[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
NET NEUTRALITY AND THE ROLE OF ANTITRUST
=======================================================================
HEARING
before the
SUBCOMMITTEE ON
REGULATORY REFORM,
COMMERCIAL AND ANTITRUST LAW
of the
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
NOVEMBER 1, 2017
Serial No. 115-24
__________
Printed for the use of the Committee on the Judiciary
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available on the World Wide Web: http://judiciary.house.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
30-101 WASHINGTON : 2018
COMMITTEE ON THE JUDICIARY
BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr., JOHN CONYERS, Jr., Michigan
Wisconsin JERROLD NADLER, New York
LAMAR S. SMITH, Texas ZOE LOFGREN, California
STEVE CHABOT, Ohio SHEILA JACKSON LEE, Texas
DARRELL E. ISSA, California STEVE COHEN, Tennessee
STEVE KING, Iowa HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona Georgia
LOUIE GOHMERT, Texas THEODORE E. DEUTCH, Florida
JIM JORDAN, Ohio LUIS V. GUTIERREZ, Illinois
TED POE, Texas KAREN BASS, California
JASON CHAFFETZ, Utah CEDRIC L. RICHMOND, Louisiana
TOM MARINO, Pennsylvania HAKEEM S. JEFFRIES, New York
TREY GOWDY, South Carolina DAVID CICILLINE, Rhode Island
RAUL LABRADOR, Idaho ERIC SWALWELL, California
BLAKE FARENTHOLD, Texas TED LIEU, California
DOUG COLLINS, Georgia JAMIE RASKIN, Maryland
RON DeSANTIS, Florida PRAMILA JAYAPAL, Washington
KEN BUCK, Colorado BRAD SCHNEIDER, Illinois
JOHN RATCLIFFE, Texas
MARTHA ROBY, Alabama
MATT GAETZ, Florida
MIKE JOHNSON, Louisiana
ANDY BIGGS, Arizona
Shelley Husband, Chief of Staff & General Counsel
Perry Apelbaum, Minority Staff Director & Chief Counsel
------
Subcommittee on Regulatory Reform, Commercial and Antitrust Law
TOM MARINO, Pennsylvania, Chairman
BLAKE FARENTHOLD, Texas, Vice-Chairman
DARRELL E. ISSA, California DAVID N. CICILLINE, Rhode Island
DOUG COLLINS, Georgia HENRY C. ``HANK'' JOHNSON, Jr.,
KEN BUCK, Colorado Georgia
JOHN RATCLIFFE, Texas ERIC SWALWELL, California
MATT GAETZ, Florida PRAMILA JAYAPAL, Washington
BRAD SCHNEIDER, Illinois
C O N T E N T S
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OPENING STATEMENTS
Page
The Honorable Bob Goodlatte, Virginia, Chairman, Committee on the
Judiciary...................................................... 4
The Honorable John Conyers, Jr., Michigan, Ranking Member,
Committee on the Judiciary..................................... 6
The Honorable Tom Marino, Pennsylvania, Chairman, Subcommittee on
Regulatory Reform, Commercial and Antitrust Law, Committee on
the Judiciary.................................................. 1
The Honorable David Cicilline, Rhode Island, Ranking Member,
Subcommittee on Regulatory Reform, Commercial and Antitrust
Law, Committee on the Judiciary................................ 3
WITNESSES
Hon. Maureen K. Ohlhausen, Acting Chairman, Federal Trade
Commission
Oral Statement............................................... 9
Mr. Michael Romano, Senior Vice President, Industry Affairs &
Business Development, NTCA (The Rural Broadband Association)
Oral Statement............................................... 11
Hon. Terrell McSweeny, Commissioner, Federal Trade Commission
Oral Statement............................................... 13
Hon. Robert M. McDowell, Former Commissioner, Federal
Communications Commission
Oral Statement............................................... 15
OFFICIAL HEARING RECORD
Responses to Questions for the Record from the Hon. Maureen K.
Ohlhausen, Acting Chairman, Federal Trade Commission........... 36
Responses to Questions for the Record from Mr. Michael Romano,
Senior Vice President, Industry Affairs & Business Development,
NTCA (The Rural Broadband Association)......................... 39
Responses to Questions for the Record from the Hon. Terrell
McSweeny, Commissioner, Federal Trade Commission............... 43
Responses to Questions for the Record from Hon. Robert M.
McDowell, Former Commissioner, Federal Communications
Commission..................................................... 47
Additional Material Submitted for the Record
Report submitted by the Honorable Tom Marino, Pennsylvania,
Chairman, Subcommittee on Regulatory Reform, Commercial and
Antitrust Law, Committee on the Judiciary. This material is
available at the Committee and can be accessed on the Committee
Repository at:
http://docs.house.gov/meetings/JU/JU05/20171101/106572/HHRG-
115-JU05-20171101-SD004.pdf
Statements, Letter, and Testimony submitted by the Honorable
David Cicilline, Rhode Island, Ranking Member, Subcommittee on
Regulatory Reform, Commercial and Antitrust Law, Committee on
the Judiciary. These materials are available at the Committee
and can be accessed on the Committee Repository at:
http://docs.house.gov/meetings/JU/JU05/20171101/106572/HHRG-
115-JU05-20171101-SD003.pdf
Article submitted by the Honorable Pramila Jayapal, Washington,
Subcommittee on Regulatory Reform, Commercial and Antitrust
Law, Committee on the Judiciary. These materials are available
at the Committee and can be accessed on the Committee
Repository at:
http://docs.house.gov/meetings/JU/JU05/20171101/106572/HHRG-
115-JU05-20171101-SD005.pdf
NET NEUTRALITY AND THE ROLE OF ANTITRUST
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WEDNESDAY, NOVEMBER 1, 2017
House of Representatives,
Subcommittee on Regulatory Reform, Commercial and Antitrust Law,
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:00 a.m., in
Room 2141, Rayburn House Office Building, Hon. Tom Marino
[Chairman of the Subcommittee] presiding.
Present: Representatives Marino, Goodlatte, Farenthold,
Issa, Collins, Buck, Ratcliffe, Gaetz, Handel, Cicilline,
Conyers, Johnson of Georgia, Eric Swalwell, Jayapal, and
Schneider.
Staff Present: Ryan Dattilo, Counsel; Slade Bond, Minority
Counsel; and Andrea Woodard, Clerk.
Mr. Marino. Good morning. The Subcommittee on Regulatory
Reform, Commercial, and Antitrust Law will come to order.
Without objection, the Chair is authorized to declare recesses
of the Committee at any time. We welcome everyone to today's
hearing on ``Net Neutrality and the Role of Antitrust'', and I
now recognize myself for an opening statement.
The Federal Communications Commission and its new Chairman,
Ajit Pai, are in the process of evaluating what is the proper
way to protect consumer welfare and support innovation in the
Internet marketplace. We are here today to examine the role of
antitrust law in that debate.
The Internet has been an overwhelmingly positive
development for our country by spurring innovation, creating
jobs, and establishing a dynamic marketplace for goods and
ideas. All branches of our government should strive to protect
the unimpeded growth of the Internet so that consumers and our
economy can continue to reap its benefits.
I strongly believe, however, that actions should be taken
to prevent discriminatory and anticompetitive conduct from
occurring in the Internet marketplace. The question at hand
today is what role should antitrust laws and the Federal Trade
Commission, which helps to enforce those laws, play in
preventing and policing this type of conduct. Antitrust law has
a number of benefits we should consider.
Antitrust law and the standards applied by the courts have
developed, evolved, and been refined over decades. This stands
in contrast to the regulations imposed under the previous FCC's
2015 Open Internet Order, which can be interpreted and enforced
by a constantly rotating commission, and the judicial
interpretation of which is uncertain. Antitrust law uniformly
applies to all participants in the Internet marketplace.
In contrast, the 2015 order's regulations only apply to
Internet service providers. Antitrust law deters and, as
necessary, can be used to prosecute conduct once it occurs and
determine on a case-by-case basis whether a violation has
occurred. This allows for flexibility and pro-consumer
innovation. The 2015 Order applies a ``one-size-fits-all''
approach, imposing a burden on all regulated parties,
regardless of whether they actually engaged or may want to
engage in improper conduct, and discouraging potential
innovation.
The impact of today's discussion is significant. Consider,
for example, the case of rural broadband. Because rural areas
of America tend to be sparsely populated, satellite and fixed-
wireless technologies are often used to deliver Internet access
to rural customers. These technologies are costly, and
consequently often involve strict data caps. A practice known
as ``zero-rating,'' or the exemption of certain data uses from
consumers and customers' data caps helps to address these
concerns through competition and innovation, lowering prices,
and improving service for customers. Yet under the 2015 Order,
this consumer welfare-enhancing competition was almost stopped.
Consider also the case of differentiated broadband plans.
When American families buy groceries, they have the choice of
purchasing food from the local supermarket or from a high-end
organic retailer like Whole Foods. Families who just want the
basics or are on a limited income, are not forced to subsidize
the preferences of shoppers with higher-end preferences.
But because of the FCC's rigid net neutrality rules,
broadband consumers do not have the same flexibility. Under the
guise of equal access, those who use the Internet sparingly--
often, the poor and elderly--are forced to subsidize their more
affluent high-bandwidth-consuming neighbors' broadband bills.
Let's also consider the future of the Internet.
5G, the next generation of mobile broadband, will deliver
speeds far surpassing today's LTE technologies as well as the
speeds of many American's home broadband connections. 5G
promises not only to advance competition in the mobile wireless
industry but also to connect a new array of ``Internet of
Things,'' or ``IoT'' devices, such as network-connected
agricultural monitoring devices, autonomous vehicles, and
medical monitoring devices. 5G delivers on these promises by
utilizing technologies that prioritize certain network uses
that require extreme responsiveness. Innovations in telehealth,
remote medical device monitoring, or communications amongst
autonomous vehicles will all benefit from prioritized
connections. Yet under the 2015 Order, such innovation might be
stopped by the regulatory overreach of a future administration.
I look forward to hearing the testimony of today's
witnesses on the potential benefits, or, if relevant,
limitations of using antitrust law to protect consumers and
innovation in the Internet marketplace.
The Chair now recognizes the Ranking Member of the
Subcommittee on Regulatory Reform, Commercial, and Antitrust
law, Mr. Cicilline of Rhode Island, for his opening statement.
Mr. Cicilline. Thank you, Mr. Chairman, and thank you for
calling this hearing today. Welcome to our witnesses. Today's
hearing is an opportunity to examine whether antitrust
enforcement is an effective and responsive substitute for the
clear bright-line consumer protections established by the 2015
Open Internet Order.
When working families pay their bill for broadband Internet
access, they expect to get what they pay for: access to the
entire lawful Internet, not just portion of it, at the speed
they pay for. Without these protections, broadband providers
could slow down consumers' Internet speeds to certain websites,
require payments by third parties to speed traffic to
consumers, or block certain websites altogether. To be clear,
these concerns are firmly grounded in reality.
As the United States Court of Appeals for the D.C. Circuit
observed in 2014, it is, and I quote, ``common sense economic
reality'' that broadband providers have powerful incentives to
require fees from edge providers to prioritize customer speeds
and discriminate against certain types of traffic.
Consequently, as the court noted, this behavior threatens
Internet openness in ways that would ultimately inhibit the
speed and extent of future broadband deployment. Importantly,
these protections do not apply to reasonable management of
networks by Internet service providers to ensure that their
consumers have the fastest and most reliable Internet speeds
possible.
Moreover, and this is a fundamental point, these
protections do not apply to specialized services, like heart
monitors, energy consumption sensors, or voice services, which
are entirely outside the scope of the 2015 Open Internet Order
because they are not a former broadband Internet access service
for consumers. Under the Trump administration, the Federal
Communications Commission is considering whether to abolish or
substantially revise these protections.
According to the Commission's notice of proposed
rulemaking, the proposed rule seeks to, and I quote, ``reverse
the decline in infrastructure investment, innovations, and
options for consumers'' and address the concerns of broadband
providers with regulatory uncertainty.
