[Senate Hearing 114-]
[From the U.S. Government Publishing Office]




 
  FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL 
                               YEAR 2017

                              ----------                              


                         TUESDAY, APRIL 5, 2016

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.

    The subcommittee met at 10:35 a.m., in room SD-138, Dirksen 
Senate Office Building, Hon. John Boozman (chairman) presiding.
    Present: Senators Boozman, Mo\ran, Lankford, and Coons.

                   FEDERAL COMMUNICATIONS COMMISSION

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

               OPENING STATEMENT OF SENATOR JOHN BOOZMAN

    Senator Boozman. Good morning. The subcommittee will come 
to order. Today, the subcommittee will consider the fiscal year 
2017 budget request for the Federal Communications Commission 
(FCC).
    I would like to welcome our witnesses, FCC Chairman Tom 
Wheeler and Commissioner Ajit Pai. Thank you all very much for 
being here. We look forward to hearing from you both about the 
details of the FCC's budget and the work you are doing to carry 
out the agency's mission.
    For fiscal year 2017, the Commission has requested a total 
of $358 million. In a disappointing move, the FCC's budget once 
again proposes to transfer additional funds from the Universal 
Service Fund (USF) to augment the FCC's operating budget. The 
Universal Service Fund is intended to help ensure that all 
Americans have access to telecommunications service. It is not 
intended to be a reserve fund to pay for the FCC's operating 
expenses.
    Many people in Arkansas think the FCC has forgotten about 
rural America. I think that view is shared by a number of my 
colleagues. Transferring money away from broadband deployment 
to offset agency spending in DC aggravates that all too real 
perception.
    Congress rightfully rejected the same request last year. 
While the FCC funding is offset by fees, that does not minimize 
our duty to ensure that the agency is operating effectively and 
the funds are being spent responsibly. This is especially 
important since these fees are directly passed on to American 
consumers.
    As members of this subcommittee, we have an obligation to 
ensure that decisions about Federal funding and policy are made 
with taxpayers in mind. Recent FCC actions remind us of the 
need for vigilant congressional oversight.
    Regulatory independence and transparency are critical to 
the functioning and credibility of the FCC. The agency's 
policies and actions have an enormous impact on our country's 
economic growth and potential. The FCC should promote economic 
growth, reduce regulatory burdens, and increase transparency, 
predictability, and accountability in the regulatory process.
    Unfortunately, as we saw with the FCC's embrace of the 
President's plan for Internet regulation, the Commission is 
moving further away from independence, transparency, and 
regulatory certainty.
    However, independence does not mean the FCC is free to 
ignore clear congressional direction, nor does it shield the 
agency from the responsibility to be responsible and responsive 
to congressional questions.
    It has been troubling to see what appears to be an obvious 
disregard of the intent of language on joint sales agreements 
included in last year's omnibus appropriations bill. At no time 
was I or my staff informed that the FCC planned to evade the 
specific language of that provision through the operation of a 
merger or acquisition. Your agency knew of the significant 
bipartisan support of this language, including that of the vice 
chair of the Appropriations Committee. Yet, the FCC consciously 
found a way to write your way out of it.
    Does Congress need to again work in a bipartisan fashion to 
close every conceivable joint sales agreements (JSA) loophole, 
or are you convinced of the need to follow congressional 
intent?
    Independence and transparency are not furthered by less 
than forthright responses to congressional questions. Last 
year, there was an effort to codify what you stated publicly 
and repeatedly, including in our hearing, that the Commission 
would not regulate rates for broadband service. However, since 
that time, your staff has reiterated that either you didn't 
mean what you said or what you said didn't mean what the 
members clearly heard.
    Again, neither the FCC, consumers, nor those you regulate 
are well-served by continued efforts to sidestep 
straightforward inquiries.
    Independence also does not mean independence from dissent 
or the input of other members of the Commission. The FCC has 
repeatedly taken action to effectively silence the minority 
members of your panel. You tweet and blog about matters before 
the Commission, but your fellow Commissioners are barred from 
speaking out under the pretense that the agency has not made 
the proposed rules public.
    As we consider your request for the next fiscal year, we 
are mindful of the ongoing need to clear the way for economic 
opportunity and for international competitiveness. The FCC has 
a responsibility to play an important and positive role in 
ensuring that the United States continues to lead the world in 
innovation and communication.
    Thank you. I will now turn to our ranking member, Senator 
Coons, for his opening statement.

               STATEMENT OF SENATOR CHRISTOPHER A. COONS

    Senator Coons. Thank you, Mr. Chairman, for convening this 
hearing today and for the ongoing opportunity for us to work 
well together on this important subcommittee.
    I would like to welcome our witnesses, Chairman Wheeler and 
Commissioner Pai. Thank you. You have important and difficult 
jobs, and I am thankful for your service and appreciate your 
joining us here today.
    I welcome this opportunity to examine the FCC's budget 
request and to discuss the agency's crucial role in ensuring 
that our national communications infrastructure is reliable, 
effective, efficient, and innovative.
    As Americans grow to be evermore connected, we demand even 
more from our connections. Smart phones, vehicle-to-vehicle 
communication, interactive television all exist potentially on 
a foundation of limited, but shared public resources.
    As the FCC continues to foster an environment that 
encourages these technological advances, it must also ensure 
our communications system works for all Americans, regardless 
of whether they are rural or urban, old or young, rich or poor.
    Even though the FCC is a small agency, its mission touches 
the lives of millions of Americans every day. In 2014, over 90 
percent of American adults owned cell phones, a number which 
continues to grow. Cell phone companies need access to 
additional spectrum to expand and upgrade their networks to 
fulfill growing demand.
    The FCC is in the process of the first-ever incentive 
auction, which will provide both spectrum that is currently 
being used by broadcast television for more wireless 
communications, while bringing in substantial revenue for the 
U.S. Treasury.
    The Spectrum Pipeline Act authorized the FCC to start work 
on the next set of spectrum auctions. I'll be interested to 
hear how the incentive auction is progressing, issues that may 
be developing, and any resource requirements for these critical 
spectrum auctions.
    Just as cell phone use becomes more common, it is becoming 
more and more critical that everyone be able to connect to 
reliable broadband service in their homes, schools, and 
communities, whether urban or rural. The FCC oversees the $10 
billion Universal Service Fund, which has a key role in 
expanding access to communications for all Americans.
    The FCC has worked over the past few years to modernize the 
fund to include broadband access while reducing waste.
    It is not only important that every student in America has 
access to state-of-the-art tools for their education, but that 
every town, no matter how rural, be connected to the vital 
communications that drive our economy.
    Last week, the FCC introduced a new proposal that would 
modernize the Lifeline program to provide a subsidy for 
Internet service for low-income individuals, and I'm interested 
to hear how this proposal would, in fact, increase access for 
individuals in need so they can use the Internet to connect to 
their families and friends, but also to apply for jobs and do 
homework.
    And I look forward to hearing about the FCC's initiatives 
to reduce waste and ensure that these resources are spent 
efficiently.
    Your fiscal 2017 request is $368 million, $16 million less 
than the current funding level. As in prior years, the total 
spending is fully offset by fees at no cost to taxpayers. The 
FCC also requests $124 million to operate the spectrum auction, 
an increase of $7 million over the current level. These funds 
are also fully offset, so they have no impact on the Federal 
deficit.
    I'm curious to hear more about the investments the FCC 
proposes to make in this year. Aging IT infrastructure, for 
example, creates inefficiencies and vulnerabilities that can 
lead to mission-critical challenges and to cyberattack.
    Funding for the FCC has been frozen for several years. I 
hope you can take this opportunity to explain the impact of 
reduced funding in the past and how you are identifying cost 
savings, increased efficiency, and eliminating waste.
    From providing a platform for the Internet of things to 
promoting Vehicle-to-Vehicle (V2V) communication, from 
modernizing the Lifeline program to bringing broadband to every 
community in America, the FCC has a very busy and full year 
ahead. And this agency is dedicated to giving the American 
people resources we all need to do our jobs. Let's make sure 
Congress does the same for the FCC.
    We have a lot to discuss today and important ground to 
cover. Thank you again for coming here today to share both of 
your perspectives on the FCC's funding requirements and goals 
for fiscal year 2017.
    Chairman Boozman, thank you for your leadership, and I am 
eager to continue to work together to advance these bipartisan 
initiatives. Thank you.
    Senator Boozman. Thank you, also, Senator Coons for all 
your hard work, as always, on the subcommittee, particularly in 
this area.
    Chairman Wheeler, we invite you to present your testimony.

                 SUMMARY STATEMENT OF HON. TOM WHEELER

    Mr. Wheeler. Thank you very much, Mr. Chairman. As last 
year, I am presenting to you, the board of directors here, like 
I used to present in business to the board of directors, using 
the PowerPoint deck, which you all have.
    On the first page, I won't read it to you, but there are a 
series of action words there--down, fewest, flat, investments 
paying off. That is the kind of story that I think we are going 
to be talking about here today.

   PAYGO PROPOSAL FOR UNIVERSAL SERVICE FUND WASTE, FRAUD, AND ABUSE 
                               OVERSIGHT

    The last item, which reflects something you talked about, 
Mr. Chairman, reflects two messages that we are getting from 
Congress. That item is, of course, the PAYGO proposal for 
Universal Service Fund waste, fraud, and abuse oversight.
    We are hearing from Congress, in these and other hearings, 
go after waste, fraud, and abuse. We put in place last week a 
new program that fixes the design flaws that have been in the 
program historically. And what we are proposing this year is 
that the police force should be paid by those that they are 
protecting, which fits with the Government Accountability 
Office (GAO) report on the Commission and the fairness of our 
regulatory fee structure.

              ASSESSING FEES CHARGED TO SERVICES PERFORMED

    There are amendments in the Commerce Committee to deal with 
that issue. It basically says that assessing fees should be 
charged to services performed. The question becomes, why should 
broadcasters, satellite operators, amateur radio, et cetera, 
have to pay for universal service, which they are not involved 
in?
    If you turn to page 2, it is a quick overview. You can see 
that we have a flat base. The reduction in move expenses 
reduces the totals. The auctions are up, and we will discuss 
that in a moment. And the full-time equivalents (FTEs) are at a 
record low. As has been referenced, these are all non-tax 
dollars.

                      USE OF REGULATORY FEE FUNDS

    Page 3 is a waterfall of the use of our regulatory fee 
funds, with 2016 on the left, 2017 on the right, and in between 
the additions and deletions. So if you go from left to right, 
there is about $4 million in salary, inflation, and contracts 
that are beyond our control. There is about $5 million in terms 
of the IT cloud, and moving our legacy systems onto the cloud 
that with the money you appropriated last year, we were able to 
transition to. There is about $2 million in predictive 
analytics to use big data to catch inappropriate Universal 
Service Fund (USF) claims. Then there is the $10 million 
funding from universal service to police universal service.

         CONSEQUENCES OF NOT DOING PAYGO FOR UNIVERSAL SERVICE

    The question arises, okay, what if there is no ability, if 
you decide that you do not want to do the PAYGO for universal 
service? Then there's a $10 million shortfall. Over on the 
right, we have tried to identify the choices and the 
consequences that result from that. It is about 56 FTEs, and 
you have to make a choice between that or between whether we 
are going to improve the consolidated database system for 
broadcasters, whether we are going to improve universal 
licensing system for the management of wireless licensees, 
whether we are going to improve the public filing system, 
whether we are going to have the tools necessary for the 
mapping that is a predicate to reforming wireless in rural 
areas in our mobility fund program, whether we are going to be 
able to continue to speed up authorization of equipment, 
because we are the chokehold for equipment authorization for 
the electronics industry, and lastly for cyber fixes.

                     SPECTRUM AUCTION AND REAUCTION

    If you turn to page 4, it is the same kind of waterfall for 
the spectrum auction. We are asking for an additional $11 
million. So the question becomes, why, if the spectrum auction 
is going to be over, are you asking for more money? There are a 
couple reasons.
    First of all, there is no guarantee that the auction is 
going to be completely over and not run into fiscal year 2017. 
Remember, this is not just a one-shot auction. If the money 
coming in from wireless carriers doesn't pay for the money 
necessary to relocate, to buy out the broadcasters, that you 
then reauction, the process is structured for reauction after 
reauction after reauction until you get to wherever that 
marketplace is. So we don't have an assurance that things will 
end with one round.

                 SPECTRUM AUCTION POST-BIDDING ACTIVITY

    Secondly, the auction very definitely is not over when the 
gavel falls. The post-bidding activity is actually as 
challenging as what we saw with the DirecTV (DTV) transition 
several years ago because, think about it, every remaining 
broadcaster will have to move its frequency. Some will have to 
move their towers. It is a very complex process.
    The National Association of Broadcasters (NAB) has been 
telling us that the time that we have allocated, 39 months to 
do this, is not sufficient. We think it is sufficient, but I 
will guarantee you it will not be sufficient if sufficient 
funds are not available.

