[Senate Hearing 115-539]
[From the U.S. Government Publishing Office]


 
  FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL 
                               YEAR 2019

                              ----------                              


                         THURSDAY, MAY 17, 2018

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

    The subcommittee met at 10:05 a.m., in room SD-138, Dirksen 
Senate Office Building, Hon. James Lankford (Chairman) 
presiding.
    Present: Senators Lankford, Daines, Coons, Leahy, Manchin, 
and Van Hollen.

                   FEDERAL COMMUNICATIONS COMMISSION

STATEMENT OF HON. AJIT PAI, CHAIRMAN


              opening statement of senator james lankford


    Senator Lankford. Good morning, everyone. Glad you're here. 
Subcommittee will come to order.
    Before I proceed, I do want to be able to say this is the 
first of our hearings on this Senate Subcommittee on 
Appropriations.
    I do want to be able to greet my colleague, Senator Coons, 
and say publicly how pleased I am to be able to work with you. 
You have been the Ranking Member here before, and now a new 
Chairman is stepping in during it. So, you'll have some mercy 
on us as we try to transition on this.
    Senator Coons. Absolutely.
    Senator Lankford. This hearing marks the first of our 
fiscal year 2019 budget hearings together for the agencies 
under the jurisdiction of the Financial Services and General 
Government Subcommittee. I look forward to collaborating with 
our Ranking Member and the entire committee on the fiscal year 
2019 bill, and to partner together for these hearings to 
conduct oversight for these agencies to ensure they're 
operating effectively and spending resources responsibly.
    Today, we have with us the Chairman for the Federal 
Communications Commission, Ajit Pai, and the Chairman of the 
Federal Trade Commission, Joseph Simons. Thank you both for 
being here today.
    This hearing is very timely, considering the recent debate 
in the Senate dealing with the open Internet, which we'll 
discuss, I'm sure, during this hearing time.
    Since the Internet was developed, the market and consumers 
have driven innovation and expansion, which has caused the 
Internet to thrive in a relatively regulation-free or low-
regulation environment. I look forward to a thoughtful 
discussion of the steps the FCC and the FTC will take to 
preserve an open and accountable and accessible Internet in a 
manner that promotes new investment, encourages innovation, and 
protects consumers.
    The FCC requests $333 million for its operating budget in 
fiscal year 2019. While this funding is provided through 
regulatory fees rather than taxpayer dollars, the use of these 
funds are subject to appropriations, and we have the 
responsibility to ensure they are spent wisely.
    The FCC has identified four strategic goals for fiscal year 
2019, including closing the digital divide, promoting 
innovation in the market for communications services, 
protecting consumer and public safety, and improving FCC 
regulatory processes. Those are laudable goals, and I believe 
that we all share those goals. I look forward to hearing how 
the FCC plans to execute these goals using the requested budget 
authority.
    I also look forward to hearing about the FCC's Lifeline 
reforms. Oklahoma, as you know, receives the second-largest 
allocation of Lifeline funds, which totals more than $128 
million. There are areas of fraud in that program we have 
discussed before. And just because it's my State doesn't mean 
we don't need to be accountable to being able to resolve those 
issues. I am glad to be able to help you as we help the Nation 
be more efficient in our funding.
    The FTC requests $309.7 million to fulfill its mission of 
protecting consumers and promoting competition. Of particular 
interest today is how the FTC is fulfilling its mission to 
prevent anticompetitive mergers and other anticompetitive 
business practices in the marketplace. Consolidation can fuel 
economic growth through the achievement of synergies and 
economies of scale, but it can also have unintended and 
negative consequences for consumers.
    Chairman Simons, you were sworn in earlier this month. Is 
this your first hearing on the Hill, so far?
    Mr. Simons. This is my first appearance, yes.
    Senator Lankford. Well, welcome.
    Mr. Simons. Thank you.
    Senator Lankford. Chris Coons and I will try to have mercy 
on you in the first round, but, after the first one, it's just 
merciless from here on out.
    [Laughter.]
    Mr. Simons. I'll appreciate that.
    Senator Lankford. Okay. We do appreciate you here. I think 
you've been in this chair 3 weeks, 4 weeks--what has it been?
    Mr. Simons. Since May 1.
    Senator Lankford. Okay. So, not even a couple of weeks, 
here, at this point. We look forward to hearing your vision for 
the FTC as you walk into this new role, and how your agency 
will protect consumers and police anticompetitive behavior 
without unduly burdening legitimate business activity.
    Again, thank you both for appearing this morning.
    I now turn to my colleague and friend, Ranking Member 
Senator Coons, for his opening remarks.


               statement of senator christopher a. coons


    Senator Coons. Thank you very much, Chairman Lankford, for 
convening this hearing today. This is the first hearing for the 
FSGG Subcommittee this year, your first as Chairman. And I very 
much look forward to working with you and your staff. I think 
we can, together, find very constructive ways that we can work 
in this year's appropriations process and moving forward to 
make sure that we are protecting consumers, spending funds 
appropriately, and advancing Federal missions.
    I'd like to welcome our witnesses, Chairman Pai and 
Chairman Simons. As Chairman Lankford just referenced, I want 
to especially thank you, Chairman Simons, for appearing today, 
since you've been on the job so briefly. We have two new 
Chairmen, and hopefully we'll find a constructive path together 
forward.
    You know, both the FCC and FTC have key consumer protection 
missions, and I want to focus briefly on a few of those.
    Yesterday, the Senate voted to restore the FCC's previous 
net neutrality rule. I voted with the majority. That rule has 
been challenged in the courts and has been the subject of a 
great deal of controversy. I think it is important to have a 
free and open Internet, but one that also values innovation and 
investment, and protects consumers. There's four key principles 
necessary to maintain that fair and open Internet: no blocking 
or throttling, no paid prioritization, and full transparency. 
And if we can find a way together to chart a path that 
accomplishes those goals, I think we will find a way to keep 
the things that all Americans value about the Internet--access 
to sites that we choose, and giving equal access while still 
promoting innovation and investment. And I look forward to a 
discussion with you, Chairman Pai, about these key issues 
around net neutrality today.
    We have also seen, from the recent Facebook and Cambridge 
Analytica controversy, that companies can use big-data 
analytics to infer very sensitive and complex information about 
individuals, and then target them with ads that can be 
successful and manipulative. I don't know that any of us yet 
know enough about the full potential of the intersection of 
artificial intelligence and big data to give informed consent 
for the use of our data by consumers, but, Chairman Simons, I 
want to talk with you today about how the FTC might be involved 
in addressing this issue, and how Internet privacy and consumer 
protection in that context may be a piece of your challenge, 
going forward. Whether data-based targeting of this type can 
ever be so manipulative that it is unfair for Section 5 
purposes is one of the things I hope we'll have a conversation 
about today.
    Last, about access for consumers, from business to 
academics to government, access to the Internet's no longer 
optional for success in the 21st century. Not only is it 
important that every student in America have access to state-
of-the-art tools to power their education, but every home or 
small business, no matter how rural, should be connected to the 
vital communications and information systems that drive our 
economy and our way of life. The FCC oversees the $10 billion 
Universal Service Fund, which helps expand access to vital 
communications systems across the country. Some might think of 
Oklahoma as significantly more rural than Delaware, but there 
are areas in both of our States where access to broadband is a 
pressing concern. The FCC has worked, over the past few years, 
to modernize the fund to include broadband access in addition 
to voice service while reducing waste. And I hope that closing 
the digital divide will continue to be one of the FCC's top 
priorities under your leadership. And I hope to work together 
with the Chairman to make sure that, in rural portions of my 
State, in Kent and Sussex Counties, as well as rural portions 
of his State, and all of America will have access to the 
broadband that we need to be successful in this century.
    I look forward to discussing these and other issues with 
our two Chairmen today. Thank you for coming before us and for 
sharing your perspectives on the FCC and FTC funding 
requirements and program goals for fiscal year 2019.
    And, in closing, again, Mr. Chairman, thank you for the 
chance to work together as friends and colleagues.
    Senator Lankford. Chairman Pai, I would invite you to 
present your testimony now.


                   summary statement of hon. ajit pai


    Mr. Pai. Chairman Lankford, Ranking Member Coons, and 
Members of the subcommittee, thank you for holding this 
hearing. And, Senator Coons, I hope you, in particular, are on 
the mend. It is an honor to present the FCC's fiscal year 2019 
budget request. And it is a privilege to appear alongside my 
distinguished counterpart from the Federal Trade Commission, 
Chairman Joe Simons.
    We, at the FCC, will use the requested funds to achieve our 
critical strategic goals. Number one, closing the digital 
divide. Number two, promoting innovation. Number three, 
protecting consumers and promoting public safety. And four, 
reforming the FCC's processes.
    In fiscal year 2018, we received $322 million, a reduction 
of about 5 percent from 2017, minus the headquarters relocation 
funds. Now, to put that number in perspective in inflation-
adjusted terms, our appropriation has declined by over 17 
percent since fiscal year 2009. These reductions have required 
the FCC to operate more efficiently. Since I became Chairman in 
January of 2017, we have done just that, cutting costs and 
accomplishing more with less money. For example, we have saved 
a lot of money by closing a warehouse where we processed our 
mail and, instead, contracting with a vendor that performs this 
task for many other governmental agencies. And, by the end of 
fiscal year 2018, we project that the Commission's full-time 
equivalent (FTE) account will have declined over 10 percent in 
just 2 years.
    Now, in light of this, our fiscal year 2019 budget request 
proposes to freeze our FTE account rather than reduce it again. 
I believe that further reductions in staffing next year would 
compromise the FCC's ability to accomplish its mission, 
particularly given the many additional responsibilities that 
Congress assigned us in the recent omnibus bill. Pursuant to 
this legislation, we must revise our application and regulatory 
fee schedules, amend caller ID spoofing rules, complete a 
proceeding on 911 call location accuracy, use the 
Connect2Health tool to create a map overlaying opioid drug 
abuse with broadband access, and coordinate with the National 
Telecommunications and Information Administration (NTIA) in its 
use of $7.5 million in infrastructure funds for broadband 
mapping. We've also been tasked with writing reports for 
Congress on a variety of topics.
    In our budget request, we are asking for $8.5 million in 
one-time information technology, or IT, investments. I know 
that this subcommittee has long supported critical IT upgrades, 
and I want to thank Senator Moran, in particular, for his 
legislative work on improving the Federal Government's IT 
capabilities. Many of our IT systems and applications are quite 
old, and it is becoming harder to keep them running. And that 
is why we are seeking funding to shift from outdated legacy 
systems and applications towards cloud-based solutions. Taking 
this step will save money in the long run. It will improve 
resiliency, it will reduce cybersecurity vulnerabilities, and 
it will enhance the services that we provide to those we 
regulate and to the American people.
    Now, these IT investments are the main reason why we are 
requesting a slight bump in appropriations for our regular 
operations in fiscal year 2019 from $322 million to $333 
million. But, even with this modest increase, our fiscal year 
2019 spending level would be identical to the amount authorized 
in the fiscal year 2018 omnibus and below our fiscal year 2017 
appropriation.
    Next year will be busy when it comes to auctions, and our 
funding needs will reflect an increased workload. In addition 
to preexisting complications--complicated auctions work 
critical to American leadership in 5G, the fiscal year 2018 
omnibus requires us to develop rules this year for incentive 
auction repack funds for low-power television stations, TV 
translators, and FM radio stations. We also must decide how to 
allocate money for consumer outreach related to the repack. 
Now, Congress directed us to stand up these new programs, and 
considers them essential to the overall success of the 
incentive auction process. And we are ready to carry out this 
mandate.
    But, based on our experience with the full-power TV repack 
fund, we expect that this work will be extremely resource and 
labor intensive. As a result, we will need an upward adjustment 
to our fiscal year 2019 auction cap request of $112 million for 
new administrative costs. The level originally had been 
projected to increase only slightly above the fiscal year 2018 
level of $111 million, which, itself, was already a 5-percent 
drop from fiscal year 2017.
    And, by the way, the billion dollars that you appropriated 
for fiscal years 2018 and 2019 for the incentive auction repack 
is already having an important impact. Just last month, we 
enabled full-power television broadcasters to get access to up 
to 92.5 percent of their estimated costs. And this boost will 
make it easier for stations to move ahead with proposed auction 
construction.
    Finally, despite our budget planning, unforeseen problems 
and disasters can upend our best efforts. For instance, during 
this fiscal year, we have had to use every tool in our toolbox 
to help people on the ground in hurricane-stricken regions, 
like Puerto Rico and the U.S. Virgin Islands, to get 
communications networks up and running, including using 
Universal Service money and experimental licenses. And we're 
not done yet. The FCC just adopted my proposal for the Uniendo 
a Puerto Rico Fund and a Connect USVI Fund. My plan extends 
more short-term assistance in the aftermaths of Hurricanes Irma 
and Maria, and longer-term support for expanding broadband 
access throughout the islands.
    In short, we have accomplished a great deal in the past 
year, and we will have a full plate next year. It's the 
appropriation that you provide, along with hard work of the 
Commission's dedicated and talented staff, that makes this 
possible.
    Chairman Lankford, Ranking Member Coons, Members of the 
subcommittee, thank you once again for holding this hearing. I 
look forward to a fruitful exchange and to working with you and 
your staffs in the time to come.
    [The statement follows:]
                  Prepared Statement of Hon. Ajit Pai
    Chairman Lankford, Ranking Member Coons, and Members of the 
Appropriations Subcommittee on Financial Services and General 
Government (FSGG), thank you for inviting me here to present the 
Federal Communications Commission's (FCC) fiscal year 2019 budget 
request. The Commission's submission provides a spending level of 
$333,118,000, derived from regulatory fees for regular FCC operations, 
and an auction spending cap of $112,734,000. At this stage, however, we 
note the need for an upward adjustment to the auction spending cap to 
enable the Commission to meet the fiscal year 2018 Consolidated 
Appropriations Act (Omnibus) requirement to establish new programs 
related to the post-incentive auction transition.
    The Commission's fiscally responsible request will provide the 
resources necessary to advance the FCC's critical strategic goals: (1) 
closing the digital divide; (2) promoting innovation; (3) protecting 
consumers and public safety; and (4) reforming the FCC's processes.
    In particular, the FCC will continue to focus on expanding high-
speed broadband access throughout the United States and bringing what I 
call ``digital opportunity'' to every American. We will continue to 
remove regulatory obstacles that unnecessarily slow down broadband 
deployment and make it more expensive. And we will continue to 
modernize our Universal Service Fund (USF) programs so that we get the 
most broadband bang for the buck. With respect to USF, we are moving 
forward this July with the nearly $2 billion Connect America Fund Phase 
II reverse auction to expand fixed broadband service to unserved 
regions, and are targeting 2019 for the $4.5 billion Mobility Fund 
Phase II reverse auction that will deliver 4G LTE access to many more 
Americans.
    As you are aware, the Commission received an appropriation of 
$322,035,000 in the Omnibus. This number represented a reduction of 
approximately 5 percent from our fiscal year 2017 appropriation, minus 
the directed funding for our headquarters relocation. To put our budget 
in perspective, in real, inflation-adjusted terms, the FCC's 
appropriation has declined by over 17 percent since fiscal year 2009.
    These reductions have required the Commission to operate more 
efficiently. Since I became Chairman in January 2017, we have done just 
that, initiating management improvements to cut costs and accomplishing 
more with less money. For example, we have saved a significant amount 
of money by closing a warehouse where we processed our mail, and 
instead contracting with a vendor that performs this task for many 
government agencies. We also are reducing our workforce in fiscal year 
2018 to comply with OMB Memo 17-22, the Comprehensive Plan for 
Reforming the Federal Government and Reducing the Federal Civilian 
Workforce. We value our workforce and recognize the importance of 
employee morale to the Commission's operations, so we are combining 
regular attrition with voluntary personnel actions to achieve these 
levels. By the end of fiscal year 2018, we project that the 
Commission's full-time equivalent (FTE) count will have declined over 
10 percent in 2 years. In light of this, our fiscal year 2019 budget 
request proposes to freeze our FTE count rather than reduce it again--
because further reductions in staffing would compromise the 
Commission's ability to accomplish its mission.
    The need to stabilize our FTE count is especially important given 
the many additional responsibilities Congress assigned the FCC in the 
fiscal year 2018 Omnibus. The FCC-related sections of the Omnibus and 
accompanying Explanatory Statement require the Commission to revise its 
application and regulatory fee schedules, amend its Caller ID spoofing 
rules, complete a proceeding on 911 call location accuracy, use the 
Connect2Health tool to create a map that overlays opioid drug abuse 
with the degree of broadband access in an area, and coordinate with 
NTIA in its use of $7.5 million in infrastructure funds for broadband 
mapping. We also have a broad range of reporting requirements on 
several Commission objectives, including rural call completion, 
veterans' broadband access, broadband coverage in Indian Country, 
modernizing the high-cost Universal Service Fund program, and 
information technology (IT) modernization efforts. And under the MOBILE 
NOW section of the Omnibus, we are required to move forward with 
freeing up additional low-,
mid-, and high-band spectrum for 5G services, along with new spectrum 
for unlicensed use. Timely meeting these obligations requires us to 
maintain and enhance the human resources we currently have.
    As part of our efforts to improve the Commission's workforce, we 
are following through with establishing an Honors Engineering Program 
this year to recruit recent engineering graduates. As the technologies 
that we regulate become more complex, it is important for us to bolster 
the ranks of engineers at the Commission. Sophisticated technical 
analysis is at least as important as the legal analysis that supports 
our decisions. In the past, we have not replenished our engineering 
resources. Now, we will, with a program that will stand alongside our 
Honors Attorney Program.
    Additionally, a thorough review of our staffing and organization 
led us to determine that we must strengthen the role of economics and 
data analysis at the Commission so that our decisions are driven by 
evidence and produce benefits that outweigh their costs. Accordingly, 
the Commission is in the process of creating the Office of Economics 
and Analytics to coordinate the contributions of economists and data 
professionals throughout the FCC. Right now, attorneys have a seat at 
the policymaking table through the Office of General Counsel and 
engineers have a seat through the Office of Engineering and Technology. 
The Office of Economics and Analytics will give economists their 
rightful seat, too.
    To maximize the benefits of improved organization and recruitment, 
we need to provide our workforce with the information technology tools 
necessary to effectuate our mission. The Omnibus Explanatory 
Statement's IT reporting requirement and the reauthorization language 
elevating the FCC's Chief Information Officer's status highlight 
Congress' desire to ensure that the FCC has the resources necessary to 
modernize its IT systems and applications. I recognize that this issue 
has been of interest to this subcommittee and that Senator Moran has 
been at the forefront of legislative efforts to ensure that agencies 
devote enough resources to IT modernization efforts.
    We likewise consider our IT upgrades to be an essential operations 
improvement. Many of our systems and applications are quite old, and it 
is becoming increasingly difficult to keep them operational. But by 
moving away from outdated legacy systems and applications toward cloud-
based solutions, we will save money, improve resiliency, reduce 
cybersecurity vulnerabilities, and enhance the services we provide to 
those we regulate and the American people. The Commission's budget 
request of $8,535,200 for one-time IT investments--a request which was 
developed in close coordination with the Commission's Acting Chief 
Information Officer--shows our commitment to your directives while at 
the same time representing a modest investment that should pay 
dividends in the long run.
    The IT investments also are the main reason why we are requesting a 
slight bump up in appropriations for our regular operations in fiscal 
year 2019, from $322,035,000 to $333,118,000. Importantly, this fiscal 
year 2019 spending level is identical to the amount authorized in 
Division P of the fiscal year 2018 Omnibus.
    Our auctions program, which has been so successful in driving 
economic growth while directing billions of dollars into the Treasury, 
is projected in the fiscal year 2019 request to increase spending 
slightly to $112,734,000 from the fiscal year 2018 level of 
$111,150,000. The current fiscal year saw a 5 percent drop from the 
fiscal year 2017 high of $117 million. The upcoming fiscal year will be 
a busy one on the auctions front. For example, we intend to hold at 
least two high-band spectrum auctions--one for the 28 GHz band and 
another for the 24 GHz band. Conducting these auctions successfully and 
promptly will be critical to American leadership in 5G, the next 
generation of wireless technology. At a minimum, in fiscal year 2019 we 
also will be engaged in preparations to auction additional high-band 
spectrum as well as mid-band spectrum in the 3.5 GHz band.
    With the auction funds we are requesting, we will also continue the 
critical work of facilitating the post-Incentive Auction repack. The 
Financial Services and General Government section of the Omnibus 
provided up to one billion dollars in funding to complete the repacking 
process, in increments of $600,000,000 and $400,000,000 in fiscal year 
2018 and fiscal year 2019, respectively. Thank you for this critical 
funding. First and foremost, the funds will be used by the Commission's 
Incentive Auction Task Force to reimburse the relocation costs of full-
power television stations. Second, the appropriated funds will be used 
to provide funding for low-power television stations, TV translators, 
and FM radio stations that incur costs resulting from the repack, as 
well as money for consumer outreach related to the repack.
    Just last month, the funds you appropriated allowed the Commission 
to increase the allocations available to full-power television 
broadcasters so that they have access to up to 92.5 percent of their 
estimated costs. This further allocation permits broadcasters to 
execute their post-auction construction, prevents undue financial 
burdens, and minimizes the likelihood that we will need to claw back 
funds moving forward. Importantly, noncommercial stations associated 
with State college systems that faced problems with local anti-
deficiency statutes should now be able to maintain their licenses and 
have the funds on hand to finance the repack.
    The fiscal year 2018 Omnibus provisions related to the incentive 
auction repack will add significantly to our workload during fiscal 
year 2019. We are now tasked with developing a rulemaking and 
overseeing the distribution of funds for three new programs, at least 
two of which--LPTV/translator repacking costs and repack-associated FM 
radio station costs--will involve significant data analysis, new 
information technology assets, and staffing. We have evaluated the 
costs and recognize that the auction cap will need to be adjusted 
upward, but I believe that Congress has given us a clear directive to 
follow through with these programs. Given the complexity of developing 
the prior analysis for the full-power stations and the sheer number of 
stations likely to seek funding under these new programs, we know that 
this effort will be resource-intensive. We look forward to working with 
your staff to provide them with all essential information related to 
these costs.
    Finally, it is important to note that despite our planning and hard 
work in developing a budget, sometimes unforeseen problems and 
disasters can render the best budget difficult to manage. For example, 
when hurricanes wreaked havoc last year on the people of Puerto Rico, 
the U.S. Virgin Islands, Texas, and Florida, we deployed staff to the 
field and I personally travelled to Puerto Rico twice. We also took a 
wide variety of actions to assist with recovery and restoration 
efforts, from accelerating telecommunications carriers' universal 
service funding to approving experimental licenses for broadband 
access, and we continue to work toward the complete restoration of 
communications services.
    We are using every tool in our toolbox to help people on the ground 
and get communications networks up and running as soon as possible. 
Last week, the Commission approved my proposal to provide additional 
funding through a Uniendo a Puerto Rico Fund (Bringing Puerto Rico 
Together Fund) and a Connect USVI Fund. Each fund will provide 
additional short-term assistance for restoring communications networks 
in the aftermath of Hurricanes Irma and Maria and longer-term support 
for expanding broadband access throughout the islands.
    Although our agency did not receive disaster funds, our staff 
devoted all available resources to help deal with these catastrophes. 
That dedication reflects how I see our agency: nimble, focused, and 
imbued with a can-do attitude when it comes to new challenges within 
our mandate. It might be dealing with hurricane recovery on one day, 
illegal robocalls the next, and a false missile alert in Hawaii the day 
after that. We do not have an easy mission, and sometimes we will 
disagree on the methods for seeing it through. But I'm proud of the 
staff at the Commission for its commitment to serving the American 
people and promoting the public interest.
    Thank you for this opportunity to discuss the FCC's budget 
proposal. I will be pleased to answer any questions that you may have.

