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


 
  ENSURING COMPETITION ON THE INTERNET: NET NEUTRALITY AND ANTITRUST 
                          (PART II), FCC PANEL

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

                                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

                               __________

                              MAY 5, 2011

                               __________

                           Serial No. 112-40

                               __________

         Printed for the use of the Committee on the Judiciary


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



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                       COMMITTEE ON THE JUDICIARY

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

      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

                   BEN QUAYLE, Arizona, Vice-Chairman

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

                     Blaine Merritt, Chief Counsel

                   Stephanie Moore, Minority Counsel


                            C O N T E N T S

                              ----------                              

                              MAY 5, 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 Melvin L. Watt, a Representative in Congress from 
  the State of North Carolina, and Ranking Member, Subcommittee 
  on Intellectual Property, Competition, and the Internet........     3
The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, Ranking Member, Committee on the 
  Judiciary, and Member, Subcommittee on Intellectual Property, 
  Competition, and the Internet..................................     4
The Honorable Darrell E. Issa, a Representative in Congress from 
  the State of California, and Member, Subcommittee on 
  Intellectual Property, Competition, and the Internet...........     5

                               WITNESSES

The Honorable Julius Genachowski, Chairman, Federal 
  Communications Commission
  Oral Testimony.................................................     7
  Prepared Statement.............................................    10
The Honorable Robert M. McDowell, Commissioner, Federal 
  Communications Commission
  Oral Testimony.................................................    15
  Prepared Statement.............................................    17

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Material submitted by the Honorable Julius Genachowski, Chairman, 
  Federal Communications Commission..............................    69

                                APPENDIX
               Material Submitted for the Hearing Record

Response of the Honorable Julius Genachowski, Chairman, Federal 
  Communications Commission, to Post-Hearing Questions from the 
  Honorable Howard Coble.........................................   286
Response of the Honorable Julius Genachowski, Chairman, Federal 
  Communications Commission, to Post-Hearing Questions from the 
  Honorable Jerrold Nadler.......................................   287
Response of the Honorable Robert M. McDowell, Commissioner, 
  Federal Communications Commission, to Post-Hearing Questions 
  from the Honorable Jerrold Nadler..............................   289


  ENSURING COMPETITION ON THE INTERNET: NET NEUTRALITY AND ANTITRUST 
                          (PART II), FCC PANEL

                              ----------                              


                         THURSDAY, MAY 5, 2011

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

    The Subcommittee met, pursuant to call, at 10:03 a.m., in 
room 2141, Rayburn Office Building, the Honorable Bob Goodlatte 
(Chairman of the Subcommittee) presiding.
    Present: Representatives Goodlatte, Quayle, Smith, Coble, 
Chabot, Issa, Jordan, Chaffetz, Griffin, Watt, Conyers, Berman, 
Chu, Sanchez, Lofgren, Jackson Lee, Waters.
    Staff present: (Majority) Holt Lackey, Counsel; Olivia Lee, 
Clerk; and Stephanie Moore, Minority Counsel.
    Mr. Goodlatte. Good morning. The Subcommittee on 
Intellectual Property, Competition and the Internet will come 
to order.
    I have an opening statement. Today's hearing is the second 
part of the Subcommittee's inquiry into ``Ensuring Competition 
on the Internet: Net Neutrality and Antitrust.'' This hearing, 
like the Subcommittee's February 15, 2011 hearing, will explore 
the FCC's Open Internet Order, whether the FCC had the 
authority to issue it and how it will affect Internet 
competition and innovation. Our previous hearing only 
reinforced my belief that the widely criticized order 
circumvents Congress' lawmaking authority and will stifle 
innovation in a morass of bureaucratic rules.
    I conducted our previous hearing at a first--as 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. Congress has taken several additional steps 
since then. One important step was the passage, early last 
month, of House Joint Resolution 37 which disapproves of the 
Open Internet Order pursuant to the Congressional Review Act.
    However, Congress' effort to protect the Internet and its 
constitutional role in making the laws of the land, did not end 
with the passage of H.J. Res. 37. Congress will continue, 
through hearings like today's, to reassert its rightful 
authority to determine the FCC's jurisdiction and to make the 
laws that will best protect the Internet as an open, innovative 
and relatively unregulated environment. The constitution 
provides that all legislative power is vested in Congress. The 
FCC can only exercise legislative power that Congress has 
delegated to it and the FCC acts unconstitutionally when it 
exceeds its limited power.
    And make no mistake, the Open Internet Order exceeds the 
FCC's power. Congress has never given the FCC the authority to 
impose this sort of top down regulation of Internet services. 
That is why the D.C. Circuit in the Comcast case correctly held 
that the FCC's previous effort to regulate Comcast's network 
management practices was not tied to any statutorily mandated 
responsibility of the FCC. Instead of accepting the limits of 
its power the FCC responded to the Comcast decision by 
inventing an entirely new legal theory to justify its desire to 
regulate broadband network practices.
    According to this new theory, the FCC has to impose 
regulations on broadband in order to encourage development and 
expansion of broadband access. The FCC undoubtedly has 
authority to encourage broadband deployment, but the open 
Internet order bears no rational relationship to that policy 
goal.
    The FCC argues that by preventing broadband networks from 
unreasonably discriminating against applications, it can 
encourage the development of new applications which will in 
turn spur consumer demand for broadband access and then 
Internet service providers will react to this increased demand 
by deploying additional broadband networks. We must reject this 
Rube Goldberg theory of regulation in which the FCC may impose 
an otherwise unauthorized regulation in the hope that it will 
spur a long chain of events that may at some point advance an 
authorized policy. Allowing such a creative and attenuated 
theory would effective remove any limits on the agency's power.
    As the evidence from our early hearing and many of the 
comments that the FCC made clear, imposing these new 
regulations are likely to discourage broadband deployment. 
Common sense tells us that the way to encourage broadband 
deployment is to decrease, not increase, broadband providers 
regulatory costs and burdens. You don't grow an industry by 
regulating it. The way to encourage growth and innovation in 
broadband and the Internet economy as a whole is to maintain 
the relatively unregulated environment in which the Internet 
was conceived, grew and continues to thrive today.
    Rather than a heavy-handed regulatory approach crafted by 
the FCC, I believe a light-touch antitrust based approach will 
best protect a competitive, innovative and open Internet. 
Antitrust law provides a time tested and predictable system for 
preventing providers from engaging in anti-competitive blocking 
or discrimination. Unfortunately, by overstepping its authority 
and imposing its regulatory regime, the FCC has begun to take 
the country down a regulatory direction rather than a flexible, 
fair antitrust-based response to this threat, as this Committee 
has recommended in the past.
    When an agency oversteps the powers that Congress has given 
it, and takes for itself Congress' exclusive power to make the 
laws of the United States, Congress must hold the agency to 
account. Hearings like today's are an important tool for 
ensuring agency accountability. I look forward to this 
opportunity to take statement from our two distinguished FCC 
witnesses and to demand a public explanation for the 
commission's overreach.
    At this time it is my pleasure to recognize the Ranking 
Member of the Committee, the gentleman from North Carolina, Mr. 
Watt.
    Mr. Watt. Thank you, Mr. Chairman and I thank the Chair for 
convening this hearing, although I would have to say I have 
some reservations, some ambivalence about both the 
jurisdictional questions that we are dealing with and the 
timing of this.
    In any event, I do want to welcome Chairman Genachowski and 
Commissioner McDowell to the Subcommittee. They seem to, from 
everything I have read, be on the different tracks that perhaps 
the Chair and I are on, so at least we will get balanced views 
about this issue.
    The debate about net neutrality is far from new. It started 
over a decade ago as broadband network providers became 
increasingly vertically integrated. For example, cable 
companies began to expand from the provision of television 
services to start deploying high-speed Internet, landline 
telephone and even wireless cellular services. Questions 
quickly emerged by how the stratified communications legal 
regime would apply to new conglomerate companies offering 
services that crisscross services and a wealth of regulatory 
laws. At issue then and now is the very architecture of the 
Internet and how to ensure that it remains open to all lawful 
content, information, applications and equipment. Large 
innovative, U.S. based companies like Amazon, E-bay, Facebook 
and Google urged the FCC to act to establish some baseline 
rules that would promote and protect commerce, creativity and 
global competitiveness. Fulfilling that task has been easier 
said than done.
    On the other side of the issue, some Internet service 
providers or advocacy groups fear burdensome restrictions will 
operate to choke off innovation, free speech and commerce. In 
addition, some, like the Chairman, make the process claim that 
antitrust laws are adequate to ensure that the Internet remains 
a viable engine of economic growth.
    Now that the order has issued and the courts have cleared 
the pathway for publication, the intensity has grown here in 
Congress to determine one, whether the FCC had the authority to 
act; two, whether the antitrust laws provide the appropriate 
legal framework to ensure competitiveness on the Internet and 
three, whether the substantive rules embodied by the Open 
Internet Order, transparency, no blocking, no unreasonable 
discrimination, will provide the necessary safeguards to 
ensure--to the entire Internet community, including consumers, 
rights holders and service providers.
    There are no doubt a variety of opinions on this 
Subcommittee, indeed in Congress, as to the FCC's authority to 
police the Internet and to the effectiveness of the antitrust 
regime. Attorney General Holder was just here Tuesday and was 
asked a number of questions about the effectiveness of his 
antitrust division and policies. While these are legitimate 
inquiries I dare predict the same form of net neutrality or 
open Internet rules will ultimately monitor and regulate 
functions to access the Internet, whether through voluntary 
agreements or Federal laws or regulations. I would like to see 
it--see to it that such rules ban illegal conduct, including 
child pornography and online theft, and strike the right 
balance with lawful commerce that stimulates creativity, 
preserves open social discourse and yet has the capacity to 
raise the necessary capital for first rate network management.
    In short, I think whether the rules will protect consumers 
and promote growth in the--is the most important inquiry and 
the repeal efforts are an unfortunate distraction. So I am 
happy that we have the commissioners before us today who 
studied the submissions and have the expertise to assess the 
probable effect of the open Internet rules on its users and I 
look forward to their statement.
    I would just say, outside my notes, as a Member of the 
Financial Services Committee, I think I probably have a much, 
much different perspective on the value of the regulatory 
framework that we have in our system than from my service on 
the Judiciary Committee. I am one that believes that the more 
we dictate these things, as opposed to establishing the broad 
principles, the more we dictate them legislatively, the more 
likely we are to get them wrong and that we ought, quite often, 
defer to regulators to make more reasoned judgments about these 
things, listen to the experts, listen to the consumers and 
business advocates and try to balance their interests within 
the general framework that we have established legislatively. 
So I expose my bias on that. It comes from long service on a 
different Committee, but I think it applies here with equal 
force.
    And with that, Mr. Chairman, I yield back.
    Mr. Goodlatte. I thank the gentleman.
    And the Chair is now pleased to recognize the Ranking 
Member of the full Committee, the gentleman from Michigan, Mr. 
Conyers.
    Mr. Conyers. What a rare opportunity this is this morning 
to have these two excellent public servants before us and I am 
indebted to all of you here. It is rare that--didn't Mr. 
Goodlatte make the opening statement? And it is so unusual when 
I find myself more in agreement with him than the Ranking 
Member of the Subcommittee, especially--yeah, democracy is 
great, isn't it? The reason is because it was Chairman 
Goodlatte that mentioned that there are antitrust remedies that 
this Committee has and I think that is very important. And I 
hope that Mel Watt will agree with both of us in that regard.
    What I was doing since I have had the chance to talk with 
both of you, is that in summary I have to dismiss the view that 
there is irreparable harm being done, that there is nothing 
broken and that the--there is ample protection to consumers 
that is sufficient as it exists now. I wish I could see things 
that way. I don't.
    And then the court, in terms of Mr. McDowell's very 
excellent presentation, in terms of whether the FCC has 
rulemaking authority, we better hope that it does because I 
don't know what else they would do if this commission existed 
and couldn't make rules as a result of the good work that you 
two have mostly agreed with each other and the FCC as a whole.
    We are in for a, I think a very exciting discussion. But 
this case is already--that question is already in the Federal 
judiciary now being resolved. And I--of course our opinions are 
always maybe worth something to them, and whether they are or 
not we give them anyway. So I think this is an excellent 
opportunity that rarely comes.
    We have all worked together on telecommunications issues. 
I, as a long time supporter of net neutrality, was not unhappy 
with the December order of the Federal Communication 
Commission. As a matter of fact, I don't think it went far 
enough to ensure consumer protection and a competitive 
marketplace. The House of Representatives have already voted 
twice to defund and undo the FCC's work and I would like to 
just review some of the arguments that have made--that have 
been made to undermine this net neutrality argument, the net 
neutrality order of the FCC, which the congressional product I 
did not have much sympathy for.
    First, the regulations will cause irreparable harm. Well, 
great. That nothing is broken that needs fixing. That existing 
laws already protect consumers sufficiently. Please, give me a 
break somebody, I mean we are suffering out here. What we need 
is more effective and more precise regulation, not none or 
less.
    Here is some instances where the Internet service providers 
have blocked, slowed, censored content on the Internet. That is 
not a good thing. Verizon Wireless has blocked pro-choice text 
messages. Comcast has slowed traffic to competing video service 
providers. These are demonstrable, uncontrovertible harms that 
will only worsen if this commission is prevented from acting as 
is now being proposed in the House of Representatives.
    Unfortunately ISPs disclose little information to the 
public about how they manage their networks. There is little 
transparency. We have no readily available way to tell if and 
how they could be censoring or slowing content.
    And I conclude with this. The high-speed market is highly 
consolidated and anti-competitive. Most of the people in this 
country have only two choices for high speed Internet. Thirteen 
percent of the--about 90 percent of our citizens live in either 
a monopoly or duopoly. Now let's not start this conversation 
off this morning with everything is okay. It is far from okay.
    And so with that modest opening I thank the Chairman for 
his generosity and time and I turn back the rest of it to 
Chairman Goodlatte.
    Mr. Issa. Mr. Chairman?
    Mr. Goodlatte. I thank the Ranking Member. The custom of 
the Committee is to recognize the Chairman and Ranking Member 
of the Subcommittee and the full Committee and ask other 
Members to submit their statements for the record. Since we 
have had two on that side, we will defer to the gentleman from 
California for an----
    Mr. Issa. Thank you, Mr. Chairman. And I am going to be----
    Mr. Watt. I have no objection to that.
    Mr. Issa. Thank you.
    And I will be brief. I know that the Ranking Member of the 
full Committee is more knowledgeable on all things of this 
Committee, however I know a monopoly when I see one and there 
is no place in America that I know of in which you could say 90 
percent of any state or 90 percent of any region and certainly 
not 90 percent of America, live under a monopoly or a duopoly, 
because ultimately if you have satellite and you have cellular, 
you already have two before you get into any of the well known 
broadband.
    I would like to take exception though, at the onset. In 
order to assert authority one needs to have it. I believe what 
we're seeing here today is an assertion of authority that was 
not granted, a claim of antitrust behavior by monopolies that 
has not been proven. The FCC did not determine that they had 
it, nor are they continuing to study. Instead of asking for 
whether they are were right to make a decision, instead of 
coming to Congress for limited authority, they chose, in a 
quiet period, while Congress was not watching, to do this. 
Clearly, we were at home, we got the word. Clearly, the 
question was not before them, the history of harm was not 
available to them, the finding of a monopoly or duopoly 
certainly does not exist, had it, it would have long ago gone 
through the courts.
    More importantly, if we allow this to stand then we must 
make the presumption that we can regulate gasoline at the gas 
stations so that all grades of gas sell for the same price. We 
can regulate the railroad so that all freight and passengers 
are carried by the same rate per pound.
    Let me not belittle the fact that there were a few isolated 
instances that need to be looked at. Let me not limit the 
question to whether or not there should be some sort of 
guidance available as to fairness and equality. I for one 
believe that if you sell a product and you block a competitor's 
product then you have no claim of any, any right to say you 
serve the public trust. So although I find some things which 
needed to be acted on, I find it completely unacceptable that 
an agency took it on itself to do so.
    I will disagree, just one more time, with the Ranking 
Member of the full Committee, just because something is before 
the courts doesn't mean that it belongs before the courts if in 
fact the only thing the court can essentially say is that the 
FCC had--ceded authority that we as Congress know we did not 
give them.
    I thank the Chairman for the indulgence on this and yield 
back.
    Mr. Goodlatte. I thank the gentleman for his comments and 
without objection other Members' opening statements will be 
made a part of the record.
    And it is now my pleasure to welcome our two witnesses. As 
is the custom in this Committee, we would ask that they stand 
and be sworn.
    [Witnesses sworn.]
    Mr. Goodlatte. Thank you, gentleman.
    Our first witness, Federal Communications Commission 
Chairman Julius Genachowski was nominated to that position by 
President Barack Obama on March 3, 2009 and was sworn into 
office on June 29, 2009.
    Prior to his nomination Chairman Genachowski had spent over 
a decade in the private sector, first as a senior executive 
with the IAC Interactive Corporation and since 2005 at firms 
that he founded to invest in early and mid-stage technology 
companies. Before entering the private sector, Chairman 
Genachowski served as chief counsel to the FCC from 1994 to 
1997, as an advisor to then Representative Charles Schumer of 
New York, and at that time a Member of this Committee, and as a 
law clerk to D.C. Circuit Court of Appeals Chief Judge Abner 
Mikva and Supreme Court Justices William Brennan and David 
Souter.
    Our second witness, Federal Communications Commissioner 
Robert McDowell was originally appointed by President George W. 
Bush and confirmed by the Senate in 2006. Commissioner McDowell 
was reappointed to the commission on June 2, 2009 by President 
Barack Obama. This made him the first Republican appointed to 
an independent agency by President Obama. He was confirmed by 
the Senate for a second time on June 25, 2009.
    Prior to joining the FCC Commissioner McDowell was senior 
vice president for the Competitive Telecommunications 
Association or CompTel, an association representing competitive 
facilities based telecommunication service providers and their 
supplier partners. Over his career he has worked in various 
public policy and private sector positions with a consistent 
focus on telecommunications policy.
    Welcome to both of you and Chairman Genachowski, we will 
ask that you begin.