                          ADDITIONAL AUCTIONS

    So we need to make sure that just because the auction may 
seem to be over, the responsibilities of that auction are far 
from over. And we have four new actions that we have to 
complete in 2017, four additional auctions: a FM auction, FM 
translators, a half million 3.5 gigahertz licenses, and the 
reauction of the Advanced Wireless Services-3 (AWS-3) spectrum.
    So, again, we have choices with consequences. We have built 
the world's best auction system. We are pioneering the world's 
first incentive auction. It is a complex process. It is also 
process, which as you can see in the lower right-hand corner, 
provides the best return on investment in government, and that 
for the money that it takes, we have provided great returns.
    I see that I am going over my time, so I will stop here. 
I'm happy to discuss other parts of the presentation, including 
IT and the PAYGO issue, if you would like.
    Thank you, Mr. Chairman.
    [The statement follows:]
                 Prepared Statement of Hon. Tom Wheeler
    Chairman Boozman, Ranking Member Coons, and members of the 
Financial Services and General Government Subcommittee, thank you for 
inviting me here to present the Federal Communications Commission's 
fiscal year 2017 budget request. Our proposal demonstrates the 
Commission's successful efforts to keep costs down, while maximizing 
and leveraging resources to benefit consumers and industry. This budget 
asks for less than the previous year's appropriated amount and once 
again provides more in management efficiencies.
    Last year, the Commission asked for $388,000,000 in general 
spending authority derived from Section 9 regulatory fees for our 
overall non-auction costs, an auctions cap of $117,000,000, and a 
$25,000,000 transfer from the Universal Service Fund (USF) to oversee 
that program's general operations. You responded by providing 
$384,012,497 overall with $44,168,497 of that number in directed 
spending to initiate our FCC headquarters footprint reduction. That 
left $339,844,000 for regular spending. You also granted our requested 
$117,000,000 for the auctions cap, but you did not provide the USF 
transfer.
    We have initiated the facilities process as a result of the 
directed funding and we expect to forge ahead with the footprint 
reduction as soon as GSA awards the lease. We appreciate this 
Committee's support for this important process and expect that the 
footprint reduction will save $119 million over the life of the next 
lease.
    During the past year, you also provided us with reprogramming and 
reorganizing authority to consolidate our Enforcement Bureau. We also 
received permission for a reprogramming request to use unobligated 
funds to support our IT server move to a secure facility off-site from 
the FCC headquarters location. The Enforcement Bureau consolidation is 
well underway and we completed the server move in September.
    For the past 7 years, general funding for the Commission has been 
between $336 and $339.8 million, with an additional reduction of $17 
million due to the 2013 sequestration. The Commission's auction cap was 
stagnant at $85,000,000 for 9 years until we received increases 
starting in 2013 to fund the Incentive Auctions process. Most of the 
Commission's increased costs have been associated with inflationary 
adjustments and mandated pay raises. Calculating the flat funding 
levels in light of inflation and sequestration impacts shows that we 
have experienced reductions in our purchasing power. Accordingly, we 
have seen significant staffing reductions. The FCC's FTE level has 
dropped from 1,775 in 2010 to a projected 1,650 in fiscal year 2017, 
the lowest level in more than 30 years. We also have reduced our 
contractors by more than one-half during the same period.
    The fiscal year 2017 budget requests a total of $358,286,000 
derived from section 9 regulatory fees, a $9,500,000 transfer from the 
USF to pay for the costs of reducing improper payments and enforcing 
that $8.3 billion program, and a $7,000,000 increase in the Spectrum 
Cap to $124,000,000. Of the $358,286,000 number, $16,866,992 will be 
directed to complete the facilities leasing process and footprint 
reduction. Overall, the fiscal year 2017 request is $25,726,497 less 
than our fiscal year 2016 appropriated level of $384,012,497, if you 
allow the requested USF transfer amount. If you decide against 
transferring the USF funds again this year, we would be underfunded 
from the onset by $9.5 million.
    I am attaching a series of slides to illustrate in greater detail 
the Commission's resource needs, management objectives and spending 
process, all of which I plan to discuss with you during my oral 
testimony. These slides also provide a clear outline of projected funds 
raised, money spent, and programmatic goals. They illustrate in detail 
the administrative and funding issues that we have faced, while 
providing a positive picture of how many of our investments are paying 
off.
    One area of progress that I wanted to highlight is our work to 
improve the FCC's efficiency and effectiveness. I am pleased to report 
that more than 77 of the 154 recommendations of the Commission's 2014 
Process Reform Working Group have been fully implemented and most of 
the remainder are being implemented. Many of these reforms are related 
to operational improvements that this subcommittee supports--enhanced 
transparency, greater public access, streamlined processes, cost 
savings measures, better employee training, and overall, more efficient 
use of the resources that you give us to carry out our routine mission 
objectives.
    In many places where we made reform investments, we have seen 
phenomenal success. The sixth slide in the attachment lists seven of 
these IT success stories. A July, 2015 article in Forbes detailed how 
one of these--the new FCC Consumer Complaint System--saved the writer 
$1,800 after a short investment of online time. And of course, we saved 
all taxpayers additional funds by avoiding expensive contractor costs 
and purchasing an off-the-shelf system to stand-up this new consumer 
system.
    Those who use our systems on a routine basis also have praised our 
work. On February 24, 2016, the president of the Federal Communications 
Bar Association wrote the Commission on behalf of the lawyers who use 
our systems to thank us for improving and updating our Web site. While 
work continues to improve FCC.gov, users can navigate with less effort, 
saving time and resources.
    Our funding levels have an impact on our process reform success 
rate and we must constantly review our resources and prioritize between 
mission objectives based on costs. The Commission requested additional 
funds for some reform projects, especially with regard to our 
Information Technology operations. Although we did not receive these 
funds, we did not throw in the towel--we made tough cost cutting 
decisions and moved ahead.
    One such decision was the consolidation of our Enforcement Bureau 
facilities nationwide--done only after careful study, significant 
stakeholder input, and a full Commission vote. With your permission, we 
reorganized these offices to better focus on their primary 
responsibility--enforcement of the Commission's rules governing 
radiofrequency interference--while maximizing the efficient use of our 
resources. This process has already saved more than $400,000, and we 
are on track to save an additional $220,000 per month. Once the other 
elements of the consolidation plan go into effect, we should save 
between $8-9 million per year. These cost savings will allow us to make 
essential upgrades to our field investigative equipment, and enhance 
the complaint intake and database systems. In the meantime, we have 
continued to improve our support for public safety entities, and we 
have attacked pirates in high-volume areas like New York where we have 
the most significant number of violations.
    The server ``lift and shift'' is another good example of our 
flexibility in re-assigning funds to mission-critical objectives. We 
had been saddled with over 200 legacy systems, many of which were in 
disrepair. After receiving reprogramming permission, we retired 
approximately 70 servers and moved more than 120 to a new location in 
September. At the same time, we were unable to convince you to provide 
us with $3 million per year to cover the ongoing maintenance and 
updates of our broadband map. Our solution was to go back to the 
drawing board and find a much cheaper option. That is why we dropped 
the fiscal year 2016 request in fiscal year 2017 and instead opted for 
a less expensive commercial product--a more adaptable Geospatial 
Mapping System that will support the 350,000 individual users per year 
who access the FCC Maps page.
    When we ask for IT funds, as we are in the current fiscal year, we 
do so only after exhausting all available resources, closely examining 
the least expensive options, and finding the best return for the 
taxpayers and those we regulate. In fiscal year 2017, we hope to take 
another step toward completing our projected IT modernization efforts, 
rewriting additional legacy applications to a resilient cloud-based 
platform. With regard to individual IT projects, we are focused in the 
current fiscal year on systems that support essential services and 
public safety, such as the Universal Licensing System, the Network 
Outage Reporting Systems and the Disaster Reporting system. With your 
help in the next fiscal year, we will modernize and upgrade other 
important systems, including our Consolidated Database System and 
Equipment Authorization System, among others. We will hit the most 
critical systems first and ask that you support our efforts to ensure 
that America's communications industry has the fastest, most efficient, 
reliable and secure access to emergency notification systems and 
licensing programs available.
    These improvements and upgrades represent expenditures. But the 
Commission also generates revenue, most notably through our management 
of commercial spectrum. Setting aside the money raised at auction, 
making spectrum available for wireless use helps spur significant 
economic growth and job creation.
    The auctions cap increase has unquestionably been one of your 
wisest investments--and one that your children, grandchildren and great 
grandchildren will appreciate. Before 2013, the Commission endured 9 
years of auctions caps at $85 million--no inflationary adjustments, no 
funds for improving the operational efficiencies or resiliency of our 
IT systems, and no money to study new projects to support auctions 
programming. You changed that to ensure funding that supports 
auctions--and now we are asking you again for a modest increase.
    The infusion of additional funds since 2013 has supported our 
efforts to bring in over $42 billion to the Treasury in two major 
auctions. But most importantly, your permission to use additional 
auctions funds has supported our efforts to develop and prepare for the 
first-ever Incentive Auction, which is slated to launch this month. 
This process has involved highly skilled, technologically savvy FTEs 
and contractors, across multiple disciplines, including cutting-edge 
economics and engineering. It also has involved the development of 
essential and resilient IT systems to support this program.
    To ensure preservation of service for broadcast viewers and timely 
network deployment, we have been focused on post-auction planning for 
over a year, including the release of the draft relocation 
reimbursement form and a reimbursement cost catalog, and we have 
already begun to pivot and to accelerate our planning for the post-
auction transition. Like the auction, the transition will be a complex 
effort spanning several years. So we will continue to experience costs 
associated with the Incentive Auctions into the next fiscal year and 
beyond. But I have no doubt that the money spent in this effort will 
yield important dividends--financially for the Treasury, and for 
industry growth supported by freed-up commercial spectrum.
    Also, since I testified last year, the Commission has been asked to 
do even more to promote spectrum resources. The Bipartisan Budget Act 
of 2015 not only extended our auction authority but it mandated that we 
work with other agencies to identify and develop resources for a 
``spectrum pipeline.'' In addition to the Incentive Auction and other 
innovative auctions on our planning list, we will be expending 
resources to support the core goals of the new legislation. To do so, 
we need to upgrade our traditional and aging auction IT systems--the 
ones that were not upgraded during the pre-2013 years--for use into the 
next decade, and engage in a broad range of economic and engineering 
studies to ensure that the next generation of auctions are at least as 
successful as past auctions.
                               conclusion
    The Federal Communications Commission's mission to maximize the 
benefits of communications technology for the American people helps to 
grow our economy, expand opportunity, and boost U.S. competitiveness. 
With appropriate funding, we can achieve Congress' varied mandates and 
do so in a fiscally sound manner.
    I appreciate this subcommittee's attention to the Commission's 
funding for the next fiscal year, and I look forward to answering your 
questions. Thank you.

                                 SLIDES


   Commission's Resource Needs, Management Objectives, and Spending 
                                Process
















    Senator Boozman. Thank you, Chairman Wheeler. And happy 
birthday.
    Mr. Wheeler. Thank you, sir.
    Senator Boozman. Quite a way to spend your birthday.
    Mr. Wheeler. For 70 years, I've been preparing for this 
day.
    Senator Boozman. Commissioner Pai.

                   SUMMARY STATEMENT OF HON. AJIT PAI

    Mr. Pai. Thank you, Mr. Chairman. Chairman Boozman, Ranking 
Member Coons, members of the subcommittee, thank you for 
holding this hearing and for affording me the privilege of 
testifying on the FCC's budget request for fiscal year 2017.
    This morning, I would like to focus on two of the issues 
that I discussed in my written testimony: first, joint sales 
agreements, or JSAs, among television broadcast stations; and 
second, broadband rate regulation.

                         JOINT SALES AGREEMENTS

    First, JSAs. I urge this subcommittee to once again act to 
safeguard joint sale agreements among television stations. In 
last year's appropriations bill, as the chairman pointed out, 
an overwhelming bipartisan majority in Congress ordered the FCC 
to grandfather existing JSAs for 10 years, but the Commission 
has flatly refused to follow the law. It is now using the FCC's 
merger review process to force companies to unwind JSAs, 
including those previously blessed by the agency.
    One recent example involves my home State and Senator 
Moran's home State of Kansas. The Commission recently required 
parties to terminate a JSA that allowed Entravision, a 
Univision affiliate, to provide the only Spanish-language news 
in the Sunflower State.
    This action was particularly egregious because the FCC's 
chairman had previously testified to your counterparts in the 
House that this very agreement would not be affected by the 
Commission's new JSA policy. In response to the Commission's 
actions, a bipartisan group of 12 Senators, including Chairman 
Boozman and Senator Durbin, have made clear their displeasure 
with the FCC's actions.
    They stated that the FCC, in their words, ignored 
bipartisan concerns raised by Congress on JSAs and that they 
were ``extremely disturbed'' by the Commission's actions. In 
particular, they explained that the Commission was, as they put 
it, ``undermining Congress' clear intent to preserve JSAs that 
were lawfully executed prior to the FCC's 2014 rule changes.'' 
At a time when folks in Washington can agree on very little, it 
is telling when a powerful bipartisan group of lawmakers has 
found common cause in taking on the agency's lawlessness in 
this matter.
    In this letter, the Senators asked the FCC to eliminate any 
conditions imposed on previously approved license transfers 
that required terminations of any JSAs in existence prior to 
March 31, 2014. They also asked the FCC going forward to 
respect preexisting JSAs when evaluating any assignments or 
license transfers.
    Unfortunately, Chairman Wheeler's response to this letter, 
as well as his testimony 2 weeks ago before the House, makes 
clear that the FCC has no intention of complying with the law 
or these requests. As Chairman Boozman aptly put it, there is 
an obvious disregard for Congress' instructions here.
    I, therefore, would urge this subcommittee to include very 
specific language in the upcoming appropriations bill requiring 
the FCC to take the steps requested by the Senators and follow 
the law.

