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89–781 2014

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 

Small Business Committee Document Number 113–083 

Available via the GPO Website: www.fdsys.gov 

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Congress.#13
(II) 

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 VELA ́ ZQUEZ, 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 

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(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Sam Graves ..................................................................................................... 1 

Hon. Nydia Vela ́zquez ............................................................................................. 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 

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(1) 

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, Vela ́zquez, 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 

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portant 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 Vela ́zquez for her 

opening statement. 

Ms. VELA ́ ZQUEZ. 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 

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cause 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 earlystage 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 

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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 

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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 

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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 Vela ́zquez? 

Ms. VELA ́ ZQUEZ. 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. VELA ́ ZQUEZ. 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 

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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. VELA ́ ZQUEZ. Have you performed any small business impact analyses conforming the Regulatory Flexibility Act? 

Mr. WHEELER. Yes, ma’am. 

Ms. VELA ́ ZQUEZ. 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. VELA ́ ZQUEZ. 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. VELA ́ ZQUEZ. 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 

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on the 15th of December. I do not want any more delays on this. 

We have waited on special access long enough. 

Ms. VELA ́ ZQUEZ. 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. 

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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 Vela ́zquez, 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. 

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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 fullyloaded 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. 

SBREP-219 with DISTILLER

11 

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. 

SBREP-219 with DISTILLER

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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 

Vela ́zquez, 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. 

SBREP-219 with DISTILLER

13 

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 

SBREP-219 with DISTILLER

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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 

SBREP-219 with DISTILLER

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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 

SBREP-219 with DISTILLER

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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 

SBREP-219 with DISTILLER

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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 twothirds 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. 

SBREP-219 with DISTILLER

18 

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. VELA ́ ZQUEZ. Mr. Chairman? 

Chairman GRAVES. Yes, ma’am. 

Ms. VELA ́ ZQUEZ. 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? 

SBREP-219 with DISTILLER

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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. VELA ́ ZQUEZ. 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. Vela ́zquez, thank you very much for inviting me 

today. 

Ms. VELA ́ ZQUEZ. 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.] 

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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 Vela ́zquez, 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 competiSBREP-219 with DISTILLER

21 

tion 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 

SBREP-219 with DISTILLER

22 

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 Erate 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 workSBREP-219 with DISTILLER

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ing 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-onone interviews, OCBO connects entrepreneurs with financial experts who make daily decisions about capital infusion. 

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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. 

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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. 

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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. 

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SBREP-219 with DISTILLER


Insert offset folio 27 here 89781.001
28 

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 busiSBREP-219 with DISTILLER

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nesses 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-ofreturn 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 

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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 

SBREP-219 with DISTILLER

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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 (DCA), 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. 

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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. 

SBREP-219 with DISTILLER

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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 

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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. 

SBREP-219 with DISTILLER

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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 mediumsized 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: 

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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 

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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. 

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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 

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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. 

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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 IPbased 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. 

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