    Senator Lankford. Thank you.
    Chairman Simons.
                              ----------                              


                        FEDERAL TRADE COMMISSION

STATEMENT OF HON. JOSEPH SIMONS, CHAIRMAN
    Mr. Simons. Chairman Lankford, Ranking Member Coons, and 
Members of the subcommittee, I am honored to appear before you 
today for the first time as Chairman of the Federal Trade 
Commission, and also honored that I get to do it with Chairman 
Pai. Thank you for the opportunity to testify about the 
Commission's fiscal year 2019 appropriations request and its 
work to protect consumers and promote competition.
    In fiscal year 2018, the FTC's enacted budget is $306.3 
million, with 1140 full-time equivalents (FTEs). For fiscal 
year 2019, the FTC is requesting $309.7 million and the same 
1140 FTEs. The FTC is a highly productive and effective 
independent agency, and it uses its funds efficiently and 
effectively. The Commission has a broad dual mission, to 
protect consumers and to maintain competition.
    And this is a historic time at the FTC. Four commissioners 
have joined the agency in the past 2 weeks, including myself. 
We look forward to continuing the agency's longstanding 
tradition of bipartisanship, collegiality, and cooperation. And 
we are proud of our track record. And we will continue to 
utilize our resources effectively on behalf of U.S. consumers. 
For example, in fiscal year 2017, we estimate that the agency 
saved consumers over $3.7 billion through its competition 
enforcement efforts and over $1.29 billion through its consumer 
protection enforcement efforts.
    Let me go into a little more detail about how we carry out 
our dual mission. On the consumer protection side, fighting 
fraud is a major focus. The Commission's antifraud program 
stops some of the most egregious scams and steps in to protect 
the most vulnerable U.S. consumers. We also leverage our 
resources to educate consumers about these scams.
    Illegal robocalls remain a significant consumer protection 
problem, and we are using every tool at our disposal to combat 
them. A Federal district court recently imposed a $280 million 
penalty in the FTC's case against Dish Network, but 
technological developments have led to a huge increase in 
illegal calls, despite aggressive law enforcement. And that is 
why the FTC has taken steps to spur technological-based 
solutions in the marketplace, such as sponsoring public 
challenges to incentivize innovators to develop creative 
solutions to the robocall issue. And we look forward to working 
with our partners, especially including Chairman Pai at the 
FCC, to better combat illegal robocalls.
    Consumer privacy and data security enforcement continues to 
be a very top priority, including our ongoing nonpublic 
investigations of Facebook's privacy practices and the Equifax 
data breach. With respect to data security, the Commission has 
brought more than 60 cases alleging that the companies failed 
to implement reasonable safeguards to protect consumer data. 
But, we should do more. And that's why I support additional 
data security legislation that would strengthen the FTC's 
existing authority. And I look forward to working with Congress 
on this important issue.
    On the competition side, the Commission seeks to promote 
competition through vigorous law enforcement, a robust policy 
and research agenda, and international cooperation. The FTC 
enforces U.S. antitrust laws in many sectors that directly 
affect consumers and their pocketbooks, such as healthcare, 
consumer products and services, technology, manufacturing, and 
energy. The FTC is well aware of concerns about the size and 
reach of large technology companies and their growing 
importance in consumers' daily lives. The Commission will 
continue to scrutinize tech mergers and conduct by tech firms 
to ensure not only that consumers benefit from their innovative 
products, but also that competition thrives in this dynamic and 
highly influential sector.
    Going forward, I plan to think critically and deliberately 
about the Commission's near- and long-term enforcement and 
policy agenda. Today, I am announcing that the Commission will 
hold a series of public hearings, beginning later this year, 
covering issues of substantial relevance to both of our core 
missions. For example, one of our first hearings will focus on 
competition and consumer protection implications of the FCC's 
Restoring Internet Freedom Order. We intend to invite all 
relevant stakeholders and allow the public to provide comments 
to the Commission so that we may hear a broad and diverse range 
of viewpoints.
    In closing, the FTC remains committed to maximizing its 
resources to enhance its effectiveness in protecting consumers 
and promoting competition, anticipating and responding to 
changes in the marketplace, and meeting current and future 
challenges.
    Thank you for the opportunity to share my views with the 
subcommittee. And I look forward to your questions.
    [The statement follows:]
                Prepared Statement of Hon. Joseph Simons

                            I. INTRODUCTION

    Chairman Lankford, Ranking Member Coons, and Members of the 
subcommittee, I am Joe Simons, Chairman of the Federal Trade Commission 
(``FTC'' or ``Commission''), and I am pleased to appear before you 
today to testify about the Commission's fiscal year 2019 appropriations 
request and its work to protect consumers and promote competition.\1\
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    \1\ This written statement presents the views of the Federal Trade 
Commission. My oral statement and responses to questions are my own and 
do not necessarily reflect the views of the Commission or of any other 
Commissioner.
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    The FTC is a highly productive and effective independent agency 
comprised of three bureaus: the Bureau of Consumer Protection 
(``BCP''), the Bureau of Competition (``BC''), and the Bureau of 
Economics, which supports both BCP and BC. It is the only Federal 
agency with a broad mission to both protect consumers and maintain 
competition in most sectors of the economy. Its jurisdiction ranges 
from privacy and data security, to mergers and acquisitions, to 
anticompetitive tactics by pharmaceutical companies, to high-technology 
and emerging industries. This is an historic time at the Commission; 
four new Commissioners joined the agency in the past 2 weeks, including 
myself. We look forward to continuing to work cooperatively in a 
bipartisan manner.
    The FTC is primarily a civil law enforcement agency that 
investigates and prosecutes those engaging in unfair or deceptive acts 
or practices or unfair methods of competition, and seeks to do so 
without impeding legitimate business activity.\2\ The FTC also educates 
consumers and businesses to encourage informed consumer choices, 
compliance with the law, and public understanding of the competitive 
process. Through its research, advocacy, education, and policy work, 
the FTC seeks to promote an honest and competitive marketplace and 
works with foreign counterparts to harmonize competition and consumer 
protection laws across the globe.
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    \2\ The FTC has broad law enforcement responsibilities under the 
Federal Trade Commission Act, 15 U.S.C. Sec. 41 et seq., and enforces a 
wide variety of other laws ranging from the Clayton Act to the Fair 
Credit Reporting Act. In total, the Commission has enforcement or 
administrative responsibilities under more than 70 laws. See http://
www.ftc.gov/ogc/stats.shtm.
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    The Commission pursues a vigorous and effective law enforcement 
program, and the impact of its work is significant. The Commission has 
an experienced and talented staff executing this work, but it needs the 
resources to support their efforts. This testimony provides a 
description of the agency's current budget, its budget request for 
fiscal year 2019, and the basis for the increase in its request. This 
testimony also provides a short overview of the FTC's work to protect 
U.S. consumers and competition, including highlights of some of the 
agency's major recent activities and initiatives. It also identifies 
certain challenges that affect the Commission's ability to protect U.S. 
consumers and competition to the full extent of our authority.

                        II. BUDGET AND RESOURCES

    In fiscal year 2018, the FTC's enacted budget is $306.3 million and 
1,140 FTEs. For fiscal year 2019, the FTC is requesting $309.7 million 
and 1,140 FTEs. The additional $3.4 million requested is for expert 
witnesses, a growing need in light of increased numbers of complex 
investigations and litigation in both competition and consumer 
protection matters. As a result, we face significantly higher costs to 
obtain the kinds of outside experts often needed to support our cases. 
For example, in competition cases we require experts to opine on such 
issues as the proper definition of product and geographic markets, the 
likelihood of entry by new competitors, and appropriate models to weigh 
merger efficiencies against potential competitive harm. Consumer 
protection cases often require experts to opine on scientific, data 
security and privacy, and advertising issues. Experts also are 
sometimes called upon to assist with proving appropriate monetary 
relief. It is critical that the FTC have sufficient resources to 
support expert work in litigation, particularly in cases against large, 
well-financed defendants.
    The FTC's budget request assumes that total offsetting collections 
from Hart-Scott-Rodino Act (HSR) filing fees and Do Not Call fees will 
provide the FTC with $140.4 million in fiscal year 2019, so that an 
estimated $169.3 million in direct appropriations would be needed to 
provide the FTC with the requested amount of $309.7 million in fiscal 
year 2019.
    The FTC seeks to maximize its budget and uses its no-year money 
flexibility to manage it, but substantially increased expert costs are 
limiting the agency's ability to meet critical IT modernization and 
other investments necessary to continue to optimize operations.
    The agency continues to utilize its resources effectively on behalf 
of American consumers. When possible, the agency collects money to 
return to harmed consumers. During fiscal year 2017 alone, the agency 
returned over $543 million in redress to consumers and deposited $94 
million into the U.S. Treasury, reflecting collections in both consumer 
protection and competition matters. In addition, in fiscal year 2017, 
FTC orders in the Volkswagen,\3\ Amazon,\4\ and Net Spend \5\ matters 
required defendants to self-administer consumer refund programs worth 
more than $11.5 billion.
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    \3\ FTC v. Volkswagen Group of America, Inc., No. 3:15-md-02672-CRB 
(N.D. Cal. May 17, 2017), available at https://www.ftc.gov/enforcement/
cases-proceedings/162-3006/volkswagen-group-america-inc.
    \4\ FTC v. Amazon.com, Inc., No. 2:14-cv-01038 (W.D. Wash. Apr. 4, 
2017), available at https://www.ftc.gov/enforcement/cases-proceedings/
122-3238/amazoncom-inc.
    \5\ FTC v. NetSpend Corporation, No. 1:16-cv-04203-AT (N.D. Ga. 
Apr. 10, 2017), available at https://www.ftc.gov/enforcement/cases-
proceedings/netspend-corporation.
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    Each year, the agency estimates how much money it has saved 
consumers through law enforcement, in comparison to the FTC's costs. 
The FTC estimates that in fiscal year 2017 the agency saved consumers 
over $3.7 billion through its competition enforcement efforts and over 
$1.29 billion through its consumer protection enforcement actions.\6\ 
During fiscal year 2017, the agency saved consumers over 12 times the 
amount of resources devoted to the consumer protection program; over 55 
times the amount of resources devoted to the merger program; and more 
than 39 times the amount of resources devoted to the nonmerger 
antitrust enforcement program.
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    \6\ FTC Report, Agency Financial Report for Fiscal Year 2017, at 45 
(Nov. 16, 2017) available at https://www.ftc.gov/reports/agency-
financial-report-fy2017.
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                    III. CONSUMER PROTECTION MISSION

    As the Nation's primary consumer protection agency, the FTC has a 
broad mandate to protect consumers from unfair, deceptive, and 
fraudulent practices in the marketplace. It does this by, among other 
things, pursuing law enforcement actions to stop unlawful practices, 
and educating consumers and businesses about their rights and 
responsibilities, respectively. The FTC targets its enforcement and 
education efforts to achieve maximum impact, which includes working 
closely with Federal, State, international, and private sector partners 
on joint initiatives. The agency also convenes workshops with various 
stakeholders to examine emerging consumer protection issues and 
releases reports on a variety of consumer protection topics. The 
Commission's structure, research capacity, and committed staff enable 
the FTC to continue to meet its mandate of protecting consumers and 
competition in an ever-changing marketplace. Among other issues, the 
FTC addresses fraud across most sectors of the economy, protects 
privacy and data security, and helps ensure that advertising claims to 
consumers are truthful and not misleading. Below we list some recent 
significant examples of the agency's work.
A. Protecting Consumers from Fraud
    A major focus of the FTC's law enforcement is fighting fraud. The 
Commission's anti-fraud program tracks down and stops some of the most 
egregious scams that prey on U.S. consumers--often, the most vulnerable 
consumers who can least afford to lose money. Below are a few examples 
of the variety of frauds that the Commission has recently pursued, and 
ways that the Commission leverages its limited resources to do so 
effectively.
            1. Imposter Scams
    Reports about imposter scams have been on the rise over the past 
few years, and many of these scams target seniors.\7\ Fraudsters 
falsely claiming to be government agents (including the IRS and even 
the FTC), family members, or well-known tech companies contact 
consumers and pressure them to send money, often via cash-like payment 
methods.
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    \7\ FTC Fiscal Year 2019 Congressional Budget Justification, 
available at https://www.ftc.gov/reports/fy-2019-congressional-budget-
justification.
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    For example, during the past year, the FTC joined Federal, State, 
and international law enforcement partners in announcing ``Operation 
Tech Trap,'' a nationwide and international crackdown on tech support 
scams that trick consumers into believing their computers are infected 
with viruses and malware, and then charge them hundreds of dollars for 
unnecessary repairs.\8\ The FTC brought actions to shut down these 
deceptive operations and also developed consumer education materials to 
help consumers avoid falling victim to tech support scams in the first 
place.\9\
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    \8\ Press Release, FTC and Federal, State and International 
Partners Announce Major Crackdown on Tech Support Scams (May 12, 2017), 
available at https://www.ftc.gov/news-events/press-releases/2017/05/
ftc-federal-state-international-partners-announce-major-crackdown. 
``Operation Tech Trap'' is just one example of a law enforcement 
``sweep''--coordinated, simultaneous law enforcement actions with 
partners--that the FTC uses to leverage resources to maximize effects. 
Another example of a recent sweep is ``Game of Loans,'' the first 
coordinated Federal/State law enforcement initiative targeting 
deceptive student loan debt relief scams. Press Release, FTC, State Law 
Enforcement Partners Announce Nationwide Crackdown on Student Loan Debt 
Relief Scams (Oct.13, 2017), available at https://www.ftc.gov/news-
events/press-releases/2017/10/ftc-state-law-enforcement-partners-
announce-nationwide-crackdown.
    \9\ FTC Guidance, Tech Support Scams (July 2017), available at 
https://www.consumer.ftc.gov/articles/0346-tech-support-scams#How.
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            2. Emerging Frauds
    The FTC strives to stay ahead of scammers who are always on the 
lookout for new ways to market old schemes. For example, there has been 
an increase in deceptive money-making frauds involving 
cryptocurrencies--digital assets that use cryptography to secure or 
verify transactions. The Commission has worked to educate consumers 
about cryptocurrencies and hold fraudsters accountable. In March, the 
FTC halted the operations of Bitcoin Funding Team, which allegedly 
falsely promised that participants could earn large returns by 
enrolling in money-making schemes and paying with cryptocurrency.\10\ 
On June 25, the FTC will host a workshop to explore how scammers are 
exploiting public interest in cryptocurrencies like bitcoin and 
Litecoin, and to discuss ways to empower and protect consumers against 
this growing threat of exploitation.\11\
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    \10\ FTC v. Thomas Dluca, et al. (Bitcoin Funding Team) No. 0:18-
cv-60379-KMM (S.D.N.Y. Mar. 16, 2018), available at https://
www.ftc.gov/enforcement/cases-proceedings/172-3107/federal-trade-
commission-v-thomas-dluca-et-al-bitcoin-funding.
    \11\ FTC Workshop, Cryptocurrency Workshop (Apr. 30, 2018), 
available at https://www.ftc.gov/news-events/events-calendar/2018/06/
decrypting-cryptocurrency-scams.
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            3. Illegal Robocalls
    Illegal robocalls remain a significant consumer protection problem 
because they repeatedly disturb consumers' privacy and frequently use 
fraud and deception to pitch goods and services, leading to significant 
economic harm. In fiscal year 2017, the FTC received more than 4.5 
million robocall complaints.\12\ The FTC is using every tool at its 
disposal to fight these illegal calls.\13\ Technological advances, 
however, have allowed bad actors to place millions or even billions of 
calls, often from abroad, at very low costs, and in ways that are 
difficult to trace. This continues to infuriate consumers and challenge 
enforcers.
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    \12\ Total unwanted-call complaints for fiscal year 2017, including 
both robocall complaints and complaints about live calls from consumers 
whose phone numbers are registered on the Do Not Call Registry, 
exceeded 7 million. See Do Not Call Registry Data Book 2017: Complaint 
Figures for Fiscal Year 2017, available at https://www.ftc.gov/reports/
national-do-not-call-registry-data-book-fiscal-year-2017.
    \13\ See FTC Robocall Initiatives, available at https://
www.consumer.ftc.gov/features/feature-0025-robocalls.
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    Since establishing the Do Not Call Registry in 2003, the Commission 
has fought vigorously to protect consumers' privacy from unwanted 
calls. Indeed, since the Commission began enforcing the Do Not Call 
provisions of the Telemarketing Sales Rule (``TSR'') in 2004, the 
Commission has brought 135 enforcement actions seeking civil 
penalties,\14\ restitution for victims of telemarketing scams, and 
disgorgement of ill-gotten gains against 439 corporations and 356 
individuals. As a result of the 125 cases resolved thus far, the 
Commission has collected over $121 million in equitable monetary relief 
and civil penalties.\15\ Recently, the FTC and its law enforcement 
partners achieved an historic win in a long-running fight against 
unwanted calls when a Federal district court in Illinois issued an 
order imposing a $280 million penalty against Dish Network--the largest 
penalty ever issued in a Do Not Call case.\16\
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    \14\ As is true of all TSR violations, telemarketers who violate 
the Do Not Call provisions are subject to civil penalties of more than 
$40,000 per violation. 15 U.S.C. Sec. 45(m)(1)(A); 16 C.F.R. 
Sec. 1.98(d).
    \15\ See Enforcement of the Do Not Call Registry available at 
https://www.ftc.gov/news-events/media-resources/do-not-call-registry/
enforcement.
    \16\ U.S. et al. v. Dish Network, L.L.C., No. 309-cv-03073-JES-CHE 
(C.D. Ill. Aug. 10, 2017), available at https://www.ftc.gov/
enforcement/cases-proceedings/052-3167/dish-network-llc-united-states-
america-federal-trade. The Dish litigation began in 2009 when the 
Department of Justice brought an action on behalf of the FTC with the 
States of California, Illinois, North Carolina, and Ohio alleging 
millions of violations of the Telemarketing Sales Rule, the Telephone 
Consumer Protection Act (``TCPA''), and various State Do Not Call laws 
by making tens of millions of calls--often robocalls--to telephone 
numbers on the Do Not Call Registry.
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    Part of the huge uptick in illegal calls, including robocalls, is 
attributable to relatively recent technological developments that 
facilitate telemarketing without requiring a significant capital 
investment in specialized hardware and labor.\17\ Today, robocallers 
benefit from automated dialing technology, inexpensive international 
and long distance calling rates, and the ability to move 
internationally and employ cheap labor. The result: law-breaking 
telemarketers can place robocalls for a fraction of one cent per 
minute. Moreover, technological changes have also affected the 
marketplace by enabling telemarketers to conceal their identities when 
they place calls.
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    \17\ FTC Workshop, Robocalls: All the Rage (Oct. 18, 2012), 
available at https://www.ftc.gov/news-events/events-calendar/2012/10/
robocalls-all-rage-ftc-summit. A transcript of the workshop is 
available at https://www.ftc.gov/sites/default/files/documents/
public_events/robocalls-all-rage-ftc-summit/
robocallsummittranscript.pdf.
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    Recognizing that law enforcement, while critical, is not enough to 
solve the problem of illegal calls, the FTC has taken steps to spur the 
marketplace to develop technological solutions. For instance, the FTC 
led four public challenges to incentivize innovators to help tackle the 
unlawful robocalls that plague consumers.\18\ The FTC's challenges 
contributed to a shift in the development and availability of 
technological solutions in this area, particularly call-blocking and 
call-filtering products.
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    \18\ The first challenge, in 2013, called upon the public to 
develop a consumer-facing solution to blocks illegal robocalls. One of 
the winners, ``NomoRobo,'' was on the market within 6 months after 
being named one of the winners. To date, ``NomoRobo,'' which reports 
blocking over 600 million calls, is being offered directly to consumers 
by a number of telecommunications providers and is available as an app 
on iPhones. See Press Release, FTC Announces Robocall Challenge Winners 
(Apr. 2, 2013), available at https://www.ftc.gov/news-events/press-
releases/2013/
04/ftc-announces-robocall-challenge-winners; see also Press Release, 
FTC Awards $25,000 Top Cash Prize for Contest-Winning Mobile App That 
Blocks Illegal Robocalls (Aug. 17, 2015), available at https://
www.ftc.gov/news-events/press-releases/2015/08/ftc-awards-25000-top-
cash-prize-contest-winning-mobile-app-blocks; Press Release, FTC 
Announces Winners of ``Zapping Rachel'' Robocall Contest (Aug. 28, 
2014), available at https://www.ftc.gov/news-events/press-releases/
2014/08/ftc-announces-winners-zapping-rachel-robocall-contest; Press 
Release, FTC Announces Robocall Challenge Winners (Apr. 2, 2013), 
available at https://www.ftc.gov/news-events/press-releases/2013/04/
ftc-announces-robocall-challenge-winners.
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    In addition, the FTC regularly works with its State, Federal, and 
international partners to combat illegal robocalls. For example, this 
spring the FTC and Federal Communications Commission co-hosted a Joint 
Policy Forum on Illegal Robocalls to discuss the regulatory and 
enforcement challenges posed by illegal robocalls, as well as a public 
technology expo featuring new technologies, devices, and applications 
to minimize or eliminate the number of illegal robocalls consumers 
receive.\19\
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    \19\ See Press Release, FTC and FCC to Host Joint Policy Forum on 
Illegal Robocalls (Mar. 22, 2018), available at www.ftc.gov/news-
events/press-releases/2018/03/ftc-fcc-host-joint-policy-forum-illegal-
robocalls; Press Release, FTC and FCC Seek Exhibitors for an Expo 
Featuring Technologies to Block Illegal Robocalls (Mar. 7, 2018) 
available at www.ftc.gov/news-events/press-releases/2018/03/ftc-fcc-
seek-exhibitors-expo-featuring-technologies-block-illegal.
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B. Protecting Consumer Privacy and Data Security
    The FTC has unparalleled experience in consumer privacy 
enforcement. The Commission has used its core enforcement authority--
Section 5 of the FTC Act--to take action against companies engaged in 
unfair or deceptive practices involving the privacy and security of 
consumers' information.\20\ The FTC also enforces sector-specific 
statutes that protect certain health,\21\ credit,\22\ financial,\23\ 
and children's information.\24\
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    \20\ 15 U.S.C. Sec. 45(a).
    \21\ 16 C.F.R. Part 318.
    \22\ 15 U.S.C. Sec. Sec. 1681-1681x.
    \23\ 16 C.F.R. Part 314, implementing 15 U.S.C. Sec. 6801(b).
    \24\ 15 U.S.C. Sec. Sec. 6501-6506; see also 16 C.F.R. Part 312.
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    Some of the FTC's privacy enforcement priorities include financial 
privacy, children's privacy, health privacy, the Internet of Things, 
and data security. Ongoing work includes investigations of Facebook's 
privacy practices \25\ and the Equifax data breach. These kinds of 
large and complex investigations underscore the need for resources. In 
January, the Commission issued its annual report summarizing its 
privacy and data security work in 2017.\26\ Below are a few highlights 
of the Commission's recent work.
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    \25\ Statement by the Acting Director of FTC's Bureau of Consumer 
Protection Regarding Reported Concerns about Facebook Privacy Practices 
(Mar. 26, 2018), available at https://www.ftc.gov/news-events/press-
releases/2018/03/statement-acting-director-ftcs-bureau-consumer-
protection.
    \26\ FTC Report, Privacy & Data Security Update: 2017 (Jan. 2018), 
available at https://www.ftc.gov/reports/privacy-data-security-pdate-
2017-overview-commissions-enforcement-policy-initiatives (hereinafter 
``2017 Privacy & Security Update'').
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    Financial privacy has long been an area of particular emphasis for 
the FTC. For example, the FTC alleged that online tax preparation 
service TaxSlayer violated the Gramm-Leach-Bliley Act's Safeguards Rule 
by, among other things, failing to implement adequate risk-based 
authentication measures and failing to require consumers to choose 
strong passwords.\27\ The FTC alleged that malicious hackers were able 
to gain full access to nearly 9,000 TaxSlayer accounts between October 
2015 and December 2015 and use that information to engage in tax 
identity theft, which allowed them to obtain tax refunds by filing 
fraudulent tax returns.
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    \27\ TaxSlayer, LLC, No. C-4626 (Nov. 8, 2017), available at 
https://www.ftc.gov/enforcement/cases-proceedings/162-3063/taxslayer.
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    The Commission also takes seriously its commitment to protect 
children's privacy, which continues to be a focus of the FTC's 
enforcement efforts. In the Commission's first children's privacy case 
involving Internet-connected toys, the FTC announced a settlement with 
electronic toy manufacturer VTech Electronics for violations of the 
Children's Online Privacy Protection Rule, including a civil penalty of 
$650,000.\28\ The FTC alleged that the company collected children's 
personal information online without first obtaining parental consent, 
and failed to take reasonable steps to secure the data it 
collected.\29\
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    \28\ U.S. v. VTech Electronics Ltd. et al., No. 1:18-cv-00114 (N.D. 
Ill. Jan. 8, 2018), available at https://www.ftc.gov/enforcement/cases-
proceedings/162-3032/vtech-electronics-limited. See also U.S. v. Prime 
Sites, Inc. also d/b/a Explore Talent, No. 2:18-cv-00199 (D. Nev. Feb. 
12, 2018), available at https://www.ftc.gov/enforcement/cases-
proceedings/162-3218/prime-sites-inc-explore-talent.
    \29\ In addition to law enforcement, the FTC also undertakes policy 
initiatives, such as its recent workshop co-hosted with the Department 
of Education on educational technology and student privacy. See Student 
Privacy and Ed Tech (Dec. 1, 2017), available at https://www.ftc.gov/
news-events/events-calendar/2017/12/student-privacy-ed-tech.
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    The FTC has also continued to focus on privacy and data security 
involving the Internet of Things. For example, last year Vizio, one of 
the world's largest manufacturers and sellers of Internet-connected 
smart televisions, agreed to pay $2.2 million to settle charges that it 
installed software on its televisions to collect the viewing data of 11 
million consumers without the consumers' knowledge or consent.\30\ 
Additionally, the FTC co-hosted with the National Highway Traffic 
Safety Administration a workshop on privacy and security issues posed 
by automated and connected motor vehicles.\31\
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    \30\ VIZIO, INC. and VIZIO Inscape Services, LLC, No. 2:17-cv-00758 
(D.N.J. Feb. 6, 2018), available at https://www.ftc.gov/enforcement/
cases-proceedings/162-3024/vizio-inc-vizio-inscape-services-llc.
    \31\ FTC Workshop, Connected Cars: Privacy, Security Issues Related 
to Connected, Automated Vehicles (June 28, 2017), available at https://
www.ftc.gov/news-events/events-calendar/2017/06/connected-cars-privacy-
security-issues-related-connected.
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    Data security continues to be a crucial part of the FTC's privacy 
work. To date, the Commission has brought more than 60 cases alleging 
that companies failed to implement reasonable safeguards for the 
consumer data they maintain.\32\ For example, the Commission recently 
announced an expanded settlement with ride-sharing platform company 
Uber Technologies related to allegations that the company failed to 
reasonably secure sensitive consumer data stored in the cloud.\33\ As a 
result, an intruder accessed personal information about Uber customers 
and drivers, including more than 25 million names and email addresses, 
22 million names and mobile phone numbers, and 600,000 names and 
driver's license numbers. The FTC also reached a settlement with one of 
the world's largest computer manufacturers, Lenovo, related to 
allegations that the company pre-loaded software onto some of its 
laptops that compromised security protections in order to deliver ads 
to consumers.\34\
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    \32\ 2017 Privacy & Security Update, supra n.26.
    \33\ Uber Technologies, Inc., Matter No. 1523054 (Apr. 11, 2018), 
available at https://www.ftc.gov/enforcement/cases-proceedings/152-
3054/uber-technologies-inc. Following the announcement of last year's 
original proposed settlement, the Commission learned that Uber had 
failed to disclose a significant breach of consumer data that occurred 
in 2016--in the midst of the FTC's investigation that led to the August 
2017 settlement announcement. Due to Uber's misconduct related to the 
2016 breach, Uber will be subject to additional requirements. Among 
other things, the revised settlement could subject Uber to civil 
penalties if it fails to notify the FTC of certain future incidents 
involving unauthorized access of consumer information.
    \34\ Lenovo, Inc., No. C-4636 (Jan. 2, 2018), available at https://
www.ftc.gov/enforcement/cases-proceedings/152-3134/lenovo-inc.
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    As the United States' leading privacy enforcement agency, the 
Commission is committed to the success of the EU-U.S. Privacy Shield 
framework, a critical tool for protecting privacy and enabling cross-
border data flows. We have brought enforcement actions to enforce it 
and will continue to do so when participants fail to meet their legal 
obligations. The Commission will continue to work with other agencies 
in the U.S. Government and with our partners in Europe to ensure 
businesses and consumers can continue to benefit from the Privacy 
Shield.
    The Commission is aware that Congress has long considered whether 
to adopt comprehensive data security legislation. The agency stands 
ready, willing and able to work with Congress on that issue.
    Finally, the Commission supports its vital enforcement work with 
privacy and security research. For example, in February, the FTC held 
its third annual PrivacyCon, a conference examining cutting-edge 
research and trends in protecting consumer privacy and security.\35\ 
The FTC also held a conference to examine how identity theft has 
evolved over the last decade and what we can do to address the 
challenges it poses.\36\ And in December, the Commission held a 
workshop to examine consumer injury in the context of privacy and data 
security.\37\
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    \35\ This year's event focused on the economics of privacy 
including how to quantify the harms that result from companies' failure 
to secure consumer information, and how to balance the costs and 
benefits of privacy-protective technologies and practices. FTC 
Workshop, PrivacyCon 2018 (Feb. 28, 2018), available at https://
www.ftc.gov/news-events/events-calendar/2018/02/privacycon-2018.
    \36\ FTC Workshop, Identity Theft: Planning for the Future (May 24, 
2017), available at https://www.ftc.gov/news-events/events-calendar/
2017/05/planning-future-conference-about-identity-theft.
    \37\ FTC Workshop, Informational Injury (Dec. 12, 2017), available 
at https://www.ftc.gov/news-events/events-calendar/2017/12/
informational-injury-workshop.
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C. Truthfulness in National Advertising
    Ensuring that advertising is truthful and not misleading has always 
been one of the FTC's core missions because it allows consumers to make 
the best use of their resources and allows companies to compete on a 
level playing field. Below are a few recent examples of the 
Commission's work in this area.
    This past year, the agency has continued to bring cases challenging 
false and unsubstantiated health claims, including those targeting 
older consumers, consumers affected by the opioid crisis, and consumers 
with serious medical conditions. The Commission has brought cases 
challenging products that claim to improve memory and ward off 
cognitive decline, relieve joint pain and arthritis symptoms, and even 
reverse aging.\38\ The Commission also has sued companies that 
allegedly claimed, without scientific evidence, that using their 
products could alleviate the symptoms of opioid withdrawal and increase 
the likelihood of overcoming opioid dependency.\39\ Finally, the 
Commission recently barred a marketer from making deceptive claims 
about its products' ability to mitigate the side effects of cancer 
treatments.\40\
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    \38\ See, e.g., FTC and State of Maine v. Health Research 
Laboratories, Inc., No. 2:17-cv-00467 (D. Maine Nov. 30, 2017), 
available at https://www.ftc.gov/enforcement/cases-proceedings/152-
3021/health-research-laboratories-llc; Telomerase Activation Sciences, 
Inc. and Noel Thomas Patton, No. C-4644 (Apr. 19, 2018), available at 
https://www.ftc.gov/enforcement/cases-proceedings/142-3103/telomerase-
activation-sciences-inc-noel-thomas-patton-matter.
    \39\ FTC v. Catlin Enterprises, Inc., No. 1:17-cv-403 (W.D. Tex. 
May, 17, 2017), available at https://www.ftc.gov/enforcement/cases-
proceedings/1623204/catlin-enterprises-inc. In addition, in conjunction 
with the FDA, the FTC recently issued letters to companies that 
appeared to be making questionable claims to sell addiction or 
withdrawal remedies. FTC and U.S. FDA Opioid Warning Letters (Jan. 24, 
2018), available at https://www.ftc.gov/ftc-fda-opioid-warning-letters.
    \40\ FTC v. CellMark Biopharma and Derek E. Vest, No. 2:18-cv-
00014-JES-CM (M.D. Fla. Jan. 12, 2018), available at https://
www.ftc.gov/enforcement/cases-proceedings/162-3134/cellmark-biopharma-
derek-e-vest.
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    When consumers with serious health concerns fall victim to 
unsupported health claims, they may put their health at risk by 
avoiding proven therapies and treatments. Through consumer education, 
including the FTC's advisories, the agency urges consumers to check 
with a medical professional before starting any treatment or product to 
treat serious medical conditions.\41\
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    \41\ FTC Consumer Blog, Treatments and Cures, at https://
www.consumer.ftc.gov/topics/
treatments-cures.
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D. Consumer Education and Outreach
    Public outreach and education is another critical element of the 
FTC's efforts to fulfill its consumer protection mission. The 
Commission's education and outreach programs reach tens of millions of 
people each year through our website, the media, and partner 
organizations that disseminate consumer information on the agency's 
behalf. The FTC delivers actionable, practical, plain language 
materials on dozens of issues, and updates its consumer education 
whenever it has new information to share. The FTC disseminates these 
tips through articles, blog posts, social media, infographics, videos, 
audio, and campaigns such as ``Pass It On''--an innovative means of 
arming older consumers with information about scams that they can 
``pass on'' to their friends and family.\42\
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    \42\ See Pass It On, www.consumer.ftc.gov/features/feature-0030-
pass-it-on#identity-theft.
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                        IV. COMPETITION MISSION

