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[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]

IS THE FCC RESPONDING TO THE NEEDS OF SMALL BUSINESS AND RURAL AMERICA?

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

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                           SEPTEMBER 17, 2014

                               __________

                               [GRAPHIC] [TIFF OMITTED] 
                               

            Small Business Committee Document Number 113-083
              Available via the GPO Website: www.fdsys.gov
              
              
          
                                   ______

                         U.S. GOVERNMENT PRINTING OFFICE 

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                   HOUSE COMMITTEE ON SMALL BUSINESS

                     SAM GRAVES, Missouri, Chairman
                           STEVE CHABOT, Ohio
                            STEVE KING, Iowa
                         MIKE COFFMAN, Colorado
                      BLAINE LUETKEMEYER, Missouri
                     MICK MULVANEY, South Carolina
                         SCOTT TIPTON, Colorado
                   JAIME HERRERA BEUTLER, Washington
                        RICHARD HANNA, New York
                         TIM HUELSKAMP, Kansas
                       DAVID SCHWEIKERT, Arizona
                       KERRY BENTIVOLIO, Michigan
                        CHRIS COLLINS, New York
                        TOM RICE, South Carolina
               NYDIA VELAZQUEZ, New York, Ranking Member
                         KURT SCHRADER, Oregon
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                        JANICE HAHN, California
                     DONALD PAYNE, JR., New Jersey
                          GRACE MENG, New York
                        BRAD SCHNEIDER, Illinois
                          RON BARBER, Arizona
                    ANN McLANE KUSTER, New Hampshire
                        PATRICK MURPHY, Florida

                      Lori Salley, Staff Director
                    Paul Sass Deputy Staff Director
                      Barry Pineles, Chief Counsel
                  Michael Day, Minority Staff Director
                  
                  
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Sam Graves..................................................     1
Hon. Nydia Velazquez.............................................     2

                                WITNESS

Hon. Thomas Wheeler, Chairman, United States Federal 
  Communications Commission, Washington, DC......................     3

                                APPENDIX

Prepared Statement:
    Hon. Thomas Wheeler, Chairman, United States Federal 
      Communications Commission, Washington, DC..................    20
Questions and Answers for the Record:
    Questions and Answers from Hon. Sam Graves to Hon. Thomas 
      Wheeler....................................................    27
    Questions and Answers from Hon. Blaine Luetkemeyer to Hon. 
      Thomas Wheeler.............................................    32
    Questions and Answers from Hon. Jaime Herrera Beutler to Hon. 
      Thomas Wheeler.............................................    35
    Questions and Answers from Hon. Tom Rice to Hon. Thomas 
      Wheeler....................................................    38
Additional Material for the Record:
    National Association of Realtors.............................    41

 
IS THE FCC RESPONDING TO THE NEEDS OF SMALL BUSINESS AND RURAL AMERICA?

                              ----------                              

                     WEDNESDAY, SEPTEMBER 17, 2014

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 2:00 p.m., in Room 
2360, Rayburn House Office Building. Hon. Sam Graves [chairman 
of the Committee] presiding.
    Present: Representatives Graves, Leutkemeyer, Collins, 
Tipton, Hanna, Rice, Velazquez, Schrader, Clarke, Hahn, Payne, 
and Barber.
    Chairman GRAVES. Good afternoon. We will call the hearing 
to order.
    Today we welcome Chairman of the FCC Board of 
Commissioners, Thomas Wheeler, to our Committee, and he is 
going to be discussing how the FCC is responding to the needs 
of small businesses in rural America. And I want to thank you 
all for taking the time to be with us, and thank you, Mr. 
Chairman.
    Mr. WHEELER. Thank you, Mr. Chairman.
    Chairman GRAVES. Modern communications technologies provide 
endless opportunities to small businesses and to rural America, 
and the growth of the telecommunications industry and the 
advances in the way that we communicate with each other in the 
past 15 years has been no less than astonishing. We have seen a 
digital revolution that has fundamentally changed the way 
America does business. Because of this rapid advancement, small 
firms can communicate with potential buyers around the world. 
Family farmers are using wireless technologies to monitor their 
crop production and entrepreneurs can launch a website or 
application from their living room or just about anywhere in 
the United States. Most importantly, these new technologies 
provide the gateway and opportunity for economic growth and job 
creation, especially in the rural areas. Continued 
congressional oversight of the FCC is essential to ensure that 
the concerns and ideas of small firms and those enterprises 
located in rural America are given due consideration during the 
regulatory process. This is a theme that this Committee has 
tried to hammer home throughout the past two Congresses, 
including when Chairman Wheeler's predecessor appeared here two 
years ago. Policymakers need to listen to small businesses.
    There are 28.2 million small businesses in America, and 
they make up 99.7 percent of the U.S. employer firms and create 
63 percent of all the net new jobs in this country. We cite 
these statistics often because it is our job to remind people 
in Washington how important the vitality of our small 
businesses are. By almost every measurable mark, small 
businesses drive our economy.
    What we want to do here today is to ensure that the FCC 
gets the job done right when developing their regulatory 
policies. This means ensuring an open and free Internet that 
will allow for the free flow of information and services, 
facilitating the build-out of high speed Internet to rural and 
unserved areas and providing needed spectrum to industry 
players, both small and large, to ensure that our tech 
companies continue to innovate and create jobs.
    Our Committee can be a valuable resource for the FCC as it 
moves forward with the numerous actions it is working on, and 
we would like to be your partner in that process. It is 
important for small businesses to have a seat at the table 
early in the regulatory process as they can provide real-world 
examples of how regulation is going to affect them and provide 
regulators with potentially less burdensome but similarly 
effective options.
    I want to thank everyone for being here again, particularly 
the Chairman, and I now yield to Ranking Member Velazquez for 
her opening statement.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    Today's hearing offers an opportunity to examine the 
benefits and challenges of broadband deployment. More small 
businesses are embracing broadband than ever before, and it is 
rapidly changing the way business is conducted. Many new 
businesses are designed around emerging technology based on the 
access of broadband. For this reason, it is even more important 
to enable small firms to utilize broadband and the nearly 
limitless technologies derived from it. Giving small companies 
this access helps them become more successful and efficient. 
Enhancing broadband availability is not only good for small 
businesses, it is good for America. The number of jobs 
dependent on technology is suspected to grow, creating 
opportunities for large and small companies in every sector of 
the U.S. economy.
    We have seen the benefits broadband technology can bring to 
our daily lives in a variety of ways. However, there are still 
many people without basic access to reliable Internet 
connections in both rural and urban areas. Unfortunately, the 
adoption gap may further widen without adequate support for 
broadband deployment. While federal programs have helped reduce 
the digital divide in communities across the country, much work 
remains to be done.
    Today's hearing will focus on improving broadband access in 
order to strengthen the small business economy. The insights 
gathered today will enable us to ensure that policies are 
effectively supporting network deployment. Additionally, we 
will examine other critical telecommunications and technology 
issues facing small businesses. Among these are the Connect 
America Fund, spectrum auctions, and of course, net neutrality. 
While many of these rules are just starting to take shape, our 
duty is to protect the interest of small firms, working within 
the industry and those who rely on these services as customers. 
Balancing the needs of all parties is significant to 
guaranteeing competition within this industry and its 
customers. This committee will ensure that the needs of small 
firms are taken into account in all FCC rulemaking procedures 
because our continued leadership in technological innovation is 
at stake.
    In advance of the testimony, I want to thank Chairman 
Wheeler for taking the time to be here with us today. We look 
forward to hearing your insight on these important topics, and 
with that I yield back, Mr. Chairman. Thank you.
    Chairman GRAVES. All right. Our witness today is The 
Honorable Thomas Wheeler, Chairman of the Federal 
Communications Commission. He is a graduate of Ohio State 
University and he was appointed chairman by President Obama in 
November of 2013. He has a 30-year career spanning several 
segments of the telecommunications industry, including stops as 
managing director of Core Capital Partners, a venture capital 
firm investing in early-stage Internet protocol-based companies 
and is co-founder of Smart Brief, the Internet's largest 
electronic information service for vertical markets. From 1979 
to 1984, he served as president and CEO of the National Cable 
Television Association, and from 1992 to 2004, he served the 
same role for the Cellular Telecommunications and Internet 
Association.
    Chairman Wheeler, thanks for being here.

