[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

ENSURING COMPETITION ON THE INTERNET:
NET NEUTRALITY AND ANTITRUST

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

HEARING

BEFORE THE

SUBCOMMITTEE ON
INTELLECTUAL PROPERTY,
COMPETITION, AND THE INTERNET

OF THE

COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

__________

FEBRUARY 15, 2011

__________

Serial No. 112-13

__________

Printed for the use of the Committee on the Judiciary

Available via the World Wide Web: http://judiciary.house.gov

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COMMITTEE ON THE JUDICIARY

LAMAR SMITH, Texas, Chairman
F. JAMES SENSENBRENNER, Jr., JOHN CONYERS, Jr., Michigan
Wisconsin HOWARD L. BERMAN, California
HOWARD COBLE, North Carolina JERROLD NADLER, New York
ELTON GALLEGLY, California ROBERT C. ``BOBBY'' SCOTT,
BOB GOODLATTE, Virginia Virginia
DANIEL E. LUNGREN, California MELVIN L. WATT, North Carolina
STEVE CHABOT, Ohio ZOE LOFGREN, California
DARRELL E. ISSA, California SHEILA JACKSON LEE, Texas
MIKE PENCE, Indiana MAXINE WATERS, California
J. RANDY FORBES, Virginia STEVE COHEN, Tennessee
STEVE KING, Iowa HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona Georgia
LOUIE GOHMERT, Texas PEDRO PIERLUISI, Puerto Rico
JIM JORDAN, Ohio MIKE QUIGLEY, Illinois
TED POE, Texas JUDY CHU, California
JASON CHAFFETZ, Utah TED DEUTCH, Florida
TOM REED, New York LINDA T. SANCHEZ, California
TIM GRIFFIN, Arkansas DEBBIE WASSERMAN SCHULTZ, Florida
TOM MARINO, Pennsylvania
TREY GOWDY, South Carolina
DENNIS ROSS, Florida
SANDY ADAMS, Florida
BEN QUAYLE, Arizona

Sean McLaughlin, Majority Chief of Staff and General Counsel
Perry Apelbaum, Minority Staff Director and Chief Counsel
------

Subcommittee on Intellectual Property, Competition, and the Internet

BOB GOODLATTE, Virginia, Chairman

HOWARD COBLE, North Carolina, Vice-Chairman

F. JAMES SENSENBRENNER, Jr., MELVIN L. WATT, North Carolina
Wisconsin JOHN CONYERS, Jr., Michigan
STEVE CHABOT, Ohio HOWARD L. BERMAN, California
DARRELL E. ISSA, California JUDY CHU, California
MIKE PENCE, Indiana TED DEUTCH, Florida
JIM JORDAN, Ohio LINDA T. SANCHEZ, California
TED POE, Texas DEBBIE WASSERMAN SCHULTZ, Florida
JASON CHAFFETZ, Utah JERROLD NADLER, New York
TOM REED, New York ZOE LOFGREN, California
TIM GRIFFIN, Arkansas SHEILA JACKSON LEE, Texas
TOM MARINO, Pennsylvania MAXINE WATERS, California
SANDY ADAMS, Florida
BEN QUAYLE, Arizona

Blaine Merritt, Chief Counsel

Stephanie Moore, Minority Counsel

C O N T E N T S

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FEBRUARY 15, 2011

Page

OPENING STATEMENTS

The Honorable Bob Goodlatte, a Representative in Congress from
the State of Virginia, and Chairman, Subcommittee on
Intellectual Property, Competition, and the Internet........... 1
The Honorable John Conyers, Jr., a Representative in Congress
from the State of Michigan, and Ranking Member, Committee on
the Judiciary.................................................. 3
The Honorable F. James Sensenbrenner, Jr., a Representative in
Congress from the State of Wisconsin, and Member, Subcommittee
on Intellectual Property, Competition, and the Internet........ 4
The Honorable Judy Chu, a Representative in Congress from the
State of California, and Member, Subcommittee on Intellectual
Property, Competition, and the Internet........................ 4

WITNESSES

Larry Downes, Senior Adjunct Fellow, TechFreedom
Oral Testimony................................................. 7
Prepared Statement............................................. 9
Laurence Brett (``Brett'') Glass, Owner and Founder, LARIAT
Oral Testimony................................................. 54
Prepared Statement............................................. 57
Gigi B. Sohn, President and Co-Founder, Public Knowledge
Oral Testimony................................................. 61
Prepared Statement............................................. 64

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Prepared Statement of Parul P. Desai, Policy Counsel, Consumers
Union, submitted by the Honorable Zoe Lofgren, a Representative
in Congress from the State of California, and Member,
Subcommittee on Intellectual Property, Competition, and the
Internet....................................................... 84
Statement of the U.S. Department of Justice, submitted by the
Honorable Maxine Waters, a Representative in Congress from the
State of California, and Member, Subcommittee on Intellectual
Property, Competition, and the Internet........................ 95
Letter to the Federal Communications Commission (FCC), submitted
by the Honorable Maxine Waters, a Representative in Congress
from the State of California, and Member, Subcommittee on
Intellectual Property, Competition, and the Internet........... 143

APPENDIX
Material Submitted for the Hearing Record

Prepared Statement of Randolph J. May, President, The Free State
Foundation..................................................... 155
Letter from Lisa R. Youngers, Vice President, External Affairs,
XO Communications, and Others.................................. 170

ENSURING COMPETITION ON THE INTERNET: NET NEUTRALITY AND ANTITRUST

----------

TUESDAY, FEBRUARY 15, 2011

House of Representatives,
Subcommittee on Intellectual Property,
Competition, and the Internet,
Committee on the Judiciary,
Washington, DC.

The Subcommittee met, pursuant to notice, at 1:30 p.m., in
room 2141, Rayburn House Office Building, the Honorable Bob
Goodlatte (Chairman of the Subcommittee) presiding.
Present: Representatives Goodlatte, Smith, Coble,
Sensenbrenner, Chabot, Issa, Jordan, Poe, Chaffetz, Reed,
Griffin, Marino, Adams, Quayle, Watt, Conyers, Berman, Chu,
Sanchez, Lofgren, Waters, and Jackson Lee.
Staff Present: (Majority) Holt Lackey, Counsel; Olivia Lee,
Clerk; and Stephanie Moore, Minority Counsel.
Mr. Goodlatte. Good afternoon. The Subcommittee will come
to order. I will now give my opening statement.
Welcome to this hearing of the Intellectual Property,
Competition, and the Internet Subcommittee entitled: Ensuring
Competition on the Internet: Net Neutrality and Antitrust.
The Judiciary Committee's jurisdiction over the antitrust
laws in the Telecommunications Act of 1996 and our long history
overseeing the Department of Justice's decades of litigation
with the AT&T monopoly, endowed this Committee with a special
duty to ensure that the communications and information markets
of the United States operate in a free, fair, and legal
fashion.
This Committee has long been concerned on a bipartisan
basis about allegations and fears that the incumbent telephone
and cable companies who provide a majority of this country's
Internet service could abuse their power in the Internet
service market to discriminate against certain website content
or platforms to anticompetitive effect.
Today marks the House Judiciary Committee's third hearing
in the past 5 years exploring the net neutrality issue. After
hearings in 2006, the Committee adopted bipartisan legislation
that would have amended the Clayton Act to enshrine certain net
neutrality principles. The Judiciary Committee's bipartisan
commitment to protecting competition and freedom online
continued under Democratic control, and the Committee visited
the issue once again in a 2008 hearing entitled: Net Neutrality
and Free Speech on the Internet.
This newly formed Subcommittee on Intellectual Property,
Competition and the Internet will continue this tradition of
protecting the competition and innovation that has marked the
Internet era.
But it is the FCC's recent open Internet order that makes
today's hearing both necessary and urgent. That widely
criticized order seeks to entrench a one-size-fits-all
regulatory approach to net neutrality that circumvents
Congress' law making authority and that threatens to stifle
innovation on the Internet in a morass of bureaucratic rules.
The FCC is pushing this order notwithstanding the D.C.
Circuit's Comcast decision which squarely held that Congress
has never given the FCC the broad authority it claims to
regulate Internet services.
Today's hearing is a first step in reasserting that under
our constitutional system, it is the role of Congress, the
people's elected representatives, to make the laws. Most agree
that those who provide access to the Internet should not be
able to discriminate against certain online content or engage
in other anticompetitive behaviors that restrict access to
online services.
The question presented by today's hearing is whether
potential anticompetitive conduct by Internet service providers
is better addressed by the FCC's proposed industry-wide
regulations or by a more flexible, antitrust-based regime that
targets bad behaviors. I believe that the right approach is a
light touch that focuses on punishing anticompetitive behavior,
enforcing antitrust laws, and even potentially tweaking those
laws to ensure that they still operate as intended in the
digital age. Antitrust law will better balance the need for
innovation and competition than an FCC regulatory regime
possibly can.
Regulatory approaches often result in regimes where
innovators must seek permission before rolling out new products
or services. However, the Internet is simply too dynamic for
that kind of heavy-handed, top-down regime. An antitrust
approach would allow the private sector to move forward with
innovation subject to being held to account if and when it
became anticompetitive.
The FCC's regulations would hinge on a vague standard of
whether or not a particular innovation was reasonableness in
the eyes of the Commission. Antitrust law would judge that
reasonableness and legality of actions according to objective
economic principles and more than a century of case law.
FCC regulations would be enforced and interpreted according
to the whims of D.C.-based regulators who too often are subject
to capture by special interests and repeat players. Antitrust
law would be enforced by the independent judiciary in
courtrooms throughout our Nation. Furthermore, as Ronald Reagan
once said: A government bureau is the nearest thing to eternal
life we will ever see on this Earth.
Once the door is opened to FCC regulation of the Internet,
it will be hard to both turn back those regulations and prevent
the regulations from expanding to reach other online
industries, including online content providers.
Both sides of the aisle on this Committee have long agreed
that a court-based antitrust approach is preferable to the
bureaucratic approach proposed by the FCC.
As Ranking Member Conyers pointed out when the Committee
reported an antitrust-based net neutrality bill in 2006, the
FCC is like a moss pit, there is nothing that can happen there.
The Internet must be allowed to grow and innovate and
continue to deliver the astounding new products and services
that have come to characterize it. We must not allow the
Internet to be mired in a regulatory moss pit. I look forward
to today's hearing and to the light that our distinguished
panel of witnesses can shine on this important subject.
It is now my pleasure to yield to the Ranking Member of the
full Committee for a further elaboration of the definition of
``moss pit,'' the gentleman from Michigan, Mr. Conyers.
Mr. Conyers. Thank you, Mr. Goodlatte, Mr. Chairman. I wish
you would be more critical in selecting quotes to read back
that I said. I can't deny that I said that, but I can tell you
that I have modified my view somewhat and I will not use that
kind of terminology today.
And I wanted to thank you and Chairman emeritus
Sensenbrenner and even Darrell Issa who have all been people
who have been working on this very important subject of how we
ensure competition on the Internet. The considerations of the
FCC, of antitrust law, and using our own legislative
jurisdiction are all things that I would like to continue to
work with you and all of the Members of the Committee on.
You have been working on this issue, and, by the way,
Howard Berman of California has been on this, too, for quite
awhile.
Now, the question that concerns me the most is that the
Internet is now a function of free speech in this country and
in the world. As a matter of fact, many of the uprisings in the
Middle East are all based on--and as a matter of fact they are
called Twitter riots. It is a new mode of us talking to one
another, not just in this country but everywhere.
In some countries, like China, there are very severe limits
on what is acceptable, and we have had cases even in this
country where service providers have arbitrarily terminated the
services of their customers because they didn't like what they
were doing.
So we come here today to consider how we can make sure that
this commonly referred to net neutrality, that it is open, that
it doesn't turn on what classification you get or how much you
pay, but that lawful, legal, content should be available to
everybody in as fair and democratic a manner as possible. So we
continue these hearings.
The American job market hinges on a dynamic, open Internet.
That is how we get innovation and create new ideas that are
translated into business and commercial and industrial
activity. So we in this country must and do remain committed to
technological innovation, including the universal access to
broadband technology in order to keep American workers
competitive.
But as people watch live sporting events from their cell
phones, and bloggers update the world in real-time events, we
must remember that most people in the United States can only
choose between one, and, sometimes if they are lucky, two
Internet service providers for high-speed Internet access.
Therein lies the problem. Recent proposed business plans give
telecommunication companies favored treatment to some Internet
content and disfavored treatment to other content. So I think
that is an important part of what we are here for today. This
is an important hearing.
It is now my view, since you have quoted me so accurately
in a previous hearing, for me to say that the FCC rulings on
net neutrality are weak. They are not overarching or strong.
They don't meet up to standards. I am looking forward soon to
have hearings in your Committee to make certain that we can
deal in a more fulsome way with this subject matter.
I thank you for this opportunity.
Mr. Goodlatte. I thank you, Mr. Conyers.
We will now stand in recess. There are a series of votes
and we will resume the hearing after we return from the votes.
[Recess.]
Mr. Goodlatte. The Subcommittee will reconvene. And it is
now my pleasure to recognize the Chairman emeritus of the
Committee, the gentleman from Wisconsin, Mr. Sensenbrenner, who
has done a lot of work in this area.
Mr. Sensenbrenner. Thank you very much, Mr. Chairman. And I
want to commend you for holding this hearing so early in this
Congress.
The whole issue of access to the Internet--net neutrality,
or however it is described--I think is a very important one
because the Internet and its expansion has been the principle
driving force behind technological innovation, not just in the
United States, but worldwide.
I am concerned that the type of regulation approved by the
Federal Communications Commission ends up picking winners and
losers. And frankly, it is not the job of the government to
pick winners and losers, it is the job of the government to
protect people against anticompetitive and monopolistic
practices. That is why I believe that the proper thing for the
Congress to do would be to set aside the FCC's order and make
whatever amendments to the antitrust law that are necessary so
that antitrust provisions can be effectively enforced.
The other thing is that antitrust laws are supervised by
judges, and that is the way it has been for 100 years. That
seems to have worked out fairly well in dealing with these
issues, rather than either having the Congress do it or the
commissioners of the FCC to do it. And I am just convinced, and
have been for a while, that the road the FCC has gone down is
not good for the Internet, not good for the people, and not
good for competition. So I would hope that we would continue
vigorously pursuing this issue, and I yield back the balance of
my time.
Mr. Goodlatte. I thank the gentleman.
And I am now pleased to yield to the gentlewoman from
California, Ms. Chu.
Ms. Chu. Thank you, Mr. Chair. And I would like to thank
Mr. Goodlatte for holding this hearing.
Mr. Watt, the Ranking Member, could not be here today, but
he sends his regards. I am just temporarily taking over the
Ranking Chair position at this point.
While today it is estimated that more than one-quarter of
our world's population, or nearly 2 billion people, use the
Internet, from social working to political campaigns, the
Internet is now the leading tool for speech and action. We need
only to look at the role that the Internet has played during
democratic demonstrations across the globe. Journalists named
uprisings in Moldova and Iran during 2009 the ``Twitter
revolutions,'' and the Web has played a critical role in
disseminating information and rallying crowds as Hosni
Mubarak's rule has ended in Egypt.
Furthermore, the future of the American job market hinges
on a dynamic, open, and lawful Internet. The United States must
remain committed to technological information and investment,
including universal access to broadband technology, in order to
keep American workers competitive.
But as people watch live sporting events from their cell
phones, and bloggers update the world in real-time events in
Tahrir Square, we must remember that more than 90 percent of
U.S. Consumers can choose only between one or two Internet
service providers for high-speed Internet access.
Recent proposed business plans from telecommunication
companies would give favored treatment to some Internet content
and disfavored treatment to others. What treatment you get
could be determined by how much you pay or potentially whether
the Internet service provider approves of the content or has a
financial interest in it. The problem is that many of the
innovations we have enjoyed on the Internet may never have
occurred if some of the proposed regimes were left unchecked.
We would never have had a Google search engine or eBay auctions
or Huffington Post blogs if pay-to-play had been our national
policy.
I am concerned that if the U.S. Government stands by and
does nothing, we will find that only a handful of companies
dictate where and how people access information on the
Internet. So as we delve into this issue, we must remember that
Congress and the executive branch must tread lightly. Nothing
less than free speech and millions of jobs are at stake.
I do want to emphasize that an Open Internet can and must
be a lawful Internet. Digital piracy has ravaged U.S. companies
and cost America countless jobs. The Internet has also afforded
anonymity for criminals who steal identities and exploit
children. Network neutrality does not mean safe havens for
piracy, child exploitation, or other Internet crimes. Network
neutrality fosters fairness.
Our colleague, John Lewis, and esteemed poet, Maya Angelou,
a native of Mr. Watt's district, along with several others, are
receiving the Presidential Medal of Freedom at a ceremony at
the White House at this time, and this is why Ranking Member
Watt cannot be here today. He regrets that he cannot attend and
will submit his questions to the witnesses in writing. And he
looks forward to additional hearings on net neutrality with
officials from the FCC.
I look forward to hearing from our witnesses today and to a
meaningful discussion on today's topic.
Mr. Goodlatte. I thank the acting Ranking Member. And
without objection, other Members' opening statements will be
made a part of the record.
And before we introduce our witnesses, I would ask that
they please stand and take an oath.
[Witnesses sworn.]
Mr. Goodlatte. Thank you. Please be seated.
Our first witness is Larry Downes, a senior adjunct fellow
at the newly formed think tank, TechFreedom. He is the author
of three books and has held faculty positions at Northwestern
University Law School, the University of Chicago Graduate
School of Business, and the University of California at
Berkeley, where we was associate dean of the School of
Information and a senior lecturer at the Haas School of
Business. After graduating magna cum laude from the University
of Chicago Law School, Mr. Downes served as law clerk to the
Honorable Richard A. Posner, Chief Judge of the United States
Court of Appeals for the Seventh Circuit.
Mr. Downes is an Internet industry analyst and consultant
who works primarily with technology companies to integrate
emerging technologies into business strategy, with a special
emphasis on legal and regulatory constraints. His clients have
included startups as well as leading global technology
providers. His expertise in the legal business and regulatory
environment of the Internet industry strongly qualify him to
testify at this hearing.
After him, we will hear from Mr. Brett Glass. All too often
the conversation in the Beltway, whether in Congress or at
regulatory agencies like the FCC, becomes dominated by large
interest groups with permanent D.C.-based lawyers and lobbyists
to advocate for them. There is a tendency to think about these
issues in terms of big businesses, but as FCC Commissioner
Robert McDowell observed in his dissent from the Open Internet
Order, many broadband providers are not large companies, many
are small businesses. The same is true of content providers and
hardware companies. Many of the businesses who will be affected
by the Open Internet Order are small.
It is fundamentally important when settling policy to
always bear in mind the effect of the rules made in Washington
and what they will have on ordinary Americans and the small
businesses that are the primary job creators throughout the
country. That's why I am pleased to introduce our next witness,
Brett Glass of Laramie, Wyoming, to testify about the effect
that he believes the FCC's Open Internet Order will have on his
small business and other small businesses like his.
Our final witness will be Gigi Sohn, President and Co-
founder of Public Knowledge, a nonprofit organization that
seeks to promote openness, access, and the capacity to create
and compete in all three layers of our communication system:
the physical infrastructure, the systems, and the content. Ms.
Sohn is the senior adjunct fellow at the Silicon Flat Iron
Center for Law, Technology and Entrepreneurship at the
University of Colorado, and a senior fellow at the University
of Melbourne Faculty of Law, Graduate Studies Program in
Australia. She has been a nonresident fellow at the University
of Southern California Annenberg Center and an adjunct
professor at Georgetown University and the BenjaminN. Cardozo
School of Law at Yeshiva University.
We will begin with Mr. Downes. Welcome.