    The Commission seeks to promote competition through vigorous law 
enforcement, a robust policy and research agenda, and international 
cooperation and coordination.
A. Enforcement
    The FTC enforces U.S. antitrust law in many sectors that directly 
affect consumers and their pocketbooks, such as healthcare, consumer 
products and services, technology, manufacturing, and energy. The 
Commission shares Federal antitrust enforcement responsibilities with 
the Antitrust Division of the U.S. Department of Justice.
    One of the agencies' principal responsibilities is to prevent 
mergers that may substantially lessen competition. Under U.S. law, 
parties to certain large mergers and acquisitions must file premerger 
notification and wait for government review. Over the past five fiscal 
years, premerger filings under the Hart-Scott-Rodino Act have increased 
more than 50 percent; in the most recent fiscal year, the antitrust 
agencies received over 2000 HSR filings for the first time since 
2007.\43\ The vast majority of reported transactions do not raise 
competitive concerns, and the agencies clear those transactions 
expeditiously. However, when the evidence gives the Commission reason 
to believe that a proposed merger would likely be anticompetitive, the 
Commission has intervened. Since the beginning of fiscal year 2016, the 
Commission has challenged 45 mergers after the evidence showed that 
they would likely be anticompetitive.\44\ Although many of these cases 
are resolved via divestiture settlements, in the last year alone, the 
Commission voted to initiate litigation to block seven mergers, each of 
which has required a significant commitment of resources to prosecute. 
Three of those challenges ended successfully when the parties abandoned 
the transaction after the Commission initiated litigation.\45\ The four 
other merger cases are still being litigated.\46\ In addition, 
Walgreens substantially restructured its proposed acquisition of Rite 
Aid after the Commission raised concerns about the original transaction 
during an extensive review.\47\
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    \43\ In fiscal year 2017, the agencies received notice of 2,052 
transactions, compared with 1,326 in fiscal year 2013 and 2,201 in 
fiscal year 2007. For historical information about HSR filings and U.S. 
merger enforcement, see the joint FTC/DOJ Hart-Scott-Rodino annual 
reports, available at https://www.ftc.gov/policy/reports/policy-
reports/annual-competition-reports.
    \44\ During the same time period, the Antitrust Division challenged 
an additional 43 mergers.
    \45\ FTC v. DraftKings, Inc., No. 17-cv-01195 (D.D.C. Jun. 19, 
2017), available at https://www.ftc.gov/enforcement/cases-proceedings/
161-0174/draftkings-fanduel-ftc-state-california-
district-columbia-v; Press Release, FTC Challenges Proposed Acquisition 
of Conagra's Wesson Cooking Oil Brand by Crisco owner, J.M. Smucker 
Co., (Mar. 5, 2018), available at https://www.ftc.gov/news-events/
press-releases/2018/03/ftc-challenges-proposed-acquisition-conagras-
wesson-cooking-oil; In re CDK Global & Auto/Mate, Dkt. 9382 (Mar. 20, 
2018), available at https://www.ftc.gov/enforcement/cases-proceedings/
171-0156/cdk-global-automate-matter.
    \46\ FTC v. Sanford Health, et al., No. 1:17-cv-00133 (W.D.N.D. 
Jun. 23, 2017), available at https://www.ftc.gov/enforcement/cases-
proceedings/171-0019/sanford-health-ftc-state-north-
dakota-v; In re Tronox Ltd., Dkt. 9377 (Dec. 5, 2017), available at 
https://www.ftc.gov/
enforcement/cases-proceedings/171-0085/tronoxcristal-usa; In re Otto 
Bock HealthCare North America, Inc., Dkt. 9378 (Dec. 20, 2017), 
available at https://www.ftc.gov/enforcement/cases-
proceedings/171-0231/otto-bock-healthcarefreedom-innovations; FTC v. 
Wilhelmsen et al., No. 1:18-cv-00414 (D.D.C. Feb. 23, 2018), available 
at https://www.ftc.gov/enforcement/cases-
proceedings/171-0161/wilhelm-wilhelmsen-et-al-ftc-v.
    \47\ See Statement of Acting Chairman Maureen K. Ohlhausen in 
Walgreens Boots Alliance/Rite Aid, (Sept. 19, 2017), available at 
https://www.ftc.gov/public-statements/2017/09/statement-
acting-chairman-maureen-k-ohlhausen-walgreens-boots-alliancerite.
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    The Commission also maintains a robust program to identify and stop 
anticompetitive conduct, and it currently has a number of cases in 
active litigation.\48\ For over twenty years and on a bipartisan basis, 
the Commission has prioritized ending anticompetitive reverse-payment 
patent settlements in which a brand-name drug firm pays its potential 
generic rival to delay entering the market with a lower cost generic 
product. Following the U.S. Supreme Court's 2013 decision in FTC v. 
Actavis, Inc.,\49\ the Commission is in a much stronger position to 
protect consumers. Since that ruling, the FTC obtained a landmark $1.2 
billion settlement in its litigation involving the sleep disorder drug, 
Provigil,\50\ and other manufacturers have agreed to abandon the 
practice.\51\ In addition, the Commission has challenged other 
anticompetitive conduct by drug manufacturers, such as abuse of 
government process through sham litigation or repetitive regulatory 
filings intended to slow the approval of competitive drugs.\52\ The 
Commission also obtained a stipulated injunction in which Mallinckrodt 
ARD Inc., agreed to pay $100 million and divest assets to settle 
charges that it had illegally acquired the rights to develop a drug 
that threatened its monopoly in the U.S. market for a specialty drug 
used to treat a rare seizure disorder afflicting infants.\53\
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    \48\ In addition to the cases involving pharmaceutical firms 
discussed infra, pending litigation alleging anticompetitive conduct 
includes FTC v. Qualcomm, Inc., No. 17-cv-00220 (N.D. Cal. Jan. 17, 
2017), available at https://www.ftc.gov/enforcement/cases-proceedings/
141-0199/qualcomm-inc; In re 1-800 Contacts, Inc., Dkt. 9372 (Aug. 8, 
2016), available at https://www.ftc.gov/enforcement/cases-proceedings/
141-0200/1-800-contacts-inc-matter; In re Louisiana Real Estate 
Appraisers Board, Dkt. 9374 (May 31, 2017), available at https://
www.ftc.gov/
enforcement/cases-proceedings/161-0068/louisiana-real-estate-
appraisers-board; and In re Benco Dental Supply et al., Dkt. 9379 (Feb. 
12, 2018), available at https://www.ftc.gov/enforcement/cases-
proceedings/151-0190/bencoscheinpatterson-matter.
    \49\ FTC v. Actavis, Inc., 570 U.S. 756 (2013).
    \50\ Press Release, FTC Settlement of Cephalon Pay for Delay Case 
Ensures $1.2 Billion in Ill-Gotten Gains Relinquished; Refunds Will Go 
To Purchasers Affected by Anticompetitive Tactics (May 28, 2015), 
available at https://www.ftc.gov/news-events/press-releases/2015/05/
ftc-
settlement-cephalon-pay-delay-case-ensures-12-billion-ill.
    \51\ Joint Motion for Entry of Stipulated Order for Permanent 
Injunction, FTC v. Allergan plc, No. 17-cv-00312 (N.D. Cal. Jan. 23, 
2017), available at https://www.ftc.gov/enforcement/cases-proceedings/
141-0004/allergan-plc-watson-laboratories-inc-et-al, and Stipulated 
Order for Permanent Injunction, FTC v. Teikoku Pharma USA, Inc., No. 
16-cv-01440 (E.D. Pa. Mar. 30, 2016), available at https://www.ftc.gov/
enforcement/cases-proceedings/141-0004/endo-pharmaceuticals-impax-labs.
    \52\ FTC v. Abbvie Inc., No. 14-cv-5151 (E.D. Pa. Sept. 8, 2014), 
available at https://www.ftc.gov/enforcement/cases-proceedings/121-
0028/abbvie-inc-et-al; FTC v. Shire ViroPharma Inc., No. 17-cv-131(D. 
Del. Feb. 7, 2017), available at https://www.ftc.gov/enforcement/cases-
proceedings/121-0062/shire-viropharma.
    \53\ Stipulated Order for Permanent Injunction and Equitable 
Monetary Relief, FTC v. Mallinckrodt ARD Inc., No. 1:17-cv-00120 
(D.D.C. Jan. 30, 2017).
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    The Commission also follows closely activity in the high-technology 
sector. From smart appliances and smart cars to mobile devices and 
search platforms, the widespread use of technology and data is not only 
changing the way we live, but also the way firms operate. While many of 
these changes offer consumer benefits, they also raise complex and 
sometimes novel competition issues. Given the important role that 
technology companies play in the American economy, it is critical that 
the Commission--in furthering its mission of protecting consumers and 
fostering competition--understand their developing technologies and 
scrutinize their conduct to ensure that they abide by the same rules of 
competitive markets that apply to any company.
B. Policy and Research
    To complement our enforcement efforts, the FTC pursues a robust 
competition policy and research agenda to improve agency 
decisionmaking, and engages in competition advocacy and education 
initiatives. The FTC promotes competition principles in advocacy 
comments to State lawmakers and regulators as well as our sister 
Federal agencies. The FTC also organizes public workshops and issues 
reports on important topics, such as a recent workshop on prescription 
drug distribution practices,\54\ several workshops concerning 
occupational licensing reform,\55\ and an upcoming event on competition 
among residential real estate brokers.\56\ Last year, the Commission 
concluded a comprehensive review of its merger remedies to evaluate the 
effectiveness of the Commission's orders issued between 2006 and 2012, 
and made public its findings.\57\ Examining prior enforcement efforts 
to assess their impact on competition and consumers is critical to 
formulating an effective and efficient antitrust enforcement program, 
and the Commission will continue these self-assessment efforts in order 
to deploy our resources where they can do the most good.
---------------------------------------------------------------------------
    \54\ FTC Workshop, Understanding Competition in Prescription Drug 
Markets: Entry and Supply Chain Dynamics (Nov. 8, 2017), available at 
https://www.ftc.gov/news-events/events-
calendar/2017/11/understanding-competition-prescription-drug-markets-
entry-supply.
    \55\ See, e.g., Press Release, FTC Announces Second Economic 
Liberty Public Roundtable (Sept. 11, 2017), available at https://
www.ftc.gov/news-events/press-releases/2017/09/ftc-announces-
second-economic-liberty-public-roundtable.
    \56\ FTC Workshop, What's New in Residential Real Estate Brokerage 
Competition (Jun. 5, 2018), available at https://www.ftc.gov/news-
events/events-calendar/2018/04/whats-new-
residential-real-estate-brokerage-competition-ftc-doj.
    \57\ FTC Staff Report, The FTC's Merger Remedies 2006-2012: A 
Report of the Bureaus of Competition and Economics (2017), available at 
https://www.ftc.gov/system/files/documents/reports/ftcs-merger-
remedies-2006-2012-report-bureaus-competition-economics/
p143100_ftc_merger_
remedies_2006-2012.pdf.
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C. International Engagement and Collaboration
    With the expansion of global trade and the operation of many 
companies across national borders, the FTC and the Antitrust Division 
of the U.S. Department of Justice increasingly engage with foreign 
antitrust agencies to ensure close collaboration on cross-border cases 
and convergence toward sound competition policies and procedures.\58\ 
The FTC effectively coordinates reviews of multijurisdictional mergers 
and continues to work with its international counterparts to achieve 
consistent outcomes in cases of possible unilateral anticompetitive 
conduct. The U.S. antitrust agencies facilitate dialogue and promote 
convergence through multiple channels, including through strong 
bilateral relations with foreign competition agencies, and an active 
role in multilateral competition organization projects and initiatives. 
When appropriate, we also work with other agencies within the U.S. 
Government to advance consistent competition enforcement policies, 
practices, and procedures in other parts of the world.\59\
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    \58\ In competition matters, the FTC also seeks to collaborate with 
the State attorneys general to maximize results and use of limited 
resources in the enforcement of the U.S. antitrust laws.
    \59\ For example, we work through the United States Government's 
interagency processes to ensure that competition-related issues that 
also implicate broader U.S. policy interests, such as the protection of 
intellectual property and non-discrimination, are addressed in a 
coordinated and effective manner.
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                             V. CONCLUSION

    The FTC remains committed to maximizing its resources to enhance 
its effectiveness in protecting consumers and promoting competition, to 
anticipate and respond to changes in the marketplace, and to meet 
current and future challenges. We look forward to continuing to work 
with the subcommittee and Congress, and we would be happy to answer 
your questions.

    Senator Lankford. Thank you.
    We'll go to a time of questioning. I do want to remind 
Members that we have an 11:15 vote, and so I'm going to watch 
the clock pretty carefully. We're going to go through as many 
rounds as we have time for, but I'll be attentive to make sure 
as many people get in their questions before the 11:15 time.
    Chairman Pai, let me ask you a little bit about the IT 
modernization that you're working through right now. Give me 
the specifics on it, what you're trying to do. Are you dealing 
with legacy issues that won't be an issue in the future? Is 
this moving beyond where you are? Help us understand that a 
little better.
    Mr. Pai. Thank you for the question, Chairman Lankford. We 
are requesting an increase of approximately $8 million to 
upgrade our IT systems. Those upgrades consist of, basically, 
two different buckets. One is systems, I guess you would say, 
and the other is applications.
    One example of the systems that we are looking to upgrade 
involves the Disaster Information Reporting System--or DIRS. 
This has been critical during hurricane season, for example, to 
allow the Commission and the public and the Congress to know 
where the outages might happen if a hurricane or other natural 
disaster comes through. That system is in need of upgrade, and 
that's what some of the funding will go to.

                           BROADBAND FORM 477

    An example of the application that we are looking to 
upgrade involves broadband form 477. This is the information 
that we get to the FCC that allows us to know where the digital 
divide is existing and where it is not. And to be able to 
upgrade the user interface in order to make it more user 
friendly and more responsive to us is going to be critical.
    So, those are the kinds of IT upgrades that might involve 
an upfront investment. But, in the long run, there will be a 
big payoff, we believe, in terms of saving the Congress money 
and in providing benefits to the public.
    Senator Lankford. Okay. Let me get some clarifying 
questions in here, as well, on the Restoring Internet Freedom 
Order, which takes effect on June 11, 2018. At this point, what 
do you think is the FCC's role, going forward, dealing with the 
Order?

                              TRANSPARENCY

    Mr. Pai. Senator, I think the decision that we have made is 
that the best approach is the light-tough approach that started 
with the Clinton administration in 1996 and that extended until 
2015. And we had a decision to make based on the facts and the 
record. We decided to institute an enhanced transparency 
requirement along with Federal Trade Commission enforcement to 
protect the core values that I believe in and that I completely 
agree with Senator Coons on. We want a free and open Internet, 
and we want the incentive to innovate and to invest, going 
forward.
    Senator Lankford. Transparency has been a major piece, and 
there's been multiple lawsuits that have gone for several years 
dealing with the FCC, making sure that they have that authority 
to deal with the transparency aspect. What do you think that 
transparency looks like in the days ahead dealing with Internet 
service providers or content providers, edge providers?
    Mr. Pai. So, our rules with respect to transparency only 
extend to Internet service providers. We don't have authority 
over edge providers, like some of the companies that the 
Federal Trade Commission might regulate. But, with respect to 
Internet service providers, we have been very clear that they 
have to disclose any manner of business practices that are 
outlined in our order. If they do not do that, it is an FCC 
violation, and we will pursue it aggressively.
    Senator Lankford. Chairman Simons, dealing with this issue 
on restoring Internet freedom, obviously the authority comes 
back to FTC, where it was in the past, up until 2015. Does the 
FTC have what it needs to be able to protect both the consumers 
and deal with inappropriate trade practices in the days ahead 
dealing with Internet service providers?

                        RESOURCES AND AUTHORITY

    Mr. Simons. Senator, thank you for the question. I believe 
we do have the resources and the capability, but we are 
conducting an inventory at the present just to make sure and 
confirm that that is the case. I've also talked to Chairman 
Pai, who confirms for me that, to the extent we need additional 
resources, particularly technical resources, that he is willing 
and able to help us.
    Senator Lankford. Dealing with transparency issues for the 
edge providers, for the content providers, do you have what you 
need, as far as regulatory authority?
    Mr. Simons. I think we can--we're in the same position we 
were in 2015.
    Senator Lankford. Right.
    Mr. Simons. So, to that extent, yes. However, as I 
mentioned in my oral remarks, I think it might--we want to take 
a close look at whether we need additional authority in the 
privacy and data security area, particularly as regards to our 
ability to get remedial relief.
    Senator Lankford. Okay. But, that's on the content 
providers, the edge providers, not the Internet service 
providers.
    Mr. Simons. It would be on both.
    Senator Lankford. On both? Okay. Terrific.
    Mr. Simons. Yes.
    Senator Lankford. I want to be able to drill down on that a 
little bit.
    I'm going to recognize Senator Coons for his questions, and 
be able to keep going, but I want to come back and be able to 
follow up on that, as well.
    Senator Coons. Thank you, Chairman Lankford.
    Let me sort of follow up on that, if I might.

                             NET NEUTRALITY

    Chairman Simons, would you agree that paid prioritization, 
blocking, throttling, practices by Internet Service Providers 
(ISPs) that may advantage or disadvantage access to particular 
parts of the Internet could be seen as unfair practices?
    Mr. Simons. Under the right circumstances, yes.
    Senator Coons. And so, are you confident that the FTC, 
should you end up in the place where you are the principal 
provider of a guarantee of a free and open Internet, you feel 
you have the authorities you need to do that? And, if not, 
you'll come back to us and seek legislation that would clarify 
exactly what the regulatory framework needs to be?

                          UNFAIRNESS AUTHORITY

    Mr. Simons. Yes, absolutely, sir.
    Senator Coons. Given a hearing that we had yesterday on the 
Judiciary Committee about Cambridge Analytica and Facebook, I'm 
increasingly concerned that the average consumer doesn't really 
understand the scope and the potential reach of personally 
identifying information of remarkable complexity and breadth 
for them to be able to give meaningful consent. And, in recent 
years, the Commission has successfully used its Section 5 
unfairness authority to require companies both to take 
reasonable cybersecurity measures to protect consumers' 
personal information, but also, I think, could do more in order 
to protect consumers to ensure that they have a knowing 
engagement in the use of their personally identifying 
information.
    Tell me, if you would, about how the Commission has used 
its unfairness authority to protect consumer privacy and 
whether you think, going forward, the FTC might make greater 
use of that unfairness authority to protect consumers and their 
privacy.
    Mr. Simons. So, we've brought a bunch of cases involving 
consumer privacy. There's a VTech case involving toys 
interconnection. There's a VIZIO case involving television. 
There is a TaxSlayer case involving tax returns. So, we're 
active in this area. This is a priority for us. And I'm working 
with the staff to make sure it remains a priority.
    Senator Coons. Well, I look forward to remaining in contact 
with you, because I think most Americans aren't aware of the 
scope of the data breaches that are happening with regularity 
and of the breadth and depth of personally identifying 
information that is now being routinely mined in order to, you 
know, target advertising to them, which, in some ways, is 
positive----
    Mr. Simons. Yes.
    Senator Coons [continuing]. Or that might be unreasonably 
manipulative. So, I think we have some important work to do 
together on that.

                            MEDIA OWNERSHIP

    Chairman Pai, if I might, the FCC's current media ownership 
rules limit any broadcaster from reaching, if I understand 
correctly, more than 39 percent of the country, to ensure 
independence and variety. But, the FCC is moving to reinstate 
the UHF discount, which has an impact on these requirements and 
is also considering a merger between Sinclair and Tribune, 
which, if approved, could create a massive broadcast group with 
access to more than 72 percent of all U.S. households, dwarfing 
all other current media owners. Do you believe the 39-percent 
limit should still be in place? And my understanding is that 
the UHF discount is currently being reviewed by the D.C. 
Circuit. Will you wait for a decision by the D.C. Circuit 
before proceeding?
    Mr. Pai. Senator, thanks for the question. Two different 
components to the answer.
    So, with respect to what I think the national cap should 
be, that is the subject of a pending proceeding. We are still 
receiving inputs, and we haven't yet made a determination, one 
way or the other. And this has obviously been the subject of 
some litigation and consideration of the Commission for----
    Senator Coons. Some controversy.
    Mr. Pai [continuing]. For many years.
    With respect to the merger, itself, and how it might 
interplay with that proceeding, I can't forecast. The 
transaction itself has been on hold--the shot clock, as it's 
called, has been on hold since approximately January 14 of 
2018. And so, we don't have any pre--we don't have any 
determination as to what that timeframe might be for restarting 
it and how it might interplay with this pending proceeding.
    Senator Coons. So, what are the factors the FCC should 
consider when reviewing it? And I don't think I got a clear 
answer to whether you'd proceed without a decision by the D.C. 
Circuit with----
    Mr. Pai. Oh, I'm sorry. Yes, I forgot the D.C. Circuit 
decision. So, there, too, we haven't--we have to make a 
decision based on the facts that are in front of us. We don't 
know if and when the D.C. Circuit is going to rule in the near 
term, and so it's difficult to forecast how we should make a 
decision based on what the D.C. Circuit might do. But, you 
know, forecasting from an oral argument, as you know, is--
always involves some uncertainties.
    And the next question was with the factors that we would--
--
    Senator Coons. Yes.
    Mr. Pai [continuing]. Consider with respect to the merger 
to the proceeding.
    Senator Coons. The merger, in terms of concentration. And, 
you know, one critically impacts the other. If the UHF rule is 
allowed to apply to this particular merger, then there might be 
an outcome that I think allows greater concentration than I, at 
least, would be comfortable with, not being an FCC 
Commissioner, myself.
    Mr. Pai. I think you've done fairly well, Senator, for 
yourself.
    But, I think, with respect to the factors that we would 
consider, I would refer back to the original answer I gave when 
I was a nominee on November 30, 2011, before this body. We take 
the facts that are before us, we apply the law faithfully, and 
we determine whether the consummation of that transaction would 
be in the public interest. And so, some of the concerns that 
you and other Members have outlined are some of the things that 
we have to take into account.
    At the end of the day, the public interest is served with a 
vibrant, competitive broadcasting business, and that is the 
polestar that we abide by.
    Senator Coons. Well, I hope competitiveness and consumer 
interests end up remaining the polestar.
    Thank you very much, Chairman Pai.
    Mr. Pai. Absolutely.
    Senator Coons. Thank you, Chairman.
    Senator Lankford. Senator Daines.
    Senator Daines. Thank you, Chairman Lankford, Ranking 
Member Coons, for holding this hearing. And congratulations on 
your new chairmanship, there, Mr. Chairman. When I grow up, I 
want to be you.
    Senator Lankford. Yes, sure.
    Senator Daines. I want to thank Chairman Pai and Chairman 
Simons for coming here today, and congratulate Chairman Simons 
for your recent confirmation. I truly look forward to working 
with both of you regarding the concerns on Montana. I would 
love to have you both back out in the State. I know Chairman 
Pai has been out there before.