                       BROADBAND RATE REGULATION

    Second, the subcommittee should forbid the FCC from using 
any appropriated funds to regulate broadband rates. While the 
subcommittee did so last year, this provision did not make its 
way into the appropriations bill that was ultimately passed by 
Congress. In my view, the subcommittee should take another bite 
at this apple. There is no legitimate reason to oppose 
preventing the FCC from regulating broadband rates.
    Supporters of the FCC Internet regulations have repeatedly 
disclaimed any interest in doing so. President Obama himself 
told the FCC to forbear from rate regulation. Chairman Wheeler 
told this very subcommittee last year, and I quote, ``If 
Congress was to come along and say that's off the table for the 
next Commission, too, I have no difficulty with it.''
    It is, therefore, perplexing that the FCC and the 
administration lobbied so hard last year to kill the 
subcommittee's attempt to take broadband regulation off the 
table. Indeed, from my understanding based on multiple sources, 
the FCC and the administration turned down a deal that would've 
provided millions of dollars in additional funding to the FCC 
in exchange for a provision prohibiting broadband rate 
regulation.
    All of this raises serious concerns about the Commission's 
real intentions. When it comes to Internet regulation, we know 
all too well from past experience that what was once 
unthinkable can become quite real the moment political pressure 
is applied.
    A less intrusive regulatory approach can give way to heavy-
handed, utility-style regulation. A wireless service plan that 
benefits consumers, like T-Mobile's Binge On, can be highly 
innovative and highly competitive one month and be the subject 
of an FCC investigation the next month.
    Simply put, Congress should not trust the FCC's claim that 
it won't regulate broadband rates. Indeed, just 2 weeks ago, in 
a startling reversal, the chairman told the Subcommittee on 
Communications and Technology of the House Energy and Commerce 
Committee that he now believes the FCC should and does have the 
authority to regulate broadband rates.
    The only way to ensure that rate regulation does not happen 
is for Congress to take a Reagan-inspired approach: Trust, but 
codify.
    Chairman Boozman, Ranking Member Coons, members of the 
subcommittee, thank you once again for holding this hearing. I 
look forward to answering your questions and look forward to 
working with you and your staffs in the days to come on these 
critical issues.
    Thank you, Mr. Chairman.
    [The statement follows:]
                  Prepared Statement of Hon. Ajit Pai
    Chairman Boozman, Ranking Member Coons, and members of the 
subcommittee, it is a privilege to appear before you today. Thank you 
for inviting me to testify on the Federal Communications Commission's 
budget request for fiscal year 2017.
    Last year, I offered three specific suggestions to this 
subcommittee regarding the Commission's budget request for fiscal year 
2016. I am pleased that Congress and the subcommittee took these 
recommendations into account.
    First, Congress and the subcommittee provided specific budget 
authority for moving the FCC's headquarters or reorganizing how we use 
our existing facilities (known internally as ``restacking''). Moving or 
reorganizing is likely to produce meaningful cost savings over the long 
term, but this will require a substantial, one-time expense. I 
therefore thought that it made sense for Congress to provide us with 
specific budget authority for that purpose. If these funds had been 
included within our general appropriation amount, as the Commission had 
requested, it would have given many a misleading picture of the 
Commission's base budget and made it harder to reduce that budget when 
there was no longer the need to spend money on moving expenses.
    I therefore applaud the Commission for requesting specific budget 
authority for fiscal year 2017 instead of general budget authority for 
the second (and hopefully final) tranche of moving or restacking funds. 
In my view, this is a fiscally responsible proposal, and I urge this 
subcommittee to approve it.
    Second, Congress and the subcommittee rejected the Commission's 
request to transfer $25 million from the Universal Service Fund (USF) 
to the Commission. I opposed the transfer request, among other reasons, 
because it would have imposed a stealth tax increase on the American 
people.
    I am disappointed that the Commission is yet again seeking to 
siphon money from the USF to fund the FCC's work, and I urge this 
subcommittee to again reject this proposal. To be sure, the Commission 
this year is requesting a smaller transfer of $9.5 million. But the 
reasons for opposing any diversion of USF funds to the Commission are 
just as compelling now as they were 1 year ago. I agree with Chairman 
Greg Walden of the Subcommittee on Communications and Technology of the 
House Energy and Commerce Committee that transferring USF funds to the 
FCC is a ``disturbing proposal.'' And Chairman John Thune of the Senate 
Commerce Committee has said that it would set ``a dangerous 
precedent.'' The Commission's authorizers are right: USF funds should 
be spent across our country closing the digital divide, not at the 
FCC's headquarters here in Washington, DC.
    Third, the subcommittee forbade the Commission from using any 
appropriated funds to regulate broadband rates. I was disappointed that 
this provision did not make its way into the appropriations bill that 
was ultimately passed by Congress.
    The subcommittee should take another bite at this apple. There is 
no legitimate reason to oppose blocking the FCC from engaging in 
broadband rate regulation. Supporters of the FCC's Internet regulations 
have repeatedly disclaimed any interest in regulating broadband rates. 
President Obama himself told the FCC to ``forbear[] from rate 
regulation.'' And Chairman Wheeler told this subcommittee last year: 
``If Congress was to come along and say that's off the table for the 
next Commission, too, I have no difficulty with it.''
    It is therefore perplexing that the FCC and the administration 
lobbied so hard last year to kill this subcommittee's attempt to take 
broadband rate regulation off the table. Indeed, my understanding from 
multiple sources is that the FCC and the administration turned down a 
deal that would have provided millions of dollars in additional funding 
to the Commission in exchange for a provision prohibiting broadband 
rate regulation.
    All of this raises serious concerns about the Commission's real 
intentions. Because when it comes to the topic of Internet regulation, 
we know from past experience that what was once unthinkable can become 
quite real the moment political pressure is applied. A less-intrusive 
regulatory approach can give way to heavy-handed, utility-style 
regulation. A wireless service plan like T-Mobile's Binge On can be 
``highly innovative and highly competitive'' 1 month and be the subject 
of an FCC investigation the next. Simply put, Congress should not trust 
the Commission's claim that it won't regulate broadband rates. Indeed, 
just 2 weeks ago, in a startling reversal, Chairman Wheeler told the 
Subcommittee on Commerce and Technology of the House Energy and 
Commerce Committee that he now believes that the FCC should and does 
have the authority to regulate broadband rates. The only way to ensure 
that rate regulation does not happen is for Congress to take a Reagan-
inspired approach: ``trust, but codify.''
    As you begin drafting our appropriations bill for fiscal year 2017, 
I want to draw the subcommittee's attention to three additional 
concerns: the grandfathering of joint sales agreements (JSAs) among 
television stations, the proposed increase in auction spending, and the 
FCC's oversized media shop.
    One, I urge this subcommittee to once again act to safeguard joint 
sales agreements among television stations. In last year's 
appropriations bill, an overwhelming bipartisan majority in Congress 
passed a law ordering the FCC to grandfather existing JSAs for 10 
years. How did the FCC respond? It has ignored the law and is using the 
FCC's merger review authority to force companies to unwind JSAs. One 
recent example involves my home State of Kansas where the Commission 
recently required parties to terminate a JSA that allowed Entravision, 
a Univision affiliate, to provide the only Spanish language news in the 
Sunflower State. This action was particularly egregious because the 
FCC's leadership had previously testified to your counterparts in the 
House that this specific JSA would not be affected by the Commission's 
new policy.
    A bipartisan group of 12 Senators, including Chairman Boozman and 
Senator Durbin, have made their displeasure clear. They stated that the 
FCC ``ignored bipartisan concerns raised by Congress'' on JSAs and were 
``extremely disturbed'' by the Commission's actions. In particular, 
they explained that the Commission was ``undermin[ing] Congress' clear 
intent to preserve JSAs that were lawfully executed prior to the FCC's 
2014 rule changes.'' It is telling that despite agreement on little 
else, a powerful, bipartisan group of lawmakers has found common cause 
in taking on the agency's lawlessness in this matter.
    In its letter, Senators asked the FCC to eliminate any conditions 
imposed on previously approved license transfers that require the 
termination of any JSAs in existence prior to March 31, 2014 and 
respect the statutory grandfather of JSAs when evaluating any 
assignments or license transfers in the future. Unfortunately, Chairman 
Wheeler's response to this letter as well as his testimony two weeks 
ago before the House makes clear that the Commission has no intention 
of complying with the law or these requests. I therefore would urge 
this subcommittee to include very specific language in the upcoming 
appropriations bill requiring the Commission to take such action.
    Two, I am skeptical of the Commission's proposal to raise spending 
on the spectrum auctions program to $124 million. The $117 million 
being spent this year is a record, and it's easy to understand why the 
auctions program is funded at that level. After all, this fiscal year 
we are holding the world's first incentive auction for spectrum, an 
enormously complicated endeavor requiring plenty of resources. And 
included in that budget was $7.2 million targeted for the Commission's 
move.
    Fiscal Year 2017 should be quite different. The incentive auction 
will likely be over, and there is no comparable spectrum auction on the 
horizon for that fiscal year. Even the fiscal year 2017 request for the 
Commission's move is less--$4.4 million lower, to be precise. And yet, 
rather than a substantial decrease, the request for auction spending in 
fiscal year 2017 is $7 million higher. It's difficult to understand 
why.
    Let's look, for example, at one of the specific spending increases 
proposed for the auctions program. The Commission is requesting $3.58 
million and three additional FTEs to implement the Spectrum Pipeline 
Act of 2015. Why can't this work be handled by current FCC employees 
and the existing budget? Many FCC staffers have been working on issues 
related to the forward side of the incentive auction. During the next 
fiscal year, when the forward auction work will be completed, I'm 
confident that we could easily reassign three of them to help implement 
the Spectrum Pipeline Act of 2015.
    I would also urge this subcommittee to examine closely whether 
reductions can be made from last year's spending. Are there expenses 
that have been or will be incurred during this fiscal year because of 
the incentive auction that will not be repeated during fiscal year 
2017? Can we devote fewer staff resources to the auction program if no 
major auction will be held? And if the answer to one or both of these 
questions is yes, shouldn't the amount of funds provided by Congress 
for the spectrum auctions program be adjusted accordingly?
    Three, I also recommend that this subcommittee examine carefully 
the budget request for the FCC's Office of Media Relations. For fiscal 
year 2017, the FCC requests 15 FTEs for the Office of Media Relations. 
By comparison, in its budget request for the next fiscal year, the 
Federal Trade Commission only requests 10 FTEs for its Office of Public 
Affairs, which handles that agency's relations with the media. Why 
should the FCC's media relations office be 50 percent larger than the 
FTC's? The FTC's mission is just as critical and arguably broader, 
considering it applies consumer protection and competition rules to 
virtually all non-common carriers. Given that this subcommittee has 
jurisdiction over both the FCC and FTC, it is well-positioned to look 
into this matter.
    From my perspective, I have witnessed a disturbing mission creep 
within the FCC over the last couple of years when it comes to media 
relations. Specifically, Commission staffers are being directed to 
conduct what are most appropriately described as propaganda efforts. 
Non-public information is often shared with the press while my office 
is left in the dark. Resources are poured into controlling press 
cycles, creating pithy Twitter hashtags, and garnering positive 
headlines for the Chairman's Office rather than working inside the 
building to reach consensus. In some cases, the agency's media blitz 
has been designed to exert pressure on other Commissioners, both 
Democrats and Republicans, to vote for the Chairman's proposals. This 
is inappropriate. Career staffers should not be conducting media 
campaigns designed to influence the votes of FCC Commissioners. Indeed, 
until Commissioners vote on a proposal by the Chairman, the Commission 
as a whole has no position on that proposal. Yet the Chairman's 
Office's hope--usually requited--is for the press to run headlines 
``The FCC is about to [insert policy prescription du jour].''
    What makes the matter worse is that these media campaigns are often 
conducted on background so Commissioners and the public have no idea 
who is waging them. Indeed, the trade publication Communications Daily 
reported last December that ``the FCC stands out for its extensive use 
of events where officials speak on behalf of the agency to groups of 
reporters but the officials can't be identified by name or quoted 
verbatim.'' The publication further reported that ``[m]any PR experts 
said they couldn't recall any agency other than the FCC that holds news 
events that aren't on the record so routinely on matters unrelated to 
national security.''
    One example of what has gone wrong occurred last month when the 
Chairman circulated his proposal to expand the Lifeline program. My 
office did not learn about this proposal from the Chairman's Office. We 
didn't learn about it from the relevant FCC Bureau or anyone else at 
the Commission. Instead, we first found out about it from an article in 
The New York Times. That's right. The Chairman's proposal was shared 
with The New York Times before it was shared with FCC Commissioners--or 
at least with the minority Commissioners. Moreover, following 
publication of The New York Times article, FCC officials held a call 
with a large group of reporters to promote the Lifeline proposal before 
giving Commissioners a copy of the plan. Conduct like this does not 
reflect respect for the role played by other Commissioners at the FCC 
and should stop immediately.
    If the FCC's Office of Media Relations has the time and resources 
to engage in activities that are more appropriate for a partisan 
political campaign than the rulemaking process conducted by a multi-
member administrative agency, then I suspect that it is too large and 
its budget should be cut substantially.
    Chairman Boozman, Ranking Member Coons, and members of the 
subcommittee, thank you once again for holding this hearing and 
allowing me the opportunity to speak. I look forward to answering your 
questions, listening to your views, and working with you and your 
staffs in the days ahead.

    Senator Boozman. Thank you very much, Commissioner Pai, for 
your testimony.
    At this time, we will proceed to questions, where each 
Senator will have 7 minutes per round. I expect we will have 
time to accommodate at least two rounds.

                 IMPLEMENTATION FOR THE RATE OF RETURN

    Chairman Wheeler, what is the timeline for implementation 
for the rate of return?
    Mr. Wheeler. So as you know, Senator, we were successful in 
putting together a bipartisan effort in the Commission, working 
with the rate of return carriers to develop a new structure. 
That is now out, and the next trigger here is the decision by 
the carriers themselves as to whether they want to participate 
in that.

      CHOICE BETWEEN THE NEW MODEL OR THE RATE OF RETURN STRUCTURE

    So they will have a choice between the new model that has 
been suggested or the rate of return structure, and that 
becomes their option. That is an option that is now on the 
table for them for the coming year.
    Senator Boozman. So what is the timeline?
    Mr. Wheeler. This is for the coming year, sir.
    Senator Boozman. So just sometime this year.
    Mr. Wheeler. Yes, sir.
    Senator Boozman. How soon will companies have support for 
their standalone broadband consumers?
    Mr. Wheeler. So the program, as soon as companies make a 
decision as to whether they want to go with the model or with 
the rate of return, then the program will kick in. If you're 
asking for a specific date as to when the funds are going to 
flow, I'm not sure I can give you that specifically, but I can 
get back to you on that.
    Senator Boozman. Thank you.
    Commissioner Pai, I understand that you dissented in part 
to the rate of return order. Can you please elaborate further 
on your concerns?
    Mr. Pai. Thank you for the question, Mr. Chairman.

               DISSENTION TO THE NEW RATE OF RETURN ORDER

    One of the reasons why I dissented was in part because the 
system adopted by the majority is exceedingly complex.
    Take, for example, the basic proposition that everyone in 
this country should be able to buy stand-alone broadband 
service. That service is currently unavailable for way too many 
rural Americans, including folks like my parents in rural 
Kansas.
    So I proposed, last June, a one-page set of rule changes, 
very simple, easy to understand, easy to adopt by the carriers. 
Unfortunately, the majority took a very complex view of this 
entire thing.
    First of all, they refused to disclose in advance of the 
vote what exactly the reforms were, so it was difficult for us 
to get meaningful input from the public, including some of 
these carriers who are going to be responsible for opting in or 
not to some of these changes.
    Second, the broadband service proposal adopted by the chair 
of the FCC is itself complex. If you look at my dissent, there 
is an 11-factor test that these people have to adopt. It may be 
the case, but I tend to doubt, that mom-and-pop telephone 
companies are going to be able to figure out how to apply the 
natural logarithm that was just invented by the FCC to a 
certain kind of service to figure out what their costs are 
going to be.
    I would've preferred a much simpler approach in part 
because the last time we tried this kind of rate of return 
reform, before I got to the FCC, we ended up having to 
reconsider our decision seven separate times.
    So when you ask about the timeframe, one of the reasons why 
I adopted a simple approach that was disclosed in advance, each 
of which was rejected, was because that gets us to a point 
where carriers are able to make that decision much more quickly 
than they otherwise would have been.

                   CURRENT CAP ON THE HIGH-COST FUND

    Senator Boozman. Mr. Chairman, it is extremely important 
for companies to find efficiencies and be restrained in the 
expenditure of USF monies. However, I have heard repeatedly 
that the current cap on the high-cost fund is set too low. I 
understand that there are still two outstanding components of 
the high-cost fund reform still to be addressed, the Alaska 
Plan, Tribal Broadband Factor.
    Is the current cap adequate to sufficiently fund building 
broadband in rural America?
    Mr. Wheeler. So I think one of the key things that is 
important here, Senator, and to follow up on the previous 
question as well, is that issue--but let me talk first about 
rate of return and then about price cap.

                          RATE OF RETURN ORDER

    The rate of return order was a bipartisan order developed 
over months with Commissioner O'Rielly in the lead, along with 
Commissioner Clyburn and myself.
    There has been a lot of talk about how this Commission has 
a hard time working together, but here was a bipartisan group 
rolling up their sleeves together on a very complex issue that 
also involved sitting down with the parties who were affected 
and having back and forth negotiations with them.
    I think that what I have learned in the process is that it 
is the give-and-take of dealing with complex issues and finding 
consensus that creates the kinds of what some people refer to 
as complexity, because you say, okay, here's this little thing 
here, we'll have to fix that.
    But the point of the matter is that there is a rate of 
return program in place that, again, was bipartisan and was 
supported by the organizations of the carriers.

        PRICE CAP FOR ALASKA AND RATE OF RETURN IN TRIBAL AREAS

    On the price cap side, yes, we have to work on not just 
price cap for Alaska but also rate of return in tribal areas. 
Considering the other issues, these are complex issues in and 
of themselves that really don't lend themselves to quick little 
sound byte answers. So we will have a specific proceeding on 
Alaska this year, and we will have a specific proceeding on 
tribal issues this year, because all of the issues will come 
together to affect unique circumstances.
    Senator Boozman. So is the cap adequate?
    Mr. Wheeler. I think the cap is going to be adequate. We 
will find out as we go through this process, but I'm working 
with the assumption that it is.
    Senator Boozman. Okay.

                RAISING LOCAL RATES ON TELEPHONE SERVICE

    Commissioner Pai, the FCC is forcing rural companies to 
raise local rates on telephone service, making it unaffordable 
for many rural Arkansans. In the past, you have said that this 
issue is another example of why so many of our Nation's 
heartland feels so alienated from Washington, DC. I hear this 
all the time for my constituents when I am out and about in 
Arkansas.

               RATE FLOOR AND ITS IMPACT ON RURAL AMERICA

    Can you comment on the rate floor and its impact on rural 
America, especially the elderly and those on fixed income?
    Mr. Pai. Thanks for the question, Mr. Chairman. This is 
something that we have had a dialogue about before, 
unfortunately, far too often.
    I think it strikes the average person, whether in 
Portsmouth or Fayetteville, it is ridiculous that the Federal 
Government is actually ordering telephone companies to increase 
the amount that they have to pay even though it doesn't save 
the Universal Service Fund a single dollar.
    That is part of the reason why I have urged for years now 
the FCC to scrap the rate floor. It should not be a condition 
of getting subsidies from the Universal Service Fund that 
telephone companies say to elderly people, to poor people, to 
others who don't have the means, we are going to require you to 
increase the amount you pay for telephone service so that we 
can argue that there is some rough parity between what rural 
Americans pay and what urban Americans pay.
    It is all too obvious, I think, that rural incomes have 
lagged behind urban incomes. So it seems to me, the Federal 
Government shouldn't be in the business of saying, well, rural 
consumers' costs should also increase.
    Also, if I could just make a quick observation about the 
prior question about the rate of return reform, two quick 
points, if I might, Mr. Chairman, with your indulgence.

                         RATE OF RETURN REFORM

    First, the very complexity the chairman has talked about is 
exactly the reason why Commissioner O'Rielly strongly supported 
disclosing this proposal before the FCC voted on it. I think 
that is the way Congress operates. Your constituents would be 
angry if you adopted legislation without ever putting it online 
for people to scrutinize.
    He recognized that this is very complex, and that is one of 
the reasons why he wanted to have public input before people 
were able to vote on it.
    Second, your question about the sufficiency of the high-
cost fund is a critical one because it is involving other 
programs under the Universal Service Fund.
    Currently, the FCC has recently increased the amount of the 
budget for the E-rate program by $1.5 billion per year. Last 
week, it adopted Lifeline reforms without adopting any 
meaningful budget, so the amount of spending for that program 
is going to increase dramatically in the years to come.
    Each of those program increases is going to put a great 
deal of pressure on the high-cost fund. Remember what the high-
cost fund supports. It supports Senator Coons' vision of 
bringing broadband to every community. So every dollar we 
essentially direct away from the high-cost fund is one less 
dollar that delivers digital opportunity to rural and low-
income Americans.
    Senator Boozman. Senator Coons.
    Senator Coons. Thank you, Senator Boozman.
    If I might, Chairman Wheeler, I just want to start with 
some questions about cybersecurity and IT across many of the 
Federal agencies that this subcommittee is concerned with. We 
have seen cyber challenges last year, and I'm concerned about 
investment in that.