  STATEMENT OF THE HONORABLE THOMAS WHEELER, CHAIRMAN, UNITED 
            STATES FEDERAL COMMUNICATIONS COMMISSION

    Mr. WHEELER. Mr. Chairman, thank you. Ranking Member, I 
appreciate both of your thoughts. It is a privilege to be here, 
both as chairman of the FCC and, Mr. Chairman, as you just 
indicated, as a small business man myself. I am one of the 28.2 
million that you talked about because for over 30 years, I have 
helped start or started myself a series of companies. Some 
worked, some did not, which is the story of small business 
life. But I know firsthand that being a small business person 
is a 24/7 activity and means living on the edge. And I bring 
that experience to this job. As you indicated, for most of the 
past decade, I was a partner at a venture capital firm where we 
invested in and helped grow early stage startup companies who 
were by definition small businesses. And I think that as an 
entrepreneur I had a special awareness or understanding of the 
challenges that they faced.
    I am also an amateur historian, and from those studies I 
know that the networks that connect us are the networks that 
define our economy. And today, those networks have never been 
more important because the historic change that we are all 
living through right now is that our networks are our new 
economy. Previous networks were enablers of economic activity. 
The railroad would haul raw materials to a central point where 
it would be fabricated and hauled back out to a mass market, or 
the telephone company would enable commerce in physical 
products. But today our economy is all about nonphysical 
products, and use of information is the key activity of every 
21st century business, regardless of its size, even the 
physical product business.
    How information flows across networks and how information 
creates new information is what the new economy is all about. 
And based on that reality, our goals at the FCC are rather 
direct--to see that everyone has access to 21st century 
connectivity, including the necessity to subsidize service 
where it is not otherwise economically feasible; to assure that 
networks freely interconnect to become a collection of open 
networks, networks that are open to all; to preserve the 
historic principles, such as public safety, and to assure that 
they are maintained despite the evolution in technology, and to 
protect network users, whether they are small business people 
or consumers from those who might exploit them. And, of course, 
to provide for the national security. Those are what I have 
termed the ``network compact.'' They are the principles that 
are at the core of the relationship between those who build and 
operate networks and those who use them.
    As a businessman, I would also add to that that I believe 
fervently in the power of competition. There is a mantra around 
the Commission that goes like this: competition, competition, 
competition, or more frequently, competition, competition, 
competition, as our North Star, because at times of rapid 
technological change, regulation can never be as efficient as 
competitive innovation in keeping pace. Thus, we must protect 
competition where it exists. We must promote it where it cannot 
exist. And we must make sure that where broadband competition 
is unrealistic that we shoulder the responsibility to promote 
its deployment.
    But going back to my small business roots, I believe that 
our telecommunications networks are the onramp to opportunity. 
That whether it is the local insurance agency that needs to 
communicate to be able to be able to receive and process 
claims, or a guy and a gal and a dog in a garage inventing the 
next thing on the Internet. That the key component determining 
each party's success is their access to modern, high speed, 
open communications networks. Our networks have never been more 
important than they are now, and that is why I look forward to 
discussing these issues with you. Thank you for inviting me.
    Chairman GRAVES. Thank you, Mr. Chairman.
    We will start questions with Mr. Tipton.
    Mr. TIPTON. Thank you, Mr. Chairman. And Mr. Wheeler, thank 
you so much for taking your time. I am pretty heartened by some 
of the comments that you are making in terms of addressing 
localism, the importance of connectivity, and the economies 
that we are in.
    I would like to speak a little bit on what may at first 
blush perhaps seem to be just a provincial issue, but we have 
examples of this literally across the country. I come from the 
Third District of Colorado.
    Mr. WHEELER. Yes, sir.
    Mr. TIPTON. We have Montezuma and La Plata Counties in that 
district that are labeled as orphan counties when it comes to 
being able to get instate transmissions of television. And as a 
result of curtain policies and the DMA market that we are 
relegated to, which is currently Albuquerque, we simply do not 
receive Colorado news, Colorado weather forecasts, Colorado 
emergency broadcasts. And probably equally important to many 
people in my district, our folks are forced to watch the Dallas 
Cowboys lose rather than the Denver Broncos win.
    So this is an important issue in all sincerity. We have one 
example that came out of our district, when we were having the 
fire in Colorado Springs. Had folks in the two counties who had 
relatives. They could not get updates in terms of what was 
going on, possibly endangered family members.
    So given in your testimony that you stated that promoting 
this localism in a broad spectrum is the Commission's mission, 
I would like to hear what the FCC is thinking about the 
retransmission policy for places like southwest Colorado. We 
have three DMAs in state that they could be part of, rather 
than being stuck with an out-of-state market.
    Mr. WHEELER. Thank you, Mr. Tipton.
    And I understand the challenge. It is beyond silly. The 
difficulty that we face is the authority that we have to deal 
with it under various statutes. And I know that there is talk 
right now in the other body about an amendment that might open 
the door and help on the retransmission side. There are also 
some copyright questions involved. It is a thorny kind of issue 
that I think boils down to if I could find a solution I would, 
and every time we go looking for it we come across limitations 
as to what our statutory authority may be. But I understand the 
issue, and I would like to be helpful in it to the extent that 
it is possible.
    Mr. TIPTON. I appreciate that. Your predecessor did 
indicated he was willing to work with us to resolve these 
issues. We were not able to get in touch with his office even 
though we tried. So you are making a commitment to us that you 
are willing to work with us to be able to address these very 
credible concerns in our district?
    Mr. WHEELER. Mr. Tipton, the day you call, I will be back 
to you post haste.
    Mr. TIPTON. Great. And we will have you help reach out to 
our Senate side who will work with us as well on this.
    I also want to be able to move on on the broadband issue. 
Back in May we had over 130 representatives and Senators that 
wrote you in support of broadband mechanism to promote network 
deployment in areas served by small independent rural carriers. 
And just given--I heard your comments but I would like you to 
be able to expand and receive comments on the proposed 
standalone broadband funding mechanism on whether the FCC has 
made any progress towards moving towards that goal.
    Mr. WHEELER. So we have just closed the comment period on 
the proceeding I think last week. And we will be moving through 
that process. I know the standalone broadband is an important 
issue. I know that it also is an issue that has a couple of 
sides because some people say, ``Well, wait a minute. If you 
are no longer going to support voice, what is the impact of 
that going to be on older people and minorities who cannot 
otherwise afford broadband.'' And we have to work our way 
through those. But I am hopeful that, as I say, this proceeding 
has just recently closed, and we want to move on it with 
dispatch.
    Mr. TIPTON. Great. Do you see some policy changes that need 
to happen to promote broadband deployment into these rural 
areas that are underserved and develop an environment literally 
to attract sorely needed competition into these rural areas?
    Mr. WHEELER. Well, the key word that you just said is 
competition, because the interesting thing is that our telecom 
policy, our policy to support expansion into rural areas is one 
that is based on a ``Hello, Grandma'' kind of a concept of 
voice calls. And in that situation, we were talking about 
twisted pair copper as the only way to get it done. In a 
broadband environment there are, hopefully, an increasing 
number of ways to get it done. You can get it on DSL over 
copper, you can get it on fiber, you can get it from satellite, 
you can get it in microwave. There are multiple ways of being 
able to do that.
    And so one of the things that we have to be working our way 
through is saying, okay, how do we make sure that we, (a) 
maintain service and the investment that the American people 
have made in the service, while at the same point in time 
making sure that we are not excluding new potentially improved 
service providers. And so our solution to that has been that we 
ought to run some taste tests, and we ought to run some trials. 
And so we have got $100 million that we have said we will use 
to fund atypical rural broadband deployment trials--with the 
emphasis on trials--to find out whether there, in fact, beyond 
the hypothetical, can be put in place alternatives to the 
system that has always existed. And we will be taking the final 
bids on these--I am sorry, not bids--the final offers to 
provide service the middle of next month, and I hope that we 
will have made our decision by the end of the year and that 
there will be trials operational next year.
    Mr. TIPTON. Great.
    Mr. Chairman, thank you for your indulgence. Chairman 
Wheeler, thank you for being here. I yield back.
    Chairman GRAVES. Ranking Member Velazquez?
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    Mr. Wheeler, what steps is the FCC taking to ensure that 
there is a smooth transition for the affected businesses so 
that they do not experience increased costs or a reduction in 
alternative services?
    Mr. WHEELER. Well, I think that that is the biggest 
challenge that we face. Well, there are two challenges. One is 
how do we make sure that we are keeping up with technology and 
that people are getting the kind of service levels that is 
warranted by new technology? And then if there are going to be 
transitions, how do we make sure that they mitigate the impact 
on consumers, as well as those who have been relying on it?
    And so one of the things that we are doing, for instance, 
is this taste test, as I said, is this trial of $100 million to 
let us find out, for instance, what is the impact if commercial 
high speed broadband service is offered by the municipal co-op 
and how does that affect both those who would use the service 
as well as competitors that it might be overbuilding on top of. 
I think it is a ``try before you buy'' kind of a situation.
    Ms. VELAZQUEZ. But more specifically, can you tell us what 
type of outreach you are doing with the small business 
community?
    Mr. WHEELER. With the small business community? Well, I 
mean, I think that the small business community, as I said, the 
key to success of any business, but particularly important for 
small business, is to make sure that they are the recipients of 
the bandwidth necessary for them to conduct business. How do we 
do that? We have outreached to the small business community on 
multiple issues, ranging from cybersecurity to what is going on 
in broadband. We also work with the SBA in our activities and 
that we make sure that in our proceedings it is open to all and 
that we have voices of small business people heard.
    Ms. VELAZQUEZ. Have you performed any small business impact 
analyses conforming the Regulatory Flexibility Act?
    Mr. WHEELER. Yes, ma'am.
    Ms. VELAZQUEZ. Okay, good. Thank you.
    The court has stated that the commission could not adopt 
net neutrality rules that ban discrimination and blocking, if 
the commission does not reclassify broadband as Title II 
service. Whether to adopt Title II is a highly debated topic 
now. What are the repercussions for adopting Title II for the 
overall market, and what are the challenges finding a balance 
between your current proposal and the more stringent Title II?
    Mr. WHEELER. So what the court said was that the way in 
which the 2010 rules were implemented was inappropriate, but 
that the Commission had authority to deal with anything that 
interfered with what they called the virtuous cycle; that new 
applications drive better bandwidth which drives new 
applications and you have this virtual cycle. Activities like 
you named--blocking, choosing one player over another, 
degrading service, fast lanes, this sort of thing--I believe 
all interfere with the virtuous cycle. And the question then 
becomes do we use the Section 706 authority that the court 
pointed to or do we use Title II? And in our Notice of Proposed 
Rulemaking, we have specifically asked for input on the Title 
II question. And Title II is very much on the table. And that 
comment period just closed this week. And I look forward to 
moving forward on that as well. But I will assure you that 
Title II is very much a topic of conversation and on the table 
and something that we specifically asked for comment on in the 
proceeding.
    Ms. VELAZQUEZ. Thank you.
    While it is important to protect competition within the 
market, there are really only a handful of dominant carriers 
that dictate prices due to a lack of true competition. How will 
the FCC further regulate this industry and strengthen 
competition, especially for those small carriers competing 
against the giants of the industry?
    Mr. WHEELER. Well, I think there are a multitude of issues 
there. One is obviously we want to continue to orient our 
universal service support to broadband. Second of all, 
competitive carriers and those providing competitive services 
rely on what is called special access which is the connection 
between businesses, if you will. Consumers do not get involved 
in this. And there has for a long time been an inability for 
the Commission to move on special access. We are now moving on 
special access. We are collecting data. I set a deadline of the 
15th of December for the data that we need, and we are going to 
address the special access question as well.
    Ms. VELAZQUEZ. Will you anticipate any more delays?
    Mr. WHEELER. I hope not. In all candor, the thing that has 
held us back to this point has been getting OMB approval to 
collect the data, and we went back to OMB and we said, ``Look, 
this is important stuff.'' And we were able to negotiate with 
OMB the kind of data that got collected. And it was just the 
other day that we put out the public notice to begin collecting 
that data, and that is due on the 15th of December. I do not 
want any more delays on this. We have waited on special access 
long enough.
    Ms. VELAZQUEZ. Thank you.
    Thank you, Mr. Chairman.
    Chairman GRAVES. Mr. Rice?
    Mr. RICE. I am concerned about the adoption of Title II 
with respect to the Internet, and you were saying that your 
concern is that certain activities interfere with this so-
called virtuous cycle.
    Mr. WHEELER. Right.
    Mr. RICE. Those activities you said were blocking and 
prioritizing service?
    Mr. WHEELER. Blocking, prioritizing, requiring some kind of 
paper form, degrading a service in order to offer a higher 
service, favoring----
    Mr. RICE. Is that going on now? Are providers doing that?
    Mr. WHEELER. So I think that what we have seen thus far is 
a series of instances. This whole thing started, for instance, 
when Comcast blocked Bit Torrent and their folks from getting 
Bit Torrent. We have seen instances where carriers have blocked 
or degraded the ability to get Skype because it is competitive 
to their voice service. We saw in the mobile world how AT&T 
blocked FaceTime early on after it was introduced on the iPhone 
because it was competitive. So the issue is that yes, there are 
indications of these kinds of problems having happened in the 
market.
    Mr. RICE. These things that you are talking about, I mean, 
they could be dealt with through other laws, could they not?
    Mr. WHEELER. Well, that is a really great question, Mr. 
Rice. And they have not been.
    Mr. RICE. Here is my point. The Internet has been kind of a 
``Wild, Wild West'' it appears to me, and there has been an 
incredible explosion of innovation that has come out of the 
Internet. And when the federal government steps in and starts 
regulating, you will stifle that. You will stifle it far more 
than anybody else who is trying to block a competitor that 
could be attacked under any of these other anti-trust laws. I 
would caution greatly against further federal regulation of the 
Internet.
    Mr. WHEELER. Well, I think you have just hit on what the 
challenge is, because it is clear that there must be an open 
Internet. I mean, that is what is necessary for the small 
business; that is what is necessary for the entrepreneurs; that 
is what is necessary for consumers.
    At the same point in time, communications carriers are 