                          5G WIRELESS NETWORKS

    Chairman Pai, I recently returned from leading a 
congressional delegation to China. I lead a delegation there 
every year. I spent 5 years working there with Proctor & 
Gamble, back in the 1990s. I fear that we are losing the race 
to 5G. The United States led, and we won, the race to 4G, but I 
am concerned that we are falling behind.
    One of the big obstacles is access to spectrum. China has 
the ability to set aside large swaths of prime spectrum, while 
the United States has difficulty opening up even modest amounts 
of prime 5G spectrum. My question is, What is the Commission 
doing to deal with this very important issue and ensure the 
United States remains the worldwide leader?
    Mr. Pai. Senator, thank you for the question and for your 
advocacy in favor of U.S. leadership in 5G. That is a goal that 
I share. We want the U.S. to be the haven of innovation and 
investment when it comes to 5G, just as it was for 4G. But, 
other countries, as you've seen in your travels, have seen the 
success that we have in 4G; they want to claim that for 
themselves in the next generation.
    So, here are some of the things that the FCC is doing to 
maintain U.S. leadership in 5G. First, we have scheduled 5G 
spectrum auctions. We're going to conduct the 28 gigahertz 
auction in November, followed immediately by the 24 gigahertz 
auction. Just yesterday, I announced, and today I will be 
publishing, my plan to get additional spectrum out into the 
commercial marketplace, looking at the lower 37 gigahertz band, 
for example, where we would resolve some issues and set up a 
band plan and explore different sharing protocols.
    Additionally, we are--I'm proposing to my colleagues, and, 
if they agree, we will, in fact, make available more spectrum 
in the 26 and 42 gigahertz bands. And so, we are taking action 
there to make sure that more flexible wireless-use spectrum is 
made available. We are moving as quickly as we can on the 
spectrum front to make sure that we set the stage, so to speak, 
so that innovators and entrepreneurs can take advantage of it.

                            RURAL BROADBAND

    The infrastructure piece is also critical, though. The 5G 
networks of the future are going to look very different from 
the 4G networks, with macro cell-site towers and the like. So, 
the unspoken part of the 5G equation, I think, is that 
infrastructure policy needs to be modernized, as well, to make 
sure that small cells, for example, face streamlined regulatory 
reviews and that getting more fiber in the ground, especially 
in rural areas, is something that----
    Senator Daines. Yes, and that's on the rural side of it, 
particularly in the 3-and-a-half-gigahertz spectrum.
    Mr. Pai. Right.
    Senator Daines. That's very important to rural communities. 
We want them--don't want them overlooked.
    What's the status of that Notice of Proposed Rulemaking 
(NPRM)? And can you commit to working with all stakeholders to 
make sure that rural areas, like rural Montana, are not left 
behind?
    Mr. Pai. Absolutely, Senator. And I've seen some of those 
rural areas in your State, and I understand how important it is 
for them to have wireless service. I have delegated the 
leadership on this issue to Commissioner O'Reilly. I understand 
that he's meeting actively with stakeholders. I, myself, can 
commit to you that I'd be willing to work with you and any 
other stakeholders who might be interested in making sure that 
this 3-dot-5 gigahertz spectrum is used for the benefit----
    Senator Daines. Yes. And the stakes, again, are so high. 
I--just looking--I think--I fear complacency right now in the 
United States regarding the challenges of China and their 
innovation ecosystem. I started the morning, here, a couple of 
weeks ago in Shanghai, went to grab a cup of coffee at 
Starbucks, the largest Starbucks in the world. They're opening 
up one new Starbucks every 15 hours in China. I tried to pay 
with some Chinese Renminbi (RMB). They looked at me, like, 
``Why are you using cash?'' I said, ``Well, I could use a 
credit card.'' ``Why are you using a credit card?'' It's 
cashless, it's credit-cardless, it's all done on the phone, 
here----
    Mr. Pai. Exactly.
    Senator Daines [continuing]. With Chinese apps Alipay and 
WeChat, so forth.
    Chairman Pai, I believe it's important we prioritize our 
unserved areas before upgrading areas that already have access. 
There are many communities in Montana that still lack any 
access to broadband. And I believe that we should use the 
limited amount of Federal money that we have, such as Rural 
Utilities Service (RUS) and Universal Service Fund (USF) funds, 
to build out broadband to these unserved communities. Do you 
agree that we should limit wasting taxpayer dollars 
overbuilding networks and, instead, use those funds for our 
unserved communities?
    Mr. Pai. I absolutely agree with you, Senator. I think it's 
not just Congress's expectation, but it's the American public's 
expectation, that we will stretch these scarce Federal funds as 
far as possible. And that means not overbuilding. If there is 
private investment in an area, or where the Government is 
already subsidizing one competitor, we need to be able to 
target the unserved areas, the parts of Montana and the country 
that are off the grid, on the wrong side of the digital divide, 
to make sure as many Americans as possible get access.
    Senator Daines. Thank you.

                           CHILDREN'S PRIVACY

    Chairman Simons, I recently introduced the bipartisan Safe 
Kids Act, which would ensure that our children's privacy is 
protected. Unfortunately, we've seen an increase in online 
platforms misusing our personal information and breaking the 
trust of the American people. Do you agree that children's 
privacy is a unique issue and that we should have added 
protections online to keep our kids safe?
    Mr. Simons. I do, sir. I do. Absolutely, Senator.
    Senator Daines. Mr. Chairman, I'm out of time. Thank you.
    Senator Lankford. Thank you.
    Mr. Van Hollen.
    Senator Van Hollen. Thank you, Mr. Chairman. And 
congratulations, Mr. Chairman, on taking over the chairmanship 
of this subcommittee.
    Welcome, to both of you.
    And I want to start by associating myself with the comments 
of the Ranking Member, Senator Coons, both with respect to net 
neutrality. As you know very well, we had a vote in the House 
yesterday, 52 to 47, overturning the rule--here in the Senate. 
That will go to the House. And, you know, we're hoping the 
House follows the Senate lead. We're going to have to agree to 
disagree with you on that. I also agree with Senator Coons 
about the concerns on consolidation of media ownership.

                            RURAL BROADBAND

    My questions really relate to broadband deployment in rural 
areas. The FCC has its annual 706 broadband deployment report. 
You and the Commission have been considering looking at mobile 
and, sort of, fixed terrestrial as just one category, which, in 
my view, would ignore the important distinctions. Congressman 
Andy Harris and I wrote to you about this. And I want to thank 
you for deciding, in the end, to go ahead with continuing to 
look at both mobile and fixed terrestrial separately. I think, 
when it comes to things like telemedicine, public schools, and 
other schools, there are really important differences.
    So, can you tell us today that, for the remainder of your 
tenure, you will continue to provide that sort of distinct 
reporting for mobile and fixed terrestrial?
    Mr. Pai. Thank you, Senator, for the question. I think 
Congress has charged us with annually taking a look, under 
Section 706, of whether advanced telecommunications capability 
is being advanced throughout the country. And so, that requires 
a contemporaneous look at the evidence from that year. And so, 
I can't forecast into the future, but what I can say is that we 
always have our eye on making sure that broadband, both mobile 
and fixed, gets into all parts of the country. And that's why 
our lead proposal----
    Senator Van Hollen. And I assume, from the decision you 
made this year, that you recognize the important distinction, 
in terms of the capabilities provided, mobile versus fixed 
terrestrial----
    Mr. Pai. Without question, Senator. That's why our lead 
proposal was----
    Senator Van Hollen. Yes.
    Mr. Pai [continuing]. To maintain that 25-megabit standard 
to----
    Senator Van Hollen. Yes.
    Mr. Pai [continuing]. Look at fixed broadband. But, we want 
to understand how consumers use mobile broadband so that--you 
know, for example, in our mobile policies, we're making sure 
that we keep up with where consumers want the mobile Internet 
to be.
    Senator Van Hollen. Got it.
    Rural healthcare program.
    Mr. Pai. Yes.
    Senator Van Hollen. As you know, in 2016, I think we hit 
the first year where the $400 million cap was exceeded. There 
was more demand than the $400 million would provide. I 
believe--well, I don't--a big, large group of bipartisan--a 
group of Senators wrote to you, just within the last couple of 
weeks----
    Mr. Pai. Yes.

                              TELEMEDICINE

    Senator Van Hollen [continuing]. Asking for you to raise 
the cap. So, my question to you is, Do you agree that we need 
to raise the cap in order to meet the telemedicine and other 
needs in these rural areas?
    Mr. Pai. Senator, while I can't say exactly what the number 
should be, I can say that I do support increasing the program. 
I think that this is one of the critical programs within the 
Universal Service Fund, and it's often one that gets 
overlooked, even though telemedicine, as you point out, is a 
game changer, especially in some of these rural communities. I 
was, just a few weeks ago, in Scottsville, Kentucky, and I saw 
how telemedicine, for the first time, is allowing kids in Allen 
County schools to see an expert at Vanderbilt University's 
Children's Hospital; whereas, previously, there's not a single 
pediatrician in the entire county. That is significant, and 
that is something that the rural healthcare program that we 
administer should try to support.
    Senator Van Hollen. Great. Because in Maryland, University 
of Maryland Medical System, for example, as hospitals on the 
Eastern Shore and those kind of telemedicine services are 
essential. And this shortfall as a result of the cap is really 
compromising their ability to provide those services.
    Mr. Pai. If I can make one quick plug.
    Senator Van Hollen. Sure.
    Mr. Pai. So, we can, obviously, increase the amount of the 
cap. One of the things that we can't do is take--make any 
tweaks to interstate licensing, especially in a State like 
Maryland, which, of course, borders other States. One of the 
things I've heard from telemedicine practitioners is that 
that--those barriers in terms of State-by-State licensing----
    Senator Van Hollen. Yes.
    Mr. Pai [continuing]. Are holding telemedicine back.
    Senator Van Hollen. That's----
    Mr. Pai. That's something that Congress----
    Senator Van Hollen [continuing]. Good to know. No, we'll 
follow that. And do you have the budget authority to do--if you 
raise the cap, you already have the budget authority to do 
this, right?
    Mr. Pai. Correct. Yes, we do.
    Senator Van Hollen. Okay.
    Mr. Pai. Yes.

                         PAY FOR DELAY SCHEMES

    Senator Van Hollen. Chairman Simons, a quick--pay-for-
delay. This came up in your confirmation hearing. I think 
Senator Klobuchar asked you about it. Do you agree that these 
pay-to-play schemes, where you have a brand-name pharmaceutical 
essentially paying off a generic, is anticompetitive and 
anticonsumer?
    Mr. Simons. Well, they certainly can be. And the FTC has a 
long history of enforcement matters involving these pay-for-
delay schemes, even before I was at the FTC the last time--so, 
that was in 2001 to 2003. And that priority for us has 
continued up to the present.
    Senator Van Hollen. So, yes, and I appreciate that. I know 
you bring cases. But, I also know you asked the--a previous FTC 
asked the court for the authority to just sort of say these 
are, on their face----
    Mr. Simons. Oh.
    Senator Van Hollen. So, we're going to have--we have 
legislation. Will you work with Senator Klobuchar and I and 
others to pass legislation to just put an end to this practice?
    Mr. Simons. I'm certainly happy to work with you, 
absolutely.
    Senator Van Hollen. Okay. And I have some other questions, 
I guess I'll submit for the record----
    Senator Lankford. Go ahead----
    Senator Van Hollen [continuing]. Regarding----
    Senator Lankford. No, you need to stay in, because myself 
and the Ranking Member are going to do some follow-on 
questions, as well----
    Senator Van Hollen. Okay, great.
    Senator Lankford [continuing]. But, if you want to----
    Senator Van Hollen. Thank you. I appreciate that.

                             DATA BREACHES

    The other question has to do with data security and 
breaches. We just saw this huge Equifax breach. I know that 
Equifax had been under, I think, a 5-year consent order. I 
don't know exactly what you called it.
    Mr. Simons. Facebook, right?
    Senator Van Hollen. No----
    Mr. Simons. Facebook has been under a----
    Senator Van Hollen. I think Equifax had been, as well----
    Mr. Simons. Oh, yes.
    Senator Van Hollen [continuing]. Because of their sale of 
some mortgage data that violated the rules.
    Anyway, my question to you is that--what are you doing to 
get to the bottom of these incredible data breaches, which, in 
the case of Equifax, reportedly compromised the personal 
information of over 143 million Americans? My understanding is, 
you don't have supervisory authority, you only have, sort of, 
enforcement authority. Is that right?
    Mr. Simons. That's right. The Consumer Financial Protection 
Bureau (CFPB) has supervisory authority.
    Senator Van Hollen. Is there a way that you can step up--
especially in the case of Equifax, where you have a 5-year 
agreement, and the breach happened in March of last year, 
during the pendency of that agreement--can you use that as a 
mechanism to get under the hood and figure out what's 
happening?
    Mr. Simons. Yes. For an existing order, we have the ability 
to go in and make sure that they are complying. So, there's an 
obligation, as a general matter in our existing orders, that 
the companies make available to us the ability to come in, talk 
to us, and provide information that we need to make sure that 
they are complying with the order.
    Senator Van Hollen. And are--in terms of the Equifax data 
breach, are you investigating that? Are you looking into that?
    Mr. Simons. Yes. There is a--I mean, we've publicly 
announced that there is a major ongoing investigation into that 
breach, yes.
    Senator Van Hollen. All right.
    Mr. Simons. So, we're heavily focused on that.
    Senator Van Hollen. Thank you.
    Thank you, Mr. Chairman.
    Senator Lankford. I want to recognize the Vice Chairman of 
the full committee, Senator Leahy.
    Senator Leahy. Well, thank you very much, Mr. Chairman.
    And it is interesting. It was commented at the last hearing 
I was at, that was going on in the Appropriations Committee. 
Senator Shelby and I are trying to make the Committee work, and 
we have a whole lot of Committee meetings going on at once, so 
I apologize for coming in late.

                             NET NEUTRALITY

    But, Chairman Pai, I did want to come here, because I 
disagree with many of the decisions you've made at the FCC. I 
also am concerned about the tone you've adopted. I think you've 
shown contempt for the public through your decisions. You 
ignored the overwhelming public support--I mean, I've never 
seen such overwhelming public support--for net neutrality. 
You've gone against the will of Congress by seeking to 
undermine media ownership rules. You've engaged in blatantly 
partisan activity. You mock those who disagree with you in what 
I think are ill-advised attempts at what you may think is 
humor.
    Too many people in the administration sometimes forget they 
serve all Americans, not just one person. And perhaps 
appearances at partisan political events and posting insulting 
videos with alt-right activists will ingratiate you to 
President Trump, but I think we have to remember, Democrats, 
Republicans, everybody else, we serve a higher call, and that's 
the American people.
    So, you have repeatedly stated that repealing net 
neutrality will lead to more investment by ISPs, particularly 
in rural parts of the country. The office has gone so far as to 
assert as fact that repeal will bring more service to 
underserved Americans while at the same time lowering the cost 
of their monthly bill.
    I hope you can provide Vermonters, in a largely rural 
State, who overwhelmingly support net neutrality, with some 
specific data to show exactly how this new investment you claim 
will take place will benefit them. Because I've held hearings 
there with people from large businesses and small businesses, 
all of whom support net neutrality.
    So, let me ask you this question. Within 1 year of repeal, 
how many currently underserved or unserved Vermonters will gain 
access to service due solely to private investment? Within 1 
year.
    Mr. Pai. Senator, we can't forecast what the specific 
number will be, but we know the number will be higher that--who 
have access, in part because of our ConnectAmerica Fund 
auction, the Mobility Fund auction, and the other steps we are 
taking----
    Senator Leahy. Higher by what percent? Five percent? Ten 
percent? Fifty percent? What?
    Mr. Pai. It's difficult to say, Senator, but we have seen 
an uptick in last year alone. There has been preliminary 
evidence that there has been a substantial increase in capital 
expenditures. We hope that trend continues for Vermonters and 
folks around the country.
    Senator Leahy. Last year, in Vermont?
    Mr. Pai. In 2017, around the country, on an aggregate 
national basis.
    Senator Leahy. But not in Vermont.
    Mr. Pai. We don't have that specific data, but I'd be happy 
to work with you on it.
    Senator Leahy. How--within 1 year of repeal, how many 
Vermonters will have seen their broadband bill reduced, 
relative to what they are currently paying?
    Mr. Pai. There, too, Senator, we can't forecast with 
precision, of course, where the state of the world might be, 
but the general trend, we think, is going to be better, faster, 
cheaper broadband, in part because we're introducing more 
competition and access.
    Senator Leahy. Okay. Then, as a general thing, nationwide, 
what percentage----
    Mr. Pai. There, too, we can't----
    Senator Leahy [continuing]. Would be reduced?
    Mr. Pai [continuing]. Give you a specific number, but I can 
tell you that we will see more competition nationwide, and not 
just from the traditional wireline companies that most people 
know. I've approved, under my leadership, the first net--non-
geostationary satellite companies, getting more fixed wireless 
companies, promoting more small wireless companies, like VTel, 
in places like Vermont, to make sure they get access to the 
spectrum they need to connect Vermonters.

                             MOBILITY FUND

    Senator Leahy. Well, I mean, these are generalities, but 
they don't really answer the question. For example, I looked at 
the eligibility map the FCC put out in advance of the upcoming 
Mobility Fund auction. Now, I realize that's an initial 
breakdown of eligible areas, but the map of Vermont's coverage 
doesn't even pass the laugh test. I was born in Vermont. I know 
the State. Now, do you agree that the data underlying your maps 
has serious flaws that need to be corrected?
    Mr. Pai. Oh, Senator, there's no question that we want the 
map to be robust, but that, to do so, we need to have a 
challenge process to identify flaws in the map. And that's why 
we've invited States and localities, the Farm Bureau, in 
Kansas, for example, others, to challenge it, to make sure we 
get an accurate picture of----
    Senator Leahy. Well, have you ever been to Vermont?
    Mr. Pai. I have, yes.
    Senator Leahy. Have you ever tried to make a phone call, 
driving around in rural areas?
    Mr. Pai. It's been a while. I'm sure I tried, at some 
point. But, I have certainly done it in many parts of the 
country where you get few, if any, bars on your phone.
    Senator Leahy. Well, I think the map you have may undercut 
the number of unserved households by nearly 20,000 people. Now, 
that may not seem like a lot in some places. In our State, that 
is a lot of people. I----
    Mr. Pai. Absolutely.
    Senator Leahy. I can't--and I realize my time is up, but, 
Mr. Chairman, I just cannot tell you the concerns I have in 
the--people coming up to me in the grocery store or on the 
street and everything else in Vermont, Republicans and 
Democrats alike, who are really concerned about your 
chairmanship and your unresponsiveness to the public comments 
you've gotten on this issue.
    Thank you, Mr. Chairman.

                 BROADBAND MOBILE ACCESS/MOBILITY FUND

    Senator Lankford. Chairman Pai, let me follow up on the 
Mobility Fund II and the map that's out there and the challenge 
process. We want to be able to dive into that a little bit, as 
well. Because, Vice Chairman Leahy was talking about it in 
Vermont. In Oklahoma, there are sections that I can look at on 
the map, as well, that I know full well there's no cell service 
there, and certainly not broadband mobile access in those 
areas. Help me understand this--the challenge process, as I 
understand it, a company that wants to challenge and says, 
``No, this is an unserved area,'' can challenge it. They're 
going to have to pay for the process to be able to go through 
and evaluate it on their own to bring the data. And then 
there'll be a bidding for that area then. And, of course, 
they're now bidding against other companies who didn't pay for 
the challenge, but now that's open. So, literally, the company 
that's challenging it seems to be disadvantaged in the bidding 
process, as well, because they've already invested money, and 
their competitors haven't invested money in it. Am I tracking 
that correctly or not tracking that correctly?
    Mr. Pai. Well, Senator, so there are some nuances here that 
I should mention. So, one is, of course, to step back for a 
second, we started with a bespoke data collection. If we had 
started with the data collection that we had when I came into 
office, then essentially every carrier could just say, ``Well, 
we cover the entire State of Oklahoma.'' No one would second-
guess it. That's point one, which I think should be mentioned, 
that we required them to use a similar technical parameter in 
running predicted coverage. And so, that's why we came up with 
the map we did.
    In addition to that, I instructed the staff to come up with 
a second map, identify also those areas where there is only one 
unsubsidized competitor, because that allows companies like the 
one in your hypothetical to target those areas that are ripe 
for challenge.
    In addition to that, we recognize that some companies, 
especially the smaller companies or companies that are serving 
rural areas, may not have the wherewithal to do a full 
challenge. So, we've empowered State and local governments to 
be able to challenge, as well.
    Additionally, we issued, a few weeks ago, a waiver to the 
Kansas Farm Bureau, just as one example, that would allow them 
to challenge. Because, if you think about it, if you're a 
farmer who is not on a road, you are keenly aware of the fact 
that there's not as much coverage, but the carrier that could 
serve that area may not know all the details. And so, the Farm 
Bureau, I think, is a good way to----
    Senator Lankford. Okay.

                             MOBILITY FUND

    Mr. Pai [continuing]. To leverage that. So, essentially, 
getting as many people as possible into the arena, so to speak, 
to tell us where the coverage is not will help us direct 
Mobility Funds to where coverage should be.
    Senator Lankford. So, do you think there is enough time for 
them to be able to do that? That is, by the way, a very good 
idea for the States, the counties, the Farm Bureaus----
    Mr. Pai. Absolutely.
    Senator Lankford [continuing]. Everybody else to be able to 
track it. So, my understanding is, is--by the end of this year, 
they have to have that challenge information in, and that it's 
a 10-year process, then, after that. Is that--am I tracking 
that correctly?
    Mr. Pai. It's 150-day challenge process. And off the top of 
my head, I believe it ends in August. I might have that wrong. 
It started a couple of months ago.
    Senator Lankford. Yes.
    Mr. Pai. In addition to that, the FCC staff is--that is 
running these auctions, they're doing road shows, so to speak, 
so they've been in New Hampshire, West Virginia, Mississippi, 
and we've set up all these forums to make sure that people 
understand. Additionally, we're doing webinars to get people up 
to date and informed about these issues. And we want to move as 
quickly as we can, but we also want to make sure that everybody 
is fully informed. And that kind of balance is often difficult 
to strike.
    Senator Lankford. So, the question will be, is--when you 
get to that spot, is there a need to be able to extend that out 
and say, ``If we run out of time and we're still getting 
challenges in, if additional Farm Bureaus step up and say, 
`Yeah, I want to be able to step into this, as well,' or 
additional States or counties are learning through the process 
and jumping in''--do you think there might be a need to be able 
to extend the time, to be able to make sure we get it all in?
    Mr. Pai. I believe we do have some flexibility, in terms of 
how far--an extension of time. I will say, however, we also 
don't want to delay the Mobility Fund auction too late, because 
we have a window for doing it, considering some of the other 
auctions we're holding. So, we--there's some give in the 
system, but----
    Senator Lankford. No, I get it. Because, again, in areas 
where the challenges are resolved, they're not wanting a delay, 
they're wanting service.
    Mr. Pai. Exactly.
    Senator Lankford. They're wanting to be able to get it 
moving. That makes complete sense, and I get that.
    Mr. Pai. Yes.
    Senator Lankford. Okay. Well, great.
    Senator Coons, do you have additional questions, as well?
    Senator Coons. On that specific issue, if I might.

                            BROADBAND ACCESS

    Crowd sourcing, I thought, had played a role, early on, in 
making sure that broadband access mapping was adequate. Is 
there a role for crowd sourcing in making sure that there are 
current validated maps that are more accurate?
    Mr. Pai. Absolutely, Senator. The best--the FCC analog to 
crowd sourcing in this context is the app that we have set up. 
Anybody can download the app for free. And, essentially, when 
you click on the app, you can then do a test, a speed test, to 
determine between 6:00 a.m. and 12:00 a.m. whether you have 
coverage in your particular area. Once you complete the test, 
then that information is essentially uploaded, and then the FCC 
can aggregate it and determine, okay, these five consumers, 30 
miles outside of Wilmington, didn't have coverage at this 
particular time. We know, okay, this is an area that there 
might be a problem. That is, essentially, the way, in addition 
to the challenges I described to Senator Lankford.
    Senator Coons. How broadly has that app been used? Because 
I've found that a fascinating--when I first heard about it, I 
thought that was a fascinating application----
    Mr. Pai. Yes.
    Senator Coons [continuing]. Of crowd sourcing to use just 
average citizens to field test what providers are saying is 
their access levels.
    Mr. Pai. I can get back to you.
    [The information follows:]

  background on the fcc speed test app for iphone expands options for 
                mobile broadband performance information
    The blog releasing the system can be found at this link: https://
www.fcc.gov/news-events/blog/2014/02/25/fcc-speed-test-app-iphone-
expands-options-mobile-broadband-performance.
    The FCC released the android app in late 2013 and the IOS version 
early the following year.
    Over 200,000 people downloaded the app, but as the app is 
anonymized, it is difficult to say how many individuals ran tests.
    We developed the app to protect privacy and worked with members of 
the FTC and ISPs on our privacy policy.
    The android app runs autonomously and therefore generates more 
information than the IOS app which must be initiated by the end user. 
This is a constraint of the IOS operating system.
    We have recorded many millions of tests with the assistance of 
volunteers.
    The app is currently given a 4/5 stars on the Google Play store. We 
hope to release a newer version later this year or early next year.

    Mr. Pai. I don't know the specific numbers on how many have 
downloaded the app and how many have used it, but I do know 
that it's being used actively. Our own staff has said that, 
additionally, carriers--smaller carriers have been using it to 
institute their own challenge evidence.
    Senator Coons. Interesting.

