> FEDERAL ELECTION COMMISSION
>
> PUBLIC HEARING ON INTERNET COMMUNICATIONS
>
> Wednesday, June 29, 2005
>
> 9:35 a.m.
>
> Ninth Floor Hearing Room
>
> 999 E Street, N.W.
>
> Washington, D.C.
>
> **I N D E X**
>
> [ITEM]{.underline} [PAGE]{.underline}
>
> Opening Remarks 3
>
> [Panel 1]{.underline}
>
> Robert F. Bauer 4
>
> Reid Alan Cox, Center for Individual
>
> Freedom 6
>
> Laurence E. Gold, AFL-CIO 13
>
> Questions and Answers 18
>
> [Panel 2]{.underline}
>
> Jim Boulet, Jr. 116
>
> Mark Jaskulski, Student, Widener University
>
> School of Law 121
>
> Kristinn Taylor, Free Republic, LLC 129
>
> Questions and Answers 135
>
> [Panel 3]{.underline}
>
> Michael Bassik, The Online Coalition 178
>
> Duncan Black, Eschaton (atrios.blogspot.com) 183
>
> Trevor Potter, The Campaign Legal Center 189
>
> Karl J. Sandstrom, OMB Watch 194
>
> Questions and Answers 198
>
> [P]{.underline} [R]{.underline} [O]{.underline} [C]{.underline}
> [E]{.underline} [E]{.underline} [D]{.underline} [I]{.underline}
> [N]{.underline} [G]{.underline} [S]{.underline}
>
> CHAIRMAN THOMAS: Let\'s go ahead and get started. I know that one of
> our colleagues is here
>
> but just hasn\'t quite wound his way here, but we
>
> can get started.
>
> The special session of the Federal Election Commission for Wednesday,
> June 29, 2005, will again please come to order. Welcome to the second
> day of hearings on the Commission\'s proposed rules for Internet
> communications. We heard from three panels yesterday, and we will hear
> from three panels today. Each of today\'s panels will last for an hour
> and a half. Each witness will have five minutes to make an opening
> statement. We have a light system that basically will move to orange
> when you\'ve got about 30 seconds left. When it hits red, please try
> to wrap up.
>
> We will have at least one round of questions from Commissioners, the
> general counsel, and our staff director, and there will be a second
> round if time permits. We will have a short break between the first
> two panels followed by a lunch break after the second panel. The
> hearing will resume after lunch, with the third panel beginning at
> 2:15.
>
> So, let us get underway. Our panel this morning consists of Robert
> Bauer of the Perkins Coie law firm; Reid Cox, who is general counsel
> of the Center for Individual Freedom; and Laurence Gold, who is
> associate general counsel of the AFL-CIO.
>
> We\'ll work with the alphabet again. Let\'s start with Mr. Bauer;
> then, we will go to Mr. Cox; and then, we will finish up with Mr.
> Gold. Mr. Bauer, welcome. Please proceed.
>
> MR. BAUER: Thank you, Mr. Chairman, and thank you, Members of the
> Commission for inviting this testimony, holding these hearings. I have
> filed comments, as you know, and so, I will let the comments speak for
> themselves, and I will take very little time here.
>
> I just wanted to make two quick observations, one of which echoes my
> comments, and that is, as you know, in those comments and in the
> blogosphere, I had hoped that the Commission would consider taking
> this occasion to produce a statement of policy so that people
> understand what the regulatory perspective on this issue of the agency
> is, and I would suggest that you have the makings of one, at least in
> draft, and that is the statement that Commissioner Toner issued
> yesterday.
>
> Second, I wanted to make a comment about the distinction that I know
> yesterday was drawn repeatedly between individuals on the one hand and
> other users of the Internet on the other. For legal purposes, in a
> variety of contexts, I think that distinction is very important, to be
> sure. It also corresponds to fundamental intuitions people have about
> the interests that are really at stake here in many ways.
>
> I\'m also worried, however, that the distinction will lead us to a
> very narrowed view of what the individual interest here really is. The
> individual interest, the fabled Internet user at her desk in the
> basement, perhaps not even finished the first cup of coffee of the
> morning has an interest in the Internet as a full and unrestricted
> public space.
>
> That is also the interest, not merely that he or she can bang away
> without restriction on the computer, devise ads, send them out, set up
> a Website, but that he or she, in using his or her computer there in
> the basement alone, can connect to politics in its most vibrant and
> diverse form, with the full range of voiced represented in Internet
> political dialogue.
>
> So I would hate to see the individual interest here treated as a very
> isolated interest that enables the agency to create some reserved
> space for individual activity while busily restricting other forms of
> political speech on the Internet because I believe individuals have an
> interest in that other speech as well. That is what makes it a
> democratic space, and that is also very much of an individual
> interest.
>
> Thank you.
>
> CHAIRMAN THOMAS: Mr. Cox.
>
> MR. COX: Good morning. Given where I am, although I am not running for
> office, I think it is appropriate for me to introduce myself by saying
> I\'m Reid Cox, and I\'ve approved this message.
>
> In all seriousness, I am the general counsel of the Center for
> Individual Freedom. The Center is a nonpartisan, nonprofit advocacy
> group dedicated to protecting and defending individual rights and
> freedoms in the legal, legislative and educational arenas, and the
> Center is incorporated in the Commonwealth of Virginia and is
> tax-exempt under Section 501(c)(4) of the Internal Revenue Code.
>
> Perhaps the cornerstone of the Center\'s advocacy has been and
> continues to be a vigorous exercise and defense of free speech, press,
> and association rights. Indeed, we at the Center are not only
> concerned about our own First Amendment rights but also that those
> same freedoms are enjoyed by all Americans regardless of their
> political persuasion or ideological outlook.
>
> Quite simply, we believe that all Americans should enjoy and are
> constitutionally entitled to speak, publish, and associate concerning
> the issues concerning our neighborhoods, communities, states and
> country as well as our representative government at all levels.
>
> So let me begin with a couple of first principles. The freedoms of
> speech, press, and of association protect all Americans equally. The
> First Amendment draws no distinction between the individual who sets
> up his soapbox in a town square and the network news anchor who sits
> down each night at a studio in New York City. The Constitution does
> not value the newspaper sold at newsstands nationwide any more than
> the leaflet handed out at a local intersection.
>
> In other words, neither the amount of money expended nor the number of
> people reached has ever been a test for whether speech should be free
> under the Constitution. Moreover, today, neither of those factors is a
> barrier to anyone thanks to the Internet. The Internet is quite simply
> the most powerful and most democratic communications medium the world
> has ever known.
>
> Over the Internet, an individual or group of individuals can set up
> their own printing press, television or radio station and mailing
> center at virtually no cost, and they can communicate to the whole
> world, a single person, or any size audience in between, doing so in
> real time, asynchronous time, or both.
>
> On the other end of the communication, receivers have more power to
> determine what they read, hear, and see on the Internet than they do
> on any other medium. Thus, though anyone can publish via Internet, the
> receiver generally has to take some affirmative step to receive those
> communications, and while the Internet allows the publisher to reach
> anyone across any boundary, it gives just as much power to the
> audience not to be reached. And these features make it the perfect
> public forum, empowering both speakers and listeners alike.
>
> All this is my long way of wondering aloud why the Commission\'s
> proposed media exemption should not protect all news stories,
> commentaries, and editorials published on the Internet, regardless of
> who publishes them. While we have been trained to understand that the
> media is the institutional press, this is no longer the case in the
> information age, and I want to use the Center for Individual Freedom
> as an example.
>
> Each and every week, the Center publishes news stories, commentaries,
> and editorials that are read by millions of readers each year, and
> just like any other periodical publisher, the Center distributes its
> content to tens of thousands of subscribers each Friday in a
> publication named the Lunchtime Liberty Update.
>
> It happens that the Center\'s periodical is published exclusively on
> the Internet, not because that\'s the only way we can do so but
> because it\'s cost-effective, and because it enables the Center to
> publish quickly and retain content control. Otherwise, the Center\'s
> publications are just like those you might receive from the mainstream
> press. I would cite as examples the Weekly Standard or the New
> Republic.
>
> I should note parenthetically that the reasons that the Center
> publishes on the Internet are the same reasons that the Weekly
> Standard, the New Republic, and other traditional publications have
> shifted large portions of their content exclusively to the Internet.
> So the question for the Center and countless other groups and
> individuals is why aren\'t our news stories, commentaries, and
> editorials exempt under the Commission\'s safe harbor for media?
>
> Returning to first principles, it can\'t be because we don\'t own an
> old-fashioned printing press, nor can it be because we don\'t hold an
> FCC broadcasting license. The First Amendment again protects the town
> crier and pamphleteer just the same as the daily newspaper and evening
> newscast, and thus, the distinction for the Commission seems to turn
> on how it defines the word media.
>
> As I explained in my written comments, such preferential treatment to
> the institutional press not only raises the specter of the Government
> picking and choosing who can speak; it also threatens the speech of
> those with the least means. Indeed, while it may be true that the
> First Amendment protects everyone equally, it does so only at the
> price of extraordinary transactions costs in the form of legal fees
> and legal time, especially when the speaker finds himself or his
> speech at the margins.
>
> Thus, in practice, any careful speaker, especially one with limited
> means, must weigh the consequences of speaking before uttering even
> the first word. A blanket exemption would counteract this chilling
> effect by clearly ensuring a safe harbor for those who are included,
> but for those who are excluded, remain left out in the cold. As a
> result, if the Commission is to protect free speech, press, and
> association rights of all Americans, individuals, groups, publishers,
> what have you, it must do so by expanding the media exemption to
> clearly and explicitly include every publisher, online and offline,
> big and small, new and old.
>
> I thank the Commission for allowing me to submit written comments and
> testify today, and I welcome your questions on either the media
> exemption or any of the other proposed rules.
>
> CHAIRMAN THOMAS: Thank you.
>
> Mr. Gold.
>
> MR. GOLD: Thank you, Mr. Chairman. I appreciate the opportunity to
> testify today on behalf of the AFL-CIO. And we do appreciate the
> evident intend in the draft regulation to exercise some restraint in
> the sensitive areas, but we are concerned that the Commission or at
> least the draft proceeds somewhat incautiously in this area.
>
> BCRA did not regulate or purport to authorize or command the
> Commission to regulate the Internet. It was well known at the time of
> the passage of the McCain-Feingold law that the Internet was a very
> vibrant and widely used forum for political communications, and yet,
> nowhere did Congress purport to extend its regulation there.
>
> Of course, the Commission is considering the rules before it as a
> result of the Shays v. FEC case, but as Commissioner Toner pointed out
> in his statement yesterday, nonetheless, this rulemaking, both its
> timing and its content, are largely voluntary on the part of the
> Commission, and we believe that you may have proceeded unnecessarily
> beyond even what meeting the issue raised in the Shays case would
> command, namely, the concern in the case that excluding per se the
> Internet from the definition of public communication, at least for the
> purpose of the coordination regulations, was impermissible under the
> act. For example, as we point out in our comments, to add to the
> Section 114 regulations a specific reference to Internet use for
> incidental use of corporate or union facilities seems to us to be
> gratuitous, confusing, and possibly even chilling, let alone
> reasonably enforceable.
>
> We suggest that, and I think it is plain from the comments that you
> have received and just the overall atmosphere, that there really is no
> clamor out there for the Commission to wade in certain of the areas
> that the draft suggests it might. There is no record of corruption or
> its appearance or of abuse of the Internet to date, let alone of the
> apparently boundless and rather novel notion of circumvention of
> existing law.
>
> That reality, I think, belies some of what I would respectfully refer
> to as the overwrought language in the Shays decision, namely that the
> exemption of the Internet from coordinated communications would
> severely undermine the act and would, quote, permit rampant
> circumvention of the campaign finance laws and foster corruption or
> the appearance of corruption. I just don\'t see any evidence that
> that\'s truly the case.
>
> Another factor that I think the Commission ought to consider, and I\'m
> sure it is, is the very practical one of how do you go about enforcing
> this? Whatever you do, how does the Commission monitor and enforce?
> Granted, much of what you do or most of what you do in the enforcement
> area is in response to complaints, but in a world where you have I
> think I read in one of the comments an estimate of a million blogs to
> begin with, and certainly, hundreds of millions of people using the
> Internet globally but certainly, in the United States, at least 100
> million people using the Internet its ubiquitous nature, the leveling
> nature of it, the disproportionality of expense and result or expense
> and readership, if you will, on the medium, I think that the more you
> wade into this area, especially when you don\'t have to, you\'re
> asking for a great deal of demands on your resources that may itself
> be disproportionate to its value in enforcing the law and vindicating
> its intent.
>
> And finally, with respect to that, a point that I raised, I think,
> throughout the comments of the AFL-CIO is insofar as you do get into
> this area, it\'s really important that there be some mechanism to
> quantify what it is that the Internet costs. The act, of course, is
> about regulating money, not speech, or at least it should be, and this
> is something that we have wrestled with, the AFL-CIO has wrestled
> with, and I know others have over the last seven or eight years is how
> do we quantify, insofar as we believe or consider that what we do over
> the Internet does have some\--is regulated in some manner and has to
> be accounted for, how do we quantify the cost of what we\'re doing?
>
> There\'s nothing in the regulations that addresses that; there\'s
> really no guidance in the advisory opinions. I have asked informally
> staff on a couple of occasions just over the telephone, you know, how
> do you go about doing this and have never really gotten a satisfactory
> response.
>
> This is a pretty important point. If you\'re going to be dealing with
> thresholds, or if you\'re going to be dealing with reporting, or if
> you\'re going to be dealing with suggestions that certain expenditures
> or contributions or expenditures that themselves could implicate and
> result in penalties, there has to be some way for people to understand
> how it is they\'re supposed to value what they\'re doing.
>
> I know that this was not really discussed in the NPRM. My survey of
> the comments at least of those who are testifying, there is virtually
> no reference to it, and I would suggest that if the Commission decides
> to do anything that it might want to elicit yet another round of
> comments on that issue.
>
> And with that, I welcome your questions.
>
> CHAIRMAN THOMAS: Thank you very much.
>
> Our questioning, we\'re going to start this panel\'s questioning with
> Commissioner Smith.
>
> COMMISSIONER SMITH: Thank you, Mr. Chairman. I thank our witnesses for
> their comments.
>
> Mr. Gold, would I be correct in saying, I mean, do you think we could
> comply with the Shays-Meehan decision by, for example, amending the
> coordinate reg, 109.21, to simply say for purposes of this section,
> public communications could include communications over the Internet?
>
> MR. GOLD: That they will not? I\'m sorry.
>
> COMMISSIONER SMITH: That for purposes of this section, a public
> communication includes communications over the Internet.
>
> MR. GOLD: That would plainly be one way to respond, and that would be
> leaving aside the\--that at as a matter of policy, I think that that
> would be responsive in itself to the decision, and the Commission
> would not have to do anything else. I don\'t think that would be an
> appropriate response as a policy matter, but as a legal matter\--
>
> COMMISSIONER SMITH: Well, that is sort of my next question. And it\'s
> to preface, one of the things that I think has come up through this is
> that a lot of people, I think, would just never even dream that their
> Internet activity could, in fact, be subject to the law, that if they
> were an incorporated site doing express advocacy, that they might be
> violating the law, or if they were, you know, republishing campaign
> material on their site; they might be accused of coordinated
> contributions, or if they were doing a whole host of other things.
>
> And now, suddenly, people are aware, oh, you mean this does apply to
> us? Which I do think will mean there will be probably more complaints
> filed next time around, and so, I mean, the question is at this point,
> you know, should we do more than would be required merely to address
> the Shays-Meehan decision?
>
> And let me ask you a bit more than on policy: where would you go
> generally speaking? And in particular, I\'ll ask, just to make sure
> you can\'t follow the question, one thing I\'d like your opinion on in
> particular is would your organization, would you be comfortable with
> an exemption that allowed individuals to use their work computers so
> long as it\'s in accordance with the work policy, workplace policy and
> that is not based on content so that if, you know, the company says
> look: here is your PC, your laptop, and you can use it for whatever
> you want just as long as you\'re doing your work. You know, would you
> be comfortable with that kind of\--
>
> MR. GOLD: Well, addressing different parts of your question first,
> should the Commission do more than is strictly required by the
> decision, assuming that it needs to do anything, given that there is
> an appeal in process, I think that the Commission is\--what I gather
> from the NPRM is that the Commission is trying to do some things in a
> positive way in the sense of giving regulatory assurances, if you
> will, and as I said in my opening statement, I appreciate that
> sentiment, but I think that it may raise more questions and concerns
> than it allays, and I think Mr. Bauer\'s comments address that notion
> as well.
>
> Were it to go elsewhere at this point, I think\--and one of Mr.
> Bauer\'s colleagues, Marc Elias, submitted comments talking about
> fraudulent use of the Internet that may be captured already and
> covered already by the existing statute and regulations just applied
> to that area, but that is certainly an abuse. That\'s certainly an
> abuse that implicates the campaign finance laws way more than a lot of
> the other things that have been raised
>
> With respect to a union or a corporation policy or the regulation of
> the ability of employees or staff to use corporate facilities, union
> facilities, Internet facilities for different things, I think our view
> is this: any organization, union or corporation, is going to have
> policies that control that, that restrict that in order for it to do
> its ordinary business. And I think you can leave it to these
> organizations acting sensibly that they are not going to have a
> workplace where anyone can, to an unlimited amount, certainly on the
> job, use their facilities for private pursuits, political pursuits,
> anything unrelated to the organization\'s mission.
>
> At the same time, I think that certainly, it would be improper for a
> union or corporation to be able to coerce employees to use the
> equipment to do certain things, especially off hours, in a political
> realm, and I think it\'s very unlikely that that\'s going to happen,
> and I think that the law already takes care of that.
>
> But again, you\'ve had these incidental use regulations, the
> Commission has, for a long time, and they have not been specific as to
> what it is we\'re using. It\'s the facilities and the equipment of the
> enterprise. To add a specific reference to the Internet just seems
> gratuitous. These regulations, I\'m really unaware of much, if any,
> enforcement of these regulations. They\'re cautionary. I know there is
> a value sometimes in regulations just setting a standard, even if
> there is never an instance of enforcement.
>
> But in this, in particular, I think, again, I think it\'s just
> gratuitous and unnecessary, and I think that you can trust that
> practices out there are not going to create problems.
>
> COMMISSIONER SMITH: It was suggested by some of the witnesses
> yesterday that the use, the regulation of incidental use was
> problematic and that the one hour-four hours is effectively the
> maximum rather than the safe harbor because it\'s the only way people
> can do it and know they won\'t have complaints.
>
> I see our yellow light is on, so I will just ask quickly either Mr.
> Bauer or Mr. Cox, would you agree with that assessment that that is
> not a very effective regulatory mechanism, at least not as applied to
> our topic today?
>
> MR. COX: Yes, I think working for a 501(c)(4), where obviously, a lot
> of the employees have interests in politics and do their own political
> work on their own, the one hour, four hour safe harbor being the
> bright line that we can identify, it\'s very difficult for us, you
> know, a lot of us work at all hours of the day, and it\'s very useful
> to be able to use the computer at the office for some of our personal
> work as well, whatever that may be, if it involves politics or not.
>
> And so, four hours is just such an extremely limited amount of time;
> if that\'s the key, it\'s basically just forcing people to kind of
> live an abnormal life, I would say; to basically\--my advice to my
> colleagues at the Center would be, look, you have a four hour limit,
> and then, you can\'t use the computer at the office anymore; that just
> seems a little bit ridiculous to me.
>
> COMMISSIONER SMITH: Thank you, Mr. Chairman.
>
> CHAIRMAN THOMAS: Next, we have Commissioner McDonald.
>
> COMMISSIONER MCDONALD: Mr. Chairman, thank you; Bob, Reid, Larry,
> welcome this morning, and thank you all for coming.
>
> Let me Bob first, and Bob, you\'re not under oath. Can you truthfully
> say that you anticipated that the Nationals would be doing better than
> the Orioles at this point in the season?
>
> \[Laughter.\]
>
> MR. BAUER: Truthfully, absolutely not, and I\'m frustrated about it.
>
> \[Laughter.\]
>
> COMMISSIONER MCDONALD: Well, we\'ll get to that later.
>
> Thank all of you for coming. Let me try to at least play the devil\'s
> advocate, because otherwise, I thought we were getting ready to take a
> vote yesterday; people were out there so quickly that I didn\'t think
> we were going to have any fun at all, which just seems a little odd,
> since we\'re supposed to be hearing what you all have to say first.
>
> But nevertheless, let me just ask a couple of questions: Reid, if I
> could ask you first of all, and this came up quite a bit yesterday,
> and it\'s a very important question, and I don\'t claim to know the
> answer, but do you envision any scenario where someone who would hold
> themselves out to be part of the media, is there a scenario where that
> simply wouldn\'t be the case, or can virtually anyone just come
> forward and announce that they really are entitled to a media
> exemption because they have an opinion, if you will?
>
> MR. COX: Well, I mean, I think it is a complex line drawing problem,
> but I think it\'s a complex line drawing problem that occurs in a lot
> of areas with regard to the First Amendment. I think, you know, I\'ve
> been involved recently in some reporters\' privilege cases which, as
> you may know, if you know any First Amendment law, involves whether
> newsgatherers are entitled to a privilege to protect their
> confidential sources from grand jury subpoena or discovery, and the
> courts have a hard time there drawing the line of what is a reporter
> and what is not a reporter.
>
> But in general, it seems to me and it seems to the courts they are
> very careful in trying to not define the institutional press as what
> is a reporter or what is entitled to the journalist privilege. There
> is currently a case out in California that, in fact, the California
> Supreme Court just took that involves bloggers, where Apple has
> subpoenaed bloggers, and the California Supreme Court has taken the
> case.
>
> Presumably, the lower court decision was that there was not a
> privilege, and the California Supreme Court has now granted review,
> and so, that tends to suggest that maybe, they might reverse.
>
> COMMISSIONER MCDONALD: Let me ask you your opinion. The reason I\'m
> asking is, and I\'m going off of your statement, and of course, there
> was a story about reporters this morning who had a little bad luck, as
> it turns out. But from your perspective, I\'m just curious. I\'m not
> looking for a right answer or a wrong answer. Is there a scenario that
> you yourself would see that if someone came forward and gave their
> opinion, either we were told yesterday and rightfully so that it
> shouldn\'t be confined just to bloggers\--
>
> MR. COX: Sure.
>
> COMMISSIONER MCDONALD: \--but the whole area itself; if someone in
> fact enunciates that they are for all practical purposes entitled to
> the press exemption, can you foresee a scenario where they couldn\'t
> do that?
>
> MR. COX: I guess, you know, nothing is coming to mind to me that would
> say they couldn\'t, but I think you still have a case-by-case
> approach. I mean, I still think there are people that whatever their
> content is that wouldn\'t\--and I should say, I use the language in my
> comment in my oral testimony very carefully. I stole the language from
> your proposed rule of news story, commentary, or editorial. I\'m not
> saying that the whole realm of speech is necessarily protected.
>
> COMMISSIONER MCDONALD: We\'re always delighted when someone will use
> our material.
>
> \[Laughter.\]
>
> COMMISSIONER MCDONALD: I apologize; I\'m not trying to cut you off,
> but I want to get to Larry for just a second.
>
> Larry, yesterday, obviously, Carol Darr and others but I think Carol
> hit on the Tillman Act, obviously, of 1907 and the tension about where
> American politics stands, and the scenario that was posed by other
> witnesses yesterday ran kind of like this, which is that if I spent
> \$20 million, the AFL-CIO or General Motors, in relationship to a
> number of formats out of their general treasury funds, obviously,
> there would be a problem.
>
> On the other hand, running basically the same message on the Internet
> using the same type of funds under at least some of the witnesses\'
> positions, they would be totally exempt regardless. What\'s your
> thought about that? What is the difference? I mean, the question about
> trying to monitor 100 million people is certainly a legitimate
> question. It\'s like trying to monitor drugs, however. I mean, you
> don\'t quit simply because thousands of people are apparently more
> successful at acquiring them than I suspected, if I can get this
> right.
>
> But what is your thought about that and the tension that obviously
> comes forward, and that\'s what everybody is really looking at?
> They\'re not looking at these great scenarios where people are going
> to out and pick on people. We were criticized this morning, the
> statement was the FEC never rushes in to do anything. I was listening
> to that driving in, so I find it ironic that the witnesses think
> we\'re ahead of the ballgame. But just quickly, what do you think
> about that as a comment from the other commenters?
>
> MR. GOLD: I think that points out, you know, really one of the most
> difficult questions, you know, granted. But when I think about your
> example, how could the AFL-CIO, for example, spend \$20 million on the
> Internet, on an Internet message, I am hard pressed to figure out how
> the AFL-CIO could do that, I mean, what would comprise that cost if
> you\'re talking about the AFL-CIO\'s own Website?
>
> I just cannot imagine why whatever the AFL-CIO would want to do on the
> Internet could cost that much. If you\'re talking about the AFL-CIO
> purchasing space on somebody else\'s site, that may be qualitatively a
> different matter, and the proposed regulations do make that kind of
> distinction in trying to draw some lines, and as we\'ve said, we think
> that may be a fair line, although again, with the fundamental concern
> about how do you quantify any of this in order to have some kind of
> equal understanding about it, and fair enforcement and standards that
> actually, you know, can be applied.
>
> COMMISSIONER MCDONALD: It\'s almost like any in-kind analysis, is it
> not?
>
> MR. GOLD: Right, but when you\'re talking about an organization\'s own
> Website, and granted, you know, there are ways to spend money to do
> very fancy things and to put video on and do all sorts of things, you
> know, some of which we know from now; some of which a year from now
> will be novel; and a lot of what costs a lot now probably will cost
> very little in a year. I mean, that\'s the other thing about this:
> it\'s so ephemeral, kind of how we approach costs.
>
> So I just think there is something really, really different about how
> we approach this medium in that respect and the access of it. I know
> it has almost become a cliche dating back to the Reno case, but I
> think those really are important principles that you have to consider.
> And it\'s not just a\--I just don\'t think it\'s a simple matter of
> equating, you know, numbers here, numbers there in the real world and
> especially given how things are changing.
>
> COMMISSIONER MCDONALD: Thank you.
>
> CHAIRMAN THOMAS: Commissioner Toner, Vice-Chairman Toner.
>
> VICE-CHAIRMAN TONER: Thank you, Mr. Chairman.
>
> Mr. Gold, I\'d like to start with you. As you alluded to in your
> opening comments, on page 2 of your written comments, you indicate
> that in your view, the Shays ruling has not levied any particular
> command on the agency was the phrase you used and that you would
> counsel us to resolve any doubts in favor of declining regulation. Of
> course, if you asked 10 lawyers what their view of the Shays decision
> is, you get 10 nuanced answers, but I\'m going to ask you as a lawyer:
> is it your view that, as a matter of law, Shays does not require this
> agency to regulate the Internet?
>
> MR. GOLD: I think as a matter of law, well, given that the Commission
> did not appeal, the Commission has, unfortunately, I think, boxed
> itself in in having to respond in some manner.
>
> VICE-CHAIRMAN TONER: We\'re appealing standing, however.
>
> MR. GOLD: Excuse me?
>
> VICE-CHAIRMAN TONER: We are appealing standing.
>
> MR. GOLD: You are appealing standing; that\'s true, so it is
> potentially an issue, and that\'s why I said earlier that it\'s a
> voluntary effort, to some degree, to do anything until the appeal is
> resolved. The merits of what she struck down or purported to strike
> down, of course, were not separately appealed.
>
> I think that the Commission just has a great deal of discretion.
> Leaving aside the appeal, let\'s pretend there\'s no appeal
> whatsoever, okay? Given that there\'s an appeal, I don\'t think that
> the Commission has to do anything. If that\'s your question, given
> that there still is an appeal that could result in overturning her
> decision on the Internet point even on a procedural ground, you don\'t
> have to do anything as a matter of law. I do believe that.
>
> Assuming that you lose standing, and the decision stands; that is, it
> is not changed by the Court of Appeals, then, plainly, the Commission
> has to do something to address to what degree, what circumstances the
> Internet should be considered a form of general public political
> advertising.
>
> VICE-CHAIRMAN TONER: Is there any doubt in your mind that Congress did
> not intend for this Commission to regulate the Internet when it passed
> McCain-Feingold?
>
> MR. GOLD: Well, I think that there certainly was no affirmative
> attempt to do it. This was a heavily debated bill in both houses
> stretched over a year, and I think that the legislative history is
> pretty well devoid of discussion about whether or not to regulate the
> Internet. At the same time, everybody knew and had known for years,
> and the Commission had already issued, you know, a number of advisory
> opinions in this area, and people knew its significance.
>
> I think that is significant. Is there any doubt? Well, you know,
> absent\--you know, it would be more helpful, I suppose, if there had
> been specific proposals, and I don\'t recall any, specific amendments
> to regulate the Internet that were voted down. That would be very
> helpful. I don\'t believe that happened. I could be incorrect. But I
> think that it\'s extremely unlikely. Certainly, there\'s no command;
> certainly, there\'s no suggestion that Congress wanted the Internet
> regulated.
>
> VICE-CHAIRMAN TONER: Would it be surprising if they did intend to
> regulate the Internet, but they didn\'t include the Internet in the
> definition of public communication, even though they included a wide
> variety of other media?
>
> MR. GOLD: Yes, I do agree with that, really because again, because the
> Internet was so well-known and so much publicity about it, so much
> concern about it as a form of political communication, the fact that
> they codified, you know, a public communication standard and listed
> many media and not that, despite the fact that there is a catchall,
> you know, I think, you know, it is one thing for the catchall to be
> promulgated, say, 20 years ago when nobody had the Internet in mind;
> it\'s quite another thing for a catchall to be promulgated at the time
> when an Internet is a premier form of communication and the Internet
> not be mentioned. And I think, you know, that is perhaps the strongest
> single indicator that there was no intent to regulate the Internet
> itself.
>
> VICE-CHAIRMAN TONER: Mr. Bauer, I\'m interested in this proposal on a
> statement of policy that you outline in your comments, and as I
> understand it, you would want the agency to make clear that this is
> not the beginning of Internet regulation but rather the end of
> regulation, if we do issue regulations, and as I understand it, you
> believe that these principles that the Center for Democracy and
> Technology have drawn upon, that we should draw upon those principles.
>
> My question is do you think that we should do this statement of policy
> concurrently with this rulemaking? Is this something we should be
> doing on parallel tracks? How would you envision it?
>
> MR. BAUER: I would envision that as appropriate, it be done on
> parallel tracks. I think that, for example, in response to the
> question of Commissioner Smith to Mr. Cox about how you would deal,
> for example, with including Internet communications within the
> definition of public communication; once you\'ve done that, the
> natural question people will ask is, well, what does that mean?
