    [Senate Hearing 116-]
    [From the U.S. Government Publishing Office]

      FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL
                                   YEAR 2020

                                  ----------

                              TUESDAY, MAY 7, 2019

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

        The subcommittee met at 2:30 p.m., in room SD-138, Dirksen
    Senate Office Building, Hon. John Kennedy (Chairman) presiding.
        Present: Senators Kennedy, Moran, Boozman, Daines,
    Lankford, Coons, Manchin, and Van Hollen.

         FEDERAL COMMUNICATIONS COMMISSION AND FEDERAL TRADE COMMISSION

                   opening statement of senator john kennedy

        Senator Kennedy. All right, folks. The subcommittee will
    come to order.
        We are going to hear today about the fiscal year 2020
    budget requests for the FCC and the FTC. We have with us today
    our two chairmen; from the FCC, Chairman Ajit Pai, who has
    served as chairman since January of 2017. He was previously a
    commissioner on the Federal Communications Commission. He is a
    proud graduate of Harvard and Chicago Law. We also have from
    the Federal Trade Commission, Chairman Joseph Simons. He has
    been chairman since May of 2018. He was previously a partner at
    the law firm of Paul, Weiss, where undoubtedly he made more
    money. He was co-chair of the firm's Antitrust Group, and he is
    a graduate of Cornell and Georgetown Law.
        Let me say a few words, and then I will call on my
    colleague Senator Coons.
        As indicated today, we are convening the first hearing for
    the Financial Services and General Government Subcommittee for
    fiscal year 2020.
        I would like to welcome my colleague Senator Coons and all
    the Members of the subcommittee, and I am very pleased to be
    working with them.
        I look forward to us taking a collaborative approach to
    these hearings and to our fiscal year 2020 appropriations bill.
    Our subcommittee may be small dollar-wise, but we are mighty.
    And we are committed to saving taxpayer money and spending what
    we spend wisely.
        The programs and agencies funded by this subcommittee, I do
    not need to tell our two chairmen, play an important role in
    supporting the American economy, ensuring a fair and efficient
    system of justice, and promoting private-sector growth.
        The FTC is a critically important agency, and is the
    Nation's top cop on the consumer beat. We want to make sure it
    is using its resources as efficiently as possible. I do not
    mean to suggest that you are not, but that is what our
    questions will be directed toward.
        The FTC requests $312.3 million in fiscal year 2020, which
    is an increase of $2.6 million, to fulfill its mission of
    protecting consumers and promoting competition.
        We are eager to hear about the new initiatives in the FTC's
    Bureau of Competition and Bureau of Consumer Protection. We are
    also anxious to hear about your new task force to monitor
    competition and technology markets and your efforts to ensure
    consumer privacy. Welcome, Mr. Chairman.
        Today we will also talk with our chairman at the FCC about
    his agency's efforts to expand the deployment of rural
    broadband, to improve public safety, and to protect consumers.
    The President's budget proposes $335.7 million for operating
    expenses at the FCC for fiscal year 2020.
        The FCC has also identified four strategic goals for fiscal
    year 2020. Those include closing the digital divide, promoting
    innovation in the market for communication services, protecting
    consumer and public safety, and of course, improving FCC
    regulatory processes. I am looking forward to hearing how our
    friends at the FCC plan to execute these goals under their
    requested budget authority.
        I am also looking forward to hearing about the FCC's plan
    to win America's race to 5G through its ongoing and planned
    spectrum auctions, while simultaneously protecting rural
    communities and incumbent officeholders.
        I want to thank both of you again for appearing this
    morning.
        Before I ask the Ranking Member, Senator Coons, to give his
    remarks, I just want to say an additional word that occurred to
    me as I was walking over here today. It is really directed to
    all of us, particularly to our friends at the FCC.
        So-called ``net neutrality'' is critically important to the
    American people, and many reasonable people have different
    points of view on what we ought to do.
        The problem is that regardless of what one thinks about the
    correct course with respect to net neutrality, we need to pick
    a course and stick to it because it is very, very hard for
    people and consumers to comply with changing rules. It is very
    hard when we have the policy bouncing around like a ping-pong
    ball.
        This is just one person's opinion, but it is really time
    for Congress to act. We need to roll up our sleeves. I think we
    have more in common than we do not. We need to stop passing the
    buck, and we need to pass a net neutrality bill.
        With that, I will call on my colleague and esteemed Ranking
    Member, Senator Coons.

                   statement of senator christopher a. coons

        Senator Coons. Thank you, Chairman Kennedy, for convening
    this hearing today, for that opening statement, and for the
    first hearing in this Congress in which you will be the
    Chairman of the FSGG subcommittee. I look forward to working
    with you. I enjoyed a great working relationship with your
    predecessor, Senator Lankford, and my staff and I are very
    excited to begin this year's appropriation process.
        I also want to welcome our witnesses, Chairman Pai and
    Chairman Simons. Both of you testified before this subcommittee
    last year. We have stayed in touch, and it is very good to see
    both of you back here today to review your fiscal year 2020
    budget request.
        Chairman Pai, I am, as you know, concerned you are
    requesting a cut in funding.
        As your agency also takes the lead in making sure the
    United States is the global leader in 5G technology, I look
    forward to discussing whether that makes sense.
        Chairman Simons, you are requesting an increase of less
    than 1 percent, at the same time we are counting on the FTC to
    protect every American's privacy in the Internet age. I am
    going to ask whether that is realistic, given the increasing
    cost of litigation and expert witnesses.
        Chairman Pai, Chairman Simons, each of your agencies plays
    a central role in protecting Americans' privacy, as the
    Chairman referenced. These personal devices we all carry around
    with us everywhere allow us to connect and talk with loved ones
    and find the fastest route from A to B. You can even apparently
    buy a car, a home, anything on your smartphone these days.
        But they also tell companies an awful lot about us. So I am
    interested to learn, Chairman Pai, what steps the FCC has taken
    to address the sale of consumers' location on their phones.
        And, Chairman Simons, there are reports the FTC will soon
    level its largest ever fine in a case dealing with consumer
    privacy, and I want to hear how your current enforcement
    authorities are working or not and what additional authorities
    you may seek.
        I could not agree more with the Chairman's comments about
    net neutrality. I think we have had a several-year-long fight
    back and forth. It is time for us to sort it out and to
    legislate responsibly.
        On broadband, for our connected devices to work well, every
    home, no matter how rural, must be connected to the
    communications and IT systems that now drive our economy and
    our way of life. I hear about connectivity issues in the more
    rural areas of my home State. Yes, a State as small as Delaware
    does still have rural areas in Kent and Sussex Counties that
    struggle with reliable access.
        The FCC oversees the multibillion-dollar universal service
    fund, which expands access to vital communications, including
    remote health care access for systems across the country. I
    want to know what you think we should be doing to make sure
    that all American communities have access to broadband.
        Chairman, I know you are addressing this issue, but it has
    not been fixed yet, and I want to talk with you about it
    further.
        Last, let me just mention robocalls. Americans receive--I
    did not believe this number when it was first given to me--5
    billion robocalls a month. That is more than double the number
    of calls received just 2 years ago. That means someone in this
    room is going to get a robocall during this hearing, and I want
    to understand, frankly, what you are doing about this and
    whether you have sufficient resources and authorities to
    address that problem adequately.
        We have got lots to talk about, so let me stop talking, Mr.
    Chairman, and let us get on with this first hearing of this
    Congress for fiscal year 2020.
        Thank you.
        Senator Kennedy. All right. Thank you, Senator.
        Chairman Pai, I will now invite you to make your opening
    remarks.
    STATEMENT OF HON. AJIT PAI, CHAIRMAN, FEDERAL
                COMMUNICATIONS COMMISSION
        Chairman Pai. Thank you, Mr. Chairman.
        Chairman Kennedy, Ranking Member Coons, Members of the
    subcommittee, thank you for inviting me to present the FCC's
    fiscal year 2020 budget request, and I wanted to extend a
    personal thanks to each of you for taking time out of your busy
    schedules to meet with me personally about these important
    issues.
        Mr. Chairman, as you recognized, our requested spending
    level is $335,660,000, derived from regulatory fees for regular
    FCC operations, with an auction spend cap of $132,538,680.
        But, first, I would like to thank you for providing us with
    generous funding in the omnibus as well as permission to
    complete internal reorganizations to advance agency reform
    efforts.
        Additional auction funds are supporting Congress' expansion
    of the TV Broadcaster Relocation Fund to reimburse low-power
    television, TV translator, and FM radio stations for costs that
    are related to the post-Incentive Auction repack.
        We also appreciate your authorization to create the Office
    of Economics and Analytics at the FCC. We are making great
    strides, expanding and deepening the use of economic analysis
    in our decisionmaking.
        Our budget proposal for near year for regular operations is
    slightly below what we received for fiscal year 2019, and our
    auction cap is only adjusted upward for inflation. So our FTE
    level will stay the same.
        What will those 1,448 FTEs be doing? Well, in my written
    testimony, I discussed important agency priorities, such as 5G
    and public safety, but I would like to focus my oral remarks
    this afternoon on rural broadband deployment.
        The FCC's top priority is to close the digital divide. I
    have personally seen how the lack of broadband can affect rural
    communities in particular, from a bayou outside of Hammond,
    Louisiana, to the mountains of Capon Springs, West Virginia.
        I have seen how the business case for deployment too often
    does not exist without Federal help, and that is why the FCC
    has been pursuing an aggressive agenda to expand high-speed
    Internet access across rural America.
        For example, through our groundbreaking Connect America
    Fund Phase II reverse auction, we are awarding about $1.5
    billion to connect over 713,000 homes and small businesses
    nationwide with fixed broadband. This will make a big
    difference in these communities.
        Earlier this year, when I was in Seaford, Delaware, I
    visited officials from Bloosurf, a broadband provider that will
    use FCC-directed funds to connect over 5,000 unserved locations
    in Sussex County, Delaware, and the Eastern Shore of Maryland.
        And just last week, I met with representatives of electric
    cooperatives from States including Oklahoma, Alabama, Arkansas,
    and Oregon.
        Our funding will allow these electric co-ops to deliver
    gigabit fiber to previously unserved rural areas, enabling
    things like telemedicine and precision agriculture, while
    strengthening rural communities.
        Last December, we also reformed our Alternative Connect
    America Cost model, or A-CAM program. Specifically, we offered
    many small rural carriers more funding in return for deploying
    faster broadband to more rural locations.
        As a result of these offers, we announced last month that
    an additional 106,000 rural homes and small businesses will get
    faster broadband. That is a 31 percent increase in the number
    of locations receiving broadband of at least 25/3 megabit-per-
    second speeds through the A-CAM program, and the increase is
    much larger in many States, like 105 percent in Montana and 92
    percent in my home State of Kansas.
        We have also begun requiring that small rural carriers that
    still rely on the FCC's legacy mechanism provide faster
    broadband to more rural locations.
        Under the previous administration's rules, these carriers
    were only required to provide 10/1 service to about 115,000
    locations. Under our new rules, these same carriers will have
    to provide at least 25/3 broadband to more than 600,000
    locations.
        At the same time, we initiated a second round of A-CAM
    offers to these carriers. If all accept, they will have to
    provide 25/3 service to at least 1.1 million new locations,
    including over 38,000 in Oklahoma, 34,000 in Kansas, 29,000 in
    Montana, and 27,000 in Arkansas.
        Of course, we need to do more just to close the digital
    divide, and that is why, among other things, I intend in the
    coming year to establish a Rural Digital Opportunity fund.
        Currently, the FCC directs substantial amounts of money
    each year to larger carriers to deploy 10/1 broadband service
    to many rural homes and businesses under a program adopted
    during the prior administration. This program is in many
    States, including Louisiana, but in my view, 10/1 service is
    not good enough for rural America. So I intend to replace this
    program with a Rural Digital Opportunity Fund. This fund will
    distribute over $20 billion through a reverse auction to deploy
    gigabit-speed broadband to up to 4 million homes and
    businesses.
        We are taking many other steps to promote rural broadband
    deployment, from reducing regulatory barriers to fiber
    deployment to increasing funding for our rural health care
    program to enable telemedicine.
        I do not have enough time to discuss all of them now. So
    let me conclude simply by thanking our staff for the hard work
    they do each and every day and thank you for the resources you
    give us to help meet the public interest.
        I look forward to answering your questions and working with
    you and your staff in the time to come to promote the public
    interest.
        Thank you, Mr. Chairman.
        [The statement follows:]
                      Prepared Statement of Hon. Ajit Pai
        Chairman Kennedy, Ranking Member Coons, and Members of the
    Financial Services and General Government Subcommittee, thank you for
    inviting me here to present the Federal Communications Commission's
    Fiscal Year 2020 Budget Request. The Commission's Office of Management
    and Budget-designated spending level for fiscal year 2020 is
    $335,660,000, derived exclusively from regulatory fees for regular FCC
    operations, and an auction spending cap of $132,538,680.
        But before I discuss the Commission's plans for the next fiscal
    year, I want to take this opportunity to thank this subcommittee for
    its support during the prior year. We greatly appreciate your decision
    to provide us with funds above the fiscal year 2019 request, as well as
    your permission to complete internal reorganizations to advance agency
    reform efforts.
        Let me highlight a few positive impacts of this subcommittee's
    decisions.
        First, you increased auction funding by more than $17 million. The
    funds provided by this subcommittee have enabled us to meet our
    statutory deadline to complete our rulemaking to implement changes to
    the TV Broadcaster Relocation Fund and provide money to reimburse low-
    power television, TV translator, and FM radio stations impacted by the
    post-Incentive Auction spectrum repack. They have also helped us
    establish a dedicated call center and launch a public education
    campaign to assist consumers impacted by the relocation of broadcast
    stations. And they have funded monthly reports to subcommittee staff on
    our progress with respect to the repack.
        Second, you authorized two agency reorganization initiatives to
    help the Commission better carry out its mission. You approved the
    creation of the Office of Economics and Analytics, which brought
    together economists who were previously scattered throughout the
    Commission. The Office is already having a positive impact on the
    Commission's work, and going forward, I am confident that it will allow
    us to continue expanding and deepening the use of economic analysis in
    the Commission's decision-making. This subcommittee also permitted us
    to transfer the audit and enforcement responsibilities associated with
    our Equal Employment Opportunity rules from the Media Bureau to the
    Enforcement Bureau. This reorganization, which took place earlier this
    year, was supported by many civil rights organizations and will help us
    to more effectively enforce these rules.
        Third, you gave us nearly $6 million above our general request for
    fiscal year 2019, which is supporting a broad range of Commission
    efforts essential to our core mission. The FCC greatly appreciates your
    decision to return our funding to $339,000,000 in fiscal year 2019.
    This amount means a great deal to a small agency and aids our efforts
    to expand the deployment of rural broadband, improve public safety,
    foster technological innovation, protect consumers, and modernize our
    information technology.
        Turning to the future, I'd like to discuss some of the Commission's
    most important priorities for next year--priorities that the funds
    requested in this budget submission are critical to advancing.
        First, we will continue our work to secure our Nation's leadership
    in 5G, the next generation of wireless connectivity. 5G networks will
    be 100 times faster than today's networks, maybe even more. They will
    have lag times that are a tenth of what they are today. And they'll
    have much more capacity, being able to connect as many as one million
    devices per square kilometer.
        Our work on 5G will open the door to new services and applications
    that will grow our economy and improve our standard of living. Smart
    transportation networks will link connected cars--reducing traffic,
    preventing accidents, and limiting pollution. Ubiquitous wireless
    sensors will enable healthcare professionals to remotely monitor your
    health and transmit data to your doctor before problems become
    emergencies. Connected devices will empower farms to apply precision
    agriculture. And there will be more innovations that we can't even
    conceive of today.
        These breakthroughs will boost our economy. One study pegs 5G's
    potential at 3 million new jobs, $275 billion in private investment,
    and $500 billion in new economic growth.
        To realize this potential, we've developed a comprehensive strategy
    that will ``Facilitate America's Superiority in 5G Technology''; it's
    called the ``5G FAST'' plan. It has three key components: (1) pushing
    more spectrum into the marketplace; (2) promoting the deployment of
    wireless infrastructure; and (3) modernizing outdated regulations. In
    my testimony today, I'd like to concentrate on the first prong,
    spectrum.
        The applications and services of tomorrow will require much more
    bandwidth. They cannot be developed and deployed without spectrum. This
    critical resource represents the lifeblood of the communications
    industry--and with it, the future of our economy. That's why the FCC
    must continue its work to aggressively make more spectrum available for
    commercial use.
        In my testimony to this subcommittee last year, I said that the FCC
    would hold two high-band spectrum auctions during fiscal year 2019: one
    for the 28 GHz band and another for the 24 GHz band. And I noted that
    conducting these auctions successfully and promptly would be important
    to U.S. leadership in 5G.
        I am pleased to report that we have done what I said we would do.
    Our 28 GHz auction began last November and concluded this January. All
    in all, bidders won 2,965 licenses, and the auction raised $702,572,410
    in gross bids for the U.S. Treasury. Our 24 GHz auction began in March.
    The clock phase of this auction ended in April, and the assignment
    phase is currently taking place. Gross bids so far have more than
    doubled from the amount raised in the 28 GHz auction, to just short of
    $2 billion.
        While these auctions are significant accomplishments, the FCC
    cannot and will not rest on our laurels. Instead, we will continue to
    free up spectrum for commercial use. Starting on December 10, we will
    hold the largest auction in Commission history--we expect the upper 37
    GHz, 39 GHz, and 47 GHz bands will release 3.4 gigahertz of spectrum
    into the commercial marketplace. During the next fiscal year, we also
    intend to auction mid-band spectrum in the 3.5 GHz band. We will
    continue our work to make additional mid-band spectrum bands available
    for flexible use, including in the 2.5 GHz and 3.7-4.2 GHz bands.
        All in all, these auctions will free up for the commercial
    marketplace over 5 gigahertz of spectrum for flexible use. For context,
    that's more spectrum than is currently used for mobile broadband by all
    mobile broadband providers in the United States combined.
        As part of our balanced spectrum strategy, we have also been
    working to make more spectrum available for unlicensed use. Earlier
    this year, for example, we allocated over 21 gigahertz of spectrum
    above 95 GHz for unlicensed operations. And we are continuing our
    effort to open up a large amount of unlicensed spectrum in the 6 GHz
    band, proposing to safeguard incumbents with innovative technologies
    and sharing techniques that will make sure we get the most use of this
    limited, essential resource.
        The second priority I'd like to address involves our continuing
    efforts to close the digital divide. Closing the digital divide has
    been my top priority since becoming chairman. That's why last year, the
    Commission took a variety of steps to better enable the private sector
    to deploy broadband infrastructure. For example, we made it easier and
    cheaper for competitive providers to attach fiber to utility poles
    through a groundbreaking reform called ``one-touch make ready.''
        Of course, there are some areas where the business case for
    broadband deployment just won't exist--no matter how much red tape we
    cut. These are typically rural areas with sparser populations and lower
    incomes. The FCC manages programs to connect these rural communities
    through what is called the Universal Service Fund (USF). And we've been
    aggressively taking action to maximize the USF's impact--to stretch
    scarce dollars as far as we can.
        Last year, we finished a landmark reverse auction called Connect
    America Fund Phase II. Through this novel approach, we're awarding
    about $1.5 billion to connect over 713,000 homes and businesses
    nationwide. Before the auction, we identified parts of our country that
    were unserved by broadband. This was so that we could target funding to
    leverage--not displace--private capital expenditures. We didn't want to
    fund overbuilding. We also made sure the auction was open to providers
    of all types, including rural telecom companies, cable, fixed wireless,
    and satellite companies, ands well as electric utilities. This ensured
    that there would be plenty of competition.
        The outcome of the auction was a tremendous success. We distributed
    funding much more efficiently thanks in part to intermodal, competitive
    bidding, saving $3.5 billion from the $5 billion price we initially
    thought would be required to connect these unserved areas. We also
    ensured that 99.7 percent of the winning bids would provide consumers
    with service of at least 25/3 Mbps. And we set a level playing field
    that enabled a variety of entities, from fixed wireless to electric
    utilities, to win.
        Moreover, last December, we implemented reforms to the FCC's
    Alternative Connect America Cost Model (A-CAM). As a result, a total of
    186 small, rural carriers participating in the A-CAM program have now
    accepted $65.7 million in additional annual support over the next
    decade to provide 106,000 more rural homes and small businesses with
    25/3 Mbps broadband service. This represents a 31.8 percent increase in
    the number of locations that will have high-quality service available
    through the FCC's A-CAM program. And the increase is much larger in
    many States, such as 105.4 percent in Montana and 92.4 percent in my
    home State of Kansas.
        In December, for the first time we also began requiring that small,
    rural carriers that continue to rely on the Commission's legacy, cost-
    based support mechanism provide 25/3 Mbps broadband service to specific
    numbers of rural homes and small businesses in their service areas.
    Under the prior administration's rules, these carriers were only
    required to provide 10/1 Mbps service to 115,441 locations; under our
    new rules, these same carriers will have to provide 25/3 Mbps broadband
    to at least 600,535 locations. At the same time, we also initiated a
    second round of A-CAM offers of fixed, model-based support for a term
    of 10 years to these carriers, in exchange for building out 25/3 Mbps
    broadband to all fully-funded locations in their service areas. If all
    legacy-reliant carriers accept the new A-CAM offers, they will be
    required to provide 25/3 Mbps service to at least 1,126,082 locations.
        Last year, we took other steps through the Fund to help close the
    digital divide as well. For example, we increased the annual cap on
    rural healthcare program spending by nearly 43 percent, to $571 million
    per year for that funding year--the first increase in the program's
    funding level since it was established in the 1990s. These additional
    funds will help to provide critical connectivity to rural healthcare
    institutions.
        And we plan to continue our emphasis on closing the digital divide.
    Later this year, for example, we will begin a rulemaking to establish a
    $20.4 billion Rural Digital Opportunity Fund. Applying lessons learned
    from the Connect America Fund Phase II reverse auction, this program
    will spur the deployment of high-speed broadband networks across more
    of rural America over the next decade, bringing greater economic
    opportunities to America's heartland. Service providers that win
    funding in the reverse auction will deploy needed infrastructure to
    provide up to gigabit-speed broadband in the parts of the country most
    in need of connectivity. I'm excited about this program--it will be the
    FCC's single biggest step yet to close the digital divide and will
    connect up to four million rural homes and small businesses to high-
    speed broadband networks.
        Of course, it is important that we spend USF funds wisely and
    eliminate waste, fraud, and abuse in these programs. That's why last
    month, we sent you a reorganization plan to create a Fraud Division
    within the Enforcement Bureau. I am pleased that this proposal was
    unanimously endorsed by the Commission and cleared by the Office of
    Management and Budget. This reform will embed a permanent effort to
    combat USF fraud within the structure of the Enforcement Bureau.
        Our third priority is to continue fulfilling our important mission
    to protect public safety. Last year, for example, we took important
    steps to improve Wireless Emergency Alerts, which play a critical role
    in notifying Americans when emergencies strike.
        In February, I visited the Orleans Parish Communications District,
    which is the 911 call-handling and dispatch center for the Crescent
    City. And in March, I traveled to New Jersey and Delaware and visited
    911 call centers. These interactions underscored to me the importance
    of supporting those who work every day to help their fellow Americans
    in their time of need. During the last fiscal year, we began work to
    implement laws passed by Congress to improve 911 calling. For example,
    we proposed rules to implement Kari's Law. Kari's Law requires multi-
    line telephone systems--which commonly serve hotels, office buildings,
    and campuses--to enable users to dial 911 directly. And it also
    contains a notification requirement so that when a 911 call is made in
    these settings, a front desk or security office will be alerted to
    facilitate building entry by first responders. We have proposed rules
    to help first responders locate wireless 911 callers in multi-story
    buildings. In the coming year, the Commission intends to take further
    steps to improve 911 calling. Among other things, I believe that we
    will be able to take final action to add a vertical, or ``z-axis''
    metric to our location accuracy rules and finalize rules implementing
    Kari's Law.
        Our work in this area also extends to national security and
    involves our review of foreign companies that seek to do business in
    the United States. Later this week, at our May open meeting, the
    Commission will act to promote secure communications--a long-standing
    FCC priority. In 2011, China Mobile USA, which is ultimately owned by
    the Chinese Government, applied to the Commission seeking to provide
    international telecommunications services in the United States.
    Consistent with agency policy, we solicited the views of the relevant
    Federal agencies on whether the application raised national security,
    law enforcement, or related concerns.
        After a lengthy review of the application and in consultation with
    the U.S. intelligence community, in 2018, the executive branch agencies
    recommended that the FCC deny China Mobile USA's application due to
    substantial national security and law enforcement concerns that cannot
    be resolved through an agreement with the company (called ``voluntary
    mitigation''). Notably, this is the first time the executive branch has
    ever recommended that the FCC deny an application due to national
    security concerns. Based on this recommendation and the full public
    record in this proceeding, I have determined that approving this
    application would not serve the public interest. At our May meeting,
    the Commission therefore will vote on an order that would deny China
    Mobile USA's application.
        Going forward, we will continue to use our statutory authority to
    protect the people and overall security of United States. That includes
    following through with our proposal to ban the use of money from the
    FCC's Universal Service Fund from being used by recipients to procure
    equipment or services from companies that pose a national security
    threat to our communications networks or the communications supply
    chain.

                                    *  *  *

        I would like to conclude by highlighting the FCC's most important
    resource: our staff. Day in and day out, they come to work ready and
    eager to advance the public interest. Whether they are working to
    expand broadband deployment, combat robocalls, promote wireless
    innovation, protect public safety, or address consumer complaints, they
    serve the American people with skill and dedication, and I am honored
    to have them as colleagues. The funds that you provide to our
    Commission enable them to do their jobs, and for that I am very
    grateful.
        Thank you for this opportunity to discuss this budget proposal. I
    will be pleased to answer any questions that you may have.

        Senator Kennedy. Thank you, Mr. Chairman.
        Chairman Simons.
    STATEMENT OF HON. JOSEPH J. SIMONS, CHAIRMAN, FEDERAL
                TRADE COMMISSION
        Mr. Simons. Chairman Kennedy, Ranking Member Coons, and
    distinguished Members of the subcommittee, I am pleased and
    honored to appear before you today to testify about the
    Commission's fiscal year 2020 appropriations request and to do
    so along with my friend, Chairman Pai.
        The FTC is an independent agency with a broad mission to
    protect consumers and maintain competition in most sectors of
    the economy, ranging from oil and industrial chemicals to high
    technology and consumer goods and lots in between.
        The FTC has a long history of bipartisanship and
    cooperation, and we work very hard to maintain that tradition.
        We fulfill our mission using three critical tools. First
    and foremost, the FTC pursues a vigorous and effective law
    enforcement program, and the impact of its work is significant.
    Our competition enforcement program is critically important to
    maintain in competitive markets across the country. Vigorous
    competition results in lower prices, high quality goods and
    services, and innovative new products and services.
        Our consumer protection enforcement program stops unfair
    and deceptive practices in the marketplace, everything from
    fraud to deceptive advertising to robocalls to problematic
    privacy and data security practices.
        Second, we pursue a policy and research agenda to improve
    agency decisionmaking. Last fall, for example, the Commission
    began its Hearing on Competition and Consumer Protection in the
    21st Century. These public hearings are exploring whether
    broad-based changes in the economy, evolving business
    practices, new technology, or international developments might
    require adjustments to competition and consumer protection law,
    enforcement priorities, and policies.
        The formal hearings will conclude shortly, and we expect to
    produce several reports by the end of the year. We also engage
    in advocacy by promoting competition principles and comments to
    State lawmakers and regulators, and we host initiatives like
    PrivacyCon, which explores cutting-edge research on privacy and
    security topics.
        Third, the FTC provides important consumer education and
    business guidance to encourage, inform consumer choices and
    compliance with the law. For example, the Commission has
    created a series of educational materials for older Americans.
    These include a series of materials that give details on scams
    that affect seniors, blogs to help identify these scams, and
    materials to empower older adults to educate others, like our
    Pass It On campaign.
        We also work to provide companies with resources on a
    variety of issues that affect businesses. For example, our
    Cybersecurity for Small Business campaign, a joint effort with
    NIST, the SBA, and DHS, includes a dozen need-to-know topics
    like ransomware, phishing, and tech support scams.
        In fiscal year 2019, the FTC's enacted budget is $309.7
    million, and for fiscal year 2020, the FTC is requesting $312.3
    million. The additional $2.6 million is requested for expert
    witnesses and IT modernization. Expert witnesses are an
    increasing need in light of the growing number of complex
    investigations and litigation in both competition and consumer
    protection matters.
        We also require additional resources to modernize our IT
    infrastructure, which includes moving critical applications
    from our aging on-premises data center to the cloud, including
    critical litigation software support.
        We are committed to using our resources efficiently to
    protect consumers and promote 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 I look forward to answering your questions.
        Thank you.
        [The statement follows:]
                  Prepared Statement of Hon. Joseph J. Simons

                                I. INTRODUCTION

        Chairman Kennedy, 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 2020 appropriations
    request and its work to protect consumers and promote competition.\1\
    ---------------------------------------------------------------------------
        \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 any other
    Commissioner.
    ---------------------------------------------------------------------------
        The FTC is an independent agency with three main bureaus: the
    Bureau of Consumer Protection (``BCP''); the Bureau of Competition
    (``BC''); and the Bureau of Economics (``BE''), which supports both BCP
    and BC. The FTC is the only Federal agency with a broad mission to both
    protect consumers and maintain competition in most sectors of the
    economy. Its jurisdiction includes privacy and data security, consumer
    fraud, mergers and acquisitions, and anticompetitive tactics by
    pharmaceutical and other companies. We enforce the law across a range
    of sectors, including healthcare, high technology, and emerging
    industries. The FTC has a long history of bipartisanship and
    cooperation, and we work hard to maintain it.
        The FTC has broad law enforcement responsibilities under the
    Federal Trade Commission Act,\2\ 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 other responsibilities under
    more than 75 laws.\3\ The Commission pursues a vigorous and effective
    law enforcement program, and the impact of its work is significant. Its
    competition enforcement program is critically important to maintaining
    competitive markets across the country: vigorous competition results in
    lower prices, higher quality goods and services, and innovative and
    beneficial new products and services.
    ---------------------------------------------------------------------------
        \2\ 15 U.S.C. Sec. 41 et seq.
        \3\ See https://www.ftc.gov/enforcement/statutes.
    ---------------------------------------------------------------------------
        The FTC also investigates and prosecutes those engaging in unfair
    or deceptive acts or practices, and seeks to do so without impeding
    lawful business activity. The agency has a varied toolkit to advance
    its mission. For example, the Commission collects consumer complaints
    from the public and maintains one of the most extensive consumer
    protection complaint databases, Consumer Sentinel. The FTC and other
    Federal, State, and local law enforcement agencies use these complaints
    in their law enforcement and policy efforts. The FTC also has
    rulemaking authority. In addition to the FTC's Magnuson-Moss rulemaking
    authority, Congress has given the agency discrete rulemaking authority
    under the Administrative Procedure Act (``APA'') over specific topics.
    The agency regularly analyzes its rules, including seeking public
    feedback, to ensure their continued efficacy. The FTC also educates
    consumers and businesses to encourage informed consumer choices,
    compliance with the law, and public understanding of the competitive
    process.
        To complement these enforcement and public education efforts, the
    FTC pursues a consumer protection and competition policy and research
    agenda to improve agency decision-making, and engages in advocacy and
    education initiatives. Last fall, the Commission began its Hearings on
    Competition and Consumer Protection in the 21st Century.\4\ This
    extensive series of public hearings is exploring whether broad-based
    changes in the economy, evolving business practices, new technologies,
    or international developments might require adjustments to competition
    and consumer protection law, enforcement priorities, and policy. To
    date, we have heard from more than 350 panelists and received more than
    850 public comments. The formal hearings will conclude shortly, and we
    will be accepting public comments through at least the end of June.
    These hearings underscore the unique role that the FTC plays in the
    development of sound competition and consumer protection policy.
    ---------------------------------------------------------------------------
        \4\ FTC, Hearings on Competition and Consumer Protection in the
    21st Century, https://www.ftc.gov/policy/hearings-competition-consumer-
    protection; see also FTC Press Release,
    FTC Announces Hearings On Competition and Consumer Protection in the
    21st Century
    (June 20, 2018), https://www.ftc.gov/news-events/press-releases/2018/
    06/ftc-announces-hearings-
    competition-consumer-protection-21st.
    ---------------------------------------------------------------------------
        This testimony provides a brief overview of the FTC's budget and
    resources. It also discusses 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 discusses the Commission's
    international efforts to protect consumers and promote competition.

