[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]



 
                   WRECKING THE INTERNET TO SAVE IT? 
                     THE FCC'S NET NEUTRALITY RULE

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

                                HEARING

                               BEFORE THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 25, 2015

                               __________

                           Serial No. 114-18

                               __________

         Printed for the use of the Committee on the Judiciary
         
         
         
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      Available via the World Wide Web: http://judiciary.house.gov
      
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                       COMMITTEE ON THE JUDICIARY

                   BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        JERROLD NADLER, New York
LAMAR S. SMITH, Texas                ZOE LOFGREN, California
STEVE CHABOT, Ohio                   SHEILA JACKSON LEE, Texas
DARRELL E. ISSA, California          STEVE COHEN, Tennessee
J. RANDY FORBES, Virginia            HENRY C. ``HANK'' JOHNSON, Jr.,
STEVE KING, Iowa                       Georgia
TRENT FRANKS, Arizona                PEDRO R. PIERLUISI, Puerto Rico
LOUIE GOHMERT, Texas                 JUDY CHU, California
JIM JORDAN, Ohio                     TED DEUTCH, Florida
TED POE, Texas                       LUIS V. GUTIERREZ, Illinois
JASON CHAFFETZ, Utah                 KAREN BASS, California
TOM MARINO, Pennsylvania             CEDRIC RICHMOND, Louisiana
TREY GOWDY, South Carolina           SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho                 HAKEEM JEFFRIES, New York
BLAKE FARENTHOLD, Texas              DAVID N. CICILLINE, Rhode Island
DOUG COLLINS, Georgia                SCOTT PETERS, California
RON DeSANTIS, Florida
MIMI WALTERS, California
KEN BUCK, Colorado
JOHN RATCLIFFE, Texas
DAVE TROTT, Michigan
MIKE BISHOP, Michigan

           Shelley Husband, Chief of Staff & General Counsel
             Perry Apelbaum, Staff Director & Chief Counsel
                            C O N T E N T S

                              ----------                              

                             MARCH 25, 2015

                                                                   Page

                           OPENING STATEMENTS

The Honorable Bob Goodlatte, a Representative in Congress from 
  the State of Virginia, and Chairman, Committee on the Judiciary     1
The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, and Ranking Member, Committee on 
  the Judiciary..................................................     3

                               WITNESSES

The Honorable Tom Wheeler, Chairman, Federal Communications 
  Commission
  Oral Testimony.................................................     6
  Prepared Statement.............................................     8
The Honorable Ajit Pai, Commissioner, Federal Communications 
  Commission
  Oral Testimony.................................................    12
  Prepared Statement.............................................    14
The Honorable Joshua D. Wright, Commissioner, Federal Trade 
  Commission
  Oral Testimony.................................................    20
  Prepared Statement.............................................    22
The Honorable Terrell P. McSweeny, Commissioner, Federal Trade 
  Commission
  Oral Testimony.................................................    45
  Prepared Statement.............................................    47

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Material submitted by the Honorable Bob Goodlatte, a 
  Representative in Congress from the State of Virginia, and 
  Chairman, Committee on the Judiciary...........................    51
Material submitted by the Honorable J. Randy Forbes, a 
  Representative in Congress from the State of Virginia, and 
  Member, Committee on the Judiciary.............................    57
Material submitted by the Honorable Zoe Lofgren, a Representative 
  in Congress from the State of California, and Member, Committee 
  on the Judiciary...............................................    69
Material submitted by the Honorable Hank C. ``Hank'' Johnson, 
  Jr., a Representative in Congress from the State of Georgia, 
  and Member, Committee on the Judiciary.........................    82
Material submitted by the Honorable Sheila Jackson Lee, a 
  Representative in Congress from the State of Texas, and Member, 
  Committee on the Judiciary.....................................    94

                                APPENDIX
               Material Submitted for the Hearing Record

Response to Questions for the Record from the Honorable Tom 
  Wheeler, Chairman, Federal Communications Commission...........   124


                   WRECKING THE INTERNET TO SAVE IT? 
                     THE FCC'S NET NEUTRALITY RULE

                              ----------                              


                       WEDNESDAY, MARCH 25, 2015

                        House of Representatives

                       Committee on the Judiciary

                            Washington, DC.

    The Committee met, pursuant to call, at 2:07 p.m., in room 
2141, Rayburn Office Building, the Honorable Bob Goodlatte 
(Chairman of the Committee) presiding.
    Present: Representatives Goodlatte, Smith, Chabot, Issa, 
Forbes, King, Franks, Gohmert, Jordan, Poe, Marino, Collins, 
DeSantis, Walters, Buck, Ratcliffe, Bishop, Conyers, Nadler, 
Lofgren, Jackson Lee, Cohen, Johnson, Chu, Deutch, Richmond, 
DelBene, Jeffries, Cicilline, and Peters.
    Staff Present: (Majority) Shelley Husband, Chief of Staff & 
General Counsel; Branden Ritchie, Deputy Chief of Staff & Chief 
Counsel; Allison Halataei, Parliamentarian & General Counsel; 
Kelsey Williams, Clerk; Anthony Grossi, Counsel; (Minority) 
Perry Apelbaum, Staff Director & Chief Counsel; Danielle Brown, 
Parliamentarian; James Park, Counsel; and Rosalind Jackson, 
Professional Staff Member.
    Mr. Goodlatte. Good afternoon. The Judiciary Committee will 
come to order. Without objection, the Chair is authorized to 
declare recesses of the Committee at any time.
    We welcome everyone to this afternoon's hearing on 
``Wrecking the Internet to Save It? The FCC's Net Neutrality 
Rule,'' and I will begin by recognizing myself for an opening 
statement.
    On February 26, the Federal Communications Commission voted 
3-to-2 along party lines to approve the commission's new Open 
Internet order. FCC Chairman Wheeler argues that this order 
will preserve and protect the Internet as a platform for 
innovation, expression, and economic growth. He claims that the 
order will not raise Internet service costs, slow broadband 
speeds, reduce investment, limit consumer choice, or let the 
government regulate rates.
    Chairman Wheeler also asserts that the commission's 
dramatic, last-minute departure from the FCC's proposed rule 
was made independently without undue White House influence and 
was consistent with the Administrative Procedure Act.
    Today's hearing will challenge each and every one of these 
assertions. The order will undoubtedly raise Internet service 
costs. The text specifically permits the FCC to impose 
additional fees, raises the rate carriers must pay to deploy 
broadband, and opens the door to higher State and local taxes. 
The result is an estimated $11 billion in new taxes and fees.
    This estimate, moreover, does not include regulatory 
compliance costs. An army of lawyers and accountants will be 
required to comply with the 300-plus page order and the 
dizzying array of additional regulations, proceedings, and 
opinions that it contemplates. The order will also slow 
broadband speeds.
    Europe already imposes utility-style regulation on its 
broadband providers. As result, Europe trails America in 
virtually every measurable category relating to Internet speed 
and deployment. Indeed, Europe is thrilled that the FCC is 
leveling the competitive playing field. The Secretary General 
of the European Policy's Party recently remarked that the FCC 
was about to impose the type of regulation which has led Europe 
to fall behind the U.S. in levels of investment.
    The FCC's order will reduce consumer choice. A group of 142 
wireless Internet service providers, 24 of the country's 
smallest ISPs, and the Small Business and Entrepreneurship 
Council all urged the FCC not to impose Title II regulation, 
because it would hinder our ability to further deploy 
broadband, erode investment and innovation, and badly strain 
our limited resources.
    These are the types of companies that serve small and rural 
communities, like many in my district, and the FCC's 
regulations threaten their very livelihood. Forcing companies 
out of business rarely results in more consumer choice.
    The FCC's order will discourage investment. Nothing chills 
investment faster than regulatory uncertainty, and this order 
is the very definition of it. It allows the FCC to regulate 
virtually any activity it deems to have violated its vaguely 
worded, seven-factor ``Internet conduct'' standard.
    Chairman Wheeler describes this new authority as ``sitting 
there as a referee and being able to throw the flag.'' What he 
doesn't tell you is that he won't be the only one who can throw 
the flag. Hoards of trial lawyers will now have the ability to 
file a suit in any Federal court in the country claiming 
violations of the new, vague conduct standard.
    Additionally, there is uncertainty regarding the validity 
of the FCC's order itself, which has already been challenged in 
court. The last time the FCC acted in this area, it took over 3 
years for the courts to largely invalidate the FCC's net 
neutrality rule.
    Chairman Wheeler told other congressional Committees that 
the order does not allow the FCC to regulate rates. Chairman 
Wheeler further argues that his commission will set precedent 
that will make it more difficult for future commissions to 
regulate rates. Yet, it is this very commission that has 
overturned decades of precedent to categorize Internet service 
under Title II. Obviously, precedent does not carry much weight 
at the FCC.
    Furthermore, it increasingly appears that the FCC changed 
its proposed order under political influence, rather than 
independently. In the words of Commissioner Pai, ``Why is the 
FCC changing course? President Obama told us to do so.''
    Finally, the public did not receive adequate notice of the 
final rule as required by the Administrative Procedure Act. 
Nearly every facet of the final rule is distinguishable from 
the proposed rule, and many aspects of the final rule did not 
receive even a single mention in the proposed rule.
    The Internet that existed before this FCC order was 
dynamic, competitive, open, and free. By raising costs, 
imposing a heavy regulatory burden, introducing regulatory 
uncertainty, and instituting government meddling into nearly 
every aspect of the Internet, the FCC will seriously undermine 
the competitive nature of the Internet. Barriers to entry will 
rise. Smaller rivals will be forced to exit. And consolidation 
will likely ensue.
    Given these fundamental changes to the Internet, one would 
expect widespread documented abuses. Yet, within its 300-plus 
page order, the FCC does not point to a single example of 
actual anticompetitive conduct occurring on the Internet. Four 
million Americans wrote the FCC asking it to protect and 
promote an Open Internet. The FCC turned a deaf ear and 
delivered the most heavy-handed regulatory regime imaginable.
    The FCC has destroyed the city in order to save it.
    I look forward to hearing today's testimony on how the 
FCC's order will impact the future of competition on the 
Internet, and I now am pleased to yield to the Ranking Member 
of the Committee, the gentleman from Michigan, Mr. Conyers, for 
his opening statement.
    Mr. Conyers. Thank you, Mr. Chairman, for your views.
    Now, the full Committee of Judiciary has a central role in 
studying the issue of net neutrality, and, more generally, 
competition on the Internet. As the Committee considers today 
the specific question of what impact the Federal Communication 
Commission's latest Open Internet order has on competition and 
innovation, we should keep several factors in mind.
    To begin with, whatever approach one uses to ensuring an 
Open Internet inaction is not an option. There are real threats 
to net neutrality. And as I have observed earlier at hearings 
in 2008, 2011, 2014, there are many areas in the United States 
where consumers have the choice of only one or two broadband 
Internet service providers. As a result, these providers 
effectively function as monopolies or duopolies.
    In turn, their control over the broadband access market can 
result in differential treatment of content, depending on how 
much a content provider pays, whether the broadband provider 
also offers competing content, or if any other financial 
incentive for discriminating for or against given content were 
present.
    These concerns I have expressed before and have only become 
more problematic since then, particularly in light of further 
acquisition by broadband providers that may result in even less 
consumer choice, less innovation, higher costs, more power in 
the hands of these few broadband providers.
    In light of this threat, I commend the Federal 
Communications Commission and its leadership for its work in 
crafting a strong set of rules for ensuring an Open Internet. 
Congress has created the FCC to develop the specialized 
expertise to properly regulate the complex telecommunications 
industry in the service of public interest.
    After a lengthy rulemaking period, during which almost 4 
million Americans and all industry stakeholders made their 
voices heard on this issue, the FCC has fulfilled that mandate 
with respect to preserving and promoting an Open Internet. 
Rules to address net neutrality have the benefit of addressing 
potential threats to an Open Internet before they fully 
materialize.
    Additionally, having a set of best practices enshrined in 
rules would provide certainty for industry. The FCC's net 
neutrality rules, therefore, must be given an opportunity to 
take root.
    So I am pleased that the FCC's Open Internet order contains 
key provisions that I and others have long called for and that 
will help protect competition. They include a rule preventing 
broadband providers from blocking Internet access; from 
imposing paid prioritization of Internet traffic; also a 
restriction prohibiting any other practices that unreasonably 
interfere with or disadvantage users' ability to access 
broadband service or lawful content applications or services; 
and a requirement mandating disclosure to users of information 
concerning network management practices and any terms, 
conditions, or limitations on the broadband service itself.
    These measures are critical to protecting the virtuous 
cycle of innovation, which net neutrality fosters, and which 
ensures both competition and innovation among broadband and 
content providers to the ultimate benefit of consumers.
    Finally, enforcement of existing antitrust law as the 
exclusive or primary means of ensuring an Open Internet would 
be insufficient.
    Under the current antitrust law, there is relatively little 
that regulators can do outside the merger review context to 
address the conduct of a regulated industry, such as broadband 
Internet service, with respect to enforcing net neutrality 
principles.
    Through a series of decisions, the Supreme Court has 
limited the potential to successfully pursue claims under the 
Sherman Antitrust Act with respect to net neutrality. Moreover, 
exclusive reliance on antitrust enforcement is simply 
insufficient.
    While having the benefit of a more nuanced and fact-
specific approach to the problem, antitrust enforcement alone, 
I am sorry to say, would also be a cumbersome, more limited, 
more resource-intensive, and after-the-fact way to develop a 
regulatory regime for net neutrality.
    Another potential approach would be for the Federal Trade 
Commission to use its authority under Section 5 of the Federal 
Trade Commission Act to stop unfair methods of competition. 
Although I hold an expansive view of Section 5, to the extent 
that this approach goes beyond the scope of the Sherman Act or 
other antitrust laws, it would be very controversial, as some 
of my friends here in the Committee would be the first to note.
    So finally, moreover, antitrust law is not sufficiently 
broad in scope, as it fails to address the noneconomic goals of 
net neutrality, including the promotion of innovation, and the 
protection of free speech and political debate.
    That is why the former Chairman of this Committee, a 
Republican, and Zoe Lofgren from California and I, all three of 
us introduced a bipartisan piece of legislation going back to 
2006 to strengthen antitrust law to address net neutrality, in 
part because the FCC was doing too little at that time, in my 
view.
    So I do not have that concern with the FCC's latest Open 
Internet order. Rather, I congratulate them on their good work. 
And I welcome all of our witnesses, especially the chairman of 
FCC himself, to join in this discussion this afternoon.
    And I thank you, Mr. Chairman, for the time.
    Mr. Goodlatte. Thank you, Mr. Conyers.
    And without objection all other Members' opening statements 
will be made a part of the record.
    We welcome our very distinguished panel today. And if you 
would all rise, I will begin by swearing in the witnesses.
    Do you and each of you swear that the testimony that you 
are about to give shall be the truth, the whole truth, and 
nothing but the truth, so help you God?
    Thank you very much.
    Let the record reflect that all of the witnesses responded 
in the affirmative.
    Tom Wheeler is the current chairman of the Federal 
Communications Commission. Prior to his appointment to the 
commission by President Obama, Chairman Wheeler was involved in 
telecommunications as a policy expert, advocate, and 
businessman. He has worked in senior positions at two 
technology investment companies, founded a technology company, 
and served as president and CEO at both the National Cable 
Television Association, and the Cellular Telecommunications and 
Internet Association. Chairman Wheeler earned his undergraduate 
degree from the Ohio State University.
    Ajit Pai currently serves as an FCC Commissioner. Prior to 
his appointment to the commission by President Obama, 
Commissioner Pai held several positions within the FCC's Office 
of General Counsel, including as Deputy General Counsel.
    Before joining the FCC, Commissioner Pai worked in both the 
public and private sectors. He was a communications law partner 
at the firm Jenner & Block, associate general counsel at 
Verizon, a trial attorney in the Antitrust Division of the 
Department of Justice, and chief counsel to a Senate Judiciary 
Subcommittee, and a clerk for Judge Feldman in the District 
Court of the Eastern District of Louisiana.
    Commissioner Pai earned his undergraduate degree with 
honors from Harvard University, and his law degree from the 
University of Chicago, where he was an editor of the law 
review.
    Joshua Wright currently serves as a commissioner to the 
Federal Trade Commission. Prior to his appointment to the 
commission by President Obama, Commissioner Wright was a 
professor at George Mason University School of Law and held a 
courtesy appointment in the Department of Economics. He is a 
leading scholar in antitrust law, economics, and consumer 
protection, and has published more than 60 articles and book 
chapters, coauthored a leading casebook, and edited several 
book volumes focusing on these issues.
    Commissioner Wright is currently on his fourth stint at the 
FTC, having previously served in both the Bureau of Economics 
and Bureau of Competition.
    Commissioner Wright earned his undergraduate degree with 
honors from the University of California, San Diego, and his 
law degree and Ph.D. from UCLA.
    Terrell McSweeny currently serves as commissioner to the 
FTC. Prior to her appointment to the commission by President 
Obama, Commissioner McSweeny served as chief counsel for the 
Competition Policy and Intergovernmental Relations Department 
within the Antitrust Division of the Department of Justice. 
Commissioner McSweeny previously served as senior adviser to 
President Obama and Vice President Biden, deputy chief of staff 
to then-Senator Biden, and counsel to the Senate Judiciary 
Committee. She also worked in private law practice at the firm 
O'Melveny & Myers.
    Commissioner McSweeny earned her undergraduate degree from 
Harvard University, and her law degree from Georgetown 
University School of Law.
    All of your written statements will be entered into the 
record in their entirety, and we ask that each of you summarize 
your testimony in 5 minutes or less. To help you stay within 
that time, there is a timing light on your table. When the 
light switches from green to yellow, you have 1 minute to 
conclude your testimony. When the light turns red, that is it, 
time is up. It signals that your 5 minutes have expired.
    Chairman Wheeler, we are very appreciative of your being 
here today. You are welcome to begin the testimony. You may 
want to push the button on that and pull the microphone closer.