TESTIMONY OF LARRY DOWNES, SENIOR ADJUNCT FELLOW, TECHFREEDOM

Mr. Downes. Mr. Chairman and Subcommittee Members, thank
you for inviting me here today.
I commend this Subcommittee for its prompt attention to the
dangerous and illegal rulemaking of the FCC on December 23,
2010.
The agency's Report and Order on Preserving the Open
Internet, passed by a bare majority of commissioners, just as
the 2010 lame duck Congress was about to adjourn, created new
regulations for some broadband Internet access providers. These
new rules entomb into law one view of what some refer to as the
``net neutrality principle.''
Now as an early Internet entrepreneur, I share the
enthusiasm of all five commissioners--not just the three who
voted to approve the new rules--for the Open Internet. I just
don't believe there is any need for regulatory intervention to
save this robust ecosystem or that Congress ever granted the
FCC authority to do so.
As the report itself makes clear, the premise of looming
threats to the Open Internet that motivated these proceedings
proved chimerical. The rulemaking process is unduly political
and disappointingly obtuse. The order rests on a legal
foundation the agency cannot seriously expect will hold up in
court or in Congress. The result: regulations that no one,
other than FEC Chairman Julie Genachowski, publicly supported.
The Report and Order is deeply flawed. And as with any
regulation involving disruptive technologies, the risk of
unintended consequences is high. In its haste to pass something
before the new Congress convened, the FCC has interfered with
the continued evolution of this vital technology, preserving
Open Internet principles in the same way that amber preserves
prehistoric insects--by killing them.
I want to highlight just a few of the fatal defects of the
Report and Order.
Number one, there was no need for new regulation. Despite
thousands of pages of comments from parties on all sides of the
issue, in the end the majority could only identify four
incidents in the last 10 years of what it believed to be non-
neutral behavior. All four were quickly resolved outside the
agency's adjudication processes, yet these four incidents
provide the majority's sole evidence of the need to regulate
now.
With no hint of market failure, the majority instead issued
what it calls ``prophylactic rules'' it hopes will deter any
future problems. But it's worth noting that the rules, as
adopted, would, at most, only apply to one of the four
incidents which involved a small ISP alleged in 2005 to have
blocked its customers' access to Voice Over Internet Protocol
telephone service. If anticompetitive practices do emerge,
existing antitrust enforcement mechanisms are in place to
correct them. Indeed, these laws already provide adequate
deterrence.
Therefore, to justify their new rules, the majority
preemptively and recklessly rejects the idea that a violation
of the new rules requires proof of anticompetitive practices or
demonstrable consumer harms--hallmarks of modern antitrust
practice.
All one can say charitably is that the majority is
reserving to its future discretion a determination of what
practices actually violate the spirit of the new rules. It's
hard to think of a better example of an arbitrary and
capricious decision.
Number two, exceptions reveal a profound misunderstanding
of the Open Internet. The Report and Order detail at least 16
significant exceptions, caveats, and exemptions for current
non-neutral network management practices, practices the
majority acknowledges are ``inconsistent'' with the Open
Internet first principles.
In most cases, the inconsistent practices are exempted only
because they have become entrenched and vital features of the
online experience for consumers, with no harm to the Open
Internet. The long list should have made clear to the majority
that network engineering has evolved beyond simplistic slogans
of an open and neutral network. The evolution of these network
practices is far from over, but the majority's ``these and no
more'' list condemn future innovations to the relatively
glacial pace of FCC approval. This will unintentionally skew,
slow, or stunt the next-generation Internet ecosystem in ways
that threaten U.S. competitiveness in this most global of all
markets.
The majority have promised to review the rules no later
than 2 years from now, but in Silicon Valley, where I come
from, 2 years might as well be forever.
Number three, the FCC lacked authority to issue the rules,
and likely knew it. Despite promises that the agency's very
smart lawyers had unearthed legal support for their new rules
beyond arguments rejected by the D.C. Circuit in the Comcast
decision, the Report and Order largely repeated those
arguments. This half-hearted effort suggests the agency has
little expectation the rules will survive court challenges that
have already begun, and issued them solely to get the messy
proceedings off its docket.
I have submitted a report examining these and other
concerns in detail, and I look forward to your questions. Thank
you.
Mr. Goodlatte. Thank you, Mr. Downes.
[The prepared statement of Mr. Downes follows:]

__________

Mr. Goodlatte. Mr. Glass, welcome.