investing $60 billion a year in infrastructure, and we have got 
to have that kind of infrastructure build out. And you do not 
want to put in place rules that would disincentivize companies 
from making that kind of continued investment.
    Mr. RICE. And my point, Mr. Wheeler, is the federal 
government. And I am not picking on you. You can put in 
whatever regulations that you want that can be the most well-
intentioned things possible, but you will not be able to 
foresee everything, and you will stifle innovation. And the 
Internet has been a fountain of innovation that has helped to 
bring prosperity to this country and the world, and you will 
stifle that if you mushroom the regulation under Title II.
    Mr. WHEELER. So the interesting challenge is that, as you 
know, most of America's major carriers have said we will adhere 
to the 2010 open Internet rules even though they have been 
thrown out by the court. And in adhering to them, have 
continued to innovate and continued to invest, and that is the 
process that we want to see continue.
    Mr. RICE. These things that you named that you thought were 
problems that you felt like you needed to add additional 
regulation for, can you name any instances of those occurring 
that could not be handled by other areas of the law, like anti-
trust?
    Mr. WHEELER. Yes, sir. I think that there is a significant 
difference between what is an anti-competitive behavior defined 
under the Sherman Act and what are the public interest 
obligations that the Telecommunications Act mandates that we 
deal with. And that while many issues may be able to be dealt 
with on an anti-trust basis, not all issues and the ability to 
deal with them with a public interest orientation rather than 
the strict construct of anti-trust law is one that will go more 
to all of the issues and less to specialized issues.
    Mr. RICE. My friend, if it is not broke, do not fix it. It 
is working great. Let us please do not stamp it out. I am a 
firm believer in the scariest phrase that you will hear is ``I 
am from the government. I am here to help.'' So let us do our 
best to keep the hands off, and I for one will do what I can to 
keep the FCC from adopting Title II with respect to the 
Internet. Thank you.
    Mr. WHEELER. Thank you, Mr. Rice.
    Chairman GRAVES. Ms. Hahn?
    Ms. HAHN. Thank you. Thank you, Mr. Chairman, Ranking 
Member Velazquez, and thank you, Mr. Wheeler, Chairman Wheeler, 
for coming to our Committee to talk about FCC and how it 
impacts small businesses. This might be a little different line 
of questioning, but I did hear the Broncos being brought up, so 
I am going to bring up the Dodgers.
    As you know, Monday was a big day for the FCC. The Dodgers, 
City of Los Angeles, Time Warner Cable, and KDOC came to an 
agreement to broadcast the final few games of the regular 
season. And as you probably know, this entire baseball season, 
70 percent of the region's viewers had been unable to watch the 
Dodgers. They only have six remaining home games to broadcast 
and the impact it has on small businesses is something I did 
not realize until it started getting brought up to me. I was 
always just on the side of the fans and how unfair it was to 
have this dispute, not allowing the fans to watch the games. 
But then I got a lot of calls into my office from small 
businesses, many of whom are restaurants, sports bars, who 
really depend on those local games being broadcast. A lot of 
times customers would call and say, ``Hey, are you showing the 
Dodgers game?'' And they would have to say no, and it really 
did hurt their bottom-line when this was happening.
    So I am happy about the small breakthrough that happened, 
and I know you were instrumental in bringing all the parties to 
the table and I hope you share my call that some of us in 
Congress had to have all the providers enter into binding 
arbitration so we can finally put this issue to rest.
    So I am just going to ask you, how can we fix this 
arbitration process so disputes such as this do not go on for 
an entire season? Really, of course, a crushing blow to the 
fans, but a lot of our small businesses really were impacted by 
this silly dispute. So I would like to hear your comments on 
that.
    Mr. WHEELER. I think you used the right descriptor there 
about when you characterized the dispute. I, as you know, wrote 
to the CEO of Time Warner Cable which owns the rights, as well 
as to every one of the cable and satellite providers, saying 
exactly what you said, ``Can we not come together here?'' I got 
a little more specific with the CEO of Time Warner Cable 
because what has happened here, as you know, is that Time 
Warner Cable has purchased the exclusive rights to the Dodgers. 
And they purchased them paying a price that at least the media 
analysts say negatively affected their performance last year 
because the analysts claimed they overpaid. And the other 
providers, the DIRECTVs, the cable systems, et cetera, all 
said, ``Well, wait a minute. I do not want to pay--you are 
telling me that I am going to pay this kind of a fully-loaded 
price or I cannot get it at all does not make any sense to 
me.'' There has got to be a way to come together.
    So I am happy that the decision was made, and for the last 
six games this is absolutely terrific. And then it is into the 
playoffs and it is a whole different contractual reality and 
that is wonderful.
    Ms. HAHN. And not the World Series.
    Mr. WHEELER. I would not go that far, please. I am a 
Dodgers fan, but I also want to see the Nationals get in.
    Ms. HAHN. This is our year. This is our year. I want to go 
on record that this is our year.
    Mr. WHEELER. But I have then opened up an inquiry, an 
investigation with Time Warner Cable because I want to know 
more about what is going on here. Because the reality is that a 
lot of money was put on the table to support an entity that is 
doing all right itself economically, and consumers ended up 
suffering. That is not right and I want to know more. And so I 
have gone back and opened an investigation with Time Warner to 
find out exactly what the facts of this are. I have talked to 
each of the CEOs of each of the distribution channels, and they 
have all said to me, ``I am ready to do it. I want to do it. 
But just because they paid a lot, why do I have to pay a lot?'' 
And we have got to get over that kind of hurdle.
    Ms. HAHN. Well, thank you. I appreciate that a lot. As you 
know, I think all the congressional members of the L.A. 
delegation had written to you, asking you to get involved 
because we thought that would be helpful. And again, while this 
was a small step, this agreement, we need long term to not put 
fans and small businesses at the mercy of these kinds of 
disagreements in the future.
    Mr. WHEELER. I agree.
    Ms. HAHN. And I look forward to seeing how you are going to 
solve it.
    Mr. WHEELER. Thank you, ma'am.
    Ms. HAHN. Dodgers and Nationals series would be awesome.
    Mr. WHEELER. That would be okay. That would be all right. 
Wait a minute. That will not happen. Sorry. Earth to Tom, that 
will not happen.
    Chairman GRAVES. Mr. Luetkemeyer?
    Mr. LUETKEMEYER. Thank you, Mr. Chairman.
    Thank you, Mr. Chairman for being here today. I normally do 
not read my questions but I have got two questions I want to be 
sure and get to today so I am going to cut my own remarks short 
here so I can make sure I get to the questions.
    I heard from many small business owners in rural Missouri 
which I represent with little or no access to high speed 
broadband who had recently written to you, Mr. Chairman, on the 
subject of Connect America Fund II. I am concerned that if we 
do not set the floor for support at a reasonable speed, such as 
megabytes per second, that for years to come most of the rural 
constituents in my district will be left on the wrong side of 
the digital divide.
    As you have not yet responded to my letter which I wrote to 
you August 15th, I wish you would address to the Committee 
today with regards to the speed requirement you set in your 
Connect America Fund II order that it will provide support for 
adequate facilities based on high speed broadband for the small 
businesses in rural America looking to compete in the global 
economy with urban competitors, number one.
    Number two, in addition, the Connect America Fund is for 
deploying broadband in rural areas currently served by large 
price capped carriers. A long-term Connect America Fund program 
for those carriers was supposed to be in place almost two years 
ago. When you consider the hurdles the FCC has faced to 
implement Connect America Fund for just over a dozen larger 
carriers, how long do you think it will take to produce a 
Connect America Fund program for the smaller carriers and is 
there a way to do this on a faster basis? If you could respond 
to that, please.
    Mr. WHEELER. Thank you. First of all, I apologize. I did 
not realize that we are a month from a letter that you have 
written. That is inexcusable, and I am normally a zealot on 
getting quick responses.
    Mr. LUETKEMEYER. Well, we were in recess. You probably 
thought we would not be here. That is okay.
    Mr. WHEELER. I got that.
    So first of all, we have proposed increasing the throughput 
in order to get universal service funds from four megabits per 
second to 10 megabits per second for precisely the reason that 
you mention: That you cannot have a digital divide. When 60 
percent of the Internet's traffic at prime time is video and it 
takes four or five meg to deliver video, a four meg connection 
is not exactly what is necessary in the 21st century. And when 
you have got a half a dozen different devices, wireless and 
other connected devices in a home that are all going against 
that bandwidth, it is not enough.
    So what we were saying is we cannot make the mistake of 
spending the people's money, which is what universal service 
is, to continue to subsidize something that is subpar. As I 
said, before the comments on this have just closed. I am 
hopeful that by the end of the year we will be able to have 
that issue tidied up.
    On your second issue about the rate of return carriers, it 
gets much more complex, unfortunately. The rate of return 
carriers serve less than 5 percent of the population but get 50 
percent of the high cost allocation because their situation is 
so unique and costly. And muddling around with that has higher 
potential opportunity costs. We have a proceeding on that as 
well that has multiple parts that include some suggestions made 
by the representatives of the rate of return carriers that we 
have put out for comment. That also has just closed, and I am 
hopeful that we will be able to get to that. I do not think we 
will be able to get to it as quickly as the Connect America 
Fund, but I think it is an early 2015 kind of an issue.
    Mr. LUETKEMEYER. Okay. One more question.
    As a result of the predominately rural district I 
represent, I appreciate the Agency's efforts to address the 
rural call completion problem that continues to harm rural 
Americans when calls destined for rural business, hospitals, 
public service, whatever are dropped before reaching their 
provider. Can you update the Committee on the status of 
implementing the recordkeeping or retention rules adopted last 
year? In particular, why have not those been implemented a year 
after they were adopted and when can we expect to see the rules 
finally put in place?
    Mr. WHEELER. Great. A couple of things on that.
    One, we have been in active enforcement activities. We 
fined Windstream $2.5 million. We fined Level 3 almost a 
million dollars because of their failure to deliver on the call 
completion expectation. We also had a proceeding in which we 
said we want to begin to collect data that allows us to get 
more granular to understand exactly where things are happening. 
That ran into two problems. Problem number one was that a bunch 
of carriers filed for reconsideration saying, well, these kind 
of connections you should not look at and redefine what you are 
looking at, and we had to go through that process and that is 
now taken care of. And the other is again back to another OMB 
issue where OMB had to give us permission under the Paperwork 
Reduction Act to go out and ask questions. Those have now both 
been resolved, and we are moving forward on the collection of 
data, which is going to allow us to get very granular on what 
the rules need to be.
    Mr. LUETKEMEYER. Very good. I appreciate your candid 
remarks. As a Cardinal fan, maybe if the Dodgers had a better 
team or a better fan base you would not have those problems.
    I yield back.
    Chairman GRAVES. Mr. Barber.
    Mr. BARBER. Well, thank you, Mr. Chairman, Ranking Member 
Velazquez, for holding this important hearing. And thank you 
for being with us, Mr. Chairman.
    I will steer clear of the sports analogies and go right to 
the issue that is significant in my district. I represent 
southern Arizona, Tucson being the urban area, and all of 
Cochise County, which is one of the nine districts in the House 
that is a border community with Mexico. And as I talk to people 
in my district, particularly in Cochise County and rural Pima 
County, which is where Tucson is based, I hear stories over and 
over again about the lack of access to broadband or wireless.
    I was in Huachuca city just the other week talking to the 
mayor who has a system that is archaic. So archaic it hardly 
works at all. And the situation is even worse in Tombstone. 
They are famous for Wild West City or the town too tough to 
die. And so we really have a desperate need for small 
businesses in my district, and I am sure it is true in rural 
districts all over the country, to have increased access to 
broadband and to high speed Internet that they need. The 
economies of those communities rely on better Internet service 
and they just do not have it.
    So Mr. Chairman, I have just three questions for you. I 
will take them in order and perhaps I will give them all three 
to you so you can respond and we will not go back and forth.
    With 12 million Americans living without access to 
broadband, could you share with us what the FCC's goal is for 
increasing broadband access in the next five years, and how are 
you engaging the private sector to meet that goal?
    And secondly, as you are talking to small businesses across 
our country, how are broadband speeds and broadband prices 
influencing their business strategies and decisions?
    And finally, Mr. Chairman, in a slightly different vein, 
cyber threats are growing every day. We have many briefings in 
the House Armed Services Committee, in the Homeland Security 
Committee on which I sit about the threat and the hits that we 
are getting every single day. And our small businesses need to 
be aware of these threats as much as the big companies. They 
must have the security tools and the resources they need.
    So I would like to ask, Mr. Chairman, if you could explain 
what kind of outreach the FCC is conducting with our small 
businesses to make sure that they are prepared. So if you could 
try to answer those, I appreciate it.
    Mr. WHEELER. Thank you, Mr. Barber.
    So there is no doubt you have to have high speed if you are 
going to play in the 21st century economy. The question is, as 
I said before in response to another question, that our 
universal service program was based on voice and based on 
supporting companies that provided the voice. My predecessor 
wisely moved off of voice to focus on supporting broadband. The 
next questions that we have to face are, as was previously 
asked: (1) Is that broadband speed fast enough? And (2) Are 
there competitive alternatives to get that broadband?
    So, for instance, if on LTE Wireless, LTE, you can get 25 
to 100 megabits, should that be the solution to serving these 
kinds of areas? If you can get not quite as fast but 
significantly faster than four megabits service off of 
satellite, should that be a solution?
    And so we are moving into a period where there are going to 
be competitive alternatives. We are also moving into a period 
where the existence of those competitive alternatives has an 
economic impact on the people who have traditionally provided 
connectivity to your area. And so it becomes this kind of a 
balancing act as to how we make this progress happen. But it 
has to happen.
    And then insofar as your cyber question, I could not agree 
more, which is one reason that we have published several 
brochures and tips and talking points for small business about 
how they need to be worried about cyber and how it is a real 
issue and what they can do, and those are available on the FCC 
website and we promote their availability.
    But the bigger question is that whether it is the local, as 
I said, insurance agent or the company that is providing last 
mile service, they are getting service from big network 
providers and those network providers have to provide a level 
of cybersecurity in their networks. And we are working with 
them to develop both a set of standards that can be measured to 
so that we can identify what the issues are and hopefully 
remediate them and to try and do it in a voluntary process so 
that we get as much participation from everybody as possible.
    Mr. BARBER. Thank you, Mr. Chairman. I yield back.
    Chairman GRAVES. Mr. Collins?
    Mr. COLLINS. Thank you, Mr. Chairman.
