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NET NEUTRALITY: IS ANTITRUST LAW MORE 

EFFECTIVE THAN REGULATION IN 

PROTECTING CONSUMERS AND INNOVATION? 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

REGULATORY REFORM, 

COMMERCIAL AND ANTITRUST LAW 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

JUNE 20, 2014 

Serial No. 113–111 

Printed for the use of the Committee on the Judiciary 

( 

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

COMMITTEE ON THE JUDICIARY 

BOB GOODLATTE, Virginia, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

LAMAR SMITH, Texas 

STEVE CHABOT, Ohio 

SPENCER BACHUS, Alabama 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

RAU ́ L LABRADOR, Idaho 

BLAKE FARENTHOLD, Texas 

GEORGE HOLDING, North Carolina 

DOUG COLLINS, Georgia 

RON DeSANTIS, Florida 

JASON T. SMITH, Missouri 

[Vacant] 

JOHN CONYERS, JR., Michigan 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO R. PIERLUISI, Puerto Rico 

JUDY CHU, California 

TED DEUTCH, Florida 

LUIS V. GUTIERREZ, Illinois 

KAREN BASS, California 

CEDRIC RICHMOND, Louisiana 

SUZAN DelBENE, Washington 

JOE GARCIA, Florida 

HAKEEM JEFFRIES, New York 

DAVID N. CICILLINE, Rhode Island 

SHELLEY HUSBAND, Chief of Staff & General Counsel 

PERRY APELBAUM, Minority Staff Director & Chief Counsel 

SUBCOMMITTEE ON REGULATORY REFORM, COMMERCIAL AND ANTITRUST LAW

SPENCER BACHUS, Alabama, Chairman 

BLAKE FARENTHOLD, Texas, Vice-Chairman 

DARRELL E. ISSA, California 

TOM MARINO, Pennsylvania 

GEORGE HOLDING, North Carolina 

DOUG COLLINS, Georgia 

JASON T. SMITH, Missouri 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

SUZAN DelBENE, Washington 

JOE GARCIA, Florida 

HAKEEM JEFFRIES, New York 

DAVID N. CICILLINE, Rhode Island 

DANIEL FLORES, Chief Counsel 
(III) 

C O N T E N T S 

JUNE 20, 2014 

Page 

OPENING STATEMENTS 

The Honorable Bob Goodlatte, a Representative in Congress from the State 

of Virginia, and Chairman, Committee on the Judiciary ................................. 1 

The Honorable Henry C. ‘‘Hank’’ Johnson, Jr., a Representative in Congress 

from the State of Georgia, and Ranking Member, Subcommittee on Regulatory Reform, Commercial and Antitrust Law ................................................. 2 

The Honorable Spencer Bachus, a Representative in Congress from the State 

of Alabama, and Chairman, Subcommittee on Regulatory Reform, Commercial and Antitrust Law ........................................................................................ 4 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, and Ranking Member, Committee on the Judiciary ......... 5 

WITNESSES 

The Honorable Joshua D. Wright, Commissioner, Federal Trade Commission 

Oral Testimony ..................................................................................................... 9 

Prepared Statement ............................................................................................. 11 

The Honorable Robert M. McDowell, former FCC Commissioner, and Visiting 

Fellow, Hudson Institute, Inc., Center for the Economics of the Internet 

Oral Testimony ..................................................................................................... 17 

Prepared Statement ............................................................................................. 19 

Bruce M. Owen, Morris M. Doyle Centennial Professor in Public Policy, 

and Director, Stanford Public Policy Program, Stanford University 

Oral Testimony ..................................................................................................... 42 

Prepared Statement ............................................................................................. 44 

Tim Wu, Professor of Law, Columbia Law School 

Oral Testimony ..................................................................................................... 70 

Prepared Statement ............................................................................................. 72 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Material submitted by the Honorable Henry C. ‘‘Hank’’ Johnson, Jr., a Representative in Congress from the State of Georgia, and Ranking Member, 

Subcommittee on Regulatory Reform, Commercial and Antitrust Law .......... 78 

Material submitted by the Honorable Suzan DelBene, a Representative in 

Congress from the State of Washington, and Member, Subcommittee on 

Regulatory Reform, Commercial and Antitrust Law ........................................ 90 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Supplemental Material submitted by the Honorable Robert M. McDowell, 

former FCC Commissioner, and Visiting Fellow, Hudson Institute, Inc., 

Center for the Economics of the Internet ........................................................... 98 

Supplemental Prepared Statement submitted by Bruce M. Owen, Morris M. 

Doyle Centennial Professor in Public Policy, and Director, Stanford Public 

Policy Program, Stanford University .................................................................. 141 

Letter from The American Antitrust Institute (AAI) ........................................... 155 

(1) 

NET NEUTRALITY: IS ANTITRUST LAW MORE 

EFFECTIVE THAN REGULATION IN 

PROTECTING CONSUMERS AND INNOVATION? 

FRIDAY, JUNE 20, 2014 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON REGULATORY REFORM, 

COMMERCIAL AND ANTITRUST LAW

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 9:03 a.m., in room 

2141, Rayburn Office Building, the Honorable Spencer Bachus, 

(Chairman of the Subcommittee) presiding. 

Present: Representatives Bachus, Goodlatte, Farenthold, Issa, 

Marino, Collins, Smith, Johnson, Conyers, DelBene, Jeffries, and 

Cicilline. 

Staff Present: (Majority) Anthony Grossi, Counsel; Ashley Lewis, 

Clerk; Christine Bealer, Law Clerk; (Minority) Slade Bond, Counsel; James Park, Counsel; and Rosalind Jackson, Professional Staff 

Member. 

Mr. BACHUS. The Subcommittee on Regulatory Reform, Commercial and Antitrust Law hearing will come to order. 

Without objection, the Chair is authorized to declare a recess at 

any time. 

At this time, we will have our opening statements. 

Would the Chairman of the full Committee like to go first? 

Mr. GOODLATTE. If you like, Mr. Chairman, I would be happy to. 

Mr. Chairman, thank you for holding this hearing. 

Regulation and antitrust law have long had an uneasy relationship. Antitrust law serves to protect a competitive process by prosecuting anticompetitive conduct if and when it occurs. Regulation 

typically dilutes or casts aside reliance on antitrust enforcement 

and attempts to constrain or direct market forces by imposing new 

rules of conduct. 

These approaches generally are at odds with each other and a 

natural tension has arisen between the two. 

There are few more important issues that will impact the future 

of the Internet than the question of whether to apply antitrust law 

or regulation to protect the Internet from anticompetitive and discriminatory conduct. 

I want to thank Chairman Bachus for holding today’s hearing on 

this critical question. 
2 

Proponents of imposing additional regulation on the Internet 

marketplace argue that it is needed to encourage competition and 

promote innovation. I am deeply skeptical of these claims. 

In my experience, regulation generally stifles rather than facilitates competition and innovation. In fact, it is my belief that the 

Internet has flourished precisely because it is a deregulated market. 

That is not to say that we should stand by and allow companies 

to engage in discriminatory or anticompetitive activities. 

I believe that vigorous application of the antitrust laws can prevent dominant Internet service providers from discriminating 

against competitors’ content or engaging in anticompetitive pricing 

practices. 

Furthermore, antitrust laws can be applied uniformly to all market participants, not just to Internet service providers, to ensure 

that improper behavior is prevented and prosecuted. 

In 2007, the Department of Justice expressed its preference for 

antitrust enforcement over regulation when it warned that, ‘‘The 

FCC should be highly skeptical of calls to substitute special economic regulation of the Internet for free and open competition enforced by the antitrust laws.’’ 

DOJ further stated that regulation ‘‘could in fact prevent, rather 

than promote, optimal investment and innovation in the Internet, 

with significant negative effects for the economy and consumers.’’ 

I understand that the nature of the Internet and the speed at 

which the market evolves could present challenges to enforcing the 

existing antitrust laws in the Internet context. We may need to 

consider amending the current antitrust laws to ensure that they 

can be applied promptly and effectively to protect the competitive 

nature of the Internet marketplace. 

The Judiciary Committee has long played a role in ensuring that 

antitrust laws are properly equipped and can be applied effectively 

in the telecommunications industry. This Committee will continue 

to play a key role advocating for strong antitrust enforcement and, 

certainly, will examine these issues closely to the extent telecommunications laws are rewritten over the coming years. 

I look forward to hearing from today’s witnesses on this important debate, and I yield back the balance of my time. 

Mr. BACHUS. I thank the Chairman of the full Committee, Mr. 

Goodlatte. 

Now I recognize the Ranking Member, Mr. Hank Johnson of 

Georgia, for his opening statement 

Mr. JOHNSON. Thank you, Mr. Chairman. 

The modern Internet is a powerful engine for social enrichment 

and, I would argue, for basic freedom in America and perhaps in 

other locations throughout the world, where the culture has attained this degree of intellect and innovation. 

Whether it is educational opportunities like the Khan Academy 

channel on YouTube, Starbucks’ recent announcement to offer its 

employees a free college education online through Arizona State 

University, or online hackathons that equip young minorities with 

tools to thrive in the innovation economy, consumers everywhere 

benefit from content services that educate, enrich, and connect us 

together. 
3 

It is no mystery why the United Nations lists Internet penetration as a key metric in reducing poverty. We all succeed when more 

members of society have access to such important tools online for 

productivity, education, and, indeed, personal well-being. 

That is why today’s hearing is such an important opportunity to 

discuss the best path forward to advance an open Internet. I 

strongly and unequivocally believe in an open Internet. 

Openness goes beyond economic concerns like growth and competition. Openness embraces our very core value as Americans, 

equality of opportunity. If our ideas are good enough, they should 

have a chance. 

Openness also separates us from closed, autocratic societies that 

limit the educational and social opportunities of their people. 

Look no further than the Great Firewall of China, which has established barriers to free expression, education, and cultural enrichment, and stunted the opportunity and growth of China’s people. 

Undoubtedly, antitrust agencies have certain advantages—like a 

prosecutorial mindset and a removal from political influence—that 

make them attractive as regulatory watchdogs. 

