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+ - ENSURING COMPETITION ON THE INTERNET: NET NEUTRALITY AND ANTITRUST
+
+[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
+
+
+
+ U.S. GOVERNMENT PRINTING OFFICE
+64-583 WASHINGTON : 2011
+-----------------------------------------------------------------------
+For sale by the Superintendent of Documents, U.S. Government Printing Office,
+http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202�09512�091800, or 866�09512�091800 (toll-free). E-mail, [email protected].
+
+ 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
+
+ ----------
+
+ 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:]
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+ __________
+
+ 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:]
+
+
+
+
+
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+
+
+
+
+
+
+ __________
+
+ 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.
+---------------------------------------------------------------------------
+ *The material referenced was not submitted to the witness.
+---------------------------------------------------------------------------
+ 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:]
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+ __________
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+ 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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+ ----------
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+ Material Submitted for the Hearing Record
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+ Letter from Lisa R. Youngers, Vice President, External Affairs,
+ XO Communications, and Others
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