                            II. BUDGET AND RESOURCES

        In fiscal year 2019, the FTC's enacted budget is $309.7 million and
    1,140 FTEs. For fiscal year 2020, the FTC is requesting $312.3 million
    and 1,140 FTEs. The additional $2.6 million requested is for expert
    witnesses and IT modernization. Expert witness contracts are an
    increasing need in light of the growing number 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 that we need to support our cases.
    For example, in competition cases, we require experts to opine on
    complex issues including: proper product and geographic market
    definitions; anticompetitive effects resulting from a merger or
    anticompetitive conduct; efficacy of economic models used to evaluate
    various antitrust issues; and potential efficiencies associated with
    any merger or challenged business practice. 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 calculating 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.
        In addition to the growing need for experts, the agency also
    requires additional resources to modernize our IT infrastructure. In
    support of the IT modernization program, the FTC requests funding to
    update the Commission's portfolio of direct mission applications, as
    outlined in the agency's Information Resources Management (``IRM'')
    Strategic Plan.\5\ These applications support operations that are
    necessary for the successful execution of the FTC's mission, such as
    the Hart-Scott-Rodino (``HSR'') Premerger Filing Program and the
    collection and management of consumer redress funds. The requested
    funding would support the development of a roadmap for modernization of
    all direct mission applications and the initial migration of those
    currently managed in FTC's on-premise data center to cloud platforms.
    The funding would also be used to improve productivity through process
    reengineering and increased integration with other technology and
    systems used by FTC staff and the public.
        In addition to the technology benefits, these additional resources
    would dramatically improve our business operations. Notably, many of
    the agency's processes still involve manual paperwork and employee
    intervention to complete an activity. For example, the current HSR
    premerger filing process requires a significant amount of time-
    consuming manual input from the public, FTC employees, and other
    Federal agencies. The HSR premerger filing process starts when a
    merging party submits a hard copy of the HSR form, called an HSR
    filing, to the FTC and Department of Justice (``DOJ''). The entire
    filing, including attachments, often runs to hundreds of pages. After
    receiving the HSR filing, FTC staff must manually enter the information
    provided in the filing into the premerger software. After all this
    information is inputted manually, the software tracks the status of the
    filing through the review process. A modernized version of the
    premerger software would allow filers to submit premerger filings
    online and track the filing through the entire premerger review
    process. This would significantly decrease the burden on filers by
    allowing them to submit filings online and would eliminate the manual
    steps taken by the FTC and other Federal agencies. Projects such as the
    digitalization of the HSR Premerger Filing would also directly support
    FTC's compliance with the recently enacted 21st Century IDEA Act.
    ---------------------------------------------------------------------------
        \5\ FTC Information Resource Management (IRM) Strategic Plan, for
    fiscal year 2019-2022. The IRM provides strategic direction for the use
    of IT resources that support the agency's evolving mission and business
    needs.
    ---------------------------------------------------------------------------
        The FTC's budget request assumes that total offsetting collections
    from HSR filing fees and Do Not Call fees will provide the FTC with
    $151 million in fiscal year 2020. As a result, in order to meet the
    requested $312.3 million amount in fiscal year 2020, an estimated
    $161.3 million in direct appropriations would be required.
        The agency continues to use its resources effectively and
    efficiently on behalf of American consumers. When possible, the agency
    collects money to return to harmed consumers.
        During fiscal year 2018 alone, the agency disbursed $601 million to
    claimants, third party administrators, and the Treasury. The agency
    returned over $83 million in redress to consumers and deposited over
    $10 million into the U.S. Treasury, reflecting collections in both
    consumer protection and competition matters. Additionally, Commission
    actions required defendants to self-administer refund programs worth
    more than $1.6 billion during fiscal year 2018.
        The agency estimates how much money it has saved consumers through
    law enforcement in comparison to the FTC's costs. In recent years, the
    agency saved consumers on average $38.90 for every $1 of resources
    devoted to the consumer protection program; $50.16 for every $1 of
    resources devoted to the merger program; and $40.12 for every $1 of
    resources devoted to the nonmerger antitrust enforcement program.

                        III. CONSUMER PROTECTION MISSION

        As the Nation's primary consumer protection agency, the FTC has a
    broad mandate to protect consumers from unfair and deceptive practices
    in the marketplace, including fraud. We do this by, among other things,
    pursuing law enforcement actions to stop and deter unlawful practices,
    and educating consumers and businesses about their rights and
    responsibilities. The FTC's enforcement and education efforts include
    working closely with Federal, State, international, and private sector
    partners on joint initiatives. Among other issues, the FTC works to
    protect privacy and data security, helps ensure that advertising claims
    to consumers are truthful and not misleading, addresses fraud across
    most sectors of the economy, and combats illegal robocalls.
        The FTC's law enforcement orders prohibit defendants from engaging
    in further illegal activity, impose other compliance obligations, and
    in some cases, ban defendants from engaging in certain conduct
    altogether. Where appropriate, the FTC collects money to return to
    harmed consumers. During fiscal year 2018, Commission actions resulted
    in over $1.6 billion being returned to consumers. Specifically, the
    Commission returned more than $83.3 million in redress to consumers,
    and the FTC resolved matters--including in the Volkswagen,\6\
    Amazon,\7\ and NetSpend \8\ matters--that required defendants to self-
    administer consumer refund programs worth more than $1.6 billion. The
    FTC also collected civil penalties worth more than $2.4 million and
    forwarded an additional $8.5 million to the U.S. Treasury in fiscal
    year 2018.
    ---------------------------------------------------------------------------
        \6\ FTC v. Volkswagen Group of America, Inc., No. 3:15-md-02672-CRB
    (N.D. Cal. May 17, 2017), https://www.ftc.gov/enforcement/cases-
    proceedings/162-3006/volkswagen-group-america-inc.
        \7\ FTC v. Amazon.com, Inc., No. 2:14-cv-01038 (W.D. Wash. Apr. 4,
    2017), https://www.ftc.gov/enforcement/cases-proceedings/122-3238/
    amazoncom-inc.
        \8\ FTC v. NetSpend Corp., No. 1:16-cv-04203-AT (N.D. Ga. Apr. 10,
    2017), https://www.ftc.gov/enforcement/cases-proceedings/netspend-
    corporation.

    ---------------------------------------------------------------------------
    A. Protecting Consumer Privacy and Data Security

        Since the enactment of the Fair Credit Reporting Act (``FCRA'') \9\
    in 1970, the FTC has served as the chief Federal agency charged with
    protecting consumer privacy. With the development of the Internet as a
    commercial medium in the 1990s, the FTC expanded its focus on privacy
    to reflect the growing collection, use, and sharing of consumer data in
    the commercial marketplace.
    ---------------------------------------------------------------------------
        \9\ 15 U.S.C. Sec. 1681. Among other things, the FCRA prohibits the
    unauthorized disclosure of sensitive data used for credit, employment,
    and other decisions.
    ---------------------------------------------------------------------------
        The Commission's primary source of legal authority in the privacy
    and data security space is Section 5 of the FTC Act, which prohibits
    deceptive or unfair commercial practices.\10\ Under Section 5 and other
    authorities granted by Congress, the FTC has aggressively pursued
    privacy and data security cases in myriad areas, including children's
    privacy, financial privacy, health privacy, and the Internet of
    Things.\11\ To date, the Commission has brought more than 65 cases
    alleging that companies failed to implement reasonable data security
    safeguards, and more than 60 general privacy cases.\12\
    ---------------------------------------------------------------------------
        \10\ 15 U.S.C. Sec. 45. The Commission also enforces sector-
    specific statutes containing privacy and data security provisions, such
    as the Gramm-Leach-Bliley Act (``GLB Act''), Public Law No. 106-102,
    113 Stat. 1338 (1999) (codified as amended in scattered sections of 12
    and 15 U.S.C.), and the Children's Online Privacy Protection Act
    (``COPPA''), 15 U.S.C. Sec. Sec. 6501-6506.
        \11\ See, e.g., FTC, Privacy & Data Security Update: 2018 (March
    2019), https://www.ftc.gov/system/files/documents/reports/privacy-data-
    security-update-2018/2018-privacy-data-security-
    report-508.pdf.
        \12\ Id.
    ---------------------------------------------------------------------------
        Section 5, however, is not without its limitations. For example,
    Section 5 does not allow the Commission to seek civil penalties for the
    first offense. It also excludes non-profits and common carriers from
    the Commission's authority, even when the acts or practices of these
    market participants have serious implications for consumer privacy and
    data security. To better equip the Commission to meet its statutory
    mission to protect consumers, we urge Congress to enact privacy and
    data security legislation, enforceable by the FTC, which grants the
    agency civil penalty authority, targeted APA rulemaking authority, and
    jurisdiction over non-profits and common carriers.\13\
    ---------------------------------------------------------------------------
        \13\ Commissioner Phillips supports congressional efforts to
    consider consumer data privacy legislation. He believes legislation
    should be based on harms that Congress agrees warrant a remedy, and
    that tools like penalties and rulemaking should be calibrated carefully
    to address those harms. Commissioner Phillips believes Congress should
    also give appropriate consideration to the trade-offs involved in new
    regulation, and, with regard to rulemaking, reserve to itself
    fundamental value judgments appropriately made by the legislature.
    Finally, Commissioner Phillips believes data security legislation is a
    critical step Congress should also take to protect consumer privacy.
    ---------------------------------------------------------------------------
        While the Commission believes new authority could be very
    beneficial for American consumers, we will continue to use every tool
    currently at our disposal to address consumer harm. For example, the
    Commission protects children's privacy online by enforcing the
    Children's Online Privacy Protection Act (COPPA). We recently alleged
    that Unixiz, doing business as i-Dressup.com, violated the COPPA Rule
    by failing to obtain parental consent prior to collecting personal
    information from children, as well as failing to protect children's
    personal information.\14\ The FTC's complaint also alleged that the
    company stored and transmitted users' personal information in plain
    text, failed to implement an intrusion detection and prevention system,
    and failed to monitor for potential security incidents. As a result, a
    hacker accessed the personal information of approximately 2.1 million
    users, including 245,000 users under the age of 13. And in March, the
    FTC announced a settlement with the operators of the popular video
    social networking app Musical.ly, now known as Tik Tok, for COPPA
    violations.\15\ The FTC alleged that the company collected children's
    personal information online without first obtaining parental consent.
    Because COPPA allows the Commission to seek civil penalties for its
    violations, the defendants agreed to pay a $5.7 million dollar civil
    penalty, the largest ever obtained by the Commission in a COPPA case.
    ---------------------------------------------------------------------------
        \14\ U.S. v. Unixiz, Inc. d/b/a i-Dressup.com et al., No. 5:19-cv-
    02222 (N.D. Cal. Apr. 24, 2019), https://www.ftc.gov/enforcement/cases-
    proceedings/172-3002/unixiz-inc-doing-business-i-dressupcom.
        \15\ U.S. v. Musical.ly, et al., No. 2:19-cv-1439 (C.D. Ca. Mar.
    27, 2019), https://www.ftc.gov/
    enforcement/cases-proceedings/172-3004/musically-inc.
    ---------------------------------------------------------------------------
        Further examples of data security enforcement include the
    Commission's settlement with Uber Technologies over the company's
    alleged failure to reasonably secure sensitive consumer data stored in
    the cloud.\16\ 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. During the
    pendency of that investigation, Uber suffered a second, larger breach
    of drivers' and riders' data in October-November 2016, and failed to
    disclose that breach to consumers or the FTC for more than a year,
    despite being the subject of an ongoing FTC investigation of its data
    security practices during that time. Among other things, the final
    order prohibits Uber from misrepresenting how it monitors internal
    access to consumers' personal information and the extent to which it
    protects personal information, with the threat of strong civil
    penalties if it fails to comply.\17\ And in May 2018, the Commission
    resolved allegations that PayPal's Venmo peer-to-peer payment service
    misled consumers about their ability to control the privacy of their
    Venmo transactions and the extent to which their financial accounts
    were protected by ``bank grade security systems.'' \18\
    ---------------------------------------------------------------------------
        \16\ See FTC Press Release, Federal Trade Commission Gives Final
    Approval to Settlement with Uber (Oct. 26, 2018), https://www.ftc.gov/
    news-events/press-releases/2018/10/Federal-trade-
    commission-gives-final-approval-settlement-uber.
        \17\ As discussed above, because the FTC does not have civil
    penalty authority under Section 5, it could not require Uber to pay a
    civil penalty in the first instance.
        \18\ PayPal, Inc., No. C-4651 (May 24, 2018), https://www.ftc.gov/
    enforcement/cases-proceedings/162-3102/paypal-inc-matter.
    ---------------------------------------------------------------------------
        Just this past month, the Commission settled with an online rewards
    website, Clixsense.com, for its alleged failure to take appropriate
    steps to secure consumers' data.\19\ The FTC alleged that the company's
    inadequate security--including its storage of personal information in
    plain text and its failure to perform vulnerability and penetration
    testing--allowed hackers to gain access to the company's network
    through a browser extension downloaded by the company. These failures
    resulted in hackers gaining access to personal information regarding
    6.6 million consumers, over 500,000 of whom were U.S. consumers.
    ---------------------------------------------------------------------------
        \19\ James. V. Grago, Jr. also d/b/a ClixSense.com, Matter No.
    1723003 (Apr. 24, 2019) (proposed consent order), https://www.ftc.gov/
    enforcement/cases-proceedings/172-3003/james-v-grago-jr-doing-business-
    clixsensecom.
    ---------------------------------------------------------------------------
        In addition to its enforcement efforts in the privacy and data
    security areas, the Commission seeks to improve agency decisionmaking
    through its policy initiatives. Last fall, for example, the Commission
    held four days of panels that specifically addressed consumer privacy
    and data security.\20\ The Commission also announced its fourth
    PrivacyCon, which will take place on June 27, an annual event that
    explores evolving privacy and data security research.\21\
    ---------------------------------------------------------------------------
        \20\ See FTC Press Release, FTC Announces Sessions on Consumer
    Privacy and Data Security as Part of Its Hearings on Competition and
    Consumer Protection in the 21st Century (Oct. 26, 2018), https://
    www.ftc.gov/news-events/press-releases/2018/10/ftc-announces-sessions-
    consumer-privacy-data-security-part-its.
        \21\ See FTC Press Release, FTC Announces PrivacyCon 2019 and Calls
    for Presentations (Oct. 24, 2018), https://www.ftc.gov/news-events/
    press-releases/2018/10/ftc-announces-privacycon-2019-calls-
    presentations.
    ---------------------------------------------------------------------------
        The Commission also is empowered to conduct industry studies
    related to privacy and data security under Section 6(b) of the FTC
    Act.\22\ In March, we issued 6(b) orders to several Internet service
    providers to evaluate their privacy practices.\23\ As we have done in
    the past, we will use the information we learn from this study to
    better inform our policy and enforcement work.
    ---------------------------------------------------------------------------
        \22\ 15 U.S.C. Sec. 46(b).
        \23\ See FTC Press Release, FTC Seeks to Examine the Privacy
    Practices of Broadband Providers (Mar. 26, 2019), https://www.ftc.gov/
    news-events/press-releases/2019/03/ftc-seeks-examine-
    privacy-practices-broadband-providers.
    ---------------------------------------------------------------------------
        The Commission continues to work closely with our law enforcement
    partners in the European Union (``EU'') and its member States to ensure
    the success of the EU-U.S. Privacy Shield framework. Under the EU's
    General Data Protection Regulation (``GDPR''), companies are required
    to meet certain data protection requirements in order to transfer
    consumer data from the EU to other jurisdictions. Privacy Shield--a
    voluntary mechanism that companies can use to comply with the GDPR when
    transferring data from Europe to the United States and which
    facilitates billions of dollars in transatlantic data flows--is
    enforced by the FTC with respect to those participants under its
    jurisdiction.\24\
    ---------------------------------------------------------------------------
        \24\ See www.privacyshield.gov and www.ftc.gov/tips-advice/
    business-center/privacy-and-security/privacy-shield. Companies can also
    join a Swiss-U.S. Privacy Shield for transfers from Switzerland.
    ---------------------------------------------------------------------------
        Last fall, for example, the Commission announced settlements with
    four companies that we alleged had falsely claimed Privacy Shield
    certification.\25\ And in September 2018, Chairman Simons, along with
    the Secretary of Commerce and our European counterparts, participated
    in the second annual review of the Privacy Shield framework,
    culminating in a European Commission recommendation for continued FTC
    enforcement in the Privacy Shield area.\26\ Our Privacy Shield approach
    is built on four pillars: referrals from the Department of Commerce;
    priority consideration of referrals from the European Union; checking
    for Privacy Shield violations as part of every privacy investigation;
    and proactive monitoring of Privacy Shield participants.
    ---------------------------------------------------------------------------
        \25\ See FTC Press Release, FTC Reaches Settlements with Four
    Companies That Falsely Claimed Participation in the EU-U.S. Privacy
    Shield (Sept. 27, 2018), https://www.ftc.gov/news-events/press-
    releases/2018/09/ftc-reaches-settlements-four-companies-falsely-
    claimed.
        \26\ See Report from the Commission to the European Parliament and
    the Council on the Second Annual Review of the Functioning of the EU-
    U.S. Privacy Shield, COM (2018) 860 final, https://ec.europa.eu/info/
    sites/info/files/report_on_the_second_annual_review_of_the_eu-
    us_privacy_shield_2018.pdf.
    ---------------------------------------------------------------------------
        Finally, many of the FTC's privacy and data security investigations
    and cases involve complex facts and technologies and well-financed
    defendants, often requiring outside experts, which can be costly. It is
    critical that the FTC have sufficient resources to support its
    investigative and litigation needs, including expert work, particularly
    as demands for enforcement in this area continue to grow.

    B. Protecting Consumers from Fraud

        Fighting fraud is a major focus of the FTC's law enforcement
    efforts. 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. In 2018,
    imposter scams became the top consumer fraud complaint, in part due to
    the rise in reports about government imposter scams.\27\ Fraudsters
    falsely claiming to be government agents (including the Social Security
    Administration, IRS and even the FTC), family members, or well-known
    tech companies contact consumers. These fraudsters pressure them to
    send money, often via cash-like payment methods, such as gift cards or
    money transfers, or trick them into providing personal information.
    Many of these scams target older Americans.
    ---------------------------------------------------------------------------
        \27\ FTC Press Release, Imposter Scams Top Complaints Made to FTC
    in 2018 (Feb. 28, 2019), https://www.ftc.gov/news-events/press-
    releases/2019/02/imposter-scams-top-complaints-made-ftc-2018.
    ---------------------------------------------------------------------------
        In response to the rise in imposter complaints, the FTC has filed
    multiple cases against defendants who deceptively pose as the
    government or well-known tech companies. For example, the FTC recently
    brought two actions against defendants for falsely claiming
    affiliations with the Federal Government. The Commission charged Sunkey
    Publishing with using copycat military recruitment websites to trick
    consumers seeking military careers into providing their personal
    information; according to the complaint, Sunkey then sold the
    information to post-secondary schools as part of its lead generation
    business.\28\ The Commission's action against American Immigration
    Center stopped an alleged scheme using deceptive websites and
    advertising that falsely implied an affiliation with the U.S.
    Citizenship and Immigration Services to dupe legal residents trying to
    renew their green cards or apply for naturalization.\29\
    ---------------------------------------------------------------------------
        \28\ FTC Press Release, FTC, FTC Takes Action against the Operators
    of Copycat Military Websites (Sept. 6, 2018), https://www.ftc.gov/news-
    events/press-releases/2018/09/ftc-takes-action-against-operators-
    copycat-military-websites.
        \29\  FTC Press Release, American Immigration Center Settles with
    FTC on Government Imposter Allegations (Oct. 16, 2018), https://
    www.ftc.gov/news-events/press-releases/2018/10/
    american-immigration-center-settles-ftc-government-imposter. The court
    entered the Stipulated Order for Permanent Injunction and Monetary
    Judgment against the defendants on December 7, 2018.
    ---------------------------------------------------------------------------
        The Commission also helps older Americans protect themselves from
    fraud. Last month, the FTC joined Federal, State, and international law
    enforcement partners in announcing a nationwide and international
    crackdown on elder fraud schemes with a particular focus on technical
    support scams. Technical support scams dupe consumers into believing
    their computers are infected with viruses and malware, and then charge
    them hundreds of dollars for unnecessary repairs. As part of that
    initiative, the FTC filed suit against technical support operator Elite
    IT Partners,\30\ developed new consumer education materials to help
    consumers avoid falling victim to these scams,\31\ and released new
    complaint data that illustrates the disproportionate effect these scams
    have on older adults.\32\
    ---------------------------------------------------------------------------
        \30\ FTC Press Release, FTC Halts Tech Support Scam as Part of
    Major Initiative Focused on Older Adults Hit Hardest by These Scams
    (Mar. 7, 2019), https://www.ftc.gov/news-events/press-releases/2019/03/
    ftc-halts-tech-support-scam-part-major-initiative-focused-older.
        \31\ See How to Spot, Avoid and Report Tech Support Scams, https://
    www.consumer.ftc.gov/
    articles/how-spot-avoid-and-report-tech-support-scams.
        \32\ See FTC Consumer Protection Data Spotlight, Older Adults
    Hardest Hit by Tech Support Scams (Mar. 7, 2019), https://www.ftc.gov/
    news-events/blogs/data-spotlight/2019/03/older-adults-hardest-hit-tech-
    support-scams.
    ---------------------------------------------------------------------------
        Over the last year, the FTC has targeted business opportunity
    scams, filing numerous actions against defendants who promise consumers
    a legitimate opportunity to earn money if consumers will pay for
    defendants' ``coaching'' services. In reality, the ``coaching''
    services provide no value to consumers and are typically nothing more
    than a handful of training videos and documents with generic
    information. In Digital Altitude, the Commission brought an action
    against defendants who allegedly defrauded consumers out of millions of
    dollars--some paying more than $50,000--by promising of individualized
    coaching on how to run an online business.\33\ The Commission also
    brought separate actions against defendants in FBA Stores \34\ and,
    with the Attorney General of Minnesota, against defendants in Sellers
    Playbook \35\ based on allegations that the defendants falsely claimed
    they could teach consumers ``the secrets for making money on Amazon.''
    The Commission's actions shut down three large operations that resulted
    in over $100 million in losses to consumers.
    ---------------------------------------------------------------------------
        \33\ FTC Press Release, FTC Obtains Court Order Halting Business
    Coaching Scheme
    (Feb. 8, 2018), https://www.ftc.gov/news-events/press-releases/2018/02/
    ftc-obtains-court-order-halting-business-coaching-scheme.
        \34\ FTC Press Release, FTC Action Halts a Large Deceptive Business
    Opportunity Scheme (Mar. 23, 2018), https://www.ftc.gov/news-events/
    press-releases/2018/03/ftc-action-halts-large-deceptive-business-
    opportunity-scheme.
        \35\ FTC Press Release, FTC and State of Minnesota Halt Sellers
    Playbook's Get Rich Scheme (Aug. 6, 2018), https://www.ftc.gov/news-
    events/press-releases/2018/08/ftc-state-minnesota-halt-sellers-
    playbooks-get-rich-scheme.
    ---------------------------------------------------------------------------
        The Commission's fraud cases also extend to sprawling international
    scams. The Commission charged the defendants in MOBE--competitors of
    Digital Altitude--for running an international coaching scam that the
    FTC alleged took more than $300 million from thousands of American
    consumers.\36\ The Commission also recently filed an action against
    defendants in Sanctuary Belize, a massive land sale scam that allegedly
    bilked over $100 million from consumers, largely retirees. According to
    the complaint, recidivist Andris Pukke perpetrated an international
    scheme selling lots in a development in remote southern Belize with
    promises that he never intended to keep. The FTC shut down the
    enterprise by obtaining a temporary restraining order and preliminary
    injunction, and continues to litigate the matter.\37\
    ---------------------------------------------------------------------------
        \36\ FTC Press Release, FTC Action Halts MOBE, a Massive Internet
    Business Coaching Scheme (June 11, 2018), https://www.ftc.gov/news-
    events/press-releases/2018/06/ftc-action-halts-mobe-massive-Internet-
    business-coaching-scheme.
        \37\ FTC Press Release, At FTC's Request, Court Halts Massive
    ``Sanctuary Belize'' Real Estate Investment Scam (Nov. 8, 2018),
    https://www.ftc.gov/news-events/press-releases/2018/11/ftcs-
    request-court-halts-massive-sanctuary-belize-real-estate.
    ---------------------------------------------------------------------------
        The FTC frequently works with other law enforcement agencies to
    tackle widespread fraud. In July 2018, the FTC launched ``Operation
    Donate with Honor,'' a coordinated effort to target fraudulent and
    deceptive fundraising for military and veterans' causes that has
    resulted in over 100 law enforcement actions.\38\ As part of that
    initiative, the FTC has announced four cases with several State
    Attorneys General to shut down sham charity operations that were using
    consumers' generous donations for private benefits and spent very
    little of the donated funds on the charitable programs.\39\
    ---------------------------------------------------------------------------
        \38\ FTC Press Release, Operation Donate with Honor: Law Enforcers
    Unite to Challenge Deceptive Fundraising (Jul. 19, 2018), https://
    www.ftc.gov/news-events/blogs/business-blog/2018/07/
    operation-donate-honor-law-enforcers-unite-challenge. This initiative
    included 54 Attorneys General from all 50 States, the District of
    Columbia, American Samoa, Guam, and Puerto Rico, and 16 State agencies
    that oversee charities.
        \39\ FTC & State of Missouri v. Disabled Police and Sheriffs
    Foundation, Inc., et al., No. 4:19-cv-00667 (E.D. Mo. Mar. 28, 2019),
    https://www.ftc.gov/enforcement/cases-proceedings/172-3128/disabled-
    police-sheriffs-foundation-inc; FTC & State of Florida Office of the
    Attorney General v. American Veterans Foundation, Inc., et al., No.
    8:18-cv-00744 (M.D. Fla. Mar. 28, 2019), https://www.ftc.gov/
    enforcement/cases-proceedings/172-3163/american-veterans-foundation-
    inc; FTC et al. v. Help the Vets, Inc., et al., No. 6:18-cv-1153-Orl-
    41KRS (M.D. Fla. July 19, 2018), https://www.ftc.gov/enforcement/cases-
    proceedings/172-3159/help-vets-inc; FTC v. Travis Deloy Peterson, No.
    4:18-00049-DN (D. Utah July 16, 2018), https://www.ftc.gov/enforcement/
    cases-proceedings/182-3049/veterans-america.
    ---------------------------------------------------------------------------
        The FTC strives to stay ahead of scammers by analyzing Sentinel
    complaints to help raise public awareness about fraud. In October 2018,
    the FTC launched its Consumer Protection Data Spotlight series to alert
    law enforcers, industry, and the public about growing threats and
    important patterns identified in Sentinel data. The Spotlight explores
    data over time, showing how scammers change tactics and catch consumers
    off guard.\40\ In addition, the FTC is making Sentinel data more
    accessible to State and local governments, the media, academics, and
    the public-at-large by publishing interactive dashboards that enable
    people to see what kind of fraud is affecting their State or large
    metropolitan area.\41\
    ---------------------------------------------------------------------------
        \40\ The first Spotlight identified a sharp rise in gift cards-
    particularly iTunes and Google Play cards-as a payment method for
    scams. See FTC Consumer Protection Data Spotlight, Scammers
    Increasingly Demand Payment by Gift Card (Oct. 2018), https://
    www.ftc.gov/news-events/blogs/data-spotlight/2018/10/scammers-
    increasingly-demand-payment-gift-card. Most recently, the Spotlight
    pointed to the dramatic increase in reports about imposters passing
    themselves off as Social Security Administration officials, which is
    happening just as reports about IRS imposter scams are waning. See FTC
    Consumer Protection Data Spotlight, Growing Wave of Social Security
    Imposters Overtakes IRS Scam (Apr. 2019), https://www.ftc.gov/news-
    events/blogs/data-
    spotlight/2019/04/growing-wave-social-security-imposters-overtakes-irs-
    scam.
        \41\ See generally FTC, FTC Consumer Sentinel Network (Apr. 8,
    2019), https://
    public.tableau.com/profile/Federal.trade.commission.

    ---------------------------------------------------------------------------
    C. Truthfulness in National Advertising

        Ensuring that advertising is truthful and not misleading has long
    been one of the FTC's core missions. It allows consumers to make well-
    informed decisions about how to best use their resources and promotes
    the efficient functioning of market forces by encouraging the
    dissemination of accurate information.
        For example, 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.\42\ We have challenged bogus claims that treatments
    could cure, treat, or mitigate various serious diseases and ailments,
    including those affecting children and older consumers.\43\ We have
    brought law enforcement actions against advertisers and ad agencies who
    allegedly used native advertising--commercial advertising masquerading
    as editorial content--to deceptively sell health products such as
    mosquito repellants during the Zika virus outbreak and cognitive
    improvement supplements.\44\ The Commission also has sued companies
    that claimed, allegedly without scientific evidence, that using their
    products could alleviate the symptoms of opioid withdrawal and increase
    the likelihood of overcoming opioid dependency.\45\ The Commission
    obtained an order barring a marketer from making deceptive claims about
    its products' ability to mitigate the side effects of cancer
    treatments.\46\ And we have issued joint warning letters with the Food
    and Drug Administration to marketers who claim their dietary
    supplements and cannabidiol (``CBD'') products treat or prevent serious
    diseases, including Alzheimer's disease and cancer.\47\
    ---------------------------------------------------------------------------
        \42\ See, e.g., Telomerase Activation Sci., Inc. et al., No. C-4644
    (Apr. 19, 2018), https://www.ftc.gov/enforcement/cases-proceedings/142-
    3103/telomerase-activation-sciences-inc-noel-thomas-patton-matter; FTC
    v. Health Research Labs., Inc., No. 2:17-cv-00467 (D. Maine Nov. 30,
    2017), https://www.ftc.gov/enforcement/cases-proceedings/152-3021/
    health-research-laboratories-llc.
        \43\ See, e.g., FTC v. Regenerative Med. Grp., Inc., No. 8:18-cv-
    01838 (C.D. Cal. filed Oct. 12, 2018), https://www.ftc.gov/enforcement/
    cases-proceedings/172-3062/regenerative-medical-group-inc; A&O Enters.,
    Inc., No. C-4670 (Feb. 21, 2019), https://www.ftc.gov/enforcement/
    cases-
    proceedings/172-3016/ao-enterprises-doing-business-iv-bars-aaron-k-
    roberts-matter.
        \44\ See, e.g., FTC v. Glob. Cmty. Innovations LLC, No. 5:19-CV-
    00788 (N.D. Ohio
    Apr. 10, 2019), https://www.ftc.gov/enforcement/cases-proceedings/162-
    3135/global-community-
    innovations-llc-et-al-geniux; Creaxion Corp., No. C-4668 (Feb. 8,
    2019), https://www.ftc.gov/
    enforcement/cases-proceedings/172-3066/creaxion-corp; Inside Publ'ns,
    LLC, No. C-4669 (Feb. 8, 2019), https://www.ftc.gov/enforcement/cases-
    proceedings/172-3067/inside-publications-llc.
        \45\ FTC v. Catlin Enters., Inc., No. 1:17-cv-403 (W.D. Tex. May
    17, 2017), https://www.ftc.gov/enforcement/cases-proceedings/1623204/
    catlin-enterprises-inc. In addition, in conjunction with the FDA, the
    FTC issued letters to companies that appeared to be making questionable
    claims in order to sell addiction or withdrawal remedies. See FTC Press
    Release, FTC, FDA Warn Companies about Marketing and Selling Opioid
    Cessation Products (Jan. 24, 2018), https://www.ftc.gov/news-events/
    press-releases/2018/01/ftc-fda-warn-companies-about-marketing-selling-
    opioid-cessation.
        \46\ FTC v. CellMark Biopharm, No. 2:18-cv-00014-JES-CM (M.D. Fla.
    Jan. 12, 2018), https://www.ftc.gov/enforcement/cases-proceedings/162-
    3134/cellmark-biopharma-derek-e-vest.
        \47\ See FTC Press Release, FTC Joins FDA in Sending Warning
    Letters to Companies Advertising and Selling Products Containing
    Cannabidiol (CBD) Claiming to Treat Alzheimer's, Cancer, and Other
    Diseases (Apr. 2, 2019), https://www.ftc.gov/news-events/press-
    releases/2019/04/ftc-joins-fda-sending-warning-letters-companies-
    advertising; FTC Press Release, FTC and FDA Send Warning Letters to
    Companies Selling Dietary Supplements Claiming to Treat Alzheimer's
    Disease and Remediate or Cure Other Serious Illnesses Such as
    Parkinson's, Heart Disease, and Cancer (Feb. 11, 2019), https://
    www.ftc.gov/news-events/press-releases/2019/02/ftc-fda-send-
    warning-letters-companies-selling-dietary.
    ---------------------------------------------------------------------------
        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.\48\
    ---------------------------------------------------------------------------
        \48\ FTC Consumer Blog, Treatments and Cures, https://
    www.consumer.ftc.gov/topics/
    treatments-cures.

