that is the so-called rate floor. The rate floor was 
designed to reduce ``excessive subsidies for basic phone 
service.'' But it doesn't do that. Instead, it increases the 
rates rural consumers pay without reducing the subsidies that 
carriers receive.
    Specifically, the rate floor offers certain rural telephone 
companies Federal universal service dollars to increase 
consumers' phone bills. And these rate hikes are not minimal. 
Today, the rate floor is $14 per month, but it is set to go up 
soon to $20.46 on July 1, increasing rates for over 1 million 
rural consumers. That is a 46 percent jump for some consumers, 
many of whom are still waiting for the economic recovery to 
arrive.
    And for small carriers in these areas, it may mean more 
serious financial problems. Rate shock could send customers off 
their networks entirely, which means further uncertainty about 
the economics of rural investment.
    My view is that we should not add to the challenges our 
fellow citizens face in rural America. Instead, we should 
freeze the rate floor indefinitely and reexamine this policy. 
We followed that path with respect to the QRA benchmarks under 
the Chairman's leadership, and I hope we do so here, too.
    Second, process reform. This is important because it 
affects every area of the Commission's work. On the legislative 
front, a bipartisan supermajority of the U.S. House of 
Representatives passed recently the FCC Process Reform Act of 
2013. The House also passed the FCC Consolidated Reporting Act 
of 2013 back in September by a vote of 415 to 0. Together, 
these bills would eliminate outdated mandates on the agency, 
streamline our operations, and make it more accountable to the 
public. I hope these bills become laws soon.
    However, the FCC cannot and should not wait for Congress to 
act. There is much that we can do on our own. All too often, 
proceedings at the FCC drag on needlessly for many years. I am 
encouraged that Chairman Wheeler from the get-go has said that 
process reform is a priority, and many of the reforms proposed 
in last month's staff report on this topic are a good starting 
point.
    For instance, we should establish more deadlines and set an 
internal schedule for meeting those deadlines. We should also 
become more transparent to the public and to Congress about the 
work we do, and we can do that by creating an FCC dashboard on 
our Web site that collects in one place key performance 
metrics, such as how long it takes us to process consumer 
complaints.
    And Chairman Udall, I support your call to make our 
consumer complaint database searchable and user friendly. You 
are absolutely right that this idea, which is included in the 
FCC Process Reform Act I just mentioned, would benefit 
consumers. I believe it should be a part of our dashboard. For 
if we make it easier for others to hold us accountable for our 
performance, I am confident that all of us would act with more 
dispatch.