But as Tim Wu will testify later in today’s hearing, the current 

framework for antitrust law is designed for every kind of business 

in the world, but is a poor fit for noneconomic values like openness, 

freedom of expression, and, indeed, equality and freedom. 

It is also abundantly clear that the remarkable success stories of 

the first large Internet startups—Google, Amazon, and Yahoo— 

were not written in a regulatory vacuum. Rather, these companies 

all benefited from a regulatory ecosystem that encouraged the 

widespread deployment and adoption of broadband Internet. 

As an expert agency with 80 years of expertise over telecommunication services and, more recently, information services 

like the Internet, the Federal Communications Commission has 

been at the forefront of crafting regulations that not only encourage 

growth and competition, but also advance noneconomic values like 

equality of opportunity and fairness. 

Indeed, as the D.C. Circuit recognized earlier this year in Verizon 

v. FCC, regulations that ensure Internet openness have fostered a 

‘‘virtuous circle’’ of both social and economic fruit. Although the 

court ultimately vacated the open Internet order in Verizon, the 

D.C. Circuit strongly upheld the commission’s basis for promulgating net neutrality rules under Section 706 of the Telecommunications Act of 1996, precisely because Congress mandated the commission to encourage broadband deployment to advance this virtuous cycle of social and economic growth. 

There is little doubt in my mind that the D.C. Circuit blueprint 

in Verizon aptly demonstrates the commission’s authority to promulgate rules to protect the open Internet through its Section 706 

mandate. 

But the commission shouldn’t have to rely on this authority alone 

to uphold a common goal that countless Americans share. There is 

wide bipartisan agreement that updating the Telecommunications 

Act of 1996 is long overdue. 
4 

Yes, we all enjoyed the thrill of logging on to AOL or other Internet service providers over our dial-up modems in the 1990’s, but 

the Internet has changed since then. So should our laws. 

In closing, I thank the Chair for holding today’s hearing. As the 

sole Committee with jurisdiction over antitrust law, I look forward 

to working together with my Republican colleagues to ensure that 

the next great communications act upholds the common principles 

of competition and opportunity and equality and freedom, these 

being things that we all share. 

I look forward to today’s testimony, and I yield back. 

Mr. BACHUS. I thank the gentleman from Georgia. 

I want to welcome you to the hearing today. The hearing today 

is entitled ‘‘Net Neutrality: Is Antitrust Law More Effective than 

Regulation in Protecting Consumers and Innovation?’’ 

So we are not dealing with the whole subject of net neutrality 

or some time maybe more descriptive ‘‘network neutrality.’’ A lot of 

people don’t know what the ‘‘net’’ is, but I think it refers to the network. 

Let me say from the onset that our focus of the hearing is not 

on any specific agency proposals or any regulatory proposals, although they will undoubtedly be referred to during the hearing. 

Rather, the interest of the Judiciary Committee is whether the 

application of antitrust laws would be a more effective approach to 

protecting consumers and promoting innovation in this arena than 

the long, frequently contentious, and sometimes arbitrary, Federal 

regulatory process. 

It is becoming increasingly hard to recall when the Internet was 

not an integral part of our lives. It spurred new technologies, created jobs, established dynamic marketplace for goods and ideas. It 

is a wonderful educational tool. 

Fast-spreading technologies have always attracted significant interest because of public policy issues they raise. As a railroad attorney, I have studied the history of the railroads, and that was always a struggle between development of rails and regulation. 

And many of you who know that industry, overregulation almost 

killed the industry before the Staggers Act. It revived itself only because of the scaling down of regulation. But even today, there are 

tremendous issues in that industry, as well as this industry, public 

interest, public safety, et cetera. 

And these issues with the network deal with issues including access, competitive balance, and the tension between the private interest and public interest, between regulation and innovation. So it 

is always a balancing act. 

On May 15, the Federal Communications Commission proposed 

a rule, marking its third attempt to address the issue of net neutrality. Its two previous attempts were struck down by the courts. 

As regulatory proceedings continue to stretch on, a question I 

have is whether there may be a more efficient and more effective 

way to safeguard against potential discriminatory behavior than 

Federal rulemaking. That is where antitrust law comes in. 

Antitrust law has a number of benefits to consider. Antitrust law 

and the standards applied by the courts have developed, evolved, 

and been refined over decades. This stands in contrast to newly 

proposed regulations that include untested definitions and ap-
5 

proaches, which would be interpreted and enforced by a constantly 

rotating commission. And the courts, on many occasions, would be 

dealing with cases of first impression, as opposed to established 

case law. 

Antitrust law uniformly applies to all participants in the Internet 

marketplace. Recent FCC regulations, by comparison, would only 

apply to a smaller group of Internet service providers. Antitrust 

law prosecutes conduct once it occurs, and determines on a caseby-case basis whether a violation has occurred. Regulation is a onesize-fits-all approach, and imposes a burden on all regulated parties, regardless of whether the parties actually engaged in improper conduct. These regulations could also stifle legitimate and 

necessary innovation before it happens. 

And then you have the different approaches that different countries take, although the network or the Internet is a worldwide system. 

Antitrust law violations may be brought by both private actors 

and enforcement agencies equipped with lawyers, economists, technicians who have decades of experience policing anticompetitive 

conduct. Regulatory violations typically may be pursued only by a 

select group of defined parties and the regulatory agency. 

Notably, the FCC only has one single administrative law judge, 

and that is something that I was even not aware of before this 

hearing. 

These are only some of the factors that should be considered 

when determining whether an antitrust or regulatory approach 

should be taken to protect Internet users from anticompetitive conduct. 

Today’s witnesses are very distinguished and have perspectives 

from each of the relevant agencies, the FCC, the Federal Trade 

Commission, and the Department of Justice. 

And I noticed Commissioner Wright is here, so we actually have 

one of our sitting commissioners. We are glad you are joining. 

I look forward to hearing their testimony on the benefits and limitations of using antitrust law to protect consumers and innovation. 

At this time, I recognize the gentleman from Michigan, Mr. Conyers, the Ranking Member of the full Committee, former Chairman, for his opening statement. 

Mr. CONYERS. Thank you so much, Chairman Spencer Bachus, 

for holding what I consider an important hearing on net neutrality 

and the role of antitrust in ensuring a free and open Internet. This 

should be a very interesting hearing, to say the least. 

This Committee has a central role in studying the issue of net 

neutrality, and more generally, competition on the Internet, and I 

appreciate the Chairman’s decision to assert our jurisdiction. 

Turning to the specific question of whether antitrust is more effective than regulation in addressing net neutrality, we should 

keep in mind that we need a regulatory solution to address potential threats to net neutrality, and must allow the Federal Communications Commission to do its job. 

Congress created the FCC to develop expertise so that it could 

properly regulate the complex telecommunications industry. Any 

FCC rules to address net neutrality would have the benefit of addressing some potential threats to net neutrality before they fully 
6 

materialize. And it could do so in a manner that would be more 

comprehensive than the piecemeal approach of antitrust enforcement. 

Additionally, having a set of best practices enshrined in rules 

would provide certainty for the industry. The FCC’s efforts, therefore, must be given the opportunity to develop. 

And in developing its rules to ensure a free and open Internet, 

the FCC should incorporate the following principles. 

Broadband network providers should be prohibited from failing 

to provide access to its broadband network for any provider of content applications or services on reasonable and nondiscriminatory 

terms. 

Broadband network providers should be prohibited from blocking, 

impairing, or discriminating against or otherwise interfering with 

the ability of anyone to use a broadband service to use or access 

lawful content applications or services on the Internet. 

And there should be strong transparency requirements regarding 

clear disclosure to users of information concerning any terms, conditions, or limitations on the broadband network service. 

The FCC began its latest rulemaking process only a month ago, 

and so we must give time to allow this process to proceed. 

To the extent that we do look to antitrust law as a way of ensuring net neutrality enforcement of existing antitrust law, it would 

be insufficient. Under current antitrust law, there is relatively little that antitrust enforcers can do outside the merger review context to address the conduct of a regulated industry like broadband 

Internet service with respect to enforcing net neutrality principles. 

Through a series of decisions, the Supreme Court has limited the 

potential to successfully pursue claims under the Sherman Antitrust Act arising in the net neutrality context. Moreover, exclusive 

reliance on antitrust enforcement, while having the benefit of a 

more nuanced and fact-specific approach to the problem, would also 

be a cumbersome, more limited, more resource-intensive, and afterthe-fact way to develop a regulatory regime for net neutrality. 

Another potential approach would be for the Federal Trade Commission to use its authority under Section 5 of the Federal Trade 

Commission Act to stop unfair methods of competition. 

While I hold an expansive view of Section 5, to the extent that 

this approach goes beyond the scope of the Sherman Act or other 

antitrust laws, it would be very controversial, as some of my 

friends on the other side of the aisle would be the first to note. 

Moreover, antitrust law is not sufficiently broad in scope, as it does 

not address the noneconomic goals of net neutrality, including the 

protection of free speech and political debate. 

Our former Chairman of Judiciary, James Sensenbrenner, and 

Zoe Lofgren and I introduced bipartisan legislation in 2006 to 

strengthen antitrust law to address net neutrality in part because 

the FCC was doing too little at that time, in my view. 

And I certainly am open to suggestions on how antitrust law can 

be better tailored to address net neutrality concerns. But if we go 

down that path, current law must be modified to codify net neutrality principles. 
7 

So whether one supports a more antitrust approach or a more 

regulatory approach, inaction by Congress and regulators is not an 

option, as potential threats to net neutrality remain present. 

And in my opening statements in 2008 and 2011 on this very 

same issue, I noted that in many parts of our country, consumers 

have the choice of only one or two broadband Internet service providers that effectively function as monopolies or duopolies. I noted 

then that the market power that these broadband providers enjoy 

could lead to deferential treatment of content carried by the provider, depending on how much a customer pays or the financial incentives for discriminating for or against given content. 

The concerns I noted may have only grown since then, particularly in light of increasing consolidation in the telecommunications 

industry that may result in even less choice, less innovation, higher 

costs, and more power in the hands of fewer broadband providers. 