    Thank you for attending today.
    Mr. WHEELER. Mr. Collins.
    Mr. COLLINS. I have got a very rural district, western New 
York, eight counties, a couple of them have definite broadband 
issues as well as, frankly, even cell phone coverage issues. 
But let us start with we certainly agree, or I certainly agree, 
10 megabytes should be the minimum download. There are no two 
ways about it.
    So the basic question is, under special access rules, it is 
1.54 megabytes and so it is a simple question that since we all 
agree the minimum should be 10, and we all have to look at our 
priorities, why is the FCC continuing to deal at all with 
special access at 1.54 and new regulations and the like for 
what I would call an outdated, obsolete service?
    Mr. WHEELER. Well, 1.5 is what is called T1 and it is kind 
of the table stakes for interconnection amongst and between 
various carriers and businesses. Special access is not 
controlled by speeds. Special access is a carrier, normally a 
dominant carrier like AT&T or Verizon, selling services to 
others who need it, whether it be the local cable company--I am 
sorry, the local cellular company or a rural telephone company 
or others, who are typically competitors. Therein lies the rub. 
And so what we are now finally getting in a position to be able 
to do is to have the data--because we were prevented from 
getting the data that you have got to have to make this 
decision--having the data that enables us to address just how 
can we make sure that there is a fairly priced, readily 
available, sufficient capacity to your point, special access 
available for these competitors. That is what our rule is all 
about, and by the end of this year we are going to have the 
data that is going to allow us to be very granular on that.
    Mr. COLLINS. So in my remaining time, let me ask you one 
other question on the data. My county, Orleans County, one of 
ours, if you look at the FCC, I think they would say that 
county has 95 percent access to broadband, but I have 
determined that data is in many cases driven off the last four 
digits of the nine digit zip code. And if you look at the way 
some of them are served, by definition, if a single customer in 
that last four digit of the nine digit zip code, if a single 
customer has access, it is deemed every customer has access. 
And so they are actually paying right now with another county 
to do a joint study where they believe their access is in the 
50 to 60 percent where because of that nuance in the definition 
of the data, with good data we make good decisions, with bad 
data that is not the case, are you aware of that very 
interesting nuance and what are we doing about it?
    Mr. WHEELER. Yes, sir. And one of my mantras is we have to 
have data-driven decisions.
    Mr. COLLINS. I agree.
    Mr. WHEELER. And if it is garbage in, it is garbage out.
    Mr. COLLINS. Right.
    Mr. WHEELER. And so there are a couple of things that are 
interestingly going on. The National Broadband Map, which we 
have recently taken responsibility for from NTIA, has these 
kind of anomalies in it in large part because the information 
is submitted, not collected. And there is a significant nuance 
there when we are saying you tell us what is going on rather 
than us going and finding it.
    And the other interesting thing that has happened with the 
Connect America Fund in the process that we have now 
established for Phase Two is that people are able to challenge 
whether or not there is service. A potential competitor is able 
to challenge and say, ``Wait a minute. There is not service. 
You say there is not, there is. There is or there is not.'' 
Either way. And that is helping us enrich the map. But I agree 
with you, sir, that if you are going to be data driven, you 
have to have good data.
    Mr. COLLINS. Speaking for the counties, they are actually 
paying their own money to do another study to try to disprove 
the 95 percent.
    Mr. WHEELER. I look forward to--I thank them for doing that 
and I look forward to their results.
    Mr. COLLINS. Okay, very good. Thank you.
    Mr. WHEELER. Thank you, Mr. Collins.
    Chairman GRAVES. Mr. Payne?
    Mr. PAYNE. Thank you, Mr. Chairman and to our ranking 
member.
    Let us see, Mr. Wheeler, during your testimony you 
mentioned that the FCC is reviewing diversity issues to see how 
best we can promote a diversity of voices, including women and 
minorities. Can you elaborate on this process and how the FCC 
believes they can accomplish this goal?
    Mr. WHEELER. Yes, sir. And we are in a situation right now 
where let us talk about broadcast properties for a second. When 
you have got less than a couple of percent of the broadcast 
properties in America owned by minorities, something is wrong. 
And when I came in here is what I found. There was a game being 
played by Washington broadcast lawyers that said we will create 
all kinds of fancy legal structures that will allow companies 
to combine in an individual market, where we have a rule that 
says there is one licensee per market because we want to have 
diversity of voices and diversity of ideas and diversity of 
ownership. We will allow the creation--we will construct these 
creations--where the company does not really own the license 
but they get the use of the license and they can get around the 
rules. And what that had the impact of doing was chasing out 
small business opportunity because the big guys were able to 
outbid and the big guys were able to have economies of scale. 
And the big guys fixed it. It was done through a structure 
called JSA, Joint Sales Agreements. And we came in and we 
changed that rule. There was a huge human cry. Oh, it is the 
end of broadcasting efficiencies. Oh, you are going to really 
hurt small business and minorities because we are so good to 
them. And we went ahead and did it and we were supported by 20 
different minority groups saying this is the right thing to do.
    And Congressman, I am happy you asked that question because 
I am happy that I can sit here today and say that last week I 
was at the Commission when people were coming through led by 
the Minority Media and Telecommunications Council, talking 
about how they were now minority owners of broadcast outlets 
that came on the market because of our change in this rule. And 
it is not enough but it is a start. And I also think, by the 
way, that the whole issue of open Internet is crucial, and the 
opportunity--I am going up to, as you know, Mr. Rush is on the 
Telecomm Subcommittee Energy and Commerce, and he has asked me 
to come up and meet with a group of entrepreneurs in Chicago to 
talk about how to use broadband to create opportunity for 
entrepreneurs who are working on workshops at this across the 
country, doing webcasts across the country at the FCC. But I 
think there is also great opportunity in an open Internet for 
small business and minority entrepreneurs.
    Mr. PAYNE. Well, I appreciate that effort moving in that 
direction, and for me, it is not so much about a preference as 
it is leveling the playing field. As you say, a bunch of 
Washington lawyers got together and crafted something that 
would not allow certain individuals to be able to compete, so I 
applaud those efforts and hope you continue to move in that 
direction.
    And with that I will yield back.
    Chairman GRAVES. Ms. Clarke?
    Ms. CLARKE. Thank you, Mr. Chairman. And I want to thank 
the ranking member as well. I would like to thank Chairman 
Wheeler for appearing before us today, and quite frankly, I 
want to associate myself with the comments of Mr. Payne and 
will be looking forward to your continued advocacy in this 
regard because when you look at the fact that 7 percent of full 
power commercial stations are owned by women and that there are 
just 2.2 percent minorities when we comprise 40 percent of the 
population, someone has got their thumb on the scales clearly.
    Mr. WHEELER. I was hoping Mr. Tipton would still be here 
and tell him when you see him that one of those, an outfit 
called Cheng Media, which is now the only Asian-owned broadcast 
outlet in the United States, is now operating in his district 
and it is operating as a result of this rule change that we 
just talked about.
    Ms. CLARKE. Outstanding. Well, we want to encourage your 
continued support of those endeavors.
    My district has access to broadband. I am from Brooklyn, 
New York, but it has serious adoption and digital literacy 
gaps. These are the skills that are essential for participating 
in the 21st century economy. So I want to hear from you what 
you think FCC can do or is doing to address this concern, and 
how will E-rate modernization affect these gaps?
    Mr. WHEELER. So I think you just raised a key issue here 
with E-rate. I am old enough that I took shop class in high 
school. I do not even think they offer shop class anymore. 
Right? But it was deemed important that I learn how to work a 
metal lathe, right, which has not exactly helped me in my 
activities to date. But I had that hands-on experience. The 
thing that was really exciting to me about what the E-rate has 
done is that it is giving students an exposure to the Internet 
and the use of computers that is not, well, we are going to go 
to Computer class now, but it is, ``You have got to live with 
it.'' And this is how we all learn things. And you get the 21st 
century skills by doing 21st century things every day in every 
class.
    And so what we have done in the E-rate is we came in and 
identified that there was a huge problem--that E-rate was doing 
a very good job of getting broadband connectivity to the 
school. About two-thirds of schools in America are connected by 
fiber now. But it was not doing a good job getting connectivity 
to the student. And how do you have each student have Wi-Fi 
access?
    So we identified what we call the Wi-Fi Gap. And we found a 
billion dollars this year, and a billion dollars next year that 
we have targeted specifically for Wi-Fi in schools and 
libraries and specifically made sure that it does not 
cannibalize the money that is used for the important 
connectivity in the first place. But, if as a result students 
in their everyday classroom activities are becoming digitally 
literate just by repeated use, by repeated exposure, then I 
think we have sent them out after graduation with the skillsets 
that are necessary to exist in a 21st century economy, and it 
has happened by osmosis. And that is the best way to learn 
something.
    Ms. CLARKE. And in terms of the embrace of sort of the Wi-
Fi and making that available, has there been any real pushback? 
Because I could certainly see those who offer Wi-Fi for a fee 
being concerned about the competition.
    Mr. WHEELER. But unfortunately, they were not offering it 
for a fee in schools and it was not there. I am actually quite 
proud, Ms. Clarke, that one of the things that we also did was, 
utilize a small amount of money--a billion dollars is a small 
amount of money--a finite amount of money, and we were able to 
get the schools in America to be able to piggyback on the GSA 
contracts for Wi-Fi access points, the largest purchaser of 
equipment in the world, and now schools in Brooklyn or in 
Missouri can get pricing for their Wi-Fi equipment that is the 
same price that the U.S. Government pays. Not through a federal 
purchasing program but just through a structure that we were 
able to create. And that in itself is going to drive more Wi-Fi 
into schools and libraries.
    Ms. CLARKE. Well, I thank you very much once again, Mr. 
Chairman, and Mr. Graves, I yield back.
    Chairman GRAVES. The Internet has obviously flourished the 
last 20 years and it has fundamentally changed how small 
businesses and small firms are doing business nationally and 
internationally, and preserving that is obviously something 
that is pretty important to me, and I have concerns about how a 
more heavily regulated Internet is going to affect small 
businesses. But my question to you is have you considered what 
the proposed net neutrality regulations are going to do to 
small businesses and have you sought out the input from small 
businesses? I would be curious about what the input is.
    Mr. WHEELER. Yes, sir, in multiple ways.
    As you may have read, we have had 3.7 million comments on 
this document. There has never been more public input to 
something that the FCC has done. And they are wildly in support 
of open Internet requirements. I have probably received myself 
tens and tens of thousands of emails addressed to me, and a lot 
of them, you get things that are like them, too, that are not 
exactly the ones you want to show your mother. But I look at 
them, and the ones that I have been most interested in are the 
ones from teachers and small business people who are saying, 
``I am a small business person in so-and-so. Let me tell you 
how this is important to me and why it is important to me.'' I 
have met with startup companies and venture capitalists in 
Silicon Valley as well as in Silicon Alley, in Brooklyn, as a 
matter of fact is where the meeting was held. And sat down with 
them and said as small business people, as entrepreneurs, as 
the lifeblood of growth, let us talk about how this works.
    So, yes, sir. And I also, I would add that even if I had 
not done any of that, I bring 30 years of experience as a small 
business person, including the scars of my companies being 
denied access to networks, and I am a fervent believer in open 
Internet.
    Chairman GRAVES. Any other questions?
    Ms. Clarke?
    Ms. CLARKE. Thank you, Mr. Chairman. I do have one more 
question for Chairman Wheeler.
    While the FCC included initial reg flex analysis, it looked 
primarily at small entities in the tech and telecomm industry. 
I recognize these industries will be impacted, but I am 
concerned about the 28 million small firms that utilize the 
Internet in one way or another for business purposes. Has a 
similar analysis been done to look at the effect on small firms 
as end users?
    Mr. WHEELER. This is in the open Internet proceeding? Yes, 
we have specifically asked questions about that. And we also 
have proposed an idea which is a unique idea in the history of 
the Agency, and that is that how does a small business who does 
not have the cash to hire a Washington lawyer to go represent 
them before the FCC, get their voice head at the FCC? And so we 
have proposed the creation of a small business ombudsman at the 
FCC to on an email be able to advocate--to find out the facts 
and advocate on behalf of this small business.
    Ms. CLARKE. Good answer.
    I yield back, Mr. Chairman.
    Ms. VELAZQUEZ. Mr. Chairman?
    Chairman GRAVES. Yes, ma'am.
    Ms. VELAZQUEZ. Based on your experience, because I have 
been on this committee for 22 years and for 20 of them we have 
been dealing with the issue of the digital divide, especially 
for small businesses and rural America. And I hear that you are 
involved in increasing the speed and deployment infrastructure 
for broadband, but what else can we do to increase or attract 
competition in rural America to improve public policy, or what 
else do we need to do? Or do you have all the tools that are 
needed?
    Mr. WHEELER. I believe that we have tools that are 
adequate. I am not sure we have all the tools that are needed 
or that would be nice to have. Let me put it that way.
    The challenge is how do you recognize that one of the great 
things about the Internet economy is that there is no longer 
the telephone monopoly, that there are multiple ways of 
reaching people? And how do you provide the necessary incentive 
for for-profit companies to do that, while at the same time 
recognizing that for the last 80-90 years there have been 
companies out there that have received some kind of a subsidy 
to enable them to offer services, and that they have entered 
into debt agreements, they have hired people and made 
representations, and this sort of thing?
    And so one of the most challenging things in this evolution 
is how do you embrace competition in a way that is logical and 
responsible? And that is why we are supporting these trial 
projects, because I do not know the answer. I could sit down 
and hypothesize and answer, but I would much rather have a 
market test, and that is what we are trying to do.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    Chairman GRAVES. Again, thank you, Mr. Chairman for 
testifying before the Committee.
    As I mentioned in my opening statement, I would like to see 
the FCC and this Committee be partners moving forward and make 
sure that we keep the lines of communication open as we look at 
broadband and deployment and make sure those obstructions are 
alleviated. But again, we appreciate you coming in. This is my 
last hearing as chairman of the Committee. So thank you for 
being that individual.
    Mr. WHEELER. It is a privilege to be your final witness, 
Mr. Chairman. Ms. Velazquez, thank you very much for inviting 
me today.
    Ms. VELAZQUEZ. I will be here.
    Mr. WHEELER. I have a feeling he will still be here, too; 
right?
    Chairman GRAVES. With that I would ask unanimous consent 
that all members have five legislative days to submit 
statements and supporting materials for the record. And without 
objection that is so ordered. And with that the hearing is 
adjourned.
    [Whereupon, at 3:20 p.m., the Committee was adjourned.]
                            A P P E N D I X