   TESTIMONY OF THE HONORABLE JULIUS GENACHOWSKI, CHAIRMAN, 
               FEDERAL COMMUNICATIONS COMMISSION

    Mr. Genachowski. Thank you, Chairman Goodlatte. Sorry, 
Chairman Goodlatte. I apologize. Ranking Member Watt, Ranking 
Member Conyers, Members of the Subcommittee, thank you for the 
opportunity to be here. This is my first time testifying before 
this Subcommittee since becoming chair of the FCC.
    Prior to my appointment, Chairman Goodlatte thank you for 
mentioning this, I spent more than a decade in the private 
sector as an executive and as an investor. I saw in the private 
sector the importance of high-speed Internet, of wired and 
wireless broadband to our country's economic success and to 
addressing so many challenges our Nation faces from education 
to public safety. The importance of communications to our 
economy and to all Americans is why the Communications Act has 
long given the FCC authority in this area.
    So we are working hard at the FCC, on a bipartisan basis, 
and I thank my colleague, Commissioner McDowell for his service 
and cooperation, on a series of issues including universal 
service for broadband, on reducing barriers to private sector 
broadband buildout, on promoting competition, on promoting next 
generation 911 and public safety networks and on unleashing 
spectrum so that we can lead the world in mobile and address 
the looming spectrum crunch.
    I also saw, in the private sector, the importance of the 
Internet's freedom and openness to its powerful success as a 
platform for innovation and economic growth, as well as for 
free expression. I learned that no central authority, public or 
private, should have the power to pick which companies or which 
ideas win or lose on the Internet. And I learned that certainty 
and predictability are critical to encouraging private sector 
investment and innovation, as is flexibility for companies and 
sectors characterized by fast moving technologies and markets.
    When I arrived at the FCC the agency had, on a bipartisan 
basis, taken steps to enforce Internet freedom and openness in 
response to incidents in which Internet service providers had 
blocked or degraded lawful online content. This occurs in a 
market where more than 70 percent of Americans live in areas 
with only one or two fixed, terrestrial broadband providers.
    Unfortunately, what some have called the ad hoc process by 
which the prior FCC sought to protect Internet openness, 
generated uncertainty among Internet stakeholders. That's why, 
in 2009, we launched a fair and open Administrative Procedures 
Act process with the goal of establishing a framework that 
would be good for all parts of the broadband economy, for 
consumers of Internet services, for innovators and 
entrepreneurs building new products and services on the 
Internet and for Internet service providers building and 
operating networks. That was our goal and I believe we achieved 
it.
    Our sensible, high-level framework to preserve Internet 
freedom has increased certainty and generated support from a 
very broad array of stakeholders who in the past could not find 
common ground.
    The light-touch rules of the road are built on the 
commissions prior bipartisan steps in this area and rooted in 
the Communications Act. The rules fit on one page and boil down 
to four things.
    First, transparency so that consumers and innovators can 
have basic information to make smart choices about broadband 
networks. Empowering them with information will reduce the need 
for government involvement.
    Second, no blocking of lawful Internet content or services 
so that consumers can be free to access such content or 
services and so startup and other Internet companies can be 
free to reach Internet consumers.
    Third, a level playing field, a fair non-discrimination 
principle so that consumers and markets, not the government, 
are picking winners and losers online.
    And fourth, flexibility for Internet service providers. 
Flexibility to manage broadband networks, to deal with 
congestion or harmful or unlawful traffic, to pursue innovation 
in business models and to earn a meaningful return on 
investment so that we can have a fast and robust broadband set 
of networks in the United States.
    Some people think the framework we adopted doesn't go far 
enough, others thing it goes too far. I believe it gets it 
right. One of the Nation's leading venture capitalists 
described our framework in terms used by many other investors 
and companies throughout the broadband economy, quote, this 
effort is a pragmatic balance of innovation, economic growth 
and crucial investment in the Internet.
    It promotes competition in the marketplace and increases 
certainty. It is not regulation of the Internet, it is a light-
touch framework to preserve the dynamic, free and open nature 
of the Internet. Virtually all major investment analysts agreed 
that our framework was good news for the broadband economy.
    We completed the Internet freedom order in December and I 
believe that undoing the framework would increase uncertainty, 
decrease investment and hurt job creation.
    Some argue that rather than acting the FCC should have 
allowed antitrust laws to be the sole remedy for violations of 
Internet freedom. In my view, while vitally important, 
antitrust laws alone would not adequately preserve the freedom 
and openness of the Internet or provide enough certainty and 
confidence to drive investment in our innovation future.
    As we heard during our FCC proceeding, antitrust 
enforcement is expensive to pursue, takes a long time and kicks 
in only after damage is done, especially for startups, in a 
fast-moving area like the Internet, that is not a practical 
solution.
    The Supreme Court decision in Trinko also raises 
uncertainty about relying solely on antitrust laws as a remedy 
in the context of communication services.
    To conclude, while the FCC was divided on the particular 
issue of open Internet rules, the issue has a bipartisan 
foundation at the FCC and the fact is that even at the FCC 
today we resolve more than 95 percent of our votes on a 
bipartisan basis. We are now focused together on promoting 
universal access to broadband and unleashing spectrum, 
initiatives of vital importance to our 21st century economy, to 
our global competitiveness and to expanding opportunity 
broadly.
    I look forward to working with my commission colleagues and 
with Congress and the Subcommittee to harness the opportunities 
of communications technologies for our economy and for all 
Americans.
    Thank you and I look forward to your questions.
    [The prepared statement of Mr. Genachowski follows:]

    
    
    
    
    
    
    
    
    
    