And having given you that impartial view of my position on this 

matter, I yield back the balance of my time and thank the Chairman of the Subcommittee. 

Mr. FARENTHOLD [presiding]. Thank you very much. 

And I have taken the Chair for Mr. Bachus, who was called away 

for votes in another Committee that he serves on. 

Without objection, other Members’ opening statements will be 

made part of the record. 

We really have a great panel today, and I would like to begin by 

introducing our witnesses. 

Commissioner Josh Wright is a sitting Commissioner at the Federal Trade Commission. He was sworn in January 1, 2013, to a 

term that expires in September 2019. Prior to joining the commission, Commissioner Wright was a professor at George Mason University School of Law and held a courtesy appointment in the Department of Economics. He is a leading scholar in antitrust law, economics, and consumer protection, and has published more than 60 

articles and book chapters, coauthored a leading casebook, and 

edited several books and volumes focusing on these issues. 

Commissioner Wright also served as coeditor of the Supreme 

Court Economic Review, and was a senior editor of the Antitrust 

Law Journal. 

Commissioner Wright previously served the FTC in the Bureau 

of Competition as its inaugural scholar in residence from 2007 to 

2008. 

He is focused on enforcement matters and policy. His return to 

the FTC marks his fourth stint at the agency after having served 

both in the Bureau of Economics and Bureau of Competition from 

1997 and 1998, respectively. 

Prior to his tenure at George Mason, Commissioner Wright 

clerked for Justice James Selna of the U.S. District Court for the 

Central District of California. Commissioner Wright graduated 

with honors from the University of California, San Diego, and received his J.D. and Ph.D. from UCLA. 

Mr. Robert McDowell, Commissioner McDowell, is former Commissioner of the Federal Communications Commission. He was appointed by Presidents George W. Bush in 2006 and Barack Obama 

in 2009, and unanimously confirmed by the U.S. Senate each time. 
8 

His second nomination made him the first Republican appointed by 

President Obama to an independent agency. 

During his tenure at the FCC, Commissioner McDowell worked 

continuously to forge a bipartisan consensus in adopting policies to 

promote economic expansion, investment, innovation, competition, 

and consumer choice. 

The Washington Post called him an independent force at the 

FCC, while Broadcasting & Cable magazine described his tenure as 

statesmanlike. 

Commissioner McDowell has also been an official member of the 

U.S. diplomatic delegation working on treaty negotiations and 

international conferences covering global spectrum and telecom 

policies. 

Prior to joining the FCC, Commissioner McDowell worked in a 

senior position in the telecommunications industry for 16 years. 

He graduated cum laude from Duke University and received his 

law degree from the College of William and Mary School of Law. 

Professor Bruce Owen is Morris M. Doyle Centennial Professor 

in Public Policy at Stanford University and a senior fellow in the 

Stanford Institute for Economic Policy Research. He directs the 

Stanford Public Policy Program, which offers undergraduate and 

graduate degrees in public policy analysis. 

Professor Owen was the chief economist in the office of Telecommunications Policy at the White House under President Nixon, 

as well as chief economist in the Antitrust Division of the Department of Justice under President Carter. 

Following his public post, he taught economics at both Duke and 

Stanford. Professor Owen has published numerous books and articles on mass media, economics, telecommunications, and regulatory 

policy, among other topics. 

Professor Owen received his B.A. from Williams College and 

earned his Ph.D. at Stanford. Welcome. 

Professor Tim Wu is a professor of law at Columbia Law School 

in New York City, where he teaches courses in, among other 

things, communications law and intellectual property. Professor 

Wu has also taught at the law schools of Harvard, Stanford, University of Chicago, and the University of Virginia. 

Professor Wu recently served as senior adviser in the Competition and Consumer Protection Division at the Federal Trade Commission. He is also widely credited with coining the term ‘‘net neutrality’’ through the publication of his paper, ‘‘Network Neutrality, 

Broadband Discrimination.’’ 

Professor Wu clerked for Judge Richard Posner at the Seventh 

Court of Appeals, and Supreme Court Justice Stephen Breyer. 

Professor Wu received a bachelor of science degree in biochemistry from McGill University and his law degree from Harvard, magna cum laude. 

Each of the witnesses’ statements will be entered into the record 

in its entirety, and I ask that each witness please summarize your 

testimony in 5 minutes or less. 

You have some indicators in front of you. Much like the traffic 

signal, green means go, yellow means hurry up, and red means 

stop. 
9 

So we will get going, and we will start with Commissioner 

Wright. You are recognized for 5 minutes. 

TESTIMONY OF THE HONORABLE JOSHUA D. WRIGHT, 

COMMISSIONER, FEDERAL TRADE COMMISSION 

Mr. WRIGHT. Chairman Goodlatte, Chairman Bachus, Ranking 

Members Conyers and Johnson, and Members of the Subcommittee, thank you for the opportunity to appear before you 

today. My name is Josh Wright, and I am a Commissioner at the 

Federal Trade Commission. 

I am pleased to join you to discuss competition and regulation in 

the broadband sector and, more specifically, the issues highlighted 

by the ongoing debate surrounding net neutrality. 

I should make clear at the outset that the views I express today 

are my own and do not necessarily reflect the views of the Federal 

Trade Commission or any other commissioner. 

Today, I will focus my comments upon competition policy and 

regulation in broadband markets from a consumer welfare perspective. Consumer welfare is the lodestar of competition policy and 

antitrust, and it guides decisionmaking at the FTC. 

The consumer welfare approach harnesses the power of rigorous 

economic analyses to inform competition policy and antitrust. 

This emphasis on consumer welfare makes antitrust particularly 

well-suited for tackling complex issues and questions related to 

broadband competition, and for addressing the important issues 

raised in the net neutrality debate. 

More specifically, the ‘‘rule of reason’’ analytical framework that 

lies at the core of antitrust analysis can be deployed effectively to 

analyze business practices in the broadband sector and to separate 

conduct that increases consumer welfare from those business practices that make consumers worse off. 

I would like to begin by discussing net neutrality from an economic perspective. At its heart, the net neutrality debate concerns 

the competitive effects of what economists would describe as 

vertical contractual arrangements between broadband providers 

and content providers. 

Put another way, net neutrality is about the fear that broadband 

providers will enter into business arrangements that disadvantage 

certain content providers, harm competition, and thereby leave consumers and Internet users worse off. 

For example, a broadband provider might enter into an exclusive 

contract with an online video site to foreclose a rival video site’s access to the broadband provider’s subscriber. This type of potential 

competitive concern is grounded in antitrust economics, and more 

specifically, in the ‘‘raising rivals costs’’ literature familiar to students of antitrust. 

Proponents of net neutrality traditionally have responded to 

these types of concerns by favoring a rigid, categorical ban or other 

significant restrictions upon broadband providers’ ability to enter 

into vertical contractual relationships. 

Fearing that any network discrimination by broadband providers 

creates undue risk of competitive harm, they often have argued for 

a one-size-fits-all approach prohibiting such arrangements. This ap-
10 

proach, however, fails to recognize the fundamental economic point 

that most vertical contractual relationships benefit consumers. 

The economic literature is replete with examples and empirical 

evidence that vertical contracts create consumer benefits by reducing double marginalization, preventing free-riding, facilitating new 

business models on entry, and aligning manufacturer and distributor incentives. 

Consumers benefit from these efficiencies because they are 

passed on to them in the form of lower prices, increased output, 

more content, higher quality, and greater innovation. 

Moreover, considerable empirical evidence further supports the 

view that vertical contracts are more often than not procompetitive. 

These empirical studies cut sharply against the idea that 

broadband providers necessarily will use such arrangements in a 

way that harms competition. 

The marketplace experience and learning also demonstrates that 

so-called non-neutral business models deployed by providers have 

proven highly beneficial to consumers. 

For instance, in 2002, a fledging Google was able to strategically 

achieve economies of scale by beating out its competition in a bid 

to become the default search engine on AOL, then the country’s 

leading Internet service provider, by offering a substantial financial 

guarantee. 

To be clear, the economic literature and empirical evidence does 

not claim that vertical contracts never create competitive concerns. 

The correct regulatory question is not whether vertical contracts 

can harm consumers, but rather what regulatory structure and 

legal rules will best promote consumer welfare in this context? 

Any economically coherent answer to that question must, in my 

view, begin with the fundamental observation and market experience that the business practices at the heart of the net neutrality 

debate have generally been procompetitive. 

In light of the economic theory and evidence, in my view, antitrust offers a superior analytical framework—one that focuses upon 

consumer welfare—to address any potential anticompetitive concerns in the broadband sector. 

Over the past century, antitrust jurisprudence has evolved a 

highly sophisticated ‘‘rule of reason’’ balancing approach for investigating whether vertical arrangements are anticompetitive in practice. The ‘‘rule of reason’’ framework is a flexible one that allows 

consumers to benefit from the vast number of vertical agreements 

that help consumers while also creating a means, grounded in 

sound economics and evidence, for identifying those contracts that 

harm consumers. 

In closing, it is my belief that antitrust offers a superior approach to addressing anticompetitive concerns in broadband markets in a manner that achieves the best result for consumers. 

I will be happy to answer any questions. Thank you. 

[The prepared statement of Mr. Wright follows:] 
11 
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13 
14 
15 
16 
17 

Mr. FARENTHOLD. Thank you, Commissioner Wright. 

We will now go to Commissioner McDowell. 

TESTIMONY OF THE HONORABLE ROBERT M. McDOWELL, 

FORMER FCC COMMISSIONER, AND VISITING FELLOW, HUDSON INSTITUTE, INC., CENTER FOR THE ECONOMICS OF THE 

INTERNET 

Mr. MCDOWELL. Thank you, Mr. Chairman, Ranking Members, 

and Members of the Committee. It is an honor to be back here before your Committee again today. 

At the outset, I should make clear that it is my hope that the 

Internet remains open and freedom-enhancing, as it has been since 

it was privatized in the mid-1990’s. 

As the Internet migrated further away from government control, 

it proliferated beautifully, growing from just under 90,000 users in 

the late 1980’s to approximately 3 billion users globally today. 

