OVERSIGHT OF THE FEDERAL

COMMUNICATIONS COMMISSION

HEARINGS

BEFORE THE

SUBCOMMITTEE ON TELECOMMUNICATIONS AND

THE INTERNET

OF THE

COMMITTEE ON ENERGY AND

COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

MARCH 14 AND JULY 24, 2007

Serial No. 110–18

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OVERSIGHT OF THE FEDERAL

COMMUNICATIONS COMMISSION

HEARINGS

BEFORE THE

SUBCOMMITTEE ON TELECOMMUNICATIONS AND

THE INTERNET

OF THE

COMMITTEE ON ENERGY AND

COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

MARCH 14 AND JULY 24, 2007

Serial No. 110–18

(

Printed for the use of the Committee on Energy and Commerce

energycommerce.house.gov

OVERSIGHT OF THE FEDERAL COMMUNICATIONS COMMISSION

COMMITTEE ON ENERGY AND COMMERCE

JOHN D. DINGELL, Michigan, Chairman

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, JR., New Jersey

BART GORDON, Tennessee

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

DIANA DEGETTE, Colorado

Vice Chairman

LOIS CAPPS, California

MIKE DOYLE, Pennsylvania

JANE HARMAN, California

TOM ALLEN, Maine

JAN SCHAKOWSKY, Illinois

HILDA L. SOLIS, California

CHARLES A. GONZALEZ, Texas

JAY INSLEE, Washington

TAMMY BALDWIN, Wisconsin

MIKE ROSS, Arkansas

DARLENE HOOLEY, Oregon

ANTHONY D. WEINER, New York

JIM MATHESON, Utah

G.K. BUTTERFIELD, North Carolina

CHARLIE MELANCON, Louisiana

JOHN BARROW, Georgia

BARON P. HILL, Indiana

JOE BARTON, Texas

Ranking Member

RALPH M. HALL, Texas

J. DENNIS HASTERT, Illinois

FRED UPTON, Michigan

CLIFF STEARNS, Florida

NATHAN DEAL, Georgia

ED WHITFIELD, Kentucky

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

VITO FOSSELLA, New York

STEVE BUYER, Indiana

GEORGE RADANOVICH, California

JOSEPH R. PITTS, Pennsylvania

MARY BONO, California

GREG WALDEN, Oregon

LEE TERRY, Nebraska

MIKE FERGUSON, New Jersey

MIKE ROGERS, Michigan

SUE WILKINS MYRICK, North Carolina

JOHN SULLIVAN, Oklahoma

TIM MURPHY, Pennsylvania

MICHAEL C. BURGESS, Texas

MARSHA BLACKBURN, Tennessee

PROFESSIONAL STAFF

DENNIS B. FITZGIBBONS, Chief of Staff

GREGG A. ROTHSCHILD, Chief Counsel

SHARON E. DAVIS, Chief Clerk

BUD ALBRIGHT, Minority Staff Director

(II)

(III)

SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET

EDWARD J. MARKEY, Massachusetts, Chairman

MIKE DOYLE, Pennsylvania

JANE HARMAN, California

CHARLES A. GONZALEZ, Texas

JAY INSLEE, Washington

BARON P. HILL, Indiana

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, JR, New Jersey

BART GORDON, Tennessee

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

GENE GREEN, Texas

LOIS CAPPS, California

HILDA L. SOLIS, California

JOHN D. DINGELL, Michigan (ex officio)

FRED UPTON, Michigan

Ranking Member

J. DENNIS HASTERT, Illinois

CLIFF STEARNS, Florida

NATHAN DEAL, Georgia

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

VITO FOSELLA, New York

GEORGE RADANOVICH, California

MARY BONO, California

GREG WALDEN, Oregon

LEE TERRY, Nebraska

MIKE FERGUSON, New Jersey

JOE BARTON, Texas (ex officio)

(V)

C O N T E N T S

MARCH 14, 2007

Page

Hon. Edward J. Markey, a Representative in Congress from the Commonwealth of Massachusetts, opening statement .................................................... 1

Hon. Fred Upton, a Representative in Congress from the State of Michigan,

opening statement ................................................................................................ 2

Hon. Jane Harman, a Representative in Congress from the State of California, opening statement ........................................................................................ 4

Hon. Anna G. Eshoo, a Representative in Congress from the State of California, opening statement ........................................................................................ 5

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, opening statement ....................................................................................... 6

Hon. Nathan Deal, a Representative in Congress from the State of Georgia,

opening statement ................................................................................................ 8

Hon. Eliot L. Engel, a Representative in Congress from the State of New

York, opening statement ...................................................................................... 9

Hon. Frank Pallone, Jr., a Representative in Congress from the State of

New Jersey, prepared statement ........................................................................ 11

Hon. Lois Capps, a Representative in Congress from the State of California,

prepared statement .............................................................................................. 12

WITNESSES

Kevin J. Martin, Chairman, Federal Communications Commission ................... 15

Prepared statement .......................................................................................... 17

Answers to submitted questions ...................................................................... 168

Michael J. Copps, Commissioner, Federal Communications Commission .......... 21

Prepared statement .......................................................................................... 24

Answers to submitted questions ...................................................................... 96

Deborah Taylor Tate, Commissioner, Federal Communications Commission .... 26

Prepared statement .......................................................................................... 28

Answers to submitted questions ...................................................................... 147

Jonathan S. Adelstein, Commissioner, Federal Communications Commission . 34

Prepared statement .......................................................................................... 35

Answers to submitted questions ...................................................................... 120

Robert M. McDowell, Commissioner, Federal Communications Commission .... 38

Prepared statement .......................................................................................... 39

Answers to submitted questions ...................................................................... 263

SUBMITTED MATERIAL

Jerry Brito, ‘‘Failure to Communicate,’’ Wall Street Journal, March 13, 2007 .. 286

Letter of January 26, 2007 from Dee May, Vice President, Federal Regulatory, Verizon, to Marlene H. Dortch, Secretary, Federal Communications

Commission ........................................................................................................... 287

JULY 24, 2007

Hon. Edward J. Markey, a Representative in Congress from the Commonwealth of Massachusetts, opening statement .................................................... 289

Hon. Fred Upton, a Representative in Congress from the State of Michigan,

opening statement ................................................................................................ 291

Hon. Mike Doyle, a Representative in Congress from the Commonwealth

of Pennsylvania, opening statement ................................................................... 292

Page

VI

Hon. Jane Harman, a Representative in Congress from the State of California, opening statement ........................................................................................ 293

Hon. John Shimkus, a Representative in Congress from the State of Illinois,

opening statement ................................................................................................ 294

Hon. Bobby L. Rush, a Representative in Congress from the State of Illinois,

opening statement ................................................................................................ 295

Hon. Joe Barton, a Representative in Congress from the State of Texas,

opening statement ................................................................................................ 296

Hon. Bart Stupak, a Representative in Congress from the State of Michigan,

opening statement ................................................................................................ 297

Hon. Mike Ferguson, a Representative in Congress from the State of New

Jersey, opening statement ................................................................................... 298

Hon. Edolphus Towns, a Representative in Congress from the State of New

York, opening statement ...................................................................................... 299

Hon. Cliff Stearns, a Representative in Congress from the State of Florida,

opening statement ................................................................................................ 299

Hon. Anna G. Eshoo, a Representative in Congress from the State of California, opening statement ........................................................................................ 300

Hon. Nathan Deal, a Representative in Congress from the State of Georgia,

opening statement ................................................................................................ 301

Hon. Hilda L. Solis, a Representative in Congress from the State of California, opening statement ........................................................................................ 302

Hon. Charles W. ‘‘Chip’’ Pickering, a Representative in Congress from the

State of Mississippi, opening statement ............................................................. 303

Hon. Charles A. Gonzalez, a Representative in Congress from the State

of Texas, opening statement ................................................................................ 304

Hon. J. Dennis Hastert, a Representative in Congress from the State of

Illinois, opening statement .................................................................................. 305

Hon. Gene Green, a Representative in Congress from the State of Texas,

opening statement ................................................................................................ 306

Hon. Lois Capps, a Representative in Congress from the State of California,

opening statement ................................................................................................ 308

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, opening statement ....................................................................................... 309

Hon. Marsha Blackburn, a Representative in Congress from the State of

Tennessee, opening statement ............................................................................ 310

Hon. Eliot L. Engel, a Representative in Congress from the State of New

York, opening statement ...................................................................................... 311

WITNESSES

Kevin J. Martin, Chairman, Federal Communications Commission ................... 313

Prepared statement .......................................................................................... 316

Answers to submitted questions ...................................................................... 402

Michael J. Copps, Commissioner, Federal Communications Commission, ......... 329

Prepared statement .......................................................................................... 330

Deborah Taylor Tate, Commissioner, Federal Communications Commission, ... 332

Prepared statement .......................................................................................... 334

Jonathan S. Adelstein, Commissioner, Federal Communications Commission, 344

Prepared statement .......................................................................................... 346

Rob McDowell, Commissioner, Federal Communications Commission, .............. 357

Prepared statement .......................................................................................... 358

SUBMITTED MATERIAL

John M. Lawson, president and chief executive officer, Association of Public

Television Stations, letter of July 23, 2007, to Mr. Engel ................................ 397

CTIA—The Wireless Association, letter of July 16, 2007, to the Federal Communications Commission ..................................................................................... 399

Michael J. Copps, ‘‘The Price of Free Airwaves,’’ the New York Times, June

2, 2007 ................................................................................................................... 424

Letter of December 19, 2006 from Mr. Dingell to Kevin J. Martin, and

Mr. Martin’s response of December 20, 2006 ..................................................... 425

(1)

OVERSIGHT OF THE FEDERAL

COMMUNICATIONS COMMISSION

WEDNESDAY, MARCH 14, 2007

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON TELECOMMUNICATIONS

AND THE INTERNET,

COMMITTEE ON ENERGY AND COMMERCE,

Washington, DC.