TESTIMONY OF LAURENCE BRETT (``BRETT'') GLASS,
OWNER AND FOUNDER, LARIAT

Mr. Glass. Thank you, Chairman Goodlatte, Ranking Member
Chu, Members of the Committee, thank you very much for inviting
me to testify. It's a great honor for me to be the first of my
relatively young industry to speak before Congress.
To stay as close as I can to my allotted time, I would like
to offer you an abridged version of my prepared testimony,
which I hope you will enter into the record in full.
First, some background. I'm an electrical engineer. I
received my bachelor's of science from the Case Institute of
Technology in 1981 and my master's at Stanford in 1985. I have
designed computer chips, written popular computer software, and
penned more than 2,500 published articles. In the early 1990's,
I moved from Palo Alto, California, to the beautiful small
college town of Laramie, Wyoming.
Laramie is roughly the size of Stanton, Virginia. When I
arrived, I discovered there was no ready access to the Internet
outside of the University of Wyoming campus, so I founded
LARIAT, the world's first fixed Wireless Internet Service
Provider, or WISP. LARIAT began as a nonprofit cooperative
whose purpose was to teach, promote, and facilitate the use of
the Internet.
Fast forward 11 years to 2003, the Internet was well
established and the membership decided they no longer wanted to
be members of a co-op, they simply wanted to buy good Internet
service from a responsible local provider. So the board
prevailed upon me and my wife, who had served as caretakers of
the network, to take it private.
We did, and we've been running LARIAT as a small,
independent Internet service provider ever since. We have very
slim margins. Our net profit is less than $5 per customer per
month, but we're not doing it to get rich, we're doing it
because we love to do it and want to help our community.
We at LARIAT have always been the strongest possible
advocates for consumer choice, of free speech, and of
inexpensive, high-quality Internet access. It's our mission and
it's our passion. And while I now have more help, I still climb
rooftops and towers to install Internet with my own hands, to
train my employees, and to check the quality of every job.
Now, since LARIAT has started, the cable and telephone
companies have also gotten into the broadband business. We
compete gamely with them within the city limits, but our
services, unlike theirs, extend far into the countryside. Other
WISPs were started and set up shop in our town, forcing us to
compete harder and innovate more. We estimate that there are
now between 4,000 and 5,000 WISPs, as shown on the map in the
written version of my testimony. WISPs now serve more than 2
million people and reach approximately 70 percent of all U.S.
homes and businesses, including many with no access to DSL or
cable. We create local, high-tech jobs and we stimulate the
development of other businesses. We can cost effectively serve
areas where there is no business case for any other form of
terrestrial broadband.
We also provide vigorous competition where other kinds of
broadband do exist. For example, a WISP called D.C. Access
serves homes and businesses here on Capitol Hill. It even
provides the free Wi-Fi on the Supreme Court steps.
Unfortunately, I'mhere to tell you today that the network
neutrality rules enacted by the FCC will put WISPs' efforts to
provide competitive broadband and to deploy to rural and urban
areas who do not have access or competition at risk.
Firstly, the rules address prospective harms rather than
any actual problem. Contrary to what advocates of regulation
say, ISPs have never censored legal, third-party Internet
content. Secondly, even before the rules were issued, the
Commission's notice of proposed rulemaking created uncertainty
which drove away investors. The final rules are vague,
permitting reasonable network management, but not fully
defining what the word ``reasonable'' means. As Commissioner
Robert McDowell pointed out in his well-written dissent, this
lays the groundwork for protracted, expensive, legal wrangling
that no small business can afford.
The rules also allow anyone, whether or not he or she has
service from a particular provider, to file a formal complaint
alleging violations. Even, now before the rules have taken
effect, groups here in D.C. have filed complaints against
MetroPCS for offering a great, affordable Smart phone service
plan which prohibits a few bandwidth-hogging activities. My own
company could suffer a similar fate. Our most popular
residential service plan comes with a minor restriction; it
does not allow the operation of servers.
Now, Mr. Chairman, most Internet users would not know what
a server was if it bit them, and they have no problem uploading
content to a Web site such as YouTube for distribution. This
means customers that do need to operate a server could obtain
that capability by paying a bit more to cover the additional
cost. But if the FCC decides against MetroPCS, we will almost
certainly be forced to shift everyone to the more expensive
plan. We will therefore be less competitive, offer less value
to consumers, and especially less value to economically
disadvantaged ones.
We will also hesitate to roll out innovative services for
fear that the Commission could find fault with some aspect of
them. For example, selling priority delivery of data, even for
a new high-tech service such as Telepresence, is strongly
disfavored by the rules. This is like telling UPS or FedEx that
they cannot offer shippers overnight delivery because it's
somehow unfair to those who use ground service.
Now in my FCC filings, I urged the Commission to promote
competition rather than requiring us to ask permission to
innovate, but the majority rejected this approach in favor of
onerous regulations which address a problem that does not
exist.
I therefore urge Congress--which is the ultimate source of
the FCC's authority--to set things right. Rather than the
excessive regulation which would extinguish small competitors
like WISP and create a duopoly that did require constant
oversight, we should facilitate competition, crack down on
anticompetitive tactics, and then allow markets to do the rest.
Only by adopting this approach can we allow American small
businesses to create jobs, innovate, and prosper while solving
a very real problem, providing ubiquitous broadband access to
our Nation.
Thank you.
Mr. Goodlatte. Thank you, Mr. Glass.
[The prepared statement of Mr. Glass follows:]

__________

Mr. Goodlatte. Ms. Sohn, welcome.

TESTIMONY OF GIGI B. SOHN, PRESIDENT AND CO-FOUNDER, PUBLIC
KNOWLEDGE

Ms. Sohn. Chairman Goodlatte, Members of the Subcommittee,
thank you for the opportunity to discuss the importance of
network neutrality to protect consumers and competition on the
Internet.
An Open Internet is vitally important to political and
social discourse, commerce, innovation, and job creation in the
U.S. Past actions by incumbent broadband Internet access
providers have threatened the Open Internet, requiring the FCC
to set enforceable baseline rules.
Contrary to assertions by incumbents that consumers enjoy
competition when it comes to broadband Internet access and can
simply switch providers, the FCC's national broadband plan
reported that nearly 91 percent of all Americans reside either
within a monopoly or duopoly broadband market. Given this
reality, it is important that the Subcommittee work to promote
net neutrality to ensure competition on the Internet.
In its Competitive Impact Statement in a Comcast-NBCU
merger, the Justice Department laid out how the competitive
harms presented by the merger were matters of antitrust and how
they warranted clear network neutrality protections. The DOJ
recognized that online videos distributors, OVDs, represent an
emerging class of competitors to traditional multichannel video
service providers, MVPDs, like Comcast. Although new MVPDs have
endured nationally, incumbent video service providers like
Comcast remain dominant in their regions.
Because OVDs are able to provide service in any geographic
area, they are a source of direct competition to cable in the
geographic area in which it is dominant. At the same time,
because the profit margins from subscription video are far
greater than that of program distribution, Comcast and other
traditional MVPDs have a strong incentive to interfere with
nascent OVD competitors. Thus, the DOJ found that Comcast had a
much greater incentive to prevent the emergence of rival video
services such as OVDs than it does to cultivate them as
customers for video service. Comcast simply cannot hope to make
up lost revenue caused by cable subscribers cutting the cord
through the sale of programming to OVDs.
Network neutrality rules, such as the conditions imposed by
the DOJ and Comcast, work against this anticompetitive danger.
While the DOJ was specifically addressing Comcast, these
antitrust concerns apply across the broadband market. A
customer may wish to cut the cord and drop the video
subscription, but the monopoly or duopoly broadband Internet
access provider, also offering a video package, will have the
incentive and ability to prevent this by interfering with the
delivery of online video.
That same harmful incentive exists in the market for
telephony. Just as the incumbent cable provider has a strong
incentive to interfere with broadband delivery of competing
video, the incumbent telephone provider has a strong incentive
to degrade competing voice traffic. These harms are not
speculative. There is a documented history of anticompetitive
actions taken by broadband access providers.
Aside from the Madison River and Comcast/BitTorrent cases,
AT&T has blocked several applications, such as SlingBox video
streaming and VoIP applications like Skype, from its mobile
network while permitting similar products to use its network.
Cox and RCN both admitted to slowing or degrading Internet
traffic, and despite claims that these practices were designed
to handle congestion, neither provider disclosed their traffic
management practices to subscribers.
Despite proclaiming that they have no intention of ever
actually blocking or degrading content, broadband Internet
access providers include within their terms of service
provisions that allow them to engage in precisely these
practices. And let me emphasize, these are only the cases we
know about. Organizations like mine don't have the kind of
money to track everything that ISPs do.
Now, I want to make clear that while I believe that
antitrust law has a role to play in ensuring an Open Internet,
it cannot do the job alone. Broadband providers can
discriminate against applications of service providers without
that discrimination rising to the level of an antitrust
violation. And as the Judiciary Committee recognized when it
introduced Open Internet-related legislation in 2006, the
Supreme Court's Trinko decision severely limits the
applicability of antitrust laws to regulated industries like
cable and telephone companies. Thus, the recently enacted FCC
rules are crucial to preserving an Open Internet.
Public Knowledge is deeply concerned about recent decisions
in Congress to invoke the Congressional Review Act to repeal
those rules. Should Congress enact a CRA repeal, the FCC's
power to protect an Open Internet and not just the recently
enacted rules, would be virtually eliminated.
Mr. Chairman, through the years, the Judiciary Committee
and this Subcommittee have played a vital role in making
certain that American consumers were protected by the vigilant
enforcement of antitrust laws. This mission is now more
critical than ever. As a DOJ analysis shows, anticompetitive
activities by large carriers have the potential to affect
millions of consumers in what may be net neutrality issues or
may not. We urge the Subcommittee to keep a close watch on
today's communications markets and to be alert to the kind of
abusive market power that can affect consumers, companies, and
the economy as a whole.
I thank you and look forward to your questions.
Mr. Goodlatte. Thank you, Ms. Sohn.
[The prepared statement of Ms. Sohn follows:]