   TESTIMONY OF THE HONORABLE TOM WHEELER, CHAIRMAN, FEDERAL 
                   COMMUNICATIONS COMMISSION

    Mr. Wheeler. As you said, Mr. Chairman, I did not go to law 
school, but I have built companies, met payrolls, and created 
jobs, and it is from that perspective that I would like to 
address the issues today.
    The widespread use of the Internet exists because of 
decisions of the FCC decades ago that restrained the power of 
the dominant telecommunications network operator. To take one 
example that was important in my education as an entrepreneur, 
FCC regulations enabled open access for the modems that powered 
the early use of the Internet. There would have been no AOL 
without the FCC's openness mandate, for instance.
    The whole Open Internet debate burst into the public 
consciousness when a Republican-led FCC took action against 
Comcast for degrading the delivery of content. The decision was 
overturned in court.
    That led to the 2010 Open Internet rules. These, too, were 
challenged, and the court remanded them to the agency because 
the commission imposed common carrier-like requirements on 
activities previously characterized as information services.
    Nonetheless, the court upheld the commission's power to 
protect the Open Internet and observed, ``Broadband providers 
represent a threat to Internet openness.''
    This observation is not academic theory. It was my real-
life experience as an entrepreneur. I was part of a new pay-
per-view video service. When we would seek to get on a cable 
system, the first question the cable operator would ask is, 
what is our cut? Access had to be purchased.
    Likewise, when I was a venture capitalist in the early days 
of mobile data, the only way a wireless carrier would let an 
application provider on his network was for a cut of the 
revenue. Again, access had to be purchased.
    When internet protocol allowed consumers to leap these 
walled gardens, the ISPs sought to use their position as 
network gateways to their advantage.
    Congressional leaders such as Representatives Walden and 
Upton, and Senator Thune, as the chairs of the FCC's 
authorizing Committees, introduced legislation banning 
blocking, throttling, and paid prioritization. Our order has a 
similar ban, as well as establishing that, in the future, ISPs 
cannot act to hurt consumers or innovators, a determination the 
FCC would make on a case-by-case basis, not by broad 
prescriptive regulations.
    We took a businesslike approach in our report and order. It 
was patterned on the regulation the wireless industry asked for 
in 1993, and which has proven so successful, Title II status 
and the forbearance from the old parts of Title II that don't 
apply to the new circumstances. And it is an approach that 
worked.
    When, for instance, the big wireless carriers refused to 
let voice customers of smaller carriers roam on their networks, 
it was a Republican-led FCC that in 2007 invoked Title II to 
mandate open access.
    Finally, allow me to quickly reflect on the allegation that 
our order creates business-threatening uncertainty. When Title 
II was applied to broadband DSL in the late 1990's and early 
2000's, it didn't chill investment. The network industry 
invested more than it had before or since.
    Similarly, during the 4 years the 2010 Open Internet rules 
were in place, broadband capital investment increased steadily, 
topping out at almost $70 billion annually. It is no wonder, 
therefore, that Sprint, T-Mobile, Frontier Communications, 
Google Fiber, Cable Vision, along with hundreds of small rural 
phone companies and the small competitive wireless companies, 
all say they can build their business within Title II.
    Even behemoths like Comcast, AT&T, and Verizon, who opposed 
what we did, continued to invest in their networks even knowing 
the rule was coming. In fact, AT&T and Verizon did so very 
dramatically in the recent AWS-3 spectrum auction.
    There would be, however, a serious casualty of uncertainty 
were no Open Internet rules in place, the innovators who need 
to know that they will be able to get on the networks owned by 
Comcast and AT&T and Verizon.
    Openness without fear of pay-to-play is the key to 
innovation. Similarly, if investors believe their capital will 
be siphoned off by the big network providers or, worse, the 
companies won't be able to reach consumers, investment capital 
will dry up.
    I recognize the propensity of this issue to dance on the 
heads of legal pins. In reality, however, this issue is simply 
about whether those who operate networks will be the rule-
makers or whether consumers and innovators will have the 
security of knowing that the network operators will not be able 
to misuse their position.
    Thank you again for this opportunity. I look forward to 
your questions.
    [The prepared statement of Mr. Wheeler follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
           
                               __________
                               
    Mr. Goodlatte. Thank you, Chairman Wheeler.
    Commissioner Pai, welcome.

  TESTIMONY OF THE HONORABLE AJIT PAI, COMMISSIONER, FEDERAL 
                   COMMUNICATIONS COMMISSION

    Mr. Pai. Thank you, Mr. Chairman. Chairman Goodlatte, 
Ranking Member Conyers, Members of the Committee, thank you for 
inviting me to testify today. I appreciate the opportunity to 
share with you my views on one of the most important regulatory 
decisions in recent history, the FCC's decision to regulate the 
Internet.
    Put simply, Title II Internet regulation is a solution that 
won't work to a problem that doesn't exist.
    First, the Internet isn't broken. There was nothing for the 
FCC to fix. Indeed, the Internet ecosystem in the United States 
is the envy of the world. Nonetheless, the FCC decided to treat 
broadband as a public utility. In so doing, it erased a 
bipartisan consensus dating back to the Clinton administration 
that the Internet should be unfettered from government 
regulation.
    Second, the FCC's Title II solution isn't narrowly tailored 
to solve even the hypothetical net neutrality problem. It goes 
far beyond that by adopting a broad and general Internet 
conduct standard rule, by threatening Internet service 
providers with rate regulation, by claiming authority to 
regulate Internet interconnection, and by applying a variety of 
Title II provisions that have nothing to do with net 
neutrality.
    All of this regulation will be a raw deal for consumers. It 
will mean higher broadband prices, lower broadband speeds, 
fewer service plan choices, and less competition in the 
broadband marketplace.
    Now let me focus on that last point, since antitrust 
teaches that robust competition is the best way to protect 
consumer welfare. Title II will reduce competition among 
Internet service providers. Monopoly rules designed in the 
monopoly era will inevitably move us in the direction of a 
monopoly. Thousands of smaller ISPs don't have the means to 
withstand a regulatory onslaught.
    This isn't just my view. The President's own Small Business 
Administration admonished the FCC that its proposed rules would 
unduly burden small businesses.
    Unsurprisingly, small ISPs are worried. One-hundred-forty-
two wireless ISPs said the FCC's new rules ``would likely force 
us to raise prices, delay deployment expansion, or both.'' 
Twenty-four of the country's smallest ISPs, each with fewer 
than 1,000 customers, told us that Title II ``will badly strain 
our limited resources.'' And 43 government-owned broadband 
providers told the FCC that Title II will ``risk serious harm 
to our ability to fund and deploy broadband without bringing 
any concrete benefit for consumers or edge providers.'' These 
are joined by many other companies, big and small.
    In sum, the FCC's Title II regulations not only address a 
nonexistent problem in the marketplace, they will actually harm 
consumers by limiting their broadband choices.
    Even if there were evidence of anticompetitive behavior, 
antitrust would provide the appropriate framework for 
addressing this problem. The scalpel of antitrust, not the 
sledgehammer of Title II, is the best guarantor of consumer 
welfare.
    The Department of Justice and the Federal Trade Commission 
are quite capable of vindicating the public interest by 
investigating and, as appropriate, prosecuting business 
practices that threaten competition. These authorities are 
likely to be more effective than applying Title II.
    For one thing, the FCC's order goes far beyond bright-line 
rules. It adopts vaguely worded standards that are sure to mire 
the FCC and the industry in novel, free-ranging, and expansive 
proceedings.
    For another thing, antitrust law focuses on the abuse of 
market power, but the FCC's Title II regulations presume that 
each and every Internet service provider is, per se, an 
anticompetitive gatekeeper. This view has no basis in economics 
or the agency's record. The notion that corporate behemoths 
like Facebook, Google, and Netflix need to be protected from 
Main Street Broadband, an ISP with four customers in Cannon 
Falls, Minnesota, is absurd.
    Finally, antitrust allows the DOJ and the FTC to target the 
actual exercise of market power by dominant providers whenever 
it presents a threat to online competition. In contrast, the 
FCC's Title II approach focuses solely on the conduct of ISPs, 
ignoring evidence suggesting that startups face a greater and 
existing threat from a different corner, dominant edge 
providers.
    Twitter's recent blocking of Meerkat, detailed in my 
written testimony, is just one example.
    For these and other reasons, I believe that the FCC's 
heavy-handed Internet regulations will reduce competition and 
harm consumers. Antitrust enforcement would be a far superior 
approach.
    Chairman Goodlatte, Ranking Member Conyers, Members of the 
Committee, thank you once again for allowing me to testify. I 
look forward to answering your questions and to working with 
you and your staff in the time to come.
    [The prepared statement of Mr. Pai follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
                                   __________
                                   
    Mr. Goodlatte. Thank you, Commissioner Pai.
    Commissioner Wright, welcome.

  TESTIMONY OF THE HONORABLE JOSHUA D. WRIGHT, COMMISSIONER, 
                    FEDERAL TRADE COMMISSION

    Mr. Wright. Thank you, Chairman. Chairman Goodlatte, 
Ranking Member Conyers, Members of the Committee, thank you 
very much for the opportunity to appear before you today. My 
name is Josh Wright, and I am a commissioner at the Federal 
Trade Commission.
    Before diving into the FCC's latest net neutrality 
regulation, I want to make clear that the views I express today 
are my own and do not necessarily reflect the views of the FTC 
or any other commissioner. My views are based upon my 
experience and expertise as an academic economist, antitrust 
lawyer, and law professor researching antitrust and regulation, 
and as a commissioner of the FTC.
    I want to begin by discussing net neutrality from an 
economic perspective. The first relevant question to address in 
my view is what market failure, if any, is the FCC trying to 
solve with net neutrality regulation. Chairman Wheeler has 
expressed concern that broadband providers are gatekeepers. 
There are gatekeepers everywhere. Not all gatekeepers require 
regulation.
    Starbucks is the gatekeeper to my all-important morning cup 
of coffee, and the supermarket is the gatekeeper to your access 
to Cheerios. A gatekeeper becomes an economic problem 
potentially worthy of regulation only insofar as the broadband 
industry is either a natural monopoly or otherwise exhibits 
meaningful monopoly power. The simple fact that there are 
multiple suppliers of both wired and wireless broadband 
Internet render this justification of regulation unpersuasive.
    Nevertheless, fearing that any network discrimination by 
broadband providers creates undue risks of competitive harm, 
net neutrality proponents have argued for a one-size-fits-all 
prohibition. This categorical prohibition ignores the empirical 
economic research that demonstrates plainly that contractual 
arrangements between entities that occupy different links in 
the same supply chain--in this case, Internet access providers 
and content providers--very rarely result in consumer harm.
    Further, economists have long understood that these 
vertical restraints often and, indeed, overwhelmingly provide 
substantial benefits for consumers. As one study from leading 
economists assessing the state of empirical evidence on 
vertical contracts at issue here says, ``With few exceptions, 
the literature does not support the view that these practices 
are used for anticompetitive reasons.''
    Other surveys of the economic literature by prominent 
economists come to similar conclusions. So does the FTC's 
investigation of the broadband industry.
    In my view, it is more than fair to say there is a general 
consensus upon empirical economists on this point.
    Surely, given the state of the economics literature and the 
FTC's own report, the FCC's categorical prohibition is 
inappropriate and likely to harm consumers.
    Now if the best economic evidence cannot possibly justify 
an outright ban on vertical restraints in the broadband 
industry, yet there is some chance that vertical restraints can 
harm some broadband consumers some of the time, then what 
should a regulatory agency like the FCC do? My answer is 
nothing, and the reason is that antitrust law is exceptionally 
well-equipped to pick up the slack.
    Indeed, President Obama's current regulatory czar and 
former director of the FTC's own Bureau of Economics, Howard 
Shelanski, has noted that antitrust enforcement is often 
superior to broad regulation. This is because antitrust 
jurisprudence has evolved a highly sophisticated rule of reason 
to adjudicate various types of vertical arrangements by 
analyzing their cost and benefits to consumers on a case-by-
case basis.
    Indeed, antitrust law initially adopted but ultimately and 
long ago rejected a categorical prohibition of certain vertical 
restraints, not unlike the FCC's new prohibition on paid 
prioritization. The FCC should learn from antitrust's 
historical mistakes rather than relive them.
    I am quite confident that the antitrust regime, after more 
than a century of developing expertise and applying it to rule 
of reason, will be able to apply it to the broadband industry.
    I will now turn from antitrust to the FTC's other 
enforcement priority, consumer protection. By reclassifying 
broadband Internet providers as common carries under Title II, 
the FCC threatens to strip the FTC of its jurisdiction to 
regulate broadband providers. I believe reclassification under 
Title II will unequivocally harm consumers by depriving them of 
the FTC's activities in the broadband sector.
    Importantly, the FTC has certain enforcement tools at its 
disposal that are not available to the FCC. Unlike the FCC, for 
example, the FTC can bring cases in Federal district court and 
obtain equitable remedies, such as consumer redress.
    The FTC's recent action against AT&T in Federal district 
court involving failure to disclose throttling to consumers on 
unlimited data plans and its settlement with TracFone, who 
agreed to pay $40 million to the FTC for consumer redress to 
settle charges that it deceived millions of consumers with its 
promise of unlimited data service, are just two examples 
illustrating the consumer benefits that will disappear with 
reclassification.
    In my view and for the reasons discussed, I am confident 
that a complete and economically rigorous cost-benefit analysis 
of the FCC's new regulation would reveal that it will harm 
competition and leave consumers worse off than a regime focused 
upon antitrust.
    Thank you for your time and for the invitation to testify. 
I am happy to answer any questions.
    [The prepared statement of Mr. Wright follows:]
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                                   __________
                                   
    Mr. Goodlatte. Thank you, Commissioner.
    Commissioner McSweeny, welcome.

 TESTIMONY OF THE HONORABLE TERRELL P. McSWEENY, COMMISSIONER, 
                    FEDERAL TRADE COMMISSION

    Ms. McSweeny. Thank you. Thank you very much. And I want to 
thank the Members of the Committee and Ranking Member Conyers 
for the invitation to appear today.
    My name is Terrell McSweeny, and I am also a Federal Trade 
Commissioner. Like my colleague, Commissioner Wright, I will 
begin by making the usual disclaimer. I am speaking on behalf 
of myself and not the commission or my colleagues.
    I am delighted to talk to you today about the role of 
competition enforcers like the Federal Trade Commission in 
protecting consumers and competition. For 100 years, the 
Federal Trade Commission has worked to ensure that American 
consumers and the entrepreneurs who bring new and exciting 
products to the marketplace are free from anticompetitive, 
deceptive, and unfair practices that threaten to harm them.
    The FTC's role as a consumer protection and antitrust 
enforcer has evolved along with the economy, adapting to the 
interconnectedness of our 21st century lives to protect 
consumers online and on mobile platforms. In the last decade, 
the FTC has brought more than 100 cases involving consumer data 
security and privacy, and we have cracked down on emerging 
issues such as cramming on mobile phone bills, and unauthorized 
in-app purchases by children, winning millions of dollars in 
redress for consumers harmed by these practices.
    The FTC plays an important role promoting innovation by 
advocating for competition that can be introduced by disruptive 
entrance, and by investigating and prosecuting anticompetitive 
practices across a wide variety of industries. While antitrust 
enforcement is vital to protecting a competitive marketplace, 
it is not always the most effective way to address policy 
issues in the economy.
    Sometimes the public interest is best protected through a 
combination of antitrust enforcement and well-designed 
regulation. Protecting the virtuous cycle of the Open Internet 
is one of these instances.
    The debate over the best way to protect the Open Internet 
raises a host of complicated issues, including public policy 
issues that go beyond the scope of antitrust and consumer 
protection enforcement. The FCC has spent years studying the 
Open Internet issue, informed by the data and input from market 
participants, academics, and the views of nearly 4 million 
commenters.
    On the basis of that record, the FCC concluded that 
Internet openness promotes a virtuous cycle, in which 
innovation by providers of new content, applications, and 
services generates increased consumer broadband demand. This 
increase in broadband demand increases broadband infrastructure 
investment, which in turn spurs new innovation from content 
producers.
    Ex post, case-by-case antitrust enforcement is unable to 
offer the same protections to innovators in the content space 
as clear, ex ante rules.
    Under the Open Internet order, innovators who seek to 
provide new content, applications, and services can have 
confidence that discriminatory network access will not threaten 
their chances of competitive success. Antitrust enforcement, on 
the other hand, would require detection, investigation, and a 
potentially lengthy rule of reason analysis.
    I would also like to point out that the FCC considered 
First Amendment interests, freedom of expression, diversity of 
political discourse, and cultural development as a part of the 
Open Internet proceeding. These are noneconomic, but very 
important values that are not generally protected by antitrust 
laws.
    I want to stress that there is not an either/or choice that 
must be made between FCC regulation and FTC enforcement as it 
relates to the Open Internet. Both are different tools with 
different features, and both have a role to play when it comes 
to protecting consumers and ensuring an Internet that continues 
to foster competition and innovation.
    The optimum outcome for consumers is Open Internet coupled 
with repeal of the common carrier exemption in the FTC Act, 
which may hinder the FTC from protecting consumers against 
unfair and deceptive common carrier activities.
    The FTC has decades of experience and specific statutory 
tools, such as consumer redress, that complement FCC oversight 
of common carriers, and we have a long history of successfully 
working together with the FCC and look forward to continuing to 
work with them.
    I will conclude by pointing out that the status quo in the 
United States is overwhelmingly one of an Open Internet. It is 
almost out-of-date to refer to the Internet as its own sector 
somehow detached from the rest of the economy. The Internet has 
truly become the Internet of everything. It is the medium that 
we use to carry on friendships, file our taxes, book vacations, 
talk to our doctors, watch movies, manage businesses, and 
increasingly coordinate our lives from the moment we get up 
until the time we go to bed. Ensuring that the Internet remains 
a fountain of innovation and disruption is at the heart of Open 
Internet policy.
    I don't view this as a situation in which the FCC's Open 
Internet order threatens to usher in some new and unproven 
market reality. Rather, it is the elimination of the Open 
Internet in this country that would put us in unchartered 
territory.
    Thank you for holding this hearing and for having me here, 
and I look forward to answering your questions.
    [The prepared statement of Ms. McSweeny follows:]
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                                   __________
                                   