The subcommittee met, pursuant to call, at 9:00 a.m., in room

2123 of the Rayburn House Office Building, Hon. Edward J. Markey (chairman of the subcommittee) presiding.

Members present: Representatives Doyle, Harman, Gonzalez,

Inslee, Hill, Boucher, Rush, Eshoo, Stupak, Engel, Green, Capps,

Solis, Dingell, Upton, Hastert, Stearns, Deal, Cubin, Shimkus, Wilson, Pickering, Fossella, Radanovich, Walden, Terry, Ferguson and

Barton.

Staff present: Johanna Shelton, Tim Powderly, Mark Seifert,

Colin Crowell, Maureen Flood, Dave Vogel, Neil Fried, Courtney

Reinhard.

OPENING STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH

OF MASSACHUSETTS

Mr. MARKEY. Good morning. The subject of today’s oversight

hearing is the Federal Communications Commission. This year, as

we look to the operation of the Commission, we will have the

chance to assess whether the agency that is tasked with overseeing

an important and vital sector of our national economy is properly

organized for such a role. In particular, our oversight will analyze

whether it is operating at maximum efficiency, what constructive

proposals can be considered to improve its operations, whether it

is adhering to congressional intent in implementing our Nation’s

laws and to what extent its policy agenda advances the public interest. An overarching goal for this subcommittee during this Congress will be to develop a plan for achieving ubiquitous, affordable

broadband service to every American.

Right now, depending upon the ranking one chooses to cite, the

United States is 15th in the world or 21st or 29th in broadband

penetration. Certainly, some of the countries ahead of us in the

rankings are not apt comparisons. Iceland, for example, is ahead

of the United States but has half of its population in one city, Reykjavik, where the phone book lists people by their first name. Yet,

several countries that have leapt ahead, Japan, the Netherlands,

2

Sweden, Israel, Finland, Canada, Belgium, surpass the United

States not only in broadband penetration, but also in speed.

The Commission still defines broadband at a minimum of just

200 kilobits per second, a speed that would only be considered

broadband service in many other countries if it had a good gust of

wind behind it. The reality is that America currently suffers from

the lack of an overarching broadband plan, a low speed threshold,

poor data and threats to the openness of the Internet. The Commission has a role to play with Congress and this subcommittee in

each of these areas. The Commission should explore ways to create

incentives for investment in new technologies; how to animate the

technology already in the ground, the copper network, for

broadband services and competition; how to modernize and rationalize universal service and how to ensure that wireless broadband

networks, municipal broadband networks and others can interconnect with the incumbent in an efficient and cost-effective way.

This subcommittee will hold several hearings on Internet freedom and network neutrality later this year, so I won’t dwell on

that subject here, other than to say it is an indispensable policy for

the future of the Web and must be addressed in a way that safeguards the open architecture that has made the Internet so vital

in so many sectors of our economy and our society.

An important step the Commission could also soon take to advance our broadband goals would be to revamp its data collection

and analysis. We simply need a better and more accurate picture

of broadband service in America. This will help policy makers identify solutions and fine tune remedies for overcoming obstacles and

achieving our national goals. Improved data collection is something

that also is a dire need in the area of media ownership. It is imperative that the Commission know the extent of minority and womenowned licenses. The fact that this information is not readily available to the public is alarming and hinders the Commission’s work

on promoting localism, media ownership, low power radio, small

business participation in wireless auctions and other important initiatives. I hope that this can be addressed soon, as well.

And finally, I want to mention the Commission’s cable franchise

order, which the Commission adopted in December on a 3 to 2 vote.

I am very concerned about the process by which the order was

adopted and the effect that this order will have on funding the

PEG channels and institutional networks or INETs. These local

cable access channels provide an important local voice in a media

environment marked by consolidation and INETs are often used for

public safety in homeland security purposes.

This is an important hearing, and we welcome the FCC Commissioners here this morning, and we intend to have them appear as

frequent guests of this subcommittee as we proceed forward this

year. That concludes the opening statement of the Chair. We now

turn and recognize the ranking member, the gentleman from

Michigan, Mr. Upton.

OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN

Mr. UPTON. Well, thank you, Mr. Chairman. I am glad daylight

savings time changed. We all got here, most of us, on time, as well.

3

I thank you, as well as Chairman Martin and his colleagues for appearing before us this morning. While your positions may not be

the most glamorous in government, they are indeed among the

most important, and I welcome all five of you, and I look forward

to having an in-depth discussion on a host of issues today.

It is an exciting time in the world of telecommunications. Technology plays an integral role in all of our lives. We have seen tremendous advancements in the last decade, and one can only imagine what the next decade will hold. As the ranking member of this

subcommittee, I envision a tech sector that is indeed ripe for

growth. But we do have a responsibility to ensure that we do not

over-regulate industry with burdensome red tape. Last year, the

House overwhelmingly, by a super majority vote of 321 to 101,

threw its support behind creating a national cable franchise process to knock down barriers and to streamline the process for the

competitive cable entry into towns, cities, villages and counties all

across the country.

And while a national franchise is a commonsense solution that

would have leveled the playing field and expedited new entrants

into the marketplace, our legislation, unfortunately, did not survive

the 109th Congress. But the end of the last Congress did not put

an end to the conversation. Although our bill did not become law,

the mission continues, and I applaud the FCC for attempting to accomplish some of the same objectives that we were striving for via

their rulemaking process. The FCC’s action was an important first

step, and I hope that as they move forward, they take the necessary steps to include existing cable companies under the umbrella, as well.

Our legislation struck the right balance for consumers, providers

and municipalities, and I would like to think that our bill helped

to lay the framework for States to purse their own franchise bills.

California recently became the ninth State to change its law to

allow statewide video franchise licenses and I am pleased that my

State of Michigan also adopted a streamlined process, and 14 other

States are also currently considering similar legislation.

As each State allows statewide entry into the video market, consumers shortly thereafter reap the benefits, enjoying more services

at lower prices. States changing their teleco laws also allow for the

further deployment of broadband and while the tech sector is the

engine that drives the Nation’s economy, there is no question that

our economic growth is directly related to broadband deployment.

Broadband is the equivalent of the country’s interstate highway

system of the 1950s. Communities that were not located near an

exit or an on-ramp experienced little growth through the decades.

The same can be said as we look at broadband.

As the chairman said, we are all embarrassed to say that the

U.S. currently ranks 12th among developed nations in access to

broadband, even behind Japan, Korea and Iceland. We must continue fostering greater broadband deployment and access nationwide through deregulation, as well as further development deployment of the spectrum, such as with the DTV legislation, which will

help deliver broadband to communities throughout the country, including the most rural of locales. If our communities are not wired,

then we will continue to fall further behind other nations.

4

In addition to broadband deployment, I remain quite concerned

on a number of issues. Media ownership caps continue to thwart

the broadcast industry. As we speak, the WARN Commission is

working to establish a national alert system for the 21st century.

The NTIA’s announcement this week on converter boxes reminds

us that the DTV transition is on the horizon. I look forward to

hearing the Commissioners’ thoughts on these and other issues of

critical importance.

And lastly, I want to commend all of your work, particularly

Chairman Martin, for being such a loyal partner in our effort to increase the fines for indecency by tenfold. The new law which President Bush signed last June delivered something of real value to

families across the Nation, and I would remind all of us that it was

with strong bipartisan support in not only this subcommittee, but

the entire Congress, that saw the enactment of this important legislation.

I want to thank all of you for being here this morning. Look forward to your testimony and the dialog that we will have, and I

yield back. Thank you, Mr. Chairman.

Mr. MARKEY. The gentleman’s time has expired. We recognize

the gentleman from Pennsylvania, the vice chair, Mr. Doyle.