                          Statement of

                     Tom Wheeler, Chairman

               Federal Communications Commission

                           Before the

                  Committee on Small Business

                 U.S. House of Representatives

                           Hearing on

  ``Is the FCC Responding to the Needs of Small Business and 
                        Rural America?''

                       September 17, 2014

    I. Introduction

    Chairman Graves, Ranking Member Velazquez, members of the 
Committee, thank you for the opportunity to be here today.

    Having spent the past decade in the private sector, helping 
to grow new businesses, I have a unique appreciation for the 
entrepreneurial spirit of America's small business owners. 
Small businesses are a key driver of job creation and economic 
growth, and they are the foundation of local economies across 
America--from Missouri's countryside to the neighborhoods of 
Manhattan.

    Since becoming Chairman less than a year ago, I have 
traveled to many of those areas--including some of the most 
rural and remote areas and Indian Reservations--and met with 
small businesses, as well as schools, libraries, and citizens, 
to learn more about how we can improve their access to modern 
communications services, especially high-speed broadband. I've 
also met with small and rural telcos to better understand their 
unique challenges and the ways the Commission can help overcome 
them through our various programs.

    In the 21st century information economy, starting and 
operating a small business requires access to 21st century 
communications. High-speed broadband, wired and wireless, helps 
small businesses better serve existing customers through 
improved operations, and reach new ones by making anyone with 
an Internet connection a potential customer.

    At the FCC, we are committed to harnessing the power of 
broadband communications to grow our economy and improve the 
lives of the American people. Our work is guided by what I call 
the Network Compact--a set of values Americans have a right to 
expect from their network providers--such as universal access, 
consumer protection, and public safety. Overarching these 
values is the belief that competition is superior to 
regulation, and competition is the Commission's most effective 
tool for driving innovation, investment, and consumer and 
economic benefits.

    II. Expanding Access of Small Businesses and Rural Areas to 
High-Speed Broadband

    Consistent with these guiding principles, the FCC has taken 
multiple actions to assist small businesses and expand 
communications opportunities for rural America. Those actions 
start with making sure every American small business has access 
to true high-speed broadband.

    Currently, about 12 million Americans live in areas where 
wired broadband isn't available. These are homes with students 
at a disadvantage compared to their connected neighbors. These 
are small businesses, whether a local florist or a hunting 
lodge, that can't compete in a connected world. And these are 
communities that can't attract businesses to locate to their 
towns and offer jobs to those in need. To help connect these 
unserved areas, the Commission has modernized the Universal 
Service Fund to focus on broadband, including establishing the 
Connect America Fund (CAF). Roughly a quarter of all universal 
service contributions come from small businesses, and by 
increasing efficiencies these reforms help ensure that 
consumers and small businesses are getting more bang for their 
universal service buck.

    In Phase I of the Connect America Fund, the Commission has 
made investments that will make broadband available to 1.6 
million unserved Americans in areas served by the nation's 
largest traditional local providers--known as ``price cap'' 
carriers. In addition, Mobility Fund Phase I investments also 
include $300 million to expand advanced mobile wireless service 
and nearly $50 million for better mobile voice and broadband on 
Tribal lands.

    The Commission took another important step forward last 
January, when we authorized in our Technology Transitions Order 
experiments to advance the deployment of voice and broadband-
capable networks in rural areas with support from the Connect 
America Fund. Our challenge is to preserve the values that 
consumers and businesses, both large and small alike, have come 
to expect from their networks, while unleashing new waves of 
investment and innovation, which will deliver untold benefits 
in the form of modern broadband networks for the American 
people, including rural America. We cannot be a nation of 
opportunity without networks of opportunity. That's why we are 
moving forward with these trials, which will provide an 
opportunity to consider how better to ensure that all of our 
universal service programs are working together effectively to 
ensure that residential consumers, small businesses, and anchor 
institutions have access to evolving services delivered over 
scalable networks.

    Building on that action in January, we recently adopted an 
Order establishing a $100 million budget for the rural 
broadband experiments, criteria for what we expect from 
applicants, and an objective, clear-cut methodology for 
selecting winning applications. These rural broadband 
experiments will allow us to explore how best to structure our 
second phase of CAF investments, including through the use of a 
competitive bidding process in price-cap areas, and gather 
valuable information about deploying next generation networks 
in high-cost areas.

    Importantly, this is the first time the Commission will 
attempt to use the tool of competitive bidding to bring 
broadband to rural America through the Connect America Fund. 
Competition holds the promise of better services at lower 
costs--it is time to use that dynamic for the benefit of rural 
America.

    CAF Phase II will result in another five million Americans 
getting access to broadband for the first time. We expect to 
move forward with CAF Phase II with all dispatch, and the 
lessons learned in our rural broadband experiments will help us 
achieve our goal of delivering world-class voice and broadband 
networks to rural America.

    We also want to make sure small businesses not only have 
access to broadband, but also that they have broadband with 
sufficient bandwidth to meet their evolving needs.

    When a single HD video requires 5 Mbps of capacity, it's 
clear that the FCC's current benchmark for broadband--4 Mbps--
isn't adequate. This is why, as part of a Notice of Inquiry 
issued this August, we have proposed updating the broadband 
speed required for universal service support to 10 Mbps. We 
also ask whether to include latency, data usage allowances, or 
other characteristics in benchmarking broadband; whether to 
establish separate benchmarks for fixed and mobile services; 
how to best evaluate mobile and satellite services; and how to 
take into account differences in broadband deployment, 
particularly between urban areas versus non-urban and Tribal 
areas.

    We also want to make sure that anchor institutions like 
schools and libraries have robust broadband connections to meet 
community needs. This July, we took a major step forward in 
making sure that every school and library in America has high-
capacity broadband to the building and within every classroom 
and library, particularly for smaller schools and libraries in 
rural areas. Previously, smaller, rural schools and libraries 
had difficulty securing E-rate funding for internal connections 
within a school or library. The Order increases support 
targeted for Wi-Fi in rural school districts by nearly 75 
percent and is expected to expand Wi-Fi connectivity to nearly 
20 million students during its first two years, as well as 
ensure more equitable availability of funds to rural schools 
and libraries. While an important step, there are still far too 
many rural and Tribal schools and libraries that do not have 
sufficient broadband connectivity to the building and we are 
actively working on tackling this issue through the next steps 
of E-rate modernization and implementation of the next phase of 
the Connect America Fund.

    III. Promoting Wireless Connectivity and Competition to All 
Americans

    When we talk about access to broadband in 2014, we are 
increasingly talking about wireless connectivity. The 
Commission is working aggressively to make sure small 
businesses and all Americans can take advantage of the new 
services and applications enabled by mobile broadband.