Its success as the fastest-growing disruptive technology in 

human history was the direct result of the Clinton administration’s 

bipartisan policy to keep the government’s hands off the Internet 

sector. In short, the Internet is the greatest deregulatory success 

story of all time, in my view. 

When it comes to the net neutrality debate, it is important to remember that nothing is broken that needs fixing. The FCC is pursuing new rules without the benefit of a comprehensive, peer-reviewed economic study, something I have called for time and again 

over many, many years. 

If there is systemic market failure, let’s discover that through a 

data-driven process. 

In 2007, the Federal Trade Commission examined the market. 

And in a unanimous and bipartisan fashion, found that there was 

no market failure, while eloquently warning against creating new 

rules that may produce harmful, unintended consequences, a report 

whose lead staffer was another FTC Commissioner, Maureen 

Ohlhausen. 

Instead of making a new and untested body of law that would 

produce uncertainty and potentially collateral regulation of the entire Internet sector, our public policy should rely on what has 

worked so well for virtually every other aspect of the highly complex American economy: our antitrust and consumer protection 

laws. 

Those laws are effective, enjoy a century of court-tested legal 

precedent, and can be administered by the Federal Trade Commission at the same speed, or lack thereof, as the Federal Communications Commission. 

Additionally, other State and Federal statutes and common law 

offer powerful consumer protections, such as those covering breach 

of contract, tortious interference with contract, deceptive trade 

practices, fraud, and much more. 

For instance, if ISPs were to breach their terms of service with 

customers, the plaintiffs bar would have a field day launching an 

uncountable number of class action lawsuits. These are powerful 

deterrents against anticompetitive practices. 

Additionally, having been part of official U.S. diplomatic delegations to negotiate treaties in the communications space, as well as 
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recently being a member of the international blue ribbon panel on 

Internet governance, I can personally attest to the influence of the 

American net neutrality debate on international efforts to regulate 

all corners of the Internet. 

The ongoing prospect of new net neutrality rules has generated 

thinking throughout the world that more regulation in the Internet 

ecosystem should be the norm. Recent initiatives in Europe, covering all types of Internet-related companies, underscore this point. 

In sum, Internet regulation appears to be a one-way ratchet. 

Lastly, today, I offer a warning. Some technology companies that 

are pushing for classification of Internet access as a telecommunications service under Title II of the Communications Act of 1934 

should be careful what they wish for. 

This section of the Communications Act is not only antiquated— 

in fact, the FCC just celebrated its 80th birthday yesterday—but 

it is particularly powerful, prescriptive, far-reaching, and, by some 

counts, has over 1,000 requirements. As market forces caused the 

technical architecture of tech and telecom companies to converge, 

companies that today are calling for the regulation of their rivals, 

and naively think they will not get swept up in Title II regulations 

themselves, could wake up one day having to live under its mandate. 

As a technical and business matter, transmission services and information services are quickly becoming indistinguishable. 

So across the globe, content and application companies are falling under the purview of more and more regulations and court orders. 

In conclusion, whether creating new rules or foisting antiquated 

laws on new technologies, the end result would be counterproductive and create uncertainty and unintended consequences. A 

better path would be to rely on time-tested antitrust and consumer 

protection laws that have helped make the American economy the 

strongest and most innovative in the world. 

Thank you for the opportunity to testify today, and I look forward to your questions. 

[The prepared statement of Mr. McDowell follows:] 
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Mr. FARENTHOLD. Thank you, Commissioner McDowell. 

We will now recognize Professor Owen for his 5 minutes. 

TESTIMONY OF BRUCE M. OWEN, MORRIS M. DOYLE CENTENNIAL PROFESSOR IN PUBLIC POLICY, AND DIRECTOR, STANFORD PUBLIC POLICY PROGRAM, STANFORD UNIVERSITY 

Mr. OWEN. Thank you, Mr. Chairman, Ranking Member, and 

Members of the Committee, for this opportunity to testify today. 

Net neutrality is a seductive slogan. It seems to have many people in favor of it, many of whom I suspect don’t know exactly what 

it means. Its meaning seems quite protean. It adjusts like a mutating virus to fit the defenses of the body against it. 

I think the most common current definition or usage of net neutrality involves what is more commonly called common carrier regulation. That is a public utility to which anyone has a right of access on nondiscriminatory terms. 

Now, we have a lot of experience with common carrier regulation 

in the United States, starting with the first Federal regulatory legislation in 1887, the Act to Regulate Commerce, which created the 

Interstate Commerce Commission, and began the regulation of railroads. Later, trucking and other modes of transportation were included, all under a common carrier rubric. 

The fact is that none of that regulation stopped discrimination. 

In fact, discrimination 20 and 30 years into regulation of transportation under the act was much worse, or at least much more extensive, than when it began. 

Moreover, like many other industries, the transportation industries became embedded in the political economy of the regulatory 

structure. The loudest voices affecting transportation policy in 

Washington were the railroads, and the trucking industry itself. 

And before very long, before the Depression, in fact, we had a series of regional monopolies or cartels overseen and refereed by the 

regulator. And the results for consumers were not good. 

Consumers were clearly worse off. They paid higher prices, output was reduced, entrants were kept out, and innovation was resisted, because you had to get a license from the ICC to compete 

in the transportation business. And one of the things the ICC took 

into consideration was whether the current incumbents would be 

harmed. 

The issue was not whether customers would be benefited, but 

whether incumbents would be harmed. 

The same thing happened in telecommunications and telephone 

regulation, in particular. It came to be true that the interests of 

AT&T, the old Bell monopoly that was broken up in 1982, were primary at the FCC, and the interests of consumers were definitely 

secondary. 

Entrants were excluded. Technology was excluded or slowed. And 

consumers lost in order to benefit the incumbent monopoly. 

We don’t have a good history with regulation, even where there 

is a lot of concentration in the industry. 

I think, therefore, we have to be very careful before imposing 

regulation. The first stop, the presumption in our economy is competition, and the promotion of competition by the government is the 

ideal way to go. And if that fails, which it can do, then we turn 
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to regulation reluctantly as a last resort to solve serious and otherwise irremediable market failures. 

We don’t start with regulation. We start with competition. 

So there is no particular evidence that competition isn’t working 

in the parts of the telecommunications industry devoted to Internet 

supply. And there is every evidence that competition is in fact increasing, largely because of technology and, in particular, the growing use of portable devices supported by broadband wireless service. 

The capacity of wireless broadband service to serve the needs of 

consumers in competition with wireline Internet access providers is 

limited only by the FCC, which is in control of the amount of spectrum that can be devoted to that use. 

If we would like to see even more competition than we already 

have in local broadband access to the Internet, the first thing to 

do is to increase the spectrum available to wireless providers. 

Technology will also help with that. As we move to the fifth generation of wireless service, we will be able to provide greater 

amounts of service within roughly the same bandwidth. 

Antitrust policy promotes and protects competition. Regulation, 

whatever its intent and however well-meant, has the practical effect of suppressing competition. Antitrust promotes and protects innovation that makes it easier to enter an industry, when that 

would benefit consumers. Regulation, whatever the intent of it may 

have been, tends to suppress innovation in the interests of the incumbent regulated firms. 

It seems clear that antitrust is an effective way to preserve competition. One of those great victories of antitrust in the last century 

was breaking up the Bell System monopoly, the result of which was 

a huge increase in competition, both at the local level and in longdistance service. And, more important, unleashing the forces of innovation. 

The Bell telephone monopoly was a great inventor. Bell Labs was 

a wonderful source of—— 

Mr. FARENTHOLD. Professor Owen, if you could wrap it up. We 

need to try to stay on our time here. 

Mr. OWEN. I am sorry. 

But it was a reluctant innovator. AT&T didn’t become an innovator until after it was largely deregulated after the breakup. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Owen follows:] 
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Mr. FARENTHOLD. Thank you, Professor. 

We will now go to Professor Wu. 

TESTIMONY OF TIM WU, PROFESSOR OF LAW, 

COLUMBIA LAW SCHOOL 

Mr. WU. Chairman, Ranking Member, Members of the Subcommittee, thanks so much for holding this hearing. I welcome the 

opportunity. 

I can summarize my comments in a few sentences. I have the 

highest admiration for the antitrust laws and the agencies enforcing antitrust laws. But I simply don’t think they are equipped to 

handle the broad range of values and policies that are implicated 

by net neutrality and by the open Internet. 

Just to take a sample, what I am suggesting is that when we 

consider Internet policy, what we are really considering is not 

merely economic policy, not merely competition policy, but also 

media policy, social policy, oversight of the political process, issues 

of free speech. 

There are a wide range of noneconomic values that I fear the 

antitrust law, despite its expertise, despite the decades, indeed, 

over a century of lawmaking in that area, simply does not capture. 

And for that reason, I think that, despite its imperfections, we 

should stick with the process of FCC oversight of the Internet and 

enforcement of net neutrality rules. 

So let me break some of these ideas out a little bit. 

First, as I said, I have enormous appreciation for the antitrust 

laws and the agencies that enforce them. I served for some time at 

the Federal Trade Commission. 

And I think there are some advantages that the FCC could learn 

from in this area. There is a commendable insulation from influence. The adversary process is very well handled. I think the FTC 

does a good job at what it does. 

The problem is with the FTC and other antitrust agencies is that 

they are optimized for one kind, or two kinds in the case of FTC, 

two kinds of problems. And that is the protection of consumer welfare through the competitive process. 

And this is obviously a worthy goal. I am not going to sit here 

and say we shouldn’t protect the competitive process. That is terrific. 

And this is typically accomplished by focusing on a complex and 

very sophisticated economic analysis, which, again, I commend 

when we are considering only the issue of competition. 

The problem is that in its day-to-day operations, the Internet implicates a whole host of noneconomic values, which are simply not 

well-captured by antitrust processes. 

Let me just give an example. Let’s imagine we had an Internet 

service provider that for its own reasons decided it did not like political speakers on one or another side of the spectrum. Let’s say 

we had a different ISP that for whatever reason believed that local 

news sources were less valuable than national news sources and 

decided to favor them. Or let’s say we had an ISP that had a bias 

in favor of big speakers as opposed to small speakers, for whatever 

reasons. Or maybe just something totally irrational, like it favored 

one sports team, it just thought the New York Rangers were a bet-
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ter hockey team despite losing the Stanley Cup than the L.A. 