    ---------------------------------------------------------------------------
    D. Illegal Robocalls

        Illegal robocalls also remain a significant consumer protection
    problem and one of consumers' top complaints to the FTC. These calls
    disturb consumers' privacy, and frequently use fraud and deception to
    pitch goods and services, leading to significant economic harm. In
    fiscal year 2018, the FTC received more than 5.7 million complaints
    about unwanted calls, including 3.7 million complaints about
    robocalls.\49\ The FTC has used all the tools at its disposal to fight
    these illegal calls, including 141 enforcement actions to date.\50\
    ---------------------------------------------------------------------------
        \49\ See Do Not Call Registry Data Book 2018: Complaint Figures for
    FY 2018, https://www.ftc.gov/reports/national-do-not-call-registry-
    data-book-fiscal-year-2018.
        \50\ See FTC Robocall Initiatives, https://www.consumer.ftc.gov/
    features/feature-0025-robocalls. 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 enforcement actions
    seeking civil penalties, restitution for victims of telemarketing
    scams, and disgorgement of ill-gotten gains against 444 corporations
    and 358 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. See Enforcement of the Do Not Call
    Registry, https://www.ftc.gov/news-events/media-resources/do-not-call-
    registry/enforcement. In August 2017, 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. U.S. et al. v. Dish Network,
    L.L.C., No. 309-cv-03073-JES-CHE (C.D. Ill. Aug. 10, 2017), https://
    www.ftc.gov/enforcement/cases-proceedings/052-3167/dish-network-llc-
    united-states-america-
    Federal-trade.
    ---------------------------------------------------------------------------
        The FTC's most recent law enforcement crackdown stopped four
    separate robocall operations.\51\ For example, in FTC v. Christiano,
    the FTC obtained a $1.35 million civil penalty and a ban on providing
    an autodialer to anyone engaged in telemarketing against two technology
    companies and their owner for knowingly providing the tools that
    unlawful telemarketers used to blast out billions of illegal
    robocalls.\52\ In another case from the recent crackdown,\53\ the FTC
    sued a recidivist robocaller and his partners for allegedly running a
    Google rankings scam that used robocalls to reach their victims and
    bombarded individuals who did not own businesses with the same
    robocalls.\54\ In April, a court granted the FTC's motion for summary
    judgment, banning him and one of his co-defendants from all
    telemarketing and imposing a $3.3 million judgment.
    ---------------------------------------------------------------------------
        \51\ See FTC Press Release, FTC Crackdown Stops Operations
    Responsible for Billions of Illegal Robocalls (Mar. 26, 2019), https://
    www.ftc.gov/news-events/press-releases/2019/03/ftc-crackdown-stops-
    operations-responsible-billions-illegal.
        \52\ FTC v. James Christiano et al., No. 8:18-cv-00936 (C.D. Cal.
    June 5, 2018), https://www.ftc.gov/enforcement/cases-proceedings/162-
    3124/james-christiano-et-al-netdotsolutions-inc.
        \53\ FTC v. Pointbreak Media LLC et al., No. 18-cv-61017 (S.D. Fla.
    May 23, 2018), https://www.ftc.gov/enforcement/cases-proceedings/172-
    3182/pointbreak-media-llc-0.
        \54\ Previously, in 2017, the FTC settled claims with Ramsey for
    illegal robocalls and calls to numbers listed on the National Do Not
    Call Registry. See FTC v. Ramsey et al., No. 9:17-cv-80032 (S.D. Fla.
    Jan. 13, 2017), https://www.ftc.gov/enforcement/cases-proceedings/132-
    3254/
    justin-ramsey.
    ---------------------------------------------------------------------------
        Despite the FTC's vigorous law enforcement program, technological
    advances continue to permit bad actors to place millions or even
    billions of calls, often from abroad, at very low cost, and in ways
    that are difficult to trace. This phenomenon continues to infuriate
    consumers and challenge enforcers. 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, from 2013 to 2015, the FTC led
    four public challenges to incentivize innovators to help tackle the
    unlawful robocalls that plague consumers.\55\ 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. Consumers can access information about
    potential solutions available to them on the FTC's website.\56\ The
    telecommunications industry has also developed a new framework, SHAKEN/
    STIR, which is designed to limit illegitimate number spoofing and
    reduce illegal robocalls.
    ---------------------------------------------------------------------------
        \55\ The first challenge, in 2013, called upon the public to
    develop a consumer-facing solution to block illegal robocalls. One of
    the winners, ``NomoRobo,'' was on the market within 6 months after
    being selected by the FTC. NomoRobo, which reports blocking over 600
    million calls to date, is being offered directly to consumers by a
    number of telecommunications providers and is available as an app on
    iPhones. See FTC Press Release, FTC Announces Robocall Challenge
    Winners (Apr. 2, 2013), https://www.ftc.gov/news-events/press-releases/
    2013/04/ftc-announces-robocall-challenge-winners; see also FTC Press
    Release, FTC Awards $25,000 Top Cash Prize for Contest-Winning Mobile
    App That Blocks Illegal Robocalls (Aug. 17, 2015), https://www.ftc.gov/
    news-events/press-releases/2015/08/ftc-awards-25000-top-cash-prize-
    contest-winning-mobile-app-blocks; FTC Press Release, FTC Announces
    Winners of ``Zapping Rachel'' Robocall Contest
    (Aug. 28, 2014), https://www.ftc.gov/news-events/press-releases/2014/
    08/ftc-announces-winners-zapping-rachel-robocall-contest.
        \56\ See https://www.consumer.ftc.gov/features/how-stop-unwanted-
    calls.
    ---------------------------------------------------------------------------
        The FTC continues to engage with industry stakeholders and supports
    the industry initiative to authenticate caller ID numbers. The FTC also
    regularly works with its State, Federal, and international partners to
    combat illegal robocalls.\57\
    ---------------------------------------------------------------------------
        \57\ See, e.g., FTC Press Release, FTC and FCC to Host Joint Policy
    Forum on Illegal Robocalls (Mar. 22, 2018), www.ftc.gov/news-events/
    press-releases/2018/03/ftc-fcc-host-joint-policy-forum-
    illegal-robocalls; FTC Press Release, FTC and FCC Seek Exhibitors for
    an Expo Featuring Technologies to Block Illegal Robocalls (Mar. 7,
    2018), www.ftc.gov/news-events/press-releases/2018/03/ftc-fcc-seek-
    exhibitors-expo-featuring-technologies-block-illegal; Memorandum of
    Understanding Among Public Authorities of the Unsolicited
    Communications Enforcement Network Pertaining to Unlawful
    Telecommunications and SPAM (May 2016), https://www.ftc.gov/
    policy/cooperation-agreements/international-unlawful-
    telecommunications-spam-enforcement-
    cooperation; FTC Press Release, FTC Signs Memorandum of Understanding
    With Canadian Agency To Strengthen Cooperation on Do Not Call, Spam
    Enforcement (Mar. 24, 2016), https://www.ftc.gov/news-events/press-
    releases/2016/03/ftc-signs-memorandum-understanding-canadian-agency-
    strengthen.
    ---------------------------------------------------------------------------
        For many years, the Commission has recommended eliminating the
    common carrier exemption. The exemption is outdated and no longer makes
    sense in today's marketplace where the lines between telecommunications
    and other services are increasingly blurred. It impedes the FTC's work
    tackling illegal robocalls and more broadly circumscribes other
    enforcement initiatives. For example, a carrier that places, or assists
    and facilitates, illegal telemarketing might argue that it is beyond
    the Commission's reach because of the common carrier exemption.
    Likewise, the exemption may frustrate the Commission's ability to
    obtain complete relief for consumers when there are multiple parties,
    some of whom are common carriers. It also may pose difficulties when a
    company engages in deceptive or unfair practices involving a mix of
    common carrier and non-common carrier activities. Finally, litigation
    has been complicated by entities that attempt to use their purported
    status as common carriers to shield themselves from FTC
    enforcement.\58\
    ---------------------------------------------------------------------------
        \58\ See, e.g., Answer and Affirmative Defenses of Defendant
    Pacific Telecom Communications Group at 9, 17-20, Dkt. 19, FTC et al.
    v. Caribbean Cruise Line et al., No. 0:15-cv-60423
    (S.D. Fla. June 2, 2015), https://www.ftc.gov/enforcement/cases-
    proceedings/122-3196-x150028/caribbean-cruise-line-inc.

    ---------------------------------------------------------------------------
    E. Consumer and Business 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 the FTC's website, the media, and partner
    organizations that disseminate consumer information on the agency's
    behalf. The FTC delivers actionable, practical, plain-language guidance
    on dozens of issues, and updates its consumer education materials
    whenever it has new information to share.
        The FTC disseminates these tips through articles, blog posts,
    infographics, videos, social media, and education campaigns. For
    example, in response to the enactment of the Economic Growth,
    Regulatory Relief, and Consumer Protection Act,\59\ which allows
    consumers nationwide to freeze their credit and place year-long fraud
    alerts for free, the Commission helped consumers take advantage of the
    new protections by: updating IdentityTheft.gov; revising its identity
    theft publications; and providing blogs, webinars, and podcasts in
    collaboration with a wide range of partners.\60\
    ---------------------------------------------------------------------------
        \59\ Public Law No: 115-174.
        \60\ See, e.g., FTC Press Release, Starting Today, New Federal Law
    Allows Consumers to Place Free Credit Freezes and Yearlong Fraud Alerts
    (Sept. 21, 2018), https://www.ftc.gov/news-events/press-releases/2018/
    09/starting-today-new-law-allows-consumers-place-free-credit-freezes.
    ---------------------------------------------------------------------------
        The FTC also tailors its guidance to serve specific audiences,
    including older adults.\61\ A recent FTC report to Congress details how
    older adults experience scams,\62\ and a series of FTC Data Spotlights
    gives further details on scams that affect older adults \63\ and helps
    educate consumers.\64\
    ---------------------------------------------------------------------------
        \61\ See www.ftc.gov/PassItOn and www.ftc.gov/Pasalo. The campaign
    has distributed more than 10.6 million print publications since its
    creation, including 1.1 million so far in fiscal year 2019.
        \62\ FTC Report, Protecting Older Consumers: 2017-2018 (Oct. 2018),
    https://www.ftc.gov/
    reports/protecting-older-consumers-2017-2018-report-congress-Federal-
    trade-commission.
        \63\ See, e.g., FTC Consumer Protection Data Spotlight, Older
    Adults Hardest Hit by Tech Support Scams (Mar. 7, 2019), https://
    www.ftc.gov/news-events/blogs/data-spotlight/2019/03/older-adults-
    hardest-hit-tech-support-scams.
        \64\ See, e.g., FTC Consumer Blog, How to Spot, Avoid, and Report
    Tech Support Scams (Feb. 2019), https://www.consumer.ftc.gov/articles/
    how-spot-avoid-and-report-tech-support-scams and https://
    www.consumidor.ftc.gov/articulos/como-detectar-evitar-y-reportar-las-
    estafas-de-soporte-tecnico.
    ---------------------------------------------------------------------------
        The Commission also works to provide companies with resources on a
    variety of issues that affect businesses. For example, our
    ``Cybersecurity for Small Business'' campaign, a joint effort with the
    National Institute of Standards and Technology, the Small Business
    Administration, and the Department of Homeland Security, includes a
    dozen need-to-know topics as well as fact sheets, videos, and other
    materials.\65\
    ---------------------------------------------------------------------------
        \65\ See Cybersecurity Resources for Your Small Business (Oct. 18,
    2018), https://www.ftc.gov/news-events/blogs/business-blog/2018/10/
    cybersecurity-resources-your-small-business. These materials will soon
    be available in Spanish.
    ---------------------------------------------------------------------------

                            IV. COMPETITION MISSION

        The FTC enforces U.S. antitrust law in many sectors that directly
    affect consumers and their wallets, such as healthcare, consumer
    products and services, technology, manufacturing, and energy. The
    Commission shares Federal antitrust enforcement responsibilities with
    the DOJ Antitrust Division.
        One of the agencies' principal responsibilities is to prevent
    mergers that may substantially lessen competition. Under U.S. law,
    parties to certain mergers and acquisitions must file premerger
    notification with the FTC and DOJ and observe the statutorily
    prescribed waiting period before consummating their transactions.
    Premerger filings under the HSR Act have generally increased steadily
    since fiscal year 2013. Last year, for the second year in a row, we
    received just over 2,000 HSR filings.\66\
    ---------------------------------------------------------------------------
        \66\ The agencies received 2,111 HSR filings in fiscal year 2018, a
    slight increase from fiscal year 2017, where we received 2,052. Apart
    from the last 2 years, the last time annual HSR notification filings
    exceeded 2,000 was back 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, https://www.ftc.gov/policy/reports/
    policy-reports/annual-competition-reports.
    ---------------------------------------------------------------------------
        Most reported transactions do not raise significant competitive
    concerns, and the agencies clear those non-problematic transactions
    expeditiously. But when the evidence suggests that a proposed merger
    likely would be anticompetitive, the Commission does not hesitate to
    intervene. In fiscal year 2018, the Commission took enforcement actions
    against 22 different mergers, most of which were resolved through a
    consent decree. We also challenged five mergers in court: Federal
    courts granted preliminary injunctions in two cases; \67\ the parties
    abandoned their plans in the face of our court challenge in two cases;
    \68\ and a ruling is currently pending in the fifth matter.\69\
    ---------------------------------------------------------------------------
        \67\ See, FTC v. Tronox Ltd., 332 F. Supp. 3d 187 (D.D.C 2018),
    (granting preliminary injunction); FTC v. Wilh.Wilhelmsen Holding ASA,
    341 F. Supp. 3d 27 (D.D.C. 2018) (granting preliminary injunction). The
    agency also won a full administrative trial on the merits in the Tronox
    matter before an administrative law judge, before the parties
    ultimately settled with the agency. FTC Press Release, FTC Requires
    Divestitures by Tronox and Cristal, Suppliers of Widely Used White
    Pigment, Settling Litigation over Proposed Merger (Apr. 10, 2019),
    https://www.ftc.gov/news-events/press-releases/2019/04/ftc-requires-
    divestitures-tronox-cristal-suppliers-widely-used.
        \68\ J.M. Smuckers and Conagra abandoned their planned combination
    after the FTC filed suit in March 2018. CDK abandoned its plan to
    purchase Auto-Mate after the Commission initiated litigation in March
    2018.
        \69\ The agency formally challenged the consummated merger of Otto
    Bock and Freedom Innovations in fiscal year 2018. Litigation before an
    administrative law judge concluded last fall, and the agency is
    currently awaiting a ruling.
    ---------------------------------------------------------------------------
        Over the past year, the Commission has continued its decades-long
    efforts to fight anti-competitive conduct in the pharmaceuticals and
    healthcare industries, where rising costs continue to burden American
    consumers. For over twenty years, the Commission has prioritized ending
    anticompetitive reverse payment patent agreements 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.,\70\ 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,\71\ and other manufacturers,
    including the remaining Actavis defendants,\72\ have agreed to abandon
    the practice.\73\ In administrative litigation, the Commission ruled in
    March of this year that Impax had engaged in an illegal reverse payment
    agreement designed to block consumers' access to a lower-cost generic
    version of the branded drug, Opana ER.\74\ In addition, the Commission
    has challenged other anticompetitive conduct by drug manufacturers.
    Last month, the Commission filed a complaint against the health
    information company Surescripts, alleging that it employed illegal
    vertical and horizontal restraints to maintain its monopolies over two
    electronic prescribing, or ``e-prescribing,'' markets (routing and
    eligibility).\75\ Additionally, a Federal court recently ruled that
    AbbVie Inc. used sham litigation illegally to maintain its monopoly
    over the testosterone replacement drug Androgel, and ordered $493.7
    million in monetary relief to consumers who were overcharged for
    Androgel as a result of AbbVie's conduct.\76\
    ---------------------------------------------------------------------------
        \70\ 570 U.S. 756 (2013).
        \71\ FTC 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), https://www.ftc.gov/news-events/press-releases/2015/05/ftc-
    settlement-cephalon-pay-delay-case-ensures-12-billion-ill.
        \72\ On February 28, 2019, after over 10 years of litigation, the
    Commission reached a settlement with the final remaining defendant in
    the Actavis case. FTC Press Release, Last Remaining Defendant Settles
    FTC Suit that Led to Landmark Supreme Court Ruling on Drug Company
    ``Reverse Payments'' (Feb. 28, 2019), https://www.ftc.gov/news-events/
    press-releases/2019/02/last-remaining-defendant-settles-ftc-suit-led-
    landmark-supreme.
        \73\ FTC Press Release, FTC Enters Global Settlement to Resolve
    Reverse-Payment Charges against Teva (Feb. 19, 2019), https://
    www.ftc.gov/news-events/press-releases/2019/02/ftc-enters-global-
    settlement-resolve-reverse-payment-charges; Joint Motion for Entry of
    Stipulated Order for Permanent Injunction, FTC v. Allergan plc, No. 17-
    cv-00312 (N.D. Cal. Jan. 23, 2017), https://www.ftc.gov/enforcement/
    cases-proceedings/141-0004/allergan-plc-watson-laboratories-inc-et-al;
    Stipulated Order for Permanent Injunction, FTC v. Teikoku Pharma USA,
    Inc., No. 16-cv-01440 (E.D. Pa. Mar. 30, 2016), https://www.ftc.gov/
    enforcement/cases-proceedings/141-0004/endo-pharmaceuticals-impax-labs.
        \74\ FTC Press Release, FTC Concludes that Impax Entered into
    Illegal Pay-for-Delay Agreement (Mar. 29, 2019), https://www.ftc.gov/
    news-events/press-releases/2019/03/ftc-concludes-impax-
    entered-illegal-pay-delay-agreement.
        \75\ FTC Press Release, FTC Charges Surescripts with Illegal
    Monopolization of E-Prescription Markets (Apr. 24, 2019), https://
    www.ftc.gov/news-events/press-releases/2019/04/ftc-charges-surescripts-
    illegal-monopolization-e-prescription.
        \76\ FTC v. AbbVie Inc., 329 F. Supp. 3d 98 (E.D. Pa. 2018);
    Statement of FTC Chairman Joe Simons Regarding Federal Court Ruling in
    FTC v. AbbVie (June 29, 2018), https://www.ftc.gov/news-events/press-
    releases/2018/06/statement-ftc-chairman-joe-simons-regarding-Federal-
    court-ruling.
    ---------------------------------------------------------------------------
        The Commission also maintains a robust program to identify and stop
    anticompetitive conduct. This year, in administrative litigation of the
    1-800 Contacts matter, the Commission ruled that agreements among
    competitors to limit the scope of their Internet advertising were
    unlawful.\77\ The agency also successfully argued and won an important
    procedural victory in the U.S. Court of Appeals for the Fifth Circuit,
    defeating an effort by the Louisiana Real Estate Appraisers Board to
    obtain interlocutory review of the agency's determination that the
    State-action doctrine did not apply to its conduct.\78\ The agency also
    has several other conduct matters in active litigation.\79\
    ---------------------------------------------------------------------------
        \77\ In re 1-800 Contacts, Inc., Dkt. No. 9372 (Nov. 14, 2018),
    https://www.ftc.gov/system/files/documents/cases/
    docket_no_9372_opinion_of_the_commission_redacted_public_
    version.pdf. This matter is currently on appeal to the U.S. Court of
    Appeals for the Second Circuit.
        \78\ La. Real Estate Appraisers Bd. v. FTC, 917 F.3d 389 (5th Cir.
    2019).
        \79\ 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), https://www.ftc.gov/enforcement/cases-proceedings/141-0199/
    qualcomm-inc; In re Benco Dental Supply et al., Dkt. 9379 (Feb. 12,
    2018), https://www.ftc.gov/enforcement/cases-
    proceedings/151-0190/bencoscheinpatterson-matter.
    ---------------------------------------------------------------------------
        The Commission also continues to focus its attention on high
    technology markets. In an effort to more closely monitor developments
    in the technology sector, the FTC's Bureau of Competition recently
    announced the creation of a Technology Task Force dedicated to
    monitoring competition in U.S. technology markets.\80\ The Task Force
    will include attorneys from the Bureau of Competition with expertise in
    complex product and service markets and ecosystems, including markets
    for online advertising, social networking, mobile operating systems and
    apps, and platforms, and will be supported by a Technology Fellow who
    will provide important technical assistance for investigations. The
    Task Force will examine industry practices, conduct law enforcement
    investigations, and coordinate and consult with staff throughout the
    FTC on technology-related matters, including prospective merger reviews
    and reviews of consummated technology mergers.
    ---------------------------------------------------------------------------
        \80\ FTC Press Release, FTC's Bureau of Competition Launches Task
    Force to Monitor Technology Markets (Feb. 26, 2019), https://
    www.ftc.gov/news-events/press-releases/2019/02/ftcs-
    bureau-competition-launches-task-force-monitor-technology.
    ---------------------------------------------------------------------------
        In addition to competition enforcement, the FTC promotes
    competition principles in advocacy comments to State lawmakers and
    regulators, as well as to its sister Federal agencies,\81\ and in
    amicus briefs filed in Federal courts considering important areas of
    antitrust law.\82\ The Commission benefits from critical self-
    examination, examining prior merger enforcement decisions to assess
    their impact on competition and consumers, and we intend to expand this
    effort going forward. Similarly, through the series of hearings
    described above, the Commission is devoting significant resources to
    refresh and, if warranted, renew its thinking on a wide range of
    cutting-edge competition issues.\83\
    ---------------------------------------------------------------------------
        \81\ See generally https://www.ftc.gov/policy/advocacy.
        \82\ Amicus briefs are posted at https://www.ftc.gov/policy/
    advocacy/amicus-briefs.
        \83\ See Prepared Remarks of Chairman Simons Announcing the
    Competition and Consumer Protection Hearings (June 20, 2018), https://
    www.ftc.gov/system/files/documents/public_
    statements/1385308/
    prepared_remarks_of_joe_simons_announcing_the_hearings_
    6-20-18_0.pdf.
    ---------------------------------------------------------------------------

                          V. INTERNATIONAL COOPERATION

        The FTC also engages in significant international work to support
    its domestic enforcement programs. During the last fiscal year, the FTC
    cooperated in 43 investigations, cases, and enforcement projects with
    foreign consumer, privacy, and criminal enforcement agencies. To
    sustain this level of cooperation, the agency often works through
    global enforcement networks, such as the International Consumer
    Protection and Enforcement Network, the Global Privacy Enforcement
    Network, the Unsolicited Communications Enforcement Network, and the
    International Mass Marketing Fraud Working Group. The FTC also works
    directly with foreign counterparts on enforcement issues.\84\
    ---------------------------------------------------------------------------
        \84\ For example, the FTC has conducted several trainings and
    roundtables in the United States and India to help develop the capacity
    of Indian law enforcement to address tech support and other impostor
    scams such as the impersonation of IRS and Social Security officials.
    To address these continued threats, the FTC will convene a fourth
    annual roundtable in June, in partnership with the U.S.-India Business
    Council, on combatting Indian call center fraud. U.S.-India Business
    Council, 4th Annual Round Table on Stepping Up to Stop Indian Call
    Center Fraud, https://www.usibc.com/event/4th-annual-round-table-on-
    stepping-up-to-stop-indian-call-center-fraud.
    ---------------------------------------------------------------------------
        International enforcement cooperation also is critical for the
    FTC's competition program. With the expansion of global trade and the
    operation of many companies across national borders, the FTC and DOJ
    increasingly engage with foreign antitrust agencies to ensure close
    collaboration on cross-border cases and convergence toward sound
    competition policies and procedures.\85\ The FTC effectively
    coordinates reviews of multijurisdictional mergers and continues to
    work with its international counterparts to achieve consistent outcomes
    in cases of possible 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 multilateral competition organization projects
    and initiatives. The FTC also works with other agencies within the U.S.
    Government to advance consistent competition enforcement policies,
    practices, and procedures in other parts of the world.\86\
    ---------------------------------------------------------------------------
        \85\ 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.
        \86\ For example, the Commission works through the U.S.
    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.
    ---------------------------------------------------------------------------
        The U.S. SAFE WEB Act is key to much of the agency's international
    work, especially on consumer protection and privacy matters.\87\ Passed
    in 2006 and renewed in 2012, the Act strengthens the FTC's ability to
    work on cases with an international dimension. It allows the FTC to
    share evidence and provide investigative assistance to foreign
    authorities in cases involving spam, spyware, misleading health and
    safety claims, privacy violations and data security breaches, and
    telemarketing fraud. In many cases, the foreign agencies investigated
    conduct that directly harmed U.S. consumers; in others, the FTC's
    action led to reciprocal assistance. The Act also has bolstered the
    agency's authority to engage in enhanced enforcement cooperation with
    foreign counterparts, including through memoranda of understanding,
    international agreements, staff exchanges, and other mechanisms.
    ---------------------------------------------------------------------------
        \87\ Undertaking Spam, Spyware, and Fraud Enforcement With
    Enforcers Beyond Borders Act (U.S. SAFE WEB Act), Public Law No. 109-
    455, 120 Stat. 3372, extended by Public Law No. 112-203, 126 Stat. 1484
    (amending 15 U.S.C. Sec. Sec. 41 et seq.). Certain provisions, such as
    the secondment program for foreign officials described below, also
    apply to the FTC's competition work.
    ---------------------------------------------------------------------------
        The U.S. SAFE WEB Act has been a remarkable success. The Act
    enabled the FTC to respond to more than 130 SAFE WEB information
    sharing requests from more than 30 foreign enforcement agencies. It
    allowed the FTC to issue more than 115 civil investigative demands in
    more than 50 investigations on behalf of foreign agencies, both civil
    and criminal. The Commission has also used this authority to file suit
    in Federal court to obtain judicial assistance for one of its closest
    law enforcement partners, the Canadian Competition Bureau.\88\
    ---------------------------------------------------------------------------
        \88\ See Remarks by John Pecman, Commissioner of Competition
    [Canada] at International Privacy Enforcement Meeting (June 4, 2015),
    https://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03957.html.
    ---------------------------------------------------------------------------
        The FTC's foreign law enforcement partners similarly have assisted
    FTC enforcement actions. For example, the FTC worked directly with U.K.
    and Canadian authorities to halt Next-Gen Inc., a sweepstakes scam.\89\
    The FTC relied on key information sharing provisions of the U.S. SAFE
    WEB Act to facilitate cooperation with its U.K. partner and, last
    month, the defendants forfeited $30 million in cash and assets to
    settle the FTC's charges. In the privacy arena, the FTC used key
    provisions of the U.S. SAFE WEB Act to collaborate successfully with
    the Office of the Privacy Commissioner of Canada in its COPPA case
    against V-Tech, the FTC's first case involving Internet-connected
    toys.\90\ The FTC also brought several significant enforcement actions
    in the past year relying on the SAFE WEB Act's provisions that allow
    the FTC to reach foreign conduct that has a ``reasonably foreseeable''
    effect on U.S. consumers, or that involves ``material conduct'' in the
    United States, as the basis for challenging practices involving foreign
    defendants.\91\
    ---------------------------------------------------------------------------
        \89\ FTC Press Release, Operators of Sweepstakes Scam Will Forfeit
    $30 Million to Settle
    FTC Charges (Mar. 7, 2019), https://www.ftc.gov/news-events/press-
    releases/2019/03/operators-sweepstakes-scam-will-forfeit-30-million-
    settle-ftc.
        \90\ U.S. v. VTech Electronics Ltd., et al., No. 1:18-cv-00114
    (N.D. Ill. Jan. 8, 2018), https://www.ftc.gov/enforcement/cases-
    proceedings/162-3032/vtech-electronics-limited.
        \91\ See, e.g., FTC Press Release, Court Temporarily Halts
    International Operation that Allegedly Deceived Consumers through False
    Claims of ``Free Trial'' Offers and Imposed Unauthorized Continuity
    Plans (Nov. 28, 2018), https://www.ftc.gov/news-events/press-releases/
    2018/11/court-temporarily-halts-international-operation-allegedly; FTC
    Press Release, At FTC's Request, Court Halts Massive ``Sanctuary
    Belize'' Real Estate Investment Scam (Nov. 8, 2018), https://
    www.ftc.gov/news-events/press-releases/2018/11/ftcs-request-court-
    halts-massive-sanctuary-belize-real-estate; FTC Press Release, FTC
    Halts Online Marketers Responsible for Deceptive ``Free Trial'' Offers
    (July 3, 2018), https://www.ftc.gov/news-events/press-releases/2018/07/
    ftc-halts-online-marketers-responsible-deceptive-free-trial; FTC Press
    Release, FTC Action Halts MOBE, a Massive Internet Business Coaching
    Scheme (June 11, 2018), https://www.ftc.gov/news-events/press-releases/
    2018/06/ftc-action-halts-mobe-massive-Internet-business-coaching-
    scheme.
    ---------------------------------------------------------------------------
        The Act also underpins the FTC's ability to participate in cross-
    border cooperation arrangements. This includes data transfer mechanisms
    such as the EU-U.S. Privacy Shield framework and the Swiss-U.S. Privacy
    Shield framework, as well as the APEC Cross-Border Privacy Rules
    System, designed to protect privacy and data flows in the Asia-Pacific
    region. Many U.S. companies use these mechanisms to carry out cross-
    border data flows consistent with strong privacy protections. The SAFE
    WEB Act also provides the FTC with key powers helping to carry out
    enhanced cooperation with important partners.\92\
    ---------------------------------------------------------------------------
        \92\ FTC Press Release, FTC Signs Memorandum of Understanding with
    United Kingdom's Competition and Markets Authority to Strengthen
    Consumer Protection Enforcement Cooperation (Mar. 25, 2019), https://
    www.ftc.gov/news-events/press-releases/2019/03/ftc-signs-memorandum-
    understanding-united-kingdoms-competition. The MOU streamlines sharing
    investigative information and complaint data, simplifies requests for
    investigative assistance, aids joint law enforcement investigations,
    and provides strong confidentiality and data safeguards.
    ---------------------------------------------------------------------------
        The SAFE WEB Act's provision authorizing staff exchanges also
    yields tremendous benefits. Using the Act, the FTC established an
    International Fellows program that has enabled the agency to host over
    120 officials of foreign competition, consumer protection, and data
    privacy agencies to work alongside FTC staff on enforcement matters,
    subject to confidentiality protections, over the past dozen years.
    Foreign counterparts continue to seek exchanges with us, as the Fellows
    incorporate their learning from the FTC into the work of their home
    agencies, strengthening their capacity as well as our cooperative
    relationships with those counterparts.
        The Act sunsets in 2020. The Commission strongly urges Congress to
    reauthorize this critical authority and eliminate the sunset provision.
    Just as Congress permanently granted the Securities and Exchange
    Commission and the U.S. Commodity Futures Trading Commission similar
    enforcement powers decades ago, and provided the Consumer Product
    Safety Commission with permanent authority to share information with
    its foreign counterparts, we ask Congress to repeal the Act's sunset
    provision and make the SAFE WEB Act's cooperation tools a permanent
    part of the FTC Act.