                               __________
    Mr. Goodlatte. Thank you, Chairman Genachowski. 
Commissioner McDowell, welcome.

 TESTIMONY OF THE HONORABLE ROBERT M. McDOWELL, COMMISSIONER, 
               FEDERAL COMMUNICATIONS COMMISSION

    Mr. McDowell. Thank you, Mr. Chairman, Ranking Member Watt 
and Ranking Member of the full Committee, Mr. Conyers. It is 
terrific to be here today. This too is my first time testifying 
before your Subcommittee and it is an honor to be here. So 
thank you for having me.
    The Federal Communications Commission was created by 
Congress almost 77 years ago. Today its influence reaches far 
beyond the radios, telephones and telegraphs of 1934. By some 
estimates the FCC holds sway over one-sixth of the American 
economy, or a slice of the economic pie that is the same size 
as the healthcare sector. For better or for worse, our actions 
touch the daily lives of all Americans.
    During my 5 years as a commissioner my focus has been to 
support policies that promote consumer choice offered through 
abundance rather than regulation and its unintended 
consequences, whenever possible. In the absence of market 
failure, unnecessary regulations in the name of serving the 
public interest can have the perverse effect of harming 
consumers by inhibiting the constructive risk-taking that 
promotes investment, innovation, competition, lower prices and 
jobs.
    Competition obviates the need for government intervention. 
With that in mind I have made increased competition in the so-
called ``last mile'' of our country's communications 
infrastructure a top priority. These facilities serve as the 
vital on and off ramps to the Internet, the greatest 
deregulatory success story of all time.
    Since my arrival at the commission in 2006 the FCC has 
taken several historic steps to spur the construction of 
broadband facilities. Our video franchising order of 2006 
removed local barriers to entry into the video market and 
helped spark the largest private investment in fiber to the 
home in American history.
    In early 2007, in the wake of the Supreme Court's Brand X 
decision, without dissent, the FCC finished a deregulatory 
project, started by Clinton-era chairman Bill Kennard, by 
classifying wireless broadband Internet access service as an 
information service. And please keep in mind that broadband 
Internet access services were never regulated as common carrier 
phone services. The FCC's orders after the Brand X decision 
merely formalized its consistent light-touch treatment of 
information services.
    Our bipartisan actions provided the deregulatory certainty 
for entrepreneurs to launch the smartphone revolution which has 
made the United States the world leader in adoption of fourth 
generation devices and networks.
    In one of its finest moments, the commission voted 
unanimously, in 2008, to approve the unlicensed use of vacant 
TV channels, known as white spaces. Under Chairman 
Genachowski's leadership we took that action a step further in 
an additional five to nothing vote last September. Unlicensed 
use of these airwaves offers the promise of greater consumer 
empowerment. I am eager for the FCC to finish its work in this 
area, as soon as possible. Combining the spectral power of 
white spaces with the constructive chaos of an unregulated and 
unlicensed market will act as an antidote for potential anti-
competitive conduct in the last mile thus negating the need for 
additional rules.
    Chairman Genachowski also deserves credit for bringing to a 
vote many other initiatives that may seem unimportant at first 
blush, but actually have a profound effect on promoting 
competition in the last mile. Among them are: Creating a shot 
clock to ensure faster decisions by local authorities affecting 
placement of wireless towers; ensuring resolution of pole 
attachment approvals with reduce rental rates for broadband 
providers and repurposing some satellite spectrum for 
terrestrial broadband use.
    One frequently forgotten fact about the FCC, that the 
Chairman just reminded us all about, is that roughly 95 percent 
of our votes are not only bipartisan but they are unanimous. 
Certainly we have had our differences of opinion, including 
over the topic of this hearing, the regulation of Internet 
network management. For the convenience of the Subcommittee's 
Members, I have attached a copy of my dissent, which is rather 
long, sorry about that, in that proceeding and I respectfully 
request it be included in the record.
    In a nutshell, however, I dissented from last December's 
order precisely because, number one, nothing is broken in the 
broadband Internet access market that needs fixing and the 
government is not the best tool to fix it if something had been 
broken. Number two, as Chairman Goodlatte said, Congress never 
gave the FCC the legal authority to act as it did. Number 
three, the order is likely to cause more harm than good. And 
number four, sufficient antitrust and other consumer protection 
laws exist to prevent and cure any of the contemplated harms 
outlined in the order.
    So thank you again for inviting me to appear before you and 
I look forward to your questions.
    [The prepared statement of Mr. McDowell follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
                               __________