Mr. DOYLE. Thank you, Mr. Chairman, and thank you for holding this hearing. It is an important hearing, and welcome to the

members of the Commission. Mr. Chairman, I have many, many

questions today, so I am going to waive my opening statement and

take the time on the back end.

Mr. MARKEY. The Chair recognizes the gentlelady from California, Ms. Harman.

OPENING STATEMENT OF HON. JANE HARMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Ms. HARMAN. Thank you, Mr. Chairman. I would like to welcome

the members of a very important regulatory commission, especially

Commissioner Tate, who is making her first appearance before us.

That may be true of Commissioner McDowell, as well. Two out of

five. You toil on matters big and small. In the small category,

though big to my constituents, I want to thank you again for your

heroic, though unsuccessful, efforts to block needless area code

splits in California. As for the big category, as stewards of spectrum licenses, you decide who will get to use the public airwaves.

For our Nation’s first responders in the communities they serve,

this can be, this is, a life and death decision.

It is astonishing that leaps and bounds in technology, represented by the BlackBerries and cell phones in this room, seem to

have passed over our firefighters and police officers. The DTV transition deadline is less than 2 years away. By my lights, it should

be much sooner. But nonetheless, the auction of 700 MHz will take

place in less than 1 year, and the $1 billion grant program for inoperability will be out the door this fiscal year. We need a quick resolution on your rulemakings for public safety broadband networks

in the 700 MHz band, otherwise we risk wasting Federal money

and local agencies’ time and efforts to build networks within a regional and national framework.

5

I can’t stress how important this is. As Katrina showed us, the

lessons of the 9/11 attacks will haunt our Nation until we get it

right. I am one who sadly believes we are probably in store for

more natural and more terrorist attacks in this country, and they

could come at any time. We still don’t have the infrastructure for

interoperable communications. A lot of this rests on you, and I

would hope, as one member of this committee, that we can provide

all the support you need to make the best and wisest decisions

quickly so we can get on with it. I yield back the balance of my

time.

Mr. MARKEY. The gentlelady’s time has expired. The gentleman

from Mississippi, Mr. Pickering.

Mr. PICKERING. Mr. Chairman, I will waive the rest of my time

and save those for the questions. Thank you.

Mr. MARKEY. Gentleman from Oregon, Mr. Walden.

Mr. WALDEN. Thank you, Mr. Chairman. I, too, am going to

waive and save the time for questions.

Mr. MARKEY. The gentleman from Texas, Mr. Gonzalez.

Mr. GONZALEZ. Waive opening.

Mr. MARKEY. The gentleman from Indiana, Mr. Hill.

Mr. HILL. Mr. Chairman, I, too, will waive my opening statement

and ask questions later on.

Mr. MARKEY. The gentlelady from California, Ms. Eshoo.

OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Ms. ESHOO. Thank you, Mr. Chairman. Chairman Martin and

Commissioners, welcome to the Energy and Commerce Committee.

I can’t help but think that you might have needed someone to help

guide you to the place because it has been a very long time since

the Commission has been here. Actually, it is 3 years ago this

month when the Commission was here at that time, the Janet

Jackson-inspired indecency hearing, and I really don’t recall the

last time the full Commission has been here. So this is an important hearing, and Mr. Chairman, thank you for calling it.

Chairman Martin, I am particularly pleased to see you because

I am eager to hear from you about your management of this allimportant agency. I continue to hear concerns from my constituents

and many others; many, many complaints about matters before the

Commission, complaints that the Commission is unresponsive, insular and even capricious, at times, in terms of its actions. From

the mundane, everyday business of the Commission to actions surrounding mergers of some of the largest corporations in the world,

there is a consistent thread about the Commission and that is that

it is nontransparent, has a heavy-handed decision making process

during your tenure as chairman.

I am being very rough on you, but I think these are things that

we really need to talk about and get out on the table, and as I said,

it has been a long time since the Commission has been here. What

concerns me most is the lack of transparency and the fairness in

the Commission’s deliberations regardless of the outcome. Sometimes we agree, other times we don’t agree. That is not the point.

Many of the actions taken by the Commission in recent years bear

6

out what I just said. But I think that the consideration of the recently concluded AT&T-BellSouth merger is the most troubling, at

least it is to me.

You were clearly intent on expediting the AT&T-BellSouth merger, and I think being expeditious is important, because these are

timely decisions. And we can agree to disagree on whether completion of the merger was grounded, really, in the interests of consumers, but what I don’t agree with and what I certainly don’t support

are the lengths to which you, as the chairman, went to to try to

force the merger through the Commission.

In particular, I think you are now the father of a new word in

the English language, and that is ‘‘unrecuse.’’ I have never heard

of unrecuse before. I thought if one recuses themselves, that that

stands, and I found that tremendously troubling, and I salute Commissioner McDowell in how he conducted himself, but that essentially that he was forced to participate in the merger proceedings,

I think is cause for deep concern. It is very difficult to develop consensus, but really, as policy makers, that is the job that is given

to us, especially in the public square, because we are not here for

ourselves, we are here to represent the people of our country.

I don’t think that action has instilled confidence in the Commission with the American people. This is all public and of all places,

the Federal Communications Commission. So it is very troubling to

me. And then once that failed and then you had to achieve a bipartisan consensus to approve the merger, you and Commissioner

Tate, whom I welcome here today, took the extraordinary step, and

I don’t know if this has ever been done at the Commission before,

to disavow many of the critical merger conditions to which you and

AT&T had agreed. I mean, this is the equivalent of signing statements; where the president signs legislation and then says I don’t

like parts of it, so I am not going to honor it. And so I think we

have to have a discussion of that.

So welcome to the committee. I look forward to the testimony,

and I certainly look forward to the questions that we will pose and

your answers to them.

Mr. MARKEY. The gentlelady’s time has expired. The gentlelady

is also right. It is unusual to have the FCC here. It may be impossible to reunite the Beatles, but for the first time in 3 years, we

have reunited the FCC in front of this committee, so it is a big historic day. Let me turn and recognize the gentleman from Michigan,

the chairman of the full committee, Mr. Dingell.

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN

The CHAIRMAN. Mr. Chairman, I thank you for your courtesy and

I commend you for holding this hearing. It has been 4 long years

since this committee conducted a general oversight hearing on the

Federal Communications Commission. Indeed, this is the first such

hearing for this chairman in his new role and for two of the remaining Commissioners.

The FCC is an independent agency created by the Congress. It

is an arm of the Congress. And this committee, a committee on

which I have proudly served for some while, has jurisdiction over

7

this agency and the Nation’s telecommunications laws. I have great

respect for the important work of the FCC and its Commissioners.

The FCC writes regulations for industries that are vital to our democracy and to our economy. The laws charge the FCC with serving the public interest. That means all parties, rich, poor, minorities, small business owners, large business owners, rural residents,

people with disabilities, should be fairly, properly and promptly

treated by the Commission and its policies.

It is equally vital that this committee exercise vigilant and proper oversight of FCC activities. For some time, the Commission has

not been subject to an appropriate level of congressional oversight.

This oversight slumber seems to have led to some rather unfortunate and unwelcome consequences. The FCC has strayed from its

sole duty; that is to implement the laws as passed by the Congress.

The FCC is not a legislative body. That role resides here, in this

room, with the people’s elected representatives. And it is also not

an arm of the administration, something which no administration

in my recollection has understood fully, but it is something that

Sam Rayburn believed in very strongly, and it is something which

the current occupant of the chair of this committee believes with

equal strength.

Now, when the FCC loses its proper role or proper sight of its

proper role, consumers suffer, as does the credibility of the agency.

I fear that this has too often been the case. Last December the FCC

adopted a measure concerning cable television franchises. The matter was one on which Congress had been actively engaged. In 1984,

those of us who wrote the law established well-defined and distinct

roles in cable regulation for local governments and for the FCC. If

reform of that regulatory structure is necessary, then it is the

Congress’s prerogative to undertake such action, as we have done

before. It is not, however, a role for the FCC.

In this case, the Commission, not the Congress, preempted local

governments on matters involving municipal property. The Commission had good intentions, and I hope they were good, notwithstanding the fact that the Congress already has assigned franchising matters, such as franchising negotiations and universal buildout requirements, to local officials, not the FCC. I strongly support

efforts to increase cable competition and lower prices for cable consumers and have been working for many years to achieve both of

these goals.

The Commission must work, however, entirely within the framework of existing laws to achieve that goal, and it must respect the

laws that are enacted by the Congress and not exceed the authorities which it is given. That, however, did not happen here. The

Commission chose to ignore the well-settled divisions of responsibility. Such action is unwise and may, I fear, give rise to false hopes

to consumers.

Furthermore, the Commission appears to be continuing a disturbing practice of voting on measures long before they are complete. Once voted, the Commission often takes months to issue a

proper order. One such delay, the AT&T-BellSouth merger order,

has forced dissatisfied parties into court where they are compelled

to sue over a press release. I find nothing on this in the Administrative Procedures Act or in the histories of the legislative governVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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ment and the regulatory agencies. I find regulating by press release to be a curious way, then, to interpret the Administrative

Procedures Act.