The Supreme Court has long held, however, that the
Commission cannot simply rescind rules, but instead must
examine the relevant data and articulate a rational connection
between relevant facts and its deregulatory actions.
Notwithstanding the Commission's claims that our current
net neutrality protections have undermined broadband deployment
and adoption, the U.S. Court of Appeals for the D.C. Circuit
has held twice in the past 3 years that Internet openness
fosters innovation and leads to the expansion and improvement
of broadband infrastructure. Unless the Commission is able to
explain why it has ignored this data showing the causal
relationship between strong net neutrality protections and
broadband investment, its actions are likely to be arbitrary
and capricious under the Administrative Procedures Act.
Turning to the subject of today's hearing, there is
substantial uncertainty concerning the application of the
antitrust laws to discriminatory conduct by broadband
providers. First, it is unclear that the Federal Trade
Commission has authority to enforce the antitrust law against
common carriers, which are exempted under section 5 of the FTC
Act, even where a carrier is acting as a broadband provider.
This exact question is before the ninth circuit in an en banc
review of its prior ruling that the FTC does not possess this
authority.
Secondly, to the extent that the Federal Trade Commission
even has the authority over common carriers, there is no
evidence that antitrust enforcement is a substitute for bright-
line rules to ensure openness. The Commission's proposal does
not address or even ask this question, while the Federal Trade
Commission's 2007 report on broadband connectivity and
competition policy does not provide clear guidance on whether
paid prioritization blocking or throttling are cognizable harms
under the antitrust laws.
The point is underscored by bipartisan legislation
introduced by Chairman Goodlatte in 1999 and Chairman
Sensenbrenner in 2006, which each would have made
discriminatory conduct by broadband providers an antitrust
violation tacitly recognizing that this conduct does not
violate the antitrust laws today. And finally, as Professor Tim
Wu has previously testified before this Subcommittee, the type
of economic analysis that antitrust enforcement relies upon
does not reflect diffuse but important values, like speech or a
healthy economy.
In other words, it is virtually impossible for antitrust
enforcement to protect against the full array of discriminatory
conduct prohibited by the Open Internet Order. Before closing,
I want to make a moment to note that a primary goal of
preserving Internet openness is to prevent Internet gatekeepers
from choosing the content that consumers are able to see online
or balkanizing the Internet.
Today, there is increasing concern that some platforms have
abused their dominance to stifle innovation, undermine privacy,
and divert readers and advertising revenue away from
trustworthy sources of news and information, as the Open
Markets Institute recently observed in a letter to the FTC. I
have previously requested that the Committee hold a hearing to
examine the effects of platform dominance on consumers,
innovations, and workers to ensure that the antitrust laws are
working effectively, and I renew that request today.
As I have said before, we cannot retreat from hard
conversations about new issues. I again thank the Chairman for
calling today's hearing and look forward to the testimony of
our esteemed panel of witnesses. And I yield back.
Mr. Marino. Thank you. The Chair recognizes the Chairman of
the full Judiciary Committee, Mr. Goodlatte from Virginia for
his opening statement.
Chairman Goodlatte. Thank you, Mr. Chairman. And I very
much appreciate your holding this very important hearing today.
Actually, today's hearing marks the seventh hearing over the
past decade that the Judiciary Committee has held on the topic
of net neutrality. The significant amount of time and effort
devoted to this topic evidences the need for a more permanent
solution. Fortunately, the FCC, under the leadership of newly-
confirmed Chairman Ajit Pai, is taking actions to help steer us
in that direction.
On May 18, 2017, 2 years after the Obama administration's
FCC imposed the Open Internet Order, the current FCC adopted a
Notice of Proposed Rulemaking (``NPRM'') to reexamine the
regulatory framework established by the 2015 Order. The NPRM
proposes, among under things, to reverse the decision of the
Obama administration's FCC to reclassify broadband Internet
access service as a telecommunications service under the
Communications Act of 1934. The NPRM also requests comment on
whether to keep, modify, or eliminate certain ``bright-line
rules'' adopted in the 2015 Order and whether regulatory
intervention in the Internet service provider market is
necessary. Finally, the NPRM proposes to eliminate the
``general Internet conduct standard,'' which gives the FCC
significant discretion to prohibit any ISP practice that it
believes runs afoul of a non-exhaustive list of factors.
The Internet that existed before the 2015 Order was
dynamic, competitive, open, and free. By raising costs,
imposing heavy regulatory burdens, introducing significant
regulatory uncertainty, and instituting government meddling
into nearly every aspect of the Internet, the Obama
administration's FCC seriously undermined the Internet's
competitive nature.
The Obama administration's FCC argued, under the guise of
``net neutrality,'' that imposing blanket regulation on the
Internet marketplace is needed to encourage competition and
promote a ``virtuous cycle'' of broadband use, innovation, and
investment. I am deeply skeptical of these claims.
In my experience, regulation generally stifles, rather than
facilitates, competition and innovation. In fact, it is my
belief that the Internet flourished precisely because it
developed in a less regulated market. That is not to say that
we should stand by and allow companies to engage in
discriminatory or anticompetitive activities. Rather, I believe
that the principles of ``net neutrality'' can be best achieved
through the vigorous application of our Nation's antitrust laws
and, at most, a much lighter-handed regulatory approach than
that contained in the 2015 Order.
Strong enforcement of our antitrust laws can prevent
dominant Internet service providers from discriminating against
competitors' content or in engaging in anticompetitive pricing
practices. Supporters of net neutrality have voiced particular
concerns over vertical agreements or mergers between Internet
service providers and related businesses. Many experts
acknowledge that these vertical agreements could possibly lead
to anti-competitive conduct that could potentially harm
consumers. In extreme cases, these arguments could eventually
block downstream products, degrade services, and lead to higher
prices for American families. I strongly agree that these anti-
competitive practices should be aggressively deterred and
punished.
Yet, it is in these specific areas that the FTC has the
relevant expertise and the most robust toolbox to address
anticompetitive activities. Blanket regulation, by contrast,
would deny consumers the potential benefits in cost savings and
improved services that may result from vertical agreements.
Furthermore, antitrust laws can be applied uniformly to all
Internet market participants, not just to Internet service
providers, to ensure that improper behavior is policed
uniformly across all corners of the Internet marketplace.
The House Judiciary Committee conducted previous hearings
last Congress, examining whether antitrust law or regulation is
more effective at protecting consumers and innovation on the
Internet. And witnesses testified strongly in support of
applying antitrust law.
Given the NPRM being considered by the FCC, it is essential
that we continue this conversation as we search for a more
permanent solution to this issue that provides for the
flexibility to drive innovation and consumer welfare.
Ultimately, I am open to the idea of amending the antitrust
laws, if necessary, to account for the characteristics of the
Internet. I will continue to use the House Judiciary
Committee's jurisdiction over our Nation's antitrust laws and
enforcement agencies in order to protect an open Internet and
ensure that the Internet continues to flourish in a competitive
deregulatory environment.
Today's hearing will demonstrate the significant support
for reversing the 2015 Order and returning to a less-intrusive
regulatory state in which the antitrust laws and the Federal
Trade Commission play a significant role in addressing harmful
conduct.
I look forward to hearing today's testimony on the role of
antitrust laws in creating a permanent solution to the net
neutrality debate that has been raging for over a decade. And I
yield back. Thank you, Mr. Chairman.
Mr. Marino. Thank you. The Chair recognizes the Ranking
Member of the full Judiciary Committee, Mr. Conyers of
Michigan, for his opening statement.
Mr. Conyers. Thank you, Chairman Marino. And top of the
morning to all of our witnesses and members here, including the
son of one of them. The Judiciary Committee has a central role
in studying the issue of net neutrality and, more generally,
competition on the Internet. As the Committee considers today
the specific question of whether antitrust law would be a
better tool than regulation to ensure Internet competition and
innovation, we should keep several factors in mind.
To begin with, failure to guarantee net neutrality is not
an option. As I have previously observed at prior hearings on
this topic, and I do not want to give my seniority away, but in
2008, 2011, 2014, 2015, there are many areas in the United
States where consumers have the choice of only one or two
broadband Internet service providers. As a result, these
broadband providers effectively function as monopolies or
duopolies, let's face it.
Their control over the broadband access market gives them
the incentive and ability to provide differential treatment of
content, depending on factors like how much a content provider
pays or whether the broadband provider also offers competing
content. Such discrimination can lead to less consumer choice,
less innovation, higher costs, and more power to control the
flow of information and ideas in the hands of fewer broadband
providers. Enforcement of existing antitrust laws as the
exclusive or primary means of ensuring an open Internet,
however, would be insufficient.
Under current antitrust law, there is relatively little
that regulators can do outside the merger review context to
address the conduct of a regulated industry, such as broadband
Internet service, with respect to enforcing net neutrality
principles. Through a series of decisions, the Supreme Court
has limited the potential to successfully pursue claims under
the Sherman Antitrust Act with respect to net neutrality.
In addition, antitrust enforcement alone would be a
cumbersome, more limited, more resource-intensive, and after
the fact way than regulation to develop a regulatory regime for
net neutrality. Moreover, antitrust law is not sufficiently
broad in scope, as it fails to address the noneconomic goals of
net neutrality, including the promotion of innovation and the
protection of free speech and political debate.
Now, while I welcome the recent efforts of some
progressives to restore the original understanding and purpose
of antitrust law to better account for the political
implications of the excessive concentration of corporate power,
antitrust law, nonetheless, will remain a necessary but
insufficient tool with respect to ensuring net neutrality. In
light of the foregoing, the Federal Communications Commission's
2015 Open Internet Order provides a strong and vital set of
rules for ensuring an open Internet, and the Commission should
not rescind it.
Rules to address net neutrality have the benefit of
addressing potential threats to an open Internet before they
fully materialize. Additionally, having a set of best practices
enshrined in rules would provide certainty for the industry. I
am particularly pleased that the Open Internet Order contains
key provisions that many others like myself have long called
for, including a rule preventing broadband providers from
blocking or throttling Internet access or from imposing paid
prioritization of Internet traffic and prohibition on any other
practices that unreasonably interfere with or disadvantage
users' ability to access broadband service or lawful content
applications or services.
These measures are the best way to protect the virtuous
cycle of innovation which net neutrality fosters and which
ensures both competition and innovation among broadband and
content providers to the ultimate benefit of consumers. I thank
Chairman Marino for holding this hearing, and I look forward to
our witnesses' testimony today. Thank you, Mr. Chairman.
Mr. Marino. Thank you. Without objection, other members'
opening statements will be made part of the record.
Statement submitted by the Honorable Henry C. ``Hank''
Johnson, Jr., Georgia, Subcommittee on Regulatory Reform,
Commercial and Antitrust Law, Committee on the Judiciary. This
material is available at the Committee and can be accessed on
the Committee Repository at: http://docs.house.gov/meetings/JU/
JU05/20171101/106572/HHRG-115-JU05-MState-J000288-20171101.pdf.
Mr. Marino. I will begin by swearing in our witnesses
before we introduce them. If you would please all rise, and
raise your right hand.
Do you swear that the testimony you are about to give
before this Committee is the truth, the whole truth, and
nothing but the truth, so help you God?
Let the record reflect that all of the witnesses have
responded in the affirmative. Please be seated, and thank you.
I am going to introduce all of the witnesses before we
start with your opening statements. Maureen K. Ohlhausen was
sworn in as Commissioner of the Federal Trade Commission on
April 4, 2012 and was designated as Acting Chairman by
President Donald Trump in January 2017.
Prior to joining the Commission, Ohlhausen was a partner in
Wilkinson Barker Knauer, LLP, where she focused on FTC issues,
including privacy, data protection, and cybersecurity. Ms.
Ohlhausen previously served at the Commission for 11 years,
most recently as Director of the Office of Policy Planning from
2004 to 2008, and she led the FTC's Internet access taskforce.