    Mr. Goodlatte. Thank you, Commissioner McSweeny.
    Before we begin the questioning by Members of the 
Committee, I will ask unanimous consent to enter into the 
record a letter dated today from the Consumer Electronics 
Association on behalf of its more than 2,000 U.S. technology 
companies, indicating support for an Open Internet and 
expressing concern that the swath of Title II regulations and 
legal challenges to FCC authority will cause uncertainty, slow 
investment, reduce competition, and hinder innovation, and 
calling on Congress to take action in this area.
    [The information referred to follows:]
    
    
                               __________
    Mr. Goodlatte. Secondly, I would ask unanimous consent to 
enter into the record the dissenting opinion of the FCC 
Commissioner Mr. Pai.*
---------------------------------------------------------------------------
    *Note: The submitted material, the dissenting opinion of the FCC 
Commissioner, is not printed in this hearing record but is on file with 
the Committee and can be accessed at:

      http://docs.house.gov/Committee/Calendar/
      ByEvent.aspx?EventID=103236.
    Without objection, they will be made a part of the record.
    And we will turn to the questioning.
    If I may, I will start with you, Chairman Wheeler. Can you 
please walk us through the many specific examples of 
anticompetitive actions taken by Internet service providers 
over the last 3 years that support issuing massive regulations 
on the Internet?
    To be clear, I am looking for actual examples of bad 
conduct rather than hypothetical conduct. To my knowledge, 
there were not any specific examples cited in the 300-plus page 
order.
    Mr. Wheeler. Thank you, Congressman. Yes, I would be happy 
to. I think the root is what the district court said when they 
said that there is the technological capability and the 
economic incentive to do something.
    Mr. Goodlatte. I am talking about actual examples where it 
has taken place in the last 3 years.
    Mr. Wheeler. So for instance, in 2007, a Republican 
commission moved against wireless carriers who were doing 
exactly the same kind of thing we are talking about here, and 
used Title II to deal with that. What was happening was the 
wireless carriers, the big guys, were saying to the small guys, 
``Your customers can't roam onto our turf, onto our networks.''
    Mr. Goodlatte. Chairman Wheeler, let me interrupt because 
that was 8 years ago that that took place, and we are talking 
about in the last 3 years. But let me give you another 
question.
    To the extent that actual anticompetitive conduct was 
occurring on the Internet and the FCC chose not to intervene, 
why wouldn't the Federal Trade Commission be able to prosecute 
that conduct under current law?
    Mr. Wheeler. Thank you, Congressman. I was going to get to 
more recent things, if you are interested. I mean, there are 
examples of blocking of iPhone apps, iPad apps, Android apps, 
blocking a mobile wallet app that was put on the phone, 
limiting access to Google Voice. And as recently as last 
August, Verizon tried to throttle the data speeds for users who 
had bought unlimited access. So there is a list, and I can go 
through others, if you want.
    Mr. Goodlatte. Let me ask Commissioner Pai if he wants to 
shed light on that. Why is it that there were no examples cited 
in the report?
    Mr. Pai. That is a key question, Mr. Chairman. The answer 
is, as detailed in the FCC's decision, there is no evidence of 
a system-wide failure in the Internet marketplace. The fact 
that the agency has to rely on a decade-old example of a small 
ISP in North Carolina, of isolated niche examples since then, 
all of which were solved through private initiatives, not 
through the application of heavy-handed Title II rules, 
demonstrates that there was no problem to be solved here.
    Mr. Goodlatte. Will there be an increase in State and local 
taxes levied against Internet service providers as a result of 
the Open Internet order? And will the Internet Tax Freedom Act, 
something that has very strong bipartisan support here in the 
Congress, protect against all of these types of taxes?
    Mr. Pai. Mr. Chairman, I believe the answer to the question 
is no. The order explicitly opens the door to the imposition of 
billions of dollars of new taxes, the most notable of which is 
the assessment of Universal Service Fund fees or taxes on 
broadband. The only thing the order promises is that those fees 
won't go up on the effective date of the order itself.
    Moreover, there are a number of State and local fees and 
taxes which will be assessed. One example, which flows from the 
reclassification of broadband as a Title II telecom service, is 
pole attachment rates. Previously, a lot of the competitive 
providers were able to avail themselves of a relatively lower 
rate, applicable to cable companies. Now that rate will go up 
to a higher rate that telecom providers pay.
    All of those costs will be passed on to the consumer.
    Mr. Wheeler. Mr. Chairman, can I----
    Mr. Goodlatte. Let me turn to Commissioner Wright, and if I 
have some time left, I will come back to you, Mr. Chairman.
    The FCC adopted the one-size-fits-all regulatory approach 
in its Open Internet order. Why is it important to evaluate 
each anticompetitive action on its merits using decades of 
antitrust case law and deploying an economic analysis? At the 
end of the day, what is better for consumers?
    Mr. Wright. Thank you for the question, Mr. Chairman.
    I think it is important to note that sometimes this idea 
that antitrust is ex post and regulation is ex ante is a bit 
overplayed. Antitrust has ex ante regulations. For example, we 
ban all price-fixing. Sometimes, we have broad prohibitions 
like you see here. Sometimes we don't. We used to have ex ante, 
broad prohibitions on vertical restraints.
    The reason we don't, and the reason that antitrust, 
starting about 40 years ago, went to a case-by-case approach is 
because an economic revolution of both theory and empirical 
data on vertical restraints hit the world in the '60's and 
'70's and '80's. And what we learned was not only were these 
types of contracts unlikely to harm competition, but 
importantly, oftentimes, they offer serious benefits for 
consumers.
    The virtue of a case-by-case approach isn't just how often 
that you can attack or detect anticompetitive conduct. It is 
allowing consumers to reap the benefits of the conduct when it 
is procompetitive. And that is the difference between a case-
by-case approach and a per se prohibition, and why it is 
important to retain the former.
    Mr. Goodlatte. Thank you.
    My time has expired, but, Chairman Wheeler, we will give 
you a moment to add what you wanted to add a moment ago.
    Mr. Wheeler. Well, I was just going to say that what 
Commissioner Pai said about taxes isn't quite as portrayed. The 
reality of property taxes is that they are on telephone 
companies ``and utilities.'' And we do not reclassify and 
specifically address in the order that that does not deal with 
this.
    The second issue----
    Mr. Goodlatte. It could be done in the future, though, 
could it not?
    Mr. Wheeler. It specifically says in the order that we are 
talking about telecommunication----
    Mr. Goodlatte. Once you go down this road, a future FCC 
could change that order and go that direction as well, could 
they not?
    Mr. Wheeler. Mr. Chairman, future companies can behave in 
ways that they tell us that they are not going to behave as 
well. We all live with this.
    Mr. Goodlatte. And future Congresses.
    Mr. Wheeler. Valid point.
    One other point is the issue of application of Universal 
Service against broadband. Commissioner Pai sits on the 
bipartisan Federal-State board that will deal with that issue. 
So there will be a recommendation coming from them, which 
Commissioner Pai, in which he will be participating. But even 
if they come back and say you should change the contribution, 
it is not an increase in the amount collected; it is just that 
it gets applied to different things.
    So, essentially, in a household, it becomes the same kind 
of a number.
    Mr. Goodlatte. We will follow up on that in a moment, but 
my time has expired, so we will turn now to the gentleman from 
Michigan, Mr. Conyers, for his questions.
    Mr. Conyers. Thank you.
    Well, I am very interested in this discussion. Let me just 
ask, Mr. Wheeler, how has FCC encouraged competition and 
innovation over communications networks?
    Mr. Wheeler. Thank you very much, Congressman.
    The joke around the FCC is that my mantra has been 
``competition, competition, competition,'' or, more 
appropriately, spoken as ``competition-competition-
competition,'' because it ought to be the ultimate mantra of 
everything we do.
    And the difficulty that we face today is that, insofar as 
high-speed networks in this country, about 80 percent of 
Americans have either only one choice or zero choice. About 25 
percent of them have zero choice for high-speed networks. And 
what we need to be doing is encouraging that.
    That is why specifically in this order we said that we will 
not have rate regulation, we will not have tariffing, we will 
not have unbundling, those kinds of things associated with the 
so-called utility status, because we want to create an 
environment in which carriers are investing in ever-faster, 
evermore ubiquitous, competitive broadband services.
    The interesting thing is that Wall Street seems to agree, 
because if this was the end of the world that everybody keeps 
talking about, then you would think you would see the stocks 
crashing. Instead, the stocks have been going up. And on the 
day of the vote even, when we adopted the rule, they went up.
    So it is very important that we build a strong economic 
base so that carriers are incentivized to build competitive, 
ever-faster networks.
    Mr. Conyers. One of your colleagues says the Internet is 
not broken, and there is nothing for the FCC to fix, and it is 
only based on hypotheticals. Is there much truth in that or 
any?
    Mr. Wheeler. Thank you, Congressman.
    You know, Mr. Walden and Mr. Upton and Senator Thune have 
all introduced legislation to ban blocking, ban throttling, ban 
paid prioritization--the three big things that we ban in our 
order. So there is, I think, a suggestion that at least some 
other people other than us feel that there are difficulties in 
the marketplace.
    We did have the instance of Comcast blocking. We did have 
the instance I told the Chairman about of Verizon throttling.
    Verizon, interestingly enough, went into court when they 
were suing to overturn the 2010 rules, and their lawyer said: I 
have been specifically instructed to tell the court that one of 
the reasons we are appealing is because we want to do paid 
prioritization.
    Then in a letter to Chairman Leahy, when he was chairing 
the Senate Judiciary Committee, the major ISPs, when asked if 
they would pledge to not do paid prioritization, they said we 
do not foresee. They did not say they would not.
    Our rule says you will not. And again, I go back to what 
the court said, which was that there is an incentive, an 
economic incentive, and a technological capability for these 
network providers to harm innovation, to harm competition, and 
to harm this virtuous circle of innovation driving new 
networks, which drive more innovation, et cetera.
    Mr. Conyers. Very interesting.
    Commissioner McSweeny, what are potential limitations in 
relying on antitrust enforcement to protect an Open Internet?
    Ms. McSweeny. Thank you for the question. I would note 
there are a couple of problems here.
    One, and it is not an insignificant one, is detection. 
First, it might be very difficult for antitrust enforcers to 
detect some of these problems because it is hard sometimes for 
consumers to even know that they are happening.
    The second would be just to note that because, by its 
nature, antitrust enforcement is after the fact, it is on a 
case-by-case basis after an intensive investigation. It can be 
very difficult to remediate harms.
    So if your concern is about the innovators who never get to 
consumers, or the consumers who never get to the innovators, it 
can be very difficult to rely solely on antitrust to protect 
that.
    Mr. Conyers. Let me ask you, finally, can we get FCC and 
FTC to cooperate in enforcement and regulation?
    Ms. McSweeny. Absolutely, sir. In fact, we already have a 
long history of cooperating together quite successfully.
    Mr. Conyers. Very good. Glad to hear it.
    Thank you, all.
    Mr. Goodlatte. Thank you, Mr. Conyers.
    The Chair now recognizes the gentleman from Virginia, Mr. 
Forbes, for 5 minutes.
    Mr. Forbes. Mr. Chairman, thank you.
    Commissioner Pai, you heard I believe Chairman Wheeler 
mention something about a redistribution of taxes to all 
companies. Do you agree with him? Or can you give us your 
thoughts on that?
    Mr. Pai. Thank you for the question, Congressman. I 
respectfully disagree with the Chairman.
    First of all, nothing the FCC says about the classification 
of broadband provided for tax purposes binds any State and 
local authority. The mere fact that they are now telecom 
providers means that the door is open for State and local 
entities to reclassify them as such.
    If I could enter into the record the Washington Post ``Fact 
Checker'' that just came out today, suggesting that a left-
leaning Progressive Policy Institute study indicating that $11 
billion in State and local fees would be raised is, in fact, 
the case.
    Mr. Forbes. I would request that we allow that to be 
submitted.
    Mr. Goodlatte. Without objection, that document will be 
made a part of the record.
    [The information referred to follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
        