                               ROBOCALLS

    If I might, Chairman Simons, on robocalls, I think all 
Americans are fed up with robocalls. As I was trying to get 
some sleep, just last night, I got a 10:00 p.m. call that 
seemed to be from my home State, home exchange. And so, I 
answered it and was greeted with a delightful solicitation.
    [Laughter.]
    Senator Coons. I didn't listen long enough, but it sounded 
like it was going to be for a cruise, maybe for a timeshare. 
You know, I commend you for the work that the FTC's done, that 
you've done in this area, and I understand that evolving 
technologies by robocallers make this job difficult. An appeals 
court recently overruled a portion of the FTC's recent rule in 
this area. Will that decision have an impact on the FTC's 
ability to move forward? And how do you see the path forward on 
appropriately allowing access to folks who want who want to 
solicit for business while protecting Americans' privacy?
    Mr. Simons. So, I think the--so, let me say that I think 
the case you're talking about involved a part of our authority, 
and left most of it untouched, but I'd want to--I would need to 
talk to the staff in more detail to have a better understanding 
of that.
    In terms of going forward--so, I think what it is, is--I 
think it's really a technological solution that needs to be had 
in order to stop the calls that you get and I get. And my wife 
is just all over me about this, believe me, so this is front 
and center in my mind.
    Senator Coons. Your number-one constituent.
    Mr. Simons. Yes.
    [Laughter.]
    Mr. Simons. And my most important constituent, exactly.
    So, I think, though, that what's important here is that 
there's got to be some kind of a technological solution. So, 
that's why we encouraged or sponsored this contest, with prize 
money, for innovators to develop technological solutions. And 
there are some on the market, and they're working fairly well. 
They're generally with--applicable to cellphones, the mobile 
phones. But--so, that's the type of thing. And I know that 
Chairman Pai, who could, I'm sure, discuss this in a lot more--
with a lot more knowledge than I could, is looking at the 
technological solutions on his side. And we are talking to him 
about those, as well.
    Senator Coons. Chairman Pai.
    Mr. Pai. Senator, I share your frustration and Chairman 
Simons' wife's frustration. I seem to be either the luckiest 
person on Earth, given how many Marriott vacations I've won, or 
I'm getting robocalled like crazy.
    So, we are taking a number of steps in order to tackle this 
problem. On the front end, so to speak, we recently approved an 
industry-led standard to develop a call-authentication 
standard, essentially a digital fingerprint for every phone 
number, so that when you get that number on your phone, even if 
it's not programmed in, you can know this is a genuine number 
that's assigned to a genuine person who's entitled to use it.
    Secondly, we have also empowered carriers to block numbers 
that are spoofed, in some cases, that are clearly invalid or 
have not been assigned to an actual human person.
    Additionally, we are taking steps to make sure that we 
establish a reassigned numbers database so that, if a 
legitimate business--the local pharmacy or school or whatever--
wants to call you, and your number has, unbeknownst to them, 
been reassigned, they can consult that database so that they 
don't bother the new recipient of that number with anything--
with a call that they don't want.
    On the back end, so to speak, we've been very aggressive in 
terms of enforcement. Just a few weeks ago, we imposed the 
largest fine in the FCC's history, $120 million, against a 
Florida robocaller who unleashed 96 million robocalls in the 
last 3 months of 2016. We have other enforcement actions in the 
pipeline, which I can't necessary speak about, for obvious 
reasons.
    And I personally have raised this issue with some of my 
counterparts. I've had a very fruitful discussion with the 
Chairman of India's Telecommunications Regulatory Authority, or 
TRAI, and I said, ``Look, a lot of cases, the--our law 
enforcement authority in the U.S. extends no further than our 
borders. We know that some call centers are located in your 
country. Could you please help us, sharing resources to be able 
to tackle this problem?'' He and others have been very 
cooperative, and hopefully we can begin to tackle this problem 
into the time to come.
    And I know Congress has been very supportive, as well, with 
legislative fixes. For example, to extend certain statutes of 
limitations that make it very difficult to prosecute some of 
the bad actors. And if that's something of interest, we would 
love to work with you on it. Time is not on the side of 
consumers, who are just getting sick of these calls.
    Senator Coons. That is a genuine interest, and I would 
appreciate a chance to hear from and work with both of you on 
this.
    Three more questions, if I might, Mr. Chairman, and then 
I'm----
    I'd be interested, Chairman Pai, just in hearing about the 
911 call location accuracy proceeding that the FCC needs to 
compete--complete--where it is, what it is, what challenges 
might remain.

                            EMERGENCY CALLS

    Mr. Pai. So, this is a critical part of the 911 system, as 
you know. The most important thing we hear from public safety 
when they get a 911 call is to understand, ``Where are you?'' 
And location accuracy, especially as calls become wireless, as 
some 70 to 80 percent of the typical call center will field--of 
the calls going into a call center will be wireless now. So, we 
want to make sure that location accuracy is robust as possible. 
I believe, by August of 2018, the industry is due to come back 
to us with a consensus plan on what the location accuracy 
standards will be. We will then evaluate those plans, determine 
whether they are sufficient. And we are always going to be 
encouraging companies to be more forward-thinking.
    Although it doesn't necessarily relate to location 
accuracy, I will also emphasize that we have made steps to make 
sure that wireless emergency alerts are more targeted, that 
they are as robust as possible so that we don't blanket the 
entire State of Delaware, for example, with an alert that 
probably should be located similar--just in Dover. And that's 
another thing that we want, to make sure that our public safety 
communications are localized so that people get information 
that's relevant to them.
    Senator Coons. That transitions nicely to my next question. 
I was interested in the hurricane recovery work you mentioned 
in your----
    Mr. Pai. Yes.
    Senator Coons [continuing]. Prepared Statement, the Connect 
USVIA Fund and a Uniendo a Puerto Rico Fund.
    Mr. Pai. Yes.
    Senator Coons. I'd be interested in hearing about that. 
My--having visited both Puerto Rico and the Virgin Islands, you 
know, connectivity was not terrific before the hurricanes. You 
know, these communities have suffered dramatically. I think our 
response to the hurricane impact in Puerto Rico, it was 
woefully behind. I'd be interested in hearing more about what 
FCC is doing to invest, and noted that, without receiving 
specific hurricane funds, FCC professionals engaged and were 
proactively involved in restoring telecommunications to the 
island. I'd be interested in hearing more about that.
    Mr. Pai. Thank you for this question, Senator. I personally 
visited Puerto Rico in November. I again went to Puerto Rico 
and the Virgin Islands in March. I have spoken repeatedly to 
Governor Roseo of Puerto Rico and the--spoken to the 
telecommunications authority there, and many, many other 
stakeholders. I've stood in the muck of Utuado, a small rural 
town in western Puerto Rico, and I've seen utility poles that 
were snapped like matchsticks, fiber that is laying on the 
ground, decrepit, and people who are struggling to get energy 
back in some of their communities.
    That has imbued me and our agency with a sense of mission. 
We have never forgotten the people of Puerto Rico or the Virgin 
Islands, and I'm pleased to report, as I said in my opening 
statement, that we have adopted, although not yet released--
hopefully, that'll happen soon--my plan to extend $954 million 
of relief to the people of those two territories. This will 
involve short-term relief to make sure that wired and wireless 
networks get up and running, but we also want to tackle some of 
the long-term problems.

                           EMERGENCY SERVICE

    As you pointed out, the infrastructure there had some 
issues before Hurricanes Irma and Maria. Our goal is not simply 
to restore those networks to where they were, but essentially 
to make them future-proof so that, as we enter the next 
hurricane season, which starts only 2 weeks from now, they can 
take advantage of next-generation technologies in a much more 
sustainable way.
    There are other issues that we have been doing, too. We 
have approved experimental licenses, for example, to Google for 
Project Loon to be able to beam Internet access without having 
to have fixed infrastructure on the land, like a fiber line. 
Other things that we've done, as well, to extend deadlines for 
carriers so that they don't have to worry about filling out FCC 
paperwork, they can focus on connecting people, as well. And 
there are other issues involving healthcare institutions and 
healthcare--and educational institutions, be happy to work with 
you on.
    But, I can tell you that this has been front and center for 
me from the day Irma made landfall, and we'd be happy to keep 
you apprised as things develop, about our progress.
    Senator Coons. Well, that's great work. Thank you. And I'd 
look forward to hearing more about it.

                             NET NEUTRALITY

    Let me just close with a general--a series of questions for 
both of you, since I think the average American is unclear 
about where net-neutrality-related regulation actually falls 
What's the path forward, how is this going to happen in a way 
that matters for them? Would each of you say that you agree 
that Americans should have reasonable access to the same high-
quality Internet services and that the Government has a role to 
ensure that Internet service providers can't slow down certain 
content or block certain websites or effectively create fast or 
slow lanes?
    Mr. Pai. Absolutely, yes.
    Mr. Simons. Yes, I would agree with that, certainly to the 
extent that it's caused by anticompetitive conduct.
    Senator Coons. And are you committed to working together in 
a responsible, consultative way to make sure that we can 
guarantee to all Americans that there isn't anticompetitive 
conduct by ISPs or by edge providers that would lead to the 
sorts of activities--throttling or paid prioritization lanes or 
a lack of transparency--that would genuinely affect their 
ability to access the Internet in the way they've become used 
to?
    Mr. Simons. Yes, Senator.
    Mr. Pai. Yes, Senator. And, as Chairman Simons has pointed 
out, we have a memorandum of understanding that formalizes that 
relationship. And I've personally spoken with Chairman Simons 
about this issue.
    Senator Coons. I look forward to working with both of you 
to make sure that net neutrality is a reality for the average 
American. I don't think most of my constituents have followed 
the details of the very lengthy back-and-forth, in terms of 
which agency ends up exactly with the regulatory 
responsibility. I think it falls on us, in Congress, to work in 
a responsible and a measured and bipartisan way, and with you, 
as the regulators, to make sure that the experience of the 
average American is unchanged, going forward.
    Thank you very much, to both of you.
    Mr. Simons. Thank you, Senator.
    Senator Lankford. Thank you. And I would share that most 
people that I talk to on net neutrality, they assume, because 
FCC is not going to do any more, that no one will, and they 
don't realize that FTC will then take this on. And then the FTC 
had it, 2015 and before, all the way back to when Al Gore 
invented the Internet, all the way back to the start.
    [Laughter.]
    Senator Lankford. So, just a little fun there. Yes. I know. 
I know. He's a smart guy.
    I have a series of questions I want to be able to bounce 
off of you, as well.

                           CONTACT LENS RULE

    For Chairman Simons, this is an area that's been discussed 
for a long time. It's the wonderful contact-lens rule that's 
out there that has hung on for so long and has increased in 
complexity, and there's a lot of competition. Forty million 
users of contact lenses all raise their hand at some point and 
say, ``Hey, we want to make this as simple as possible,'' and 
there are thousands of different providers. Give us an update 
where things are and how we can make sure that whatever is in 
force has the least amount of burden possible on both the 
consumer and on optometrists.
    Mr. Simons. Yes, thank you, Senator.
    So, the rule is currently under review. We've taken a large 
number of comments in April. The staff is going through the 
comments and preparing a recommendation, which I don't know the 
timing on. I have to check with them on that. But, hopefully 
very soon.
    Senator Lankford. Is the comment period closed at this 
point, so comments are all in?
    Mr. Simons. I believe that's true.
    Senator Lankford. Okay.
    Mr. Simons. I believe that's true. And so, I completely 
agree with you that we don't want to do anything that puts an 
undue burden on providers or physicians and, in the end, comes 
back to actually bite the consumer. On the other hand, we want 
to make sure that there is effective and efficient compliance 
with the rule.
    Senator Lankford. Right. Okay. And would expect that to be 
finalized, or at least the ruling to come out, when?
    Mr. Simons. I'd have to check and get back to you.
    [The information follows:]

    The Federal Trade Commission (FTC) received thousands of public 
comments on its proposed amendment to the Contact Lens Rule after the 
conclusion of the comment period on January 30, 2017, and thousands 
more in response to the public workshop the FTC held in March 2018. 
Accordingly, FTC staff is reviewing the additional comments and intends 
to make a recommendation to the Commission by the beginning of 2019.

    Senator Lankford. Okay, that's fine. Then we'll follow up 
from that one.
    Tell me about--you had a request for an increase in your 
budget, based on expert----
    Mr. Simons. Yes.
    Senator Lankford [continuing]. Witnesses.
    Mr. Simons. Yes.
    Senator Lankford. Tell us a little bit about that and why--
I read, in your written testimony, some of the details on 
that--help us understand why this is an increasing issue.

                            EXPERT WITNESSES

    Mr. Simons. Sure. So, the Federal Trade Commission is 
experiencing a very, very high level of litigation. We have--
it's not like we have a big blip in enforcement matters, but we 
have a big blip in matters that actually go to litigation. And, 
in addition to that, the litigation is more complex--has become 
more complex over time, which requires more expert testimony, 
more expert analysis, and that drives up--that's what's driving 
up the costs.
    Senator Lankford. Okay. Would you expect that this is a 
cost needed this year, the next year, or do you anticipate this 
is a sudden rush of a large number of cases with increased 
complexity, and so it's a 1- or 2-year bump?
    Mr. Simons. That's a good question. It really depends on 
whether our increased litigation is going to have a deterrent 
effect and cause future companies to maybe be more willing to 
settle.
    Senator Lankford. Okay.
    Mr. Simons. So, I think companies, over the recent past, 
have been interested in litigating and challenging our ability 
there. And so, it depends on the extent to which we end up 
having to go to litigation in--going out into the future.
    Senator Lankford. Okay, thank you.
    I do want to associate myself with everything that Senator 
Coons said about robocalls. Both of your entities have a role 
in that, in helping determine, how do we actually solve that? 
The Do Not Call List provided a great deal of joy for most 
Americans, and then now the robocalls are all attacking their 
systems. And so, I understand that completely, that this is an 
issue that we have to be able to resolve, long term.
    Let me move on, as well, to talk about pharmacy benefit 
managers.
    Mr. Simons. Yes.

                       PHARMACY BENEFIT MANAGERS

    Senator Lankford. This has been an issue with both the 
mergers. Several insurance companies have now purchased 
pharmacies to be able to acquire the pharmacy benefit manager 
in the middle. That is pushing people, especially in rural 
areas that used to use an independent pharmacy in a rural area, 
now the cost increases for that, because their insurance 
company owns a pharmacy company in another town, and now 
they're being pushed to say, ``You've either got to mail order 
or go over there,'' to make it much more difficult for the 
consumer. Tell me how that is going right now with the 
discussions on mergers and with oversight on anticompetitive 
issues.
    Mr. Simons. Right. So, as you know, there is--there are--is 
an existing merger that's being reviewed by the Justice 
Department.
    Senator Lankford. Right.
    Mr. Simons. And so, I don't want to comment on that, other 
than to say that we're really not involved, as a general 
matter, although, if the Justice Department asks us, we would 
provide some of our expertise to them, because the FTC has a 
lot of expertise with respect to the pharmacy business.
    In terms of the PBMs and the concentration issue, that's 
one of the things I mentioned actually during my confirmation, 
that I'm interested--my confirmation hearings--that I'm 
interested in exploring. We want to do some retrospectives. We 
want to see if, in fact, the calls we made previously were the 
right calls. And we also want to look forward from that time to 
see if, in fact, there are things going on that we need to 
address.
    Senator Lankford. I think during the national conversation 
with the Epipen, a lot of people learned for the first time 
what a pharmacy benefit manager makes and how this works in the 
system, and were a little shocked at the process. And that has 
been a much larger conversation that's been an ongoing dialogue 
in Congress for a while, but it is becoming more of a public 
conversation now.
    Mr. Simons. Yes. Yes. That whole process is a little 
opaque, and we need to--I think it would be helpful to shine a 
little light on it.
    Senator Lankford. Would be helpful.
    Chairman Pai, let me come back to a conversation you and I 
have had for several years now about Lifeline and about access, 
whether that be tribal access, where we gain access to 
individuals that are in the Lifeline program. Those who should 
be in the Lifeline program, versus those who should not, that 
we're not getting good documentation for. We don't have good 
followup, we have a popup tent showing on a street corner, 
providing free cellphones, but they're not actually checking 
information, there's not a fixed setting there, historically. 
Where are we now on dealing with Lifeline to make sure that we 
maintain the program, but we also maintain its validity? And 
then, where do you see the next step for it?

                            LIFELINE REFORMS

    Mr. Pai. Senator, we are moving forward on some of our 
Lifeline reforms. For example, with respect to areas of 
interest to Oklahoma, we have made sure that we target the 
funding for Enhanced Lifeline, Tribal funding, to areas that 
are non-metropolitan. So, for example, the metropolitan area of 
Tulsa, which is one of the top 15 markets in the United States, 
has relatively robust communications competition and services 
the low prices. But, we want to make sure that Lifeline funding 
is more targeted to the rural areas of Oklahoma, to folks who 
are on the wrong side of the digital divide.
    Also, we want to make sure that we enhance the incentive of 
facilities-based providers to build out networks in those 
areas, especially rural and Tribal areas. That is where I think 
the long-term benefit could be had, and that's where I think 
Lifeline funding could be extremely useful.
    We're also stepping up the national verifier and working 
with the Universal Service Administrative Company to make sure 
that the--that electronic tool is up and running as soon as 
possible, in six States by the end of the year. And we're 
taking other steps, as well, to make sure that every dollar 
that's spent in this program goes to somebody who is in need, 
as opposed to a company that's looking to fleece the system.
    Senator Lankford. Right. So, the verifier has been an 
ongoing conversation for several years at this point. Six 
States by the end of the year. Where does it go from there, and 
what's the speed of use?
    Mr. Pai. Hopefully, assuming the first six States go well, 
we will be able to ramp up very quickly. And, in 2019, 
hopefully we'll be able to add more States to that tally.
    Senator Lankford. Okay.

                         CONTRABAND CELLPHONES

    Let me talk about something, again, you and I have talked 
about before, and that is contraband cellphones in correctional 
facilities. You and I have both discussed this face to face, 
and have exchanged letters on this back and forth. We've talked 
to the communications industry, as well, about it. There are 
some ongoing meetings about this, but this is a very serious 
issue of contraband cellphones getting into correctional 
facilities and then literally running criminal organizations 
from inside of the prisons. So, where are we on this? Catch me 
up on all the different dialogues, because there seems to be a 
lot of task-force working for quite a few years now in 
different forms. When do we move from task force to 
implementation?
    Mr. Pai. Absolutely, Senator. And when I first raised this 
issue a couple of years ago, I was shocked at the problem. And 
I think the average American would be shocked to know how 
widespread this problem is and what the public safety threats 
to it can be.
    So, in February, I convened a meeting with all of the 
stakeholders--wireless companies, correctional officials, 
solutions providers, State and local officials, and me 
personally there--for an entire afternoon, hashing out a lot of 
the issues that needed to be hashed out.
    One of the outgrowths of that was that there is now a 
working group consisting of the wireless industry and 
correctional officials. They met on April 30, and they narrowed 
down a lot of the issues, agreed to certain protocols for 
things like testing of microjamming, essentially jamming within 
a very tiny area--geographic area within a prison. Some of that 
testing hopefully will move forward.
    Additionally, I have personally been working with, and my 
staff has been working with, the Department of Justice, 
because, in many cases, under the law as it stands, the 
Department of Justice is the one that has to authorize States 
to engage in certain jamming and other trials and the like. And 
that process is moving forward quickly.
    So, it's a frustrating issue. I know that progress is never 
as quick as we want it to be. Every day, or every month, it 
seems like there's a new story about somebody using a 
contraband cellphone for violent crimes or even for scams, as 
you----
    Senator Lankford. Right.
    Mr. Pai [continuing]. Pointed out.
    Senator Lankford. Or for----
    Mr. Pai. We want to----
    Senator Lankford [continuing]. Or for stalking someone 
that--they stalked someone outside of the prison, they're 
imprisoned, and they're still stalking them inside the prison.
    Mr. Pai. Absolutely. I've been to a maximum security 
facility in Georgia, where the officials told me that, in many 
cases, the prisoners know about a transfer to that prison or 
from that prison before the officials do, because they are all 
keeping in touch on cellphones.
    Senator Lankford. So, give me a best guess on time, on when 
we're trying to actually move to implementation on some of 
these areas. And, by the way, there's great mercy from this 
dialogue--from this dais, how long things take. If anyone knows 
they take way too long, it would be Members of Congress working 
through the process. But, help us understand the process now. 
When will we start to actually implement putting tests in place 
and being able to distribute this? And is there something you 
need from us, legislatively?
    Mr. Pai. So, as to the first, we have put that question to 
the working group. We obviously can't fiat that they will come 
to a consensus solution, but we have encouraged them to try to 
come to that solution as quickly as possible. And we're 
grateful, following from the April 30 meeting, they agreed to 
certain things, in terms of the trials on microjamming and the 
like. Be happy to get some more particulars to you, if that 
would be useful to you and the Members of the subcommittee.
    [The information follows:]

Testing Results can be found at:

https://www.justice.gov/opa/pr/bureau-prisons-tests-micro-jamming-
technology-
federal-prison-prevent-contraband-cell-phones.

FCC Response to the issue:

    ``We are pleased that industry and corrections officials came 
together today to agree on actionable steps to find a solution to the 
use of illegal cellphones in prisons, which is a major threat to the 
safety of correctional facility employees, other inmates, and the 
public. The FCC has relentlessly pushed to identify new technology 
solutions to legally address this urgent problem, including convening 
the first working group meeting this year of state correctional 
agencies, public safety officials and the wireless industry.''

The Cellular Telecommunications Industry Association & Association of 
State Correctional Administrators released a joint statement following 
the meeting the April Meeting:

    ``ASCA and CTIA are committed to protecting the public from the 
dangers posed by contraband cellphones in the hands of prison inmates. 
We welcome the FCC's continued focus on this problem and today's task 
force meeting marked the beginning of an important partnership. It's 
clear there's no easy answer, but ASCA and CTIA launched an initiative 
today to begin to identify and test solutions in the coming months for 
stamping out the use of contraband cellphones.''

    Mr. Pai. With respect to the second, I think there may be 
additional authority that could be useful in allowing us to 
tackle this problem in a rifleshot way, so to speak. I'd be 
happy to work with you on that. Our legislative experts have 
been thinking about it, as well. It's an area that is extremely 
frustrating, not least because I don't think the law originally 
contemplated that you would have these devices that are more 
valuable than drugs or even gold----
    Senator Lankford. Right.
    Mr. Pai [continuing]. Inside of these prison walls.
    Senator Lankford. Well, let's--I tell you what we'll do. 
We'll reach out to your staff and----
    Mr. Pai. Okay.
    Senator Lankford [continuing]. And try to set up a meeting 
pretty quickly to be able to discuss this and see what 
legislative solutions might be necessary and what we can do and 
start to be able to work on. This is not a partisan issue for 
us, but it's an issue that needs to be resolved, long term and 
quickly. And if there are areas that we need to be able to step 
in, we're glad to be able to step in and help engage in that.

                             5G DEPLOYMENT

    Let me ask about the 5G deployment, as well. Senator Daines 
spoke about this also. There is a concern about both the speed 
of 5G out there, but let me give you two opposite issues and 
things that rise up. One of them is economic espionage. If the 
5G providers are now quietly giving access to someone that may 
be an economic rival to us, how do we defend against that? So, 
we don't want to distribute so quickly that we're also not 
being attentive to economic espionage and availability and 
access points.
    And the second side of that is the health issues. There are 
some individuals that have raised health concerns on 5G 
deployment, radiation.
    How are you getting information out on both of those to 
make sure we're not making ourselves vulnerable to economic 
espionage and we're also being attentive on any health concerns 
that individuals may have?
    Mr. Pai. Thank you, Senator. With respect to the second 
issue, which I'll tackle first, we are not the health experts 
when it comes to these issues. We have consulted, of course, 
with the Federal Food and Drug Administration and with others 
who are responsible for determining what those standards should 
be. And we are confident that our standards are ones that are 
healthy for consumers, going forward.
    Second, with respect to the first issue, economic 
espionage, we have taken action there to make sure that the 
national--the security aspects of our communications networks 
are sound. So, for example, with respect to Universal Service 
funding, recently my colleagues agreed with the proposal that I 
put on the table to explore restricting Universal Service 
funding from being spent on companies or from countries that 
may present a national security threat to the United States, as 
determined by the intelligence community or Congress. So, 
that's to be determined in the notice of proposed rulemaking. 
There may be other steps that we need to take, and we'd be 
happy to work with other law enforcement or security agencies 
and the executive branch or with this committee, if it would be 
helpful.
    Senator Lankford. Okay, terrific.
    Chairman Simons, you and I had spoken earlier about a 
possible need for legislation. And you also mentioned that in 
your written testimony, as well, on data security legislation, 
that it may be needed at some point. Any other clarity that you 
want to help provide to us, or can we set up a meeting with 
your team to be able to go through any of those details?
    Mr. Simons. Yes, happy to set up a meeting. Absolutely.
    Senator Lankford. Okay. Any other details of that you want 
to give orally at this point?

                             DATA BREACHES

    Mr. Simons. The only thing I would say, just kind of 
generally to give you some context, is we're concerned that our 
authority--our existing authority allows us to get restitution 
and disgorgement. And in data breach cases, in privacy cases, 
it's very difficult to prove damage. So, those are--and 
particularly trace it to a specific data breach--so, in those 
cases, civil penalty authority really would be helpful.
    Senator Lankford. That would be helpful.
    Let me hesitate for a moment.
    Senator Manchin, you would be up next on questioning. Ready 
to go? Senator Manchin.
    Senator Manchin. Thank you, Mr. Chairman.

                             MOBILITY FUND

    Chairman Pai, we've had a lot of conversations. And 
Mobility Fund is my big thing. And you and I have had some 
conversations. And I know, since 19---and we talked--1935, FDR 
signed the Rural Electrification Act. I've said this. If you 
lived in West Virginia in the '30s, you probably didn't--in 
rural West Virginia--didn't have electricity. You live in rural 
West Virginia now, in 2018, a lot of times, more than likely 
you don't have connectivity. And we've got to do something 
about that.
    So, other than visits like the one the FCC is holding in 
West Virginia tomorrow--you're coming, and I appreciate that 
very much--what else is the FCC doing to ensure State and local 
participation in the process that we need in this Mobility 
Fund? The mapping--are you--I know there's been some 
adjustments to the maps. Okay. Do you think that has been 
accurate, as far as what's done to date on our mapping?
    Mr. Pai. So, Senator, with respect to the first piece, the 
State and local, we have made sure that we include State and 
local entities as part of the challenge process. We're doing 
aggressive outreach to them, not just in West Virginia, but 
everywhere from Mississippi to New Hampshire. Our expert staff 
is going on the ground to make sure that everybody is fully 
informed. Additionally, they've done a webinar, which has been 
very well received, not just from governmental entities, but 
from small carriers and consumers, to educate them about the 
process.
    With respect to the second question, we have made sure that 
we upgrade the quality of the maps, not just through the 
challenge process, but also by granting--or by--where was I 
going with that? Oh, so, with the--oh, gosh, I forgot where I 
was in my train of thought there.
    [Laughter.]
    Senator Manchin. Let me----
    Mr. Pai. Oh, yes, I remember now, sorry. So, the staff has 
done another run of the maps to make sure that we also produce 
a secondary map----
    Senator Manchin. Okay.
    Mr. Pai [continuing]. That identifies an area where there 
is only one unsubsidized competitor, so that is an area that is 
more likely to be----
    Senator Manchin. Right now, we're just 3 months away from 
the deadline, right?
    Mr. Pai. As--I believe that's correct----
    Senator Manchin. Three months, okay.
    Mr. Pai [continuing]. Essentially.
    Senator Manchin. And I'm concerned but--that by the time 
the State and local government entities can figure out the 
challenge process--they're having a hard time with this right 
now--it's going to be too late. And the money is absolutely 
critical for this to be done, and needs to be started now. So, 
I would ask, do you have any data on how many challenges you 
have received so far?
    Mr. Pai. I can't--I don't know the specific number, but I'd 
be happy to get that to you, if it would be helpful.
    [The information follows:]

    Mobility Fund Phase II (MFII) will award, via a reverse auction, up 
to $4.53 billion to support deployment of 4G LTE mobile service where 
it is now lacking. This process includes a map of areas presumptively 
eligible for support, initially published on February 27, 2018 (with 
updates published on August 1, 2018).
    MFII includes a process for challenging the map. This ``challenge 
process'' is one part of the Commission's efforts to ensure that 
limited funds are targeted to areas that lack unsubsidized 4G LTE 
service. All government entities (including State, local, and Tribal 
governments) as well as all mobile service providers required to file 
Form 477 data are eligible to participate in the MF-II challenge 
process. Such eligible entities may request access to the USAC MF-II 
Challenge Process Portal at any time via the MF-II Challenge Portal 
Access Request form, available at www.fcc.gov/MF2-Challenge-Portal/
form. Other entities, including individual consumers, organizations, or 
businesses not otherwise eligible, may participate upon the entity 
filing and the Commission granting a waiver for good cause shown.
    The challenge window initially was designated to remain open for 
150 days, until August 27, 2018. On August 3, 2018, the Office of the 
Chairman circulated for a vote by all commissioners an Order to extend 
by 90 days the window to file challenges to the eligibility map for the 
upcoming Mobility Fund Phase II broadband auction.
    As of July 31, 2018, a total of 93 entities had access to the 
Universal Service Administrator Company (USAC) MF-II Challenge Process 
Portal to participate in the MF-II challenge process. Of these 
entities, 38 are mobile service providers required to file Form 477 
data; 15 are State government entities; 20 are local government 
entities; 15 are Tribal government entities; and five are other 
entities that have filed petitions requesting, and have each been 
granted, a waiver to participate. To date, challengers have submitted 
data including 1,672,497 speed tests.