Ms. Ohlhausen was also Deputy Director of that office.
From 1998 to 2001, she was an attorney advisor for former
FTC Commissioner, Orson Swindle, advising him on competition
and consumer protection matters. Before coming to the FTC, Ms.
Ohlhausen spent 5 years at the U.S. Court of Appeals for the
D.C. Circuit serving as a law clerk for Judge David B. Sentelle
and as a staff attorney.
She also clerked for Judge Robert Yock of the U.S. Court of
Appeals Claims from 1991 to 1992. Ms. Ohlhausen graduated with
distinction from Antonin Scalia Law School, George Mason
University in 1991 and graduated with honors from the
University of Virginia in 1984. Commissioner, thank you for
being here.
Michael Romano is the Senior Vice President of Industry
Affairs and Business Development at NTCA Rural Broadband
Association, where he oversees public policy advocacy, industry
affairs, business opportunities, and community outreach efforts
for the trade association on behalf of several hundred rural
telecom operator members.
Prior to working with NTCA, Mr. Romano was general counsel
with the firm Bingham McCutchen LLP, representing
telecommunication carriers and other service providers in
regulatory rulemaking and adjunctive proceedings and civil and
administrative litigation.
He has also worked with Global Telecom and Technology,
formerly Global Internetworking as vice president and General
Counsel, and at other tech companies, such as America Online
and Level 3 Communications. Mr. Romano was also an associate at
the firm of Swidler Berlin LLP, representing clients in
regulatory processings for State regulators in the Federal
Communications Commission and in contract negotiations with
other industry operators. Mr. Romano earned his B.A. from
Middlebury College and his J.D. from Georgetown University Law
Center. Welcome, sir.
Terrell McSweeny currently serves as Commissioner to the
FTC. Prior to her appointment to the Commission by President
Obama, Commissioner McSweeny served as Chief Counsel for the
Competition Policy and Intergovernmental Relations Department
with the Antitrust Division of the Department of Justice.
Commissioner McSweeny also served as Senior Advisor to
President Obama and Vice President Biden, Deputy Chief of Staff
to then-Senator Biden, and counsel to the Senate Judiciary
Committee.
She also worked in private practice at the firm of
O'Melveny and Myers. Commissioner McSweeny earned her
bachelor's degree from Harvard University and her J.D. from
Georgetown University School of Law.
Robert McDowell is a partner with the firm Cooley LLP,
where he specializes in regulatory communication mergers and
acquisitions and telecommunications and wireless technology.
Prior to joining Cooley, Mr. McDowell served as a Commissioner
of the Federal Communications Commission, the FCC, for 7 years.
He was first appointed by President George W. Bush in 2006 and
again by President Obama in 2009.
At the FCC, Mr. McDowell led efforts to expand consumer
access to spectrum through his work on the two largest wireless
auctions in the U.S. history at the time. He played a key role
in 2009 digital television transition, and led efforts to
establish the first Federal Civil Rights rule in a generation
by creating a ban on racially discriminatory practices in
broadcast advertising.
He also helped oversee several large and complex mergers
including SiriusXM and Comcast NBCUniversal. Prior to serving
with the FCC, he was senior vice president for CompTel, the
Competitive Telecommunications Association. Mr. McDowell earned
his B.A. with honors from Duke University and his J.D. from
William and Mary Law School. And I know that he has some very
competent backup with him sitting behind him, his son. So,
welcome.
Each of the witnesses' written statements will be entered
into the record in its entirety. I ask that each witness
summarize his or her testimony in 5 minutes or less. To help
you stay within that time, there is a timing light in front of
you. The light will switch from green to yellow indicating that
you have 1 minute to conclude your testimony. And when the
light turns red, it indicates that the witnesses' 5 minutes
have expired.
I want to thank you witnesses for being here, and the
Honorable Ms. Ohlhausen, please.
STATEMENTS OF MAUREEN K. OHLHAUSEN, ACTING CHAIRMAN, FEDERAL
TRADE COMMISSION; MICHAEL ROMANO, SENIOR VICE PRESIDENT,
INDUSTRY AFFAIRS AND BUSINESS DEVELOPMENT, NTCA (RURAL
BROADBAND ASSOCIATION); TERRELL MCSWEENY, COMMISSIONER, FEDERAL
TRADE COMMISSION; AND ROBERT MCDOWELL, FORMER COMMISSIONER,
FEDERAL COMMUNICATIONS COMMISSION
STATEMENT OF MAUREEN K. OHLHAUSEN
Ms. Ohlhausen. Chairman Marino, Ranking Member Cicilline,
and members of the Subcommittee, I appreciate this opportunity
to appear before you today to discuss network neutrality and
the role of antitrust. Ten years ago, a bipartisan FTC approved
a staff report that analyzed competition in consumer protection
issues related to net neutrality and cautioned against
regulation. Applying economic and antitrust analysis, our
report explained that banning non-neutral behavior could harm
consumers more than it helps them. Instead, the report noted
that the FTC could assess whether ISP's practices are
anticompetitive, unfair, or deceptive on a case-by-case basis.
The report also recommended that ISPs clearly disclose the
material terms of broadband access, particularly any traffic-
shaping practices. This report remains highly relevant today,
and where the evidence has changed, it shows the broadband
market is more competitive than it was in 2007, strengthening
the report's conclusions. More recently, FTC staff filed a
comment to the FCC detailing our expertise and recommending
that the FCC reclassify broadband as a title I noncommon
carrier service. And I agree with that recommendation, and
filed my own comment to that effect.
As the 2007 report and subsequent comments state, the FTC's
antitrust and consumer protection tools help ensure that
consumers can pursue their preferences, whether for prioritized
services or for equal treatment of all data by ISPs. The FTC
has addressed a wide range of anticompetitive behavior,
including the kinds of behavior that concern net neutrality
advocates.
For example, the FTC has sued companies for foreclosing
rival content in an exclusionary or predatory manner, and
challenged problematic access discrimination, pricing, and
bundling practices. And we have conditioned vertical mergers
that would have foreclosed competition in a downstream market.
Antitrust enforcement, by protecting the competitive process,
can promote net neutrality if that is what consumers want.
Advocates of regulation often argue that consumers value
the equal treatment of data by ISPs. If so, then any ISP that
systematically degrades applications and content that its
subscribers demand will certainly face a backlash. On the other
hand, consumers may desire and benefit from certain non-neutral
ISP practices, such as streaming services bundles or
prioritization of telemedicine services. Case-by-case antitrust
enforcement focused on competitive harm will allow ISPs and
content providers to experiment in ways that benefit consumers,
while guarding against arrangements that foreclose access to
edge providers.
Supporters of net neutrality regulation also commonly
assert that the retail broadband market lacks competition, but
measuring competition is not a simple exercise of counting how
many wireline ISPs in an area provide broadband at a certain
speed threshold. It requires careful product and market
definitions and analysis of the disciplining effects of
substitutes and potential entrants. The evidence of growing
competition, such as improving speeds, the expansion of mobile
broadband, and vigorous pricing competition, must also be
considered when determining whether net neutrality regulation
is necessary.
Like our antitrust tools, the FTC's consumer protection
authority can help address concerns that consumers are not
getting what they expect from their ISP. Our deception
authority bans companies from offering consumers one product or
service but providing them something different. And if ISPs
promise to adhere to net neutrality principles, the FTC can
hold them to these promises. Our deception authority also
requires companies to disclose material information--for
example, blocking or throttling practices--if not disclosing it
would mislead a reasonable consumer.
The FTC's unfairness authority prohibits practices where
the actual or likely consumer injury is substantial,
unavoidable, and not outweighed by benefits to consumers or
competition. The FTC has used this authority to sue companies
that unilaterally violated their promises. Indeed, the FTC is
currently challenging as unfair and deceptive AT&T Mobility's
alleged practice of throttling wireless data plans which they
advertise as unlimited.
Case-by-case enforcement against particular instances of
harm to consumers or competition is the right approach when we
know that a type of practice typically benefits consumers and
spurs competition.
In contrast, a per se prohibition is appropriate only where
we have evidence that a specific practice nearly always harms
consumers without corresponding benefits. In short, the FTC has
tools that are capable of protecting consumers and competition
online. Thank you.
Hon. Ohlhausen's written statement is available at the
Committee or on the Committee Repository at: http://
docs.house.gov/meetings/JU/JU05/20171101/106572/HHRG-115-JU05-
Wstate-OlhausenM-20171101.pdf.
Mr. Marino. Thank you. Mr. Romano.
STATEMENT OF MICHAEL ROMANO
Mr. Romano. Chairman Marino, Ranking Member Cicilline, and
members of the Subcommittee, thank you for the chance to offer
the perspective of small, rural broadband network operators on
agency roles and governance related to broadband. I am Mike
Romano, Senior Vice President of NTCA, the Rural Broadband
Association.
Our nearly 850 members serve the most rural parts of the
U.S., less than 5 percent of the U.S. population, spread across
more than 35 percent of the U.S. land mass. On average, they
employ a few dozen people.
Nonetheless, these small, hometown businesses strive to
deploy networks that position rural America for success in a
broadband world. Any small business can talk to the perils of
ambiguous and heavy handed regulation, but for rural broadband
operators in particular, time and resources needed to comply
with the complex rules can hinder efforts to fulfill a
statutory mandate for universal service, ensuring that every
American, no matter where they live, has access to services
reasonably comparable in price and quality to those in urban
areas.
At the same time, the capital-intensive nature of rural
telecom makes regulatory certainty essential. Finding a steady
balance in any framework is critical to promote and sustain
rural broadband. This requires a division of labor between
agencies based upon clear statutory constructs, core
competencies, and expertise. Thus, even as NTCA has urged rules
of the road to enable and sustain rural broadband, we have
expressed concern about rules that may reach too far or be used
as a platform for yet more rules to come.
To this end, NTCA did not support retail broadband
regulation by the FCC leading up to the Open Internet Order. We
advocated, instead, for a different regime that would have
targeted oversight of interconnection between the underlying
networks. We had hoped the 2015 Open Internet Order might adopt
a limited approach like we advocated, but it did not. Instead,
the order imposed complex and escalating obligations only upon
retail broadband providers, despite the dynamic, multisided
nature of the broadband ecosystem.
Beyond questions of burden and the one-sided nature of the
rules, the value of some of the rules adopted in 2015 remains
unclear. For example, NTCA argued that new sector-specific
privacy rules to govern custody and the use of data would only
burden retail broadband providers and confuse customers, given
other firms have control of the same data subject to different
rules.
For these reasons, NTCA was grateful when the FCC and
Congress earlier this year put brakes on certain of the rules.
Our Nation now has an important opportunity to reset and to
establish a more appropriate division of labor, based, again,
upon clear statutory constructs, core competencies, and agency
expertise.
NTCA submits that consumer broadband protection and retail
marketplace competition issues are better overseen by the FTC,
which is well-versed in such matters in the oversight of mass
market services generally than by the FCC. Placing these
responsibilities with the FTC, pursuant to its statutory
mandates, can help avoid the kinds of concerns I described
moments ago. But other distinct statutory provisions are
important to keep in mind too, as our Nation considers next
steps with respect to promoting the use of broadband.
Of particular significance to rural America is the separate
statutory mandate for universal service. The ongoing importance
of promoting universal service in a broadband world must be
sustained in any regulatory transitions to come. To help
fulfill this statutory mandate, NTCA has highlighted the need
to ensure that underlying networks interconnect and exchange
data. A targeted focus by the FCC on such matters would be in
sharp contrast to retail broadband services that have been the
subject of sweeping regulatory attention to date.
A network-focused framework need not, and indeed must not,
interfere with a dynamic retail broadband marketplace. It must
not transform into new net neutrality rules, creep into retail
regulation, or erect ex-ante obligations that hinder
innovation. This, in fact, was one of our primary concerns with
the Open Internet Order in that the new rules looked very
different than even the title II based frameworks under which
our members had operated for years as historical telephone
companies.