Kings, and so tried to adjust coverage around sports. 

Whatever it was, these are the kinds of issues, whether political, 

social, sports, whatever, you name it, that simply do not register 

in the antitrust analysis, because if you have political bias, it 

doesn’t necessarily give a competitive advantage to the ISP. 

And so what I am trying to suggest here is that at stake in the 

net neutrality debate is really protection of the American political 

process and protection of the United States as an open society. And 

we can’t accomplish that simply—we can’t leave a matter that important to the economists. That is what I am trying to suggest. 

I have great respect for economists. I have a great respect for 

economic analysis. But I want to suggest we cannot leave the multiple values at stake in American society and in our political process to mere economic analysis. 

And I will close my comments right there. Thank you very much. 

[The prepared statement of Mr. Wu follows:] 
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Mr. FARENTHOLD. Thank you very much. 

We will now recognize the Chairman of the full Committee, the 

gentleman from Virginia, for the first round of questioning. 

Mr. GOODLATTE. Thank you very much, Mr. Chairman, for your 

forbearance. 

And, Professor Wu, while I disagree with much of what you just 

said, particularly the thought that, as has been attempted in the 

past, regulating the content offered by broadcasters on television 

and radio, which was a very popular thing to do in the past, and 

now that that has been pushed aside to allow for freer speech, I 

would suggest to you that we have far greater diversity of opinion 

expressed in that traditional market. And the thought that we 

would need to have FCC commissioners regulating content on the 

Internet to make sure that somebody’s avenue to access to the 

Internet was fair and balanced would be, to me, an extraordinarily 

harmful thing to do. 

But I want to commend you on one thing and that is you have 

picked a name for this subject, ‘‘net neutrality,’’ that stuck. I have 

been at this issue for a dozen years. Congressman Rick Boucher 

and I introduced legislation before Congressman Conyers and Congressman Sensenbrenner did several years ago. We called it ‘‘open 

access.’’ And I think we would probably agree on the principle that 

the Internet should have open access to all the competitors and all 

of the consumers that have access to it. 

So let me direct a question first to Commissioner Wright. It has 

been reported that, during peak hours, Netflix traffic accounts for 

approximately a third of all Internet traffic. When I saw that recently, I was amazed. I think that is a great credit to the popularity of Netflix, of whom I am one of their customers. 

This amount of traffic could indicative of a significant market position. One of the reasons that antitrust law holds more appeal 

than regulation is its ability to prosecute improper conduct by all 

market participants, not just a select few. And I am not in any way 

suggesting that Netflix has an improper market position. 

But to the extent that Netflix were to use its market position to 

engage in anticompetitive behavior, would antitrust law, or existing or proposed regulation, be more effective at policing improper 

conduct? 

Mr. WRIGHT. Thank you, Chairman. I appreciate the question. 

And ‘‘House of Cards’’ is quite a show. Whether it grants Netflix 

market power I think is a question that is one—the place where 

antitrust analysis began with such a question is what the antitrust 

laws do with respect to market power is say that if a firm achieves 

its market position by innovation, by building a better mousetrap, 

by making content that benefits consumers, this is the type of conduct that the antitrust laws celebrate rather than condemn. Antitrust laws step in when a firm with market power abuses it in such 

a way to make consumers worse off. 

Those sorts of concerns, that a Netflix, for a hypothetical example, or any firm in the broadband space with market power would 

discriminate in such a way to harm consumers would set off a set 

of standard analyses. The FTC and other antitrust agencies and 

courts, for that matter, have analyzed these problems for decades 
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upon decades in a variety of industries. And the formula, the algorithm, for analyzing these problems are now sort of well-known. 

I will say, with respect to the methodology rather than boring 

you with its details, that it is focused upon asking a central question of whether the conduct at issue makes consumers better off— 

in this case, Internet users—better off or worse off. 

Mr. GOODLATTE. I am going to interrupt you there, because I 

want to direct one more question, and I have 1 minute left. I am 

going to direct it to Commissioner McDowell. 

Antitrust law has the benefit of being available for prosecution 

of improper conduct, if and when it occurs. In your view, has there 

been a demonstration of widespread abuses by Internet service providers or other market participants that justifies deploying a before-the-fact regulatory approach to potential improper conduct on 

the Internet? 

And a follow-up question is, can you explain why the FCC is unwilling to conduct a cost-benefit analysis before regulating such an 

important component of our national economy? Is it fearful of the 

potential results? 

Mr. MCDOWELL. No, I am not aware of widespread market failure. And that is why for years I called for a bona fide, peer-reviewed market study to be put out for public comment time and 

time again. The FCC is 0-and-2 in the appellate courts. I can’t 

speak to their motivations. 

The courts have now handed the FCC a very tiny legal needle, 

and it is trying to put a big, fat regulatory rope through that eye. 

I think they will fail again in court unless they are very, very careful. 

And if anything, this is an issue for Congress to look at, if there 

were a market failure to begin with, which there is not. 

Mr. GOODLATTE. Thank you very much. 

Thank you, Mr. Chairman. 

Mr. FARENTHOLD. Thank you, Mr. Chairman. 

We will now recognize the Ranking Member, Mr. Johnson, for 5 

minutes. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

I would ask unanimous consent to include a letter from Consumers Union on the importance of rules to protect net neutrality, 

for it to be placed in the record. 

Mr. FARENTHOLD. Without objection, so ordered. 

[The information referred to follows:] 
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Mr. JOHNSON. And I would also, for clarification, just note that, 

Commissioner Wright, you are testifying before us today only in 

your individual capacity, and that your oral and written testimony 

do not necessarily reflect the views of the Federal Trade Commission. 

Is that correct? 

Mr. WRIGHT. That is correct. 

Mr. JOHNSON. All right, thank you, sir. 

Now, Professor Owen, you stated that most consumers are confused about the definition of the term ‘‘net neutrality.’’ Would you 

give us your definition? 

Mr. OWEN. I don’t have my own definition. 

Mr. JOHNSON. Okay, well, I will tell you what, then—— 

Mr. OWEN. I do my best to infer it. 

Mr. JOHNSON. All right, let me ask, then, for Professor Wu to 

give us his definition of the term. 

Mr. WU. Net neutrality is a principle that suggests that Internet 

carriers should give consumers what they want when they want it, 

and not stand in the way, not to block some sites, and not to favor 

some sites over others. It is just a basic principle of nondiscrimination, which we have in many public accommodations, inns, hotels, 

airlines, and so forth, as applied to the basic transportation facilities of the Internet. 

Mr. JOHNSON. All right, thank you. 

Commissioner Wright, the U.S. Supreme Court’s recent decision 

in American Express v. Italian Colors upheld the rights of companies to force arbitration of antitrust terms through adhesive 

clauses hidden in contracts in companies’ terms of service online. 

Are you familiar with that decision? 

Mr. WRIGHT. I am vaguely familiar with that decision. 

Mr. JOHNSON. Well, in her dissent, Justice Kagan clarified the 

issue. She said that as a result of that decision, AMEX’s contract 

will succeed in depriving Italian Colors of any effective opportunity 

to challenge monopolistic conduct allegedly in violation of the Sherman Act. The Federal Arbitration Act, the majority says, so requires. Don’t be fooled, she says, only the Supreme Court so requires. The Federal Arbitration Act was never meant to produce 

this outcome. In the hands of today’s majority, arbitration threatens to become more nearly the opposite, a mechanism easily made 

to block the vindication of meritorious Federal claims and insulate 

wrongdoers from liability. The Court thus undermines the Federal 

Arbitration Act no less than it does the Sherman Act and other 

Federal statutes providing rights of action. 

So, Commissioner Wright, in your written testimony, you argue 

that the courts should set the rules of the road for Internet openness through antitrust law. But how could a complaint of anticompetitive behavior even reach the courts if it is lawful to force 

every consumer, small business, and employee to arbitrate their 

claims in a foreign venue that is secret, that is for profit. 

You are familiar with arbitration process—no jury trial, no right 

to appeal. 

How does your opinion about how the Internet should be regulated fare in light of that Supreme Court ruling? 
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Mr. WRIGHT. I appreciate the question, and I am going to give 

you two quick answers. One is, there is nothing in that decision 

that would preclude the FTC or DOJ from bringing a case. We are 

not in arbitration agreements with any of the companies at issue. 

We bring investigations in areas where there are arbitration 

clauses all of the time. 

Mr. JOHNSON. The public, though, would be banned, essentially, 

from a jury trial. 

Mr. WRIGHT. The second reason—so that speaks for the public 

agencies, like the FTC and DOJ. 

Mr. JOHNSON. We would need the public subject to the government going to court. 

Mr. WRIGHT. The second part of the answer, with respect to private rights of action, I can tell you, perhaps not on an industryby-industry basis, but private rights of actions, both before and 

after the Supreme Court’s decision in Italian Colors, are alive and 

well. 

There is no downtick in exercise of private rights of antitrust action. In fact, over the last 30 years, private rights of action are at 

an all-time high. 

Mr. JOHNSON. Well, they are going to be at an all-time low, as 

we proceed forward under this U.S. Supreme Court ruling, which 

actually snuffs out the constitutional right, Seventh Amendment 

right, to a jury trial where the case in controversy exceeds $20 or 

more. 

So I will, at this time, yield back the balance of my time. 

Mr. FARENTHOLD. Thank you very much. 

The gentleman from Southern California has indicated that he is 

under a time constraint, and out of the good sense of yielding to 

my full Committee Chair on Oversight and Government Reform 

Committee, I will now recognize Mr. Issa. 

Mr. ISSA. Thank you, Mr. Chairman. And as a result, I will go 

to a different Subcommittee on the other side of this wall in just 

a few minutes, and I thank you. 

Professor Wu, I really appreciate your being here. I think you 

have given us the appropriate characterization of the true reason 

for net neutrality. You said it was social media policy, speech policy, political policy. You used words including control. All of that, 

you did voluntarily here, right? 