                 IT SPENDING IN CYBERSECURITY UPGRADES

    The past few budget requests from FCC have included large 
increases for IT spending in cybersecurity upgrades that have 
not been funded. This year's budget request is for about $5 
million, if I understand, for various IT projects, and it 
continues to make progress on a multiyear initiative to shift 
FCC applications and data to the cloud.
    The IG reported significant progress this year toward 
compliance with cybersecurity standards, but there are still a 
number of IG findings that would require more policy and 
technological changes.
    How would this budget request help improve the FCC's 
cybersecurity protections? How would the telecommunications 
industry and the average American be impacted by the FCC's 
current IT systems? And last, how has FCC been able to make 
progress on these IT initiatives in recent years without 
additional funding? And how would you be able to proceed if 
Congress this year again fails to provide adequate funds for 
these particular purposes?
    Mr. Wheeler. Thank you, Senator. Let's see if we can tick 
through them.

                             CYBERSECURITY

    On the cyber front, we've made great progress, but we are 
only about halfway there. The Federal Information Security 
Management Act (FISMA) report on our cybersecurity capabilities 
says to us that we are about 50 percent to the goals that need 
to be in place. That is a major component of the money that is 
in this budget.
    I've now forgotten your last two questions. This is what 
happens when you get to be this old.
    Senator Coons. How would you continue to make progress, if 
we don't provide specific funding? And how is the average 
American and how is the telecom industry impacted by your 
current IT systems?

       CHOICES TO BE MADE IF SPECIFIC IT FUNDING IS NOT PROVIDED

    Mr. Wheeler. So the difficulty is, as I said, if you don't 
fund it, there are choices that have to be made. Are we going 
to invest in cyber? Are we going to invest in improving the 
systems that those people who rely on us expect? Or are we 
going to cut personnel and end up slowing down licensing 
processes and other activities?
    We have been able to live under the cuts that have happened 
in the past few years by doing multiple steps. We moved out of 
some space, saving about $3 million a year, which, frankly, we 
spent on IT. We have consolidated our field offices, which will 
save about $8 million a year over coming years. It hasn't yet, 
because it is a phasedown, but we will save money over the 
future years.
    We have other things that we have also done to try to live 
within the numbers you have given us. The difficulty is, we are 
down to the bone now. And, to mix metaphors, the low-hanging 
fruit of those kinds of activities don't exist anymore, and it 
is going to affect our ability to deliver services.
    If we don't have the licensing system upgrade and 
improvement for broadcasters, we are increasing the burden on 
broadcasters at a time when it is managerially irresponsible to 
do so. If we don't have a system for tracking better now using 
new IT techniques, to license mobile services, I mean, shame on 
us.
    Yes, we can limp along. We can say, ``Okay, thanks. What 
you see is what you get, and there are going to be no 
improvements.'' I don't think that is anything that you want us 
to do, and it's certainly not something that the people in the 
agency who hold themselves to high standards want to do.
    Senator Coons. Let me, if I could, move to the incentive 
auction, the Broadcaster Relocation Fund, for my remaining 2 
minutes.

                           INCENTIVE AUCTION

    As you described, you have just begun the first-ever 
incentive auction. It is a complex spectrum auction. It is 
probably the most complex you've under ever undertaken. There 
are a lot of unknowns. We won't know which stations are selling 
their licenses, which are staying on the air but moving to new 
locations, which are moving, until the auction is complete.

                          SPECTRUM ACT BUDGET

    And the Spectrum Act, which authorized it, provided, I 
think, a $1.75 billion budget to cover this. I have some 
questions about how the FCC plans to administer that $1.75 
billion fund to broadcasters.
    If it is not enough, how will you prevent stations from 
going off the air? And if stations aren't able to comply with 
that 39-month deadline, will you extend it? And how are you 
communicating with broadcasters during this process?
    Commissioner Pai, you have also proposed the FCC should 
look at that as a budget. How would you propose that be 
allocated to broadcasters?
    If both of you would respond, that should take up the 
remainder of my first round.
    Mr. Wheeler. Thank you, Senator.

               TIMELINE AFTER THE INCENTIVE AUCTION ENDS

    The clear fact is that when the gavel goes down, the 
auction doesn't stop. This is a major overhaul of how we use 
the broadcast spectrum. There has been a huge dispute with the 
broadcasters as to whether the timeline that we have put in 
place is long enough for them. They say it may take up to 10 
years. We think it can be done in 39 months.
    It is going to take serious resources to get to that point. 
And if we don't have those resources, then we won't be able to 
do it in 39 months.
    It is also important that we recognize that we have to 
educate consumers. Included in our budget is outreach to 
consumers to say, hey, here's what is going on in your market 
so that you understand.
    I mean, it may be that our greatest challenge in the 
incentive auction is not the reverse auction rebanding and 
reselling but it is the residuals that come behind that, in 
terms of how we make sure that this incredibly important 
broadcasting system is maintained.
    Senator Coons. Thank you.
    Commissioner Pai.
    Mr. Pai. Senator, I would include, along with the 
chairman's answer, just the critical questions here are, 
obviously, money and time.
    As to time, I think the chairman and I are in agreement 
that it is unclear how much time it is going to take. If it 
ends up taking more than 39 months, then obviously the FCC 
working with Congress will have to take remedial measures.

                         INCENTIVE AUCTION COST

    In terms of money, the fact that the $1.75 billion is all 
that has been allocated by Congress is critical. That is part 
of the reason why, 4 years ago, I proposed that we treat that 
amount as a budget and we structure the incentive auction 
accordingly, so that we didn't risk going above that amount, 
because the excess would have to be paid out of the 
broadcasters' pocket.
    It is unclear how much money it is going to take. We have 
heard estimates that are above that amount. We have heard 
estimates right around that amount. Whatever the ultimate 
number ends up being, it may be the case that we as well as the 
broadcast community will be coming back to you, depending on 
how things work out.
    Senator Boozman. Senator Moran.
    Senator Moran. Mr. Chairman, thank you very much.
    Mr. Chairman, Commissioner, thank you for being here.
    First of all, Commissioner Pai, let me express my gratitude 
to you for your comments in regard to the joint sales 
agreement, particularly as it affects our State. And I 
certainly would like to work with my colleagues on this 
subcommittee to fulfill the request that you made, along with 
those Senators who signed the letter to the chairman.

                             SET-TOP BOXES

    Let me ask you, Commissioner Pai, about set-top boxes. The 
Commission's recent proposal to alter the marketplace for set-
top boxes, I want to better understand your position. I think 
you said that it takes a 20th century approach to a 21st 
century problem. I certainly support consumer choice in the 
marketplace, but could you tell us a little bit more about your 
thoughts? Can you talk about the alternative, the Downloadable 
Security Technical Advisory Committee (DSTAC) proposal that is 
not being considered? And I guess if the Commission continues 
down the path it is on, what do you foresee occurring?
    Mr. Pai. Thank you for the question, Senator, as well as 
for your comments about the JSA and our home State.
    To be fair up front, I should clarify that my quote about 
the 20th century solution to 21st century problem was actually 
former Representative Henry Waxman, Chairman of the House 
Energy and Commerce Committee, who penned an op-ed, with your 
indulgence, I would like to enter into the record.
    But my basic concern with the cable set-top box proposal is 
that it didn't adhere to Senator Nelson's, ranking member of 
the Senate Commerce Committee, admonition that the FCC should 
engage in an impartial, evenhanded inquiry. What he meant by 
that was that our Downloadable Security Technology Advisory 
Committee, with the delightful acronym DSTAC, came up with two 
different proposals.

                  DEVELOPMENT OF AN APP-BASED ECONOMY

    One was for the agency to essentially double down on the 
1990s technology of the set-top box. The other was to encourage 
development of more of an app-based economy because, as most 
consumers know, especially younger ones, apps now are much 
preferable to things like hardware when it comes to video 
consumption.
    Unfortunately, the FCC took a very slanted approach to this 
issue. It spent dozens and dozens of pages lauding the first 
proposal with respect to the new set-top boxes that it wants 
introduced into this ecosystem and included three spare 
paragraphs about the other app-based approach in which it said 
please describe why this proposal will destroy America and harm 
consumers left and right.
    I'm mystified by this approach, as was Congressman Waxman. 
For one thing, as I said, it doubles down on technology that 
very few consumers seem to want. The inextricable result of 
these regulations, if it is successful, which I will get to in 
a second, is going to be that consumers will have to introduce 
another set-top box into their homes. Either cable operators 
will have to spend a lot of money redoing their network 
architecture, which will cost them quite a bit, or they will 
have to enable the introduction of a second box. Obviously, the 
second box is going to be cheaper.
    Second, the entire proposal of the FCC delegates this 
question to a hodgepodge of very disparate interests--cable 
operators, programmers, and others. It says to them, 
essentially, we are going to put you in a room, and we will 
give you an unspecified amount of time to sort this out.
    Given how disparate these interests are, I tend to doubt 
they are going to come to an agreement anytime soon. I've 
analogized it to the State Department saying we proclaim Middle 
East peace, and we delegate to Saudi Arabia, Israel, Jordan, 
and the rest of the players in the Middle East, the decision of 
how to get there.
    Now, even if they reach a consensus, which I tend to doubt 
when it comes to this issue, even then, the FCC's regulations 
wouldn't kick in for an additional 2 years. So we are talking 
about 3 years or more before these regulations take effect.
    Think about how long it takes, in this ecosystem, how short 
of a time that is. Three years ago we didn't have Google 
Chromecast. We didn't have the Amazon Fire TV Stick. Three 
years from now, there is no telling what kinds of innovations 
are going to bypass this 1992-era approach to regulating this 
marketplace.
    So I would much prefer an evenhanded, market-based solution 
which encourages all companies to develop apps and other 
consumer-friendly approaches as opposed to doubling down on 
this very intrusive regulatory system that has produced the 
uncompetitive marketplace we have today.
    Senator Moran. Thank you, Commissioner.

                       MEXICO AND SPECTRUM ISSUES

    Mr. Chairman, you and I had a conversation at this hearing, 
I think this hearing, not the Commerce Committee hearing, about 
a year ago, in regard to the southern border, Mexico, and 
spectrum issues.
    Mr. Wheeler. Yes, sir.
    Senator Moran. My understanding, and I think it was 
Commissioner Rosenworcel at her confirmation hearing brought us 
up-to-date with the status of those efforts. I think after our 
conversation last year, I felt pretty comfortable that things 
were moving in the right direction.
    You are now gathering data, including rolling approvals 
mentioned last year.
    Mr. Wheeler. Right.
    Senator Moran. Tell me what's going on, and will we have 
information sooner than later, as to your success?
    Mr. Wheeler. Yes. Thank you, Senator.
    I think we are making great progress on it. I've met with 
the Mexican delegation myself, and I have spoken to 
counterparts in Mexico. I believe that there is goodwill on all 
sides to resolve this issue.
    I'm pleased with the progress that has been made on this 
and believe it will continue.
    Senator Moran. What progress has been made?
    Mr. Wheeler. So the issue is, on both sides of the border, 
the 800 megahertz spectrum and how you make sure that with the 
rebanding activities that are going on in Mexico, that they 
don't interfere with what is going on in the United States. And 
at the same point in time, we are having rebanding inside the 
800 megahertz and how you coordinate all of these.
    That process is a complex process. It is an ongoing 
process. But this is a process that I have assurances from my 
counterparts in Mexico that this is happening, and I have 
assurances from our international bureau, which is living with 
this issue on a day-by-day basis, that, in fact, progress is 
being made, and we are resolving these problems.

              PRIVACY RULES FOR INTERNET SERVICE PROVIDERS

    Senator Moran. Commissioner Pai, I chair a subcommittee in 
the Committee on Commerce related to privacy, related to the 
FTC. Recently, the FCC has proposed new privacy rules for 
Internet service providers. I certainly have an interest in the 
role the FCC considers is proper for it, and what that means to 
the role that the FTC traditionally, historically, has played. 
And I worry about an uneven regulatory playing field within the 
Internet ecosystem.
    Prior to the FCC's open Internet order, ISPs were subject 
to the FTC's oversight with respect to their privacy practices. 
Do you believe that consumer privacy rights were adequately 
protected during that time? What are the examples, if you 
don't, that they were not? And what do you think is going to 
occur in regard to the future of this issue of who regulates 
this sphere?
    Mr. Pai. Thanks for the question, Senator. It is a very 
important issue to consumers and to regulators and lawmakers 
alike.
    My concern with what the FCC did last week with respect to 
privacy is that it created a very unlevel playing field. It 
said we are going to single out one part of the Internet 
ecosystem, Internet service providers, and subject them to 
stringent regulation while completely ignoring everybody else 
in the Internet ecosystem.
    Now it is critical, stepping back, to remember that this 
hole was dug in the first instance by the FCC's decision to 
reclassify all telecommunication carriers as common carriers. 
That took away from the FTC, which had applied uniform 
regulation in this area of privacy to everybody in the space. 
So we had to provide some guidance.
    Unfortunately, the guidance we provided, as suggested by 
certain privacy groups like the Electronic Privacy Information 
Center (EPIC), is completely inadequate.
    Second, I think it is also important to remember that the 
FCC itself has recognized that there should be a uniform 
expectation of privacy. As the chairman put it last November 
before the House Energy and Commerce Committee, consumers have 
``a uniform expectation of privacy'' and, therefore, he 
predicted that the FCC ``would not be regulating edge providers 
any differently'' from Internet service providers.
    The document adopted last week makes clear that that is 
simply not the case. When you have that kind of two-track 
regulation, you distort the market. You, ultimately, don't end 
up serving consumers, because people have a different level of 
privacy depending on which entity it is that they are dealing 
with. That's not ultimately what is good for the American 
consumer.
    Senator Moran. I have exceeded my time. Thank you, Mr. 
Chairman.
    Senator Boozman. Senator Lankford.
    Senator Lankford. Thank you, Mr. Chairman.
    Gentlemen, thank you for being here.
    And happy birthday to you as well. I join in in not 
imagining something more fun than spending your 70th birthday 
being before this subcommittee.
    So glad you are both here.

                  UNIVERSAL SERVICE FUND AND LIFELINE

    I need to ask a general question, because I'm losing track 
somewhat of where we are headed long-term on the Universal 
Service Fund and Lifeline, in particular. I know what it was 
born to be. Where is it going?

                                LIFELINE

    So help me understand the purpose of Lifeline. Is Lifeline 
about getting access for rural customers or for those in 
poverty? Is it something broader than that? Where is it going?
    Mr. Chairman, do you want to take that?
    Mr. Wheeler. Thank you, Senator.
    If you trace the history, Lifeline started in the Reagan 
administration to provide to low-income Americans access to 
what was the typical communications mode of that era, the 
telephone. In the second Bush administration, that was changed 
to the new typical way of connecting, which was the cell phone. 
So what we have said is that it is broadband Internet----
    Senator Lankford. It was my understanding that the original 
purpose, though, it was about emergency use, so that if 
somebody in a rural area or someone in an urban area wanted to 
have access to 911 and have access in an emergency situation, 
that family would have access to a phone. It wasn't just so 
that they could be connected to the world. It was to be 
connected for emergency uses.