But representing networks that sit hundreds of miles away
from potential interconnection points and have already faced
connectivity challenges in other contexts, NTCA is deeply
concerned about ensuring rural America gets and stays connected
with the rest of the broadband world, consistent with the goals
of universal service.
NTCA submits the FCC is well-equipped by law and experience
to deal with matters of interconnection specifically as a
distinct and separate matter from any net neutrality
considerations. We, therefore, encourage a continued role for
the agency in this discrete yet critical regard, even as the
FTC might soon reassume primacy with respective to consumer
protection and competition in the retail broadband marketplace.
In short, as changes are contemplated to address broadband
policy, NTCA urges Congress and the FCC and FTC working in
partnership to ensure that other distinct but important public
policy principles, such as universal service and connectivity,
are also fulfilled and sustained in a broadband world. NTCA
looks forward to continuing to work with you and the agencies
on behalf of our hundreds of small operator members and the
millions of rural Americans they serve. Thank you.
Mr. Romano's written statement is available at the
Committee or on the Committee Repository at: http://
docs.house.gov/meetings/JU/JU05/20171101/106572/HHRG-115-JU05-
Wstate-RomanoM-20171101.pdf.
Mr. Marino. Thank you. The Chair now recognizes the
Honorable Ms. McSweeny.
STATEMENT OF TERRELL MCSWEENY
Ms. McSweeny. Good morning. Thank you very much, Chairman
Marino and Ranking Member Cicilline, Chairman Goodlatte,
Ranking Member Conyers; a pleasure to see you and the
distinguished members of the Committee. I am Terrell McSweeny.
I am a commissioner at the Federal Trade Commission, but today
I am speaking on behalf of myself, not the commission. I
support the FCC's 2015 Open Internet Order because it
establishes clear rules to protect consumers and entrepreneurs
who are dependent on a few very large broadband providers that
serve as the gatekeepers to the Internet.
For more than a decade, the status quo in the United States
has been an open Internet that supports thriving innovation. I
am proud to serve at the Federal Trade Commission, but it is
wrong to assume that a framework that relies solely on
backward-looking consumer protection and antitrust enforcement
can provide the same assurances to innovators and consumers as
forward-looking rules contained in the FCC's Open Internet
Order.
While it is true that the FTC possesses a great deal of
expertise in areas of antitrust and consumer protection, it
does not possess specialized subject matter expertise in
telecommunications, data network management practices, or in
detecting instances of data discrimination. That expertise is
housed at the FCC. These are very real and significant limits
to the effectiveness of the FTC's tools in policing
nondiscrimination on networks and protecting competition.
Moreover, antitrust tools are designed to protect
competition, but broadband markets are highly concentrated. The
majority of American consumers have little or no choice when it
comes to wireline broadband. Competitive pressure cannot be
counted on to either push ISPs to offer consumers better
contract terms or quality of service or to limit discriminatory
conduct.
Since most U.S. consumers are dependent on a few big
players to access the Internet, the critical question, then, is
whether these companies have the incentive and ability to harm
consumers and competition. Both the Department of Justice and
the Federal Communications Commission have recognized that they
do.
For example, big broadband companies also supply video
programming. That means that their revenues are directly
threatened when consumers use broadband connections to access
competing video providers or new entrants. It is well-
established that appropriately tailored regulation can
complement antitrust law in highly concentrated markets,
particularly when vertically integrated incumbents have
incentives to harm competitors. Absent clear rules, the
detection of discriminatory conduct is costly, difficult, time-
consuming, and hard to remedy.
For example, let's say you are watching streaming video,
and your stream becomes slow or grainy. Is that caused by
intentional data discrimination by your ISP, or might it be a
server issue related to the content provider? Perhaps it is a
spotty connection, or maybe it is something else entirely. How
would a typical consumer know? How would the FTC?
If the FTC were to detect a possibly anticompetitive
practice, antitrust enforcement requires not only detection but
thorough investigation, prosecution, a potentially lengthy rule
of reason analysis, and perhaps a multiyear appeals process. At
the end of that process, we could not travel back in time to
undo the harm that had excluded the rival or reset the
competitive evolution of the marketplace. Remedy remains a
serious challenge to relying on an antitrust enforcement
approach.
Moreover, the premise of Internet openness is that
consumers should be able to use their broadband connections to
access the lawful content of their choosing. Noneconomic
values, such as freedom of expression and diversity of
discourse, may not be easily reached under antitrust law.
Finally, the FTC's jurisdiction over common carriers remains
unclear. Even if the FCC reclassifies broadband as an
information service, the majority of providers will continue to
provide common carrier services, and, therefore, will remain
classified as common carriers.
Unless Congress repeals our common carrier exemption, we
will continue to face challenges to our authority over these
industries. Additionally, renovations to the FTC's authority--
for example, giving it more extensive tools to protect consumer
data and privacy, making sure it has the proper resources, and
giving it more leeway to challenge anticompetitive measures and
conduct in highly-concentrated markets--would help the
Commission keep pace with changes in the economy.
Earlier this year, Congress took the unfortunate action, in
my view, of repealing the FCC's broadband privacy rules,
leaving consumers without important protections over how their
data is used and shifting the risk from industry giants onto
American families. We should not double down on this approach.
This is not a situation where we have an either-or choice
between clear FCC rules to protect an open Internet and FTC
enforcement.
By design, the agencies have different tools, with
different features. Both have a role to play when it comes to
protecting consumers and ensuring an Internet that fosters
innovation. Thank you.
Hon. McSweeny's written statement is available at the
Committee or on the Committee Repository at: http://
docs.house.gov/meetings/JU/JU05/20171101/106572/HHRG-115-JU05-
Wstate-McSweeneyT-20171101.pdf.
Mr. Marino. Thank you. The Chair recognizes the Honorable
Mr. McDowell.
STATEMENT OF ROBERT MCDOWELL
Mr. McDowell. Thank you, Mr. Chairman. Chairman Goodlatte,
Chairman Marino, Ranking Members Conyers and Cicilline, and all
distinguished members of the Committee, thank you so much for
having me back before your Committee today. Also, thank you for
the special recognition of my aide-de-camp for the day, Cormac
Augustine McDowell. It is an honor to be back here and also
with this distinguished panel with Chairman Ohlhausen,
Commissioner McSweeny, and Mr. Romano.
So, I am a partner at Cooley LLP, and today, I am
representing Mobile Future, where I am the Chief Public Policy
Advisor. Mobile Future is a coalition of cutting-edge
technology and communications companies and a diverse coalition
of nonprofit organizations working to support an environment
that encourages investment and innovation in the dynamic
wireless sector, such as with 5G and the Internet of Things.
During my 7 years as a commissioner of the Federal
Communications Commission, from 2006 to 2013, I worked
extensively on protecting an open and freedom-enhancing
Internet, and testified before this Committee during many of
the hearings that Mr. Conyers pointed out earlier.
During the course of my work, I weighed the costs and
benefits of ex-ante economic regulation of these markets versus
ex-post enforcement of antitrust and competition laws. Each
time I examined the facts and the law, I determined that ex-
post enforcement worked far better for the dynamic and fast-
paced Internet market than top-down ex-ante telecom regulation
drawn from antiquated statutes. I was also inspired by the
FTC's unanimous and bipartisan report from 2007, which
underscored the importance of avoiding unnecessary economic
regulation in this space, and it prophetically warned against
its likely unintended consequences.
Indeed, bipartisan and light-touch Internet policies
engendered during the Clinton-Gore administration worked
incredibly well, making the Internet the greatest deregulatory
success story of all time. Internet technologies proliferated
faster than any other disruptive technology in history and are
improving the human condition more and more each day as the
direct result of flexible light-touch public policy.
But in 2015, the FCC radically departed from that long-
standing bipartisan light-touch consensus when it voted three
to two to classify broadband Internet access as a telecom
service for the first time in U.S. history. In so doing, it
imposed a 1934 law designed for phones that were held in two
hands onto the complex and dynamic Internet, all while
stripping the Federal Trade Commission of its ability to police
the broadband market due to the common carrier exemption.
As a result, investment in next-generation networks has
been deterred, popular innovations, such as zero-rating
offerings, have been discouraged, and the legal landscape has
been thrown into a state of confusion, especially when it comes
to consumer privacy protection.
The FCC is poised to reverse that error, however. Assuming
it will rescind the title II Order, consumers, entrepreneurs,
innovators, and investors alike should all know that American's
time-tested antitrust and competition laws stand at the ready
to protect the Internet ecosphere and keep it vibrant, just as
they did so well before the counterproductive 2015 Order.
Both the Department of Justice, who is not here today, and
the FTC have proven themselves to be highly effective cops on
the beat throughout the complex Internet economy.
Lastly, and perhaps most importantly, today it is my hope
that when the FCC rescinds the title II Order, it will also
reiterate that broadband Internet access is inherently an
interstate service, which calls for exclusive Federal
jurisdiction.
The Commission should, therefore, preempt all State and
local laws attempting to regulate broadband services, including
those addressing privacy. Having a byzantine patchwork of state
and local laws attempting to regulate the borderless and global
Internet will wreak havoc on the digital economy, suffocate
investment and innovation, confuse consumers, and encourage
foreign governments and multilateral international bodies to
respond in kind.
Rescinding the title II Order with strong Federal
preemption will simplify the regulatory landscape, provide
certainty to all market players, and offer consumers one set of
strong and clear Federal privacy protections administered by
the one expert agency for privacy, the Federal Trade
Commission. Thank you very much, and I look forward to your
questions.
Hon. McDowell's written statement is available at the
Committee or on the Committee Repository at: http://
docs.house.gov/meetings/JU/JU05/20171101/106572/HHRG-115-JU05-
Wstate-McDowellR-20171101.pdf.
Mr. Marino. Thank you. We will now begin our 5 minutes of
questioning, and the Chair recognizes the Chairman of the full
Judiciary Committee, the gentleman from Virginia, Congressman
Goodlatte.
Chairman Goodlatte. Thank you very much, Mr. Chairman.
Welcome to all of these panelists. I think you have given us
excellent testimony. Mr. McDowell, let me start with you. In
your testimony, you discussed the regulatory whiplash that has
resulted from the 2015 Order. Can you elaborate on that
description, and compare what impact an ex-post antitrust
approach would have on innovation and the Internet?
Mr. McDowell. What we mean by that is the ex-ante
regulation can be translated in the vernacular as a mother-may-
I. So, if you look at popular service offerings, such as zero-
rating, consumers like zero-rating. It can benefit consumers.
It can cost them less money for services and products.
The FCC, initially, kind of gave a green light, or a
cautious green light, that zero-rating was allowed under its
2015 Order, and then immediately after that, started to pull
back from that, and question it, and wanted to see case-by-case
what each offering of zero-rating entailed, whether or not they
did like it. And that started to inhibit the offering of a very
popular service.
So, that is part of the regulatory whiplash. And then, of
course, we have this, you know, ping pong match that has gone
on over the years throughout a large percentage of my career of
the FCC issues an order, it goes up to the appellate courts, it
comes back to the FCC, there is a surprise election, the FCC
changes hands, there is going to be another order, maybe other
appeals. And that is where I think it would be great for
Congress to give some clarity, and ultimately, put this debate
to rest.
Chairman Goodlatte. Mr. Romano, you used the example of
rural call incompletion in your testimony to describe how
certain anticompetitive conduct could also occur with respect
to rural broadband providers. Can you elaborate more on those
fears?
Mr. Romano. Thank you, Chairman Goodlatte. Yes. So, rural
call completion, for those that are not familiar with it, is
essentially this notion of where we have seen instances of
calls failing to reach rural America, where consumers and
businesses cannot receive their calls that are placed by urban
consumers or businesses. We cite that as a concern of where we
think that there is a need for some limited involvement by the
FCC.
We have seen that in the past, the FCC has been very
effective in that specific instance of where you are talking
about interconnection of networks being able to delve into the
problem, figure out who the actors are in the space, and
helping to resolve the concern, so that service is restored. We
think that is an example of the right kind of regulation, the
right targeted, limited regulation that is handled on an ex-
post basis, mind you, but allows somebody to jump in and be a
cop on the beat, if you will, to address such concerns.