                                 VI. CONCLUSION

        The FTC remains committed to marshalling its resources efficiently
    in order to effectively protect consumers and promote 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 Kennedy. Thank you, Mr. Chairman.
        We will now move to 5-minute periods of questions.
        Chairman Simons, I want to start with you. Let us start
    with the topic of antitrust.

                                 FTC ANTITRUST

        Some of our social media companies are no longer
    companies--they are countries. They are huge, and they got that
    way by buying their competition. Under at least one point of
    view traditional antitrust analysis, that is okay because they
    have not put pressure on pricing because their services are
    free.
        Another point of view is that, well, there are other ways
    to hurt a consumer than raising prices. I want to know what the
    position of the FTC is. I know you have appointed a committee,
    a task force. What is your task force doing? When is it going
    to finish, and what is the position of the FTC going to be on
    these antitrust issues?
        Mr. Simons. Thank you, Senator.
        I am going to start with the Technology Task Force. This is
    created in the Bureau of Competition, and it is not temporary.
    So it is basically creating like another division that we
    already have, a litigating division in the Bureau of
    Competition. Its mission is to focus on companies in the high-
    tech sector, particularly digital platforms.
        Senator Kennedy. Right.
        Mr. Simons. All right. And so it is looking at exactly the
    things that you just described. It is going to be looking at
    the transactions that they are engaging in. It is going to be
    looking at the conduct that they are engaging in, aside from
    the transactions, and we are looking for----
        Senator Kennedy. Excuse me for interrupting, Mr. Chairman,
    but I have got other questions.
        Do you know when the task force is going to complete its
    work and the FTC will have a policy with respect to antitrust?
        Mr. Simons. So the Task Force is ongoing. It is like a law
    enforcement effort. So, hopefully, it is going to bring--we
    expect them to bring cases, and those cases can just continue.
        Senator Kennedy. When?
        Mr. Simons. When what?
        Senator Kennedy. When do you think you will bring cases?
    When will we know what your policy is?
        Mr. Simons. Oh. So the policy is irrespective of the
    Technology Task Force. Our policy is to stop anticompetitive
    conduct and anticompetitive mergers that either result in price
    increases, reductions in product quality, which would include
    privacy, and reductions in innovation. That is the basic
    concept.
        Senator Kennedy. Have you brought any cases reflecting that
    point of view?
        Mr. Simons. Sure. We brought one last week involving the
    health care sector in a high-tech platform called Surescripts.
    This is e-prescribing. It connects the pharmacy benefit
    managers (PBMs) to the doctors and the doctors to the
    pharmacies.

                        CONSUMER CREDIT RATING AGENCIES

        Senator Kennedy. Let me shift gears to consumer credit
    rating agencies.
        Our rating agencies form a very useful function. They
    gather information about each of us. Can we agree, however,
    that when the rating agencies have information that is
    inaccurate, they could do a better job of making it easier for
    a consumer to change that information? Could they not?
        Mr. Simons. Well, certainly, it is very important that the
    information they have be accurate.
        Senator Kennedy. But have you ever had a situation where it
    was not accurate and you----
        Mr. Simons. Yes. In fact, we brought a case against a
    company called RealPage, which is a background screening
    company, and they were using an algorithm to match up data to
    people's criminal records. And they were not doing a very good
    job of it.
        So we brought a case and got them to change their algorithm
    and also to pay monetary relief of $3 million.
        Senator Kennedy. But what I am talking about is a situation
    where the rating agencies have information on you, for example,
    and they just got it wrong.
        Mr. Simons. You know, this is an example. That is what
    happened. They had it wrong.
        Senator Kennedy. But I am talking about a procedure where,
    short of having the FTC go bring a case, a consumer can call
    the rating agency and correct the information. What can we do
    to encourage the rating agency to fix it, as opposed to saying
    ``we do not care, because we do not have to''?
        Mr. Simons. Well, the statute requires them to fix it and
    have dispute procedures in place.
        Senator Kennedy. I know.
        Mr. Simons. So if they are not doing that, then that would
    be a violation of the statute, and that is something that we
    would correct. We would try to correct.
        Senator Kennedy. In the meantime, the consumers have to
    wait and put up with the bad information about him or her?
        What I am asking is, Can you visit with our credit rating
    agencies----
        Mr. Simons. Yes.
        Senator Kennedy [continuing]. And try to have them set up a
    system that looks like somebody designed it on purpose, so that
    consumers can say, ``Hey, you got my information wrong. Please
    fix it''----
        Mr. Simons. Yes. One of the----
        Senator Kennedy [continuing]. And then they will do it as
    opposed to saying, ``You do not pay our fees. Business guys pay
    our fees. So call somebody who cares''?
        Mr. Simons. Right. I mean, one of the things we are doing
    is we are talking to the Consumer Financial Protection Bureau
    (CFPB), and considering a workshop that will address exactly
    these issues.
        Senator Kennedy. Okay.
        Senator Coons.

                                   ROBOCALLS

        Senator Coons. Thank you, Mr. Chairman.
        To both of you, about robocalls, Americans receive more
    than 5 million robocalls a month, and as best I know, virtually
    every American would like it to stop.
        You, Chairman Pai, have encouraged phone companies to
    implement a new technology. I think it is called SHAKEN/STIR,
    which alerts a consumer to spoofing, to changing the caller ID
    to a number other than the actual calling number. Have the
    phone companies listened to your advice so far and deployed
    this technology?
        Chairman Pai. Thank you for the question, Senator.
        Generally speaking, they have, and we have posted the
    responses to my demand from last fall and earlier this spring
    that they adopt Call Authentication this year, with the penalty
    being if they do not, the FCC will intervene regulatorily to
    make sure that they do.
        So there have been a number of announcements from various
    companies, the top 14 in particular, talking about some of
    their efforts in this regard. In addition to that, we have also
    been encouraging them to empower themselves to block calls that
    are obviously spoofed.
        We have been creating a reassigned numbers database to
    allow legitimate callers to determine whether a number has been
    reassigned.
        We have been working with foreign governments to make sure
    that we share information when we see the calls are coming from
    a particular country, and just last week, actually, we put out
    a consumer advisory about the one-ring scam in which a call
    comes from, say, Mauritania or Sierra Leone, and it only rings
    once. And it is tempting some consumers to call back, and it
    essentially operates like a 900 number. You get all these fees
    per minute if you call back.
        There is a very good example of the collaboration between
    Chairman Simon's agency and mine. We direct them to the FTC if
    they want to file a complaint. We urge them not to answer the
    calls. We want to empower consumers with information, and we
    want companies here to get rid of ``the scourge of
    civilization,'' as former Senator Fritz Hollings once called
    it.
        Senator Coons. Well, we can continue that work in his
    memory.
        Does the FCC have a dedicated unit focused on this, and do
    you feel like you have the scope and reach of authorities that
    you need to continue the work you describe?
        Chairman Pai. The answer to the first question, Senator, is
    yes. We have the Telecommunications Consumer Division within
    our Enforcement Bureau, the primary focus of which is tackling
    this problem.
        In addition, I know that Members of Congress and Members of
    this body of both the parties are looking at legislation like
    the TRACED Act, which I support.
        We want additional tools to help tackle this problem, and I
    think the TRACED Act in particular is a step in the right
    direction.
        Senator Coons. Chairman Simons, what is the FTC doing as
    part of this, and what comments might you have on the scope and
    reach of your current authorities and whether they are
    sufficient?
        Mr. Simons. Thank you, Senator.
        So we continue to sue people who engage in robocalls. We
    had four at least, I think, in the past year, but as you know,
    a lot of those calls come from overseas and places where--they
    are kind of like boiler room operations which when you shut one
    of them down, they just reopen someplace up right next door,
    down the block, or even in another country.
        So one of the things we would really very much like is to
    get authority to go after common carriers, which we do not have
    right now.
        Our sense is we could have a material impact, particularly
    for the foreign robocallers. They have to have an entry point
    into the U.S. telephone network system, and their call
    characteristics are quite distinct. You should be able to find
    them, and my understanding is that there are carriers who
    actually cater to this type of traffic. So we could go after
    them and stop them from carrying the robocalls if we could get
    authority to cover the common carriers.
        Senator Coons. I would welcome the chance to work with you
    on that. Are you aware of legislation that specifically
    addresses that? I am not.
        Mr. Simons. I think there is some legislation that has been
    introduced very early on.
        Senator Coons. Okay.
        Mr. Simons. Very early days for that.
        But, yes, I would very much appreciate any help we could
    get on that.
        Senator Coons. Thank you, Mr. Chairman.
        Chairman Pai, I am glad you are taking active measures to
    make sure that we are a leader in 5G technology deployment in
    the United States.
        As your plan notes, to successfully deploy 5G, we are going
    to need more spectrum. In particular, there is a band, the C-
    Band, that may well be vital to this, and my understanding is
    some of the current users have suggested they be allowed to
    sell the rights to wireless companies.
        This would result in a significant windfall profit to those
    users who did not have to pay to get that spectrum in the first
    place.
        Do you have a rough estimate about how much money such an
    auction might generate or sale, and why not have the FCC
    auction off parts of the C-Band itself? What delay might it
    cause? What sort of revenue might it generate to the Treasury,
    and would you need any authorities to be able to do that?
        Chairman Pai. I appreciate the question, Senator.
        In our Notice of Proposed Rulemaking on this issue, we teed
    up all of the different options, and our goal here was pretty
    simple: to solicit public input across the board on what the
    appropriate course for the FCC would be.
        In addition to that, we have been soliciting targeted input
    on some of the authority questions. For example, last week, we
    issued a series of questions about the legal ramifications of a
    particular course of action because the last thing we want to
    do, of course, is to make a decision that we believe is in the
    best interest of the American people but then be stuck in the
    courts for a long time.
        So there are many different factors here that we are trying
    to balance. One of them, of course, is time. As you mentioned,
    5G leadership is a top priority for America, not just in terms
    of national competitiveness, but in terms of the innovation and
    investment that will happen on our shores if we get it right on
    5G. That is one factor. The quicker we can get the spectrum to
    market for 5G, the more effective it will be.
        Another consideration is some of the incumbent users or
    customers of this band, and so we want to see, to the extent
    that they have concerns, to what extent we can accommodate
    those concerns.
        Another one which you highlighted as well is just making
    sure that for Members of Congress especially that the amount of
    revenue that will be raised, could be raised from this
    spectrum. In that regard, I do not have a verified internal
    estimate of how much could be raised, but with mid-band
    spectrum, we have a number of initiatives under way. And there
    has been a lot of chatter in the private sector about how much
    it could raise.
        Mid-band is in that sweet spot, it has good propagation
    characteristics in terms of coverage and as well as throughputs
    in terms of capacity, and so that is one of the reasons why
    this band in particular is very highly prized.
        Senator Coons. But it could be tens of billions of dollars;
    is that correct?
        Chairman Pai. I have seen estimates along those lines. I do
    not have any independent way to verify those estimates.
        Senator Coons. Thank you. I look forward to continuing to
    work on 5G and other issues.
        Thank you, Mr. Chairman.
        Senator Kennedy. Thank you, Senator Coons.
        Before I call on Senator Moran, give us the names, Chairman
    Simons, of those carriers that work closely with the
    robocallers that make it easier for the robocallers to do
    business.
        Mr. Simons. I do not have those, but I can get them.
        Senator Kennedy. Would you?
        Mr. Simons. Sure.
        Senator Kennedy. Can you get them to me?
        Mr. Simons. Yes.
        Senator Kennedy. I will put it on my Facebook page.
        Mr. Simons. Okay.
        [Laughter.]
        Mr. Simons. Well----
        Senator Kennedy. These are carriers that make it--these are
    American companies that make it easier for the robocalls.
        Mr. Simons. Yes. So this is a--these are probably small
    carriers, and so I do not have a list. We would have to develop
    the list.
        Senator Kennedy. Can you get me a list?
        Mr. Simons. I would have to check with my staff, but
    assuming these----
        Senator Kennedy. Well, we ought to tell people who they
    are.
        Mr. Simons. No, I agree. But because we do not have
    authority over them now, we have not looked in detail at who
    they are.
        Senator Kennedy. Okay.
        Senator Moran.

                                FTC'S AUTHORITY

        Senator Moran. Chairman Kennedy, thank you. I join Ranking
    Member in welcoming you to your chairmanship and look forward
    to working with you.
        Let me start with you, Chairman Simons. FTC's current
    Section 5 authority and other specific enforcement authorities
    that you have, does the FTC currently have the financial and
    staffing resources to effectively enforce against harmful data
    collection and processing practices? So what resources, if any,
    additional do you need for your current responsibilities?
        Mr. Simons. Right. So the first thing I would point out
    would be we lack civil penalty authority. So we can go into
    court under 13(b) and try to get monetary relief, but usually,
    with data security cases, it is very hard to prove a specific
    harm, that a specific breach resulted in a specific harm to any
    consumer.
        So the ability to get significant monetary relief is quite
    limited under our current authority, and our sense is that it
    would be much better if we had civil penalties because that way
    we could create an effective deterrent and cause people to
    think more carefully about their data security practices and
    protect consumers' data.
        Senator Moran. So, in answer to my question, you are asking
    for a legislative endeavor----
        Mr. Simons. Yes.
        Senator Moran [continuing]. Not necessarily something from
    this appropriations subcommittee?
        Mr. Simons. Right, yes. We would like to get civil penalty
    authority. We would like to get targeted rulemaking, and we
    would like to get jurisdiction over nonprofits and common
    carriers.
        Senator Moran. As you know, I chair the Commerce
    Subcommittee that deals with these topics, so I appreciate you
    reminding me of that.
        Let me ask you. If that subcommittee or the full Commerce
    Committee, those that are working on data privacy legislation
    are successful--and I am teamed up with a handful of Senators,
    and I think that I remain optimistic that we will be able to
    deal legislatively with data privacy. So if Congress were to
    enact a Federal privacy law to provide the FTC with those
    improved authorities, how would you expect your resource needs
    at the FTC to change?
        Mr. Simons. I think they would go up significantly. One
    point of comparison would be if you look at the UK Data
    Protection Authority, which has jurisdiction to enforce the
    General Data Protection Regulation (GDPR), which is a much more
    extensive privacy law than what we enforce now, they have--this
    is just the UK--they have over 500 people doing that job.
        Even the Irish Authority has, I think 140. We have about
    40.
        Senator Moran. A dramatic difference.
        We had the Irish Authority in front of our full committee
    last week.
        Mr. Simons. Yes.
        Senator Moran. As perhaps an aside, but something I want to
    say to you, Mr. Chairman, when we had you and all the remaining
    commissioners in front of our subcommittee, I want to tell you
    how impressed I was with every member of the Commission, and it
    was good to see the capabilities but also the evidence of
    working together to find solutions to problems. I am very
    grateful and appreciative for what I saw.
        Mr. Simons. Thank you so much. We deeply appreciate that.

                                    FCC MAPS

        Senator Moran. Chairman Pai, let me turn to you in a
    conversation that you and I have had ever since you showed me
    mobility maps. I remain concerned with the effectiveness of the
    Form 477 data collection process, and that is important. We
    talk about the resources in this committee. We would talk about
    the FCC and the Universal Service Fund. It also matters over at
    USDA and Rural Development and those dollars.
        I want to make certain that if we are going to spend the
    amount of money that you have to spend and that the Department
    of Agriculture has to spend that it goes where it needs to go
    to provide broadband service for all Americans.
        I joined--in fact, I led a letter that you will receive
    from the Kansas Congressional Delegation regarding our concerns
    about the 477 data collection process.
        Do you have any suggestions how the FCC plans to improve
    the maps? I know there is an effort afoot to determine whether
    carriers violated rules. Is there something that is taking
    place between now and that determination to improve the quality
    and accuracy?
        Chairman Pai. Yes, Senator, is the short answer.
        With respect to fixed broadband, right after I got into
    office, we started a comprehensive rethink of the Form 477
    process, maps where fixed broadband is and importantly where it
    is not.
        We are now engaging with staff--and I expect the staff will
    come to me with some recommendations--on how to make sure that
    this information is both accurate and more granular, so we
    understand, for example, where broadband within a census block
    is as opposed to simply understanding whether a census block
    has a single household covered in that block.
        On the mobility side with respect to wireless broadband, we
    do have the Mobility Fund Phase II, as you and I have discussed
    before, and here, thanks in part to Senator Manchin's advocacy,
    we determined that we believe that one or more carriers may
    have submitted inaccurate data.
        I referred immediately that matter to the Enforcement
    Bureau for investigation. I anticipate that the staff will come
    back to me with some reports on that investigation at some
    point in the near future, and at that point, we will determine
    how to proceed with respect to the Mobility Fund II program.
        But overall, I share, 100 percent, your concern, and the
    concern of other Members of the committee, that we need to have
    accurate mapping data in order to make sure that this scarce
    Federal funding is being distributed to close the digital
    divide, not to overbuild or----
        Senator Moran. Part of the FCC's conclusion as to how to
    improve the data has been to encourage an appeal process, and
    hundreds of folks across Kansas went out and attempted to do
    that--the Kansas Farm Bureau, others--in trying to determine
    whether or not the maps were accurate.
        What have you learned from that process of that information
    being provided to the FCC? Does it validate the maps, or does
    it indicate there remains problems?
        Chairman Pai. I think the challenge process has been
    illuminating. It has illustrated that in many cases, consumers
    and small businesses--farmers out there, for example--have been
    able to pinpoint that some of these mapping statistics are
    inaccurate, and that has been enormously helpful.
        In the context of our Form 477 proceeding, that is one of
    the reasons why, among other solutions, we are looking at
    crowdsourcing as a way of getting information aside from the
    carriers themselves so that we get the consumer experience
    reflected in our records as well as the Form 477 data itself.
        Senator Moran. Mr. Chairman, earlier in the day, you were
    kind enough to suggest you would come join me in Kansas. Maybe
    you and I can go out and take the device together. We can
    travel Kansas. I can show you some of the places where my cell
    coverage gets dropped every time I am there. It would be a
    great opportunity for us, you and I, to go experience the
    confirmation process to make improvements.
        Chairman Pai. Well, Senator, it is a great State. Some
    would say the greatest State. I would always be pleased to go
    back home.
        Senator Moran. I was very offended by the Chairman's
    suggestion that you were proud of your alma mater. I thought
    you would be proud of your State.
        [Laughter.]
        Senator Kennedy. Senator Van Hollen.
        Senator Van Hollen. Thank you, Mr. Chairman.
        I want to associate myself with the Chairman's comments
    earlier on about credit rating agencies. Big problem.
        Thank you both for being here.

                                       5G

        Chairman Pai, on 5G, you stated U.S. leadership in 5G is a
    national imperative for economic growth and competitiveness. I
    agree. Would you also agree it is a strategic imperative
    globally at this point in time?
        Chairman Pai. Yes, sir.
        Senator Van Hollen. And would you agree that we are falling
    behind? I would just call your attention to a Washington
    Examiner article, just April 10: State Department admits U.S.
    cannot compete with China's 5G. You were at a National Security
    conference, I think, in Prague, in the Czech Republic recently
    talking about the risks of Huawei and the Chinese system.
        Do you believe that deployment of a Huawei system would
    pose a privacy risk and even a security risk here in the United
    States and to our allies?
        Chairman Pai. I appreciate the question, Senator. I have
    been spending a lot of time thinking about this issue, working
    with colleagues across the executive branch and with Members of
    Congress.
        I think the short answer is that the FCC believes--we have
    not announced any proposal along these lines--that the
    deployment of equipment or services by companies that receive
    Federal funds from us that present a national security threat
    to the United States is unacceptable. We cannot assume that
    risk.
        We want to think about security with respect to next-
    generation networks at the front end as opposed to worrying
    about it as an afterthought once it is too late, and that is
    one of the messages I was privileged to help share with some of
    our allies in Prague. And as a result of those conversations,
    over 31 nations agreed with the United States and the Prague
    proposals to think about the security of these ICT networks.
        Now, with respect to the other part of your question, I do
    not believe in terms of development and deployment of these
    technologies, the United States is falling behind. For example,
    Cisco's VNI report earlier this year pointed out that North
    America would have twice as many 5G connections by 2022 as
    Asia. The ABI Research Group said specifically the United
    States will win the race to 5G in the short term and----
        Senator Van Hollen. Let me--Chairman Pai, I mean, you have
    been following what has happened in Europe, right?
        Chairman Pai. Yes.
        Senator Van Hollen. I mean, both in the UK, France,
    Germany, our National Security officials have been there
    warning people about the risks to their users about deploying
    Huawei.
        Right now, it does not appear that we are winning that
    battle in the sense that I do not think any of them to date
    have said, ``We are going to rip out what we already have from
    Huawei. It is too expensive.''
        So I do have a question here because your predecessor,
    Chairman Wheeler, talked about this. This was a national
    priority. How is it that we got ourselves as a country in a
    position where we do not have one of the major suppliers with
    respect to at least the radio phase of this? I mean, you have
    got Ericsson. You have got the Finnish company. But then you
    have got Huawei. How did this happen, and what do we need to do
    now to make sure we do not fall behind going forward?
        Chairman Pai. It is a great question, Senator. I think
    there are some long-term economic trends that made it very
    difficult for some of the suppliers to remain in business.
        I think one of the other challenges, to be frank, is the
    fact that the Chinese government picks national champions in
    this space, subsidizes them in many cases, and those subsidies
    allow some of their domestic champions to compete when it comes
    to developing----
        Senator Van Hollen. No, I think that is a big issue.
        You know, we were a little bit ahead of the curve when we
    talked about semiconductors. As an industry, the U.S.
    Government was part of that. I know there is a lot of emphasis
    on always relying on the private sector. It is obviously a
    creative force, but some of these essential technologies
    require a national strategic focus. So I just want to continue
    that conversation.

                              NON-COMPETE CLAUSES

        Chairman Simons, a question about non-compete clauses. I am
    very concerned with the growth of non-complete clauses. It goes
    beyond non-compete causes for engineers and physicians. We are
    talking about fast food workers. We are talking about hair
    stylists. In fact, the Treasury Department estimates that 30
    million American workers are now bound by non-compete clauses,
    including minimum wage sandwich makers, camp counselors.
        So you got a letter recently from Senator Blumenthal and
    many of us on this. I saw your response. I appreciate your
    expressed concern. My question is, what are you going to do
    about it? Does the FTC, in your view, have the authority to do
    a rulemaking in here to put an end to this nonsense where
    someone making sandwiches is theoretically bound by a non-
    compete clause? And then if they want to contest it, they have
    got mandatory arbitration on the other side. So what are you
    going to do about this?
        Mr. Simons. So I share your concern, absolutely,
    particularly with respect to the----
        Senator Van Hollen. I mean beyond the concern. I just want
    to know exactly what you are going to do.
        Mr. Simons. Yes. Well, here is what we are doing right now.
    I am having the Bureau of Economics do a review of the economic
    evidence that these types of clauses over the full range,
    whether it is on the low end of the pay scale or the high end
    of the pay scale, to see what impacts there are that we can
    find already proven in the economic literature. So that is the
    first step.
        So that comes back and shows that we already have the basis
    for a rulemaking. Then that is something we will be pushing
    for.
        On the other hand, if the economic evidence is not
    sufficient to justify a rulemaking, then I think what we are
    going to try to do is develop the evidence.
        Senator Van Hollen. What is your estimate timeline here in
    terms of the end of that analysis and decision on rulemaking?
        Mr. Simons. So the literature review should be done pretty
    quickly. I would think a matter of months. If it turns out that
    there is a good basis for a rulemaking, then I think that could
    happen within months of that.
        On the other hand, if there is not the economic evidence
    that would support such a rule, then we would have to develop
    it ourselves, and that would take considerably longer.
        Senator Van Hollen. Thank you.
        Senator Kennedy. Senator Lankford.
        Senator Lankford. Mr. Chairman, thank you.
        Gentlemen, thanks for being here as well. We have got a lot
    to be able to cover, as you can tell, a lot of issues here.
        I jump into one that is especially important I think for
    the FCC, and that is this issue about contraband cell phones
    that we have got to be able to resolve that are in our prisons.
        In Oklahoma, we had 7,500 contraband cell phones that were
    picked up just last year. We have individuals in prison running
    their gangs, calling out hits, executions that are occurring,
    selling drugs, reaching out to children, that are pedophiles
    within our prisons. It is a serious issue, and it is an issue
    currently the Federal law prohibits the FCC from engaging on
    the issue of trying to be able to allow a waiver for prisons to
    be able to jam those cell phone devices.
        This is something that this subcommittee and Congress
    requested a report from FCC on that was due April the 15th.
    That I understand there was a delay waiting on another report
    coming in and trying to get a study on this. We need to get
    this issue resolved in law and what direction that we are going
    to head on it.
        Where is that report from the FCC? When do you expect it to
    come to us?
        Chairman Pai. Thank you for the question, Senator, and for
    your longstanding advocacy on this issue, an issue where I
    share your great concern. It is a real public safety menace and
    one that I have been focused on for a while.
        We are analyzing the recent report on which our own report
    is dependent. We will get it to you as soon as we can. My
    understanding is our staff is looking at that right now, and I
    hope to be able to deliver it to you----
        Senator Lankford. So is that a month away? Is it 6 months
    away? Is it 6 hours away?
        Chairman Pai. Much closer to 1 month than 6 months.
        Senator Lankford. Okay. Thank you.

                                AUTOMATED CALLS

        Let us talk about some of the automated calls coming from
    overseas that Chairman Simons has already brought up as well.
    We have automated calls coming in extremely large numbers,
    coming from overseas, that they have a digital signature that
    can be identified coming in. That is why American carriers are
    able to identify those and to be able to filter those out.
        What would prohibit us at this point from blocking
    automated calls from coming from overseas? And so if there is
    an automated call coming at all, it would have to originate in
    the United States, and then Americans could filter that if they
    chose to, but blocking it just at our borders. Would there be a
    reason we would not do that?
        Chairman Pai. From a legal perspective, do you mean, or as
    a policy matter?
        Senator Lankford. As a policy matter.
        Chairman Pai. I think part of the problem is the technology
    has evolved to the point where it is very difficult to
    distinguish where this traffic is coming from. That is part of
    the reason why the private sector has led a Traceback Group
    that we rely upon often to try to figure out when we see some
    of these calls that are masked, spoofed especially, they seem
    to be coming from the United States.
        We try to track the origin of those, and then one of the
    things I have done is worked with some of my counterparts, the
    chairman of the Indian FCC equivalent, for example, so we can
    share information when we see that some of these calls are
    coming from dedicated call centers that exist for no reason
    other than to robocall American consumers.
        That is an effort where we think the Call Authentication
    Framework and some of these other tools that we have been
    trying to develop in consultation with the private sector will
    prove worthwhile, but it is getting to the point where we need
    to be able to track down these phone calls and stop them at
    their source as opposed to trying to track them down after the
    call is placed.
        Senator Lankford. If there is a legislative need that you
    have that says, ``I can only go this far,'' then I have a block
    on legislation, we need to know it obviously. Jerry Moran and
    his leadership in the authorizing committee, we need to be able
    to identify that so we can keep moving on this to be able to
    get this resolved.
        We have spoken briefly about the Mobility Fund Phase II and
    the testing as well. I know that you are actively pursuing the
    issue of trying to get the maps correct. I appreciate that you
    are doing that. That is exceptionally important to any of us
    that have rural areas in our State, which I do obviously, and
    large areas where there is no coverage. I am trying to resolve
    that.
        I do want to identify, though, on the broadband portion of
    this. There have been some questions on the performance
    standards testing and the requirements for the speed testing
    and the equipment and how intrusive that is to the consumer. Is
    this something that can be resolved, as in the process of being
    resolved now, so the consumer is not affected in this process
    of getting a testing?
        Chairman Pai. We are examining that issue, Senator.
        There is a pending petition for reconsideration that had
    been filed by the representative of the rural telephone
    carriers, and one of the things that we are examining, is there
    a way to tweak this requirement to minimize the burden on some
    of these smaller carriers who should be spending this money,
    the scarce funding, to build out broadband as opposed to some
    of the testing.
        Senator Lankford. Do you have a timeframe on that?
        Chairman Pai. We do not have a particular timeframe. We are
    scheduled to sit down with our staff at some point in the near
    future and figure it out, but we are much closer to the end of
    that process. The petition has been pending for a while, and we
    hope to act very soon.
        Senator Lankford. We look forward to that and that getting
    resolved, and that would be very helpful for a lot of folks as
    they are doing investment.

                                  CHINA MOBILE

        Last question I want to be able to bounce off of you is
    this issue of China Mobile.
        Chairman Pai. Yes.
        Senator Lankford. You denied an application for China
    Mobile. It has been pending out there for a long time. I
    believe that is the first time that there has been a denial
    like that. Is there anything that we need to know that we are
    trying to address not only from what Senator Van Hollen was
    bringing up about Huawei that we are all extremely familiar
    with, that China Mobile and its American subsidiary is now
    blocked out of the United States?
        Chairman Pai. Senator, hopefully the FCC will vote on
    Thursday to agree with my proposal to ban China Mobile from
    entering the U.S. market.
        In addition to that, the supply chain proceeding that I
    mentioned to Senator Van Hollen is outstanding. We hope to be
    able to resolve that.
        There are a number of other issues that I would be happy to
    discuss with you in a different setting involving some of the
    threats that we are seeing to security.
        But what I will say is that I do believe that certain
    Chinese suppliers, such as Huawei, do indeed present a threat
    to the United States, either on their own or because of Chinese
    domestic law.
        For example, China's national intelligence law explicitly
    requires any individual or entity that is subject to that law
    to comply with the request from the intelligence services. That
    is a problem because especially when you are talking about 5G
    networks that are deployed in one country and could be managed
    by software that is resident in another country, that presents
    some security risks, I think, and those risks to me are
    unacceptable when it comes to the deployment of 5G networks on
    our shores.
        Senator Lankford. Right. Thank you.
        Thank you, Mr. Chairman.
        Senator Kennedy. You bet.
        Senator Manchin.
        Senator Manchin. Thank you, Mr. Chairman, and thank you,
    Mr. Pai and Mr. Simons, for being here.
        Chairman Pai, I think last year, I was the only one Member
    of Congress to formally and successfully challenge the Federal
    broadband, as you know.
        You recognize I just--we are fighting it all over, and we
    knew the maps had been wrong from day one.