                           PREPARED STATEMENT

    Finally, I should note that while all commissioners are 
asked to vote on a budget proposed by the Chairman and 
submitted to the Office of Management and Budget, I have not 
been asked to participate in the development of the agency's 
budget request. But with that context in mind, I will do my 
best to respond to any questions you might have on that score 
or on any of the policy priorities that the FCC is tackling.
    Thank you once again, Mr. Chairman, Ranking Member Johanns, 
and I look forward to our exchange.
    [The statement follows:]
                  Prepared Statement of Hon. Ajit Pai
    Chairman Udall, Ranking Member Johanns, and members of the 
subcommittee, it is a privilege to appear before you today. Thank you 
for inviting me to testify on the work of the Federal Communications 
Commission (FCC).
    We have been busy, and today I'd like to share with you my views on 
several important issues that we are confronting, namely: freeing up 
spectrum for commercial use, reforming the Universal Service Fund's 
high-cost and E-Rate programs, removing regulatory barriers to 
infrastructure investment, adjusting our rules to the changing media 
marketplace, ensuring Americans can always reach help when they dial 
911, and reforming the agency's processes.
    Spectrum.--Given this subcommittee's focus on appropriations, it is 
worth noting that the FCC is one of few agencies that can generate a 
profit for the Federal Government. By auctioning off spectrum, the 
Commission has raised tens of billions of dollars for the Treasury over 
the last two decades. Between 2005 and 2008, for example, the 
Commission's spectrum auctions raised over $33 billion that was used 
for deficit reduction, and the FCC's auctions program was a net 
contributor to the Treasury each and every year.
    But the Commission's auction program has not always turned a 
profit. From January 2009 through December 2013, the Commission raised 
a paltry $72 million in auction revenue, or about two-tenths of 1 
percent of the amount raised in the prior 4 years. Indeed, when you 
account for the Commission's spending on auctions, our auctions program 
has actually lost money during the last 5 years. This is bad news not 
just for the Treasury but also for American consumers, whose demands 
for additional bandwidth have increased as their use of tablets and 
smartphones has spiked over this same period of time.
    That is why, since joining the Commission, I have concentrated on 
trying to accelerate the allocation of spectrum for mobile broadband 
and to rejuvenate the Commission's auction program. And I am pleased to 
report that we recently have made real progress on both of these 
fronts. Just last month, the Commission completed its first major 
spectrum auction in 6 years by auctioning off the H Block, 10 MHz of 
long-fallow spectrum once thought to be virtually worthless, to the 
tune of $1.564 billion. Former Chairwoman Clyburn deserves credit for 
pushing that auction through, as does Chairman Wheeler for finishing 
the job.
    But our work isn't finished. In the Middle Class Tax Relief and Job 
Creation Act of 2012, often called the Spectrum Act, Congress entrusted 
the Commission with holding a number of spectrum auctions, all with the 
twin goals of getting new spectrum into the commercial marketplace and 
raising at least $27.95 billion for national priorities.
    What are those national priorities? In short, they are deficit 
reduction and public safety--two things I'm sure every member of this 
subcommittee holds as priorities. Regarding the former, our incentive 
auctions hold the promise of raising more than $20 billion for deficit 
reduction. Indeed, Congress counted on us raising this money when it 
passed the Spectrum Act, so if the Commission fails to follow through, 
we will be responsible for increasing the budget deficit.
    As for public safety, successful spectrum auctions will provide 
money for key public safety priorities, such as the First Responder 
Network Authority's (FirstNet's) build-out of a nationwide, 
interoperable public safety broadband network. That $7 billion build-
out makes good on the recommendation of the 9/11 Commission that first 
responders need interoperable communications systems in times of 
disaster. The Spectrum Act also set aside up to $135 million for State 
and local public safety officials, up to $300 million to advance the 
research and development of wireless public safety communications, and 
up to $115 million for the deployment of next-generation 911 (NG911). 
Under the law, all of this funding will be realized only if the net 
revenues of our wireless auctions are at least $27.95 billion.
    Given these important national priorities, we need to aim high. The 
H Block auction was a first step toward those goals, but a chunk of the 
money raised there will pay for running our auctions program. We still 
have about $27 billion to go.
    The next step towards raising these needed funds will be the 
auctioning of Federal spectrum as required by the Spectrum Act. Most 
important to that effort are two bands of spectrum, 1755-1780 MHz 
paired with 2155-2180 MHz, that will hopefully become part of a new 
Advanced Wireless Service-3 (AWS-3) service. These bands are already 
internationally harmonized for commercial use, which means deployment 
will be swifter and cheaper than other options. That also means 
carriers are likely to bid more for this spectrum, which can lead to 
greater net revenues for the national priorities I described above.
    Note that I said ``hopefully.'' Under the Commercial Spectrum 
Enhancement Act, the Commission can only assign commercial licenses for 
this spectrum if the revenues from the auction exceed 110 percent of 
the costs of relocating Federal users out of that spectrum and 
coordinating with those that remain. And the best way to make sure that 
we hit that mark and push that spectrum out into the marketplace is to 
invite all carriers to participate in the auction and offer a band plan 
that incentivizes the carriers to bid up the spectrum without 
restraint.
    One further note on this band: I regret that we will not be 
bringing all of this spectrum to the marketplace free and clear from 
interference by incumbent Federal users. Clearing 1755-1780 MHz of 
Federal users would be the best way to maximize the value of spectrum, 
both at auction and for consumers. That's what we did 10 years ago when 
we created the AWS-1 band that is so important to mobile broadband 
today, and that's why the Spectrum Act puts a thumb on the scale for 
clearing and allows sharing only if clearing is ``not feasible because 
of technical or cost constraints.'' But it appears that the decision 
has been made that clearing is not feasible at this point. I therefore 
hope that the Government will do its part for the public, publishing 
specific and detailed transition plans as early as possible and 
coordinating with carriers quickly so that this spectrum can be put to 
use soon.
    After this auction of Federal spectrum in the fall, the broadcast 
incentive auction will be the Commission's best opportunity to push a 
large amount of spectrum well-suited for mobile broadband into the 
commercial marketplace and raise the billions we need. With this 
auction, television broadcasters will have the opportunity to 
relinquish their spectrum that wireless carriers will then have the 
opportunity to purchase, with the bid-ask spread (i.e., the net 
revenues) going to the Treasury once the Commission has paid for the 
relocation expenses of broadcasters remaining in business.
    As the Commission moves forward on incentive auctions, I believe 
that five principles should guide our work. First, we must be faithful 
to the statute. It is our job to implement the Spectrum Act, not to 
rewrite it to conform to our policy preferences. Second, we must 
respect the laws of physics. Our band plan and approach to repacking 
must work from an engineering perspective. Third, we must be fair to 
all stakeholders. This is especially important because the incentive 
auction will fail unless both broadcasters and wireless carriers choose 
to participate. Fourth, we must keep our rules as simple as possible. 
The broadcast incentive auction is inherently complicated; unnecessary 
complexities are likely to deter participation. And fifth, we need to 
complete this proceeding in a reasonable timeframe. Prolonged 
uncertainty is not good for anyone.
    My greatest worry regarding the incentive auction, at this point, 
is about participation. In order for the incentive auction to be 
successful, we will need robust participation by broadcasters and 
wireless carriers alike. But right now, I am concerned that the 
Commission will make unwise policy choices that will deter 
participation in both the reverse and forward auctions. My position on 
the reverse auction is simple. Prices paid to broadcasters should be 
determined by the market. The Commission should not set them by 
administrative fiat. The Commission should not deter broadcaster 
participation through a complicated ``scoring'' scheme that tries to 
prejudge the compensation television station owners should receive. Any 
attempt to restrict payments to broadcasters will prove to be penny-
wise and pound-foolish. Indeed, without sufficient broadcaster 
participation, the entire incentive auction will fail.
    And on the forward auction, the Commission should not limit 
carriers' ability to participate, such as by setting a spectrum cap or 
narrowing the spectrum screen despite the significant competition that 
exists in the wireless market. The inevitable effect of such a policy 
would be less spectrum for mobile broadband, less funding for national 
priorities, a higher budget deficit, and an increased chance of a 
failed auction. With a $27.95 billion target, we cannot let this 
auction fail.
    Finally, there's one last piece of spectrum I'm excited to discuss: 
the 5 GHz band. Although we are not planning to auction this spectrum, 
it can--and I believe will--be of substantial value to the American 
economy. The 5 GHz band is tailor-made for the next generation of Wi-
Fi. Its propagation characteristics minimize interference in the band 
and the wide, contiguous blocks of 5 GHz spectrum allow for extremely 
fast connections, with throughput reaching 1 gigabit per second. The 
technical standard to accomplish this, 802.11ac, already exists, and 
devices implementing it are already being built. All of this means we 
can rapidly realize these benefits: more robust and ubiquitous wireless 
coverage for consumers; more manageable networks for providers; a new 
test bed for innovative application developers; and other benefits we 
can't even conceive today.
    Following the instructions set forth by Congress in the Spectrum 
Act, the Commission launched a rulemaking last year to make up to 195 
MHz of additional spectrum in the 5 GHz band available for unlicensed 
use. We also proposed to allow greater utilization of those segments of 
the 5 GHz band already available for unlicensed use. Last summer, I 
urged the FCC to move forward with its 5 GHz proceeding in stages, 
addressing the easier questions (such as how to modify the service 
rules for the UNII-1 band) before moving on to the hard ones.
    And at the end of this month the Commission will be taking action. 
Although I cannot comment on specifics, I can say that I am pleased 
that we will be making the band attractive for commercial Wi-Fi while 
safeguarding incumbent users. That means better, faster devices for 
consumers, which is all the more important given the growing congestion 
in the 2.4 GHz band (which consumers right now commonly rely upon for 
Wi-Fi access).
    Universal Service Fund.--Another big ticket item in the 
Commission's budget is the Universal Service Fund, which disbursed over 
$8.36 billion last year. The Fund contains four separate programs, 
three of which are capped. The high-cost program has a yearly budget of 
$4.5 billion, which is used to keep rural telephone rates 
``affordable'' and deploy broadband to areas where the competitive 
market would not otherwise go. The E-Rate program, which supports 
schools and libraries, had a $2.38 billion cap last year, which is 
adjusted each year for inflation. And the rural healthcare program is 
capped at $400 million, but spending totaled only $157 million last 
year. The only uncapped program is the Lifeline program, which 
disbursed $1.79 billion last year, more than double the $817 million 
disbursed in 2008. In addition to these disbursements, the Fund spent 
$109 million in 2013 on administrative costs (not including the costs 
of Commission staff overseeing the program), with the majority ($65.6 
million) dedicated to administering the E-Rate program. My testimony 
will focus on the high-cost program and the E-Rate program.
    High-Cost.--The Communications Act of 1934 makes an important 
promise in its very first sentence: Congress created the Federal 
Communications Commission to ``make available, so far as possible, to 
all the people of the United States . . . a rapid, efficient, Nation-
wide, and world-wide wire and radio communication service with adequate 
facilities at reasonable charges.'' We at the FCC take this promise 
seriously. That is one reason why the Commission adopted the 2011 
Universal Service Transformation Order, which reoriented the Fund away 
from supporting telephone service and toward supporting next-
generation, broadband-capable networks.
    Fortunately, it looks like the Commission will soon be crossing one 
obstacle to rural investment off its books: the quantile regression 
analysis (QRA) benchmarks. For over a year, I and many others have 
warned that the QRA benchmarks have increased regulatory uncertainty, 
chilled the investment climate, and impeded the deployment of broadband 
to rural Americans. That said, the benchmarks have been the law for 
over 2 years so it was no small matter when Chairman Wheeler announced 
a change of course in December. Ending regulatory uncertainty is the 
right thing to do, especially given that the QRA benchmarks did not 
save the Fund one dollar. I am hopeful that ending the QRA benchmarks 
means that bringing next-generation technologies to our Nation's rural 
citizens will be a priority during Chairman Wheeler's tenure, and I 
look forward to continue working with him to make that happen.
    But sometimes it seems that every step forward for rural America is 
accompanied by a step back. I am concerned about another aspect of the 
Universal Service Transformation Order that is likely to have serious 
and unfortunate consequences for rural consumers: the so-called ``rate 
floor,'' which was adopted before Chairman Wheeler or I arrived at the 
Commission. The rate floor was designed to reduce ``excessive subsidies 
for basic phone service,'' but in fact it increases the State-set rates 
rural consumers pay without reducing the subsidies that carriers 
receive. Specifically, the rate floor offers certain rural telephone 
companies Federal universal service dollars to increase customers' 
phone bills. So if a company increases its rates by a dollar, it'll 
receive an extra dollar for per line from the Fund.
    And these rate hikes are not de minimis. Today, the rate floor is 
$14 per month, but it is set to go up to $20.46 on July 1 under the 
terms of the Universal Service Transformation Order. That's a 46 
percent jump for rural consumers, many of whom are still waiting for 
the economic recovery to arrive. And for small carriers, it may mean 
more serious financial problems. Such a rate shock could send customers 
off the network entirely, which means further uncertainty about the 
economics of investing in rural America. We should not be adding to the 
challenges our fellow citizens face in rural America. Instead, I hope 
the Commission will soon freeze the rate floor indefinitely and 
reexamine this policy.
    There are other steps that we must take to follow up on the promise 
of universal service. For example, we have yet to implement phase II of 
the Connect America Fund, which is the FCC's primary vehicle for 
delivering broadband to the millions of rural Americans without it. The 
second phase was supposed to commence at the beginning of 2013 but it 
looks like it won't start until 2015 at the earliest. Given that the 
Wireline Competition Bureau has been doing yeoman's work to complete 
the model necessary for that effort--and given the urgent need for 
broadband in the country--we should aim to make sure that effort does 
not fall further behind. That means setting out the competitive bidding 
process that will occur in areas where price-cap carriers decline 
Connect America Fund support sooner rather than later because no part 
of rural America should miss the broadband revolution while waiting for 
the regulatory dust to settle.
    Similarly, it is time for the Commission to start moving forward 
with a Connect America Fund for rate-of-return carriers. In 
constructing that fund, we must recognize that broadband operators in 
rural America today face unique challenges. Rural carriers must 
carefully plan their infrastructure over a 10- or 20-year time scale if 
they are to recover their costs. Indeed, Congress embedded this 
principle into section 254 of the act, including a statutory command 
that universal service support be ``predictable.'' What is more, line 
loss in rural America is real. As such, we must recognize that direct 
support for broadband-capable facilities, within the existing budget, 
is critical.
    E-Rate.--I am hopeful that, in the next few months, we will bring 
about real reform of that program. Established at the direction of 
Congress 18 years ago, the E-Rate program is intended to bring advanced 
communications services to schools and libraries across America.
    In many ways, the E-Rate program has been a success. Internet 
access in public schools has almost tripled, and speeds have grown 
alongside availability. For example, a 2010 FCC survey showed that 22 
percent of respondents were ``completely'' satisfied and another 58 
percent were ``mostly'' satisfied with the bandwidth they're getting. 
And just last year, 87 percent of educators responding to an 
independent survey reported that ``access to adequate bandwidth is 
available for robust communication, administrative and instructional 
needs'' in ``all'' or ``most'' classrooms on a school campus.
    But like all Federal programs, E-Rate has had its share of 
difficulties. For applicants, the funding process from start to finish 
can stretch for years. To navigate arcane steps like Form 470 
competitive bidding, Form 471 Program Integrity Assurance review, and 
the Form 500 commitment adjustment process, schools must enlist 
specialized E-Rate consultants, draining scarce dollars away from 
students and technology.
    For parents, the process is so opaque that they cannot know ahead 
of time how much funding their child's school might receive and cannot 
track whether it is actually spent on enriching the education of their 
kids.
    For school boards, E-Rate's ``priority'' system (under which things 
like paging and Blackberry services for administrators get prioritized 
over connecting a classroom to the Internet) distorts their spending 
decisions since some services are discounted by up to 90 percent while 
others may or may not receive any discount in a given funding year.
    For Government watchdogs, there's plenty of waste and abuse to 
worry about. For example, one Brooklyn school has gotten millions of E-
Rate dollars over the years including money for Internet access 
services--even though the students are not allowed to use the Internet.
    And for everyone with a phone line, and who hence contributes to 
the program, it's hard to tell what bang we're getting for our 
universal service buck--there is no meaningful transparency with 
respect to E-Rate spending and no real information on the impact of 
that spending.
    There is a better way--one which would focus the E-Rate program on 
children. To create a student-centered E-Rate program, we need to 
fundamentally rethink how we structure the program. That means starting 
each school and library with an upfront allocation of funding so they 
know how much they can spend and can plan accordingly (a concept a 
subcommittee like this one should appreciate). That means establishing 
a meaningful matching requirement so that schools and libraries have a 
strong incentive not to waste money. That means cutting the red tape so 
that the initial application is just one page and there's only one 
other form needed before funds are disbursed. That means targeting 
funding at next-generation technologies like broadband and Wi-Fi while 
still letting local schools set their own priorities. And that means 
publishing all funding and spending decisions on an easily accessible, 
central Web site so that every parent, every journalist, every 
Government watchdog, every American can see just how E-Rate funds are 
being spent.
    The student-centered E-Rate program I have outlined (a summary is 
appended to this testimony) would fulfill E-Rate's statutory mission of 
bringing advanced services to schools and libraries across the country. 
It would reduce waste, fraud, and abuse in the program and increase 
transparency and accountability. By streamlining the rules, we would 
also reduce the need for administrative overhead, saving the Government 
millions more. And it would free an extra $1 billion for next-
generation services in its first year ($600 million of which is 
currently spent each year on basic telephone service and other outdated 
technologies), all without collecting an extra dime from the American 
people.
    Given the potential savings at hand, I do not support increasing 
the program's budget at this time, and I am pleased that Chairman 
Wheeler appears to be on the same page. For example, last week he said 
that ``[s]imply sending more money to the E-Rate program to keep doing 
business as it has been for the last 18 years is not a sustainable 
strategy.'' I concur. Indeed, under no circumstances should we increase 
the size of the E-Rate program without finding corresponding new 
savings elsewhere in the Universal Service Fund. We cannot ask 
Americans to pay even more in their monthly phone bills, especially 
when median household income in this country is lower than it was in 
2007.
    If we are willing to make the ``hard decisions,'' as Chairman 
Wheeler has put it, I believe that real reform of the E-Rate program 
can become a reality. A student-centered E-Rate program--that's what 
teachers and librarians need, and that's what America's students and 
parents are counting on us to deliver.
    Infrastructure Investment.--Removing regulatory barriers to the 
deployment of infrastructure is another Commission priority. To give 
entrepreneurs, investors, and innovators the regulatory certainty they 
need to invest in next-generation infrastructure, we need to make sure 
that we are not saddling them with last-generation rules. That means 
hastening the Internet protocol (IP) Transition and facilitating 
wireless infrastructure deployment.
    IP Transition.--Almost every segment of the communications industry 
is competing to offer newer, faster, and better broadband services. 
Telecommunications carriers are upgrading DSL with IP-based technology 
and fiber. Cable operators have deployed DOCSIS 3.0 to increase 
bandwidth 10-fold. Satellite providers are offering 12 megabit packages 
in parts of the country that never dreamed of such speeds. And millions 
of Americans--many of whom don't subscribe to fixed broadband service 
at home--now have access to the Internet on the go using the mobile 
spectrum the Commission auctioned back in 2006 and 2008. Indeed, 
according to the State Broadband Initiative of the National 
Telecommunications and Information Administration, 98.8 percent of 
Americans had access to high-speed broadband as of December 2012. The 
common thread knitting all of these changes together is the Internet 
protocol (IP), a near-universal way to route and transmit data.
    What are the results of all this competition? More choices for 
consumers, and major challenges to old business models. Thirty years 
ago, most American consumers had access to one network largely run by 
one carrier, Ma Bell. Today, Americans are fleeing the copper network. 
33.6 million Americans dropped their copper landlines over the past 4 
years. About one in seven households with plain old telephone service 
over the public-switched telephone network (PSTN) dropped their service 
last year alone. And competition is rampant: 99.6 percent of Americans 
can choose from at least three wireline competitors, and 92 percent can 
choose from 10 or more. The evidence also shows that consumers are in 
fact exercising that choice: Interconnected voice over Internet 
protocol (VoIP) providers added 14.6 million subscriptions over the 
last 4 years. Essentially, voice is becoming just another application 
riding over the Internet.
    Over a year ago, I called on the Commission to move forward with an 
All-IP Pilot Program, one that would give forward-looking companies a 
path to turn off their old time division multiplexing (TDM) electronics 
in a discrete set of wire centers and migrate customers to an all-IP 
platform. Why? Because we cannot continue requiring service providers 
to invest in both old networks and new networks forever. Every dollar 
that is spent maintaining the networks of yesterday is a dollar that 
can't be invested in building and upgrading the networks of tomorrow. 
Our goal should be to maximize investment in IP infrastructure so that 
high-speed broadband extends to every corner of our country.
    I am pleased that, under Chairman Wheeler's leadership, the 
Commission adopted an order establishing an Al-IP Pilot Program 
consistent with the four guidelines I set forth last year. First, 
carrier participation should be voluntary--and the order announced that 
``no provider will be forced to participate in an experiment.'' Second, 
trials should reflect the geographic and demographic diversity of our 
Nation-- and the order sought ``experiments that cover areas with 
different population densities and demographics, different topologies, 
and/or different seasonal and meteorological conditions.'' Third, no 
one can be left behind--and the order declared that ``no consumer [may] 
lose[ ] access to service or critical functionalities'' and that 
residential and business customers must receive ``clear, timely, and 
sufficient notice of any service-based experiment.'' And fourth, we 
must be able to evaluate an all-IP trial with empirical data--and the 
order sought ``experiments that collect and provide to the Commission 
data on key attributes of IP-based services.'' With these core 
principles in place, I am optimistic that the trials will be a success.
    I am especially happy that the All-IP Pilot Program is moving 
forward on a unanimous, bipartisan basis. As I said last year, this 
isn't an issue that divides the left from the right or Republicans from 
Democrats. Accordingly, the order reflects our consensus that companies 
should have the opportunity to go all-IP. What is more, the order 
demonstrates that reaching an agreement does not mean compromising your 
values. I look forward to continuing our collaborations as we assess 
the proposed trials that are already coming in.
    Of course, preparing for the IP Transition does not end with 
conducting an All-IP Pilot Program. We also need to take a hard look 
our regulations in light of the coming transition, if for no other 
reason than that the private sector needs flexibility to make 
investment decisions based on consumer demand, not outdated regulatory 
mandates. Accordingly, I believe four principles should shape our 
approach to the overall transition.
    First, we must ensure that vital consumer protections remain in 
place. For example, when consumers dial 911, they need to reach 
emergency personnel; it shouldn't matter whether they are using the 
(public switched telephone network (PSTN), a VoIP application, or a 
wireless phone. The same goes for consumer privacy protections and 
antifraud measures like our slamming rules. Second, we must not import 
the broken, burdensome economic regulations of the PSTN into an all-IP 
world. No tariffs. No arcane cost studies. And no hidden subsidies that 
distort competition to benefit companies, not consumers. We must also 
repeal the old-world regulations such as retail tariffing that no 
longer make sense in a competitive all-IP world. While they remain on 
the books, wholesale expansion to IP may just be too tempting. Third, 
we must retain the ability to combat discrete market failures and 
protect consumers from anticompetitive harm. Fourth, we must respect 
the limits of the Communications Act and not overstep our authority. If 
the law does not give us the authority to act, we must turn back to 
Congress for guidance rather than venturing forth on our own.
    Wireless Infrastructure.--Along with ending the economic 
regulations that deter wireline infrastructure investment and delay the 
deployment of next-generation networks, we need to address the business 
and technical challenges of deploying wireless broadband. Building a 
wireless network is expensive enough, but numerous Federal, State, and 
municipal regulations can make further deployment difficult or even 
prohibitive. To be sure, some oversight is necessary to ensure sound 
engineering and safety and to respect environmental, historical, and 
cultural concerns. But many procedures simply frustrate, rather than 
facilitate, deployment. That ultimately harms consumers who are denied 
better and cheaper wireless services.
    I am therefore pleased that the Commission moved forward last 
September with a Notice of Proposed Rulemaking seeking comment on a 
variety of ideas for reducing regulatory barriers to the construction 
of wireless infrastructure. In particular, I'd like to highlight three 
of them in my testimony this morning.
    First, we should make clear that local moratoria on the approval of 
new wireless infrastructure violate Federal law. The FCC has already 
put in place a shot clock for localities to address tower siting 
permits and other building applications. Prohibiting moratoria would 
address the tactic some localities have used to evade those deadlines 
by adopting an indefinite ``time out'' on the approval of wireless 
infrastructure.
    Second, we should modernize our rules to exempt distributed antenna 
systems (DAS) and small cells from our environmental processing 
requirements, except for rules involving radio frequency emissions. 
Given their small size and appearance--some small cell equipment can 
fit in the palm of your hand, for instance--there is no reason to 
subject DAS and small cells to the same environmental review process as 
a 200-foot tower. We should similarly update our historic preservation 
rules, which add yet more regulatory requirements, in order to 
facilitate the deployment of DAS and small cells. It bears noting that 
the greater the deployment of wireless infrastructure like this, the 
less reliance carriers (and hence consumers) must place on larger, 
``macro'' cell sites and the less power networks and devices will 
consume.
    Third, we should address what happens when a local government 
doesn't comply with our shot clock. Currently, if a city does not 
process an application within 150 days, the only remedy is to file a 
lawsuit. This increases delay and diverts investments away from 
networks. To fix this problem, we should supplement our shot clocks 
with a backstop: If a locality doesn't act on a wireless facilities 
application by the end of the time limit, the application should be 
deemed granted. (As a legal matter, I believe the FCC has this 
authority following the Supreme Court's decision last May in City of 
Arlington, Texas v. FCC.)
    There are also other steps that the Commission can take to hasten 
the deployment of wireless infrastructure. For example, we have sought 
comment on clarifying the scope and meaning of section 6409(a) of the 
Spectrum Act, which prohibits State and local governments from denying 
certain collocation requests. I hope that we make appropriate 
clarifications in the near term. And we are looking for ways to 
expedite the deployment of infrastructure to implement positive train 
control, as required by the Rail Safety Improvement Act of 2008. I 
support moving forward on all these fronts swiftly; the American public 
deserves no less.
    Net Neutrality.--Given the amount of work the Commission must do to 
remove regulatory barriers to infrastructure investment, I hope that we 
do not divert our attention to promulgating rules that may in fact 
erect new barriers. I am of course talking about ``net neutrality,'' 
which has apparently returned to the FCC's agenda after the courts 
ruled--for the second time in 4 years--that the FCC exceeded its 
authority in attempting to regulate the network management practices of 
Internet service providers.
    Without delving too far into the subject, let me say this. For over 
a decade, the Nation's broadband infrastructure has been governed by 
four Internet Freedoms, set forth by then-FCC Chairman Michael Powell. 
First, consumers should have their choice of legal content. Second, 
consumers should be able to run applications of their choice. Third, 
consumers should be permitted to attach any devices they choose to the 
connection in their homes. And fourth, consumers should receive 
meaningful information regarding their service plans. Although our 
Nation's broadband marketplace is dynamic and rapidly evolving, these 
four freedoms have remained vibrant throughout--they are in a sense the 
pillars, the foundation of the market--and they have long received 
bipartisan support.
    With those principles already entrenched, the FCC should stay its 
hand and refrain from any further attempt to micromanage how broadband 
providers run their networks. Such restraint is the best way to ensure 
that the market--and hence consumers--dictate the future of the 
Internet. This, in turn, will encourage innovation throughout the 
entire Internet ecosystem and incentivize the continued deployment of 
high-speed, quality broadband service. Our goal should be to connect 
all Americans with smart networks, not to enact rules that require 
networks to be dumb pipes. So let's recognize net neutrality for what 
it is: an unnecessary distraction from the pressing need to end 
regulatory barriers that stand in the way of ubiquitous broadband.
    Media Marketplace.--The media landscape has undergone revolutionary 
change in the last few decades. But the FCC's rules have not kept pace 
with the realities of the marketplace. Accordingly, since joining the 
Commission, I have advocated updating our regulations on a variety of 
fronts while at the same time preserving the Commission's commitment to 
the core values of competition, diversity, and localism. Today I will 
focus on two aspects of our work: reviewing our media ownership rules 
and revitalizing the AM radio band.
    Media Ownership.--The Commission is required by law to review its 
media ownership regulations every 4 years. This cycle's review began in 
September 2009 as we announced a series of workshops to begin gathering 
information from various stakeholders. Now, more than 4 years later, 
our review is still not complete. The time has come for us to launch 
our next review, but we have not yet finished the last one. This is 
unacceptable and shows a troubling disregard for our legal obligations. 
We should bring the current quadrennial review to a close at the 
Commission's March 31 meeting.
    We should make sensible reforms to our rules so that they reflect 
the marketplace realities of 2014 rather than those of 1975. For 
example, I supported then-Chairman Julius Genachowski's proposal to 
eliminate the newspaper-radio and radio-television cross-ownership 
rules. I also believe that the time has come to eliminate the 
newspaper-television cross-ownership rule. In this day and age, if you 
want to operate a newspaper, we should be thanking you, not placing 
regulatory barriers in your path. I am a realist and understand that 
whatever reforms we end up implementing will not go as far as I might 
prefer. But I do believe that we should be able to find common ground 
and move forward with some sensible reforms.
    Unfortunately, it appears that the Commission is set on tightening 
our media ownership rules in a piecemeal fashion rather than engage in 
the holistic review that Congress envisioned. Most disturbing is a 
proposal to make Joint Sales Agreements (JSAs) attributable under our 
local television ownership rule. As broadcasters' share of the 
advertising market has shrunk in the digital age, television stations 
must be able to enter into innovative, pro-competitive arrangements in 
order to operate efficiently.
    JSAs allow stations to save costs and to provide the services that 
we should want television broadcasters to offer, particularly in our 
Nation's mid-sized and small media markets. In my home State, for 
example, a JSA between two Wichita stations enabled the Entravision 
station, a Univision affiliate, to introduce the only Spanish-language 
local news in Kansas. Across the border in Joplin, Missouri, a JSA 
between Nexstar and Mission Broadcasting not only led to expanded news 
programming in that market but also nearly $3.5 million in capital 
investment. Some of that money was spent upgrading the stations' 
Doppler Radio system, which probably saved lives when a devastating 
tornado destroyed much of Joplin in 2011.
    JSAs are also an important tool for enabling minority ownership of 
television broadcasters. Although the Commission has not studied the 
link between joint sales agreements and ownership diversity, my 
office's own review estimated that 43 percent of female-owned and 75 
percent of African-American-owned full-power commercial television 
stations currently are parties to JSAs. For example, WLOO serves the 
Jackson, Mississippi market and is owned by Tougaloo College, a 
historically African-American college. WLOO is also party to a JSA with 
another Mississippi station, WDBD, which, in the words of WLOO's 
general manager, ``has permitted WLOO to become a real success story, 
enabling a new, minority station owner to reinvigorate this station and 
expand its local services.'' Without the JSA, WLOO reports that it 
would have to stop creating locally-produced programming so that it 
could redirect that money to hiring a small sales staff, and its 
general manager is worried that it may not have the funding to survive 
an equipment failure.
    For stations in smaller markets like Wichita, Joplin, and Jackson, 
the choice isn't between JSAs or having both television stations 
operating vibrantly on an independent basis. Rather, the real choice is 
between JSAs and having at most one television station continue to 
provide news programming while the other does not. Indeed, the 
economics suggest that there likely will be fewer television stations, 
period.
    Another piecemeal change to our media ownership rules was teed up 
in September with a notice of proposed rulemaking (NPRM) proposing to 
eliminate the ultra high frequency (UHF) discount portion of our 
national television ownership rule. Given the transition from analog to 
digital television, there is a strong case for ending the UHF discount; 
UHF signals are not inferior to very high frequency (VHF) signals in 
the digital world. Unfortunately, the Commission's NPRM went about it 
the wrong way.
    We should not modify the UHF discount without simultaneously 
reviewing the national audience cap, which currently stands at 39 
percent. The NPRM recognized the interdependent relationship between 
the national audience cap and the UHF discount, acknowledging that 
``elimination of the UHF discount would impact the calculation of 
nationwide audience reach for broadcast station groups with UHF 
stations.'' Or, to put the matter succinctly, eliminating the UHF 
discount would substantially tighten the national ownership limit. For 
example, one company that is now more than 19 percentage points under 
the cap would be only 3 points below the cap if the UHF discount were 
eliminated.
    I was therefore disappointed that we proposed to end the UHF 
discount without asking whether it is time to raise the 39 percent cap. 
Indeed, this step is long overdue, notwithstanding any change to the 
UHF discount. The Commission has not formally addressed the appropriate 
level of the national audience cap since its 2002 Biennial Review 
Order, and it has been about a decade since the 39 percent cap was 
established. The media landscape is dramatically different today than 
it was then, and I wish that the NPRM had addressed the national 
television rule in a comprehensive manner.
    AM Radio.--This past October, the Commission launched an AM Radio 
Revitalization Initiative, something I had championed for more than a 
year. It's been over two decades since we last comprehensively reviewed 
our AM radio rules. Over that time, the AM band has struggled. 
Interference problems, declining listenership, financial challenges for 
minority-owned broadcasters, and other factors have brought the band 
low. But millions of Americans--myself included--still rely on and 
believe in AM radio. So this initiative is close to my heart.
    The Commission's NPRM embraced a sensible two-stage strategy for 
improving AM radio service. First, we proposed several ways to give AM 
broadcasters relief in the short term. For instance, we suggested a 
number of changes to our technical regulations, such as eliminating the 
``ratchet rule,'' which effectively prevents AM broadcasters from 
improving their facilities. And perhaps most importantly, we sought 
public input on letting AM stations apply for new FM translators so 
that it is easier for them to reach listeners with a quality signal. 
I'm the first to acknowledge that these and other proposals will not be 
an immediate panacea for the difficulties confronting the AM band. But 
based on the conversations I have had with AM broadcasters across the 
country during the past year, I am convinced that they can make a 
substantial, positive difference to numerous AM stations.
    Second, we also invited the American public and stakeholders to 
share their proposals for the long-term future of the AM band. What 
steps can the Commission take so that there will be a vibrant AM radio 
service 10 or 15 years from now?
    The comment cycle closed last week, and we received many insightful 
and creative submissions from broadcasters, engineers, and others with 
an interest in AM radio. While we continue to review those comments, I 
am optimistic that the Commission will act quickly to implement an 
initial set of reforms to help the AM band. Indeed, my office's quick 
review of the comments that were filed suggests overwhelming support 
for many of the Commission's proposals.
    Connecting Americans to 911.--Federal law designates 911 as ``the 
universal emergency telephone number within the United States for 
reporting an emergency to appropriate authorities and requesting 
assistance.'' So when Americans dial 911, they expect and deserve to 
reach emergency personnel who can assist them in their time of need. 
Unfortunately, a recent tragedy shows that this is not always the case.
    On December 1, Kari Rene Hunt Dunn met her estranged husband in a 
Marshall, Texas hotel room so that he could visit their three children, 
ages 9, 4, and 3. During that encounter, Kari's husband forced her into 
the bathroom and began stabbing her. Kari's 9-year-old daughter did 
exactly what every child is taught to do during an emergency. She 
picked up the phone and dialed 911. The call didn't go through, so she 
tried again. And again. And again. All in all, she dialed 911 four 
times--but she never reached emergency personnel. Why? Because the 
hotel's phone system required her to dial 9 to get an outside line. 
Tragically, Kari died as a result of this vicious attack. Kari's 
daughter behaved heroically under horrific circumstances. But the 
hotel's phone system failed her, her mother, and her entire family.
    At first, I was shocked to hear that such a situation could exist. 
But when you think about it, it's probably the case in many places--
hotels, office buildings, college campuses, and schools--that use 
``multiline telephone systems'' or MLTS. But the truth of the matter is 
that we don't know the extent of the problem. That's why I launched an 
inquiry in January to gather the facts. As a first step, I sent a 
letter to the chief executive officers (CEOs) of the 10 largest hotel 
chains in America. As we continue to examine the information provided 
by those companies, I am encouraged by their willingness to respond and 
work with us to ensure everyone can reach a 911 operator when they need 
to. I am also encouraged that the American Hotel and Lodging 
Association, which represents 9 of the top 10 chains and many, many 
more hotels and motels, has convened an internal task force to address 
the issue.
    So what is the issue, precisely? In the case of Kari Hunt Dunn, it 
was what we call the ``Direct Dial'' issue--whether somebody picks up 
on the other end if you dial 911. But there are a couple of 
accompanying issues that come along with it. First is the question of 
who should pick up the other end of the line. Should it always be 
someone at the Public Safety Answering Point (PSAP)? Or in some 
buildings, should it be an on-site security office or front-desk clerk? 
And if the call does to go the PSAP, how does someone in the building 
find out that a call has been placed so that he or she can provide more 
immediate assistance or guide first responders to the correct room?
    The second question is location. Do the first responders know where 
the call is coming from? In large office buildings or complexes, on 
college campuses, and in hotels, it's not enough for first responders 
to show up at the front door, if one even exists. Conveying accurate 
location information to these emergency personnel is critical. If 
someone calls 911 in this building, for instance, think about how long 
it could take emergency medical technicians (EMTs) to find a person in 
distress if they don't know exactly where to go.
    We can't erase the tragedy that occurred in a Marshall, Texas hotel 
room last December. But we can work to prevent such tragedies from 
happening again, and that's what I am determined to do. I am confident 
that everyone here shares my belief that when an emergency strikes, 
people, whether in a hotel or office building, should be able to reach 
someone who can help.
    Process Reform.--Before concluding, I would like to touch on a 
subject that affects all areas of the Commission's work: process 
reform. The U.S. House of Representatives recently passed the Federal 
Communications Commission Process Reform Act of 2013, H.R. 3675. I hope 
that this commonsense bill, as well as the Federal Communications 
Commission Consolidated Reporting Act of 2013, H.R. 2844, which the 
House of Representatives passed 415 to 0 back in September, will soon 
be enacted into law. Together, these bills squarely address the need to 
modernize the FCC to reflect our dynamic, converged communications 
marketplace. And they would eliminate outdated mandates on the agency, 
streamline its operations, and make it more accountable to the public. 
These are two pieces of straightforward, good-government legislation, 
and I hope that the President will soon have the opportunity to sign 
them.
    The FCC, however, should not and need not sit still waiting for 
Congress to act. We should do what we can on our own to improve our 
internal processes. Our goal should be clear: The FCC should be as 
nimble as the industry that we oversee. All too often, proceedings at 
the Commission needlessly drag on for many years. I am encouraged that 
Chairman Wheeler has said that process reform is a priority, and many 
of the reforms proposed in last month's staff process reform report are 
a good starting point.
    Indeed, a variety of reforms would improve the Commission's 
performance. We should streamline our internal processes where 
possible. For example, let's adopt a procedure akin to the U.S. Supreme 
Court's certiorari process for handling applications for review--but 
one that maintains accountability by giving each of the five 
Commissioners the opportunity to bring a Bureau-level decision up for a 
Commission vote. Let's speed up our processing of smaller transactions. 
Let's establish more deadlines, such as a 9-month deadline for ruling 
on applications for review and petitions for reconsideration along with 
a 6-month deadline for handling waiver requests--and let's ensure our 
internal calendar sets a schedule for getting those items prepared and 
circulated in time so that we can meet those deadlines. When we adopt 
industry-wide rules, let's more frequently use sunset clauses that 
require us to eventually revisit the wisdom of (and, if necessary, 
revise or repeal) those rules.
    We should also become more transparent to the public and to 
Congress about how long it takes the Commission to do its work. One way 
to do this would be by creating an FCC Dashboard on our Web site that 
collects in one place key performance metrics. Let's keep track of how 
many petitions for reconsideration, applications for review, waiver 
requests, license renewal applications, and consumer complaints are 
pending at the Commission at any given time. And let's compare the 
current statistics in all these categories against those from a year 
ago, from 5 years ago, so everyone can see if we are headed in the 
right direction. If we make it easier for others to hold us accountable 
for our performance, I'm confident that we would act with more 
dispatch.
    My emphasis on acting promptly is not just about good government. 
It is also about the impact that the FCC's decisions (or lack thereof) 
have on our economy. As the pace of technological change accelerates, 
so too must the pace at the Commission. We can't let regulatory inertia 
frustrate technological progress or deter innovation.
    Finally, I should note that while all Commissioners are asked to 
vote on a budget proposed by the Chairman that is delivered to the 
Office of Management and Budget, I have never been asked to participate 
in the development of the agency's budget request. With that context in 
mind, I will do my best to respond to any questions you may have.
              appendix--a student-centered e-rate program
    A student-centered E-Rate program focuses on five key goals:
(1) Simplify the Program
   -- Schools need to fill out only two forms: an initial application 
        and a report back on how the money was spent
   -- Initial application can be no more than one page
   -- Universal Service Fund (USF) administrator does all the 
        calculations, reducing the burden on schools
   -- Less red tape means fewer delays, more predictability, and no 
        need to hire consultants
(2) Fairer Distribution of Funding
   -- Allocates E-Rate budget across every school in America; every 
        school board and parent knows how much funding is available on 
        day one
   -- Schools receive money on a per-student basis; funds follow 
        students when they change schools
   -- Additional funds allocated for schools in rural and/or low-income 
        areas as well as small schools to account for higher costs and 
        different needs
(3) Focus on Next-Generation Technologies for Kids
   -- Eliminates disincentive to spend money on connecting classrooms
   -- No more funding for stand-alone telephone service
   -- Students come first; funding directed only to instructional 
        facilities, rather than non-educational buildings like bus 
        garages
   -- Equal funding for all eligible services; local schools (not 
        Washington) set priorities
(4) More Transparency and Accountability
   -- Creates Web site where anyone can find out exactly how any school 
        is spending E-Rate funds; enables parents, schools boards, 
        press, and public to conduct effective oversight
   -- School district superintendent or school principal must certify 
        that E-Rate funds were used to help students
(5) Fiscal Responsibility
   -- Ends the ``more you spend, more you get'' phenomenon: Schools 
        given fixed amount of money and must contribute at least one 
        dollar for every three E-Rate dollars they receive
   -- Better incentives, reduced waste, and less red tape allows 
        program to accomplish a lot more with the same amount of money; 
        over $1 billion more in first year provided for next-generation 
        technology
   -- Caps overall USF budget before any increase in E-Rate budget; any 
        expansion in E-Rate must be accompanied by corresponding cuts 
        elsewhere in USF