    Mr. Goodlatte. Thank you, Commissioner McDowell. And 
without objection your, I'm sure, cogently written dissenting 
opinion will be made a part of the record.
    I'm pleased to note that the Chairman of the full 
Committee, Congressman Lamar Smith of Texas is present. I don't 
believe he has a statement to make and these buzzers are going 
off a second time indicate that we have votes on the floor. So 
the Committee will stand in recess and we will begin the 
questioning as soon as we return.
    Thank you, gentlemen.
    [Recess.]
    Mr. Quayle [presiding]. Welcome back to the hearing on 
Ensuring Competition on the Internet and Net Neutrality and 
Antitrust.
    I want to thank the witnesses for being patient with the 
votes and we will just start getting right into the questions.
    And I am going to recognize myself for 5 minutes. The first 
question is for you, Chairman Genachowski. There has been 
reports, just last month, that the newest 706 Report is going 
to be coming out and within that report you--the FCC is going 
to be giving broadband deployment a failing grade. That is 
according to the reports, I don't know if that is accurate.
    But, looking at the statistics, you have 95 percent of 
households have access to at least one broadband service and 
about 200 million people have signed up in the last 10 years. 
Now if you have 95 percent deployment in access to broadband 
services and that is a failing grade, I find it a little 
troubling and a little confusing. But I am kind of new to 
Washington here and when you use that and contrast with a GAO 
report that came out in 2011, in February, not on the FCC but 
on another agency in Homeland Security, when they said that 
they only had 15 percent control of the southern border and 44 
percent operational control and they were saying--the secretary 
was saying that, you know, this is the best it has ever been, 
and from my understanding that could be a B+ to an A.
    So I am trying to understand the sliding scale that we have 
here in Washington where 95 percent could be an F and 15 
percent could be a B+ to an A. So if you could just tell me how 
does the deployment get an F or failing grade, if that is true, 
in the reports that are coming out.
    Mr. Genachowski. So thank you for the question. We are 
working on a 706 Report, it hasn't been released yet and so let 
me not address what it might say specifically. But I can answer 
your question in the following way. I think that there is broad 
agreement that broadband access, high-speed Internet access is 
a service that should be universal. It is so essential to our 
economy, it is essential to education, it is essential to small 
businesses, it is essential to public safety. The numbers 
that--I will just talk about last year's report, that stood out 
for me and that stand out for me in general on this issue is 
that over 20 million Americans live in areas that have no 
broadband infrastructure. And so if they want to be part of the 
online world, if they want to start a small business in their 
area, these are rural communities all over the country, but 
over 20 million, I think that is a significant number. And the 
second significant number are the number of Americans who could 
have--who could subscribe to broadband but don't, for various 
reasons. That number is about 33 percent. So that is about 100 
million Americans who aren't part of our online world, because 
practically broadband isn't available to them.
    My view is that we need for our economy to be moving to 
true universal broadband very, very quickly. Our global 
competitors are. And I think that while we are making progress 
as a country, in a variety of ways, Congress asked us to 
determine whether broadband availability is moving in a 
reasonable and timely manner. Last year we concluded that it 
was not. And I will tell you that based on these kinds of 
numbers and based on what we seeing happening around the world 
and their focus, I think any spur we can give to ourselves to 
get broadband to every part of rural America, to increase our 
adoption rates from 67 percent to, you know, to 90 percent to 
100 percent, it is a very important issue.
    Mr. Quayle. Okay. Thank you. And I would shift topics to 
the order that came out. And I was just looking at it and the 
order argues that broadband providers have the incentive to 
limit Internet openness. But, if the order is correct the 
Internet openness creates a virtuous cycle that drives consumer 
demand for broadband access. Wouldn't broadband access 
providers have every incentive to preserve openness and 
increase demand for their product?
    Mr. Genachowski. Well, there is a history here, of course. 
And the FCC has enforced Internet freedom and openness going 
back to at least 2005. And it found that there were instances 
where Internet service providers blocked or degraded or slowed 
down content. In one case it was voice over Internet content, 
in another case it was lawful video. And the incentives to 
block a competitor I think are there.
    From a global perspective I agree with your point, we 
benefit from preserving a baseline free and open Internet 
because it will trigger the virtuous cycle that I--that you 
spoke about and Commissioner McDowell spoke about and that I 
completely agree with. But I don't think there is any real 
doubt that in a market that isn't characterized by vibrant 
competition that there are incentives to, if you are 
controlling a consumer's Internet access to the home, 
incentives to harm a competitor. And as I said in my opening 
statement, in this context where many of these competitors are 
early-stage startups, the option of waiting to be blocked, 
hiring a lawyer, filing an antitrust lawsuit I think is not 
practical. Having high-level, light-touch, baseline rules that 
say, look no blocking, let's move on, I think benefits the 
entire ecosystem.
    Mr. Quayle. All right. Thank you, Mr. Chairman.
    The Chair now recognizes the Ranking Member of the 
Subcommittee, the gentleman from North Carolina, Mr. Watt.
    Mr. Watt. Mr. Chairman, with the recognition that I have to 
be here for the rest of the hearing anyway, as the Ranking 
Member, I think I am going to defer and let my other Members go 
in front of me.
    Mr. Berman, I think, would be next.
    Mr. Berman. I appreciate that. I thank the gentleman and I 
probably should be here for the rest of the hearing too, but I 
don't have to be. [Laughter.]
    Chairman Genachowski, I wanted to ask you a more elaborate 
question but I am just wondering, is it possible, right at the 
outset real quickly, because of my 5 minute time limit, to 
establish, I hope the answer to this is yes, that net 
neutrality doesn't mean neutrality between lawful and unlawful 
content.
    Mr. Genachowski. Correct. Yes.
    Mr. Berman. Because that has been one fear of mine. And I 
think the FCC and your open Internet order addressed that 
question, I just wanted to make sure I understand it right.
    Mr. Genachowski. You understand correctly. Our open 
Internet framework is only about lawful contact--content. We 
make clear in our order that it doesn't interfere with 
enforcement of laws against--relating to unlawful content, 
whether it is theft of intellectual property, whether it is 
child pornography, those are outside our rules.
    Mr. Berman. Great. And in fact I think in addition to what 
you referred to the Administration has specifically endorsed 
the policy of promoting voluntary marketplace initiatives to 
address cooperative efforts among ISPs and rights holders 
regarding online copyright infringement and then what the FCC 
has done.
    So I--my question I guess is this, given these statements 
and the clarifying language in the FCC open Internet order, 
what can the FCC give assurances--what assurances can the FCC 
give to ISPs that they can enter into voluntary agreements with 
copyright owners to try to address or mitigate copyright 
infringement online without running afoul of net neutrality 
principles? I have been hearing reports for a couple years that 
ISPs and copyright owners are trying to agree on some kind of 
graduated response program to address the peer-to-peer 
infringement online, but assuming that they reach an agreement, 
how are they to know that the program is lawful under FCC 
rules?
    Put another way, can we--how do we get--how can we ensure 
that voluntary practices undertaken solely for the purpose of 
mitigating the occurrence of copyright infringement aren't 
stymied by the fear that people will use the net neutrality 
principles as a sword to prevent such practices from being 
implemented?
    The net neutrality rules aren't completely clear on what--
how or when an ISP can make reasonable efforts to address 
unlawful activity or when and how it is determined that their 
practices constitute reasonable network management. And I don't 
think the FCC wants to be the arbiter of copyright infringement 
issues online, but you do determine whether efforts to mitigate 
infringement are reasonable.
    Is there any way to give these companies comfort that they 
have some discretion to implement those kinds of initiatives 
which are truly targeted at addressing or mitigating the 
occurrence of copyright infringement?
    Mr. Genachowski. An intention of the framework we adopted 
was to provide that confidence. We made it clear that only 
lawful content falls within the range of the framework. We made 
it clear that our framework doesn't inhibit sensible, voluntary 
efforts to protect intellectual property. Certainly our doors 
at the FCC are open and we have been encouraging voluntary 
efforts that are sensible and that protect intellectual 
property.
    Mr. Berman. So is there a way for a person to talk about a 
possible way to deal with that issue and get some indication of 
whether they are going down the right track?
    Mr. Genachowski. I image that there is, but I would say the 
first step would be to do what I believe is already occurring, 
the discussions with staff of the FCC and our doors are open 
for that and they will continue to be.
    Mr. Berman. Thank you very much.
    I yield.
    Mr. Quayle. Thank you very much. The Chair now recognizes 
the gentlelady from California, Miss Lofgren, for 5 minutes.
    Ms. Lofgren. Thank you, Mr. Chairman and thanks to both of 
our witnesses.
    I think as I listened to the various opening statements, I 
couldn't help remembering the 1996 proceedings on the Telecom 
Reform Act. At one point Henry Hyde, then the Chairman, said 
the Republicans and Democrats are adversaries but the Commerce 
Committee is our enemy. [Laughter.]
    And I think to some extent, if we look at our differing 
approaches to this issue, it does relate to our jurisdictional 
spread. And I was one of the, with Mr. Conyers, introduced the 
bill just about 3 years ago with an antitrust approach to this 
effort. But I must say I am completely satisfied with what the 
FCC has done in this regard.
    While I thought the antitrust approach had merit, clearly 
the FCC is in a position to move more nimbly and, you know, I 
think of the years that Judge Greene had the antitrust breakup 
here in D.C. So I think that the approach you have taken is a 
solid one.
    I would note as well, that although not every Member of 
this Committee, apparently, is enthusiastic about your efforts, 
the business community is enormously enthusiastic about your 
efforts, all the way from TechNet which represents about $2 
trillion in market cap out in--primarily in--well, the 
technology sector, even the big telecoms, AT&T and Sprint and 
Dish were supportive of this. So the fight is inexplicably here 
in the Committee even though the commercial world has moved on.
    And I think there is a very good reason for it. I want to 
give credit, certainly, to the commission for bringing 
content--consensus for what had been, you know, a contentious 
issue. But it is enormously important that we have these rules 
in place. I know sometimes people will say, well isn't this 
really a fight between Google and AT&T. I don't worry about 
Goggle, they have got plenty of money, they can, you know, pay 
for whatever. But I worry about the startup that could be 
squashed, you know, killed in the cradle before there is an 
opportunity, if we don't have a free and open Internet.
    So, I just wanted--I thought it was necessary to say that 
clearly. Although we had had this antitrust effort, I am not 
sure that there have been successful efforts in remedying 
ongoing practices in the telegong industry as opposed to 
stopping mergers or doing breakups of companies.
    Mr. Chairman, do you have any instances where we had 
success using antitrust on an ongoing basis?
    Mr. Genachowski. Well, we certainly heard, during our 
proceedings, from startup companies, early-stage companies, 
small businesses, investors putting risk capital to work in 
early-stage companies was that as important as they believe 
antitrust laws are, and I share that, that they didn't see it 
as a practical solution for the, you know, entrepreneur in the 
great American tradition, in their garage or in their dorm room 
taking advantage of an open Internet to put a new product, a 
new service, a new idea in front of consumers.
    So it wasn't--no insult to antitrust law, but not something 
that early-stage investors and companies thought was a 
realistic solution. And in fact what we heard overwhelmingly 
was that in the absence of basic high level rules of the road, 
the investors in the early-stage companies who had to devote 
their capital, whether it was time or money, would feel much 
less confident, much less willing to do it, not being certain 
whether if they started an Internet business it could be 
blocked from reaching the broad Internet audience.
    Ms. Lofgren. Now one of the measures of whether this serves 
entrenched interests or challengers is what does the venture 
capital world say about it, because they are funding the 
disrupters. In terms of angel investors in the VC world, are 
they supportive of what the commission has done?
    Mr. Genachowski. They have been very supportive. A series 
of prominent leading venture capitalists have been supportive 
as have investors who are investing in the infrastructure 
itself, because what we really need as a country is both 
incredible vibrancy and dynamism in the startup world----
    Ms. Lofgren. Right.
    Mr. Genachowski [continuing]. So that we continue to lead 
the world in that kind of innovation, we also need fast, robust 
wired and wireless networks. The government is not going to 
build those, we need private sector investment to build it. And 
over the course of the proceeding we were able to craft an 
approach that met our goal of increasing the incentives across 
the board to grow the pie.
    I agree with Mr. Quayle on the idea of all working together 
to get a virtuous cycle of investment in early-stage companies 
and infrastructure. And honestly, the early reports on what we 
did is that we--well there was--as I said, there were some 
people who thought we went too far and some people thought we 
didn't go far enough, but the general view was that this was a 
positive for investment throughout the broadband economy.
    Ms. Lofgren. Well, my time is up. I would just like to 
thank you, Mr. Genachowski, for your leadership on this. I 
think it is important for freedom in America and our economy 
future.
    And I yield back.
    Mr. Quayle. Thank you. The Chair now recognizes the 
gentleman from California, Mr. Issa, for 5 minutes.
    Mr. Issa. Thank you, Mr. Chairman.
    Mr. Genachowski, I pretty much, in the opening statement 
gave you some of my ideas of you don't have this authority, you 
have taken it, I disagree. But I will move on past that to a 
couple of questions that are on another set of subjects.
    You are an independent agency. You serve for a term. You 
don't serve at the pleasure of the President. Is that correct?
    Mr. Genachowski. Correct.
    Mr. Issa. Did you discuss net neutrality with the President 
and if so, when?
    Mr. Genachowski. Didn't discuss net neutrality with the 
President. The FCC's----
    Mr. Issa. Were you aware that the President made this an 
issue in his campaign?
    Mr. Genachowski. I think many people were aware----
    Mr. Issa. No, were you?
    Mr. Genachowski. Yes.
    Mr. Issa. Okay. Did you do it, in any way, shape or form, 
because you believe that it was a promise made by President 
Obama that was not being kept by legislative authority? Yes or 
no, please.
    Mr. Genachowski. No.
    Mr. Issa. Okay. So you made this because you thought that 
the market outcome you were seeking to achieve was good for 
America. Fair characterization?
    Mr. Genachowski. Yes.
    Mr. Issa. Well, I commend you for that. Now the question 
is, do you believe we should do the same thing, make gasoline 
and diesel the same price? Yes or not?
    Mr. Genachowski. I am not an expert on gas.
    Mr. Issa. No, but you are an expert on what is good for the 
consumer.
    Mr. Genachowski. I am familiar with----
    Mr. Issa. Do you believe that we should regulate everything 
so it is good for the consumer?
    Mr. Genachowski. No, I don't.
    Mr. Issa. You don't? So you, for example, would not suggest 
that you just give all the rest of the spectrum, as quickly as 
possible, to AT&T, Verizon and Sprint so that they can create 
more brand--broadband capacity faster, drive down the price to 
the goal you say you want?
    Mr. Genachowski. I believe we have a serious spectrum 
opportunity and challenge.
    Mr. Issa. No, no that is--that--spectrum opportunity means 
you want to sell it and make a lot of money. Right? For the 
American people.
    Mr. Genachowski. We would like to bring market mechanisms 
and expand auction authority for the FCC. We----
    Mr. Issa. No, no. You want to make more money for the 
American people by selling more spectrum. Yes or no? That is 
not a hard one. I don't need the flowery.
    You have been selling spectrum. You have sold spectrum to 