Chairman Goodlatte. Thank you. Commissioner Ohlhausen, what
improvements, if any, should be made to the antitrust laws to
ensure an open and competitive Internet marketplace? Should
some sort of antiblocking or throttling or prioritization
standards, or even categorical bans, be enacted, in your view?
Ms. Ohlhausen. One of the first improvements I would
recommend is to get rid of the common carrier exemption that
the FTC is subject to, because I think that does create a lack
of clarity. Certainly, the Department of Justice can bring
enforcement actions, but I would recommend that. And then
secondly, I think the antitrust laws have been able to address
these kinds of behaviors in other markets.
And so, I would be interested in hearing further proposals
about what kind of changes, you know, Congress thinks would be
appropriate here. I certainly have been supportive of the idea
of the transparency requirement that the Internet service
providers are subjected to. I think that creates a very good
baseline, so that they are at least clear to consumers about
what traffic-shaping behavior they may be engaging in.
Chairman Goodlatte. Thank you. And Commissioner McSweeny,
critics of the antitrust law approach, such as yourself, assert
that litigation can be expensive and that a resolution can take
too long relative to the dispute at issue. However, how would
you compare that to the expense of an FCC action or litigation
under the Open Internet Order and the potential time it takes
for the FCC or courts to reach a resolution under the order? Is
not that going to be an equally long and expensive process?
Ms. McSweeny. Thank you for the question. I think from my
perspective, I am primarily concerned about the impact of
relying on an after-the-fact enforcement approach, as it
relates----
Chairman Goodlatte. I think that is critically where you
and I disagree. You think you know ahead of time what you need
to do to protect consumers, and I think that the dramatic
competition that takes place on the Internet and new ideas is
much better to figure out what consumers want, and then, let
them decide, rather than you tell us ahead of time, because I
think as former-Commissioner McDowell has pointed out, that has
already begun to have a distortive effect on what is available
on the Internet.
Ms. McSweeny. I think what is really challenging is for
entrepreneurs on the edge: app developers, the people who are
generating the enormous demand for all of the wonderful
innovation flowing from the Internet. If they cannot reach
their audience, and they have to pay multiple fees----
Chairman Goodlatte. But they can.
Ms. McSweeny [continuing]. In order to connect with them--
--
Chairman Goodlatte. But they can and do.
Ms. McSweeny [continuing]. Then they will not be able to
scale. And there is no remedy for that available to them under
antitrust law.
Chairman Goodlatte. I get that. But they can, and they do.
And there is just no evidence that what you are arguing is
taking place.
Ms. McSweeny. Well, they can, and they do because the
status quo in the United States is an open Internet.
Chairman Goodlatte. Right. But it has been based upon free
and open competition, not based upon an order that they have to
look at just as much as the telecom providers have to look at,
in terms of what the rules of the road are. And that is really,
in my opinion, the camel's nose under the tent in terms of what
the FCC will do to regulate all aspects of the Internet, not
just the broadband providers. Thank you, Mr. Chairman.
Mr. Marino. Thank you. The Chair recognizes the gentleman
from Michigan, Congressman Conyers, for his questions.
Mr. Conyers. Thank you, Mr. Chairman. I want to begin by
asking unanimous consent to enter into the record a letter from
the National Association of Realtors, a statement from Anant
Raut, a visiting fellow on behalf of public knowledge on net
neutrality and the role of antitrust, a letter from Consumer
Union to you, Mr. Chairman, and Ranking Member Cicilline, and
finally, a statement of four sentences by our colleague, Frank
Pallone.
Mr. Marino. Without objection.
These materials are made available at the Committee or on
the Committee Repository at: http://docs.house.gov/meetings/JU/
JU05/20171101/106572/HHRG-115-JU05-20171101-SD003.pdf.
Mr. Conyers. Thank you. Commissioner McSweeny, please could
you discuss with us the limitations of antitrust law in
enforcing net neutrality principles? That is why we are here.
Ms. McSweeny. Yes. I think setting aside the jurisdictional
question that we have been discussing about whether the FTC
even has appropriate jurisdiction under its statute, there are
some real challenges associated with relying on an antitrust
enforcement approach because this conduct may be difficult to
detect. The antitrust enforcement agencies may not have
sufficient expertise in network management to fully understand
certain types of conduct.
And, of course, antitrust enforcement necessarily relies on
a full investigation and approach that balances through the
rule of reason analysis, both the harms but also the benefits
of the activity and is focused primarily on economic values as
opposed to noneconomic values, like speech and freedom of
discourse.
Finally, I think there is a real challenge associated with
what remedies may be available. If you are an innovator on the
edge, and you are seeking to connect to your audience, then you
may have a really difficult time relying solely on antitrust
laws as a remedy. If you can never afford to make all the
payments that you need to make to get access to the customers
in the first place, then antitrust law 5 years after that has
happened is not going to be a very useful remedy for you.
Mr. Conyers. Here is what Frank Pallone, our colleague, a
Ranking Member on House's Energy and Commerce Committee said:
``The FCC's current net neutrality protections provide the
strongest protections for free speech and innovation online and
have been upheld by the court. Keeping these rules in place is
the fastest and surest way to protect consumers.
Unfortunately, the FCC is working to undo these protections
at the behest of a few large corporations. I urge my colleagues
to stand united in defense of these protections. That is the
best option to ensure an open Internet into the future.'' What
do you think?
Ms. McSweeny. I agree.
Mr. Conyers. Okay. What effect would rescinding the Open
Internet Order have on investment and innovation in the entire
Internet market?
Ms. McSweeny. I think that is a really important question,
one that would require probably additional investigation,
except there is an extensive record that the FCC has already
relied on and that has been before the courts considering the
order as well that really points to this virtuous cycle, this
cycle of innovation that is incredibly important. It generates
demand for investment in the infrastructure. It generates
demand for all of the new services on the edge. And what we
risk here is undermining all of the economics of that cycle and
all of the innovation that is generated by it.
Mr. Conyers. You know, some of have suggested that
broadband providers do not have economic incentive to engage in
discriminatory conduct because broadband markets are
competitive, and consumers can switch easily among providers.
What do you say?
Ms. McSweeny. Well, most U.S. broadband markets are highly
concentrated. Most consumers do not have a lot of choices when
it comes to what providers to use.
Mr. Conyers. That is true.
Ms. McSweeny. And finally, we do have a very serious
challenge, I think, when it comes to relying on competition to
solve the problems that could be generated by very large
vertically integrated firms that have an incentive to interfere
with their competitors.
Mr. Conyers. Thank you, commissioner. I yield back the
balance of my time.
Mr. Marino. Thank you. The Chair now recognizes the
gentleman from Texas, Congressman Farenthold.
Mr. Farenthold. Thank you very much. I want to start out
with the troubling case in the court right now that we may rule
that AT&T is a common carrier even for their Internet service,
which would take away the FCC's jurisdiction. And I wanted to
ask the members of our panel do you think Congress should act
to remove that exemption or create specific exceptions or wait
and see? We will start with Ms. Ohlhausen.
Ms. Ohlhausen. The FTC on a unanimous bipartisan basis has
long recommended that Congress remove common carrier exemption.
So, I would continue to support the removal of that.
Mr. Farenthold. And Mr. Romano.
Mr. Romano. Yes. I think this is one of these areas where
Congress could indeed help out and provide clarity with the
statute.
Mr. Farenthold. Ms. McSweeny, I know you are----
Ms. McSweeny. I agree.
Mr. Farenthold. All right.
Mr. McDowell. Without speaking directly to that case, but
yes, mobile broadband, in particular the common carrier
exemption, should be eliminated.
Mr. Farenthold. All right. Let's talk a little bit about
rural broadband for a second. Mr. Romano, correct me if I am
wrong: most rural broadband is delivered by independent folks.
I mean, we do not have the big boys going out into the smaller
counties.
Mr. Romano. As I mentioned, our average employee base for
our membership is about 25 employees.
Mr. Farenthold. And do any of these companies generate
massive content that they might want to prioritize over, you
know, Netflix or Hulu?
Mr. Romano. Not generally speaking. No, sir.
Mr. Farenthold. All right. And so, while I have you, I am
going to kind of jump around here, and I apologize for that.
You talked in your testimony with Mr. Goodlatte about some of
the interconnect issues and call completions. Are you seeing
some of the interconnect issues also in broadband, or is it
just primarily in the voice service?
Mr. Romano. The call completion issue has been distinct to
voice service, Congressman. The question that arises in our
mind, though, is 10 years ago we would not have thought call
completion would be an issue. We want to have somebody who can
be some cop on the beat to jump in should that problem arise.
We do not think, however, firm, hard, ex-ante rules are
appropriate for this.
Mr. Farenthold. But do not your rural broadband folks
typically get their feed from fiber to go to some big pairing
point somewhere? If that happens, could not they just switch to
somebody else in that same pairing point and solve that?
Mr. Romano. In many cases, Congressman, there may be
multiple routes for interconnection; however, in other cases
there are not, particularly in more rural States. It can be
hard to--and distant, hundreds of miles away--to get to those
interconnection points.
Mr. Farenthold. All right. And Ms. McSweeny, you are kind
of the lone pro net neutrality person on this panel. So, I want
to visit with you for a second. I am concerned that if we adopt
your pre-regulatory scheme that you are talking about, we
actually make it harder for those innovators to get in because
if you have got a new product that the regulations do not seem
to contemplate, that is potentially a bar to entry too, is not
it?
Ms. McSweeny. Well, I think the innovators that I am
worried about are generally innovators on the edge that are
trying to enter the marketplace and connect with customers and
scale very quickly. And, of course, they need to be able to do
that without having to pay tolls to multiple companies.
Mr. Farenthold. Who is that happening to now?
Ms. McSweeny. Well, we have the Open Internet Order in
place now. So, we are protecting them.
Mr. Farenthold. Okay. Who was it happening to a year before
the Open Internet Order?
Ms. McSweeny. Well, again, I think the status quo of the
United States has been the open Internet, which is why having
rules to continue to protect it are very, very valuable.
Mr. Farenthold. Are not the Open Internet Rules then just a
solution looking for a problem?
Ms. McSweeny. They are an important preservation of the
pipeline for innovation to customers and the Internet. So, I
think that they are very critical in preserving all of the
innovation that we have enjoyed from having principles that
protect the open Internet.
Mr. Farenthold. All right. I want to go back to moving more
of this over to the FCC, because a lot of the net neutrality
rules deal specifically with who delivers the Internet to your
house. And we have had some big discussions on privacy there.
And if we move back to the FTC, the regulation is not just
limited to say, as you will, the edge providers. You get the
service providers too. I am as concerned about my ISP having my
personally-identifiable private information as I am with Google
and Facebook and any other place that I happen to order a pair
of shorts from. So, why do we need to divvy this up between so
many people? Mr. McDowell?
Mr. McDowell. You raise an excellent point. Historically,
the U.S. has had one expert agency to administer privacy
regulation. That has been the Federal Trade Commission. It is a
very complex issue. They have grappled with it beautifully. The
FCC stumbled as it tried to implement that privacy order, and
we need to revert jurisdiction back to the Federal Trade
Commission.
Mr. Farenthold. I wish I had time to give the other folks
an opportunity to answer this, but I see my time is expired,
Mr. Chairman.
Mr. Marino. Thank you. The Chair recognizes the gentleman
from Rhode Island, the Ranking Member of this Committee,
Congressman Cicilline.
Mr. Cicilline. Thank you, Mr. Chairman. I think at the
outset, it is important to note that when the Chairman of the
full Committee said, you know, ``Why is not it just up to
consumers?'' It is important to note that 22 million people
commented on net neutrality or an open Internet. And
overwhelmingly, consumers said we want an open Internet and net
neutrality and support the rule. So, if we want to listen to
consumers that is a good beginning point.