__________

Mr. Goodlatte. I will now recognize myself to begin
questions.
Let me ask each of you, how do you anticipate the Open
Internet Order of the FCC affecting the ability of startup
companies that you advise to raise capital--I guess we are
directing this to you, Mr. Downes--and have you already seen
any effect?
Mr. Downes. I have not seen any effect yet. Of course the
rules are very new and there is already, as you know, two legal
challenges as well as discussions in Congress about potentially
disapproving of the order. But in general I think it's quite
accurate to say that the ability of my clients, particularly in
the hardware business, to raise capital will be affected by
these orders. The problem, of course, is there is a great deal
of uncertainty. There was a lot of--the rules themselves are
fairly vague, but of course all the exceptions and exemptions I
mentioned in my opening statement make it very difficult to
tell what is and isn't allowed as far as a network management
practice, techniques for optimizing certain kinds of content or
certain kinds of media. We don't know if in the future if I
invent some new network management technique--and of course
they're being invented all the time--it would be much more
difficult for me to raise capital, or for my clients to raise
capital, to pursue those kind of techniques. I think it's safe
to say particularly early-stage investors will want--the way
they currently ask for patent stuff, they'll ask for approval
from the FCC.
Mr. Goodlatte. Is it fair to say that while there's always
risk in investing in a business--particularly a new business--
that with antitrust laws you know the rules of the road and you
can consult an attorney, you can take into account what you
think those rules are as you move forward; but with FCC
regulation, you can look at a set of regulations, begin down
that path, and while you are substantially invested in this new
technology, this new idea, suddenly those regulations can be
changed and you're in a situation where you are no longer a
profitable investment?
Mr. Downes. Yes. I think that's absolutely correct, Mr.
Chairman. And it is also, I think, worth mentioning that the
way the FCC implemented the enforcement provisions of its
order, very, very broad. Any party has standing to bring a
complaint, formal complaint before the FCC about any practice
that it believes may or may not violate the net neutrality
rules, even non-customers. And it's very difficult, of course,
for anyone to know. You know, if the Internet goes slow one
day, you don't know if that means somebody is doing a net
neutrality violation or if it's slow because something is
broken. But under the enforcement provisions of the order, the
FCC will file essentially a full legal case, with discovery and
everything that goes with it, for any time a formal complaint
is filed. And that, of course, is potentially disastrous.
Mr. Goodlatte. And the ability to raise capital as well as
the ability to incentivize the development of new technologies
would be affected the same way by the uncertainty created by
FCC regulations.
Mr. Downes. Yes, I believe that is so.
Mr. Goodlatte. Let me turn to Mr. Glass. Would you say that
you are able to be more flexible and customer oriented than
your competitors in your capacity as a small ISP? And if you
agree with that statement, will the FCC regulations make it
harder for you to remain as flexible and customer oriented?
Mr. Glass. Mr. Chairman, let's see; as Mr. Downes said, we
do not know exactly how the FCC regulations are going to be
enforced. It may be at the whims of these commissioners or at
some future sitting commissioners that may have different
opinions. They are vague enough that we're not exactly sure. So
I can't tell you exactly how they might affect our ability to
provide innovative services, but we do provide innovative
services now that are unique.
For example, we have doctors on our network, some of whom
live fairly far out of town; and what we do, when someone goes
into the emergency room and they get a CAT scan or an MRI, we
go ahead and we prioritize the traffic so that that doctor can
immediately--or as least as fast as possible--view the CAT scan
and determine what's wrong, give an opinion to the hospital,
dash to the hospital if he needs to do so. That sort of
priority could arguably be in violation of the FCC's rules. We
don't know, but they presumptively discriminate against that
prioritization. So we really don't know where things are going,
but we are very concerned.
Mr. Goodlatte. Ms. Sohn, I appreciate your attention to
antitrust laws, but I have a concern about your suggestion that
antitrust laws and FCC regulations will work well together in
this regard. My reading of the Trinko decision is different
than yours. Quite frankly, my understanding of that decision is
that if you have an industry that is regulated like the cable
industry is regulated, like the telephone industry is
regulated, then the Supreme Court said that in the Trinko case
that you look less to antitrust laws.
But here the point, is that the FCC is not regulating the
Internet now and should not be, and therefore the vitality of
our antitrust laws would be stronger and more effective if we
do not have additional FCC regulation of the Internet, which I
am very concerned is simply kicking the door open for the FCC
to regulate this incredibly innovative development in our
society and in our economy that I think has grown tremendously
and become such a huge part of our economy because it has not
become heavily regulated.
Do you want to respond to that?
Ms. Sohn. Sure. Network neutrality it is not regulation of
the Internet, it is regulation of the companies that provide
the on-ramps to the Internet--telephone and cable companies.
And the FCC does regulate them, and that's why I'm very
concerned that the Trinko decision really guts antitrust law,
and that's why former Chairman Sensenbrenner introduced that
law in 2006.
Mr. Goodlatte. Sure. But that law was designed to tweak our
antitrust laws to make them more effective. And I would freely
acknowledge that we need to look at what we need to do with our
antitrust laws to make them effective in addressing what's
going on on the Internet, but not turn this over to a
regulatory process that is very different than antitrust,
which, as we just discussed with Mr. Downes, creates a lot more
certainty in terms of investment, in terms of developing new
technologies, than having the uncertainty of ever-expanding
regulatory powers for the FCC, which I think, as I stated at
the outset, are in violation of Congress' intent to begin with.
Ms. Sohn. Look, I share your concern. I'm not for big FCC
regulating everything, regulating the Internet. My
organization, probably to your dismay, brought the case that
struck down the FCC's authority to implement the broadcast
flags, so I share those concerns. But the problem is even if--
let's set the Trinko case aside--and I would point you to
testimony that Howard Shelansky of the FTC did about the effect
of the Trinko case on antitrust enforcement in this area. And
Howard Shelansky is no fan of network neutrality.
But setting that aside, there are places that are of
concern to consumers and concern to edge companies, like
Facebook and Twitter and Netflix and Google that just won't be
touched by antitrust law. For example, let's say Verizon or
Comcast wants Google to pay for faster service or better
quality of service, that's not something necessarily that is
going to be covered by antitrust law. It's not as easy as a
situation where AT&T blocked Skype, where you know that AT&T
has a competitive interest in disfavoring VoIP. So there can be
instances of discrimination that the FCC rules cover that
antitrust law just does not.
Mr. Goodlatte. Mr. Downes, would you care to respond, or
Mr. Glass?
Mr. Downes. Well, Mr. Chairman, it is possible that, of
course, the broadband provider may ask a company to pay more
for more service.That's sort of the nature of competitive
industries. It isn't necessarily a violation of net neutrality
in principle, and it's certainly not necessarily anything that
would be considered anticompetitive or demonstrable consumer
harm. That's the standard for antitrust. I think that's a good
standard.
And the problem, as I said, with the FCC is that they
didn't give us any standard at all. They said we reject that as
the standard by which we're going to enforce the
antidiscrimination rule, but we don't know what standard
they're going to apply instead. They just don't want people to
be picking winners and losers on the Internet. But I don't want
to leave that to the discretion of the FCC.
Mr. Goodlatte. Thank you.
Mr. Glass.
Mr. Glass. Yes. I would really like--it would be really
wonderful for me, because I do experience a lot of
anticompetitive tactics, especially at the hands of the local
incumbent--local exchange carrier to have some recourse under
antitrust law. Right now, I am forced to operate as if I don't.
And actually, because of that, the best thing that I can ask
the government to do is enable competition and at least don't
keeping me from competing. I would like to see the antitrust
law fixed, however.
Mr. Goodlatte. Thank you.
The gentleman from Michigan, Mr. Conyers.
Mr. Conyers. Thank you, Mr. Chairman.
I am in the process, lady and gentlemen, of separating out
three considerations: One, the concept of net neutrality; two,
the role of the Federal Communications Commission; and three,
antitrust law. And so I have come to this hearing with the view
that the FCC has probably not exercised its fullest authority
in this area before this is all over.
Contrary to those who think the FCC has exceeded its
authority and it's not what Congress intended, I think that a
case could be made for the FCC becoming stronger. So let me
question you in this respect: We all agree on the validity and
significance of net neutrality as a telecommunications concept;
is that true? Yes. Blank. Blank.
Okay. Do you have reservations about net neutrality? Do you
think it's dangerous, or are you worried about where it's
going, or what?
Mr. Downes. Well, as I said in my statement, Mr. Conyers, I
am not against net neutrality. I am in favor of the Open
Internet, I've been a beneficiary of the Open Internet. My
concern is principally with the idea that the FCC, as a
regulatory body, is the one to decide what it actually means
and to enforce it.
Mr. Conyers. Well, I'm not talking about the FCC. That's
number two on my list. I'll get to that. But you seem reluctant
to just come out and say that you are for net neutrality.
Mr. Downes. No, I've said it. I have written that I am in
favor of net neutrality in principle.
Mr. Conyers. Fine. But I've had to kind of tease it out of
you.
What about you, can I get a straight, okay, yes, I'm for it
answer?
Mr. Glass. Mr. Conyers, I would love to be able to give
that sort of a response. The problem is even if you look at
Wikipedia, there are three or four definitions of net
neutrality under that one heading.
Mr. Conyers. Well, you take the one that you want. Would
you like net neutrality as you would define it?
Mr. Glass. I would like to see net neutrality if it means
freedom from anticompetitive tactics. I would not like to see
it if it means onerous regulation or micromanagement of
innovative companies that are trying to do things.
Mr. Conyers. Well, I'm talking about the concept itself,
I'm not talking about who's running it and how it's being
managed. I don't mean to put words in your mouth, for goodness
sake, heaven forbid, but from you two witnesses I seem to sense
that there is some hesitation about just coming out and saying
net neutrality is a good thing and I'm glad it's here.
I mean, you start telling me about the FCC and who's
regulating, I'm just asking you about net--everybody isn't for
net neutrality. And I suspect that--I'm not a psychiatrist, but
deep down do you have some reservations about net neutrality?
You can say yes if you want to.
Mr. Glass. I think I do have reservations----
Mr. Conyers. All right. Very good. Now that's what I'm
trying to get at.
Now Professor Downes, deep down, don't you have some
reservations about net neutrality?
Mr. Downes. No. Look, if net neutrality is a political
term, yes; if it's an engineering term, no.
Mr. Conyers. Well, let's see. Okay. Now let me ask the
gentlelady witness, where do you come out on this net
neutrality?
Ms. Sohn. I am a stalwart supporter of net neutrality. My
organization does not think that the FCC's rules went far
enough, although we are willing to live with them. They are
rules of the road. We believe, as the Commission does, that the
companies that provide the on-ramps to the Internet--they are
either a monopoly or duopoly in 90 percent of this country--
should not be able to pick winners and losers.
Mr. Conyers. Well, now let me raise this, since my time is
just about gone--you fellows did a good job on making me work
so hard to get a yes or no answer.
But the last question, Mr. Chairman, if I might, on the
question of antitrust, do all of you agree with me that
antitrust is a very difficult thing to prosecute? There are
certain standards and levels. And antitrust in the Department
of Justice has been going down for decades. We don't get much
of that anymore. Does that statement ring positive with you?
Mr. Downes. Well, I don't think if you asked companies like
Microsoft and Intel if they think antitrust has gone down, they
would say no.
Mr. Conyers. Yeah, but I'm asking you.
Mr. Downes. I think, certainly in terms of the technology
industry, antitrust has been applied more than it had been
before, and often I think with dangerous consequences.
Mr. Conyers. Well, there wasn't any industry before.
What do you say, sir?
Mr. Glass. From the point of view of a small business
person, I don't know if I will ever have recourse to antitrust,
but I would love to be able to avail myself of such remedies.
Mr. Conyers. Yes, ma'am.
Ms. Sohn. Well, I agree with you 100 percent. And
particularly when it comes to regulated industries like
broadband Internet access providers, the Trinko and Credit
Suisse cases have completely eviscerated antitrust enforcement.
Mr. Conyers. Thank you, Mr. Chairman.
Mr. Goodlatte. I thank the gentleman.
The Chair recognizes the gentleman from Pennsylvania, Mr.
Marino.
Mr. Marino. Mr. Chairman, I have someone that I have to
meet here shortly. Could I reserve my time and when I get back,
if I have questions, ask them?
Mr. Goodlatte. Absolutely. We will do that.
And now the Chair turns to the gentlewoman from California
for her questions.
Ms. Chu. Thank you, Mr. Chairman.
Well, some would suggest that current antitrust law is
sufficient to protect consumers with regard to access to
broadband. Ms. Sohn, you seem to imply that both the Department
of Justice and the FCC have a role to play in protecting net
neutrality.
If the FCC were stripped of its ability to enforce net
neutrality principles, would the Department of Justice have the
ability to prevent broadband providers from discriminating
among Internet content?
Ms. Sohn. Within the context of a merger like Comcast, yes.
And I think the Justice Department did an outstanding job in
doing that. However, if it comes to plain old antitrust
enforcement, that kind of enforcement has been severely limited
by Supreme Court decisions in the Trinko case and the Credit
Suisse case. So I think it would be very difficult without some
legislation. And I would encourage this Subcommittee to think
about it.
And particularly if you're concerned about the competition
in the application space between search engines or between
social networks, there is nothing in antitrust law that would
allow you to move forward on that either. So I would encourage
this Subcommittee to think about how do we repair the damage
done by the Supreme Court in the Trinko and Credit Suisse
cases.
Ms. Chu. And why is it important to have the FCC involved?
Ms. Sohn. Because the FCC, first of all, in light of those
Supreme Court cases, there is very little that an antitrust
authority can do when it comes to regulated companies like
broadband Internet access providers. And secondly, there are
activities that broadband Internet access providers can do that
discriminate, that hurt an Open Internet, that do not rise to
an antitrust violation. So there are gaps there that the FCC,
with its public interest mandate, can fill.
Ms. Chu. Let me ask about the authority of the FCC. There
has been significant debate about the Commission's authority to
regulate broadband, and in particular Verizon has appealed the
Commission's Open Internet Order, alleging that the FCC has
acted outside the bonds of its statutory authority. Do you
believe the FCC does have the authority to develop net
neutrality rules?
Ms. Sohn. Well, we would have preferred that the FCC
reclassified broadband Internet access as a telecommunications
service, just as Justice Scalia suggested in the Brand X case.
Unfortunately, they did not do that. The FCC believes that it
has threaded the needle that the D.C. Circuit gave it, the hole
that the D.C. Circuit gave it in the Comcast decision, and the
court will decide that. Again, we would have preferred that