>
> And you could respond to that a couple of ways, one of which is then
> to produce a slew of regulations that explain will be construed and
> not be construed to be a coordinated Internet public communication. I
> would vastly prefer the Commission not elect that course. I think that
> it could provide guidance about what all of that means in a statement
> of policy that I think would be reassuring to the regulated community
> and also provide a meaningful guidance.
>
> As I have, I think, said before, it is self limiting also on the part
> of the agency. It means that you subscribe to a certain view of
> Internet politics, and I think you subscribe to it in a way that is
> more compelling than what you would produce in an explanation and
> justification.
>
> VICE-CHAIRMAN TONER: Do you think the statement of policy ought to
> make clear that the agency is not going to pursue further regulation
> of the Internet?
>
> MR. BAUER: I don\'t know that the Commission could make a statement
> like that in a statement of policy and particularly bind itself.
>
> VICE-CHAIRMAN TONER: Right.
>
> MR. BAUER: Something could develop that none of us, I think, on this
> panel could foresee that would change your collective mind about it,
> but I think that it would be clear from the statement of policy just
> precisely how you view things; what it is that the regulated
> community\--excuse me, at the moment unregulated, possibly soon to be
> regulated community can expect about your future actions.
>
> I think that there is a significant amount of uneasiness that whatever
> you produce, even if it is presented as a modest response to the Shays
> case represents, if you will, the first step toward a much longer and
> more painful journey. And of course, if you look at the development of
> campaign finance regulation, at least in the 20th Century, it\'s hard
> to argue that a step one has taken is not followed by other steps. It
> typically is.
>
> VICE-CHAIRMAN TONER: Would it be something where we could perhaps
> create a presumption in the statement of policy that we are not going
> to further regulate the Internet absent record evidence, as the
> witnesses have talked about?
>
> MR. BAUER: That would be extraordinarily helpful, in my judgment. I
> mean, as Larry mentioned in his opening remarks, you know, there
> really isn\'t any record. There\'s no claim here. This is a very
> abstract debate, and for that reason, I think particularly menacing to
> the Internet community, and so, I think that the Commission could make
> the statement that it is going to require more than abstract policy
> debate and hypotheticals and hypothesized harm to proceed with
> restrictions on Internet politics.
>
> VICE-CHAIRMAN TONER: And you recommend we should do this statement of
> policy when we do this rulemaking.
>
> MR. BAUER: That is my view, and my view is also I don\'t know that it
> calls upon the agency to do something dramatically different; that is
> to say, in the way of thinking through the issue that it would have to
> do to arrive at a decision about the rules, so I don\'t think it\'s a
> diversion. I think it\'s something that can be efficiently
> accomplished with the production of rules, and I think it would be
> extraordinarily well received.
>
> VICE-CHAIRMAN TONER: Thank you.
>
> CHAIRMAN THOMAS: Thank you.
>
> Next, we have Commissioner Weintraub.
>
> COMMISSIONER WEINTRAUB: Thank you, Mr. Chairman.
>
> Bob, let me suggest that you use that other mike, because the one
> you\'re using doesn\'t seem to be working that well.
>
> Larry, let me start with you. I was sort of surprised. As I understood
> your comments, when we talked about public communications by labor
> unions, you seemed to be open to including communications on password
> protected sites, and that would obviously also apply to corporations,
> and I was\--if that is indeed your view, I may have misread it. That
> sort of surprised me, because it doesn\'t seem like a very public
> communication.
>
> So I wanted to ask you if I\'m misreading you or\--
>
> MR. GOLD: Right; I\'m not sure I did comment on\--my comments in my
> written comments or this morning?
>
> COMMISSIONER WEINTRAUB: No, the written comments.
>
> MR. GOLD: If there\'s anything in the written comments that password
> protected Internet communications ought to be regulated, that\'s not
> what I was suggesting.
>
> COMMISSIONER WEINTRAUB: I just clarified that.
>
> MR. GOLD: Protected to the restricted class; I think that\--just like
> any other medium.
>
> COMMISSIONER WEINTRAUB: Right, right, okay. Thanks.
>
> I think that one thing that\--well, let me talk about this issue of
> incidental use of computers. We\'ve had a lot of testimony about that,
> and people have basically seemed to feel pretty unanimously that it\'s
> just not very practical. If we were to take that piece out of it,
> would it be worthwhile to say, to affirmatively state, because some
> people seem to want an affirmative statement; in some sense, Bob seems
> to want an affirmative statement.
>
> Would it be worthwhile to say that among the things you can use on an
> incidental basis, and by that, we mean, you know, whenever your boss
> doesn\'t need you to be using it for some other purpose are computer
> facilities?
>
> MR. GOLD: Well, the incidental use regulations have been there. They
> preceded the Internet. I believe they\'re there. And I\'m just not
> aware of anybody being concerned about it particularly.
>
> It\'s not that people are violating it necessarily. I think the truth
> is that most people, in fact, are rather oblivious of them, and I just
> think that\'s the reality of it. But at the same time, there\'s no
> abuse out there. And one thing that\'s different about a lot of
> equipment we\'re talking about is its mobility. When the regulation
> was written, and it talked about facilities and equipment, I think
> largely that had to do with, you know, in office or in plant or in
> location equipment and services and the like that people would use,
> not mobile equipment that could communicate.
>
> That just didn\'t exist. It exists now. People routinely take laptops
> that are issued by their employers, whether it\'s a union or a
> corporation.
>
> COMMISSIONER WEINTRAUB: Or Blackberries.
>
> MR. GOLD: Pardon?
>
> COMMISSIONER WEINTRAUB: Or Blackberries.
>
> MR. GOLD: Or Blackberries and cell phones, which now can do it all,
> and they use it for all sorts of things. Nobody\'s going to quantify
> that.
>
> COMMISSIONER WEINTRAUB: Okay.
>
> MR. GOLD: There is just no abuse there. And why say anything more
> about it?
>
> COMMISSIONER WEINTRAUB: So you don\'t think that by having suggested
> that we would include that and then pulling it back, people would then
> say, oh, now, it\'s not included? We\'ve sort of put it out there, and
> now, I\'m a little afraid about pulling it back.
>
> MR. GOLD: You did, and I think I maybe want to give a little more
> thought about how\--
>
> COMMISSIONER WEINTRAUB: We put it out with good intentions.
>
> MR. GOLD: I understand that, and I said so. I think I acknowledged
> that there was a lot of, you know, good intent here, what I called
> regulatory assurances, but the risk is that you open up something, and
> then, if you\'re trying to walk back from it, you know, what does that
> mean? And I want to give a little more thought to it.
>
> I think Bob Bauer\'s notion of a statement of policy generally is
> salutary, and maybe that\'s how you address this.
>
> COMMISSIONER WEINTRAUB: Let me ask anybody about another issue where I
> think we have to walk back from our regulations. We have, and I\'m
> sure they are widely disregarded, and everybody is oblivious of them,
> but we have on the books currently a regulation that says if you send
> out 500 unsolicited substantially similar emails expressly advocating
> for a candidate, it needs a disclaimer. And I am sure that is violated
> all the time, and it is ridiculous for us to have a rule like that on
> the books.
>
> So we thought about making it better by adding this notion of you\'ve
> got to have a commercial purchase of a list in order to trigger that.
> But should we just repeal the regulation altogether? I mean, I feel
> uncomfortable just leaving it out there, because I don\'t like having
> a regulation on the book which means that people are violating the law
> with no bad intent and a rule that we would never actually enforce
> literally.
>
> MR. COX: If I could comment on that, actually\--
>
> COMMISSIONER WEINTRAUB: Sure.
>
> MR. COX: I actually do agree with you. I think you should just repeal
> the reg. And the reason I think that is that the definition that you
> have now proposed for unsolicited I think raises all kinds of other
> problems that would need to be clarified.
>
> I mean, I always try to draw the analogy between U.S. postal mail and
> email, and it\'s very much the same in the sense that, I mean, when
> did they buy the list? I mean, as often happens, organizations like
> mine and the AFL-CIO and everyone else will rent a list, but then,
> people will decide look: we like this organization; we want to be in
> communication with them.
>
> Does that mean that four months down the line, when we\'ve been having
> ongoing communication that because we rented the list originally, and
> the name was produced through a rented list that that then means we
> have to put a disclaimer on email to them? There are separation
> problems if you have some people who were rented or that you purchased
> their name from at some point, and you have people who found you by
> the grace of God on the Internet, on the vast, wide, Internet that
> now, you have to keep two separate lists to make sure you don\'t
> violate the Commission\'s regulation.
>
> I just think that there is a lot of clarification that would need to
> be done, and I guess also, unlike with U.S. postal mail, there are
> also cost issues. I mean, it really doesn\'t cost anything to send out
> email, and so, as you say, people are a little bit more oblivious to
> it, and so, there could be just any number of violators. So it would
> be very difficult to enforce the rule in any consistent sense across
> the whole variety of people who would be emailing out information that
> would be subject to it.
>
> COMMISSIONER WEINTRAUB: I didn\'t mean to ignore you, but I\'ll get
> back to you in the next round because my red light is on.
>
> CHAIRMAN THOMAS: Thanks.
>
> Commissioner Mason.
>
> COMMISSIONER MASON: Thank you.
>
> I think I agree with all three of you on the philosophical basis, and
> so, I wanted to ask you a couple of questions about how we get there.
>
> First, Mr. Gold, just to try to establish a basis here, there has been
> some concern raised about employers and unions coercing employees, and
> is it your belief that generally speaking, employees, labor unions
> representing employees would complain if that happened, if an employer
> were coercing employees to do political activity?
>
> MR. GOLD: Oh, without question.
>
> COMMISSIONER MASON: And is it your experience that union employees
> will complain if they feel like they are being coerced by their union?
>
> MR. GOLD: Yes, it is.
>
> COMMISSIONER MASON: Mr. Gold and Mr. Bauer have both criticized the
> specifics of our occasional use proposal, and I understand that, but
> you\'ve both sort of suggested that one hour a week, four hours a
> month is kind of restrictive. Do you have any specific ways of
> clarifying that? What should we do? Should we repeal one hour a week,
> four hours a month? Would that be better? Or any suggestions?
>
> MR. BAUER: Well, the specific reference to the Internet, that is to
> say, whether or not you would include, I mean, the larger rule
> presents a separate question, obviously, about all corporate
> facilities. To speak now about corporate laptops, I would, as
> Commissioner Weintraub expressed it, walk back from the suggestion
> that that rule would be applied to the use of the employer-supplied
> computer for personal purposes.
>
> I believe, not wishing to overhawk the suggestion that it can be
> addressed in the statement of policy the reasons why you\'re walking
> it back. It can be explained as part of the Commission\'s overall
> regulatory view of the Internet. As to the larger rule, are you asking
> whether the larger rule makes any sense? Because it doesn\'t make any
> more sense in the other context than it does in this one. So if you
> were going to, you know, really go for the gold here and get rid of
> that rule, too, you have my blessing.
>
> COMMISSIONER MASON: Mr. Cox, you referred a little bit to the Internet
> as a public forum.
>
> MR. COX: Yes.
>
> COMMISSIONER MASON: And I assume you\'re echoing or thinking about a
> number of judicial decisions regarding public fora. Can you give us
> any guidance as to how we might apply that line of cases to this
> rulemaking? What implications would it have? What tools would you use?
>
> MR. COX: I guess the first thing I would say is that it\'s important,
> I mean, in public fora in general, the Commission\'s regulation of
> speech wouldn\'t be existent, and I guess the difficulty here is, and
> this is why I focus my comments on the media exemption, is it seems to
> me that the Commission has really done a disservice to those of us who
> aren\'t members of the institutionalized press by what seems to be a
> media exemption that only touches the institutionalized press. And so,
> we\'re left wondering\--
>
> COMMISSIONER MASON: Let me try to make, since you\'re focused on that,
> that question a little more specific. You know, our problem is we have
> to use the tools we have. The tool we have is the statute. The news
> story, commentary, or editorial you quoted actually comes ultimately
> from the statute. The statute also refers to these things have to be
> through the facilities of a broadcasting station, newspaper, or other
> periodical publication, and that is why we feel a little bit
> restricted in terms of you talk about the institutional media.
>
> The suggestion in the statute is that there is a thing, a definable
> class of entities that are broadcasting stations, newspapers, or other
> periodicals, and it\'s very obvious to everyone that some things that
> are on the Internet obviously do qualify as other periodical
> publications, but the question is does everything on the Internet
> qualify?
>
> And so, the question I raised yesterday and I would raise to you is is
> there any way that we could justify and say that the Internet itself
> qualifies as the facility of a periodical publication such that any
> news story, editorial, or commentary on the Internet would fall within
> the media exemption?
>
> MR. COX: Well, I certainly think you get a long way using the word
> periodical publication. I mean, I think, for one, a lot of groups like
> us that do publish regularly; blogs tend to publish regularly, as
> well, updating maybe not at a constant rate of, you know, we\'re going
> to update the blog every day at 9:00 a.m. but in terms of constant
> posting.
>
> And so, I think periodical publication gets you to protecting quite a
> bit of information on the Internet. As for the rest, I think that, you
> know, I guess it seems to me that I obviously am between a rock and a
> hard place here in the sense that I really wish that the Commission
> had appealed the decision so I\'m hopeful that\--
>
> COMMISSIONER MASON: So do I, but we\'re not there.
>
> MR. COX: We aren\'t there. And so, I guess I would stress, I would say
> that whatever you can do to expand the media exemption as far as it
> could possibly extend, that would at least give people the clarity
> that they would not be subject to regulation by the Commission.
>
> COMMISSIONER MASON: Thank you, Mr. Chairman.
>
> CHAIRMAN THOMAS: Thank you. Excuse me.
>
> I started out yesterday noting that it\'s fairly apparent that the
> Internet is becoming a much more popular vehicle for political
> advertising and political activity and that a significant amount of
> money actually is being utilized for Internet activity. Just in terms
> of overall advertising, I also want to note a recent report on CNN.com
> shows Jupiter Research projecting that Internet advertising will grow
> 27 percent to \$10.7 billion in 2005.
>
> Now, obviously, political advertising is going to be just a part of
> that. But numbers I was pulling off of our own FEC reports, just using
> purpose disclosed terms like Web or Internet or email, came up with
> about \$25 million showing up just on Schedule B, and then, we did
> some research of 527 organizations, and we basically\--just looking at
> eight different 527 organizations came up with over \$2.2 million
> worth of disclosure disbursements that fell into categories like that.
>
> And I noted, for example, the largest spender in this area, Progress
> for America, showed about \$900,000 being paid for email list
> services; over \$158,000 for Website services, and over \$213,000 for
> Internet banner ads. So we\'re starting to see, I think, potential for
> some significant spending in these areas, but granted, it\'s only a
> part of what shows up in terms of Federal election spending, I
> suppose.
>
> But I just raise that at the outset because we have started down this
> road using the concept of advertising, paid advertising on somebody
> else\'s Website as where we want to kind of focus. But I will start
> with you the same way I did yesterday: we\'re sort of saying if a
> candidate coordinates with somebody in terms of having an ad produced
> and put on some person\'s Website other than the payor, we\'re going
> to run that through our coordinated communication rules; what about a
> situation where a candidate\'s campaign basically decides they want to
> build a million person plus email list, and they want to basically
> have the techware available so that they can send emails out whenever
> they want to, and they also develop the potential to attach some nice
> streaming videos, some nice hard-hitting ads to those email messages,
> and let\'s say that an organization has, an organization has \$900,000
> available to spend on that kind of email list sending.
>
> If it\'s fully coordinated with the candidate, the candidate sort of
> does all the preparation, production and so on and then goes to a
> corporation or a union and says will you pay the bill, should that be
> regulated as an in-kind contribution? Are we, in other words, with our
> proposal, in a sense, being a little bit unfair? We\'re saying we
> would treat it as a coordinated communication if we\'re talking about
> a paid ad that they want to place on someone else\'s Website, but we
> don\'t seem to be interested in treating it as an in-kind contribution
> if what we\'re talking about is a significant email effort that might
> cost a lot of money.
>
> There\'s a question in there, I think. Anyone?
>
> MR. BAUER: If I may by default, I think I understand the component
> parts of the question, and there\'s one piece of this that I may be
> wrongly breaking out and that I want to focus on for a minute, and
> that is that the corporations that spend a huge amount of money and
> for that matter unions under 441(b) for Federal election related
> activity are restricted, in that you\'ve posited a situation where
> they\'re spending an enormous amount on something that is intended of
> public use. It\'s not the transmission over the Internet, it seems to
> me, that triggers the material question under the campaign finance
> laws.
>
> I say that simply because there may be other ways to worry through
> that issue should it become a question, which comes to my second
> point, which is I\'m very worried about the construction of
> hypotheticals, which have an anxiety-inducing component to them,
> corporations which are spending millions of dollars to produce
> streaming videos, and they\'re coordinating with people who are
> putting them on their Websites or whatever it is for candidates; I may
> not have followed precisely who was who in your hypothetical.
>
> And I\'m unaware that any of that is happening. And so, I think that
> it is not at the moment a comfortable platform on which to build a
> regulatory position. It goes to the point that Larry made earlier that
> we don\'t have a record.
>
> So if I may summarize, because I actually took the answer in two
> different questions, first of all, I don\'t still think in your
> hypothetical that restrictions on Internet transmission per se are
> called for to deal with the problem that you\'ve identified, but
> secondly, I\'m not sure that the problem you\'ve identified is
> anything other than a hypothetical one.
>
> MR. GOLD: I think, again, that the question you raise is a very
> important question, and currently, of course, we have a regulation
> that has been operative for a couple of years now that exempted, I
> believe, your hypothetical from regulation.
>
> I\'m also unaware of\--not that I would know, necessarily, of course,
> but I\'m not aware of coordinated Internet communications having taken
> place in the last election cycle as you described. It certainly
> didn\'t happen with respect to the AFL-CIO or any union that I\'m
> aware of, which is not to say that that\'s for all time reason not to
> address it.
>
> In listening to the figures you proposed from the research and
> Schedule Bs and the 527 reports and the like, which I take were the
> 872s to the IRS and the breakdown for Progress for America, my first
> thought was I wonder how they quantified that. I wonder what they
> included in that. To what degree was there overhead paying vendors,
> you know, construing certain expenses as applied to that in some kind
> of an overall overhead breakdown?
>
> I don\'t know. These are the kinds of issues that we have been trying
> to deal with now for years, as I mentioned in my opening statement.
>
> You know, plainly, I think, if there is, you know, some truly overt
> effort to do a substantial in-kind contribution over the Internet,
> that may be fairly subject to coordination standards, but there has to
> be a threshold. There has to be a means to quantify, and we still have
> to look at it a bit differently than we look at it in other contexts
> in that there is, unlike, I think, purchasing broadcast time or
> newspapers, you\'re dealing with a medium that inherently, what\'s put
> into it may be utterly disproportionate to its impact, to its
> readership, to its value, and it just may be. It\'s just so different
> in that respect.
>
> So I don\'t have a facile answer, but I think, you know, it\'s
> something that clearly has to be, you know, thought through very
> carefully here, but proceed very cautiously. I\'m not sure that\'s a
> very satisfactory answer, but it\'s a start.
>
> MR. BAUER: Mr. Chair, since you control the clock, can I take an
> additional 30 seconds?
>
> CHAIRMAN THOMAS: But of course.
>
> MR. BAUER: Thank you. Again, I want to stress this point, thinking
> about the numbers involved here, I don\'t know that that hypothetical
> you suggest calls for restrictions on Internet communications. It
> doesn\'t seem to me, if a candidate is coordinating with a corporation
> over the development of an ad for \$900,000, whatever the number is,
> because I realize part of your hypothetical would be spent for the
> development of an email list, it still seems to me that the Commission
> has options other than intervening in the regulation of the Internet.
>
> So I may be somewhat less alarmed than Larry that if such a situation
> should come to pass, and in my judgment, it hasn\'t, and in my
> judgment, it\'s unlikely to, but should such\--for a variety of
> reasons having to do with the Internet itself\--but should such a
> situation come to pass, I believe the Commission has other
> alternatives available to it in studying the question and devising a
> regulatory response.
>
> CHAIRMAN THOMAS: Okay; I\'m out of time. Maybe we can come back to
> what those other alternatives would be.
>
> Larry Norton.
>
> MR. NORTON: Thank you, Mr. Chairman. I want to thank the members of
> the panel for coming.
>
> Mr. Bauer, I want to follow up with another anxiety producing
> hypothetical that has been presented in some of the comments, and
> it\'s similar to the one I think the Chairman raises, and this one
> concerns the wealthy individual. There is a\--one of the commenters
> says under the Commission\'s proposed regulations, a wealthy
> individual could set up a Website and then spend very large amounts of
> money in coordination with a candidate on the professional creation
> and production of campaign materials, as the Chairman was discussing:
> campaign videos or other ads, which are then disseminated through the
> Website or by email.
>
> Under the proposed regulations, that would not be considered a public
> communication, because it would not be a distribution for a fee on
> another person\'s Website and therefore would fall outside the
> coordination rules. And the commenter says this is precisely the kind
> of loophole that Shays indicated should not be permitted.
>
> Whether that\'s so or not, I anticipate if it were exempted, we would
> find ourselves in District Court defending it, and my question to you
> is do you think that that scenario is also largely hypothetical, and
> to the extent that it is, does that cut in favor of exempting it
> through rule at this time?
>
> MR. BAUER: You mean providing that the Commission won\'t reach that
> activity?
>
> MR. NORTON: Do you think that it would be appropriate for the
> Commission to exempt that activity by regulation, to establish through
> regulation that that sort of activity would not constitute a
> coordinated communication?
>
> MR. BAUER: Yes, I would favor that. I do not have\--first of all, I\'m
> always uncertain about a number of terms that are used in
> hypotheticals like that; for example, wealthy individual. Frequently,
> we talk about wealthy individuals. Sometimes, we talk about the amount
> of money actually spent on the development of a Website, on a
> particular project.
>
> And some people who, by some people\'s measure, are not particularly
> wealthy may choose, because they are very motivated to spend what
> others would think would be an insane amount of money pursuing a
> political project. And so, I don\'t think we should confuse the two.
>
> But I also think in that contrast lies the nub of the problem, which
> is that I don\'t think we should be worried about that kind of
> individual activity on the Internet. I don\'t think we should be
> worried about an individual who, committed in that fashion, may
> communicate with a campaign before setting out to produce an
> advertisement like that at his or her own expense.
>
> I don\'t think we have anything to fear from it. I don\'t think that
> there is any evidence that it is going to have a corrupting effect. I
> think it is an expression the power of the Internet to draw people
> into direct expression, into direct expression, not through the
> campaign, not speech by proxy in the classic sense that Buckley meant
> it but through expression on the Internet that he or she funds out of
> his or her personal resources.
>
> So I certainly would welcome some Commission action to assure people
> that merely because they choose to commit money to a project like that
> and communicate with a campaign in whatever form that communication
> may take\--when you talk about communicating with a campaign, it may
> mean having a conversation about the presentation of an issue with
> somebody who is at a very junior tier or level of a campaign
> organization in one state out of a 50-state Presidential campaign.
>
> And that is perfectly appropriate. In fact, that kind of local
> communication is something we presumably would want to encourage.
>
> MR. NORTON: One of the other scenarios that was discussed yesterday
> was in connection with the Commission\'s proposal to exempt individual
> activity, and you\'ve addressed that in your early comments. But one
> question it opens up is what happens when individuals get together,
> and in particular, how does it intersect with our political committee
> rules?
>
> And so, if you have a group of individuals who get together, and their
> stated purpose is to reelect Congressman Jones, and they establish a
> Website, and all of their activity is conducted through the Internet,
> and the Website contains express advocacy communications and videos
> that are produced that contain express advocacy, and they\'re all
> about reelecting Congressman Jones, would it be appropriate for the
> Commission, by rule, to establish that those communications would not
> constitute an expenditure, so that they, for instance, if the activity
> is conducted exclusively over the Internet, you could not be regarded
> as a political committee?
>
> MR. BAUER: I absolutely think so. I believe that one of the most
> lamentable sort of trends in the campaign finance laws has been to
> devalue association in a variety of forms and to cast the argument
> purely in terms of individual speech, not that I want Mr. Cox to be
> distressed with that formulation. I\'m all in favor of individual
> speech, too, but where individuals choose to aggregate or associate
> for a common political purpose, the right of assembly, as it is
> termed, the law also ought to be very protective.
>
> I think we have an opportunity now precisely on a hypothetical like
> the one you describe where that association occurs around this
> democratized, very cost-efficient medium to extend a hand of
> protection to it, and I think the Commission hospital do so.
>
> MR. NORTON: Thank you very much.
>
> Thank you, Mr. Chairman.
>
> CHAIRMAN THOMAS: Staff Director Jim Pehrkon.
>
> MR. PEHRKON: Thank you, Mr. Chairman, and welcome to the panel.;
>
> Mr. Cox, early on, if I understood you properly, you indicated that
> the Internet provided sort of unique capabilities that allowed
> individuals to either view or not view or accept or reject
> communications and information. And if you could, could you elaborate
> on what the specific techniques or characteristics are that do that?
>
> MR. COX: Sure; I mean, I think that, you know, I think that one of the
> problems that the Commission has is that the Internet has so many
> different platforms that are a part of it, and so, I think each one of
> them have their own characteristics.
>
> With regard to email, you only receive an email if your address is
> known to someone else, and so, that tends to be a characteristic that
> you\'ve consented to getting that email to begin with, or even if you
> get an unconsented email in your inbox, you\'re certainly not coerced
> to open it up.
>
> With regard to the Web, generally, the characteristic is that you
> actually go out in search of information, or even in the context of
> banner advertisements on sites, the banner advertisement is in general
> very small, and to really convey any amount of information, you would
> have to click through and be able to open it up.
>
> And so, the receiver, it seems to me, is more than any other medium
> really in control of what information and what communication is being
> received. If they don\'t want to receive a communication, they simply
> don\'t have to. They either don\'t have to go in search of it; they
> don\'t have to open it up. And so, that\'s very different than, for
> instance, a television station or a radio station, where, to a certain
> extent, other than turning it off, you\'re a captive audience, and
> what you receive is what you receive, and you don\'t have any choice
> in the matter other than to turn it off. The same with respect to a
> newspaper: if you open up a newspaper, unless you just close it,
> you\'re kind of a captive audience there as well.
>
> And so, I would say that the Internet, and moreover, I guess, it\'s
> the amount of information and the way that the receiver is initiating
> on the World Wide Web, for instance, a search or has initiated
> conversation with another email user or has signed up for a listserv
> or whatever, that\'s oftentimes not the same as with regard to a radio
> station or television station.
>
> MR. PEHRKON: I\'m actually disappointed in your answer, because I
> hoped you were going to tell me how to get rid of all my popups.
>
> \[Laughter.\]
>
> MR. PEHRKON: Mr. Gold, yesterday, one of the questions that came up or
> some of the comments were that particularly, bloggers are very
> low-cost activities. I think we had Mr. Moulitsas yesterday who has
> probably one of the better known blogging sites out there. And he
> indicated his level of activity or expenditure during a year was
> approximately somewhere around \$150,000, and he indicated he thought
> he was one of the largest operators out there.
>
> In addition to that, many of the other folks seem to indicate that
> many of these blogging sites ran in the range of \$1,000 to \$2,000 a
> year, sometimes less, sometimes a little bit more. You had indicated
> that the AFL would not be spending millions and millions of dollars on
> its Website or didn\'t so far.
>
> Could you give us a sense as to what the general range is of how much
> does it cost to build and operate your Website?
>
> MR. GOLD: Right, good question, and there is an answer somewhere. I\'m
> not sure what it is off hand. I probably should know, but perhaps one
> reason I don\'t know is because the AFL-CIO\'s Website is, I think it
> would be fair to say, 99 percent, the content is 99 percent not
> related to electoral matters, and where it is, the PAC pays for it,
> and we make an effort to quantify that and report it as an independent
> expenditure.
>
> The AFL-CIO may be different than other institutions or different
> individuals in that it is a complicated institution with a lot of
> constituent organizations and covers a lot of territory. And so,
> again, when you\'re talking about trying to quantify some of these
> things, there\'s a sunk cost, certainly, in purchasing the equipment,
> maintaining the equipment and the like which may or may not be fairly
> attributable to any particular addition by a keystroke of particular
> content.
>
> And that\'s why, again, I think if you wade into this at all, you
> really need to look at that carefully. Again, what the Commission\'s
> concern should be is about expenditure of money: what expenditure of
> money is truly relevant here? And that\'s\--
>
> MR. PEHRKON: Actually, sort of what I\'m trying to drive at is what is
> the outside parameter, if you have a sense of that? The overall
> expenditure for the Website that puts a cap on where it is because\--
>
> MR. GOLD: Right, it would, and you\'re talking about what are the
> components? It\'s, you know, the purchase of equipment, which has
> already occurred. It\'s the maintenance of equipment. It\'s the
> staffing of the Website. It is, I guess, any production costs that are
> uniquely related to the Website.
>
> A lot of content that goes on the Internet was created for other
> purposes. It\'s just\--you copy it, you paste it, and that\'s that.
> You know, what do you count? Why should, to what degree should we, the
> AFL or anybody, but put to the task of trying to figure all that out
> and spend the time and effort to come up with those figures in order
> to report that? It\'s so random, to use a favorite term these days;
> okay, to do it, and that\'s one of the things that I think the
> Commission really has to think through very carefully before it issues
> anything that\'s going to send a lot of people scurrying to do things.
>
> MR. PEHRKON: I see my time is up.
>
> Thank you for your comments.
>
> CHAIRMAN THOMAS: We have a little less than 20 minutes left. We\'ll
> take a run at sort of going backwards through the list of
> Commissioners, and I\'ll take about three minutes here. See if we can
> keep track of that.
>
> I just wanted to get your response. You talked about how in theory,
> the Commission could just respond to the court\'s decision by
> modifying the definition of public communication as it relates to
> coordinated communications. But I\'m not sure that we can. Don\'t we
> also have to deal with the fact that public communication is a term of
> art used with respect to the state and local party FEA, Federal
> election activity, rules, and don\'t we also have to deal with the
> part of the Court\'s decision that dealt with the generic campaign
> activity definition, which also relies, because of our regulation
> approach, on the term public communication? And that\'s another
> concept that applies in the area of party, state and local party
> spending, so I just want to quickly get your assessment of whether we
> don\'t also have an obligation to deal with those aspects of the reach
> of the term public communication.
>
> Larry? Closest to the microphone.
>
> \[Laughter.\]
>
> MR. GOLD: My mistake.