I would like to begin with Commissioner Ohlhausen. You said
in your testimony that these noncompetitive actions of
throttling and blocking, et cetera, can be cured when consumers
identify it, and they can switch to a provider. So, I guess the
first question I have is, is this really realistic that an
individual consumer would be able to determine when a broadband
provider is throttling, blocking, or prioritizing content, and
then make this very frictionless transition to another provider
in the absence of competition in many places in our country,
and the inability for just an individual to know that?
So, does not your model or your response imagine this kind
of myth that an individual consumer has the ability to detect
all this stuff? Is not that why that notion of competition
being the framework that will prevent this from happening just
does not work?
Ms. Ohlhausen. So, Mr. Cicilline, the edge providers who
are trying to transmit this content to consumers have an
enormous interest in making sure that that content or services
are delivered. So, these are not individual consumers. They are
some of the most powerful, well-funded companies in the United
States.
And so, often when there have been complaints that their
traffic is being degraded, that certainly has gotten a lot of
attention. They have a lot of incentive and ability to do that.
As for switching, one of the issues that we have seen is the
enormous growth in wireless broadband access. So, I think that
we need to include in the market wireless providers. And so,
switching has become a lot easier.
Mr. Cicilline. But to follow up on that, should consumers
be forced to incur fees, delayed access to high-speed Internet,
and the trouble of finding comparable broadband service, even
if it exists, to remedy the harms of discriminatory conduct of
broadband providers? Does not that shift the costs of this to
the consumer?
Ms. Ohlhausen. Well, the increased competition in the
market, we have already seen that there are not fees for
changing. Or if they are changing to a different provider,
often that provider will pay the fees for them.
Mr. Cicilline. Okay. Commissioner McSweeny, would you
respond to that? Do you agree?
Ms. McSweeny. Well, I do agree. I am very concerned that we
are shifting an enormous amount of the cost of this onto
consumers who are not well-positioned, as you point out, to
detect most of this conduct, and very often may either have
little choice or, in some cases, may be in contracts that
require them to pay additional fees in order to make a change.
So, I see these markets as highly concentrated. I am very
concerned about relying on just consumer demand and competition
that may or may not exist in order to generate the results that
we are hoping to have by having the Open Internet Order.
Mr. Cicilline. And Commissioner McSweeny, you said in your
testimony something to the effect that broadband markets are
highly concentrated and that competition alone will not provide
the protection that I hope we all want. I am sure you heard the
testimony of Commissioner Ohlhausen. I did not completely
understand it, but the idea that we should look at competition,
not just in terms of the way we look at competition normally,
but some other analysis. Did that make any sense to you?
Ms. McSweeny. Well, I think competition is a wonderful
virtue. It is terrific in markets, but when we do not have very
competitive markets, relying on an enforcement tool that is
about preserving the competition or even trying to generate the
competition can be a very imperfect tool. And that is why it is
very well established that regulation is a complementary tool,
as it is in this case, in order to ensure both the outcomes
that we want, but also to make sure that consumers are
protected and to make sure that noneconomic values, political
discourse, freedom of speech, access to content, that kind of
thing, are protected as well.
Mr. Cicilline. Thank you. My final question is for
Commissioner Ohlhausen. Do you believe that paid prioritization
is a form of exclusionary conduct under the antitrust law?
Ms. Ohlhausen. I think it can be, but it is not necessarily
in every case. It depends on the market power and the ability
of other competitors to get into the market. But paid
prioritization is common in other markets outside of broadband,
as well.
Mr. Cicilline. And do you see any special danger of that
being present in the Internet service provider sector?
Ms. Ohlhausen. I think we need to examine each market very
carefully, and my point about market competition is that we
need to understand who all the competitors are in the
marketplace to be able to make an accurate analysis of what the
state of competition is in that market.
Mr. Cicilline. Thank you. I yield back, Mr. Chairman.
Mr. Marino. Thank you. The Chair now recognizes the
gentleman from Colorado, Congressman Buck.
Mr. Buck. Thank you, Mr. Chairman. Mr. McDowell, I noticed
that you twitched earlier when the Ranking Member asked
Commissioner McSweeny a question, and I just want to give you
the opportunity to answer that question.
Mr. McDowell. So, good thing I am not a poker player
because, apparently, I have a terrible tell.
Mr. Buck. So, let me ask the question, and then you can
answer it. How does that sound? The question was, ``what is the
effect of rescinding the Open Internet Regulations on
investment and innovation of the Internet,'' and you seemed
anxious to answer that. So, I just wanted to give you that
opportunity.
Mr. McDowell. Thank you. Yes. Actually, there are a number
of studies out there showing an investment in broadband
infrastructure has been deterred or stalled or slowed as a
result of the 2015 title II Order. So, we saw robust investment
and innovation throughout all corners of the Internet ecosphere
before the 2015 Order. Whenever you introduce new rules in any
context, investors have to first figure out what those rules
are, and there is a pause at a minimum.
As we start to approach the need to invest in 5G, which
will be, by the way, a substitute for fixed wireline broadband.
It will be 100 times faster than 4G, and the Internet of
Things, as well, investment needed there are hundreds of
billions of dollars. We need to rollback ex-ante mother-may-I
regulations. So actually, investors the,--record at the FCC is
replete with analyses from investors saying the best
environment is the pre-2015 Order.
Mr. Buck. Thank you. Chairman Ohlhausen, it is my
understanding that a number of States have indicated that they
intend to impose regulation on network ISPs if the FCC rolls
back the title II provisions. What should or can Congress do in
that situation? And then, I want to ask you what can the FCC
do?
Ms. Ohlhausen. Well, Congress certainly, if it were to take
this up as a legislative matter, could ensure that the Federal
legislation preempted State actions in this space.
Mr. Buck. Okay. And what about the FCC?
Ms. Ohlhausen. What the FCC could do? I believe the FCC has
in other regulatory matters stated that it preempted State
action in that space.
Mr. Buck. Mr. Romano, I represent a rural area of Colorado.
And I have visited with a number of citizens and leaders in
that area, and they are very concerned about the lack of
broadband in rural Colorado. One of the primary concerns is
that it is very difficult to have economic development in areas
that do not have broadband. What can we do? What should
Congress do? What can the government do to try to encourage
universal broadband?
Mr. Romano. Thank you for the question, Congressman. You do
represent a very rural area. I think we have 15 members just in
your area alone, in eastern Colorado.
Mr. Buck. I have heard from each of them.
Mr. Romano. Us too. I would say three things. First of all,
with respect to sort of the topic of this hearing, I think
right size regulation, light-touch regulation is important. The
effect on these companies, these small companies where they
only have a handful of employees, of regulatory compliance
costs can be significant on their operations, if not their
investments. But just in managing the number of people they
have to deal with and the kinds of markets they face, that is
an important piece.
A second piece would be looking more towards making sure
that they can stay connected to urban markets; the
interconnection issue I talked about. Making sure that the fact
that they are far away from urban markets, that they can still
get reasonably comparable broadband. That the costs of reaching
those urban markets are taken care of or accounted for somehow,
and what you have to charge a rural consumer is very important.
And the third piece flows from that which is the universal
service program. It is the best, most proven program ever put
into place to promote rural networks which enable broadband. It
is in a state of flux right now. Shoring up that program would
do far more for rural broadband than any other proposal we have
seen.
Mr. Buck. And what can Congress do to shore up that
program? Because the feedback that I am getting is that the
reimbursement rates are decreasing, and that as a result of
that, many of these rural providers are reluctant to expand the
programs that they now have.
Mr. Romano. That is spot on, Congressman. The fact is that
we are at levels of investment or recovery under the Universal
Service Program that track back to 2010. We are being asked to
do more and more to invest in broadband deeper and deeper into
rural areas. I think everybody wants that. It simply cannot be
done for the same price we used to compensate for telephone
networks ages and ages ago. We are asking these networks to do
more, but yet these companies are facing right now on average a
12 percent cut to their support because of the caps in that
program. And it is undermining rural broadband investment and
operations.
Mr. Buck. My time is up. I thank you very much.
Mr. Marino. Thank you. The Chair now recognizes the
gentlewoman from the State of Washington, Congresswoman
Jayapal.
Ms. Jayapal. Thank you so much, Mr. Chairman. And thank you
all for your testimony and for your service. The Internet
should be free from discrimination against users and preserve
choice and opportunity of communication for everyone. That is
my basic belief. In my hometown of Seattle, believe it or not,
my constituents still experience the consequences of a lack of
competition among Internet providers.
Even though we have six broadband providers, their coverage
areas do not overlap, and result in slower speeds and higher
prices for my constituents. So, the consequences of media
consolidation loom large. And increasingly with entities which
create content, also distributing content, I worry that full
promise of greater choices and lower cost to consumers stands
to be reversed.
Can it be clearly said that companies that create and
distribute content have a vested interest in ensuring that
their consumers have access to their products first? We need to
dig deeper into the realities of a world where as of a few
years ago, just 2011, 90 percent of the American media was
controlled by just half a dozen companies. Compare that to
1983, when 90 percent was owned by 50 companies. And
nationwide, 62 million Americans in urban areas and 16 million
in rural areas cannot access fast Internet.
And it is a serious issue, given how much the Internet is
ingrained into our lives. More and more, you cannot apply for a
job unless you have access to the Internet. You cannot pay
bills or even check your kids' grades, as I found out when
everything went online, in terms of checking what was going on
with my son. So, it is clear that there is much work to be
done, especially in light of ongoing efforts to undermine net
neutrality.
And so, while I am pleased that we are holding a hearing on
this critical issue, I am simply not convinced yet that
antitrust enforcement alone is sufficient to protect consumers.
And particularly on noneconomic issues like free speech, on
throttling, blocking, or prioritizing content, and of questions
that, Ms. McSweeny, you raised in your testimony or your
answers around prevention versus remedy.
So, in the process that led up to the 2015 Internet Order
and again this year, there was tremendous input from consumers
to the FCC, civil rights groups, musicians, independent
filmmakers, arts organizations, and many expressed concerns
about free expression and viewpoint diversity. And yesterday,
in The New York Times, comedian Kamau Bell wrote about the
impact of net neutrality on artists. And I will just quote him.
He says, ``This fair Internet, where everyone from an
amateur comedian to a celebrity to a huge media company plays
by the same rules, means you do not need a lot of money or the
backing of someone with power to share your content with the
world.'' Mr. Chairman, I ask unanimous consent to enter this
op-ed into the record.
Mr. Marino. Without objection.
This material is available at the Committee or on the
Committee Repository at: http://docs.house.gov/meetings/JU/
JU05/20171101/106572/HHRG-115-JU05-20171101-SD005.pdf.
Ms. Jayapal. Thank you. Ms. McSweeny, since the FTC
typically views such concerns as outside of its jurisdiction,
how would antitrust law have to be expanded and modified to
address those concerns?
Ms. McSweeny. Well, I think one of the questions that I
would ask about whether we wanted to expand antitrust law to
reach noneconomic concerns would be whether we really want to
take a set of tools that is designed to protect competition and
consumers in the marketplace and expand it outward, especially
when we have an expert regulator, the Federal Communications
Commission, that already has expertise and a public interest
mandate on this beat.
So, I would argue that we can get the job done by using the
tools the Federal Communication Commission has and by perhaps
expanding and complementing the FCC's jurisdiction with the FTC
as a backup. But I do not think it is necessary for this to be
an either/or premise.
So, yes, there are ways we could expand antitrust law that
I think, in my view, would be very helpful in promoting
competition; not just protecting net neutrality, but promoting
competition generally in the marketplace and online as well.
And it would be helpful maybe in protecting consumers, but we
already have an expert agency with an extensive record that has
proceeded in putting in place very clear rules to protect the
open Internet.
Ms. Jayapal. And Mr. Romano, in your testimony, in your
written testimony, you seem to indicate that you do believe
that there is some role for both the FTC and the FCC in
regulation. And, in fact, if I read this correctly, you seem to
be more concerned about who is being regulated rather than the
regulation itself.