There is also the matter of forbearing from certain statutory provisions due to arbitrary inaction. In a recent case, a 2–2 tie resulted in the grant of a forbearance petition. Because the Commission failed to release an order in that case, it is not clear as to the

precise relief which is granted or the reason for the decision or who

will benefit and who will be hurt. It is not apparent to me how the

public or the courts can judge the wisdom of agency activity in such

circumstances.

There is also the matter of the Commission’s responsiveness to

consumers. I understand that the Commission has recently turned

its attention to backlog consumer complaints, including thousands

of do-not-call complaints dating back to 2003. We will be asking the

Commission to make available to us some of these complaints and

the Commission’s response. I understand that the Commission’s response, in some instances, is to return the complaint to the complainer with the request that further information be sent in complaints that are as much as 4 years old. I find this curious and discouraging, and I think that it raises questions about whether the

Commission is working hard and whether we need to schedule an

oversight hearing in this committee every month to keep the business of the Commission on track.

The FCC is an important instrument of Congress, designed to

help the public good. Whether you have worked for political campaigns, the executive branch, Capitol Hill or the private sector, it

is important to remember that once one assumes a seat on the

Commission, one is obligated to act independently and to promote

the public interest. I hope that from this committee meeting will

come some strides in that direction for the committee, for the executive and for the FCC. Thank you, Mr. Chairman.

Mr. MARKEY. The Chair recognizes the gentleman from Nebraska, Mr. Terry.

Mr. TERRY. I will waive.

Mr. MARKEY. The gentleman from Georgia, Mr. Deal.

OPENING STATEMENT OF HON. NATHAN DEAL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA

Mr. DEAL. Thank you, Mr. Chairman, and I would like to thank

the Commissioners for being present with us today. I would just

like to raise a few issues with you and hopefully hear your comments during your testimony or during the questioning period.

To start with, I would like to hear your opinion regarding the

current Government regulated retransmission consent regime.

When I first began talking about this issue a few years ago, I asserted that the system was broken and could cause harm to consumers. Recent events have unfortunately proven my assertion is

true. Over the last 6 months, thousands of consumers have lost access to local broadcast programming due to failed negotiations.

From what I understand, what we have witnessed to date may just

be the tip of the iceberg. With everything I have seen, the retransmission consent system lacks the principles normally present in a

9

free market. I will say it again. Retransmission consent regime

lacks the principles that we find in a free market.

I know the proponents of the current regulatory regime assert

that because agreements are being reached, the system must be

working. I am not convinced by that argument. Just because agreements ultimately are reached does not mean that the system is

good and fair or that all parties are willing participants. The more

I have learned about how this system works, the clearer it becomes

to me that the retransmission consent negotiations are based on

Federal regulations which do not grant a level playing field to all

players. In short, I believe the current system leads to agreements

based not on free market values but on who has the most

leveraging power.

Second, I would like to learn what the Commission plans, when

it plans to complete its proceedings and issue a final order in regard to white spaces. I believe it is important that we move to facilitate the use of unlicensed white spaces, as they will lead to increased broadband access for millions of Americans and enable a

wide range of innovative wireless devices and services.

And lastly, I would like to ask the chairman, hopefully, to explain the Media Bureau’s recent decision on set-top boxes. I have

heard concerns from rural cable subscribers that the decision may

lead them to pay $2 to $3 more on their cable bills each month,

and it is possible that the Commission will soon review this issue.

Thank you, Mr. Chairman. I look forward to the comments and

the questions.

Mr. MARKEY. The gentleman’s time has expired. The gentleman

from Michigan, Mr. Stupak.

Mr. STUPAK. Mr. Chairman, I welcome the Commission, and I

would waive my opening and reserve my time for questioning,

please.

Mr. MARKEY. Gentleman from New York, Mr. Engel.

OPENING STATEMENT OF HON. ELIOT L. ENGEL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW

YORK

Mr. ENGEL. Thank you very much, Mr. Chairman, for holding

this important hearing. It is absolutely imperative that we have

the Federal Communications Commission Chairman and Commissioners testify on a regular basis. I would like to take this opportunity to address some issues of concern to me, but first, I would

like to start by thanking the Commission for allowing WRCR, a

local radio station in my district, to change its operating frequency

from 1300 to 1700 kilohertz.

The change will greatly improve the coverage of this station. It

is a valuable asset for Rockland County, NY, in the event of an

emergency. Many people would turn their radio dial to WRCR for

immediate, up-to-date information. Couldn’t do it before because

the signal wasn’t good, and the new expanded coverage will guarantee that all residents of Rockland County will have this essential

information, so I thank the Commission for its efforts.

Today we will hear many of our colleagues bring up an array of

important issues that are within the FCC’s jurisdiction. One issue

that is of particular importance, obviously, is the state of the DTV

10

transition. The FCC has been tasked with the responsibility of the

success of this transition. If they don’t approach the analog cutoff

date with care and consideration, the consumer, as we have said

many times here before, millions of TV-viewing Americans will be

left with a black screen on that day.

I am concerned that the FCC is relying heavily on a Web site to

inform consumers about the transition and how to prepare for the

analog cutoff day. I don’t believe that is enough. Twenty-one million U.S. households rely on over-the-air TV. Many of them are minorities and have a combined income of $30,000 or lower and do

not have immediate access to the Internet, and I am not convinced

that simply a Web site will help these families, by itself.

The FCC has proposed a DTV program, which in 2008 was only allocated $1.5 million for outreach. If you contrast that with the

city of Berlin, Germany, who accomplished an analog cutoff in

2003, city of 3.3 million, spent close to a million dollars in consumer education, while we have to educate 300 million citizens,

and if we are only planning on spending $1.5 million, I really don’t

think that is enough, so I would like to explore that in some of the

questions.

Obviously, also, I am very concerned about broadband penetration. The U.S. continues to languish behind other nations in

broadband penetration, and the Commission ruled on streamlining

the franchising process recently, so I would like to hear some statements about that. When we are talking about having the FCC ensure that competitors have access to provide video service to apartments and condominiums, I think we need to have some questions

about that. I have also, in New York, we have our new governor,

who was then attorney general, investigated into alleged pay-forplay practices between major record labels and radio stations, and

I intend to ask some questions about that.

And I would also like to hear if we could sort of draw out the

opinions of the XM and Sirius satellite radio services, which have

decided to merge. We heard testimony just last week about that,

and some of the argument is that satellite radio is just one part

of the radio world, not just its own market. I would tend to agree

with that and would wonder what the Commissioners have to say

about that, so gentlemen and lady, I look very much forward to listening to all of you. It is nice to have two new Commissioners here

and our three old friends, not really old, but our three friends, and

again, thank you for the job you do. We may not always agree, but

we know you do important work and we appreciate it. Thank you.

Mr. MARKEY. I thank the gentleman. The gentlelady from New

Mexico, Mrs. Wilson.

Mrs. WILSON. Thank you, Mr. Chairman. I will reserve for questions.

Mr. MARKEY. The gentlelady from California, Ms. Solis.

Ms. SOLIS. I will waive.

Mr. MARKEY. She will waive her time, as well.

Mr. MARKEY. The gentleman from Illinois, Mr. Rush.

Mr. RUSH. Mr. Chairman, I will waive.

Mr. MARKEY. The gentleman from Washington State, Mr. Inslee,

will reserve. And the gentleman from Texas, Mr. Green.

Mr. GREEN. I will reserve, Mr. Chairman.

11

Mr. MARKEY. I think that that is all of the opening statements

that the subcommittee will entertain, and that will give us an opportunity to turn to our extremely distinguished panel this morning. Statements will be accepted for the record.

[The prepared statements of Mr. Pallone and Mrs. Capps follow:]

PREPARED STATEMENT OF HON. FRANK PALLONE JR., A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF NEW JERSEY

Good morning Chairman Martin and other members of the Commission. I want

to begin by thanking Chairman Markey for holding this long overdue oversight

hearing.

The FCC, like every other agency of Government, is accountable to the people and

the Congress. Yet, this Commission has decided to not follow that principle. As a

creature of Congress, their job is to interpret the law, not to legislate it. Instead,

they have decided to give itself the authority to pick winners and losers in the telecommunications marketplace, and the consumer is suffering.

We have witnessed inaction and backlogs over the past few years, which includes

lengthy delays of very important matters to consumers. In fact, this FCC has the

lowest output since 1994.

As a firm believer in competition, I have seen firsthand the benefits it provides

to consumers. However, having only two realistic broadband choices is not competition. All consumers should have plenty of choices for broadband, leading to affordable prices and better services. But I am concerned that the FCC’s recent policies

and procedures have resulted in weak competition within the broadband marketplace.