>
> \[Laughter.\]
>
> MR. GOLD: I\'m not sure that you do have to do that. The route that
> the court took was looking at coordinated communications and its
> incorporation of the definition of public communication. I think
> that\'s where it got to, why the issue was raised there. It may be
> that you can make distinctions between public communications depending
> on the speaker. I\'m not sure, and the party issue and the generic
> campaign issue is a bit outside of the strict realm of the concerns of
> the AFL-CIO in this proceeding, so I\'m speaking more personally here
> perhaps.
>
> But I\'m not sure that\'s the case. I follow the logic of it, of what
> you\'re saying, that it\'s a definition, and it\'s a definition for
> all purposes, which is another reason why you need to proceed very
> carefully, if that\'s how it\'s going to be, and further distinctions
> are not going to be made in a regulatory framework.
>
> CHAIRMAN THOMAS: Let me throw out another question and Bob, you can
> either answer the first or this question.
>
> We seem to have developed this\--what I consider to be another total
> carveout in our current regulation for any sort of activity that is on
> the Internet in coordinated communication rules. It seems to suggest
> that if it\'s Internet communication under the current rule, it won\'t
> be analyzed as an in-kind contribution, and therefore, you can
> coordinate it, and you can pay for it.
>
> I guess we have this odd situation where, therefore, you\'ve got this
> carveout in the area of coordinated activity, but you don\'t have a
> parallel carveout in the area of noncoordinated activity. So as I see
> it, someone working with an Internet communication, if they\'re not
> coordinating with a candidate or party committee, let\'s say with a
> candidate, and they undertake express advocacy, we sort of have this
> awkward situation where they\'re potentially subject to more
> regulation in the sense that they do have to somehow keep track of the
> cost of an express advocacy communication even though we\'re talking
> about Internet-related communication.
>
> So we have proposed in this rulemaking to specify in the definition of
> expenditure that we\'re going to apply what\'s typically called the
> individual volunteer activity allowance in the statute to
> noncoordinated activity as well, that you wouldn\'t necessarily have
> to be volunteering with a candidate\'s campaign and coordinating with
> the campaign, but you can be working totally independently, and this
> is our effort to sort of use this opportunity to clarify that we want
> to undo that tension, that awkward concept that we\'re describing.
>
> Any comment on whether we should use this opportunity to do that or
> not?
>
> MR. BAUER: Well, I certainly support the protection of the
> uncoordinated individual expression. I couldn\'t agree with that more.
>
> CHAIRMAN THOMAS: Well, I\'ve used up my time. Let me just very quickly
> say I love your point about how Internet may have a little bit more
> ability to sort of shut it off or disregard, but, you know, I\'m
> pretty good with my remote control on TV. I can move off those
> commercials like nobody\'s business. Radio, I don\'t even listen to
> stations anymore that have commercials on them. Letters, mail, junk
> mail, I do the same thing. I read the stuff that I want to read, but I
> just throw in the junk, the other stuff, so it\'s fairly analogous
> even in other settings. I\'m not quite sure we can build our
> distinctions on that, but I certainly appreciate that the unique
> nature of the Internet, the low cost nature. I think that is probably
> the most distinguishing factor.
>
> Commissioner Mason.
>
> COMMISSIONER MASON: Thank you. Mr. Bauer, Mr. Gold, we had some
> testimony yesterday that if we stay with this concept that okay,
> we\'re only going to address payments to somebody else for putting
> content on their Website, and that, by the way, gets us over the
> threshold of, well, how much is it worth, because the question is,
> generally speaking, how much you paid for it.
>
> There was still some concern about needing a threshold, and the
> example was given of the small blogs where, you know, you get as low
> as \$5 an ad. By the way, that\'s not unique. There are some markets
> in which you can buy a radio ad for \$5.
>
> And my question is, looking at the statute or other tools we might
> have, what should the threshold be? And the one we see in the statute
> that might have some application appears to me to be the \$200
> itemization threshold; in other words, if the disclosure purpose is
> one of the lowest thresholds, and if committees don\'t have to
> disclose the donor information for contributions or disbursements of
> under \$200, what would be the purpose of having them go through this
> regulatory rigamarole for a \$5 blog ad?
>
> So my question is really twofold: is that or anything else in the
> statute or regulations you can point to a good basis for at what level
> we would say even though we\'re regulating these purchases, we\'re
> going to still establish a minimum threshold, and is that one high
> enough to be useful?
>
> MR. GOLD: High enough to be useful?
>
> COMMISSIONER MASON: Well, we had these, you know, people throwing out,
> well, maybe it should be \$25,000 or something else, and one of the
> problems I have is I don\'t see any \$25,000 thresholds in the
> statute. They\'re all, as you know, incredibly low, \$1,000 and, you
> know, so on.
>
> MR. GOLD: Well, you know, the initial distinction you make does solve
> some problems, I suppose. If you\'ve paid for something, that\'s some
> measure of what the value is, unless, I suppose there will always be
> the question raised is that really, or is there some kind of reduction
> that implies some other contribution; we go down that road, but
> leaving that aside, again, I have an overriding concern with
> quantification that I have raised in this proceeding: if somebody is
> paying for something, as I acknowledged in my comments, that may be
> the way you quantify it and may be that you don\'t treat it any
> differently.
>
> If it\'s reportable, it\'s reportable, and the fact that it\'s on the
> Internet makes it no different. That is perhaps, you know, the one
> sensible approach to take.
>
> The statute, you know, again, not having been written to perceive this
> medium just doesn\'t\--as you\'re finding, I know, in trying to deal
> with all sorts of things, the media exemption, the like; how do you
> apply it here? You know, what sense does it make? And when you step
> back, you say, well, there is a certain logic. A lot of you think that
> there is a certain logic to it that you can apply: will it make sense
> for this and not for anything else?
>
> And as the Chairman just said, you know, maybe it isn\'t really such a
> matter that you have to search it out and maybe we do have as much
> control over that medium as others.
>
> But then, when you step back, there seems to be a consensus, I think,
> that it\'s just silly to apply some of these concepts nonetheless to
> this medium the same formulaic, formulistic way, and that\'s difficult
> for you to wrestle with, because you\'ve got the statute, and you\'ve
> got the statute, and you do have to deal with that, and you\'ve got a
> statute, and you\'ve also got people out there ready to pounce on you
> and sue you if you don\'t do it the way they like, and it\'s perhaps
> inevitable.
>
> But ultimately, Congress, I think, is going to have to deal with this
> or not; perhaps deal with it in the way that the Reid bill suggests
> and basically just say look, forget about it. So a bit of a longwinded
> answer but\--
>
> COMMISSIONER MASON: I just want to get an answer from Mr. Bauer, if
> you have one: is \$200 enough to make any difference in this context
> of paying, again, paying for something on somebody else\'s site, and
> if not that, is there something else we could hook ourselves on in the
> statute?
>
> MR. BAUER: Real quick question: are you talking about purchasing a
> paid advertisement?
>
> COMMISSIONER MASON: Purchasing a paid ad.
>
> MR. BAUER: Or content that is generally coordinated\--
>
> COMMISSIONER MASON: Let\'s just limit it right now to just purchasing
> a paid ad. I go to DailyKos, and, you know, it\'s \$1,000 for a margin
> ad. I go to another site, it\'s \$10 for a margin ad. And some people
> have said look, these little sites are so little, we need to kind of
> not let them worry and not let people worry, and, you know, should we
> have an exemption for that?
>
> MR. BAUER: With respect to the question of a disclaimer? Just a
> disclaimer?
>
> COMMISSIONER MASON: No, this would be for reporting purposes,
> coordination purposes, everything.
>
> MR. BAUER: I\'m afraid I\'m going to have too complicated an answer
> for the time permitted, and it\'s probably a function of muddled
> thinking, so I\'ll say I don\'t know where you will find a better
> benchmark than the one that you\'ve cited, but I will give it some
> additional thought, and I will blog my response.
>
> \[Laughter.\]
>
> COMMISSIONER MCDONALD: And to help Commissioner Mason, we know that it
> might cost \$1,000; they might ask for \$1,000, but they would take
> \$10. You learned that. We learned that yesterday as well.
>
> CHAIRMAN THOMAS: Commissioner Weintraub.
>
> COMMISSIONER WEINTRAUB: Thank you, Mr. Chairman.
>
> Bob, I owe you a question. Let me start by asking you to put on your
> state party lawyer hat. The suggestion was made yesterday, and it was
> in the written comments, that we should ask state parties to allocate
> the cost of their Websites on a time space method based on the number
> or size or something of PASO communications of Federal candidates. And
> I\'m concerned, A, that we don\'t have statutory authority to do that,
> since public communications by state parties are by definition not
> allocable, and B, if we tried to ask them to allocate that sort of
> thing on a dynamic Website where things go up, things go down that
> this would just not be feasible for them to do. Do you want to comment
> on that?
>
> MR. BAUER: I agree. It isn\'t. And I think in my written comments\--as
> I say, I don\'t have them in front of me, but I recall in my written
> comments, I said I thought that we ought to protect the use by parties
> of their own site and not attempt to impose a complicated methodology
> for the use of their own Web.
>
> COMMISSIONER WEINTRAUB: Let me also ask about republication of
> campaign materials. This is sort of a knotty problem on the Internet,
> because it doesn\'t really have any cost. Numerous people have told
> us, you know, to do a cut and paste or a link, and yet, there it is in
> the statute that we\'re supposed to, you know, that\'s part of our
> coordination analysis that we are supposed to take into account
> republication of campaign materials. Can we get around that by virtue
> of the fact that there\'s no cost attached to it or by some other
> means that you clever people can come up with?
>
> MR. GOLD: I think this is, again, this is exactly the kind of
> instance, as you know, where the statute precedes the technology, and
> the application is foolish. It just is, because of the cost involved,
> and everybody does this. Everybody\--I mean, what is the Internet?
> It\'s passing messages around easily, quickly.
>
> COMMISSIONER WEINTRAUB: I agree with you, but how do we get around the
> statute?
>
> MR. GOLD: Well, I think maybe you do\--
>
> COMMISSIONER WEINTRAUB: Not how do I get around the statute. How do we
> deal with the statutory language?
>
> MR. GOLD: Right, right.
>
> \[Laughter.\]
>
> COMMISSIONER WEINTRAUB: I don\'t want to\--
>
> \[Laughter.\]
>
> COMMISSIONER SMITH: How do we craft a regulation that comports with
> the statute and meets your goal.
>
> \[Laughter.\]
>
> MR. GOLD: Right, that\'s my answer.
>
> \[Laughter.\]
>
> COMMISSIONER MCDONALD: I hope you establish that the media is
> listening.
>
> MR. GOLD: Perhaps come up with a de minimis standard. I know that
> sometimes, the Commission has not entirely been successful at having
> it pass judicial review, but in this area, you might succeed. Given
> the volume and the ease of its use and the lack of quantifiability, I
> see that as the approach.
>
> COMMISSIONER WEINTRAUB: Bob, any thoughts?
>
> MR. COX: You know, I agree with Larry that a de minimis use would be
> useful, but I also think that republication raises just a variety of
> issues, one of which is, you know, is there knowledge of
> republication? I mean, one of the problems with the Internet is that
> you get lots of passed on messages and so on, and so, it may be that
> you are republishing without even knowing that it was campaign
> material to begin with.
>
> And then, I think the de minimis test brings up Larry\'s point again
> as to how do you quantify? And so, I think that\'s very difficult. I
> mean, I know from the Center\'s point of view, I can tell you that,
> you know, if you include all of the cost of development of a Website
> and the development of an email list and, you know, your Web guy,
> however many hours he\'s put in, you\'re talking thousands and
> thousands of dollars. But to actually just post a single post on the
> Internet takes all of five minutes of our Web guy in house. So which
> do you use?
>
> I mean, you have the Website; that single post never would have been
> put up if you didn\'t have the Website development to begin with
> but\--
>
> COMMISSIONER WEINTRAUB: Bob?
>
> MR. BAUER: I embrace the comments of my co-panelist.
>
> COMMISSIONER WEINTRAUB: Very pithy. Thank you.
>
> One last question: here and in previous panels, the argument has been
> made, and I think it\'s very compelling, that, you know, commentary on
> the Internet, commentary by anybody should be treated as commentary by
> the established press. And this goes to, you know, whether the media
> exemption is limited to the established press or to anybody who has an
> opinion. And the counterargument, as you know, is that that, if we
> were to broaden the exception that wide, it would swallow the rule;
> there would be nothing left in campaign finance regulation, because
> everybody would be a member of the media.
>
> So I would like to invite each of you to respond to that argument.
>
> MR. COX: My pithy response really quick is that swallowing the rule
> would not necessarily be a bad thing in my mind so\--
>
> MR. BAUER: I am very ambivalent about this whole question, as Mr. Cox
> said earlier, to which I\'m generally sympathetic of extending the
> media exemption, but of course, when you say expand the media
> exemption, that means that it\'s a claim. It\'s a claim that the
> Commission itself can review. It\'s a claim that the Commission
> reviews on the facts of every individual case.
>
> So what you\'ve done is you\'ve not so simply extended the exemption;
> you\'ve extended the community of individuals and organizations
> conceivably operating sites who actually are dependent on the
> government for approval, if you will. I think that is overstating the
> case but certainly for permission to proceed as a media related entity
> subject to regulatory protection.
>
> And so, I, on the one hand, don\'t agree that some of the
> organizations identified in the NPRM like Slate and so forth would
> qualify for the media exemption by all sort of intuitive standards.
>
> COMMISSIONER WEINTRAUB: You don\'t agree that they would?
>
> MR. BAUER: No, I would agree that they would. Please, don\'t clutter
> my email box.
>
> \[Laughter.\]
>
> COMMISSIONER WEINTRAUB: I know you didn\'t mean it.
>
> MR. BAUER: But I also believe that we ought to try to find a way
> without overworking that exemption to provide protection to the
> blogging community, because I don\'t think they ought to be worrying
> about filing advisory opinion requests or having themselves, having
> their activities challenged under the fact specific conditions of
> achieving that exemption.
>
> COMMISSIONER WEINTRAUB: So to protect the blogging community is\--
>
> MR. BAUER: Statement of policy.
>
> COMMISSIONER WEINTRAUB: A statement of policy.
>
> MR. COX: If I could just have 30 seconds.
>
> CHAIRMAN THOMAS: Ten.
>
> MR. COX: Ten; okay.
>
> COMMISSIONER MCDONALD: I\'ll yield my time.
>
> MR. COX: The problem with not extending the media exemption is that if
> we don\'t have a clear blanket rule, organizations like mine from the
> Commission, we find ourselves\--sure, we are worried about having to
> go case-by-case through the courts, which is no easier.
>
> COMMISSIONER WEINTRAUB: I\'d like to ask Mr. Gold for comment, and I
> will forfeit time on the next panel.
>
> MR. GOLD: Just a few seconds, then. I don\'t have an easy answer to
> that difficult question, but I will say it\'s certainly perplexing for
> the AFL-CIO, which has a Website and does have news on it, news that
> it views\--it\'s particular news, but it\'s broad range but limited.
> How is that different from any other Internet publication put out that
> may be the online arm of an offline publication that is also a
> specialty publication, let\'s say?
>
> The range of it, the ease of it, you can construct something that is
> just as sophisticated and has just as much comment as the online
> version of that specialty publication, even though you are a union or
> a business corporation, not a media corporation, and certainly, it\'s
> not satisfactory to say the media exemption protects some and not
> others, but it\'s very thorny.
>
> CHAIRMAN THOMAS: Vice-Chairman Toner.
>
> VICE-CHAIRMAN TONER: Thank you, Mr. Chairman.
>
> I think this has been an interesting discussion, because I\'m very
> open to this idea of some type of spending threshold, and Mr. Gold,
> you talked about a de minimis concept, and yet, we attempted that in
> the Levin funds area, and it was struck down by the district court.
> And we\'ve had a good discussion, I think, about this paid advertising
> versus unpaid advertising, and of course, we attempted something
> analogous to that in the electioneering communications area, and it
> was struck down by the district court.
>
> And as we go on with this rulemaking, if we do issue regulations,
> those are going to be some of my concerns, that as a policy matter,
> this may make a lot of sense. And yet, we may find ourselves in the
> same judicial problem that we face ourselves today.
>
> MR. GOLD: On the other hand, you do have a de minimis rule for unions
> and corporations announcing endorsements and putting out press
> releases and that sort of thing. I don\'t believe that\'s ever been
> challenged. But it\'s been there for a long time and does not seem to
> cause a lot of consternation, and that is somewhat analogous.
>
> There, the analogy is this, and I\'ll be quick, because I know there
> is limited time: a de minimis expense for, you know, press releases
> and the announcement, I think in part the rationale for that is
> largely whatever the transmission of it, it\'s being done by the
> media. It\'s media attention. That\'s the transmission of it. And the
> organization itself is not expending to communicate the message except
> just to issue that release, and then, it\'s up to the press, whatever
> that is, to decide what to do with it.
>
> The Internet, obviously, there is an obvious analogy in putting
> something on a Website, and I do believe there is a passivity there
> that is unique, and the question is how many people come visit it.
>
> VICE-CHAIRMAN TONER: And I\'m very open to that, considering that on a
> policy level.
>
> Mr. Bauer, I wanted your thought, because I understand that you would
> prefer that we not further expand regulation on the Internet, and I
> agree with that. But the core concept in the NPRM is focusing on paid
> advertising placed on another person\'s Website, and my question to
> you is do you think if we are going to proceed with regulation, are
> you comfortable with that kind of framework?
>
> MR. BAUER: I\'m comfortable with the notion that if someone uses the
> Internet the way they use a newspaper, and they pay for an
> advertising, you know, paying the price, generally published,
> available to everybody, to use that site for promotional purposes that
> a disclaimer is appropriate in the circumstances, and I don\'t have
> any fundamental objection to that at all.
>
> VICE-CHAIRMAN TONER: And no problem with that being treated as a
> coordinated communication if coordination takes place.
>
> MR. BAUER: No.
>
> VICE-CHAIRMAN TONER: Mr. Cox, your thoughts on that?
>
> MR. COX: Yes; I mean, in the end, the disclaimer, as long as you know
> that you need it, is probably not all that big a deal. I guess my
> question is how many people are actually going to know that they need
> it? I think that, you know, there are lots of groups like the Center
> that are probably even smaller than the Center and are working on a
> shoestring budget that quite frankly just won\'t have any idea, and
> so, it\'s going to come 120 days or whatever the standard is before
> the election.
>
> VICE-CHAIRMAN TONER: I\'m always shocked that people don\'t read all
> 500 pages of our regulations. They are a really good read.
>
> \[Laughter.\]
>
> MR. COX: Yes, what\'s going to trigger it is they\'re going to send
> out a solicitation campaign over their email list, and they\'re not
> going to have a disclaimer, and I just don\'t see how you\'re going to
> enforce that rule in any fair way to them.
>
> VICE-CHAIRMAN TONER: Well, perhaps we\'ll be at 520 pages of our
> regulations when we finish this proceeding.
>
> Mr. Gold, just real briefly, fundamentally, you feel comfortable with
> this paid advertising concept, again, if we choose to go forward that
> it can work?
>
> MR. GOLD: If the Commission chooses to go forward, it\'s a reasonable
> way to draw a line as opposed to all of the others. I\'m not all that
> enthused about it, but there\'s a certain logic, there again, it\'s
> doing something affirmative. It\'s an affirmative reach out that has
> maybe a more easily quantifiable cost more directly analogous to
> things that happen in other media than other aspects of Internet use.
>
> VICE-CHAIRMAN TONER: And real quickly, if we went forward with that
> concept, do you think we would also, for the logic that you indicate,
> have to include situations where people are getting advertising below
> market value and basically treat them as in-kinds? Do you think
> that\'s required for the concept to work?
>
> MR. GOLD: It probably does follow, and again, I suppose over time, the
> market value will be more easily ascertainable on the Internet than it
> is now, but it certainly seems to be pretty\--
>
> VICE-CHAIRMAN TONER: Inherent in the architecture of the rule?
>
> MR. GOLD: It is\--inherently, I suppose you need to go there. I don\'t
> know enough about how the valuation is on the Internet for advertising
> to be able to comment further, I think.
>
> VICE-CHAIRMAN TONER: Mr. Bauer, would you agree? Would in-kinds have
> to be included?
>
> MR. BAUER: I\'m not prepared to make that concession yet. Obviously,
> thinking about it, when you say it\'s inherent in the architecture of
> the rules, you know, we can redraw the blueprint. We can change the
> plan. But I will agree with you that this is a problem of stepping in
> this direction. This is the reason why I share Mr. Cox\'s and others\'
> anguish that the Commission didn\'t appeal, but as Commissioner Mason
> said, we are where we are.
>
> There is a certain logic in regulation. You take a certain step, and
> you are compelled ultimately by the alleged logic of regulation to
> take the next step. So I understand the question you\'re raising, but
> I\'m leery of making a concession on the record.
>
> VICE-CHAIRMAN TONER: Because if a \$1,000 ad that\'s actually paid for
> is covered by regulation, but another company doesn\'t charge for it
> as a gift, and we don\'t cover it\--
>
> MR. BAUER: I think that\'s right. I think you are clearly headed in
> that direction. It is not a hypothetical I have given enough thought
> to, and so, I didn\'t want to neglect the possibility, to quote
> Commissioner Weintraub, that I could comport with the statute and
> still get to the result that I want.
>
> VICE-CHAIRMAN TONER: Thank you, Mr. Chairman.
>
> CHAIRMAN THOMAS: Commissioner McDonald.
>
> COMMISSIONER MCDONALD: Mr. Chairman, thank you.
>
> Well, a couple of observations and one quick question. Let me go back,
> and I appreciate Commissioner Mason\'s comments that we are where we
> are. Let me just say to Reid, first of all, about the appeal process,
> oh, if I had a nickel for every time my colleagues turned down an
> appeal I wanted, I could probably be a Republican. I\'d have that much
> money.
>
> \[Laughter.\]
>
> COMMISSIONER MCDONALD: I went to my colleagues and asked them to
> develop a process so that we might automatically get into an appeal
> position one way or the other that we would take a stand, and being
> the senior member of this Commission, my opinion was so valued, I lost
> 5-1. I reached the point where I thought about voting against myself,
> it was looking so bad.
>
> But I think we ought to develop a position, and I hope this Commission
> does some day, where it\'s great to talk about a case-by-case basis,
> but a lot of times, procedurally and structurally, it creates problems
> for this Commission.
>
> What I\'m interested in, though, is I want to go back to your point if
> I could, Reid, for just a second about the difference between TV,
> newspaper, radio, and the Internet. When I pick up the newspaper every
> morning, the first thing I do, as Bob can tell you, is I go to the
> sports page. That\'s usually the second and third thing I do, too, by
> the way. And I can pick up that sports page, or I have purchased the
> newspaper because I assume that it\'s something I\'m interested in. I
> could go to the business section if I wanted to read about crime in
> America, but I prefer to go to the sports page first.
>
> On TV, I don\'t have to turn off the television. I don\'t have to turn
> the television on. When I turn it on, there are hundreds of stations I
> can view, 11 and 12, by the way, for ESPN and ESPN-2, where I\--I
> guess again, I\'m having trouble seeing this great distinction that
> people are talking about. I went on the Web the other day to look up a
> political matter, and it said I could refer to 6,437 sites or
> something like that. I have trouble focusing on one site, so 6,437
> seems a little bit more than I was prepared to do.
>
> I guess what I\'m trying to explore with you just for a second, and I
> take the point that the Minority Leader, Senator Reid, may well be
> able to press ahead, and he may well be right, and Congress may well
> take care of this problem for this Commission. I would submit to you
> that they may start taking a different view if routinely, in their own
> states and districts, they start getting beaten to death, because
> then, it\'s not as much fun as it used to be, and this has happened in
> other areas of the law.
>
> But I really don\'t see the difference, frankly, going back to what
> some of the witnesses said yesterday about spending money for a radio
> ad and an ad on the Internet. I truly, I guess I just don\'t see it. I
> take the point that you\'re voluntarily doing something, but in every
> medium that I\'m aware of, short of loudspeakers, maybe, coming into
> the neighborhood, again, it\'s determined by me.
>
> I don\'t know what they\'re going to say when I turn on the evening
> news. You know, they may take this position or that, and I may go from
> CNN to ABC to CBS to Fox\--it\'s not as likely, but I could. But
> wherever you\'re going, I think the principle is still the same, and I
> guess I just\--if you wouldn\'t mind amplifying on that a little bit,
> it would help me.
>
> MR. COX: Commissioner, I take your point. I guess the point that I
> guess I would put back to you is that the difference is that the
> scarcity with regard to whether that\'s newspaper or television or
> radio broadcast is not the same as with regard to the Internet.
>
> And so, while the way that you\'re envisioning just digesting media is
> that you always have a choice, your choices with regard to all of the
> other scarce media are limited to those media, those media that are
> available and what they choose to print. That\'s not the same case
> with the Internet, and moreover, when you interact with the Internet,
> it\'s much more self directed than with regard to a newspaper.
>
> I mean, the newspaper has decided to put whatever ads that they have
> on the page along with your sports story about the Nationals or, for
> you, the Orioles, it sounds like, and on a radio, if you\'re listening
> to a program, it\'s going to be interrupted with an advertisement. On
> the Internet, you can go as you said, you found more than 6,000 sites
> on a political issue that you wanted to do, and you can go to the
> site, or you cannot go to the site.
>
> COMMISSIONER MCDONALD: But out of those 6,000, when I pick one, the
> one I pick, I\'m still getting the opinion of whoever put that
> forward, am I not?
>
> MR. COX: Well, but you\'re choosing, before you even go there, to\--
>
> COMMISSIONER MCDONALD: Absolutely. I couldn\'t agree with you more.
>
> MR. COX: When you\'re listening to the radio, when that ad comes on,
> they\'re not saying here\'s an ad for the Orioles come on; choose to
> turn on or turn off your radio, and moreover, we\'re going to tell you
> when you need to turn it on to get to the program that you were
> listening to.
>
> COMMISSIONER MCDONALD: More like the popup that the staff director
> alluded to earlier, I gather.
>
> MR. COX: But I think it\'s that characteristic of the Internet
> combined with the fact that it\'s just not a scarce resource. I mean,
> you have so many more choices, and the person who is interacting with
> the Internet, the receiver, is the one who is actually making those
> choices as opposed to the broadcaster making those choices.
>
> COMMISSIONER MCDONALD: Have you had a chance to think, are there any
> exceptions to the rule since I first asked you when we opened up, do
> you know of a scenario? I wanted to give you more time.
>
> MR. COX: Well, and this is one of the things that I think the
> Commission needs to consider as they consider all of these rules is
> that it\'s very hard for me to talk about the Internet, because there
> are so many different facets of it. There\'s email; there\'s
> listservs; there\'s the World Wide Web; there\'s streaming video,
> audio, and that\'s why, in the regulations, I think the Commission
> needs to be very clear as to are the rules a fit-all, or do they only
> fit certain formats on the Internet that are involved?
>
> COMMISSIONER MCDONALD: I thank you.
>
> Thank you very much.
>
> CHAIRMAN THOMAS: Commissioner Smith.
>
> COMMISSIONER SMITH: Thank you, Mr. Chairman.
>
> It strikes me, talking about the press exemption, if we extended it
> broadly, would the exception swallow the rule? And I found myself
> thinking why would that matter? What would be the problem? As it
> stands now, if you have lots of money, you can get the press
> exemption. You can buy a newspaper; you can buy a radio station; you
> can buy a broadcast station. So in theory, the exception has already
> swallowed the rule for the rich, the really rich, I mean, the big, big
> money, not the merely wealthy individuals that Mr. Bauer refers to.
>
> If we extend it to the press exemption, suddenly, we\'re saying that
> people with very little money can participate in that way. And I
> thought that was the purpose of the law. So I\'m not sure why I would
> be concerned that all of a sudden, we\'d have all kinds of small
> groups of citizens or individual citizens spending very little money
> to participate in the politics. I don\'t know why that would be
> swallowing the rule; I think that would be fulfilling the rule, in a
> sense.
>
> And I mention that noting that, you know, a lot of the blogs that are
> most successful, as was noted for us yesterday by the witnesses; I
> mean, it\'s true: if you look at a site like DailyKos, very successful
> site, one of the most successful sites. Technology, from a
> technological standpoint, they are very, very primitive. They are
> basically just text sites. They don\'t do the streaming video, they
> don\'t do much else, and they don\'t require a lot of money.
>
> That\'s a kind of a lead-in to say that I have been surprised by what
> I sensed throughout this hearing has been something of a resistance to
> the idea that the press exemption should be widely extended, or that
> that wouldn\'t solve a lot of the problems. And I appreciate, Mr.
> Bauer, your point that it does, nonetheless, it expands the universe
> of people who now have to come to us and find out, do they get the
> press exemption?
>
> On the other hand, for the most part, it\'s worked pretty well. I
> mean, there are complaints every cycle filed against CBS and, you
> know, a variety of big networks and station owners and so on, but for
> the most part, I don\'t think those are a big problem. They\'re fairly
> readily, fairly easily dismissed, and so, I really wonder that putting
> in a good, making clear that Internet operations get the press
> exemption would not, in fact, solve a lot of the problems.
>
> And along those lines, I want your instant lawyering here with some
> help on how do we deal with something that Commissioner Mason raised,
> which is how do we fit that into a statute that doesn\'t actually talk
> about the press as what you\'re putting out but talks about the press
> exemption going to the fact that it is put out by the facilities of a
> publisher or a broadcaster.
>
> Could we say, for example, just or by a person, you know, for Internet
> activity or something like that, how do we kind of again fit that into
> the statute, which doesn\'t talk about the activity but actually gives
> it to the fact that you\'re a broadcaster or a publisher? And if
> people want to comment on my earlier kind of long intro to that,
> they\'re free to do that, too.
>
> MR. BAUER: I\'ll be very brief: first of all, I think\--I\'m very
> sympathetic to your view that the media exemption protects big money
> and that we shouldn\'t be concerned about working the interpretation
> of the media exemption so it admits smaller actors, smaller
> publishers. I completely agree with that, and I agree with you that
> the Commission has, on balance, though I can\'t recall each and every
> instance, and I\'m sure if I could, I would be offended by some, that
> the Commission has by and large made the right call on the specific
> cases put before it.
>
> Having said all of that, I think in principle, it\'s a high price of
> admission to the community of media organizations to have to come to
> the Government in any event. I mean, maybe the result is a good one,
> but the process is troublesome. But that\'s more in the nature of
> banging my fist on the table than probably being very helpful.