------------------------------------------------------------------------
                                      Legacy E-Rate     Student-Centered
                                         Program         E-Rate Program
------------------------------------------------------------------------
Spending Priorities..............  --Prioritizes       --Focuses on next-
                                    voice telephone     generation
                                    service, long-      services; no
                                    distance calling,   funding for
                                    cell phone          stand-alone
                                    service, and        telephony
                                    paging ahead of     service
                                    connecting         --All eligible
                                    classrooms with     services treated
                                    broadband           equally
                                    Internet access     (including
                                   --Funding            connecting
                                    available for non-  classrooms);
                                    instructional       local schools,
                                    facilities such     not Washington,
                                    as bus garages      should set
                                    and sports          priorities
                                    stadiums           --Students come
                                                        first; funding
                                                        directed only to
                                                        instructional
                                                        facilities
------------------------------------------------------------------------
Process..........................  --Complicated       --Simple
                                   --Schools face up   --Only 2 forms
                                    to 6 separate       required;
                                    forms plus          initial
                                    outside review by   application is
                                    an approved         only one page
                                    planner            --Streamlined
                                   --Schools must       rules eliminate
                                    spend money on      need for
                                    consultants to      consultants
                                    navigate web of    --USF
                                    rules such as the   Administrator
                                    28-day rule, the    does all the
                                    2-in-5 rule, and    calculations
                                    discount
                                    calculations
                                   --Backlog of
                                    appeals stretches
                                    back a full
                                    decade
------------------------------------------------------------------------
Funding Allocation...............  --Funding tied to   --Funding follows
                                    discounts; higher-  the student
                                    discount schools   --Funding
                                    get more funding    allocated to all
                                    overall and         schools based on
                                    funding for more    student
                                    services            population,
                                   --Complex rules      adjusted for
                                    encourage           challenges that
                                    arbitrage and       schools in rural
                                    gaming              and low-income
                                   --Differences in     areas face
                                    spending among     --Additional
                                    States and within   allocation for
                                    States are          very small
                                    largely arbitrary   schools and
                                   --More than $400     schools in
                                    million lost each   remote areas
                                    year due to red     like Alaska
                                    tape               --Much less money
                                                        lost as a result
                                                        of red tape
                                                        means more money
                                                        for students
------------------------------------------------------------------------
Financial Planning...............  --Funding           --Funding
                                    available to a      available
                                    school may change   immediately to
                                    dramatically from   all schools,
                                    1 year to the       independent of
                                    next                decisions made
                                   --Funding tied to    by other schools
                                    decisions of       --Minimal
                                    every other         fluctuations
                                    school in the       from 1 year to
                                    country             the next allow
                                   --Schools must bid   for long-term
                                    out services        financial
                                    before they know    planning
                                    if funding is
                                    available
                                   --Funding not
                                    secured until
                                    months or even
                                    years after
                                    funding year
                                    starts
------------------------------------------------------------------------
Fiscal Responsibility............  --The more you      --Fixed pot of
                                    spend, the more     money for each
                                    you get             school and
                                   --Some schools       matching
                                    have little skin    requirement of
                                    in the game by      one dollar for
                                    receiving up to a   every three from
                                    90 percent          E-Rate promotes
                                    discount            prudent spending
                                   --Priority and      --Reducing
                                    group-discount      wasteful
                                    rules discourage    spending allows
                                    long-term,          the program to
                                    efficient-scale     accomplish a lot
                                    purchasing          more with the
                                   --Cap on E-Rate      same amount of
                                    but not overall     money; over $1
                                    Universal Service   billion more
                                    Fund                provided in
                                                        first year for
                                                        next-generation
                                                        technology
                                                       --Cap overall
                                                        Universal
                                                        Service Fund
                                                        before any
                                                        increase in E-
                                                        Rate budget
------------------------------------------------------------------------
Transparency and Accountability..  --Funding           --Funding
                                    available to        available to
                                    schools not         schools publicly
                                    disclosed until     disclosed
                                    after the fact      immediately to
                                   --Parents can't go   enable parents,
                                    online to see       school boards,
                                    precisely how a     press, and
                                    school's E-Rate     public to
                                    funds are being     conduct local
                                    spent; online       oversight
                                    catalog just       --Schools to
                                    shows funding for   report online
                                    each recipient      exactly what
                                    divided into four   they're getting
                                    broad categories    for E-Rate
                                   --Relies on          dollars; school
                                    complicated rules   administrators
                                    and Federal         must certify
                                    audits and          it's spent on
                                    investigations      students
                                    for                --Transparency
                                    accountability      and local
                                                        control are key;
                                                        Federal
                                                        oversight a
                                                        backstop
------------------------------------------------------------------------
Relation to Libraries............  --Libraries         --Libraries
                                    receive about 10    receive about 10
                                    percent of E-Rate   percent of E-
                                    funding             Rate funding
------------------------------------------------------------------------


    Senator Udall. Thank you very much, Commissioner Pai. Thank 
you both for your testimony.
    We are going to proceed with 7-minute rounds for each 
member, and then we will go through multiple rounds if the 
members desire, however long.
    Chairman Wheeler, I wanted to focus--you have mentioned 
this, both of us have mentioned the $36 million increase, which 
is a 10 percent increase, and you have discussed a little of 
that. I am wondering if you can talk a little bit--with these 
additional funds, will they improve the FCC's ability to carry 
out its mission? And what would be the impact if you didn't 
have those funds?
    I am trying to look at the other side of it. You put, I 
think, very solidly forward the positive side. What would be 
the impact of not doing that?

                              FCC FUNDING

    Mr. Wheeler. Thank you, Mr. Chairman.
    You know, I am 5 months on the job now. And having come 
from the private sector, I am still learning the realities of 
Government. But one of the things that we have been trying to 
focus on is a basic concept of efficiency and how do you make 
things work and work well?
    As I indicated previously, the IT situation at the FCC is 
intolerable. It is a situation that no American business would 
allow to exist. We have begun to put in place solutions. We 
have brought in a crackerjack chief information officer (CIO) 
who understands what needs to be done. Absent the resources to 
do it, however, we are going to sit there with incompatible 
devices, with the inability to have common databases.
    We have--just to give you an example--98,000 different data 
points inside our agency that make it totally impossible to 
build the database, to relate back and forth. We have got to 
consolidate all of those. So, clearly, one thing is how do we 
become more efficient?
    And one of the frightening things, when you look at it from 
a budgeting point of view, we are asking for $13 million to fix 
IT. It is going to cost us more than that the next 2 years for 
baling wire and glue if we don't. So, clearly, there is cause 
and effect here, and there are results that come from it.
    Like Commissioner Pai, I strongly support what you have 
proposed insofar as an online consumer database. We just 
couldn't do it--we didn't have the tools to do it. Yes, it 
ought to be online. Yes, it ought to systematized. It is 
ridiculous.
    And as Commissioner Pai indicated, we are looking at other 
process reform kinds of activities. If we don't deal with the 
challenges presented by an $8.4 billion program that is being 
overhauled in all of its components and enforce our rules and 
our expectations, as is our fiduciary responsibility, then we 
won't be carrying out our fiduciary responsibility.
    Twenty-five people enforcing an $8.4 billion program 
doesn't make sense. So what I have tried to do, sir, is to--is 
to bring to the job a businessman's approach and say, okay, 
what are the challenges? How do we fix them? And then let us 
demand the results on that.

                            RURAL BROADBAND

    Senator Udall. Thank you very much for that.
    In my second question, I wanted to focus on rural 
broadband. And as you are well aware, this is a really, really 
critical challenge.
    And I am wondering, how will you continue to advance 
universal service reform to ensure that unserved areas are 
targeted for broadband support? How will you balance the need 
to connect areas with no broadband service while upgrading 
areas with slow service? And how will the additional staff 
requested in the budget help achieve these goals?
    Mr. Wheeler. So you said the key word, ``balance.'' And one 
of the joys that I have learned and that you all experience 
daily is making choices and how do you balance between various 
things.
    Yes, we have to get service into unserved areas. Yes, we 
have to make sure that in areas where there is service, that 
that service is expanding in its quality and speed. Yet we have 
a finite pot. And so, that balance is crucial.
    My concern and why we have asked for additional FTEs for 
the Wireline Competition Bureau is that these are huge issues 
to have these balancing of interests and to have fairness 
across an incredibly diverse country.
    And what we have--we are constrained in the Wireline Bureau 
because of all of the issues that we are dealing with. And when 
we pull people away to do enforcement, we are pulling them off 
of things like this. And we need to make sure that we have the 
right kind of enforcement activities so that we are then are 
not robbing Peter to pay Paul in the rural broadband kinds of 
decisions that have to be made.
    Senator Udall. The thing that is striking to me from your 
2012 Broadband Progress Report is 19 million Americans lack 
access to broadband. That is 6 percent of the population. Rural 
Americans are 13 times more likely to lack access to broadband 
than Americans in urban areas.
    My State of New Mexico ranks 44th among 50 States when it 
comes to broadband access, and over 14 percent of New Mexicans 
do not have access to broadband. So we appreciate your 
initiatives, and we appreciate you working to really push us 
forward in that area.
    And with that, Senator Johanns, I call on you for your 
first round of questions.

                             FTE DEPLOYMENT

    Senator Johanns. Thank you, Mr. Chairman.
    Chairman Wheeler, as you have pointed out, one of the most 
significant increases in your budget is the 45 FTEs anticipated 
in the Universal Service Fund program, if you will. You have 
also acknowledged that the FCC budget request essentially parks 
most of the new USF hires in the Wireline Competition Bureau, 
but I think you are anticipating that they could be spread 
elsewhere.
    For example, I could see they could go to the Wireline 
Bureau, the Enforcement Bureau, the Office of Inspector 
General, the Office of Managing Director. The difficulty that 
creates for us who are supposed to be providing some oversight 
here is how are these people going to be deployed? So I have a 
couple of questions for you.
    Can you give me--give the subcommittee here more 
specificity as to where you think you are heading here maybe 
today, but also as this rolls out?
    And then the second thing I want to ask because your 
testimony prompts this question, with the sorry state of your 
IT as you have described it, does it make sense to try to get 
that up to speed and allocate resources there more aggressively 
and think about FTEs in a future budget request? So those are 
my questions.
    Mr. Wheeler. Thank you.
    Senator Johanns. And Commissioner, I will ask you to offer 
some thoughts on that, too.
    Mr. Wheeler. Thank you, Senator.
    Let me be specific on where the people go. Fifteen people 
into the Enforcement Bureau, which is almost doubling the 
number of enforcement people for universal service. Ten people 
into the Office of Managing Director.
    And the reason that is important is that the Universal 
Service Administrative Corporation, which is the structure, the 
quasi-independent structure that disburses the funds, reports 
in through the Office of the Managing Director, and that is 
where you need to have auditing capability and oversight 
capability there. So there are 10 people for that.
    Six people for the Office of Inspector General, and as you 
know, they run their own shop.
    Senator Johanns. Right.
    Mr. Wheeler. We don't dictate how they do that.
    And then the remaining 14 are for the Wireline Competition 
Bureau, which is for multiple reasons. One, what happens in 
enforcement is you get a series of appeals and things like 
this, and that gets handled by the Wireline Bureau. And also, 
as I was saying to Senator Udall, we have been robbing Peter to 
pay Paul to do enforcement. So that is the specific breakout of 
it.
    Now insofar as your question about IT versus enforcement, I 
wish that I could make that decision, sir. But I don't see 
how--I mean, I think that we have got two fiduciary 
responsibilities here.
    One is to make sure that $8.4 billion is appropriately 
spent. And with all respect, I think that we have some catching 
up to do on our oversight and enforcement of those programs. 
And we are in the process of modernizing.
    And second, as you suggested, the IT system, I mean, we 
just simply cannot go on this way. Here is a little interesting 
fact. As a result of my being here today and being in the news, 
we will see a precipitous increase in the amount of attacks on 
the FCC Web site, just because people say, ``Oh, FCC, let's 
go.'' We cannot tolerate that.
    If we have responsibility for the economic engine of the 
21st century, we can't be sitting here, one, without 
capabilities and, two, exposed as we are. So the choosing 
between these is incredibly difficult.
    Senator Johanns. You know, Mr. Chairman, your observation 
is correct. You know, back in my U.S. Department of Agriculture 
days, one of the most surprising things I learned in the first 
days of being there is how aggressively the system was 
attacked. Every minute, every day, it was just constantly being 
pinged by somebody who was trying to find a weak point.
    So that is what prompted my question. If you had to make 
tough choices, and I know you would like to do it all, where 
would you go? Would it be IT, or would you go to employees, the 
new ones that you have requested?
    Mr. Wheeler. And I appreciate what you are saying. I think 
we have a fiduciary responsibility on both counts. I can't sit 
here and say to you, sir, and members of the committee, that we 
can allow enforcement to continue as it has on the Universal 
Service Fund and all its components.
    I have stood up a special strike force to be able to deal 
with waste, fraud, and abuse. There are two things. Both of 
these issues undermine the basic foundation of both activities. 
If you don't have a good IT system, it undermines your ability 
to get things done at the agency. And if you don't have a good 
enforcement system, it undermines the credibility of the 
program itself. I wish I could cut the baby in half, sir.
    Senator Johanns. Commissioner Pai, do you have any 
thoughts?

                              USF FUNDING

    Mr. Pai. Senator, just briefly, I think the exchange you 
have just heard is reflective of the difficult balance that has 
to be struck. On one hand, the FCC has to vindicate the public 
interest. On the other hand, the American people deserve and 
expect a measure of fiscal responsibility, and that is a 
difficult balance to strike in any situation.
    I think it also comes in the context of the overall cap in 
domestic discretionary spending, which is slated to increase, 
as you know, only by 0.1 percent. And so, I think it is 
incumbent on us, both to justify the proposed increase and to 
devote those resources that are approved to worthy causes.
    With respect to USF enforcement, I, of course, support 
robust enforcement of the agency's rules and the law. I, 
myself, have not been presented with a very specific plan about 
how those resources would be deployed in terms of the 
particular tasks the particular employees would be devoted to. 
Would it be time limited or permanent, et cetera? But I 
certainly look forward to working with the Chairman and this 
committee on that regard.
    With respect to IT spending, I do agree that we need to 
devote more attention to our IT systems. For example, our 
internal tracking system, among other things, is rather slow, 
shall we say. A charitable way of putting it. And so, I think 
it would help us operate more efficiently, deliver better 
results for the American public if that were speedier.
    On the other hand, I also think it is important for us to 
use the IT spending resources we get more effectively. And so, 
for example, we spent a great deal of money on the FCC Web 
site. It is a Web site that many people find incredibly 
difficult to use. More often than not, people actually click 
through to the old Web site, which looks like it was, you know, 
cutting edge back in 1998. I myself do that.
    And so, I think it is important for us to focus on the IT 
priorities that really matter and to make sure that that 
balance between the public interest and fiscal responsibility 
always is maintained.
    Senator Johanns. Mr. Chairman, I have some more questions, 
but I will wait until the next round.
    Senator Udall. Senator Moran.
    Senator Moran. Mr. Chairman, thank you very much.
    Mr. Chairman and Commissioner, thank you very much for 
being here.
    Senator Udall, thank you for having this hearing.
    We had a hearing on the FCC in which we had the Chairman 
and a number of the commissioners here 2 years ago before you 
were the chairman and when I sat in the chair of Senator 
Johanns. That was the first hearing this subcommittee had had 
in 9 years on the FCC.
    And I think this is--your agency is one of the most 
important. You happen to have three Senators here who represent 
pretty rural States, and I appreciate the focus that we can 
bring to this attention. And I thank you for your leadership.
    On IT acquisition, Senator Udall and I are interested in 
trying to determine how to have a system of IT acquisition that 
is well founded across the Federal Government. And I am going 
to submit for the record a number of questions in writing about 
IT acquisition at the FCC.
    In response to certainly Senator Johanns' question, what I 
see, Mr. Chairman, is that you have found two areas in which 
you think there is a need for additional funding, two that are 
priorities. Hard to differentiate which one has the highest 
priority.
    In your short time that you have been Chair of the FCC, 
have you found places that the FCC is spending money that it 
should not or does not need to or is a low priority?
    Mr. Wheeler. Yes. I think the issue that we have is, again, 
when I came on, what I discovered was about 70 percent of the 
budget is people, without much flexibility in the people other 
than moving desks around from one assignment to the other. And 
so, as our priorities change, what we end up doing is 
reassigning people rather than seeking new budgets or things 
like this.
    So, yes, we have had some dramatic changes from--in the 
Wireline Bureau, from narrowband activities being repurposed 
into broadband activities, being repurposed into rural 
broadband activities in particular.
    In the Wireline Bureau things are being repurposed into the 
new Internet protocol transition that is taking place in 
networks. I mean, something as current as this morning, sir.
    The matter of what are the rights of traditional telephone 
companies operating on twisted copper pairs to end their 
service and say we are going to go over to an IP service that 
can affect the ability to power the phone in the middle of a 
tornado in Kansas, can affect the ability of a burglar alarm to 
communicate and other kinds of things. We are having to switch 
resources.
    So what I am trying to say, in an answer to your question, 
is we are constantly reprioritizing. It doesn't show up like a 
business account normally does in a line-by-line kind of 
operation because what we are doing is moving existing bodies 
back and forth among tasks.