    Mr. Pai. I know that----
    Senator Manchin. Very helpful. I don't----
    Mr. Pai. Yes. No, I understand your concern. That's part of 
the reason why----
    Senator Manchin. We're having that--we're having a meeting 
in West Virginia tomorrow morning. And I'm going to go back 
to--and I think----

                    DIGITAL DIVIDE IN RURAL AMERICA

    Mr. Pai. Yes.
    Senator Manchin [continuing]. You all are coming. I 
appreciate that very much.
    Mr. Pai. Yes.
    Senator Manchin. These are things I think--West Virginia is 
one of the known--I've been telling most of southern West 
Virginia, my areas hit the hardest, in some of the most rural 
areas, the most difficult terrain, that they can expect--
because I bet kids can't do homework. You know, when you have 
parents driving their children to sit in front of the school to 
do their homework, something's wrong. In 2018, the United 
States of America, something's wrong. And that's what--that's 
the reality I'm dealing with. Okay?
    So, tomorrow they're going to want to know, Do we have a 
pathway forward? What's the plan? What's the time element? How 
much longer do I do without?
    Diversification of our economy. I've got 12 counties that 
aren't participating in 21st-century economy----
    Mr. Pai. Right.
    Senator Manchin [continuing]. Because of this. It's just a 
horrific challenge we have.
    Mr. Pai. I couldn't agree more, Senator. And I--since I 
became Chair, I've visited 25 States and the U.S. territories, 
in Puerto Rico and Virgin Islands. I've had many times when I 
simply see no service or, if I'm lucky, one bar on my phone. 
I--so, I understand that frustration.
    Senator Manchin. Yes.
    Mr. Pai. We want to correct that. That's why we want to 
hold this Mobility Fund auction, and as early as possible in 
2019, to make sure that we fill those gaps so that we have 
folks in West Virginia, around the country, don't have to sit 
there and wonder, ``If I have to make a 911 call or have my 
kids do their homework, you know, will we have connectivity?''
    Senator Manchin. Okay. Well, and--you know, and--as you 
know, the net neutrality thing's been a hot item. And----
    Mr. Pai. I've heard a little bit about things.
    Senator Manchin. A little bit about that, yes. And I'm 
pleased with the vote that we had yesterday. And I know that 
you might not be as pleased as I am. With that, I still think 
there's a pathway forward. I think the Internet can be open, 
and it can be owned by every citizen in this great country of 
ours. And also, the ability for industry to do what it needs 
with technology and advancements. I think there's a balance to 
be had.
    I think you've seen now, with the representation, how we 
voted, that we want to work this out. Okay? But, we're not 
going to allow it to be owned by anybody that's not the average 
citizen that can't get on, having the same opportunities 
everyone should have.
    They were talking about that yesterday. I said, I'm worried 
about just connecting. You're worried about who's going to have 
it, who's going to control it, but I can't even get people 
connected to it. That's the big push we have tomorrow.
    Mr. Pai. Right.
    Senator Manchin. So, when you come tomorrow, you can help 
us through that, and--the high-cost rural areas I'm concerned 
about. How do y'all intend to address that, when you have a 
rural area that needs to have connectivity, but the population 
base is not there to justify any type of return? That's going 
to be a lot of front-end investment.
    Mr. Pai. Two basic tools in the toolbox, Senator. One, of 
course, is Federal subsidies for the Universal Service Fund, 
making sure that we target the areas that are off the grid or 
on the wrong side of the digital divide.
    Second tool in the toolbox is modernizing our rules to 
encourage much more access and competition. So, for example, in 
parts of West Virginia, where it's very mountainous, the 
terrain is just prohibitive for laying fiber for hundreds, if 
not thousands, of miles, you know, throughout all the nooks and 
crannies of the State, maybe there's another option: fixed 
wireless or satellite. And so, we've approved the next 
generation of satellite constellations that could provide 
speeds and prices that are comparable to what you would get 
from a terrestrial provider.

                              FAIRNESS ACT

    We want to think creatively. I personally do not care what 
technology is brought to bear to connect folks across the 
country. We want all of them to have a full and fair chance to 
compete for consumers' attention, and we want people to get 
connected, because it's not just, as you point, education, it's 
healthcare, starting a business, precision agriculture. All of 
these things increasingly depend on connectivity.
    Senator Manchin. Thank you, Mr. Chairman.
    Senator Lankford. Thank you.
    Gentlemen, thank you both for being here and going through 
it, not only your preparation for this hearing, but the work 
that you're doing every single day. We really do appreciate it. 
The----
    Senator Coons. Senator Manchin has one more question, I 
think.
    Senator Lankford. Senator Manchin, you have one additional 
question?
    Senator Coons. Senator Manchin.
    Senator Manchin. I just--I had a discussion the other day--
and I'm sorry to take just a few more minutes, but there was a 
discussion the other day, and people were--we were just talking 
about, How did our country become so toxicity in the political 
arena? You know, it's what team you're on and what side you're 
on, how we can destroy each other. It's just awful. It's not 
who we are as a country. It's not how we become a country.
    So, I started asking questions. And the person who had 
insight in history--this is a person who served in this body 
many, many years ago and saw the change when it came. And you 
know what he said? He said, ``FCC, Fairness Act'' of the 1980s, 
I guess, when it was changed. Because, up until that time, we 
never had one side or the other side, it was both sides, 
whether it was all the radio shows, television, everything had 
to be equal. And then the Chairman at that time--I think it's 
in the 1980s, and I thought--do you have--have you looked into 
this, or the--have you been asked about that, the Fairness Act, 
where you would stand? Do you think it would help?
    Something's got to be done to save the country. And right 
now we're destroying each other. And we're all good friends, 
but we're pushed politically to the brinks of--you know, of 
engagement that we should never be in, other than trying to 
work out something for our country.
    And I didn't--I did not realize the depths of how things 
have changed. And he watched it change. He was there up until 
the FCC--and it was the Chairman that made a decision. It was a 
rule change. It wasn't legislation. They never could get 
legislation back after that, once the sides broke up and took 
their respective positions.
    Do you have any comment on that, on the Fairness Act?
    Mr. Pai. Senator, I do know Chairman Dennis Patrick, who 
was the Chairman at the time, as well as Chairman Fowler, who--
--
    Senator Manchin. Fowler was--what year was this?
    Mr. Pai. This--it was repealed formally in 1987, under 
Chairman Patrick. And the notice of proposed rulemaking, as I 
understand it, was introduced under Chairman Fowler earlier. He 
was Chairman from 1981 and 1987.
    I do daresay that I know more than most about the toxicity 
of the political environment----
    Senator Manchin. Yes.
    Mr. Pai [continuing]. Right now. Without going into 
details, it is often a rough-and-tumble discourse that is less 
civil than it perhaps used to be.
    Senator Manchin. But, I'm saying, when the airwaves--when 
there was fairness to the airwaves and to the public, they had 
to give a balanced approach, a balanced--equal time.
    Mr. Pai. I guess the difficulty I have, Senator, there is 
that, while I might agree with the symptom that you're 
identifying, I'm not sure about the cause, for a variety of 
different reasons. First, under the First Amendment, there are 
substantial questions about whether the Government should get 
involved in mediating that kind of public discourse. And, when 
it comes to the FCC, in particular, there are issues when the 
FCC intrudes upon content regulation, deciding, okay, this is 
too far, or this is not.
    Secondly, I think with the onset of the digital era, when 
you think about it, the Internet is one of the greatest 
platforms for free expression in history. And, even if the FCC 
wanted to, and could, under the Constitution, do so, I'm not 
sure it would be wise to have bureaucrats in Washington sitting 
in judgment about who is allowed to take a position in the 
public square.
    Senator Manchin. I don't think we're asking that. I think, 
basically, what we're saying is that it worked up until that 
point in time, and it's gone to heck in a handbasket since.
    Mr. Pai. Yes.
    Senator Manchin. So, if you're looking for results, you're 
going to find out what the cause is.
    Mr. Pai. Yes.
    Senator Manchin. You have to have an opinion on that. You 
can't just justify it and say, ``Oh, yes, let 'em just rip it 
away,'' on the right or the left.
    Mr. Pai. Unfortunately, Senator, I'm not sure that there's 
an FCC-led solution here. This seems to be more of a 
widespread----
    Senator Manchin. No, I don't think it is, because you all 
undid it. The FCC is what caused this problem we have. And if--
it's going to be a legislative fix, if there's ever going to be 
one. And I don't think the will is here for it. That's the 
shame of it. So, didn't know if you wanted to have----
    Mr. Pai. I----
    Senator Manchin [continuing]. Your opinion heard.
    Mr. Pai. Believe me, I share the aspiration for a more 
civil discourse.
    Senator Manchin. Yes.
    Mr. Pai. And if you can legislate that, I think I and I----
    Senator Manchin. Be better off.
    Mr. Pai [continuing]. The public would be all the better 
for it.
    Senator Manchin. Yes.
    Senator Lankford. I think the best thing we can probably do 
is model that, rather than legislate that. The hard part would 
be--all the conversation about fairness doctrine and where that 
goes is--at some point, somebody has to sit and say that's a 
conservative thought or that's a liberal thought, and so we've 
got to give somebody else equal time. Ultimately, that 
somebody's sitting in DC, evaluating every broadcast, 
determining how many conservative thoughts were said and how 
many liberal thoughts were said, and trying to be able to 
provide that balance. And that just gets tough.
    Senator Manchin. Senator, I'm just--I'm--I just--I was 
amazed to hear the person's history and the knowledge that 
his--this Senator had. You know the Senator I'm talking about. 
But, there are observations saying somehow the system had some 
civility to it, and it wasn't being run out of the FCC.
    Senator Lankford. Right.
    Senator Manchin. It was when the FCC interjected itself to 
change that rule that basic----
    Senator Lankford. Rolled out.
    Senator Manchin [continuing]. Kept civility that threw it 
to a tailspin. That's it in a nutshell. That was his 
observation, because he lived it. He lived it, being a 
legislator before and after this observation.
    Senator Lankford. Yes.
    I do want to thank our witnesses today. Thanks for all the 
preparation that you're doing. We'll continue to be able to 
follow up on the staff level. We want to be able to maintain a 
good dialogue. The one thing that can be really very helpful to 
us is, on the staff-level conversation, when we need additional 
documents, to be able to have that interplay back and forth. We 
also want you to hear from us. If there are moments that you 
think we need additional legislation to be able to resolve this 
issue, ``We're stuck until we get the legislation,'' please 
know that we are very open to be able to discuss that and to be 
able to bring all the individuals to bear, not only in 
appropriations, but obviously the authorizing committees, as 
well, to be able to sit down and be able to have those 
conversations. Please don't assume, ``We're stuck and we can't 
do anything,'' and that we're aware that you're stuck. Please 
let us know. And so, we can help partner with you. We're all 
serving the American people, and we all want to try to get this 
right.

                     ADDITIONAL COMMITTEE QUESTIONS

    If there's no further questions on this, the--the hearing 
record will remain open until next Thursday, May 24, for 
subcommittee Members to submit any statements or questions to 
the witnesses for the record.
    [The following questions were not asked at the hearing, but 
were submitted to the agencies for response subsequent to the 
hearing:]
                  Questions Submitted to Hon. Ajit Pai
          Questions Submitted by Senator Christopher A. Coons
    Question. I welcome the FCC's decision to modernize the 2.5 GHz 
band, also known as Educational Broadband Services (EBS), which is 
important for both educational and commercial users. This proceeding 
creates an opportunity to expand 5G to many more Americans, while also 
opening up new spectrum for rural broadband deployment. Both are worthy 
goals. Some schools and EBS licensees have contacted me to express 
concern about the comment period for this proceeding. The short comment 
and reply period, along with the fact that it may begin during the 
middle of the summer, might prevent their participation in the 
proceeding. Chairman Pai, would you be amenable to extending the 
comment period in order to ensure all interested parties can 
participate in the proceeding?
    Answer. I understand your concerns. That's why on June 21, 2018, 
the Commission extended the deadline for filing comments in this 
proceeding by 30 days to August 8, 2018, and to September 7, 2018 for 
reply comments. We determined that the number, scope, and importance of 
the questions asked in the 2.5 GHz NPRM warranted an extension of the 
comment and reply comment deadlines and that this extension would build 
a more comprehensive record. With this extension, commenters will have 
a total of 141 days to comment--from when I first released the draft in 
April through the reply deadline.
    As you recognize, this proceeding is an essential step forward in 
modernizing the 2.5 GHz band. Significant portions of the EBS spectrum 
in this band currently lie fallow across approximately one-half of the 
United States, mostly in rural areas. And the 2.5 GHz band is the 
largest band of contiguous flexible use spectrum below 3 GHz. Moving 
ahead as expeditiously as possible will make available a scarce public 
resource that could be used to connect millions of Americans.
    Question. I am happy to see that the Commission seems to be 
coalescing around an approach that continues to make spectrum available 
in the low-, mid- and high-bands. In addition to the 3.5 GHz band, I 
understand you are considering a plan that could ultimately free up to 
40 MHz of additional mid-band frequencies in the L-band. Will you 
provide me an update on the status of that proceeding?
    Answer. On May 31, 2018, Ligado filed an amendment to its pending 
applications seeking changes to the ancillary terrestrial component of 
its L-band mobile-satellite service networks. In the amendment, Ligado 
proposes specific measures to protect certified aviation GPS receivers 
by limiting transmit power in the 1526-1536 MHz band and by observing 
other conditions. The record on Ligado's latest amendment recently 
closed. The Commission will be working closely with our Federal 
partners, led by the National Telecommunications and Information 
Administration, as we review the record and determine next steps.
    Question. I am concerned that in the current FCC rulemaking for the 
Lifeline program, the Commission has proposed to prevent wireless 
resellers from providing this service. This change could have the 
effect of removing the existing services of more than 7.5 million low-
income households. In Delaware alone, about 27,000 households could 
lose their service. Why do you believe resellers should not be 
permitted to provide Lifeline service?
    Answer. I have not reached any conclusion as to whether resellers 
should be permitted to participate in the Lifeline program. However, we 
are looking at this issue because resellers have been the subject of 
the vast majority of Commission Lifeline investigations for waste, 
fraud, and abuse. Also, we are examining how the Lifeline program can 
support investment in broadband networks where they are needed most--in 
low-income communities in our cities, in rural areas, and on Tribal 
lands.
    Question. How does eliminating resellers, a major market 
participant, promote competition in this space?
    Answer. This is one of the issues that we are looking at in the 
pending proceeding. However, I would note that competition to arbitrage 
the Commission's rules--whether by signing up phantom subscribers, 
deceased subscribers, or ineligible subscribers--does not benefit 
consumers. Instead, it penalizes the American people by increasing the 
universal service taxes they must pay each month. The Commission is 
still evaluating how to crack down on the waste, fraud, and abuse that 
has gone on for far too long. But I firmly believe the Lifeline 
program's goal is--or should be--to empower consumers, not companies. 
And that will be our lodestar as we move forward to ensure that 
unscrupulous companies stop abusing this important program.
                                 ______
                                 
            Questions Submitted by Senator Patrick J. Leahy
    Question. At the hearing, I asked you to provide data on how your 
decision to repeal the 2015 net neutrality rules will spur private 
investment in Vermont, specifically by providing me with detail on how 
many currently unserved Vermonters will gain service within 1 year of 
repeal. In your response, you primarily cited Universal Service Fund 
programs as the reason why more Vermonters would have broadband access 
next year.
    What percentage of new broadband investment in rural America will 
occur without support from the Universal Service Fund or other 
government funding sources such as Rural Utilities Service loans or 
grants?
    Answer. Repealing the Title II Order will lead to more investment 
throughout the United States, more jobs, and ultimately better, faster, 
cheaper broadband for consumers, including small businesses. Forcing 
innovative companies providing 21st century services through a 
government-controlled bottleneck--one intended for a 20th century 
telephone monopoly--makes deployment in rural America even harder. Just 
take the case of VTel, a rural broadband provider in Vermont. VTel 
wrote to say that ``regulating broadband like legacy telephone service 
would not create any incentives for VTel to invest in its network. In 
fact, it would have precisely the opposite effect.'' The company went 
on to say that it is now ``quite optimistic about the future, and the 
current FCC is a significant reason for our optimism.'' Indeed, VTel 
recently announced that it has committed $4 million to upgrade its 4G 
LTE service and to begin rolling out faster mobile broadband that will 
start its transition to 5G, the next generation of wireless 
connectivity. For your convenience, I am attaching VTel's letter to 
this response.
    To be sure, in some areas the business case for broadband 
deployment will not be there absent government help. And although the 
Commission does not track the counterfactual data of how much 
investment would occur without government funding, I can say that I 
believe sufficient, predictable support through the Universal Service 
Fund is essential if we are to close the digital divide. Reducing the 
costs of deployment--such as by repealing the Title II Order and 
adopting one-touch make-ready rules for pole attachments--will help 
stretch our scarce universal service dollars farther and bring more 
rural Americans online.
    Question. I questioned you about the troubling map the FCC put out 
for the upcoming Mobility Fund auction. Unfortunately, this isn't the 
only flawed FCC broadband map. Independent analysis of the FCC's fixed 
broadband map for Vermont indicates that it may undercount the number 
of unserved households by nearly 20,000. That is a real percentage of 
the population in a small State like Vermont. I am very concerned about 
the quality of data the FCC is relying on to develop these maps.
    Was any of the data underlying these maps used as part of your 
analysis in the net neutrality repeal proceeding?
    Answer. I agree with you that accurate and reliable data is 
critical to sound decisionmaking and a vital tool in developing 
policies to close the digital divide, promote competition, and more. 
The Federal Communications Commission took into account Form 477 data 
in the Restoring Internet Freedom Order--just as the prior Commission 
relied on such data in the Title II Order. However, the Commission did 
not review that evidence in isolation but in the context of the broader 
administrative record, and specifically noted concerns raised by 
stakeholders about how to construe that data. Notably, the Commission 
found substantial evidence in the record as a whole that Internet 
service providers had decreased investment following the Title II Order 
and substantial evidence that the Federal Trade Commission, consumers, 
and market forces could effectively police unreasonable network 
management practices. In contrast, the record contained a ``paucity of 
concrete evidence'' supporting the prior administration's findings in 
the Title II Order (note that the FCC's chief economist later referred 
to that Order as an ``economics-free zone''). And to the extent that 
existing Form 477 data may overstate actual deployment, that only 
emphasizes the importance of ending public-utility regulation of 
Internet service providers; we will only close the digital divide by 
adopting policies that encourage broadband investment, not deter it.
    Nonetheless, I agree that we must improve the Form 477 data 
collection devised by the last administration. That's why the 
Commission under my leadership commenced a rulemaking last year to 
review Form 477 and consider ways to improve the quality, accuracy, and 
usefulness of the deployment data it collects on fixed and mobile voice 
and broadband service, as well as examine easing the burden on industry 
by eliminating unnecessary or erroneous data filing requirements. 
Currently, Commission staff is reviewing the record of that proceeding, 
and I look forward to receiving staff recommendations on how to further 
improve that data collection.
    Question. I appreciate that the FCC has put in place a challenge 
process to determine if areas considered served by the Mobility Fund 
maps have service. Given that most of Vermont is considered served by 
this map, I am concerned that providers and State officials that may 
want to conduct challenges will not have ample time to do so. I am also 
concerned that you are still conducting outreach in the States to 
explain how the challenge process will work even as the timing on the 
window for challenges is running.
    Why did the FCC open the challenge window before concluding 
outreach at the State level?
    Answer. Our Mobility Fund Phase II outreach has been extensive and 
inclusive. Beginning in October 2017, Commission staff have conducted 
numerous meetings, webinars, and conference calls with stakeholders 
from numerous States, and conducted on-site training events and 
presentations in Texas, Tennessee, New Mexico, Kansas, West Virginia, 
Maine, New Hampshire, Mississippi, and Washington State. We released a 
map of areas most susceptible to challenge, that is, those where only 
one unsubsidized carrier reported offering service, so that challengers 
could better target their efforts. We also changed the parameters of 
speed testing for challengers, reducing the number of measurements 
required to successfully challenge an area. We released the list of 
qualifying handsets to the public so that local governments could more 
easily enlist volunteers. We have broadened the number of entities able 
to participate in the challenge process by granting waivers to everyone 
from Senator Joe Manchin (D-WV) to the Farm Bureaus of Kansas and 
Mississippi. In addition, the Mobility Fund Phase II webpage on the 
Commission's site contains all the processes, data, documents, and 
education and outreach materials that are available to the public.
    We have worked hard to ensure that the challenge process will 
produce a high-quality map. I nonetheless agree with you that the 
agency should exercise its discretion to ensure that the process is as 
robust as possible. That's why I have circulated to my colleagues an 
order extending the length of the challenge process by 90 days--by 
lengthening the period during which challenges can be submitted, State 
and local governments and other challengers will have a significant 
additional opportunity to conduct tests, which in turn means a more 
accurate map for carrying out the Mobility Fund Phase II auction.
    Question. Will you consider extending the time available for 
challenges to ensure that there is both adequate time to conduct them 
and adequate understanding of how the process will work?
    Answer. Yes. I have circulated to my colleagues an order that would 
do just that.
    Question. My friend and former Chairman of this Committee, Senator 
Cochran, sent you a letter on March 29, 2018, explaining the 
Appropriations Committee's intent in setting a national ownership cap 
for television broadcasters at 39 percent and its interaction with the 
now-obsolete UHF discount. I agree with former Chairman Cochran's 
assertion that the Committee did not intend for the UHF discount to be 
used as a loophole to the Congressionally-established 39 percent 
national ownership cap.
    Do you agree or disagree with Chairman Cochran's assessment of the 
Committee's intent that the UHF discount not be used to undermine the 
39 percent ownership cap? If not, please explain how Chairman Cochran's 
assessment was deficient.
    Answer. The Commission is currently in the midst of a holistic 
review of that regulation. In addition to asking whether we should 
eliminate the UHF Discount, we have sought comment on whether the 39 
percent cap should be maintained, raised, lowered, or eliminated. I 
called on the Commission to launch such a holistic review back in 2013 
and am pleased that we were able to finally take that step last 
December. The comment cycle on the national ownership cap Notice of 
Proposed Rulemaking has now closed, and we are now in the process of 
reviewing the record. In my view, it is important for the Commission to 
complete this holistic review of the national ownership cap before 
weighing in on the merits.
    Although our assessment is ongoing, I would note that the prior 
administration flatly rejected the position that the FCC lacked the 
legal authority to alter the 39 percent national ownership cap. Indeed, 
it specifically ``conclude[d] that the Commission has the authority to 
modify the national audience reach cap, including the authority to 
revise or eliminate the UHF discount.'' The prior FCC explained: ``We 
find that no statute bars the Commission from revisiting the cap or the 
UHF discount contained therein in a rulemaking proceeding so long as 
such a review is conducted separately from a quadrennial review of the 
broadcast ownership rules pursuant to Section 202(h) of the 1996 Act. 
The [2004 Consolidated Appropriations Act] simply directed the 
Commission to revise its rules to reflect a 39 percent national 
audience reach cap and removed the requirement to review the national 
ownership cap from the Commission's quadrennial review requirement. It 
did not impose a statutory national audience reach cap or prohibit the 
Commission from evaluating the elements of this rule. Thus, the 
Commission retains authority under the Communications Act to review any 
aspect of the national audience reach cap; it simply is not required to 
do so as part of the quadrennial review.'' In the Matter of Amendment 
of Section 73.3555(e) of the Commission's Rules, National Television 
Multiple Ownership Rule, Report and Order, 81 Fed. Reg. 89421, para. 21 
(2016).
    Question. A Bloomberg article from April 3, 2018, outlined a series 
of disturbing employment practices used by Sinclair Broadcast Group to 
restrict the free movement of its employees to competing broadcast 
stations. According to the Bloomberg report, some Sinclair employees 
are subject to forced arbitration clauses as part of their employment 
contracts. Forced arbitration clauses strip employees of their rights 
and shield corporations from the consequences of harmful behavior such 
as discrimination or sexual harassment. Sinclair's employment contracts 
are reportedly even more punitive, containing clauses requiring 
employees to pay back 40 percent of their annual compensation if they 
leave before the end of the contract term.
    Sinclair's practices not only restrict the rights of its employees, 
but also serves to stifle competition in the broadcast industry as a 
whole. Given the unique obligations broadcasters have due to their use 
of the public airwaves, I am concerned that these practices may violate 
the public interest.
    Will you commit to investigating whether Sinclair's employment 
practices violate the public interest as part of your evaluation of 
this transaction?
    Answer. Based on a thorough review of the record, I had serious 
concerns about the Sinclair-Tribune transaction. Given these concerns, 
I circulated a Hearing Designation Order to commence a hearing before 
an Administrative Law Judge to determine whether Sinclair affirmatively 
misrepresented or omitted material facts with the intent to consummate 
this transaction without fully complying with our broadcast ownership 
rules. This order was approved unanimously by the Commission and 
released on July 19, 2018. On August 9, 2018, Tribune withdrew from the 
transaction, and the next day, Sinclair notified the Commission that it 
was dismissing with prejudice applications involving the transaction.
                                 ______
                                 
               Questions Submitted by Senator Jerry Moran
    Question. According to the FCC's 2018 Broadband Deployment Report, 
the Title II Order drastically harmed broadband deployment in the 2 
years following its adoption in 2015. Could you please explain the 
findings of this report?
    Answer. The 2018 Broadband Deployment Report demonstrates that the 
pace of both fixed and mobile broadband deployment declined 
dramatically in the 2 years following the prior 2015 Title II Order. 
From 2012 to 2014, the 2 years preceding the Title II Order, fixed 
terrestrial broadband Internet access was deployed to 29.9 million 
people who never had it before, including 1 million people on Tribal 
lands. In the following 2 years, new deployments dropped 55 percent, 
reaching only 13.5 million people, including only 330,000 people on 
Tribal lands.
    From 2012 to 2014, mobile LTE broadband was newly deployed to 34.2 
million people, including 21.5 million rural Americans. In the 
following 2 years, new mobile deployments dropped 83 percent, reaching 
only 5.8 million more Americans, including only 2.3 million more rural 
Americans. And from 2012 to 2014, the number of Americans without 
access to both fixed terrestrial broadband and mobile broadband fell by 
more than half--from 72.1 million to 34.5 million. But the pace was 
nearly three times slower after the adoption of the 2015 Title II 
Order, with only 13.9 million new Americans gaining access to both over 
the next 2 years.
    Question. Modernizing the Federal Government's IT systems needs to 
remain a top-priority for all agencies. According to the GAO's High-
Risk Series report, the Federal Government annually spends over $80 
billion on information technology (IT), but more than 75 percent of 
this spending is for ``legacy IT''. Earlier this year, I was successful 
in getting the FCC CIO Parity Act signed into law. This law requires 
the FCC to ensure that the agency's Chief Information Officer (CIO) has 
a significant role in the budgeting, programming, and hiring decisions 
of the agency, and given the CIO's subject matter expertise, 
prioritizing the replacement of costly and vulnerable legacy IT systems 
would be accounted for in this critical decisionmaking. Will you please 
describe the current role of the FCC's CIO in the agency's efforts to 
formulate an effective and targeted budget? What are the FCC's specific 
budget priorities related to modernizing its IT systems?
    Answer. I appreciate your ongoing and substantial commitment to 
ensuring that the Federal Government has robust and resilient 
Information Technology (IT) resources. It is essential that CIOs feel 
empowered to make critical decisions essential to upgrading and 
modernizing our IT systems. I am pleased to note that our Acting CIO 
currently plays an important role in working with our Managing Director 
and my office to develop our budget and allocate resources.
    Our top budget priority related to IT modernization is to end our 
reliance on outdated legacy systems by moving systems and applications 
to the cloud. Such efforts not only improve the quality of our IT 
services, they also decrease expenses in the long run because it is 
quite expensive to keep many of our legacy systems running.
    Consistent with this priority, in our fiscal year 2019 budget 
request, we have asked for $8,535,200 for IT modernization and 
implementation, including $4,619,000 for shifting systems to the cloud 
and $3,666,200 for shifting applications to the cloud. In fact, this 
request comprises the vast majority of the new spending contained in 
that budget request. Pages 20-24 of the fiscal year 2019 request 
provide a complete narrative of changes to our salaries and expenses 
from the prior fiscal year.
    Moreover, it is important to note that we recently received 
approval for a reprogramming that would move de-obligated resources to 
current IT needs through the end of the fiscal year, improving our 
security and redesigning our Electronic Comment Filing System.
    Question. As your written testimony mentions, the recent omnibus 
appropriations package for fiscal year 2018 included up to one billion 
dollars in funding to complete the broadcaster ``repacking'' process 
following the spectrum incentive auction. This continues to be an issue 
that I will closely monitor. What types of administrative resources are 
expected to be needed by the commission, including staffing and IT, to 
effectively distribute these new allocated funds?
    Answer. The process for establishing the new funds for LPTV 
stations, translators, and FM stations is expected to cost more than 
$17 million in fiscal year 2019. I am pleased that the administration, 
the House, and the Senate have recognized these additional costs and so 
far supported the necessary increase to our auctions cap.