   SUBSIDY FOR CELL PHONES AND SPENDING TO ALLOW ACCESS TO BROADBAND

    Mr. Wheeler. That was one of the purposes. I think it was a 
broad connectivity issue. I think the issue that we are dealing 
with today is, since the Internet is where you have to go to 
get a job, since the Internet is where you have to go to apply 
for veterans' benefits, since the Internet is the core to 
everything, it's what you need to do your homework, the same 
kind of basic need to be able to have access--so what we said 
is let's take the same amount of dollars, the same subsidy that 
is being provided for cell phones, and say, can we spend that 
to allow for access to broadband?
    Senator Lankford. So let me clarify. One access point per 
family, is that still in the goal?
    Mr. Wheeler. Yes, sir.
    Senator Lankford. Okay, so would it be one phone, and not 
one phone and one broadband access?
    Mr. Wheeler. Yes, sir.
    Senator Lankford. Is that correct, per family?
    Mr. Wheeler. Yes, sir.
    Senator Lankford. Is it the assumption this will be a smart 
phone that is carrying a mobile phone connection for voice and 
then also some sort of interconnectivity? Is that the model or 
is it an assumption that this will be two separate pieces, that 
it could be a cell phone and it could also be a land-based more 
of hardwire coming into the home?
    Mr. Wheeler. The consumer can make that choice, but it will 
be only one.
    Senator Lankford. It will be one per family.
    Mr. Wheeler. Yes, sir.
    Senator Lankford. Is it targeted only to those that cannot 
afford it?
    Mr. Wheeler. Yes, sir. It is low income.
    Senator Lankford. So is it targeted to those who are not 
currently using it, then? So if someone currently has a mobile 
phone or currently has broadband service, would they not be 
eligible for it, or can they switch over and get a subsidy for 
something they are already purchasing?
    Mr. Wheeler. It is targeted to those who are on the 
Supplemental Nutrition Assistance Program (SNAP) and other 
programs, and what they have is not taken into consideration.
    Senator Lankford. So an individual that currently has a 
cell phone and currently has broadband service they are paying 
for could, if they are also eligible, go back and get a subsidy 
to be able to offset the cost for that. Is that correct?
    Mr. Wheeler. For $9.25.
    Senator Lankford. So it is $9.50 for broadband, $9.25----
    Mr. Wheeler. $9.25 across-the-board.
    Senator Lankford. $9.25 for both.
    Mr. Wheeler. Right.
    Senator Lankford. So $9.25 for broadband, an additional 
$9.25 then for the voice.
    Mr. Wheeler. No.
    Senator Lankford. Or is it $9.25 for both?
    Mr. Wheeler. Cold turkey.
    Senator Lankford. So you either get the broadband $9.25 or 
you get the voice $9.25?
    Mr. Wheeler. Yes, sir.
    Senator Lankford. Okay. So it is a $9.25 subsidy that comes 
in one time per family.

                            TRIBAL SURCHARGE

    Is that the same for a tribal member? Let's talk about the 
functioning of that.
    Mr. Wheeler. No. When the changes to wireless were made in 
the Bush administration, there was put in place a tribal 
surcharge of $25 per month, the rationale being that there 
needed to be infrastructure buildout, and that this would be 
used to encourage infrastructure buildout.

     SERVICE PROVIDERS BUYING WHOLESALE MINUTES AND RESELLING THEM

    The reality that happened was there was no additional 
infrastructure buildout, that the people who began to take 
advantage of this program in terms of service providers were 
those who were buying wholesale minutes, reselling them, and 
getting $34 a month instead of $9 a month. That is one of the 
things that we have to change in this comprehensive rule.

                ENCOURAGING THE BUILDOUT ON TRIBAL LANDS

    Now, there has been a proposal. Commissioner Pai put 
forward a proposal that we had to do it in the Lifeline order 
itself. But as I indicated earlier, what we want to be able to 
do is not to have a system that penalizes individuals on tribal 
lands, but to have a coordinated policy that adjusts all of the 
economic factors to encourage the buildout on tribal lands. 
That means that we have to have this overall program.
    Senator Lankford. Is it access for tribal members or is it 
access for anyone who is on tribal lands?
    Mr. Wheeler. It is on tribal lands.
    Senator Lankford. So let's talk about my great State of 
Oklahoma.
    Mr. Wheeler. Yes, sir.

              STATE OF OKLAHOMA AND NON-RESERVATION STATE

    Senator Lankford. As you know, the FCC has had a little bit 
of a struggle with my State, because we are a non-reservation 
State. About two-thirds of the State is historic tribal area.
    There was a map that was released last year that was about 
an 1890 map that was released saying this is the historic area, 
and it was later changed to add more to it.

              STATE OF OKLAHOMA AND HISTORIC TRIBAL LANDS

    The challenge that happens in my State as well is that two-
thirds of the State property itself is historic tribal lands. 
So we currently have a situation where nontribal members in 
Tulsa are paid $34 and nontribal members in Topeka are paid $9.
    And I'm still trying to figure out the purpose here. Is the 
purpose here to try to target toward tribal members or just 
tribal lands or where there has been tribal lands?
    Mr. Wheeler. So the situation you point out we are 
painfully aware of. We tried to make some changes in redrawing 
the map last June. We were taken to court again, reinforcing 
how a piecemeal solution is not the solution, which is why I 
have been saying we need this overall approach.

PROVIDING SUPPORT TO TRIBAL MEMBERS AND ENCOURAGING THE CONSTRUCTION OF 
                     INFRASTRUCTURE ON TRIBAL LANDS

    The goal is twofold: one, to provide support to tribal 
members by, two, encouraging the construction of infrastructure 
on tribal lands. By this, I mean real tribal lands, not 1890s 
maps.
    Senator Lankford. So what are you looking at as an 
alternative at this point?
    Mr. Wheeler. So we have started rulemaking that is going to 
try to get into the details. I mean, as this colloquy 
indicates, this is an issue that you have to get very granular 
into, and you have to get very detailed into, and you have to 
get very macro in how you put all the pieces together.
    So we are going to start a rulemaking on that, and I hope 
that we will finish it this year.

                  STATE OF OKLAHOMA LIFELINE CUSTOMERS

    Senator Lankford. This will be something I will stick 
around for another round and we'll get a chance to talk 
through. This is the reason that Oklahoma has 10 times as many 
Lifeline customers as Oregon does----
    Mr. Wheeler. Yes, sir.
    Senator Lankford [continuing]. For similar-sized State, 
because a formula has been created that is a rush to get into 
my State for the increased usage there, which obviously there 
are folks in my State that are enjoying the free cell phone. It 
is not a subsidized piece, because, for them, it pays the 
entire bill.
    But it is a wasteful issue for the Federal Government and 
for the taxpayers, and there's no reason folks in Topeka should 
pay for the folks in Tulsa and their full cell phone coverage 
just because they live in that historic area.
    Mr. Wheeler. We are in violent agreement on that.
    Senator Lankford. We will finish talking this through in a 
moment then.
    I yield back.
    Senator Boozman. Senator Coons.
    Senator Coons. Thank you, Chairman Boozman. Thank you for 
your understanding of that multiple committees that a number of 
us end up being responsible for in our hearings.

                             SET-TOP BOXES

    Let me just continue a line of questioning that was 
started. I would be interested, Chairman Wheeler, in your 
answer about set-top boxes. Commissioner Pai had an opportunity 
to address the FCC's recent proposal to unlock set-top boxes. 
While it may achieve some savings for consumers, which is of 
interest, I'm also concerned about copyright protections.
    If you would just speak to whether, in your view, the 
proposal would alter or affect in any way copyright 
protections?
    Mr. Wheeler. Thank you very much, Senator.
    Congress was very clear to us in the Telecom Act, saying 
that there shall be--not ``may,'' ``there shall''--that the 
Commission shall ensure that there are competitive choices for 
consumers in navigation devices. And ``devices'' in our world 
is both hardware and software.
    And the reality is that 99 percent of cable and satellite 
subscribers today do not have those choices. Congress was 
clear. You have to have choices.
    So then Congress came back and said we want you to put the 
DSTAC committee together that Commissioner Pai was talking 
about and advise on that.

             SET-TOP BOXES AND ALTERNATIVE DEVICES OR APPS

    So what our proposal is, is to open up the process so that 
there are alternative devices or apps that can be used by 
consumers, so they don't have to keep paying the same monthly 
fee month after month after month after month, even after the 
cost of the box has been retired. You can buy it for $50 at 
Best Buy, something that you get charged $10 a month for the 
rest of your life by your cable operator.

                          PROTECTING COPYRIGHT

    So how you do that and make sure that, for instance, to 
your point about protecting copyright, is really important. And 
technology has moved us along so that there are hundreds of 
millions of devices out there today, from smart TVs to iPhones 
to smart phones to tablets that are streaming video that are 
protecting the content. There are services out there like Hulu 
that are streaming the video to those devices, protecting the 
content, protecting the advertising, and all of those 
components.
    What we did in our rulemaking is to say that, and this is 
in two specific paragraphs, paragraph 17 and paragraph 71, 
where we say that you cannot do anything, that this independent 
device cannot do anything to affect the content stream. That 
means infringing on copyright, overlaying ads, all of these 
other kinds of things.
    In fact, the language that we chose to accomplish that is 
taken directly from the language that the cable industry's 
cable card uses today, their license agreement, to accomplish 
the same thing.
    But this is a notice of proposed rulemaking. The reason you 
put out that kind of specificity is to say, okay, tell me where 
this isn't sufficient. So if there are ways that this isn't 
sufficient, we're interested and we want to fix it.
    Senator Coons. Thank you for the response, and I look 
forward to working with you and other members of the 
subcommittee and Commission to ensure intellectual property 
continues to be respected.

  LEVERAGING DATA ACROSS MULTIPLE FEDERAL AGENCIES TO REDUCE IMPROPER 
                                PAYMENT

    My last quick question, if I might, in the USF enforcement 
and fraud prevention areas, is the FCC planning to utilize the 
Treasury's Do Not Pay Center, which leverages data across 
multiple Federal agencies to reduce improper payment?
    Mr. Wheeler. Senator, I'm not sure about that specific 
program. What I to know is that the Office of Management and 
Budget (OMB) has a program that utilizes big data to try and 
identify where it is. That has been included in this proposal.
    Senator Coons. Thank you. Thank you both for your 
testimony.
    Thank you for accommodating.
    Senator Boozman. Thank you, Senator Coons.

                         JOINT SALES AGREEMENTS

    Commissioner Wheeler, the 2015 and 2016 omnibus included 
provisions that ordered the FCC to grandfather existing joint 
sales agreements for 10 years. Since the enactment of the 
omnibus, the FCC has claimed that past precedents allow the 
agency to utilize its merger review authority to force 
companies to get rid of JSAs.
    You and your staff knew clearly the intention of Congress. 
Your staff helped craft, working with us, the language and 
provided technical assistance.
    Given the strong bipartisan support and Congress' clear 
intent, why are you ignoring these provisions and instead 
relying on past precedents at the agency to supersede this law?
    Mr. Wheeler. Thank you for asking that question, Senator, 
because I take this incredibly seriously.
    Senator Boozman. You should.
    Mr. Wheeler. I do not concur with suggestions that that we 
were somehow trying to ignore the interest of Congress, if I 
may explain.
    When a license transfer is sold, it takes on a new owner 
and becomes a new license. All of our precedents in broadcast 
television and radio have always held that.
    I was concerned about this, so I went to the language that 
you all enacted last year.
    Senator Boozman. That we worked on with your staff to 
write.
    Mr. Wheeler. And it says a party to a joint sales agreement 
that was in effect on March 31, et cetera, et cetera, shall not 
be considered to be in violation of the ownership limitations.
    When a sale takes place, that party goes away and a new 
party comes in. As I say, that has been the precedent of the 
agency across-the-board. That was our interpretation of what 
this intent was here.
    Senator Boozman. Well, we are the ones that crafted the 
bill, so I can tell you what our intent was, and it is not as 
you perceive it.
    Mr. Wheeler. And we have heard that now.
    Senator Boozman. So I guess the question not for you but a 
question for ourselves is, as a subcommittee, why should we 
provide you more resources, if you're not going to follow the 
laws that we write and expect to be followed?
    Commissioner Pai, in your opinion, how should the 
Commission treat JSAs?
    Mr. Pai. Senator, I think, as you put it, we should simply 
follow the law.
    This was no secret. After the FCC decided to retroactively 
ban these agreements in the spring of 2014, Senator Mikulski, 
Senator Blunt, and others wrote to us and said, look, we want 
you to grandfather existing JSAs, JSAs the FCC staff had 
previously blessed. The agency refused to take heed of that.
    So as you observed, Congress passed overwhelmingly this 
appropriations language. The language is exceedingly clear. 
Even if that language were not clear, if there was some wiggle 
room, it's pretty obvious what Congress' intent was.
    Nonetheless, the agency is now coming up with these 
precedents, which don't, I don't believe, apply, given the face 
of this clear language. I would also point out that the agency 
has previously said that some of these JSAs would remain in 
existence.
    Again, I quote from the House Appropriations hearing from a 
couple years ago. ``There is nothing in what we were doing that 
would make that go away.''
    Now that's clearly not the case, so that is part of the 
reason why I agree with Senator Durbin, Senator Schumer, you, 
and many others who signed this letter, who said Congress' 
clear intent to preserve JSAs that were lawfully executed prior 
to the FCC's 2014 rule changes has to be respected. The only 
way at this point for the FCC to respect it is for you to make 
it exceedingly clear, notwithstanding any other provision of 
law or any FCC precedent, existing JSAs as of May 2014 shall be 
respected.
    I'd be more than happy to work with your staff, if you feel 
it appropriate, to come up with language that won't give the 
FCC any arbitrary wiggle room in the future.
    Senator Boozman. We appreciate that. But it is sad that we 
have to do that.

                     REGULATION OF BROADBAND RATES

    Chairman Wheeler, you have said repeatedly that there 
should be no regulation of broadband rates. At last year's 
hearing, you clearly stated that you had no problem if Congress 
enacted an appropriations rider that prevented you from doing 
so. Yet during the omnibus negotiations, you and the 
administration lobbied hard to kill the rider.
    Why are you stating one position publicly then working 
behind closed doors to push for the opposite?
    Mr. Wheeler. Thank you, Mr. Chairman. I don't believe that 
was the reality.
    Again, this is something that is very serious, so I went to 
the record from last year's hearing and the colloquy that you 
and I had. And you said, would you have objection to Congress 
prohibiting the FCC from spending money on rate charges? To 
which I replied, as you know, we forbore from a lot of sections 
in title II. There has been a concern raised, well, okay, you 
know this Commission will stay out of that, but what about the 
next Commission, if Congress wants to come along and say that 
is off the table, the de-forbearing, then I'm all for it.

             RATE REGULATION VERSUS CAN THE FCC DE-FORBEAR

    So the difficulty is that the discussion moved from the 
question of prohibiting de-forbearing to the broad issue of 
should there be rate regulation. And if the issue is, does the 
FCC have rate regulation versus can the FCC de-forbear, then 
all of a sudden you're gutting the open Internet order, you're 
gutting the FCC's ability to deal with other issues on an ex-
post basis, as opposed to ex-ante, which is what we were 
talking about earlier, because at the heart of everything are 
rates.
    So paid prioritization is a rate issue. Throttling is a 
rate issue. Blocking is a rate issue. Interconnection is a rate 
issue. The kind of terms that AT&T agreed to in its merger with 
DirecTV (DTV) not to use its ability to harm those using its 
network is a rate issue--not to discriminate, that is the word 
I was looking for, is a rate issue.
    So I look forward to continuing to work with you. We can 
find legislation that says, no, you may not de-forbear, but 
that is different from the broader rate issue this seems to 
have morphed into.
    Senator Boozman. Sadly, this is like the last bill that we 
were talking about, the last regulation. You knew my intent 
during that testimony. I asked you clearly if you would 
support, not block, whatever, our intent of going forward with 
putting that rider in the appropriations.
    It didn't get in there. You worked very hard to keep it 
out.
    Commissioner Pai, can you comment?