                            RURAL BROADBAND

    Senator Moran. When you and I first met, Mr. Chairman, the 
initial conversation, you were going through the nomination 
process.
    Mr. Wheeler. Yes, sir.
    Senator Moran. The first conversation, we had several 
topics, but rural broadband is often front and center with me. 
You indicated in a House hearing--and I appreciate that 
conversation. You said things that I like to hear, and you 
followed through with changes in the order of 2011.
    You indicated in a House hearing that the QRA would be 
altered. And my question is, can you give us an update on your 
plans? What will replace the QRA? How long of a term strategy--
what is the long-term strategy in regard to Universal Service 
Fund?
    Mr. Wheeler. The long-term strategy for the Universal 
Service Fund, we could be here past lunch. But first of all, I 
thank you for the kind words and the credit for the change 
decision on the QRA and particularly, as you pointed out, that 
it was a unanimous decision out of the Commission.
    But I know you raised this, and believe me, you weren't the 
only member of this body or the other body that raised it with 
me. So I had to dive in and learn about it. And you know, the 
QRA was a really well-intentioned, well-meaning pursuit of 
perfection. And like everything else in life, you know, the 
perfect is the enemy of the good. And the complexities just 
went out of control. And so, my comment was, ``Timeout, let us 
stop this.''
    Now the question is, what are we going to replace it with? 
There are multiple proposals that have been submitted by rate-
of-return carriers and their various representatives. We are 
trying to sort through those right now.
    I can't tell you what the answer to that is going to be 
right now. We have just reverted to the previous process before 
the QRA and continue working on the old allocation 
methodologies.
    But we will--I believe the record is just in the process of 
closing, if it hasn't just closed. And we will take all of 
those and try and piece them together.
    The interesting thing to me, though, is that there are 
different approaches being proposed by the same kinds of 
carriers, which again puts us back in this position of, okay, 
how do you make decisions or how do you say, okay, here is 
another alternative that we ought to be looking at?
    Senator Moran. Timeframe?
    Mr. Wheeler. I hope that we get done with that in the next 
6 months.
    Senator Moran. Mr. Chairman, I used most of my time 
complimenting you, but I assume that the time still has 
expired. I am glad we are having another round.
    Thank you.

                             TRIBAL ISSUES

    Senator Udall. Okay. We will go for another round here.
    You mentioned QRA, and I also, I think, communicated with 
you that we welcomed your plan to scrap that. In the case of 
New Mexico, I think that hurt many small rural telephone 
cooperatives, and so we appreciate that effort there.
    Wanted to talk a little bit about tribal broadband and the 
FCC Office of Native Affairs and Policy, Chairman Wheeler. I 
want to express my appreciation to the Commission's efforts to 
address the digital divide facing Native American communities. 
Telephone access on tribal lands still lags far behind the rest 
of the country.
    By the FCC's own report, the number of people without 
broadband access on rural tribal lands is eight times worse 
than the national average. This digital divide creates real 
hardships for people. We know that. We see it on a firsthand 
basis in visits out in New Mexico in these rural areas. And it 
is also a barrier to economic development, which is obviously 
crucial.
    So I support the recent positive developments, such as the 
work of the FCC's Office of Native Affairs and Policy. I am 
concerned, however, that the FCC's budget request does not 
include specific funding to support this office's critical 
mission for Indian Country, which encompasses, as you know, 565 
federally recognized tribes, approximately 231 federally 
recognized Native Alaskan entities, and about 38,000 
beneficiaries of Hawaiian homelands.
    Can you explain to me how the FCC budget request will 
address the telecommunication challenges facing Native American 
communities and how high a priority are tribal issues to you?
    Mr. Wheeler. Yes, sir. Thank you.
    The only reason it isn't spelled out in the budget is that 
you don't spell out offices. But I can assure you that the 
$300,000 that this subcommittee has in the past suggested and 
that was affected by sequestration is definitely in there and 
will be appropriately spent.
    Insofar as our policy with regard to tribal lands, I met 
probably 3 weeks ago with leaders of the Native American 
community, and I told them several things. First of all, I 
learned something. I learned about the concept of trusteeship 
and how I am a trustee and I didn't know I was. And I learned 
about how the concept of consultation is not the concept--is 
not the use of the word that I have always grown up using. 
There are specific responsibilities associated with that.
    And I committed to these leaders and I committed in front 
of their large meeting several things. One, that we would 
improve the consultations. Two, that I took the trusteeship 
seriously. And three, that I wanted their help on three 
specific goals. One is improving broadband in Indian country. 
Two is dealing with the question of access to the spectrum that 
passes over Indian country. And three is assuring the diversity 
of voices, which is the question of priority licensing for 
radio stations that operate in Indian country.
    I also told them that we would refresh and strengthen the 
Native Nations Broadband Task Force and that I would physically 
be in Indian country addressing these issues with the people.
    I also noted to them in passing that because of my son, I 
am probably the only FCC Chairman that has ever attended 
powwows on Indian reservations from the Dakotas down to 
Arizona. Unfortunately, never in West Virginia--never in New 
Mexico, Senator.
    Senator Udall. Thank you.
    And I think, I know my two Senators who are up here on the 
dais with me understand a lot of these tribal and Native 
American issues. But you are absolutely right. The trust 
responsibility is one that is there, Federal Government with 
the tribal communities, and needs to be one that is respected 
and worked with and understood.
    And also consultation. I mean, it is a different kind of 
consultation, and that is why the office we have is so 
important. Because the folks in there know and understand that. 
They reach out in a very significant way and involve all of 
these many communities across the United States to participate 
and be a part of the dialogue, among many other things. So 
thank you very much for that.
    I am going to try to get one more question in here on E-
Rate, and I mentioned the importance of E-Rate in my opening 
remarks, and I am excited about the potential innovations to 
help improve student achievement. Could you expand on your 
testimony about how E-Rate could be modernized to better meet 
the needs of schools in the current broadband era?
    Mr. Wheeler. Yes, sir.
    We need to focus on a 21st century goal, which is high-
speed broadband to schools. When the E-Rate was put in place in 
1996, the world was a little different. We were talking about 
dial-up modems then. And the idea of connecting schools was 
quite different.
    We are in a situation today where we are spending $2.4 
billion on the E-Rate, and over half of that is not going to 
high-speed broadband. Now over the years, paying for pagers, 
paying for dial-up voice service, paying for cell phone 
service, things like this were logical. But the world has 
changed, and I am again back to--we have got to make decisions 
on how we spend a finite pot of money.
    So we are in a process right now of developing a new 
rulemaking, which we will bring to the Commission this summer, 
that modernizes the E-Rate program to focus on the delivery of 
broadband as a priority. To make sure that rural America 
doesn't end up dealing with the leftovers as it often has in 
the P2, the Part 2 of the program--making sure that it is less 
burdensome on the schools.
    I mean, it is--first of all, back to the IT issue, it is 
done on paper. It is really ridiculous in the way it is done. 
And it is done annually. Continuing on, we need to make sure 
that there is efficiency in the way in which the program is 
both administered at our level and at the local level. And that 
the buying is done right, that we emphasize buying consortia 
who can get better prices and that we create a structure that 
does that. And that is what we are doing in this new 
modernization order.
    Senator Udall. Thank you very much.
    Senator Johanns.
    Senator Johanns. Thank you, Mr. Chairman. Just a couple 
more questions.
    Let me, if I might, Chairman Wheeler, shift gears a little 
bit here to positive train control.
    Mr. Wheeler. Yes, sir.
    Senator Johanns. My understanding is that the FCC has put 
together a proposal known as program comment that is intended 
to function as an amendment to the FCC's 2004 programmatic 
agreement. I understand that FCC's licensing authority over 
spectrum necessary for positive train control triggers an FCC 
role in the infrastructure.
    Why would the FCC not be able to recommend to the Advisory 
Council on Historic Preservation (ACHP) that the utility poles 
that are necessary here in the railroad rights-of-way be 
excluded from the historic preservation review? Wouldn't the 
ACHP exempt activity where the potential effects on historic 
properties are foreseeable and likely to be, de minimis, 
minimal and not adverse? And could you--do you feel you could 
make that recommendation to them?
    And I guess what I am looking for here, we know we have got 
a big problem out here. You must carry this around in the back 
of your mind as the must-do checklist for the next few months. 
Isn't there a way to put some streamline behind this, and 
because at the end of the day, it needs to get done, right? We 
all face that.
    Mr. Wheeler. Yes, sir, Senator.
    And it is not in the back of my mind. Yes.
    Senator Johanns. Front and center, yes.
    Mr. Wheeler. The points you make are all spot-on. There are 
two roles the Commission has in positive train control (PTC). 
One is spectrum, and the other is antenna siting. I think on 
the spectrum side, we get pretty good marks because we 
facilitated the transfer of spectrum. We facilitated the 
sharing of spectrum. That is working.
    As you point out, the National Environmental Protection Act 
and the National Historic Preservation Act have specific 
provisions that say that there needs to be tribal sign-off on 
any antennas.
    Now I came out of the wireless business. When you are going 
one-off, that can be done. When you come in with tens of 
thousands like we have to do here, it chokes the system. So 
there are two options that I faced.
    Option one is, yes, we could do what you suggested, and we 
could go amend the whole process. The joy of that is that the 
processes you have to go through to get there--and then the 
court review, and then everything that comes with it--probably 
puts us on the other side of the deadline date here.
    So my decision was how do you make things move faster? 
Because the reality is the railroads have a date, a deadline 
that you established. The tribes had no deadline. So we started 
back to the consultation concept.
    We brought together a couple of meetings and have developed 
a process for batch processing, if you will, to handle these in 
groups rather than one-off that we hope is going to break 
through the logjam. I must say that the issue has been 
exacerbated by the fact that there were many, as in thousands, 
of antennas put in place by railroads before any recognition of 
this. And the need to go back and catch up on those while 
moving forward on the others is a nontrivial undertaking.
    But again, I think that we have developed a process that 
speeds it up by doing batch. But I can assure you, sir, that we 
are keenly aware of what you are talking about. And this is a 
statutory responsibility, two statutory responsibilities, and 
our job is to facilitate and obey both.
    Senator Johanns. Yes, and here is what I would offer, Mr. 
Chairman and Commissioner Pai. This is the kind of issue where 
us getting in the middle of it and doing this, that, or the 
next thing may only interfere with the process. On the other 
hand, I think both the chairman, myself as ranking member, 
Senator Moran, others who work with the tribes every day, every 
week in our office would be more than willing to be as helpful 
as we can because this deadline is real. And unless we change 
the deadline, we have all got a big problem on our hands. So I 
just put that out there.

                             ISSUE DIALOGUE

    The last thing I wanted to say--and I will have some 
questions that I will just submit to the record. But this is 
more of an offer, Mr. Chairman, than a question. I think, in 
your job, if you could satisfy two issues, they would be naming 
the building after you.
    Spectrum and net neutrality. And you know, you have this 
huge history. You have kind of worked with everybody here. I 
find these issues enormously interesting and engaging. I have 
got no ax to grind. I am not running for reelection. I am going 
to move on in life.
    Here is an offer that I would make. I would love to start a 
dialogue with you in just a general way about these issues. I 
would welcome it. Obviously, at the end of the day, it might be 
more dialogue than anything, but I think these are--I love to 
tell the story about my first car phone where my wife took my 
car for a day, got this huge surprise for me. Got a phone 
installed. You know, one of these big clunky things on a cord.
    I loved this thing. I used it every day for that first 
month. I got the first bill, darn near had to mortgage the 
house to pay the first bill.
    Look at the difference that has occurred in a rather brief 
period of time. The key to the way forward, though, and the 
impact on our economic growth in this country really deals with 
many issues, but these two issues are so at the core of it. And 
I would love to pick your brain about it.
    Mr. Wheeler. This afternoon, our offices will be in 
contact, and I would look forward to that a lot.
    Senator Johanns. Thank you. I welcome that dialogue, and 
let us hope it continues. So thank you.
    Mr. Wheeler. Thank you, sir.
    Senator Udall. Thank you both.
    Senator Moran.

                              RURAL RATES

    Senator Moran. Chairman, thank you again.
    Commissioner Pai indicated in his opening statement about 
the impact of the announced rate floor increase. I wanted to 
highlight for you, Mr. Chairman, in Kansas our companies 
currently charge rural customers anywhere from $11.77 to $18.25 
per month for phone service. By State law, they are prohibited 
from increasing that rate more than $1.50 in any 1 month for a 
12-month period.
    So by State law, it just seems to me there is no capability 
of complying with this decision. The new rate of $20.46, they 
just can't meet that July 14 deadline. And so, I am interested 
in what the FCC's response is into that particular problem.
    But further, many rural customers in Kansas receive both 
phone service and broadband service from the same company. And 
therefore, when the phone service costs are increased, I think 
a natural reaction, and it is particularly true in today's 
world, is to eliminate the land line. And the costs then fall 
for broadband even more directly. I mean, my guess is that 
broadband services become even more expensive as a result of 
the increasing phone rate.
    I wondered if you had--if you have any thought that that is 
a rational occurrence, if I am making something up or that is 
the propensity to do that exists? Have you given any thought to 
what the consequence is to broadband customers because of the 
increasing cost of phone service? And then are you willing to 
address this issues?
    Mr. Wheeler. Well, that is--on the second point, I would 
like to get some research on that and not just shoot from the 
hip. But I mean that is a legitimate issue.
    On the first point, again, this is the joy of this job. I, 
Senator Johanns, thank you for your thought that they might 
name the building after me. This is not a goal, okay?
    But if there is anything that I hope that folks will say at 
the end of my term is that at least we made decisions. Because 
the thing that American business can't afford and American 
consumers can't afford is limbo.
    Senator Moran. Certainly.
    Mr. Wheeler. So as Commissioner Pai said in his statement, 
and he and I are in agreement on this, it was a unanimous 
decision out of the FCC before we arrived to set up the 
structure that led to exactly what you talk about. So I inherit 
the results of the algorithm that everybody agreed to that 
produces this result.
    We have two responsibilities--to adhere to the statute and 
not to be stupid. And it seems to me that if we create a 
situation where we run headlong into the kind of Public Utility 
Commission (PUC) problems you were talking about, where we 
create a situation where suddenly there is a 46 percent rate 
hike that gets slapped on everybody in July, that is tending 
towards the other thing that we don't want to have.
    So what I am going to be proposing is that, one, we delay 
the implementation beyond July because you have got to provide 
the window for the PUCs to be able to deal with--the companies 
to be able to deal with the PUCs to be able to deal with 
things. And secondly, that we develop a phase-in so that this 
isn't hitting everybody's bills bang on, but comes in over 
time.
    Because there still is a statutory responsibility that the 
rates be reasonably comparable. And it is not just urban 
subscribers who are doing some of this subsidization of rates. 
It is other rural subscribers who are doing this subsidization 
of rates as well.
    So it is not a question of whether. It is a question of 
how, and how do you do it reasonably.

                 INTERNAL REVENUE SERVICE USF POLICIES

    Senator Moran. Thank you.
    I don't want Commissioner Pai to have been here and not had 
an opportunity. But before I turn to him and before my time 
expires, let me raise another topic and then hear from either 
or both you.
    I have never thought of this before. This question was 
brought to my attention, that the Internal Revenue Service 
(IRS) treats all universal service high-cost funding, including 
the Connect America Fund Phase 1 dollars, as general revenue 
instead of a contribution to capital. You are smiling. So you 
know this topic.
    The general revenue has tax liability consequences that 
will diminish the effectiveness of the fund. And I am curious 
as to whether or not the FCC has had ongoing conversations with 
the IRS. I am told that there is a comparable analogous 
situation that occurred previously, and I am curious as to 
whether you are addressing this issue between the FCC and the 
IRS.
    Mr. Wheeler. So I am smiling because I recently became 
aware of this as well. There was literally a company, in seeing 
this yesterday, that said that they had just been told by the 
IRS to follow the same rules as had been used in the Broadband 
Technology Opportunities Program (BTOP) that you are 
referencing.
    And so, what I am doing is asking our general counsel to 
get into this and to find out what is going on. I was smiling 
when you mentioned the IRS because it is that time of year.
    Senator Moran. I don't know that the IRS brings many 
smiles.
    Here or at home. Commissioner Pai, either one of those 
topics?

                               RATE FLOOR

    Mr. Pai. Sure. To start, Senator, you should know that the 
Chairman is already making his mark. The very first floor at 
the FCC is labeled ``TW,'' and I think it is a sign of things 
to come. Even in 5 months, he is getting the floors renamed for 
him.
    But more seriously----
    Mr. Wheeler. It stands for ``12th Street.''
    Mr. Pai. Well, so they say. I am not buying it yet.
    But to the first topic, with respect to the rate floor, the 
FCC has twin responsibilities here under the law. We have to 
make sure that the rates are reasonably comparable. We have to 
make sure that communication services are affordable.
    The way I think about it is from the perspective of a 
consumer in Washington, DC, versus my hometown of Parsons, 
Kansas. The rates are different. I mean, in DC, it is $20.46. 
In Parsons, it is $14. But if you look at the median income, 
the median income in Washington, DC, is $64,000. The median 
income in Parsons is $38,000.
    So if you try to pair those statutory responsibilities, it 
seems to me that reasonably comparable doesn't just mean that 
the exact rate has to be equal. It has to mean that these 
services are affordable for people, regardless of where they 
live, taking into account all of the circumstances.
    Second, in terms of State law, I think it is critical for 
us from an institutional perspective to have a good 
relationship with our State and local colleagues who, to the 
extent that the rate floor would end up overriding State law or 
putting these carriers in a catch 22--either they comply with 
State law or Federal law--I think that is something to be 
avoided.
    The second thing, though, that you mentioned is something 
that is really close to my heart, and I think the chairman 
captured it exactly right in his opening statement. We live in 
an Internet age. And so, it follows from that that the 
consequence of not having broadband Internet access or access 
to other advanced communication services is that almost quite 
literally you live in another era. And that is becoming all too 
real for people in rural America.
    And the reason that I say that in answer to your question 
is that line loss in rural America is real. I have heard it 
from carriers in Kansas, Nebraska, New Mexico, States across 
this country. And so, as a result, if they lose universal 
service support because people just feel compelled to drop that 
land line, either the carrier has to try to make a go of it on 
broadband alone, for which there is no support, or they simply 
go out of business. And I think that is an untenable state of 
affairs.
    And so, stepping back from the trees of the QRA and the 
rate floor, et cetera, and looking at the forest of universal 
service, my own vision is that we would move to a Connect 
America Fund for rate-of-return carriers. We would move to a 
system that would allow standalone support for broadband 
facilities, recognizing that, for an increasing number of 
Americans today, voice isn't a distinct service as it used to 
be for the last 100 years. It is simply another application 
riding over the Internet.
    And if we embrace that kind of a vision depending, of 
course, on what the particulars of the record show, I think we 
are going to be in a situation where rural Americans and urban 
Americans will have a more level playing field in terms of, you 
know, the Internet access and other communications 
opportunities that truly do fall at the heart of the 
Communications Act.
    So that is something to flag for the future. And I think, 
Senator Johanns, you would be perfectly positioned to take a 
role on this issue going forward. That is the real level 
playing field, I think, for our people going forward.
    Senator Moran. Commissioner, thank you.
    If the voting schedule allows, I will be in your hometown 
of Parsons tomorrow, visiting the community college and the 
community hospital.
    Mr. Pai. I hope you say ``hi'' to my parents.
    Senator Moran. I hope to see them. Thank you.
    Mr. Wheeler. Are they going to name those after you?
    Mr. Pai. I am by far not the most august person from 
Parsons. Even now there is a quarterback in the NFL who 
deserves that title.
    Senator Udall. Thank you for those comments.
    Chairman Wheeler and Commissioner Pai, I just want to add 
to the earlier comments about the impact on small rural 
telephone cooperatives of a potential new increase in terms of 
the local service rate floor.
    New Mexico telephone providers in rural areas of Chaves and 
Lincoln Counties, for example, are very worried that this will 
cause a spike in their customers' phone bills. So I do 
appreciate your willingness to look carefully at the concerns 
that are raised here and thank you for doing that.