                               __________
                               
    Mr. Pai. Secondly, in terms of the Federal taxes, in 
particular, the writing is on the wall. If you look at some of 
the promises the FCC has made in terms of the programs that are 
administered under the Universal Service Fund, last December, 
just to give you one example, the FCC decided to increase by 
$1.5 billion the amount of spending on the schools and 
libraries program. That money has to be funded from somewhere. 
It is going to be funded through Universal Service Fund 
contributions.
    So the pressure to apply it to broadband is tremendous. And 
now the FCC having indicated that the door is open, I think we 
clearly know the consumers are going to be paying from the 
bottom line.
    Mr. Forbes. Okay.
    Chairman Wheeler, even if everyone who is participating 
here today could agree that blocking, throttling, and paid 
prioritization by Internet service providers is not good for 
innovation and not good for consumers, don't you think the Open 
Internet rule that was passed by the FCC on a party-line vote 
is one dimensional and does nothing to prevent other 
stakeholders from violating the same principles of protecting 
an open Internet, specifically making interconnection 
negotiations one-sided and anticompetitive for ISPs, therefore, 
hurting Internet users?
    For example, on several occasions, edge providers have 
blocked Internet users from accessing their content on the 
Internet based off of their ISP.
    Mr. Wheeler. Thank you for your question, Congressman. I 
think that it is equally bad when edge providers block content. 
The question is whether the Congress has given us authority to 
deal with that. What Congress did give us authority to deal 
with was when an ISP connects to the public Internet.
    What we said in our order was that we would assert 
jurisdiction and be watching, that we would not assert 
regulation, which a lot of folks wanted us to do, we would not 
say we are going to do this or that, but that we would watch 
what was happening there. That goes to the concept that I think 
is at the core of what we are trying to do, which is how do you 
establish a set of basic concepts, which is the just and 
reasonable test which has stood the test of time and been well-
established in the litigation, and have what I call a referee 
on the field, who can take a look at something and say, ``Now 
does that fit with inside that kind of circumstance?"
    I think that is in keeping with what was going on that 
Commissioner Pai referenced leading up to the Open Internet 
order, which was when various commissions were saying, ``Here 
are the rules of the road. Here are the standards we want you 
to adhere to. And we are holding the sword of Damocles over 
your head that if you don't, we have the ability to do 
something.''
    The problem was that when the Verizon court made its 
decision, it took away the sword. And it put us in a position 
where we have to say, what is it that we are regulating, and 
what are the standards, and how are we going to continue--on 
the point you made, and the point Commissioner Pai made--making 
sure that we are watching that marketplace to make sure that 
the behavior there does not hurt consumers and does not hurt 
innovators.
    Mr. Forbes. Commissioner Wright, I only have seconds left, 
but do you agree or disagree with Chairman Wheeler on that?
    Mr. Wright. With what portion of it?
    Mr. Forbes. Well, whatever you can do in 30 seconds, I 
guess, because that is all I have--or Commissioner Pai, either 
one.
    Mr. Pai. Congressman, I think your question targets exactly 
the reason why Title II regulation by the FCC is inferior to 
antitrust. The fact is that there is no evidence in the record 
of anticompetitive blocking sufficient to support industry-wide 
regulation.
    To the contrary, the FCC is also, by focusing myopically 
solely on ISPs, ignoring other potential threats that could 
come from edge providers.
    I provided the example in my written testimony of Meerkat, 
a very innovative live-stream application that, it argues and 
some have argued, has been crippled by Twitter refusing access 
to its social graph.
    Those are the kinds of threats that antitrust is perfectly 
well-suited to examine, but the FCC simply isn't able to do it 
based on Title II.
    Mr. Forbes. Thank you.
    Mr. Chairman, I yield back.
    Mr. Goodlatte. I thank the gentleman.
    The Chair recognizes the gentleman from New York, Mr. 
Nadler, for 5 minutes.
    Mr. Nadler. Thank you, Mr. Chairman.
    Along with President Obama and about 4 million other 
Americans, I urged the FCC to defend the principle of net 
neutrality and to reclassify broadband providers as common 
carriers under Title II of the law, in order to ensure that 
everyone has equal access to the Internet. Therefore, I am very 
pleased with the actions of the FCC. The FCC chairman, in 
particular, should be applauded for his actions and for his 
leadership.
    The FCC has a vital role to play in protecting the virtuous 
cycle of innovation by preventing broadband providers from 
blocking, throttling, or offering paid prioritization. 
Providers should be common carriers, and must not block 
content; slow, or degrade the transmission of content; or 
extract higher fees for faster transmission of content.
    The FCC must never allow for a pay-to-play Internet, where 
one company can refuse to allow fast access to another company 
unless they pay a premium. That could lead to anticompetitive 
behavior and the stifling of innovation.
    What if a smaller competitor with a great idea cannot 
afford to pay an additional fee for access to the Internet's 
fast lane? Innovation would suffer and, ultimately, consumers 
would be harmed. Everyone deserves equal access at equal 
speeds.
    I agree with the FCC chairman when he says that having an 
Open Internet and net neutrality is beneficial to consumers. I 
agree with the FCC chairman when he says he wants to prevent 
blocking. E.g., Comcast can't say no access to YouTube. I agree 
with the FCC chairman when he says he wants no discrimination. 
Comcast can't degrade Netflix in order to make Comcast's 
competing service look better. I use Comcast only as example, 
not an allegation.
    The best way to ensure that these rules are strong and 
enforceable is to use the Title II common carrier authority. 
The FCC has every right to do so and, in fact, was merely 
acting on the court's suggestion to reclassify broadband 
providers as common carriers.
    In addition, antitrust law is not sufficient on its own to 
prevent big Internet providers from harming consumers. 
Antitrust law is important, but so is regulation, and the two 
should work hand-in-hand to protect consumers and promote 
competition.
    We shouldn't have to wait until a monopoly starts beating 
up on consumers before the law steps in.
    As Gene Kimmelman and Allen Grunes put it in an op-ed in 
The Hill, ``The FTC is a bit more like a fire hose. It is there 
to put out a fire after it has started.''
    Well, we want to prevent forest fires, if you will, and we 
need the FCC there to help us at the front end.
    Commissioner Wheeler, Commissioner Pai says that Title II 
regulation will reduce competition among broadband providers, 
and that it will harm consumers by limiting the kinds of 
pricing and data plans that smaller and upstart broadband 
providers can offer. What would you say to that?
    Mr. Wheeler. Well, thank you very much, Mr. Nadler, for 
your comment.
    And I think Commissioner Pai and I have different views of 
the world. He tends to see a world full of small ISPs and 
behemoth edge providers, when I think the reality is there are 
three behemoth ISPs, and thousands, tens of thousands of 
innovative edge providers, and two guys and dog in a garage who 
got a new idea that will be up tomorrow, thanks to the openness 
of the Internet.
    The expectation a consumer should have should not be 
determined by the net revenue of the company they happen to do 
business with, which typically is the only choice they have to 
get high-speed broadband. But the rules should apply to 
everybody.
    Mr. Nadler. Thank you. Now, some have alleged that 
President Obama directed the FCC to reclassify broadband 
providers under Title II. Some have alleged that White House 
staff had inappropriately ex parte communications with the FCC 
prior to the President's public call for reclassification and 
strong Open Internet rules.
    What is your response to these two?
    Mr. Wheeler. No, sir, there were no secret instructions 
from the White House as to what we should be doing.
    Mr. Nadler. And no improper ex parte communications?
    Mr. Wheeler. And no improper ex parte communications.
    Mr. Nadler. Thank you.
    Commissioner McSweeny, do you think it inconsistent that 
some of your fellow witnesses complain about the supposed 
uncertainty stemming from implementation of Internet conduct 
rules? That is, the rule prohibiting unreasonable interference 
or disadvantaging of users' Internet access or use of lawful 
content that is contained in the Open Internet order on the one 
hand, but then trumpet a piecemeal, case-by-case approach to 
protecting net neutrality using antitrust enforcement on the 
other?
    Ms. McSweeny. Well, Mr. Nadler, as a consumer protection 
and competition enforcer, I strongly believe in both the role 
of enforcers, but I also believe in the role of regulators. 
That is why I think it isn't really a choice that we need to 
make, that the most ideal outcome here would be to have both 
the FTC and, to the extent it is relevant, the Department of 
Justice undertaking their enforcement mission to protect 
consumers, and the FCC similarly using its authorities with an 
Open Internet rule to provide the same kind of protection.
    Mr. Nadler. Thank you. My time has expired.
    Mr. Goodlatte. The Chair thanks the gentleman.
    The Chair now recognizes the gentleman from Iowa, Mr. King, 
for 5 minutes.
    Mr. King. Thank you, Mr. Chairman.
    I thank the witnesses for your testimony.
    And I turn first to Mr. Pai. I am just wondering this. Let 
us just say that I have an Internet service provider, and he is 
doing all of these things that seem to be crossing some of the 
philosophy within the commission itself, and that would be 
slowing down some traffic and billing more for faster traffic, 
and some of those things.
    What are my alternatives, if I have a fiber-optic landline 
that maybe comes through a municipal service provider? What can 
I do under the proposal that you have, which is let us not 
change it. Let us leave it, actually, the way it was. What are 
my alternatives?
    Mr. Pai. Congressman, if any consumer is facing what they 
consider to be a consumer-unfriendly practice by their 
provider, they can always seek recourse from the Federal Trade 
Commission to the extent that there is anticompetitive conduct 
involved. The Department of Justice and Federal Trade 
Commission always have authority.
    But I would argue that the best tonic to those kinds of 
problems is competition. Ranking Member Conyers put his finger 
on the issue. If you have sufficient choices, the issues of net 
neutrality vanish because there is no incentive, no ability 
whatsoever, to engage in that kind of conduct. You can simply 
switch.
    And that is why Title II takes our eye off the ball by 
reducing competition, making it harder for smaller ISPs to 
enter the marketplace.
    Mr. King. Okay, so I might have one or two or more landline 
providers. I might have a satellite provider. I might have more 
than that. I have two or so satellite providers, and I could 
have a wireless provider. Is it possible that people out there 
have as many as five or six different options to choose from 
now if they are unhappy with the provider that they have?
    Mr. Pai. It is, and I think one of the reasons why the 
American Internet economy is the envy of the world, is because 
we do have a multiplicity of providers in a lot of areas. 
Companies are spending billions of dollars to acquire spectrum, 
to deploy infrastructure.
    What is needed now is for the FCC to remove some of the 
barriers to infrastructure investment, to essentially do what 
Google Fiber has done in Kansas City, but on a national level, 
to allow every American to benefit from the broadband 
revolution.
    Mr. King. Well, then who is this FCC rule trying to help? 
What is the object?
    Mr. Pai. I am not sure what the object is, but I can tell 
you what the result is. The results will be simply less 
competition for the benefit of the American consumer.
    Mr. King. Could this be spawned from the idea that ``it 
isn't fair'' idea? It isn't fair that some people have more 
money than others. It isn't fair that some people can pay for a 
faster service than others. It isn't fair that everybody can't 
ride in first class.
    Mr. Pai. One could very well make that argument.
    And if I could respectfully disagree with the Chairman in 
his characterization of how I view the marketplace, just to 
give you one example, Google is worth more than Comcast, 
Verizon, and T-Mobile combined, so it is not as if we are 
dealing only with scrappy edge providers working out of their 
garages.
    But, secondly, I think the reason why we see Wall Street 
and other people perhaps inflating the values of these dominant 
company stocks is precisely because they know that Title II 
regulation is going to squeeze a lot of these providers out of 
the marketplace. It is going to make it impossible for the 
wireless ISP, for the small cable company, for even the 
municipal broadband provider, to provide a competitive 
alternative.
    Mr. King. Let me try another thing here. I spent my life in 
the business world, and I would invest capital. And if the 
government came in to try to regulate that capital, I would 
invest it under the rules we had, but when the rules changed, 
then the value of my assets might be diminished if it is more 
difficult for me to extract profit out of those assets.
    So is there any discussion on the commission about the 
rights to property that are being regulated into a diminished 
state of competitiveness? Was that part of the discussion?
    Mr. Pai. I don't think that concern was addressed 
adequately. I think the fact that the rules are so broad and so 
vague makes it very unclear how people who are in the private 
sector who have to take that risk are going to be able to pull 
the trigger and make that investment decision.
    Mr. King. The expectation to be able to make a profit on 
your capital investment though, would it be your opinion that 
it is diminished with this rule?
    Mr. Pai. I think it is diminished, and the question of 
whether it rises to the level of a regulatory taking for 
constitutional purposes is something that a court will have to 
sort out.
    Mr. King. Commissioner McSweeny, you have heard this 
dialogue. Do you have any comments on what might be rights to 
property, and the opportunity to get a return on investment, 
the comments that we have had in exchange?
    Ms. McSweeny. Sure, I mean it is my understanding that the 
action the FCC is taking is based on an extensive record 
grounded in trying to protect the virtuous cycle of innovation 
that it assessed exists here.
    When innovators create content, people want more broadband. 
When they want more broadband, more broadband gets built.
    So I would suggest, from my perspective, the evidence I see 
in the marketplace is that mostly in America, two-thirds of 
Americans have a choice of one broadband provider, and they 
don't have a lot of competition on the local level for these 
kinds of services. Very often, they can also be locked into 
plans as well that have switching costs for them when they are 
making those choices.
    So I think the evidence the FCC is acting on here is to 
protect that virtuous cycle of innovation and competition, and 
that the evidence is relatively well-established by an 
exhaustive record that has even been acknowledged by the D.C. 
Circuit.
    Mr. King. Thank you, Commissioner.
    I thank the witnesses and yield back the balance of my 
time.
    Mr. Goodlatte. The Chair thanks the gentleman, and 
recognizes the gentleman from Michigan for a unanimous consent 
request.
    Mr. Conyers. Thank you. I have five letters, one of which 
is addressed to both of us, plus an article from The Hill, and 
I ask unanimous consent to enter them into the record, sir.
    Mr. Goodlatte. Without objection, they will be made a part 
of the record.**
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    **Note: The submitted material is not printed in this hearing 
record but is on file with the Committee and can be accessed at:

      http://docs.house.gov/Committee/Calendar/
      ByEvent.aspx?EventID=103236.
    Mr. Goodlatte. And the Chair now recognizes the gentlewoman 
from California, Ms. Lofgren, for her questions.
    Ms. Lofgren. Thank you, Mr. Chairman.
    As you know, I represent Silicon Valley here in the 
Congress, and I will say that the level of excitement and 
gratitude, Commissioner Wheeler, over the decision made by the 
FCC is immense. I brought this paper because the San Jose 
Mercury News is kind of the newspaper of record. Here it is, 2 
days after the commission vote, ``GOP, Valley Unable to 
Click.'' There is a picture of our colleague, Kevin McCarthy, 
and, ``Republicans react harshly to tech line in the sand over 
protections for Internet.''
    I mean, other than SOPA, this is the biggest issue that has 
been before the tech community in a long, long time.
    In the article, one of the founders of TechNet said this, 
``The GOP seems to think that Orwellian language is going to 
work on the world's smartest people. If you say net neutrality 
is government regulation, and if you think there is anyone in 
the Valley who thinks that is a true statement, you are already 
dead in the water. They would be better off just saying we 
disagree.''
    So I hope that this hearing is just more whistling in the 
wind, and I do believe that your very wise decision will 
prevail.
    I have a couple of questions. The first is just for my 
enjoyment. I remember when SOPA was discussed here, and we had 
about 10 million phone calls and emails in half a day. How many 
Americans contacted the FCC to ask you to do this net 
neutrality rule that you did?
    Mr. Wheeler. About 4 million people, Congresswoman.
    Ms. Lofgren. Very good. And has anything else generated 
that level of input recently?
    Mr. Wheeler. It even broke the record of Janet Jackson's 
wardrobe malfunction.
    Ms. Lofgren. Wow. You know, in terms of Title II, I am 
interested in competition. As has been pointed out by 
Commissioner McSweeny, there isn't any in most of the country, 
in terms of broadband access.
    How might your ruling actually help in the deployment of 
broadband? One of the issues that I am sort of intrigued by is 
that common carriers now have access to utility poles in ways 
that they did not before.
    Just for one example, Google Fiber was looking at 
deployment in my town, and people are very eager because it is 
like 10 times faster than any other provider, but a big 
constraint is tearing up the streets, and they don't have 
access to the poles. But now, maybe they do.
    Do you have an opinion on that?
    Mr. Wheeler. Thank you, Congresswoman.
    Yes, Commissioner Pai talked about pole attachments as an 
imaginary horrible. I think it is actually a leveling of the 
playing field and quite good news.
    I happened to be involved in the cable industry when the 
Congress in 1978 said, ``Hey, the telephone companies are 
keeping cable companies from getting on the poles, and we think 
cable companies ought to get on.'' As the cable companies then 
became dominant, they turned around and said, ``Oh, the law 
says only cable, and so Google and other competitors can't get 
on.'' What we have done here is to level the playing field on 
that.
    There is talk about that increasing rates. The reality is 
in our order we say, we are going to be watching, and if 
utilities start playing around with that, we are going to step 
in and it is not going to happen.
    The point that you made is really important, however, and 
that is that every day we are seeing major ISPs step forward 
and say, ``We are going to build new competitive high-speed 
broadband.'' It is not just Google that is out building.
    Ms. Lofgren. No, I wouldn't want it to be just them.
    Mr. Wheeler. Exactly, it is not just them. It is over-
building each other, and that is what we want to have. And the 
reason they are doing it is because there is no rate 
regulation, and we haven't affected their ability to get a 
return.
    Ms. Lofgren. Let me ask you this, in terms of municipal 
providers, does your rule affect them or are you taking other 
steps to allow municipalities that want to provide broadband as 
a utility to step forward?
    Mr. Wheeler. Thank you. It does not specifically address 
them. In the same meeting, we did happen to rule on two 
petitions we had from Tennessee and North Carolina where 
municipal providers were asking us to preempt State laws that 
kept them from expanding.
    Ms. Lofgren. So there is some hope.
    Let me just do, finally, the FTC Act does relate to common 
carriers, and Commissioner McSweeny recognized that a lot of 
things you do, the free speech issues and the like, have 
nothing to do with what she does. What do you think about 
amending the FTC statute so that the common-carrier carve-out 
was either diminished or eliminated? Would that make any sense?
    Mr. Wheeler. Thank you, Congresswoman. I think that that is 
an idea that is definitely worthy of review. We have had great 
working relationships with the FTC. We work in tandem on many 
issues. As you point out, it is going to require legislation to 
resolve it.
    We are trying to take steps in the interim and make sure 
that we have an MOU that says, ``Here's how we are going to be 
working together.'' But I think the point you have raised is a 
very good one.
    Ms. Lofgren. Mr. Chairman, I would like to ask unanimous 
consent to place in the record, ``GOP, Valley Unable to 
Click.''
    Mr. Goodlatte. We would be happy to place that in the 
record.
    [The information referred to follows:]
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
                                   __________
                                   