AT&T, Sprint, Verizon, you didn't sell any to Comcast, Comcast 
bought their way into cable, for the most part you have been 
selling it.
    You sell it and then you say, I want tell to you how to use 
it. Is that correct, based on net neutrality?
    Mr. Genachowski. Sorry, I didn't understand the last piece, 
I didn't hear the last piece.
    Mr. Issa. Well look, you are selling--you are saying you 
want a better price, it is a value, you are trying to do all 
this but in fact you start off by selling them a very expensive 
commodity. The most expensive fundamental delivery system is 
through the airways, the least expensive fundamental is through 
a piece of fiber, as far as per terabyte. Right? You can't 
deliver as much through broadband as you can, today, through a 
piece of fiber or even copper.
    Mr. Genachowski. Yes.
    Mr. Issa. Okay. Mr. McDowell, you are not completely on the 
other side of this, but in your opinion, don't we have a 
fundamental problem saying that you have to charge the same 
price, effectively, you have to show no preference, when in 
fact in many cases you have a constrained basic capability? 
Nothing in the FCC ruling actually gives AT&T, Verizon, Sprint 
or for that matter the cable companies inherently more 
bandwidth to--in which to deliver services. Is that correct?
    Mr. McDowell. Correct.
    Mr. Issa. So, in addition to the question of whether there 
was antitrust and so on, where is the benefit to a market that 
is already growing, I won't say exponentially, that gets 
overused, but it is growing a pretty feverish rate when we look 
at where we were 10 years ago versus where we are today? Where 
is the benefit inherent in this ruling?
    Mr. McDowell. It is--I think it is----
    Mr. Genachowski. Sorry. No----
    Mr. McDowell [continuing]. Yes, thanks.
    Mr. Genachowski [continuing]. Go ahead. Sorry.
    Mr. McDowell. I think it is confusing. I think what this 
order has done is actually create confusion in the marketplace 
and actually I disagree with the premise that the business 
community is uniformly behind this and the investment 
community. In fact, the evidence in the record is--points to 
quite the contrary.
    We have to look at broadband services in America went from 
covering 15 percent of Americans in 2003, by the end of 2009, 6 
years later, it covered 95 percent of Americans in the absence, 
in the absence of regulation. Also in the absence of regulation 
we had a free and open Internet, under existing law. So I think 
the order was unnecessary and I think it actually creates more 
questions than answers.
    Mr. Issa. Well, I am going to close by having something I 
think that will unite the two of you and which I think we all, 
we should all agree. As we have this fundamental growth, as we 
try to figure out ways to keep the Internet open, isn't the 
fundamental part of what you achieved, not everything you 
sought to achieve, including regulation, the fundamental 
question that you should not be able to block like services to 
those which you are already delivering in your package? Is that 
a fundamental item that the examples that we talked about and 
the worry that Congress had is the one thing that probably both 
sides of the dais agree Congress should have dealt with before 
you did?
    Mr. Genachowski. It was a fundamental piece of our 
framework.
    Mr. McDowell. I think Congress dealt with it through 
Section 2 of the Sherman Act. Congress dealt with it with 
Section 5 of the Federal Trade Commission Act and other 
competition and consumer protection laws. I think there is 
another way to address these hypothetical harms.
    Mr. Issa. Oh, I didn't say I approved of net neutrality as 
the FCC did it, but simply that we did have an obligation to 
ensure that like products were not restricted when they 
happened to come from the competitor of the carrier themselves.
    Mr. McDowell. We want openness and freedom on the Internet.
    Mr. Issa. So do I. Thank you.
    I yield back.
    Mr. Goodlatte [presiding]. Thank the gentleman. The 
gentlewoman from Texas, Ms. Jackson Lee is recognized for 5 
minutes.
    Ms. Jackson Lee. Thank you very much and to both the 
Chairman and the Ranking Member for these ongoing hearings. And 
I have expressed a continuing theme to both the Chairman and 
the commission. Let me thank both of you for the quality of 
work. I know how extensive it is for the different views that 
you are now espousing. But, my thought on this Committee of 
competition and intellectual property is how can we protect the 
genius of America and how can we create jobs.
    And certainly the business community is involved in that 
continuing question and theme. At the same time, for those of 
us who define the business community is that alone, a positive, 
small Internet business user, whether they be sitting in rural 
America or urban America, getting for the first time that 
access or opportunity, I think that is also part of the 
business community. And Mr. Chairman, we may not be able to 
query them, but we have a responsibility to them.
    So I want to ask both of you, what do you think is the 
heart of the net neutrality rule in order--Mr. Chairman the 
heart, very concisely and that for the commissioner, and I'll 
go with the chairman first--and give me the basis of your 
interpretation of the FCC authority to have rended such a rule.
    Let me start with the chairman first. And I have follow up 
questions so if you can be very concise, I would appropriate 
it.
    Mr. Genachowski. Sure. The heart of the order are four 
basic propositions: No blocking of lawful content to consumers; 
transparency so that network management practices are available 
to consumers, reducing the need for government involvement; 
third, reasonable network management permitted and fourth, 
flexibility to deal with network congestion and to invest in 
networks.
    The authority comes from Title I of the Communications Act, 
provisions in Title II, Title III, Title VI and Sections 706. 
And I would be happy to discuss any of those.
    Ms. Jackson Lee. Just give me Title I in particular.
    Mr. Genachowski. Well, Title I, for a very long time, going 
back to Chairman Powell in the early 2000's confirmed by the 
Supreme Court in Brand X made it clear that the FCC, under 
Title I, has the ancillary authority to adopt measures, 
policies with respect to advanced services like high-speed 
Internet. And again, I could go on but I want to respect your 
time.
    Ms. Jackson Lee. Thank you very much.
    Commissioner?
    Mr. McDowell. Well, I let the chairman speak for himself on 
what the heart of the order was.
    Ms. Jackson Lee. Yeah, I'm asking you.
    Mr. McDowell. You asked--well----
    Ms. Jackson Lee. You can either answer it and as they say, 
I----
    Mr. McDowell. Sure.
    Ms. Jackson Lee [continuing]. Asked the question, you can 
give me the answer as you so desire.
    Mr. McDowell. But, it is his order, I dissented against it 
so he knows the heart of it better than I do, because it is his 
heart.
    But in any case----
    Ms. Jackson Lee. But you can interpret the heart, as you 
saw it, that caused you to vote against it.
    Mr. McDowell. I will stipulate to the fact the Chairman has 
a good heart and that he had the best of intentions with 
executing this order.
    But I do disagree with the legal authority. The Title I 
portion is the fundamental cornerstone that the majority tried 
to use to justify its actions. And in a very similar fashion, 
almost identical fashion in some cases, as to what it tried to 
do before and that was struck down by the D.C. Circuit last 
year. So that is one of the many reasons I have concerns about 
the order.
    Ms. Jackson Lee. All right. And then let me start with you 
then, your opposition to it was based upon the fact of, I 
assume, the free market abilities. But let me just ask this 
question to you. In the alternative of what the chairman and 
the commissioners voted on, what is your answer to the 
unfettered access of the small, minority, women-owned and 
businesses and others who are trying to access this huge 
phenomenon?
    Mr. McDowell. Excellent question. For years, long before 
Chairman Genachowski came to the FCC, I have been advocating a 
different approach all together, which is to use the non-
governmental Internet governance model that the Internet was 
built upon and that is what made it so great. So that is to 
gather together, the FCC could find a new role for itself, 
gather together all the non-governmental entities that help run 
the Internet, the Internet Society, the Internet Engineering 
Task Force, you could have consumer protection agencies, 
government, academics, engineers, bring them all together to 
spotlight allegations of anti-competitive conduct and use 
existing antitrust and consumer protection laws to cure that.
    Sometimes, as we found with the Comcast/Bit Torrent matter, 
that merely shining the sunlight makes the infection go away.
    Ms. Jackson Lee. But----
    Mr. McDowell. And that is adequate. All of the allegations 
that were made earlier of what has gone wrong here, first of 
all were--just a tiny amount of what--of each--of the 
quadrillions of Internet communications each day but also were 
rectified under existing law.
    Ms. Jackson Lee. My time is short and I----
    Mr. McDowell. Sorry.
    Ms. Jackson Lee [continuing]. Appreciate that 
interpretation.
    Chairman, respond to that. And I will lay my premise again, 
I am concerned on the premise of net neutrality, is the 
unfettered access, which I believe you were going after, how do 
you respond to----
    Mr. Genachowski. We share that concern.
    Ms. Jackson Lee [continuing]. The commissioner's point?
    Mr. Genachowski. I think it is fundamental to our economy, 
to the genius of America, as you said.
    A couple of points. One is, the FCC, going back to at least 
2005 has enforced protections for early-stage innovators, small 
businesses, others who want to access an open Internet. And 
that was deemed necessary, number one.
    Number two, I agree with Commissioner McDowell on the 
importance of transparency and that is why we made it one of 
the hearts of the order.
    And the third point that I would make is while we heard, 
very loudly, from the communities that you mentioned and from 
others that baseline rules of the road were necessary to 
provide confidence for investment and for startup activities, 
nothing in our order, in fact we specifically support private 
third party entities developing around that baseline, to 
minimize the need for government involvement. But the core 
question was, should there be a baseline framework protecting 
freedom--Internet freedom and openness. On a bipartisan basis 
the FCC, since 2005 at least agreed to that, I respect 
Commissioner McDowell for dissenting consistently over that 
period, but there is a bipartisan foundation to it and our 
actions were consistent with that bipartisan history and the--
our analysis of the record and what we heard from the 
investment community and from early-stage entrepreneurs.
    Ms. Jackson Lee. And you believe it is squarely founded on 
antitrust premises of open competition or the non-hindrance of 
competition?
    Mr. Genachowski. I believe it is--I believe we had ample 
authority into the Communications Act. Antitrust is available 
as a remedy as well, but as I said earlier, I believe that that 
remedy would be insufficient for startups who are blocked or 
interfered with, given the realities of what it takes to start 
a company in America.
    Mr. Goodlatte. The time of the gentlewoman has expired.
    Ms. Jackson Lee. I thank the gentleman.
    Mr. Goodlatte. I thank the gentlewoman. And I will ask my 
questions at this point.
    Chairman Genachowski, aren't broadband providers in a 
competitive market in a better position than the FCC to figure 
out how to increase demand for their property?
    Mr. Genachowski. I think broadband providers are in a 
strong position to figure out how to increase demand for their 
product. They have also told us that they recognize that there 
are challenges that they have been unable to solve alone.
    Mr. Goodlatte. And what do you mean by that?
    Mr. Genachowski. Well, our work, which was broadly based, 
found that the adoption gap that we have in this country, 67 
percent versus a goal of a hundred, is related to, in some 
cases affordability, in some cases relevance, people lacking 
knowledge of the benefits of the Internet, in some cases 
digital literacy, in some cases trust of the Internet. And we 
have been working with the broadband industry to develop 
measures that would be a win-win and increase demand adoption 
from 67 percent at a faster rate.
    Mr. Goodlatte. In a competitive broadband market wouldn't 
market forced prevent broadband providers from adopting any 
practices that actually harm their consumers, lest those 
consumers switch to a competitor?
    Mr. Genachowski. I think that, you know, the market that we 
are looking at is one where over 70 percent of the country only 
has one or two choices. I would agree that with more 
competitors and very vibrant competition in place----
    Mr. Goodlatte. But your order specifically says that the 
FCC didn't conduct a market power analysis.
    Mr. Genachowski. I respectfully--the order spent a lot of 
time analyzing the markets, there is a section called cost and 
burdens. We didn't conduct a formal antitrust analysis.
    Mr. Goodlatte. Why not? We like that around here.
    Mr. Genachowski. It wasn't necessary, it hasn't 
traditionally been thought necessary in the FCC's context. But 
the important point to emphasize is the order is filled with 
market analysis, the record is filled with market analysis, the 
Administrative Procedures Act imposes us on an obligation to 
analyze all of the costs and issues in the record and we did 
that in the order.
    Mr. Goodlatte. You note in your statement, and just again 
stated, that as a justification for the order, that more than 
70 percent of Americans live in areas with only one or two 
fixed broadband providers. Does the reasonableness standard 
embodied in the order apply in the same way, whether the 
alleged violation occurred in one of these areas or in the 30 
percent of America with a more competitive broadband market?
    Mr. Genachowski. We haven't had to address that question. 
We heard from the industry that they would, in general, prefer 
having the ability----
    Mr. Goodlatte. You haven't had to address that question 
until today and we are asking you today.
    Mr. Genachowski. I wouldn't want to prejudge issues that 
might come to the commission, but I would agree with you, at a 
higher level I would agree with your point that the more there 
is competition the less there is a need for government 
involvement.
    Mr. Goodlatte. Is it true that the FCC may publish an order 
in the Federal Register, even before the order has received 
final approval from OMB?
    Mr. Genachowski. I am not aware of that. There are 
procedures that are in place involving Paperwork Reduction Act 
and OMB approval. We are in those procedures now and we will 
follow the standard procedures.
    Mr. Goodlatte. Given the sense of urgency surrounding 
adoption of the order in December, why has the FCC chosen to 
delay publishing the open Internet order until the full 
Paperwork Reduction Act process is complete?
    Mr. Genachowski. Well, the order has been published in the 
sense that it is there, everyone knows exactly what it is. 
Formal publication in the Federal Register is a process that I 
don't consider myself an expert on. As I mentioned there are 
Paperwork Reduction Act processes, OMB processes, the Federal 
Register has its own processes, we are doing our work as 
quickly as we can in connection with those processes to get to 
final publication in the Federal Register. But it doesn't 
change the rules that we adopted and that have been made public 
already.
    Mr. Goodlatte. The order--Commissioner McDowell, the order 
explicitly declines to conduct any market power analysis. Do 
you believe that the a market power analysis is necessary to 
distinguish between benign network management practices and 
network management practices that actually harm consumers?
    Mr. McDowell. Absolutely and you are absolutely right. At 
footnote 49 of the order it says specifically we are not 
performing a market power analysis in this proceeding. I think 
that is very telling.
    Mr. Goodlatte. And do you think that is because they do not 
have any evidence to substantiate a claim that there is a 
market power problem that is harming consumers?
    Mr. McDowell. Each time the government has looked at the 
broadband Internet access market, it has not found a 
concentration of market power or abuse of that power, whether 
it is the Federal Trade Commission in 2007 or whether it was 
the Department of Justice just last year filing comments with 
the FCC. In fact, both of those agencies, in both of those 
instances warned against just this type of regulation because 
of the disincentives that it might provide to the buildout of 
broadband.
    And when we are talking about trying to build out broadband 
to that last 5 percent of Americans who might not have access 
to it, it is important to provide those incentives as much as 
we can.
    Mr. Goodlatte. Chairman----
    Mr. Genachowski. I reserve my right, at a later point to--
--
    Mr. Goodlatte. You are welcome to respond right now.
    Mr. Genachowski. Very quickly. The DOJ's filing with the 
FCC called this market that we are discussing, concentrated. 
And the chairman of the Federal Trade Commission testified, in 
our process, in a way that--with respect was different from 
what Commissioner McDowell suggested. And I would just suggest 
that we make the FTC and the DOJ materials part of the record 
of the proceeding.
    Mr. Goodlatte. Without objection they will be.
    Mr. McDowell. And they speak for themselves.
    Mr. Goodlatte. Sure.
    [The information referred to follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    