The United States is the country that invented the Internet. However, it has fallen to 16th in the world in broadband penetration. I am also worried about the lagging broadband deployment, as well as the FCC’s unreliable broadband data.

President Bush has urged that affordable high-speed Internet access be available

to all Americans by 2007. However, he has not set out a national broadband policy.

Meanwhile, the FCC recently released a ‘‘Broadband Report’’ in which they defined

broadband with speeds of 200 Kilobits. This definition is from 1999 and is obsolete.

Innovation has flourished over the past few years, and with services like YouTube

and others that measure is no longer acceptable.

The report also measures penetration by ZIP codes, assuming a ZIP code is fully

serviced if only one person has broadband. These types of measurements are flawed.

I do not believe this committee and this Congress can enact the right policies if we

aren’t given an accurate overall picture.

More specifically, as the chairman of the Health Subcommittee, I recognize the

importance high speed interactive broadband can have for health professionals and

patients. As the Communications Workers of America cited in their recent report,

‘‘Speed Matters,’’ high speed ‘‘enables remote monitoring, efficient chronic disease

management and more effective responses to emergencies.’’ Broadband gives

healthcare great possibilities by increasing access, lowering costs and providing better flexibility.

The FCC is not proactively recognizing their responsibility to the American people. I hope with some more guided oversight, we can begin to address these important issues.

12

13

14

15

Mr. MARKEY. The entire Federal Communications Commission,

appearing before us. You can see that there is an intense amount

of interest in your testimony here today. We welcome you back, Mr.

Chairman, before the full committee. We look forward to your testimony and the testimony of any of the other Commissioners who

wish to make opening statements and then we will turn to questions from the subcommittee members, so Mr. Chairman, whenever

you are comfortable, please begin.

STATEMENT OF KEVIN J. MARTIN, CHAIRMAN, FEDERAL

COMMUNICATIONS COMMISSION

Mr. MARTIN. Well, thank you, and good morning, Chairman Markey and Ranking Member Upton and all the members of the committee, and thank you for the opportunity to be here with you

today. I have had the privilege of serving at the Federal Communications Commission for over 5 years, including 2 years as the

agency’s chairman, and during this period, my colleagues and I, following guidance from this committee and Congress, have overseen

a telecommunications industry undergoing rapid and unprecedented change.

These changes have seen the telecommunications industry transition from a period of sharp decline to a time of significant growth.

Ushered in by the broadband revolution, companies and consumers

alike have finally found the promised land of convergence. Telephone calls are now being made over the Internet, television programs are increasingly watched on the computer, not on TV, and

cell phones are mini computers. They take pictures, play songs,

send e-mails and hopefully soon will even send and receive emergency messages.

These technological advances and converging business models

are creating unparalleled opportunities and considerable challenges. With this guidance in mind, the Commissioners try to make

decisions based on the fundamental belief in promoting a robust,

competitive marketplace. Competition is the best method of delivering the benefits of choice, innovation and affordability to American

consumers. Competition drives prices down and spurs providers to

improve service and create new products.

The Government, however, still has an important role to play.

The Commission has worked to create a regulatory environment

that promotes investment in competition, setting the rules of the

road so that players can compete on a level playing field. For instance, shortly after I became chairman, we removed legacy regulations like tariffs and price controls which discourage providers from

investing in broadband networks. Since then, broadband penetration has increased, while the prices of DSL and cable modem services have decreased.

The Government also must act, when necessary, to protect consumers and achieve broader social goals. Public safety has been

and will continue to be one of the Commission’s top priorities. In

the first major role in my tenure, we applied stringent 911 rules

to VOIP telephone service providers. Many believe that our actions

were too aggressive; the Commission unanimously disagreed. The

911 rules we applied require that people receive the same guaranVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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teed access to emergency services as do those using traditional

phones.

Broadband technology is a key driver of our economic growth and

enables almost all of today’s innovations. The ability to share increasing amounts of information at greater and greater speeds increases productivity, facilitates commerce and helps drive innovation. Perhaps most important, broadband has the potential to affect

almost every aspect of our lives. During my tenure as chairman,

the Commission has worked hard to create a regulatory environment that promotes broadband deployment. We have removed legacy regulations like tariffs and price controls that discourage carriers from investing in their broadband networks, and we work to

create a regulatory level playing field among broadband platforms.

And we have begun to see some success as a result of the Commission’s policies. According to the Commission’s most recent data,

high speed connections increased by almost 52 percent for the full

year ending in June 2006. An independent study by Pew Internet

and American Life Project confirmed this upward trend, finding

that from March 2005 to March 2006, overall broadband adoption

increased by 40 percent, from 60 to 84 million, twice the growth

rate of the year before.

And perhaps most importantly, the Pew study found that the significant increase in broadband adoption was widespread and cut

across all demographics. Broadband adoption grew by more than

120 percent among African Americans and by almost 70 percent

among middle income Americans. During the same time, the average price of broadband paid by consumers has also dropped. The

Pew study found that in February 2004 to December 2005 the average price for home broadband access fell from $39 to $36 per

month, and for DSL, monthly bills fell from $38 to $32, or almost

20 percent.

And while the Commission has worked hard to promote

broadband access, there is more we can do. The Commission is

committed to obtaining better information about broadband deployment and services nationwide. Since I became chairman, we have

already taken steps to improve the information we collect and report. For instance, for the first time last year, we began reporting

information regarding different speeds of broadband connections.

In addition, last September I brought forward proposals to gain an

even better picture of broadband deployment in this country.

Wireless service is also becoming an increasingly important platform to compete with cable and DSL as a provider of broadband.

To promote more choice for consumers among broadband providers,

the Commission has made a significant amount of spectrum available on both a licensed and unlicensed basis that can be used to

provide broadband services in municipalities, rural areas and

across the country. In September, the FCC closed its largest and

most successful spectrum auction, raising almost $14 billion, and

the Commission is currently preparing to auction 60 MHz in the

700 MHz band.

The Congress recognized that competition in the video services

market benefits consumers by resulting in lower prices and higher

quality services. The cost of basic cable service has gone up at a

disproportionate rate when compared against other communicaVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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tions sectors. The average price of the expanded basic cable package almost doubled between 1995 and 2005, increasing by 93 percent. However, where a second cable operator is present, cable

prices are significantly lower, almost 20 percent lower. In December of last year the Commission took steps to streamline the franchise process and promote competition in the delivery of video programming.

Promoting competition and choice must continue to be a priority

in the voice area, as well. We need to continue to ensure that new

entrants are able to compete with incumbents for telecommunications services. We recently made clear that new telephone entrants, such as cable and VOIP providers, must be given access to

local telephone numbers and be able to interconnect with incumbents to deliver local calls.

And finally, as I touched on in the beginning of my remarks,

there are times when marketing forces alone may not achieve

broader social goals. When I testified before this committee approximately a year ago, I recommended that unauthorized access

to callers’ phone records be made illegal and that the Commission’s

enforcement tools be strengthened. Since then I know the committee has been actively working on this issue, and the Commission

has been working on its part, as well.

I propose that the Commission strengthen our privacy rules by

requiring providers to adopt additional safeguards to protect consumers’ phone records from unauthorized access and disclosure.

Perhaps no other issue before the Commission garners more public

interest than the periodic review of media ownership rules. The attention devoted to media ownership issues is not surprising, as the

media touches almost every aspect of our lives. And critical to our

review of media ownership rules is the collection of objective facts

and an open dialog with the public. We have commissioned multiple economic studies and are engaging in hearings across the

country.

I see that my time has expired, so I would just ask for my full

written statement to be submitted for the record.

[The prepared statement of Mr. Martin follows:]

STATEMENT OF KEVIN J. MARTIN

Good morning Chairman Dingell, Chairman Markey, Ranking Member Barton,

Ranking Member Upton and members of the committee. Thank you for the opportunity to be here with you today. I have a brief opening statement and then I look

forward to answering any questions you may have.

I have had the privilege of serving at the Federal Communications Commission

for over 5 years, including 2 years as the Agency’s chairman. During this period,

my colleagues and I, following guidance from this committee and Congress, have

overseen a telecommunications industry undergoing rapid and unprecedented

change.

These changes have seen the telecommunications industry transition from a period of sharp decline to a time of significant growth. Ushered in by the broadband

revolution, companies and consumers alike have finally found the promised land of

convergence. Telephone calls are now being made over the Internet and cable systems. Television programs are watched when and where we want them and are increasingly on the Internet. Cell phones are mini-computers. They take pictures, play

songs and games, send e-mail, and hopefully soon will send and receive emergency

messages in times of disaster. Teens talk to one another over IM, SMS and

MySpace, not the telephone. They ignore the TV and stereo, downloading songs onto

MP3 players and watching and posting videos on YouTube instead. As Time magaVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
18

zine recognized, 2006 was the year of the individual, thanks in large part to how

communications technologies and innovations have empowered us all.