>
> Item number two, I think that Commissioner Mason\'s suggestion that
> you could work with the term facilities is a reasonable one. For some
> reason, and it\'s something that we ought to all give some thought to,
> or at least I should. I don\'t think this is an insurmountable
> technical problem, that is to say, working with the tool that you
> have, the statute, to find a way to execute upon a defensible, that is
> to say, immune from challenge choice of language or interpretation
> that would permit Internet facilities to be treated as broadcast
> facilities for purposes of the exemption. I just don\'t think that\'s
> going to be a huge problem.
>
> COMMISSIONER SMITH: Let me just ask Mr. Cox, then, to comment, because
> most of his comments were directed to the media exemption, but I
> think\--I mean, again, this won\'t be a standing alone provision; in
> other words, this would be part of efforts to, I think, create,
> perhaps, for example, broad exemptions for personal use of activity,
> computers for, you know, individual bloggers, maybe something, as
> Commissioner Mason has tried to get, some de minimis threshold.
>
> So I would view it as one of a panoply of rules that would hopefully
> provide people with some protection in the sense that they can go
> ahead. And you\'re right: they would end up having complaints filed;
> they might have to come to the Commission, but at least people would
> always have that defense, and I think it would make it a much more
> manageable situation. I wouldn\'t view this as the sole prop for
> trying to protect the Internet, but it strikes me as a very important
> one that people seem somewhat reluctant to use.
>
> Mr. Cox, any thoughts on that?
>
> MR. COX: I mean, I guess I would reiterate my previous comment, which
> I think the problem, the constraint that the statute still imposes on
> you, if I can be so bold as to suggest my own plain read of the
> statute is that it seems to me that individuals or groups of
> individuals would be covered as long as they\'re engaging in a
> periodical publication.
>
> The difficulty is if they\'re engaging in something less than a
> periodical publication, and so, I guess my answer to that is
> certainly, I appreciate the broadest interpretation of periodical
> publication, meaning that it doesn\'t necessarily have to come out
> every week at exactly the same time or every day at exactly the same
> time, but it seems to me that the facilities of a periodical
> publication could be, for a blogger, someone\'s living room.
>
> COMMISSIONER SMITH: But the odd issue there is that I think, well, I
> know the Commission has, I don\'t think consistently has but has in
> some cases seemed to extend the press exemption to movies and books,
> which don\'t fit periodicals either.
>
> MR. COX: Sure.
>
> COMMISSIONER SMITH: So clearly, and I haven\'t heard anybody even in
> the reform community squealing about that, that they want to censor
> movies. So I think that clearly, they would give us some leeway to say
> well, you know, maybe it\'s not a classical periodical but\--
>
> MR. COX: I had to look at the statute again, because the way that you
> were talking earlier in terms of any publisher, I mean, if that is the
> language, and it doesn\'t appear to be, actually; it appears to say
> periodical publication, but if it\'s publisher, to me, there are a lot
> of analogies in defamation law or privacy law where publication is
> simply the minute that you tell someone else, that that seems to me to
> be a definition that you could take, and you could say it would apply
> to an individual or to anyone.
>
> But if it is periodical publication, then, maybe relying on some of
> the Commission\'s earlier rulings with regard to movies and so on,
> that periodical is a very broad term.
>
> COMMISSIONER SMITH: Does the Chairman\--
>
> MR. GOLD: I agree, as a legal, technical matter, the way to use the
> press exemption here is that phrase, other periodical publication. And
> there certainly seems to be consensus, I think, that Slate, Salon
> qualify here. They can only qualify since they are only online, they
> can only qualify as an other periodical publication. That is the only
> way to fit them into that phrase.
>
> And I think if they were to change content, they could change content,
> I think, many times during the course of the day. I think the notion
> of periodical could be adjusted to meet the unique needs of the
> Internet. It\'s not like a newspaper; you know, a broadcast facility
> is also a continuous mechanism. That is a different word in the
> statute, but why should that be treated differently?
>
> So I guess there is a root there, but again, the question would then
> be, you know, where do you draw the line even on the Internet? What is
> periodical, what isn\'t. You could take a pretty broad view and go
> pretty far along to fix it without changing the statute, I suppose.
>
> COMMISSIONER SMITH: Thank you.
>
> CHAIRMAN THOMAS: Well, we have already gone about 20 minutes beyond,
> 22 minutes beyond where we planned to be, but we have such
> distinguished guests with such expertise, I wanted to make sure that
> everybody had a chance to ask all of the questions they felt
> appropriate. I apologize to the succeeding panel. We\'ll see if we can
> sort of get back on track.
>
> Let\'s take a break. It looks to me like we\'ve got about seven
> minutes before 11:30 comes, so we\'ll see if we can get started. I\'ll
> gavel in at 11:30 sharp, and we\'ll only be 15 minutes behind
> schedule. Thank you again for coming.
>
> \[Recess.\]
>
> CHAIRMAN THOMAS: The second panel this morning consists of Jim
> Boulet\--is it Boulet?
>
> MR. BOULET: Yes, sir.
>
> CHAIRMAN THOMAS: Thank you; executive director of English First; Mr.
> Mark Jaskulski\--is that right?\--student at Widener University School
> of Law; Kristinn Taylor?
>
> MR. TAYLOR: Yes.
>
> CHAIRMAN THOMAS: Of Free Republic.
>
> MR. TAYLOR: Yes.
>
> CHAIRMAN THOMAS: Thank you one and all.
>
> Unfortunately, Mr. Charles Marshall, who was scheduled to testify with
> this panel on behalf of the North Carolina Association of Broadcasters
> was unable to make it today, but we will carry on. You probably have
> been waiting in the wings, and as you probably know, we\'re trying to
> keep opening statements to five minutes, and that little light will
> turn to an orange light when you\'ve got about 30 seconds left.
>
> So we\'ll go alphabetically, and Mr. Boulet, please proceed.
>
> MR. BOULET: All right; I have a statement that I prepared. Then, I was
> listening to the first panel, and so I\'m going to try to combine the
> two in my allotted time.
>
> In one sense, I don\'t really belong here. I\'m not an attorney,
> though I do play one on TV from time to time. But what I am is a
> practitioner and someone who has fiddled with the Internet and its
> various forms for a long time. So I like to think of myself as an
> English-speaking translator of computer speak.
>
> There\'s so many things that go into my statement. I\'ve been doing
> politics since 1976 in one fashion or another and seeing the
> technology change. In 1976, to use a computer required a trip to the
> computer center in the hopes of finding an unoccupied keypunch
> machine. Some of you may remember that. To some of you, I have just
> talked about the days when dinosaurs roamed the Earth. Now, you go to
> Starbucks; you sit in front of a free wireless network; and you can do
> 10 times what I could do 30 years ago.
>
> During the late 1980s and early 1990s, we would upload files to
> bulletin boards run by volunteer sysops, system operators, at the
> then-breathtaking speed of 14.4 fax modem capability. Sometimes, those
> files would be transmitted by the phyto network, within 24 hours, and
> we were stunned.
>
> I built the first English First Internet site myself in 1996. I added
> a blog in 2002. And I hope that because of this\--that\'s why I asked
> for your time today. I\'ve seen some of these things, and if I could
> persuade the Commission of only one thing today, it would be this:
> regulating the Internet would be in no way similar to its experience
> or its expertise in regulating political campaigns or political mail
> in any way, shape, or fashion.
>
> Say I wish to campaign against a Presidential candidate. If I
> commission advertising and purchase time for that advertising, I\'m
> out real money long before I\'ve reached the eyes or ears of a single
> voter. It is quite easy for the Commission to easily identify every
> detail of those expenses I\'ve incurred and determine how and by whom
> they\'re paid.
>
> The amount of money at stake is substantial. Yet a few\--we just saw
> this last month\--a few unhappy Ohio Republicans could throw up an
> Internet Website in mere hours because they were made at Senator
> Voinovich. It cost very little. Probably done by College Republicans.
> I was a College Republican. You have a lot of time on your hands. Very
> little cost; the ability to identify the details of the expenses, to
> regulate that as some kind of in-kind campaign contribution is very
> limited. The amount of money at stake is nickles and dimes.
>
> The Commission has so much work on its plate that the idea of chasing
> nickles, dimes, and pennies\--what we will do, at English First, I pay
> a lawyer, I pay an accountant to do my PAC work. We will comply,
> whatever it takes. But is that the best use of everybody\'s resources
> to figure out how much, how to allocate 2,000 emails, say, that go out
> on behalf of something that\'s arguably political? If I put a
> disclaimer on there, and it is then stripped out by a third party who
> forwards the email to his own list, there is just no way to cost that
> out that I can see.
>
> The other problem in the email area that is something that really
> hasn\'t been discussed is that email doesn\'t work like postal mail.
> There is a certain guarantee that postal mail will get through, even
> if the address is mangled. Yet email, if you have one character wrong,
> a capital U, it won\'t go through. And what has happened is that
> people are finding out that it\'s not worthwhile to rent an email
> list, because half of them are no good; they\'ve got old addresses on
> them. So you\'re much better off in developing an opt-in list.
>
> Now, let\'s say\--I\'m trying to remember who it was; I believe it was
> you, Mr. Chairman, talking about a campaign sending out an email with
> a video attached that people could then watch. If I were to put out
> such an email, it would kill my list, and the reason is well, the
> press, many government agencies, Congress, has\--my time has expired a
> long time ago\--has broadband access, most people don\'t. And so, when
> a friend sends me 10 pictures of her cat, it\'s 30 minutes to download
> it. I will not download video.
>
> So we also have the concept, and I\'ll, you know, enter the rest of my
> statement into the record and just say the other area that hasn\'t
> been discussed is called spam-blockers. If I get an email from a
> strange campaign, I couldn\'t even\--and I have this, which I\'ll give
> to the Secretary for the Commission\--to try to order a product I
> wanted to buy, my email was blocked until I used his spam-blocker to
> tell him I was a real person, and I wanted to buy his product.
>
> As that technology, you have the Mozilla browser that blocks popup
> ads, most of the ads, most of the things we talk about today if people
> hate them are blocked. And people really see their email box as
> something far more private than their postal box, so that regulation
> in this area, really, the people are going to take care of it much
> more than any campaign will.
>
> I thank the Commission for its time today.
>
> CHAIRMAN THOMAS: Thank you.
>
> Mr. Jaskulski.
>
> MR. JASKULSKI: I just want to begin by thanking the Commission for
> allowing me this chance to participate in the hearings this morning. I
> appreciate it.
>
> As the Internet continues to blossom into a tool utilized by most of
> the key players in politics, the decision this Commission is about to
> make will no doubt have an effect on the elections of our future. Let
> me begin by telling you a little bit about my background and how I
> ended up sitting at this table today. It was a little over a year ago
> that the word blog became a part of my everyday vocabulary. I was
> preparing to attend my third national Presidential political
> convention last summer, and I wanted to have a place where some of my
> friends and family could keep abreast of my trials and tribulations,
> because when you attend a Presidential convention, you never know who
> you are going to run into.
>
> In the past, I had some interesting stories and photos to share, but
> for the most part, I decided to keep them to myself. That was before I
> started my Website and had a place where people all over the world
> could see what was happening in my life and what I thought of certain
> things that were occurring.
>
> I started a Website on Blogger so that people could see these stories
> and pictures I uploaded. And it got me thinking, and I wanted to delve
> into this issue some more. Currently, I am a law student one semester
> away from graduating from Widener University School of Law, and
> election law is an area I find extremely interesting, but that did not
> happen recently.
>
> The issue regarding the struggle between the modern day media and
> politics has been something that has interested me for years. For
> example, I can remember when I was in high school, and I was probably
> the only teenager excited about a new startup called MSNBC. I remember
> rushing home from school the day the channel began to broadcast,
> because in my heart, I thought the concept of a channel melding
> technology and politics and news was intriguing. I find it amazing
> that almost 10 years later, we are still struggling with this issue.
>
> Last fall, I took a class that covered election law, and that is how I
> ended up studying this topic that I speak about today, the media
> exemption and its relationship to bloggers. Over the past year, I\'ve
> developed some strong opinions about how I think this Commission
> should approach this: bloggers should remain free from regulation, and
> the best way, I believe, to do this is by allowing bloggers to employ
> the media exemption.
>
> Two-fifths of Americans who are online have read a political blog, and
> more than a quarter read them once a month or more. As the number of
> blogs and those reading them continues to increase, the amount of
> people commenting and reporting on political stories will also grow.
> In order for people to maintain this newfound role on the American
> soapbox, the FEC needs to extend the media exemption for all members
> of the blogosphere.
>
> There are several reasons why I hold this belief: to begin, bloggers
> continue to gain credibility in media circles and should be considered
> journalists who can employ the media exemption. For example, bloggers
> were out in front of the mainstream media and their reporting on such
> tarnished public figures as Senator Trent Lott, former CBS News
> anchorman Dan Rather, and CNN Chief Ethan Jordan.
>
> In a scandal-ridden political society, America needs the bloggers to
> continue the work they do, unfettered by concerns of complicated
> campaign finance laws. Bloggers are journalists covering stories that
> the mainstream media are afraid to cover or stories traditional
> journalists simply do not have the time or resources to cover. Without
> bloggers, many big news stories that started on a whim would have been
> passed over.
>
> In the years to come, America will increasingly rely on bloggers to do
> this dirty work, but any changes to campaign finance laws without a
> media exemption for bloggers will discourage their efforts. As news
> organizations have trimmed their budgets and avoided complicated
> stories, bloggers have stepped in to provide coverage of many ignored
> areas.
>
> However, one major issue clouding any vision of political bloggers as
> traditional journalists for purposes of the media exemption is the
> fact that many bloggers operate without formal ethical guidelines or a
> code of conduct. On the one hand, there are mainstream newspapers,
> network TV news and cable channels like Fox News touting their
> objectivity and promising coverage that is not tainted by partisan
> politics, and on the other, bloggers are reporting opinion news, news
> that reflects the individual blogger\'s own beliefs and preferences
> and tends to filter out dissenting views.
>
> There are arguments on both sides when it comes to adopting a
> so-called bloggers\' standard of care. So far, many bloggers resist
> any notion of ethical standards saying individuals ought to decide
> what is right for them. They consider blogging synonymous with a
> conversation, and you cannot develop a code of conduct for
> conversations.
>
> In much the same fashion, longtime bloggers have circulated their own
> sets of guidelines that call for disclosing any conflicts of interest,
> publicly correcting any misinformation and linking to any sources of
> materials referenced in their posting.
>
> It may be some time until bloggers adopt a uniform set of standards,
> but bloggers already have informally adopted norms that go beyond what
> traditional journalists do. Many people who argue that bloggers should
> not have the same rights as \"authentic\" journalists focus their
> attention, and you talked about this earlier, examining the fact that
> many bloggers opine more than they report.
>
> The reality that many bloggers dedicate a good number of their
> postings to personally remark on the hot topic of the day should not
> disqualify them from the media exemption. In fact, this gives credence
> to the comparisons between traditional media and bloggers. Bloggers
> are simply taking advantage of advances in new technology to tell
> their story, and their passages resemble online editorial pages,
> similar to ones found in many newspapers today.
>
> It seems hardly unfounded to allow the media exemption for editorial
> and opinion divisions of a newspaper while disallowing it for bloggers
> who do much the same thing on a daily basis. For purposes of the media
> exemption, the FEC should not go down the road, picking and choosing
> which people are and are not journalists, as technology changes the
> way news, information, and opinion is delivered.
>
> The newspaper editorial pages supply commentary on a story on which
> their paper has reported on preceding pages. Editors and news
> directors traditionally have the job of sorting through possible leads
> and deciding which they are comfortable reporting. In much the same
> approach, bloggers usually refer by hyperlink to an online story or
> other blogger they find interesting, while explaining an issue and
> supplying their own editorial comments.
>
> One of the only differences between the two is the fact that bloggers
> are oftentimes not doing the conventional reporting. The entry of
> bloggers into the opinion marketplace is a good thing for both
> democracy and the press itself, and it should not be changed. More
> views are being represented; more subjects are being examined in
> detail, and that means more sunlight shines into institutions of all
> kinds.
>
> As the numbers of voices speaking about various topics proliferates,
> the issue of credibility of a specific blog will also come into
> question. Be it proper or not, readers generally know what to expect
> from editorial pages of the New York Times or the Washington Times,
> and the same can be said for blogs. Depending on their political
> outlook, a reader can judge for himself or herself who has the more
> fitting analysis.
>
> To simply say that blogs cannot be afforded the journalistic media
> exemption because they engage primarily in opinions is just not
> suitable. I thank you once again for your time and attention. I look
> forward to answering any questions.
>
> CHAIRMAN THOMAS: Thank you.
>
> Mr. Taylor.
>
> MR. TAYLOR: Thank you.
>
> My name is Kristinn Taylor. I am here speaking on behalf of James C.
> Robinson, founder, president, and principal owner of FreeRepublic LLC,
> which owns the electronic bulletin board known as FreeRepublic.com. I
> ask that the following statement and supporting documents be entered
> into the record.
>
> FreeRepublic.com is a news analysis and activism Website. It is one of
> the most popular and influential politically oriented sites on the
> Web, with over 200,000 registered accounts, some inactive or revoked,
> and many times over that number of people who freely read the site
> without posting to it.
>
> FreeRepublic.com is read by officials at the highest levels of
> government in all branches. It is also read by major political
> parties, the media, talk show hosts, Americans all across the country,
> and people from around the world. FreeRepublic.com is a living
> embodiment of what the founders had in mind when they enshrined the
> First Amendment in the Bill of Rights. FreeRepublic is dedicated to
> advancing conservatism and defending the Constitution of the United
> States.
>
> To that end, Mr. Robinson issued a statement on March 22, 2004, to
> make clear to all who visit and wish to participate on his Website his
> goals and principles, excerpts from which I will quote. In our
> continuing fight for freedom, for America, and our Constitution and
> against totalitarianism, socialism, tyranny, terrorism, et cetera,
> Free Republic stands firmly on the side of right, i.e., the
> conservative side.
>
> Free Republic is private property. It is not a Government project, nor
> is it funded by Government or taxpayer money. We are not a publicly
> owned entity, nor are we an IRS tax free nonprofit organization. We
> pay all applicable taxes on our income; we are not a part of or funded
> by any political party, news agency, or any other entity. We sell no
> merchandise, product, or service, and we offer no subscriptions or
> paid memberships.
>
> We accept no paid advertising or promotions. We are funded solely by
> donations, non tax deductible gifts, from our readers and
> participants. We aggressively defend our God-given and First Amendment
> guaranteed rights to freedom of speech, freedom of the press, free
> exercise of religion and freedom to peaceably assemble and petition
> the Government for redress of grievances. We also aggressively defend
> our right to freedom of association as well as our Constitutional
> right to control the use and content of our own personal property.
>
> Despite the wailing of liberals and others who do not share our
> purpose, we feel no compelling need to allow them a platform to
> promote their repugnant and obnoxious propaganda on our forum.
> FreeRepublic.com is not a liberal debating society. We are
> conservative activists, dedicated to defending our rights, defending
> our Constitution, defending our republic, and defending our
> traditional American way of life.
>
> Our God-given liberty and freedoms are not negotiable. May God bless
> and protect our men and women in uniform fighting for our freedom, and
> may God continue to bless America, signed by Jim Robinson.
>
> Let me repeat, our God-given liberty and freedoms are not negotiable.
> We do not come here on bended knee begging Federal masters for relief.
> We do not come here to pledge our fealty to Lord John McCain, nor to
> Lords Feingold, Shays, and Meehan. We do not come here to bow before
> the black robes of Her Majesty Kollar-Kotelly. No, we come here to say
> hands off the Internet, hands off the First Amendment, and hands off
> Free Republic.
>
> We are here because our system of checks and balances has failed.
> Congress passed a law they knew to be unconstitutional. President Bush
> signed the law, knowing it was unconstitutional. The Supreme Court, in
> its ruling, threw out the Constitution, once again reaffirming the
> principle that the plain language of the Constitution does not mean
> what it says but only what five justices in black robes say it means.
>
> While this Commission has commendably tried to minimize the impact of
> BCRA on the Internet, even this modest proposal by the Commission is a
> proverbial camel\'s tent under the tent. Groups like FreeRepublic.com
> and our members do not have the resources to fend off attacks by the
> Government and lawyers who wield the law as a weapon of political
> intimidation and control
>
> Recently, the Communist government of China has tightened its grip on
> the Internet. All China-based Websites must register with the
> Government. All Internet cafes must register with the Government.
> Major Websites must sign a code of conduct approved by the Government.
> Incredibly, the American company Microsoft has kowtowed to the
> Communist Government of China by blocking words like freedom,
> democracy, and human rights from its blog hosting service in China.
>
> Surely, this Commission does not want to be known as the agency that
> followed the lead of the Communists in China by restricting political
> speech on the Internet.
>
> Thank you.
>
> CHAIRMAN THOMAS: That was pretty close to five minutes precisely. Very
> good. Thank you one and all.
>
> We are going to run the questioning first with Commissioner Mason.
>
> COMMISSIONER MASON: Thank you.
>
> Mr. Jaskulski, you discussed in your testimony the need for\--I think
> you put it the need for ethical guidelines or a code of conduct, and I
> wanted to try to understand, are you suggesting that the Government
> needs to mandate ethical guidelines or a code of conduct, or just what
> relevance would that have to our proceeding here?
>
> MR. JASKULSKI: I guess a way of\--I talked about this with Carol Darr.
> I talked to her on the phone, I spoke with her. And she said that the
> way that\--there is no way for this Commission to sit down and look
> through and do exactly what you had said.
>
> I\'m just saying that that\'s a way for people who run a blog that if
> they want to gain some type of\--I guess, like an opinion page on a
> newspaper, they\'re going to have their own guidelines that should be
> followed, and I guess I\'m saying that to gain some credibility,
> rather than any blogger putting anything what they want out there, and
> I think that may be something for you to look at; I don\'t know how
> this Commission would implement it, but that might be something that
> could be looked at.
>
> I don\'t know if I answered your question.
>
> COMMISSIONER MASON: Well, I think just to make it clear, you\'re not
> suggesting that we draw up a code of conduct which\--
>
> MR. JASKULSKI: No.
>
> COMMISSIONER MASON: \--we would impose or which we would use to say,
> well, because somebody has followed this code of conduct, then, they
> are media, and they get the exemption, but if they don\'t follow a
> particular code of conduct, they aren\'t.
>
> MR. JASKULSKI: I guess from my studies of this, there is some type of
> a code that has to be followed in order to be able to employ the media
> exemption, in order\--you have to be in the ordinary study of\--in the
> reporting of news. I don\'t know what the exact wording is. And so
> what I\'m saying is that maybe that might be a way to connect that
> with blogs, that you cannot be just\--with the NRA News, they had what
> they were trying to do there, and they had to, in order to do that,
> they had to do both sides.
>
> They have to be equal access, and that\'s kind of what I\'m saying.
> I\'m not saying equal access purchase words, but they have to allow
> for both\--they have to actually be a legitimate news source is what
> I\'m trying to say, and I guess that\'s going to be kind of hard for a
> blog to do that, when most of them are very partisan, and I know
> that\'s what most of them would say.
>
> COMMISSIONER MASON: Are you suggesting, then, that it\'s your opinion
> that most blogs shouldn\'t be covered by the media exemption? I don\'t
> mean to be hard on you, but you came, and you volunteered, and these
> are the questions we need to have answered, and so, you know, I\'m
> asking your opinion about that.
>
> MR. JASKULSKI: No, I completely understand that. I would consider
> bloggers journalists, and I guess that they should be allowed the
> media exemption. And I guess the code of conduct is something that\--I
> don\'t know how to respectfully answer your question; I\'m sorry.
>
> COMMISSIONER MASON: Mr. Taylor, I\'m against the ChiComs, too. My
> question is in terms of your activities, you don\'t take advertising.
> Part of our proposal has to do with that, so you seem to be okay.
>
> MR. TAYLOR: But we have run a banner ad or two from, I think, one
> exploratory campaign and maybe from some others\--
>
> COMMISSIONER MASON: But that was your choice to do that.
>
> MR. TAYLOR: Voluntarily, yes, yes, there was no money exchanged.
>
> COMMISSIONER MASON: So Mr. Robinson or whoever was in charge of the
> content on the site decided there was a candidate that he liked, and
> so, he would put that candidate\'s banner up.
>
> MR. TAYLOR: Yes.
>
> COMMISSIONER MASON: But it seems to me in other respects, you\'ve
> described something which, arguably, would fit within the media
> exemption, that is, you have a publisher, Mr. Robinson; you have
> contributors, and the genius of the Internet is instead of having 20
> writers, you have 200,000 writers.
>
> But I just want you to think about your activities and think about the
> specifics of our proposal as you understand them, and to say do you
> understand that if properly applied, the media exemption and/or the
> individual volunteer exemption, which would cover a lot of your
> individual contributors, would combine to protect your site against
> regulation?
>
> MR. TAYLOR: We understand that, but on the other hand, we also have a
> problem with the whole idea of political speech and activity falling
> under regulation of the Federal Government, especially when it comes
> to the right of the people to influence the makeup of that government.
>
> Now, campaign finance reform laws have been referred to as incumbent
> protection acts, and the proof is in the pudding, with the reelection
> rates of incumbents. And it is very difficult for unknowns to get
> noticed without having lots of money or having ways of publicizing
> their campaigns. You know, we will take whatever exemption is given
> us, but on the other hand\--
>
> COMMISSIONER MASON: I appreciate that, and I just want to make a
> comment, because I know my time is up. But to the extent that your
> complaint is with Congress or the Supreme Court, I probably join you,
> all right? And so, what I do want to make sure we focus on is what
> we\'re doing, and if there\'s something wrong with our regulatory
> proposal, you know, then, let\'s hear it. We\'re open to it. But
> don\'t mistake us for having been the ones who passed the law or
> issued the judicial decisions construing it.
>
> MR. TAYLOR: I thought I made that in my statement, where I commended
> the Commission for their restraint so far.
>
> CHAIRMAN THOMAS: Commissioner McDonald.
>
> COMMISSIONER MCDONALD: Mr. Chairman, thank you. Jim and Mark and
> Kristinn, thank all of you for coming today.
>
> I will be brief. I want to go back and pursue just a moment the
> questions by Commissioner Mason. Earlier, my valued friend
> Commissioner Smith pointed out, and I take his point, by the way,
> because my goal is not to agree with the panelists on any side. My
> goal is to try to pose some questions so that we can have a dialogue.
>
> He pointed out in the last panel that it may not be all bad that the
> press exemption be extended wide and far, and that may well be true,
> by the way. But in the same exchange, Commissioner Mason pointed out
> we\'re still confronted with some statutory constraints, and I
> realize, taking Kristinn\'s point, that I gathered from what you said
> you may not be too enamored with either the FEC law or the Supreme
> Court, and you may not be the only person who has that point of view,
> although I can\'t imagine anyone not liking us, but if that\'s the
> case, I\'ll accept it and go on.
>
> But for any of you, and I really am just trying to get at this,
> because going back to the point made by Commissioner Mason just now,
> first of all, it\'s important to remember why we really are here, and
> I want to clarify that we\'re not responsible for the start of World
> War II either, so we\'re just trying to get at a very narrow area.
>
> And do any of you see in the press exemption\--maybe I\'ll start with
> you, Mark, as a new lawyer to be and someone who has taken a great
> interest in this area\--is there a scenario that you see that someone,
> by just the mere pronouncement that they are indeed journalists, would
> not be able to avail themselves of the press exemption? Not passing,
> by the way, on whether that\'s good or bad; I\'m just trying to figure
> out if there is any scenario that you would see that that would be the
> case.
>
> MR. JASKULSKI: I\'ve read some things about this where they had said,
> like, to be a lawyer, you have to pass the bar; to be a doctor, you
> have to pass\--to be a journalist, there is nothing that you have to
> do. And I think that what I was trying to say is\--
>
> COMMISSIONER MCDONALD: This will be news to the journalists, the
> mainstream journalists, but nevertheless, I take your point.
>
> MR. JASKULSKI: Well, I was a journalism major, so I spent four years
> doing it.
>
> COMMISSIONER MCDONALD: I take your point. Wow, this is getting tougher
> by the moment; all right.
>
> MR. JASKULSKI: What I\'m trying to say is that a code of conduct,
> while you most likely would not be able to employ that, may be a way
> for them to either, if Congress were to approach this issue or if the
> bloggers on their own were to approach this issue, that might be a way
> for them to sort of raise their standing, I guess a little bit of it.
> And I don\'t know if I\'m stating it quite the proper way, but I think
> that a code of conduct would sort of\--there\'s people like the editor
> of DailyKos versus somebody who has just started a blog this morning
> who is just posting random things; there\'s a difference between the
> two, and they\'ve gained some credibility. He\'s been doing it for
> years.
>
> So I think that\'s all I\'m trying to say, and as opposed to he\'s
> going to follow a different ethical standard versus somebody who\'s
> just\--that can be an 11-year-old child doing it on their summer
> vacation.
>
> COMMISSIONER MCDONALD: Absolutely, but let me pursue that for a
> second. But he had to start out at the same spot as whoever started
> this morning.
>
> It goes back to the incumbent question. I would point out to Kristinn
> that incumbents long before the FECA came into effect, I might point
> out, were routinely winning reelection. This is not peculiar. I\'m not
> arguing whether it may not be\--I would submit maybe reapportionment
> has more to do with success than anything else, but whatever it might
> be, this is not particularly newsworthy, and I might also say\--
>
> COMMISSIONER SMITH: I just want to go on the record. I think it\'s the
> quality of the incumbents.
>
> \[Laughter.\]
>
> COMMISSIONER MCDONALD: And I just want to go on record whether\--
>
> COMMISSIONER SMITH: Who are the ones who laugh?
>
> COMMISSIONER MCDONALD: And I just want to go on record with my good
> friend that I couldn\'t agree with him more; once again, bipartisan
> support.
>
> But the fact of the matter is that all incumbents were either
> challengers at one time, or there was an open seat. I mean, no matter
> who is sitting in Congress, they were a challenger, or at least they
> weren\'t the incumbent. And so, I guess I kind of get back to square
> one about this, in terms of I take your point about establishing
> yourself over time, and that certainly enhances your credibility.
>
> But if you start today, and you have at least the same standards,
> whatever those might be, maybe it\'s ethics; maybe it\'s background or
> so on and so forth, I guess my question is still the same: are you, by
> the nature of announcing you are a journalist, would that make you one
> in terms of the press exemption, I mean? Not arguing whether it\'s
> good or bad. I\'m just trying to understand what\--
>
> MR. JASKULSKI: I guess the product that you produce would make you a
> journalist. Anybody can sign up and can go to journalism school. And I
> went to journalism school and found out I wanted to be a lawyer, so
> it\'s, you know, anybody can go through school. It\'s the fact of when
> you finish, or even if you didn\'t go to school\--many journalists
> didn\'t even go to school\--it\'s the fact of what you produce and
> whether it\'s\--you\'re going to lose your credibility; I mean, you
> see stories every day of journalists, not every day, but, you know,
> Jason Blair and other journalists who I would say most people would
> say they\'re not journalists now because of the things that they\'ve
> done. They\'ve lost credibility. I mean, he\'s not going to get hired
> somewhere; and then, he writes a book, but that may answer your
> question. I mean, everybody writes a book.