                              FCC'S MOBILITY FUND

        The problem I am concerned with is the amount of time it is
    taking. You have put everything on hold, Mobility II Fund. That
    is $4.5 billion.
        Little States and rural areas of any State is dependent on
    connectivity.
        Also, we brought to you, basically, the cost in certain
    areas. It is much costlier in the mountainous areas of West
    Virginia to build out the infrastructure that would be in the
    flatlands of our neighboring friends, and we wanted to make
    sure that was in the consideration of that.
        The time elements as far as deploying these funds, what
    time table are you all on? And I am not being critical, except
    that you just do not know how desperate it is. We cannot keep
    people. Businesses cannot function. Nothing happens.
        Chairman Pai. I could not appreciate that more, Senator.
        As I mentioned in my opening statement, when I visited
    Capon Springs--and I visited with a small business owner who is
    consistently losing business because after folks are enjoying
    the beautiful outdoors of West Virginia in the evenings, they
    want to plug in and watch Netflix or some other service, and
    they cannot do it. So that is starting to cost him. That is
    just one example from one business in one town.
        We want to make sure that these funds are getting
    distributed to close that digital divide, and that is why with
    respect to the Mobility Fund, we want to try to resolve those
    enforcement investigations of the carrier or carriers that
    submitted inaccurate data, so then we can figure out how to
    right-size the Mobility Fund Phase II.
        Senator Manchin. Here is what I am concerned about. If the
    feedback, the public feedback, is not built into the whole
    review process and then if you are going to wait until you
    think you have corrected the whole problem, it is going to be--
    I do not know how long it is going to be until we do this.
        Cannot you when you correct the maps, the maps are
    corrected--the lights are crazy here, I know.
        Chairman Pai. Yes, sir.
        Senator Manchin. You think they are bad on your side. You
    ought to try them on our side.
        [Laughter.]
        Senator Manchin. Anyway, as you correct--and the maps have
    been corrected and we commend--to a State, and basically, the
    app--you know, we have apps, and we can go around, which we
    have done. And we contest and we showed it. Your people
    accepted that as factual. We appreciate that.
        But as we correct them, cannot we start when the need is
    there, start releasing some of the funds?
        Chairman Pai. I think part of the concern we have, Senator,
    is to make sure that to the extent that a carrier or carriers
    submitted inaccurate data, if we proceed before we figure out
    the inaccuracies in the map and how to correct them, then we
    run the risk that you have highlighted before, which is that we
    might be directing funding to a part of the country that
    already has service. And so we want to make sure we get that
    part of it right and then make the determination with respect
    to how to proceed on Phase II.
        Senator Manchin. But the public feedback mechanism has to
    be in a 477.
        Chairman Pai. On the fixed side, yes. And that is where in
    the----
        Senator Manchin. It is not there now.
        Chairman Pai. Right.
        So, in the context of the 477 proceeding, we are thinking
    about incorporating crowdsourcing or other types of consumer-
    led information.
        Senator Manchin. Because these apps, basically they can
    submit to you off their phone and show you the app that
    basically shows they are not covered----
        Chairman Pai. Right.
        Senator Manchin [continuing]. Or the coverage is less than
    what the providers are showing.
        Chairman Pai. And with respect to the 477 process, that is
    one of the things we are hoping to wrap up in the near term as
    well. We have been working very much with the private sector on
    different solutions to try to figure out where broadband is and
    unfortunately where it is not.
        Senator Manchin. Sir, again, I want to comment on basically
    the amount of time we have had in getting response back from
    your office. So any of your staff that is here, I am being
    constructively critical that we do not get response as quick as
    we should, and I will give you a few examples.
        It was last August. We invited you to West Virginia to see
    some of the unique challenges, okay? We still have not had a
    response on that. That was last August about you coming and
    trying to--we are only 3 hours. We are an hour and a half away.
    We are not that far.
        Chairman Pai. Yes.
        Senator Manchin. We will drive you, okay?
        In December, I had to put a hold on Commissioner Carr's
    nomination, as you recall, until we could get basically a
    thorough, expeditious review on the Mobility Fund to include
    terrain factor. We got that moving. It took us holding him up.
        So, without the hearing today, I do not know when we could
    have gotten a response on the February letter, and we got a
    response a couple days ago.
        If you are having trouble with the staff or you need
    resources for your staff to be able to do the job and get back
    with Congress, we have to answer every weekend we go home, and
    they are on--it does not change. They do not have connectivity.
    They are honest, and they want to know when it is going to
    happen. We have been telling them about the Mobility broadband
    fund, rural broadband, and they are tickled to death with it.
    Now they do not believe it. They do not believe it is going to
    happen.
        So I am just saying whatever it takes on that to Congress
    and the congressional inquiries, it is a matter of us
    communicating, and if we do not hear from you all, we have no
    way to communicate.
        Chairman Pai. I appreciate it, Senator. Your concern, we
    will look to rectify that, and part of the reason why when you
    requested a waiver to be able to participate in the challenge
    process, I personally told our staff, ``Let us make sure we do
    what we can to allow the Senator to participate.''
        Senator Manchin. Well, just communicate with us. Just call
    us back, you know, whatever. Just to hear from you would be
    great.
        Mr. Simons, very quickly, because my time is up, on the
    Committee on Foreign Investment in the United States (CFIUS),
    you know about, of course, CFIUS.
        Mr. Simons. Yes, I know what CFIUS is, but we do not really
    participate----
        Senator Manchin. You have nothing in that whatsoever?
        Mr. Simons. No.
        Senator Manchin. Have you identified basically things as
    far as the different building blocks that we have, a
    manufacturer that affects our economy that could be detrimental
    if CFIUS review is not pertaining to those? And I am using
    butane, propane, everything that we have in the white gasses
    that are coming out of the New Marcellus and Utica Shale.
        Mr. Simons. I am sorry, Senator. That is in not our
    jurisdiction.
        Senator Manchin. That is not in our bailiwick?
        Mr. Simons. Right. Sorry.
        Senator Manchin. Well, I wish it was. We need help there.
    They are trying to drain every ounce of energy we have out of
    our country and take it and monopolize it. China is awful about
    what they are trying to do.
        Thank you, Mr. Chairman.
        Senator Kennedy. Senator Boozman.
        Senator Boozman. Thank you, Mr. Chairman, and
    congratulations on being Chair of the subcommittee. I know that
    you and Senator Coons will work together very closely. This
    subcommittee has a great track record of working together, not
    only as the chair and Ranking Member, but also the staffs, so
    lots of good things that we can get done in this particular
    subcommittee.

                                 RURAL NETWORKS

        Chairman Pai, as one of the co-chairs of the Senate
    Broadband Caucus, I want to echo Senator Manchin's concerns
    with the mapping.
        We have lots of areas in Arkansas, and you do not live too
    far from Arkansas, back in the old days, but simply, we have
    situations where it is marked to serve and it is simply not
    anywhere close to being served. So we would appreciate all of
    your help in moving forward and trying to get that corrected.
    It is so, so very important.
        We have got lots of different entities now that are moving
    into the space to try and provide service. Last year, Congress
    made what some have called a ``down payment'' on investing in
    rural infrastructure by creating the $600 billion Reconnect
    Program to be administered by USDA Rural Services, and an
    additional $550 million was added in the fiscal year 2019
    omnibus.
        I guess the question is, with all of the work being done on
    the networks, how are we coordinating that? How are we making
    sure that it is spent in an efficient way, that there is not
    duplication of effort?
        Chairman Pai. Thank you for the question, Senator.
        We have been working closely with the U.S. Department of
    Agriculture and with other stakeholders to make sure that the
    Federal funding that you have allocated is not going to
    duplicate efforts that another agency might be supporting, but
    we do work very closely with them, and ultimately, whether
    through legislation or through those agency-to-agency efforts,
    we will make sure that this taxpayer funding is devoted just
    once to close that digital divide.
        Senator Boozman. Right. In regard to the shape files that
    are being provided, USDA, FCC, you are collecting the broadband
    information. If it were in the same format, could that help
    facilitate coordination between the agency and USDA to target
    funding to avoid overbuilding?
        Chairman Pai. That is one of the issues that we are
    examining in the context of our Form 477 proceeding, what is
    the best way to proceed with respect to mapping. One sector of
    the industry has advanced the idea of shape files as a way of
    skinning that cat, so to speak. Another sector has proposed a
    different methodology. We are engaging with all of those
    stakeholders. From our perspective at least, we want to make
    sure that we do what we can as soon as we can to get a more
    accurate sense of broadband availability. So we look forward to
    keeping you informed.
        Senator Boozman. I would appreciate that.
        It does seem like it would make sense if we could have a
    standard.
        Chairman Pai. Exactly. We want to operate on the basis of
    common facts, both at FCC and at USDA, I think.
        Senator Boozman. The other thing is I would like to second
    Senator Lankford's concern with the prisons. We are in a
    situation now where the cell phones run anywhere from $500 to
    $1,000. It is a very corrupting influence in that regard.
        There was an article I think over the weekend or last week
    about soldiers, prisoners playing like they were females or
    whatever and trapping soldiers, blackmailing them, things like
    that.
        I think in Arkansas, there were 1,600 that were
    apprehended, and it is difficult because then you have got to
    try all those people. And that relies on the county prosecutor
    right there, so again, just all kinds of problems. So anything
    that you could do to push that forward would be greatly
    appreciate, or if you need additional authorities or whatever,
    be sure and let us know so that we can be helpful in that
    regard.
        Chairman Pai. Thank you, Senator. You have got my
    commitment. I have personally visited maximum security
    facilities in Georgia, minimum security facilities in
    Massachusetts, and everything in between, voluntarily I would
    add, and one of the things they have made clear is that in many
    cases, these cell phones are the most valuable currency to a
    prisoner, more valuable than drugs or anything else.

                               CONTACT LENS RULE

        Senator Boozman. Chairman Simons, recently, your contact
    lens release, you are working hard on that. There is some
    concern that the paper trail regarding prescription providers,
    prescription release, there is concern that there is--you know,
    if you can do it on that end, why not do it to the online
    sellers and have them have a paper trail also?
        Right now, we could get our cell phones out and punch up
    prescription contact lenses, and you would find a bunch of
    people that were selling without prescriptions. Do you have any
    comment about that?
        Mr. Simons. Yes, Senator. Thank you for the question.
        So we are looking at changes to the rule that would tighten
    up what some people would refer to as loopholes in terms of
    passive verification. So this is where the seller needs to call
    or otherwise contact the prescriber and get the prescription
    validated, and so there is reported instances or incidents in
    the record which are described as doing it in a very kind of--
    almost a hidden way, and so we are trying to bolster that and
    close those loopholes, make sure that the sellers actually have
    the prescription and that the prescription is valid and
    accurate and they do not change the brand without the
    consumer's consent.
        Senator Boozman. Thank you, Mr. Chairman.
        And we will submit some more questions regarding that, so
    appreciate it. Thank you.
        Mr. Simons. Thank you.
        Senator Kennedy. Senator Daines.
        Senator Daines. Thank you, Chairman Kennedy, Ranking Member
    Coons.
        Senator Kennedy. Welcome to the discotheque.
        [Laughter.]
        Senator Kennedy. I expect John Travolta to walk in.
        [Laughter.]
        Senator Daines. I will walk out, sir, if he comes in 1970s
    clothes.
        I want to thank Chairman Pai and Chairman Simons for coming
    today.

                                       5G

        Chairman Pai, always good to see you, and I wanted to chat
    a bit about 5G mid-band spectrum.
        I am very concerned and fear the U.S. is falling behind on
    the race to 5G, and we simply cannot let that happen in this
    race with China.
        The 5G economy is going to lead to a breakthrough in jobs,
    information, connectivity; however, other countries are making
    four times more mid-band spectrum available in the next few
    years compared to the United States.
        Mid-band spectrum will be a key component to make 5G a
    reality, especially in places like Montana. We need to stop
    just talking about 5G and actually take some action and see
    some real solutions. An important part of this is the 3.5
    gigahertz band, which I want to thank you for working with me
    on that last year.
        Could you update me on the timeframe for that auction so we
    can get that spectrum deployed?
        Chairman Pai. I appreciate that question, Senator, and for
    your leadership on this band in particular, which as I was
    mentioning earlier in response to a question is sort of in the
    sweet spot, so to speak, when it comes to 5G innovation.
        We believe the auction will proceed in 2020. So, in less
    than a year, we will be able to hold that auction, and in the
    meantime, we have been working with some of our other Federal
    partners on things like the environmental sensing capabilities
    to make sure that deployments can occur as quickly as possible.
        Senator Daines. Another piece of mid-band spectrum
    certainly is C-Band.
        Chairman Pai. Yes.
        Senator Daines. Currently, our broadcasters, our cable
    companies use portions of this band to provide content to rural
    Montana, but it is also prime 5G spectrum. How do we balance
    the current and future uses in this band as we move forward?
        Chairman Pai. That is the $64,000 question, and there are a
    number of different complicated interests from a policy
    perspective. Additionally, there are some legal complications
    as well.
        With respect to the latter, we just issued a request for
    public comment on some of the legal questions that we need to
    be able to sort through in order to proceed on the band.
        With respect to the policy question, there are a number of
    different tradeoffs. One of them is time. As often mentioned by
    the panel, there is considered to be a race to 5G in some
    quarters, and in order to lead in 5G, we need to make more
    spectrum and mid-band spectrum in particular available.
        That is one of the reasons why we have been thinking about
    in the C-Band proceeding, how important a priority is it to be
    able to move quicker, even if that means that we proceed with
    something other than an auction.
        On the other hand, we also have some incumbent customers
    who are relying on that band, as you mentioned, especially for
    the delivery of video programming in places like rural Montana.
    How do we accommodate the concerns of folks like that? And that
    is one of the issues we have been sorting through.
        A number of other different complicated questions in terms
    of timing and the like, but ultimately, we want to be able to
    find a solution that allows us to promote 5G leadership,
    especially in mid-band spectrum, while also accommodating some
    of the concerns that have been expressed.
        Senator Daines. How optimistic are you that you can find
    that solution?
        Chairman Pai. I am fairly optimistic. This is, without
    question, one of the more complicated issues I have confronted
    at the FCC. There is no question about it. There's a number of
    different industries, a number of different legal questions. It
    is very, very complicated, but nonetheless, I am optimistic
    that we will be able to find a solution that threads the
    needle, advances the ball in terms of the public interest.

                                   ROBOCALLS

        Senator Daines. I want to shift gears and talk about
    robocalls. Chairman Simons, Chairman Pai, Montanans are being
    inundated by illegal robocalls every day, and they are
    frustrated. In fact, I have got my phone here with me.
        Mr. Chairman, if I happen to get a robocall, would you
    allow me to put it on speakerphone so we could all hear it, if
    it happens?
        Senator Kennedy. Please.
        Senator Daines. So I have got RoboKiller app on my phone.
    If I happen to get a robocaller, I am going to put it on
    speakerphone here. I get so many of them. It would not surprise
    me if one happened during my line of questioning.
        What is worse is these bad actors are spoofing numbers.
    They look just like they are from our neighbors, from our
    friends, from our family. Montanans are fed up with the lack of
    action being taken right here, and thankfully, with my support,
    Congress is finally taking action with this bipartisan TRACED
    Act.
        My question is this. I will start with Chairman Simons. Can
    you commit to work with me to do whatever is necessary to put a
    stop to these illegal robocalls?
        Mr. Simons. Absolutely.
        Senator Daines. Chairman Pai, same question to you.
        Chairman Pai. Yes, sir.
        Senator Daines. And when do you think we can do that?
        Chairman Pai. Soon, hopefully. I would defer to you on the
    timing of the TRACED Act, but----
        Senator Daines. Assuming we pass the legislation that
    enables that, as you have seen the text, how long will it take
    us? How long will it take you all to implement that and get
    that done?
        Chairman Pai. Certain tools, we could implement
    immediately. For example, it would make it easier for us to go
    after some of these robocallers in terms of extending the
    statute of limitations. That is not something that requires, as
    I understand it, anyway, a full notice and comment rulemaking.
    But I think we could move very quickly.
        Senator Daines. Okay. Thank you.
        Thank you, Mr. Chairman.
        Senator Kennedy. Thank you, Senator.
        I have got a few more questions, and I welcome my
    colleagues joining now as well.
        Let me go back to the robocalls. Did I understand you to
    say, Chairman Simons, that in order for these foreign
    robocallers to do what they do, they have to have the
    cooperation of our carriers?
        Mr. Simons. That is my understanding.
        Senator Kennedy. And there are certain carriers that
    facilitate their conduct?
        Mr. Simons. Yes. Our understanding is that there are
    certain carriers that cater to this type of traffic.
        Senator Kennedy. And do we know who those carriers are?
        Mr. Simons. I would have to talk to my staff about whether
    they know any specific carrier, but----
        Senator Kennedy. Is that under your jurisdiction----
        Mr. Simons. Yes.
        Senator Kennedy [continuing]. Or is that under FCC?
        Mr. Simons. We know. I am told we know who those carriers
    are.
        Senator Kennedy. We know.
        Mr. Simons. My staff says we do.
        Senator Kennedy. Okay.
        Mr. Simons. Okay.
        Senator Kennedy. So why are we not punishing them the rest
    of their natural lives?
        Mr. Simons. Well, we would love to, but we do not have
    jurisdiction over them because they are common carriers, and
    our authority does not allow us to go after common carriers.
        Senator Kennedy. Who has jurisdiction over them?
        Chairman Pai. That would be the FCC.
        Senator Kennedy. Why is the FCC not punishing them the rest
    of their natural lives?
        Chairman Pai. Well, we would be happy to look at the
    particular investigation that Chairman Simons----
        Mr. Simons. Promoted.
        Chairman Pai [continuing]. Is referring to.
        Senator Kennedy. Well, it seems to me it is real simple.
    The American people are being inundated with these calls. Many
    of them are coming from foreign countries. Even if they are
    coming from the United States, they are not any more pleasant.
    In order for them to do it, they have to use carriers in the
    United States. These carriers are helping them do it for money,
    and you can stop them.
        Chairman Pai. Absolutely. And that is one of the reasons
    why we have demanded that the phone companies implement call
    authentication, that digital fingerprint for every single phone
    call. So you have a validation before you even look at the
    phone to know that that phone call is coming from a legitimate
    source.
        Senator Kennedy. But I guess what I am saying is while we
    dither around in the Senate trying to decide whether to pass a
    bill, we should let you go after the carriers. I mean, they
    have got to be violating some rule.
        Chairman Pai. I would be happy to take a look at the facts.
        Senator Kennedy. Would you look at the facts and get back
    to us in a week?
        Chairman Pai. Happy to do that.
        Senator Kennedy. I mean, this is a serious problem, Mr.
    Chairman, as you know.
        Chairman Pai. Absolutely.
        Senator Kennedy. And I would like a list of the carriers. I
    do not want to deny anybody due process or be unfair to
    anybody, but if you know who they are, I would like to know who
    they are too, okay?

                               WIRELESS SPECTRUM

        Let me talk about spectrum. Bandwidth. What is the proper
    term? Spectrum?
        Chairman Pai. Spectrum is commonly used.
        Senator Kennedy. Okay. We cannot achieve 5G without
    spectrum, right?
        Chairman Pai. Correct.
        Senator Kennedy. You do not have enough spectrum, do you?
        Chairman Pai. For the commercial side, that is correct,
    sir.
        Senator Kennedy. Some Federal Government agencies have some
    of this spectrum, do not they?
        Chairman Pai. Yes, sir.
        Senator Kennedy. Do all those agencies need the spectrum
    that they are hoarding? You do not have to answer that. I think
    all the agencies do not need the spectrum that they are
    hoarding. Some of them do; some of them do not. Some of them
    could share.
        Chairman Pai. Right.
        Senator Kennedy. Could we get the President to issue an
    executive order saying, ``Share your spectrum. We would like to
    get to 5G sometime this millennium''?
        Chairman Pai. Senator that is obviously a decision the
    White House would have to make.
        What I can tell you is that we are always urging our
    Federal partners to either relinquish or share spectrum because
    technology has advanced to the point where we can have a win-
    win, and we have worked very cooperatively with some entities
    like the Department of Defense. Others have been a little more
    challenging, but at the end of the day, if as the President
    himself has said that 5G is a national priority that American
    leadership on this is a priority for everybody, we need to make
    sure that we have a spectrum supply that is ready to meet that
    challenge.
        Senator Kennedy. Well, I mean, if the agency needs it, that
    is one thing, but if it is just a question of, ``well, we do
    not need it, but we are not giving it up'', or ``we could share
    it, but we will not'', we need to give them a little incentive.
    And I will talk to the White House about that. If I cannot
    convince them, Senator Van Hollen can.
        [Laughter.]
        Senator Kennedy. Let me ask you just one other thing. Let
    me see where my notes are here.

                                  FCC AUCTION

        Oh. When you allocate the spectrum, Mr. Chairman, are you
    doing private sales?
        Chairman Pai. Secondary market transactions, we encourage
    because we believe that that is the best way ultimately to get
    the spectrum to its highest valued use, but we also auction
    spectrum. So we are in the middle of a spectrum auction right
    now.
        Senator Kennedy. How do you know you are getting a better
    deal for the American taxpayer in a private sale versus an
    auction if you do not hold the auction?
        Chairman Pai. So one of the things we have found over the
    years is that if we decide to prohibit those secondary market
    transactions, over time, it will take a lot longer to allocate
    that spectrum to its highest-valued use. And that is part of
    the reason why for the last quarter century, we have been
    encouraging the secondary market transactions. That speed to
    market is one of the factors that has allowed the FCC to
    promote U.S. leadership on 4G, and one of the questions with
    respect to 5G is should we encourage the secondary market there
    as well.
        Senator Kennedy. Well, why cannot we redesign the system so
    that we achieve speed while maximizing the price? An auction is
    going to get you a better price than a private sale, is it not?
        Chairman Pai. It depends. I think the auction would
    certainly raise revenue for the Treasury, which is, of course,
    one of the major considerations that underlayed our authority
    in the first place back in 1993.
        One of the questions has been, does that auction process
    end up taking longer than a secondary market? If you have an
    asset and I want it, should you just be able to sell it to me
    directly as opposed to having a third party administer the
    transition of that asset?
        Senator Kennedy. Can you make recommendations to us on the
    laws we need to change to allow you to achieve maximum revenue
    and do it quickly?
        Chairman Pai. We would be happy to.
        Senator Kennedy. Get me that information.
        Chairman Pai. We would be happy to, Mr. Chairman.
        Senator Kennedy. Senator Coons.
        Senator Coons. Thank you, Mr. Chairman.
        Let me follow up on some issues that we touched on earlier.
        First, Chairman Pai, there were widespread reports that
    mobile carriers were selling customers' precise location data
    without their knowledge or consent. You have a colleague on the
    Commission--I think it is Commissioner Rosenworcel--who is
    concerned this practice may not have stopped and sent letters
    to each of the major mobile carriers asking them about it. Do
    you share her concerns, and is the FCC examining this sale of
    real-time location information?
        Chairman Pai. Senator, I do share the concerns that have
    been expressed, and that is why when we first got reports about
    this practice, I immediately directed our Enforcement Bureau to
    initiate an investigation into any and all carriers that might
    be engaging in the practice.
        Senator Coons. Well, thank you. I hope you will follow that
    up further.

                                    PRIVACY

        On privacy, Chairman Simons, the FTC has some authority to
    regulate and protect consumers' privacy. As I mentioned, there
    is news reports--you do not need to comment--that you are close
    to announcing a record action against a particular company.
        While that is encouraging, I am concerned you could be
    doing much more in the data privacy protection area.
        Are there other recent examples of the FTC using its
    current authority to protect a customer's privacy, and what
    risks remain outside your authority that we should address?
        I think in this hearing, you so far mentioned the ability
    to oppose civil penalties for first-time violations and
    authority over nonprofits and common carriers. Did I roughly
    get that right?
        Mr. Simons. Yes.
        Senator Coons. Are there examples you would like to point
    us to of your active use of your existing authorities to
    protect the data privacy of----
        Mr. Simons. Yes. So we just had I think in the last week
    two cases. One was a Children's Online Privacy Protection Act
    (COPPA) case, and the other was a data security case. These
    involved about 8 million consumers, and one of them was
    facilitating contact between adults and--stranger adults and
    children. So we stopped that.
        I think it is important to understand what our privacy
    authorization is currently, and basically, we have the statute
    that is 100 years old or more, a hundred and, whatever it is,
    five. And back then, when the Congress passed that statute,
    they had no idea that these privacy issues would come up,
    obviously.
        So I give a lot of credit to my predecessors at the
    Commission for coming up with our privacy program and building
    it out of a statute that was not designed for it.
        So what we have done is it primarily covers situations
    where the company has a deception about what its privacy policy
    is, and then we bring a case under our deception authority to
    remedy that, or in instances where there is something that
    looks more akin to a privacy tort, like invasion of privacy or
    something like that, we bring that under our fairness count.
        So we do not have the authority--so that and we have it in
    a few statutes like the Fair Credit Reporting Act (FCRA) and
    the Children's Online Privacy Protection Act (COPPA), where we
    have specific authority in the privacy and data security area,
    but that is the limit of our authority.
        People all the time ask me, ``Why do not you do something
    like GDPR?'' Well, we do not have the authority to do that. Our
    authority is actually quite limited, and that is one of the
    reasons we are encouraging the Congress to consider privacy
    legislation.
        Senator Coons. Senator Moran referenced there is a working
    group on Commerce about this. There is also a group of us on
    Judiciary that are beginning to engage in this. Senator Flake
    and I in the last Congress held a number of roundtables with
    industry and advocacy representatives to look at GDPR, to look
    now at the California State law, and then to begin to come to
    some common understanding about what might be inappropriate
    Federal legislative standard.
        I am concerned about the FTC having the resources, the
    ability, the scope to actually effectively implement something
    that we might put in.
        I think if I remember correctly, you said earlier, you have
    40 personnel dedicated to this, whereas the UK has 500.
        Mr. Simons. Right.
        Senator Coons. I want to make sure that we stay in close
    communication about your potential increase in resource needs
    should we be successful in legislating around this.

       MERGERS INVOLVING PHARMACEUTICALS/GENERAL PHARMACEUTICAL ANTITRUST

        Let me ask a last question. There was a hearing earlier
    today on the Judiciary Committee about prescription drug
    prices. My understanding is the FTC does have and use authority
    in terms of pay-for-delay activities, unfair market practices
    that lead to unreasonably high prescription drug prices.
        What else does the FTC do in terms of pharmaceutical
    marketing or pricing, and what more could you do if you had
    additional authorities or resources?
        Mr. Simons. So the things we do, we focus on--of course,
    the first thing we do is we are looking out for anticompetitive
    mergers that involve pharmaceuticals. We are looking for the
    pay-for-delay cases. We are looking for the sham litigation
    cases, and we are looking for--there is one more--exclusive
    dealing cases and those types of matters in law enforcement.
        We are also engaged in--we are monitoring prices. There is
    a CMS survey of the prices that pharmacies pay, and so we are
    monitoring that to see if there are any price spikes, in which
    case we look to investigate what those are and see if there is
    an enforcement action that is appropriate.
        Senator Coons. Thank you. Thank you for your testimony, and
    I look forward to working with both of you in the year ahead.
        Thank you, Mr. Chairman.
        Senator Kennedy. Senator Moran.
        Senator Moran. Chairman, thank you.

                               FAKE TECH SUPPORT

        Chairman Simons, I have heard from Kansas companies about
    criminals who are buying words on search engines that make
    their fake tech support websites show up at the top of the
    list----
        Mr. Simons. Yes.
        Senator Moran [continuing]. When someone searches for a
    tech product support. These criminals run, I assume, complex
    organizations and are able to trick someone into thinking they
    are talking to the tech company's product support and then
    convince the consumer to provide remote access to their
    computers.
        They infect their computers with virus, charge them
    hundreds of dollars to remove the virus, sometimes accessing
    their bank accounts as well.
        Do you have any recommendations for me or this subcommittee
    as to what can be done to prevent consumers from falling
    victim?
        Mr. Simons. Yes. I think one of the things that we focus on
    quite a bit is consumer outreach, so education, consumer
    education to alert them to the fact that these things are
    occurring and to watch out for them and try to avoid them.
        Then, of course, we prosecute them when we find them.
        Senator Moran. How successful have you been in finding and
    prosecuting?
        Mr. Simons. I think we have--we have had our fair amount of
    success, I think. I could get you more information on that.
        Senator Moran. I can see myself being in that circumstance.
        Mr. Simons. Oh, yes. It happened to my wife.
        Senator Moran. So you have an advocate in the household for
    a fix.
        Mr. Simons. Oh, yes. That and robocalls.
        Senator Moran. Very good. She reflects my constituency as
    well.
        Chairman Pai, you and I talked a little bit earlier today.
    Tell me what you see the FCC's role--what leadership can you
    provide in helping Kansans and Americans, particularly rural,
    but those with disabilities, veterans and others, in regard to
    telehealth.
        Chairman Pai. Thank you for the question, Senator.
        This is a major area of interest for me and for the
    Commission. We have a rural health care program that subsidizes
    the connectivity needs of hospitals and other health care
    facilities to the extent that they are providing rural
    telemedicine and telehealth services.
        Under my leadership, for the first time ever, since the
    1990s, since this program was created, we increased the budget
    for that program, 43 percent, up to $571 million for the
    previous year, and it is adjusted for inflation.
        Going forward, one of the things we are exploring is
    setting up a connected care pilot program, essentially allowing
    health care services to follow patients outside of the
    hospital, using wireless connectivity for example, to monitor
    their vital signs, so that health care professionals can
    intervene sooner.
        There are many different regulatory and legislative
    solutions to help broaden the promise of telemedicine. For
    example, I have talked about the need for Congress or some
    other entity to address the issue of State licensing of medical
    professionals. I have been to a whole bunch of rural health
    care facilities where they say, ``We have got a rural community
    in need just across the State border, but we cannot provide
    those telemedicine services because of those licensing
    barriers.''
        I have worked with the CMS Administrator, who is broadening
    the range of telemedicine services that can be reimbursed, and
    in addition to that, I have been working very closely with the
    Veterans Affairs Department.
        One of the things that Congress wisely did last year was to
    break down those licensing barriers for VA facilities, and I
    have visited now--I believe it is five VA facilities from
    Boise, Idaho, to Providence, Rhode Island. And they are doing
    some cutting-edge work on telemedicine, especially on the area
    of veterans who have mental health needs, for example, that is
    gaining massive results, and that is the kind of thing we love
    to see translated over to the civilian side.
        I would love to work with you on it because, as you know
    better than most, in a lot of these rural communities, there is
    no alternative. There is no doctor living in your community.
    You might have to drive an hour or two, if not more, to see
    somebody, and that is not an option for many, many people. If
    you have a child that is sick, you have to take time off work
    and incur all those costs as well.

                          RURAL BROADBAND/FTC PRIVACY

        We think that broadband's promise is great in rural America
    and especially when it comes to telemedicine.
        Senator Moran. Chairman Pai, thank you very much. thanks
    for your leadership on this issue. It is a challenge across the
    country.
        Chairman Pai. I appreciate it.
        Senator Moran. Chairman, thank you.
        Senator Kennedy. Senator Van Hollen.
        Senator Van Hollen. Thank you, Mr. Chairman.
        Chairman Simons, I do want to take this opportunity to
    thank you and your team for participating in a number of the
    consumer protection forums that we have had in the State of
    Maryland. I teamed up with our State Attorney General, Brian
    Frosh, and as you suggested, it is one of the best attended
    gatherings that we have, where we go over all the scams that
    are perpetrated against consumers or constituents. So I want to
    thank your team for that.
        Let me follow up on some of the efforts to protect privacy.
    Coincidentally, in the Banking Committee today, as Senator
    Kennedy knows, we also had a hearing with respect to what the
    Europeans are doing in the JDPR and the California law be given
    the number of financial information, personal information that
    is collected.
        But I want to go back to broadband consumer privacy because
    back in the previous administration, the FCC had adopted the
    Broadband Consumer Privacy Rules. Those were then rescinded.
    They were subject to a CRA here in Congress.
        I think many people believed--and maybe even Chairman Pai
    shares this view--that we could deal with that in the FTC
    forum.
        So my question is, given that--this was an opt-in, opt-out.
    I mean, everyone is talking about it now, but that is what that
    protection was for back then. Can you now, using your existing
    authority, even before we move forward with broader
    legislation, at least with respect to some of these target
    areas like that rule, the broadband consumer privacy rules--can
    you move forward on your own authority in this area?
        Mr. Simons. I do not believe so.
        Senator Van Hollen. Okay.
        Mr. Simons. We need your help.
        Senator Van Hollen. And, Chairman Pai, I thought at one
    point you suggested that maybe the FTC could move forward in
    this area when you overturn the regulation.
        Chairman Pai. I do agree, Senator. I have consistently said
    the consumers should have a uniform expectation of privacy.
    They do not care whether it is a network operator or a Silicon
    Valley tech giant that holds their information. They want that
    information to be protected, and that is part of the reason why
    I think that a uniform level of regulation is something that we
    would welcome--well, I do not want to speak for Chairman
    Simons, but certainly, I think consumers would benefit if
    Congress spoke with a unified----
        Senator Van Hollen. Well, that regulation, I mean, I am
    right, am I not, that that was overturned by you and the
    Commission?
        Chairman Pai. Well, that FCC decision in 2016 only applied
    to Internet service providers, not to edge providers like
    Google and the----
        Senator Van Hollen. Right. And so your argument was that it
    was not within your jurisdiction?
        Chairman Pai. No. My argument was that there should be a
    consistent level of regulation, that consumers have that
    uniform expectation of privacy, and that the FTC----
        Senator Van Hollen. Okay. So even though we were protecting
    lots of people, unless we protected everybody, you were going
    to be against it; is that it?
        Chairman Pai. No, no. In fact, one of the things I pointed
    out in my dissent back in 2016 was that it was asymmetric
    regulation. That Silicon Valley companies that sought every
    kind of information that you had were being left unregulated
    completely, whereas Internet service providers were being
    singled out for asymmetric regulation. I think events over the
    last couple of years, if anything, have proven that----
        Senator Van Hollen. That is no doubt we need--there is no
    doubt. I think there is a consensus here that we need
    protection for consumers. I am not sure about the argument
    about eliminating protections for some as we wait to get
    protections for everybody, but we will debate that.
        And your answer is you do not have the authority in the FTC
    to move forward in this area?
        Mr. Simons. Well, we do not have the authority to pass the
    same rule that the FCC passed.
        Senator Van Hollen. Okay. But you can look at some of these
    other areas. I will follow up.