                           RURAL TRANSLATORS

    I just have one additional question here. And to both of 
you, this is about TV translators. Nearly 54 million Americans, 
including most--almost 600,000 New Mexicans rely exclusively on 
over-the-air TV. In New Mexico, many of those TV viewers rely 
on more than 200 translators located throughout the State to 
receive broadcast television. This is especially the case in 
rural areas and on tribal lands. As the Commission proceeds 
with the incentive auction rulemaking, will you consider the 
importance of protecting TV viewers in rural areas who are 
served by TV translators?
    Mr. Wheeler. I have been hogging. Do you want to go first?
    Mr. Pai. Sure. So, Senator, I take that concern very 
seriously. I have heard from folks across the country, but 
especially in the Mountain West and Midwest that this is an 
area of concern for a lot of people.
    And that is specifically why I mentioned when the FCC 
adopted the Notice of Proposed Rulemaking on September 28, 
2012, that the FCC should flag this issue and make sure that we 
do whatever we can, within the constraints of the law, to make 
sure that the people who rely on these translator services 
don't suddenly find that they are left in the dark, so to 
speak.
    Mr. Wheeler. Ajit just put it right. Do everything we can 
within the constraints of the law. I mean, the difficulty in 
the law is that it specifically excluded translators and low-
power TV stations in the repacking kinds of activities.
    I believe that there are--I believe that there are 
solutions to this that range from, one, fortunately these are 
in rural areas, and the spectrum crunch does not exist in rural 
areas. So the betting odds that a translator gets caught up in 
this are slim. There may be some. But in those instances where 
there are, I think that there are other alternatives, and what 
we are going to be doing is trying to work through developing 
those other pathways so that we can maintain exactly what Ajit 
said, which was how do you maintain, keep the service from 
going black, at the same point in time adhering to the law? And 
again, that is what you pay us for.
    Senator Udall. Right. Thank you very much for that.
    I know that I may have additional comments for the record. 
I know my distinguished ranking member may also.
    I think Senator Moran has one final question, he tells me.

                       INCENTIVE AUCTIONS PROCESS

    Senator Moran. Thank you, Mr. Chairman and Ranking Member, 
for your indulgence.
    I want to talk about license--about spectrum auction, 
excuse me. There is a lot of focus on the nature of the 
auction, how that is--how it is going to occur.
    What I think may be missing is whether there is going to be 
any spectrum to auction. And I think broadcasters are looking 
for, you talked earlier about certainty, the business community 
needs some certainty. When can a broadcaster begin to 
understand what their company spectrum may be worth?
    They have got to enter into contracts for towers and 
employees. You have got to plan your business, and I don't know 
that any broadcaster knows what return, what they may receive 
if they put their spectrum up for auction. Is there--I think 
you are going to be in front of the broadcasters here in Las 
Vegas before very long. I assume this would be a question. Any 
thoughts?
    Mr. Wheeler. Yes, sir.
    There is a timeline that basically works this way. Starting 
next week, we start working inside the Commission with 
commissioners, such as Commissioner Pai, and working through 
the options that we see that are on the table and narrowing it 
down. Same point in time, working with you all up here to share 
with you what our thoughts are in terms of how to structure the 
auction.
    As you mentioned, then I go out to talk to the National 
Association of Broadcasters (NAB). I am not going to give a 
speech that says here are all the answers. But what will follow 
from that is a series of meetings with broadcasters that roll 
out here are the various concepts.
    But I think that it is beyond that. That I spent the last 
almost decade investing in companies and selling companies. I 
am used to seeing a book, that the investment banker comes 
forward and says, okay, here are all the numbers you need to 
know. Here are the assumptions. Here are the spreadsheets. Plug 
in whatever assumptions you want and kick out conclusions at 
the end.
    I think it is incumbent upon us to meet with broadcasters 
and say here is a book. Here is what it means in your 
particular circumstance. You make the decision. This is a 
voluntary auction. You've got to decide whether you want to 
come, then you decide whether you want to stay in it.
    But we are going to approach this in a business-like manner 
that provides to the broadcasters the information they need to 
make an informed decision. And you can't do it on a blanket 
kind of a basis. You have got to sit down and say, okay, now in 
this community, with these kinds of realities, these are the 
expectation.
    Senator Moran. I hope you are successful in accomplishing 
that.
    Mr. Chairman, thank you.
    Senator Udall. Thank you, and thank you both, Senator 
Johanns and Senator Moran, for participating today. Really 
appreciate that.
    I want to thank everybody who participated in the hearing. 
And especially our staff members, who I think worked very 
closely with your staff to make this a successful hearing. And 
appreciate hearing from the top officials of the FCC about the 
resource needs and the opportunity to explore a number of 
important and timely issues.
    Today's discussion has provided helpful insights, I think, 
into the FCC's operations and, really, the challenges that you 
all face. This information will be instructive as Congress 
moves forward with our work on the fiscal year 2015 funding.

                     ADDITIONAL COMMITTEE QUESTIONS

    And with that, I believe our hearing is concluded. And 
well, let me also say the hearing record will remain open until 
next Thursday, April 3 at 12 noon for subcommittee members to 
submit statements and/or questions to be submitted to witnesses 
for the record.
    [The following questions were not asked at the hearing, but 
were submitted to the Commission for response subsequent to the 
hearing.]
                Questions Submitted to Hon. Tom Wheeler
                Questions Submitted by Senator Tom Udall
                      consumer complaints database
    Question. Chairman Wheeler, thank you for your comments about the 
importance of improving how the Federal Communications Commission (FCC) 
handles consumer complaints. As you know, Senator Nelson and I wrote to 
you before the hearing to ask that the Commission implement an online 
consumer complaints database.
    What steps can the Commission take now to begin to implement a 
consumer complaints database?
    More generally, how should the Commission use new technologies to 
help guide its enforcement and policymaking activities?
    Answer. Despite limited funds for mission-critical information 
technology (IT) projects, the Commission is making significant progress 
toward modernizing the FCC's consumer complaints process and supporting 
IT. To speed this process, we are exploring the use of cloud-based, 
commercially available, ``off-the-shelf'' technology to address 
consumer needs. With careful use of fiscal year 2014 funds and the 
infusion of fiscal year 2015 funds, we hope to meet our goal of having 
a new consumer complaint system in place by the end of the calendar 
year. In the interim, the Commission will make modifications to 
existing systems that support progress toward a new system, and engage 
in related outreach efforts.
    As part of our modernization process, the Commission will solicit 
input from stakeholders, including both service providers and consumer 
groups. These comments will assist the Commission in developing design 
features for the new consumer complaint Web site that support core 
mission objectives--accessibility, transparency and functionality. The 
planned system will be designed to accommodate a more user-friendly 
complaint portal for consumers and allow consumers to check their 
complaint status online. This redesign also will make available 
summarized data about the volume and type of complaints to provide more 
information to the public and our partners as part of a ``dashboard.''
    A streamlined consumer complaints process and the implementation of 
modern technologies will provide essential support to Commission staff 
as they review consumer complaints and initiate enforcement activities. 
In addition, the Enforcement Bureau is reviewing new methods for 
streaming information from agents in the field. These combined system 
improvements and modernization will enable better tracking of 
complaints, cases, and related information. Overall, the ability to 
review complaints in a more efficient fashion will provide a foundation 
for policy decisions that rely upon statistical data analysis while 
supporting less workforce-intensive information gathering efforts.
                               data caps
    Question. Mr. Wheeler, I previously authored legislation to help 
wireless consumers avoid ``bill shock'' after inadvertently exceeding 
monthly usage limits. Today, most consumers are accustomed to online 
access at home with a broadband subscription that allows unlimited 
access to data from the Internet. Yet many wireline and wireless 
Internet service providers are now experimenting with or implementing 
usage-based pricing and ``data caps.'' My understanding is that 
consumer groups have asked the Commission to collect information on how 
companies implement and administer such data caps.
    What steps has the Commission taken to do so?
    Will you commit to studying the impacts of data caps for consumers 
and publicly reporting the Commission's findings?
    Answer. In August 2013, the Commission's Open Internet Advisory 
Committee investigated the use of data caps for wireline broadband 
services and identified policy issues that data caps raise. That report 
can be found at http://transition.fcc.gov/cgb/oiac/Economic-
Impacts.pdf.
    Building on the report and consumer concerns, the May 15, 2014 Open 
Internet Notice of Proposed Rulemaking asked a number of questions 
about data caps, including whether the Commission should require both 
wireline and wireless providers to disclose network practices that 
relate to data caps. We also have asked whether the Commission should 
require disclosures enabling end users to identify application-specific 
usage, to distinguish which user or device contributes to total data 
usage, to identify traffic potentially exempt from caps, and to 
identify current consumption levels. We will fully examine the record 
garnered by the Notice of Proposed Rulemaking (NPRM) and from other 
sources on data caps, and address consumer concerns in any future 
order.
      digital television channel 6 radio interference protections
    Question. Public radio stations operating at FM frequencies near 
the digital television (DTV) channel 6 petitioned the FCC in 2009 to 
updates its interference rules. In general, such rules are important to 
preventing harmful interference between various broadcasters. Yet my 
understanding is that the Commission's current rules for DTV channel 6 
interference are based on analogue TV technology.
    Given the DTV transition, will the FCC consider reviewing proposals 
to update its DTV channel 6 interference rules?
    Answer. National Public Radio filed a Petition for Rulemaking in 
October 2009 seeking the elimination of the current rule that protects 
TV Channel 6 from non-commercial FM station interference. At the end of 
2009, the Commission placed the Petition out for public comment. While 
I recognize that the Petition was filed several years ago, Commission 
action remains pending given our work to implement the Incentive 
Auction provisions contained in the Middle Class Tax Relief and Job 
Creation Act of 2012 (Spectrum Act). One of the options for TV 
broadcasters under the Spectrum Act is to volunteer to move from a UHF 
channel to a VHF channel (which includes Channel 6 allotments). It may 
well be prudent to wait to see what the final channel plan will look 
like before modifying any interference rules between the different 
services.
         emergency 9-1-1 call centers ``do-not-call'' registry
    Question. The Middle Class Tax Relief and Job Creation Act of 2012 
requires the Commission to create a ``Do-Not-Call'' Registry for 
telephone numbers used by emergency 911 call centers, or Public Safety 
Answering Points (PSAPs), and to prohibit the use of automatic dialing 
``robocall'' equipment to contact those numbers. Your budget request 
includes a resubmitted fiscal year 2014 base item increase of $500,000 
to implement PSAPs' Do-Not-Call Registry.
    Could you explain in more detail how this funding will be used to 
improve emergency 9-1-1 operations?
    Answer. The Commission's budget request supports the October 17, 
2012 FCC Order establishing the Do-Not-Call Registry for telephone 
numbers used by Public Safety Answering Points (PSAPs). This registry 
is essential to protecting the integrity of PSAP communications. Under 
the Middle Class Job Relief Act of 2012 and the 2012 FCC Order, 
verified PSAP administrators or managers must be able to place into the 
registry telephone numbers that are used for the provision of emergency 
services or for communications between public safety agencies. The 
current Federal Trade Commission (FTC) Do-Not-Call List does not 
support these numbers and creates a gap where robocallers can interfere 
with essential first responder actions and communications. The 
Commission currently is exploring the least expensive alternatives for 
implementing this list, including potentially utilizing the sofiware 
and contractors involved in the development of the FTC's Do-Not-Call 
List.
                          fcc regulatory fees
    Question. Last year, the Commission adopted an order to update its 
regulatory fee structure. This followed a Government Accountability 
Office (GAO) report that found the Commission's regulatory fee 
structure is out of date given changes in the telecommunications 
market, in regulation, and in the Commission's work over the last 
decade. The FCC order describes the changes as initial steps to more 
comprehensively revising the Commission's regulatory fee program. The 
order also notes that the Commission will issue ``shortly'' a Second 
Further Notice of Proposed Rulemaking once more public input is 
considered.
    When does the Commission plan to take the next steps to modernizing 
its regulatory fee structure?
    Answer. The Commission is currently involved in a multi-year effort 
designed to ensure fairness and transparency within the section 9 
regulatory fee structure. Congress annually requires the Commission to 
collect regulatory fees ``to recover the costs of . . . enforcement 
activities, policy and rulemaking activities, user information 
services, and international activities.'' To calculate regulatory fees, 
the Commission allocates the total amount to be collected among the 
various regulatory fee categories. This allocation is based on the 
number of full time employees (FTEs) assigned to work in each 
regulatory fee category. Below is a summary of the Commission's 
rulemaking efforts:
Reform Effort Summary
    2008 Further Notice of Proposed Rulemaking.--FCC sought comment on 
revising its regulatory fee schedule to address significant changes in 
the communications industry and the Commission since FTEs were 
allocated to regulatory fee categories in 1998.
    2012 NPRM.--FCC inquired into updating the FTE allocations for the 
first time since 1998.
    2012 GAO Report.--General Accountability Office (GAO) recommended 
fundamental reevaluation of how to align regulatory fees more closely 
with regulatory costs.
    2013 NPRM; 2013 Report and Order.--FCC applied current FTE data to 
determine the number of FTEs working on regulation and oversight of 
Interstate Telecommunications Service Providers and other fee 
categories and revised the calculation of FTEs in the International 
Bureau to categorize most of those FTEs as indirect.
    FCC also adopted permitted amendments (reclassification of services 
in the regulatory fee schedule as defined in section 9(b)(3) of the 
Communications Act of 1934, as amended (the act)) which requires 
notification to Congress prior to implementation. Notifications are 
planned to be provided for fiscal year 2014 regulatory fees.
  --Consolidation of UHF and VHF television stations into one 
        regulatory fee category.
  --Assessment of regulatory fees on Internet Protocol TV (IPTV) 
        licensees by including them in the cable television category.
    The Commission also committed to a further notice to consider 
additional regulatory fee reform and conclusively readjust regulatory 
fees within 3 years.
    2014 Ex Partes.--FCC staff engaged a wide and numerous array of 
Commission regulatees to obtain further input concerning regulatory fee 
reform.
    2014 Draft Second Further Notice of Proposed Rulemaking.--FCC staff 
have drafted and circulated a Further Notice seeking comment on 
additional reform measures to improve the regulatory fee process, 
including the adoption of methodologies tailored to ensure more 
equitable distribution of the regulatory fee burden among categories of 
Commission licensees under the statutory framework in section 9 of the 
act. Some of the issues for which the draft Further Notice seeks 
comment were raised by commenters in fiscal year 2013 (or earlier), 
along with subsequent ex parte meetings, and the Further Notice now 
tailors its inquiry, in response to the more developed record, to 
further examine these proposals.
                    fcc resources for merger reviews
    Question. Chairman Wheeler, given recent announcements of 
telecommunications mergers, does the Commission's budget proposal 
include sufficient funding to support the timely review of major 
telecommunications transactions? What impact does the review of large 
transactions have on the Commission's resources?
    Answer. The Commission maintains a special Transaction Team within 
the Office of General Counsel (OGC), which confers with other bureaus 
and uses administrative efficiencies to ensure transparent and timely 
review of large-scale mergers. The volume of these transactions varies 
year-to-year, but we have found that the creative use of intra-agency 
teams of this nature provides the required level of support for our 
mission-critical activities.
    The Commission overall has the lowest level of FTEs in 30 years as 
well as half as many contractors as 4 years ago. This situation, 
coupled with unwieldy, relic IT systems, hobbles our efforts in all 
agency operations. If this Committee supports our overall budget 
request, the Commission should have sufficient resources to handle 
transactions as well as other OGC projects.
                                lifeline
    Question. Chairman Wheeler, your testimony highlights plans to 
increase universal service oversight. I am pleased that the FCC has 
already increased oversight of the Lifeline program, which helps low 
income persons get telephone service. As you know, Lifeline dates to 
the Reagan administration and was expanded to include wireless phone 
service during the presidency of George W. Bush. This initiative can be 
a ``Lifeline'' for low income persons in a time of emergency, or when 
applying for a job. That is why the Commission must continue reforms to 
guard against waste, fraud, and abuse. One of those reforms is a new 
National Lifeline Accountability Database. This will help weed out 
``double dipping'' if there are duplicate participants receiving 
Lifeline assistance.
    How soon will this database be implemented?
    Answer. Last month, the National Lifeline Accountability Database 
(NLAD) became fully operational in all States and has had a significant 
impact in reducing waste, fraud, and abuse. Thus far, NLAD already has 
identified $169 million in annual savings by flagging existing 
duplicates for elimination while preventing enrollment.
                             net neutrality
    Question. Chairman Wheeler, as you know, I am a supporter of a free 
and open Internet. The principle of such ``network neutrality'' is that 
Internet users should be able to access lawful online content and 
applications regardless of the source, without blocking or interference 
from their Internet service provider. This helps innovators and 
startups compete on a level playing field with established companies. 
Following the Verizon v. FCC decision by the U.S. Court of Appeals for 
the District of Columbia Circuit, you stated that you intend to propose 
new open Internet rules. You further noted the Commission's 
responsibility to preserve the Internet ``as an open platform for 
innovation and expression while providing certainty and predictability 
in the marketplace.''
    Do you believe that the authority granted under section 706 of the 
Communications Act gives the Commission adequate authority to ensure a 
free and open Internet?
    Under what circumstances would the Commission use its authority 
under title II of the Communications Act to ensure a free and open 
Internet?
    Answer. For over a decade, the Commission has struggled with the 
idea of net neutrality. There has been a bipartisan consensus, starting 
under the Bush administration with Chairman Powell, on the importance 
of an open Internet to economic growth, investment, and innovation.
    In January of this year, the U.S. Court of Appeals for the D.C. 
Circuit agreed that the Commission has the legal authority under 
section 706 of the Telecommunications Act of 1996 to craft enforceable 
rules to preserve a free and open Internet, even while it found that 
two of the rules we adopted in the 2010 Open Internet Order went beyond 
the FCC's authority.
    On May 15, 2014, the Commission adopted a Notice of Proposed 
Rulemaking initiating the process of crafting rules to protect and 
promote the open Internet. The proposals we put forward and the 
questions we ask in this Notice focus on maintaining an open, fast, and 
robust Internet that continues to serve as a platform for economic 
growth, investment, innovation, free expression, and competition.
    I believe that the section 706 framework set forth by the Court of 
Appeals in Verizon is sufficient to give us the authority to adopt and 
implement robust rules that will accomplish this goal. At the same 
time, the Notice asks whether the best path forward may be under title 
II. The entire purpose of an NPRM is to give Americans the ability to 
express themselves and provide analysis and guidance. I look forward to 
a broad and thoughtful debate on the record.
    We have specifically created a means by which Americans who may not 
otherwise participate in an FCC proceeding can make their voice heard 
through our new Open Internet e-mail address: [email protected]. And 
to ensure sufficient opportunity for broad public comment, we have 
provided for a comment and reply period that will give everyone an 
opportunity to participate.
                           number portability
    Question. Under the Commission's local number portability (LNP) 
rules, consumers can generally keep their existing phone number when 
switching to a new telephone service provider. Today, this is something 
many consumers take for granted. A private, third-party entity 
administers the number portability system on behalf of the Commission. 
My understanding is that the Commission is in the process of 
considering proposals for administering this system.
    Without commenting on any specific proposal before the Commission, 
will you assure me that the Commission will preserve consumer 
protections such as number portability in the transition to Internet 
protocol- or IP-based telephone networks?
    Answer. The Commission will work to preserve consumer protections 
such as number portability in the transition to Internet Protocol- or 
IP-based telephone networks.
                         positive train control
    Question. After the crash between a commuter train and a freight 
train in 2008, Congress moved quickly to require the installation of a 
safety system, known as ``positive train control.'' It was not clear at 
that time how many antennas and stations would be required along the 
tracks. We now know that over 20,000 antennas need to be installed and 
approved by the FCC. In some areas, the approval process includes 
consultation with tribal governrnents.
    How will the FCC balance the need to move expeditiously to permit 
this new safety system while ensuring that the proper environmental and 
historical reviews are taking place?
    Does the budget request include enough resources to complete this 
task in time to meet, the statutory deadline for installing the 
positive train control system?
    How is the FCC coordinating with other Federal, State, local and 
tribal officials on this issue? Have you encountered any problems in 
those collaborations?
    Answer. On May 16, 2014, the Advisory Council on Historic 
Preservation (ACHP) voted to approve a Program Comment that modifies 
the FCC's usual procedures for historic preservation review. The 
process outlined in the Program Comment is tailored to the unique 
circumstances surrounding the deployment of Positive Train Control 
(PTC) facilities, and provides a mechanism for timely review by all 
parties. PTC is a transformative technology that has the power to save 
lives, prevent injuries, and avoid extensive property damage. It is a 
top priority of the Commission to facilitate an efficient and timely 
review process that complies with the National Environmental Protection 
Act (NEPA) and the National Historic Preservation Act (NHPA) while 
expediting this important safety measure. I believe the timelines set 
forth in the Program Comment will help the Commission reach this 
balance.
    Additionally, I am pleased that we have reached an agreement with 
the freight rail industry that will resolve the siting issues for one-
third of the PTC poles while providing substantial resources to tribal 
nations and States to support and advance historic preservation. As a 
result of this agreement, the freight railroads are immediately able to 
start using nearly 11,000 previously constructed poles for important 
testing and other preparatory activities and for the ultimate provision 
of PTC.
    As part of the agreement, the seven class I freight railroads have 
agreed to create a Cultural Resource Fund totaling $10,000,000 to 
provide funding directly to tribal nations and State Historic 
Preservation Offices to support cultural and historic preservation 
projects. A neutral third-party administrator will administer the fund. 
Each freight railroad has also committed to training its employees on 
environmental and historic preservation compliance and to building 
working relationships with tribal nations.
    The Memoranda of Understanding between the freight railroads and 
the FCC is available on the FCC Web site at http://www.fcc.gov/
encyclopedia/positive-train-
control-ptc.
    The Program Comment Public Notice is also available on the FCC Web 
site at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-14-
680A1.pdf.
    The FCC moved resources from other projects to the PTC project over 
a year ago and continues to dedicate additional personnel and resources 
to resolving this issue. The pending budget request for fiscal year 
2015 does not contain a specific request for PTC funding but the 
Commission has been able to fully fund the necessary resources for this 
project from its internal S&E account, utilizing FTEs and resources 
within the Wireless Telecommunications Bureau and the Consumer and 
Governmental Affairs Bureau.
    During this time we have worked closely with tribal nations, State 
Historic Preservation Officers, the Advisory Council for Historic 
Preservation, the Federal Railway Administration, the National 
Transportation Safety Board, and land-holding Federal agencies. We have 
a constructive working relationship with all of these parties which led 
to the adoption of the procedures in the Program Comment and the 
landmark agreement with the freight rail industry.
                               telehealth
    Question. Telehealth tecimologies can greatly enhance rural medical 
services. New Mexico is a large State with many residents living far 
from urban areas. Telehealth sometimes offers the best avenue to help 
meet healthcare needs. That is why I am working in a bipartisan manner 
with Senator Thune and others to help reduce some of the barriers to 
telemedicine. In December 2012, the Commission updated its existing 
rural healthcare universal service mechanism, making $400 million 
available to rural healthcare providers for broadband services through 
the ``Healthcare Connect Fund.''
    What other actions can the FCC take to encourage greater use of 
telehealth technologies?
    Answer. We must leverage all available technologies to ensure that 
advanced healthcare solutions are readily accessible to all Americans, 
from rural and remote areas to underserved inner cities. By identifying 
regulatory barriers and incentives and building stronger partnerships 
with stakeholders in the areas of telehealth, mobile applications, and 
tele-medicine, we can expedite this vital shift.
    That's why I recently announced the formation of a new Commission 
Task Force--CONNECT2HEALTHFCC--that will bring together the expertise 
of the FCC on the critical intersection of broadband, advanced 
technology, and health. I appointed a senior, experienced staffer--
Michele Ellison as Chair of the Task Force and Deputy General Counsel.
    Specifically, the CONNECT2HEALTHFCC Task Force will consider ways 
to accelerate the adoption of healthcare technologies by leveraging 
broadband and other next-gen communications services. To advance this 
broad initiative, our Task Force will work hand in hand with the 
leadership of the Commission, in particular with the FCC's Director of 
Health Care Initiatives and the Chiefs of the Wireline and Wireless 
Bureaus and Office of Engineering and Technology. The Task Force will 
also collaborate with public and private stakeholders in the healthcare 
and technology space.
                    tribal mobility fund eligibility
    Question. The Eastern Navajo Agency in New Mexico, along with the 
Ramah Navajo and Zuni Pueblo, are some of the most underserved areas in 
the continental United States. It is my understanding that first phase 
of the Tribal Mobility Fund auction treated the vast majority of the 
Eastern Navajo Agency as having 3G service. This meant that those areas 
were not eligible for funding. Yet my understanding is that mobile 
broadband service is not actually available throughout this area.
    Will the Commission take steps to confirm the level of service 
available in these areas before excluding them from consideration in 
future Tribal Mobility Fund auctions?
    Answer. I recognize the importance of finding solutions and 
ensuring robust service on tribal lands and I will continue to take 
actions that support this goal.
              tv blackouts during retransmission disputes
    Question. Last year during a dispute over retransmission fees, 
nearly three million Time Warner Cable customers lost access to CBS 
programming. In response, then Acting Chairwoman Clyburn stated that 
media companies should ``accept shared responsibility'' for putting 
consumers' interests above other interests during such disputes.
    Given the Commission's authority under section 325 of the 
Communications Act, what more can the Commission do to better protect 
consumers during such retransmission disputes?
    Answer. There is no question that the video marketplace has changed 
since Congress established the retransmission consent regime in 1992. 
Additionally, retransmission agreements have become more complicated 
with the advent of digital distribution options. The Commission's rules 
require parties to negotiate in good faith for retransmission consent. 
Although not directly related to blackouts, we recently modified our 
rules to prohibit joint retransmission consent negotiations between two 
non-commonly owned, top-four ranked TV stations in the same market in 
order to help level the playing field and get negotiations back to a 
one-on-one discussion, as Congress intended. With respect to blackouts, 
the Commission continues to monitor situations when disputes occur, and 
we will continue to help facilitate fair and effective completion of 
negotiations for the benefit of consumers.
                   telecommunications relay services
    Question. The Americans with Disabilities Act (ADA) recognizes the 
importance of telecommunications for persons with disabilities, 
including those who have difficulty hearing or speaking on the 
telephone. With Video Relay Service (VRS), individuals using sign 
language can make relay calls through communications assistants. These 
assistants then voice what is signed to the called party. For Americans 
who communicate best with sign language, VRS provides an important 
service.
    Will you give your assurance that the Commission will fully meet 
its obligations under the Americans with Disabilities Act with respect 
to telecommunications relay services?
    Answer. I agree that the Commission must fully meet its obligations 
under the Americans with Disabilities Act with respect to 
telecommunication relay services and I will continue to take all 
actions necessary to facilitate this program.
        21st century communications and video accessibility act
    Question. Passed by Congress in 2010, the Twenty-First Century 
Communications and Video Accessibility Act contains protections that 
enable people with disabilities to access broadband, digital and mobile 
innovations. According to a 2009 FCC study, persons with disabilities 
are less likely to use Internet-based communications technologies. For 
examples, 65 percent of Americans have broadband at home, yet only 42 
percent of Americans with disabilities have these services. This gap is 
due in part to physical barriers that people with disabilities confront 
in using the Internet.
    What is the level of compliance with the communications provisions 
of the Twenty-First Century Communications and Video Accessibility Act?
    What other actions can the FCC to ensure that Americans with 
disabilities have access to new broadband technologies?
    Answer. The Commission has completed all rulemakings associated 
with statutory deadlines established by the provisions of the Twenty-
First Century Communications and Video Accessibility Act (CVAA). You 
will find below a list of implementation deadlines requiring compliance 
with the Act's provisions. Generally, the Commission has been very 
pleased with the efforts of covered entities to meet these deadlines in 
a timely fashion.
    The Commission's Disability Rights Office (DRO), housed in the 
Consumer and Govenmiental Affairs Bureau, is active on various 
proceedings designed to ensure access to new broadband technologies. 
These include proceedings requiring access to Internet-based 
telecommunications relay services, updating the hearing aid 
compatibility requirements, and ensuring disability access to wireline 
communications as we make the transition from the public switched 
telephone network to IP-based forms of communication. In addition, 
through its complaint process, DRO keeps abreast of and addresses 
accessibility barriers as these arise. Finally, DRO maintains an email 
list, Accesslnfo, of over 2000 individuals through which DRO regularly 
informs consumers, state and local governments, and industry 
stakeholders nationally and internationally of Commission rulemakings, 
events, and other actions pertaining to expansion of the rights of 
people with disabilities.