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                               __________

    Mr. Goodlatte. In that regard, Commissioner McDowell, 
Chairman Genachowski has been somewhat dismissive of antitrust 
remedies to address these issues. I don't see problems because, 
as you correctly point out, there are quadrillions of bits of 
information that are exchanged I think very freely over the 
Internet on a daily basis and the examples of potential abuse 
have been de minimis and have been solved under current law as 
opposed to this new proposed rule.
    But, let me just ask you, looking ahead and supposing that 
issues will arise, as I no doubt believe they will, do you 
believe that antitrust law provides an appropriate and adequate 
remedy for the sorts of misconduct that the open Internet order 
seeks to curtail?
    Mr. McDowell. Yes.
    Mr. Goodlatte. Any elaboration on that?
    Mr. McDowell. Sure. So under--I didn't know how long I had. 
Under Section 2, whether it is refusals to deal or exclusive 
dealings or raising rivals' costs, all of the scenarios put 
forth by the proponents of Internet network management 
regulation for these rules can be addressed by those laws. But 
so can also, you know, Section 5 of the Federal Trade 
Commission Act could also address it as well.
    And you make an excellent point which is the de minimis 
amount of allegations that have been made and all, all were 
resolved in favor of consumers under existing law.
    Mr. Goodlatte. Thank you. My time is expired.
    And the Chair now recognizes the gentlewoman from 
California, Ms. Chu for 5 minutes.
    Ms. Waters. Thank you very much, Mr. Chairman. Let me 
welcome Mr. Genachowski here and Mr. McDowell here this morning 
with their statement.
    Voice. It is just Judy Chu. Sorry. Ms. Judy Chu.
    Ms. Waters. Oh, it is Judy's turn? I am sorry.
    Mr. Goodlatte. I think we recognized Ms. Chu.
    Ms. Waters. It was? Okay.
    Mr. Goodlatte. But we will come---- [Laughter.]
    We have a lot of California----
    Ms. Chu. It's fine.
    Mr. Goodlatte. I said we have a lot of California 
gentlewomen here and we respect them all, but we are going to 
Miss Chu first.
    Ms. Chu. Well, thank you.
    Well, Chairman Genachowski, opponents of the rules of the 
road have argued that the Internet is open and inspired 
innovation under current law and that broadband has expanded to 
reach a significant number of Americans. So, please explain for 
our knowledge what has changed in the marketplace, in your 
opinion, to make this rule necessary.
    Mr. Genachowski. Well, the misperception that some people 
have is that the framework that we adopted was the first time 
that the FCC adopted measures to preserve a free and open 
Internet. In fact, in 2002 the FCC issued open Internet 
principles; in 2005 it enforced--it issued an enforcement 
action against a company that was blocking voice over the 
Internet; later, under its framework, it issued--it enforced--
it took an action against a cable company that was blocking 
online video. What we saw--what I saw when I came to the FCC 
was that there had been a bipartisan history in favor of 
preserving a free and open Internet, but we inherited a process 
that wasn't the traditional rulemaking process, had created 
uncertainty because there weren't any rules that had been 
written down. And we took it upon ourselves to increase 
certainty and predictability in the overall broadband economy 
by conducting an open Administrative Procedures Act rulemaking 
process.
    One other point, if I may, the fact that there were 
incidents of blocking, degrading during these years when the 
FCC made clear that that shouldn't happen, means a lot because 
it means that even with the rules there were issues. In the 
absence of the FCC going back to 2002 saying this was an issue, 
it is fair to presume that there would have been many more 
instances of interference with Internet openness and freedom. 
What we have done now is simply codify a fair and reasonable, 
broadly supported framework that increases the level of 
certainty and predictability for everyone in the broadband 
economy, including America's great entrepreneurs and early-
stage investors.
    Ms. Chu. And in fact talking about those companies that 
have blocked services on the Internet, can you be more specific 
about them, specific examples?
    Mr. Genachowski. Sure. In 2005 a company called Madison 
River blocked voice over the Internet traffic to its consumers. 
In 2008 Comcast blocked lawful video from Bit Torrent. We 
learned in, I think, 2009 that Apple and AT&T had agreed that 
voice over the Internet applications should not be allowed on 
the IPhone, that has since been changed. There have been 
private lawsuits raising instances of Internet blocking or 
degrading that were settled by--with agreements to follow 
practices consistent with open Internet and freedom. All of 
this was as against a backdrop of an expectation any lawyer 
would have told any company, look the FCC has something in 
place here, before our framework they would have said, but 
we're not sure exactly what it is.
    Ms. Chu. And how has this rule been received by the 
industry and other players?
    Mr. Genachowski. Well, I think in this contentious area I 
am very proud of our staff for working hard to get the broadest 
possible consensus that anyone has seen in an issue that is 
difficult like this. And so across the spectrum from early-
stage entrepreneurs and investors, to major ISPs and cable 
companies, there has been support for the predictability and 
certainty that the order provides. I mentioned in my opening 
statement that it has been described as a pragmatic resolution 
that promotes investment, economic growth and innovation.
    Ms. Chu. And in fact opponents do argue that this 
regulation would hurt our economy and stifle private sector job 
creation and undermine innovation. How does this ensure that we 
can continue to have innovation in--and that investment can 
flourish?
    Mr. Genachowski. Well, fundamentally this is an innovation 
framework. It makes sure that the next entrepreneur with a 
great idea in a garage or a dorm room can start that business 
knowing that if he or she puts it on the Internet it will reach 
an audience and the market will decide whether or not it is 
successful. And they don't have to worry about it being blocked 
by any of the companies that control access to the Internet, 
that is a fundamental way to make sure that we preserve what 
has been so great about the Internet in promoting innovation, 
job creation and private investment in our company.
    Ms. Chu. Thank you. I have no time--awareness of the time 
because of the----
    Mr. Goodlatte. I think that gives you a little latitude to 
ask another question.
    Ms. Chu. Oh. Okay. Well, but thank you, I think I will 
yield back.
    Mr. Goodlatte. I thank the gentlewoman.
    And the Chair now recognizes the gentleman from North 
Carolina, Mr. Coble?
    Mr. Coble. Mr. Chairman, I thank you for that. Mr. Chabot, 
the gentleman from Ohio has been here longer than I, Mr. 
Chairman. If you would recognize him then I will get mine 
later.
    Mr. Goodlatte. With your deference we will be happy to do 
that and we will recognize the gentleman from Ohio for 5 
minutes.
    Mr. Chabot. Thank you, I--just one question and then I am 
going to yield the balance of my time to Mr. Coble and then he 
can have my time and his time.
    I understand that it has already been discussed, to some 
extent here today, in my absence, the fact that some have 
argued that we don't need further regulation to achieve net 
neutrality because our Federal antitrust laws may be used to 
seek redress from anti-competitive behavior. How does that 
argument square with the impact of the Supreme Court's ruling 
in Trinko that makes it considerably more difficult to bring an 
action under our antitrust laws for activities regulated by the 
FCC pursuant to the Telecommunications Act?
    And I will start with Mr. McDowell, I guess. In fact I will 
give it to Mr. McDowell, then I am going to go ahead and yield 
back so I can go with Howard.
    Mr. McDowell. Thank you, Mr. Chabot. You know, I was in the 
private sector when the Trinko case was decided in 2004 and I 
read it many times and I have reread it in preparation for this 
hearing. What is--I think Trinko is first of all a case of bad 
facts, perhaps not making the best law. You have an indirect 
purchaser situation, first of all. But second of all, what the 
Court said there, my interpretation is that when there is a 
statutory regime setting up regulatory relief for a particular 
matter, that the courts are loathe to step in with antitrust 
remedies. And what you had in Trinko, I think, has to be looked 
at specifically to the facts and the law applied to Trinko. You 
had the Telecommunications Act of 1996, you had Title II 
specifically, you had the unbundling obligations of the 
regional Bell operating companies, so you had Sections 271 and 
Section 251 and Section 251(c)(3) in particular. And so that 
was a very prescriptive, statutory regime, that gave the FCC a 
great deal of authority and latitude as to how to address 
competition matters and regulatory matters that came up within 
the confines of the statute.
    Here, with broadband Internet access, broadband Internet 
access by the net neutrality order's own admission is not 
common carriage. The order itself, from last December, goes out 
of its way to say it is not common carriage, even though I 
think the FCC is trying to foist a lot of the common carriage 
type regulation on there, on its face it is saying it is not 
common carriage. So therefore, Title II would not apply, so 
therefore it is unregulated, so therefore the antitrust laws 
would apply even in the face of Trinko.
    But I would like to address a few other things as well. Not 
to split hairs on the legal history of the FCC's actions 
regarding an open Internet, the FCC, in 2005 did bring action 
against Madison River and entered into a consent agreement. 
Madison River was a phone company and was violating its 
statutory obligations under Title II and that is how the FCC 
came after it.
    The Internet principles of 2005 were just that, they were 
principles. All four commissioners at that point said they were 
not enforceable, they did not have the effect of rules, they 
didn't go through the notice of proposed rulemaking process, 
the notice and comment process. They weren't codified in the 
Code of Federal Regulations. Yet, at least two, I think three 
actually, of the commissioners reversed themselves in 2008 to 
address the allegations made against Comcast in the Bit Torrent 
affair that arose in 2007. So in 2008 there was that order and 
the commissioners reversed themselves to say, oh those are 
enforceable rules when in fact they didn't go through the 
process, they weren't codified in the Code of Federal 
Regulations, they were not rules.
    So that was when the commission actually started to take a 
turn down----
    Mr. Conyers. Sorry.
    Mr. McDowell [continuing]. A turn down the wrong road in 
terms of its authority. And I think that is important. But what 
is also important about what the chairman said is that all of 
those complaints, every single one of them were resolved under 
existing law that came prior to the net neutrality order, every 
single one of them.
    Mr. Chabot. Okay. Thank you very much.
    I would like to yield the balance of my time to Mr. Coble.
    Mr. Coble. Mr. Chairman, what little time I have then I 
will wait my turn, but let me start with Mr. McDowell.
    Mr. McDowell, will the order only affect large cable and 
telephone companies or will it affect smaller companies as 
well, a.). And b.) how will it affect local co-ops?
    Mr. McDowell. It affects, from my understanding of it, all 
companies regardless of their size and including local, rural 
co-ops.
    Mr. Coble. Let me go to the chairman and try to beat the 
red light, Mr. Chairman. Mr. Chairman, given that the recent 
academic studies have demonstrated that in excess of 89 percent 
of the bit traffic--Bit Torrent traffic is copyright infringing 
material, would slowing down or delaying or blocking Bit 
Torrent package to prevent copyright infringement be allowed 
under the rule under the order?
    Mr. Genachowski. The order addresses only lawful content 
and it makes it clear that measures to enforce intellectual 
property or other actions against unlawful content are 
permissible under the framework.
    Mr. Coble. Mr. Chairman, do I have time for one more 
question?
    Mr. Goodlatte. Without objection, gentleman is recognized 
for an additional minute and then we are going to give you 
another bite of the apple here. So----
    Mr. Coble. And by the way, I apologize for my delay, I had 
two other hearings going on this morning.
    Mr. Goodlatte. Go right ahead.
    Mr. Coble. I thank you, Chairman.
    Either to Mr. McDowell or--Commissioner McDowell or the 
chairman. The order predicts significant and likely 
irreversible harm from threats to openness unless the FCC rules 
are enacted, I am told. Has the lack of these rules led to 
significant and irreversible harm at any point in the past?
    Mr. McDowell. The lack of rules has not led to significant 
or irreversible harm, in fact we have an open and freedom 
enhancing Internet, I think precisely because the government 
has not been involved.
    Mr. Coble. Mr. Chairman, you want to be heard?
    Mr. Genachowski. If I could just add again, since 2002 the 
commission has made clear that it was important to the country 
and the commission to preserve Internet openness and freedom 
and since 2005 enforced it in a series of instances. The 
mechanism that it used was later invalidated by the court and 
so that left the commission without--at great uncertainty in 
the marketplace, particularly for early-stage investors. The 
framework that we adopted, pursuant to Administrative 
Procedures Act process under the Communications Act restored 
certainty and predictability among early-stage investors and in 
various ways for Internet service providers as well.
    Mr. Coble. Thank you. Mr. Chairman Goodlatte, thank you for 
your generosity. I yield back.
    Mr. Goodlatte. I thank the gentleman. The Chair now 
recognizes the second gentlewoman from California, Ms. Sanchez 
for 5 minutes.
    Ms. Sanchez. Thank you and I will just point out for the 
Chairman's general knowledge that California sends the most 
female representatives to the United States Congress, that is 
why you find yourself in the midst of so many here on 
Judiciary.
    Mr. Goodlatte. And we are pleased to have them all. 
[Laughter.]
    Ms. Sanchez. Thank you so much. I want to thank both of our 
witnesses for joining us today. And as both witnesses notice 
in--or noted in their written treatment, I think the FCC does a 
great job of addressing the issues in front of them, to the 
best that they can in a bipartisan manner and that is something 
that is to be envied from somebody sitting on this side of the 
table, so to speak.
    I want to start my questioning with Chairman Genachowski. 
Did I pronounce that correctly?
    Mr. Genachowski. Genachowski.
    Ms. Sanchez. Genachowski, I'm sorry. You know, it is no 
secret that in the FCC's national broadband plan 13 percent--
just 13 percent of Americans have only one broadband access 
provider and 78 percent of Americans have only two broadband 
options which means not a lot of choice out there. So I am 
curious in getting your perspective on in the absence of the 
open Internet order that the FCC has adopted, should those 
citizens be worried about the content that they hope to access 
potentially being censored?
    Mr. Genachowski. Well that was one of the reasons why we 
thought it was important to adopt the order and I think the 
framework that we adopted gives consumers and innovators basic 
protections to ensure that if you are a consumer you can access 
whatever is lawful on the Internet, if you are an entrepreneur 
you can put something on the Internet and know that consumers 
will have access to it.
    Ms. Sanchez. Great. And just as a side note, I would be 
interested to know what you are doing to try to help expand 
options for these folks that don't have a lot of choices when 
it comes to access.
    Mr. Genachowski. We each, Commissioner McDowell and I each 
mentioned several items that we are working on together to 
increase competition, from dealing with infrastructure issues 
like tower siteing and pole attachment to freeing up more 
spectrum both unlicensed and licensed. Those are just some of 
the measures that we pursue to promote and extend competition 
in the marketplace.
    Ms. Sanchez. Great. I am curious in knowing what you think 
the impact of the open Internet order will have minority 
communities in particular.
    Mr. Genachowski. I think keeping the Internet open allows 
anyone with an idea or a business concept to have a real 