These technological advances, converging business models, and the digitalization

of services are creating unparalleled opportunities and considerable challenges.

Faced with such fast-paced change, regulations and the Commission often struggle

to keep up.

The FCC is an independent agency and a creature of Congress. Our highest priority, therefore, is to implement the will of Congress. In the Telecommunications Act

of 1996, Congress instructed the Commission on how to approach such challenges.

The preamble reads:

An Act to promote competition and reduce regulation in order to secure lower

prices and higher quality services for American telecommunications consumers and

encourage the rapid deployment of new telecommunications technologies.

Preamble, Telecommunications Act of 1996, Pubic Law No. 104–104, 110 Stat. 56

(1996). With this guidance in mind, the Commission has tried to make decisions

based on that fundamental belief in promoting a robust, competitive marketplace.

Competition is the best method of delivering the benefits of choice, innovation, and

affordability to American consumers. Competition drives prices down and spurs providers to improve service and create new products.

The Government, however, still has an important role to play. The Commission

has worked to create a regulatory environment that promotes investment and competition, setting the rules of the road so that players can compete on a level playingfield. For instance, shortly after I became chairman, we removed legacy regulations,

like tariffs and price controls which discouraged providers from investing in

broadband networks. Since then, broadband penetration has increased while the

prices of DSL and cable modem services have decreased.

Government also must act when necessary to protect consumers and achieve

broader social goals. Thus, while eliminating many economic regulations, the Commission recognizes that there are issues that the marketplace alone might not fully

address. For instance, government should ensure that the communications needs of

the public safety community are met and that new and improved services are available to all Americans, including people with disabilities, those living in rural areas

and on tribal lands, and schools, libraries, and hospitals. For example, the Commission expanded the ability of the deaf and hard of hearing to communicate with their

family, friends and business associates by requiring Video Relay Services (the preferred method of communication) to be offered 24 hours a day, seven days a week,

and by recognizing IP Captioned phone service as a form of Telecommunications

Relay Service.

INCREASING BROADBAND DEPLOYMENT

Broadband technology is a key driver of economic growth and enables almost all

of today’s innovations. The ability to share increasing amounts of information, at

greater and greater speeds, increases productivity, facilitates interstate commerce,

and helps drive innovation. But perhaps most important, broadband has the potential to affect almost every aspect of our lives. It is changing how we communicate

with each other, how and where we work, how we educate our children, and how

we entertain ourselves.

During my tenure as chairman, the Commission has worked hard to create a regulatory environment that promotes broadband deployment. We have removed legacy

regulations, like tariffs and price controls, that discourage carriers from investing

in their broadband networks, and we worked to create a regulatory level playingfield among broadband platforms.

We have begun to see some success as a result of the Commission’s policies According to the Commission’s most recent data, high-speed connections increased by

26 percent in the first half of 2006 and by 52 percent for the full year ending June

30, 2006.

An independent study by Pew Internet and American Life Project confirmed this

upward trend, finding that from March 2005 to March 2006, overall broadband

adoption increased by 40 percent—from 60 to 84 million—twice the growth rate of

the year before. The study found that, although overall penetration rates in rural

areas still lags behind urban areas, broadband adoption in rural America also grew

at approximately the same rate (39 percent).

Perhaps most importantly, the Pew study found that the significant increase in

broadband adoption was widespread and cut across all demographics.

According to their independent research:

19

• broadband adoption grew by almost 70 percent among middle-income households (those with incomes between $40,000 and $50,000 per year); • broadband adoption grew by more than 120 percent among African Americans;

• broadband adoption grew by 70 percent among those with less than a high

school education; • broadband adoption grew by 60 percent among senior citizens.

The average price of broadband paid by consumers also has dropped in the past

2 years. The Pew study found that, from February 2004 to December 2005, the average price for home broadband access fell from $39 per month to $36 per month. For

DSL, monthly bills fell from $38 to $32 or almost 20 percent.

While the Commission worked hard to promote broadband access and affordability, there is more we can do. The Commission is committed to obtaining better

information about broadband deployment and services nationwide. Since I became

Chairman, we have already taken some steps to improve the information we collect

and report. For instance, for the first time last year, we began reporting information

regarding different speeds of broadband connections (e.g., about services offered at

speeds in excess of 200 kbps).

In addition, last September, I put forward a proposal to gain an even better picture of broadband deployment in this country. This proposal asks questions about

how we can obtain more specific information about broadband deployment and consumer acceptance in specific geographic areas and how we can combine our data

with those collected at the State level or by other public sources. By improving our

data collection, we will be able to identify more precisely those areas of the country

where broadband services are not sufficiently available.

I also have circulated our fifth inquiry into ‘‘whether advanced telecommunications capability is being deployed to all Americans in a reasonable and timely

fashion.’’ 47 U.S.C. §157 nt. In this Notice, we seek comment on all aspects of

broadband availability, including price and bandwidth speeds. In particular, we seek

comment on whether, given the evolution of technology and the marketplace, we

should redefine the term ‘‘advanced services’’ to require higher minimum speeds. Between these two proceedings, it is my hope that the Commission will solicit the information necessary to better assess the competitive progress in the broadband market.

ENCOURAGING WIRELESS DEPLOYMENT

Wireless service is becoming increasingly important as another platform to compete with cable and DSL as a provider of broadband. To promote more choice for

consumers among broadband providers, the Commission has made a significant

amount of spectrum available on both a licensed and unlicensed basis that can be

used to provide broadband service in municipalities, rural areas and across the Nation.

The Commission is working to make available as much spectrum as possible to

put the next generation of advanced wireless devices into the hands and homes of

consumers. In September the FCC closed its largest and most successful spectrum

auction, raising almost $14 billion. The spectrum offered was the largest amount of

spectrum suitable for deploying wireless broadband ever made available in a single

FCC auction. The Commission specifically designated licenses for smaller and rural

geographic areas to promote access by smaller carriers, new entrants, and rural

telephone companies.

The Commission is currently preparing to auction 60 MHz in the 700 MHz band.

This spectrum is also well-suited for the provision of wireless broadband, and the

upcoming auction represents a critical opportunity to continue deploying wireless

broadband services, especially to rural communities. Again, the Commission will

consider the need to provide for smaller geographic licensing areas. I also believe

we should consider adopting more stringent build out requirements to facilitate

broadband deployment in rural and underserved areas.

On the unlicensed side, the Commission recently initiated a proceeding to resolve

technical issues associated with ‘‘white spaces’’ to allow low power devices to operate

on unused television frequencies. And the Commission has completed actions necessary to make available 255 MHz of unlicensed spectrum in the 5 GHz region,

nearly an 80 percent increase.

The Commission is also considering an order that would classify wireless

broadband Internet access service as an information service. This action would

eliminate unnecessary regulatory barriers for service providers. This classification

also would clarify any regulatory uncertainty and establish a consistent regulatory

framework across broadband platforms, as we have already declared high speed

Internet access service provided via cable modem service, DSL and BPL to be inforVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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mation services. This action is particularly timely in light of our auctions which are

specifically making available spectrum for wireless broadband services.

PROMOTING COMPETITION

Consumers today are benefiting from technological developments and innovation

in media. DVRs, VOD and HD programming offer more programming to watch at

any given time then ever before.

While consumers have an enormous selection of channels to watch, they have little choice over how many channels they actually want to buy. For those who want

to receive 100 channels or more, today’s most popular cable packages may be a good

value. But according to Nielsen, most viewers watch fewer then two dozen channels.

For them, the deal isn’t as good.

The cost of basic cable services have gone up at a disproportionate rate—38 percent between 2000 and 2005—when compared against other communications sectors. The average price of the expanded basic cable package, the standard cable

package, almost doubled between 1995 and 2005, increasing by 93 percent. The

GAO and the Commission’s most recent cable price survey found that while cable

does face some competition from DBS, DBS and cable do not seem to compete on

price. In other words, the presence of a DBS operator does not have an impact on

the price the cable operator charges its subscribers. Significantly, however, where

a second cable operator is present, cable prices are significantly lower—almost 20

percent ($43.33 without competition vs. $35.94 where there is competition).

Congress recognized that competition in the video services market benefits consumers by resulting in lower prices and higher quality of services. Indeed, one of

the Communications Act’s explicit purposes is to ‘‘promote competition in cable communications,’’ and Congress expressly prohibited local authorities from granting exclusive franchises. In December of last year, the Commission took steps to implement section 621 of the Act, which prohibits local authorities from unreasonably refusing to award a competitive franchise.

We need to continue to take steps to remove regulatory barriers to competition

in the video market by, for instance, ensuring that consumers living in apartment

buildings are not denied a choice of cable operators. We need to continue our efforts

to create a regulatory environment that encourages entry by making sure that competitive providers have access to ‘‘must-have’’ programming that is vertically integrated with a cable operator.

