[House Hearing, 112 Congress]
[From the U.S. Government Printing Office]
ENSURING COMPETITION ON THE INTERNET: NET NEUTRALITY AND ANTITRUST
(PART II), FCC PANEL
COMPETITION, AND THE INTERNET
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
MAY 5, 2011
Serial No. 112-40
Printed for the use of the Committee on the Judiciary
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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
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
Blaine Merritt, Chief Counsel
Stephanie Moore, Minority Counsel
C O N T E N T S
MAY 5, 2011
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
The Honorable Julius Genachowski, Chairman, Federal
Oral Testimony................................................. 7
Prepared Statement............................................. 10
The Honorable Robert M. McDowell, Commissioner, Federal
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
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,
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
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
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
At this time it is my pleasure to recognize the Ranking
Member of the Committee, the gentleman from North Carolina, Mr.
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
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.
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
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
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
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
I thank the Chairman for the indulgence on this and yield
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.
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
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
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
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
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
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
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
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
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
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.
Mr. Quayle [presiding]. Welcome back to the hearing on
Ensuring Competition on the Internet and Net Neutrality and
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
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
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
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
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
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
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.
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
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
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
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
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
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
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
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
Mr. Genachowski. It was a fundamental piece of our
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
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
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
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
Ms. Jackson Lee. Thank you very much.
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,
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
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
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
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
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
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
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
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
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
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:]
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
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-
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
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
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
Mr. Goodlatte. With your deference we will be happy to do
that and we will recognize the gentleman from Ohio for 5
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
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
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
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
Mr. Goodlatte. And we are pleased to have them all.
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
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
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
Ms. Sanchez. Great. And I thank you for your time and I
Thank you, Mr. Chairman.
Mr. Goodlatte. I thank the gentlewoman and the Chair now
recognizes California gentlewoman number three, Ms. Waters, for
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 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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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----
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
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
With that, I again thank the witnesses and declare the
[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
Response of the Honorable Julius Genachowski, Chairman, Federal
Communications Commission, to Post-Hearing Questions from the Honorable
Response of the Honorable Robert M. McDowell, Commissioner, Federal
Communications Commission, to Post-Hearing Questions from the Honorable