they had gone to Title 2. They decided to go a different way,
and the courts will decide.
Ms. Chu. I have to admit that this all seems academic to me
because the FCC can clearly regulate this area if they decide
to reclassify broadband under the Telecommunications Act. In
your view, why has the Commission held off on reclassifying
broadband?
Ms. Sohn. I think it's just fear. It's fear of the
political blowback that would have happened. Yes, it would have
been a controversial decision, but it would have been the most
legally sustainable. It's unfortunate. I think the FCC's
general counsel was quite correct that not reclassifying not
only would have affected net neutrality, but would affect
universal service, would affect privacy, would affect any
number of important consumer protections that the FCC might
undertake, but I think it's all about politics.
Ms. Chu. Thank you. I yield back.
Mr. Goodlatte. I thank the gentlewoman.
The gentlewoman from Florida, Ms. Adams, is recognized.
Mrs. Adams. Thank you, Mr. Chairman.
Commissioner McDowell's dissent that said that reasonable
standards set out in the Open Internet Order is one of the most
subjective and litigated standards in the legal system, do you
agree with that statement?
Ms. Sohn. Could you repeat that? I didn't quite understand
that.
Mrs. Adams. The observation in Commissioner McDowell's
dissent that the reasonable standard set out in the Open
Internet Order is one of the most subjective and litigated
standards in our legal system?
Ms. Sohn. That is absolutely correct, because under Title 2
of the Communications Act--again, the place where I would have
preferred the FCC to go--what is prohibited is unjust and
unreasonable discrimination. So the good thing about, had they
decided to go there, is that you have years and years of
precedent. Now they have set this new standard, ``reasonable
network management,'' which I don't think is as onerous as my
colleagues but, however, is going to have to undergo a whole
new set of adjudications.
So yes, I agree with Commissioner McDowell, but perhaps we
disagree that that would have been the better way to go because
there is precedent, and because telecommunications providers
know how to behave under that precedent. And in fact, there are
over 800 telecommunication providers who choose to be regulated
under Title 2. And wireless telephone service--not broadband
service, is also regulated under Title 2. So it's something we
know.
Mrs. Adams. So, would you agree that a standard that
determines a behavior's reasonableness by a majority vote of
FCC commissioners, is harder to predict than either a bright-
line rule or a rule of reason constrained by over a century of
antitrust law?
Ms. Sohn. Well, I mean, that's an interesting question. But
as I said before, antitrust law doesn't really apply here
because of Supreme Court precedent. So it's hard for me to say
which is better and which is not. But let me say something
about reasonable----
Mrs. Adams. Let me ask you something. Let's get a little
bit clearer. Would you rather have something under an antitrust
law that has been century tested, or a reasonableness law that
is subject to the five--I think it was five--commissioners'
discretion?
Ms. Sohn. Well, I would say the reasonable standard in
Telecom was also time tested. It's also 70 years old. So I
guess to me it's a wash.
Mrs. Adams. I'm asking you, would you rather have one or
the another?
Ms. Sohn. I think you have to have both. It's a false
choice, you cannot choose. You have to have both.
Mrs. Adams. So you think that the antitrust law, if not
amended to quell your concerns, would be a better route than--
or the reasonableness law would be a better route than the
antitrust law?
Ms. Sohn. No. The problem is that even if the antitrust law
is vigorously enforced, there are still gaps that it doesn't
reach when it comes to preserving an Open Internet. The gap
where, for example, an Internet service provider wants to
charge a Facebook or a Google for speedier service, okay; not
because it has its own search engine, but just because, because
it wants the money, that isn't really covered by antitrust law.
Okay. And that's something that can come under the FCC's public
interest standard.
So the problem is the gap, and that's why I can't--it's not
fair for me to say I like one better than the other because you
have to have both.
Mrs. Adams. Mr. Glass, you look like you would like to
answer that.
Mr. Glass. Well, I guess what I'm concerned about is there
are five commissioners on the FCC. The appointments are usually
political and partisan. The organization is far more
politically driven than it should be, and this is something
that we need to fix. I honestly believe that the FCC has
structural problems that Congress should eventually address.
But as it stands right now, it really has been capricious.
And I really do believe the definition of ``reasonable'' is
going to float, depending on who is sitting on the Commission
at the moment. It's very difficult to conduct business in an
industry where you have that sort of uncertainty.
Mrs. Adams. Mr. Downes, would you like to comment.
Mr. Downes. Yeah. I mean, I think it's worth noting that
what they did end up with in the end was not as strict and not
as onerous as what they started with, which was a
nondiscrimination rule. And I think what's interesting is in
the year and couple months' process by which the FCC was taking
comments and having testimony on the net neutrality proceeding,
I think one of the things they realized was there are a lot of
discriminatory practices in the network's design, some of them
very recent, some of them there to optimize certain kinds of
content or certain kinds of media or certain kinds of services.
And that those practices are not harmful to consumers, they
were not intended to be anticompetitive, and in fact they're
necessary to have an Internet today that looks like what it
does, not what it looked like back in 1996.
So I'm actually pleased that the FCC stepped back from the
brink in terms of how far it went with the anti-discrimination
rule. Obviously, I would have preferred them not to have any
rule at all, but the one they had is not as bad as what they
started with.
Mrs. Adams. Thank you. I yield back my time.
Mr. Goodlatte. I thank the gentlewoman.
The gentlewoman from California, Ms. Sanchez, is
recognized.
Ms. Sanchez. Thank you, Mr. Chairman.
Mr. Glass, I would like to start with you.
In your written testimony you state that Internet service
providers have never censored third-party content. So I want to
ask you a very simple yes-or-no question. Are you familiar with
AT&T's 2007 admission that they did censor part of a 2007 Pearl
Jam concert that was critical of then-President George W. Bush?
Are you familiar with that?
Mr. Glass. Yes, I am. However, they were the publishers of
the content, and therefore they had a First Amendment right to
edit it.
Ms. Sanchez. They were also the Internet service provider,
the ISP; correct or not correct?
Mr. Glass. As far as I know, you didn't need to use just
their service in order to access the content. So I'm not sure
if they qualify as the ISP in the same sense.
Ms. Sanchez. Well, don't you agree that that type of
precedent allows for the possibility that an ISP could censor
content?
Mr. Glass. There is always that possibility, but as an ISP
who has worked my whole life to give people access, I
amfervently in favor of not doing so.
Ms. Sanchez. I just was asking about whether or not the
possibility existed there. And I think, if I'm not mistaken,
you answered yes, that that possibility does exist.
So without net neutrality, what is to stop a rival ISP from
blocking access to Web sites, for example, promoting LARIAT
service, in effect blocking potential customers from knowing
that there are alternative services?
Mr. Glass. The market has generally taken care of that. We
have more than 10 facilities based and even more nonfacilities-
based providers in our area. Customers are easily outraged by
such tactics, and they will switch.
Ms. Sanchez. That is my next question. In your written
testimony, you argued that consumers will ``move quickly to
competitors if they dared to try censoring content.'' However,
as the FCC's national broadband plan notes, 13 percent of
Americans have only one broadband access provider and 78
percent of Americans have only two broadband options.
So what would you say to the citizens of both of those
groups who have very limited options with regard to who their
providers are going to be, that hey, if you are outraged at the
censorship, if that occurs from your Internet service provider,
and you don't have another provider to go to, what is the
recourse? And even maybe where there are two providers that are
present, what if both are engaging in that activity, what is
the recourse there?
Mr. Glass. Well, I'm not sure where that figure came from
because, again, wireless ISPs reach 70 percent of U.S. Homes
and businesses right now, and they are continuing to expand.
Ms. Sanchez. That is businesses. That is not necessarily
individuals.
Mr. Glass. Homes and businesses. But I am hoping we will
certainly work to resolve that problem.
Also, I have here, and we may want to enter it into the
record, a white paper from the FCC which was published in
December 2010 where they surveyed customers, and two-thirds of
them thought it would be easy to switch providers if they
wanted to.
Ms. Sanchez. But those two-thirds may be under the mistaken
impression that they have more than one provider available in
their area, and what if they don't?
Mr. Glass. Actually, Ms. Sanchez, I would be inclined to
think that it is the reverse. What we find is that most people
don't know that wireless ISPs like myself are an option, and we
are working to correct that by advertising as hard as we can.
Many people do not realize that we do offer a real alternative,
and will offer more of one as time goes by.
Ms. Sanchez. Ms. Sohn, do you agree with what Mr. Glass has
to say about censorship and recourse for consumers?
Ms. Sohn. AT&T engaged in blatant censorship when they
wouldn't allow Sling Media to be on their platform, even though
they allowed MLB streaming video. That was censorship as well.
I am not a First Amendment law expert, but I can tell you I
don't know of any case, Supreme Court or otherwise, that says
that a telecommunications provider, like AT&T, has absolute
First Amendment rights that don't get balanced against the
First Amendment rights of people like you and I.
Let me say something about WISPs because I love them. I
love Brett's company. I think they are terrific. But by nature,
they are niche players. They are enterprise oriented, and they
operate mostly where there aren't spectrum congestion problems.
In many places they serve as hot spots. And if you look at Mr.
Glass's own Web site, it shows you the guaranteed downstream
capacity. And for residential areas, it is 256 K, 384 K, 384 K,
512 K, 768 K. That doesn't even meet the definition of
broadband that the FCC has put out. So I admire his service. I
would love to see him compete and compete and compete; but to
say that they measure up to a Comcast or to an AT&T or even a
broadband wireless service is just not the case.
Ms. Sanchez. Thank you for your answer.
Mr. Chairman, I will submit my additional questions in
writing in the interest of time.* I yield back.
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*The material referenced was not submitted to the witness.
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Mr. Goodlatte. I thank the gentlewoman.
I am now pleased to recognize the gentleman from
California, Mr. Issa.
Mr. Issa. Mr. Glass, sometimes being around here for awhile
actually has a benefit besides sitting on the top row. Wasn't
it roughly 8 years ago that the world gold standard for high
bandwidth was 256, set by Korea when they came out with
universal 256 broadband? So how many years are you behind the
leading edge of broadband typically? When will you be at T1
speeds in your rollout?
Mr. Glass. Mr. Issa, we are not behind T1 speeds now. The
only reason why we offer lower tiers, and by the way, the FCC
standard for broadband until recently was 200 K, meaning that
every one of our services met the old standard.
Mr. Issa. Thank you.
Mr. Glass. They moved goalposts. In any case, we can do far
more. However, due to anticompetitive behaviors relative to
special access, in other words the way we get our bandwidth
from the Internet, our bandwidth is very, very expensive. The
reasons you see those rates on our page going down to those
levels is simply the bandwidth is so expensive that people
don't want to pay more to get more. We would love to give them
cheaper broadband, and we are working on it. But unfortunately
right now, due to those anticompetitive tactics, that is what
we can offer for that price.
Mr. Issa. Let me go through a line of questioning.
Mr. Glass, today with the bandwidth you have available, if
I have a small- to medium-sized business and no other access
and I wanted to run VoIP enterprise system at my business, you
would by definition, I assume, be prepared to just treat me
like any other bandwidth and interrupt me all the time and have
me have voice go up and down; or would you give me assured
service and priority so that my voice traffic was reliable and
predictable and quality?
Mr. Glass. Actually, this is one thing, Mr. Issa, that we
do differently from other ISPs. Other ISPs don't give you a
guaranteed minimum speed on your connection. Our company does
that for every customer, whether it is residential or business.
And we can go to quite high speeds as long as the customer is
willing to purchase the bandwidth.
I have right here----
Mr. Issa. Okay, so you don't have a bandwidth limitation as
earlier was said off of that sheet. That is some sort of a
misunderstanding? You can deliver high bandwidth, assured
service, and you do?
Mr. Glass. Absolutely.
Mr. Issa. Ms. Sohn, going back to you, with the FCC
sticking in the middle of something that has been growing
virtually exponentially, providing services such as hundreds or
thousands of simultaneous VoIP connections, something that
wasn't even thought of outside of a Cisco in your building
system a few years ago, what is it that the FCC brings
incrementally to this process in your opinion? What is that
they are going to do better than what has been happening the
last decade?
Ms. Sohn. They are going to provide clear rules of the road
to ensure that consumers are protected, that they can access
any Web site, any application, any content they want. They will
be bring certainty, and not just certainty for consumers.
Mr. Issa. Okay, I will assume that is exactly what they are
going to provide. Are they going to guarantee me that I can
take all of the bandwidth available at the maximum speed, that
it is given to me by the carriers? In other words, if I have 15
MIP download, they are going to guarantee that I can take all
15 at all times; right?
Ms. Sohn. No, I don't think so.
Mr. Issa. Okay, so right now--and I don't want to sound
like O'Reilly, but let me be a little bit here.
Ms. Sohn. Be my guest. You are doing a great job.
Mr. Issa. Right now, if everybody wants to take the maximum
speed, of course, the system crashes or it slows down. So
assured bandwidth, with some sort of metering or prioritizing,
in your opinion, wouldn't you say that is in the interest of
the consumer? In other words, if I need my voice traffic to
actually keep going, even while somebody else is trying to
download 10 movies simultaneously, don't I have an interest;
and how is the FCC going to do a better job than what was
already in place?
Ms. Sohn. First of all, what the FCC is doing is keeping
the status quo in place. And I think that is really, really
important here when people talk about the FCC is imposing net
neutrality.
Mr. Issa. Okay, I will take your answer as the status quo.
Mr. Downes, since I only have a few moments left, if they
are keeping the status quo and the growth has been exponential
and it has been done throughout the FCC, how am I from the dais
to understand what the benefit is to this grab by the FCC
during a recess?
Mr. Downes. Frankly, Mr. Issa, I see no benefit to what the
FCC is doing. I see only harm, and the harm is the potential
for them to slow down the process by which these things will
continue to improve. And new services and new network
management engineering will be introduced into the network over
time. The only thing that is going to happen is that will slow
down or worse.
Mr. Issa. Thank you.
Thank you, Mr. Chairman. I yield back.
Mr. Goodlatte. It is now my pleasure--this is a California-
centric thing here. This is the third woman from California I
am pleased to recognize.
Mr. Issa. We are going to give you a lot more. This is
important to California.
Mr. Goodlatte. It sure is. The rest of the country, too. We
are glad to hear from Californians, including the gentlewoman
from Silicon Valley, Ms. Lofgren.
Ms. Lofgren. Thank you. Before I ask my questions, I ask
unanimous consent to make some testimony from Consumers Union a
part of the record.
Mr. Goodlatte. Without objection.
[The information referred to follows:]