chance. And that is true for members of minority communities. 
We have actually seen a number of examples of business and 
content entrepreneurs from minority communities take advantage 
of an open Internet to build an audience, build a business. It 
is one of the many reasons why preserving the openness and the 
freedom of the Internet has real value for the country.
    Ms. Sanchez. Thank you. I am interested in knowing, if you 
can give us an example of how--because it has been suggested 
that antitrust laws would help with respect to violation of 
Internet freedom, but can you give me an example of how using 
solely antitrust enforcement would play out regarding a 
violation of Internet freedom?
    Mr. Genachowski. What concerned the staff and us as we 
looked at this issue was--and what we heard from early-stage 
companies and investors, you know, imagine an early-stage 
company working out of its garage or a small office, that has a 
great product, that perhaps is competitive with a product 
offered by an Internet service provider and gets blocked. Well, 
what is that early-stage company supposed to do? If the only 
remedy is filing an antitrust lawsuit, you know, here is a 
company that has no money, that has very few customers, if any, 
having to find a lawyer, pay the lawyer to file a lawsuit, 
prove damage and hope at the end of the day--well this--it is 
just--even telling the story, it is not realistic for America's 
early-stage entrepreneurs and small businesses, and it is why I 
think that going back many years there has been a real 
consensus that baseline protections for Internet freedom and 
openness were necessary and would be a healthy complement to 
antitrust laws, which themselves are very, very important.
    And so it is no--I don't mean any disrespect to antitrust 
laws, they play a critical role in promoting our economy and 
competition, but in some areas like this, they aren't alone 
enough.
    Ms. Sanchez. There might be in fact an additional hurdle 
for people that are trying to compete?
    Mr. Genachowski. Um hmm.
    Ms. Sanchez. Great. And then finally, you know, there has 
been some debate over what the response has been from the 
commercial sector to the rules that you adopted in December, 
whether it has been predominantly positive or negative. You 
mentioned that in your experience you have been that it seemed 
to be predominantly positive people are looking for something 
that is pragmatic and something that has predictability. And I 
am just wondering if you can expand on that a little bit.
    Mr. Genachowski. Sure, of course. You know, the--and we 
would be happy to provide you--people said things publicly and 
so I am not, you know, reporting simply in private 
conversations. And we heard from, I think one of the Members 
mentioned TechNet which broadly represents the technology 
community, companies and associations throughout the broadband 
economy, large ISPs and cable companies, early-stage investors 
and entrepreneurs. We would be happy to provide you with some 
of the examples of statements that were issued after the order 
was adopted.
    Ms. Sanchez. Would you say, with the Chairman's indulgence 
I will just--if I could have an additional 15 seconds to ask 
this last question?
    Mr. Goodlatte. Without objection the gentlewoman is 
recognized for an additional minute.
    Ms. Sanchez. Oh, thank you. Very generous.
    Would you say that these are not always people that have 
the same interests, so it is sort of a broad swath of people 
who are interested in this issue have actually come to some 
sort of agreement in terms of support?
    Mr. Genachowski. Very much so. And I--at some level we 
became concerned that sort of the Groundhog Day ongoing battle 
on net neutrality was doing harm to the potential of high-speed 
Internet for all Americans. And we heard that from many 
entities throughout the economy saying, you know what, it is 
time to resolve this, the gap between the bid and ask isn't 
that large, let's work together to find a framework that moves 
us forward and allows us to tackle other issues that we need to 
tackle as country, unleashing spectrum, transforming the 
Universal Service Fund from telephone to broadband, a whole 
series of issues that we need to drive broadband success in the 
United States.
    Ms. Sanchez. Great. And I thank you for your time and I 
yield back.
    Thank you, Mr. Chairman.
    Mr. Goodlatte. I thank the gentlewoman and the Chair now 
recognizes California gentlewoman number three, Ms. Waters, for 
5 minutes.
    Voice. Number four.
    Ms. Waters. Thank you very much, Mr. Chairman. Again, I 
would like to thank Mr. Genachowski and Mr. McDowell for both 
being here today with this statement. I have three areas that 
it is going to be hard to get to in a limited period of time, 
but if I kind of tell you in advance perhaps you can respond to 
questions that I am going to have about the Comcast/NBC merger, 
about net neutrality and of course our new bank media mogul, 
Mr. Jamie Diamon and JPMorgan.
    On the Comcast/NBC merger, the FCC and DOJ have authority 
to review media mergers under Federal antitrust laws. The FCC's 
process allows for a more comprehensive public interest 
analysis. According to the Supreme Court and FCC president, 
factors considered to be in the public interest must include a 
deeply rooted preference for preserving and enhancing 
competition, promoting diversity of license holdings and 
generally managing the spectrum in the public interest.
    How does consolidation promote a diversity of license 
holdings and what types of public interest conditions tend to 
promote a diversity of license holdings and broadcast 
viewpoints? Which public interest conditions in the FCC's order 
approving the Comcast merger were not previously agreed to or 
presented by the merging applicants months in advance? That is 
on Comcast.
    On net neutrality, many of us consider the FCC net 
neutrality's rule very weak and all of the consumer protection 
and public interest organizations have basically said this. I 
want to know, since the future of the Nation's communications 
infrastructure is moving to mobile wireless, is the FCC at all 
concerned about the lack of protection for wireless Internet 
users?
    My colleagues on the other side of the alley are also 
worried about investment. Many investment firms and venture 
capitalists are now lining up behind innovators who are 
developing mobile applications for cell phones and other 
portable services. If the FCC is at all concerned about the 
potential blocking that could occur over mobile wireless 
networks, what may that may stifle investment and mobile 
application?
    And finally, last year Bloomberg reported that JPMorgan 
Chase owns a 10.2 percent stake in U.S.A. Today publisher 
Gannett Company, making it the company's largest shareholder. 
Besides U.S. Today, Gannett owns more than 80 other daily 
newspapers scattered across the country. JPMorgan Chase owns or 
wields considerable power over Reader's Digest Association, 
Source Internet Companies and American Media. If the holdings 
of all these companies that JPMorgan Chase has inherited were 
rolled into a single entity it would be the largest magazine 
publisher in the United States.
    JPMorgan could also become a co-owner of the Tribune 
Company, publisher of the Los Angeles Times and Chicago 
Tribune, depending on the outcome of the proposed bankruptcy 
organization or reorganization plans in courts. I have been 
following the L.A. Times waiver for quite some times now and I 
suppose they have been holding on and they have been protected 
in this waiver until they could resolve this bankruptcy and 
perhaps do this kind of sale that is being contemplated.
    So, is the FCC at all concerned about whether JPMorgan's 
mass media holdings violate the agency's cross-ownership rules? 
Do you think it serves the public interest for Wall Street to 
own significant portions of the media?
    Mr. Genachowski. Thank you for the questions. Let me try to 
address each of them.
    With respect to Comcast/NBC, the statutory obligation of 
the agency is to determine that a license transfer is in the 
public interest. And so it is not surprising that companies who 
seek FCC approval think in advance about what types of actions 
might permit the FCC to determine that the transaction was in 
the public interest. And often those public interest benefits 
from the start are beneficial.
    Of course they don't determine the end of our process. In 
that transaction we conducted a very thorough, extensive review 
and over the course of it approved the merger with a series of 
conditions that allowed the commission to determine that the 
transaction was in the public interest. I would be pleased to 
provide you a full list of it and both what was in the initial 
public interest showing and what----
    Ms. Waters. No, no, no. I know what it is in it and I will 
be watching to see if there is going to be an enforcement. I 
don't like it. You have spoken to it. We can move on.
    Mr. Genachowski. And so the second question on wireless, a 
couple of points. There is a misperception, to a certain 
extent, about what we did on wireless and open Internet. We did 
have--we do have a provision, a no blocking provision for 
wireless Internet access. The transparency requirements are 
there. And there is also a provision saying no blocking of 
competitive applications. So those are there.
    We also said that we would monitor developments in the 
wireless space to see if additional action was necessary. We 
hope there won't be, but it is part of the FCC's role to 
monitor and determine if additional action is necessary.
    And on the third question, I am not familiar with the 
underlying--sorry.
    Ms. Waters. If you may, just for a moment on the wireless, 
since the future of the Nation's and communication's 
infrastructure is moving to mobile wireless, is the FCC at all 
concerned about the lack of protection for wireless Internet 
users? I really want to understand with this dual track, this 
dual system that we have, how are you going to do that?
    Mr. Genachowski. Well, we thought it was appropriate to 
take into account legitimate differences between wired and 
wireless, but let me say, the wireless is incredibly important 
to the future of our economy.
    Ms. Waters. That is right.
    Mr. Genachowski. Wireless Internet access is very 
important. Ensuring open Internet on wireless is very 
important. We took into account differences between wired and 
wireless in putting together our rules, but again, there is a 
no blocking rule in affect, no blocking of competitive 
applications, transparency rules in effect. I expect and 
believe that those will be sufficient to preserve Internet 
freedom and openness on wireless, but the FCC will monitor the 
situation and act, if necessary.
    Ms. Waters. Now to JPMorgan.
    Mr. Genachowski. Well, you have mentioned facts that I am 
not aware and so I don't want to tread into areas that I just 
haven't had a chance to think about or be briefed on.
    Ms. Waters. Oh, this is big. You have got to know about 
that?
    Mr. Genachowski. We will look at it. I am not aware of any 
rules that--cross-ownership rules limiting investment by 
financial institutions in broadcast entities. But we would be 
happy to follow up if you----
    Ms. Waters. No, that's--what I am getting to is this 
consolidation. You know--you are aware that JPMorgan has bought 
up these other magazines, newspapers, what have you? You are 
aware of that?
    Mr. Genachowski. I am aware now.
    Ms. Waters. Okay. And you are aware, particularly of their 
purchase of the Tribune or the court actions around the 
Tribune. I guess a decision was made yesterday or today or so 
about their bankruptcy status and what that means in terms of 
JPMorgan's purchase of the Tribune. Are you aware of that?
    Mr. Genachowski. I am not familiar with the current status 
of the bankruptcy proceeding. I am aware that a bankruptcy 
proceeding is going on with the Tribune.
    Ms. Waters. But you know they want it?
    Mr. Genachowski. Excuse me?
    Ms. Waters. You know that JPMorgan is going after Tribune?
    Mr. Genachowski. I don't know exactly.
    Ms. Waters. Okay. All right.
    Mr. Genachowski. But I would be happy to follow up, 
understand it more and----
    Mr. Goodlatte. The time of the gentlewoman has expired.
    Ms. Waters. Thank you.
    Thank you very much, Mr. Chairman.
    Mr. Goodlatte. And in the category of the last shall be 
first or the first shall be last, the Ranking Member deferred 
his questions and so we will recognize him now.
    Mr. Watt. Thank you, Mr. Chairman. And I deferred for--
because I knew I was going to need to be here until the end of 
the hearing, as the Ranking Member and other Members had other 
things to do.
    I also deferred because at the outset I kind of have viewed 
this as a difference in philosophy share. A free enterprise 
person, antitrust laws will take care of everything and you 
know, stay out of free enterprise and then you have got another 
side. And you know, and I still, even after the whole hearing 
and all of the questions and answers, kind of come down at that 
same place. You have one philosophy about this, the Chairman 
has another philosophy, the Chairman of our Subcommittee has 
one philosophy about it, the Ranking Member has another 
philosophy about it.
    I said at the outset that I was closer to the chairman, 
Chairman Genachowski's position than I was. But so I ask this 
to Mr. McDowell, he has been here most of the time, hadn't had 
a chance to exert himself as much. But I have always kind of 
felt like it is important to understand more my--the opinion of 
the person who I disagree with, and so I ask this question for 
that purpose. When I was practicing law--the beauty of being in 
Congress, I have said a number of times in this Committee and 
other Committees, is when I was practicing law I never asked a 
question that I didn't know the answer to, of a witness on the 
witness stand. Here I can ask any question that I want, without 
worrying about the--whether I know the answer to it because 
nine times out of ten I don't know the answer to it. And my 
purpose, I think the purpose of these hearings is to educate 
Members of Congress about it.
    So the questions I am going to ask are designed to educate 
me about your position, Mr. McDowell, because I want to 
understand it better.
    It seems to me that at least on the surface, and I am sure 
you will be able to clarify why this is not the case, you 
believed that the FCC has some role with respect to the--to 
broadband. You say, in your statement, ``Since my arrival at 
the commission in 2006, the FCC has taken several historic 
steps to spur the construction of broadband facilities.'' You 
list some of those.
    And then you say, on page four of your statement, that 
``Chairman Genachowski also deserves credit for bringing to a 
vote many other initiatives that may seem unimportant at first 
blush, but actually have a profound effect on promoting 
competition in the last mile.'' So you obviously think FCC has 
some role in that last mile.
    And then you talk about the creation of a shot clock to 
ensure faster decisions by local authorities, ensuring timely 
resolution of pole attachment approvals with reduced rental 
rates for broadband providers, repurposing some satellite 
spectrum for terrestrial broadband use. So it is quite 
obviously to me that you believe that the FCC has some role and 
I am trying to figure out what your bright line distinction is 
between where you think the FCC ought to be acting with 
reference to broadband and where it ought not be acting, 
because it seems to me that in some cases when things have gone 
the way you wanted on that last mile, you were very happy with 
where--with the fact that the FCC was there doing something. 
And yet, in this case you have dissented and said, I don't want 
you to be there. And the appearance is, is that gives you a 
results-oriented process as opposed to a substance-oriented 
process. But I am sure that is not the case.
    So just help me understand what you think the dividing line 
between--is between what the FCC did and what it shouldn't--
what it did in this case and what it has done in other cases, I 
guess.
    Mr. McDowell. Excellent question. Thank you. So my guiding 
principle is whether or not we have statutory authority. So 
whatever the case might be before us, whether it is this or 
something else, even if I think it is a good idea but if we 
clearly do not have the statutory authority to do something 
then we can't do it.
    In this case, with the net neutrality order the commission 
overreached, in my view. And fresh off a court opinion saying 
that it overreached using the same or substantially similar 
arguments that it did just a year earlier. So----
    Mr. Watt. What are the statute--what is the statutory 