    Mr. Goodlatte. The Chair recognizes the gentleman from 
Texas, Mr. Poe, for 5 minutes.
    Mr. Poe. I thank the Chairman.
    I thank you all for being here.
    Mr. Pai, let me start with you, and I have the same 
questions for everybody, but let me see if I can get through 
all the questions. What country has the best Internet service?
    Mr. Pai. The United States.
    Mr. Poe. If we implement the rule that you all have agreed 
to, the statement has been made that the Europeans, who are our 
competitor, would be glad because it would diminish our quality 
down to their quality. Is that a fair statement or not?
    Mr. Pai. I do think the playing field will be leveled in 
the sense that America's broadband marketplace will become less 
competitive, and Europe is actively trying to get rid of some 
of their utility style regulation to make themselves more 
competitive.
    Mr. Poe. This 300-page regulation doesn't mention any 
specific examples of abuse. Is there a reason for that?
    Mr. Pai. I think the reason is because there is no 
industry-wide evidence of abuse. There are isolated examples 
from 8 years ago, from 10 years ago. But one would expect a 
broken Internet to offer up a plethora of current contemporary 
examples.
    Mr. Poe. This is implemented. How much is it going to cost, 
counting all the lawyers, all the regulators, all the people 
viewing the Internet? How much is this going to cost taxpayers?
    Mr. Pai. The answer is unknowable, and that is because the 
application of the rules, is unknowable. I think it is telling, 
for example, with respect to the Internet conduct standard, 
that the FCC on the very date it adopted this standard, said, 
and I quote, ``We don't know where things go next.'' The recipe 
for regulatory uncertainty is there to see.
    Mr. Poe. That is based upon the concept of the general 
conduct rule, is that what you are talking about?
    Mr. Pai. That is correct.
    Mr. Poe. Basically, if I quote the Chairman correctly, we 
don't know what that general conduct rule really means.
    Mr. Pai. I think that is exactly the problem innovators and 
entrepreneurs are going to face. We are essentially going to be 
funneling their entrepreneurial spirit through a regulatory 
bottleneck.
    Mr. Poe. Okay, general conduct rule--no, sir, I am asking 
questions. You will get your turn in a minute.
    The general conduct rule is meaning that, basically, the 
FCC is going to determine what is fair, as far as Internet 
service access. Is that a good word to use, what is fair?
    Mr. Pai. Essentially, that is the standard because the 
agency lays out seven vaguely worded standards, says it is 
nonexhaustive, doesn't give you any indication of how it is 
going to be applied, and explicitly tees up what appear to be 
pro-consumer options, such as T-Mobile's Music Freedom, that 
are on the chopping block.
    Mr. Poe. You know, fair means different things to different 
folks. I was a judge in Houston a long time, and I heard that 
word a lot. It meant different things to whoever you were 
asking the question about, whether something is fair. That 
troubles me in a report starting new regulations that we don't 
really--the government, God bless us, the government is going 
to decide what is fair. That concerns me, just as a comment.
    What countries have the greatest control over their 
Internet's system?
    Mr. Pai. Certainly, I think some countries like North 
Korea, Cuba, and countries like that I think exercise a fair 
degree of control.
    Mr. Poe. How about China? Do they control their Internet?
    Mr. Pai. They do, and they actively block a lot of 
applications and services.
    Mr. Poe. Do the Russians? Does tsar Putin control his 
Internet? I am sorry, President Putin, control the Internet in 
Russia?
    Mr. Pai. I have heard instances of the Russian Government.
    Mr. Poe. Do they control who has access to the Internet?
    Mr. Pai. I am not clear to what extent.
    Mr. Poe. If you know.
    Mr. Pai. On that particular question, I am not sure.
    Mr. Poe. Will Internet speed, for those of us who use the 
Internet, will it increase or will it decrease if the FCC 
implements this 300-page rule?
    Mr. Pai. I believe it will decrease.
    Mr. Poe. Why?
    Mr. Pai. Because it will dis-incentivize companies from 
making the major investment decisions they have to make. It 
will impede them from deploying the infrastructure that carries 
some of this high bandwidth traffic, and especially to the 
extent that consumers are using bandwidth-hungry applications, 
it is going to make it more difficult for those applications to 
be delivered.
    Mr. Poe. FCC doesn't control content of Internet, does it 
not?
    Mr. Pai. It does not, thankfully.
    Mr. Poe. I agree with that. Thankfully, it does not.
    It concerns me that we may get to a point where the FCC 
decides in the name of fairness to control content, which I 
think is a constitutional violation.
    Let me ask you this, does a rule that is implemented and 
proposed, how do we get there? I see there is a conflict in 
statements. Were you told, or the commission told by the 
Administration, impose this, let FCC control net neutrality.
    Mr. Pai. Well, I think the President's statement on 
November 10, if you go to the White House Web site, it says, 
``This is my plan, and I am asking the FCC to implement it.'' 
That is a pretty direct statement.
    Mr. Poe. Was that before or after you implemented the plan?
    Mr. Pai. That was before we implemented the plan, but well 
after we adopted the proposal in May of 2014.
    Mr. Poe. I have the same question for the other three, and 
I will put these in writing so you all can answer them in 
writing.
    You think the plan will diminish competition? Is that what 
you said?
    Mr. Pai. I do.
    Mr. Poe. Okay. Thank you, Mr. Chairman, for your patience. 
I will have the same questions, if I may, for the other three 
in writing.
    Mr. Goodlatte. We will ask that they respond to them in 
writing.
    The Chair now recognizes the gentlewoman from Texas, Ms. 
Jackson Lee, for 5 minutes.
    Ms. Jackson Lee. Mr. Chairman, thank you, to the Ranking 
Member as well.
    It looks like a journey that we travelled some years ago. 
If you are on this Committee long enough, you will see some 
circular returns as we looked at dealing with some other, if 
you will, communication entities on another journey that we 
took some years ago dealing with how we would best serve the 
American public.
    Frankly, to the witnesses, I believe that this is what this 
discussion is about. They are our bosses, and this is about 
serving the American public.
    So I would like to ask Chairman Wheeler and Ms. McSweeny to 
help me walk through this journey. I am looking at some 
questions that I asked. We are trying to track the date, either 
2010 or 2011, and I assume it is public record. I can say that 
it was a witness by the name of Ms. Sohn, and we went through a 
journey dealing with issues of competition and what would best 
suit the consumer. The last answer indicated it would be 
anticompetitive.
    So, Chairman Wheeler, let me ask you the question, on net 
neutrality, where would it be on the scale of competitiveness 
or anticompetitiveness?
    Mr. Wheeler. Thank you, Congresswoman. It is a 
procompetitive activity, and at its core is the fact that it is 
not old-style utility regulation. It does not regulate rates, 
does not have tariffs, does not have unbundling.
    Let me give you a couple of examples of that. Here's a Wall 
Street analyst's report. He says, we think the path to retail 
rate regulation is so difficult that it is close to 
inconceivable.
    Now people keep talking about these imaginary horribles 
about there could be rate regulation in these unique 
circumstances.
    Ms. Jackson Lee. If I may stop you for a moment, I am going 
to let you finish. So in essence, net neutrality could provide 
a profit on both ends, those who access it and those who own 
the highway? Am I correct?
    Mr. Wheeler. Thank you for putting it that way. Yes, ma'am, 
because the goal here is how do we make sure that we have 
consumer protections and protections for those innovators in 
place and, at the same point in time, create incentives for the 
build-out of capacity and the competitive build-out for 
capacity.
    If you look at what is been going on, as I was saying 
before, when people knew that we were headed toward Title II, 
they are still building. The stocks are up. The analysts are 
saying there is not going to be these things pulling back.
    There was huge bidding in the AWS-3 spectrum auction, 
setting all kinds of records, about three times what we 
expected we would make, despite the fact that people knew they 
were going to be covered under Title II of the act.
    So, yes, this has been designed to make sure that carriers 
are allowed to charge the rates they need to justify the 
investment to build competitive and ever-faster broadband.
    Ms. Jackson Lee. But all those who have modeled their life, 
maybe the new Millennials, maybe the Generation X and beyond, 
after the likes of founders of the various techs that are out 
in California, per se, or in Austin, Texas, they all still have 
an opportunity. They can wake up one morning in a college dorm 
and have a brilliant idea and pursue it under this net 
neutrality.
    If I might get Ms. McSweeny, and I would like to come back 
to you, Chairman, in my short time.
    Commissioner McSweeny, if you would, answer the same 
question about competitiveness. But I then want both of you to 
follow up on the idea of how this differs from the garden 
variety enforcement of utilities. People are fearful that we 
are going to pounce down on them in an opposite way, which is 
net neutrality. They won't have any assistance from us.
    But, if you could, on the idea of competitiveness, very 
important. Consumers having access. The highway being in top 
shape.
    Ms. McSweeny. Yes, Congresswoman, and to your point, also 
the innovators. I would say it is virtuous on both ends of that 
cycle. So the edge providers, those students you referred to in 
Austin that have this great idea, having clear rules that 
provide them access is very important to making sure that that 
innovation pipeline remains open and available to people.
    So yes, I would say that that is part of why this Open 
Internet order is very important to maintaining the Open 
Internet.
    Ms. Jackson Lee. Commissioner Chairman, did you want to 
just get back on enforcement?
    Mr. Wheeler. There are 48 sections of Title II, and we have 
forborne from 27 of those, saying those are the old rules, 
those are what you did in the monopoly era, those are what you 
did when you were treating this as a utility. We have patterned 
it on the model that has worked so well for the last 22 years 
for the wireless industry.
    Interestingly enough, the wireless industry asked to be 
regulated under Title II, and to have old rules forborne, and 
the commission forbeared, forborne--whatever the word is--from 
19 of the sections. We did it for 27 sections, so we are 
actually 50 percent more deregulatory than the wireless 
industry has had for the last 22 years and been wildly 
successful.
    Mr. Goodlatte. Time of the gentlewoman has expired.
    Ms. Jackson Lee. Thank you, Chairman. Thank you.
    Mr. Goodlatte. The gentleman from Pennsylvania, Mr. Marino, 
is recognized for 5 minutes.
    Mr. Marino. Thank you, Chairman.
    Welcome, panel members.
    Commissioner Wright, it appears that the FCC's Open 
Internet order will prohibit smaller rival companies to compete 
with large companies. What say you about that?
    Mr. Wright. I think Commissioner Pai articulated this 
concern in a way that is consistent with my understanding a 
little bit earlier. I think he is correct that there is 
substantial risk that raising the cost of smaller rivals to 
compete, and thus entrenching existing monopoly power to this 
extent, is a real concern to be worried about under this order.
    Mr. Marino. The way I understand antitrust laws is they 
protect one's ability for free competition. Is that the main 
idea behind antitrust law?
    Mr. Wright. Yes.
    Mr. Marino. The FCC, again, Mr. Wright, the FCC has asserts 
that it can protect consumers and their privacy. Yet the FTC, 
and not the FCC, has a longstanding history of prosecuting this 
type of conduct. How many cases has the FTC prosecuted?
    Mr. Wright. If we are talking about both consumer 
protection cases in this space as well, I don't have an exact 
number, but we have been around prosecuting these cases for a 
long time.
    Mr. Marino. Do you know how many the FCC has pursued?
    Mr. Wright. I do not.
    Mr. Marino. Okay.
    Ms. McSweeny, do you know how many the FCC has pursued?
    Ms. McSweeny. No, sir, I don't.
    Mr. Marino. Okay. Well, my research shows me that the FCC 
has pursued two.
    Commissioner Pai, what do you have to say about the FCC's 
ability and experience with consumer privacy investigations and 
litigation, relative to the FTC?
    Mr. Pai. Congressman, that is a great question. Thank you 
for it.
    Our experience, as you pointed out in your colloquy with 
our FTC counterparts, is extremely limited because the FCC, 
until reclassification, simply didn't have that much authority 
in this space, in the broadband space.
    Mr. Marino. Mr. Pai, again, what happens with the fines, 
the money, that the FCC collects? Do you know what happens with 
that money, where it goes?
    Mr. Pai. My understanding is that those fines are deposited 
in the United States Treasury.
    Mr. Marino. What happens with the fines and the money that 
the FTC collects?
    Mr. Pai. I would defer to my FTC colleagues on that.
    Mr. Wright. They go back to consumers.
    Mr. Marino. Okay. Do we all agree that--and if you don't 
agree, raise your hand--that that money should be going back to 
the consumers and not into the Treasury?
    You don't agree, Chairman?
    Mr. Wheeler. I think that the answer to the FTC question is 
that it is both, and we have participated in some recent 
settlements with the FTC that have just done that. Some 
actually also goes back to States because we have done it 
collectively.
    Mr. Marino. Are you saying the FCC money goes to States and 
consumers? The FCC money, not the FTC.
    Mr. Wheeler. No, I am saying the FTC, we work together with 
the FTC, and in things that we have done together, it has been 
States, Federal Government, and consumers.
    Mr. Marino. But they have been initiated by the FTC, not 
the FCC. If you have a fine, where does it go? If the FCC has a 
fine----
    Mr. Wheeler. No, ours go to the Treasury.
    Mr. Marino. Okay, I think it is better off going back to 
the consumer, my personal opinion.
    Mr. Wheeler. Sir, could I correct one thing on the privacy 
question?
    Mr. Marino. Quickly, because I don't have much time.
    Mr. Wheeler. I think the two privacy actions you were 
talking about are in the last 6 months. We have had decades of 
CPNI, Customer Proprietary Network Information, rules and 
enforcement against that to protect what people watch, what 
people dial.
    Mr. Marino. Sir, I understand where you are going with 
that, but that is complete and distinct from the prosecution 
end of things. I am a prosecutor. I know these things. I have 
done these things. That is distinct of that.
    Mr. Wheeler. It is more than two. Those are the basics.
    Mr. Marino. Ms. McSweeny, for decades the FTC has used 
antitrust laws to protect against anticompetitive actions in a 
wide range of industries. Do you agree with me on that?
    Ms. McSweeny. Yes, sir.
    Mr. Marino. Why do you believe, or perhaps you don't 
believe, the FTC is ill-equipped to prosecute anticompetitive 
conduct on the Internet?
    Ms. McSweeny. Sir, I believe the FTC is well-equipped to 
prosecute it. My point is that I think consumers are better 
off, and entrepreneurs are better off, when there are clear 
rules in the Open Internet order, and also the FTC on the beat 
to protect consumers and to protect competition.
    Mr. Marino. Yes, but why do we need two forms of government 
for doing something like this? The government is big enough at 
this point. We don't need duplicative services.
    I am colorblind, sir. Has my time run out?
    Mr. Goodlatte. We will allow the witness to answer your 
question.
    Mr. Marino. Yes, please.
    Ms. McSweeny. Thank you.
    I mean, I would say that you are correctly pointing out 
that there are slightly different tools in the FTC toolbox than 
there are in the FCC toolbox. From my perspective as a Federal 
Trade Commissioner, I think the FTC tools are providing 
consumer redress, and the fact that we are not limited by a 1-
year statute of limitation, are very good tools for protecting 
consumers, which is why support repealing the common carrier 
exemption in the Federal Trade Commission Act.
    Mr. Marino. Thank you.
    Mr. Goodlatte. It would be a good question how that matches 
up with the Supreme Court's decision in the Trinko case, but we 
will now recognize the gentleman from Georgia for his 
questioning.
    Mr. Johnson. Thank you, Mr. Chairman.
    Commissioner Pai, you do agree that open debate is healthy 
and that elected leaders should take sides on important issues 
so that voters can hold them accountable?
    Mr. Pai. Absolutely.
    Mr. Johnson. And public statements by the White House on 
the important subject of net neutrality were appropriate, were 
they not?
    Mr. Pai. I think that any citizen of the United States can 
weigh in, and the President is a citizen of the United States, 
like any other.
    Mr. Johnson. In fact, it was his comments that contributed 
to the more than 4 million public comments that were ginned up, 
and that the FCC was able to peruse and consider in its 
rulemaking process. Isn't that correct?
    Mr. Pai. Well, the President's comments postdated the bulk 
of those comments. The agency was considering a very different 
proposal when the President made his announcement on November 
10.
    Mr. Johnson. Well, my question was, though, that his 
comments contributed to the volume of in excess of 4 million 
comments that were actually received by the agency in the 
rulemaking process. Isn't that correct?
    Mr. Pai. My understanding is the vast majority of the 
comments came before the President's announcement.
    Mr. Johnson. Well, there were some though. Come on, give 
the President some credit. Can't you do that? And if you can't, 
I understand.
    Well, now, it is a fact that under the past four 
Administrations, both Republican and Democratic presidents, 
that they have publicly participated in the FCC rulemaking 
process. Isn't that a fact?
    Mr. Pai. I am not aware of anything on the level of the 
November 10 announcement.
    Mr. Johnson. Well, let me ask Chairman Wheeler, are you 
aware of that, sir?
    Mr. Wheeler. Yes, sir.
    Mr. Johnson. Certainly, there is nothing wrong with that, 
is there, Mr. Pai?
    Mr. Pai. Well, I think the concern comes when the agency is 
proposing X and the President instructs the agency to do Y and 
the agency does Y. I think that is a concern.
    Mr. Johnson. Well, you are kind of getting warm a little 
bit now.
    So the President publicly commented, which you say it is 
okay, he should do as a public official, and that actually 
helped to gin up more public comment, and others have done it 
in the past, other Presidents have done it in the past.
    Now, FCC rules, there are some exemptions that allow for ex 
parte communications between the FCC and other Federal agencies 
during the rulemaking process. That is correct, isn't it?
    Mr. Pai. That is correct, sir.
    Mr. Johnson. And the White House is also exempted.
    Mr. Pai. I can't recall whether the exemption covers other 
Cabinet departments, or whether it also includes the White 
House, the Executive Office of the President, but there is an 
avenue for White House participation.
    Mr. Johnson. Let me ask you this question, you have no 
evidence to refute the assertion that Chairman Wheeler made 
during this hearing that there had been no ex parte 
communications between the FCC and the White House on this 
particular issue during the rulemaking process. Is that 
correct?
    Mr. Pai. I have no personal knowledge of any consultations.
    Mr. Wheeler. Mr. Johnson, if I can do one clarification, 
there was an ex parte when Jeff Zients, an adviser to the 
President, came to see me to say the President was going to 
have an announcement and take a position. There was an ex parte 
filed on that.
    Mr. Johnson. I see, okay.
    Well, other than that, Mr. Pai, do you know of any evidence 
that supports the Republican charge or allegation that the 
President strong-armed the FCC in some way to issue the order 
that we are concerned with here today? Do you have any 
information or any evidence that you can share with us?
    Mr. Pai. Congressman, I know various congressional 
Committees are looking at that. I am solely looking at what the 
President actually said publicly.
    Mr. Johnson. You don't know of any evidence that the 
President has exerted any undue influence on the decision-
making process. Is that correct?
    Mr. Pai. Other than the public statements that the 
President made, I am not aware of any.
    Mr. Johnson. Which was something that Presidents do, and it 
was entirely proper, I think you have already stated.
    Mr. Pai. Well, Congressman, as a former staffer under 
Republican and Democratic administrations, I cherish the 
agency's independence, and my concern comes when a political 
actor of any party instructs the agency as to what to do and 
even the legal theory that it is supposed to use.
    Mr. Johnson. Well, sir, you can't have it both ways, now.
    Mr. Goodlatte. Time of the gentleman has expired.
    The Chair recognizes gentleman from Georgia, Mr. Collins, 
for his questions.
    Mr. Collins. Thank you, Mr. Chairman. I appreciate it.
    Chairman Wheeler, thanks to you and the rest of this panel 
today. I appreciate you coming forward and discussing this 
reclassification on the commercial Internet as Title II, but I 
think even in light of the last questioning and line of 
questioning, and I want to go over a timeline, which I think 
may put this in perspective, because I have always operated off 
the perception in life, and I think it is true, that perception 
is reality. And that may not be the truth, but perception is 
reality, and it clouds most of what we do.
    So then going over the timeline, Mr. Wheeler, you had 
stated on February 19 in 2014 in response to the D.C. Court of 
Appeals ruling of Verizon v. FCC rejecting your assumption of 
authority to regulate the Internet, the FCC would accept the 
D.C. Court's invitation by proposing rules that will meet the 
court's test for preventing improper blocking of and 
discrimination among Internet traffic.
    Nearly 2 months later, you formally proposed the Chairman's 
draft of proposed rulemaking to your fellow commissioners. 
Notably, this draft did not propose to reclassify broadband 
under Title II.
    Then on May 14, 2014, the FCC's NPRM containing 
consideration of Title II reclassification passed by vote of 3-
to-2.
    In the months that followed, things got really interesting. 
On November 10, 2014, President Obama publicly stated what he 
believed the FCC and independent agencies should do: reclassify 
consumer broadband under Title II of the Telecommunications 
Act.
    The day after the FCC vote, President Obama sent a thank 
you note to Reddit users for their advocacy for Title II 
reclassification. And the next day, Politico reported that DNC 
sent out an email stating the FCC approved President Obama's 
plan.
    As an independent agency--again, perception takes hold--you 
are under the highest scrutiny to act in a manner completely 
free from political influence and executive branch pressure. I 
am very concerned that this has been a failure.
    Legally, it appears the executive branch may have 
legislated de facto through your agency and is now implementing 
its policy, and you have allowed the credibility of the agency 
to suffer because of it.
    When the many lawsuits come, and I do not believe you will 
enjoy the presumption of the Chevron defense, and ultimately 
your flawed theory justifying this expansion will be struck 
down rightly.
    In the Utility Air Regulatory Group v. EPA, the Court made 
it clear that an agency must be grounded in the statute, which 
I do not believe you are, and the agency has no power to tailor 
legislation to bureaucratic policy goals to regulating ways 
unrecognizable to Congress that designed it, which in this case 
I believe you truly are.
    Now, Mr. Wheeler, I don't know if you want to be a Member 
of Congress. It is not a fun process to get here. But if that 
is what you want to do, then you know, find your application, 
run, spend a million, let your world know who you are, and come 
on and join us and legislate, because one of the things that 
you said earlier was that Congress, several legislators have 
put forward ideas in legislation to deal with this.
    Again, many of us do believe there is an Article I issue 
here, and that your role has been overstepped in this by doing 
what you are doing. You have applied the most antiquated 
regulatory framework to an area where innovation and growth 
have thrived. We cannot regulate our way to better innovation 
here. And we also can't do that by circumventing Congress to do 
so.
    So in light of that, let me go to Mr. Pai.
    Mr. Wheeler, if you want to jump in, that is fine. We don't 
have a lot of time.
    Basically, the order touts the FCC's substantial experience 
over the past decade on last-mile issues, but admits that the 
agency lacks similar depth in the Internet traffic exchange. 
The net neutrality order represents--and I am skipping here 
just a second--but, the net neutrality order represents a 
massive expansion of the commission's role and is a precursor 
to a larger, more costly bureaucracy overseeing and regulating 
Internet from the top to bottom.
    I want to know a comment how this monster that you have 
unleashed is going to be kept in check.
    Mr. Pai, and then just briefly Mr. Wheeler.
    Mr. Pai. Congressman, there is no question that before 
February 26, the FCC did not exert jurisdiction over Internet 
interconnection. After February 26, it does.
    Before February 26, the FCC didn't purport to have 
jurisdiction over such things as wireless service plans. After 
February 26, it does.
    Before February 26, the FCC had no arguable role in rate 
regulation. After February 26, there is ex post rate 
regulation, as we agreed last week.
    Mr. Collins. Mr. Wheeler, just a question here, do you all 
have a lot of free time over at the FCC? I mean, a lot of free 
people sitting around doing nothing to take on such an 
expansion?
    Mr. Wheeler. Congressman, thank you for the question.
    In 1996, the Congress changed the rules and said we want 
you to look both in terms of telecommunication services and 
information services. A telecommunication service is defined as 
a service that hauls an information service. When the 
commission first looked at the question of were these ISPs 
telecommunication services or information services, it was an 
entirely different world back in 2002.
    Mr. Collins. I am going to stop right there. I am going to 
reclaim my time for a second, because I think that is the heart 
of what we are dealing with here, is what was dealt with at 
that time, that is a congressional decision. That is something 
that should be debated in the halls of Congress, not in an 
executive agency.
    Mr. Wheeler. I am sorry, I wasn't making myself clear. I am 
sorry.
    Mr. Collins. I think that is the whole problem with this. 
It is not clear.
    Mr. Wheeler. Congress said to us to make the decision about 
whether it is a telecommunication service or an information 
service. In 2002, there were about a million Web sites, and 
what ISPs were doing was providing information services. Today, 
there are 1.25 billion Web sites, and what ISPs are doing is 
hauling traffic, not providing information services.
    So what we were doing was saying Congress said to us, 
``These are the rules you should look at,'' and we looked at 
that, and we saw that in the intervening time, the activities 
of those regulated had changed substantially from one class to 
the other.
    Mr. Goodlatte. Time of the gentleman has expired.
    Mr. Collins. I yield back.
    Mr. Johnson. Mr. Chairman, I have a unanimous consent 
request.
    Mr. Goodlatte. Gentleman will state his unanimous consent 
request.
    Mr. Johnson. To insert an op-ed entitled, ``Why Presidents 
Advise the FCC'' by Harold Feld and Kate Forscey; another 
publication entitled, ``It Is Common and Legal Practice for the 
President to Weigh In on FCC Policymaking'' by Public 
Knowledge; and last, an article published by the Washington 
Post entitled, ``Will the FCC's Net Neutrality Decision Cost 
Americans $15 Billion in New Taxes? Nope,'' for the record.
    Mr. Goodlatte. Without objection, they will be made a part 
of the record, and I am sure they will be excellent reading.
    [The information referred to follows:]
    