    We are taking multiple actions to make more spectrum 
available for wireless broadband. In February, the Commission 
concluded its first major auction of mobile broadband spectrum 
since 2008, auctioning the 10 megahertz H-Block, which raised 
more than $1.5 billion, much of which will be put to use toward 
funding FirstNet's nationwide public safety broadband network.

    This March, the Commission adopted a Report and Order 
establishing service rules for our upcoming AWS-3 auction of 65 
megahertz of highly desirable spectrum this November. The 
Commission in March also changed rules to make 100 megahertz of 
unlicensed spectrum in the 5 GHz band usable for purposes 
including gigabit Wi-Fi.

    In May, the Commission adopted a Report and Order that 
establishes ground rules for our historic Incentive Auction, as 
well as Mobile Spectrum Holdings policies to promote 
competition in our upcoming auctions as well as potential 
future spectrum transactions. By marrying the economics of 
demand with the economics of current broadcast spectrum 
holders, the Incentive Auction will harness market forces to 
determine the highest and best use of spectrum, while providing 
a potentially game-changing financial opportunity to America's 
broadcasters.

    Underlying all of our work on auctions is a commitment to 
competition and ensuring smaller businesses have a shot to 
compete. For instance, the ``market-based reserve'' spectrum in 
the Incentive Auction will provide opportunities for wireless 
providers to gain access to important low-band spectrum that 
could enhance their ability to compete and help ensure that two 
dominant carriers can't run the table in the auction. Our 
establishment of smaller geographic license areas and 5 by 5 
spectrum blocks in both the Incentive Auction and AWS-3 auction 
will also enhance small businesses' ability to compete for and 
win spectrum licenses.

    In August, I circulated a Notice of Proposed Rulemaking to 
update the FCC's competitive bidding rules--also known as our 
Designated Entity or DE rules--to recognize the challenges new 
entrants face in entering the wireless industry, such as 
raising funds to compete in an auction, finding a revenue 
stream to support business expansion or developing a business 
model based on market needs rather than regulatory mandates. 
This proposal would provide innovative, smaller companies with 
the opportunity to build wireless businesses that can spur 
additional investment and offer more choices to consumers.

    The FCC's Office of Communications Business Opportunities 
(OCBO) continues to conduct workshops to educate and empower 
small business owners to take advantage of opportunities in the 
communications sector. Our annual conference on capitalization 
strategies for small and diverse media and communications 
businesses will be held again this fall. Through seminars and 
one-on-one interviews, OCBO connects entrepreneurs with 
financial experts who make daily decisions about capital 
infusion.

    Early participants in OCBO's Cap Access program have seen 
real benefits. For example, the National Association of Latino 
Community Asset Builders made the initial, crucial connections 
at our conferences that ultimately led to $3.7 million in 
federal funds through the Broadband Technology Opportunities 
Program. With that much-needed capital, they established 
broadband-enabled small business support centers throughout the 
country.

    IV. Promoting Competition, Localism and Diversity in the 
Media Marketplace

    Related to these on-going efforts to promote and increase 
participation in communications services, the Commission also 
has a duty to promote competition, localism, and diversity 
within the media marketplace. The Commission has taken actions 
over the past year that could have a positive impact for small 
business entities.

    One of the first votes I took as Chairman of the Commission 
at my first Open Meeting in November 2013 was to approve a 
Declaratory Ruling to clarify our policies and procedures for 
reviewing transactions in the broadcasting industry involving 
foreign ownership and investment. Such a clarification could 
unleash new capital to help existing broadcasters and potential 
new entrants to serve the needs and interests of their 
communities.

    Additionally, we have rules in place that limit broadcast 
ownership concentration. A major component was the initiation 
of the quadrennial review of the Commission's media ownership 
rules in March of this year. We sought comment on the various 
rules and are exploring how to craft rules that can meet our 
goals and survive judicial review. As part of this proceeding, 
we are reviewing diversity issues to see how best we can 
promote a diversity of voices, including women and minorities.

    While our quadrennial review is underway, we have to 
enforce our existing rules and close loopholes where necessary 
to ensure there's a level playing field for all--including 
small business entities. In March, we took a significant step 
to close a loophole in our attribution rules for TV Joint Sales 
Agreements (JSAs) that had been exploited by some to circumvent 
our local TV ownership limits. These new rules will protect 
viewpoint diversity and competition goals. As an example, just 
a few weeks ago, Gray Communications announced that it had 
terminated some sharing agreements with six TV stations in 
smaller markets and engaged the Minority Media 
Telecommunications Council (MMTC) to find new buyers for those 
stations. I applauded the news in late August that MMTC was 
successful in finding new buyers that will increase diversity 
of ownership and programming in each of these markets, all of 
which are in areas that serve smaller communities, including 
Grand Junction, Colorado; Monroe, Louisiana; and Fargo, North 
Dakota.

    For other instances where there are attributable JSAs, and 
parties believe those existing or proposed agreements would be 
in the public interest, we will entertain waiver requests and 
process them on an expedited basis.

    V. Fostering Innovation and Entrepreneurship Through an 
Open Internet

    The Internet's open design has empowered innovators and 
entrepreneurs across the country to launch small businesses--
some of which have grown to become world-leading companies. 
This May, the Commission adopted a Notice of Proposed 
Rulemaking that begins the process of crafting rules to protect 
and promote the open Internet. The focus of the proposals we 
put forward and the questions we ask in this Notice is on 
maintaining a broadly available, fast, and robust Internet that 
serves as a platform for economic growth, investment, 
innovation, free expression, and competition.

    September 15th marked the close of the comment period for 
this proceeding. We are closely examining the issues and 
reviewing the public record, which includes more than 3 million 
comments--the largest body of comments for any FCC rulemaking 
proceeding. And we're not stopping with that. Just yesterday, 
we began a series of six public roundtable forums through which 
we are soliciting the views of Americans, as well as expert 
advice from a wide array of stakeholders, about how best to 
craft enforceable rules of the road that will bring certainty 
to the marketplace.

    As this process moves forward, we will continue to enforce 
our Open Internet Transparency rule, which was upheld in court 
and is an important tool to help small businesses make informed 
choices about the Internet access services they buy. It is my 
goal to get final rules back on the books as quickly as 
possible to give consumers, businesses and innovators the Open 
Internet protections they currently lack.

    VI. Ensuring Network Safety, Security and Reliability

    The Commission is also working to make sure that the 
broadband networks small businesses rely on are safe, secure, 
and reliable.

    To ensure that all Americans are not harmed and benefit 
from the transition to next-generation networks, we are 
obtaining data on the impact of technology transitions in rural 
areas, including Tribal lands, where residential consumers, 
small businesses, and anchor institutions may not have access 
to advanced broadband services.

    The Commission is working to stop rural call completion 
problems, which can damage small and large businesses alike. 
Last year, the Commission enhanced our ability to investigate 
this problem with new data retention and reporting 
requirements. Thus far, our Enforcement Bureau has issued three 
consent decrees to combat this problem, and we will continue to 
take action against carriers that fail to provide reliable 
communications.

    To protect against cyber threats, our Public Safety and 
Homeland Security is working with the private sector and other 
government agencies to create a new paradigm for cyber 
readiness. This private sector-led effort must be more dynamic 
than traditional regulation and more measurably effective than 
blindly trusting the market or voluntary best practices to 
defend our country.

    We are working with industry to identify public goals, 
working with the affected stakeholders in the communications 
industry to achieve those goals, and letting that experience 
inform whether there is any need for next steps.

    We also have practical tools like our Small Business Cyber 
Planner, which lays out a number of common-sense steps small 
businesses can take to improve security.

    VII. Process Reforms

    The Commission is sensitive to the impact of our regulatory 
processes on the entities we serve, including small businesses. 
In fact, process reform has been a priority since Day One of my 
Chairmanship, when I tasked staff to develop, within 60 days, 
specific recommendations to improve the efficiency and 
transparency of the FCC's processes. For instance, the 
Commission has conducted a review of its regulatory fee 
structure to update the payment scale and provide regulatory 
fairness for all of the Commission's licensees. Among the 
changes we have made is raising the de minimis payment level to 
exclude those licensees owing less than $500 from having to pay 
a fee, giving small businesses a break, and also enabling the 
Commission to realize cost savings for processing.

    VIII. Conclusion

    I want to thank the Committee again for this opportunity to 
discuss the many things the Commission is doing to benefit 
America's small businesses. I look forward to working with 
members of this committee on these and other relevant issues, 
and I welcome your questions.
[GRAPHIC] [TIFF OMITTED] 

                Small Business Committee Hearing

  ``Is the FCC Responding to the Needs of Small Business and 
                        Rural America?''

                   Wednesday, September 17th

         Chairman Sam Graves--Questions for the Record

    1. This committee is very concerned about the time and 
other resources that rural carriers spend on sometimes outdated 
regulatory requirements. Earlier in September, the FCC put out 
a notice (79 FR 52334) seeking comment on information and data 
collection by the Commission. Is it your intention to reduce 
the amount information that small communications carriers are 
required to gather and submit?

    RESPONSE:

    Generally, the Commission continually strives to reduce 
burdens on the entities we regulate--especially small 
businesses. One of the priorities of my Chairmanship is to 
improve the way the Commission functions, as well as to modify 
or eliminate unnecessary regulations. We have made progress, 
and will continue the effort to reduce burdens, where 
warranted.

    The Federal Register notice cited above is a required 
Paperwork Reduction Act (PRA) notice that addresses rules 
adopted by the Commission on February 20, 2014, governing the 
quality of closed captioning on television programming. In 
adopting the new closed captioning quality rules, the 
Commission had to carefully balance Congressional mandate to 
provide the millions of Americans who are deaf or hard-of-
hearing with full access to video programming through the use 
of closed captioning with the burdens such rules may place on 
the video programming distributors. While we believe we 
appropriately struck such a balance, the PRA notice 
specifically seeks comment on, among other things, whether the 
proposed collection of information is necessary for the 
Commission to properly function and whether there are ways to 
minimize the burdens. In addition, we note that the Commission 
rules provides that petitioners who submit a request for 
exemption based on economic burden are automatically exempted 
from the closed captioning obligations while their petitions 
are pending, thereby deferring and potentially eliminating any 
burden on the petitioners. PRA comments are due to the 
Commission on November 3, 2014 where they will be reviewed by 
staff.

    2. Most independent communications carriers, especially in 
rural areas, are small businesses that serve small businesses. 
Do you have a time line for implementing Connect America Fund 
distribution criteria for rural rate-of-return carriers?

    RESPONSE:

    The Commission is focused on updating the universal service 
fund high-cost program to ensure that we are delivering the 
best possible voice and broadband experiences to residents and 
businesses in rural America within the confines of our Connect 
America budget, while providing increased certainty and 
predictability for all carriers and a climate for increased 
broadband investment and expansion. In April, the Commission 
adopted the Connect America Fund Further Notice of Proposed 
Rulemaking that sought comment on proposals from rural carrier 
associations and also other possible methods to establish a 
Connect America Fund for rate-of-return carriers within the 
current budget for the program, and how to provide rate-of-
return carriers with a way to transition to new forms of 
support. In that same proceeding, the Commission eliminated the 
Quantile Regression Analysis benchmarks rule for all rate-of-
return carriers because it was not serving its intended 
purpose. We have received a thorough record of these issues, 
and they are under consideration by Commission staff. Please be 
assured that we will take into consideration the issues and 
concerns presented by all stakeholders as the Commission 
reviews the record in this proceeding as expeditiously as 
possible.