                   Summary of Compliance With the Act

               implementation of the twenty-first century
       communications and video accessibility act of 2010 (cvaa)
Section 102. Hearing Aid Compatibility
    Extends hearing aid compatibility requirements to handsets used for 
advanced communications services.
          No implementation deadlines.
Section 103. Relay Services
    Revises the definition of telecommunications relay services (TRS).
          No implementation deadlines.
    Requires VoIP service providers to contribute to the TRS Fund by 
October 8, 2011.
          On October 7, 2011, the FCC adopted rules requiring covered 
        entities to register with FCC by December 31, 2011; report 
        revenues for fourth quarter 2011 by April 1, 2012, to determine 
        contributions for the 2012-2013 TRS Fund year; and to report 
        revenues and contribute to the TRS Fund annually thereafter.
Section 104. Access to Advanced Communications Services and Equipment
    Adds sections 716 (accessibility requirements for advanced 
communications services and equipment), 717 (recordkeeping and 
enforcement provisions), and 718 (accessibility requirements for 
Internet browsers built into mobile phones) to the Communications Act.
    1. Requires implementing rules for Sections 716 and 717 by October 
8, 2011.
          On October 7, 2011, the FCC released a report and order 
        adopting rules. Covered entities must comply with accessibility 
        requirements by October 8, 2013. FCC established new request 
        for dispute assistance and informal complaint procedures, 
        effective October 8, 2013, for alleged violations of Sections 
        255, 716, and 718 of the Communications Act.
    2. Requires recordkeeping obligations to commence 1 year after 
rules become effective.
          Rules became effective January 30, 2012; recordkeeping 
        obligations began January 30, 2013. FCC established Web-based 
        system for submission of recordkeeping compliance 
        certifications and contact information (RCCCI Registry) by 
        April 1, 2013, and annually thereafter.
    3. Requires Section 718 to be effective October 8, 2013.
          On April 26, 2013, the FCC adopted rules to implement Section 
        718. Covered entities must comply with the accessibility 
        requirements by October 8, 2013.
    4. Requires the FCC to establish an accessibility clearinghouse by 
October 8, 2011.
          The FCC launched its Accessibility Clearinghouse in October 
        2011.
    5. Requires FCC biennial reports to Congress; first report by 
October 8, 2012.
          The FCC submitted its first biennial report to Congress on 
        October 5, 2012; next report due October 2014.
    6. Requires the Comptroller General to conduct a study and report 
to Congress by October 8, 2015.
Section 105. National Deaf-Blind Equipment Distribution Program 
        (NDBEDP)
    Adds Section 719 to the Communications Act, which authorizes up to 
$10 million from the TRS Fund annually to support programs that 
distribute accessible telecommunications, advanced communications, and 
Internet services equipment to low-income individuals who are deaf-
blind. Requires implementing rules by April 8, 2011.
          On April 4, 2011, the FCC adopted rules to establish the 
        NDBEDP as a pilot program. The FCC certified state-based 
        entities and launched the pilot program on July 1, 2012. The 
        FCC will adopt rules for a permanent NDBEDP by June 2015.
Section 106. Emergency Access Advisory Committee (EAAC)
    1. Requires the FCC to establish the EAAC within 60 days after 
October 8, 2010.
          On December 7, 2010, the FCC announced the appointment of 
        EAAC members.
    2. Requires the EAAC, within 1 year after member appointment [or by 
December 7, 2011], to conduct a national survey and submit a report 
with recommendations to the FCC.
          The EAAC conducted a national survey and submitted a report 
        and recommendations to the FCC on December 6, 2011.
    3. Authorizes the FCC to promulgate regulations.
          No implementation deadlines. On May 8, 2013, the FCC adopted 
        rules to require bounce-back messages by September 30, 2013, 
        when text-to-911 messages are not supported. Major carriers 
        volunteered to support text-to-911 by May 15, 2014.
Section 201. Video Programming Accessibility Advisory Committee (VPAAC)
    1. Requires the FCC to establish the VPAAC within 60 days after 
October 8, 2010.
          On December 7, 2010, the FCC announced the appointment of 
        VPAAC members.
    2. Requires the VPAAC to submit, within 6 months after the VPAAC's 
first meeting on January 13, 2011 [or by July 13, 2011], a report with 
recommendations about closed captioning of IP-delivered video 
programming (``first report'').
          The VPAAC submitted its first report to the FCC on closed 
        captioning on July 13, 2011.
    3. Requires the VPAAC to submit, within 18 months after October 8, 
2010 [or by April 9, 2012], a report with recommendations about video 
description, emergency information, user interfaces, program guides, 
and menus (``second report'').
          The VPAAC submitted its second report to the FCC on April 9, 
        2012.
Section 202. Video Description, Emergency Information, and Closed 
        Captioning
    Amends Section 713 of the Communications Act with respect to the 
provision of video description, accessible emergency information, 
closed captioning on video programming delivered using Internet 
protocol, and petitions for exemption from the closed captioning 
requirements.
Video Description
    1. Requires, 1 year after the enactment of the CVAA, or by October 
8, 2011, the reinstatement of FCC regulations that mandated the 
provision of video description on video programming, with certain 
modifications.
          On August 25, 2011, the FCC released a report and order 
        reinstating the video description rules, effective October 8, 
        2011, and requiring compliance by July 1, 2012.
    2. Requires, not later than 1 year after the completion of the 
phase-in of the reinstated regulations, or by July 1, 2013, the FCC to 
initiate an inquiry on video description and report to Congress 1 year 
after initiating that inquiry, i.e., by July 1, 2014.
          The FCC initiated an inquiry on video description on June 25, 
        2013.
    3. After filing its report to Congress by July 1, 2014, but no 
later than October 8, 2016, 6 years after the enactment date of the 
CVAA, the FCC must extend the video description requirements to 
broadcast stations in the top 60 television markets.
          The FCC's video description rules extend requirements to 
        broadcast stations in the top 60 television markets beginning 
        on July 1, 2015.
    4. Not before July 1, 2016, 2 years after completing its report to 
Congress, the FCC may increase the video description requirement by up 
to 75 percent (from 50 to 87.5 hours per quarter) for televised video 
programming.
    5. Nine years after the date of enactment of the CVAA, or by 
October 8, 2019, the FCC must submit to Congress a report assessing the 
provision of video description, particularly with respect to television 
markets outside the top 60.
    6. Ten years after the date of enactment of the CVAA, or on October 
8, 2020, the FCC is authorized to phase in the video description 
regulations for up to 10 additional television market areas each year.
Emergency Information
    Requires the FCC to adopt rules, not later than 1 year after the 
second VPAAC report, or by April 9, 2013, that require video 
programming owners, providers, and distributors to convey emergency 
information in a manner that is accessible to individuals who are blind 
or visually impaired.
          The FCC adopted rules on April 8, 2013, to require, by May 
        26, 2015, the use of a secondary audio stream to convey 
        televised emergency information aurally, when such information 
        is conveyed visually during programming other than newscasts, 
        for example, in an on-screen crawl.
Closed Captioning on Video Programming Delivered Using Internet 
        Protocol (IP)
    Requires the FCC to adopt rules, not later than 6 months after the 
first VPAAC report, or by January 13, 2012, to require closed 
captioning on IP-delivered video programming that was published or 
exhibited on television with captions after the effective date of such 
regulations.
          On January 12, 2012, the FCC adopted rules governing the 
        closed captioning requirements for IP-delivered video 
        programming. Implementation was phased in for two different 
        types of IP-delivered programming: (1) programming newly added 
        to an IP distributor's inventory; and (2) programming already 
        in an IP distributor's inventory.
          Programming that is newly added to an IP distributor's 
        inventory must be captioned if the program was shown on 
        television with captions on or after the following dates:
          -- September 30, 2012--for pre-recorded video programming 
        that is not substantially edited for the Internet.
          -- March 30, 2013--for live and near-live video programming.
          -- September 30, 2013--for pre-recorded video programming 
        that is substantially edited for the Internet.
          Programming already in an IP distributor's inventory must be 
        captioned according to the following implementation schedule:
          -- Within 45 days after the program is shown on television 
        with captions on or after March 30, 2014 and before March 30, 
        2015;
          -- Within 30 days after the program is shown on television 
        with captions on or after March 30, 2015 and before March 30, 
        2016; and
          -- Within 15 days after the program is shown on television 
        with captions on or after March 30, 2016.
Exemptions Based on Economic Burden
    Replaces the term ``undue burden'' with the term ``economically 
burdensome'' as the standard by which the FCC is to assess requests for 
exemptions from the closed captioning requirements.
          No implementation deadlines. On July 19, 2012, the FCC 
        amended its rules to replace the term ``undue burden'' with 
        ``economically burdensome'' and determined that the four 
        factors in Section 7 13(e) of the Communications Act will be 
        used to evaluate requests for exemption.
Section 203. Closed Captioning, Emergency Information, and Video 
        Description Capability
    Amends Section 303(u) and adds Section 303(z) to the Communications 
Act to update requirements for apparatus that receive, play back, or 
record video programming to be compatible with closed captioning, video 
description, and accessible emergency information so that these 
features and services reach viewers.
Apparatus Closed Captioning Capability
    Requires the FCC to adopt rules to update apparatus closed 
captioning capability requirements within 6 months after the first 
VPAAC report, or by January 13, 2012.
          On January 12, 2012, the FCC adopted rules that require 
        apparatus manufactured on or after January 1, 2014 to comply 
        with the updated closed captioning capability requirements.
Apparatus Video Description and Emergency Information Capability
    Requires the FCC to adopt rules for apparatus video description and 
emergency information capability within 18 months after the second 
VPAAC report, or by October 9, 2013.
          The FCC adopted rules on April 8, 2013, to require apparatus 
        manufactured on or after May 26, 2015, to provide a secondary 
        audio stream to convey required video description and televised 
        emergency information aurally, when such information is 
        conveyed visually during programming other than newscasts, for 
        example, in an on-screen crawl.
Section 204. User Interfaces on Digital Apparatus
    Adds Section 303 (aa) to the Communications Act. Requires user 
interfaces on apparatus designed to receive or play back video 
programming, including IP-delivered video programming, to be accessible 
to and usable by individuals who are blind or visually impaired, and 
mandates a mechanism that is reasonably comparable to a button, key, or 
icon for activating closed captioning and video description features. 
Requires the FCC to adopt rules for these provisions within 18 months 
after the second VPAAC report, or by October 9, 2013.
          On October 29, 2013, following the shutdown of the Federal 
        govermnent due to a lapse in appropriations, the FCC adopted 
        rules requiring video programming apparatus user interfaces to 
        be accessible to and usable by individuals who are blind or 
        visually impaired, and a mechanism for activating closed 
        captioning and video description by December 20, 2016.
Section 205. Access to Video Programming Guides And Menus Provided on 
        Navigation Devices
    Adds Section 303(bb) to the Communications Act. Requires on-screen 
text menus and guides provided by navigation devices (set-top boxes) to 
be audibly accessible in real-time upon request by individuals who are 
blind or visually impaired, and mandates access to any built-in closed 
captioning capability through the use of a mechanism that is reasonably 
comparable to a button, key, or icon designated for activating the 
closed captioning or accessibility features. Requires the FCC to adopt 
rules for these provisions within 18 months afier the second VPAAC 
report, or by October 9, 2013.
          On October 29, 2013, following the shutdown of the Federal 
        government due to a lapse in appropriations, the FCC adopted 
        rules requiring on-screen text menus and guides provided by 
        navigation devices to be accessible to individuals who are 
        blind or visually impaired, and a mechanism for activating 
        closed captioning by December 20, 2016. Small multichannel 
        video programming distributors (MVPDs) must comply by December 
        20, 2018.
                          unlicensed spectrum
    Question. Spectrum is a scarce and valuable resource. This is the 
case for both licensed and unlicensed spectrum. Unlicensed spectrum 
fuels innovation and, according to one recent study, helped generate 
over $220 billion in value to the US economy last year. Given the 
growth of WiFi and the explosion of connected devices sometimes 
referred to as the ``Internet of things,'' the value of unlicensed 
spectrum will likely continue to grow.
    As the Commission proceeds with upcoming spectrum auctions, will 
you work to preserve adequate access to unlicensed spectrum?
    Answer. As contemplated by the Middle Class Tax Relief and Job 
Creation Act, the May 15th Incentive Auction Report and Order adopted 
rules to permit unlicensed use of technically reasonable guard bands 
required to protect licensed services in the new 600 MHz band, in 
addition to Channel 37 and remaining TV White Spaces. This action will 
make available a significant amount of low-band spectrum for unlicensed 
use, much of it on a consistent, nationwide basis.
    We also are actively participating in ongoing efforts with the 
Department of Transportation and industry to resolve technical issues 
in a portion of the 5 GHz ITS band currently used for vehicle-to-
vehicle communications and with the Defense Department to resolve 
issues in a portion of the 5 GHz band used for military radar. 
Resolving these issues could make an additional 195 MHz of spectrum 
available for wireless broadband. We hope and expect parties to engage 
productively, and we will be watching closely.
         budget request for universal service fund (usf) reform
    Question. The fiscal year 2015 President's budget requests an 
additional 45 FTE for Universal Service Reform. Please provide a table 
that lists each new FTE by office and bureau, with a description of the 
proposed responsibilities for each new FTE.
    Answer. The FCC's $10,877,000 request would provide 45 additional 
FTEs for enforcement-based oversight and supplement the 25 FCC 
employees tasked with oversight of the $8.4 billion USF programs. 
Specifically, the requested funds will provide for a Joint USF Anti-
Fraud Task Force to combine resources agency-wide and develop a 
strategic, targeted approach to identifying, preventing, eliminating 
and prosecuting activities that undermine the integrity of the USF 
program. The 45 FTEs will be spread throughout the agency as follows:
  --6 FTES for Office of Inspector General (investigations and 
        enforcement)
  --20 FTEs for Enforcement Bureau (increasing EB 's capacity to handle 
        complex cases)
  --10 FTEs for Office of Managing Director (financial systems and 
        operational oversight)
  --9 FTEs for Wireline Competition Bureau (oversight and compliance 
        activities such as identifying potential rule violations, 
        reviewing data and reports from beneficiaries)
    Below are detailed descriptions of the bureau activities and the 
bulk of these employees, but note that there may be adjustments based 
on budgetary constraints and a final programmatic review:
FCC USF Anti-Fraud Joint Task Force Plan: Wireline Competition Bureau
  --The Wireline Competition Bureau (WCB) oversees the Federal 
        Universal Service Fund. WCB manages the four USF programs--
        Lifeline, E-Rate, Connect America Fund and Rural Health Care--
        as well as contributions. Because WCB manages the Fund in close 
        coordination with USAC, WCB often becomes aware of potential 
        abuse of the Fund, mainly through USAC audits, appeals, annual 
        filings, press reports and! or through discussions with 
        stakeholders.
  --WCB's role will fall into three main categories: initial inquiry 
        into potential rule violations; internal support and 
        consultation; and coordination and outreach.
    --Initial Inquiry into Potential Rule Violations.--WCB is well-
            positioned to serve as the eyes and ears of the agency to 
            identify potential rule violations. WCB meets with funding 
            recipients and others involved with USF on a daily basis 
            and in the course of those meetings frequently identifies 
            situations that deserve further scrutiny. WCB also 
            coordinates with USAC on a daily basis and often becomes 
            aware through that process of potential violations.
        WCB staff will enhance and augment these existing functions by 
            dedicating expert staff to these tasks as well as to 
            analyzing data (e.g., National Lifeline Accountability 
            Database data, FCC Forms and Annual Reports), to identify 
            potential targets for investigation, conduct initial 
            assessments, and make prompt referrals to the EB Strike 
            Force.
    --Internal Support and Consultation.--WCB will serve as a resource 
            on factual (including historical) and legal issues 
            regarding waste, fraud and abuse in each of the USF 
            programs. The team will identify patterns of fraud/fraud 
            risk in and among the USF programs. Based on lessons 
            learned in this process, the team will advise policymakers 
            on how to mitigate the risk of waste, fraud and abuse going 
            forward. The team would also provide USAC with guidance and 
            training on fraud related issues and will have a role in 
            the development and review of compliance plans. Finally, 
            the team will recommend areas for intensive review or 
            auditing to USAC, the EB Strike Force, and the OIG.
    --Coordination and Outreach.--WCB will work with other 
            representatives of the USF Anti-Fraud Task Force to 
            coordinate efforts with OGC and OIG on fraud issues and 
            will work with OMR on crisis communications.