>
> COMMISSIONER MCDONALD: Lawyers and doctors, too, by the way. No, I
> take your point.
>
> I thank you.
>
> CHAIRMAN THOMAS: Let\'s move on to Vice-Chairman Toner.
>
> VICE-CHAIRMAN TONER: Thank you, Mr. Chairman. I want to thank all the
> panelists for being here today. I particularly admire Mr. Jaskulski,
> you coming, being in law school and sharing your time with us, and I
> guess you\'ve earned the right to critique journalists, having sat
> through four years of that curriculum, and we understand your point of
> view on that.
>
> Mr. Boulet, I\'d like to begin with you. On page 6 of your comments,
> you talk about the challenge of regulation focusing on spamming, and
> you say at the top of page 6, the Commission\'s efforts to regulate
> unsolicited email in any way will inevitably founder. This is because
> the true spammers set up shop outside the jurisdiction of American law
> just like the online gambling sites do.
>
> I\'d like your thoughts, if you could elaborate on that, and is it
> basically your view that any type of effort to distinguish between
> unsolicited and solicited email is going to be problematic because the
> truly sophisticated actors are just going to go offshore?
>
> MR. BOULET: That is one of my points there, and I\'d amplify this way
> as a practitioner, as somebody with a Website, with an opt-in mailing
> list. I have no way of telling where that name came from other than
> that it purports that I\'d like to receive your mail.
>
> Now, if I wanted to destroy some other group, you know, you have an
> intern just sit there and type in email addresses to people, and then
> they\'re your people, and then, they email and say I\'ve received this
> unsolicited email. There\'s just\--in this area, I marvel every time
> that I put out a legislative alert that I get email back saying take
> me off your blankety-blank list.
>
> Well, you were never on my list, but you were forwarded, and depending
> on what people do, if you\'re aggressive and\--once, as we know, money
> and politics will, if someone feels a need to use political spam, the
> gambling sites have shown that; you set up a Russian site; you set up
> a site in India. There\'s really no way to curtail speech in this
> area.
>
> VICE-CHAIRMAN TONER: Is it your concern that if we were to proceed in
> that fashion, it would be the people who are in this country, the
> people who are not as sophisticated, who might be subject to
> restriction, whereas, those who have the means to be offshore, who are
> more sophisticated, would go free?
>
> MR. BOULET: That\'s precisely my point. I think that the one
> overarching thing we have here is regulation in this area is much more
> likely to trap Uncle Joe and Aunt Minnie than me.
>
> VICE-CHAIRMAN TONER: I don\'t know who Uncle Joe is, but I\'m
> confident we don\'t want to trap him.
>
> MR. BOULET: He\'s an ordinary citizen.
>
> COMMISSIONER MCDONALD: That was an old Russian term, actually.
>
> \[Laughter.\]
>
> VICE-CHAIRMAN TONER: Uncle Joe.
>
> COMMISSIONER MCDONALD: In Moscow.
>
> MR. BOULET: But yes, also, touching on the journalism area, which I
> can\'t help myself\--
>
> VICE-CHAIRMAN TONER: Please, you can pile on the journalists as well.
>
> MR. BOULET: No, actually, I think I are one, because I contribute to
> National Review Online from time to time, and I\'ve been identified as
> a \"lesser Cornerite.\" The curious thing is National Review Online
> has a much better readership than my own blog, but under the media
> exemption as I understand it, if I contribute to National Review
> Online, it\'s protected free speech. Yet, that identical posting on my
> own blog might be questionable.
>
> Yet, my own mother doesn\'t read my blog. So you have the odd thing of
> trying to regulate that which is read the least, regulating the people
> who know the least, whereas those who have legal advice will take it.
>
> VICE-CHAIRMAN TONER: We deal with that from time to time here, and
> we\'ve heard from plenty of lawyers today who represent people.
>
> I want to get a sense on your thoughts in terms of blogs and whether
> or not it\'s your view that, look, blogs have come to the fore in the
> last couple of years, and there could be an argument that they should
> be within the press exemption but that we should be technologically
> neutral in whatever we do, because there are a lot of other online
> activities that are not blogs. What are your thoughts on that?
>
> MR. BOULET: I had the chance to listen to the last panel, so I\'ve had
> more time to compose my thoughts than some others have had. I think if
> your Web pages rather than\--because a blog is just a Web page\--if
> it\'s a Web page on the Internet, however defined, it\'s a free
> speech. It\'s a public communication by definition.
>
> VICE-CHAIRMAN TONER: Is it your recommendation that the most
> technologically neutral and encompassing term we could use is Web
> page?
>
> MR. BOULET: It\'s my thought today. I would give that more thought.
> You need to somehow capture that anything on a Website has to go up
> with certain code, whether it\'s\--you know, and so, if you say a Web
> page, that won\'t protect email; Internet communications, which
> include Web pages, email.
>
> There\'s a dialogue feature on FreeRepublic and some; that those
> should be protected. We don\'t want FreeRepublic or me\--I don\'t
> allow feedback on our blog or on our Website, because some nut posts
> something, and I\'m busy doing something else, and it\'s my fault that
> it\'s there. So we don\'t\--but they take some responsibility. That
> should be protected. We really need more discussion of politics in
> this country rather than less.
>
> VICE-CHAIRMAN TONER: Thank you, Mr. Chairman.
>
> CHAIRMAN THOMAS: Thank you.
>
> Commissioner Weintraub.
>
> COMMISSIONER WEINTRAUB: Thank you, Mr. Chairman.
>
> Well, I wish that a journalistic code of ethics would prevent
> journalists from misquoting me. I\'m sitting here, and I see I was
> misquoted on C-NET as having asked yesterday what\'s the best way for
> us to regulate bloggers, when, in fact, what I asked was what\'s the
> best way for us not to regulate bloggers? So, all those C-NET readers
> out there, don\'t send me your complaints. I didn\'t ask that. I
> don\'t want to regulate bloggers.
>
> Anyway, I want to just briefly talk about email. And that is we have a
> regulation on the books right now, which I did not\--wasn\'t here when
> it passed that says that if you send 500 substantially similar emails
> advocating the election or defeat of a clearly identified Federal
> candidate, you have to have a disclaimer on it. That strikes me as a
> very silly rule, one that is probably widely ignored to the extent
> that anybody even knows it exists, and it\'s kind of silly for us to
> have such a silly rule on the books.
>
> Now, what we had proposed to do was to add a layer to that and say
> only if you buy an email list and sort of root out all of the people
> who just kind of have big address books, and they want to, you know,
> get excited about the election and say hey, everybody should vote for
> my candidate, or vote against the other guy, who\'s a bum.
>
> But a number of people have indicated that they have various concerns
> with that approach. And I\'m beginning to think that the better way of
> doing this would just be to repeal that regulation altogether. Are
> there any circumstances that we should be worried as a Commission
> about regulating people\'s email?
>
> MR. TAYLOR: No; just let it go. As Mr. Boulet said, you know, it will
> be a nightmare to enforce.
>
> COMMISSIONER WEINTRAUB: I agree with you. It\'s been on the books for
> two years, by the way.
>
> MR. TAYLOR: And nobody knows about it. I didn\'t know about it, you
> know. And, you know, as someone said yesterday, the people putting
> yard signs up, going door to door, they don\'t think about the FEC
> when they\'re doing those things, and they shouldn\'t. And people that
> are sending emails around, they shouldn\'t worry about it, either.
>
> You know, the purpose of the Commission and the laws is to root out
> the evil influence of big money, you know? You know, big money is
> still out there. Little people shouldn\'t have to worry about it, and
> I really don\'t even think big money ought to be regulated that much.
> Just let people exercise their freedom of speech and, you know, let
> the public decide.
>
> And the public is not stupid, and they\'re not that gullible, and
> they\'re not that easily swayed. We have a vigorous political debate
> in this country going on every election cycle, and it\'s more people
> are getting involved, and I think the more regulations we put on
> people and corporations and labor unions, for that matter, the less
> robust the dialogue is; the less people feel free to participate if
> they have to think, well, gee, is there some regulation out there that
> I\'m going to fall afoul of?
>
> So when it comes to email, just let it go.
>
> MR. BOULET: I would agree, and I would just add this, briefly: in an
> era of spam filters, which we\'ve arrived at, I didn\'t get the bill
> for my Internet renewal, because the spam filter said\--so, I think
> the chances of unsolicited political email getting through are getting
> less and less, I mean, to the point where, as I say in my remarks, the
> utility of mailing an email list for political purposes is zero.
>
> COMMISSIONER WEINTRAUB: And following up on some of your comments in
> your opening statement, Mr. Boulet, some people have expressed concern
> about, well, what if the email has an attachment, and the attachment
> has a slick video, and it\'s, you know, and it\'s very expensive, and
> somebody puts a lot of money into it? I gather that your view would be
> we really don\'t have to worry about that, because, a, people aren\'t
> going to download it, because it will take up too much\--it will take
> too long for most people. I know I have\--sorry to admit this\--dialup
> at home, and it takes me forever to download, as I say, five pictures
> of somebody\'s cats. And I\'m a dog person, so I would never do that.
>
> MR. BOULET: Thank you.
>
> COMMISSIONER WEINTRAUB: But I gather you don\'t think that\'s a
> problem we need to be terribly concerned about.
>
> MR. BOULET: Especially, browsers are now moving to where the email
> product I use lets me see what\'s on the server, and if I don\'t
> recognize the name, and it\'s some big whopping file, it don\'t get
> downloaded, it doesn\'t get downloaded. And more people are going to
> that.
>
> COMMISSIONER WEINTRAUB: Any disagreement?
>
> MR. JASKULSKI: I think one other thing I wanted to add is what\'s the
> difference between if somebody writes it in an email versus if they
> put it on their blog? If they write the same thing on their blog, and
> they email it out to 501 people, they shouldn\'t be able to do that
> versus if they put it on their blog, it\'s allowed. I mean, that\'s
> kind of not fair, I guess, would be the word.
>
> COMMISSIONER WEINTRAUB: And I want to be clear that right now, even
> now, in this rule that we\'ve never actually enforced against anybody
> to my knowledge, it\'s only a disclaimer requirement. It doesn\'t ban
> these kind of things. But I think it is kind of silly.
>
> I yield back the balance of my time, Mr. Chairman.
>
> CHAIRMAN THOMAS: You didn\'t have any to yield.
>
> \[Laughter.\]
>
> COMMISSIONER WEINTRAUB: Oh, did I?
>
> CHAIRMAN THOMAS: You were right on the money.
>
> Let me just scratch a little bit at this media exemption concept. You
> know, the media exemption is phrased in a way that suggests that if
> you\'ve got some sort of media entity and use of facilities, it can\'t
> enjoy the press exemption if it\'s something that\'s owned or
> controlled by a candidate or a party committee.
>
> And one issue that\'s come out is, you know, what about the
> hypothetical, I guess it is, it\'s sort of based on what happened in
> the South Dakota Senate race, but what about the hypothetical where
> you\'re starting to see bloggers being paid by candidates to basically
> put up friendly commentary?
>
> And I suppose the question, the media question is should there be some
> sort of disclaimer requirement there, and to put it in the legal
> context, right now, the statute says that if someone basically puts
> out\--basically makes a disbursement or expenditure for some form of
> general public political advertising that in the case of a
> candidate\'s own political committee, if it\'s paying, there does have
> to be a disclaimer saying that the candidate\'s campaign organization
> paid for it.
>
> If it\'s put out by someone other than a candidate\'s own committee,
> some sort of political committee entity, then, there would have to be
> a disclaimer if the message contains express advocacy or solicits
> contributions for some under Federal election concepts.
>
> So I guess my question is given the way the media exemption is built
> with this idea of it doesn\'t apply where a candidate or party
> committee owns or controls the facility in question, does there come a
> point where payments from some candidate\'s campaign or maybe from a
> party committee to a media entity constitute that level of control
> such that we\'d say, all right, at that point, you don\'t get the
> media exemption; at that point, we\'re going to consider you a
> controlled entity of the paying candidate or party committee; and at
> that point, basically, what\'s happening is the candidate or party
> entity is paying for that service, so there has to be a disclaimer?
>
> Any reaction to all that sort of stepping through the legal boundaries
> we\'ve got?
>
> MR. JASKULSKI: I think that the disclaimer is something that needs to
> be done, and Professor Rick Hassan, who writes the election law blog,
> has written a lot about this, and he has said that you need to put a
> disclaimer on every page of a blog, you know, each link of a blog,
> each entry into a blog can be linked to, and you don\'t see the rest
> of it.
>
> So if you\'re just putting a disclaimer on the main page, then,
> somebody who is going directly to somebody who\'s written, you know,
> their third entry on, you know, June 15, they may not see a
> disclaimer. And that\'s something that needs to be done. I think you
> need to put a disclaimer on every single entry just like you would
> every email.
>
> CHAIRMAN THOMAS: In a sense, no matter how much has been paid, no
> matter whether the payment might just be a relatively small part of,
> say, the operating budget of some Website?
>
> MR. JASKULSKI: I think most people would want to know if what they\'re
> reading is really the words of that person or whether they\'re getting
> paid to write something for that. Most people would want to know that.
> Americans would want to know that. And what\'s the harm on just
> telling somebody this person is employed by such and such or being
> paid by such and such candidate? I don\'t think there\'s any harm with
> that.
>
> It\'s not saying don\'t read it or whatever; the person has a choice
> to read it, just the same as if somebody who doesn\'t want to\--a
> person who is a former Congressperson who is working on a TV station,
> they\'re going to get paid for their thing; obviously, they\'re not an
> elected official anymore, but they\'re still\--people would want to
> know they\'re getting paid as a contributor versus just somebody on,
> say, somebody who goes on Fox News, and, you know, Joe Scarborough,
> for example, has a TV show on MSNBC, people would want to know that
> he\'s getting paid by MSNBC versus if he\'s just going on there and
> giving a comment.
>
> I don\'t know if I said that clearly enough.
>
> MR. BOULET: I see our light is on, but let me say I couldn\'t disagree
> with my friend more, for a couple of reasons: you need bright lines in
> the law. That\'s what this Commission should be about. And it should
> also be about laws that are enforceable. Now, right now, if a campaign
> makes a payment to English First, you know, they don\'t, but, and
> that\'s solicited, so you have something to track.
>
> But if money is contributed by a third party on behalf of\--it becomes
> just a real nest of\--I mean, to my mind, there are some days when I
> read the Washington Post, and I think it should have a disclaimer paid
> for by the Democratic Party. And, you know, others would look at the
> Washington Times and say there should be a disclaimer on that, too.
>
> I also think that it\'s a distinction; I think most people would be
> surprised if Joe Scarborough wasn\'t paid to be on TV. I just really
> think that the South Dakota thing, the press will take care of that in
> any election: any Website, any blog that becomes rah-rah one guy,
> they\'ll be looking into it.
>
> MR. JASKULSKI: The whole issue, that came out through a blog with the
> whole South Dakota thing, so if it wasn\'t for the blogs, and if they
> weren\'t allowed to do what wanted to do and report, being unfettered,
> they wouldn\'t be able to go out there and do that.
>
> CHAIRMAN THOMAS: Okay; I\'ve used my time. Thank you.
>
> Commissioner Smith.
>
> COMMISSIONER SMITH: Thank you, Mr. Chairman.
>
> Okay; Mr. Taylor, I want to first make sure I\'ve got this. So Free
> Republic is an incorporated entity, an LLC.
>
> MR. TAYLOR: Yes.
>
> COMMISSIONER SMITH: And it relies for income on gifts from people who
> read the site or account holders at the site.
>
> MR. TAYLOR: Right.
>
> COMMISSIONER SMITH: Can I ask how much the site costs a year to run?
>
> MR. TAYLOR: As stated on the home page of FreeRepublic, the annual
> budget is about \$260,000.
>
> COMMISSIONER SMITH: About \$260,000. So basically, we\'ve got\--how
> many people donate? Can I ask that? Do you know that number?
>
> MR. TAYLOR: It\'s probably in the low thousands.
>
> COMMISSIONER SMITH: Okay; so we\'ve got a few thousand people donating
> money to a site, and what is the mission of Free Republic?
>
> MR. TAYLOR: To advance the cause of conservatism and to defend the
> Constitution of the United States.
>
> COMMISSIONER SMITH: Does that often entail getting into people
> discussing and posting about political campaigns?
>
> MR. TAYLOR: Every day.
>
> COMMISSIONER SMITH: And specifically saying who they want to win or
> lose those campaigns?
>
> MR. TAYLOR: Yes, sir.
>
> COMMISSIONER SMITH: So we\'ve got a couple of thousand people
> contributing money to an organization whose primary goal is to advance
> conservative policies, and on a regular basis, they advocate for or
> against particular candidates that they think will do that.
>
> MR. TAYLOR: Yes.
>
> COMMISSIONER SMITH: I don\'t mean to be sanguinous or to take away
> from the sanguine attitude of my colleague, Commissioner Mason, but
> that sounds a lot to me like a political committee under the FEC\'s
> regulations. So then, and that would be a big problem for you, I would
> suggest.
>
> MR. TAYLOR: Yes; it would not only be a problem for us; it would be a
> problem for the Democratic Underground site.
>
> COMMISSIONER SMITH: That\'s right; it would be a problem for a number
> of groups.
>
> Now, we\'ve talked a lot, and one thing I think some of the commenters
> have said is don\'t focus on blogs, per se. Or as Mr. Boulet said,
> Websites or something else. I do think to some extent, we\'ve used
> blogs as shorthands for sort of the whole array of types of Websites,
> but it is a point that I\'ve had about groups like Democratic
> Underground and Free Republic.
>
> Even if we used the press exemption and extended it to the Internet,
> to Websites, could we extend it broadly enough to cover an
> organization such as Free Republic? I mean, unlike, say, Slate or
> Salon, Free Republic doesn\'t really look like a newspaper, or unlike,
> you know, NewsMax, doesn\'t really look like a newspaper, and it
> doesn\'t really carry news stories other than reprinting things that I
> guess people post up there.
>
> MR. TAYLOR: If I could say, sir, there is regularly independent
> reporting being done on Free Republic. You know, I\'ve written
> independent reporting stories myself; other people, like the man who
> just whispered in my ear, John Armour, has done so. You know, as I
> mentioned and submitted testimony, we broke the story that there was
> trouble with the Space Shuttle a couple of years ago.
>
> Political news is broken on Free Republic. So, you know, we do a lot
> of news, but, you know, we also, you know, have a definite political
> point of view. Mr. Robinson\'s position is he wants to advance
> conservatism. And if by electing more Republicans covers that goal,
> fine. If Republicans won\'t do the job, then, you know, we\'ll look to
> somebody else to advance the cause of conservatism.
>
> So it\'s not, you know, blindly supporting one party. It\'s supporting
> people who share the same ideology.
>
> COMMISSIONER SMITH: But either way, a lot of that results in direct
> political advocacy.
>
> MR. TAYLOR: Unfortunately so. We are Americans, and, you know, we do
> believe in exercising our rights. And like I say, you know, it\'s
> unfortunate that, you know, you\'re bringing that up here like, you
> know, are we a committee that has escaped that notice or the tentacles
> of the Federal Government. That is very disturbing.
>
> COMMISSIONER SMITH: It may have been a dangerous thing for you to
> appear here today.
>
> MR. TAYLOR: Yes, it is, you know?
>
> COMMISSIONER SMITH: Well, I don\'t want to\--but I think it just
> suggests to me that either a site such as yours, Democratic
> Underground, and I know some other basically forum sites would have
> real problems unless the press exemption were to cover them, and that
> would require us making sure that when we define anything like that
> that we made sure that we were defining the press exemption quite
> broadly, because I don\'t think it\'s obvious to a lot of people that
> a Free Republic or a Democratic Underground would fit in there.
>
> I think, again, my colleague, Commissioner Weintraub, said yesterday
> that some sites just feel more like, and I think that\'s kind of true,
> a Salon or a Slate or a NewsMax, but, you know, there could be some
> problem, and we have to address that.
>
> COMMISSIONER WEINTRAUB: I don\'t think I said anything like that, just
> to correct the record.
>
> COMMISSIONER SMITH: I wrote it down in my notes, but in any case\--on
> the disclaimer issue, Mr. Boulet, you said nobody pays you anyway, no
> campaign pays you, but if some campaign were giving money to English
> First, right, and you went on CNN or C-SPAN or MSNBC, you wouldn\'t
> have to have a disclaimer that, oh, by the way, I\'m paid by the
> campaign, would you?
>
> MR. BOULET: Not that I\'m aware of.
>
> COMMISSIONER SMITH: That\'s not my understanding of the law, either.
> So to require a blogger to put that kind of disclaimer on would
> actually be an expansion of the law to bloggers that doesn\'t apply to
> other people who are using the press.
>
> MR. BOULET: I hadn\'t thought of that. You\'re exactly right.
>
> COMMISSIONER SMITH: Okay; well, I see I\'m out of time, so I won\'t
> try to pursue that line of questioning. Maybe we\'ll get back to it.
>
> Thank you, Mr. Chairman.
>
> CHAIRMAN THOMAS: General Counsel Larry Norton.
>
> MR. NORTON: Thank you, Mr. Chairman. I don\'t have any questions.
>
> CHAIRMAN THOMAS: Jim Pehrkon, staff director.
>
> MR. PEHRKON: Yes. Thank you, Mr. Chairman, and welcome to the panel.
>
> I\'m trying to get an idea: we\'ve got a sense of the Free Republic
> Website and the sort of scope of their operations in dollar terms.
>
> CHAIRMAN THOMAS: Microphone, Jim.
>
> MR. PEHRKON: In terms of the other organizations and the other sites,
> could you give us a quick sense of how much money do you spend each
> year? How many employees? What\'s your operating budget and the type
> of things that you actually do?
>
> MR. JASKULSKI: I do mine completely free. \$8 just to update the
> domain name; that\'s all I do, and it\'s just me doing it, and it\'s
> pretty much just pictures of, you know, the things that I\'ve done and
> everything.
>
> MR. BOULET: I need to talk to your domain provider.
>
> \[Laughter.\]
>
> MR. BOULET: The one thing that I\'ve definitely seen is the Internet
> can be a money pit, and as consultants come in offering to do things
> for me, I find that their prices are very high, and the sites look
> really nice and take forever to download.
>
> I\'ve built a site with commercially available software. Let\'s say
> that over the time that it\'s been up, since 1996, I\'ve probably
> spent about \$1,000 for software, my time. We rent all of the space on
> a provider. It\'s \$14 a month. The domain is\--I\'m doing this from
> memory\--\$70 for three years.
>
> MR. PEHRKON: So less than \$1,000 a year.
>
> MR. BOULET: That would be fair.
>
> MR. PEHRKON: That\'s the only question I have.
>
> CHAIRMAN THOMAS: We\'ll go back through.
>
> Commissioner Smith, I believe.
>
> COMMISSIONER SMITH: Well, as we try to get back on schedule, I guess
> I\'ll just say I appreciate\--I\'ll just let things go at this point.
> I appreciate your coming in again. It\'s nice to see some people who
> aren\'t in the usual circuit and especially Mr. Jaskulski, I
> appreciate your coming down. I didn\'t see it anywhere in your
> comments; if it\'s there, I missed it. What\'s your blog site?
>
> MR. JASKULSKI: Readtheblog.com
>
> COMMISSIONER SMITH: Readtheblog.com. All right; there is your plug.
> I\'ll look at it.
>
> Thank you, Mr. Chairman.
>
> CHAIRMAN THOMAS: Thank you.
>
> I have no additional questions. I do want to thank you all for coming.
> I think it\'s very important that we get the perspective of people who
> are working in this area and have very practical experience with all
> of these rules that we here are dealing with, and in some sense, we
> have an obligation to deal with, but we, I think, this helps us
> appreciate the difficulties. Thank you. Let\'s see.
>
> Commissioner Weintraub? Anything more?
>
> Vice-Chairman Toner? Nothing more?
>
> Commissioner McDonald, I don\'t think, has anything more.
>
> Commissioner Mason, nothing more?
>
> Any other questions?
>
> Well, thank you all, then, one and all for coming.
>
> Any last comments or thoughts? I guess I should offer up a last
> chance.
>
> MR. TAYLOR: I appreciate Mr. Smith pointing out a potential problem
> for groups like Free Republic and others. We, unfortunately, are stuck
> with the laws that we have and the orders of the court, and, you know,
> we vigorously disagree. We believe that the First Amendment belies
> what it says and that it is absolute.
>
> And I would hope that if any Commissioner who sits here as a
> Constitutional officer finds that the laws and the orders of the court
> violate the Constitution and their conscience that rather than
> disobeying that they would resign in protest. They would not be the
> first person to resign from the Government when they feel that the
> Government has gone too far.
>
> CHAIRMAN THOMAS: You\'re the only one who has suggested that.
>
> \[Laughter.\]
>
> COMMISSIONER SMITH: Senator McCain has suggested that to me several
> times.
>
> \[Laughter.\]
>
> CHAIRMAN THOMAS: That\'s true. I guess today, you\'re the only one.
>
> Again, thank you all for\--
>
> MR. BOULET: We want to break for lunch, but could I make Commissioner
> Weintraub feel a little better? A couple of things when we talk about
> journalists: you know, UNESCO has refused to define one, because they
> said once you define a journalist, you can regulate them, and they\'re
> against that, so we even have international law on your side.
>
> But I found that when I talk to a real journalist about a story I
> participate in, I can go through the article and play count the
> mistakes. Yet when I read a story about you, I know every word of it
> must be true so\--
>
> \[Laughter.\]
>
> COMMISSIONER WEINTRAUB: I\'ve had the same experience.
>
> MR. BOULET: And this is where the Internet and the blogs are so useful
> as a corrective for that sort of thing. And I thank you all for your
> time today.
>
> CHAIRMAN THOMAS: Thank you. We will recess, unless Commissioner
> McDonald wants to ask any more questions.
>
> We will recess. We will take up again on schedule, if possible, and we
> will gavel back at 2:15.
>
> \[Whereupon, at 12:36 p.m., the hearing was recessed, to reconvene at
> 2:19 p.m., this same day.\]
>
> [A F T E R N O O N S E S S I O N]{.underline}
>
> \[2:19 p.m.\]
>
> CHAIRMAN THOMAS: Good afternoon one and all. Our special session will
> please come to order. Welcome back from lunch.
>
> We have one more panel of witnesses to hear from this afternoon. For
> those who haven\'t already witnessed our little process, we\'re asking
> opening statements to be about five minutes. We\'ve got a little light
> system there that we will work with to give you a reminder. You start
> getting a little orange light at about 30 seconds left. And we\'re
> going to try to arrange it so that we can go around the table, and
> Commissioners can have about five minutes of questioning of witnesses
> after your opening statements, and then, we will make another round if
> we have some time.
>
> The panel this afternoon consists of Michael Bassik of the Online
> Coalition. I remember fondly being served with a letter by Mr. Bassik
> at a conference where I spoke not too long ago. Mercifully, it was
> just a letter; Duncan Black, who is the founder of the Weblog
> Eschaton\--I\'m not sure I\'m going to get that right.
>
> MR. BLACK: Eschaton.
>
> CHAIRMAN THOMAS: Eschaton; my apologies; and also, we have Trevor
> Potter, of the Campaign Legal Center. He is a former Commission
> chairman. And we have Karl Sandstrom, also a former Commissioner, on
> behalf of OMB Watch.
>
> We are planning to go alphabetically, unless you all have a better
> idea, so Mr. Bassik, please feel free to start.
>
> MR. BASSIK: Chairman Thomas and distinguished members of the Federal
> Election Commission, thank you for the opportunity to testify today. I
> am pleased to represent the Online Coalition during these proceedings.
>
> I plan to focus my attention today on the proposal to add the term
> paid advertisements on the Internet to the definition of public
> communication. Over the past decade, the Internet has grown into a
> political powerhouse. As a result, organizations, political parties,
> and candidates are now taking advantage of the growth of the Internet
> by building robust Websites to disseminate information, organize
> volunteers, and solicit contributions.
>
> Many have also begun to experiment with paid advertisements on the
> Internet. Republicans and Democrats alike have started to integrate
> online marketing into their overall paid media strategies, spending
> more than \$14 million last year to purchase billions of advertising
> impressions on over 100 leading Websites, blogs, and search engines.
>
> Now, while this number pales in comparison to the \$1.3 billion spent
> on television, tens of millions spent in direct mail, and estimated
> \$51 million spent on newspaper ads, this is a significant number and
> represents a 3,000 percent increase over online advertising
> expenditures during the 2000 election cycle.
>
> Dr. Michael Cornfield, who is in the audience today, recently wrote
> that it is plausible to project further online ad spending growth as
> the Internet continues to develop into the medium of choice for
> political research and organizing. And I would have to agree: as one
> of the few professional online media consultants in the country and
> after serving as the online advertising agency of record for John
> Kerry and the Democratic National Committee in this past election
> cycle, I am intimately aware of the potential for growth in this area
> and also aware of the consequences of adding the term paid
> advertisements on the Internet to the definition of public
> communication, and truthfully speaking, I see no real consequences to
> this change in the rules.
>
> Few, if any, individuals, lawyers or consultants set out to take
> advantage of the ability to coordinate freely with respect to paid
> advertising in 2004. I estimate that 99 percent of political banner
> advertisements on the Internet carried proper disclaimers, and despite
> the presence of what many would consider to be a gaping loophole
> created by the FEC, not one single state or local party spent any soft
> money online for the purpose of influencing a Federal election.
>
> It has been argued that no one abused these advantages of the
> Internet, because no one knew they existed. This, however, is no
> reason to change the existing rules based on what amounts to a hunch:
> that abuse and corruption may one day befall the online advertising
> industry.
>
> It appears, however, that we have no choice. We realize that it was a
> court and not the FEC that brought about this NPRM. So what are we to
> do? The best course of action seems to be the one that you have
> charted already: to be the expansion of the definition of public
> communication to include paid advertisements on the Internet.
>
> We arrive at this conclusion reluctantly. After all, the growth of the
> Internet as a political information, fundraising, and marketing tool
> has been fueled in part by the Federal Election Commission\'s hands
> off approach to online political communication and advertising. We do,
> however, have a few additional comments and suggestions.