                                       5G

        Let me ask you, Chairman Pai. I want to get back to 5G for
    a minute because obviously we want to accelerate the deployment
    of 5G here in the United States, and as I indicated, we are
    going to have to sort of review how we got so far behind in
    some parts of 5G here in the United States.
        But we also want to make sure that we protect the security
    of 5G going forward because it is going to be, as I understand
    it, connected to everything, the Internet of Things. So we want
    to make sure that malign actors cannot breach the cybersecurity
    of these systems.
        As I recall back in November 2017, the Obama administration
    had proposed some regulations to deal with the cybersecurity
    concerns on 5G. You thought that might be too burdensome, and
    so we have dispensed with those.
        So my question now is, what is your plan specifically to
    make sure that as we move forward in 5G that we also make sure
    that we do it right from the start? Because obviously, to the
    extent that we get it right from the start, we will not have a
    whole lot of problems. We will have less problems with security
    going forward. What are your specific plans?
        Chairman Pai. Thank you for the question, Senator.
        We are working very extensively with our Federal partners.
    For example, the Cybersecurity and Infrastructure Security
    Agency at the Department of Homeland Security has primary
    jurisdiction over this issue, and we work regularly with Chris
    Krebs, the head of that agency.
        Along with that, I have been working extensively with a lot
    of other Federal partners. You referenced earlier the Prague
    conference, for example. I mean, there we had not just me, but
    representatives from the National Security Council, the
    Department of State, the Department of Commerce, and other
    agencies working together to make sure the security of the ICT
    networks was something that we recognized.
        In addition to that, we have been working with the privacy
    sector to make sure that some of these technical standards for
    5G are being developed, that those security protocols are
    incorporated into the standards. So as I was mentioning
    earlier, this is not something where we just go ahead and build
    it as quickly as we can and then maybe a year or two later
    wonder, ``Oh, maybe we should do something on security.''
        We want security to come in at the front end, and so we
    have been engaging in those conversations as well.
        Senator Van Hollen. Are there going to be any standards
    that are required as best practices in this area?
        Chairman Pai. That is one of the things we are developing,
    and so it might not be the sort of formal FCC regulations that
    might have been proposed in the past because, as I said, the
    DHS has the primary jurisdiction over this, but what we can say
    is we have been urging industry, all stakeholders, to think
    about the security of these 5G networks at the front end. And
    that is a message that has been very well received.
        Senator Van Hollen. All right. I look forward to continuing
    the conversation because it seems to me we want some uniform
    rules of the road so that people know that every carrier, every
    5G provider has built into it important security protections.
        Chairman Pai. And I think that supply chain proceeding that
    I mentioned earlier also serves a very important signaling
    function. If the FCC proposes to ban the use of this Federal
    funding from being used on equipment or services that come from
    companies that present a national security threat, I think that
    obviously sends a signal to our domestic companies.
        We want to take security seriously. We are not going to use
    this funding for any purpose that might compromise national
    security. Even from a business perspective, it may make sense
    in some circumstances.
        Senator Van Hollen. Got it. If I could, Mr. Chairman.
        So I understand you have the authority with respect to the
    public funds. If you thought that there was a component, a
    carrier, U.S. carrier was going to be put in their phone that
    you thought could compromise the system, do you have the
    authority at the FCC right now to say do not do that?
        Chairman Pai. To the extent it is accepting Federal funds?
        Senator Van Hollen. No. Without Federal funds.
        Chairman Pai. Generally speaking, that is one of the issues
    that we are exploring. Our jurisdiction is not as clear as it
    would be in the case of Federal funding that is being expended.
        Senator Van Hollen. Right. I understand that. Maybe we can
    follow up on that as well.
        Chairman Pai. I would be happy to do that.
        Senator Van Hollen. Thanks.
        Senator Kennedy. Senator Daines.
        Senator Daines. Thank you, Chairman Kennedy.

                                  DRUG PRICING

        Chairman Simons, our current drug pricing system is full of
    convoluted and opaque practices, and those are probably the
    kind words I could use today.
        As Montanans continue to struggle to afford the medications
    they rely on, I believe we need a better understanding of how
    the drug supply chain works today in order to protect patients
    and, importantly, lower costs. That is why I introduced a bill
    with Chairman Grassley last week that would require the FTC to
    study the role of the middle man, the pharmacy benefit
    managers, in this drug supply chain.
        It is my understanding the last time the FTC examined PBM
    practices was back in 2005.
        Chairman Simons, don't you think it is long overdue for our
    Nation's consumer protection agency to examine whether the
    pharmacy middle men are actually focused on driving down costs
    for patients, because I think about rebates and so forth,
    instead of lining the pockets of their own industry?
        Mr. Simons. Thank you for that question, Senator. I am not
    sure I will take all the characterizations so strongly.
        But we are very concerned. We are focused on looking at how
    the PBMs are behaving. We were trying to do merger
    retrospectives for those and some without success so far, but
    we are also monitoring this sector of the health care industry
    very carefully, and we are looking for problems that we can
    attack with law enforcement.
        Senator Daines. Do I have your commitment to work with me
    on this piece of legislation?
        Mr. Simons. Sure. I would be happy to be as helpful as I
    can in any way possible.
        Senator Daines. I spent 13 years in the consumer products
    world once upon a time, this difference between a list price
    and net price.
        Mr. Simons. Yes.
        Senator Daines. And I am very curious. These rebates, over
    $170 billion of rebates go back in the system, and I would be
    very curious to see how much of that actually gets to the
    consumer to look at in terms of these opaque practices right
    now in the system.
        Mr. Simons. Right.

                           EMERGENCY BROADCAST SYSTEM

        Senator Daines. Chairman Pai, last week, I introduced the
    bipartisan PIRATE Act. Pirate broadcasters hurt not only
    Montana's legitimate radio broadcasters, but can affect our
    emergency broadcast system as well as air traffic control
    communications.
        Could you discuss some of the problems you have with
    cracking down on these bad actors?
        Chairman Pai. Yes. Thank you for the question, Senator.
        One of the problems is that it is somewhat like Whack-A-
    Mole. If you shut them down in one location, they may move to
    another location, and that is why one of the FCC's strategies
    in this area has been to go after not just the pirates
    themselves, but those who may be giving them assistance.
        For example, one of our most significant enforcement
    actions to date on this issue under my leadership has been
    going after some individuals who essentially harbored a pirate,
    made their home and other facilities available to this
    individual to do pirate broadcast. That is one of the things
    that we have found that has been a problem.
        I look forward to working with you on your legislation, and
    we welcome any tools that might be able to help us attack this
    problem. It is a major problem for the licensed broadcasters
    who are looking to do the right thing.
        Senator Daines. Thanks, Chairman Pai.
        Another one of my priorities--and this is for you, Chairman
    Pai--has been making sure that Federal dollars for broadband
    and wireless connectivity are directed to unserved, rural areas
    instead of overbuilding existing networks.
        I know you grew up in rural Kansas. Part of this can be
    solved by better communication between the USDA and the FCC.
    Part of it can be resolved with stricter overbuilding rules. I
    believe both of these have been improved with recent
    legislation that I have been a champion of, but there is
    another component that needs to be addressed, and that is
    better information and better mapping.
        Many of my colleagues have discussed this at length, and
    there are a number of possible solutions, including
    partnerships, crowdsource data, shape files. I want to make
    sure we get the best data possible while also protecting the
    privacy of Montanans.
        Could you provide an update on the FCC actions and what you
    might see as possible solutions?
        Chairman Pai. I appreciate the question, Senator, and the
    entire premise of our Mobility Fund Phase II was exactly what
    you enunciated at the beginning of your question, which is that
    we do not want to subsidize a competitor in a part of the
    country that already has service.
        Meanwhile, there are many swaths of Montana, Kansas, other
    States, that do not have any service at all, and that was the
    entire premise when we started in January and February of 2017.
        With respect to the mapping issues, on the fixed side we
    have an ongoing Form 477 proceeding, which is examining, among
    other solutions, the shape files proposal that you mentioned.
    We hope to be able to get some recommendations from our staff
    on how to proceed with the Form 477 updates relatively soon. We
    essentially want to make that more granular so that they are
    more meaningful to us and more meaningful to you as well.
        On the Mobility Fund side, we have the ongoing enforcement
    investigation into a carrier or carriers that may have
    submitted inaccurate data. I expect that our staff is going to
    come to me relatively soon with a recommendation there as well,
    and we can determine what appropriate action to take with
    respect to the investigation and how to proceed with the
    overall Mobility Fund program.
        Senator Daines. Thank you, Chairman Pai.
        Senator Kennedy. Okay. Gentlemen, thank you. I want to
    close with this. Number one, I will now say another word about
    net neutrality. Unlike the last Congress, we have a little more
    flexibility now because the CRA is no longer an option. This is
    just one person's opinion, but I wanted to get this on the
    record. In my judgment, the debate that preceded the partisan
    vote in the House revealed some major flaws in Title II that
    could set our rural communities back, and we talked about the
    importance of our rural communities today.
        I think the debate revealed that these flaws could
    unnecessarily stifle development--we do not want that--along
    with innovation. And it could also undermine broadband
    investment and competition in small towns across this country,
    including but not limited to Louisiana.
        The stakes are very high. I do not need to tell you that,
    Mr. Chairman. The Senate needs to come up with a new bipartisan
    bill, and I am calling on you to help us do that. That bill
    needs to reflect some of the challenges that we face. We need
    to protect consumers in it, and we need to protect rural
    communities and give them broader access to broadband and
    innovative competition.
        Number two, if you work for the FCC or FTC and you are in
    the audience, raise your hand.
        [Show of hands.]
        Senator Kennedy. Thank you for your good work.
        Number three, thank you, Mr. Chairman.

                         ADDITIONAL COMMITTEE QUESTIONS

        If there are no further questions, the hearing record will
    remain open until next Tuesday 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 John Kennedy
        Question. I'm concerned about the fraud, waste, and abuse in some
    of the Universal Service Fund programs, specifically, the Lifeline
    program. Last month (April), the FCC's Office of Inspector General
    issued an advisory and said ``Fraud remains a serious problem for the
    Lifeline program.'' This advisory also reminded us that just last year,
    the Office of Inspector General published an audit report which
    estimated the number of improper Lifeline payments at more than $330
    million in fiscal year 2017 alone. What reforms is the FCC engaged in
    and implementing to tackle these improper payments? Does the Office of
    Investigations have the right amount of resources to tackle this job,
    including having enough criminal investigators?
        Answer. I share your concerns about waste, fraud, and abuse in the
    Lifeline program, and am aware of the problems cited in the FCC's
    Office of Inspector General's April 16, 2019 advisory letter. If
    Lifeline is going to be an effective tool for bridging the digital
    divide, we must ensure that every dollar spent in the program is spent
    well.
        Your subcommittee took an important step in assisting us to achieve
    this goal and address USF fraud issues by approving, per your July 11,
    2019 letter, the FCC's creation of a Fraud Division within our
    Enforcement Bureau. The newly organized division will be comprised of
    attorneys and investigators with financial crimes experience to enhance
    and make permanent the FCC's ability to identify fraudulent schemes
    that have resulted in improper disbursements or other fraud on the
    government. By identifying these often-sophisticated schemes, the FCC
    can craft effective and efficient enforcement responses. I will
    certainly keep you apprised should the agency determine that the
    resources available to this division are insufficient for the task
    involved.
        Even before the designation of our new Fraud Division, we
    aggressively addressed problems in the Lifeline program. For instance,
    in 2017, the Commission settled five Lifeline improper payment
    investigations. Under the terms of the relevant consent decrees, these
    five entities are operating under a compliance plan and have made a
    total contribution of $2,355,000 to the United States Treasury. And in
    October 2018, we released a $63 million Notice of Apparent Liability
    against a Lifeline provider for apparently willfully and repeatedly
    violating the Commission's rules governing the Lifeline program.
        We have also implemented a number of important administrative
    changes that will help reduce Lifeline program fraud and improper
    payments. Rolling out the National Verifier is critical to reducing the
    unacceptably high rate of improper payments in the program. The
    National Verifier has launched in 37 States and territories as well as
    the District of Columbia. Commission staff and USAC are working
    diligently to meet the December 2019 nationwide rollout deadline
    established by the 2016 Lifeline Order.
        The National Verifier represents an important step in ensuring that
    unscrupulous providers do not enroll ineligible consumers in the
    program, but it is not enough. USAC has therefore implemented several
    safeguards at my direction to mitigate waste, fraud and abuse and
    reduce improper payments in the Lifeline program. USAC now regularly
    reviews program subscribership to identify and remove: (1) subscribers
    who list a home address that is also used by an excessive number of
    other subscribers; (2) deceased subscribers; and (3) subscribers who
    are otherwise no longer eligible for the program. Since USAC started
    this process in the fourth quarter of 2017, it has identified over $2.1
    million to be recovered from providers and removed over 141,000
    ineligible subscribers from the program. Also, in late 2017 and early
    2018, USAC made several important changes to its reimbursement system
    to prevent Lifeline providers from claiming more funding than they are
    entitled to. Audits are another important piece of improving
    accountability, and at my direction, USAC is conducting for the first
    time forensic audits of several Lifeline providers to assess compliance
    with program rules.
        We are also working with the Inspector General's Office to address
    structural weaknesses in Lifeline that will not be fixed by the
    National Verifier. For example, at my direction, USAC is developing a
    new database that will allow it to account for and monitor the
    registration activity of carrier representatives responsible for
    enrolling consumers in the program. This database will help USAC and
    the FCC identify conduct by sales agents and employees who may be
    attempting to defraud the program.
        The bottom line is that the FCC shares your concern and will always
    aim to prevent and, as appropriate, prosecute those who seek to or do
    in fact defraud the Universal Service Fund.
        Question. Chairman Pai you recently laid out a plan to create a new
    $20.4 billion Rural Digital Opportunity Fund to extend high-speed
    broadband in rural America. How many individuals currently lack access
    to broadband in their homes? Can you provide more details about the
    Rural Digital Opportunity Fund and how you plan to repurpose Universal
    Service Funds?
        Answer. Bridging the digital divide has been my top priority since
    becoming Chairman in 2017. In that time, we've focused on removing
    barriers to infrastructure, promoting competition, and providing
    efficient, effective support for rural broadband expansion through our
    Universal Service Fund programs. As a result of those efforts, the
    digital divide has narrowed substantially, and more Americans than ever
    before have access to high-speed broadband. The number of Americans in
    census blocks wholly lacking at least 25 Mbps/3 Mbps service dropped
    from 26.1 million at the end of 2016 to 21.3 million at the end of
    2017, a decrease of more than 18 percent.
        But more work remains to close the digital divide. That's why I
    circulated a proposal for the FCC's August Open Meeting to establish
    the Rural Digital Opportunity Fund, a modernized approach for
    connecting the hardest-to-serve corners of our country. Building on the
    success of the CAF Phase II auction, the Rural Digital Opportunity Fund
    would, as you observed, provide $20.4 billion over 10 years to support
    up to gigabit service to millions of unserved Americans through a
    competitive auction. This will ensure that the most unserved Americans
    will be covered for the lowest cost possible. The Commission adopted
    the Notice of Proposed Rulemaking addressing the Rural Digital
    Opportunity Fund on August 1.
        Question. Last summer, the FCC announced that it was going to take
    action to address immediate and long-term funding shortages in the
    Rural Health Care Program. When can we expect that you will take action
    in a way that gives assurance to providers that they can rely on the
    program to help get services to rural places in the lower 48 States? If
    that action is already taking place, please provide the subcommittee
    with an enumerated list of what is being done.
        Answer. As you know, the FCC's Rural Health Care (RHC) Program
    helps healthcare providers afford the connectivity that they need to
    better serve patients. We have taken several steps to extend the
    program's impact to those who may not otherwise have access to high-
    quality healthcare. For instance, we adopted the first increase to the
    program's budget in a generation. Specifically, in a June 2018 Order,
    the Commission increased the annual RHC Program funding cap by 43
    percent, to $571 million, starting with fiscal year 2017; adjusted the
    RHC Program funding cap for inflation, starting in fiscal year 2018;
    and established a process to carry-forward unused funds from past
    funding years for use in future funding years. Thanks to these
    measures, no rural healthcare providers seeking support from the Rural
    Health Care Program were capped in fiscal year 2018.
        In order to promote the efficient distribution of limited RHC
    Program funds, and increase transparency and predictability for Program
    participants, the Commission adopted a Report and Order at the FCC's
    August Open Meeting which reformed RHC Program rules. The Report and
    Order (1) reformed the distribution of RHC funding to promote
    efficiency and reduced aspects of the Telecommunications (Telecom)
    Program that encourage waste, fraud, and abuse; (2) streamlined and
    simplified the calculations of the discounted rates that healthcare
    providers pay for communications services and the amount of support
    received from the program; (3) directed the Program Administrator to
    create a database of rates that healthcare providers could use to
    quickly and easily determine the amount of support they can receive
    from the Program; (4) targeted funding to the most rural areas and
    those facing shortages of healthcare providers and ensured that
    eligible rural healthcare providers continue to benefit from program
    funding in the event that demand for the Program exceeds its funding
    cap; (5) simplified the application process for Program participants
    and provided more clarity regarding Program procedures; and (6)
    directed the Program Administrator to take a variety of actions to
    increase transparency in the Program and ensure that all applicants
    receive complete and timely information to help inform their decisions
    regarding eligible services and purchases.
        Question. When can we expect to see substantive amounts--versus
    piecemeal amounts--of 2018 Rural Health Care Program monies being
    released to those States that are in need?
        Answer. The Commission has taken steps to ensure that all funding
    requests seeking support from the Rural Health Care (RHC) Program for
    services delivered in fiscal year 2018 are funded to their full
    eligible amounts and are issued as quickly as possible. First, pursuant
    to the measures adopted by the June 2018 RHC Funding Cap Order, the RHC
    Program funding cap for fiscal year 2018 was approximately $581 million
    (as opposed to $400 million when I came into office). Second, in
    October 2018, I announced that all single-year 2018 funding requests
    would be funded to their full eligible amounts, and the Program
    Administrator began processing and issuing those funding decisions
    shortly after. Third, on May 14, 2019, the Commission adopted an Order
    providing full funding for multi-year and upfront payment funding
    requests for services delivered in fiscal year 2018. Because the total
    amount of multi-year and upfront demand exceeded the $150 million
    funding cap on such requests within the Healthcare Connect Fund, absent
    action by the Commission, USAC would have been required to pro-rate
    this funding.
        To avoid significant reductions in support, the Commission
    suspended its pro-ration rule for fiscal year 2018 and directed USAC to
    process the fiscal year 2018 portion of multi-year commitment requests
    as single-year funding requests and treat the underlying multi-year
    contracts as evergreen. That action ensured that the healthcare
    providers that submitted the request received the full funding they
    needed for their fiscal year 2018 services and created a path for them
    to seek the remaining funding requested in subsequent funding years
    without having to rebid the contracts. Taken together, these decisions
    ensured that the healthcare providers could continue to obtain the
    critical telecommunications and advanced services needed for the
    delivery of healthcare services to their rural communities.
        Question. Regarding the 6 GHz proceeding, the FCC told me in a
    recent letter that the FCC believes an automated frequency control
    (AFC) system will prevent interference to utilities and other critical
    infrastructure. I've been told by energy companies in my State that
    this technology has not been proven. Has the FCC actually tested this
    technology and can you vouch that it will work? If not, will you test
    this system prior to taking final action?
        Answer. I've consistently stated that the FCC will ensure that it
    will protect incumbent systems in the 6 GHz band from harmful
    interference. To that end, the NPRM proposes an automated frequency
    control system for the 5.925-6.425 GHz and 6.525-6.875 GHz sub-bands to
    identify frequencies on which unlicensed devices could operate without
    causing harmful interference to fixed point-to-point microwave
    receivers. The Commission has employed automated systems previously to
    enable sharing of spectrum such as in the TV White Spaces and Citizens
    Broadband Radio Service. To be sure, this is a complicated proceeding,
    with the record having only recently closed, so the Commission will
    conduct a thorough review of the record prior to making any final
    decision.
        Question. Regarding the 6 GHz proceeding, energy companies in my
    State have told me that if there is even a threat to disruption of
    their communications networks, they will need to consider relocating to
    another band, which could cost tens of millions. That is assuming it is
    even feasible to relocate, which is not a given. In the 90s, the FCC
    compensated utilities when they were forced into the 6 GHz band. I have
    significant concerns asking Louisiana energy customers to pay for this
    effort. Since this action may force incumbents out of this band, will
    you support compensating those who need to relocate to ensure the
    safety and reliability of the electric grid?
        Answer. As mentioned above, the Commission will ensure that it will
    protect incumbent systems in the 6 GHz band from harmful interference.
    Indeed, it has proposed and is considering rules to ensure interference
    will not occur. Accordingly, the NPRM does not propose to relocate
    energy companies to other spectrum bands, and they are not expected to
    incur any costs under the proposed rules.
        Question. In Louisiana, the FCC's broadband maps show that a number
    of communities remain unserved, especially in rural areas. Even worse,
    the current maps overstate coverage, meaning that many more residents
    lack broadband, but we don't even know where they are. I believe the
    FCC should take immediate steps to update its broadband maps with more
    detailed service area information to identify and spur deployment,
    through private investment or subsidies like the Rural Digital
    Opportunity Fund you've announced. Chairman Pai, will you prioritize
    completing the FCC's proceeding to update its broadband data and maps?
        Answer. I agree that obtaining and using updated and accurate
    broadband deployment data is critical to accomplishing the goal of
    making broadband available to all Americans, regardless of where they
    live. We need to understand where broadband is available and where it
    is not to target our efforts and direct funding to areas that are most
    in need.
        That is why the Commission began a top-to-bottom review of our
    deployment data collection to ensure that broadband data will be more
    precise, granular, and ultimately useful to the Commission and the
    public. Along those lines, the Commission adopted a Report and Order on
    August 1 to create the Digital Opportunity Data Collection, an all-new
    approach to mapping that would yield more granular and more accurate
    broadband maps. That Report and Order also provides for regular updates
    of the filed data to ensure that the maps we rely on are current. I'm
    also proposing that we verify those maps through crowdsourcing--
    feedback directly from the public. These updated maps will be used to
    focus funding to expand broadband through future initiatives such as
    the second phase of the proposed Rural Digital Opportunity Fund (RDOF).
        Question. Chairman Pai, I commend your focus on fostering a
    regulatory environment that encourages ongoing private investment,
    including in rural America. One issue that has come to my attention is
    that communities in some parts of the country are imposing additional
    franchise requirements and fees above and beyond what's allowed under
    Federal law. I'm concerned that these extra fees will discourage
    broadband deployment in rural areas that are already more costly to
    serve or make service more expensive for rural residents. Do you share
    these concerns?
        Answer. I do. And the Commission adopted rules on August 1 to
    address this issue. As you know, the Communications Act limits
    franchise fees to 5 percent of cable revenues and defines ``franchise
    fee'' to include ``any tax, fee, or assessment of any kind imposed by a
    franchising authority or other governmental entity on a cable operator
    or cable subscriber, or both, solely because of their status as such.''
    47 U.S.C. Sec. 542(g)(1). In Montgomery County, Md. et al. v. FCC, the
    U.S. Court of Appeals for the Sixth Circuit held that the terms ``tax''
    and ``assessment'' were broad enough to encompass nonmonetary
    exactions--such as cable-related, in-kind contributions. 863 F.3d 485,
    490-91 (6th Cir. 2017). But the court held that just because the
    statutory definition of ``franchise fee'' could include such
    nonmonetary contributions did not necessarily mean that it did include
    them, and it remanded the issue to the Commission for further
    consideration. See id. at 491-92.
        In response to this remand, the Commission unanimously issued its
    Second Further Notice of Proposed Rulemaking to consider the scope of
    the congressionally-mandated statutory limit on franchise fees. The
    Commission developed a voluminous record in response to this notice,
    including numerous submissions from local franchising authorities,
    providers of public, educational, or governmental (PEG) programming,
    and cable operators.
        And on August 1, the Commission reached the following conclusions.
    First, concluded that cable-related, ``in-kind'' contributions required
    by a cable franchising agreement are franchise fees subject to the
    statutory 5 percent cap on franchise fees set forth in section 622 of
    the Communications Act, with limited exceptions, including an exemption
    for certain capital costs related to PEG channels. Second, it found
    that under the Communications Act, local franchise authorities may not
    regulate the provision of most non-cable services, including broadband
    Internet access service, offered over a cable system by an incumbent
    cable operator. Third, it found that the Act preempts any State or
    local regulation of a cable operator's non-cable services that would
    impose obligations on franchised cable operators beyond what Title VI
    of the Communications Act allows. Finally, it found that Commission
    requirements that concern local franchise authority regulation of cable
    operators should apply to State-level franchising actions and State
    regulations that impose requirements on local franchising.
        This approach, while grounded in legal interpretation of the
    Communications Act, would have a very real practical impact: freeing up
    capital that could then be used to build, extend, and/or maintain high-
    speed broadband networks. This would be particularly helpful in rural
    areas which, as you observe, are too often unserved or underserved.
                                     ______

                Questions Submitted by Senator Patrick J. Leahy
        Question. You have claimed that, following the repeal of net
    neutrality protections, there would be a boom in private investment.
    During your last appearance before the subcommittee, I asked you to
    provide specific data to show exactly how this would benefit unserved
    rural communities in Vermont. At the time, you declined to provide that
    information. Now that net neutrality has been repealed for more than a
    full year, I expect that you will be able to provide my constituents in
    Vermont with evidence showing exactly how much this supposed boom in
    private investment in broadband networks has benefitted them.
      --How many unserved Vermonters have gained access to service due
            solely to private investment, excluding investments made as
            part of government programs like the Connect America Fund?
      --How many Vermonters have seen their broadband bill reduced compared
            to their December 2017 bill?
        Answer. Our deregulatory approach, including the restoration of the
    bipartisan, light-touch approach to Internet regulation reflected in
    the Restoring Internet Freedom Order, has helped increase broadband
    infrastructure investment in the United States and close the digital
    divide.
        In 2018, for example, fiber was deployed to more new homes in the
    United States than any year ever. Investment in broadband networks
    increased by $3 billion, the second straight year of increased
    investment, which followed 2 years of declining investment at the end
    of the prior administration. And the number of wireless small cells in
    the United States deployed more than quadrupled in 2018. Turning to
    Vermont, I would refer to a letter written to you from Dr. Michel
    Guite, the Chairman and CEO of Vermont Telephone and VTel Wireless
    (``VTel''), on May 25, 2018. In that letter, Dr. Guite wrote: ``As far
    as net neutrality is concerned, . . . I can assure that regulating
    broadband like legacy telephone service would not create any incentives
    for VTel to invest in its broadband network. In fact, it would have
    precisely the opposite effect.'' He continued, ``[y]ou asked Chairman
    Pai to give tangible examples of investment in rural broadband as a
    result of recent FCC policies. I can tell you that, just days ago, VTel
    committed $4 million to purchase equipment and services from Ericsson
    to upgrade its 4G LTE core to enable voice roaming and Wi-Fi calling to
    all our Vermont rural subscribers and to simultaneously begin rolling
    out faster mobile broadband that will start our transition to 5G. This
    commitment represents VTel's largest single technology investment since
    the capital invested in connection with VTel's ARRA awards, and one of
    the largest in the history of our company.'' He further stated that
    ``[t]he FCC under Chairman Pai's leadership has created a positive
    regulatory climate to make such investments,'' and concluded, ``VTel is
    quite optimistic about the future, and the current FCC is a significant
    reason for our optimism.'' For your convenience, I have attached to
    this answer a copy of the letter from Dr. Guite.
        Despite the positive strides we have seen over the last two-and-a-
    half years, our work to close the digital divide is not complete. This
    will remain our top priority as we continue our efforts to help deliver
    the benefits of broadband to all Americans.