Promoting competition and choice must continue to be a priority in the voice

arena, as well. We need to continue to ensure that new entrants are able to compete

with incumbents for telecommunications services. For example, we recently made

clear that new telephone entrants, such as cable and other VOIP providers, must

be given access to local telephone numbers and be able to interconnect with incumbents to deliver local calls to them.

Similarly, the ability to port numbers between providers is critical. Customers

should not be held hostage because a provider refuses to allow a customer to transfer his or her phone number to another wireless or wireline carrier. We need to ensure that porting numbers between providers, including between wireline and wireless carriers, is as efficient as possible.

PROTECTING CONSUMERS

There are times when market driven forces alone may not achieve broader social

goals. And we must always be on alert for companies intentionally or unintentionally harming consumers. Among the issues the Commission is turning its attention

to is the ability of unauthorized users to gain access to callers’ phone records, or

pretexting. As I testified before this committee approximately 1 year ago, the disclosure of consumers’ private calling records is a significant privacy invasion. At that

time, I recommended that this practice be made illegal and that the Commission’s

enforcement tools be strengthened. Since then, I know that this Committee has been

actively working on this issue.

The Commission has been doing its part as well. I have proposed that the Commission strengthen our privacy rules by requiring providers to adopt additional safeguards to protect customers’ phone record information from unauthorized access and

disclosure. Specifically, the Commission would prohibit providers from releasing call

detail information to customers except when the customer provides a password.

Similarly, we propose to modify our current rules to require providers to obtain customer consent before disclosing any of that customer’s phone record information to

a provider’s joint venture partner or independent contractor.

Recently, concerns about preserving consumers’ access to the content of their

choice on the Internet have been voiced at the Commission and in Congress. In its

21

Internet Policy Statement, the Commission stated clearly that access to Internet

content is critical and blocking or restricting consumers’ access to the content of

their choice would not be tolerated. Although we are not aware of current blocking

situations, the Commission remains vigilant and stands ready to step in to protect

consumers’ access to content on the Internet. Moreover, to better assess how the

marketplace is functioning and address any potential harm to consumers, I have

proposed the Commission examine this issue more fully in a formal Notice of Inquiry which is presently pending before my colleagues.

Perhaps no other issue before the Commission garners more public interest then

our periodic review of the media ownership rules. Critical to our review of the media

ownership rules is the collection of objective facts and an open dialog with the public. We have commissioned multiple economic studies and are engaging in hearings

across the country in a range of markets. The goal of these hearings is to fully and

directly involve the American people in this process. We held our first hearing in

Los Angeles, where we focused on the ability of independent television producers to

gain access to distribution. We also held a hearing in Nashville, in which we focused

on the concerns of the music industry, and in Harrisburg, Pennsylvania, in which

we focused on factors relevant to media ownership in that smaller market. The

Commission’s efforts to collect a full public record will continue in the months

ahead.

The attention devoted to the media ownership issue is not surprising. The media

touches almost every aspect of our lives. We are dependent upon it for our news,

our information and our entertainment. Indeed, the opportunity to express diverse

viewpoints lies at the heart of our democracy. We must balance concerns about too

much consolidation and too little choice with appropriate consideration of the

changes and innovation that are taking place in the media marketplace. We must

make sure that consumers have the benefit of a competitive and diverse media marketplace.

At our public hearings, the Commission has heard a consistent concern that there

are too few local and diverse voices in the community. Indeed diversity is one of the

major principles underlying our rules governing broadcast ownership. Small and

independently owned businesses can find it difficult to enter the broadcast industry

due to financial and resource constraints. I have proposed several ways to better address these issues. For example, we could permit and encourage new entrants to operate broadcast television stations through voluntary arrangements with existing

broadcasters. An eligible entity could lease a portion of a broadcaster’s digital spectrum and obtain all the rights and obligations that accompany the operation of a

broadcast television station. We also are considering other changes, such as modifying our ‘‘Equity Debt Plus’’ rule to facilitate the ability of eligible entities to enter

into partnerships, and evaluating how our leased access rules are working.

ENHANCING PUBLIC SAFETY

The events of September 11, 2001 and the 2005 hurricane season underscored

America’s reliance on an effective national telecommunications infrastructure. Public safety has been and will continue to be one of the Commission’s top priorities.

The Commission must make sure that the public has the tools necessary to know

when an emergency is coming and to contact first responders. And we must enable

first responders to communicate with each other and to rescue the endangered or

injured. The public and private sectors must also work together so that our communications system can be repaired quickly in the wake of a disaster. We recently created a Public Safety and Homeland Security Bureau to focus exclusively on these

important needs.

Thank you for your time and your attention today. I appreciate the opportunity

to share with you some of the Commission’s recent progress. With that, I would be

happy to answer any questions you may have.

Mr. MARKEY. Without objection, the full written statement of the

chairman will be included in the record, as will the full written

statements of all of the members of the Federal Communications

Commission. Now I am going to ask any of the other Commissioners who wish to make opening statements, and I will recognize

Commissioner Copps if he wishes to make a statement at this time.

22

STATEMENT OF MICHAEL J. COPPS, COMMISSIONER,

FEDERAL COMMUNICATIONS COMMISSION

Mr. COPPS. I do wish to make a statement. Thank you very

much. Thank you, Chairman Markey, Ranking Member Upton,

members of the subcommittee, thank you for the opportunity to return, at least briefly, to the Capitol, which was home to me for so

many years, beginning almost 37 years ago, actually, to discuss

with you the state of communications in our country and the role

the FCC is playing today and what else it might do as we seek to

bring the wonders of modern communications to all of our citizens.

I am constantly struck at how important this work is. Communications industries comprise one-sixth of our economy, according

to many reports, and when you consider the social and cultural and

political dimensions, there is no doubt in my mind that communications is the most formidable and influential enterprise in all of

America. There is a lot of serious work ahead for all of us, if we

are going to realize the potential of the technologies and the services rushing towards us in this hugely transformative digital age.

This work involves every sector of communications. Our media

make impressive contributions to our communities every day, but

we still do not have a media environment that fully or even adequately serves our democracy and the vibrancy of our citizens. Regarding broadband, without a well thought out game plan to bring

the wonders of the Internet to everyone across our great land, millions of people are at serious risk of being left behind. On public

safety, despite the horrible costs of 9/11 and Hurricane Katrina, we

still are not ready for the next manmade or natural disaster. The

last time a major disaster confronted our nation we were perhaps

caught by surprise. If we are not ready next time, none of our fellow citizens is going to accept surprise as an excuse. So these three

areas are my priorities at the Commission.

Let me start with the issue which is closest to my heart, and

that is broadcast media. I met with many local broadcasters who

work hard to serve the public interest, but the public-spirited part

of the enterprise is being squeezed out. Too often the programs we

receive are homogenized, creativity-killing and often gratuitously

violent. Perhaps even worse, the dearth of political and community

coverage threatens our democratic dialog and the independent

viewpoints we depend upon to help us make good decisions for the

future of our country. Localism, diversity and competition are not

abstract constructions, they are the essential ingredients for keeping our Nation’s media and our Nation healthy, vibrant and growing.

I am pleased that Chairman Martin is committed to complete our

long-dormant localism proceeding before moving forward on media

ownership, because so much of what is local has disappeared from

so much of our media. In the last year I have participated in probably a dozen media hearings in localities around the country, and

I am seeing a noticeable shift, and I think it is a remarkable one,

in the last few months; a growing impatience with things as they

are. Whether this is motivated by examples of new programming

lows or the further consolidation of newsrooms, music playlists or

a new spirit of change abroad in the land, I don’t know, but I do

23

know this, whatever the reason, millions of people are no longer

content just to defeat bad new media consolidation rules.

There is a thirst, and it is one that I share, for us to revisit the

bad old rules that got us into this predicament in the first place.

What many people want, and I wholeheartedly agree, is to bring

back some basic public interest standards, a responsibility to serve

the public good, to the broadcast media and to bring the spirit of

public interest to our other media, as well. I hope we can talk more

about this today, including the need for a credible broadcast re-licensing system and an equally compelling need to assure that the

DTV transition in broadcasting is made to serve the public interest.

Turning briefly to telecommunications, I worry that we are teetering on the edge of a digital divide in the 21st century that may

be more difficult to bridge than the one we encountered in the century just past. Our biggest infrastructure challenge as a Nation is

bringing broadband to all Americans, and I mean all of our people.

Each and every citizen of this great country should have access to

the wonders of the Internet, whether they live in rural areas or

tribal lands or in our inner cities, whether they have limited incomes or disabilities, whether they are schoolchildren or seniors.