authority for all of the other things that--I am just, again, 
you know, this is not designed to trick anybody I am just 
trying to better understand where you come down.
    Mr. McDowell. Sure. So when it comes to let's say 
repurposing spectrum, we have the authority, under Title III, 
to do that and it is explicit. If it is things like pole 
attachments, we have the authority under Title II to do that 
and it is explicit.
    Sometimes Congress gives us narrow authority, sometimes it 
gives us broad authority. Sometimes a court says you don't have 
that much authority, we are going to narrow down what our view 
of that is and we have to follow that court's order. And that 
is what has happened with net neutrality.
    Mr. Watt. So ultimately if we get the courts saying, yes 
the FCC has this authority, which is, you know, where we are 
headed, I guess, or not headed, one way or another the court 
will decide this, you are not dissatisfied with the rule you 
wrote, you are dissatisfied because you felt like the FCC 
shouldn't have written a rule?
    Mr. McDowell. That we just didn't have the authority to do 
that. So that is right.
    Mr. Watt. Yeah. Okay. All right. Okay, that is fine.
    And that is--that helps me. And believe me, I am not trying 
to call you out here, I am just trying to understand better 
what the differences were here.
    Mr. McDowell. And if I could just--you know, one common 
ground that we have is that, I think we all want an open and 
freedom enhancing Internet. But how do you get there? And we 
have already gotten there under existing law, in my view.
    Mr. Watt. Well you have gotten the--I am not sure you have 
gotten there for that last five--what do you call it----
    Mr. McDowell. Broadband adoption and deployment, that's 
different.
    Mr. Watt [continuing]. To the last mile.
    Mr. McDowell. That is a different issue for the last 5 
percent or so. Yeah.
    Mr. Watt. Okay. All right. That is all, Mr. Chairman. I--
that is very helpful and I appreciate your----
    Mr. McDowell. Thank you, sir.
    Mr. Goodlatte. Well, I thank the gentleman. If the 
gentleman has additional questions he will be recognized again 
in a moment because I have a few additional questions I would 
like to ask the witnesses. It has been a very, very helpful and 
good discussion and I think we ought to take advantage of 
closing a few issues.
    Chairman Genachowski, to revisit the whole issue of the 
justification for the order that more than 70 percent of 
Americans live in areas with only one or two fixed broadband 
providers, the broadband market is rapidly evolving. 
Commissioner McDowell has pointed out some of the statistics 
that point in that regard. Antitrust law, which we have 
advocated, has the benefit of being available and ready to step 
in at any time but is sitting on the sidelines and not, on a 
active basis, regulating unless some event takes place that 
would justify it.
    So my question for you is will the order remain in effect 
if the broadband market evolves toward what you view as being 
more competition?
    Mr. Genachowski. Well, I am sure that if very significant 
competition develops in the fixed broadband space we will be 
asked to and we would take a look at what rules are necessary 
under those circumstances. It is quite a challenge to generate 
more competition in the space. The investment costs to build 
out the infrastructure are high, switching costs are high. 
Notwithstanding a lot of good work that has been done over the 
years, we are still at a point where there are only one or two 
providers for over 70 percent of the country. So I don't think 
anyone thinks that we are imminently going to see----
    Mr. Goodlatte. But in many instances that is not counting 
wireless providers or satellite providers. Is that not the 
case?
    Mr. Genachowski. And we are--one of the reasons that we 
work together on unleashing spectrum is in additional to the 
economic benefits of making sure our spectrum infrastructure is 
available for the kind of innovation that we are seeing, is 
that we would all be very pleased to see wireless broadband 
developed as a competitor in a substitutable product for fixed 
broadband access----
    Mr. Goodlatte. Oh, I think we would agree with that too and 
we would also agree that you have the jurisdictional authority 
to work in the direction of making more spectrum available for 
that purpose and I have conveyed to you my interest in being 
supportive of that as well. But that is a separate issue from 
whether you have the authority to do what you are doing here or 
whether you need to do it given the current increasing 
availability of broadband and increasing uptake and the number 
of companies involved. We have some large companies, obviously, 
in both hard line telephone service, cable service, wireless 
service. We also have hundreds, if not thousands of small 
companies that are providing these services too.
    So, let me ask you a question regarding that. The order 
creates entirely new adversarial proceedings that can be 
initiated by quote, any person. Once any person initiates a 
proceeding against an Internet service provider, that defendant 
must answer and the FCC staff must evaluate the competing 
filings. Because these proceedings have never existed before, 
how can you be confident that creating them will not impose 
significant costs on those private parties, and the FCC, 
particularly smaller companies?
    Mr. Genachowski. Well----
    Mr. Goodlatte. And will it not have the potential affect of 
slowing down the roll out of more broadband services?
    Mr. Genachowski. We are committed to running any 
administrative processes in the most efficient way. Because of 
the reasons I articulated, my concerns about----
    Mr. Goodlatte. But this is an administrative process you 
have created that doesn't exist and wouldn't be a burden on 
anybody but for the fact that you have created.
    Mr. Genachowski. Understood. But we needed to find, in our 
opinion, some framework to preserve Internet freedom and 
openness.
    Let me make a couple of points. One is the transparency 
piece of what we did is very important and it is designed to 
minimize the need for anyone to ever have to bring a complaint.
    Number two, I agree with the point that was made that it 
would be beneficial for third party organizations to develop, 
and I look forward to working with commissioner McDowell and 
others on that, to be an initial resource. Anything we can do 
to resolve disputes before they come to the FCC we will 
support.
    And the third point I would make is that putting the 
framework in place and providing clarity to both early-stage 
companies and also Internet service providers also reduces the 
occasion for bringing complaints, because there is greater 
clarity. So we see the FCC as a backstop that we hope is 
infrequently and maybe never used. But the existence of that 
backstop we think will be important in promoting innovation and 
preserving Internet freedom.
    Mr. Goodlatte. I wish I shared your optimism about greater 
litigation. But, be that as it may, let me turn to Commissioner 
McDowell and ask him his opinion about whether small companies 
or large companies are going to be better able to deal with 
these adversarial proceedings and what affect will that have on 
competition in the Internet?
    Mr. McDowell. You know, I think the most common request we 
get at the FCC, when you boil it down to its nub, is please 
regulate my rival. And I think that is a lot of what is at the 
heart of what the push for these types of rules. Unfortunately 
we have seen a growing division between application dividers 
and Internet service providers from a policy perspective while 
at the same time from an engineer's perspective they look a lot 
alike.
    So if I were to describe to you a company that has 
thousands of miles of fiber, it has soft switches and servers 
and it offers voice, video and data services and if I gave you 
a multiple choice test and it said, is that company either a.) 
AT&T, is it Microsoft, b.), c.) is it Verizon, d.) is it 
Google, it would be a trick question because the answer would 
be e.) it is all of the above.
    And from an engineer's perspective the market is really 
demanding convergence. And we have got these old stovepipe 
regulations in the statute that actually force us to look at 
these--to treat them differently based on whether or not a bit 
travels over a piece of coax cable or a piece of copper, fiber 
or through the airwaves. And I think wireless is really going 
to change the entire landscape here.
    I think a lot of this is fighting the last war, except it 
is fighting the last hypothetical war, no war ever actually 
broke out. It is really a fight that is rooted----
    Mr. Goodlatte. But it almost invites perpetuation of that 
war into the future, doesn't it? When we open the door for any 
person to bring an adversarial proceeding, these companies 
large and small will have to deal it.
    Mr. McDowell. Absolutely. And it disproportionately, I 
think, affects the smaller companies who have to bear 
litigation costs. But also it becomes a classic case of 
``Mother, May I'' regulation when the FCC, in its order, 
invites declaratory rulings. So before a company can come out 
with a product or service do they have to come to the FCC for a 
declaratory ruling or do their rivals come to the FCC saying, 
that type of company cannot offer this type of product or 
service? Then we become an adjudicator of innovation.
    Mr. Goodlatte. Commissioner Genachowski, Mr. Chairman, the 
Department of Justice's settlement of its challenge to the 
Comcast/NBC merger included a commitment from Comcast to abide 
by the open Internet order for a period of time, even if the 
order is struck down in court. If the open Internet order is 
struck down in court, will the FCC play any role in enforcing 
this provision? And if not, how will the Department of Justice 
or anyone else enforcing Comcast's obligations under the open 
Internet order determine whether Comcast's practices are 
reasonable?
    Mr. Genachowski. I believe that both the DOJ and the FCC 
orders included conditions relating to open Internet that we 
both viewed, at the Justice Department and at the FCC, as 
transaction specific conditions that would justify the merger. 
So in the absence of the general rules, the mechanisms would 
still exist to enforce those conditions with respect to 
Comcast, I think both at DOJ and FCC.
    Mr. Goodlatte. What is the FCC's authority for using the 
merger review process to extract what Commissioners McDowell 
and Baker called quote far reaching and non-merger specific 
policy concessions, such as Comcast's promise to abide by the 
open Internet order? Weren't Commissioners McDowell and Baker 
correct that the FCC's role in merger review limited--was 
limited to ensuring that the transaction complies with all 
applicable statutory provisions?
    Mr. Genachowski. Well, that is not what the Communications 
Act says in its direction to us. In order to approve a merger 
that is within our jurisdiction, one that involves the transfer 
of licenses granted under the Communications Act, we have to 
find that the transaction serves the public interest. An 
affirmative finding is required. And so it is not surprising 
that companies seek to demonstrate that a transaction is in the 
public interest and over the years, under both Republican and 
Democratic chairman, there have been merger review processes 
that have developed at the FCC looking at areas of importance 
under the Communications Act to determine whether or not a 
transaction is in fact in the public interest. And so it is 
under that framework that we operate.
    The conditions, in my view, in that transaction were 
transaction specific. I think, for example, the open Internet 
condition, here you have the largest broadband provider in the 
country combining with a very large content player, certain it 
raised the potential harm of discriminating in favor of its 
content or against others. And so both the FCC and the DOJ 
concluded that in order to approve that transaction it needed 
to be clear that that kind of favoritism/discrimination would 
not occur.
    Mr. Goodlatte. Commissioner McDowell, do you have any 
response to that?
    Mr. McDowell. Certainly the public interest standard is 
broad and undefined when it comes to mergers. But when you ask 
one player to live by a set of rules that might be overturned 
in court for the rest of the industry, so that it is the only 
player that has to live by those rules, I think that is a 
legitimate public policy concern.
    So it has been my philosophy to look at merger conditions 
to see, as a result of the merger, is there a specific consumer 
harm or market harm that arises and what can we do, in a 
narrowly tailored fashion, to fix that and is there a way to 
sunset that rather than keep it going on, even if it is 
overturned in court more broadly for the rest of the industry.
    Mr. Goodlatte. Thank you.
    Do my questions prompt any additional questions from the 
Ranking Member?
    Mr. Watt. No, just one observation. I keep hearing 
everybody bragging about the level of competition out there, 
still having trouble getting cell service that competes---- 
[Laughter.]
    In the mountains of North Carolina.
    Mr. Goodlatte. And Virginia.
    Mr. Watt. And the mountains of Virginia. Maybe I should be 
asking a question here, how close are we to getting any 
competition for--even for phone service, landlines in the 
mountainous parts of our country?
    Mr. Genachowski. Well, transforming our Universal Service 
Fund which spends literally billions of dollars a year to 
support traditional telephone, that is what it is optimized 
for, transforming that to an efficient, focused mechanism for 
broadband is a very high priority that is shared, on a 
bipartisan basis, at the commission, number one. And number 
two----
    Mr. Watt. I have been hearing that for about three or 4 
years now, though.
    Mr. Genachowski. Well, we're working----
    Mr. Watt. I keep asking this question of all of the 
players, the mobile carriers, the--I mean nobody seems to--they 
keep saying it is coming, it is coming.
    Mr. Genachowski. All I can tell you is that the fact that 
we haven't done it yet as a country is not a good thing. We are 
taking this very seriously. In fact, about a month ago all five 
commissioners issued a joint blog letting all the players know 
that we were serious about action and if you had a point of 
view and a view on how we should solve some of these problems, 
now is the time to come to the table. And we are working in a 
very focused way on this, as we are on the spectrum challenge 
that the country faces. There is a growing gap between the 
demand on spectrum, generated by smartphones, tablets, other 
things, very exciting for economic growth, job creation, the 
gap between that and the supply. We proposed an idea for 
freeing up a substantial amount of spectrum. This is one where 
we have asked for congressional authority so that we can do 
this on an incentive based, market based mechanism. I think 
these incentive auctions would be a very positive bipartisan 
success for the country.
    Mr. Watt. Would you just transport into your hearing record 
over there that I think this needs to be done.
    I yield back, Mr. Chairman.
    Mr. Goodlatte. I don't know what authority we have to 
insert into the record at the commission. But---- [Laughter.]
    In that regard I do want to thank our witnesses for their 
statement today. I appreciate both of you taking all this time 
today and working with your schedules to make it possible.
    Without objection, all Members will have 5 legislative days 
to submit to the Chair additional written questions for the 
witnesses, which we will forward and ask the witnesses to 
respond to as promptly as they can so that their answers may be 
made a part of our record.
    And without objection all Members will have 5 legislative 
days to submit any additional materials for inclusion in the 
record.
    With that, I again thank the witnesses and declare the 
hearing adjourned.
    [Whereupon, at 12:44 p.m., the Subcommittee was adjourned.]


                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

    Response of the Honorable Julius Genachowski, Chairman, Federal 
Communications Commission, to Post-Hearing Questions from the Honorable 
                              Howard Coble





                                

    Response of the Honorable Julius Genachowski, Chairman, Federal 
Communications Commission, to Post-Hearing Questions from the Honorable 
                             Jerrold Nadler







                                

  Response of the Honorable Robert M. McDowell, Commissioner, Federal 
Communications Commission, to Post-Hearing Questions from the Honorable 
                             Jerrold Nadler