               REGULATING BROADBAND INTERNET ACCESS RATES

    Mr. Pai. Mr. Chairman, this is pretty simple. The President 
said he doesn't want the FCC regulating broadband Internet 
access rates. The chairman has said he doesn't want the FCC 
regulating ex-ante broadband Internet access rates. This 
legislation does nothing more than codify this promise.
    And it is unfortunate, as you pointed out, that while 
making the promise before the cameras, nonetheless behind the 
scenes, apparently, according to you and others, the FCC has 
not been willing to work with you to come up with a simple 
codification of what the FCC has promised to Congress.
    Second, all of the argument about ex-ante versus ex-post, 
it is critical to remember a couple weeks ago, as I pointed out 
in my opening statement, the chairman said he does want the FCC 
to have the authority and, in fact, that it does have the 
authority to engage in ex-post rate regulation.
    However, ex-post only applies the first time you make a 
decision. Once you say, okay, we decide after the fact that 
this rate is unreasonable, going forward then you effectively 
do have ex-ante rate regulation. That is part of the reason why 
it is important for Congress to speak with a unified voice here 
to make sure that, look, whatever the demerits of Title II, and 
there are plenty, nonetheless, we should all be able to agree 
with what the President said, which is that the FCC should not 
be in this business.
    That is why I think it is important for Congress to speak. 
And hopefully, this year, it will get into the final package.
    Senator Boozman. Thank you.
    Senator Moran.
    Senator Moran. Thank you, Mr. Chairman.

                         RURAL CALL COMPLETION

    Let me visit a moment about rural call completion. I know 
that the FCC is attempting to address this problem. The FCC 
instituted a declaratory ruling, and began requiring quarterly 
reporting of call completion data. When Commissioner 
Rosenworcel testified before the Commerce Committee last fall 
for her renomination, she said that the FCC had begun to 
receive those reports.
    What can you tell us about the initial data? And when will 
the FCC report or share those results?
    Mr. Wheeler. Thank you, Senator.
    I think the good news is that what we are seeing is a 
decline in the problem. There has been about a 30 percent 
decrease in the rural call completion complaints. That does not 
mean the issue has gone away.
    We are collecting the data, and what the data is suggesting 
are two things. One, there have been some instances where it 
has been necessary for us to take enforcement action. Secondly 
is that the intercarrier compensation plan, which the 
Commission set up and is now on a declining basis gradually 
disappearing, has been creating the regulatory arbitrage which 
encouraged this in the first place. Fortunately, that is going 
away.
    We have not crossed over to the zero rural call completion 
problem solution, but I think that we are making some serious 
progress toward it, both in enforcement and the realities of 
the economics.
    Senator Moran. When will the FCC report or share the data?
    Mr. Wheeler. I will get you an answer. I don't know the 
answer on that specifically, so I will get that for you.
    Senator Moran. Anything, Commissioner Pai?
    Mr. Pai. On that question, no.

                             EDGE PROVIDERS

    Senator Moran. All right. And then let me ask the chairman, 
then, following up on this privacy issue, and the jurisdiction 
between the FCC and the Federal Trade Commission (FTC), 
although edge providers are not currently regulated by the FCC, 
can they soon expect to be?
    Mr. Wheeler. No, sir.
    Senator Moran. Mr. Chairman, thank you.
    Senator Boozman. Senator Lankford.
    Senator Lankford. Thank you.

                                LIFELINE

    I want to continue this conversation about Lifeline, and we 
are headed on it.
    Commissioner Pai did not get a chance to address some of 
those issues on Lifeline. The purpose, the direction, where is 
this going in the days ahead, based on the history of it, where 
we are now, where it looks like we are headed?
    Mr. Pai. Excellent questions all, Senator.
    I think the very name of the program bespeaks the original 
purpose, which, as you pointed out, was to provide a lifeline 
to low-income and other individuals who otherwise would not be 
able to access things like emergency personnel in a moment of 
need.
    Unfortunately, as to where the program is going, I am not 
optimistic. Last week, on a very divisive party-line vote, the 
FCC forced through a number of reforms that are going to expand 
the fiscal irresponsibility of this program and will not 
otherwise deliver digital opportunity to people who actually 
need it.
    A couple different points, if I might, with respect to the 
issues you discussed previously with the chairman.

                      LIMITING LIFELINE SUBSIDIES

    First of all, Commissioner O'Rielly and I had reached an 
agreement with Commissioner Clyburn on a bipartisan deal, which 
would have solved the problem for Oklahoma and other areas. 
Specifically, I proposed that we limit Lifeline subsidies--the 
tribal subsidy, the $25 extra subsidy--to areas with 50 people 
per square mile or less. That would be the people in Tulsa and 
Reno, Nevada, and suburban areas like Chandler, Arizona, who 
were not members of a tribe, would not be getting the tribal 
subsidy. That didn't seem to be too much to ask.
    Unfortunately, the chairman's office at the last minute 
scuttled that deal, which otherwise would have put the program 
on a much more fiscally sound footing.
    It is important to remember that that formula that I 
proposed would have saved the Lifeline program approximately 
$100 million. Each of those dollars could've then been 
delivered to people who really needed the help in order to get 
online.
    Senator Lankford. So in that formula, you had to be either 
a tribal member or to be in a tribal area that had a population 
of 50 per persons or less per square mile?
    Mr. Pai. It would be the latter. Yes, if you are in an area 
with 50 people or less per square mile.
    Senator Lankford. So if you're in highly populated tribal 
area and a tribal member, you still wouldn't have access to it?
    Mr. Pai. Correct, because then, almost by definition, you 
would have enough of a critical mass of people to support more 
broadband options than you otherwise would have in more remote 
areas.

            TAKING AUTHORITY AWAY FROM THE STATE COMMISSIONS

    The second critical thing to remember is that the FCC took 
away from State Commissions, like the Oklahoma State 
Commission, the ability to police the fund. It took away, under 
section 214(e), the State Commissions' ability to certify what 
is called an eligible telecommunications carrier, ETC.
    Every member of the Oklahoma delegation, as you might know, 
wrote to the FCC on March 25 and said, look, don't do this, 
because we are the vanguard when it comes to policing waste, 
fraud, and abuse in the system. By yanking authority from the 
State like Oklahoma or others that have been forward-thinking, 
we are just inviting more waste, fraud, and abuse.

                     LIFELINE ELIGIBLE INDIVIDUALS

    Senator Lankford. So that begs the question. Is there a 
list somewhere, then, that gets pulled from, because that has 
been the challenge all along? Is there a list or is there a 
proposal for a list from the FCC that these are the eligible 
individuals for the Lifeline program?
    Mr. Pai. As far as I know, there's not. That is going to be 
an ad hoc process going forward.
    Senator Lankford. So the same thing as it has been, if you 
can show up with a piece of paper, to be able to show that.
    Mr. Chairman.
    Mr. Wheeler. Thank you, sir.

          VERIFICATION OF ELIGIBILITY FOR THE LIFELINE PROGRAM

    What we are putting in place for the first time--and the 
difficulty with the way the program was designed in the first 
place was exactly what you said. You show up and you submit to 
the party who is about to make money off of it and says, trust 
me. And then we were supposed to say we will trust you, to the 
person who is about to make money. It required a suspension of 
disbelief. That was something that we inherited from the 
previous administration.
    What we have done is first to put in place a duplication 
database, to go to your point from previously, one per 
household. And secondly, in this new order that we adopted last 
week, no more fox guarding the hen house. You don't self-
certify anymore.
    Senator Lankford. So is there a----

                      ELIGIBILITY VERIFIER PROGRAM

    Mr. Wheeler. And two, to put in place a national 
eligibility verifier program.
    So what we build is a database program that dips into the 
SNAP database, the Medicaid database, the HUD database, et 
cetera, to find out if the Lankford household is eligible. Only 
then may somebody move ahead.
    So we have centralized and ensured responsibility.
    Senator Lankford. So then every provider has access to 
that, not only someone from this database--and they would know, 
if someone begins to sign up, are they eligible from this 
master database. I assume they are pinging FCC or some other 
location to get that.
    Mr. Wheeler. Correct.
    Senator Lankford. And then they are also able to determine 
another provider is not already giving them service, because 
that was the double dipping.
    Mr. Wheeler. Correct.
    Senator Lankford. So they know if you are AT&T or Sprint or 
T-Mobile, whatever it may be, ``I'm sorry. You already have a 
T-Mobile phone in this one, and we are AT&T.'' Is that correct?
    Mr. Wheeler. Yes, sir.
    Senator Lankford. And from that list, then you are saying 
that you cannot get more than one per household, because I know 
there's been a lot of conversation about multiple households. 
If there is a misspelling, if you do ``Dr.'' one time and 
``Drive'' in another one for your address, you end up with two 
per household.
    What is the maximum per household right now, because it has 
been one per family and that seems to be loosely defined where 
there could be multiple in household?
    Mr. Wheeler. You're absolutely right. The difficulty was 
because if you are in self-certification, somebody comes in and 
say they are ``R. Smith'' and somebody comes in and says they 
are ``Ralph Smith,'' and it becomes two different people.
    We have eliminated that opportunity in this and made sure 
that, first of all, Ralph Smith is qualified, and second, there 
is nobody else at Ralph Smith's address who is getting this.
    Senator Lankford. Do the providers have access to this 
database?
    Mr. Wheeler. Yes.
    Senator Lankford. Or do they have access if someone comes 
in and makes the request? How does that happen? Does it go to 
you and they give an address, and they just send it to you and 
you're checking the database? Or do providers have access?
    Mr. Wheeler. Someone comes forward and says I would like to 
participate. The first question is, let me find out if you're 
eligible, and you ping the database. Then that answers the 
question as to whether or not----
    Senator Lankford. Can individuals also ping that database 
or just providers?
    Mr. Wheeler. No, sir.
    Senator Lankford. Because my question is, how do providers 
not send out a notification to individual subscribers and say, 
hey, if you want an additional service, we could ask at XYZ 
service, and by the way, you also are eligible for this $9.25 
additional, so it will really be free to you. So if you sign up 
for this, then we will also add this. And the provider gets an 
extra $9.25, because there are people that are not currently 
taking it that are paying their bill.
    Mr. Wheeler. That is not the goal, and I would----
    Senator Lankford. I am aware it is not the goal. I'm trying 
to----
    Mr. Wheeler. No. And I would look forward to coming back 
and working with you to make sure that that doesn't happen.
    Senator Lankford. That is something we're going to have to 
work on long term.
    Mr. Pai, thoughts or questions?
    Mr. Pai. A couple points, Senator.

                     NATIONAL ELIGIBILITY DATABASE

    First, this is old news. In 2012, the FCC said that there 
would be a national eligibility database. In 2013, that didn't 
happen. The FCC fell down on the job. I'm afraid that this time 
around, I wouldn't be all that much more optimistic.
    Senator Lankford. Does the database exist right now? Or is 
it something in future planning?
    Mr. Pai. I'm not sure exactly what the majority has in 
mind, but that database as described does not exist currently.
    There is a database that currently carriers can override, 
and that is part of the reason why we are seeing some carriers 
now simply bypassing it, rejecting the ``no'' answer they get 
from it in order to sign up customers.
    One quick point, if I might, Senator. This entire 
enterprise we are talking about, you might be surprised to 
know, doesn't support broadband. The FCC explicitly rejected my 
bipartisan agreement which would have said, look, in 2015, the 
FCC told us that broadband was 25 megabits per second 
connectivity. So I said, well, that is what people should get, 
wired connection of 25 megabits per second, 4G LTE for 
wireless. The FCC explicitly rejected that.
    It seems to me that if, as the chairman said a year ago, 25 
megabits per second connection has become ``table stakes in 
21st century communications,'' poor Americans deserve just as 
much digital opportunity as anybody else.

                   FREE SERVICE OR A SUBSIDY SERVICE

    Senator Lankford. So one of the big questions here also 
goes back to, is this a free service or is this a subsidy? And 
where are we headed for this? Is this a free service that is 
being provided to people or a subsidy so that they can get 
access?
    Mr. Pai. I certainly have no optimism that the FCC is not 
going to go all the way to a full subsidy. It is traditionally 
supposed to be a partial subsidy to exempt some of the cost.
    Senator Lankford. Right.
    Chairman Wheeler, you and I talked about this last year as 
well. Is this a free service or a subsidy service?
    Mr. Wheeler. Thank you, sir.
    I think what you're going to see is you're going to see a 
series of options for consumers. It could include free. Whether 
it will include free----
    Senator Lankford. Broadband or phone or either one?
    Mr. Wheeler. I don't know because of the pricing that the 
carriers will have to decide. Whether they can provide 
broadband service at $9.25 a month for free is an issue that 
will have to be resolved. But I think that there will be 
layers.
    Senator Lankford. Right.
    Mr. Wheeler. I'm sure that the free, voice only, which 
exists today, will be out there.
    Senator Lankford. Right. Because my concern on this is that 
the pilot program that FCC did, 14 different areas, if I 
remember this correctly, plus Puerto Rico, and they determined, 
where it was free, they had wide usage. Where it was $20 and 
people were getting $9.25, no one signed up. Where it was 
something less than that, they would sign up for a while, and 
then they would drop out.
    So basically, people are signing up, if it was free. And if 
it wasn't free, they weren't signing up.
    So is it an expectation of something different? This goes 
back to the question the chairman was pressing on as well. You 
seem to be leaning in toward we need to have more ability to be 
able to control the price of broadband. At the same time, we 
are leaning in toward providing a subsidy for broadband, 
knowing that the only people who are really going to take the 
Lifeline subsidy are those who are completely subsidized. The 
concern is that there is going to be an equal push here to say 
to providers, we are going to set the price for you. Otherwise, 
the Federal taxpayer is going to have to pay for more for USF 
to be able to cover more people, because we really have to get 
it for free.
    Tell me where I'm wrong.
    Mr. Wheeler. So I think what we are trying to say, sir, is 
that here is $9.25, and we believe that the market will offer 
services in different types of equipment, different types of 
throughput, different types of data caps, et cetera, that will 
have multiple choices.
    So we have to walk away from the old Lifeline concept, 
which was a black dial telephone or a cell phone where we will 
dictate, and go to the concept of the market determining both 
what carriers will offer and what consumers will choose. And I 
don't know the answer to that.

                      BROADBAND DELIVERED TO HOMES

    Senator Lankford. The concern really is that once we get 
into broadband delivered to a home at $9.25, there is a 
computer that has to be attached to that, there's a router that 
has to be attached to that, there is virus software that has to 
be attached to that, there are updates that have to be attached 
to that. There is a whole series of things there. Or you are 
talking about $9.25 for a smart phone, which is obviously not 
going to cover the cost of the voice and of the data that is 
coming into it as well.
    This increasing complexity seems to come up of what else 
has to be attached to it to be able to make work. And it seems 
like the budget caps are being hedged here at the $2 billion, 
that it could go more than that. We have already, in the last 
10 years, doubled the USF.
    I'm trying to figure out, for every other paying consumer 
that pays full price for all these things, how far their taxes 
are going to go up on this USF tax to offset the tremendous 
needs over here, once you start stepping into this.
    This is no longer about reaching out for emergency 
services. This is so you can do your homework and so you can do 
job applications and so you can watch cat videos on YouTube. 
This opens up a wide variety of things here, and I'm trying to 
figure out exactly where this is going and how far it goes.
    Mr. Wheeler. What we are trying to do is not be overly 
intrusive into dictating how the market works, other than to 
put caps on so that it is going to be hard to watch a cat 
video, because we want there to be uses that are for homework, 
are for finding jobs.
    So there will be 500 megabits, a gig, and 2 gigs as the top 
of the whole thing. For a couple gigs, you're going to have a 
hard time watching cat videos.
    Senator Lankford. Mr. Chairman, I am way over time. I 
apologize for that.
    Senator Boozman. Thank you for a good line of questioning, 
Senator Lankford.
    We do appreciate you being here, Chairman Wheeler, 
Commissioner Pai.
    We also wish you a very, very happy birthday for the rest 
of the day.
    We appreciate our staffs working so hard, my staff and 
Senator Coons' staff, in setting all this up.