    
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    Mr. Johnson. Thank you.
    Mr. Goodlatte. The Chair recognizes the gentlewoman from 
California, Ms. Chu.
    Ms. Chu. Commissioner McSweeny, you state in your testimony 
that the FCC considers noneconomic values that are not 
generally protected by antitrust laws. These values include 
free expression, diversity of political discourse, and cultural 
development, and antitrust actions take into account economic 
considerations.
    To what extent, if any, would antitrust actions taken by 
the FTC be able to take these factors into consideration?
    Ms. McSweeny. I think you are correctly pointing out that 
the FCC proceeding does balance some of these noneconomic 
values and that generally antitrust law isn't the right 
framework in which to protect those. Antitrust law is quite 
correctly grounded on very rigorous analysis of harm to 
competition, and that is its primary focus.
    Ms. Chu. Chairman Wheeler, when it comes to noneconomic 
values, the FCC is obligated to abide by national policy goals 
such as the goal that requires the FCC to seek to promote the 
policies and purposes of favoring diversity of media voices, 
vigorous economic competition, technological advancement, 
promotion of the public interest, convenience, and necessity. 
So basically, you have an obligation to promote diversity and 
competition in your regulations.
    Can you describe this obligation, how it applies in this 
order, and why it matters?
    Mr. Wheeler. Thank you, Congresswoman. I think that you 
have just identified the key issue that, and again, I want to 
emphasize, we work in tandem with the FTC; we should work in 
tandem with the FTC. It is a great one-two punch.
    Their job is statutorily defined with one set of criteria, 
and our job is statutorily defined with another. Then what we 
have the statutory authority, mandate, to do, is to create 
regulations that address the kind of issues you talked about in 
terms of how you expand and protect the public interest, 
convenience, and necessity.
    That is a big difference between us and the FTC, that we 
have this kind of regulatory authority on that kind of a set of 
standards to pass regulations that will govern how markets work 
different from the way the FTC has.
    Ms. Chu. Now I would like to ask you about innovation. One 
of our key goals is to ensure that new entrepreneurs are able 
to thrive and innovate. You state that there would have been no 
AOL without the FCC's openness mandate.
    Can you describe how enabling access for modems contributed 
to the growth of an entity like AOL?
    Mr. Wheeler. Thank you, Congresswoman.
    AOL was made possible by the fact that there were such 
things as commercially available modems. Remember the old Hayes 
modems that would squeak and screech at you?
    Before the FCC stepped in, AT&T said you couldn't attach 
something like that to the lines. It was a foreign attachment. 
An alien attachment, it was called. If that had been the case, 
Steve Case wouldn't have been able to go out and build his 
business.
    Openness is at the core of what built the Internet. And 
what we need to make sure continues is that that kind of 
openness is available for innovators who have an idea to reach 
their potential customers.
    If Steve Case had had to go around and go to Dayton, and 
then go to Poughkeepsie, and then go to Minneapolis, and one 
step at a time, say, ``Can I get on your network? Can I get on 
your network? Can I get on your network?'' it never would have 
been possible. But because there is openness, the innovators of 
today don't have to do that. The two guys and a dog in a garage 
tomorrow can be online and have 100,000, and a week later have 
a million people. And I have seen those businesses develop that 
way.
    When I was a venture capitalist for 10 years before coming 
to this job, I was involved in those. We would not have been 
able to invest money and create jobs had we not known that 
there was the opportunity for open access, that these 
innovators could take their idea out and test it in the 
marketplace, rather than have to go carrier to carrier knocking 
on doors and say, ``May I please get on your network?'' That is 
what is powerful about this.
    Ms. Chu. It seems as though Open Internet actions were 
taken under both Republican- and Democratic-led commissions.
    Can you give a prime example?
    Mr. Wheeler. Yes, ma'am. As I indicated before, there was 
what the Republican-led commission did insofar as the wireless 
industry is concerned, when the big wireless carriers said that 
they were going to shut out the customers of the small wireless 
carriers, and the commission came in and said, ``No, under 
Title II, you have to be open to roaming.''
    There was a situation where under a Republican 
administration, the commission said to Comcast, ``No, you may 
not disadvantage this service provider. You must provide 
service.'' I think that we are continuing that tradition.
    Ms. Chu. Thank you.
    I yield back.
    Mr. Goodlatte. The Chair thanks the gentlewoman.
    Recognizes the gentleman from Texas, Mr. Gohmert, for his 
questions.
    Mr. Gohmert. Thank you, Mr. Chairman. Thank you to the 
witnesses. Appreciate you being here.
    Mr. Wheeler, a Wall Street Journal on article February 4 
says about you that you wanted to leave some room for broadband 
providers to explore new business models. Is that correct?
    Mr. Wheeler. I am not sure the article you are talking 
about, but one of the key precepts that we have been working on 
is how do we make sure that broadband providers have the 
initiative to be creative and the initiative to invest.
    Mr. Gohmert. So you do want to leave some room for 
broadband providers to explore different business models, 
correct?
    Mr. Wheeler. Yes, sir. And we have also explicitly said 
that we do not cover what have been traditionally called 
specialized services or managed services. It was interesting to 
note that the Verizon CFO, about a week ago, said Verizon's 
growth opportunities are going to be in over-the-top services, 
and Internet of Things services, both of which it appears they 
are going to offer on their specialized services.
    Mr. Gohmert. We can find out those things from Verizon, but 
I was wanting to ask you directly about things that you 
specifically could answer from your own experience and 
knowledge.
    There was a court ruling in January 2014 that threw out the 
prior effort to control the rules to control the Internet. What 
makes the new rules more able to withstand court challenge, 
Commissioner Wheeler?
    Mr. Wheeler. Thank you for asking that question, 
Congressman.
    The basis of the court's decision was that we had imposed 
common carrier regulation on the ISPs without classifying them 
as common carriers. The heart of this decision is that, in 
fact, we did classify them as common carriers, thereby 
addressing the principle issue in the Verizon decision.
    Mr. Gohmert. Okay. So different facts, you just used 
different words to describe it, is the way it sounds.
    But I heard you just say Congress asked us to look at the 
rules. What from Congress asked the FCC to look at rules 
regarding the Internet?
    Mr. Wheeler. The 1996 Telecommunications Act.
    Mr. Gohmert. Oh, so it was recent. That was 19 years ago. 
You seized on that to say Congress was asking you to look at 
the Internet, 19 years later.
    Well, I would submit to you that something in 1996 had 
nothing to do with wanting you to take charge of the Internet.
    And I would also thank you for your willingness to leave 
some room for exploratory business models and new business 
models. That is really so gracious of you, because before the 
FCC stepped in, everybody was able to explore new business 
models. The only difference is now you are playing God with the 
Internet saying, ``I will decide. We will leave some room for 
you to come up with new business models.''
    That is not your job. The court said that in January 2014, 
and you can change the wording around, but it doesn't change 
the facts. And Congress is not asking you, was not asking you, 
to take over the Internet.
    I want to make that clear. You find something in the last 4 
years where Congress has passed it by elected officials of this 
country, and said, ``Please take over the Internet,'' then that 
would be good evidence before this Committee.
    But until that happens, some of us--most of us in the House 
and most of us in the Senate do not want you to decide who gets 
to develop a new business model and who cannot.
    I yield back my time. Thank you.
    Mr. Goodlatte. The Chair thanks the gentleman.
    Recognizes the gentleman from Florida, Mr. Deutch, for his 
questions.
    Mr. Deutch. Thank you, Chairman Goodlatte, and Ranking 
Member Conyers.
    Thank you to the witnesses for coming and subjecting 
yourselves to what we are providing.
    At Rice University in 1962, President Kennedy asked the 
American people to envision the progress of the first 50,000 
years of human history as if it took place in 50 years. And I 
quote, ``Stated in these terms,'' President Kennedy said, ``we 
know very little about the first 40 years. Only 5 years ago, 
man learned to write and use a cart with wheels. Christianity 
began less than 2 years ago. The printing press came this year. 
And less than 2 months ago, during this whole 50-year span of 
human history, the steam engine provided a new source of power. 
Last month, electric lights and telephones and automobiles and 
airplanes became available. Only last week did we develop 
penicillin and television and nuclear power. And now, if 
America's new spacecraft succeeds in reaching Venus, we will 
have literally reached the stars before midnight tonight.''
    Surely, if President Kennedy were with us today, he would 
count the transformative power of the Internet as the start of 
a brand new day in the history of human progress. By his 
measure, in the matter of seconds, we have gone from a clunky 
desktop dial-up to lightning fast data at our fingertips and in 
our pockets.
    From Google searches and PayPal transactions to Netflix 
shows and Facebook friends, I think we can all agree that the 
Internet has proven to be a platform capable of transforming 
every facet of our culture, our economy, and everyday life.
    I think we can also agree that when it comes to regulatory 
or legislative changes to how we govern the Internet, our 
guiding principle must be to preserve it as a platform for 
progress and innovation. For many years, that guiding principle 
has been net neutrality, the principle that consumers and 
businesses can use the bandwidth that they pay for however they 
choose.
    Mr. Chairman, protecting that freedom is a concern that 
transcends partisan boundaries. How do I know this? Because of 
the hundreds and hundreds of calls that we have received from 
constituents in recent months in support or net neutrality, 
they are not calling as Republicans or Democrats. They are 
small startups working on the next great social network. They 
are aspiring stars who are singing their hearts out on YouTube. 
They are professors collaborating with academics around the 
world on medical research. And they are seniors Face Timing 
with their grandchildren across the country.
    I know that is true because, in my district, I have a lot 
of those.
    They are Americans who don't want interference on the 
Internet, whether it comes from overly rigid regulations 
imposed by government, or anticompetitive agreements struck 
between corporations. And we can't blame them.
    I am glad the debate between consumers and academics and 
businesses and cutting-edge telecom companies has moved past 
whether or not net neutrality is a good thing. The question 
that remains involves how we enforce that widely supported 
principle.
    And to their credit, in the past decade or so, the FCC has 
attempted to enforce net neutrality using the lightest hand 
possible. Yet those strategies were slapped down by the courts.
    Like many of my colleagues, I have some questions about how 
the Title II reclassification ruling, recently announced by the 
FCC, will play out in practice. How can we ensure that new 
regulations keep up with the rapid pace of advancements on the 
Internet? How can we work to promote affordability for 
consumers and bring connections to underserved areas? How can 
we encourage investment in new infrastructure?
    These are the kind of questions, Mr. Chairman, that this 
Committee ought to be focused on in the coming weeks and 
months. Instead, I fear that some of my colleagues in the 
majority are more concerned with turning net neutrality, an 
issue of longstanding bipartisan support, into another wedge 
issue for which to attack the President.
    That being said, we don't have to treat Title II 
classification as the be-all and end-all solution to every 
issue regarding the Internet.
    I look forward, Mr. Chairman, to digging deeper into the 
many issues that impact the regulation of the Internet, from 
common carrier classification to our antitrust framework.
    Mr. Chairman, the space program created by President 
Kennedy may have aimed for the moon, but it yielded 
technological discoveries touching our lives in so many ways, 
and even contributed to the development and adoption of the 
Internet.
    Today, cyberspace remains a great frontier for discovery 
for all, and we must work to ensure the Internet's power as a 
platform for innovation accessible by all continues to thrive. 
That is why this hearing is so important.
    Chairman Wheeler, just two quick questions. Number one, 
does your action set rates and prices and regulate content? And 
number two, how will leveling the playing field for innovators 
and startups be good for my constituents?
    Mr. Wheeler. Thank you, Congressman. No, we specifically 
forbear from rate regulation, tariffing, unbundling, and the 
traditional components.
    Let me pick up on your----
    Mr. Goodlatte. Time of the gentleman has expired.
    The gentlewoman from Texas has a unanimous consent request.
    Ms. Jackson Lee. Yes, Mr. Chairman. I ask unanimous consent 
to put into the record a letter dated January 29, 2015, for 
about four pages of signatures from law professors from as far 
away as New York Law School and the University of South Dakota 
School of law. I ask unanimous consent to place this in the 
record.
    Mr. Goodlatte. Without objection, that will be made a part 
of the record.
    Ms. Jackson Lee. And I ask unanimous consent, Mr. Chairman, 
to put into the record testimony on pages 148 to 150--148, 149, 
150--from a hearing that we held on February 15, 2011, and 
questioning on the issue of competition. I ask unanimous 
consent.
    Mr. Goodlatte. Without objection, that will be made a part 
of the record.
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    Mr. Goodlatte. We have Members who wish to ask questions, 
and we have a vote on the floor, so with the forbearance of our 
witnesses, we would ask, if you are able to remain, please do 
so. And we will return and resume the hearing as soon as these 
votes are completed.
    Committee will stand in recess.
    [Recess.]
    Mr. Marino [presiding]. The Chair now recognizes the 
gentlewoman from Washington, Congresswoman DelBene.
    Ms. DelBene. Thank you, Mr. Chair.
    Mr. Marino. From the State of Washington.
    Ms. DelBene. From the great State of Washington.
    Mr. Marino. The great State of Washington.
    Ms. DelBene. Thanks, everyone, for being here with us 
today. This is an incredibly important issue to make sure we do 
everything possible to maintain an Open Internet.
    As someone who has worked in technology, my background is a 
businesswoman and entrepreneur. I have definitely seen 
firsthand how we have had an evolution in how we connect and do 
business, and how that has completely transformed the way the 
world works, and how critical the Internet is now to everyday 
life.
    In my district in Washington State, we have everything from 
farming communities to high-technology hubs, and they all will 
benefit from responsible and forward-looking net neutrality 
policies that will promote equal treatment of content and 
affordable access for consumers and for businesses. While there 
may be vast disagreements on the best way to achieve this goal, 
I just want to thank everyone for working toward this goal, 
because it is an important goal.
    We now see legislation and changes that are taking place in 
the way the Internet works that really weren't anticipated when 
we put communications law in place. And I believe strongly, as 
a technology person, we need to do a better job of keeping laws 
up to date with the way the world works. Clearly, we haven't 
quite done that. We have a regulatory framework that is quite 
old.
    And, Chairman Wheeler, I wondered if you agree with that 
statement, and if you look at the framework that you are 
working with right now, would you like to see changes there, so 
that we could do the best job possible of putting together a 
great environment to support innovation in this area?
    Mr. Wheeler. Well, thank you, Congresswoman, and I agree. 
This is like that line in Through the Looking Glass that it 
takes all the running you can do to stay in the same place when 
you are talking about all the changes in the Internet.
    It is interesting that the Communications Act itself, the 
Congress was incredibly farsighted in 1996, in particular, when 
they put in flexibility for decision-making to be made by the 
commission along the way. I think it is always worthwhile for 
Congress to involve itself in making sure that the statutes are 
up to date, but the flexibility that Congress has put in the 
statute has also enabled us to try.
    But what we have tried to do is not to be prescriptive and 
say, ``We are smart. We know what is going to happen in the 
marketplace. We know what technology is.'' But rather to say, 
let's have a general yardstick that can be used to measure 
things that we have never thought about as they come along, and 
the authority to do something if, in fact, they fall short of 
that yardstick.
    Ms. DelBene. Now, I know there is a Republican draft piece 
of legislation that has been put together to actually put 
forward legislation on this issue, and the draft that I have 
looked at has some particular carve-outs in it, one for 
specialized services, which seems to be loosely defined, as I 
read it, and also a carve-out that seems to allow paid 
prioritization of certain Internet services where consumers 
specifically approve it.
    I wondered if you had feedback, if you have had a chance to 
see some of this, and if you had feedback on those carve-outs, 
and how you think those might impact competition in the market.
    Mr. Wheeler. Yes. Thank you, Congresswoman.
    We have had conversations with the sponsors of the bill, 
expressing some concerns about those carve-outs and about the 
limitation on the ability of the agency to deal with what I 
just talked about, which is how do you have that yardstick 
going forward.
    Ms. DelBene. Commissioner McSweeny, by reclassifying 
broadband under Title II, the FCC gains the ability to govern 
privacy issues, and it might appear that the FTC in some cases 
loses some of this authority as well. I wondered if you would 
comment on whether you agree that that is true, or if that is 
an accurate assessment, and whether you see room for the FCC 
and FTC to collaborate to protect consumer privacy under Title 
II?
    Ms. McSweeny. I absolutely see room for the FTC and FCC to 
collaborate on privacy. I think that would be very important. 
We already do work together and have had some recent examples 
of consumer protection cases where we have worked together very 
effectively.
    As you point out, reclassification may have an impact on 
FTC jurisdiction. This is why the legislative recommendation 
that I am prepared to make today is repealing the common 
carrier exemption in the Federal Trade Commission Act.
    I think that, as Chairman Wheeler has pointed out, it is 
wonderful when Congress takes the time to think about how to 
update the consumer protection laws. And from my perspective as 
an FTC commissioner, that would make a lot of sense.
    But again, we can work with the FCC. We do work with the 
FCC. And I think consumer privacy is a priority for both the 
FTC and the FCC.
    Ms. DelBene. Privacy is an area that we have definitely 
seen legislation that is out of date, whether it is the 
Electronic Communications Privacy Act or other areas where 
legislation that was put in place decades ago hasn't been 
updated.
    Do you think we can do it this way versus another 
legislative solution with respect to privacy?
    Ms. McSweeny. Well, there are several recommendations that 
have been put forward. The Administration has put forward 
privacy legislation as well. All of these are really valuable 
contributions.
    I would add that data security is a big priority of mine 