    3. The Commission is in the process of implementing a $100 
million rural broadband experiment program to determine how to 
conduct Connect America Fund auctions. This has garnered the 
interest of many new players in this arena--local governments, 
rural electric cooperatives and other entities. How do you 
justify subsidizing carriers beyond the companies and 
cooperatives already getting Universal Service Fund support?

    RESPONSE:

    The Commission has a responsibility to ensure that the 
funds we collect to support our universal service programs are 
used in the most efficient and effective way possible, and 
these experiments give us the opportunity to, for the first 
time in the history of universal service, leverage the benefits 
of competition to determine which provider will receive the 
support to serve a particular area. In the USF/ICC 
Transformation Order, the Commission concluded that it would 
use a competitive bidding mechanism for Phase II of the Connect 
America Fund to award support in those states where price cap 
carriers decline to make a state-level commitment in exchange 
for model-based support. In the January 2014 Tech Transitions 
Order, we unanimously adopted targeted experiments to advance 
the deployment of voice and broadband-capable networks in rural 
areas with Connect America support and gain data on the impact 
of technology transitions on rural America where residential 
consumers, small businesses, schools, libraries, and health 
care providers may not have access to advanced broadband 
services. And in July 2014, the Commission unanimously adopted 
a $100 million budget and established objective criteria for 
selecting projects. These experiments will allow us to explore 
how to structure the Connect America Phase II competitive 
bidding process in price-cap areas.

    The universal service program is one of the most important 
tools at our disposal to ensure that consumers and businesses 
in rural America have the same opportunities as their urban and 
suburban counterparts to be active participants in the United 
States of the 21st century. Therefore, it is important that we 
allow all interested parties an opportunity to compete to bring 
robust broadband to rural areas. It is critical that we have a 
universal service program that supports providers who are 
willing to step up and deliver service consistent with the 
Commission's performance standards.

    Importantly, any recipient of rural broadband experiment 
funding must be designated as an eligible telecommunications 
carrier by the state(s) where it is seeking to offer service or 
by the Commission (if the relevant state lacks jurisdiction 
over that entity). This helps to ensure that these new 
participants in the universal service program meet the same 
baseline standards consumers have come to expect from incumbent 
providers. Designating rural broadband experiment participants 
as eligible telecommunications carriers also assists state and 
federal regulators in monitoring and overseeing the use of 
universal service funds.

    Competition holds the promise of better services for rural 
America at lower costs. Better service at lower cost is the 
result of broadband competition in other areas of the country, 
and it is time to use that same dynamic for the benefit of 
rural America.

    4. What protections do FCC policies contain to prevent an 
ISP from using its position as a broadband provider to target, 
through its network forensics and management technologies, the 
customers of a competitor, including those that provide alarm 
services?
    5. How can the FCC help that ISPs do not, using 
preferential treatment or priority to they or an affiliate 
provide, create an unfair competitive market advantage over 
small businesses that also reach customers using the same 
broadband network owned by the ISP?

    RESPONSES TO QUESTIONS 4-5:

    Small companies and startups must be able to reach 
consumers with their innovative products and services, and they 
must be protected against harmful conduct by broadband 
providers. As a result of the D.C. Circuit Court of Appeal's 
January decision in Verizon, there are currently no rules in 
place that prevent a broadband provider from engaging in 
conduct harmful to Internet openness, such as blocking a 
consumer from accessing a requested website, degrading the 
performance of an innovative Internet application, or 
preventing attachment of a lawful device (such as an alarm 
monitor) to a broadband network. The Open Internet is too 
important to leave consumers and innovators unprotected. We 
must reinstate strong, enforceable Open Internet rules, and we 
must do so with dispatch.

    As you know, in May, the Commission adopted a Notice of 
Proposed Rulemaking (``Notice'') to begin that process. We 
asked a fundamental question: What is the right public policy 
to ensure that the Internet remains open? And we sought comment 
on the best way to achieve that fundamental policy goal. The 
response has been remarkable: Over 3.7 million comments were 
filed by the close of the comment period on September 15, 2014. 
This record-setting level of public engagement reflects the 
vital nature of Internet openness and the importance of our 
getting the answer right in this proceeding. The Notice 
proposes clear rules of the road and aggressive enforcement to 
prevent unfair treatment of consumers, edge providers and 
innovators. It also proposes a rebuttable presumption that 
exclusive contracts that prioritize service to broadband 
affiliates are unlawful, and asks more broadly whether paid 
prioritization should be banned outright or otherwise presumed 
to be illegal.

    The Commission is considering several options that would 
form the legal foundation for the rules, including Section 706 
and Title II of the Communications Act. The Notice specifically 
asks questions about these approaches, including whether the 
Commission should revisit its classification of broadband 
service as an information service or whether we should 
separately identify and classify under Title II a service that 
``broadband providers... furnish to edge providers.'' For 
approaches involving a Title II classification, we also ask 
about how our forbearance authority should be used to tailor 
Title II obligations to achieve our public policy goals. Since 
the Notice, record filings by some parties--such as AOL, 
Mozilla, the Center for Democracy and Technology, a coalition 
of library and higher education associations, Congressman Henry 
Waxman (D-CA), and others--have suggested additional approaches 
that would combine aspects of both our Section 706 and Title II 
authority. We are looking closely at these approaches as well.

    This reflects what I said before the House Committee on 
Small Business: All options remain o the table, including Title 
II, so that we can properly protect small businesses and 
startups.
                 Questions for the Record from

                 Rep. Blaine Luetkemeyer (MO-3)

                  Committee on Small Business

                 U.S. House of Representatives

 ``Is the FCC Responding to the Needs of Small Businesses and 
                        Rural America?''

                 House Small Business Committee

                       September 17, 2014

    Questions to Tom Wheeler, Chairman of the Federal 
Communications Commission

    1. Earlier this year, it came to my attention that the 
FCC's docket regarding the Telephone Consumer Protection Act 
(TCPA) causes regulatory uncertainty, rather than clarity, for 
small businesses. In fact, 15 of my colleagues, including 
members of this Committee, sent a letter last month urging the 
Commission to enact common-sense reforms to the telemarketing 
statute by acting on one of the many TCPA-related petitions for 
declaratory ruling that are awaiting action by your agency. How 
is the Commission planning to provide regulatory certainty for 
small businesses seeking to gain customers without violating 
the statute? When will the Commission take action on the 
numerous TCPA-related petitions for declaratory ruling?

    RESPONSE:

    Congress enacted the TCPA in 1991 with a goal of protecting 
consumers from unwanted calls and facsimiles, while not 
inhibiting useful and expected communications between parties. 
The petitions for declaratory ruling that are pending before 
the Commission raise questions about how the TCPA should be 
applied to calling practices that, in many cases, businesses 
and other parties are either currently using or are proposing 
to use in the future. The petitions also raise questions about 
how the TCPA applies to certain calling technologies and 
whether distinctions should be drawn between telemarketing and 
informational calls in some contexts, among other issues. In 
evaluating the important and challenging issues raised by these 
petitions, the Commission will seek to protect consumer privacy 
from unwanted calls while ensuring that parties who wish to 
make calls that consumers find desirable can do so without 
legal uncertainty.

    The Commission has received several petitions regarding the 
applicability of the TCPA and the Commission's related rules, 
and routinely seeks comment on them with a view toward building 
a complete public record on the specific issues that they 
raise. The comment cycles for a number of these petitions have 
been completed, and the Commission staff is carefully reviewing 
the records. In addition, the staff has held numerous meetings 
with interested parties on these issues, which have been very 
informative. Please be assured that we will take into 
consideration the issues and concerns presented by all 
stakeholders as the Commission continues to work on these 
proceedings as expeditiously as possible.

    2. As with other telecommunications and technology 
regulations, the Telephone Consumer Protection Act is outdated 
and needs common-sense reforms. For example, it is my 
understanding that if a wireless number is re-assigned to a new 
customer, a business that seeks to contact the previous owner 
of the number faces liability for calling the new customer even 
though there is no way for the business to know the number was 
re-assigned. That just doesn't make much sense. How does the 
FCC plan to address and rectify this issue? Isn't there a place 
for common-sense solution here such as creating a ``safe 
harbor'' for entities that respect the request of a new 
reassigned number holder to not be called a second time by 
adding the recycled number to a suppression list?

    RESPONSE:

    Since its enactment in 1991, the TCPA has required prior 
express consent for non-emergency autodialed or prerecorded 
calls to a wireless telephone number. Petitions for declaratory 
ruling currently pending before the Commission raise the issue 
of how the TCPA should apply when a party unknowingly makes 
such a call to a wireless number that was originally held by a 
subscriber who consented to such calls, but has subsequently 
been re-assigned to another subscriber. The Commission has 
sought comment on this issue, including proposals by 
petitioners that the Commission adopt a ``safe harbor' from 
liability for such calls when the caller has complied with the 
subsequent subscriber's request not to be called. The comment 
cycles for these petitions have been completed, and interested 
parties have made informative presentations on this issue to 
the Commission staff, which is actively reviewing the entire 
record. In resolving this issue, the Commission will seek to 
carry out the TCPA's statutory goal of protecting consumers 
from unwanted autodialed or prerecorded calls while recognizing 
the practical concerns of parties who seek to comply with the 
law. Please be assured that we will consider the views and 
concerns of all stakeholders as we work toward an expeditious 
resolution of this important issue.

    3. I also understand that the TCPA requires businesses to 
obtain express consent from consumers in order to contact them. 
However, there seems to be some confusion about whether 
businesses need to obtain express consent for each type of 
contact. For example, if a customer gives a business his phone 
number for account service purposes, doesn't it make sense for 
the business to be able to call that customer for billing and 
collections purposes?

    RESPONSE:

    The TCPA has, since its enactment in 1991, required prior 
express consent for non-emergency autodialed or prerecorded 
calls to wireless telephone numbers. Petitions for declaratory 
ruling now pending before the Commission raise a variety of 
issue concerning how consent must be obtained to comply with 
this statutory requirement. The Commission has sought comment 
on these petitions, and the staff is now closely reviewing the 
record of comments that have been filed, as well as information 
provided by interested parties during ex parte presentations.

    In evaluating the consent issues before it, the Commission 
will consider the consumer's interest in deciding which calls 
he or she wishes to receive, as the TCPA provides, as well as 
the practical concerns of parties who wish to make calls to 
such consumers. As you have noted in your question, the context 
in which a telephone number is provided may be a significant 
factor in the Commission's review of consent issues. For 
example, in its original 1992 Report and Order adopting rules 
under the TCPA, the Commission found that ``persons who 
knowingly release their phone numbers have in effect given 
their invitation or permission to be called at the number which 
they have given, absent instructions to the contrary.'' More 
recently, in 2008, the Commission addressed consent in the debt 
collection context, clarifying that ``autodialed and 
prerecorded message calls to wireless numbers that are provided 
by the called party to a creditor in connection with an 
existing debt are permissible as calls made with the `prior 
express consent' of the called party.'' We will carefully 
consider the precedential value of such previous Commission 
decisions, as well as the comments of all interested parties, 
as we move toward resolution of the pending petitions that 
raise consent issues important to consumers and callers alike.
                    Questions for the Record

                    Small Business Committee

  ``Is the FCC Responding to the Needs of Small Business and 
                        Rural America?''

                   Wednesday, September 17th

           Congresswoman Jaime Herrera Beutler - QFRs

    1. ``I understand there is an issue pending before the FCC 
concerning the selection of the next Local Number Portability 
Administrator. It is very important that the voices of all 
carriers including the small and medium sized competitive 
carriers be heard. I understand the LNP Alliance, which 
represents the Northwest Telecommunications Association, filed 
comments in this proceeding and that they have expressed their 
concern about the fact that this proceeding is happening at a 
critical time during the IP transition. I share that concern 
and I am also concerned what type of transition costs may be 
imposed on these telcos, both today and in the future in an all 
IP world. Does the selection process envision a neutral, 
shared, allocation of costs in the IP world?''