                     ADDITIONAL COMMITTEE QUESTIONS

    If there are no further questions, the hearing record will 
remain open until next Tuesday, April 12, at noon, for 
subcommittee members to submit any statements or questions to 
the witnesses for the record.
    [The following questions were not asked at the hearing, but 
were submitted to the Commission for response subsequent to the 
hearing:]
                Questions Submitted to Hon. Tom Wheeler
              Questions Submitted by Senator John Boozman
    Question. The upcoming broadcast auction will be a complex 
undertaking, and many believe the 39-month window for implementation 
will prove difficult to meet. How is the FCC planning to meet this 
challenge, and what are your thoughts regarding recent calls for the 
FCC to utilize a third party to serve as transition administrator? How 
can we be confident the Commission will devote adequate resources to 
implementation?
    Answer. Like the auction itself, the transition will be an inter-
disciplinary effort that involves multiple bureaus and offices within 
the Commission. Accordingly, we have marshalled all available resources 
and highly skilled personnel to support our intra-agency Incentive 
Auction Task Force as it follows through with this essential process. 
We recently appointed a highly qualified Deputy Chair for Transition to 
the task force to specifically focus on planning for and implementing 
the post-auction transition. In this role, she will ensure that the 
transition has the attention and cross-bureau coordination it requires.
    We believe that a 39-month transition period is sufficient for 
stations to apply for a construction permit (3 months) and move to 
their new channels (36-month Construction Period), while also enabling 
forward auction winners to get access to their newly acquired spectrum 
as quickly as possible, thus ensuring a successful incentive auction.
    The Commission has created a framework that gives stations every 
opportunity to remain on the air, even if time runs short due to 
unforeseen circumstances. To assist stations, the Commission will 
permit 6-month extensions for stations that, for reasons beyond their 
control, cannot complete the modifications to their facilities during 
their construction period.
    Additionally, special temporary authority may be granted to operate 
on a new channel using a temporary facility while they complete their 
tower modifications. Eligible broadcasters can also request special 
temporary authority to operate on a channel in the TV band that is 
available because it was relinquished by a winning bidder in the 
auction.
    The Commission is also committed to establishing fair and efficient 
process for reimbursing broadcasters' relocation costs. As part of that 
process, the FCC commissioned the Widelity Report to more fully 
understand the types of costs that would be required, and the magnitude 
of those costs, to help make efficient use of the Broadcaster 
Relocation Fund.
    The Commission's Media Bureau adopted a catalog of expenses as 
guidance, which will serve as a means of facilitating the process of 
being reimbursed by setting forth categories of expenses. The 
Commission also plans to engage a reimbursement administrator to 
facilitate the disbursement of funds. It recently solicited proposals 
for this position and will shortly announce the selection of the 
administrator.
    The Incentive Auction Task Force is developing a transition 
schedule that will maximize the efficiency of this transition and 
minimize service disruptions. The Commission recognizes that many 
different variables are at play that will affect when an individual 
station can successfully transition, including weather and seasonal 
issues, daisy chains and interference issues, and availability of 
equipment and crews. We will take into account how many stations 
actually need to be repacked, and the specific characteristics of each, 
in determining the repacking schedule.
    The Commission continues to work closely with broadcasters to 
obtain important input from the industry on planning a successful 
transition, taking into account all of those different variables. We 
have also continue to have discussions with representatives of the 
wireless industry, who obviously have a stake in an efficient 
transition process. We anticipate further interaction with all affected 
stakeholders as we develop, refine and ultimately implement this 
transition plan.
    Question. The ability of financial institutions to communicate with 
consumers about pertinent account information can help prevent identity 
theft and stolen data, and give consumers the chance to receive other 
important information about their account. Yet, because of some of the 
conditions that must be met under the FCC's recent Omnibus TCPA Ruling 
to make these important calls, it is difficult for financial 
institutions to have assurances that they are not in violation of some 
technicality when making them.
    What is the FCC doing to address these concerns voiced by financial 
institutions since the ruling?
    Answer. The Commission gave full consideration to the impact its 
ruling would have on all petitioners, including businesses of all 
sizes. Consistent with our rules, the Commission sought public comment 
on all of the petitions addressed in the 2015 Declaratory Ruling. Based 
on this record, the Commission granted relief to some businesses, 
including a petitioner who provided time-sensitive healthcare robocall 
alerts. Where the Commission denied relief, based on the statute and 
Commission precedent, the ruling nevertheless provided clarity and a 
roadmap for compliance.
    The Commission specifically considered the concerns of the American 
Bankers Association (ABA) in its Declaratory Ruling. ABA filed a 
Petition seeking an exemption for four types of financial-related 
calls: (1) potential fraud or identity theft, (2) data security 
breaches, (3) steps to take to prevent identity theft following a data 
breach; and (4) money transfers. The Commission granted ABA relief on 
all four types of messages, subject to certain conditions, including 
that they be free to the recipient.
    I am committed to enforcing the TCPA, which is designed to protect 
consumers from unwanted calls and texts. Consumers value their privacy, 
regardless of whether unwanted efforts to reach them target their home 
landlines or wireless phones. At the same time, the Commission in the 
Omnibus decision provided relief where it found consumers would welcome 
the messages and the law gives us flexibility.
    Question. Do you think it was Congress' intent when enacting the 
TCPA to limit communications between financial institutions and their 
customers and members?
    Answer. Congress tasked the Commission with enforcing the law and 
expressly empowered consumers with a private right of action. The 
Commission understands the legitimate needs of businesses to 
communicate with their customers, but it is important that we strike 
the appropriate balance that protects the needs of consumers. 
Accordingly, we believe we have struck the right balance between 
consumer privacy and businesses' need to communicate with consumers.
    Question. The FCC recently released details of a draft rule to 
exempt autodialer calls to collect Federal debt from Telephone Consumer 
Protection Act (TCPA) restrictions.
    Has the FCC considered whether such changes are also appropriate 
for collecting debts owed to federally insured financial institutions, 
like credit unions and banks?
    Answer. Section 301 of the Bipartisan Budget Act of 2015, which 
amends the codified Telephone Consumer Protection Act, creates an 
exception to the TCPA's prior express consent requirement for automated 
calls to cellular or residential telephones for the purpose of 
collecting debts owed to or guaranteed by the United States.
    As with any legislation enacted by Congress, we followed the 
statutory requirements and initiated a rulemaking procedure to comply 
with our legal mandate. We will consider all issues raised in the 
record in response to our NPRM as we move forward to implement the 
Congressionally mandated exemption.
                                 ______
                                 
          Questions Submitted by Senator Christopher A. Coons
               universal service fund program efficiency
    Question. How would the additional funds requested in the budget 
for Universal Service Fund (USF) Enforcement be used to help reduce 
improper payments?
    Answer. As noted in the Commission's fiscal year 2017 budget 
request, we have determined that the USF program would benefit from the 
implementation of technology to identify, detect, and prevent improper 
payments before they have an opportunity to occur. By applying 
``predictive analytics'' to USF claims to identify abnormal or 
suspicious patterns prior to payments going out, we can better limit 
improper payments and increase the effectiveness of our efforts to 
detect and prevent fraud.
    To achieve this goal, we would acquire and implement data mining 
technology to apply predictive models to the highest risks in the USF 
program. If the FCC successfully integrates this tool into the USF 
claims process, we would increase the effectiveness of our limited 
enforcement resources by detecting patterns of non-compliance with FCC 
rules in the program.
    Using this analysis, our staff would also increase the flow of 
actionable information to Commission enforcement partners such as the 
Office of Inspector General and Department of Justice. Finally, over 
time, the cost of this system would yield a significant return on 
investment in terms of decreased improper payments, making more funds 
available for the purposes that the USF programs are intended to serve.
    Question. Please explain the roles of FCC and Universal Service 
Administrative Company (USAC) in enforcement and fraud reduction for 
USF Programs. What is the responsibility of each entity, and how do the 
two organizations work together on this topic?
    Answer. The Commission's Enforcement Bureau (EB) serves as the 
FCC's lead for investigating potential violations ofthe FCC's rules and 
recommending penalties for wrongdoers as necessary. The Enforcement 
Bureau has focused significant attention on USF-related matters. When 
conducting its investigations of USF matters, EB utilizes the legal 
expertise of the Wireline Competition Bureau and Office of General 
Counsel as well as operational support from the Office of Managing 
Director. The FCC's Office of Inspector General conducts its own audits 
of USF beneficiaries and coordinates with the Department of Justice 
when it finds any potential criminal behavior.
    The FCC has a longstanding relationship with USAC going back almost 
20 years. The FCC has worked to continually learn from its experiences 
with USF implementation and its relationship with USAC to strengthen 
the controls over USF beneficiary payments. More specifically, the FCC 
previously directed USAC to develop two separate programs, the 
Beneficiary and Contributor Audit Program (BCAP) and Payment Quality 
Assurance (PQA) program to help reduce fraud, waste, and abuse in the 
program. BCAP is designed to measure rates of program compliance among 
universal service beneficiaries and contributors. In administering the 
BCAP, USAC utilizes audit approaches tailored to both the distinctive 
features of the participant's organization and the specific amounts of 
money being audited.
    The PQA Program compliments the BCAP program. Under the PQA 
program, USAC assesses specific payments made to select beneficiaries 
in all four USF programs to determine if these payments were made in 
accordance with FCC rules. Both the BCAP and PQA are useful in 
deterring those who would attempt to violate the FCC's rules related to 
USF. BCAP and PQA raise awareness among USF program participants that 
oversight is ongoing and that they may be selected for an audit or 
subject to a payment review.
    Finally, the information derived from the BCAP and PQA programs 
provides useful information for both our EB and OIG. Pursuant to the 
FCC's ``Memorandum of Understanding'' with USAC, the staff at USAC are 
directed to provide any information about potential wrongdoing to EB 
and the OIG and to cooperate with the FCC as it conducts follow up 
investigations.
    Question. What else is the FCC doing to reduce waste in each USF 
program?
    Answer. Despite a lack of additional funds to increase our 
enforcement focus and modernize our related IT resources, the FCC has 
taken a number of affirmative actions to reduce waste, fraud and abuse 
of all USF programs; to hold accountable those found to be in violation 
of Commission rules; and to stem improper payments, not all of which 
rise to the level of fraud.
    First, we initiated the USF Strike Force within EB to focus on 
these issues, perform cross-agency investigations, and work with law 
enforcement and our OIG to better coordinate and harmonize efforts. In 
fiscal year 2016, the Strike Force has already taken action in two 
significant cases:

  --E-rate Settlement. In December 2015, the Bureau, led by the USF 
        Strike Force, reached a settlement with the New York City 
        Department of Education (NYC DOE), the Nation's largest school 
        district, regarding allegations of competitive bidding 
        violations stemming from NYC DOE's involvement in the USF E-
        rate Program. The NYC DOE settlement was the largest resolution 
        of a USF E-rate Program investigation in the FCC's history. As 
        part of the consent decree, NYC DOE paid a $3 million fine, 
        relinquished claims to its then-pending requests for USF E-rate 
        funds, and was required to appoint an independent compliance 
        monitor.
  --Lifeline Rule Violations. In April 2016, the Commission issued an 
        NAL against Total Call Mobile, Inc., proposing a forfeiture of 
        over $51 million for violations of the FCC's Lifeline rules 
        related to systemic and egregious misconduct by sales agents 
        that resulted in the enrollment of tens of thousands of 
        duplicate and ineligible consumers. The investigation was led 
        by the USF Strike Force and represented the largest proposed 
        fine in the history of the Lifeline program.

       The NAL also ordered Total Call Mobile, Inc., to explain the 
following: (1) why the Commission should not order USAC to suspend all 
of the company's Lifeline reimbursements; (2) why the Commission should 
not revoke approval of the company's eligible telecommunications 
carrier (ETC) compliance plan; and (3) why the Commission should not 
initiate proceedings to revoke the company's Commission-approved 
authorizations.

    Last year, the Bureau also settled a Lifeline investigation with 
AT&T and SNET. In that case, AT&T and SNET agreed to pay $10.9 million 
in penalties for overbilling the FCC's Lifeline program. The $10.9 
million in penalties resulting from these settlements were in addition 
to the refund payments that the companies made to fully reimburse the 
Lifeline program for ineligible customers. In addition, AT&T and SNET 
were required to adopt rigorous compliance plans, including designating 
a senior corporate manager to serve as a compliance officer, developing 
a comprehensive compliance plan, and reporting regularly to the 
Enforcement Bureau on compliance, as well as other steps designed to 
ensure it is not overbilling the Lifeline program.
    Rule revisions since I became Chairman have had a solid, positive 
impact on reducing waste, fraud and abuse. For instance, the recent 
Lifeline Order makes certain that we avoid waste fraud and abuse issues 
previously endemic to the program. Building on the 2012 Lifeline Reform 
Order that enacted comprehensive reforms to reduce waste, fraud, and 
abuse, in June 2015 the Commission adopted a Lifeline Further Notice 
that proposed to modernize Lifeline by restructuring the program to 
better support 21st Century communications.
    On March 31, 2016, the Commission then adopted an Order that 
followed through on the June 2015 modernization proposals that will 
make broadband more available and affordable for low-income consumers 
participating in the Lifeline program, while taking additional steps to 
protect the integrity of the fund. The recent Lifeline Modernization 
Order:

  --Allows low-income consumers to apply the $9.25 per month support 
        not only to bundled voice and data service packages, but also 
        to stand-alone broadband service;
  --Encourages wider participation in the program by broadband 
        providers;
  --Gives consumers competitive service options;
  --Sets minimum service standards that would ensure that supported 
        services meet modern needs;
  --Establishes a National Eligibility Verifier to remove eligibility 
        decisions from providers and to further deter waste and abuse; 
        and
  --Establishes a budget mechanism to minimize Lifeline's impact on 
        ratepayers.

    In addition, over the last few years following the 2012 Reform 
Order, the Lifeline program has exhibited a consistent downward 
trajectory in disbursements. Disbursements peaked at $2.2 billion in 
2012 and dropped consistently through last year when the program 
disbursed $1.51 billion.
    With respect to the E-rate program, the Commission also took 
important steps in the E-rate Modernization Orders in 2014 to combat 
waste, fraud, and abuse in the E-rate program. For example:

  --To assist fraud investigations and allow the Commission to pursue 
        fraud claims under the False Claims Act:
    --We extended the E-rate document retention from 5 years to 10 
            years after the latter of the last day of the applicable 
            funding year, or the service delivery deadline for a 
            funding request.
    --We also clarified that E-rate applicants and service providers 
            must allow fraud investigators onto their premises.
  --We also instituted pricing transparency measures that make E-rate 
        prices publicly available, which shine a light on whether 
        service providers offer lowest corresponding price rule-
        compliant prices and enable applicants to make cost-effective 
        purchases.
    --To eliminate incentives for applicants and service providers to 
            agree to wasteful spending for WiFi services, we adopted 
            funding budgets for purchases of category two services.