__________

Ms. Lofgren. I am glad we are having this hearing. As we
have listened to the testimony, I think it is important to
recall that something like 96 percent of Americans have a
choice of only two wire-line ISPs. If that were not the case,
we probably would have a very different set of circumstances
that face us. And when we talk about true broadband Internet,
really fast enough to allow Americans to enjoy next-generation
applications such as high-quality video, the market for true
broadband is really even smaller for most Americans.
Most of us have no alternative but our cable company which,
of course, is facing competition for content on the Internet
which raises all kinds of other potential concerns.
Now, Ms. Sohn, thank you so much for being here today. You
have been a witness many times before the Judiciary Committee.
You have described in your testimony the concern about the
monopolies and duopolies. I am wondering, can you give us a
comparison on what we are facing here with, say, another First
World area, say Europe; do they have greater competition there?
Ms. Sohn. Yes. In almost every international comparison
that you see, the U.S. is 15th, 25th as far as speed and value
is concerned. That is because we took our regulatory system
that we had in the 1990's and the early aughts and we got rid
of it when the FCC reclassified broadband Internet access as an
information service instead of telecommunication service. And
so those countries that are beating us--and it is not just
countries in Europe, it is countries in Asia, it is even
countries like Iceland and some of the Nordic countries as
well--they either require dominant telecommunications providers
to open up their networks so competitors can use them, or they
heavily subsidize their system. The government does that.
I am not necessarily a big fan of the second one since I am
a taxpayer, but I am a huge fan of the first one. If we were to
go back to Title 2, we could go there. And I think it would be
a great boon to American consumers because prices would go down
and choices would go up. I remember the narrow band world,
dial-up world. I am old enough to remember that.
Ms. Lofgren. Me too.
Ms. Sohn. In that era, American consumers had a choice of
13 Internet providers; 13. And now you are lucky if you have
two. Even here in D.C., I only have a choice of three.
Ms. Lofgren. I am still waiting for Verizon FIOS to hit my
street.
Ms. Sohn. It is wonderful.
Ms. Lofgren. Maybe that is an invitation if anyone from
Verizon is listening. Now, the competition in other countries
that have true broadband, how did they get it?
Ms. Sohn. The regulatory scheme is different. We decided
here that we are going to let the free market flourish, and
what happened is competition has sunk to where it is right now
where you have monopolies and duopolies.
Ms. Lofgren. I think it's even been discussed here today
that some of the issues are not amenable to antitrust remedies,
and I think somebody said you might be able to charge Google,
for example, a special fee for traveling on your network.
Frankly, Google could afford it. But I'm more worried about not
the Googles who are sitting financially very happily, but the
guy in the garage who doesn't have that, and that we would have
the ability really to stifle innovation without some guarantee
of access.
Ms. Sohn. That is absolutely right. Chairman Goodlatte
talked about what kind of investment would there be under net
neutrality rules. I think investment, where you are from,
Congresswoman Lofgren, would be enormous. Investment in the
next Twitter, the next NetFlix, the next Facebook, that is who
we really care about here. You are right, Google can take care
of itself. But imagine if 10 years ago Larry Page and Sergey
Brin had gone to a venture capitalist and said, I would like
you to fund this new crazy search engine idea I have; but, you
know, AT&T/Verizon are asking me to pay for transport. The VC
would say, See you later, I will invest in something else.
So it is really the next great innovation, like the ones
that were used in Egypt to stir democracy. That is what I am
really concerned about.
Ms. Lofgren. I would just note that it is necessary,
especially with the growth of video on the network, there is
going to be some crunch time here as we catch up. But my
understanding is that the rule does not forbid reasonable
network management or nondiscriminatory pro-competitive
management of the resources. I guess what I am hearing is that
is not as well defined as it needs to be. It may be correct. We
may need to have some closer definition so everybody knows what
that means. If that is the take-away from this hearing, I think
we will have achieved something.
Mr. Goodlatte. I thank the gentlewoman.
Ms. Lofgren. I thank the Chairman for yielding.
Mr. Goodlatte. The gentleman from New York, Mr. Reed is
recognized.
Mr. Reed. Thank you, Mr. Chairman, and to each and every
one of the witnesses here today.
Being relatively new to this body and to this Committee, I
will say that I have a preference for witnesses that come from
the front line, the people that are out there day in and day
out--not to mean any disrespect to the think tanks and the
academic world, we listen to them and enjoy their information--
but I would like to have a conversation from you, Mr. Glass,
because you are out there.
Since I am on the other side of the coast from California
to New York, but rural New York, western New York, in your
testimony you provided to us it talks about--I think there's a
clause here, ``Unfortunately, I am here to tell you today that
the net neutrality rules enacted by the FCC will put wireless
ISPs' efforts to provide competitive broadband and to deploy it
to the rural and urban areas that do not have access or
competition at risk.''
I want to clearly understand what brings you to that
conclusion. Can you summarize that for me?
Mr. Glass. Well, Mr. Reed, there are several reasons why it
would cause problems for us. First, it would discourage
investment. Even when the notice of proposed rulemaking came
out way before the rules were issued, we had investors who were
very concerned. One fellow actually, very dramatically, clapped
me on the back and said: The Feds are here. Small businesses
like you aren't going to be able to play anymore. Why don't you
go sell your business instead of asking for capital from me?
The second problem is the uncertainty of what we were
allowed to do and what we can't do. We don't have freedom to
innovate anymore without asking permission.
The third thing is the potential for censure by the FCC and
serious penalties, if someone who isn't even our customer comes
along and complains, and we have to either defend ourselves and
buy expensive lawyer time or potentially be fined.
Mr. Reed. Well, as a lawyer, I can understand that bill and
that concern. And I always go after the frivolous lawyers
because they give us all a bad name. And the defense cost,
being a small business developer myself, that is a risk of
business. So I appreciate that firsthand information.
Mr. Downes, in your testimony you indicated something about
the risk of unintended consequences on this report ordered out
of the FCC are high. What are those unintended consequences?
Can you articulate those for me?
Mr. Downes. Well, it is difficult to articulate unintended
consequences, but we essentially have a lot of history, not
just with the FCC and not just with the Federal Government,
State governments as well, who passed laws trying to regulate
certain problems, sometimes very specific problems--say child
pornography or indecent speech or other kinds of identify theft
or spam and so on--where the legislation, because the process
of legislating is relatively slow to the speed with which
things change in terms of technology, and especially the
Internet, by the time the legislation is passed, even with the
best of intentions, it winds up certainly not solving the
problem it intended to solve, and in fact opening up the door
for unintended types of uses where regulatory agencies or local
prosecutors would use that law to prosecute or try to interfere
with behavior that they don't like, but which was not actually
what the law was intending.
So my concern, particularly with this rule, is again that
because the FCC has said these are the only exceptions that we
are going to allow to the neutrality principle, these are the
only network engineering practices that we think are
acceptable, even though they're inconsistent, that the
unintended consequence here will be a slowdown in the
innovation of new techniques that we desperately need to keep
the growth that we have.
Mr. Reed. Thank you very much.
Ms. Sohn, do you see any unintended consequences on the
horizon? I understand unintended consequence are hard to
identify and articulate, but we have been regulating many
industries for long periods of time. Do you see any similar
situations where the unintended consequences could flow out of
these types of actions?
Ms. Sohn. Well, look, you can always have unintended
consequences. But I do think my fellow panelists are
exaggerating, and let me tell you why. First of all, both of
them say there have been hardly any documented instances of
discrimination, so what is the problem? If that is the case,
then you will not have hundreds of complaints.
My organization was one of the organizations that brought
the complaint against Comcast for throttling back BitTorrent.
That took an awful lot of work, okay, and the FCC rules say you
have to make a prima facie case. So even if you give standing
to everybody, not everybody has the expertise. And I can say in
my organization, they don't have the resources to represent
everybody. So I think that unintended consequence is a little
overwrought because it is really, really hard to bring a
legitimate complaint.
And would you rather have class action suits? Would you
rather have the States take care of it? I mean, class action
suits were brought against Comcast in California and in
Florida. So in some ways this process is even better
Mr. Reed. I am a States' rights guy, so I would tread
lightly there because the Federal Government, in my opinion,
should be a limited Federal Government. So I would defer to the
States.
Mr. Chairman, my time has expired so I will yield back.
Mr. Goodlatte. I thank the gentleman. Now I proceed to
recognize another Californian, the gentleman from Los Angeles,
Mr. Berman.
Mr. Berman. Thank you, Mr. Chairman. It is good to be here.
On medical malpractice, I am a States' rights guy.
We need to be on this whole subject, I think we need to be
careful; at least my view is net neutrality means neutral as in
anti-discriminatory and not necessarily a totally open net. If
the FCC is going to regulate, there needs to be allowances for
reasonable network management to stem the flow of infringing
works, child pornography, unlawful content not in the American
sense of unlawful, not in the Mubarak sense of unlawful. And
why do I say that? Because I really think, ultimately, without
the incentives for legitimate content, the Internet is never
going to reach its full potential, which I think is a goal of
the FCC, and it is therefore critical that policy makes it
clear that steps can be taken to protect content from being
stolen and that the existing rules do not prohibit ISPs from
taking reasonable steps to do so.
I would like to ask one question. Ms. Sohn, how the heck
are you?
Ms. Sohn. I am shocked you are asking me that question.
Mr. Berman. I thought you were going to say, Why don't you
go back to Foreign Affairs?
In your testimony, you cite to the Comcast decision as one
which illustrates a claim for why a provider may block access,
and I will quote you here: Both providers deny wrongdoing and
claim that these practices were designed to handle congestion,
but in neither case did providers disclose their traffic
management practices to subscribers. It is ironic that
providers which publicly proclaim they have no intention of
ever actually blocking or degrading content routinely include
statements in their terms of service that would allow them to
engage in precisely these practices and without prior notice to
consumers.
I would like to get a little better handle on what concern
you are expressing. Do you disagree there may be an appropriate
situation in which access is denied or blocked and is the issue
notices to subscribers? From your testimony, there is an
acknowledgement that subscribers were informed in their terms
of service, so is it something else that you are seeking here?
Ms. Sohn. So both former E&C Chairman Waxman and the FCC, I
think wisely, decided to take matters of network management--
that is, making the network flow properly--they took copyright
infringement and pornography enforcement out of that standard,
and I think that was the right choice. But what the FCC did do,
and I agreed with this, it said there should be nothing in the
net neutrality rules that prevents Internet service providers
from taking reasonable measures to protect against copyright
infringement. And it also says that nothing in the net
neutrality rules should prevent the enforcement of intellectual
property laws.
So the point there is ISPs, if they engage in reasonable
measures to enforce copyright, would be well within the net
neutrality rules. And as I understand it today, content
providers and ISPs are talking about what those reasonable
measures should be.
So it is not network management in my mind, because that is
about making sure that there is no congestion, but nothing in
the FCC's rule would prohibit something like that happening. I
am not a fan of blocking. I am certainly not a fan of ISPs
throwing customers off the network, although they do have that
ability to do that under the Digital Millennium Copyright Act
if they are adjudged to be infringers, but I am not concerned
that the network neutrality rules would prohibit reasonable
measures to ensure that copyright.
Mr. Berman. So you are telling me that if my concern about
net neutrality rules is that it will be interpreted to
essentially prohibit ISPs from getting involved in efforts,
reasonable steps to stop infringing material, I shouldn't be
concerned because you are not seeking that?
Ms. Sohn. It is right there in the order. I don't want to
be boastful, but I helped to negotiate that language. I guess I
am being boastful. No, you should not worry.
Mr. Berman. That is the kind of thing that you can boast
about any time for my purposes. Thank you.
I yield back.
Mr. Goodlatte. The gentleman from Pennsylvania, Mr. Marino
is recognized for 25 minutes.
Mr. Marino. I guess I am going to pose this question to all
three of you; but, Ms. Sohn, I will start with you. If the FCC
gets involved here, would you agree with me that it needs an
entirely additional level of administration?
Ms. Sohn. Well, I might agree that it could probably use
one or two more administrative law judges to the extent there
may be more adjudication. But the point I want to make, there
is also this body called the Broadband Internet Technology
Advisory Group, and I sit on its board along with Verizon,
AT&T, Comcast, Google and others. That is going to be a place,
a nongovernmental, multi-stakeholder forum where ISPs and
others can go to get predeterminations as to whether something
is reasonable network management.
I think that is going to take the load off the FCC from
having to have layers and layers of new bureaucracy. They will
still have to have some.
Mr. Marino. If it is going to take the load off, then why
have the FCC--and we are in a position here in this country
where spending is out of control. Government is way too big,
and we are talking about creating another administrative
branch, even if it is a branch of the FCC, to come in and
regulate.
Now, in my research concerning the FCC, it has been having
a tough time regulating television and other matters. I see
this as, in addition to an impingement of perhaps
constitutional rights violations, free speech, we have an
entirely new, additional branch of government that we have to
pay and it is something that we can't afford at this point.
Ms. Sohn. Well, look, the BITAG cannot enforce rules. It is
not a government entity. It is a multi-stakeholder group that's
only purpose is to tell ISPs whether, according to good
engineering technique, or common engineering technique,
something is reasonable network management or not. You still
need a government agency to enforce rules of the road.
So you need both. I don't disagree with you. We don't want
to bloat government bigger than it is already; however, they
may need to shift some resources. They only have one or two
administrative law judges, which is crazy. They have
adjudications in other places. So they will need to add a few
people, but I don't see it becoming more bloated.
Mr. Marino. I have heard that before with the Federal
Government. Let's start out with 2, and a year later it is 222.
If we are going to hire more administrative law judges, I would
be forced to argue there are other areas where we need
administrative law judges, you and I disagree on that. Mr.
Glass and then Mr. Downes, would you care to respond?
Mr. Glass. Mr. Marino, I have actually expressed this in
writings earlier that I made online. One of my concerns is that
the push for network neutrality regulations at the FCC has
diverted it from other pursuits which are more important. The
FCC, after it published the national broadband plan, laid out a
calendar that said certain things are going to be done in 2010.
And because it was spending so much time and energy and money
on addressing net neutrality, there were goals that it set for
the third quarter of 2010 that it has not yet gotten to. So I
am very concerned that it wasted a lot of the Commission's
resources.
Mr. Downes. I certainly agree with that, particularly in
terms of spectrum reform, which is another matter altogether. I
think it is important to understand that the FCC has been out
of the business of regulating the Internet in any respect since
1996. One of the things that is clear from the proceedings of
the last year is that the FCC, and I don't mean any disrespect
to the very hardworking staff over there, but they just don't
understand technologically what happened in that intervening
period. If they are going to start enforcing reasonable network
managing practices, the engineering expertise will have to come
up significantly from where it is.
I agree with Ms. Sohn that BITAG has great potential to
assist them if they listen to the recommendations of BITAG. But
in order for them to actually enforce these provisions, they
are going to have to do things we don't necessarily like, which
is look very closely at a lot of Internet traffic to see if in
fact discrimination is happening, or if the speed is happening
because the speed is happening.
Mr. Marino. Just quickly, Mr. Downes, first, I want you to
address the constitutionality or lack thereof, particularly
pertaining to free speech, how do you see FCC, if it does have
control and authority, drawing that line between the two?
Mr. Downes. The Report and Order sort of hedges its bets
and contradicts itself in some sense, because the FCC does
recognize under the Constitution and section 230 of the
Communications Act, Internet service providers have the ability
to shape content in many meaningful ways. So they haven't
outright said they are going to stop that practice. But on the
other hand, they said we don't see ISPs as typically being
speakers. And at the same time, they recognize that under the
Constitution and 230, they do have certain rights.
Mr. Glass. Mr. Marino, I don't believe it is a First
Amendment issue. There may be some Fifth Amendment issues, I
think, possibly here, in that if conforming to these rules
cripples our network, it may be considered regulatory taking.
Ms. Sohn. I am not sure what kind of speech a broadband
Internet access provider actually is engaging in.
Mr. Marino. That is my point.
Ms. Sohn. Well, no court that I know of has ever said that
the owner of the infrastructure has an absolute First Amendment
right. And to the extent that the courts have addressed it, it
always has been balanced against the rights of the public to
receive information. The classic case is the Turner case. It is
an old case, but it still is the leading precedent in this area
which said that cable operators had to carry over-the-air
broadcast stations because the public had the right to see free
over-the-air broadcast TV.
Mr. Marino. Don't you see an onslaught of additional
litigation?
Ms. Sohn. There already is.
Mr. Marino. I mean more?
Ms. Sohn. Look, if Verizon and Metro PCS want to drop their
lawsuit against the FCC, I would be all for it.
Mr. Marino. That is an issue not before us, but that is my
concern of, again, the additional litigation involved here plus
the fact that the cost, that it is going to be to the American
taxpayers.
Mr. Goodlatte. If the gentleman would yield, the issue in
that lawsuit is the very topic of the discussion here today
being approached from a different vantage point, and that is,
is the FCC under the laws passed by Congress entitled to do
what they are trying to do?
It is now my pleasure to yield to the fourth woman from
California, Ms. Waters.
Ms. Waters. Thank you very much, Mr. Chairman.
Before I begin my questions, I ask unanimous consent to
submit for the record the Department of Justice's competitive
impact statement prepared by the agency's antitrust division in
connection to the Comcast-NBC merger approval.
Mr. Goodlatte. Without objection.
[The information referred to follows:]