    RESPONSE:

    There has been considerable participation by small and 
medium-sized carriers in the ongoing process to select the next 
Local Number Portability Administrator (LNPA), including from 
the LNP Alliance and its members as well as others such as 
Comptel. We are currently evaluating the record in this 
proceeding, which includes the bids as well as the comments 
filed by the LNP Alliance and others. This proceeding to select 
the LNPA, however, does not change the Commission's numbering 
or cost-allocation rules, so any concerns about matters such as 
how costs are allocated are not part of the LNPA selection 
process.

    2. The Commission has stated that the 600 MHz incentive 
auction will commence in mid-2015; however, the National 
Association of Broadcasters has challenged the Order in court, 
and the FCC must also address numerous rules concerning the 
auction process before it can conduct the auction.

    3. Are you on track to meet your commitment to hold the 600 
MHz incentive auction by mid-2015 or will the NAB's lawsuit 
delay the process? What developments pose the greatest risk to 
conducting the 600 MHz incentive auction by mid-2015?

    4. If you are not on track for a mid-2015 auction, please 
explain the problems you are having and why they cannot be 
overcome on a timely basis. Please also explain in detail your 
plans for resolving any such problems.

    RESPONSES TO QUESTIONS 2-4:

    The Commission has worked to meet its goal to commence the 
world's first spectrum incentive auction in mid-2015. We have 
known from the start that the incentive auction is a complex 
undertaking, and we want to make appropriate, and timely, 
decisions to ensure a successful auction. I am confident that 
our initial Report and Order released in early June complies 
with all of the statutory directives. However, as you note, 
court challenges to the auction rules by the NAB and Sinclair 
Broadcasting could delay of the incentive auction 
implementation process.

    On October 22, the court announced a revised briefing 
schedule under which final written briefs will not be due until 
the end of January 2015, with oral arguments to follow at a 
later date yet to be determined. We are currently evaluating 
the impact of this new schedule on the timing of the auction.

    Despite the complexity of the auction, and even in the face 
of uncertainty due to lawsuits, the Incentive Auction task 
force has been making consistent progress implementing the 
auction, and we continue to make headway in our efforts.

    For example, in the past month, the Commission adopted five 
Incentive Auction-related items:

           A Notice of Proposed Rulemaking regarding 
        unlicensed operation in the TV band and new 600 MHz 
        band, including operation of fixed and personal/
        portable white space devices and unlicensed 
        microphones.

           A Notice of Proposed Rulemaking to address 
        the needs of wireless microphone users.

           A Declaratory Ruling regarding protection of 
        coverage areas and population served of broadcast 
        stations during the repacking process.

           A Second Report and Order and Further Notice 
        of Proposed Rulemaking to address (1) the methodology 
        for predicting interference between broadcast and 
        wireless operations in the same or adjacent channels in 
        nearby markets during and following the Incentive 
        Auction, and (2) outstanding proposals for additional 
        measures to prevent interference between TV stations as 
        a result of the repacking process.

           A Third Notice of Proposed Rulemaking and a 
        Suspension Public Notice for Digital LPTV to address 
        measures to facilitate the low power TV digital 
        transition and to mitigate the potential impact of the 
        Incentive Auction and the repacking process on the low 
        power TV services.

    For stations eligible to participate in the auction, we 
have increased our outreach activities to provide additional 
information on the benefits of this once-in-a-lifetime 
opportunity. On October 1, we released an informational 
package, prepared by the investment firm Greenhill and Co., to 
every eligible broadcast station. The package outlines the 
options available in the incentive auction, includes FCC staff 
estimates of high end compensation that could be paid for 
broadcast spectrum rights in each market, and information from 
the IRS on tax implications. In the coming weeks, Commission 
staff will embark on an expanded broadcaster outreach effort 
that includes sitting down with broadcasters at town halls and 
individually to discuss the opportunities presented by the 
auction. It is my hope and expectation that broadcasters will 
give participating in the incentive auction careful 
consideration. That information has been provided to the public 
on our Learn Everything About Reverse Auctions Now (LEARN) 
webpage (See www.fcc.gov/LEARN).

    We also recently released a Public Notice seeking comment 
on a draft reimbursement form to be used by broadcasters and 
other entities that incur expenses due to the post-auction 
relocation process. The Notice on the form builds on prior 
action where the Commission worked with and sought comment from 
the broadcast industry.

    The staff also is actively working on a Public Notice to 
seek public input on the final auction procedures, and 
reviewing the issues raised in the Petitions for 
Reconsideration on the Report and Order that were filed with 
the Commission in late August.
                    Questions for the Record

       Committee on Small Business Full Committee Hearing

                       September 17, 2014

                  Congressman Tom Rice (SC-07)

    1. My colleagues and I appreciate the agency's apparent 
willingness to address the rural call completion problem that 
continues to harm rural America when calls destined for rural 
businesses, hospitals, public safety officials, and individuals 
are dropped before reaching the local provider. Because of the 
critical need to fully resolve this problem, please provide a 
more detailed update on the status of your agency's actions to 
do so, including a more detailed explanation of why it has 
taken so long to implement the recordkeeping and retention 
rules the Commission adopted on this subject nearly a year ago. 
The FCC has fined three companies in the past couple of years 
for failing to ensure that rural calls are completed. Have 
these enforcement actions been effective in discouraging other 
bad actors from dropping calls? Why do you think the record 
retention and reporting will help solve the problem? What more 
can be done?

    RESPONSE:

    The consequences of call completion and service quality 
problems can be dire, impacting businesses, families, and 
public safety, and thus the Commission is committed to ensuring 
reliable telephone service in rural America. In the Rural Call 
Completion Report and Order and Further Notice of Proposed Rule 
Making, the Commission adopted new rules governing the delivery 
of long-distance calls to rural areas, including prohibiting 
false ring signaling, and requiring data retention and 
reporting of call completion performance. The rule prohibiting 
false ring signaling is already in effect. The record retention 
and call completion performance reporting requirements will 
need approval from the Office of Management and Budget (OMB) 
before going into effect. We are currently addressing petitions 
for reconsideration and waiver filed following the Rural Call 
Completion Order. Recently, I circulated an Order to my fellow 
Commissioners to address five petitions that were filed asking 
the FCC to reconsider our rules.

    To be sure, we are not waiting for the new rules to go into 
effect to take what actions we can under our existing rules. In 
particular, the Commission has taken a number of enforcement 
actions in this area. In addition to the Consent Decree entered 
with Level 3 in 2013 ($975,000), earlier this year the 
Enforcement Bureau negotiated consent decrees with two major 
long distance providers--Windstream Corporation ($2.5 million) 
and Matrix Telecom ($875,000).

    Our investigations, in conjunction with other enforcement 
efforts, which include issuing an advisory on how providers 
should address consumer complaints about rural call completion 
problems, have had positive effects in combatting this complex 
problem. These efforts have raised awareness among long 
distance providers as to how an individual intermediate 
provider (often called a ``least cost router'') performs in 
delivering calls to rural areas and, as a result, long distance 
providers have removed poor performing intermediate providers 
from particular routes. These efforts also have improved the 
process through which long distance providers address and 
resolve complaints by rural carriers and consumers about call 
completion problems.

    The new rules will further help us ensure that customers in 
rural areas receive reliable telephone service. For example, 
the data that providers file with the Commission should show us 
whether an individual long distance provider is completing 
calls to a specific rural area at a lower rate than other 
providers, which should help us take targeted, appropriate 
action, including enforcement action, if necessary. This 
information, as well as the additional data that long distance 
providers will collect and retain, will also assist long 
distance providers in monitoring the performance of each of 
their individual intermediate providers to discrete rural areas 
and highlight whether provider's call completion rates to a 
particular rural area is unacceptably low. Once the new rules 
take effect, we expect that other long distance providers, like 
Matrix, will remove poor performing intermediate providers to 
improve all completion performance to rural areas.

    We will continue to investigate the call completion 
practices of other voice communications providers, enforce our 
rules, and evaluate whether any additional measures are 
appropriate to ensure reliable telephone service in rural 
America.

    2. You and your staff have made statements that indicate 
you're considering security mandates for telecom providers if 
you decide the industry is not effectively securing its own 
assets. What security threshold will companies have to meet to 
ensure their security measures aren't regulated? When you 
consider the wide variation of network and service providers, 
how would your agency develop mandatory standards that are 
relevant for all entities when the cyber threats are always 
changing? Wouldn't it be more efficient for companies to be 
made aware of threats so they can adopt the security measures 
that are the best fit for their company? How do you plan to 
help companies in implementing such measures?

    Secure communications networks and the public safety 
functions that rely on them are crucial to our national 
security. As these networks transition to IP-based 
technologies, forward-looking market innovation driven by the 
business interests and expertise of the private sector is 
indispensable to their security and central to consumer and 
investor confidence in the communications market. This is the 
guiding principle of our cybersecurity efforts at the FCC. The 
strongest posture our nation can have is a capable private 
sector leading the development and implementation of effective, 
defensive cybersecurity measures.

    Among communications sector companies, there is a wide 
range of cyber defense capabilities. Effective employment of 
cyber capabilities varies depending on a number of factors, 
including company size and scale, reliance on public facing 
Internet infrastructure, experience with adversary exploitation 
attempts, and workforce training, among other factors. However, 
given the seriousness and sophistication of the threats that 
these networks face and the accelerating convergence of public 
safety communications around IP-based networks, I am extremely 
concerned that the relevant information is simply not yet 
available for the FCC--or any other entity--to have an informed 
understanding of the sufficiency of the protections that are in 
place. Developing a well-informed understanding of cyber risks 
for our core networks is a threshold issue for our country's 
national security interests and for the Commission's execution 
of its statutory public safety responsibilities.

    Tackling our nation's cybersecurity challenges will require 
a collaborative effort. We need a new regulatory paradigm that 
is both more dynamic than reactive compliance with rules and 
more effective than blindly trusting the marketplace. The 
companies that make up the communications sector must recognize 
their special role and the value proposition, and we look 
forward to continuing to work with these stakeholders, such as 
through the Communications Security, Reliability, and 
Interoperability Council (CSRIC), an industry-led FCC advisory 
group, which has a working group tasked with developing and 
recommending implementation details for the NIST Cybersecurity 
Framework in the communications sector.

    Over 100 subject matter experts from industry and other 
stakeholders are working urgently to establish an approach to 
cybersecurity in which they generate the sufficiency thresholds 
for their internal cybersecurity controls consistent with the 
NIST Cybersecurity Framework. Everyone involved in this effort 
is working toward the same goal: a business-driven approach to 
measuring, managing, and communicating cyber risk. I do not 
wish to prejudge this important industry-led effort, and it 
would be premature to comment on where the effort may conclude. 
We all want this effort to succeed, and the FCC will work 
diligently with communications providers and other stakeholders 
to make it so.

    Regarding threat information sharing, we agree that 
companies themselves are our country's eyes and ears in 
detecting and addressing these threats. At the FCC, we are 
evaluating the legal concerns that may complicate threat 
information sharing in the communications sector, and we are 
working collaboratively with communications stakeholders and 
companies in other sectors to find information sharing 
solutions. Again, however, it would be premature to speculate 
on what other options might be needed beyond the efforts that 
are presently underway, as neither the FCC nor the 
communications providers themselves have sufficient data or 
information on which to base such determinations.
[GRAPHIC] [TIFF OMITTED]
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