>
> The Internet has effectively put the power of advertising
> communication into the hands of every citizen. For the same price as a
> yard sign or a handful of bumper stickers, anyone can design and
> purchase a small amount of advertising on the Internet. Ads on blogs,
> for example, cost as little as \$10 per week, and ads on search
> engines such as Google can cost just 10 cents per click. Should we
> really be treating inexpensive ads purchased by individuals the same
> way we treat multimillion dollar television buys?
>
> We would argue no. We believe that there should be a spending
> threshold that must be surpassed before paid advertisements on the
> Internet would be subject to disclaimer and reporting requirements,
> especially if these advertisements were purchased by individuals. The
> minimum to run a banner ad campaign on most newspaper Websites and
> major portals is roughly \$5,000. As such, we think that the threshold
> for reporting and disclaimer requirements on paid advertisements on
> the Internet should be no less than \$5,000.01.
>
> In addition, the Commission should clarify when disclaimers are
> required on paid advertisements on the Internet and how they should
> appear. For example, disclaimers are not currently required on bumper
> stickers, buttons, pens, sky writing and similar items upon which the
> disclaimer cannot be conveniently printed.
>
> In the past, the Commission has applied this principle to certain
> digital advertisements. You have held that text messages sent to
> cellular phones did not require disclaimers because the size of the
> message rendered these disclaimers inconvenient and impractical. The
> Commission should follow these precedents in only requiring
> disclaimers on ads that are large enough to provide proper ID without
> rendering the ads useless. We hope you would agree.
>
> Thank you.
>
> CHAIRMAN THOMAS: Mr. Black.
>
> MR. BLACK: Good afternoon. My name is Duncan Black. I run the Weblog
> Eschaton, which is located at atrios.blogspot.com. Feel free to visit.
> And I appreciate the opportunity to contribute my remarks to this very
> important process.
>
> I\'d like to use my brief time to address one of the central issues:
> are bloggers entitled to the media exception, because I believe that
> many people have been asking the wrong questions about this issue.
> Frequently, the question is raised regarding whether or not bloggers
> are journalists, quote unquote, journalists, the implication being
> that if the answer is no, the media exception should not apply.
>
> However, this takes a very narrow and incorrect view of what media
> exception is applied to currently and a very narrow definition of what
> comprises our modern media. We hear it said that bloggers should not
> be entitled to the media exception for a variety of reasons. The
> reasons given include: bloggers don\'t do much original reporting;
> bloggers are overly opinionated, ideological or partisan; bloggers
> engage in activities such as fundraising or candidate advocacy;
> bloggers are irresponsible because they engage in hyperbolic or nasty
> speech; bloggers have received money from campaigns for direct
> advertising or on a few occasions for consulting services; bloggers
> publish a lot of misinformation.
>
> I won\'t defend bloggers against any of these descriptions. Each is
> true to a greater or lesser extent depending on the blogger, and it\'s
> only the potential for misinformation which I consider to be a
> potential flaw, although it is not a flaw unique to blogging. What I
> would like to point out is that all these features are pervasive
> throughout our modern media and have not generally been raised as
> reasons to deny other outlets the media exception.
>
> The media exception doesn\'t simply apply to what we would call,
> quote, responsible, balanced journalism. The media exception applies,
> for example, to talk radio hosts, who do little original reporting,
> are opinionated, sometimes engage in fundraising activities on and off
> the air; certainly engage in hyperbolic and nasty speech, and may
> receive money to consult for campaigns without any legal on air
> disclosure requirements, and as my affiliation with a media watchdog
> organization allows me to attest, regularly and repeatedly broadcast
> misinformation, deliberately or not.
>
> But it isn\'t limited to talk radio. Highly ideological and
> opinionated magazines exist all over the political spectrum. Tabloid
> newspapers are generally much more opinionated than broadsheets and
> frequently use less than polite rhetoric. Cable news is filled with
> partisan hosts and guests, sometimes in a, quote, fair and balanced
> fashion; sometimes not. Guests who are identified as political
> strategists or political consultants are almost never asked to
> disclose their political clients on air, even while discussing them.
> Some with consulting firms have even been hosts or co-hosts of their
> own television shows. James Carville and Paul Begala were Kerry
> campaign advisors while hosting CNN\'s Crossfire, and while this was
> occasionally disclosed, it wasn\'t legally mandated.
>
> Broadsheet newspapers have opinionated editorial pages, and
> endorsement of candidates by their editorial boards is standard
> practice for most of them.
>
> What I do is not dissimilar to any of this. For my readers, I
> occasionally provide scoops or original reporting; I provide a lot of
> commentary and opinion. I engage in some forms of activism and
> fundraising, though no third party money has ever passed through my
> hands or through my bank account. It all goes through a link to the
> candidate directly.
>
> The only money I have ever received from campaigns was for paid
> advertising, which anyone is free to buy. I encourage you to do so\--
>
> \[Laughter.\]
>
> MR. BLACK: \--subject to my approval about its appropriateness.
>
> I have published incorrect information at times inadvertently, most of
> which I hope I have corrected promptly, and I am therefore no
> different than what much of our modern media consists of today.
>
> My site receives about 100,000 visitors per day. Over the roughly
> three-year period I have operated the site, my out of pocket expenses
> aside from maintaining a working computer and maintaining an Internet
> connection have probably been under \$150. Some bloggers spend more on
> their sites, but the point I am making here is that nobody has to.
>
> Let me offer the following illustration: consider the case of Joe
> Trippi, formerly of the Howard Dean campaign: a political consultant
> and at times a regular media presence. During the 2004 campaign
> season, he was consulting for Congressional races through his
> consulting firm. He was also a regular contributor on MSNBC
> television. He wrote regular blog entries for their companion Website
> msnbc.com.
>
> The media exception means that none of those activities would face
> scrutiny by the FEC. However, he also operated a personal Website,
> joetrippi.com, on which he talked about news and politics.
>
> I am concerned that while his appearances on television and on NBC\'s
> Website do not face scrutiny, his activities on his own personal
> Website would face scrutiny, and that seems strange. Our campaign
> finance laws were enacted to limit the disproportionate impact of big
> money on the political system. While I understand that medium specific
> regulations may be necessary, I am troubled by the fact that
> participants in this emerging medium, which allows anyone the
> opportunity to participate in the national discourse at a minimum
> cost, would face stricter regulation and stronger scrutiny along with
> the potential for ruinous legal expense than would participants in
> media outlets owned by corporations such as Time Warner, General
> Electric and Disney.
>
> I do not believe such a discrimination would be tolerated under the
> First Amendment, and I thank you for this time and opportunity.
>
> CHAIRMAN THOMAS: Mr. Potter.
>
> MR. POTTER: Thank you, Mr. Chairman, Commissioners.
>
> I am pleased to be here this afternoon, and thank you for the
> invitation. I\'m representing the Campaign Legal Center, which has
> submitted comments, and knowing that you have covered a lot of this
> ground over the last two days, I thought it would be helpful maybe
> just to hit two points that I think bear repeating and then leave the
> rest of the time to everyone else.
>
> I think it goes without saying, but in this setting, I ought to say
> that the Internet clearly is a magnificent tool that we have and
> haven\'t had before that benefits our political system; that
> encourages citizen involvement in politics. I, myself, have
> represented Internet companies and nonprofits interested in political
> activity on the Internet for almost the last 10 years, so I can assure
> you I don\'t approach this subject callously or without an
> appreciation of what the Internet does.
>
> I\'ve heard over the last two days the statement that this rulemaking
> opens the possibility for the FEC to begin to regulate the Internet,
> and I think everybody in this room who has followed Federal election
> laws knows that that is simply not an accurate characterization of
> where we are. The FEC has been regulating the Internet since 1995.
> There have been numerous advisory opinions issued by the Commission
> telling people what they can and cannot do on the Internet and with
> which funds and who can do it and who can\'t.
>
> I\'ve represented requestors in some of those advisory opinions asking
> for exemptions where the Commission made it clear that nonpartisan
> activity could be engaged in by corporations but that partisan
> activity could not. In 2000, there was a lengthy advisory opinion from
> the Bush campaign listing a range of potential individual activity and
> asking whether or not that could permissibly be engaged in under the
> Federal election laws.
>
> So I think what the Commission is doing here is important, but it is
> useful to put it in the context of saying that it is not questioning
> whether to regulate the Internet; it is operating on the fact that it
> has regulated it for 10 years, and it is questioning, and I think
> correctly, whether everything it has said in the past is how it ought
> to view the Internet.
>
> The trigger for this rulemaking, of course, is the question of public
> communications on the Internet, and again, that is an issue that was
> raised by the Commission\'s rulemakings, where the Commission did not
> take the view proposed by the Congressional sponsors of the Bipartisan
> Campaign Reform Act and instead created a flat exemption for public
> communications on the Internet, specifically communications by party
> committees including paid advertising.
>
> That was something that the Congressional sponsors felt opened the
> potential for a significant problem in terms of spending, including
> paid advertising by corporations, unions, coordinated with, controlled
> by, political candidates or parties. That, I believe, should remain
> the focus of this rulemaking.
>
> The Commission has raised other Internet-related issues. Some of them
> were leftover from the rulemaking the Commission began but did not
> complete a couple of years ago on the Internet. Some of them are
> related to questions that arose in the 2004 election; for instance,
> the media exemption was a focus of some controversy in 2004, relating
> not directly to the Internet but whether it applied to documentaries,
> commercial films, et cetera.
>
> So my suggestion to the Commission would be that at least you deal
> with the one area that I think you have to deal with now, which is the
> public communications question, and that the rest of this rulemaking,
> you consider whether it needs to be concluded now or whether it should
> be rolled into your previous Internet rulemaking or whether, for
> instance, the media exemption ought to have a rulemaking all its own,
> given the questions that Mr. Black raised and a number of the other
> commenters about exactly how the media exemption functions even
> without the Internet.
>
> So I don\'t think all of that needs to be resolved in this rulemaking.
> That\'s not to say you couldn\'t, but if you feel that you\'ve bitten
> off more than you can chew, then, I would urge you to focus on the
> public communication issue.
>
> Thank you very much.
>
> CHAIRMAN THOMAS: Mr. Sandstrom.
>
> MR. SANDSTROM: Good afternoon, Mr. Chairman, members of the
> Commission. Being last reminds me of a remark that Congressman Udall
> once made. He said, but not everyone has said it.
>
> I hope to introduce something new and different today. I am very
> pleased to be here on behalf of a terrific organization, OMB Watch,
> which is dedicated to open government and to civic participation, and
> I would like permission to enter into the record some evidence of
> those efforts; one, an unsolicited electronic newsletter; two, a blog
> from someone whom I\'m not sure whether they\'re a foreign national or
> not but you could regularly find on their site; their news page, which
> looks an awful lot like a press page to me, and their home page, where
> they tend to be rather critical of certain sitting officeholders.
>
> For OMB Watch and for many, the Internet is not just a means to an
> end. It is an instrument of participation. It actually is what the
> organization is about. It is a way people participate. If the press is
> the fourth estate, the Internet should be considered the fifth estate.
> It is as different from the press\--and that is why I will argue it
> shouldn\'t be considered part of the press exemption\--as the nobility
> were from the commons.
>
> I think this is a lesson of ACLU v. Reno, which really gave
> extraordinary protections to the Internet, protections I\'m not sure
> are reflected in the court decision that Trevor was referring to. And
> I think that in this hearing, that uniqueness needs to be recognized.
> When my children were young and at the beach, their favorite pastime
> was creating walls of sand to keep the ocean back. The waves came
> around and over the top, and they wiped them away.
>
> This rulemaking is somewhat reminiscent of my child\'s efforts. Many
> of the walls that the Commission has been urged to create are easily
> breached. To try to create categories of bloggers seems to me a rather
> futile endeavor. Are we going to have foreign national bloggers?
> Government contract bloggers? Bloggers in the name of another?
>
> Similarly, trying to fit this into the press exemption makes little
> sense. The press exemption speaks of news stories, editorial, and
> commentary. That may make some sense when you\'re talking about how
> the news division at ABC is different from the commercial division or
> when you\'re selling advertising at the New York Times and contrasting
> it with what\'s on the editorial page, but it doesn\'t make a whole
> lot of sense when applied to the Internet.
>
> Frankly, the Internet is not your dad\'s Reader\'s Digest. For those
> of you who remember the Reader\'s Digest case, that sort of analysis
> essentially breaks down when you try to apply it to the Internet. Even
> the difference between what is advertising and what is sponsorship; if
> I sponsor a site like the fine gentleman\'s site here, am I
> advertising on the site? Or is it more like a PBS sponsorship? How are
> you going to make these distinctions between what is advertising and
> what is sponsorship, what hat they\'re wearing that particular day?
> For example, I thought there was a wonderful example about Joe Trippi.
> Do we determine what hat he\'s wearing that day to determine what
> rights he\'s entitled to?
>
> So instead of going down that route, I offer a modest proposal that
> would be a major victory for participation in this country: that is,
> treat everybody who emails and everybody\'s Website the same. And how
> do you do that? Through recognizing that actually, the means of
> communication should be valued at zero, and what\'s really valuable on
> the Internet is the content, the persuasiveness of the content.
>
> And how would you accomplish this result? It\'s fairly simple: you
> would write into the act, into the regulations, when you\'re trying to
> determine what\'s of value, saying exempt from the definition of
> contribution and expenditure, postings made on your Website, and
> emails that you undertake.
>
> To try to do it any other way, I think, is going to be in the end a
> foolhardy effort, because it won\'t succeed. Now, there are some who
> will say that this will somehow create some huge loophole. If a
> loophole is created, I think it is largely going to be a loophole
> through which information is given to the public to help them make
> informed decisions about the most important public decisions they
> make. And I doubt it is going to be some sort of loophole that will
> allow corruption to seep into our election process.
>
> So I will conclude my remarks by saying do what\'s easy: just exempt
> the value. Value it as zero; treat everyone the same.
>
> CHAIRMAN THOMAS: Thank you.
>
> We are going to start our questioning with Vice-Chairman Toner.
>
> VICE-CHAIRMAN TONER: Thank you, Mr. Chairman.
>
> Mr. Potter, I would like to begin with you and get your thoughts on
> some aspects of the core proposal in the NPRM, this treatment of paid
> advertising on someone else\'s Website, page 12 to 13 of the joint
> comments that you filed. At footnote 10, you talk about production
> costs, and as I understand it, your view is that the regulation that
> we\--if we pass regulations would include the production and creation
> costs of online activities, and at the end of the footnote, you
> indicate that if the production costs are treated as outside the
> coordination rules, this could lead to a large loophole in the rules
> on coordinated campaign spending, precisely the kind of loophole that
> the court in Shays indicated should not be permitted.
>
> My first question is do you think that legally, we\'re required to
> include production costs in any rule that we issue?
>
> MR. POTTER: I think what you were commenting on here is that the rule
> is unclear, first of all, how you\'re treating production costs. I
> think that is important to note. Secondly, there is a distinction
> between costs that are typically incurred and I think are intended by
> the rule to be covered that are incurred by individuals themselves
> versus paying others to engage in activity.
>
> And the question that this footnote raises is what happens in a
> situation where, for instance, you have a large, several hundred
> thousand dollar payment to a production agency? Is that within or
> without this distinction? I think what you are required to do and
> should do is to be clear about how you\'re accounting for these costs
> and where the line is.
>
> VICE-CHAIRMAN TONER: Do you think we would be on safer ground legally
> if we did include the production costs when they are obtained through,
> as you indicate, payments to third parties?
>
> MR. POTTER: Yes; I think payments to third parties move away from the
> direct individual activity that you have sheltered here.
>
> VICE-CHAIRMAN TONER: And on page 13 of your comments, you raise an
> issue that actually, in the morning panels, we had some discussions
> about, and that is the question of essentially in-kind contributions.
> If we adopt a rule that talks about paid advertising on the Internet
> on someone else\'s Website being a public communication, what happens
> if no payment is made, because the space is given to a candidate or a
> political party, what in other areas of the law, we would treat as an
> in-kind contribution. Do you think that in terms of any rules we\'re
> considering, we need to fashion a rule that includes in-kind activity?
>
> MR. POTTER: Well, you already have, as I understand it, covered
> in-kind contributions; for instance, in general, if a corporation or
> union were to give something in-kind to a candidate or party
> committee, that would be valued. What our comments have suggested is
> that you focus on that sort of activity and not on activity by
> individuals or bloggers, people who are not in the business of selling
> the space or the content.
>
> VICE-CHAIRMAN TONER: And in terms of any rules that we fashion, if we
> adopted a rule that focused on paid advertising on someone else\'s
> Website, and for whatever reason, a Website owner that was
> incorporated provided that space for an ad without charging anybody;
> therefore, there wouldn\'t have been any payment, but something of
> value obtained, in your view, is that something that should be in the
> scope of regulation?
>
> MR. POTTER: I think there are two separate issues that are raised by
> that question. One is the question of whether a Website or individual
> should be covered merely because they\'re incorporated. And as you
> know, in our comments, we have suggested that you consider the sort of
> exemption you have for political committees that are incorporated
> solely for liability purposes, the sort of exemption that you have
> granted in some circumstances to LLCs to deal with a circumstance
> where the corporate entity is there for liability purposes, but they
> are not a for-profit making entity, and they are not in the business
> of selling advertising.
>
> And I think the second part of the answer goes to the question of
> whether the entity is in the business of selling advertising.
>
> VICE-CHAIRMAN TONER: Let\'s say it is. Let\'s say that it is in that
> business.
>
> MR. POTTER: If, you know, hypothetically, the NewYorkTimes.com sells
> advertising to political candidates and then chooses to give it to one
> party, I don\'t see under current theories of election law why that
> wouldn\'t be an in-kind contribution of the obvious market value of
> what they have charged the opponent but not the recipient of the free
> advertising.
>
> VICE-CHAIRMAN TONER: Even though there isn\'t any money that\'s
> changed hands, it\'s still something of value that was provided.
>
> MR. POTTER: Well, there is something of public value in that that
> advertising is advertised at a rate of, let\'s say, \$1,000, and is
> sold to other people at that rate. I think that is clearly different
> from a circumstance in which a Website is not in the normal business
> of selling advertisement, and so, you\'d be saying is there something
> of value just because space was given for free.
>
> VICE-CHAIRMAN TONER: Mr. Chairman, I see my time has expired. I might
> seek your forbearance, perhaps, on another round of questioning, but
> thank you.
>
> CHAIRMAN THOMAS: We\'ll get back to more questioning later.
>
> Commissioner Weintraub.
>
> COMMISSIONER WEINTRAUB: Thank you, Mr. Chairman.
>
> Karl, I like simple ideas. I appreciate the suggestion. I take it you
> are suggesting that we do that and nothing else and abandon all of our
> other proposals.
>
> MR. SANDSTROM: Yes, because simply, you\'ll get all the fear of having
> to register and reporting to the FEC, drive it all away.
>
> COMMISSIONER WEINTRAUB: But will it be responsive to the court\'s
> order?
>
> MR. SANDSTROM: Will it be responsive to the court\'s order, I think
> this hearing is responsive to the court\'s order.
>
> COMMISSIONER WEINTRAUB: I\'m sorry. I can\'t hear you.
>
> MR. SANDSTROM: I think this hearing is responsive to the court\'s
> order, and I think any regulations that come about will become a full
> record for the judge to review, and I really do think, and I know the
> Commission did not appeal this; my personal view is the judge was
> wrong and failed to recognize the unique character of the Internet and
> that the law doesn\'t just go to how valuable something is; it goes to
> the potential for corruption, and to rest her decision on the basis
> she did I thought was rather weak.
>
> COMMISSIONER WEINTRAUB: Well, I\'m not surprised that you disagree,
> because you voted for the regulation that she struck down. But I would
> be interested in the other panelists\' views on Karl\'s suggestion of
> how we address this issue.
>
> MR. BASSIK: Just briefly, I think, I come to this with a realistic
> perspective. Would I have liked the FEC to have appealed the decision?
> Absolutely, but I think you\'ve kind of been handed your hand. And\--
>
> COMMISSIONER WEINTRAUB: No, I meant the substance of, you know, what
> he\'s suggesting that we do, that we simply exempt the cost of
> establishing, operating, and maintaining a Website and the cost of
> emailing from our definitions.
>
> MR. BASSIK: I would agree with Mike Krempasky\'s comment yesterday
> that, yes, that would be a favorable outcome, but I would also say
> that I think the FEC might fall into the trap of being too specific in
> its rulemaking that every time a new medium would come about, the same
> thing that Markos mentioned yesterday, we would have to go back and
> have a new rule. What\'s next on the horizon? Wireless? Or is it text
> messaging? We have no idea; no one could have predicted that blogging
> would have even been the topic of conversation today.
>
> So, yes, that would be an ideal outcome, but I would also say that
> there should be a little more broad exemption.
>
> MR. BLACK: I would tend to agree, yes; I don\'t really have anything
> else to add on that.
>
> COMMISSIONER WEINTRAUB: I bet you do.
>
> MR. POTTER: I was unsure how Karl\'s proposal dealt with the issue of
> paid advertising.
>
> MR. SANDSTROM: Paid advertising essentially goes to the person who is
> paying, whether that is an expenditure. It seems to me that is an
> expenditure.
>
> MR. POTTER: So the exemption that the Commission gave for public
> communications over the Internet would not apply to paid advertising
> over the Internet; is that correct?
>
> COMMISSIONER WEINTRAUB: Go ahead. Yes, have a dialogue.
>
> MR. POTTER: Just trying to figure out how the proposal works.
>
> MR. SANDSTROM: The proposal essentially talks about what you do on
> your own site and the emails you send, being whoever the sender is,
> whether it\'s an individual, an entity, that they can send out email
> and not be considered having incurred an expenditure. They can host
> something on a Website without that being considered an expenditure.
> They can republish a candidate\'s material on their Website without
> that being considered an in-kind contribution to the candidate.
>
> MR. POTTER: So taking out paid advertisement or coordinating with
> someone who takes out paid advertisement would be an expenditure.
>
> MR. SANDSTROM: Of course, when someone writes out a check to somebody,
> they\'re making an expenditure.
>
> COMMISSIONER WEINTRAUB: With that clarification, are you okay with
> that, Mr. Potter?
>
> MR. POTTER: That certainly in my view would not be what the Commission
> did in its initial rule and would address a number of the issues in
> this rulemaking. The comments we have submitted have urged the
> Commission to put paid advertising within the definition of public
> communication, even if it occurs over the Internet if it\'s by a state
> party or coordinated with a candidate or party.
>
> COMMISSIONER WEINTRAUB: So, Karl, your position is that it\'s
> implicitly there anyway; we don\'t have to specify it?
>
> MR. SANDSTROM: I always thought there was a great confusion about the
> regulation, and at least from my perspective, that has been confirmed
> here today. Certainly, that\'s an expenditure. The only concern I
> would have is that with respect to republication, that not be
> considered an in-kind contribution, because people are constantly
> republishing information they get from others, including from
> candidates, and that\'s healthy on the Internet.
>
> COMMISSIONER WEINTRAUB: I agree with you. I think that the
> republication issue is a big problem on the Internet with our trying
> to regulate it in any way.
>
> I have more questions, but I see my red light is on, so I\'ll wait for
> another round.
>
> COMMISSIONER SMITH: I just want to interject here. People were
> talking. I noticed that Markos Moulitsas is like Cher now. He\'s just
> Markos. He\'s got a name, and it just carries the day.
>
> COMMISSIONER WEINTRAUB: It\'s even shorter than that. It\'s just Kos.
>
> \[Laughter.\]
>
> CHAIRMAN THOMAS: Next, Commissioner Mason.
>
> COMMISSIONER MASON: Thank you. Also known as Mase.
>
> \[Laughter.\]
>
> COMMISSIONER MASON: All right; Mr. Black, I asked Mr. Moulitsas
> yesterday about a section of your jointly submitted testimony, and he
> seemed like he didn\'t\--he wasn\'t very familiar with it, so maybe
> this is yours, so he should have been familiar with it, because it\'s
> the section entitled payment to bloggers. And what it says is it
> should make no difference to the FEC in granting the protections of
> the media exemption whether a blogger is compensated for editorial
> content or advertising revenues.
>
> Now, what I want to understand is whether you\'re talking about that
> in terms of how these rules would apply. In other words, to the extent
> that there seems to be a consensus that we either wholly or largely
> want to protect what the blogger or any other Internet publisher
> writes on his own but that we want to regulate advertising, I want to
> understand where that leaves someone who pays you, Mr. Moulitsas, or
> anyone else for editorial comment, not for banner ads, not for
> pop-ups, not for margin ads, but if a blogger takes a payment for an
> article that\'s on the main site, what would be the regulatory status
> of that?
>
> MR. BLACK: Well, my understanding of the regulatory status of that
> should be that disclosure requirements should apply to bloggers as
> disclosure requirements currently apply across the media spectrum,
> that the disclosure requirements should be on the candidate or
> campaign or party that is making the payment, and while, you know, I
> certainly would find it, you know, kind of unethical if bloggers are
> getting paid to write nice things about candidates and not disclosing
> it, we have people getting paid to say nice things about lots of
> people and not disclosing it all the time.
>
> And so, if we\'re concerned about disclosure issues, you know, that we
> don\'t want bloggers writing nice things about candidates when
> they\'re getting paid for it and people don\'t know about it, if we
> are concerned about that, then, the simple thing, really, to do is to
> one way or another speed up disclosure requirements on candidates and
> campaigns. To kind of put the disclosure requirements on bloggers when
> nobody else in the media has to make those disclosures legally,
> ethically, it always sounds nice. More information is better; more
> disclosure is better. But to put the disclosure requirement\--
>
> COMMISSIONER MASON: I understand that, but what I\'m struggling with
> is how I draw a distinction between that and an ad; for instance, you
> have said you will reject some ads because you think they\'re
> inappropriate. Now, I suppose the advertiser could come back and say,
> well, okay, maybe that is a little over the top. Would you take this
> instead? And you might well say yes.
>
> Now, if the campaign is paying, I won\'t say you, because probably,
> you don\'t do it, but if the campaign is paying a blogger for, in
> essence, an editorial on the blog, and they\'re going back and forth
> about what the campaign would like to have said and maybe what the
> blogger is comfortable saying under his or her byline, why isn\'t that
> as much a communication by the campaign, which would require a
> disclaimer, because it\'s the campaign\'s message?
>
> MR. BLACK: I mean, let\'s say I was hired officially as a political
> consultant. That\'s what I was being hired to do, and part of my job
> as a political consultant was to fan out through the media and through
> any outlets I could, whether radio\--I make regular radio appearances;
> maybe on television. So if my job were to fan out into the media,
> including my blog, and hand out the candidate\'s message, it seems
> strange to me that I would be required to disclose it on my blog but
> not when I went onto the radio or when I went on television and gave
> the same message.
>
> COMMISSIONER MASON: I guess the problem I\'m having with that is that
> if we put it over into the magazine context, if someone works for a
> magazine, is paid to do these various things, yes, but I think the
> Commission might well have a little enforcement case if we discovered
> that a payment was made to a publication for an article and there was
> no disclaimer on the article.
>
> In other words, it\'s precisely because the payment is made to, in
> essence, the publisher, the person responsible, that you seem to
> transform or reach the difference that I think the statute lays out
> between editorial comment, which is your own, and advertising, which
> is someone else\'s. And I\'m trying to understand the difference
> between an editorial that someone pays for and advertising. For
> instance, the Mobil Corporation used to run these things called
> advertorials. The NEA still does them.
>
> And, you know, if those were political, if they were express advocacy,
> the disclaimer rules would clearly apply, even though the form of them
> is like an editorial, and they would apply because payment was made
> and because the ideas that the content, the words, are not actually
> those of a publisher; they\'re those of someone else. I\'m trying to
> understand how that works, not in all these other situations but when
> the Internet publisher takes a payment from a campaign for something
> on the site.
>
> MR. BLACK: Just to get back, I mean, you were comparing it to
> newspapers or to magazines, but sort of the framework you\'re setting
> up doesn\'t really seem to apply to television or to radio in
> precisely the same way; that is, people appear on programs all the
> time to give a certain message, and I just don\'t see the distinction.
>
> COMMISSIONER MASON: The point is the payment to the publisher. For
> instance, on some radio programs, you have a commercial that sounds
> like a commercial; the programming breaks and so on. But also, you
> will hear on talk radio programs, the host says, you know, I love such
> and such kind of juice. I drink it every day. It\'s great for my
> health. That\'s also an advertisement.
>
> And so, and whether that, and the point is not when you\'re paid to go
> on somebody else\'s publication, but when you\'re paid for your own
> publication, why is that any different from an ad?
>
> MR. BLACK: I mean, I sort of understand the point, and you know,
> there\'s often not a distinction between the blogger, that is, the
> person who writes for a Weblog and blogger as the publisher, since
> they\'re often the same person, but I\'m not incorporated. You could
> take the case of DailyKos LLC, which has hired as its blogger Markos,
> the payment is not to Markos; the payment is to the DailyKos LLC,
> right? So the payment is to his corporation, in a sense, right?
>
> COMMISSIONER MASON: So what I am trying to understand is if the
> payment is made for this content on the blog, why does it make a
> difference whether it\'s a banner or the margin or in the body of the
> blog? Why does it make a difference, as a legal construct, payments
> made by the campaign, wherever it\'s placed, and why isn\'t it treated
> the same?
>
> MR. BLACK: I think it should be treated the same.
>
> COMMISSIONER MASON: All right; so, in that particular case, there
> would be a requirement for the campaign to have a disclaimer on it,
> because the campaign paid for that placement.
>
> MR. BLACK: If it would have disclaimer requirements, then, yes.
>
> COMMISSIONER MASON: Thank you.
>
> CHAIRMAN THOMAS: Thank you. My turn, I guess.
>
> Following up on disclaimers, because I think we haven\'t touched on it
> quite as much in this process, the proposal basically says that any
> communication put out by a political committee should have a
> disclaimer in a non-Internet area, but if it is in the Internet area,
> we would only require a disclaimer where it is some form of a paid ad
> that is placed on someone else\'s Website.
>
> Now, for the nonpolitical committees, the proposal would be in essence
> only if we\'re talking about email sent to more than 500 folks where
> it is unsolicited in the sense that they purchased an email list to
> send it and it rises to the level of express advocacy or solicitation
> of contributions, would there be a disclaimer requirement.
>
> So I guess what we\'ve been hearing is that, with regard particularly
> to the situation we\'ve got for individuals or other people who are
> not a political committee would have to live under this 500 rule plus
> the concept of having purchased this list and having to deal with any
> express advocacy or solicitation/contributions setting that we\'re
> still being too onerous.