__________

Ms. Waters. I have another submission and that is from a
group of economists sent to the FCC discussing the importance
of net neutrality rules.
Mr. Goodlatte. Without objection, so ordered.
[The information referred to follows:]

__________

Ms. Waters. Thank you very much, Mr. Chairman.
I would like to thank our panelists for being here today. I
find this discussion very engaging, and I am particularly
interested, since I spent so much time on the Comcast-NBC
merger and learned so much about the power of a huge
organization with a lot of resources.
And I want to know, and I would like to ask Ms. Sohn, what
challenges will exist for online content providers in light of
mergers that will follow the Comcast-NBC merger? How can an ISP
like LARIAT, for example, compete against an ISP like Comcast-
NBC?
Ms. Sohn. First, Congresswoman Waters, I really want to
thank you for the work you did, really bringing the public's
attention to that merger, because it was a merger of
unprecedented proportions. I was disappointed that nobody--few
people in the government, save you and perhaps Mr. Cole and Mr.
Frank and the Senate, had the guts to say, How can we even
consider this? But, unfortunately, you guys were really sole
practitioners in that regard.
So, you know, I don't think Larry can compete. There is no
way. I mean, Comcast now has this vertical merger of one of the
most popular broadcast networks in the country. And also, it is
the biggest Internet service provider and the biggest cable
operator. I think the Justice Department did the best it could
within the limits that it had. Again, in fear of Trinko, I will
say they didn't want to push too far because they were
concerned about these precedents that really limit antitrust
law.
So the good news about the competitive impact statement
that you just submitted for the record is that it says that
online video distributors, what I call OVDs, are competitors.
They are part of the market, and that big ISPs like Comcast
cannot discriminate against them, cannot withhold programming
from them, and cannot throttle their traffic when they provide
online service.
Ms. Waters. Thank you very much.
Let me just ask in what ways can Internet service providers
impede access to content, products, services available on the
Internet, and what options do Internet users have if they find
they cannot access certain content, products, or services?
Ms. Sohn. They can either slow an application for a service
provider's service. They can block it. Or they can slow it so
much that it is almost like blocking it. That is what we were
challenging in the Comcast-BitTorrent case.
So there are many different ways that Internet access
providers can hurt consumers' access to the things they want to
access over the Internet.
What is the recourse? Well, that is what the FCC rules are
all about. They are about providing rules of the road so that
consumers, if they do see that they are being unlawfully
blocked or degraded from the content, services, and
applications that they want to access, that they can go
somewhere and have some recourse. And if these rules are
overturned, either in court or by the Congress, through the
Congressional Review Act or by any other method, then consumers
will not have that. They will basically be out in the cold.
Ms. Waters. You are basically saying there will be no
options?
Ms. Sohn. Absolutely. Again, as I mentioned before you were
here, antitrust law has been so neutered for regulated
industries like broadband Internet access providers, that right
now without some kind of law being passed by this Subcommittee
and the Judiciary Committee, there is no recourse there either
for consumers.
Ms. Waters. If I have time left, do you have an opinion
about what you saw happening in the Congress of the United
States? I found, in talking with Members, that many Members
were confused or misled as to what net neutrality is or should
be, and so many of them didn't even know--of the 74 who signed
on to that letter, didn't realize. What is the confusion, and
do you have any ideas how we can help people clear up what net
neutrality is and what it isn't?
Ms. Sohn. Net neutrality, quite simply, prohibits telephone
and cable operators who are the two main, who provide the two
main on-ramps to the Internet, from picking winners and losers,
from deciding that Microsoft is going to win over Google. Or
deciding that LinkedIn is going to win over Facebook. So that's
what it is about.
It is really no different than the telecommunications
regulation we have had in this country for 100 years that said
that telephone companies cannot decide whether your phone call
is going to go faster than my phone call, or whether Mr.
Glass's phone call is going to be a better quality than my
phone call. It is that simple.
Ms. Waters. Thank you very much.
I yield back the balance of my time.
Mr. Goodlatte. It is now my pleasure to recognize the
gentleman from Arizona, Mr. Quayle, for 5 minutes.
Mr. Quayle. Thank you, Mr. Chairman.
Ms. Sohn, I am going to get back to some of the beginning
testimony because I am trying to figure out the numbers. The 92
percent of people who live in areas where broadband is only a
monopoly or duopoly, does that include wireless providers in
that number as well?
Ms. Sohn. To the extent that wireless providers are
providing what the FCC now says is broadband, so the FCC's
definition of broadband is 4 megabits down and one megabit up,
and a lot of wireless providers are not providing those kinds
of speeds. That may change soon, but it is not the case today.
Mr. Quayle. So that is only wired?
Ms. Sohn. To the extent that there are any wireless, I
don't know of any wireless providers that are providing those
kinds of speed. So the answer is yes.
Mr. Quayle. So as wireless continues to evolve and
innovation continues to evolve on the wireless front with the
expansion of 4G and then 5G, won't that alleviate any of the
competition concerns that you have going forward, because there
will be enough competition via wireless carriers, via phone,
via cable, via probably other avenues where you can actually
address this with the market system rather than having the FCC
regulate this on this basis?
Ms. Sohn. I am afraid not, particularly because the two
largest landline providers, AT&T and Verizon, are also the two
largest wireless providers. Everybody else is struggling for
air. I mean, T-Mobile, Leap, Sprint, they are struggling to
compete against AT&T and Verizon. So, no. I wish it was the
case, but it is not at all the case that as--and again, in so
many issues that I work on in Public Knowledge, we are always
told the next great thing is around the corner, so why
regulate? I am still waiting for broadband over power lines.
Clearwire just abandoned residential service. That is a
wireless home service. They just abandoned it to go to
enterprise.
Mr. Quayle. Mr. Downes, can you address that question? Do
you agree with Ms. Sohn's assessment?
Mr. Downes. Only in part. It is true that the statistics
that Ms. Sohn and some of the other members have cited from the
national broadband plan, that was a reference to wire-line
broadband. There is a separate set of statistics that are in
the plan to talk about wireless competition. And, of course as
we know, wireless competition is much more robust. There are
many more providers.
I think it is absolutely the case that as 4G networks and
later networks get rolled out, assuming that we can solve our
spectrum issues, and we know this as consumers, we are moving
away from the sort of fixed computer experience of the Internet
and moving to a mobile Internet. It is app-based. It is an app-
based economy. As that happens and as we get the 4G speeds and
the kinds of capacity, yes, it will provide more options and
more competition.
It is true that one of the most promising technologies,
particularly for the rural areas that may today have no
options, is broadband over powerline. And I would reference my
written testimony where I point out that the FCC has been
delaying and interfering with the ability of VPL providers to
do experiments. So if what the FCC wants is more competition,
they really ought to be more supportive of new technologies
rather than holding them up.
Mr. Quayle. Mr. Glass, Ms. Sohn was talking earlier about
innovation within Internet companies, Facebook, Twitter. Now,
how would the Open Internet Order deter other companies like
yours from expanding and upgrading their services, because it
seems like there would be a lot of capital-intensive
improvements that you do that could fall by the wayside to
somebody else?
Mr. Glass. Mr. Quayle, actually we are involved right now
in some very capital-intensive upgrades. This radio I have here
in my hand, we are deploying these. These allow access to the
Internet at 54 million bits per second. We can attach these to
an antennae, put it on your house, and you can get up to that
speed. There is a question of cost still, but we are working on
that very heavily.
The big problem we see is being able to raise capital, as I
mentioned before. If people believe that we are a little guy
and we are unduly impacted by regulation, that is what is going
to hurt.
When we recently expanded our network, and as a matter of
fact, we are in the process of completing the expansion now. We
went to our customers and we asked them if they would invest in
us by paying ahead for a year of service. Now, that is a
Faustian bargain because it kills your cash flow. You get a lot
of money up front, a lot of capital up front, but you also have
a huge liability at that point. We had to do that because we
could not get conventional investors to invest in our company.
Mr. Quayle. Mr. Downes, there has been a lot of talk about
antitrust laws and how some people believe they are not
effective for this area. Do you believe the antitrust laws can
adequately account for any misbehavior by Internet service
providers and monopolistic opportunities they may have?
Mr. Downes. Yes. It is theoretical because we have not
tested them, and we have not tested them because there haven't
been any serious cases that require testing them. I don't
necessarily read the Trinko opinion the same way as Ms. Sohn
does. I have every reason to believe that between the FTC and
the Justice Department, if there were serious anticompetitive
problems that had demonstrable consumer harms, the effect of
which was to reduce the Open Internet, I am quite confident
that our existing antitrust laws and enforcement mechanisms
would take care of the problem.
Mr. Quayle. Thank you very much. I yield back.
Mr. Goodlatte. I thank you. I am now pleased to recognize
the gentlewoman from Texas, Ms. Jackson Lee.
Ms. Jackson Lee. Mr. Chairman, my interest in this
Committee is about creating jobs and competitiveness. I am
going to kick the football in your direction, Ms. Sohn. Do you
think that the Justice Department--and in this instance I think
you said the FTC--the FTC are sufficient and have taken note
enough to determine whether or not they need to file action and
whether or not there is an anticompetitive impact on some of
the entities that you are suggesting are negatively impacted,
and is there a reason why they haven't acted?
Ms. Sohn. I believe that the Supreme Court has effectively
gutted antitrust enforcement when it comes to regulated
companies like the telephone and cable companies that provide
broadband Internet access service. The Trinko case and the
Credit Suisse case--and it is not just me saying this--Howard
Shelanski, I mentioned him before, he testified in front of the
Subcommittee on Courts in June, and he basically said that the
Trinko and Credit Suisse cases have made it virtually
impossible to apply antitrust.
Ms. Jackson Lee. What would you offer as a remedy?
Ms. Sohn. I think Congress has to reverse those decisions
and revivify antitrust law. I think it will be helpful in a lot
of different ways.
Ms. Jackson Lee. And that would be overall, because I think
the antitrust laws are weak, period.
Ms. Sohn. Absolutely.
Ms. Jackson Lee. We just recently saw a merger dealing with
Continental and United, and it is almost as if the Justice
Department said we have no teeth, we have no ability to
respond. So you are suggesting a legislative fix?
Ms. Sohn. Absolutely. That is the only way you are going to
be able to overturn a Supreme Court precedent like that.
Ms. Jackson Lee. Mr. Downes, if you have large
telecommunications companies who also operate as Internet
service providers, and they might be perceived as unfairly
thwarting competition by slowing down the Internet speed of
access for customers who access the Web sites, do you see a
solution for them? What solution would you offer?
Mr. Downes. So you are talking about telecommunication
companies who also are service providers?
Ms. Jackson Lee. And someone is trying to access, and
because you have another provider, you might be slow in having
access. Do you see a remedy for that?
Mr. Downes. Obviously, one remedy is to switch. You don't
have to buy the whole bundle of services from the same
provider. If you have more than one choice, you can have cable
from Comcast and telephone from AT&T and Internet from Verizon
if it is mobile. So you have your choice of providers in many
areas.
In the areas you don't, I think one of the things to
recognize is that--and we see it quite dramatically in what
happened in Egypt over the last month. The very tools that have
made the Internet so powerful in the last few years in
particular allow consumers really to exercise their
dissatisfaction and unhappiness with governments or with
companies much more easily and effectively and quickly than
ever before.
Ms. Jackson Lee. What I am trying to say, they try to
access these giants from their Web site, from a competitor
Internet service. That is the question. And they feel that they
are not getting the access as quickly as possible. It can't be
that they can go to Verizon. They are talking about those
particular entities.
Mr. Downes. I'm not clear what you are asking. You're a