    Based on our experience with the initial fund administration costs, 
our staff developed the following cost analysis:

  --Increase in the Number of Eligible Entities: The new legislation 
        could increase the number of participants in the TV Broadcast 
        Relocation Fund by over 4,000, increasing the number of 
        participants from 1,134 to over 5,000.
  --Fund Administrator Cost Increase: Based on the increase in the 
        number of eligible entities and taking into consideration 
        economies of scale and the possibility that there may be fewer 
        invoices from each participant, the cost of the fund 
        administrator is anticipated to substantially increase. The FCC 
        has estimated a cost increase of a minimum of $7 million in 
        2019.
  --Cost Catalogue of Eligible Expenses: The Cost Catalogue of Eligible 
        Expenses must be expanded to include costs for LPTV stations 
        and translators, which are typically substantially lower than 
        those for full power television stations; receivers for 
        translators; and costs for FM stations.
  --System Development: Three major computer systems will need 
        development work to handle the expanded program. All systems 
        must be updated--including thorough testing of the development, 
        system integration and security--prior to the start of cost 
        estimate and/or invoice submission process which is anticipated 
        to be third quarter 2019. The cost is estimated to be 
        approximately $5 million.
  --Compensation and Benefits: Comp and Benefits for the Incentive 
        Auction Program averaged approximately $9 million per year from 
        2014 through 2016. Additional staff time will be needed in 
        financial operations, Media Bureau, Information Technology, 
        Incentive Auction Task Force, Office and Engineering and 
        Technology, and Office of the General Counsel.

    Below is a chart outlining these costs:

------------------------------------------------------------------------
   Expenditure: LPTV/Translators
      Stations & FM Stations         Fiscal Year 2018   Fiscal Year 2019
------------------------------------------------------------------------
Comp and Benefits.................         $1,000,000         $5,000,000
 
Fund Admin........................         $1,000,000         $7,000,000
Site Visits.......................                 $0                 $0
Internal Controls & Audits........                 $0           $500,000
Systems...........................         $1,000,000         $5,000,000
Cost Catalogue....................           $300,000                 $0
Outreach--LPTV & Translators......                 $0            $50,000
                                   -------------------------------------
    Subtotal......................         $2,300,000        $12,550,000
                                   -------------------------------------
    Total.........................         $3,300,000        $17,550,000
------------------------------------------------------------------------

    Question. As you know, the FCC released an Order and NPRM in March 
regarding the USF's High Cost Program. The Order restored the Federal 
support that small, rural broadband providers had seen cut over the 
past year. However, that money is expected to run out soon, and small 
carriers will once again face significant cuts when the new fiscal year 
takes effect on July 1, 2018. I recently signed a letter with over 60 
of my Senate colleagues requesting the FCC take action to provide 
predictable and long-term efficiencies to the program. How does the FCC 
plan to modernize the High Cost Program to better enable small carriers 
to offer high quality, affordable broadband to rural Americans?
    Answer. I'm grateful for your advocacy on this issue and hope you 
will agree that our reforms in March (which reflect the views you 
expressed in your letter) were a big win for rural communities that 
want high-speed Internet access and are served by rate-of-return 
carriers.
    The NPRM seeks comment on ways to improve and simplify the funding 
system so that rate-of-return carriers receiving have predictable 
support and the right incentives to efficiently invest in broadband 
connectivity in the rural areas they serve. We also consider a second 
offer of model-based support to carriers, as well as how the legacy 
rate-of-return system might be improved. The public comment and reply 
period cycle for the NPRM closed on June 25, 2018. Like you, I believe 
it is a priority to ensure that small carriers can offer high-quality, 
affordable broadband to rural America. I look forward to working with 
my colleagues to put forward an order that would do just that before 
the year is over.
    Question. Consistent with the direction in my legislation, the 
RAPID Act, the Commission recently approved a major order streamlining 
the environmental and historic preservation process for deploying small 
cells. As I understand it, that order, when the new rules become 
effective this summer, will significantly expedite the deployment of 
new facilities needed to support 5G services. I congratulate you on 
this achievement. What more needs to be done? What are the Commission's 
next steps?
    Answer. I appreciate your hard work and attention to this matter 
and your support for moving ahead to ensure that we facilitate, not 
frustrate, innovation and investment. Since I established the Broadband 
Deployment Advisory Committee (BDAC) in January 2017, the Commission 
has received significant and comprehensive advice on how to accelerate 
deployment of broadband. We have taken a number of actions designed to 
accelerate the deployment of next-generation networks and services 
through streamlining unnecessary rules that raise the cost of 
infrastructure investment and eliminating other regulatory barriers to 
deployment.
    The Commission's March 22, 2018 Order represents an essential step 
in this process. While old rules were designed with 200-foot towers in 
mind, we are now looking at the highly-densified networks of small 
cells that will be common in the 5G world. By streamlining the 
environmental and historic preservation process for deploying small 
cells instead of treating them like larger towers, we will make it 
substantially easier for carriers to build next-generation wireless 
networks throughout the United States. That means faster and more 
reliable wireless services for American consumers and business as well 
as more wireless innovation, such as novel applications based on the 
Internet of Things.
    More recently, the Commission adopted an order containing the 
BDAC's proposal for one-touch make-ready with respect to pole 
attachments. The record suggests this order will substantially speed up 
broadband deployment while at the same time ensuring that appropriate 
safeguards are in place to protect existing attachments and worker 
safety.
    Question. The recent Omnibus included language directing the 
Commission to report to Congress by the end of this fiscal year, and 
annually thereafter, regarding upcoming spectrum auctions and bands 
that might be made available for commercial use. Do you believe the 
Commission can meet this objective as well as detail for us the use of 
the money the Commission retains to administer its spectrum auction 
activities?
    Answer. Yes, the Commission is moving ahead to obtain and analyze 
the data and information required by Division P of the Fiscal Year 2018 
Consolidated Appropriations Act, or Omnibus. We expect to meet all 
deadlines.
    Question. Is it true that the FCC under your leadership proposed to 
impose on Sinclair the Commission's largest forfeiture ever for a 
violation of the Commission's sponsorship rules?
    Answer. Yes. Last December, the Commission proposed a forfeiture 
against Sinclair Broadcast Group of over $13 million for alleged 
sponsorship identification rule violations. It is the largest fine ever 
proposed for sponsorship identification rule violations.
    Question. I welcome the FCC's decision to modernize the 2.5 GHz 
band, also known as Educational Broadband Services (EBS), which is 
important for both educational and commercial users. This proceeding 
creates an opportunity to expand 5G to many more Americans, while also 
opening up new spectrum for rural broadband deployment. Both are worthy 
goals. Some schools and EBS licensees have contacted me to express 
concern about the comment period for this proceeding. The short comment 
and reply period, along with the fact that it may begin during the 
middle of the summer, might prevent their participation in the 
proceeding from educators and teachers who benefit from EBS services. 
Would you be amenable to extending the comment period in order to 
ensure all interested parties can participate in the proceeding?
    Answer. I understand your concerns. That's why on June 21, 2018, 
the Commission extended the deadline for filing comments in this 
proceeding by 30 days to August 8, 2018, and to September 7, 2018 for 
reply comments. We determined that the number, scope, and importance of 
the questions asked in the 2.5 GHz NPRM warranted an extension of the 
comment and reply comment deadlines and that this extension would build 
a more comprehensive record. With this extension, commenters will have 
a total of 141 days to comment--from when I first released the draft in 
April through the reply deadline.
    As you recognize, this proceeding is an essential step forward in 
modernizing the 2.5 GHz band. Significant portions of the EBS spectrum 
in this band currently lie fallow across approximately one-half of the 
United States, mostly in rural areas. And the 2.5 GHz band is the 
largest band of contiguous flexible use spectrum below 3 GHz. Moving 
ahead as expeditiously as possible will make available a scarce public 
resource that could be used to connect millions of Americans.
                                 ______
                                 
              Questions Submitted by Senator Steve Daines
    Question. Chairman Pai, the FCC recently issued a public notice 
requiring the registration of existing C Band downlink devices. This 
registration includes a mandatory filing fee of $435. Many of our small 
broadcasters in Montana who provide essential services to our rural 
communities have owned C Band Downlinks for years. While they are fully 
appreciative of the FCCs efforts to catalogue these devices and are 
willing to register them, many are unable to afford the mandatory fee. 
What can the FCC or congress do to help our smallest broadcasters 
afford to register devices, which they have legally owned and operated 
for years?
    Answer. As you know, increasing the usage of the 3.7-4.2 GHz band 
will be critical to our Nation's 5G efforts as well as ensuring 
widespread deployment of high-speed broadband services to rural 
America. We must make every effort to close the digital divide, and 
getting the 3.7-4.2 GHz band right is critical to that effort.
    Congress established the $435 application fee that earth stations 
now are facing when it comes to registering with the Commission. 
Nonetheless, because I firmly believe that we must be accommodating of 
those operating in smaller markets, the Commission has taken repeated 
steps to reduce the costs of registration for small broadcasters and 
cable operators. That's why Commission staff waived the costly 
engineering studies normally required of registrants, allowed filers to 
consolidate their applications to reduce application fees, and doubled 
the length of time for broadcasters and cable operators to register. 
Also, the agency may grant fee waivers or deferrals of such fees in 
specific instances where an applicant demonstrates good cause and the 
waiver would promote the public interest. I encourage entities unable 
to afford the mandatory fee to file a waiver request, and the 
Commission's staff stands ready to assist licensees with this process.
    At the same time, we must move forward with the registration 
process. Without information about existing users, the Commission will 
have no way to protect rural broadcasters and cable operators that 
currently use earth stations to access programming. And efforts like 
this to free up spectrum for more high-speed broadband access 
throughout our country--and especially in rural America--are critical. 
I believe that rural consumers in places like Wisdom and St. Ignatius, 
Montana--each of which I visited earlier this year--have waited long 
enough for high-speed broadband, and we cannot as a nation afford to 
lose the race to 5G.
    Question. Chairman Pai, one of my top priorities has been to expand 
broadband access to our rural and unserved communities. I know that you 
share this goal and the FCC has taken many steps to fulfill this 
mission, including approving new technologies quickly, as they come to 
market. What are some of the innovative technologies that the FCC sees 
as the next generation of expanding broadband access to rural Montana?
    Answer. The Commission takes an all-of-the-above approach when it 
comes to closing the digital divide. We have provided support to 
community-based rural telecom companies to build out fiber to unserved 
areas, encouraged wireless Internet service providers and electric 
cooperatives to participate in our Connect America Fund Phase II 
auction, and made it easier for competitive entrants to gain access to 
utility poles and otherwise install high-capacity fiber. And I'm 
excited about innovative technologies that could help close the divide 
even further: under my leadership, the FCC has authorized new 
constellations of satellites that hold the potential for ubiquitous 
broadband coverage, has set up the first 5G spectrum auctions 
(necessary for 5G services, which hold potential to boost access in 
rural areas), and is studying the results of the experimental license 
granted to Alphabet for Project Loon, which aimed to use balloons to 
supply Internet access to Puerto Rico following Hurricane Maria.
    Question. Chairman Pai, as the commission continues to work on 
Mobility Fund Phase II, I have heard concerns from rural providers, 
specifically, in regard to securing VoLTE agreements, who fear that 
certain changes may hurt their ability to service our most rural areas. 
Do you commit to continue to work with all stakeholders to ensure that 
the Mobility Fund Phase II is balanced and effective?
    Answer. Yes. We have worked to ensure that this process is 
transparent, balanced, and fair to all parties and provided extensive 
outreach to assist participants. Importantly, we have adopted a 
flexible approach, and I recently circulated to my colleagues an order 
that would extend the challenge process to maximize stakeholder 
participation.
                                 ______
                                 
            Questions Submitted by Senator Chris Van Hollen
    Question. During the Restoring Internet Access NPRM there were 
reports that over 2 million comments were submitted using fake or false 
information. Some comments were fraudulently submitted using the names 
and addresses of real Americans, some of whom were not alive. Your 
colleague Commissioner Rosenworcel said half a million of the fake 
comments originated from Russian email addresses.
    Chairman Pai, the FCC's budget request includes an $8.5 million 
plus up for IT investments designed to move the old systems into modern 
day cloud operations. Does this $8.5 million investment include funding 
to update the public comment system to ensure that there are no cyber-
intrusions in our public filing system?
    Answer. The FCC recently received approval of a reprogramming 
request from the Committee to fund the redesign of ECFS, and this 
redesign will take into account the need to have a secure system.
    Question. Chairman Pai, last year Montgomery County Executive 
Leggett and others met with you to request that the FCC complete its RF 
emissions proceeding that has been open since 2013. During the FSGG 
hearing, Senator Lankford asked you:

        How are you getting information out on [health concerns] and 
        [how are you] also being attentive on any health concerns that 
        individuals may have?

    You replied:
        We are not the health experts when it comes to these issues. We 
        have consulted of course with the Federal Food and Drug 
        Administration and with others who are responsible for 
        determining what those standards should be. And we are 
        confident that our standards are ones that are healthy for 
        consumers going forward.

    When and with whom has the FCC consulted with about Federal RF 
emissions?
    Please summarize the results of your consultations with the FDA and 
any other agencies you have met with and provide the Committee with any 
analyses or relevant documents the FCC has on this matter.
    Answer. The RF exposure standards in our rules have been supported 
by the Federal agencies with health expertise and the standards are 
similar to those used around the world. These standards protect the 
general population from any type of transmitter--whether it is 4G, 5G, 
Wi-Fi, or any other kind of radio transmitter. We are working with the 
Food and Drug Administration as well as other Federal partners that 
provide health standards on these issues. Most recently, Dr. Jeffrey 
Shuren, head of the U.S. Food and Drug Administration's Center for 
Devices and Radiological Health released an announcement related to 
this issue: https://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/
ucm595144.htm. Among other things, he said, ``Based on this current 
information, we believe the current safety limits for cell phones are 
acceptable for protecting the public health.''
    Question. You state your ``confidence'' in the standards. Will you 
commit to conclude the RF study and release its findings publicly 
within 6 months?
    Answer. Because our review process is dependent on the reviews of 
our Federal partners, I cannot commit to a particular timeline. 
Nonetheless, I do hope to finish our work in the near term.
    Question. The 5G rollout promises to connect Americans like never 
before. Municipalities in Maryland are working with providers to ensure 
that both rural and urban communities across the State are included and 
covered.
    Do you think cities and counties should be able to negotiate 
buildout to underserved areas or support for digital inclusion, in 
exchange for use of public property?
    Answer. The Commission's Broadband Deployment Advisory Committee 
recently and unanimously approved a Municipal Model Code that details 
what cities and counties should be able to do to facilitate deployment 
and close the digital divide. Especially important for every level of 
government is the need to reduce regulatory barriers to deployment and 
consider providing support to fund buildout where there is no business 
case. And these initiatives work hand in hand, for every dollar saved 
through the avoidance of unnecessary regulatory barriers and taxes in 
our cities is a dollar that can be used to expand access in our rural 
communities that have been too long left behind.
                                 ______
                                 
               Questions Submitted to Hon. Joseph Simons
             Questions Submitted by Senator James Lankford
                           contact lens rule
    Question. One thing I very much appreciate about the FTC is that it 
likes to periodically take a look at its rules to make sure that they 
are up-to-date, effective, and not overly burdensome. As we briefly 
discussed at the hearing, I understand that you all are now in the 
middle of just such a review of the Contact Lens Rule. I understand 
that the Commission has issued a proposed rule that would require all 
50,000 practicing eye doctors in the country to obtain from each of the 
40 million or so contact lens wearers signed documents vouching that 
their eye doctor has followed the law by giving them a copy of their 
contact lens prescription. The rule would also require that the doctors 
keep these forms on file for 3 years to aid in any future Federal 
investigation. According to the FTC's own figures, its proposed new 
requirement would add about $10.5 million in additional costs. Eye 
doctors have told me that it could cost roughly $18,000 per doctor, per 
year to comply. I understand that the FTC has issued a total of 55 
warning letters to contact lens prescribers within the last decade and 
that 2017 Freedom of Information Act data shows that the Commission 
received 300 or so complaints over the last 5 years out of nearly 200 
million prescriptions issued. While I share the Commission's commitment 
to ensuring choice and competition in the contact lens market, the 
current system seems to be working. Is this new broad mandate really 
necessary? Is there possibly a less burdensome way to ensure maximum 
doctor compliance? Frankly, it worries me the new costs that we could 
be could be saddling on thousands of small businesses in Oklahoma and 
across the country.
    Answer. The Contact Lens Rule (Rule) was enacted to implement the 
requirements of the Fairness to Contact Lens Consumers Act. The statute 
and the Rule require the automatic release of a contact lens 
prescription to the patient upon completion of a lens fitting, or at 
the end of the examination if there is no change in the prescription, 
in order to facilitate consumers' ability to shop around for contact 
lenses. Commenters have cited evidence suggesting that many contact 
lens consumers are not receiving their prescription as required by the 
Rule, either because they are not receiving their prescription at all, 
or because they do not receive it until they request it. Prescriber 
compliance with the automatic release requirement is critical to 
maximizing the Rule's intended competitive benefits.
    As part of its regular program to periodically review all its rules 
and guides, in September 2015 the Commission published a Federal 
Register notice generally requesting comments on the Rule, its costs 
and benefits, and the need for any amendments. Six hundred sixty 
comments were received. Based on review of the comments, the Commission 
published a Notice of Proposed Rulemaking (NPRM) in December 2016, 
requesting comment on proposed Rule amendments. The NPRM proposed to 
amend the Rule to require prescribers to obtain a simple signed 
acknowledgment after releasing a contact lens prescription to a 
patient, and to maintain a record of the acknowledgment for 3 years. 
The NPRM also sought comments on how to streamline the acknowledgment 
requirement to minimize the costs imposed on eye doctors. The purpose 
of the proposed amendment was to enhance both compliance and our 
ability to enforce the Rule (by providing a record that the 
prescription was given out). The Commission received over 4,100 
comments.
    The Commission held a workshop on March 7, 2018 to collect 
additional information on various Rule-related issues, including the 
proposal to require the signed acknowledgement. The public comment 
period closed on April 6, 2018. We received approximately 3,500 
comments. Based on the additional information from the workshop and the 
public comments, staff is considering how best to increase prescriber 
compliance with the Rule without imposing unnecessary burdens on 
prescribers.
                    pharmacy benefit managers (pbms)
    Question. My constituents have expressed numerous concerns 
regarding the anticompetitive effects of continued consolidation in 
pharmacy benefits management (PBM) industry, which is dominated by 
three behemoth healthcare companies that control nearly 80 percent of 
the market. They have told me that consolidation has reduced patient 
choice, decreased access to pharmacy services and lead to higher 
prescription drug costs paid by plan sponsors and consumers. How should 
the FTC evaluate and address these concerns as it reviews ongoing 
consolidation in this market? How would you ensure that purported 
merger efficiencies would be passed on to plan sponsors and consumers? 
Would you be willing to review consummated mergers in this industry to 
assess their impact on plan sponsors and consumers?
    Answer. As you know, scrutiny of competitive issues relating to 
PBMs is part of the agency's ongoing mission to promote competition in 
healthcare. The FTC has examined the conduct of PBMs in various 
contexts, including during merger investigations, and as part of broad-
based hearings on healthcare competition. Recently, the FTC hosted a 
workshop with the FDA to examine pharmaceutical distribution practices, 
including the role of intermediaries such as PBMs and Group Purchasing 
Organizations (GPOs). We held the workshop to deepen our understanding 
of various players in the pharmaceutical industry. In addition to 
presentations by experts in healthcare policy and economics, we also 
received over 300 public comments as part of the workshop, which 
identified additional areas of concern. Materials related to the 
workshop can be found on the FTC's website.\1\
---------------------------------------------------------------------------
    \1\ FTC Workshop, Understanding Competition in Prescription Drug 
Markets: Entry and Supply Chain Dynamics (Nov. 8, 2017), https://
www.ftc.gov/news-events/events-calendar/2017/11/
understanding-competition-prescription-drug-markets-entry-supply.
---------------------------------------------------------------------------
    We understand that there are concerns about PBM concentration and 
PBM practices. We are committed to bringing enforcement actions against 
any company, including a PBM, that violates the laws we enforce.
    Question. The PBMs set the rates retail pharmacies charge insured 
consumers as well as the reimbursement rates they pay the retail 
pharmacies with which they compete. Most PBMs own proprietary 
pharmacies (mail order and/or specialty pharmacies) that compete with 
retail pharmacies. It is my understanding that many PBMs offer plan 
designs that either force or incentivize consumers to use their 
proprietary pharmacies for certain prescriptions. I have also heard 
that recently one of the largest PBMs, which also owns thousands of 
retail pharmacies, dramatically cut reimbursement rates to pharmacies 
and within days sent solicitations to purchase those same stores, 
acknowledging how difficult it was for the pharmacies to stay in 
business. How should the FTC assess such apparent conflicts of 
interest?
    Answer. The Medicare Modernization Act of 2003 asked the FTC to 
examine issues that arise when PBMs operate mail-order pharmacies. 
Specifically, we examined concerns that although insurance plan 
sponsors rely on PBMs to manage and lower the costs of pharmacy 
benefits offered by the plans, a PBM might have the incentive to 
increase costs and generate additional profits by steering business 
through their own mail-order pharmacy. We collected data and assessed 
whether a PBM that owns a mail-order pharmacy acts in a manner that 
maximizes competition and results in lower prescription drug prices for 
its plan sponsor members.
    The 2005 FTC report, sometimes referred to as the PBM Conflict of 
Interest Study, looked at both claims-level and aggregate data on 
prices, generic substitution and dispensing rates, savings due to 
therapeutic drug switches, and repackaging practices. The report 
concluded that, at that time, there was strong evidence that PBMs' 
ownership of mail-order pharmacies generally did not disadvantage plan 
sponsors.\2\
---------------------------------------------------------------------------
    \2\ FTC Report, Pharmacy Benefit Managers: Ownership of Mail-Order 
Pharmacies (Aug. 2005), https://www.ftc.gov/sites/default/files/
documents/reports/pharmacy-benefit-managers-ownership-mail-order-
pharmacies-federal-trade-commission-report/050906pharmbenefitrpt_0.pdf.
---------------------------------------------------------------------------
    As stated above, we are aware of continued concerns with PBM 
practices, including alleged self-dealing. We are always open to 
receiving information about these concerns.
    Question. More and more transactions in the healthcare industry are 
vertical in nature such as the pending CVS/Aetna and Cigna/Express 
Scripts mergers. Please explain how you believe the FTC should evaluate 
these transactions and how it can ensure that plan sponsors and 
consumers will continue to have competitive choices.
    Answer. Without commenting on the specific mergers that are 
currently under review by the Department of Justice, vertical mergers 
are subject to review under Section 7 of the Clayton Act, which 
prohibits mergers where the effect of the acquisition may be 
substantially to lessen competition or tend to create a monopoly. The 
antitrust agencies have challenged vertical mergers over concerns that 
these transactions would give the merged firm the ability and incentive 
to disfavor unintegrated rivals in upstream or downstream markets, and 
through such means to harm competition. The Commission recently 
challenged a vertical merger between Northrup Grumman and Orbital ATK. 
There, the Commission required Northrup Grumman to supply solid rocket 
motors on a non-discriminatory basis to unintegrated rivals competing 
to supply the Department of Defense with integrated missile systems. 
Without such a remedy, the vertical merger would have permitted the 
combined firm to raise the price of solid rocket motors to other firms 
competing for DoD missile contracts and ultimately harm DoD. The FTC 
has previously challenged vertical mergers involving PBMs. For 
instance, in the 1999 merger of Merck & Co., Inc. and Medco Health 
Solutions, the Commission challenged the transaction over concerns that 
Merck could favor its own drugs on Medco's PBM formulary and as a 
result increase prices to consumers for certain drugs. (Merck & Co., 
Inc., 127 F.T.C. 156 (final order issued Feb. 18, 1999)). Where a 
merger creates a likelihood of harm based on the discriminatory 
treatment of rivals, structural relief is the strongly preferred 
approach to prevent that harm.
    Question. I have concerns with the lack of PBM transparency and its 
impact on plan sponsors and consumers. This lack of transparency has 
enabled PBMs to increase profits and market share at the expense of 
plan sponsors and consumers. Given continued consolidation and the 
growing negotiation leverage that PBMs command in the market, what role 
should transparency play to enhance competition and consumer 
protections?
    Answer. FTC staff has commented on proposals to increase 
transparency in healthcare markets. These comments cautioned that not 
all transparency efforts benefit consumers, and some may actually 
dampen competition by giving competitors access to competitively 
sensitive information they would not otherwise have. In general, the 
FTC staff supports laws (such as those that exist in many States) that 
increase consumer access to relevant information about healthcare 
products and services they may buy. However, laws that require the 
public disclosure of competitively sensitive information, including 
information related to price and cost, may chill competition by 
facilitating or increasing the likelihood of unlawful collusion among 
competitors. In addition, disclosure laws may undermine the 
effectiveness of selective contracting by health plans, an approach 
that generally reduces healthcare costs and improves overall value in 
the delivery of healthcare. The competitive risks are especially great 
if information is available to competing healthcare providers, 
especially in highly concentrated markets where competition among 
providers is already limited.\3\
---------------------------------------------------------------------------
    \3\ See FTC Staff Comment Regarding Amendments to the Minnesota 
Government Data Practices Act Regarding Health Care Contract Data, 
Which Would Classify Health Plan Provider Contracts As Public Data 
(June 2015), https://www.ftc.gov/policy/advocacy/advocacy-filings/2015/
06/ftc-staff-comment-regarding-amendments-minnesota-government.
---------------------------------------------------------------------------
                                 ______
                                 