                                     ______

                   Questions Submitted by Senator Jerry Moran
        Question. Your testimony indicated that the FCC was ``applying
    lessons learned from the Connect America Fund Phase II reverse
    auction'' in establishing the recently announced $20.4 billion Rural
    Digital Opportunity Fund. Would you please describe what these
    ``lessons'' are? How will the FCC propose to account for them in the
    rulemaking setting up the fund?
        Answer. Among the lessons learned from the CAF Phase II auction--
    lessons we hope to apply in the context of the Rural Digital
    Opportunity Fund--are that the mechanism of a reverse auction, with the
    intramodal competition that mechanism allows, is a much more efficient
    system for distributing funding. Similarly, ``weighting'' CAF Phase II
    bids so that proposals to offer higher-speed, lower-latency services
    were given a leg-up over lower-speed, higher-latency bids proved to be
    successful, which over 99 percent of households to be covered in that
    auction served with speeds of at least 25/3 Mbps, most served with
    speeds of at least 100 Mbps, and many served with gigabit speeds.
        Question. I support the FCC's efforts to verify that broadband
    network supported by the Universal Service Fund (USF) are meeting
    program requirements through their performance testing proposal.
    However, testing protocols need to be structured reasonably while
    taking into account the technical, administrative, and financial
    challenges posed to small carriers reliant on USF support. Please
    provide an update on the FCC's work to implement these performance
    testing requirement. Are there currently testing solutions available
    for USF participants that would not require customers installing new
    equipment in their homes?
      --Also, what is the expected timeline for implementation?
        Answer. As you note, performance measures are critical to ensuring
    that consumers receive the level of service that providers have
    committed to deploy thanks in part to universal service high-cost
    support. Under an order the FCC adopted in July 2018, carriers subject
    to performance measures were required to begin testing in the third and
    fourth quarters of 2019 and report these results with an accompanying
    certification by July 1, 2020.
        However, in order to implement the testing regime, the Commission
    needs to develop a mechanism for collecting the testing data and obtain
    Paperwork Reduction Act (PRA) approval. In addition, several petitions
    for reconsideration and applications for review were filed regarding
    the July 2018 order. In light of the issues raised in these filings,
    the need for additional technical development of the interfaces
    required, and the requirement for PRA approval, the Wireline
    Competition Bureau issued a public notice on May 20, 2019 delaying the
    requirement to begin testing and reporting of speed and latency results
    until the first quarter of 2020. The July 2018 order gives service
    providers the flexibility to use software solutions. However, one issue
    raised in the various filings was that testing solutions that can use
    existing customer premise equipment, such as cable modems and gateways,
    was not widely available. Since that time, some service providers and
    software vendors have told the Commission that these software solutions
    are increasingly available for many service providers. Commission staff
    are reviewing these filings and will continue to work to ensure that
    performance testing measures accommodate service providers of all sizes
    and capabilities.
        Question. Your testimony covered the creation of the Office of
    Economics and Analytics. Would you please describe the FCC's plans to
    ``expand and deepen'' the use of economic analysis in its upcoming
    decisionmaking?
      --In terms of rulemakings and auctions, what does coordination
            between the Office of Economics and Analytics and the other
            Bureaus and Offices look like? What are the resource-based
            needs of these coordination efforts?
        Answer. The FCC officially launched the Office of Economics and
    Analytics (OEA) in December 2018 after receiving approval for the
    reorganization from your subcommittee. Among its primary goals, OEA is
    elevating rigorous, objective economic analysis throughout the FCC in
    order to better inform policymaking.
        Generally speaking, OEA provides input to the FCC's Bureaus and
    Offices on all matters with significant economic content through all
    stages of the rulemaking process. For example, OEA contributes to
    options memos, prepares questions for NPRMs, and conducts economic
    analysis for an Order. In accordance with the rules the Commission
    adopted when it established OEA, the Economic Analysis Division (EAD)
    within OEA performs an independent economic review of all Commission-
    level rulemakings. EAD also reviews other Commission-level items and
    lends its expertise and suggestions as appropriate. As of July 1, 2019,
    EAD had reviewed over 150 Commission-level items, including proceedings
    from every Bureau within the FCC. The extent of the economic review in
    these cases typically depends on the estimated economic impact of the
    action. Items with over $100 million in estimated annual effect on the
    economy must receive a rigorous economically-grounded cost-benefit
    analysis. To date, two items have crossed this threshold.
        Similarly, Auctions Division attorneys and economists coordinate
    with the relevant Bureaus early in the rulemaking process. Auctions
    staff meet with Bureaus as soon as an auction or competitive bidding
    process is contemplated to provide expertise on designing and
    implementing efficient competitive bidding. The Auctions Division and
    other OEA economists are deeply involved in the design and
    implementation of auctions, including creating the legal documents,
    producing intricate auction timelines, providing contractor oversight,
    and conducting and closing of an auction. The coordination efforts take
    place through meetings, emails, and planning documents.
        OEA also provides economic support, as needed, for other types of
    work produced by the Bureaus and Offices, such as merger review and
    enforcement actions. The level of analytic support ranges from
    answering discrete economic questions posed by FCC staff, to embedding
    economic experts throughout a proceeding. At the start of Commission-
    level proceedings, OEA and the relevant Bureau/Office meet to jointly
    define work product and responsibilities, develop a communications
    plan, discuss timing and prioritization, and determine the necessary
    review processes. Every Bureau and Office has a designated person in
    the OEA front office for coordination of this process. Most of OEA's
    economic and analytic work is concentrated in EAD and the Industry
    Analysis Division.
        OEA also is responsible for designing and implementing FCC
    auctions; developing and implementing consistent and effective agency-
    wide data, collections, practices, and policies; and conducting long-
    term economic and analytical research related to communications
    policies to inform future rule-makings. Centralizing the FCC's economic
    functions into one office has contributed to a culture in which
    economists and others focused on economic functions work and
    collaborate effectively to perform independent economic analysis that
    informs the Commission's policymaking decisions. In addition, OEA has
    issued two economic white papers in the past 6 months--the first two
    whitepapers that the FCC has issued since 2012.
        No additional resources were requested for coordination within the
    Agency at this time.
        Question. Last Congress, I was successful in enacting the FCC CIO
    Parity Act, which 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. 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. Did the agency's CIO have a significant role in the
    development of the President's fiscal year 2020 budget request?
      --Were any specific ``legacy'' IT systems prioritized for replacement
            as a result?
        Answer. Thank you for your leadership in elevating the Chief
    Information Officer's (CIO) role within all agencies. At the FCC, our
    CIO is an essential and valued member of the Office of Managing
    Director team and has significant responsibility for developing
    Information Technology (IT) planning, budgeting and office hiring. The
    CIO had a significant role in the development of the President's fiscal
    year 2020 budget request.
        The current acting CIO and his predecessor have focused all
    available resources on following through with the replacement of legacy
    systems and modernization of our systems. The Commission's fiscal year
    2020 Budget CJ, at pages 19-21, provides the current focus on IT
    modernization. Importantly, IT system upgrades and replacement account
    for the entire new investments section of our request at $3.19 million.
        The CIO and FCC IT Team have worked closely with the Commission's
    Bureau and Office leadership to prioritize modernization efforts in the
    areas that will benefit most from replacement of the legacy systems.
    Specific IT systems prioritized for replacement include: Integrated
    Spectrum Auction System (ISAS), International Bureau Filing System
    (IBFS), Universal Licensing System (ULS), Disaster Information
    Reporting System (DIRS), and the OET Frequency Assignment Coordination
    System (OFACS).
        Question. Your testimony acknowledges the importance of making more
    spectrum available for unlicensed operations. Would you please describe
    the role that innovative technologies and sharing techniques play in
    increasing spectrum access for unlicensed operations?
      --As the Chairman of the CJS Appropriations Subcommittee, I remain
            interested in the research and development taking place at the
            Institute for Telecommunication Sciences, the primary
            engineering arm of NTIA. Does the work taking place at the
            Institute assist the FCC with its decisionmaking around
            unlicensed operations?
        Answer. Unlicensed devices typically share spectrum with other
    services on a non-interference basis. The Commission has adopted
    provisions to enable unlicensed devices to share spectrum using
    advanced sharing techniques to prevent harmful interference to
    incumbent services. For example, unlicensed devices were provided
    access to the TV White Spaces and the Citizens Broadband Radio Service
    (CBRS) by developing data bases of protected operations that would be
    avoided by the unlicensed devices. We have worked closely with the
    Institute of Telecommunication Sciences (ITS) in testing the CBRS data
    bases and we have a long history of working collaboratively with ITS on
    advanced spectrum sharing techniques for both licensed and unlicensed
    services.
                                     ______

                  Questions Submitted by Senator John Boozman
        Question. When can we expect to see substantive amounts--versus
    piecemeal amounts--of 2018 Rural Health Care Program monies being
    released to those States that are in need?
        Answer. The Commission has taken steps to ensure that all funding
    requests seeking support from the Rural Health Care (RHC) Program for
    services delivered in fiscal year 2018 are funded to their full
    eligible amounts and are issued as quickly as possible. First, pursuant
    to the measures adopted by the June 2018 RHC Funding Cap Order, the RHC
    Program funding cap for fiscal year 2018 was approximately $581 million
    (as opposed to $400 million when I came into office). Second, in
    October 2018, I announced that all single-year 2018 funding requests
    would be funded to their full eligible amounts, and the Program
    Administrator began processing and issuing those funding decisions
    shortly after. Third, on May 14, 2019, the Commission adopted an Order
    providing full funding for multi-year and upfront payment funding
    requests for services delivered in fiscal year 2018. Because the total
    amount of multi-year and upfront demand exceeded the $150 million
    funding cap on such requests within the Healthcare Connect Fund, absent
    action by the Commission, USAC would have been required to pro-rate
    this funding.
        To avoid significant reductions in support, the Commission
    suspended its pro-ration rule for fiscal year 2018 and directed USAC to
    process the fiscal year 2018 portion of multi-year commitment requests
    as single-year funding requests and treat the underlying multi-year
    contracts as evergreen. That action ensured that the healthcare
    providers that submitted the request received the full funding they
    needed for their fiscal year 2018 services and created a path for them
    to seek the remaining funding requested in subsequent funding years
    without having to rebid the contracts. Taken together, these actions
    ensured that the healthcare providers could continue to obtain the
    critical telecommunications and advanced services needed for the
    delivery of healthcare services to their rural communities.
        Question. Last summer, the FCC announced that it was going to take
    action to address immediate and long-term funding shortages in the
    Rural Health Care Program. When can we expect that you will take action
    in a way that gives assurance to providers that they can rely on the
    program to help get services to rural places in the lower 48 States? If
    that action is already taking place, please provide the subcommittee
    with an enumerated list of what is being done.
        Answer. The Rural Health Care (RHC) Program helps healthcare
    providers afford the connectivity that they need to better serve
    patients, and we have taken several actions to address a significant
    increase for Program funds in recent years, as well as to make the
    distribution of funds more efficient and equitable. For instance, in a
    June 2018 Order, the Commission increased the annual RHC Program
    funding cap by 43 percent, to $571 million, starting with fiscal year
    2017, adjusted the RHC Program funding cap for inflation, starting in
    fiscal year 2018 and established a process to carry-forward unused
    funds from past funding years for use in future funding years. Thanks
    to these measures, no rural healthcare providers seeking support from
    the Rural Health Care Program were capped in fiscal year 2018.
        With an eye on the future, and in order to promote the efficient
    distribution of limited RHC Program funds and increase transparency and
    predictability for Program participants, the Commission adopted a
    Report and Order at the FCC's August Open Meeting to reform RHC Program
    rules. The Report and Order (1) reformed the distribution of RHC
    funding to promote efficiency and reduced incentives in the
    Telecommunications (Telecom) Program that encourage waste, fraud, and
    abuse, (2) streamlined and simplified the calculations of way the
    discounted rates that healthcare providers pay for communications
    services and the amount of support received from the Program; (3)
    directed the Program Administrator to create a database of rates that
    healthcare providers could use to quickly and easily determine the
    amount of support they can receive from the Program; (4) targeted
    funding to the most rural areas and those facing shortages of
    healthcare providers and ensured that eligible rural healthcare
    providers continue to benefit from Program funding in the event that
    demand for the Program exceeds its funding cap; (5) simplified the
    application process for Program participants and provide more clarity
    regarding Program procedures; and (6) directed the Program
    Administrator to take a variety of actions to increase transparency in
    the Program and ensured that all applicants receive complete and timely
    information to help inform their decisions regarding eligible services
    and purchases.
                                     ______

                  Questions Submitted by Senator Steve Daines
        Question. I recently wrote a letter to the Commission along with my
    colleague, Sen. Johnson, regarding TV White Spaces technology and the
    need for the Commission finalize two outstanding rules. Thank you for
    taking action and providing certainty on those rules. There are still
    more issues to be resolved (such as enabling connected school buses and
    advancing IoT like precision agriculture). Can you give me an update on
    the outstanding rules regarding TV White Space and are you able to
    conclude those issues by the end of the year?
        Answer. I appreciate your ongoing interest in the Commission's TV
    White Spaces rules. As you are aware, earlier this year, the Commission
    adopted several revisions to its white spaces rules. These revisions
    improved the white space database unlicensed users rely on when
    accessing unused spectrum in the TV bands and modified technical rules
    to permit use of higher antennas in rural areas to enable greater
    coverage when providing broadband services.
        On May 3, 2019, Microsoft filed a petition for rulemaking
    requesting that the Commission further modify the rules for white space
    devices. Specifically, it requested that the Commission provide
    additional technical modifications to its rules to permit: (1) higher
    antenna power limits and heights for certain unlicensed devices; (2)
    more intensive use of unused spectrum where doing so would not cause
    harmful interference to licensed users; (3) further adjustments to the
    rules to support the use of white space channels for narrowband IoT;
    and (4) unlicensed white space device operations on movable platforms
    (such as tractors used for precision agriculture or school buses for
    connected services).
        The Commission released a public notice on May 9, 2019, seeking
    comment on the Microsoft petition. Comments were due on June 10, 2019,
    and reply comments were due on June 25, 2019. Sixteen parties filed
    comments and three parties filed reply comments. The comments were
    generally supportive, although some parties, such as wireless
    microphone manufacturers and broadcasters, expressed certain concerns.
        At this stage, our staff is reviewing the comments carefully. We
    will move forward once we have properly considered all of the comments
    and addressed the issues raised by the stakeholders.
        Question. Now more than ever, kids and parents deserve a safe place
    to access educational and entertainment content. There have been rules
    governing traditional media markets regarding advertising during
    children's program for decades, but little if anything when they are
    online. It has become imperative that we update our privacy laws to
    ensure our children's safety, which is why I introduced the SAFE KIDS
    Act that prevents websites used primarily for preK-12 purposes from
    collecting or using student data. I believe that it is important that
    we modernize children's television advertising rules to balance current
    trends while maintaining a safe space for children to watch educational
    and entertainment programs. Chairman Pai, will you commit to working
    with all stakeholders to modernize children's television advertising
    rules?
        Answer. As a general matter, I support modernizing our rules,
    within statutory constraints, to reflect today's market and technology.
    I am willing to work with all stakeholders to explore whether changes
    to the children's television advertising rules make sense.
        Question. The IP Caption Telephone Service (IP CTS) has enabled the
    hard of hearing community, and specifically certain veterans, to be
    more independent and integrate into the workforce. It is my
    understanding that the FCC is currently undergoing updates to the
    program and I want to make sure that any updates are balanced, well
    informed and broadly supported by the affected community. I believe
    that any updates should not result in an inferior service, specifically
    in regards to the automated speech recognition and access to equipment.
    Chairman Pai, will you commit to do additional studies on any proposed
    updates and work with all affected groups to ensure any existing
    concerns are addressed?
        Answer. I agree that IP CTS is a critical service for individuals
    with hearing loss. The vast majority of captioned telephone services
    already rely on automated speech recognition (ASR). However, those
    services previously have required the interposition of a communications
    assistant between the caller and the speech recognition software to
    ``revoice'' a caller's words. This interposition slows transcription,
    reduces the privacy of calls for callers, and increases the costs of IP
    CTS.
        That's why the Commission took steps to modernize IP CTS in June
    2018 by authorizing the use of ASR without a communications assistant.
    We found that ASR has become a viable alternative with its improvements
    in accuracy, speed, and privacy--especially compared to services that
    require the interposition of a communications assistant. And the
    Commission found that consumers will continue to be able to select a
    provider based on quality of service and available methods, as ASR will
    not be the sole means of offering IP CTS.
        Additionally, I want to stress that nothing regarding our reforms
    allows substandard service: Providers using ASR must continue to meet
    the Commission's minimum Telecommunications Relay Service standards and
    report data to the Commission to help us determine if further measures
    are necessary.
                                     ______

                Questions Submitted by Senator Joe Manchin, III
                           public feedback mechanism
        Question. As long as we continue to rely solely on carrier-reported
    Form 477 data to tell us where there is and isn't coverage of fixed and
    mobile broadband, we will never have a complete picture that accurately
    depicts the real-world experiences of Americans.
      --Will a ``public feedback mechanism'' be considered within the
            ongoing Form 477 proceeding?
      --Do you need new legislative authorities to consider and implement a
            ``public feedback mechanism'' or could you do that already?
        Answer. I agree that using updated and accurate broadband
    deployment data is critical to accomplishing the goal of making
    broadband available to all Americans, regardless of where they live. We
    need to understand where broadband is available and where it is not to
    target our efforts and direct funding to areas that are most in need.
    That is why the Commission began a top-to-bottom review of our
    deployment data collection to ensure that broadband data will be more
    precise, granular, and ultimately useful to the Commission and the
    public.
        The Commission voted affirmatively on August 1 on a Report and
    Order I circulated which would yield more granular and more accurate
    broadband maps. It also provides for regular updates of the filed data
    to ensure that the maps we rely on are current. Consistent with our
    current authorities, the Report and Order also enables third-party
    verification through crowdsourcing--feedback directly from the public.
                             mobility fund phase ii
        Question. It has been exactly 5 months since your agency put a hold
    on Mobility Fund Phase II. My State desperately needs this funding.
      --Do you have any idea when you plan to move forward with it?
      --Do you believe we will have to start this entire process over
            again?
        Answer. In December 2018, the Commission launched an investigation
    into whether one or more major carriers violated the MF-II reverse
    auction mapping rules and submitted incorrect coverage maps. The
    Commission has suspended the next step of the challenge process--the
    opening of a response window--pending the conclusion of this
    investigation, which we are actively working on. I expect Commission
    staff will be able to wrap up their investigation in the near term.
                         rural digital opportunity fund
        Question. Last month as part of your ``5G Fast Plan'', you
    announced the establishment of a $20.4 billion fund designated for
    rural broadband investment called the Rural Digital Opportunity Fund.
    While this announcement signals a positive step forward in bridging the
    digital divide, unless we fix our broadband coverage maps and ensure
    this new program has a dedicated amount set aside for places with
    mountainous terrain, I am concerned West Virginia will not see a dime
    of this funding.
      --I understand that your agency just opened a new docket for the
            Rural Digital Opportunity Fund so it will take some time to go
            through the regulatory process at the FCC but how do you
            envision this proposal will help my State and when do you think
            it will begin?
      --Can you commit to including a terrain factor or set aside within
            this program so that places like West Virginia have a fair shot
            at this funding when it is made available?
        Answer. On August 1, the Commission adopted a Notice of Proposed
    Rulemaking proposing to establish the Rural Digital Opportunity Fund
    (RDOF). This modernized approach for connecting the hardest-to-serve
    corners of our country will be the biggest step yet the Commission has
    taken to close the digital divide, including the gaps I've seen for
    myself in West Virginia.
        Building on the success of the CAF Phase II auction, the RDOF would
    provide more than $20 billion to support up to gigabit service to
    millions of unserved Americans through a competitive auction. This will
    ensure that the most unserved Americans will be covered for the lowest
    cost possible. The RDOF would target support to areas that lack access
    to fixed voice and 25/3 Mbps broadband and would be implemented through
    a two-phase approach.
        Phase I would allocate support to wholly unserved census blocks and
    Phase II would allocate support to unserved locations in partially
    unserved census blocks, along with areas not won in Phase I. The RDOF
    NPRM proposes to use the Connect America Cost Model to set reserve
    prices (as the Commission did with the CAF II auction). The model
    accounts for variations in cost due to terrain and soil conditions and
    are reflected in the reserve price.
        In addition, to encourage the deployment of higher speed services
    and recognizing that terrestrial fixed networks may serve as a backbone
    for 5G deployments, the weights proposed for different performance
    tiers in the RDOF NPRM favor gigabit-speed, low latency services.
        Our aim is to commence Phase I of the auction next year.
                               remote areas fund
        Question. You have stated that your agency plans to move forward
    with the Remote Areas Fund no later than 1 year after the commencement
    of the Connect America Fund II Auction which occurred in July of last
    year.
      --July is only a few short months away, are you still planning to
            move forward with the Remote Areas Fund?
      --Can you identify which areas in my State are likely to be eligible
            for this funding?
        Answer. The item adopted at the FCC's August Open Meeting proposing
    to establish the Rural Digital Opportunity Fund (RDOF) seeks comment on
    a budget of at least $20.4 billion over the next decade to support up
    to gigabit service to millions of unserved Americans through a
    competitive auction. As in the CAF Phase II auction, we propose to
    include both high-cost locations and extremely-high cost locations in
    the RDOF auction. Most of the areas that did not receive winning bids
    in the CAF Phase II auction were high-cost areas, and not extremely
    high-cost ones. Because it would be inefficient to conduct a separate
    Remote Areas Fund (RAF) auction for so few locations, we propose to
    make the areas from the CAF Phase II auction that did not attract bids,
    which could have been part of the RAF, eligible for the RDOF auction,
    and to make available the amount of funding the Commission once
    envisioned for the RAF (at least $100 million per year) part of the
    RDOF budget.
                        n11 suicide hotline for veterans
        Question. The National Suicide Hotline Improvement Act of 2018
    (Public Law 115-233), which was signed into law on August 18th, 2018,
    requires the Federal Communications Commission, in consultation with
    the Secretary of the Veterans Affairs, to complete a study on the
    effectiveness of an N11 dialing code for Veterans in crisis no later
    than August 2019.
      --What is your most recent update on the progress of the
            aforementioned feasibility study for establishing an N11
            dialing code for Veterans in crisis?
      --What is your timeline for completion of this study?
      --What outreach efforts have you conducted to date and planned in the
            future to ensure that a representative sample of Veterans,
            providers, and other relevant stakeholders have a voice in this
            process?
      --What has the Secretary of Veterans Affairs provided you to complete
            this study? Please provide any documentation from the VA that
            has contributed to this study?
      --What is the earliest date that you could implement a three-digit
            dialing number for Veterans in crisis?
        Answer. As you note, the Act directs the Commission to coordinate
    with the Department of Veterans Affairs (VA), as well as the Department
    of Health and Human Services' Substance Abuse and Mental Health
    Services Administration (SAMHSA), and the North American Numbering
    Council (NANC) in conducting a study examining the feasibility of
    designating a simple, easy-to-remember, three-digit dialing code to be
    used for a national suicide prevention and mental health crisis hotline
    system.
        The Commission's Wireline Competition Bureau issued two Public
    Notices seeking input from interested stakeholders on the issues that
    we must address in the study and the report required by the statute. In
    accordance with the statute, the Commission is also working closely
    with the VA, as well as SAMHSA, and the NANC as we carefully examine
    this important issue. The VA and SAMHSA conducted studies and provided
    reports to the Commission in early February 2019, and the NANC
    submitted its report in May.
        Commission staff is reviewing these reports, as well as comments
    filed by interested parties in the record, including veterans and
    family members of veterans. I personally have met with various
    stakeholders, including Utah Congressman Chris Stewart, the Trevor
    Project, and the American Foundation for Suicide Prevention, to hear
    their views.
        We will submit our report to Congress by the statutory deadline of
    August 14, 2019. Consistent with Congress' directive, the report will
    recommend whether a particular three-digit dialing code should be used
    for a nationwide suicide prevention and mental health crisis system.
    Before implementing any such recommendation, we would seek public input
    through a notice and comment proceeding. Interested parties, including
    veterans and veterans' organizations, would be invited to fully
    participate in that proceeding. Per your request, I've attached the VA
    Report to this response.

                                  ebs spectrum
        Question. On April 30th, 57 rural operators across 22 States
    including West Virginia filed a letter to the FCC stating that
    Educational Broadband Service (EBS) is critical to their ability to
    build out broadband networks in the rural areas they serve. They stated
    support for your plan to give educational entities the first priority
    to apply for an EBS license and enter into a lease with these rural
    operators.
      --Are you still planning to give educational entities first priority
            to obtain an EBS license and allowing educators the chance to
            partner with rural operators?
        Answer. On July 10, 2019, the Commission adopted a Report and Order
    that establishes a plan to leverage this vital mid-band spectrum both
    to provide wireless broadband, including 5G, and to help close the
    digital divide across rural America. The Report and Order does not
    adopt the proposal in the NPRM of providing a priority window for
    educational entities, as the Commission concluded that making the
    unassigned EBS spectrum available for flexible use is the best way to
    facilitate the rapid deployment of wireless broadband services,
    including 5G, to the public. We were informed in part by experience;
    today, this valuable public resource of 2.5 GHz spectrum is
    dramatically underused, especially west of the Mississippi River. And
    the overwhelming number of EBS licensees do not provide services
    themselves but rather lease spectrum to wireless carriers. The funds
    they accrue may not necessarily benefit schoolchildren. Indeed, as
    Commissioner Carr mentioned when the item was adopted, ``In the course
    of examining the 2.5 GHz licenses at issue in this order, I discovered
    that many of these national organizations are using this valuable
    public spectrum that they got for free for activities far removed from
    kids and schools. . . .  I am glad my colleagues agreed to include
    language in today's decision that directs the Enforcement Bureau and
    the Wireless Telecommunications Bureau to review these existing license
    holders for compliance with our rules and other applicable laws.''
                              5g in rural america
        Question. You recently unveiled your ``5G Fast Plan'' and while
    this new technology has the potential to yield significant economic
    benefits, expand consumer services and ignite innovation beyond our
    wildest dreams, I am concerned that much like the 3G and 4G
    technologies that have come before it, rural States like mine will not
    see this new 5G technology deployed to their area.
      --How do we ensure rural Americans are not left behind and will have
            access to this new technology?
        Answer. Bridging the digital divide is the top priority for the
    Commission, and we are working in many ways to ensure that we meet our
    statutory directive to make available, so far as possible,
    communications services in rural America.
        That ethos extends to 5G. 5G-based technologies, both fixed and
    mobile wireless, will play a major role in connecting rural Americans.
    One of the most critical steps that the FCC can take is to approve the
    T-Mobile/Sprint transaction. Right now, Sprint has tremendous mid-band
    spectrum resources. But the record before the FCC makes clear that the
    company standing alone does not have the capability to deploy 5G in
    this spectrum throughout large parts of rural America. On the other
    hand, if the T-Mobile/Sprint transaction is approved, the combined
    company has committed to the FCC that they will deploy mid-band 5G to
    88 percent of our Nation's population, including two-third of rural
    Americans. And there would be significant financial penalties if these
    commitments were not met.
        Another way to ensure that rural Americans benefit from these
    technologies is to get more spectrum into the commercial marketplace--
    whether high-band spectrum (like 24 GHz), mid-band spectrum (like 2.5
    GHz), or low-band spectrum (like 1675 MHz). Yet another way is to
    ensure that regulatory barriers to infrastructure deployment are low.
    This means streamlining the process for deploying small cells. This
    means ensuring that fiber deployment in rural areas is as appealing a
    prospect as possible to private sector companies. And this means that
    the FCC's Universal Service Fund--particularly its Rural Digital
    Opportunity Fund initiative, which will devote over $20 billion toward
    high-speed rural connectivity--helps support wireline networks critical
    for rural backhaul. I recognize that the business case for deployment
    in rural America is often difficult, if not impossible, to build.
    That's why I'm committed to modernizing our rules, and supporting
    legislative efforts to help us to do the same--the harder our rules
    make it to deploy 5G in rural areas, the less likely rural Americans
    will benefit from the faster speeds, lower latency, and next-generation
    services 5G could offer.
                                   robo-calls
        Question. Do you believe opening a robocall enforcement division
    within the FCC could be a viable step toward combating the scourge of
    unwanted robocalls?
        Answer. The Commission's Enforcement Bureau already has a division
    focused on robocalls. It's called the Telecommunications Consumers
    Division. It aggressively enforces the Telephone Consumer Protection
    Act and the Truth in Caller ID Act, and is responsible for over $200
    million in fines against robocallers and Caller ID spoofers since 2017.
                                     ______

                Questions Submitted by Senator Chris Van Hollen
        Question. Congress granted local and State governments the ability
    to require cable operators to provide monetary franchise fees, and
    public, educational, and government (PEG) access channels. In a recent
    proceeding, the FCC proposed permitting cable operators to determine
    the fair market value of PEG channels and deduct the value of these PEG
    channels, as well as any broadband and video services provided to
    schools and senior discounts, from the monetary franchise fee
    payments.\1\ In his accompanying statement, Commissioner O'Rielly
    states that current law is ``vastly anachronistic,'' and seems to
    suggest that the FCC should update regulations to reflect the current
    marketplace, and that Congress may then follow his lead, stating ``some
    of these actions may require alterations of law, but doing so would
    provide a pathway for Congress to consider the same, if it was so
    inclined.'' \2\
    ---------------------------------------------------------------------------
        \1\ In re Implementation of Section 621(a)(1) of the Cable
    Communications Policy Act of 1984 as amended by the Cable Television
    Consumer Protection and Competition Act of 1992 (September 25,
    2018)(FCC 18-131) (``Cable In-Kind/Offset FNPRM'').
        \2\ Id. at page 37.
    ---------------------------------------------------------------------------
        If you adopt this proposal, I am told the estimated losses in
    franchise fees in my Maryland communities could be as high as 70
    percent and runs into the tens of millions of dollars. No less than 32
    Members of Congress--14 Senators, including my colleague Senator
    Cardin, and 18 members of the House have voiced their objections to
    this proposal that upends more than 35 years of cable franchise rules
    and relations.
      --Due to the strong opposition against this rule, will the Commission
            consider tabling this proceeding?
      --Will you include a cost benefit analysis in this rulemaking that
            weights the impact this will have on local communities versus
            the marginal benefit to cable providers?
      --Do you have evidence in the record that demonstrates that changing
            the interpretation of the law will have a positive impact on
            broadband deployment, particularly in rural areas?
        Answer. On August 1, the Commission adopted an item to resolve the
    pending rulemaking and to faithfully implement the law that Congress
    has set forth. As you know, the pending proceeding is a direct result
    of a 2017 remand by the U.S. Court of Appeals for the Sixth Circuit in
    Montgomery County, Md., et al v. FCC. As a result of the remand, the
    Commission was obligated to take another look at how to interpret the
    definition of ``franchise fees'' in Section 622 of the Communications
    Act (47 U.S.C. Sec. 542). Specifically, the court directed the
    Commission to review how non-monetary (``in-kind'') contributions, such
    as those related to PEG channels, fit within the statutory definition.
        The Commission has a duty to implement the statute, and that is
    what it did on August 1. The relevant statute defines a ``franchise
    fee'' to include ``any tax, fee, or assessment of any kind.'' \3\ It
    then sets forth two exceptions to that definition related to PEG
    channels. For franchises in effect back in 1984, when the statute was
    passed, there is a broad exemption for ``payments which are required by
    the franchise to be made by the cable operator during the term of such
    franchise for, or in support or the use of, public, educational, or
    government access facilities.'' \4\ But for franchises granted later,
    the exemption is much narrower, covering only ``capital costs which are
    required by the franchise to be incurred by the cable operator for
    public, educational, or governmental access facilities.'' \5\
    ---------------------------------------------------------------------------
        \3\ 47 U.S.C. Sec. 542(g)(1) (emphasis added).
        \4\ 47 U.S.C. Sec. 542(g)(2)(B).
        \5\ 47 U.S.C. Sec. 542(g)(2)(C).
    ---------------------------------------------------------------------------
        This legal framework tells us two things. First, given these
    specific exemptions, the 5 percent cap (and associated franchise fee
    definition) does not include a general exemption from cable-related,
    in-kind contributions. Congress could have--but did not--create one.
    And the specific exemptions would be unnecessary if there were such a
    general exemption. The Supreme Court has made clear that it is
    ```reluctan[t] to treat statutory terms as surplusage' in any
    setting.'' \6\ We took the same approach.
    ---------------------------------------------------------------------------
        \6\ Duncan v. Walker, 533 U.S. 167, 174 (2001), quoting Babbitt v.
    Sweet Home Chapter, Communities for Great Ore., 515 U.S. 687, 698
    (1995).
    ---------------------------------------------------------------------------
        Second, with respect to post-1984 franchises, capital costs are the
    only PEG costs that are exempt from the definition of franchise fees.
    The broader exemption by its plain terms only applies to franchises in
    existence back in 1984. Congress was therefore aware of the distinction
    between existing and post-1984 franchises when it established these
    exemptions, and the Commission does not have the authority to rewrite
    the statute to expand the narrower, post-1984 one. Congress, on the
    other hand, is free to do so.
        From a policy perspective, I believe that the steps we took on
    August 1 are good for American consumers. That's because costs imposed
    by LFAs through in-kind contributions and fees imposed on broadband
    Internet access service get passed on to consumers. Evidence in the
    record suggests that every dollar paid in fees beyond the statutory cap
    is a dollar that cannot and will not be invested in upgrading and
    expanding networks. For example, comments in the record from small and
    mid-sized cable operators indicate that requests for in-kind
    contributions from local franchising authorities have a direct impact
    on their ability to invest in broadband deployment. See Ex Parte from
    Small and Mid-Sized Cable Operators, MB Docket No. 05-311 (Feb. 4,
    2019). This discourages the deployment of new services like faster home
    broadband or better Wi-Fi or Internet of Things networks.
        Question. In 2017, the FCC eliminated requirements put in place
    under the Obama administration that wireless companies acquiring
    spectrum likely to be used for 5G networks (called millimeter wave
    spectrum) have cybersecurity plans to ensure the security of
    communications over their networks that use public airwaves. Hackers of
    any company or entity that is beholden to foreign governments are
    always improving their ability to break into our digital
    infrastructure. Yet the computer systems running our satellites haven't
    kept up, making them prime targets for an attack. This makes our space
    assets a massive vulnerability--and it could get much worse if we're
    not careful. This past weekend, SpaceX won approval from the Federal
    Communications Commission to increase the number of low-flying
    satellites as part of its Starlink project so that they can provide
    faster Internet access to the world. Unfortunately, access will be
    faster for both legitimate users and hackers alike. The FCC does not
    require applicants to publicly demonstrate how they will secure these
    satellites or the Internet they plan to provide. SpaceX, like other
    private space companies, has shared virtually no information about its
    cybersecurity efforts or plans. This is extremely troubling considering
    the potential harm caused by a satellite being hacked. As experts have
    pointed out, the most mundane outcome is that the satellite will no
    longer function, but the other extreme is for an attacker to break into
    a satellite and take over any thrusters (which SpaceX has insisted its
    satellites will have) and then propel the satellite into critical
    infrastructure and military satellites in other orbits. In other words,
    attackers could possibly use the hacked satellite as a kinetic weapon.
      --Chairman Pai, with FCC eliminating these rules, what are your
            alternative plans to address these huge risks of hackers and
            malicious entities from gaining power, access, and control
            inside our telecommunications networks?
      --What specific measures is the FCC taking go address ensure these
            systems are secure?
        Answer. Threats to the Nation's communications infrastructure have
    been a long-standing concern for U.S. Government officials. The
    Department of Homeland Security's Cybersecurity and Infrastructure
    Security Agency (CISA) has the lead role for overseeing the
    cybersecurity of our Nation's communications networks. The FCC
    generally and I personally have supported CISA's efforts in this area.
    Among other things, the Commission serves as a member of the Department
    of Homeland Security's Information and Communications Technology Supply
    Chain Risk Management Task Force. It also participates in interagency
    meetings regarding the implementation of May 2019 Executive Order on
    Securing the Information and Communications Technology and Services
    Supply Chain.
        In addition, we have acted within the scope of our authority to
    advance the important values of security. For example, last year the
    Commission sought comment on whether to require encryption for
    telemetry, tracking, and command communications for satellites with
    propulsion capabilities. In a separate item last year, the Commission
    also proposed to prohibit universal service funding from being used to
    purchase equipment or services from any company that poses a threat to
    the national security of our communications networks or the
    communications supply chain. Most recently, in May 2019, the Commission
    denied China Mobile USA's application to provide telecommunications
    services between the United States and foreign destinations.
        In addition, I have interacted with numerous foreign government
    counterparts to express the views of the United States Government with
    respect to the security of communications networks. For instance, this
    past May, I was part of the United States delegation to an
    international conference on 5G network security hosted by the Czech
    Republic, where there was a broad consensus that the ``security of 5G
    networks is crucial for national security, economic security and other
    national interests and global stability.'' And earlier this month, at
    the 7th Congreso Latinoamericano de Telecommunicaciones in Argentina, I
    reminded the attendees that, ``when making decisions that affect 5G
    security, we need to remember that the implications are wide-ranging.
    5G will affect our militaries, our industries, our critical
    infrastructure, and much more.''
        Question. Chairman Pai, in April you released a public notice
    proposing a rechartering of the Communications Security, Reliability,
    and Interoperability Council or CSRIC (pronounced CIZRIC). Currently
    the CSRIC provides recommendations to the FCC to ensure, among other
    things, optimal security and reliability of communications systems,
    including telecommunications, media, and public safety. However, it is
    unclear what CSRIC's mission will be under this reorganization.
      --Please indicate where you will make 5G security and cybersecurity a
            priority for CSRIC and what standards for such cybersecurity,
            if any, they will be asked to apply.
        Answer. The Commission received recommendations from CSRIC VI on 5G
    security in its September and December 2018 reports, and 5G security
    will remain a top priority for CSRIC VII. I have directed CSRIC VII to
    address issues related to 5G security, with a focus on managing
    security risk in the transition to 5G and in emerging 5G
    implementations. More information about CSRIC VII is available on the
    CSRIC VII website: https://www.fcc.gov/about-fcc/advisory-committees/
    communications-security-reliability-and-interoperability-council-vii.
                                     ______