>
> So I\'m just curious if you can help us maybe with some sort of
> alternative basis on how to deal with the disclaimer situation, and
> Karl, I don\'t see something about the disclaimer rule in your
> approach, and I\'m not quite sure how just modifying the definitions
> of contribution and expenditure would address the disclaimer
> situation, and especially since we\'ve kind of gone at the disclaimer
> situation in terms of something being a public communication.
>
> And by the way, as you know, the disclaimer provision in the statute
> deals with not only just an expenditure having been made but also
> maybe a disbursement so\--
>
> MR. SANDSTROM: I think there\'s actually\--if you\'re making a
> solicitation, for instance, let\'s say that you just had a banner ad.
> There\'s actually no asking for money on there. You click it, and you
> fill out the form to give money. You have a disclaimer on there.
>
> Often, that will be at the site controlled by the candidate; proper
> placement of the disclaimer. Forget it on the banner ad. The
> information has gotten out to the potential contributor who they\'re
> contributing it to. That seems to be\--with respect to having
> disclaimers on blogs, if they\'re not public communication, we don\'t
> have to have a disclaimer on them. And I would trust a blogger based
> on their content and whether I can verify what they\'re saying is
> true, or whether it confirms my prejudices, and accept it or reject
> it. I don\'t need the disclaimer.
>
> If the candidate actually gets to the point where they\'re
> actually\--it\'s their editorial content, it\'s actually their
> communication, I think it\'s a fairly poor use of a blogger, because
> it\'s certainly going to change the style, but I really don\'t think
> it advances much of a public policy. I think it\'s probably a useless
> regulation at that point, and by exempting them from public
> communication, we get them out from under having to have that
> disclaimer.
>
> MR. POTTER: I listened with interest yesterday to Commissioner
> Weintraub\'s discussion of her voluminous email list, and I think
> she\'s got a point. The 500 pieces is imported from the direct mail
> context, where it is presumably far less likely that an individual was
> going to write or even mail 500 personal letters, and the Internet
> context, there may be two ways to look at it.
>
> One would be to say should that number simply be higher, and the other
> is to import the paid notion to it so that it dealt with\--and it
> still could be higher\--but sending emails to names that have been
> purchased as opposed to the individual activity of somebody sending
> email to friends and acquaintances, which I think by definition are
> not purchased emails.
>
> MR. SANDSTROM: I think that is a rather wrong approach. Do you really
> want to inquire about where a student got the 500 emails they\'re
> working with to try to encourage people to get out to vote? Does the
> Government really want to come in and say what is the source of your
> emails? How many do you have? I have spam filters. I can keep the
> stuff off of my computer. If I get anonymous, unsolicited email, and I
> want to read it, let me read it.
>
> MR. POTTER: The point here obviously is not to deal with the reader
> and spam. The point here is to deal with large sums spent on the
> Internet by entities to affect Federal elections, whether it\'s
> corporations, unions, or people in coordination with candidates. And
> that\'s why I think the purchase issue is relevant.
>
> In the hypothetical, the other end of the lane, it\'s not the student.
> The hypothetical is going out to a list vendor and spending \$1
> million to buy the names of all the voters in the first five primary
> states and then working with the candidate to make sure those people
> get regular emails. It\'s not that it\'s a bother to the recipient;
> it\'s that it\'s clearly something of value to the candidate and a
> world of difference from Commissioner Weintraub or anyone else
> emailing her friends.
>
> CHAIRMAN THOMAS: I\'m at the end of my time, I\'m sure. I didn\'t
> start the clock, as I should have, so if you want to follow up on
> that, then, we\'ll move on.
>
> MR. BASSIK: I\'ll just make a really quick comment about banner ad
> disclaimers. I think we\'ve purchased well over 1 billion ad
> impressions on behalf of Democratic candidates last election cycle,
> and I would say that when I mentioned during my speech that about 99
> percent of our ads had disclaimers, I would think it was almost
> accidental regulation, because the Website publishers had no idea what
> the rules were on disclaimers. Some required boxes; some required
> addresses; some didn\'t require any at all.
>
> So for the ease of just creating one version of the ad, we created
> them all with very large, 10-point font disclaimers. There was a
> tremendous amount of widespread confusion as to what disclaimers
> should be, so I just wanted to reemphasize that I believe that
> disclaimers are important, but for small expenditures, especially by
> individuals, to have to force an individual to go and look through
> documents and pages and maybe hire a lawyer to find out what type of
> disclaimer should I have would be, you know, really counterproductive.
> So, you know, I just emphasize that I believe if there is a disclaimer
> requirement, it should be based on a spend threshold not necessarily
> an arbitrary number of emails sent or just based on the fact that a
> \$10 ad was purchased.
>
> CHAIRMAN THOMAS: Commissioner Smith.
>
> COMMISSIONER SMITH: Thank you, Mr. Chairman.
>
> Mr. Sandstrom, Commissioner Weintraub already, I guess, had largely
> the conversation I would have had with you, and it\'s interesting to
> note that you and I had, I guess, the same interpretation of the
> regulation that was passed, but when I raised that interpretation at
> the NPRM stage two months ago, Commissioner Mason indicated no, that
> wasn\'t his understanding. He thought it did exempt paid advertising,
> and we didn\'t have to worry about it.
>
> So I think that was a problem if that was the case, and I\'m not sure
> whether we would be on strong legal ground to go back essentially with
> something that would do the same thing, like putting a definition of
> contribution and expenditure rather than public communication.
>
> That leads me to ask\--you raise, on page 5 of the testimony, your
> prepared comments\--how we just can\'t really shoehorn these folks
> into the press exemption; any attempt to categorize bloggers based on
> an existing business model or something would be unsatisfactory. But
> why would that be so if, you know, in the past, the Commission has
> adopted its regs to say the facilities of a cable broadcaster. What
> would happen if we just added the facilities of the Internet? In other
> words, something not based on whether you\'re a blogger or a forum or,
> you know, trying to figure out what you are, but just say if, you
> know, if it\'s through the Internet facilities, it qualifies for the
> press exemption.
>
> Now, there would still be questions that would arise, just as there
> are now under the press exemption, but essentially, you know, it would
> blanket it without regard to the particular form a site takes or an
> activity takes.
>
> MR. SANDSTROM: For example, I am here today representing an
> organization that doesn\'t claim to be a press outlet.
>
> COMMISSIONER SMITH: But we\'re going to make you one.
>
> \[Laughter.\]
>
> COMMISSIONER SMITH: You will after this. That\'s the point.
>
> MR. SANDSTROM: I really think that the Internet is rather unique. I
> mean, are we going to say, then, if you are a\--are we going to have
> to apply some sort of test, whether this is a news story, whether this
> is a commentary, whether this is an editorial? Does that capture
> everything someone would do on the Internet? And if I send out a
> newsletter\--
>
> COMMISSIONER SMITH: Well, those are questions, I guess, the Commission
> has to deal with now in other formats, and it seems to me that we\'ve
> been able to deal with those in a way that\'s generally satisfactory
> to people.
>
> MR. SANDSTROM: I think the Commission in recent years started to
> struggle with the press exemption as applied to things like
> documentaries. I think it\'s, you know, and how they\'re distributed.
> I think it\'s started to struggle with in house publications by
> organizations that are not traditionally considered part of the
> traditional media, be it commercial outlets and such.
>
> And you have to go back, as I recall, and I may be wrong, back in the
> fifties with respect to the ban on union contributions that dealt with
> the newsletter. And so, yes, you\'d want to expand the press
> exemption, but you\'re going to take the same standards you used to
> expand the press exemption and apply it to you know, the traditional
> media, the fourth estate, as I want to categorize them. Then, you\'re
> going to find that press exemption is going to permit far greater
> activity than I think you anticipated.
>
> COMMISSIONER SMITH: Thank you.
>
> Mr. Bassik, I wanted to ask you a question: basically, as I understood
> your opening comments, you\'re suggesting that limits on paid
> advertising, in effect, have significant effect on bloggers. Do I
> grasp that correctly?
>
> MR. BASSIK: Rephrase the question, I\'m sorry.
>
> MR. BLACK: I would ask the same question.
>
> COMMISSIONER SMITH: As I understood you to say that if we began to
> regulate paid advertising on the Internet, that would, in fact, affect
> the blogger community significantly. That\'s how I sort of read your
> opening comments.
>
> MR. BLACK: My take in my opening comments, my basic point is that what
> would significantly affect the blogging community is if requirements
> were placed on bloggers that are not required for other members of the
> media, okay? Now, if, for example, you know, there\'s a disclosure
> requirement for paid advertising, that disclosure requirement should
> fall on the campaign itself. And, now, if we think that the disclosure
> requirement should also be, you know, added into editorials, say,
> that, you know, a paid editorial crossed the line into paid
> advertising, then, it would still be the responsibility of the
> campaign to ensure that the blogger has the disclaimer on it.
>
> COMMISSIONER SMITH: Let me try to rephrase my question, and I\'ll ask
> Mr. Bassik here, because it was really more his comments that I think
> addressed it: what was the point, let\'s put it this way: what was the
> key point of your opening comment? You tell me again.
>
> MR. BASSIK: I think that I wanted to first focus on public
> communication, which is really the only area that the court really, I
> think, required or requested the FEC to act upon. Within that
> statement, I was trying to express that paid advertising is growing,
> and it\'s important, and it\'s impactful, but we should not be
> requiring individuals who are advertising online to have to all of a
> sudden start understanding the intricacies of the FEC.
>
> COMMISSIONER SMITH: Because some of the ads are so inexpensive.
>
> MR. BASSIK: They\'re so inexpensive, and the one thing that I believe
> is that the definition of public communication was intended to apply
> to million dollar or large dollar advertisements that were impossible
> for an individual like myself to purchase. I could not purchase a
> magazine ad or purchase a billboard, the average citizen. But on the
> Internet, you can. So the point is that with small ads such as small
> tiles that go on blogs or within Google ads that have 95 maximum
> characters, there shouldn\'t be disclaimers; and then, also, the\--
>
> COMMISSIONER SMITH: The question that Commissioner Mason asked this
> morning of a witness. Do you think that if we were to adopt, which we
> may or may not be able to do, sort of a \$200 threshold, that would
> solve a lot of that problem?
>
> MR. BASSIK: I think that\'s a bit low. I\'m not sure the FEC has the
> ability to go and create a really high threshold. I think this is part
> of the activities of the FEC where you suggest to Congress what
> different thresholds they should change. \$200 seems quite low. For
> example, you know, a week on, for example, Markos\' blog is more than
> \$200. But I would think that more along the lines of \$5,000 would be
> a really realistic threshold.
>
> COMMISSIONER SMITH: I\'m out of time. I hope we\'ll get back to the
> people, and I hope I should get a second round.
>
> Thank you, Mr. Chairman.
>
> CHAIRMAN THOMAS: Commissioner Smith, our tradition has been that we
> then go back through the order in reverse sequence. You\'re up next. I
> beg your pardon. I beg your pardon. Counsel\'s office. You\'ll get
> your chance in just a moment.
>
> I\'m sorry; Larry Norton, please.
>
> MR. NORTON: Thank you, Mr. Chairman.
>
> Mr. Bassik, I wanted to follow up on a statement you made, and I hope
> I jotted it down right. That was that no state or local party spent
> soft money online for Internet advertising. I hadn\'t heard that
> statement before, and I wondered what the source of your support was
> for that.
>
> MR. BASSIK: Sure; I guess it involves a little bit of bragging, in
> that no individual in the country placed more advertisements on blogs
> or Websites or search engines than myself, and I also have access to a
> lot of reporting data from Nielsen that literally trolls the Internet
> for banner advertisements, and I can search for political ads and pull
> up every single ad impression that has been placed on the Web.
>
> I saw some placed by the Pennsylvania State Democratic Party, and I
> had inquired as to the origin of funding of those, and they assured me
> it was not soft money. And I have been speaking with colleagues of
> mine who also placed advertising campaigns for Republicans; for
> example, the Pericles agency. They have also assured me it was all
> spent with hard dollars and none from state parties.
>
> MR. NORTON: Thank you.
>
> A question for former Commissioners Sandstrom and Potter: BCRA\'s
> principal sponsors submitted comments, and they wrote, in part, one of
> the major problems with the per se exclusion and the Commission\'s
> original rule was that it would have let state party committees spend
> unlimited soft money on Internet communications designed to influence
> Federal elections. The proposed rule only addresses this problem to
> the extent that state parties buy advertising on the Websites of
> others.
>
> The question is whether you think that this rule, the proposed rule
> that exempts only paid ads on the Internet leaves a major problem
> unaddressed, and if you do, why? Mr. Potter, maybe you could take that
> one.
>
> MR. POTTER: I think the problem there is that political party
> committees are spending increasing sums of money on Internet
> activities as a way of reaching voters, potential voters. Those sums
> of money include purchases of email addresses and thus mass emailing
> to voters, potential contributors, et cetera, highly sophisticated
> Websites, solicitations for contributions. The concern that I have
> with that is that those funds, I think, ought to be governed, those
> activities ought to be governed by the Federal election laws and not
> exempt solely because they occur on the Internet.
>
> MR. NORTON: Mr. Sandstrom.
>
> MR. SANDSTROM: I don\'t know how the sponsors came to the views that
> they have come to. It seems to me that any local party cannot spend
> millions of dollars of soft money on the Internet any more than they
> could spend it on television. I don\'t, you know, I don\'t fault the
> legal logic to get to the position that the sponsors came to.
>
> Could I just backtrack for a moment? One quick\--
>
> MR. NORTON: Sure.
>
> MR. SANDSTROM: This is cnn.com. I don\'t know how you have a
> disclaimer on it.
>
> MR. NORTON: I\'m going to ask Mr. Bassik and Mr. Black a question.
> We\'ve had testimony, I think, in part your testimony and other
> testimony about this rulemaking and some of the issues that we\'ve
> raised, and some of the points that have been raised were that we\'re
> asking about hypothetical problems. It\'s sort of a rulemaking in
> search of a problem. There isn\'t a demonstrated record of abuse from
> the last election. Technology is rapidly changing, and what we\'re
> looking at today and concern with bloggers and so on may look very
> different a year or two from now.
>
> Are all of these arguments for the Commission not tackling the media
> exemption and not taking on any issues other than the issues that it
> has to take on by virtue of the court decision?
>
> Let\'s start with Mr. Bassik.
>
> MR. BASSIK: Well, you know, I think the Commission would be justified
> if they just dealt with the definition of public communication, but I
> think it would leave a huge area unaddressed, and that\'s an area that
> Commissioner Smith brought up in the coming of the apocalypse or
> crackdown on blogging. I think that these areas do need to be
> addressed. But keeping in mind that not to go too far.
>
> I mean, the Commission should really be focused on areas where there
> is corruption, or there is the appearance of corruption, and I think
> that\'s why I was, you know, satisfied by the Commission\'s decision
> just to include in the definition of public communication paid
> advertisements on the Internet and not to go further, because I think
> that satisfies what the Court might be looking for, but there\'s
> really no corruption anywhere else, so I would caution against
> regulating in that area.
>
> MR. NORTON: Mr. Black, I\'m going to ask you the same question.
>
> MR. BLACK: Yes, I mean, I agree that the Commission would be justified
> in going no further, as you say, but I also agree that, I mean, I
> think that just leaves a whole nest of issues still out there. And
> whether that, of course, those issues don\'t have to be addressed
> through this particular process right now. They could be shunted for a
> future date, but my guess is they will come back.
>
> MR. NORTON: Thank you.
>
> Thank you, Mr. Chairman.
>
> CHAIRMAN THOMAS: Mr. Pehrkon.
>
> MR. PEHRKON: Mr. Chairman, thank you.
>
> Mr. Bassik, Black, former Commissioners Potter and Sandstrom, welcome,
> and I know it\'s been a long day. Mr. Black, particular question for
> you: you indicated that your operational expenses for your site are
> rather minor. I don\'t remember right now what the number was you\--
>
> MR. BLACK: I said over the lifetime, aside from maintaining a computer
> and Internet access, I\'ve probably spent under \$150 in direct
> expenses.
>
> MR. PEHRKON: Okay; over maintaining the computer.
>
> MR. BLACK: Right.
>
> MR. PEHRKON: How much has your revenue been during that period of
> time?
>
> MR. BLACK: I operated the site for about a year and a half earning
> first no revenue and then, I would say, minimal revenue, a couple
> hundred dollars a month, and just recently, over the past, say, since
> this calendar year, I\'ve probably averaged about \$5,000 a month in
> gross revenue.
>
> MR. PEHRKON: Commissioner Sandstrom, under your proposal, one of the
> things I\'m trying to get a handle on, because I clearly do not quite
> understand it. But could you sort of explain to me how this would
> affect your organization that you\'re representing, OMB Watch? Or
> would it?
>
> MR. SANDSTROM: Since anything they post on their site would have a
> zero value, if they republished materials, they carried a public
> debate, that they would be valued at zero. There would be no question
> whether they made any sort of in-kind contribution. They\'re a
> 501(c)(3), and so, they\'re very concerned that nothing they do be
> seen to be intervening in a campaign.
>
> But they are getting information out, sometimes quite critical about
> candidates. And certainly, they don\'t want to be subject to a
> complaint. They certainly don\'t want these issues to be raised, and
> the best way, I think, to do that is to essentially value their
> republication activities at zero.
>
> MR. PEHRKON: Is there any instance where there would be any value to
> the content, that it could be attributed to a dollar cost for
> developing the content?
>
> MR. SANDSTROM: I guess the idea behind my proposal is the
> communication has no value; the content has extreme value. And
> therefore, its only valuable because it persuades. It informs. And you
> shouldn\'t put a dollar value on that. I think it would be wrong, you
> know, for the system to do that. I think the strength of the Internet
> is it is out there; ideas are battling, and that\'s what\'s valuable.
> But it\'s not the dollar value.
>
> MR. PEHRKON: But if you had production costs, because that\'s not\--in
> order to develop a message, where do you put that?
>
> MR. SANDSTROM: I don\'t need to put it anywhere under my proposal,
> because this proposal, those production costs would be valued at
> essentially zero, too.
>
> MR. PEHRKON: Okay; I\'m trying to imagine a situation where you would
> ever have any expenditures.
>
> MR. SANDSTROM: For most bloggers, there would be no expenditures.
>
> MR. PEHRKON: How do you imagine which bloggers or sites would have
> expenditures? Could you give me an example?
>
> MR. SANDSTROM: None.
>
> MR. PEHRKON: Okay. Thank you very much.
>
> CHAIRMAN THOMAS: Thank you.
>
> Commissioner Smith.
>
> COMMISSIONER SMITH: Thank you, Mr. Chairman.
>
> Taking up a bit on thinking about this threshold, Mr. Potter, you had
> in your comments, your joint comments, suggested that the Commission
> should consider whether it has the authority to establish by rule a
> reasonable dollar threshold, e.g., \$25,000 for spending by an
> individual on production costs for materials to be disseminated via
> the Internet. So what do you think? Do we have that authority or not?
>
> MR. POTTER: We carefully said the Commission should consider it, get
> the advice of its General Counsel, have a reasoned opinion from them,
> because we don\'t know.
>
> COMMISSIONER SMITH: Well, I guess, he would probably like your advice,
> too. I mean, here\'s the thing\--
>
> \[Laughter.\]
>
> COMMISSIONER SMITH: \--your organization has no members, so as far as
> I can tell, the only basis you have for being up here is your
> expertise. And you\'ve kind of suggested this, and I\'m asking for
> your opinion now. Is it yes or no? What do you think? Give me your
> best guess. Do we have this authority or not?
>
> MR. POTTER: I don\'t think you do.
>
> COMMISSIONER SMITH: So in other words, you\'re suggesting, well, we
> could save the bloggers a lot of problem, but actually, we probably
> really couldn\'t. And it would have to be enforced until Congress
> acted on it.
>
> MR. POTTER: No, I\'m suggesting that all of you should take a look at
> it and see whether you think that is defensible.
>
> COMMISSIONER SMITH: If we decided to do it, would you sue us, you
> having just said you don\'t think we have that authority?
>
> \[Laughter.\]
>
> MR. POTTER: I have said that I don\'t think I see it. If you decide
> that you do based on a reasoned recommendation from the General
> Counsel\'s office, I assume you would act on it. If you decide that
> you\'re unsure, you would put it in your recommendations to Congress,
> which I think is the other approach that\'s worth doing here.
>
> COMMISSIONER SMITH: I don\'t think that\'s very helpful, but with due
> respect, I appreciate the thought that we should consider things.
>
> We have another thing that came up. Now, I note, and I\'ve noted
> repeatedly, that nothing in\--I\'ve read the plaintiffs\' brief in
> this case many times, and nothing in that brief suggests that their
> only concern was paid ads. It just never is raised; never do they say
> that paid ads are what they are concerned about and only paid ads. And
> nothing in the court opinion limits the reach of the opinion to only
> paid ads.
>
> Thus, I was delighted when after my CNET interview in March, your
> organization came out very aggressively and said this is only about
> paid ads and nothing else. And so, what I want to get down is if we
> come out with a rule that exempts everything but paid ads, are you
> going to promise that you won\'t sue us?
>
> \[Laughter.\]
>
> COMMISSIONER SMITH: And can you promise that Senator McCain won\'t sue
> us, whom you\'ve represented as a client many times?
>
> MR. POTTER: I would never be ill-advised enough to make promises on
> behalf of Senator McCain, who has his own mind on all of these things.
> I was very interested to learn really just today that it is the view
> of former Commissioner Sandstrom, who voted for this rule, and I
> gathered from your exchange earlier, perhaps your view, that the rule
> already covered paid advertising and hear at least Commissioner
> Sandstrom say he thought it covered party Websites and email purchase
> costs, et cetera.
>
> If the Commission wanted to make that clear in its rule, I think that
> would go a long way towards addressing the concerns at least that the
> Campaign Legal Center had.
>
> COMMISSIONER SMITH: It won\'t go all the way.
>
> I just want to know what Mr. Bassik and Mr. Black should be preparing
> for and whether they should have any doubts, because that has been a
> big issue, because to be blunt about it, your group has actually cast
> aspersions here on my honesty in raising these things and said I\'m
> intentionally raising things that aren\'t true, and so, I\'m trying to
> pin you down. Is that the case, or not, or are there maybe some
> problems other than paid advertising lurking out there?
>
> MR. POTTER: Oh, Commissioner Smith, I wouldn\'t be callous enough to
> cast aspersions on your honesty and I apologize if you thought I did
> cast aspersions on your honesty. Honesty isn\'t what was involved.
> What I suggested was that\--
>
> COMMISSIONER SMITH: Hold on. Hold it:
>
> Commissioner Smith\'s interview does a good job of providing
> misinformation on the subject, and then, it says: As it was obviously
> intended to.
>
> MR. POTTER: Yes, I think it was intended to cast attention towards the
> blogging community, and the suggestion that what the court had ordered
> here, which can only be remedied by Congress was the suggestion of the
> interview, was the wholesale regulation of the Internet. I don\'t
> think that\'s what the court ordered here. It ordered that the
> Commission review the definition of public communication and come up
> with something other than a flat exemption for public communication
> for all activity on the Internet.
>
> Paid advertising, party Websites, email purchases are, I think, as I
> indicated, the vast bulk of that concern, and to complete my answer,
> the only other concerns I would have are those laid out in our written
> comments.
>
> COMMISSIONER SMITH: Thank you, Mr. Chairman.
>
> CHAIRMAN THOMAS: I guess it\'s me.
>
> Just to be clear, the issue that I keep coming back to with the
> various panels is that\--I jokingly refer to it as a total carveout,
> because that\'s the term that\'s been used in another context in one
> of the rulemakings that we\'re working on. But in the coordinated
> communication area, I guess I had been assuming we didn\'t have any
> wiggle room. I had been assuming that when we say that it\'s a
> communication, you\'ve got to figure out whether it\'s regulated as a
> coordinated communication according to our regulations.
>
> And in essence, if it doesn\'t fit as a coordinated communication
> under our regulations, then, you don\'t have to worry about it being
> an in-kind contribution. And so, I sort of assumed that if you had
> established and coordinated, it was a dynamite way to work through
> those regulations and find a way to say we\'re not covered, and
> therefore, we can do it.
>
> So, it\'s very problematic, obviously, from the perspective of the
> folks who brought the Shays litigation, and it\'s problematic from my
> perspective to say that someone could basically pay in coordination
> with the candidate and have a limited amount of money for, shall we
> say, paid ads on somebody else\'s Website and not have that be treated
> as an in-kind contribution no matter how much was spent, no matter
> what the source.
>
> I also have raised, though, that, you know, the reach of our proposal
> is to just try to bring back into coordinated communication analysis
> paid ads, but we do have some fairly identifiable large expenditures
> showing up that deal with extensive Internet efforts. And I guess,
> while I\'ve got you here, Mr. Bassik, let me just inquire: we saw news
> stories, and I\'ll include them for the record suggesting that the
> Kerry campaign, among others, developed a huge mailing list, and they
> were undertaking some what I gather they thought were important
> emailings to their sizeable email list, and they were including some
> video clips.
>
> I think they were responding to the one that was put out, I guess, by
> the Bush campaign which made some reference to Adolf Hitler and a few
> Democrats in the same breath. But I\'m just curious: if a campaign
> could basically put together that kind of an effort and then basically
> ask someone else to pick up the tab, don\'t we have a similar problem?
> Aren\'t we talking about, all things said and done, some pretty
> significant expenditures being put into a campaign like that?
>
> MR. BASSIK: I disagree. I think in that instance, it\'s communication.
> It\'s written words but this time in a video format. They have not
> made an expenditure. They have not placed any advertising, and
> instead, organizations who are covered under the media exemption have
> provided air time or space for that communication from the campaign
> that was equal to, you know, John Kerry making a speech or releasing a
> press release or, in this case, designing a Web video.
>
> But I think if you look at the definition of public communication, it
> specifically mentions advertising, and I wasn\'t dictionary shopping.
> I looked up the term advertising in about a dozen dictionaries, and it
> all involved a payment and a business. Advertising is an industry. I
> would venture to say that what was going out in those emails was not
> part of the advertising industry; it was part of providing the written
> word or in video format just what Kerry was feeling.
>
> CHAIRMAN THOMAS: So just to be sure I\'m clear, you\'re saying you see
> the focus of what we\'re doing here to be limited to something that we
> could all characterize as advertising as distinguished from what might
> be going on through an email, a massive email effort.
>
> MR. BASSIK: Yes; I would think when it comes to the online advertising
> perspective, that\--I mean, the definition of public communication,
> unless I\'m incorrect, has the term advertising in it, I believe. So,
> yes, I would define advertising as the purchasing of ad space to
> promote a business, service or in this case a candidate or an issue.
>
> CHAIRMAN THOMAS: Okay; for those who are also familiar with the issue
> in the context of what is a coordinated communication, and hence, what
> is a contribution or maybe what is an expenditure, does the expense
> going into a very helpful, obviously, email effort not also pose
> problems if it is coordinated and paid for by some third party?
>
> MR. SANDSTROM: If I may ask, it may help clear up my confusion; maybe
> the same confusion Commissioner Smith has been operating under, that I
> never thought the terms in-kind contribution and coordinated
> communication were synonymous. I mean, I could come over and give you
> a piece of furniture for your campaign. That\'s an in-kind
> contribution even though you didn\'t pick out the furniture.
>
> CHAIRMAN THOMAS: What if it\'s a communication, though? That\'s\--
>
> MR. SANDSTROM: But the coordination reg goes to public communication,
> and that\'s what the Internet was exempted from. They weren\'t
> exempted and did not permit you to go pay a vendor an obligation that
> a candidate had incurred.
>
> MR. POTTER: But if the obligation incurred by the candidate was
> Internet
>
> advertising\--
>
> MR. SANDSTROM: There\'s still an obligation to the candidate. Someone
> else has paid.
>
> MR. POTTER: Even though it\'s on the Internet?
>
> MR. SANDSTROM: Even though it\'s on the Internet.
>
> MR. POTTER: I wish that had been said in the E&J. It would have been
> somewhat helpful.
>
> MR. SANDSTROM: I\'m not sure it would have been helpful. I think we
> probably still would have been used.
>
> CHAIRMAN THOMAS: Well, it does point to an obvious difference of
> opinion that\'s existed for quite some while. So to the extent that it
> is a total carveout, I think, Commissioner Sandstrom, you\'re off
> base, but if it\'s not a total carveout and all these other rules
> notwithstanding, the language of the coordinated communication can
> somehow attach. Maybe there\'s some work that can be done there to
> sort of repair that impression I think a lot of us have.
>
> VICE-CHAIRMAN TONER: Mr. Chairman, but the total carveout which I
> really like was with respect to the state party fundraising events,
> which we preserved.
>
> \[Laughter.\]
>
> CHAIRMAN THOMAS: Commissioner Mason.
>
> COMMISSIONER MASON: Thank you.
>
> Commissioner Potter, in discussing with several witnesses to whom I
> was very sympathetic with their appeals to keep all this unregulated,
> I reminded them that we had certain tools we had to work with. The
> principal one was the statute.
>
> And I want to start off sort of the same way with you. You seem to be
> positing a structure where we say, well, for most people, when we\'re
> dealing with the Internet, we\'re only going to reach where they pay
> to place, presumably, an express advocacy ad on somebody else\'s site.
> But for political party committees, everything they do on the
> Internet, their own Internet sites, the emails of whatever number and
> wherever the addresses are derived are all going to be regulated.
>
> The problem I see with that is that the statute defines both of those
> activities as general public political advertising, and that phrase
> comes up in 441d on disclosure, where party committee is or
> disclaimers, excuse me, where a party committee is required to put a
> disclaimer on\--and it goes through this list of things\--and general
> public political advertising.
>
> Any other person who engages in express advocacy is required to put a
> disclaimer on, and it runs through, and general public political
> advertising. And the same tension comes up in the combination of
> 431(20) and (22), where the definition of public communication,
> including general public political advertising, is worked back into
> Federal election activity.
>
> So the question is how can we read 441d requiring disclaimers with
> using the identical parallel language and the same paragraph in the
> statute as applied to political parties to mean Websites and any email
> but as applied to individuals to not include their Websites, to not
> include emails, to not include a whole lot of other activity?
>
> MR. POTTER: I\'m not sure I\'ve got the question, so let me try to
> answer it, and tell me if I\'m off base. First off, the statute
> clearly regulates parties and political committees in different ways
> and to a much greater extent than individuals. Specifically, it
> governs\--the phrase Federal election activity has a variety of legal
> meanings for political party committees, including the requirement for
> hard money spending, and that\'s what we\'ve addressed in our comments
> here.
>
> I agree that if an individual purchased paid advertising, they need to
> put a disclaimer on their paid ad that is run somewhere else.