So what you are saying, in effect, is that if the FCC gets ahold 

of this, we would go back to the ‘‘Leave It to Beaver’’ times, times 

in which two married adults had to be in twin beds in order to get 

past the social norms of the day, times in which even today Bill 

Maher, who I often disagree with, can’t be on broadcast, because 

the FCC won’t let him on because he uses the ‘‘F’’ bomb too often, 

times in which complaints are being considered today and in the 

last year against ‘‘Two and a Half Men’’ because they are too sexually explicit. 

This is the FCC’s role. They are a regulatory policy entity that 

actually does limit free speech, carefully questions moral norms 

and the like. 

Do you have any way to tell me that that is not true, after your 

opening statement? 

Mr. WU. What I am trying to suggest—— 
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Mr. ISSA. Please answer the question, then you can pivot to your 

suggestion. 

Mr. WU. I am suggesting that if the antitrust agencies overtake—— 

Mr. ISSA. No, no. You were telling me the good reasons for the 

FCC to have this kind of control. And I have countered with you 

are absolutely right. Everything you said about social policy, 

speech, political, these are things the FCC has controlled over the 

airwaves for my entire life. 

Commissioner McDowell, you probably have the best perspective, 

because you are a former commissioner. And there is nothing like 

somebody who has been on both sides of it. 

Do you have any question but that, in fact, that is still today a 

part of how the FCC views its mandate, when it takes complaints 

on whether ‘‘Two and a Half Men’’ is crossing the line in broadcast? 

Mr. MCDOWELL. Absolutely. The FCC has control over speech 

over broadcast licensees under a doctrine called spectrum scarcity, 

which its days may be numbered at the Supreme Court. We don’t 

know yet. 

But it does have control over speech. 

And to build on Professor Wu’s comments, and a lot of other net 

neutrality proponents, this is about bringing such controls to the 

Internet as well. It is social policy, speech policy, political regulation policy. And I think that actually does summarize it quite well, 

just as he said. 

Mr. ISSA. Well, I have been in Washington for nearly 14 

years—— 

Mr. WU. With respect, if I can answer the question? 

Mr. ISSA. Well, I think you answered it wonderfully in how you 

phrased it. 

Mr. WU. No, I would just say that I—— 

Mr. ISSA. Professor, Professor, Professor, I will ask the Chair to 

remind you this is my time. I got an answer to your question. I will 

come back to you in a moment. 

Mr. WU. All right. 

Mr. ISSA. In my 14 years, the one thing I have noticed is that 

we like to harmonize things. 

So, Commissioner Wright and Commissioner McDowell, do you 

have any question but that there would be, if the FCC takes full 

net neutrality authority, if you will, that the FCC, by definition, 

will tend to want to harmonize other spectrum, such as broadcast 

and its limited cable role, with the Internet? 

In other words, the rules of the road for broadcast that have 

given us not having things on broadcast inevitably would be applied, at least in some part of the Internet, maybe similarly to how 

we regulate cable can only go so far. And I am just going to give 

you a simple question: You can’t put what some people consider 

pornography on broadcast television, can you? 

Mr. MCDOWELL. No. 

Mr. ISSA. And it is extremely limited as to what can be on cable? 

It cannot be a free-for-all? 

Mr. MCDOWELL. It cannot be obscene. It is a different constitutional standard. 
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Mr. ISSA. Right. But on the Internet today, it is limited only to 

criminal acts, is that correct? You can put anything on the Internet, no matter how much somebody doesn’t like it, as long as it is 

not a crime, is that correct? 

Mr. MCDOWELL. Correct. 

Mr. ISSA. And if it is a crime, then law enforcement regulates it? 

Mr. MCDOWELL. Correct. 

Mr. ISSA. Okay. 

Professor Wu, I will give you the last word. Do you see any inconsistency with exactly that? Because you are talking about in 

your statements about speech policy, social policy, control? Isn’t 

that part of the concern the American people should have, that 

much of what they see on the Internet could be regulated out of 

existence? 

Mr. WU. No, I disagree. Net neutrality prevents the exact opposite. Net neutrality protects the—— 

Mr. ISSA. Net neutrality doesn’t exist. Net neutrality is a concept, 

isn’t it? 

Mr. WU [continuing]. Platform for a diversity of freedom of 

speech. We have had net neutrality rules, de facto, for the last 20 

years. We have had an incredible outpouring of speech from all 

across the political spectrum. 

And I am suggesting that if we maintain—— 

Mr. ISSA. Professor, Professor, your own words indict you. 

One last quick question. It is an antitrust question. Isn’t our real 

ability to ensure competition in our control, if we, as a Congress 

and this Committee, define the relevant market, so that in fact it 

is intended—and promote competitiveness by defining a relative 

market to a low enough level to always ensure free flow of competition? 

Mr. JOHNSON. Mr. Chairman, I would ask for regular order, if we 

are not going to allow Professor Wu to answer the question. 

Mr. FARENTHOLD. It is Mr. Issa’s time. I indulged you with—— 

Mr. ISSA. To be honest, any of them can answer any of the questions, and the last question is one. 

I think I got the answers from Professor Wu. 

Mr. JOHNSON. The time has expired, Mr. Chairman. 

Mr. ISSA. Mr. Johnson, when the gentleman goes off of the actual 

question, it is not his time. And Chairman Conyers is over there, 

and he knows well. I ask a question. I asked Professor Wu to answer the question and be succinct. Now the fact is the pertinent 

question right now, and I don’t care how much time the Chairman 

gives to Professor Wu to go on disagreeing with us, but the pertinent question is the antitrust relevant market question. 

I would appreciate all four witnesses answering. 

Mr. FARENTHOLD. We will give them a short time to answer. And 

as your time is up, we will allow each witness a couple seconds to 

go in, and then we will recognize the gentleman from Michigan, if 

anyone wants to tackle that. 

Mr. WRIGHT. I hate to do it at this point, but can you repeat the 

question? 

Mr. FARENTHOLD. No. 

Mr. ISSA. It is short. The relevant market, in other words, how 

we define competition—is competition an entire State or is competi-
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tion what is available to you in your home. Those kinds of relevant 

markets we can set, which, of course, would make antitrust harder 

and harder to circumvent, which would push for more antitrust 

control over entities that have 60, 70, or 100 percent market share 

in your particular rural home. 

Mr. WRIGHT. That is a—yes, that is correct. There is a standard 

mode of market definition analysis with antitrust that I think has 

very sound economic principles that I think would serve just fine 

here. 

Mr. MCDOWELL. So the definition of markets is very key with 

what the FCC does in defining the public interest under its publicinterest standard. And when it comes to broadband, there is coaxial 

cable, there is fiber, there is copper, there is DSL. 

There is also wireless broadband, the fastest-growing segment of 

the broadband market. And there is unlicensed wireless broadband, 

which I have been a big proponent of for a long time. 

But also what is important here is how these companies are converging. These and no longer dumb pipes. As everything migrates 

to Internet protocol, there is intelligence embedded in networks. 

And if you are a content delivery network, you have networks. And 

if you are a traditional telco or cable company, you have networks, 

and you have intelligence and content embedded in those. 

And from an engineer’s perspective, they are starting to look a 

lot alike. And so the danger for the government trying to parse this 

and with a scalpel somehow outguess the marketplace, that is the 

big danger that will undermine innovation and investment, and our 

competitive advantage. 

Mr. FARENTHOLD. Professor Owen, if you could be real quick, we 

are way over on time here, if you want to take a stab at it. You 

are welcome to pass. 

Mr. OWEN. I have been invited to pass. I pass. 

Mr. FARENTHOLD. Professor? 

Mr. WU. All right. I will answer the question. 

Market definition is essential to the antitrust policy, and it 

would determine everything we do in this area. And it is one of the 

problems in this area, because the FCC is equipped to deal with 

issues like regionalism, like localism, like diversity, which are important American values that aren’t captured by an analysis that 

only focuses on market definition. 

Mr. FARENTHOLD. Thank you very much, Professor Wu. 

And we will now recognize the Ranking Member of the full Committee, the gentleman from Michigan, Mr. Conyers. 

Mr. CONYERS. Thank you, Subcommittee Acting Chairman 

Farenthold. 

Mr. ISSA. He looks good in that chair, though. 

Mr. CONYERS. I am impressed with the fact that we have three 

very distinguished witnesses taking one position, and Professor 

Wu, I would just like to go through a few things in the minutes 

that I have. 

Would the FCC be regulating content, as was suggested by our 

full Committee Chairman Goodlatte? 

And isn’t antitrust regulation weak and slow, and can’t operate 

in a preventive way? 
85 

Mr. WU. The answer to the question is the FCC would not be 

regulating content. Net neutrality is not a call for content regulations. It is a call for nondiscrimination norms on the Internet, 

which everyone on this panel seems to agree with in one form or 

another. 

And my suggestion is that by having a neutral platform, it has 

served as an incredible platform for free and diverse speech, and 

threats to the neutrality network ultimately threaten speech environment and the political process of the United States. 

I mean, how many political outsiders have come from nowhere 

from an Internet campaign? I would suggest, with respect to the 

Chairman of the full Committee—he seems to have left—that he 

has things precisely wrong, 180 degrees wrong, and doesn’t seem 

to understand the Internet very well, because, under net neutrality, over the last 20 years, we have an incredible flourishing of 

speech, including his speech, which would probably not have been 

heard in an earlier era. 

He owes and all speakers owe the Internet an incredible debt of 

gratitude for getting their voices out there, all of the speakers in 

our society. 

And so what I am suggesting is net neutrality has supported and 

upheld this network as a platform for speech and a platform for innovation and a platform for noneconomic values. None of this is 

well-captured by antitrust scrutiny. 

The FCC has taken—it hasn’t always been pretty, but over the 

last 20 years, it has taken a light-handed approach that has had 

incredible benefits for the entire society. 

And I agree with your suggestion that the antitrust laws, had 

they been in place over the last 20 years, probably would not have 

been adequate to oversee and create the kind of incredible speech 

and innovation environment we have seen over the last 20 years. 

So I thoroughly agree with your suggestion, and I think that the 

FCC, despite its imperfections, remains the right agency to oversee 

this network. 