------------------------------------------------------------------------
                Role                         Description          # FTEs
------------------------------------------------------------------------
WCB Anti-Fraud Director............  Direct overall Anti-Fraud        1
                                      activities for WCB;
                                      report to Chief of TAPD.
Anti-Fraud Dedicated Staff Experts.  For each program, at least       8
                                      one legal expert and at
                                      least one finance/
                                      auditing expert initially
                                      allocated as follows with
                                      but with flexibility to
                                      shift experts among
                                      programs as needed:
                                       --2 E-Rate legal experts
                                      (also support Rural
                                      Health Care)
                                       --2 E-Rate compliance/
                                      auditing experts (also
                                      support Rural Health
                                      Care)
                                       --1 Lifeline legal
                                      expert
                                       --1 Lifeline compliance/
                                      auditing expert
                                       --1 Connect America Fund
                                      legal expert
                                       --1 Connect America Fund
                                      compliance/auditing
                                      expert
------------------------------------------------------------------------

Enforcement Bureau USF Strike Force
  --The EB USF Strike Force will target fraud, waste, and abuse in all 
        four components of the USF: Lifeline, E-Rate, High Cost 
        programlConnect America Fund, and Rural Health Care.
  --Strike Force--working in teams composed of attorneys, 
        investigators, and forensic analysts--will pursue violations of 
        the Communications Act, the Commission's rules, the False 
        Claims Act, the Debt Collection Improvement Act, and other laws 
        bearing on USF programs.
  --The Strike Force will investigate allegations of wrongdoing by 
        specific targets, analyze data (e.g., NLAD data, USAC E-Rate 
        funding request data, etc.) to identify patterns of misconduct, 
        conduct undercover work, and target recidivists who resurface 
        under different corporate guises.
  --The Strike Force will coordinate internally with other components 
        of the Joint USF Anti-Fraud Task Force (e.g., on investigations 
        where appropriate, on rulemakings, on policy issues) and 
        externally with DOJ and State authorities (e.g., Public 
        Utilities Commissions (PUCs), State attorney generals (AGs) and 
        other law enforcement) to investigate and pursue wrongdoers.

                                POSITIONS
------------------------------------------------------------------------
            Role                         Description              # FTEs
------------------------------------------------------------------------
Strike Force Director.......  Direct overall activities of            1
                               Strike Force; report to EB
                               Bureau Chief
Deputy Directors............  Three deputies with                     3
                               responsibilities divided as
                               follows:
                                --1. E-Rate
                                --2. Lifeline, Contributions
                                --3. High Cost, Rural Health
Strike Force Teams..........  Three 4-person teams responsible       14
                               for specific cases. Teams
                               consist of:
                                --1 attorney (team leader)
                                --1-2 investigator (interviews,
                               undercover, doc production,
                               etc.)
                                --2-3 forensic examiners
                               (document and financial
                               analysis)
Policy Counsel..............  One attorney tasked with working        1
                               collaboratively with other FCC
                               stakeholders on policy matters,
                               rulemakings, etc.
DOJ Trial Attorney Detailee.  Funding for a DOJ criminal trial        1
                               attorney detailee dedicated to
                               handling USF fraud, waste, and
                               abuse cases
------------------------------------------------------------------------

Office of the Managing Director: FTEs to Eliminate Improper Payments; 
        and Improve Operational and Financial Oversight
    The Office of the Managing Director (OMD) manages and oversees the 
functions of the Universal Service Administrative Company related to 
auditing, improper payments assessments and reporting, finance, 
accounting, procurement, information technology, administration, and 
personnel issues.
            Identifying, Recovering and Reducing Improper Payments
  --As required by the Improper Payments Elimination and Recovery 
        Improvement Act of 2012, OMD has worked to develop assessments 
        for each of the universal service programs that disburse 
        funding: Lifeline, E-Rate, High Cost programlConnect America 
        Fund, and Rural Health Care. Improper payments are any payments 
        that were not made or any payments that should have been made. 
        The law requires the Commission to have an error rate of lower 
        than 1.5 percent of total disbursements for each program.
  --For the High Cost/CAF, E-Rate and Lifeline programs, the Commission 
        must analyze and constantly review and improve procedures to 
        accurately capture improper payments based on OMB guidance. 
        Specifically, additional OMD staff will focus on working with 
        other Commission offices and USAC to bolster the assessments 
        for those programs so we can demonstrate that we are testing 
        all of the key components of those programs. In addition, as 
        the programs are reformed, assessments procedures must be 
        updated and revised accordingly.
  --Based on the findings in the completed assessments--as well as 
        findings from other audits and investigations--the Commission 
        must develop corrective action plans to reduce improper 
        payments under the statute. OMD staff will work other 
        Commission offices and with USAC to address areas of concern, 
        including by proposing rule changes, referring actions to the 
        Enforcement Bureau, performing further targeted audits, 
        conducting additional outreach, improving predisbursements 
        reviews, and taking other actions as necessary to remediate the 
        issues identified.
  --OMD staff will work to increase recovery of funds from payment 
        recapture audits (USF Beneficiary and Contributor Audits, or 
        BCAP). Nearly $300 million in potential recoveries is 
        outstanding based on audit findings. Staff will determine 
        whether audit findings were correct and if funding can be 
        collected before recovery can proceed. Staff will review 
        outstanding issues and provide guidance to USAC and 
        stakeholders.
            Operational and Financial Oversight
  --Financial.--OMD staff will analyze USF program cash management 
        practices to determine whether to revise the current commitment 
        and disbursement policies and procedures. Work with agency's 
        CFO to ensure compliance with Federal financial requirements. 
        Oversee USAC efforts to reduce outstanding commitments and 
        disbursements.
  --Information Technology.--OMD staff will work with USAC and 
        coordinate with other offices to modernize and improve USF 
        financial and programmatic systems. Improvements in the 
        financial systems will (1) ensure the proper funding is being 
        disbursed for each program; (2) provide stakeholders with 
        updated and user-friendly access to Commission and USAC 
        systems, information and data; and (3) improve data collection 
        and analysis to support policymaking and to determine whether 
        the Commission's programmatic and administrative goals are 
        being met for each program.
  --Risk Assessments.--To comply with GAO recommendations, OMD staff 
        will manage and oversee program risk assessments for E-Rate and 
        Lifeline. OMD staff will also analyze, review and implement 
        recommendations that result from the risk assessments.

                                POSITIONS
------------------------------------------------------------------------
            Role                         Description              # FTEs
------------------------------------------------------------------------
Director of USF Oversight...  Direct, plan and coordinate             1
                               overall activities
                               administrative oversight team;
                               report to Managing Director
Improper Payments Reduction   As described above                      3
 and Reporting Team.
Information Technology        As described above                      2
 Modernization Team.
Financial Management Team...  As described above                      2
Risk Assessment Team........  As described above                      2
------------------------------------------------------------------------

                                 ______
                                 
              Questions Submitted by Senator Mike Johanns
    Question. In our hearing, you indicated that a change to the 
regulation governing the FCC's implementation of their responsibilities 
would take too long and therefore be of little value in helping the 
rail industry meet the deadlines specified in the Positive Train 
Control statute.
    If the FCC is able to utilize the Program Comment and any modified 
procedures in the 2004 Programmatic Agreement specified by the Program 
Comment, what do you expect the pace of Positive Train Control (PTC) 
pole approval to be, assuming the parties subject to compliance 
obligations submit timely and complete data packages to the FCC?
    Answer. On May 16, 2014, the Advisory Council on Historic 
Preservation (ACHP) voted to approve a Program Comment that modifies 
the FCC's usual procedures for historic preservation review. The 
Program Comment permits several changes to our existing procedures that 
should significantly reduce the time required for necessary review. 
First, the Program Comment contains new, significant provisions that, 
subject to certain exceptions, exclude from review deployments of PTC 
poles installed in railroad rights of way within 500 feet of existing 
equipment that is at least 25 feet tall, including signaling equipment 
that includes a vertical post, catenary bridges or masts, or above 
ground utility transmission or distribution lines and associated 
structures.
    For those poles not excluded from review, the Program Comment 
provides for streamlined processing times. Once a railroad submits a 
deployment notification, State and Tribal Historic Preservation 
Officers have 30 days to express their interests or concerns. If there 
is no response within 30 days, the railroad can refer the matter to the 
FCC, which in turn has 10 business days to decide whether a Tribe or 
SHPO can participate in the review. In addition, the Commission must 
resolve disputes between the railroads and Tribes and SHPOs within 10 
days. These are meaningful improvements to current processing times.
    Question. The FCC's budget proposes to retain $106 million 
collected from auction revenues to develop, implement and maintain its 
auction program. This is $7.5 million above the fiscal year 2014 level. 
In fiscal year 2013 the FCC sought a $13.7 million dollar anomaly, 
increasing the cap from $85 million to $98.7 million, specifically for 
costs associated with the first-ever incentive auction. The auction cap 
was again set at the higher level in fiscal year 2014 at $98.7 million, 
citing the need for additional resources for the incentive auction. The 
fiscal year 2015 FCC budget again seeks an increase, now to $106 
million, for essentially the same purpose.
    Given concerns about transparency, the fiscal year 2014 Omnibus 
adopted House report language which required the FCC to submit to the 
Committees a report with specific detail on the Commission's fiscal 
year 2015 projected auction expenditures.
    The Committee just received the first required Auction Expenditure 
report and it is difficult to understand what costs are attributable to 
various auctions and what progress is being made towards the rollout of 
the incentive auction with the use of these funds.
    Would you please provide the Committee with more specific detail on 
how those funds will be spent and any update you have on the progress 
of the incentive auction process?
    Answer. The Commission must maintain its systems and staff to carry 
out traditional auctions while creating and maintaining new systems and 
structures to handle the Incentive Auction process. Prior to 2013, the 
Commission maintained its systems for a 10-year period at $85 million 
without any inflationary adjustments. During that period, the 
Commission administered its spectrum auction program, raising billions 
of dollars for the Treasury and providing tens of thousands of 
licenses. The Commission recently completed the $1.65B H Block auction, 
while the AWS-3 auction is scheduled for the current year. Accordingly, 
the next fiscal year will place additional strain on the traditional 
auction process.
    The increases during the past two fiscal years are specifically 
geared toward the incentive auctions process. The first increase funded 
start-up and initiation costs of a complex, unique system, and the next 
fiscal year will see an intensification of the auctions activities 
process. Below is a description of the work and continuing activities 
generating the added costs for the auctions program.
Public Releases
  --The Incentive Auction rulemaking process continues, with the 
        adoption of the Incentive Auction Report and Order, Wireless 
        Microphones Report and Order, and Mobile Spectrum Holdings 
        Report and Order on May 15, 2014.
  --To assist the Commission in making policy decisions, and to support 
        auction research conducted by our outside auction design 
        experts, the staff runs studies daily, using complex software 
        developed to support these tasks. Preliminary results from 
        these studies have been released to the public in the Repacking 
        Data Public Notice,\1\ and the accompanying workshop/webinar 
        discussing these results,\2\ and in the Aggregate Interference 
        Public Notice,\3\ which is scheduled to be released concurrent 
        with the Incentive Auction Report and Order.
---------------------------------------------------------------------------
    \1\ Incentive Auction Task Force Releases Information Related to 
Repacking; Announces Workshop/Webinar to Provide Additional Detail, GN 
Docket No. 12-268, ET Docket No. 13-26, Public Notice, 29 FCC Rcd 47 
(2014).
    \2\ LEARN Workshop on Feasibility Checking During Repacking 
Process, FCC (Feb. 21, 2014), available at http://www.fcc.gov/events/
learn-workshop-feasibility-checking-during-repacking-
process.
    \3\ Incentive Auction Task Force Releases Updated Constraint File 
Data Using Actual Channels and Staff Analysis Regarding Pairwise 
Approach to Preserving Population Served, GN Docket No. 12-268, ET 
Docket No. 13-26, Public Notice, DA 14-677 (2014).
---------------------------------------------------------------------------
Software Development
  --IT Upgrades.--Conducting the first-ever Incentive Auction is 
        complicated, and requires advanced computer system development 
        and upgrades to the Commission's current auction system to 
        support integrating the reverse and forward auctions with the 
        ``repacking'' of television stations in the UHF band.
  --Feasibility Checking.--The voluntary reverse auction, where 
        descending prices are offered to broadcast television licensees 
        in return for relinquishing usage rights, can continue only 
        insofar as the Commission is able to guarantee that any bidder 
        that exits the auction can receive a channel in its ``home'' 
        (UHF, upper VHF, or lower VHF) band. To determine how prices 
        decrease and how winners are selected, our outside auction 
        system designers have developed software called a ``feasibility 
        checker'' to perform thousands of these checks in real-time.
  --Optimization.--To determine an initial spectrum clearing target, as 
        well as a final channel assignment, the Commission will need to 
        run integer optimization software. In conjunction with our 
        outside auction designers, we are also continuing to explore 
        the use of integer optimization solvers at other points of the 
        reverse and forward auctions, or in the repacking process. The 
        staff has been working to develop elaborate optimization models 
        to achieve a balance between cost and computational time.
  --Auction Bidding Systems.--The Commission has an online auction 
        system (``ISAS'') that has served well since the debut of 
        spectrum auctions. However, the system as it is currently built 
        cannot support the unique nature of the Incentive Auction, and 
        staff has been working with our outside auction service 
        provider to design a replacement bidding system engine that 
        will support our current and future needs. The three components 
        of the Incentive Auction are all integrally connected, and 
        major features, including to the user-experience, require a 
        redesign to allow for a successful bidding process.
  --Systems Integration.--Similarly, if any one component of the 
        Incentive Auction system fails, it could cause the entire 
        auction system to fail. Recognizing that systems integration is 
        a crucial component to achieving the goals of the Spectrum Act, 
        the staff has focused much attention on ensuring that connected 
        pieces communicate successfully (from the clearing target 
        optimizer to the reverse auction bidding engine and feasibility 
        checker, for example). We have also begun the process of hiring 
        a team to help with systems user acceptance testing, and an 
        independent verification and validation team.
Studies
  --As in the previously mentioned public releases, the Incentive 
        Auction team runs studies and study scenarios to inform staff 
        and Commission decisions regarding policy decisions, and the 
        cost-benefit analysis of certain design considerations. The 
        staff works closely with our outside contractors to develop and 
        refine study software to test auction designs.
  --The auction studies feed into cross-bureau and office teams, and 
        have been integral in negotiations with Mexico and Canada on 
        the possibility of performing a joint repacking of the UHF 
        band.
                                 ______
                                 