    With respect to the High-Cost program, the Commission has taken 
steps to ensure that recipients use high-cost support only for its 
intended purpose of maintaining and extending communications services 
to rural, high-cost areas. In October 2015, the Commission released a 
public notice listing a number of expenses that eligible 
telecommunications carriers are not permitted to recover through high-
cost support. More recently, in the Rate of Return Reform Order, the 
Commission adopted a rule to limit excessively high operating expenses 
and capital investments by rate-of-return carriers and sought further 
comment on other measures to ensure that high-cost funds are used only 
for universal service purposes.
    Question. Please explain how the FCC leverages the data of other 
Federal organizations to reduce improper payments. To what extent does 
the FCC utilize Treasury's ``Do Not Pay Center'', which leverages data 
from multiple Federal agencies to reduce improper payments, or if the 
FCC does not use the Do Not Pay Center, please explain why.
    Answer. The FCC and USAC are committed to collecting universal 
service contributions and disbursing payments to program beneficiaries 
that are accurate, timely, properly documented, and in compliance with 
rules established by the FCC. Utilizing USAC's historical data, the FCC 
and USAC monitor ongoin beneficiary payments to try to identify 
potential issues, and when there is enough evidence of a problem, the 
FCC may direct USAC to put a funding hold on a beneficiary until the 
issues can be resolved. When there is enough evidence of intentional 
rule violations, beneficiaries may also be barred from further 
participation in any of the USF programs.
    The FCC has been utilizing Do Not Pay for its own payments for some 
time now. Seeing its potential benefit for USF, the FCC approached the 
Department of the Treasury to determine if USAC could access the Do Not 
Pay system. As a result, the FCC has completed an application for USAC 
requesting that Treasury grant them access to the Do Not Pay system. 
Treasury is currently reviewing the FCC's request, and the FCC hopes to 
have USAC granted access in the near future.
    Question. Through the E-rate program, the FCC pays a portion of the 
cost of broadband service for schools and libraries.
    What portion of the costs does the FCC pay?
    Answer. The E-rate program pays between 90 percent and 20 percent 
of the cost of monthly recurring broadband services for eligible 
schools and libraries, and consortia of eligible schools and libraries. 
The percentage of broadband services paid for by E-rate is determined 
by poverty level, and rurality, with the highest poverty school 
districts receiving funding to pay 90 percent of the cost of their 
broadband services.
    In 2014, the Commission raised the annual E-rate cap to $3.9 
billion (indexed to inflation) to ensure it can meet the broadband and 
WiFi needs of all eligible schools and libraries as those needs 
continue to grow. For this school year, the program has committed 
almost $2 billion for broadband and voice services for schools and 
libraries, and more than $1.3 billion for WiFi. In Delaware alone, 
schools and libraries have received funding commitments of 
$5,976,448.42 for this funding year, and $21,299,637.30 over the last 5 
years.
    Our rules require E-rate applicants to engage in a competitive bid 
process for E-rate supported services, to use price as the primary 
factor in selecting the winning bid, and to select the most cost-
effective option, which is critical in protecting against waste, fraud 
and abuse.
    Question. What should be done or is being done for schools or 
libraries that are unable to pay the remaining costs that are not 
covered by the FCC?
    Answer. When the Commission modernized the E-rate program in 2014, 
it adopted a number of changes to the program designed to drive down 
prices paid by schools and libraries for broadband services. Among 
other things, the Commission:

    1.  Made E-rate pricing information publicly available so that 
applicants can compare the prices they are getting with the prices 
others schools and libraries are getting and to encourage service 
providers to offer competitive pricing;
    2.  Equalized the treatment of Lit and Dark Fiber, so that schools 
and libraries can seek bids for lit or dark fiber and purchase the most 
cost effective option;
    3.  Made self-provisioned networks eligible for E-rate support, so 
that, in locations where applicants cannot purchase lit leased services 
at an affordable price, they have the option of building their own 
networks; and
    4.  Offered additional E-rate funding for special construction 
charges when needed to get fiber to a school or library.

    E-rate will match State funding of special construction charges 
dollar-for-dollar up to an additional 10 percent of the cost of special 
construction. This will benefit schools and libraries where the cost of 
getting connections from a provider to the school or library has been 
cost- prohibitive.
                          next generation 911
    Question. The FCC recently convened a task force to review the 
state of the 911 emergency system and its transition to NextGen 
technology. What were their recommendations?
    Answer. The Task Force on Optimal PSAP Architecture (TFOPA or Task 
Force), a Federal Advisory Committee to the Commission, released its 
Consolidated Report on January 29, 2016.
    The full text of the report can be accessed at https://
transition.fcc.gov/pshs/911/TFOPA/TFOPA_FINALReport_012916.pdf.
    The key recommendations are summarized in Section 3 of the Report. 
In brief, the Task Force concluded:

  --The successful transition to Next Generation 9-1-1 (NG9-1-1) is 
        dependent upon a cohesive, strong statewide 9-1-1 planning and 
        coordinating mechanism in all States to facilitate the timely 
        and efficient deployment of new technology and the retirement 
        of legacy 9-1-1 systems.
  --The concept of ``cooperative Federalism'' should govern the 
        transition of existing 9-1-1 networks to NG9-1-1. Legal 
        authority over different elements of 9-1-1 exists at the State, 
        regional and Federal levels. State statutes convey authority 
        for State and local officials to direct oversight and operation 
        of 9-1-1 funding and deployment and to assure the 
        responsiveness of such systems. Federal agencies, such as the 
        FCC, DOT/NHTSA, OHS, DOJ, and others have interests in 
        assisting in the efficient and cost-effective deployment of 
        NG9-1-1systems nationwide but have, in varying degrees, limited 
        statutory authority to address certain issues.
  --The Task Force endorsed the need to (i) develop a State-level cost-
        effective, efficient architecture for NG9-1-1, and (ii) to 
        develop mechanisms to protect Public Safety Answering Point 
        (PSAP) infrastructure against cyber intrusions.
  --In the area of cybersecurity, the Task Force recommended 
        introduction of a new security layer known as Emergency 
        Communications Cybersecurity Center (EC3) into PSAP network 
        architectures. The Task Force also recommended leveraging 
        existing cyber defense capabilities, such as the OHS NCC, 
        NCCIC, MS-ISAC and existing State level Fusion centers, for 
        cybersecurity information and assistance.
  --The Task Force recommended that 9-1-1 authorities explore the use 
        of shared infrastructure models and embrace strategies to 
        collaborate and share resources when transitioning to NG9-1-1.
  --The Task Force recommended development of a national system for 
        collection and analysis of standardized administrative data, 
        operational data, cost data and CAD data to provide PSAPs and 
        9-1-1 authorities with essential information to substantiate 
        decisions and improvements.
  --The Task Force examined potential NG9-1-1 funding options for State 
        and local governments, recommending that States adopt funding 
        approaches that are technologically neutral and sustainable.

    Question. Why have many communities been unable to make the digital 
transition?
    Answer. Communities face many challenges in making the transition 
to NG9-1-1, including technical, operational, training, and funding 
challenges. As a result, progress toward the transition has varied 
widely across communities, States, and regions.
    Question. What more needs to be done to ensure that Public Safety 
Answering Points have the resources they need to upgrade to advanced 
technologies?
    Answer. The recommendations of the Task Force Report provide a 
detailed ``blueprint'' of potential steps that would assist PSAPs in 
making the transition to NG9-1-1. It is essential that State and local 
9-1-1 authorities have access to appropriate resources to ensure that 
911 services will meet the needs of their communities and can take full 
advantage of the benefits of NG9-1-1. The Task Force Report also 
underscores the need for greater focus on the NG9-1-1 transition at the 
national level, including from Congress, to ensure that the transition 
is truly nationwide and does not leave under-resourced communities 
behind.
                             set-top boxes
    Question. How would your proposal to unlock set-top boxes protect 
the intellectual property rights of content producers and prevent 
widespread piracy?
    Answer. The new proposed rules would create a framework for 
providing device manufacturers, software developers and others the 
information they need to introduce innovative new technologies, while 
at the same time maintaining strong security, copyright and consumer 
protections. In the current television market, digital rights 
management (DRM) platforms offer rigorous protection against 
unauthorized copying and other violations of content owner rights. DRM 
platforms are not developed by content owners or MVPDs, but rather, by 
businesses with expertise in DRM.
    The FCC's set-top box proposal would in no way alter the role of 
DRM in the television ecosystem. Content owners would remain free to 
select the DRM platforms that they prefer. Developers of competitive 
set-top boxes and mobile apps would license the DRM technology and 
satisfy compliance requirements. That's the very same way that current 
set-top boxes support DRM, and the same way that competitive devices 
and apps already support DRM for online video.
    Question. Currently, content producers negotiate with cable 
providers and other distributors over how the content will be displayed 
and details over advertisements, in order to recoup their production 
costs. How would the proposal affect these agreements and the ability 
for content producers to recoup their production costs?
    Answer. The proposal will not have any effect on content producers 
agreements or ability to recoup production costs. It is the goal of the 
Commission to fully protect these agreements and we are having 
constructive conversations with the content community to best 
understand how the Commission can ensure that the final rules will 
fully honor and protect content producers.
    Question. What is the estimated timeline for a final standard to be 
operational? Would this process result in the creation of a standard 
that was obsolete by the time it was ready to be used?
    Answer. Our overarching goal is to fulfill the mandate of Section 
629 and ensure that consumers have choice as to how they access their 
video programming. The proposal specifically sought comment on having a 
standards body create the technical standards so that any such standard 
could be updated as technology changes, similar to the way that 
standards bodies create and update the technical standards for mobile 
phones. The Commission also sought comment on an appropriate timeframe 
for a standards body to complete this work.
                                 ______
                                 
               Questions Submitted by Senator Jerry Moran
    Question. Most small and medium-sized MVPDs license a significant 
portion of their programming through a single buying group, the 
National Cable Television Cooperative (NCTC). Existing law clearly 
indicates that Congress intended a ``buying group'' to have protections 
under the program access rules. However, in practice, the FCC's current 
rules prevent buying groups structured like NCTC from availing 
themselves of the program access rules.
    In October 2012, the FCC issued an FNPRM on its definition of a 
``buying group'' and sought comment on this and other related matters. 
The issue has now been before the FCC for over 3 years. I understand 
that the Media Bureau has been evaluating the record in this proceeding 
for some time, and that some progress was made toward resolving this 
issue last fall. When can we expect the FCC to take action? What has 
been the cause of the delay?
    Answer. The Commission's staff evaluated the record and potential 
options and determined that the record requires more details and a 
thorough review of available data and information prior to moving ahead 
with a draft Order. Accordingly, I have directed the Commission's staff 
to work with industry stakeholders to bolster the record in the coming 
months. I will keep the Committee apprised of progress in this regard.
    Question. Please provide this subcommittee and make public a list 
and approximate schedule for any and all upcoming auctions the FCC will 
undertake in fiscal year 2017?
    Answer. The Commission expects to be engaged in the 39 month 
Incentive Auctions repacking process through fiscal year 2017. Due to 
the allocation of limited Commission resources, we have not yet 
scheduled additional auctions into the following calendar year. We do 
expect to expend resources on additional spectrum auction development 
and hold spectrum and universal service auctions within the next 2 
years. These auctions will require modernization of the Commission's 
legacy auction application system to incorporate essential security 
requirements, as outlined in our fiscal year 2017 budget. The failure 
to receive these funds will delay new auctions planning and 
development. Planned but unscheduled spectrum auctions include:

  --3.5 GHz Auction: The Commission will hold auctions for the 3.5 GHz 
        band at least every 3 years on an ongoing basis. This will 
        require significant auction resources--among other things, it 
        is an auction of over 520,000 licenses (as compared to, 
        e.g.,AWS-3 with 1614 licenses) that needs to be replicable.
  --AWS-3 Re-auction: Following the AWS-3 auction, three licenses 
        remained unsold and 197 licenses were voluntarily returned to 
        the Commission by two entities. The Commission will make these 
        200 licenses available through a future auction.
  --FM Auctions: The Commission must hold two FM auctions in the near 
        term.

    Also, as directed by Congress in the Spectrum Pipeline Act (part of 
the Budget Act adopted in 2015), we will be working with NTIA to 
identify and auction 30 megahertz of spectrum by 2024, and complete 
reports to Congress that identify an additional 50 megahertz by 2022 
and another 50 megahertz by 2024.
    Question. Please provide this subcommittee and make public detailed 
auction expenditure reports for fiscal year 2013, fiscal year 2014, and 
fiscal year 2015? These reports should include the Document Number, the 
Budget Object Classification Code (BOCC), a description of each 
expense, the Destination or Vendor, and the dollar amount.
    Answer. The Commission has always met the statutorily required 
deadline for the submission of the Auctions Expenditure Reports to the 
appropriate committees as mandated in the law. The fiscal year 2015 
Report is not due until September, but I have directed my staff to 
compile and develop the report as soon as practical for submission to 
the subcommittee. You will find attached the fiscal year 2013 
(Attachment 1) and fiscal year 2014 (Attachment 2) Reports.

                              ATTACHMENT 1












































                              ATTACHMENT 2






































            Questions Submitted by Senator Richard J. Durbin
    Question. Lifeline has been a critical program in ensuring low-
income Americans have access to phone service, providing critical 
connections to work, family, and emergency services. After expanding to 
wireless cell service in 2005, I applaud the Commission for extending 
access to bring essential broadband services to the more than 100 
million Americans lacking broadband service across the country. What 
steps will the FCC take to ensure all who are eligible know of the 
expansion and are able to benefit?
    Answer. The recent Lifeline Order fundamentally modernizes and 
restructures the program to support 21st century communications that 
have become critical to full participation in modern society. As you 
noted, consumers will now be able to apply the $9.25 per month 
household subsidy to stand-alone broadband service, as well as bundled 
voice and data service. We believe that adding broadband as a supported 
service, as well as streamlining eligibility criteria to allow more 
providers to participate in the program, will increase the value and 
options for low-income consumers and allow the program to better 
address their needs.
    We also recognize that education and awareness programs can be 
effective in overcoming barriers to broadband adoption, especially 
among seniors and underprivileged populations. Broadband can be a 
critical tool to realize many economic and health gains as well as 
increased socialization, but seniors and underprivileged populations 
lag behind other demographic groups in terms of adoption and digital 
inclusion. Education and awareness programs can be effective in 
overcoming these barriers and increasing broadband adoption among these 
groups.
    To address these issues head on, the Commission has directed the 
Consumer and Governmental Affairs Bureau to develop a comprehensive 
plan to allow the Commission to better understand the non-price 
barriers to digital inclusion and to propose how the Commission can 
facilitate efforts to address those barriers. As part of this effort, 
the Commission has encouraged Lifeline providers to work with schools, 
libraries, community centers and other organizations such as food banks 
and senior citizen centers that serve low-income consumers to increase 
broadband adoption and address non-price barriers to adoption.
    We recognize the importance of the Lifeline program in addressing 
the broadband affordability gap that exists now, and believe that these 
reforms and other efforts will result in increased participation that 
will help bridge that gap.
    Question. Some have expressed concern that certain markets will be 
without any public television options as a result of the spectrum 
auction. Some areas of the country have just one public TV station, and 
should they choose to auction their spectrum, their existing customers 
would be without these services. This troubling news is not limited 
just to America's small towns: cities as large as San Diego, Detroit, 
and Dallas happen to be served by just one public TV licensee. Studies 
have found that poorer communities of color are more reliant on public 
television services than the general population, and could potentially 
be forced into the difficult decision between unaffordable paid service 
or no service at all. What steps are being taken to ensure that 
communities of color are minimally impacted during the ongoing auction?
    Answer. The Commission remains fully committed to the mission of 
non-commercial broadcasting. We think that the auction is likely to 
create few if any ``white areas,'' i.e., areas with no public 
broadcasting. Public broadcasters that wish to participate in the 
auction have the option of doing so without going off the air, by 
entering into channel sharing arrangements or bidding to move from UHF 
to VHF.
    In response to concerns raised by public broadcasting about 
possible ``white areas,'' the Commission concluded that the most 
effective means of balancing its commitment to noncommercial 
broadcasting and the mandates of the Spectrum Act is to address any 
actual service losses on a case-by-case basis in a manner that is 
tailored to the post-auction television landscape.
    In this regard, the Commission has outlined several options for 
assisting any communities left without a non-commercial station or 
channel allotment post auction:

  --The Commission could waive the freeze on the filing of applications 
        for new LPTV or TV translator stations to allow NCE licensees 
        to promptly restore any lost NCE service.
  --The Commission could consider a minor modification application by a 
        neighboring public station to expand its contour to cover a 
        community that lost NCE service, possibly by waiving our rules 
        on power and height restrictions, if the licensee can 
        demonstrate that it would not introduce new interference to 
        other broadcasters.
  --Interested parties could file petitions for rulemaking to propose 
        the allotment of new reserved channels to replace the lost 
        service once the Commission lifts the current freeze on the 
        filing of petitions for rulemaking for new station allotments, 
        or the Commission could do so on its own motion.

                          SUBCOMMITTEE RECESS

    Senator Boozman. The subcommittee is hereby adjourned.
    [Whereupon, at 11:57 a.m., Tuesday, April 5, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]