Mr. CONYERS. I would like now to turn to our other three witnesses and ask if there was anything objectionable that was just 

uttered by Professor Wu? 

Yes, former Commissioner? 

Mr. MCDOWELL. It is great to see you again, Congressman, by 

the way. 

So I am not going to say an objection, but I think there is a fine 

point of distinction, especially for the House Judiciary Committee, 

which has jurisdiction over the First Amendment, which is when 

we are talking about speech, what I think the professor is offering 

is speech balancing. In the broadcast context, historically at the 

FCC, we call that the fairness doctrine. That would probably be 

ruled unconstitutional by the Supreme Court today. 

So when you have private parties speaking on private platforms, 

the constitutional precedent says the government can’t balance the 

speech, that that is actually censorship. 

When private parties shout down one another, that is not censorship. Censorship inextricably is intertwined with state power and 

state involvement. 
86 

Now, we want the Internet to be open and free and a great platform. That is going to come through abundance and competition. 

And that is what regulation actually subverts. 

Mr. CONYERS. Could I ask Professor Wu my last question? 

Mr. FARENTHOLD. Sure. 

Mr. CONYERS. Why can’t most people see what I think I have 

heard? Why is antitrust, which is slower and weaker and can’t get 

in front of a problem, why would it be advocated over the FCC? 

Is there something I don’t understand going on underneath this 

discussion? 

Mr. WU. I, certainly, don’t advocate it. 

Antitrust is slower and sometimes weaker. It is not always weaker. The AT&T breakup was pretty strong. 

But I think what it does is it would turn, as opposed to being 

a public debate over the open Internet, it would turn to an economists’ debate where you have one set of economists with one set 

of data and another with another. 

And as I have suggested, many of the important values, which 

I think are values in our communication network, values of our 

media, would be neglected. 

Mr. CONYERS. But there is more than that? 

Mr. WU. Yes, there are important values—localism, regionalism, 

diversity, technical expertise, all of which are lost when we turn to 

a purely economic analysis that only considers economic, financial 

aspects of the Internet. 

Mr. CONYERS. Thank you very much, Mr. Chairman. 

Mr. FARENTHOLD. Thank you, Mr. Conyers. 

I will now recognize myself for 5 minutes for questions. 

I am going to start with Professor Wu. I was going to not engage, 

but you have drawn me on. 

So what is broken now? Give me some examples of where you see 

Internet service providers regulating political speech or shutting 

down potential speakers? I don’t see a big public outcry that this 

is happening. 

Mr. WU. Right, I would point to the countries outside the United 

States where they don’t have net neutrality to suggest where you 

see the problem. 

Now, in the United States—— 

Mr. FARENTHOLD. But it is countries themselves that are doing 

that through their Internet policy, not so much private sector ISPs. 

Mr. WU. Often it is a mixture of the two, whether it is the private ISP or the government involved. I also don’t think the government should discriminate, should censor the Internet either. 

Let me say, the reason we haven’t had a problem over the last 

20 years is that we have had du jure or de facto net neutrality policy in place. 

Mr. FARENTHOLD. Again, I have limited time, so I want to get to 

some other people. 

This sounds like an ‘‘if it ain’t fit broke, don’t fix it’’ kind of argument. I have been on the Internet for a very long time. Back when 

I was in college in the 1980’s accessing USENET and things like 

that. And whenever there was some sort of content regulation or 

something that wasn’t deemed fair, there was a huge outcry. And 

I don’t think there is a more vocal advocacy group out there than 
87 

Internet users. We need look no further than we were looking at 

SOPA and PIPA in this Committee to see how effective an advocate 

Internet users are. 

You have the ability, even though we are seeing a consolidation 

in the number of providers in the vast—outside of rural areas, you 

typically have two or three providers. You have a cable provider, 

a wireline provider, and a wireless provider of broadband. 

So, Commissioner Wright, Commissioner McDowell, do you see it 

broken? Do you see a problem here? 

Mr. WRIGHT. I don’t. And the FTC has studies in this regard. 

But I want to focus on one part of your question, which is the 

values. We heard a lot about the values of Internet users in a variety of ways, reflecting on the debate. 

I think that is important to note that what consumers value in 

their activities on the Internet is in fact what lies at the center of 

antitrust analysis. I have heard now, I think, something that needs 

correction with respect to how cramped a view of antitrust sort of 

is out there. 

Antitrust is a consumer welfare-based system. This means what 

economists do is not merely focus on the things we can count, but 

also on what consumers value. 

And to the extent in antitrust analysis that things like the 

amount of content, the quality of content, innovation, things other 

than price and quantity, these are captured within an antitrust 

analysis. 

Mr. FARENTHOLD. Commissioner McDowell, did you have anything you wanted to add? 

Mr. MCDOWELL. So, first of all, I would like to say the Federal 

Trade Commission can act at the same speed as the Federal Communications Commission, or lack thereof. So the idea that antitrust 

law is slower moving is just not the case. 

But also, I think it is important to point out that those countries 

where the Internet is regulated more, there is less freedom overall, 

but especially less freedom of speech. There is a direct correlation 

between more regulation, more state involvement with the net and 

less freedom, because these countries are balancing—it is really 

censorship. 

Mr. FARENTHOLD. So potentially, could some of these net neutrality regulations get in the way of innovative offerings? 

I pay close to $100 a month for my Internet access. I like it fast. 

I have four people in my house who are typically all streaming at 

the same time. But my mother, before she passed away, was email 

and Facebook. With net neutrality making these streaming services 

equally available, as opposed to somebody who just wants to use 

the Internet and email, doesn’t it force Internet service prices higher and take away my options to buy a limited account? 

Mr. WRIGHT. The case for antitrust overregulation is as simple 

as this: The general economic view is these types of contracts 

across many industries help consumers. What the antitrust ex post 

approach allows you to do is have the benefits of those contracts 

when they help consumers and reserve enforcement for those instances where we can find, and we do, abuses of market power. It 

allows consumers to have both. 
88 

Mr. FARENTHOLD. All right. And Professor Wu and some net neutrality advocates have suggested that antitrust law is ill-equipped 

to deal with this. While I disagree, are there any tweaks that we 

should be looking at in antitrust law that would perhaps address 

these problems and be there, should the problem arise? 

Mr. WRIGHT. Antitrust over the last 50 years has evolved significantly a fine-tuned approach based on modern economics that focuses on consumer welfare. That approach is one that incorporates 

things like nonprice dimensions, quality and innovation, exactly 

the things that we would want an antitrust policy to do. 

In my view, the consumer welfare approach has served antitrust 

incredibly well. It is flexible enough to reach these types of concerns, and, in my view, doesn’t need any tweaking. It does what 

it does well. What it does well is broader than some of what we 

have heard. And I don’t think it should do more than what it already does well. 

Mr. FARENTHOLD. Thank you. 

I see my time has expired. We will now recognize the gentlelady 

from Washington, Ms. DelBene. 

Ms. DELBENE. Thank you, Mr. Chair. 

And thanks to all of you for being here today. Appreciate it. 

It is clear that we have bipartisan interest in ensuring a free and 

open Internet. And we all appreciate how essential it is to innovation and economic growth. And I appreciate that there are very different views on how we get there. 

I believe that it is critical for the FCC to implement strong, enforceable rules that will protect consumers and make sure there 

are clear protections against blocking and discriminating on content. 

Commissioner Wright, your testimony suggests you believe that 

the fears that network discrimination via broadband providers 

could lead to competitive harm are unwarranted. I am not sure I 

agree with that, but can you please talk more about what you see 

as the potential benefits or efficiencies that these type of contracts 

will create for consumers, and how consumers are going to actually 

see that? 

Mr. WRIGHT. Sure. The idea of discriminatory what we call 

vertical contracts—for example, between broadband providers and 

content providers—these types of contracts have been the focus of 

antitrust inquiries and economics for a century. 

Sometimes what they do, when we have close relationships between folks in different parts of the supply chain, is align their incentives more closely to provide new types of services by combining, 

not by merger, but by contract. 

Ms. DELBENE. But specifically, a consumer today, what do you 

think they are going to see today in terms of benefits? When I hear 

from consumers, I hear concerns about net neutrality and violating 

the principles of net neutrality. I hear concern about pricing. 

When you say there are benefits? 

Mr. WRIGHT. So, for example, business models that charge—I 

mean, the heart of discrimination. Business models that charge different prices to consumers can allow lower prices to disadvantaged 

consumer groups for different types of services that might be 
89 

charged for higher prices. That discrimination gives some people 

cause for concern, and I understand that concern. 

But it also provides, and I don’t think that there is any debate 

in economic literature about this, that it provides real benefits to 

consumers by facilitating the growth and entry of new products, 

new business models, sometimes differentially priced or differentially designed. But those provide real benefits. 

Ms. DELBENE. So I guess I have a question for Professor Wu, 

then. 

Did the regulation of the Internet today prevent venture capitalists or others from investing in startups like Google and Yahoo? 

Have we seen a lack of innovation? 

Mr. WU. No. We have had a net neutrality policy for the last 20 

years, maybe 30, depending how you count. 

And we have had, during this period, the most astonishing period 

of economic growth and development centered on the Internet that 

we have ever seen in telecommunications. And it has been a tide 

that has risen all boats. 

The telecommunication sector itself, cable and telephone companies, are very profitable. And we have just had one great innovation after another. 

I have suggested that under the net neutrality policy, we have 

approached what economists aspire to, which is a market with very 

few barriers to entry. 

Ms. DELBENE. And we, de facto, today have a net neutrality policy that has been in place that folks have been operating under. 

Mr. WU. Right. 

Ms. DELBENE. Maybe not formally, but in some ways formally, 

but also informally. 

Mr. WU. Yes. I am going to agree with the sentiment, if it is not 

broken, don’t fix it. We have had net neutrality policy for the past 

20 years, and it has been terrific. 

This is no time to jettison it, jettison the FCC and turn to antitrust instead, which is unproven and will likely lead to disappointing results as compared to a successful policy we have had 

for the last 20 years. 

Ms. DELBENE. So doing that would be a change. 