So, you are asking for regulation around access of network
providers. You are saying do not just put it all on the ISPs.
Put it on the network providers for accessibility. But can you
clarify? Do you support complete repeal of the 2015 Open
Internet Order?
Mr. Romano. It is hard to say, with respect to a 300-page
order, that there is nothing in there that we like. However,
what I would say is that the rules that were adopted in 2015--
and we're companies that have operated under title II for
years, perhaps the most heavily regulated is local telephone
companies historically. Although today, of course, they are
broadband providers, primarily.
The issue I think we have with the 2015 Order is more that
it took title II, and it did not just take title II in a way
that we were used to. It re-wrote some of the rules and
frameworks in a way that no one was used to. So, for example,
in the privacy space, the CPNI rules that were under the FCC's
section 222 mandate in the Communications Act, we were used to
operating under those as telephone companies, with respect to
telecommunications information. The way in which those were
rewritten to gather all sorts of information that not only
telephone companies or broadband providers have, but also sweep
in stuff that other people have, we just did not see that as
being sort of a logical outgrowth of what title II had been.
Ms. Jayapal. But to be clear, repealing the order
completely would potentially have tremendous disastrous
consequences for rural areas, and I think the point that Ms.
McSweeny was making about competition, it is difficult
sometimes to get competition to operate in rural areas and
places where there are not as many consumers, where there is
not as much money to be made. And so, I yield back, Mr.
Chairman.
But just wanted to say that I think there is a lot more
nuance to this than simply repealing an order that would
produce--than saying we should repeal the order, and it would
produce benefits. I think there is great harm to be done. Thank
you, Mr. Chairman. I yield back.
Mr. Marino. Thank you. The Chair recognizes the gentlemen
from Georgia, Congressman Collins.
Mr. Collins. Thank you, Mr. Chairman. I appreciate it. I
think that was an interesting exchange, and I appreciate my
friend from Washington in discussing that, because I think it
really goes back into the role of what antitrust is and what
antitrust is not. And I think Ms. McSweeny, that your answer
there really sort of gave an interesting insight into why I
think this Committee is so relevant, not only in this
discussion, but other discussions that we can have in this
because the question really becomes in a certain situation is
what are we using antitrust for?
Are we trying to go out of everything that FCC already
currently can do, and are we trying to expand it? Or are we
simply trying to look at it from a perspective. What the big
debate has become is, what is this role of antitrust? Is it to
solve all of these ills of big companies and little companies,
or is to make sure that there is a level playing field, that
there is access to markets, there is access to it, which is
traditional antitrust?
Just because someone is big does not mean that they are
bad. And I think you can look at many companies coming from
many different States that they are not acting in an antitrust
violation. They are just large. They have made that precision.
So, I think it is interesting for me this discussion, but I
disagree. I am glad that it is looking to be rolled back, and I
think that is a positive step in letting the trust side of it
be dealt with.
And I think we can have more hearings in this regard. But
Chairman, I do have a question for you, madam, is, and we have
talked about this before, but under the FCC's Open Internet
Order, paid prioritization is prohibited, per se, in a sense.
Would you consider paid prioritization to be vertical restraint
in the context of antitrust law?
Ms. Ohlhausen. Paid prioritization certainly is a vertical
restraint, but that does not mean that it is anticompetitive or
makes consumers or competition worse off.
Mr. Collins. Okay. And I say how well situated would be, as
the FTC, with dealing with strictly antitrust here, FTC to
analyze vertical restraints and their impact on this in this
environment?
Ms. Ohlhausen. I think we are very well-positioned, and I
actually want to bring the Committee's attention to recent
cases that the FTC has brought against companies that have
foreclosed rival content in a way that has hurt competition.
So, we have the Realcomp case from 2009 and a recent case
against 1-800 Contacts, which I will not say any more about,
because it will be appealed to the Commission. But it is an
area, foreclosing rival content in a way that is
anticompetitive that we have brought action, and we certainly
have the tools to continue.
Mr. Collins. And when I think in expanding that out for a
just minute, and I think I have heard from others, and I have
read your opinions, what would be the long-term effects of ex-
ante or per se prohibition on this paid prioritization?
Ms. Ohlhausen. My concern is that the long-term effects is
to stifle innovation. We do not know what new technologies
might be out there, and as we move to a world of the Internet
of Things with so many connected devices, the ability to
transmit some of that traffic in a way that has prioritization
may be enormously beneficial when you think about things like
connected cars or telemedicine.
So, my concern is about freezing the Internet to the way
that it looks today. And as we go back to the 2007 report, one
of the biggest changes we have seen is the explosion of mobile
Internet access.
Mr. Collins. One of the things in following up on that
really where we have gotten to in the Internet today has been
because there has been that freedom. There has been that, you
know, to work within a current system as we go forward.
Ms. McSweeny, I just do have one question. It is my
understanding that you have testified that you support the Open
Internet Order as it is, correct? Including its ex-ante per se
prohibition on paid prioritization, is that correct?
Ms. McSweeny. Yes, that is correct. If I could just add,
though, on this specialized services question, innovation
around telemedicine and Internet of Things, that kind of thing,
I believe--and I am not the FCC, so please ask them--but it has
contemplated already in the Open Internet Order that waivers
and such can be granted for that kind of innovation. So, I do
not see this order as foreclosing that at all.
Mr. Collins. Okay. If some are starting to maybe just going
off this in a different aspect of the Internet ecosystem, from
your perspective, would you support, you know, it is like
including edge provider support in ex-ante regulation there is,
as well as relying on market forces and antitrust enforcement.
Would that be something?
Ms. McSweeny. You know, I think it is a really interesting
question. Many are arguing that the ISPs should have the same
set of rules as edge technology companies, especially the very,
very large platforms that are having a huge impact on the
marketplace, but also in our daily lives. And I think one of
the really important questions here is what are those impacts?
How much power do those companies have? And if they are very
powerful, like today's ISPs in the highly-concentrated
broadband markets, then we should be having a conversation
about whether our antitrust tools are sufficient.
Mr. Collins. Well, I think that is going to become the
honest question that we are having now, and unfortunately, I
have seen this before, big bad, small good. We got to get out
of that and go back to what antitrust is actually supposed to
look like.
But I cannot let this go, Mr. Chairman, without also saying
for those of us in rural areas, northeast Georgia for mine,
when you have players who are supposed to be providing
broadband access, and they are not. They are using their CAT
funds and other things to do other things such as they are in
my area, this is just, you know, prohibiting it out. That is
why we are looking at other acts of the GO Act and other things
to actually provide broadband services to rural areas and get
competition into the marketplace. And with that, Mr. Chairman,
I yield back.
Mr. Marino. Thank you. The Chair recognizes the gentleman
from Georgia, Congressman Johnson.
Mr. Johnson of Georgia. Thank you, Mr. Chairman. Do any of
you or do all of you support the concept of an open Internet
and the principles of no blocking, no throttling, and no paid
prioritization? Do you all support that concept? Ms. Ohlhausen,
yes or no?
Ms. Ohlhausen. I support an open Internet, but I would not
support a per se prohibition on paid----
Mr. Johnson of Georgia. Ms. McSweeny.
Ms. McSweeny. I support the open Internet as contemplated
in the 2015 Open Internet Order.
Mr. Johnson of Georgia. All right. And Mr. McDowell?
Mr. McDowell. I support an open Internet, but it also
depends for each of those. For instance, blocking of a child
porn site. That should be allowed, right?
Mr. Johnson of Georgia. Well, it is already allowed under
the 2015 Order. Is it not?
Mr. McDowell. There are many exceptions. I just wanted to
make sure that we talked about exceptions, and each of those
are important.
Mr. Johnson of Georgia. Well, yeah, of course, subject to
those exceptions. So, you support, Mr. McDowell, principles of
no blocking, no throttling, no paid prioritization?
Mr. McDowell. All those can have benefits. So, paid
prioritization----
Mr. Johnson of Georgia. Yes or no?
Mr. McDowell. By the way, paid prioritization in the
context of title II, there is a myth out there that title II
would prohibit that. Actually, title II----
Mr. Johnson of Georgia. It is a real simple question.
Mr. McDowell [continuing]. Permits paid prioritization.
Actually, it gets very complicated very quickly.
Mr. Johnson of Georgia. Well, I understand. Okay. You do
not want to answer yes or no to the question.
Mr. McDowell. Because it is complicated and nuanced.
Mr. Johnson of Georgia. Well, Mr. Romano and Ms. Ohlhausen
were quite clear, and I was just wanting to----
Mr. McDowell. Well, they are looking at it through the
antitrust lens, and I am looking at it through the FCC lens.
Mr. Johnson of Georgia. All right. Well, let me ask this
question. Do you believe, Mr. McDowell, that in order for there
to be an open Internet----and I am just going to assume for
purposes of this question that you do support an open Internet.
Mr. McDowell. Absolutely.
Mr. Johnson of Georgia. Do you believe that there should be
rules or regulations or legislation that guarantees that
concept?
Mr. McDowell. I would love to see Congress in this debate,
this back and forth, and pass new legislation that could
support an open Internet and where we would have a win-win-win
situation for all the players involved. Yes, sir.
Mr. Johnson of Georgia. What about you, Ms. Ohlhausen?
Ms. Ohlhausen. Well, I really think it depends on what that
legislation looks like, but I certainly would be, you know,
encouraged by Congress taking this on as an issue and opening
it up to further debate.
Mr. Johnson of Georgia. Do you think Congress would be
better equipped to deal with this issue than would the FCC or
the FTC?
Ms. Ohlhausen. I think it depends on what the legislation
looked like, because I would hope it would contemplate a
continuing role for the FTC going forward.
Mr. Johnson of Georgia. I see. Okay. Thank you. What about
you Mr. Romano?
Mr. Romano. I think the term, Congressman, that I used in
my testimony was regulatory pendulum swinging, and to the
extent that Congress could help bring an end to that, I think
that all involved would benefit greatly. The details of the
legislation are important, but to the extent that something
authoritative that assigns divisions of labor in the right way
to the respective agencies based upon informed judgement of
this body, I think would be welcomed.
Mr. Johnson of Georgia. Ms. McSweeny, what is your
response?
Ms. McSweeny. Well, I support the 2015 FCC Open Internet
Order, so I would want to look very carefully at what was being
proposed. I think there are ways to strengthen the FTC that
would be helpful. But so far, the action that we have seen in
this Congress has been harmful to consumers. The repeal of the
Broadband Privacy Rule, in my view, was very harmful to
consumers, because it eliminated the consumer choice around how
their information is monetized and used. And we do not have
current authority at the FTC to step in and protect consumers.
So, I would want to look very carefully at whatever was
proposed, and make sure that we were appropriately protecting
the open Internet and consumers and competition.
Mr. Johnson of Georgia. Mr. McDowell, your response to Ms.
McSweeny?
Mr. McDowell. Thank you. So, first of all, the FCC's
privacy rules never went into effect. While broadband is still
classified as a telecom service, which as of this moment, it
still is, section 222 of the FCC's rules apply. But the best
way to get consumer privacy protection is to get the best cop
on the beat on privacy, the Federal Trade Commission, back on
the beat. And that would be to return it to its information
service categorization.
Mr. Johnson of Georgia. So, you believe the FTC is better
equipped to deal with this issue of open Internet than would be
the FCC?
Mr. McDowell. Privacy and the open Internet. These are
competitive issues, inherently. These are section 5 issues,
inherently.
Mr. Johnson of Georgia. Ms. McSweeny, do you see it that
way?
Ms. McSweeny. I do not because I think, as we have been
discussing, there is an expert agency, the Federal
Communications Commission, that is protecting both consumers
and competition and the open Internet with its authorities, and
it should be doing that. The FTC is a generalist antitrust and
consumer protection enforcer.
And yes, we are very good at trying to bring cases to
protect consumers' privacy, but we have on a bipartisan basis
for years requested additional authorities to better secure
consumer data. I think that is necessary, and I think there is
nothing that forecloses an expert regulator like the FCC using
its authorities to also protect consumers' privacy.