personally as well. And I would continue to support the passage 
of comprehensive data security legislation that would not only 
provide consumers with breach notification, but would lay out 
stronger security standards.
    Ms. DelBene. Thank you.
    Thank you, Mr. Chair. I yield back.
    Mr. Marino. Thank you.
    The Chair now recognizes the gentleman from Florida, 
Congressman DeSantis.
    Mr. DeSantis. Thank you, Mr. Chairman.
    Commissioner Pai, do you view this decision as being 
motivated by political pressure, the decision to regulate the 
Internet under Title II?
    Mr. Pai. Congressman, I think there is no question that the 
public pressure put upon the agency by the November 10 
announcement by the President was the defining factor in this 
proceeding. But for that announcement, we would not have made 
the decision we made.
    Mr. DeSantis. And in fact, once the decision was made 
public, you actually had the national Democratic Party praising 
the adoption of President Obama's Internet rules, correct?
    Mr. Pai. That is correct.
    Mr. DeSantis. Now, in terms of the Internet being as it has 
been one of the keys being permissionless innovation, is Title 
II going to further that value or undermine that value?
    Mr. Pai. I think it will undermine the value, Congressman. 
The best example of that is the Internet conduct standard. It 
throws seven vaguely worded factors up in the air, and says it 
is nonexhaustive. And when asked to clarify how exactly will 
this be applied, the FCC admitted on February 26, we don't 
really know. The FCC will sit there as the referee and throw 
the flag. That is the very definition of innovation only by 
permission.
    Mr. DeSantis. Absolutely, and when you don't have ex ante 
rules, I think it really stunts the ability of people to 
dedicate capital.
    What about the taxes issue? It seems to me that this opens 
the door for taxes, Universal Service Fund taxes on people's 
broadband. And so when my constituents ask what is going on 
with the Internet, can I tell them with a straight face that 
they will not pay more as a result of this?
    Mr. Pai. I don't think you can. I think the writing is on 
the wall. And I said on February 26, read my lips, more new 
taxes are coming. And it is going to be applied to broadband 
for the first time.
    Mr. DeSantis. And that obviously will be passed on to 
consumers, and it is going to make what they buy more 
expensive. There is just no way around that, right?
    Mr. Pai. Exactly, and I think the other effect, which 
hasn't gotten a lot of attention, is it is particularly the 
low-income and underserved populations who rely on broadband 
for all kinds of things who are going to be disproportionally 
affected.
    Mr. DeSantis. In terms of the process, do you think that 
this complies with the Administrative Procedure Act? I remember 
when the notice was put out, Title II, I mean it was mentioned, 
admittedly, and I think Chairman Wheeler had pointed that out 
in a previous hearing, but it was not a notice about Title II 
being the central issue.
    So you got a bunch of comments, true. But do you think that 
is the way the process should work?
    Mr. Pai. I don't. I detail in my dissent all the reasons 
why I think the agency's decision did not comport with the 
Administrative Procedure Act. Just to give you one of many 
examples, the application of Title II to mobile broadband, 
nowhere in the document, in the Notice of Proposed Rulemaking, 
will you find the phrase ``public switched network'' and how 
Title II reclassification could work with respect to mobile. 
For good reason: the Verizon court itself said explicitly you 
cannot define mobile providers as common carriers under Section 
332.
    And so I think for a variety of reasons, the agency just 
didn't give the public sufficient notice of what it was going 
to do.
    Mr. DeSantis. Now, much has been made that there has been 
nearly 4 million comments during this period, but weren't there 
a lot of comments opposing using Title II?
    Mr. Pai. There were, and my understanding is that the reply 
comment phase, the majority of those who weighed in, once the 
FCC's intentions became clearer, did oppose the application of 
Title II.
    Moreover, I would point out, Peter Hart, who runs Hart 
Research Associates, a very respected Democratic polling firm, 
found by a 21 percent margin, the American people disagreed 
with what the FCC was proposing to do.
    Mr. DeSantis. So at this point, what is the way forward? I 
mean legally, I know you wrote a very well-written dissent. 
Clearly, this is already sparking litigation. I know that 
previous rules have had trouble in the courts.
    Do you think that this is a legally flawed rule that will 
run into trouble with the courts?
    Mr. Pai. I do, unfortunately. If past is prologue, we have 
years of litigation in front of us. The 2008 decision that the 
Chairman mentioned was rejected in 2010. The 2010 rules were 
rejected only in 2014. And given the likelihood of Supreme 
Court review here, we might be at the end of the decade before 
we resolve the propriety of these regulations.
    Mr. DeSantis. So if somebody comes to you and says, ``Look, 
I don't want Comcast throttling my Internet service or doing 
this or doing that,'' what is your response as to how the 
Internet should work and the appropriate policy response, if 
any?
    Mr. Pai. My response is encapsulated in Congressman 
Deutch's statement. All of us want a free and open Internet. 
There has been a bipartisan consensus for 2 decades that the 
Internet would be free and open with light-touch regulation. 
And I would argue the fact we are where we are, with the 
Internet economy the envy of the world, is precisely because 
the government has been restrained, has let the free market 
flourish and, where appropriate, has allowed antitrust to 
govern. But I fear that we are going on a different path now, a 
partisan one, which shouldn't be the case.
    Mr. DeSantis. And I agree. I will yield back in a second. 
The Clinton-Gore administration, they established this light-
touch approach, a Democratic administration. It was continued 
through, and I think this is a major departure, and I 
appreciate what you have done to highlight the problems.
    And I yield back.
    Mr. Marino. Commissioner Pai, would you please clarify 
something for me? You were asked the first question if you 
thought this was a political pressure, and you responded yes, 
public pressure. Did you mean public pressure or political 
pressure?
    Mr. Pai. Congressman, what I meant was that, based solely 
on the statements the President made publicly, and on the 
statement on his Website, which is public, that alone imposed a 
lot of pressure on this formerly independent agency because we 
were clearly heading down a different path until the 
President's public announcements. And those pronouncements 
obviously had a very significant political effect on the 
decision-making.
    Mr. Marino. Just wanted a clarification for the record on 
that. Thank you.
    Mr. Pai. Thank you.
    Mr. Marino. The Chair now recognizes the gentleman and my 
friend from New York, Congressman Jeffries.
    Mr. Jeffries. I thank the distinguished gentleman from 
Pennsylvania.
    If we can just pick up on that discussion, Commissioner 
Pai, you indicated that you thought it was public pressure 
brought to bear by President Obama in connection with what 
resulted in terms of the FCC order, is that correct?
    Mr. Pai. That is correct.
    Mr. Jeffries. So did the President engage in wrongdoing by 
articulating his position?
    Mr. Pai. Oh, I certainly don't embrace the view that there 
was any kind of affirmative wrongdoing. I think, from my 
perspective though, as someone who cherishes the agency's 
independence, ideally, we should make our decisions based 
solely on the law and the facts and record, not on extraneous 
political considerations. And that is where my concerns kick 
in.
    Mr. Jeffries. All right. Do you have any direct evidence, 
or even indirect evidence, that the decision that was made by 
the FCC is based on extraneous political consideration? What 
evidence do you have of that point?
    Mr. Pai. The best evidence is the fact that the agency was 
considering two very different proposals until the November 10 
announcement. Shortly after the November 10 announcement, the 
FCC publicly ruminated whether or not it needed to seek more 
comment because the President's plan had not been given 
sufficient attention by the agency.
    Mr. Jeffries. Right. Now, there were over 4 million 
comments received, a majority of which expressed support for 
the Title II position, correct?
    Mr. Pai. My understanding is the majority did, yes.
    Mr. Jeffries. And that was the American people expressing 
their opinion in terms of petitioning the government, correct?
    Mr. Pai. That is correct.
    Mr. Jeffries. So it is your view that that had nothing to 
do with the ultimate decision that the FCC reached, that it was 
all about what President Obama said, who, by the way, is the 
leader of the free world, elected by the people of the United 
States of America. But putting that small fact aside for a 
moment, you don't think that the FCC's decision had anything to 
do with public sentiment, which I gather in a representative 
democracy is pretty important?
    Mr. Pai. I think, Congressman, the agency as an independent 
agency should render its decisions based on the law set by 
Congress and the facts in the record. Where the agency was on 
November 9 was very different even given the fact that we 
already had almost 4 million comments on the record.
    The decisive event was what happened on November 10. And 
that is not something that is a fact. It is more an opinion 
expressed by a political actor.
    Mr. Jeffries. Okay. Thank you.
    Chairman Wheeler, I want to explore this concept of light-
touch regulation. I think the previous questioner indicated 
that we have gone beyond that, but I wanted to actually explore 
that and drill down on that.
    There are 47 sections, I believe, that are part of Title 
II, correct?
    Mr. Wheeler. Yes, sir.
    Mr. Jeffries. And I think you have expressly engaged in 
forbearance with respect to 27 of those sections. Is that 
correct?
    Mr. Wheeler. It may actually be 48, and we have forborne 
from 27, yes.
    Mr. Jeffries. Okay, thank you for that clarification.
    In terms of what you have forborne, regulating the Internet 
providers as a utility or rate regulation, is that part of the 
forbearance that has taken place?
    Mr. Wheeler. That is what we have not done, sir.
    Mr. Jeffries. Exactly, that is what you have not done.
    Can you talk about what else you have not done?
    Mr. Wheeler. Yes, sir. You take a look at the classic 
components of utility regulation, and it starts with rate 
regulation. Then it is a process of tariffing. And then it is 
the process of ``here is how you are going to run your network 
in terms of unbundling and providing services.'' Then it begins 
to go even further into, ``Here is how you are going to operate 
your company. Here is how your board of directors will be 
structured. Here are the reports you will make to us. Here is 
the series of accounts. Here is how you will do your accounting 
and report to us.'' None of that is involved.
    Mr. Jeffries. Okay. There has been some legitimate concern 
raised about how a consumer confronting discrimination would 
navigate their way through the FCC process as compared to an 
FTC process, if that were to avail itself. So could you walk me 
through sort of how your Open Internet order would allow for 
the adjudication of a consumer who is alleging discrimination 
in the form of either blocking or throttling?
    Mr. Wheeler. Well, we are always responsive to petitions or 
information that we receive from consumers, and we have 
historically responded to both formal and informal complaints.
    Mr. Jeffries. Okay.
    Commissioner Wright, I think it is your position that the 
FTC's adjudication process may better serve a consumer. Could 
you elaborate as to why you think that may be the case, if that 
is your position?
    Mr. Wright. That is my position, and I appreciate the 
question. Thank you.
    My position in brief is that a large amount of conduct that 
is banned or deterred under the FCC approach would be 
scrutinized under a case-by-case approach under the antitrust 
laws. The antitrust laws circa 1960 adopted an approach very 
similar to what is in the FCC order with respect to 
relationships between Internet access providers and content 
providers.
    Over the last 50 years, that approach has largely been 
rejected out of an increase in economic learning. So it is my 
view that consumers benefit from the case-by-case approach 
because it allows them to accrue the benefits of conduct that 
helps consumers and increases innovation, but allows the 
antitrust laws to operate, to deter, to penalize conduct when 
it does harm consumers. I think that that is the right approach 
and the best balance for consumers.
    Mr. Jeffries. Thank you, my time has expired, but could I 
just ask the Chairman for leave----
    Mr. Marino. Without objection.
    Mr. Jeffries [continuing]. The Chairman for leave to ask 
Commissioner McSweeny if she could just respond. Thank you.
    Ms. McSweeny. Sure, thank you, Congressman.
    My position is that the optimal outcome for consumers is 
both the FCC having in place an Open Internet order, and the 
FTC being able to use its consumer protection expertise to 
protect consumers from deceptive advertising, unfair practices, 
and anticompetitive conduct.
    To do that, we would need the common carrier exemption in 
the FTC Act to be removed.
    Mr. Jeffries. Thank you, and I thank the Chair for the 
additional time.
    Mr. Marino. Thank you.
    The Chair now recognizes the gentleman from Michigan, 
Congressman Bishop.
    Mr. Bishop. Thank you all very much for your testimony 
today.
    I would like to go back to what Representative DeSantis 
started with regard to, Commissioner Pai, your dissent.
    He broached the subject about lawsuits, and in your dissent 
you state that the trial lawyers will be able to open the 
Internet. Can you tell me about that? Are you suggesting that 
this is going to lead to rampant lawsuit abuse? And if, indeed, 
that does happen, what is the impact on the consumer, in the 
aggregate?
    Mr. Pai. Thank you for the question, Congressman.
    The FCC in its order explicitly opens the door to 
complaints both to the FCC and in any Federal court in the 
country under Section 208 of the Communications Act, from which 
the agency explicitly does not forbear.
    As a result of also not forbearing from ex post regulation, 
but only ex ante regulation, the agency obviously invites 
litigation over the reasonableness of rates. And my concern is 
that litigation, as you know, generally does not produce 
anything good for the consumer at the end of the day, because, 
number one, those costs of litigation are passed on to the 
consumer, and number two, the companies, instead of having to 
spend their time innovating and delivering innovative services, 
have to spend time litigating.
    So I think that is part of my concern, that the agency 
didn't explicitly shut the door on some of the litigation, both 
at the commission and in court.
    Mr. Bishop. Thank you very much.
    Commissioner Pai, many of the FCC's conclusions regarding 
the competitive nature of the Internet marketplace are 
predicated on the notion that 25 megabits download speed is the 
appropriate threshold. That seems arbitrary to me. How did we 
get to that number and what does it mean?
    Mr. Pai. Congressman, I share your concern. In December, 
the FCC voted to spend billions of dollars over the next decade 
deploying what it then called broadband, which was defined as 
10 megabits per second for rural areas. In January, we suddenly 
decided that 25 megabits per second was the standard, which 
excludes most mobile broadband offerings, including 4G LTE. 
Suddenly, in February, we decided that everything, any kind of 
connection to the Internet was broadband.
    So my concern is that instead of looking at it objectively 
and trying to figure out what do consumers use the Internet 
for, and trying to tailor our benchmarks to that standard, 
obviously with a little bit of an uptick based on the increased 
usage of the Internet over time, instead, we have picked a 
standard that allows us to achieve the regulatory goal of the 
moment. And that is not something that I think is objective or 
reasonable.
    Mr. Bishop. So that is a completely random, arbitrary 
number, 25 megabits.
    Mr. Pai. Yes, if you look at the FCC's January decision, it 
was grasping for things like marketing materials, anything 
other than the actual uses of the Internet by the common online 
consumer.
    Mr. Bishop. Thank you, Commissioner.
    Commissioner Wright, after the Trinko and Credit Suisse 
decisions, can an antitrust claim survive against an entity 
regulated by Title II?
    Mr. Wright. It is possible under very narrow circumstances 
post-Title II for a claim by a Title II regulated entity to 
survive. The vision of the relationship between regulation and 
antitrust contemplated by Trinko and Credit Suisse I think 
raises an important question. A lot of the questions today have 
touched upon the issue of whether regulation and antitrust are 
complements or substitutes, or whether they can work in tandem. 
Certainly, it is true that sometimes they can.
    Here, however, I think that it is important to note that 
there is a real inherent conflict between the approach adopted 
in the FCC order and modern antitrust laws. Were it 1960, and 
1960's antitrust approach to vertical restraints governing, the 
orders would be complements. They would work together quite 
well. However, what the order does is take conduct that the 
antitrust laws generally presume as procompetitive and declare 
them to be illegal and anticompetitive in all circumstances.
    In a regime like that, where it is totally and plausibly 
the case that in other situations antitrust and regulation can 
coexist, here my fear is that there is an inherent and 
inevitable conflict that is going to result in marginalization 
of antitrust enforcement in favor of a view that looks much 
more like an antitrust era from the 1960's that virtually all 
antitrust scholars of any stripe have long since rejected.
    Mr. Bishop. Thank you, Commissioner.
    I yield back.
    Mr. Marino. Thank you.
    The Chair now recognizes the gentleman from Rhode Island, 
the former Mayor of the beautiful town of Providence, my 
friend, Congressman Cicilline.
    Mr. Cicilline. I thank the Chairman.
    Thank you to the witnesses for this very important hearing, 
and thank you for being with us this afternoon.
    Chairman Wheeler, I want to start with you. There was just 
reference made to this 25 megabits per second. I don't want to 
spend a lot of time on it, but would you just quickly explain 
why that isn't arbitrary, and that there is actually a basis 
for a use of that by the FCC?
    Mr. Wheeler. Thank you, Congressman.
    About 80 percent of America has access to that today, and 
that is kind of a definition of a performance standard.
    Mr. Cicilline. Great.
    Commissioner Pai, you mentioned in your testimony several 
times that the Internet here in the U.S. is the envy of the 
world. I am wondering, in light of the fact that, for example, 
Akamai, which does an annual survey of the state of the 
Internet, ranks the top 10 countries on a whole range of things 
including connectivity, speed, availability. It rates Hong 
Kong, Singapore, South Korea, Japan, Israel, Romania, Uruguay, 
Latvia, Taiwan, and Luxemburg. The U.S. isn't even in the top 
10. The World Economic Forum ranked the United States 35 out of 
148 countries in Internet bandwidth. Other studies ranked the 
United States anywhere from 14th to 31st, globally, in average 
connection speed. Other countries with much more regulated 
markets have more options for Internet access at faster speeds 
and at a lower cost.
    So I am wondering whether or not, in light of the fact that 
75 or 80 percent of American homes only have one option, 
whether you consider, not only it the envy of the world, but 
equally importantly, that that is a competitive marketplace, 
when 75 or 80 percent of the consumers have access to one 
provider?
    Mr. Pai. Thank you for the question, Congressman.
    There are two components----
    Mr. Cicilline. I am sorry, may I also ask unanimous consent 
that those two reports, and an article entitled, ``Why the U.S. 
Has Fallen Behind in Internet Speed and Affordability,'' in the 
New York Times on October 3, 2014, be made part of the 
record.***
---------------------------------------------------------------------------
    ***Note: The submitted material is not printed in this hearing 
record but is on file with the Committee and can be accessed at:

      http://docs.house.gov/Committee/Calendar/
      ByEvent.aspx?EventID=103236.
    Mr. Marino. Without objection.
    Mr. Pai. Thank you for the question, Congressman. There are 
two components to the answer.
    First, with respect to the overall Internet ecosystem, 
there is no dispute that America's online platform is the 
greatest in the world for innovation and investment. That is 
the reason why we see such great companies, such as Google, 
Facebook, Netflix, Twitter, et cetera, building on top of this 
broadband infrastructure that we have in the United States.
    Secondly, with respect to some of the countries you 
mentioned, the United States is in a very different situation 
from say Taiwan or Latvia. We have a very sparsely populated 
country by comparison. And part of the benefit of having the 
American communication system we have is that we have a 
commitment to universal service, and we try to connect as many 
people as possible in this country to the opportunities online. 
That is a difficult thing to do when you are talking about 
places like my home State of Kansas, for example.
    Nonetheless, however, as the Chairman pointed out, 80 
percent of Americans have access to 25 megabits per second 
speeds. That is remarkable when you think about how dispersed 
our population is.
    Now, with respect to the second part of your question, you 
put your finger on the exact problem that we should try to 
solve at the FCC. How do we get more competitive alternatives 
into the marketplace? That is why I focus on a variety of 
different policies making it easier to deploy wireless 
infrastructure, getting more spectrum out there, embracing the 
IP transition. Those are things that could give people more 
alternatives than just the one or the none.
    Mr. Cicilline. Chairman Wheeler, could you respond to that?
    Mr. Wheeler. This will shock everybody to find that 
Commissioner Pai and I are actually agreeing on something 
today. But I think there are multiple reasons. One is our 
geography. Two is the national investment that they have made 
that we have not.
    But the key that we are guiding on, Congressman, is what is 
it we are doing today to make sure that that chart doesn't 
exist tomorrow? Because the chart is the result of decisions 
made a decade ago.
    I think there are three things to it. One is competition. 
We have to have competitive broadband providers. Two is 
spectrum, because spectrum is the pathway of the 21st century. 
And three is we have to have openness, because if these 
entities are allowed to build and then act as gateways where 
they make the decision of how networks are used, we will 
continue to fall down that list.
    Mr. Cicilline. Mr. Chairman, one of the criticisms of the 
order of the FCC has been that it would either discourage or 
suppress capital investment in broadband, which is obviously 
necessary to accomplish just what you described.
    Would you respond to that? And have you seen any evidence 
of that?
    Mr. Wheeler. Thank you, Congressman. A couple of quick 
examples.
    Number one is if you take a look at investment over the 
last 18 or 20 years, what you will find is that the highest 
level of investment was when broadband--DSL at the time--was 
regulated under Title II. Then it kind of dips down and you are 
in a period where there is no regulation, and then the 2010 
Internet rule comes in and it goes back up. So the fact of the 
matter is that, one, it is cyclical, and, two, it doesn't seem 
to be impacted by these rules.
    The other thing that is interesting is to watch Verizon in 
the wireless space. Verizon paid $4.7 billion at auction to buy 
C Block spectrum, which was encumbered with a requirement by 
the commission that it follow certain Open Internet-like rules, 
the only piece of spectrum where that ever has applied.
    They paid top dollar for it. They built it out. And not 
only did they build it out, that is where they put America's 
first 4G LTE network. And clearly, those kind of openness rules 
neither held them back on their investment, nor held them back 
on putting the latest technology in place.
    Mr. Cicilline. Thank you.
    I thank you, Mr. Chairman. I yield back.
    Mr. Marino. Thank you.
    The Chair recognizes the gentleman from Texas, the former 
United States attorney, Congressman Ratcliffe.
    Mr. Ratcliffe. Thank you, Mr. Chairman.
    Thank you, Chairman Wheeler and all of the commissioners 
for being here today.
    I have only been in Washington for two and a half months. 
One of the reasons that I have the opportunity to be here is 
because the people back in my district, back in Northeast 
Texas, are extraordinarily frustrated with Washington. And that 
frustration can be summed up on two points: one, executive 
overreach; and two, intrusive government regulation.
    So as to that first point, my constituents overwhelmingly 
believe that this Administration has ignored the Constitution, 
changing, waiving, and entirely suspending laws. And in fact, 
it is beyond debate but that Obamacare has been waived or 
delayed more than 20 times. Now more recently, we are dealing 
with the fact that laws have been suspended, which allow 4 to 5 
million unlawful immigrants to remain in this country.
    To the second point, we are seeing an expanding government 
that tries to impose regulations into the everyday lives of the 
people that I represent. The Obama administration in the 
President's first term averaged seven new Federal regulations 
every single day, each one of those regulations a tax, each one 
of those regulations some abridgement of someone's freedom in 
this country.
    Which brings us to this most recent encroachment of freedom 
on the people that live in my district, and, indeed, this 300-
page net neutrality rule really embodies the two things that my 
constituents dislike the most about Washington, frankly, a 
total disregard for the constitutional separation of powers and 
the government trying to reach further into their lives.
    It, certainly, appears to me that one of the most 
frustrating things about this regulation is that it is a 
solution in search of a problem that doesn't exist.
    So I have to ask, why did this happen? And it begs the 
question, did this happen for political reasons?
    So, I would like to ask this question, was this decision 
motivated by politics, Commissioner Pai?
    Mr. Pai. Congressman, I don't know what the specific 
motivation was. What I can tell you, however, is that it did 
not address a problem that actually existed in the marketplace.
    Mr. Ratcliffe. Commissioner Wright, do you believe that 
there were political motivations here?
    Mr. Wright. I, certainly, being a whole different building 
down the street can't speak to what was going on in the FCC, so 
I have no opinion on the decision-making process at that 
agency.
    Mr. Ratcliffe. Ms. McSweeny?
    Ms. McSweeny. Like Commissioner Wright, I don't have any 
visibility into the decision-making process of the FCC.
    Mr. Ratcliffe. So let me turn to the Chairman.
    Was this politically motivated?
    Mr. Wheeler. This was based on a record, an extensive 
record that had millions of comments in it and was, from the 
very beginning, an attempt to follow on in the precedent of the 
commission that had established under both Republican and 
Democratic Chairmen.
    We have talked about how previous Republican Chairmen and 
Republican commissions have moved to have openness in the 
wireless industry by invoking Title II, how they have moved 
against Comcast for blocking on the Internet, how the kinds of 
blocking, throttling, activities that are in our order are also 
in the bill that----
    Mr. Ratcliffe. Well, let me reclaim my time here, Mr. 
Chairman, because I heard your testimony earlier about 
throttling and blocking, and some of the examples. And 
obviously, you disagree with my opinion that this is a solution 
in search of a problem.
    So let me ask you this question, to the extent, and you 
went through some examples with Comcast and Verizon, but to the 
extent there was actual anticompetitive conduct occurring on 
the Internet, and the FCC simply chose not to intervene, what 
would prevent the FTC from prosecuting?
    Mr. Wheeler. I think that the issue for the FTC is whether 
the actions fall within the gambit of their authority. And as 
we have discussed earlier with another Member, there is a 
different set of authorities that we have. And we felt that 
they definitely did fall within our gambit.
    Mr. Ratcliffe. Well, let me move to the issue of cost here, 
and how this rule is going to affect the cost of the 
constituents that I represent.
    Let me start with you, Commissioner Pai. Is this going to 
make what people buy in my district on the Internet more 
expensive?
    Mr. Pai. Yes, it will.
    Mr. Ratcliffe. And what would be the reasons for that?
    Mr. Pai. The reclassification of broadband as a 
telecommunications service, and the consequent imposition of 
Universal Service Fund fees will increase consumer broadband 
bills. And it is just a question of when, not if, those 
increased fees are going to be passed on.
    Mr. Ratcliffe. Chairman Wheeler, do you agree with that?
    Mr. Wheeler. I have a different opinion, and as I said 
before, universal service is kind of a red herring. 
Commissioner Pai is on the joint board that will make a 
recommendation on that, and I think I have been gathering what 
his vote is going to be.
    But insofar as the other activities, I think that we are 
going to be promoting competition, and competition increases 
speed and drives down cost.
    Mr. Ratcliffe. Mr. Chairman, I would love to ask more 
questions, but my time has expired.
    I yield back.
    Mr. Marino. Thank you.
    Ladies and gentlemen, this concludes our hearing. Thanks to 
all of our witnesses for being here. I want to thank the people 
in the gallery for spending time here.
    Without objection, all Members will have 5 legislative days 
to submit additional written questions for the witnesses or 
additional materials for the record.
    This hearing is adjourned.
    [Whereupon, at 5:31 p.m., the Committee was adjourned.]
                            A P P E N D I X

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               Material Submitted for the Hearing Record

 Response to Questions for the Record from the Honorable Tom Wheeler, 
              Chairman, Federal Communications Commission
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

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