>
> COMMISSIONER MASON: How about their own Website that includes express
> advocacy?
>
> MR. POTTER: I was going to say that I don\'t think that what they
> write on their own Website is general public political advertising.
>
> COMMISSIONER MASON: Then why is a political party committee\'s own
> Website general public political advertising?
>
> MR. POTTER: It\'s a public communication.
>
> COMMISSIONER MASON: Public communication. Is it defined as direct
> mail, television, broadcast or other form of general public political
> advertising? That\'s what I\'m saying. The precise same words are used
> in the same paragraph of the statute to address political parties and
> to address other persons. How do we read them differently?
>
> MR. POTTER: Because the party committee is engaged in Federal election
> activity.
>
> COMMISSIONER MASON: We\'re talking about disclaimers. I think you
> reach a later complication in Federal election activity, but just in
> the disclaimer statute, just in that one little paragraph, 441d, that
> uses the precise same language, how does it mean one thing for party
> committees and something else for individuals?
>
> MR. POTTER: I suppose what you could do is decide that you were going
> to exempt individuals from what you thought to be the same language.
> I\'m just not sure that I read the statute the same way.
>
> COMMISSIONER MASON: Let\'s open it up. I mean, you\'re the former
> Commissioner. Whenever a political committee makes a disbursement for
> the purpose of financing any communication through a broadcasting
> station, newspaper, magazine, outdoor advertising facility, mailing,
> or any other type of general public political advertising or whenever
> any person makes a disbursement for the purpose of financing
> communications expressly advocating the election or defeat of a
> clearly identified candidate or solicits any contribution through any
> broadcasting station, newspaper, magazine, outdoor advertising
> facility, mailing or any other type of general public political
> advertising, and it goes on and states the disclaimer requirements.
>
> It\'s all in the same sentence. How do I read general public political
> advertising to read one thing in the first part of the sentence and a
> different thing in the second part of the sentence?
>
> MR. POTTER: The first comment is, as we\'ve said in our written
> comments, we do not believe that the general public political
> advertising language covers individuals on their own Websites. I
> think, in all due respect, I\'d like to think about your question of
> how it is covered for party committees and respond to that in writing,
> if I may.
>
> COMMISSIONER MASON: Fine.
>
> CHAIRMAN THOMAS: Commissioner Weintraub.
>
> COMMISSIONER WEINTRAUB: Thank you.
>
> A couple of points: I think that this issue of setting a threshold for
> the ads, which has been brought up by several witnesses, and, you
> know, I didn\'t know until we started to receive comments that in
> fact, you could place an ad for \$5 on the Internet. So for that
> alone, the hearing has been useful, and the comments have been useful,
> and I agree with you that that\'s a subject of great concern.
>
> And I like these ideas that people have tossed out about \$5,000,
> \$25,000; I\'m sympathetic, but I come back to the same problem that
> Commissioner Smith had, which is I\'m not sure we have the statutory
> authority to do it; you know, Mr. Potter, under duress, says that he
> doesn\'t think we have the statutory authority to do it. Mr. Simon,
> his co-signer, who is another very experienced campaign lawyer also
> doesn\'t think we have the statutory authority to do it, and I\'m not
> sure even if we asked our very fine General Counsel\'s office to come
> up with an opinion that they would come to a different conclusion.
>
> And if we ask Congress to do it, I\'m not averse to doing that, but I
> suspect that if Congress acts in this area, it\'s not going to be to
> set a \$25,000 threshold; it\'s going to be to exempt the whole thing.
> So I think that that suggestion that we go ask Congress to do it may
> backfire on you, former Commissioner Potter. It may end up\--I\'m not
> averse to doing it, but I think you\'re going to end up with a result
> that you weren\'t necessarily anticipating on that.
>
> But I think we need to think about whether we have some flexibility
> under the statute to set some kind of threshold so that we don\'t
> catch the \$5 ads and the \$10 ads.
>
> As far as disclaimers are concerned, I don\'t see any reason why that
> little CNN ad on your Blackberry there wouldn\'t be covered by the
> same rule we have for bumper stickers and pens and other things where
> it\'s just impractical. Give me a sec. The only reason we\'re talking
> about disclaimers on emails at all is because we\'ve got a regulation
> on the books that I think you might have voted for, Commissioner
> Sandstrom\--I know it was before my time\--that says if you send out
> 500 substantially similar emails expressly advocating somebody\'s
> election, you\'ve got to put a disclaimer on it.
>
> I think it\'s a silly rule. And that\'s why we tried to add something
> into it to make a it a little less silly, and what we came up with was
> this notion of buying the mailing list, that maybe that would put it
> in a different category and at least get individuals off the hook who
> generally don\'t buy email lists.
>
> But a lot of people have raised issues with that, and I am open to
> just repealing that particular provision of the rules. I invite your
> comments on that as a solution.
>
> MR. SANDSTROM: I certainly would recommend it. Whether I voted for it
> or not\--I\'m not sure if I did\--but I certainly think it\'s a wise
> proposal.
>
> COMMISSIONER WEINTRAUB: Anybody? Do you have a problem with it,
> Trevor?
>
> MR. POTTER: Yes, as I said, I think my suggestion would be to look at
> either a higher threshold or to look at a purchase requirement in
> there for the purchase of email addresses.
>
> COMMISSIONER WEINTRAUB: Well, that\'s what we\'ve got now, and various
> people have suggested that really doesn\'t quite cut it.
>
> MR. SANDSTROM: Commissioner?
>
> COMMISSIONER WEINTRAUB: Yes.
>
> MR. SANDSTROM: Could I just quickly respond to it? What if someone
> gives them to me, and they have purchased them?
>
> COMMISSIONER WEINTRAUB: Well, I mean, that\'s one of the many problems
> that people have raised with it, that, you know, and how do you know
> which ones are purchased? And this goes to something that we alluded
> to before, Trevor, which is this issue of, you know, it\'s a very
> different thing to put 500 pieces of paper into an envelope and stamp
> them and lick them and send them in the mail than to press one button
> and say, you know, to everybody in my address book, boom, I\'ve just
> now sent out an email, and it took one second and didn\'t cost me a
> thing.
>
> So, I think we have to deal with this, but similarly, this issue of
> republication of campaign materials on the Internet, and it just
> doesn\'t seem like it\'s a good fit. And I\'d be interested
> particularly in your view, Trevor, not to ignore anyone else, on how
> we should interpret that given that people cut and paste things and
> link things on the Internet all the time, and it generally just
> doesn\'t cost anything.
>
> And, you know, I don\'t like us being in a situation where we have
> rules on the books that people are violating throughout the country on
> a daily basis, and nobody pays any attention to them. I think that
> undermines respect for all of our rules if we allow rules like that to
> just sit there.
>
> MR. POTTER: That is not the purpose of the republication requirement,
> which was enacted in an era of hard copy printing, so that the
> assumption was\--
>
> COMMISSIONER WEINTRAUB: But isn\'t that in BCRA? It\'s in BCRA, isn\'t
> it? That we\'re supposed to consider that in the coordinated
> communication context.
>
> MR. POTTER: Correct.
>
> COMMISSIONER WEINTRAUB: So they knew there was an Internet out there
> when they did BCRA.
>
> MR. POTTER: But you\'re starting with a Federal Election Campaign Act,
> which had republication on the assumption that you are going to a
> printer, and often, campaigns\' principal expense or one of their
> major expenses was printing. So to say to someone, the campaign
> doesn\'t want to pay \$50,000 for fliers\--
>
> COMMISSIONER WEINTRAUB: Right; what do we do now in the Internet
> context?
>
> MR. POTTER: I think you can look at the Internet context, and in the
> example you\'ve given, where you\'re cutting and pasting, say there is
> no cost to it, and therefore, we\'re not regulating it if it is by an
> individual.
>
> COMMISSIONER WEINTRAUB: So you would be comfortable with our saying
> that for the purposes of coordinated communications, to the extent
> that people link to campaign materials or cut and paste campaign
> materials and republish them in that format, as long as there is no
> cost associated with it, we don\'t have to worry about it.
>
> MR. POTTER: By individuals, absolutely.
>
> COMMISSIONER WEINTRAUB: Thank you, Mr. Chairman.
>
> COMMISSIONER MASON: By corporations?
>
> MR. POTTER: Well, since corporations aren\'t supposed to be engaging
> in advocating the election or defeat of a Federal candidate, you then
> get back to the question of a link, which was one of the things
> Commissioner Weintraub mentioned, by a for-profit corporation. There,
> the Commission in the past has taken the view that in some
> circumstances, that could be a contribution. If it\'s on a partisan
> basis just to one candidate, then it is effectively an endorsement of
> that candidate.
>
> COMMISSIONER SMITH: So the point we\'ve heard many times in the last
> couple of days, well, if no money is spent, you don\'t have to worry
> about it isn\'t quite true, then, because the link might not really
> cost anything, but now, you\'re saying yes, it is still going to be a
> problem.
>
> MR. POTTER: A corporation can\'t endorse a Federal candidate to the
> general public even if it doesn\'t spend any money.
>
> COMMISSIONER SMITH: Okay; so there are issues, and by the way, this
> goes to various other things where the Commission applies that
> approach as well. The Commission does not only value a contribution or
> an expenditures when money is actually spent. It is the Commission\'s
> position that something that has value, even if it has a subjective
> value we have to determine, will be valued at that basis, and that is
> one of the things that has concerned me consistently about this
> rulemaking, when I suggested early on that people would have to
> be\--you know, one of the issues here would be links: how do we value
> links?
>
> What we\'ve done in other circumstances is we\'ve said, you know, the
> equivalent of if you have a link, you spend three cents on it, a
> candidate raises \$30,000 from it, the value to the candidate was
> \$30,000. You\'ve got a big violation on your hands. That\'s the
> approach we\'ve taken in other contexts, and that is the approach I
> think we want to make sure we don\'t take here. As I understand it,
> the position of the Campaign Legal Center is that is not what we
> should do.
>
> MR. POTTER: The position of the Legal Center as stated in the written
> comments is you should not consider links by individuals to be a
> contribution.
>
> COMMISSIONER SMITH: Okay; thank you, Mr. Chairman, for letting me hog
> a bit more time.
>
> CHAIRMAN THOMAS: Okay; it\'s no problem. That just came out of the
> Vice-Chairman\'s time. I\'m sure he won\'t mind.
>
> \[Laughter.\]
>
> CHAIRMAN THOMAS: Vice-Chairman Toner.
>
> VICE-CHAIRMAN TONER: Thank you, Mr. Chairman.
>
> I want to follow up on Mr. Potter. We talked earlier about the
> production of Internet materials issue and then the in-kind
> contribution scenario, and earlier, we talked about state party
> Websites and under current rules, the idea that if any portion of that
> Website has communications that promote or attack a Federal candidate
> under current law, they can still use soft money to pay for those
> types of communications. It doesn\'t federalize the Website, but if I
> understand your written testimony to be that we should change course
> in that area, and at least a portion of the Website, if it promoted or
> attacked a Federal candidate, should be considered Federal election
> activity.
>
> Is that a fair assessment?
>
> MR. POTTER: Yes; we don\'t think that state parties should engage in
> Federal election activity solely with soft funds.
>
> VICE-CHAIRMAN TONER: And is your position not that the whole site
> thereby would then become federalized but only whatever portion of the
> site, whatever page views contain the promoting or attacking of a
> Federal candidate?
>
> MR. POTTER: I would respectfully, Commissioner Toner, disagree with
> the term federalize.
>
> VICE-CHAIRMAN TONER: For dollar requirements or however we want to put
> it.
>
> MR. POTTER: I think it should be covered by the requirements
> established in BCRA and by the Commission in terms of the use of hard
> and soft money.
>
> VICE-CHAIRMAN TONER: But in terms of how much of the site would have
> to be covered with hard money, would it be your position that the
> whole site would have to be or only whatever portion of it contains
> the material promoting or attacking a Federal candidate?
>
> MR. POTTER: I don\'t know the answer to that. I think that\'s
> something worth looking at.
>
> VICE-CHAIRMAN TONER: Okay; the other thing is, and this hasn\'t been
> discussed; I want to make sure I understand your written comments. At
> pages 20 to 21, you talk about another aspect of the rulemaking,
> considering generic campaign activities. And as I understand the
> critique of the current rule limiting generic campaign activities to
> public communications; and the proposal, as I understand it, on page
> 21 of your comments that basically, generic campaign activities ought
> to encompass all generic activities of a state party, not just those
> that are public communications.
>
> And you mentioned that perhaps it should apply to, for example, phone
> banks directed to fewer than 500 people or mailings that maybe reach
> fewer than 500 people. I just want to make sure I understand the
> concern. Do you believe that we\'re legally required to take that
> position?
>
> MR. POTTER: Well, I think the Counsel was right in noting that this
> was a pretty clear requirement in BCRA and that it\'s important that
> it include all types of generic activity. So I think yes, it is
> something, as we said in our comments, that we urge the Commission to
> look at this issue and to see whether it is covering everything it
> ought to cover, was intended to cover.
>
> VICE-CHAIRMAN TONER: So if a state party sent out 300 mail pieces
> promoting a party, you know, vote Republican in November or whatever
> other type of generic activity, the view would be that that would be
> Federal election activity?
>
> MR. POTTER: Yes, just as any other activity would be that\'s of a
> generic party nature at that time in the election cycle.
>
> VICE-CHAIRMAN TONER: With no numerical threshold, no need that it be
> 500 pieces or 500 phone calls?
>
> MR. POTTER: I think our point in the comments is that we don\'t see
> such a threshold in the statute itself.
>
> VICE-CHAIRMAN TONER: That\'s something that we struggled with in terms
> of whether we have the legal ability to establish any of the
> thresholds we\'ve talked about.
>
> Mr. Chairman, just one final question. I wanted to ask Mr. Black, on
> pages 4 to 5 of your comments, you talk about the challenge of keeping
> up with sophisticated Internet users, and I just want to read briefly
> from your comments, that you say: The architecture of the Internet is
> such that enforcement of regulations on all of the proposed areas may
> be quite difficult, even futile, and the FEC should be aware of the
> ways in which certain of its efforts might be evaded.
>
> Almost all these proposed regulations have the potential to drive
> bloggers underground in order to avoid potential complaints. You talk
> about offshore accounts and all of the other activities that I guess
> people of significant means enjoy. And then, you say on page 5, as
> such, it will be those bloggers who post under their real names who
> will bear the brunt of the regulations, not those truly seeking to use
> the medium in nefarious ways. Could you elaborate on your concerns?
>
> MR. BLACK: Well, the concern is that if, you know, bloggers who are
> operating with sort of the maximum of transparency about who they are
> and what their agenda is are the ones who would in a sense face the
> kind of scrutiny that they could potentially face, while anyone who is
> wishing to engage in nefarious activity could do so quite easily, and
> it would be very difficult, you know, if this were a more widespread
> practice, it would be very difficult, in a sense, to track them down.
> They could be doing it offshore. As I said, they could be doing it
> anonymously, and there\'s nothing wrong necessarily with anonymity,
> per se.
>
> They could essentially be hiding their identity for the purposes of
> evading scrutiny, they could successfully do so, and they would be
> able to at least often successfully do so.
>
> VICE-CHAIRMAN TONER: Let me ask you more bluntly.
>
> MR. BLACK: Sure.
>
> VICE-CHAIRMAN TONER: Do you believe that if we pass proposed
> regulations in this area, it may create an incentive for people to go
> offshore with their Internet activity that affects politics?
>
> MR. BLACK: Yes, and going offshore wouldn\'t necessarily make it
> impossible to track down the users; I mean, there\'s two senses they
> may go offshore: they may physically move to France.
>
> VICE-CHAIRMAN TONER: Must be nice. Not France but\--
>
> MR. BLACK: Essentially, the servers would be located in a country
> where it would be difficult to get all the information law enforcement
> would need to get in order to essentially\--
>
> VICE-CHAIRMAN TONER: Difficult for this agency to\--
>
> MR. BLACK: Yes.
>
> VICE-CHAIRMAN TONER: \--as much as we\'d like to go to Bermuda and
> places like that.
>
> MR. BLACK: Right, exactly.
>
> VICE-CHAIRMAN TONER: Mr. Bassik, your thoughts on that? Do you think
> there\'s the potential for that type of evasion if we pass regulations
> in this area?
>
> MR. BASSIK: Yes; the Internet is an extremely easy medium to have a
> major presence on it.
>
> VICE-CHAIRMAN TONER: Offshore.
>
> MR. BASSIK: The thing about television, for example\--
>
> VICE-CHAIRMAN TONER: Unlike television and radio.
>
> MR. BASSIK: Somebody in France can\'t really buy television in the
> U.S. to impact the election here. Someone cannot engage in that
> activity. But it\'s just as easy for someone in Canada or someone in
> the States to use an offshore server to create a whatever dot com that
> is accessible here in the U.S.
>
> VICE-CHAIRMAN TONER: The email still comes, or the site is still
> accessible, as if it were in the United States.
>
> MR. BASSIK: Exactly, and to the layperson or even to the experienced
> individual, you would not be able to tell the difference. Absolutely.
>
> VICE-CHAIRMAN TONER: Thank you.
>
> MR. SANDSTROM: Could I answer that?
>
> It shows essentially the futility of this effort. You will shut down
> the local ward committee, but the local ward chairman as an individual
> can set up the same site. We\'ll shut down the ward committee in
> Chicago, but across the border in Toronto, someone could have that
> site. We will prevent people, you know, and party committees engaging
> in all these activities where someone in a cave in Afghanistan, if we
> don\'t have our devices up to try to locate them, can actually be
> broadcasting over the Internet to the U.S.
>
> What are we essentially accomplishing? It just reminds me: when my
> children were young, they used to have me come in and check whether
> there was a monster under the bed. I used to come in; no monster under
> the bed. Each time, there was no monster under the bed. Right now,
> with respect to the Internet, there is no monster under the bed.
>
> COMMISSIONER SMITH: It\'s called the appearance of corruption.
>
> COMMISSIONER WEINTRAUB: The appearance of a monster under the bed.
>
> COMMISSIONER SMITH: Not really one, but people think there is one, so
> we need to stop it.
>
> MR. POTTER: Well, there is, of course, underlying all this a
> significant distinction in our laws and our constitutional
> jurisprudence between something that is done by a party committee and
> something that is done by an individual that goes not to the
> appearance but perhaps directly to corruption, which is who\'s
> spending the money? Who\'s giving them the money?
>
> If the individual does it out of their own funds, the Supreme Court
> has found that that is not corrupting. If, on the other hand, the
> individual gives the money to the party committee, and they spend it
> on the Website, it is corrupting or potentially corrupting if it is a
> huge contribution. So you are back where you started, which is it does
> make a difference who\'s doing it in terms of where the money is
> coming from and who is soliciting the money and whether it is being
> given to a party committee that is, in the words of the Supreme Court,
> going to show gratitude for that contribution.
>
> COMMISSIONER SMITH: Mr. Chairman, could I have one point clarified?
>
> CHAIRMAN THOMAS: Commissioner Smith?
>
> COMMISSIONER SMITH: And it took me\--I wanted to double check, and I
> may still be missing something, but Mr. Potter, you said corporations
> cannot make endorsements. I\'m not even sure this matters, but when we
> talk about somebody spending money, I think it does. And I think
> that\'s wrong. You either point me\--I\'m either ignorant, and you
> need to point me to the statute or the reg. As I understand it,
> corporations can make endorsements. They can certainly make them and
> even spend money to advertise them to the restricted class, but they
> can make them even generally so long as they don\'t spend any money.
> What is prohibited is spending any expenditure.
>
> Now, one could take the position, I suppose, that a corporation cannot
> do that without spending money. If the board meets and they pass a
> resolution, they\'ve spent, you know, even if they don\'t debate it,
> they spent a minute of time, and, you know, they\'ve got 20 people who
> are worth, you know, \$800 an hour, and that adds up. So I guess\--am
> I missing something there, or is that not\--
>
> MR. POTTER: No, I don\'t think you are. That goes to the definition of
> expenditure. The Commission has, and the statute allows, a corporation
> to do certain things, as you\'ve pointed out, to its restricted class,
> such as endorse candidates. And it doesn\'t say they can endorse
> candidates to the general public.
>
> COMMISSIONER SMITH: Well, but they could if they didn\'t spend any
> money doing it.
>
> MR. POTTER: That gets to the perhaps theological question of can you
> do it without spending money.
>
> COMMISSIONER SMITH: That was my question.
>
> MR. POTTER: The Commission has taken the view, for instance, that
> using corporate letterhead is an expenditure, however difficult it is
> to define that, and thus, something of value.
>
> COMMISSIONER SMITH: And Mr. Chairman, if I could, I wanted to make one
> other suggestion. One of the good things about this hearing is there
> have been a number of comments made, particularly on technology and
> how people use the Web and things that I think our expertise needs
> this kind of commentary.
>
> And I was hoping that we might leave the record open for a couple of
> days if any of the witnesses wanted to submit things, particularly on
> how they used the Web or anything they felt there might have been some
> confusion or misunderstanding on our part that they didn\'t have a
> chance to answer on their panel, or it came up on a later panel. I\'m
> particularly concerned about the technology, because I think all of
> us, that\'s where sometimes, we\'re finding ourselves grappling a
> little bit exactly how people are doing it.
>
> So may I make that suggestion and\--
>
> CHAIRMAN THOMAS: Let me ask our Counsel\'s office, is there a problem
> with saying that witnesses have an opportunity, and I hope also
> Commissioners, who, as I have said, I\'ve made reference to articles
> and so on; I think we should be putting those in the record to the
> extent we feel it\'s appropriate so that it\'s sort of available for
> everyone; they\'ve been referenced and so on.
>
> Is there a problem with doing that?
>
> MS. SMITH: I believe, Mr. Chairman, that we have had a practice of
> doing that on occasion in the past. I would just suggest that we set a
> time, a certain amount of time so that everyone knows how much they
> have.
>
> COMMISSIONER SMITH: I would hope we keep a pretty short deadline on
> that so we can keep this, you know, that phase moving forward.
>
> CHAIRMAN THOMAS: We\'ll say without objection we will allow the
> witnesses and Commissioners to add additional explanatory material to
> the record for one week.
>
> COMMISSIONER WEINTRAUB: Mr. Chairman, I wonder if I could ask your
> indulgence to ask a couple of quick follow-up questions to the
> Vice-Chairman\'s questions.
>
> CHAIRMAN THOMAS: While we\'ve got them.
>
> COMMISSIONER WEINTRAUB: Thank you. I appreciate it.
>
> I\'m concerned about this issue of people going offshore and
> underground, and we tried very hard not to cover bloggers in our
> proposed rule, so which aspects of the proposed rules that we put out
> for comment do you think would drive people offshore, underground?
>
> MR. BASSIK: I would say the obvious one would be incorporated bloggers
> who do not receive the media exemption would be the most\--
>
> COMMISSIONER WEINTRAUB: What if we put something in that said that
> they could incorporate for liability purposes, and it wouldn\'t be an
> issue?
>
> MR. BASSIK: If those same exact people were also given an individual
> or a group of individual exemption as an extension of the volunteer
> exemption\--
>
> COMMISSIONER WEINTRAUB: That would solve the problem?
>
> MR. BASSIK: Yes, I believe so.
>
> COMMISSIONER WEINTRAUB: Because I think that\'s doable.
>
> And I wanted to ask one quick follow-up for Trevor on this issue of
> the state party Websites, because I think this is very important. As I
> read our regulations interpreting correctly, I think, the statute, a
> state party can\'t allocate the cost of a public communication, so if
> we bring their Website in as a public communication, they\'re not
> going to be able to, as long as there is a PASO reference to any
> Federal candidate anywhere on the Website or any generic campaign
> activity on the Website, they\'re going to have to pay for the whole
> thing with hard dollars. Do you have a different understanding of
> that? Because you have suggested in your written comments that they
> can use time/space, which I think presents logistical difficulties
> anyway but\--
>
> MR. POTTER: That\'s why I said I wasn\'t sure of the answer to
> Commissioner Toner\'s question, because he\'s taking the other
> assumption, which is that the public communication is that page or
> that reference, not the entire Website.
>
> COMMISSIONER WEINTRAUB: Well, what\'s your position?
>
> MR. POTTER: Well, I\'m not sure. In our comments, we have said that we
> think you can allocate the cost. If you\'d like, I\'d be happy to give
> you a more considered response to that.
>
> COMMISSIONER WEINTRAUB: I would appreciate that greatly. Just a
> second; let me ask one more question of Trevor, and that is
> logistically, I used the example yesterday of the Arizona State
> Republican Party Website, which a few months ago, when I looked at it,
> had a nice montage of all of their candidates including Senator McCain
> and President Bush and a lot of their state candidates on their front
> page.
>
> And if you go to it now, most of those pictures have disappeared, and
> now, they\'ve got a picture of President Bush, so the Websites are
> dynamic; they change on a regular basis. How exactly are we to do or
> are the state parties to do this time/space allocation when you are
> looking at something that changes over time and, you know, regularly?
>
> MR. POTTER: I would be happy to incorporate that in my answer, because
> I think it\'s the same general issue.
>
> COMMISSIONER WEINTRAUB: I would appreciate that.
>
> Commissioner Sandstrom?
>
> MR. SANDSTROM: Trevor\'s answers assume far more formality and
> structure to much of the political parties than there actually is.
> People get elected precinct chair, or there may be a precinct
> committee or a ward committee or a county committee, and it\'s a very
> volunteer-based structure. They are not determining, and I know that
> we were sued because we tried to put a threshold on when you have to
> register and report to even make it de minimis.
>
> The people who objected to that said that would introduce corruption.
> So the idea that even down to the precinct level that these entities
> would have to register and report and only use Federal dollars is a
> rather preposterous notion, since they could actually go wear another
> hat and do it as an individual.
>
> If the party were this formal structure that it seems to, you know, be
> the cause for all this concern, and I share the concern, but that is
> not the party I know.
>
> COMMISSIONER WEINTRAUB: Well, I know our experience in auditing
> numerous state party committees is that they\'re not quite as well
> organized as maybe they ought to be.
>
> Mr. Chairman, I thank you very much for the\--
>
> CHAIRMAN THOMAS: And I\'m sure the same lack of organization is on the
> other side of the aisle as well. It\'s not just that we\'re Democrats,
> I hope.
>
> COMMISSIONER WEINTRAUB: That\'s not our experience as\--
>
> MR. POTTER: That was Will Rogers\' belief.
>
> CHAIRMAN THOMAS: I think that brings us to the end.
>
> Vice-Chairman Toner, did you want to follow-up?
>
> VICE-CHAIRMAN TONER: If I could follow-up, please, I want to follow-up
> on Commissioner Weintraub\'s questioning. I want to make sure I
> understand: bloggers, it\'s your position that as long as bloggers
> were, per se within the press exemption, then, the offshore issue
> would be solved.
>
> MR. BLACK: I believe so, yes.
>
> VICE-CHAIRMAN TONER: But if we took a case-by-case approach to
> bloggers, it could be a totally different story.
>
> MR. BLACK: Well I mean, a case-by-case approach to bloggers would
> essentially put undue burdens on people; you know, I mean, I have a
> big blog, and I earn money. But, you know, lots of bloggers who earn
> \$10 a month or no money at all. And so, if, in fact, you know, by
> simply setting up a Website and posting your opinions about things
> including Federal candidates on your Website would potentially, you
> know, bring the scrutiny of the Commission to you, especially if, you
> know, that puts an undue burden, it would really have a chilling
> effect on Internet speech.
>
> VICE-CHAIRMAN TONER: And regardless of what we do on bloggers, in
> terms of the paid advertising on corporate paid advertising avenues,
> there still would be the offshore component of that, would there not?
>
> MR. BLACK: Can you repeat the question? I\--
>
> VICE-CHAIRMAN TONER: Sure; any paid advertising on the Internet that
> you might place on a corporately-owned facility that is outside the
> United States.
>
> MR. BLACK: Yes; I think I understand what you\'re saying. You\'re
> basically saying that if I place an ad on\--
>
> VICE-CHAIRMAN TONER: Yahoo UK.
>
> MR. BLACK: Yahoo UK\--
>
> VICE-CHAIRMAN TONER: \--that can be obtained here.
>
> MR. BLACK: Or even on Yahoo US if their servers happen to reside in
> Bermuda that this.
>
> VICE-CHAIRMAN TONER: Or any other search engine or Web construct that
> it is outside the United States.
>
> MR. BLACK: Yes.
>
> VICE-CHAIRMAN TONER: Thank you.
>
> MR. BASSIK: You can do that, but I think it would still be an
> expenditure.
>
> VICE-CHAIRMAN TONER: Right; but how are we going to police it? As much
> as I would like to go to Bermuda.
>
> MR. BASSIK: Well, I imagine it wouldn\'t be any different. I mean, the
> policing right now is based on who is making the expenditure, not on
> the media entity, so I don\'t see that changing, actually.
>
> VICE-CHAIRMAN TONER: Thank you.
>
> Thank you very much, Mr. Chairman.
>
> CHAIRMAN THOMAS: Well, I hope that not everybody is just going to move
> offshore, and none of this will be relevant to anybody in any context.
>
> We will bring this to a close. I want to\--Commissioner Mason, I\'m
> sorry; did you want to\--
>
> COMMISSIONER MASON: Commissioner Potter, this question about
> disclaimers that I was asking is, I think, closely related to the
> question you were just asking, and so, I think the answers at least
> will be closely related, and I want to emphasize I really think, just
> as it\'s a statutory problem for us to say we\'d all love to get a
> \$5,000 exemption, and maybe all of us here and all the witnesses
> could agree that would be a perfectly acceptable number, we just might
> not have the tools to do it.
>
> I just want to emphasize that I think it\'s a real problem that the
> distinctions you raise are ones that are reasonable, and in sort of
> the spirit of the statute might make sense, but I\'m very concerned
> that the statutory tools may not allow us to do that, and so, I would
> appreciate it if you would take a close look at the language of the
> statute and present to us if you think there really is a way to get
> where you\'re suggesting we go.
>
> MR. POTTER: I indeed will and have made those notes and am always
> happy when the Commission is concerned with the language and the
> spirit of the statute.
>
> CHAIRMAN THOMAS: Well, unlike a certain Chairman who recently stormed
> out and didn\'t let his colleagues go on beyond what we were going to
> otherwise go on, I am delighted that we took a little extra time and
> let everyone ask the questions they felt appropriate, and I thank the
> witnesses; very helpful. I thank all of the witnesses who came in
> helping this proceeding, and no further business appearing, this
> special session is adjourned.
>
> Thank you.
>
> \[Whereupon, at 4:12 p.m., the hearing was concluded.\]