I do not hear Americans out there thinking they need less
protection from exploitation of their information. I hear them
asking for more.
Mr. Johnson of Georgia. Thank you, and I yield back.
Mr. Marino. Thank you. The Chair now recognizes the
gentleman from Texas, Congressman Ratcliffe.
Mr. Ratcliffe. Thank you, Mr. Chairman. As I have listened
to the testimony and the questions today, it strikes me that I
think this hearing is emblematic of the larger ideological
debate between those that believe in a blanket one-size-fits-
all approach to regulation and commerce, versus those that
believe that a free market buffeted by reasonable antitrust
protections provides a better framework and better access for
consumers.
I certainly fall into the free market camp, because I think
even if it is well-intentioned, the overly zealous approach of
regulatory overreach often just equates to a solution in search
of a problem.
And so, to that point, I want to start with you,
Commissioner McSweeny, because in 2007, the FTC issued a report
that said and concluded that antitrust laws were sufficient to
protect against anticompetitive actions on the Internet and
also concluded that additional regulations would likely do more
harm than good. So, my question to you is what has changed
since 2007?
Ms. McSweeny. Well, a lot has changed since 2007. That was
a decade ago. The technology was wildly different. iPhones were
relatively new. I think I got my first iPhone in 2008.
Maybe I was not an early adopter, but I think what we are
talking about here 10 years later is still a highly-dynamic,
very innovative ecosystem that is rapidly changing, but that
has relied fundamentally on the principles that are enshrined
in the FCC's order. We have been aggressively trying to protect
that pipeline of innovation for more than a decade, as I am
sure Mr. McDowell can talk about.
Mr. Ratcliffe. I appreciate that. Let me reclaim my time on
that. I want to give Ms. Ohlhausen a chance to respond to that
line of thinking, with respect to the FCC's conclusions in
2007.
Ms. Ohlhausen. What I have seen change from 2007 to now is
in quite a shift towards greater competition in these markets.
So, wireless broadband providers now provide speeds greater
than what wired broadband providers provided in 2007. We have
four wireless broadband providers nationally. I mentioned
improving speeds. We have seen this expansion of mobile
broadband and vigorous pricing competition. So, competition has
grown since that time period.
Mr. Ratcliffe. Terrific. Thank you. Mr. McDowell,
Congressman Buck had a number of questions to you about rolling
back title II provisions, and I read with interest your
testimony about the Internet, calling it the greatest
deregulatory success story of all time. And I agree with you
that a light-touch regulatory framework is the ideal approach
to any dynamic industry. And I certainly see the 2015 FCC Order
as rolling back that longstanding approach.
I am curious what your perspectives are. If the FCC had
imposed that sweeping net neutrality order back in the 1990s,
what do you think Internet access and connectivity would look
like today? In other words, would it be safe to say that costs
would largely be higher, and access to connectivity would
largely be reduced?
Mr. McDowell. So, I am sorry. Just to make sure I
understand your question: you talked about net neutrality order
from the 1990s. Do you mean in terms of treating broadband or
Internet access back in the 1990s under the Clinton-Gore
administration? Okay.
So, that was the continuation of many proceedings among
both Republican and Democratic administrations to treat
information services, essentially computer-to-computer
communications, as something called an information service or
an enhanced service back in the day. And that would not be
common carriage under title II.
So, that set the stage, when the Internet was privatized in
the mid-1990s--when it migrated further away from government
control--that set the stage for, I think, the largest explosion
of entrepreneurial brilliance in world history in all corners
of the Internet ecosphere. And it was led right here in the
United States of America.
This was an American phenomenon, which spread throughout
the world. So, that is what we want to preserve. That is the
openness and the pro-competition, the pro-investment, the pro-
innovation and ultimately, the pro-consumer environment that we
want to revert back to.
Mr. Ratcliffe. Terrific. Thank you. My time is about to
expire, but Mr. Romano, I did want to ask you. You know, you
raised concerns about the FCC's Open Internet Order as singling
out retail broadband providers with which you called ill-
fitting regulations and one-sided duties. Regarding the one-
sided duties that were imposed on retail Internet service
providers, can you elaborate for me and for everyone how this
has affected small and rural providers because as you know,
that is a big part of my district?
Mr. Romano. Absolutely, Congressman. Thank you for the
question. So, a couple of things do jump to mind. Immediately
first is the privacy regulation we talked about earlier, which
was poised to take effect and would have put our small
companies serving very rural areas in the position of having
greater protections with respect to the same data that some of
the largest edge providers in the world hold. And they would
have been subject to different rules and that whatever the
rules are that need to be put into place to govern that data,
we wanted the same rules put into place to govern everybody who
holds that data.
That has an impact, obviously, on their operations in the
sense that they have to take additional steps, practices,
procedures to put into place to comply with the new privacy
rules that were different than even the telecom privacy rules
in place before it.
Mr. Ratcliffe. Thank you. Mr. Chairman, I appreciate the
indulgence. I yield back.
Mr. Marino. Thank you. The Chair now recognizes the
gentleman from California, Congressman Issa.
Mr. Issa. Thank you, Mr. Chairman. I am sorry the
gentlelady from Washington State has left, because it seemed
like Seattle is a bastion of no communication choices that
apparently Amazon and Microsoft are unable to generate enough
bandwidth in that area to quite an underserved area. But having
said that, I would like to concentrate on an assumption of
monopoly for a moment. We were talking earlier, quite a while
earlier, about getting rid of the common carrier exemption.
And I will start, and I will go down the road quickly,
because I know this is probably an area that unites us. If we
could not eliminate it completely, would it do a great service
to bifurcate the exemption? In other words, as a common
carrier, you are still excluded. But to the extent that you
provide any products or glean any economic benefit other than
as a common carrier--for example, you own part of some other
content supplier and the like--that you would automatically not
be covered by the exemption. Would that do most of the good you
need to deal with?
Ms. Ohlhausen. It would take care of some of it, but not
all of it. But it still leaves open the possibility that the
FCC could classify wide swaths of the communications network as
a common carrier service and cut the FTC out of oversight.
Mr. Issa. Okay. So, your concern is to the extent that you
would be cut out. So, legislation should be such that you not
be precluded from doing in one section of the communication
delivery system what you would be able to do in another?
Ms. Ohlhausen. That is correct, and it is particularly
acute for consumer protection, because at least the Department
of Justice, which also shares antitrust oversight, is not
subject to the common carrier----
Mr. Issa. And you often do a one-two with the Department of
Justice?
Ms. Ohlhausen. That is correct.
Mr. Issa. Is that pretty much within an answer for all that
that limitation is to? Well, go ahead, Ms. McSweeny.
Ms. McSweeny. I would support a clean repeal of the common
carrier----
Mr. Issa. No, I understand that you would like to have
potentially a clean repeal. I am saying that it is pretty clear
that when people are complaining, let's say, about Comcast,
Cox, whoever it happens to be, they are always talking about
not--and I am going to get to the other part in a moment--the
throttling or the prioritization only, which I know you are.
But they are complaining particularly about their products and
services, which may be prioritized. That has been a big part of
the discussion.
Certainly, I will go to Mr. McDowell. It was something that
was justifying the FCC's action was the theory that it was
their products and services that were being prioritized over
somebody else's in an anticompetitive way. Would that be fair?
Mr. McDowell. Yes. I think your question is very
intriguing, all the questions embedded there, because what you
are putting your finger on is convergence in the marketplace.
So, we have tech companies and communications companies,
wireless companies, and telecom companies, all with thousands
of miles of fiber, using radio frequencies, connecting servers
and routers all over the country, all over the world, that are
flooded with a slurry of ones and zeros.
And I have just described a plethora of business plans
here. But these old statutes, especially the Communications Act
from 1934, tries to impose these silos, these regulatory silos,
depending upon the flavor of the moment or who is politically
favored or not. And that is why precisely, I think Congress
needs to act.
Mr. Issa. Well then, and Commissioner Ohlhausen, let me
take something that is within your purview and compare it to
the discussion of the day. If you are in a small town, and
Safeway is the only grocery store, within Safeway, they have
decided that each endcap, each row, is going to be sold to
whoever will pay the most: Pepsi, Coke, whoever. That is
certainly a prioritization that is paid for in a, in this case,
an exclusive opportunity to buy within, let's say, 50 miles.
Would you see that as something where you would come in under
antitrust?
Ms. Ohlhausen. It really depends.
Mr. Issa. But it happens every day in America, and you do
not come in.
Ms. Ohlhausen. Exactly. It is very common. Paid
prioritization is extremely common through all markets through
the economy.
Mr. Issa. Okay. So, the test, and you said depends, and I
think this is important, and I want give Ms. McSweeny an
opportunity for this sort of a discussion. Paid prioritization
is an economic model that actually allows other people down the
road to get a different price. The same would be true of a
newspaper or magazine. They sell locations in their magazines
at premium. The back cover is not randomly selected. It is paid
for as a premium. And within that market, the relevant market,
if you will, of a magazine, the magazine has 100 percent market
share. So, every day, buyers and sellers make these decisions,
and as long as you do not see an unfair monopolistic--in other
words, they do not pass the other tests that exist under
antitrust--we look at those and say that particular behavior is
okay in this example. Correct?
Ms. Ohlhausen. Absolutely correct.
Mr. Issa. So, Ms. McSweeny, you obviously have a little bit
more of a command and control. You would like to cure all the
evils of society through these various regulatory processes,
including that everyone should come for an exemption if they
somehow have a medical device that needs a priority and hope
that the government will give it to them. And I am not trying
to be snide, but that is what I heard you say.
So, listening to the Chairwoman, is not it true that, in
fact, we do have to recognize that the provisions of antitrust
over the many decades have been the abuse of these otherwise
available privileges, such as prioritization and so on of one's
product, and that what you have proposed--which is that you go
to government when you want to have an exception, rather than
you do your business and a series of tests--will determine
whether or not you have crossed the line, not just based on a
behavior but based on market share and intent. Correct?
Ms. McSweeny. Well, here is the difference. It is very well
established in antitrust law, and there is bipartisan support
for this, that when we have highly concentrated industries,
especially when there is vertical integration of the
incumbents, that clear ex-ante rules to prohibit certain
conduct is required.
So, for example, my agency just earlier this year sent a
very nice comment to FRT, which looks at this in energy
generation markets supporting clear ex-ante rules because
simply relying on antitrust enforcement is not sufficient. So,
I do not think it is a controversial concept when you are
dealing with this kind of question to have an antitrust
enforcement agency say, ``Look, there are limitation to how we
can step in here.''
Mr. Issa. Since I am last, I would like to let the
Chairwoman respond because I think that although what Ms.
McSweeny is saying is true, is not it true that, in fact,
giving over to the FCC, as the last administration did, they
actually preempted you. It was not like you were saying your
regulations are complementary. What they really said was to the
Federal Trade Commission and to a certain extent Department of
Justice, ``You sit on the sidelines. We are going to determine
winners and losers, and they have to come to us for permission
if they need a private network or they need prioritization for
anything, including a lifesaving procedure.'' Is not that true?
Ms. McSweeny. Indeed. In fact, the Open Internet Order
stated that competition in the marketplace, even if there was
competition in the marketplace, that was not going to be
sufficient. I also just want to mention that electricity
networks are very much a unique case, right, where you have a
true, natural monopoly. They are a monopoly provider. I would
point the Committee's attention to the FTC's staff report from
2007 that looked at this particular market and said that
competition and antitrust law and consumer protection were the
appropriate tools.
Mr. Issa. Thank you. Thank you, Mr. Chairman.
Mr. Marino. Thank you. This concludes today's hearing. I
want to thank all the witnesses for attending. And without
objection, all members will have 5 legislative days to submit
additional written questions for the record and submit
additional materials for the record as well. Thank you very
much.
[Whereupon, at 12:21 p.m., the Subcommittee adjourned.]
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