               Questions Submitted by Senator Jerry Moran
    Question. Thank you for your assurance at the hearing that the FCC 
has a timeline and process to provide broadcast TV stations a ``book'' 
of financial data to help stations understand the kind of prices they 
can expect to earn if they choose to participate in the upcoming 
incentive auction. Strong participation by broadcasters will be 
critical to the success of the auction. Could you please provide the 
Committee with the timeline of the FCC process you referenced in your 
testimony, including an approximate estimation about when TV stations 
can expect to receive the financial information they need to determine 
whether or not to participate in the auction?
    Answer. I agree that strong participation by broadcasters will be 
critical to the success of the Incentive Auction, and I am committed to 
providing information to facilitate broadcasters' ability to make 
informed, fact-based decisions about whether and how to participate. On 
May 15, 2014, the Commission adopted its rules for the Incentive 
Auction. We will be providing additional data and information to 
broadcasters in the coming weeks and months, including a timeline for 
our future actions, and a ``book'' of financial data to provide 
broadcasters with an estimate of potential prices in the reverse 
auction.
    Question. As was noted in Commissioner Pai's testimony, the FCC has 
traditionally generated large revenue for the Treasury from its 
spectrum auction program, but between fiscal year 2009 and fiscal year 
2013, Congress appropriated to the FCC $452 million for auction-related 
expenses and the Commission only generated $73.25 million in auction 
revenue. The FCC budget proposal asks for $106 million for costs 
associated with auctions, which is just shy of a 25 percent increase 
from the $85 million Congress allocated for most of the last decade. As 
you know, the administration has suggested that they do not envision 
clearing additional spectrum for auction after next year's auctions and 
they will instead focus on spectrum sharing. If spectrum sharing 
becomes the preferred strategy, should we expect the Commission's 
auctions-related costs and corresponding personnel levels to drop in 
fiscal year 2016 and beyond since there are no additional major 
spectrum auctions planned?
    Answer. Certainly spectrum sharing is a goal of the Commission, and 
spectrum clearing is also possible in other instances. In some 
instances, shared spectrum may be auctioned, as will be the case with 
our AWS-3 auction scheduled for this Fall. We have spectrum auctions 
authority during the next decade, and sometimes those auctions will be 
small but with significant economic impact. For instance, during the 
period where you noted that the Commission only generated $73.25 
million in revenue, we auctioned more than 16,000 licenses, resulting 
in important growth benefits for numerous businesses nationwide. Also, 
it is essential to recognize the overall numbers--that auctions 
spending has cost less than 2 percent of the revenue received from the 
program, which is a terrific record for any government or private 
program.
    Question. The 's Wireline Competition Bureau recently announced a 
rate floor increase, which will have a major impact on Kansas telephone 
customers across the country. Rural Kansas telephone companies 
currently charge rural customers anywhere from $11.77 to $18.25 per 
month for phone service, and under Kansas law, they are only allowed to 
increase rates by $1.50 per month in any 12-month period. The new rate 
of $20.46 will be impossible for companies in my state to comply with 
by the July 1, 2014 deadline. Are you willing to commit to delaying the 
rate floor increase, and will you work with companies to address their 
challenges so they can comply with the law?
    Furthermore, if a carrier increases its rates to match the rate 
floor, I understand that it does not lose any universal service 
support. This appears to counter the argument that the rate floor 
reduces ``excessive'' universal service subsidies, yet increases rates 
despite the statute's requirement that telephone rates be 
``affordable.'' What purpose does the rate floor serve other than 
making rural rates less affordable?
    Answer. For 2014, the Commission has delayed any further reductions 
in universal service support until we have more information on the 
number of lines affected. The Commission adopted an Order on April 23, 
2014, that maintains the requirement that carriers file with the 
Universal Service Administrative Company the number of lines with rates 
below the rate floor, but delays any potential universal service 
support reductions until January 2015. In addition, the universal 
service support reductions that go into effect in January will only be 
for those lines with rates below $16, with no further increases until 
July 2016. The Order also excludes Lifeline recipients in order to 
ensure that people with the least means are not affected. Future 
reductions will be limited to an increase of no more than $2 per year.
    Although I understand the concern regarding increased landline 
rates because of the increased rate floor, what we have seen since the 
Commission implemented this rule in 2012 is a minimal impact. The rate 
floor increased from $10 in 2012 to $14 in 2013, a 40 percent increase. 
Our rules do not require carriers to raise their rates. The fact that 
many carriers continue to report some lines with rates well below the 
$14 rate floor suggests that they may have made a business decision to 
grandfather the lower rates for those customers and accept the 
associated support reductions. In 2013, carriers in 34 study areas in 
16 states were still reporting a number of lines with residential local 
service charges of $5 or less, further reinforcing that individual 
carriers may choose not to raise rates in response to the current rate 
floor.
    Question. On March 31, the FCC approved a plan to restrict 
television broadcasters' use of joint sales agreements (JSAs). What 
data and facts were considered by the FCC to make a determination that 
the use of JSAs was inconsistent with the spirit of media ownership 
rules? Does the FCC currently collect information on JSA usage among 
television broadcasters? If so, how many are there in the United 
States? How many television stations owned by women and minorities 
participate in JSAs? How many JSAs were approved by the FCC since 2002?
    Answer. The Commission's attribution rules ``seek to identify those 
interests in licensees that confer on their holders a degree of 
`influence or control that the holders have a realistic potential to 
affect the programming decisions of licensees or other core operating 
functions.' '' The attribution rules are taken into account when 
calculating ownership interests under the local TV and local radio 
ownership rules. The Commission first proposed to attribute JSAs that 
involve the sale of 15 percent or more of the weekly advertising time 
between same market television stations in 2004, and sought additional 
comment in 2010.
    Based on the records developed, and our ongoing review of TV JSAs 
as part of license transfer applications, there was growing concern 
that the increasing prevalence of such agreements warranted attribution 
similar to the radio attribution rules adopted in 2003, because they 
``provide incentives for joint operation that are similar to those 
created by common ownership.''
    It is important to note that the Commission does not review or 
approve JSAs, but does take such agreements into consideration when 
reviewing applications to transfer licenses between entities. With the 
adoption of the new rules, TV stations will now be required to file any 
attributable JSA with the Commission, and will have 2 years to unwind 
any attributable JSAs where the local TV ownership rule would not allow 
joint ownership. Additionally, under existing rules, all radio and TV 
stations are required to place a copy of JSAs in their public files. 
Based on these self-reporting requirements, approximately 130 stations 
currently report being involved in a JSA. Within the Order, the 
Commission recognized that there could be some exceptions to the new 
rule, where a JSA could be found to be in the public interest, and 
provided an expedited waiver process to address those instances.
    Question. Almost all small and medium-sized cable operators license 
most of their programming through a single buying group, the National 
Cable Television Cooperative (NCTC). In October 2012, the FCC issued an 
FNPRM that tentatively concluding its definition of a ``buying group'' 
needs to be modernized and sought comment on this and other related 
matters to ensure that buying groups utilized by smaller cable 
operators can avail themselves of certain program access rules as 
Congress intended. What is the status of this proceeding?
    Answer. The Media Bureau is currently evaluating the record in this 
proceeding, which raises complex legal and policy issues impacting not 
just small cable operators but also programmers. The Bureau is 
analyzing the costs and benefits of such a rule change as well as the 
effect of this proposed rule change on the video marketplace generally. 
While I understand the concerns raised by the NCTC, nothing is 
prohibiting the NCTC from qualifying as a buying group under the 
existing rules, as they previously have done.
  questions related to information technology strategy and investments
    Question. Describe the role of your agency's Chief Information 
Officer in the oversight of IT purchases. How is this person involved 
in the decision to make an IT purchase, determine its scope, oversee 
its contract, and oversee the product's continued operation and 
maintenance?
    Answer. The Commission's Chief Information Officer (``CIO'') or a 
member of the CIO's team is involved in every major IT acquisition by 
the FCC. The FCC IT Team has recently launched an updated enterprise 
planning approach that will improve transparency, accountability, and 
responsibility throughout the entirety of the IT investment lifecycle. 
The IT team is involved from the submission of an investment request to 
seeing the projects to completion as well as simultaneously tracking 
the on-going benefits of the investment made as a result of the 
project.
    Question. Describe the existing authorities, organizational 
structure, and reporting relationship of your agency Chief Information 
Officer. Note and explain any variance from that prescribed in the 
Information Technology Management Reform Act of 1996 (aka, The Clinger-
Cohen Act) for the above.
    Answer. The FCC's CIO is located within the Office of the Managing 
Director (``OMD''). The Managing Director directs operations in OMD and 
reports directly to the Chairman. The CIO in turn reports to the 
Managing Director on the FCC's organizational chart and for practical 
purposes coordinates with the Managing Director on the day-today 
activities of the IT team at the FCC. For longer tenn, high priority, 
and high visibility IT projects, the CIO along with the Managing 
Director brief the Chairman on a regular basis.
    The Clinger-Cohen Act specifically designated the CIO as reporting 
to the agency head for certain matters related to strategic planning in 
larger agencies listed in 31 USC Sec. 901(b) that are considered Chief 
Financial Officer Act (``CFO Act'') agencies.\4\ While the FCC is a 
smaller agency and is not a CFO Act agency; the CIO does regularly 
advise the Chairman on IT issues as mentioned above.
---------------------------------------------------------------------------
    \4\ See 40 USC Sec. 11315(c).
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    Question. What formal or informal mechanisms exist in your agency 
to ensure coordination and alignment within the CXO community (i.e., 
the Chief Information Officer, the Chief Acquisition Officer, the Chief 
Finance Officer, the Chief Human Capital Officer, and so on)? How does 
that alignment flow down to agency subcomponents?
    Answer. The FCC's smaller size and management structure lends 
itself to a high level of coordination among the FCC's CXOs. The CIO, 
CFO, CHCO, and CAO are all a part of OMD. The team meets at least 
weekly as a group to discuss ongoing issues and to coordinate on 
agency-wide matters.
    Question. How much of the agency's budget goes to demonstration, 
modernization, and enhancement of IT systems as opposed to supporting 
existing and ongoing programs and infrastructure? How has this changed 
in the last 5 years?
    Answer. The FCC has spent the vast majority of its fiscal year 2014 
IT budget, as it has in previous years, towards ongoing Operations and 
Maintenance (O&M) of existing systems versus delivering new 
functionality to the bureaus and offices it supports. To date, the FCC 
has only spent 23 percent of its budget outlay on development, 
modernization, and enhancement efforts. The remaining 77 percent has 
been spent on O&M, mainly directed towards systems far beyond the 
normal upgrade cycles. These numbers will change as a new system is 
built out to accommodate the incentive auction scheduled for 2015.
    Question. Where and how are you taking advantage of this 
Administration's ``shared services'' initiative? How do you identify 
and utilize existing capabilities elsewhere in government or industry 
as opposed to recreating them internally?
    Answer. Since the arrival of our new CIO, Dr. David Bray, the FCC 
has conducted a number of information gathering sessions with industry 
and with agencies and departments in government to ascertain the best 
practices and best solutions available for various IT functions. The 
FCC is pursuing avenues to have infrastructure services channeled 
through larger, and better resourced, agencies in order to minimize its 
exposure, both physical and monetary, to risks associated with the use 
of the Internet.
    The FCC recognizes that it cannot maintain a security posture 
nearly as well as larger and better equipped agencies in government. As 
an example, the FCC has been pursuing a course of action with Defense 
Information Systems Agency (DISA) as a provider. Unfortunately, DISA is 
looking for at least 50,000 users in an organization when it provides 
these services. The FCC's size at less than 1,800 employees does not 
readily lend itself to the DISA solution without additional incentives 
for them to take on the work.
    On the application side, the FCC has been working at outsourcing 
its Office of Inspector General (OIG) system to an agency with mature 
and well-funded solutions, such as NASA. In this case, both government 
agencies that do provide the service for other agencies are out of 
capacity. The CIO is continuing to reach out to other agencies as well 
as to industry providers to move capacity to a more flexible and modern 
environment in a modular fashion. The above examples demonstrate some 
of the FCC's ongoing efforts to find shared solutions. Since 40 percent 
of the systems at the FCC are 10 years old, or more, the need for a 
change is absolute, but re-creating the same applications on a new 
platform inside the FCC' s four walls is not the preferred approach.
    Question. Provide short, two-page, summaries of three recent IT 
program successes, projects that were delivered on time, within budget, 
and delivered the promised functionality and benefits to the end user. 
How does your agency define ``success'' in IT program management?
    Answer. Please find three summaries of recent FCC IT program 
successes below. The FCC can provide additional details as necessary.
  --ELS Enhancement.--The Experimental Licensing System (ELS) Web 
        portal was upgraded to allow for the licensing of four new 
        types of devices, medical in nature. This upgrade accelerates 
        the delivery of these medical devices for use in the 
        population.
  --OGC Tracking System.--The Office of General Counsel expanded its 
        capabilities for the tracking of court cases. This was an 
        internal upgrade to help OGC's specific business needs. This 
        upgrade deferred the need to build a new system and was 
        accommodated within the existing infrastructure by building 
        upon a system that already existed at the FCC.
  --EAS Redesign.--An agile development exercise with nine sprints 
        (discrete roll outs of functionality) which addressed some 
        security issues and developed the first phase of a new login 
        system. The new login system improves the ability of users from 
        outside the agency to login without having to go through a 
        separate unrelated system at the FCC to receive a separate 
        numeric login. This improvement assists users and saves time.
    Question. What ``best practices'' have emerged and been adopted 
from these recent IT program successes? What have proven to be the most 
significant barriers encountered to more common or frequent IT program 
successes?
    Answer. The introduction and infusion of agile development and 
behaviors throughout the organization has resulted in more timely and 
better suited outcomes from development and projects in general. The 
organization conducted numerous Agile training sessions ensuring that 
all of the staff is aware of the methodology and practice of Agile.
    The process of collecting and communicating requirements has long 
been a sore point in the development and deployment of successful 
systems. The FCC, through Agile development and better performance 
tracking, has been able to overcome the initial challenges of producing 
requirements that actually meet business goals. Through proper 
discipline, and breaking down and measuring work in digestible slices, 
the FCC can better understand and control the deliverables.
    The FCC IT department has also adopted a strategy which includes 
using ``intrapreneurs'' as the vehicle for strengthening partnerships 
with the 18 bureaus and offices of the FCC. Using this system, each 
bureau and office has a liaison working closely with them in defining 
requirements and establishing a business case which is then fed through 
a capital planning and investment control (CPIC) process for 
evaluation. This approach promotes budget transparency and provides the 
opportunity to drive data driven dashboards across all of the projects 
in IT.
    Question. Describe the progress being made in your agency on the 
transition to new, cutting-edge technologies and applications such as 
cloud, mobility, social networking, and so on. What progress has been 
made in the CloudFirst and ShareFirst initiatives?
    Answer. FCC IT has also instituted a layered approach driven by 
modular development which allows for agility, and cost-savings, through 
re-use of code, templates, and business functions. Resiliency in FCC 
operations is also a major driver in the modernization of the FCC. 
Protecting data, systems, and privacy by design through the use of 
multiple tools and approaches has delivered a more secure environment 
for FCC employees and clients. Examples of FCC commitment to 
modernization and security can be evidenced in the roll-out of Virtual 
Desktop Infrastructure (VDI) and delivering secure connections to 
mobile devices, whether FCC or personally owned.
    In committing to finding CloudFirst and ShareFirst approaches, the 
FCC is modernizing in a modular fashion which will allow for faster 
deployment to new environments as they become available. In moving data 
to the cloud environment and creating a datamart, the FCC is attempting 
to consolidate its sources of information to eliminate redundancies in 
processes and data gathering.
    The deployment of VDI, allowing for the use of devices anywhere at 
any time in a secure fashion, has gone a long way towards making FCC 
staff more mobile. The FCC has also facilitated the use of staffs 
personally owned devices by deploying secure technologies allowing for 
mobile device use in a secure fashion.
    Furthermore, the FCC is moving to a new and more interactive 
platform on its Web site which will allow for more timely and 
interactive exchanges with the public as well as its employees.
    To facilitate these many ongoing efforts and bring strategic vision 
to the future of IT at the FCC, the CIO's team has identified the 7 
tracks below as the primary paths forward for the IT organization's 
support of the mission of the FCC:
  --Improving Security to enhance telework and mobility.
  --Securing internal and external collaborations.
  --Strengthening FCC's IT security posture.
  --Transforming access to FCC enterprise data.
  --Modernizing legacy systems and tracking.
  --Improving FCC.gov and complaint reform.
  --Increasing transparency and system usability.
    Question. How does your agency implement acquisition strategies 
that involve each of the following: early collaboration with industry; 
RFP's with performance measures that tie to strategic performance 
objectives; and risk mitigation throughout the life of the contract?
    Answer. The newly installed CIO of the FCC has instituted a process 
by which providers who offer distinct solutions in areas where the FCC 
is interested have an opportunity to present to relevant staff in our 
Technology Center. This process is ongoing and allows the staff to 
understand what is possible rather than focusing on the status quo. 
Through this process, the FCC has chosen some technology paths which 
allow for participation with technology providers who can solve present 
problems with modernization and technology dependent solutions.
    There are numerous examples of where the FCC has experienced 
success in using performance measures for major IT investments. One 
clear example was the replacement of its Core Financial System. As part 
of the procurement process, the FCC asked bidders to prepare a quality 
assurance surveillance plan (QASP) founded on an initial set of 
performance metrics established by the FCC. The QASPs submitted by the 
bidders were evaluated as part of the procurement process, and the FCC 
has used the QASP throughout the lifecycle of the contract to evaluate 
the quality, accuracy, and timeliness of products and services provided 
by the vendor that was selected. Using the QASP process, a monetary 
incentive or disincentive is assigned at regular intervals throughout 
the lifecycle of the contract. The incentives correspond to the 
project's performance standards.
    Furthermore, the FCC has risk management processes built into its 
major IT services contracts that were established as part of the 
acquisition process. Through these processes, the FCC's vendors seek 
first to plan appropriately to avoid risk. If risks do arise, the 
vendors track the risks, seek to mitigate them, and generate regular 
risk management reports by which IT staff can monitor the contracts 
throughout their lifecycles.
    Question. According to the Office of Personnel Management, 46 
percent of the more than 80,000 Federal IT workers are 50 years of age 
or older, and more than 10 percent are 60 or older. Just 4 percent of 
the Federal IT workforce is under 30 years of age. Does your agency 
have such demographic imbalances? How is it addressing them? Does this 
create specific challenges for attracting and maintaining a workforce 
with skills in cutting edge technologies? What initiatives are underway 
to build your technology workforce's capabilities?
    Answer. The FCC does not base hiring decisions on age or consider 
age as a factor in determining workforce composition. Being mindful of 
increasing levels of the staff becoming eligible for retirement, 
however, the FCC has sought to use a combination of new hires and 
detailed employees from other agencies to fortify its information 
technology group.
    By building a workforce based on skilled veteran employees as well 
as new hires and detailed employees from other agencies, the FCC would 
be able to increase its knowledge base. Outside expertise will help 
inform the current staff about solutions used in other organizations 
and agencies.
    Question. What information does your agency collect on its IT and 
program management workforce? Please include, for example, details 
about current staffing versus future needs, development of the talent 
pipeline, special hiring authorities, and known knowledge gaps.
    Answer. Having recently brought in a new CIO to the FCC, the CIO's 
transition team is evaluating the current workforce to identify 
knowledge gaps and the agency's long-term staffing needs for the IT 
workforce. Through this process, the CIO has identified staffing needs 
that it is filling through both outside hires and detailed employees 
from within the agency. Also, as mentioned above, the CIO is using 
detailed employees from other agencies to provide a bridge across 
knowledge gaps while the team seeks to fill open positions.
                  Questions Submitted to Hon. Ajit Pai
                Questions Submitted by Senator Tom Udall
                     emergency 9-1-1 in hotel rooms
    Question. Commissioner Pai, I understand from your testimony that 
you are examining how to improve emergency 9-1-1 service in hotel 
rooms. Could you explain briefly what the challenges are?
    Answer. Yes. As you know from my written testimony, the problem is 
that some of the ``multiline telephone systems'' (or MLTS) that are in 
use in hotels, office buildings, college campuses, schools, and other 
large facilities require users to dial an access code (like ``9'') to 
complete a 911 call. In the case of Kari Rene Hunt Dunn, which is 
discussed in my testimony, this meant that her daughter was required to 
dial ``9-911'' to complete a call to 911. In emergencies, consumers 
will not necessarily know that they are dialing from a phone that 
requires an access code or what that access code might be.
    So far, my inquiry has revealed that the challenges are not 
technical, at least not for modern MLTS systems. Both the MLTS vendors 
and the hotels I have heard from say that their MLTS systems can be 
programmed or reprogrammed to allow consumers to reach emergency 
personnel when they dial ``911.''
    The problem is that a substantial number of these devices just 
aren't set up that way, and many hotels do not realize that this is an 
issue. When facilities that use MLTS are made aware of this issue, I 
have found that they are willing and able to take steps to fix it. Take 
La Quinta, for example. After surveying its franchisees earlier this 
year, the company discovered that in about 60 percent of its franchised 
hotels a guest would not reach emergency services by dialing ``911'' 
alone. La Quinta understood that this situation was unacceptable and 
instructed its franchisees to solve the problem. It stated that, by 
April 1, 2014, it expected that all La Quinta-branded hotels would have 
systems in place that would connect guests with emergency personnel 
when they dial ``911.'' This means that one company showed that it was 
possible to fix this problem in hundreds of hotels in just 2\1/2\ 
months. Similarly, the InterContinental Hotel Group informed me that 
the telephone provider for two of their hotel brands has already agreed 
to push out a no-cost software update to allow for direct 911 dialing.
    Based on these responses, I am not aware of any challenges that 
would prevent hotels that use modern MLTS devices from ensuring that 
their guests can reach emergency personnel when they dial 911. However, 
from talking with various industry representatives about this issue, I 
have heard that some older MLTS devices might not be capable of being 
reprogrammed to allow direct access to 911. I have not heard a 
definitive age or date range that would define that category of devices 
(though some have suggested anecdotally that it might be in the 10-15 
plus year range); nor do I have data about the percentage of any such 
devices that may still be in the marketplace. I am going to continue to 
explore this issue.
    Question. How can the Federal Communications Commission (FCC) help 
address these challenges?
    Answer. One of the most important ways the FCC can help address 
this issue is to bring public awareness and attention to the problem. 
As suggested above, hotels in my experience are willing and able to fix 
the problem when they are made aware of it.
    I am committed to continuing to work on this issue and raise 
awareness. As my testimony indicated, I launched an inquiry earlier 
this year and started out by sending letters to the chief executive 
officers of the 10 largest hotel chains in the United States. I have 
also been working with the American Hotel and Lodging Association 
(AH&LA) to find solutions to this problem. I expanded my inquiry at the 
end of March by sending letters to some of the leading vendors of MLTS 
devices and services, because this issue may occur not just in hotels 
but also in the office buildings where Americans work and in the 
schools where our children learn, among other places. In order to 
address the problem on this broader scale, the entire MLTS vendor 
community must be involved. I am looking forward to reviewing their 
responses to my inquiry.

                          SUBCOMMITTEE RECESS

    Senator Udall. And with the subcommittee being concluded, 
the subcommittee is hereby recessed.
    Thank you.
    [Whereupon, at 11:18 a.m., Thursday, March 27, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]