              Questions Submitted by Senator John Boozman
    Question. According to the CDC, nearly 1 in 5 contact lens-related 
eye infections reported to the FDA's Federal database involved a 
patient who experienced permanent eye damage, including scarred cornea, 
needed a corneal transplant, or otherwise suffered a reduction in 
vision. These contact lens-related eye infections can lead to long-
lasting eye damage but are often preventable with proper adherence to 
safe contact lens use and a doctor's oversight. FDA records indicate 
that from 2005-2015 there were 1,075 incidences of permanent vision 
loss related to improper contact lens use. Given the risk of permanent 
vision loss for contact lens wearers, what is the FTC's role in 
regulating the safe use of medical devices? How does the FTC work with 
other health-focused regulators, like the FDA, in determining the 
effect FTC rulemaking may have on patient safety?
    Answer. The FTC's role in regulating contact lenses is limited to 
enforcing and promoting compliance with the Contact Lens Rule, which 
promotes choice and competition in the contact lens marketplace. The 
FTC does not directly regulate medical devices such as contact lenses, 
nor the conditions under which they are prescribed. At the same time, 
prescriber and seller compliance with the Rule's requirements promotes 
the safe use of contact lenses. To ensure compliance, the FTC has taken 
law enforcement action against contact lens sellers who violate the 
Rule.\4\ Our settlement orders provide injunctive relief that, among 
other things: prohibits the defendants from selling contact lenses 
without obtaining a prescription from a consumer and without verifying 
prescriptions by communicating directly with the prescriber; and 
requires defendants to maintain records of prescriptions and 
verifications. In addition, the FTC has sent numerous warning letters 
to both sellers and prescribers that potentially violated the Contact 
Lens Rule. We will continue to monitor the marketplace and will take 
action against violations of the Contact Lens Rule as appropriate.
---------------------------------------------------------------------------
    \4\ See, e.g., U.S. v. Kim, No. 1:11-cv-05723 (E.D.N.Y. Nov. 28, 
2011), https://www.ftc.gov/
enforcement/cases-proceedings/112-3043/buyexclusivenet-gene-kim-us; 
U.S. v. Royal Tronics, Inc, No. 0:11-cv-62491 (S.D. Fla. Nov. 28, 
2011), https://www.ftc.gov/enforcement/cases-proceedings/112-3044/
royal-tronics-inc-dba-mycandyeyescom-jamil-hindi-us; U.S. v. Thy Xuan 
Ho, No. 1:11-cv-03419 (D. Minn. Nov. 28, 2011), https://www.ftc.gov/
enforcement/cases-proceedings/112-3042/mycutelenscom-thy-xuan-ho-aka-
brandon-lee-us.
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    The Commission routinely works with the FDA in this area. For 
example, in 2011, the FTC and the FDA jointly warned over 200 sellers 
of contact lenses about their obligations under the Contact Lens Rule. 
In addition, we have consulted with the FDA on issues relating to 
safety of contact lenses, and a representative from the FDA spoke at 
the FTC's March 7, 2018, workshop ``The Contact Lens Rule and the 
Evolving Contact Lens Marketplace.'' The FTC has also worked with the 
CDC on its Contact Lens Health campaigns to educate consumers about the 
Rule; the need for a prescription for all lenses, including non-
corrective lenses; and safe wear and care habits. A representative from 
the CDC also participated in the FTC's March 2018 workshop to address 
the issue of contact lens safety.
                                 ______
                                 
              Questions Submitted by Senator Steve Daines
    Question. Chairman Simons, the FTC recently charged a group of bad 
actors for misleading consumers who were booking hotels online. I want 
to commend the commission for their actions. This issue is a growing 
problem that has major consequences on Montana's tourist economy. I 
have introduced the bipartisan Stop Online Booking Scams Act, which 
tackles this issue and sets important transparency requirements to 
protect consumers. Do you share my concerns and would you commit to 
working with me to stop the proliferation of online booking scams?
    Answer. I share the underlying concerns about deceptive online 
travel sites. False or misleading information about hotel booking sites 
can harm both consumers and competition. Protecting consumers as they 
use and benefit from new technologies, such as those made available to 
online shoppers for hotel and other travel services, is a top FTC 
priority.
    We would be happy to work with you on legislation to address online 
booking fraud. The Commission commented on the legislation you 
introduced, S. 1164, in its 2017 Report to Congress on the Online Hotel 
Booking Market.\5\ The Report supported the underlying concerns of the 
legislation, and recommended that the proposed bill be modified to 
ensure that it does not impose undue burdens on legitimate businesses 
or unintentionally exclude sites it may intend to cover. The Commission 
offered similar comments in testimony presented in 2016.\6\
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    \5\ FTC Report, The Online Hotel Booking Market: A Report to 
Congress on Recommended Enforcement Actions Against Deceptive Marketers 
Engaging in the Online Hotel Booking Market and Appropriate Remedies to 
Apply in this Area (Aug. 2017), https://www.ftc.gov/reports/online-
hotel-booking-market-federal-trade-commission-report-congress-
recommended-enforcement.
    \6\ Prepared Statement of the Federal Trade Commission on 
``Legislative Hearing on 17 FTC Bills'' before the Committee on Energy 
and Commerce, Subcommittee on Commerce, Manufacturing, and Trade, 
United States House of Representatives (May 24, 2016), www.ftc.gov/
public-statements/2016/05/prepared-statement-federal-trade-commission-
legislative-hearing-seventeen. The Commission's testimony, among other 
things, commented on H.R. 4526, which was introduced in 2016 and is 
virtually identical to S. 1164.
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    Question. Chairman Simons, according to a recent study the world 
creates 44 exabytes of new data each day. This huge amount of data 
creates unique challenges for the FTC to help balance innovation, 
privacy and competition. Further, we are seeing a trend in a select 
number of companies controlling vast amounts of data and market share. 
Do you see a need to hire more specialists who focus on big data and 
big data economics to address these challenges?
    Answer. I agree that, in today's data-driven marketplace, it is 
important that the FTC have sufficient technical, policy, and economic 
expertise to explore the challenges associated with big data. On the 
technical front, the FTC has an Office of Technology, Research, and 
Investigation (OTech), composed of investigators, technologists, and 
lawyers. Among other things, OTech conducts original research on 
technology and big data related projects.\7\ On the policy front, the 
Commission held a workshop and issued a report in 2016, which discussed 
potential benefits of big data, highlighted challenges such as lack of 
transparency, and described how current laws may apply to the use of 
big data.\8\ In addition, the FTC's Bureau of Economics has conducted a 
host of relevant research, including several reports on the accuracy of 
data collected by credit bureaus.\9\ All of our offices work together 
to solicit additional original academic research on big data topics, 
including through our annual PrivacyCon event.\10\ This outside 
research further informs our enforcement and policy efforts.
---------------------------------------------------------------------------
    \7\ For example, OTech has produced original research on the 
practice of cross-device tracking and the tracking of data online. See 
Justin Brookman et al., Cross-Device Tracking: Measurement and 
Disclosures, PROC. ON PRIVACY ENHANCING TECH. 113, 117-22 (2017), 
https://petsymposium.org/2017/papers/issue2/paper29-2017-2-source.pdf; 
Dan Salsburg and Tina Yeung, Tracking the Use of Leaked Consumer data, 
May 2017 https://www.ftc.gov/system/files/
documents/public_events/987523/ftc-leakeddataresearch-slides.pdf.
    \8\ FTC Report, Big Data: A Tool for Inclusion or Exclusion? 
Understanding the Issues (Jan. 2016), https://www.ftc.gov/system/files/
documents/reports/big-data-tool-inclusion-or-exclusion-
understanding-issues/160106big-data-rpt.pdf.
    \9\ See FTC, Report to Congress Under Section 319 of the Fair and 
Accurate Credit Transactions Act of 2003 (Dec. 2012), https://
www.ftc.gov/sites/default/files/documents/reports/section-319-fair-and-
accurate-credit-transactions-act-2003-fifth-interim-federal-trade-
commission/130211factareport.pdf. FTC, Report to Congress Under Section 
319 of the Fair and Accurate Credit Transactions Act of 2003 (Jan. 
2015), https://www.ftc.gov/system/files/documents/reports/section-319-
fair-accurate-credit-transactions-act-2003-sixth-interim-final-report-
federal-trade/150121factareport.pdf.
    \10\ See PrivacyCon 2018, https://www.ftc.gov/news-events/events-
calendar/2018/02/privacycon-2018.
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    From a competition perspective, the FTC generally views data as we 
would any other asset. In some markets, data is the product that is 
sold to others, such as a database. In other markets, data is a key 
input to a product or service. The idea that data may have competitive 
significance or strategic importance is not new. For instance, the FTC 
has challenged several mergers involving data, applying our standard 
merger analysis framework.\11\ In cases involving data, the FTC often 
alleges harm to innovation as an anticompetitive effect of the merger.
---------------------------------------------------------------------------
    \11\ See, e.g., Reed Elsevier NV, No. C-4257 (complaint issued 
Sept. 15, 2008); FTC v. CCC Holdings, Inc., Civ. No. 1:08-CV-02043 
(D.D.C. Nov. 26, 2008); CoreLogic, Inc., No. C-4458 (complaint issued 
Mar. 24, 2014); CDK Global, Inc., Dkt. 9382 (complaint issued Mar. 19, 
2018; dismissed Mar. 26, 2018 after parties abandoned merger).
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    In terms of hiring, over the past few years, the FTC has hired 
several lawyers, technologists, and investigators with a technology 
background. I expect this trend to continue. Expertise and familiarity 
with big data issues, technology, markets, and economics will certainly 
be an important factor in hiring decisions.
                                 ______
                                 
               Questions Submitted by Senator Jerry Moran
    Question. Following the FTC's Memorandum of Understanding with the 
FCC in implementing the recent 2017 Restoring Internet Freedom Order, 
do you agree that the FTC has the necessary enforcement authorities 
provided under Section 5 of the FTC Act to protect consumers?
    Answer. We have authority under Section 5 of the FTC Act to address 
unfair or deceptive acts or practices, and unfair methods of 
competition. I intend to use our authority aggressively to address 
violations of the laws we enforce. If I find that we do not have 
adequate authority to protect consumers and competition, I will come 
back to Congress to seek it.
    Question. How would you describe the IT modernization priorities of 
the FTC? Are there specific proposals that this committee should be 
aware of?
    Answer. The FTC's modernization priorities are contained in an 
Information Resource Management Plan (IRM) that was approved by the 
FTC's Information Technology Governance Board, which comprises senior 
agency officials. The IRM prioritizes IT investments in security, 
network modernization, and support for cloud based e-discovery 
services. Roughly half of the FTC's base IT spending already provides 
modern, cloud-based services to the agency. The FTC is in the midst of 
a multi-year effort to modernize its remaining legacy IT systems, so 
the agency can continue to address its need to process ever-increasing 
volumes of information. Last year, the agency addressed network 
security concerns when it adopted the use of Personal Identity 
Verification (PIV) cards by its staff, as well as the use of GSA 
contract services for network security. More recently, the FTC 
sponsored a cloud services provider specializing in litigation support 
services through FedRAMP, to help meet our need for modern document 
review tools. The FTC also issued a multi-award Blanket Purchase 
Agreement to support the next phases of our IT modernization efforts.
    Question. How do FTC enforcement actions that challenge the data 
security practices of companies impact the commission's ability to 
protect consumers?
    Answer. The FTC uses its existing authority under the FTC Act to 
protect consumers from unfair or deceptive data security practices. To 
date, the Commission has brought more than 60 cases alleging that 
companies failed to implement reasonable safeguards for the consumer 
data they maintain. For example, the Commission recently announced an 
expanded settlement with ride-sharing platform company Uber 
Technologies related to allegations that the company failed to 
reasonably secure sensitive consumer data stored in the cloud. As a 
result, an intruder allegedly accessed personal information about Uber 
customers and drivers, including more than 25 million names and email 
addresses, 22 million names and mobile phone numbers, and 600,000 names 
and driver's license numbers.\12\ The FTC also reached a settlement 
with one of the world's largest computer manufacturers, Lenovo, related 
to allegations that the company pre-loaded software onto some of its 
laptops that compromised security protections in order to deliver ads 
to consumers.\13\
---------------------------------------------------------------------------
    \12\ Uber Technologies, Inc., Matter No. 152-3054 (Apr. 2018) 
(proposed order), https://www.ftc.gov/enforcement/cases-proceedings/
152-3054/uber-technologies-inc.
    \13\ Lenovo, Inc., No. C-4636 (Jan. 2018), https://www.ftc.gov/
enforcement/cases-proceedings/152-3134/lenovo-inc.
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    At the same time, I believe the FTC could use additional tools to 
protect consumers. For example, under the FTC Act, the FTC does not 
currently have the authority to seek civil penalties against first-time 
violators. I support comprehensive data security legislation that would 
strengthen the FTC's existing data security authority and require 
companies, in appropriate circumstances, to provide notification to 
consumers when there is a security breach. Legislation in both areas--
data security and breach notification--should give the FTC the ability 
to seek civil penalties to help deter unlawful conduct, jurisdiction 
over non-profits and common carriers, and the authority to issue 
implementing rules under the notice and comment rulemaking procedures 
of the Administrative Procedure Act, 5 U.S.C. Sec. 553. The FTC has 
long recommended these additional tools on a bipartisan basis, and I 
urge Congress to enact legislation to give these tools to the agency.
    Question. Your testimony mentioned the innovative security research 
that the FTC has promoted through its annual PrivacyCon event and other 
related workshops. Can you further describe how the agency can 
facilitate improved data security practices across industries by 
providing a platform to innovators in the data security field?
    Answer. The FTC uses three main strategies to facilitate improved 
data security practices across industries. First, the FTC deters poor 
data security practices by bringing enforcement actions against 
companies that engage in unfair or deceptive data security practices. 
Some examples are discussed above. Second, the FTC provides businesses 
with a host of guidance. In 2015, we announced our Start with Security 
initiative, in which we set forth ten lessons from our numerous data 
security enforcement actions.\14\ Last year, we provided additional 
guidance to businesses through our Stick with Security initiative, 
which was based on cases we have brought, cases we have closed, and 
frequently asked questions we receive from companies.\15\
---------------------------------------------------------------------------
    \14\ FTC Business Guide, Start with Security: A Guide for Business 
(June 2015), https://www.bulkorder.ftc.gov/system/files/publications/
pdf0205-startwithsecurity.pdf.
    \15\ FTC Blog Series, Stick With Security (Oct. 2017), https://
www.ftc.gov/tips-advice/business-center/guidance/stick-security-
business-blog-series.
---------------------------------------------------------------------------
    Finally, the Commission engages in policy discussions, one goal of 
which is to provide a platform for innovators in the data security 
field. In addition to PrivacyCon, another example is last year's IoT 
Home Inspector Challenge, a public competition aimed at spurring the 
development of security update-related IoT tools.\16\ The winning 
contestant developed a tool to enable users with limited technical 
expertise to scan their home Wi-Fi and Bluetooth networks to identify 
and inventory connected devices in their homes. The tool would flag 
devices with out-of-date software and other common vulnerabilities and 
provide instructions to consumers on how to update their devices.\17\
---------------------------------------------------------------------------
    \16\ See FTC Notice of IoT Home Inspector Challenge, 82 Fed. Reg. 
840-47 (Jan. 4, 2017), https://www.ftc.gov/system/files/documents/
federal_register_notices/2017/01/iot_frn_pub_
010417_-_2016-31731.pdf.
    \17\ FTC Press Release, FTC Announces Winner of its Internet of 
Things Home Device Security Contest (July 26, 2017), https://
www.ftc.gov/news-events/press-releases/2017/07/ftc-announces-winner-
its-Internet-things-home-device-security.
---------------------------------------------------------------------------
    Question. In 2016, Congress enacted the Better Online Ticket Sales 
(BOTS) Act to empower the FTC and State attorneys general to go after 
people who use computer programs--called ``bots''--to seize up large 
portions of ticket inventories for live events, and re-sell them on the 
secondary market. As you know, this law seeks to aid our constituents 
in gaining access quality tickets at face value. However, laws are not 
effective unless they are enforced. We have provided the FTC with a 
tool, which we believe should be used rigorously to protect consumers. 
Can you please provide an update on the commission's enforcement 
actions against the use of ``bots'' since the enactment of the law?
    Answer. The FTC is committed to enforcing the Better Online Ticket 
Sales (BOTS) Act. We appreciate this new authority and are looking for 
appropriate targets. However, the FTC's investigations are 
confidential, so we cannot disclose publicly the status of any BOTS Act 
investigations. Prior to enactment of the BOTS Act, the FTC had taken 
action in cases that involved other problematic ticket-selling 
practices. In 2010, the FTC settled allegations that Ticketmaster 
deceptively directed consumers seeking tickets to its resale site, 
TicketsNow.\18\ In 2014, the FTC settled cases with several ticket 
resellers, alleging that they used deceptive search engine ads linking 
to websites designed to look like the official venues.\19\
---------------------------------------------------------------------------
    \18\ See FTC v. Ticketmaster L.L.C., No. 1:10-cv-1093 (N.D. Ill. 
Feb. 18, 2010), https://www.ftc.gov/enforcement/cases-proceedings/092-
3091/ftc-v-ticketmaster-llc-limited-liability-
company-ticketmaster.
    \19\ See FTC v. TicketNetwork, Inc. et al., No. 3:14-cv-1046 (D. 
Conn. Aug. 12, 2014), https://www.ftc.gov/enforcement/cases-
proceedings/132-3203-132-3204-132-3207/ticketnetwork-inc-ryadd-inc-
secureboxoffice.
---------------------------------------------------------------------------
    To advance the aims of the BOTS Act, the FTC has engaged with 
primary ticket sellers, ticket resellers, foreign agencies, and State 
attorneys general about strategies for stopping bots. Also, the FTC has 
published two advisories on the BOTS Act to educate consumers \20\ and 
businesses \21\ about their rights and obligations under the Act.
---------------------------------------------------------------------------
    \20\ FTC Consumer Blog, Battling Ticket Bots (Aug. 14, 2017), 
https://www.consumer.ftc.gov/blog/2017/08/battling-ticket-bots.
    \21\ FTC Business Blog, BOTS Act: That's The Ticket! (Apr. 7, 
2017), https://www.ftc.gov/news-events/blogs/business-blog/2017/04/
bots-act-thats-ticket.
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                                 ______
                                 
            Questions Submitted by Senator Patrick J. Leahy
    Question. You noted that you are conducting a study of the FTC's 
resources to ensure it has what it needs to appropriately oversee the 
broadband industry following repeal of the FCC's 2015 net neutrality 
rules.
  --When do you expect to conclude this study?
  --When do you expect to share the results with this Committee?
    Answer. I expect to have an update for the Committee soon and, if 
necessary, a follow-up request for additional resources.
    Question. The FCC has traditionally been considered the expert 
agency for telecommunications matters, which is why I believe it is the 
correct agency to enforce net neutrality rules. You indicated at the 
hearing that the FCC may end up lending the FTC expert technical staff 
to assist it in the enforcement of open Internet principles.
  --Why would the FCC need to lend the FTC expert technical staff if 
        the FTC is adequately prepared to step in and enforce open 
        Internet principles?
  --How many network engineers and other telecommunications experts 
        does the FTC currently employ?
  --How many cases has the FTC brought against ISPs for discriminatory 
        practices such as discrimination of Internet traffic?
    Answer. The FTC is committed to working with the FCC to prevent 
unfair, deceptive, or anticompetitive conduct by Internet service 
providers (ISPs) or edge providers that would harm consumers. I have 
spoken with Chairman Pai about this issue, and we share this common 
commitment to protect consumers going forward.
    To supplement the FTC's existing expertise in competition and 
consumer protection law, we will seek input from FCC staff, when 
appropriate, to ensure that the FTC can effectively combat unfair or 
deceptive conduct by ISPs. To that end, in December 2017, the 
Commission signed a Memorandum of Understanding with the FCC, which 
provides a framework and a process for sharing information that will 
help us protect consumers.\22\ Each agency has its own legal, 
technical, and investigative expertise and experience related to ISPs, 
and the MOU sets out each agency's commitment to the other. For 
instance, under the MOU, the agencies will discuss potential 
investigations against ISPs that could arise under each agency's 
jurisdiction, and coordinate such activities to promote consistency in 
law enforcement and to prevent duplicative or conflicting actions.
---------------------------------------------------------------------------
    \22\ See Restoring Internet Freedom: FCC-FTC Memorandum of 
Understanding (Dec. 2017), https://www.ftc.gov/policy/cooperation-
agreements/restoring-Internet-freedom-fcc-ftc-
memorandum-understanding.
---------------------------------------------------------------------------
    While the FTC brought significant enforcement actions against ISPs 
for unfair or deceptive conduct prior to the FCC's reclassification of 
these companies as common carriers, the FTC has not challenged ISP 
conduct under the antitrust laws recently, although it has reviewed a 
number of mergers in Internet-related markets. In addition, the FTC has 
used other tools to monitor conduct by ISPs. For instance, FTC staff 
studied competition policies that directly affect ISPs in its 
comprehensive 2007 report, Broadband Connectivity Competition 
Policy.\23\
---------------------------------------------------------------------------
    \23\ FTC, Broadband Connectivity Competition Policy Staff Report 52 
(June 2007), https://www.ftc.gov/reports/broadband-connectivity-
competition-policy-staff-report.
---------------------------------------------------------------------------
    The FTC has experience and expertise in investigating 
anticompetitive conduct by technology firms and has brought numerous 
enforcement actions alleging consumer harm from unilateral conduct.\24\ 
When necessary, in these markets and others, we seek data and 
information from industry and technical experts. I strongly believe 
that, going forward, case-specific antitrust enforcement focused on 
consumer harm will protect consumers from anticompetitive conduct by 
ISPs and other firms in this fast-paced industry.
---------------------------------------------------------------------------
    \24\ See, e.g. Dell Computer Corporation, No. C-3658 (May 20, 
1996), https://www.ftc.gov/
enforcement/cases-proceedings/931-0097/dell-computer-corporation; In re 
Rambus, Inc., No. 9302 (decision Aug. 2, 2006), rev'd, Rambus Inc. v. 
Federal Trade Commission, 522 F.3d 456, 468 (D.C. Cir. 2008), https://
www.ftc.gov/enforcement/cases-proceedings/011-0017/rambus-inc-matter; 
Union Oil Co. of Cal., No. 9305 (Aug. 2, 2005), https://www.ftc.gov/
enforcement/cases-
proceedings/0110214/union-oil-company-california-matter; Negotiated 
Data Solutions LLC, No. C-4234 (Sept. 23, 2008), https://www.ftc.gov/
enforcement/cases-proceedings/051-0094/negotiated-data-solutions-llc-
matter; Intel Corporation, No. 9341 (Nov. 2, 2010), https://
www.ftc.gov/
enforcement/cases-proceedings/061-0247/intel-corporation-matter; 
Victrex plc, No. C-4586 (Jul. 30, 2016), https://www.ftc.gov/
enforcement/cases-proceedings/141-0042/victrex-plc-et-al-matter; FTC v. 
Qualcomm No. 5:17-cv-00220 (N.D. Cal. Jan. 17, 2017), https://
www.ftc.gov/enforcement/cases-proceedings/141-0199/qualcomm-inc.
---------------------------------------------------------------------------
    Question. I am very concerned about the flood of robocalls that 
consumers are subjected to on a daily basis. I appreciate the work the 
FTC does to help stem the tide of unwanted and fraudulent calls; 
however, most Vermonters I speak to worry that not enough is being 
done. In your testimony, you mentioned the success of the FTC's 
robocall challenges.
  --Can you expand on why you believe these challenges were such a 
        successful tool to crack down on robocalls?
    Answer. The FTC challenges helped spur development of tools 
consumers can use to block abusive robocalls. Two winners of FTC public 
challenges--essentially innovation contests with cash prizes--have 
developed frequently used call blocking apps: Nomorobo and Robokiller. 
When the FTC held the first of these challenges in 2012, there were few 
call blocking apps on the market. Since those public challenges, the 
number and variety of call blocking apps have grown exponentially. 
Today, there are hundreds of call blocking apps available on the 
Android and iPhone platforms, as well as call blocking solutions 
available for consumers with residential VoIP telephone service.

                          SUBCOMMITTEE RECESS

    This subcommittee hearing is adjourned.
    [Whereupon, at 11:35 a.m., Thursday, May 17, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]