Comcast customer and you want to go to Verizon?
Ms. Jackson Lee. No. You are a small consumer and you are
trying to go to AT&T or Verizon, and you are not able to access
as quickly as you would like; it is a slow process. Do you
think there would be any slowing down of the utilization of
those services?
Mr. Downes. Well, it depends on what is causing the
slowdown. A lot of times you experience slowdowns because of
technical----
Ms. Jackson Lee. You don't think it would be purposeful and
you don't think that small companies should have some
protection?
Mr. Downes. It could be purposeful.
Ms. Jackson Lee. What would you perceive to be a remedy for
that?
Mr. Downes. The antitrust enforcement mechanisms that
already exist for anticompetitive behaviors that have
demonstrable consumer harms.
Ms. Jackson Lee. You feel comfortable that they are
sufficient?
Mr. Downes. Yes. As I say, since we haven't tested them, we
don't know. And we haven't tested them because we haven't
needed to.
Ms. Jackson Lee. Let me go to Mr. Glass. Let me ask you the
same question. Do you believe that the current laws which
protect against monopolies or duopolies in Internet service
providers and broadband providers are sufficient? Do you
believe antitrust laws can protect small companies?
Mr. Glass. Ms. Jackson Lee, I think the law needs fixing. I
am especially concerned about what will happen if the FCC rules
stand, because as Ms. Sohn sort of alluded, when we become a
regulated entity, then suddenly Trinko kicks in and we lose
remedies under the laws.
Ms. Jackson Lee. What do you want to see strengthened under
the antitrust laws?
Mr. Glass. I would like to have the ability to take action
under antitrust to deal with the problem I am having right
now--anticompetitive pricing of the inputs to my business by
the telephone company.
Let me explain. I rent leased lines from the telephone
company to connect me to the Internet. They charge me more per
megabit per second for wholesale connections to the Internet
than they do to retail consumers who are buying DSL from them.
As a result, they are trying to make it impossible for me to be
competitive and also be profitable. I would like to be able to
take action about that.
Ms. Jackson Lee. Do they argue that you are in an area that
is difficult to serve? Do you make that kind of argument?
Mr. Glass. Actually, there is no rational justification.
The physical plant, the wires, have been fully depreciated for
decades. There is no reason why they could sell me that access
at a very low cost, except they want to prevent me from being a
better competitor.
Ms. Jackson Lee. Mr. Chairman, to conclude, we have had the
privilege of serving on this Committee in past Congresses and,
frankly, have had these hearings. I would make the argument
that we want to see competitiveness. We like large companies
and small companies. But I wonder whether or not we in the
Judiciary Committee are going to be the only ones who will
raise this concern and whether our collaborators on Energy and
Commerce will not, and whether or not we will be able to move
forward in trying to answer some of the concerns and still
balancing the commitment to competitiveness and providing jobs
that our large companies do provide.
I yield back.
Mr. Goodlatte. I thank the gentlewoman for her comments,
and look forward to working with her on that very objective.
It is now my pleasure to yield to the Ranking Member of the
Subcommittee, the gentleman from North Carolina, Mr. Watt.
Mr. Watt. Thank you, Mr. Chairman.
I apologize to the Chairman and the witnesses for not being
here earlier, and I thank Mr. Conyers and Ms. Chu for
substituting for me. I had to go over to the White House to the
Presidential Medal of Freedom presentation. One of my
constituents, or somebody who lives just outside my
congressional district was being honored, so I needed to be
there, along with John Lewis and Stan Musial and Yo-Yo Ma and
Warren Buffett and some other people. I didn't need to be there
for those reasons, but I needed to be there for my constituent.
I thought I would not ask questions, but just sitting here
listening to the questions that got asked, I got provoked to
ask a couple of questions. Somebody was talking about somebody
providing broadband over power lines. Who in the world is doing
that, and who would have the incentive to do that in today's
market? Is anybody actually doing that?
Mr. Downes. Yes. It's a technology that has been in
development for quite some time.
Mr. Watt. Is anybody doing it?
Mr. Downes. There are a number of companies that are doing
trials with it. It is very attractive for rural customers
because the infrastructure is already in place. They already
have electricity, where they may not have high-speed Internet
connections, or they can't get mobile for obvious reasons. So
it is, in fact, a very appealing technology, but so far it has
not been commercially successful.
Mr. Watt. And would the FCC's order have some impact on
that one way or another? I mean, would it disincentivize it or
would it have any impact on it at all.
Mr. Downes. Well, the BPL providers would be subject to the
same rules as any other Internet provider, assuming they're
offering broadband speeds, which is what they are doing. My
point was just that up until now, the FCC has not been
particularly helpful in encouraging this new technology, and in
fact has been criticized by the courts for rulings that have
slowed down the deployment of that technology. There is a
concern that it interferes with hand radio operators.
Mr. Watt. I thought you all wanted the FCC to get out of
the way.
Mr. Downes. Get out of the way of the broadband power line,
yes.
Mr. Watt. You want them in in some things and out of other
things. Okay. All right, I got you. That's what most people
want. They want what they want, and then they want them out of
the way when they don't want what they want.
Let me just ask a general question to all three of you. I
don't know how you promote competition in a capital-intensive,
cost-prohibitive industry. I mean, you know, you're ending up
with two major carriers here, Verizon and AT&T. I mean, a lot
of our private enterprise is becoming more and more
concentrated just because, I mean, there's just--these in many
ways are utilities, and the capital costs are so heavy. I'm
just trying to figure out how do we promote competition in
these areas?
Ms. Sohn, and then we will just go down the line, and then
I will yield back, Mr. Chairman.
Ms. Sohn. Ranking Member Watt, I mean, you are absolutely
correct; there are very high barriers to entry. Not everybody
can get spectrum. And T-Mobile and Sprint are begging the
Federal Government to perhaps put limits on what AT&T and
Verizon has, so they can get some more. Not everybody can lay
lines, coaxial cable. You have to get permission from the State
government, so the barriers to entry are huge.
So what do you do? I think the answer is to do what the
countries in Europe, Scandinavian countries, and in Asia are
doing and beating us at broadband value and speed. You have to
go back to the way we regulated these entities in the nineties
and the early aughts. You have to require the dominant
telecommunications and cable providers to open up their
networks so competitors can use them as well, what we call line
sharing--some call line sharing, unbundling, there are
different ways. But the notion is the countries that have
dozens of Internet service providers are those that have
required the big guys--the British telecoms, the French
telecoms, to open up their networks to competitor----
Mr. Watt. So how do you responded to their argument that
they paid for that and therefore shouldn't give it away, or
give it away at reduced cost after they've developed it?
Ms. Sohn. Well, without public rights of way, there would
be no cable industry, there would be no telephone industry. I
mean, they are----
Mr. Watt. And basically you're using this as a public
utility argument.
Ms. Sohn. Exactly.
Mr. Watt. Okay. Mr. Glass and Mr. Downs, and then I'll
yield back.
Mr. Glass. Yes, Ranking Member Watt. The best way to
promote competition, I think, is to do several things. The
capital cost of the kind of wireless that I provide is actually
within reach. It's not insurmountable. It's never easy to raise
capital, but it certainly is possible. What we need to do is
encourage investors to bring that capital to the table, and in
order to do that we need to be very careful about deterring
them using regulation.
We need to reduce barriers to entry--and again, regulation
is potentially a barrier to entry in this arena. We need to
come down hard on anticompetitive tactics. We've already talked
a little bit about special access as being one of the barriers
to rural broadband deployment.That is an anticompetitive
tactic. It's not asking to use something for free, it's asking
to get something at a reasonable price.
We also need to deal with spectrum. The preemptive bids by
the large incumbents so as to lock out competition are
something which the FCC hasn't addressed and really does need
to address.
But mainly I guess I need to come back to the point that
I've been making throughout the hearing. As Henry David Thoreau
once said, ``Government never furthered any enterprise but the
alacrity with which it got out of the way.'' What we need is
simply to remove the barriers, and then the market will
encourage investment and will encourage deployment.
Mr. Downes. I think for many reasons the most attractive
option for more competition, particularly with broadband
Internet access, is in the mobile space. With more wireless
providers, that's where the technology is going, and also
that's where the consumers are going as well. The most
effective thing we can do then to promote more competition
would be to do a better job of managing the existing spectrum.
That was a goal the FCC had last year. They didn't really work
on it because of the net neutrality proceeding. We'd like to
see them go back to that and actually start with an inventory
just of who has what spectrum in the first place, and then see
if we can find ways to manage it more effectively so we can
speed up the competition offered by broadband mobile providers.
Mr. Watt. My time is up, but it just seems ironic that
you're saying on one side get the FCC out of the way, and then
saying on the other side put the FCC back in and let them do
this. I mean, I don't know how you can have it both ways. I
mean, I understand what you're saying, it just seems--but now
is not the place to pursue it.
I appreciate the Chairman's indulgence.
Mr. Goodlatte. I appreciate the gentleman's comments as
well. And I will just close by saying that it was over 10 years
ago that I introduced legislation--probably the first net
neutrality legislation introduced in the Congress--along with
Congressman Rick Boucher in 1999, I think. We didn't call it
``net neutrality,'' we called it ``open access.'' It was
designed to make sure that there was open competition on the
Internet, but it was antitrust-based. And it never got to the
finish line because the various interested parties in this kept
shifting sides, and the sands underneath our legislation kept
shifting. Some of the companies that were supporting our
legislation back then are now looking in a different direction.
Some that were opposing our legislation back then would very
much support the idea today.
I very much agree with Mr. Downes' comment; the principle
purpose of the FCC is to allocate spectrum and to try to find
the most efficient way to do that; that spectrum is public
property, if you will, and therefore it is the reason for the
existence of the FCC.
I think the FCC has been on mission creep for decades now.
And we need to be very, very careful that we don't put
ourselves in a situation where we think that it is a great idea
to have the FCC regulate the Internet the same way they have
regulated the telecommunications industry and others. This is a
rapidly changing, dynamic environment, and all kinds of
decisions are made by all kinds of companies based upon what's
going to be available in terms of capital, what's going to be
available in terms of new technology and new ideas.
And I don't think it's going to happen if we empower the
FCC in a way that they have clearly not been empowered in the
past. They've been rebuffed by the courts in this area. They
have chosen to take a different route that I think is very
spurious in what they are attempting to do, and I hope the
courts will rebuff them again. But failing that, I think that
Congress should act, and I agree that it shouldn't just be a
negative act to stop the FCC; it should be a positive act to
look at our antitrust laws and see if they give appropriate
access to small actors like Mr. Glass, and to look to see
whether laws written 100 years ago are responsive to this
dynamic environment.
But if they are clear rules of the road that exist before a
decision is made to develop a product or to come up with the
finances for it, we will be better served than to go down a
path where we set about trying to find the capital, find the
people to take the risks, and then have the rules changed in
the middle of the game, which is where I fear the FCC will lead
us.
So I thank everyone for their participation. It has been a
very, very good discussion.
And without objection, all Members will have 5 legislative
days to submit to the Chair additional written questions for
witnesses, which we will forward and ask the witnesses to
respond as promptly as they can so that their answers may be
made a part of the record.
And without objection, all Members will have 5 legislative
days to submit any additional materials for inclusion in the
record.
And with that, I again thank our great witnesses, and this
hearing is adjourned.
[Whereupon, at 4:20 p.m., the Subcommittee was adjourned.]

A P P E N D I X

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Material Submitted for the Hearing Record

Letter from Lisa R. Youngers, Vice President, External Affairs,
XO Communications, and Others