                  Questions Submitted to Hon. Joseph J. Simons
                   Questions Submitted by Senator Jerry Moran
        Question. Your testimony highlighted the FTC's increasing need for
    expert witnesses in the complex investigations and litigation for both
    competition and consumer protection matters. Would you please expand
    upon the distinct uses of expert witnesses between the agency's
    competition cases and consumer protection cases?
      --Specific to the FTC's consumer protection efforts related to data
            privacy and security, would you please describe the resource
            needs for expert witnesses related to these efforts?
      --What additional value do these experts bring beyond that of the FTC
            staff, inclusive of its technologists, investigators, and
            lawyers?
        Answer. Thank you for your attention to this important issue. Our
    expert witness engagements are complex, which we would like to explain
    to the subcommittee. In general, the Commission employs experts outside
    the agency to support its litigation matters when necessary. In
    antitrust litigation in particular, expert economic testimony has
    become an essential component of helping the adjudicator assess the
    facts and apply the law. Sometimes, economists from the Bureau of
    Economics prepare to testify as an expert witness, either in an
    administrative proceeding or in Federal court. But preparing to testify
    is a time-consuming endeavor that limits that economist's availability
    to work on other investigations or enforcement actions. Choosing to
    employ an outside economic expert is a resource decision made in
    matters that appear to be heading toward litigation. Of course, the
    agency often relies on outside experts other than economists when it
    lacks specific in-house expertise.
        Given some significant differences between competition and consumer
    protection cases, this response breaks out information separately for
    each of our two enforcement missions.
    Competition Cases
        A variety of factors such as the type of case and the complexity of
    the industry in which the parties under investigation operate can
    affect the amount of time and the financial and human resources
    required to litigate competition cases. Moreover, as companies generate
    and store more data, that adds to what FTC staff must review and
    process in order to conduct relevant economic analyses. In short,
    competition litigation can be resource intensive, and those constraints
    are only growing over time.
        External experts, however, provide critical support in helping the
    agency meet the resource constraints that we face in litigating
    competition cases. Outside testifying experts and their support staff
    provide the significant back-end support needed to review and process
    voluminous datasets and conduct empirical analyses at the rapid pace
    required in many fast-moving litigation matters. That is particularly
    true in merger litigation cases where outside parties dictate the
    volume, nature, and timing of their deals thus compelling agency staff
    to move quickly to build a case. Testifying experts also often bring
    litigation experience and subject matter expertise to our competition
    cases.
        But, despite the critical role that outside experts play in our
    litigation work, the large size and growth in expert costs present
    another set of challenges to the Commission. When a competition case
    goes to litigation (versus settlement or closing), expert witness costs
    typically increase exponentially and may lead to millions of dollars in
    additional expert fees. Even very small changes in the total number of
    competition cases per year can have a dramatic impact on the agency's
    overall spending on expert fees.
        Unfortunately, the agency has a limited ability to control this
    primary driver of our expert costs. The Commission votes out a
    complaint when it has reason to believe that a competition enforcement
    action is in the public interest. But, after the vote, the course of
    litigation (and possible settlement) is determined in large part by the
    defendants and, of course, the judge or judges. Among other factors,
    defendants may choose to retain one or more experts of their own, which
    can affect our expert strategy.
        In general, we have observed that the kinds of experts qualified
    for this kind of work are becoming more expensive. In an increasingly
    data-rich world, each case requires more of an expert's time, and
    significant support resources to process data and increasingly large
    volumes of documents. Our expert budget is depleted not only by higher
    prices per hour worked, but also by the need for experts to spend more
    time preparing for each case, and the need for more support resources
    to manage each case.
        On the competition side, we have determined that the range of total
    expert costs for cases that are fully litigated (meaning a preliminary
    injunction, administrative hearing on the merits or both) in the last 5
    years is $583,100-$6.90 million.
        The remaining, requested data points for our competition cases are
    as follows:

    ------------------------------------------------------------------------
                Fiscal Year                       Expert Spending *
    ------------------------------------------------------------------------
    2008                                  $3.05 million
    2009                                  $3.40 million
    2010                                  $3.16 million
    2011                                  $2.97 million
    2012                                  $2.09 million
    2013                                  $2.98 million
    2014                                  $4.84 million
    2015                                 $10.03 million
    2016                                 $12.21 million
    2017                                 $11.46 million
    2018                                 $15.80 million
    ------------------------------------------------------------------------
    * Some years' expenditures may change due to ongoing work.

        To date, the Commission has managed allocated funds to pay the
    expert witness fees needed to pursue vigorous competition enforcement
    on behalf of consumers. We are, however, increasingly concerned with
    our ability to continue to do so.
    Consumer Protection Cases
        Many of the expert challenges identified above--such as the
    increased amounts of data, fast-paced nature of litigation, and time-
    consuming nature of expert work--apply equally in our consumer
    protection cases. Evolving technologies also continue to increase the
    complexity of our privacy and data security investigations and
    litigations.
        The Commission currently employs five technologists, three of whom
    work full time on privacy and security matters. These technologists
    provide expert assistance on privacy and security cases, for example,
    by helping attorneys draft discovery requests, participating in
    meetings with opposing parties and assisting staff in better
    understanding technical issues, and reviewing pleadings for technical
    accuracy.
        However, additional resources for expert witnesses in these cases
    continue to be a critical area of need for our agency. Although we have
    requested additional resources hire new staff technologists, we will
    need to supplement those technologists with outside consulting and
    testifying experts, who can address specific issues in cases as they
    arise. Indeed, in privacy and data security litigation, it is almost
    always necessary to have third-party testifying experts not employed by
    the agency. For example, in past cases we have hired external experts
    to testify on such matters as (1) whether a company's security
    practices were reasonable; (2) actual and likely harms resulting from
    data breaches and identity theft; and (3) the operation of peer-to-peer
    networks.
        Average expert cost per case: Between fiscal year 2016 and fiscal
    year 2018, the Commission filed an average of 71 consumer protection
    cases (mostly in Federal court) per year, spending approximately
    $30,000 per case on expert witness contracts. The Commission uses
    experts in approximately 44 consumer protection matters per year,
    spending an average of approximately $49,000 on expert witness
    contracts in each of those cases.
        Total yearly expert costs: Between fiscal year 2016 and fiscal year
    2018, the Commission spent approximately $2.16 million on expert
    witness contracts for consumer protection cases per year, and is on
    track to obligate $2.28 million during fiscal year 2019.
        Expert spending over past 10 years: The Commission's expert
    spending on consumer protection cases has remained steady over the past
    10 years. In fiscal year 2008, the Commission expended approximately
    $2.07 million on expert contracts in consumer protection cases, and is
    on track to obligate $2.28 million during fiscal year 2019.
        Question. As for the IT modernization efforts of the FTC, I found
    the current Hart-Scott-Rodino Premerger Filing Process example that you
    cited in your testimony to be particularly troubling. Was the FTC's
    Chief Information Officer (CIO) consulted in the development of the
    FTC's fiscal year 2020 budget request? Are other IT modernization
    projects included in the request?
        Answer. The FTC is pursuing a multi-year modernization program to
    update its IT and the underlying support in terms of contracting,
    security, and governance. The agency has already implemented a Blanket
    Purchase Agreement (``BPA'') to update its IT services, including those
    in support of HSR. Use of the BPA has already led to updates in the
    agency's security architecture necessary to support modernization of
    HSR practices. Through the Digital Roadmap activities directed by the
    21st Century Integrated Digital Experience Act (IDEA), the agency will
    evaluate several analytic platforms to improve the user experience for
    practitioners who submit filings to the FTC--including HSR filings.
    Each of these efforts has been led by the CIO or one of his delegated
    staff.
        Question. In January, I joined Senator Casey in introducing the
    Stop Senior Scams Act, which would ensure retailers, financial
    institutions and wire transfer companies have the resources to train
    employees to help stop financial frauds and scams on seniors.
    Specifically, the bill would create a Federal advisory council at the
    FTC to develop educational materials for companies from these specific
    industries to use to train employees on how to identify and stop
    financial scams at the point of sale. Based on my conversations with
    consumer advocates and industry representatives, education and
    awareness remains one of the key tools in preventing fraudulent
    practices in the first place. Do you agree that effective training of
    employees to identify consumer fraud and stop it would be valuable to
    consumers?
        Answer. I fully agree that training employees to identify and stop
    fraud is critically important. Consumer education is a vital tool in
    preventing consumer harm, and the Commission tailors its educational
    materials and messages for specific audiences, such as older adults,
    small businesses, and parents. Commission staff have spoken with many
    companies about their training programs and efforts to minimize fraud
    through store signage, employee training, and technology that creates
    speed bumps or triggers inquiries at the check-out counter when certain
    transactions are conducted (e.g., large denomination purchases for gift
    cards). We also hear of individual store employees who successfully
    assist customers to prevent a scam.\1\
    ---------------------------------------------------------------------------
        \1\ FTC Consumer Blog, Scam Spotted thanks to a Clever Store Clerk
    (Jan. 18, 2018), https://www.consumer.ftc.gov/blog/2018/01/scam-
    spotted-thanks-clever-store-clerk.
    ---------------------------------------------------------------------------
        Question. In March, the FTC utilized its Section 6(b) authorities
    from the FTC Act to issue orders to seven U.S. Internet broadband
    providers and related entities seeking information about the companies'
    privacy policies, procedures, and practices. The FTC has conducted
    similar examinations in the past including their 2014 report on data
    brokers. Does the FTC plan to initiate additional 6(b) special reports
    related to consumer data privacy in other industries or sectors? Do
    these special reports require significant resources?
        Answer. The Commission frequently uses its authority under Section
    6(b) of the FTC Act, which allows it to conduct industry-wide studies.
    In the past few years alone, we have studied the practices of data
    brokers and mobile device manufacturers and, as you mention, we are
    undertaking a study of Internet service providers. These types of
    studies are best suited to areas in which we can make apples-to-apples
    comparisons across a range of companies. We are considering further
    6(b) studies in other industries.
        Question. As you are aware, enactment of the Better Online Ticket
    Sales (BOTS) Act in 2016 provided the FTC and State attorneys general
    authority to treat any ``circumvention of a security measure, access
    control system, or other technological measures'' (including online
    bots) to surpass ticket purchasing limits as an ``unfair or deceptive
    practice'' under the FTC Act. Since the enactment of this law, has the
    FTC taken any enforcement actions against bad actors utilizing ``online
    bots'' to harm consumers?
      --If not, why? Are there resource issues that are preventing the FTC
            from enforcing under this authority?
        Answer. To date, the FTC has not taken any action under the BOTS
    Act. While I cannot comment on whether any non-public investigations
    are or are not underway, as a general matter capturing the use of bots
    in any context, and identifying the individuals or companies operating
    ticket bots, can be extremely complex and time consuming.
        The FTC continues to engage with primary ticket sellers, ticket
    resellers, foreign agencies, and State attorneys general about
    strategies for stopping bots. Most recently, we held a public workshop
    concerning ticket bots and other consumer protection issues related to
    the online event-ticket marketplace.\2\
    ---------------------------------------------------------------------------
        \2\ FTC, Online Event Tickets Workshop (June 11, 2019), https://
    www.ftc.gov/news-events/events-calendar/2019/03/online-event-tickets-
    workshop.
    ---------------------------------------------------------------------------
                                     ______

                  Questions Submitted by Senator John Boozman
                        regarding the contact lens rule
        Question. What evidence does the Commission have from official
    Congressional proceedings during consideration of the Fairness to
    Contact Lens Consumers Act that indicates Congressional intent to
    include automated telephone calls in the Act's definition of direct
    communication?
        Answer. With respect to official Congressional proceedings during
    consideration of the Fairness to Contact Lens Consumers Act, there is
    relatively little in the evidentiary record that explicitly discusses
    or implicates automated telephone calls. There is evidence that the
    American Optometric Association informed members of Congress that
    contact lens sellers were using ``automated phone calls'' to verify
    prescriptions, and that optometrists viewed such calls as a significant
    cause for concern.\3\ However, Congress did not expressly exclude the
    use of automated technology for verification purposes in the FCLCA, and
    did not otherwise include the phrase ``automated telephone call,''
    instead defining the term ``direct communication'' to include
    ``communication by telephone, facsimile, or electronic mail,'' and
    noting that this list is ``not exclusive.'' \4\
    ---------------------------------------------------------------------------
        \3\ See ``Fairness to Contact Lens Consumers Act: Hearing Before
    the Subcomm. on Commerce, Trade, and Consumer Protection of the H.
    Comm. on Energy and Commerce,'' 108th Cong. 1 (2003) (statements of J.
    Pat Cummings, American Optometric Association, discussing what he
    viewed as problematic automated verification messages, and noting that
    such messages can be ``difficult, if not impossible for doctors to
    respond to'').
        \4\ H.R. Rep. No. 108-318, at 10 (2003). The Committee Report also
    noted, ``It is the intent of the Committee that 'direct communication'
    means a message has been both sent and received.''
    ---------------------------------------------------------------------------
        Following enactment of the FCLCA, the Commission, in 2004, issued
    the Contact Lens Rule, and echoed the language of the FCLCA for its
    definition of ``direct communication'' as meaning ``completed
    communication by telephone, facsimile, or electronic mail.'' \5\ The
    Commission further explained, in its Statement of Basis and Purpose,
    ``The Act expressly authorizes sellers to send verification requests by
    telephone, which is commonly understood to include automated telephone
    systems. It would thus seem to be contrary to Congressional intent to
    prohibit the use of this technology.'' \6\ The Commission has always
    emphasized, however, that automated telephone systems must fully comply
    with all applicable Rule requirements in order for the verification
    request to be valid. For example, telephone requests--whether automated
    or spoken by a live person--must be delivered at a volume or cadence
    capable of being understood by a reasonable person.\7\
    ---------------------------------------------------------------------------
        \5\ Contact Lens Rule, 69 Fed. Reg. 40,509 (July 2, 2004) (codified
    at 16 C.F.R. 315).
        \6\ Id. at 40,489.
        \7\ Id. (stating ``direct communication by telephone would require
    reaching and speaking with the intended recipient, or clearly leaving a
    voice message on the telephone answering machine''); see also FTC Facts
    for Business, Complying with the Contact Lens Rule (2005), https://
    www.ftc.gov/tips-advice/business-center/guidance/complying-contact-
    lens-rule (``Automated telephone verification messages must be
    delivered in a volume and cadence that a reasonable person can
    understand'' and ``[a] request delivered by an automated telephone
    system doesn't comply with the Rule if: it isn't delivered in a volume
    and cadence that a reasonable person can understand; it contains
    incomplete verification information; or it requires the prescriber's
    office to provide an immediate response.'').
    ---------------------------------------------------------------------------
        The Commission has reiterated its view on the use of automated
    telephone verifications under the FCLCA and CLR on several occasions
    since 2004. Most recently, in the May 28, 2019 Supplemental Notice of
    Proposed Rulemaking (``SNPRM''), the Commission proposed several
    changes to improve the passive verification process and make automated
    telephone verifications more effective. The Commission proposed that
    sellers who use automated telephone verification messages would have
    to: (1) record the entire call and preserve the complete recording; (2)
    begin the call by identifying it as a prescription verification request
    made in accordance with the Contact Lens Rule; (3) deliver the
    verification message in a slow and deliberate manner and at a
    reasonably understandable volume; and (4) make the message repeatable
    at the prescriber's option. This amendment is intended to enable
    prescribers to better fulfill their role as protectors of patients' eye
    health since prescribers cannot correct or police invalid, inaccurate,
    and expired prescriptions if they cannot comprehend a seller's
    verification request.
        Question. Please describe the Commission's test-buy activities and
    other methods used to ensure compliance with the Rule.
        Answer. The Commission monitors the marketplace by engaging in its
    own review of the practices of contact lens sellers and by receiving
    complaints. The Commission also works collaboratively with the FDA in
    its monitoring of contact lens sellers. When staff determines it is
    appropriate, it purchases contact lenses through the use of undercover
    accounts. The Commission recently announced an enforcement action
    against a contact lens seller challenging the sale of contact lenses
    without a valid prescription. The order banned the defendant from
    selling contact lenses and imposed a $575,000 civil penalty.\8\ The
    Commission has also sent warning letters to sellers, including letters
    to ten contact lens sellers in 2016.\9\ We will continue to monitor the
    marketplace, taking action against violations as appropriate.
    ---------------------------------------------------------------------------
        \8\ U.S. v. Lawrence L. Duskin, No. 1:18-cv-07359 (N.D. Cal. Dec.
    6, 2018).
        \9\ See FTC Press Release, FTC Issues Warning Letters Regarding the
    Agency's Contact Lens Rule (Apr. 7, 2016), https://www.ftc.gov/news-
    events/press-releases/2016/04/ftc-issues-warning-letters-regarding-
    agencys-contact-lens-rule.
    ---------------------------------------------------------------------------
        Question. Please provide information on what percentages of
    verifications are filled through the following methods: fax, electronic
    means, personal live calls, or automated calls.
        Answer. The Commission does not have information on the specific
    percentages of verifications that occur by the various permissible
    means. Through discussions with industry, the Commission knows that the
    preferred method varies by seller.
        Question. How many sellers does the Commission audit annually for
    verification compliance? How many have been the recipient of some form
    of enforcement action?
        Answer. The Commission does not conduct annual audits of sellers or
    prescribers for compliance with the verification process. The
    Commission investigates sellers and prescribers based on complaints
    received and through Internet surveillance. Since the Rule's passage,
    the Commission has taken law enforcement action against eleven contact
    lens sellers who violated the Rule by, inter alia, failing to properly
    verify prescriptions.\10\
    ---------------------------------------------------------------------------
        \10\ U.S. v. Lawrence L. Duskin, No. 1:18-cv-07359 (N.D. Cal. Dec.
    6, 2018); U.S. v. Gene Kim, No. 1:11-cv-05723 (E.D.N.Y. Feb 7, 2012);
    U.S. v. Royal Tronics, Inc., No. 0:11-cv-62491 (S.D. Fla. Jan. 27,
    2012); U.S. v. Thy Xuan Ho, No. 1:11-cv-03419 (D. Minn. Dec. 27, 2011);
    U.S. v. Gothic Lens, LLC, No. 1:11-cv-00159 (N.D. Ga. Feb. 3, 2011);
    U.S. v. Jokeshop, LLC, No. 1:11-cv-11221 (D. Mass. Nov. 29, 2011); U.S.
    v. Contact Lens Heaven, Inc., No. 0:08-cv-61713 (S.D. Fla. Dec. 3,
    2008); U.S. v. Chapin N. Wright, II, No. 1:08-cv-11793 (D. Mass. Oct.
    31, 2008); U.S. v. BeWild, Inc., No. 2:07-cv-04896 (E.D.N.Y. Dec. 3,
    2007); U.S. v. Pretty Eyes, LLC, No. 1:07-cv-02462 (D. Colo. Nov. 28,
    2007); U.S. v. Walsh Optical, Inc., No. 2:06-cv-03591 (D.N.J. Aug. 30,
    2006).
    ---------------------------------------------------------------------------
        Our settlement orders have provided injunctive relief that, among
    other things, prohibited the defendants from: selling contact lenses
    without obtaining a prescription from a consumer; selling contact
    lenses without verifying prescriptions by communicating directly with
    the prescriber; and failing to maintain records of prescriptions and
    verifications. In addition, the Commission has sent numerous warning
    letters to both sellers and prescribers who potentially violated the
    Rule.
        Question. Does the Commission track the effectiveness of the
    verification process for stopping expired prescriptions from being
    filled? If so, how many expired prescriptions are filled each year in
    the United States? How many are not filled?
        Answer. The Commission does not have specific data on the
    effectiveness of the verification process in stopping the filling of
    expired prescriptions. However, the Commission investigates sellers
    based on complaints received for, among other things, selling lenses on
    expired prescriptions, and will take action as appropriate.
                                     ______

                Questions Submitted by Senator Richard J. Durbin
        Question. I frequently get robocalls myself--just a few months ago,
    I received a scam call from someone claiming to be part of the Social
    Security Administration. Chairman Simons, what more can the FTC be
    doing to educate consumers about scams--including Social Security scams
    and calls purporting to be from the Internal Revenue Service? What
    resources would allow the FTC to more effectively pursue these bad
    actors scamming Americans out of billions of dollars every year?
        Answer. Because we have seen an alarming growth in the number of
    reports about government imposters--largely driven by Social Security
    Administration imposter scams--the FTC is engaged in a concerted effort
    to bring attention to government imposter scams. Earlier this month,
    the FTC published a Data Spotlight to highlight the top government
    imposter scams that are reported to the FTC and to identify tactics
    these fraudsters use to scare consumers and get their money.\11\ Along
    with it, we released an interactive infographic, which enables people
    to find the top government imposter for any year since 2014, and for
    any of those, the aggregate dollar losses reported, the median
    individual dollar losses reported, and the number of people who
    reported losing money.\12\ These are just the latest in a series of FTC
    data publications, with the goal to educate the public more broadly
    about the tactics such scammers employ so consumers can recognize a
    scam call, hang up, and avoid losing money.
    ---------------------------------------------------------------------------
        \11\ FTC Consumer Protection Data Spotlight, Government imposter
    scams top the list of reported frauds (July 1, 2019), https://
    www.ftc.gov/news-events/blogs/data-spotlight/2019/07/
    government-imposter-scams-top-list-reported-frauds.
        \12\ Explore Government Imposter Scams (June 26, 2019), https://
    public.tableau.com/profile/
    Federal.trade.commission#!/vizhome/GovernmentImposter/Infographic.
    These resources are also available by accessing www.ftc.gov/data.
    ---------------------------------------------------------------------------
        On the enforcement side, the FTC is working with other Federal
    agencies to identify where these calls are coming from and to develop
    strategies for combating such fraud. In late June, the FTC convened its
    fourth India Call Center roundtable to enable industry and law
    enforcement personnel to share information and collaborate on
    strategies to stop these government imposter calls.\13\
    ---------------------------------------------------------------------------
        \13\ See U.S.-India Business Council & FTC, 4th Annual Round Table
    on Stepping Up to Stop Indian Call Center Fraud (June 20, 2019),
    https://www.usibc.com/event/4th-annual-round-table-on-stepping-up-to-
    stop-indian-call-center-fraud/.
    ---------------------------------------------------------------------------
        As discussed more fully in the Commission's written testimony,
    Congress should eliminate the outdated common carrier exemption, which
    impedes our ability to tackle illegal robocalls, among other
    enforcement initiatives. For example, removing the common carrier
    exemption would allow the FTC to reach carriers that assist and
    facilitate illegal telemarketing and obtain complete relief for
    consumers when there are multiple parties to a scheme.
                                     ______

                Questions Submitted by Senator Joe Manchin, III
                  ensuring privacy after deleting social media
        Question. I believe that the pictures and videos that you take
    belong to you. Even if you post them on a social media site they should
    still belong to you, and you should be able to choose to remove them.
        In November of 2011, your agency found that social networking
    sites, like Facebook, were allowing third parties to access photos or
    videos that a user had uploaded and had been stored by the site, even
    after the user had deleted his or her account.
      --Are social media platforms still allowing access to data even after
            a user has deleted his or her account?
      --Can users retrieve their data that has already been shared to third
            parties?
      --What can Congress do to ensure these companies are not using,
            disclosing, or in any way monetizing the content that a user
            has requested be removed?
        Answer. As background, the FTC Act prohibits companies from making
    deceptive statements about consumers' ability to delete information
    from their accounts. For example, in 2012, the Commission alleged that
    Facebook had made deceptive statements about users' ability to delete
    content, and required in its 2012 consent agreement that Facebook block
    third parties from accessing content that users thought they had
    deleted. In the new order just announced on July 24, Facebook is now
    also required to remove such deleted content from its servers.
        In the absence of deception, the FTC Act generally does not
    prohibit social media platforms or other companies from accessing user
    data after a user has deleted his or her account. In some instances,
    this may be a good thing. For example, consumers may change their mind
    about deletion and prefer not to have to re-create their entire social
    media profile. Deleted information may be needed for law enforcement
    purposes, such as locating missing or exploited children. At the same
    time, the right to access, correct, and delete serves an important
    privacy purpose. To the extent Congress considers developing privacy
    legislation that requires social media platforms or other companies to
    provide access, correction, or deletion rights to consumers, I would
    urge Congress to balance these considerations.
           deceptive treatment practices for opioids and other drugs
        Question. On multiple occasions, the Federal Trade Commission and
    the U.S. Food and Drug Administration have worked together to issue
    warning letters to marketers and distributors for illegally marketing
    products with unproven claims about their ability to help treat opioid
    addiction. Last year, in July 2018, FTC Commissioner Rohit Chopra wrote
    a letter to Congress about widespread abuse in the drug treatment
    industry.
      --Do you need new legislative authorities to address and combat this
            behavior?
        Answer. Congress recently provided the Commission with additional
    authority to address the deceptive marketing of drug treatment products
    and services. In October 2018, the President signed into law the
    ``Substance Use-Disorder Prevention that Promotes Opioid Recovery and
    Treatment for Patients and Communities Act,'' or the ``SUPPORT for
    Patients and Communities Act.'' The Act makes it unlawful to engage in
    an unfair or deceptive act or practice with respect to any substance
    use disorder treatment service or substance use disorder treatment
    product, and authorizes the FTC to enforce violations and obtain civil
    penalties. In light of this newly-obtained authority, we do not believe
    that additional legislative action is needed at this time.
                         opioid sales over the internet
        Question. FTC's efforts to investigate deceptive advertising and
    marketing practices in the opioid treatment industry are commendable.
    In April 2019, FDA Commissioner Gottlieb identified the rise in illegal
    sales of opioids over the Internet as a critical public health concern
    and major focus attention of the FDA. Since 2017, the FDA has
    identified more than 450 websites illegally offering opioids for sale.
    Major social media sites have repeatedly been identified as hosting
    ads, posts, and other messages directing users toward drug sales. Many
    of these ads are driven by algorithms and it can take days and weeks
    for social media companies to identify and take them down. Tech
    companies have been warned about illegal drug sales on their platforms
    for years, but these companies have resisted taking practical steps to
    find and remove opioid-related listings.
      --While the DEA has jurisdiction over illegal sales, the FTC works to
            protect and educate consumers. What actions are you taking to
            protect consumers from deceptive or illegal ads on social
            media?
        Answer. The FDA has primary jurisdiction over the advertising of
    all prescription drugs, including opioids, under an FDA-FTC Memorandum
    of Understanding. However, with regard to advertising in general, the
    Commission evaluates advertising on social media under the same
    standards as it does advertising in traditional media and devotes
    substantial resources to addressing social media and influencer
    marketing.
        For example, the FTC recently issued joint warning letters with the
    FDA to four marketers of flavored e-liquid products whose products were
    promoted by influencers on social media sites including Facebook,
    Instagram, and Twitter.\14\ These letters reminded the marketers that
    their advertisements must disclose material health or safety risks of
    the promoted product, as well as any material connections (such as
    monetary payments) between the marketer and influencers promoting the
    products.
    ---------------------------------------------------------------------------
        \14\ See FTC Press Release, FTC and FDA Send Warning Letters to
    Companies Selling Flavored E-liquids About Social Media Endorsements
    without Health Warnings (June 7, 2019), https://www.ftc.gov/news-
    events/press-releases/2019/06/ftc-fda-send-warning-letters-companies-
    selling-flavored-e-liquids.
    ---------------------------------------------------------------------------
        Similarly, in other recently-announced actions, we have targeted
    advertising that included promotion through social media.\15\
    ---------------------------------------------------------------------------
        \15\ See, e.g., Warning letter from FDA and FTC to TEK Naturals
    (Feb. 5, 2019), https://www.ftc.gov/system/files/attachments/press-
    releases/ftc-fda-send-warning-letters-companies-selling-dietary-
    supplements-claiming-treat-alzheimers-disease/
    tek_naturals_warning_letter_
    wl_565026.pdf (regarding products claimed to treat conditions including
    Alzheimer's and Parkinson's disease, that were marketed online,
    including through Facebook, Instagram, and Twitter); FTC Press Release,
    PR Firm and Publisher Settle FTC Allegations They Misrepresented
    Product Endorsements as Independent Opinions, Commercial Advertising as
    Editorial Content (Nov. 13, 2018), https://www.ftc.gov/news-events/
    press-releases/2018/11/pr-firm-publisher-settle-ftc-allegations-they-
    misrepresented (insect repellent promoted by celebrity athlete
    endorsers on social media).
    ---------------------------------------------------------------------------

                              SUBCOMMITTEE RECESS

        Senator Kennedy. The committee meeting is adjourned.
        [Whereupon, at 4:09 p.m., Tuesday, May 7, the subcommittee
    was recessed, to reconvene subject to the call of the Chair.]