Mr. WU. That would be a change. The change would be moving 

to antitrust. 

The FCC oversight has been terrific, both in terms of economic 

development and innovation. 

Ms. DELBENE. I also want to say that may be why we have a letter from over 100 Internet companies, from large companies, 

startups, services, who wrote the letter to the FCC last month, arguing that the commission’s rules should protect users and Internet 

companies on both fixed and mobile platforms against blocking, discrimination, and paid prioritization. 

Mr. Chair, I ask for unanimous consent to submit this record for 

the record. 

Mr. FARENTHOLD. Without objection, so ordered. 

[The information referred to follows:] 
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Ms. DELBENE. So that is an example of folks feeling like we have 

a competitive environment today where they have been able to 

thrive and innovate, and want to make sure that we continue to 

maintain that. 

So with that, Mr. Chair, I yield back. 

Mr. FARENTHOLD. Thank you very much. 

We will now recognize Mr. Smith. 

Mr. SMITH OF MISSOURI. Thank you, Mr. Chairman. Thank you 

for holding this hearing. 

I think it is important that we examine the importance of the 

antitrust laws can play in the discussion of the Internet, and particularly net neutrality debate. 

In my first question is for Mr. McDowell. How would additional 

regulation impact small and midsize Internet providers? 

Mr. MCDOWELL. Well, there is evidence in the record at the FCC 

during various rounds in 2008 and 2010, and I think coming in 

now under the current proceeding, wireless Internet service providers, WISPs we call them, and others were very concerned about 

this. Explicit evidence in the record, statements by owners saying 

they have been questioned by their banks as to what their future 

would look like, as to whether or not they could get loans from 

banks and build out and continue to improve their networks and 

serve their customers. 

Mr. SMITH OF MISSOURI. Would these companies be similarly impacted by the application of antitrust law? 

Mr. MCDOWELL. No, I don’t think so. They wouldn’t. 

So one of the questions here is creating a new body of law. 

By the way, I disagree with the premise that there has been de 

facto net neutrality policy of the government. There has been 

maybe de facto net neutrality policy in the private sector to maximize freedoms so that you are actually creating abundance and 

competition. But not by the government. 

But in any case, no is the answer to that question. 

Mr. SMITH OF MISSOURI. Okay. Well, in your view, do you believe 

the FCC is properly equipped to handle the enforcement of improper conduct over the Internet? 

Mr. MCDOWELL. What do you mean by improper conduct? Like 

anticompetitive conduct? 

Mr. SMITH OF MISSOURI. Yes. 

Mr. MCDOWELL. So the courts have cabined in the FCC’s authority here in part because Congress did not contemplate this. 

I disagree with the D.C. Circuit in the Verizon case that Section 

706 gives the FCC authority to add more regulation; 706 is about 

the FCC reducing regulations to stimulate broadband infrastructure deployment. So I disagree. It was a 2-to-1 decision. Judge Silberman’s dissent is very compelling in that regard. 

But the FCC has very limited authority here, and I think will 

fail again in court, if it goes outside the bounds of what Judge 

Tatel was drawing, which, again, I disagree with, but he is talking 

about commercially reasonable agreements, and that is something 

in the data-roaming context, which has worked so far. 

But in any case, to answer your question more succinctly, I think 

the FCC has almost no authority in this space. 

Mr. SMITH OF MISSOURI. Thank you. 
94 

Professor Wu, outside of the free-speech concerns outlined in 

your testimony, do you believe the FTC would be effective at protecting consumer interests and procompetitive behavior over the 

Internet? 

Mr. WU. I think the FTC would do some things very well. I admire, as I said, the FTC and I think they are a good agency, and 

I think they are well-equipped to deal with violations of the Sherman Act and other unfair methods of competition. 

But I don’t think they have adequate scope to deal with the full 

scope of harms, including noneconomic harms that we might see 

arise from discriminatory practice by Internet service providers. 

I have given the example of political bias, of regional bias, of localism concerns, diversity concerns. And so I think they would do 

a good job with a certain form of harm, but I don’t think their review encompasses all the harms that we care about in the Internet 

space. 

Mr. SMITH OF MISSOURI. Commissioner Wright, would you want 

to answer that same question? 

Mr. WRIGHT. The Supreme Court has described antitrust laws in 

the United States as the Magna Carta of free enterprise. The idea 

behind the antitrust laws is that competition is what tries not just 

a lower price for a gallon of milk or increased output, but increased 

quality, proliferation of content variety, and a number of things 

that have been described in this context as noneconomic values. 

I disagree that they are noneconomic values, but the fundamental idea of the antitrust laws is a belief that competition drives 

these things is the basis for having strong antitrust enforcement. 

In my view, the evolution of the antitrust laws attached and 

tethered to sound economics have given antitrust enforcement at 

the FTC and other agencies a real strong intellectual, analytical 

basis for analyzing precisely this type of conduct, allowing the conduct that benefits consumers, over which there is basically no real 

debate, and preventing competitive harms. 

Mr. SMITH OF MISSOURI. Thank you, Mr. Chairman. I yield back. 

Mr. FARENTHOLD. Thank you very much. 

We will now recognize the gentleman from Rhode Island, Mr. 

Cicilline. 

Mr. CICILLINE. Thank you, Mr. Chairman. 

Thank you to our witnesses. 

I think we are all interested in preserving the Internet as an 

open platform for innovation and for free expression, and, obviously, as a tool for investment and economic growth. 

I do think that it is very clear that the Internet plays a very special role in a free and open society, as Professor Wu says. So the 

notion is that the Federal Trade Commission has real expertise in 

ensuring competition on the sale of commodities and trades of 

widgets, of goods and services, but may not be the best agency 

when we are talking about a very different entity, and that is the 

Internet, which is a vehicle, a platform, for a whole series of other 

important democratic values. 

So the first question I have is to you Commissioner Wright, to 

follow up on Congresswoman DelBene’s point, or question rather, 

which I don’t think you answered. 
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You said that vertical contractual arrangements between 

broadband providers and content providers are beneficial for innovation and for consumers because they create certain efficiencies. 

Tell my constituents what benefits you believe would arise from 

those contractual arrangements. 

Mr. WRIGHT. Okay. So to give an example, a broadband provider 

and a content provider can have an arrangement where they are 

going to jointly, through their contract, offer a service to some 

group of consumers. 

For example, we can have a service—MetroPCS had this a couple 

years ago, where they were going to offer a service at a reduced 

price, but because of concerns about congestion on the network 

take off the use of the video downloads. I think they had YouTube 

off of it. 

But they were going to offer it at a lower price. There was a significant demand for that product. It was at a lower price to a consumer group that maybe couldn’t buy services that would have the 

sort of full scale and be at a higher price. 

We have that sort of—— 

Mr. CICILLINE. Okay, but again that all relates to an economic 

benefit. 

And I guess this is where I would like, Professor Wu, for you to 

talk a little bit more about it. It seems to me that analysis is helpful as it relates to a strictly economic analysis. 

What is the danger with approaching the Internet with that sort 

of narrow view? And what are the values that are at stake here, 

if we don’t preserve vigorously an open, accessible Internet? What 

are the implications here and around the world? 

Mr. WU. Yes, the implications are serious. I think the United 

States would no longer be the leader of Internet openness, which 

is in fact part of our foreign policy. The State Department has 

spent an enormous amount of time trying to say to authoritarian 

regimes that you need to be like us, you need to be an open Internet country. 

If we abandon the open Internet, and our rules for the open 

Internet, and say, well, we decided it is an economic issue, I think 

that sends a bad message. 

I also want to say that most of the most valuable uses of the 

Internet actually are not commercial uses. For example, probably 

one of the most valuable uses of the Internet is when extended 

family shares pictures. Parents send pictures of grandchildren to 

the grandparents. And that doesn’t show up in an economic analysis, in a commercial analysis. It is very hard to measure these 

kinds of values. 

I am concerned that things like families, just friends, totally noncommercial interactions will be the kind of things that won’t get 

properly factored into an analysis that is just focused on trade. It 

is the Federal Trade Commission, or antitrust laws, which are focused on things you can measure that have a clear commercial 

value. 

Mr. CICILLINE. And, Professor Wu, should we draw any inference 

from the fact that the overwhelming number of technology companies, as the letter that was introduced by Congresswoman DelBene 

from over 100 technologies companies who are calling on the FCC 
96 

to protect net neutrality, as compared to the folks who are the service providers, sort of the smaller group in the business of selling 

the products on the Internet, should we draw any inference from 

the different positions of those two sets? 

We heard a lot of discussion that it is going to impede innovation, impede investment from entrepreneurs. It seems as if there 

has been a very loud signal from the innovators and entrepreneurs 

that, in fact, it is critical to them and to the growth of this sector 

of our economy that there be an open Internet. 

Mr. WU. I thoroughly agree with you. I am going to return again 

to this idea that if it is not broken, don’t fix it. 

What is being proposed here is moving away from net neutrality 

policy as overseen by the FCC and toward an untested antitrust 

method. And we have seen very clearly that the incredibly vibrant 

economy, which has grown up on the Internet and in fact has been 

enormously beneficial to cable and telephone companies, they want 

net neutrality protected using the FCC. 

So why would we mess with that by experimenting with antitrust enforcement, which is untested and will have results that we 

can’t predict? And as you earlier indicated, it does not protect some 

of the most important noncommercial values at stake. 

Mr. CICILLINE. Thank you very much sir. 

I yield back. Mr. Chairman. 

Mr. FARENTHOLD. Thank you very much. 

I think that since we have been through the complete round of 

questioning, we will ask the witnesses, if anybody else has any additional questions, within the next 5 days, and we submit them, 

would you be willing to reply to those in writing? 

So, without objection, all Members will have 5 legislative days to 

submit additional written questions for the witnesses, or add additional material for the record. 

hat concludes today’s hearing. Thank you all very much. It was 

an informative and fun hearing. 

[Whereupon, at 10:44 a.m., the Subcommittee was adjourned.] 
(97) 

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD
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Supplemental Material submitted by the Honorable Robert M. McDowell, 

Visiting Fellow, Hudson Institute, Center for the Economics of the Internet 

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