The data are not encouraging. The ITU ranks your country and

mine at 15th in the world in broadband penetration, and the ITU’s

more recent and nuanced Digital Opportunity Index has us at 21,

right after Estonia and tied with Slovenia. That strikes me as 20

rungs too low for the United States of America. Do we expect our

kids to enter the digital classroom and the digital world at dial-up

speeds? We are paying a business and a competitive cost for this

poor performance, too. Fewer Americans with broadband means a

smaller Internet marketplace and a glass ceiling over the productivity of small businesses and entrepreneurs, especially in rural

and inner city areas. Without this infrastructure, they enter the

global competition with one hand tied behind their back. But what

do we expect without having a real broadband strategy?

Perhaps the first step in developing a national broadband strategy is to develop more granular broadband data to identify where

the problems lie and how best to craft solutions. There are folks in

far off places like Japan and a few right here at home, like in Kentucky, that are doing this. I hope the committee will push the Commission to develop better data, propose creative solutions and be

more proactive in working with you to develop a broadband strategy in the 21st century.

Let me just comment briefly on public safety, because that always is the most important obligation of a public servant. I believe

that after 9/11, this agency allowed other people to marginalize or

push aside the Commission, when we had the expertise and know

how to meet the charge of title I, which is to protect the security

and safety of the American people through the telecommunications

infrastructure. Chairman Martin, to his credit, has made this a priority and in doing so has created a Public Safety and Homeland Security Bureau, and the Bureau is starting down this difficult road.

And it has adopted an initiative that I long advocated, of using

the FCC as a clearinghouse so that a first responder in a little

town in rural America doesn’t have to start from scratch every time

they try to put together a plan for public and homeland security.

24

And I think the chairman, I know, supports that, but it is going

to take initiative and support, and we really need to make this

happen, and your oversight will be helpful.

One minor thing can I mention real quick?

Mr. MARKEY. Very quickly.

Mr. COPPS. All right, very quick. I mentioned this in the Senate,

too. I encourage you to consider modifying the closed meeting rules

so that the five Commissioners, the Beatles down here, aren’t just

together in their act one time a month or a year or whatever it is

up here, but let us get our act together down at the Commission.

Let more than two Commissioners get together and meet and talk.

I cannot think of a proceeding at the FCC that would not have

been improved by our ability to get together and talk. Thank you

very much. I ask permission that the rest of my statement be included in the record.

[The prepared statement of Mr. Copps follows:]

TESTIMONY OF MICHAEL J. COPPS

Chairman Markey, Congressman Upton, members of the subcommittee: Thank

you for the opportunity to return, at least briefly, to the Capitol—which was home

to me for so many years, beginning almost 37 years ago—to discuss with you the

state of communications in our country and the role the FCC is playing today, and

what more it might do, as we seek to bring the wonders of modern communications

to all our citizens. I am constantly struck by how important this work is. Communications industries comprise one-sixth of our economy—and when you consider

their social, cultural and political dimensions, there is no doubt in my mind that

communications is the most formidable and influential enterprise in all the land.

There is a lot of serious work ahead for all of us if we are going to realize the

potential of the technologies and services rushing toward us in this hugely transformative Digital Age. This work involves every sector of communications. Our

media make many impressive contributions to our communities every day, but we

still do not have a media environment that fully, or even adequately, serves our democracy and the vibrancy of our citizens. Regarding broadband, without a well

thought out game plan to bring the wonders of the Internet to everyone across our

great land, millions of people are at serious risk of being left behind. On public safety, despite the horrible costs of 9/11 and Hurricane Katrina, we still are not ready

for the next man-made or natural disaster. The last time a major disaster confronted our nation we were perhaps caught by surprise; if we are not ready next

time, none of our fellow citizens is going to accept surprise as an excuse. These

three areas are my priorities as a commissioner.

Let me start with the issue many of you know is closest to my heart: the broadcast media. I have met with many local broadcasters who work hard to serve the

public interest. But the public-spirited part of the enterprise is being squeezed out.

Too often the programs we receive are homogenized, creativity-killing, and often

gratuitously violent. Perhaps even worse, the dearth of political and community coverage threatens our democratic dialog and the independent viewpoints we depend

upon to help us make good decisions for the future of our country. Localism, diversity and competition are not abstract constructions; they are the essential ingredients for keeping our Nation’s media—and our Nation—healthy, vibrant and growing. I am pleased that Chairman Martin has committed to complete our long-dormant localism proceeding before moving forward on media ownership because so

much of what is local has disappeared from much of our media. In the last year

I have participated in probably a dozen media hearings in localities around the

country. I am seeing in the last few months a noticeable shift—a growing impatience with things as they are. Whether this is motivated by examples of new programming lows, the further consolidation of newsrooms and music playlists, or a

new spirit of change abroad in the land, I don’t know for sure. But I do know this—

whatever the reason, millions of people are no longer content just to defeat bad new

media consolidation rules. There is a thirst—one that I share—for us to revisit the

bad old rules that got us into this predicament in the first place. What many people

want, and I wholeheartedly agree, is to bring back some basic public interest standards—a responsibility to serve the common good—to the broadcast media and to

bring the spirit of public interest to other media as well. I hope we can talk more

25

about this today, including the need for a credible broadcast re-licensing system and

an equally compelling need to assure that digital broadcasting is made to serve the

public interest.

Turning briefly to telecommunications, I worry that we are teetering on the edge

of a Digital Divide in the 21st century that may be more difficult to bridge than

the one we encountered in the century just past. Our biggest infrastructure challenge as a nation is bringing broadband to all Americans—and I mean all of our

people. Each and every citizen of this great country should have access to the wonders of the Internet—whether they live in rural areas, on tribal lands, or in our

inner cities; whether they have limited incomes or disabilities; whether they are

schoolchildren or seniors. The data are not encouraging. The International Telecommunications Union ranks your country and mine at 15th in the world in

broadband penetration. And the ITU’s more recent and nuanced Digital Opportunity

Index has us at 21st— right after Estonia and tied with Slovenia. That strikes me

as 20 rungs too low for the United States of America. Do we expect our kids to enter

the digital classroom and the digital world at dial-up speeds?— We are paying a

business and competitive cost for this poor performance, too. Fewer Americans with

broadband means a smaller Internet marketplace and a glass ceiling over the productivity of small businesses and entrepreneurs, especially in rural and inner city

areas. But what did we expect without having a real broadband strategy?

Perhaps the first step in developing a national broadband strategy is to develop

better, more granular broadband data to identify where the problems lie and how

best to craft solutions. There are folks in far off places like Japan, and a few right

here at home, like in Kentucky, who are charting precisely where broadband is

going, so we know the data can be gotten. I hope this Committee will push the Commission to develop better data, propose creative options and solutions, and be more

proactive in working with you to develop a national broadband strategy for the 21st

Century. We have at our agency some of the most skilled and talented experts in

telecommunications in all the world; they can make a huge difference in helping us

to meet and master the broadband challenge.

Finally, let me just comment on one of the more vexing problems that I know each

of you is focused on: public safety. The most important obligation of any public servant is the safety of our people. I believe that after 9/11 this agency allowed others

to step in to do the job that the FCC has the expertise and the know how to do—

improving our communications capabilities in times of emergency. Chairman Martin, to his credit, has made this a priority and in doing so has created a Public Safety and Homeland Security Bureau, and the Bureau is starting down this difficult

road. And it has adopted an initiative I long advocated, developing a communications clearinghouse for public safety and homeland security ideas so that local hospitals, charities, public safety officers, small businesses, and many others need not

start from scratch when developing emergency communications plans. They don’t

have the time, money or people to start from scratch, and we need to find ways to

help them. The new Bureau has only begun this effort, and its success will require

a meaningful, on-going commitment of resources. But if we stick to it, we can save

the country time, money and, perhaps, even lives.

During the Senate’s FCC oversight hearing last month, I was pleased to hear bipartisan support for an admittedly more minor, but I think important, legislative

initiative. I encourage you to consider modifying the closed meeting rule so that the

five Commissioners could actually sit down and talk with one another occasionally.

I can’t think of any proceeding in recent years that would not have benefited from

an open and frank exchange of ideas among us before we were expected to cast a

vote. We are prohibited from doing this. The nine Supreme Court justices, the 435

members of this body, and most every other institution I can think of are encouraged to meet and exchange views before deciding outcomes. If it’s good enough for

them, it ought to be good enough for us.

Finally, in addition to talking with one another, the Commission must always

work to expand its conversations with our fellow citizens. Business is obviously an

important stakeholder in the work we do at the Commission, and it should be. But

in communications, every American is a stakeholder, because each of us is affected

in so many important ways. I believe that an important part of being a commissioner is to reach out to non-traditional stakeholders as well as traditional, to ensure that Commission decisions do indeed reflect the wide public interest. If business, government, and non-traditional stakeholders work together to build publicprivate partnerships, we can meet our many communications challenges in the coming years. In my view, that’s how we built this great country, infrastructure challenge by infrastructure challenge. And it is how we can keep it growing and keep

it great.

26

Mr. Chairman, members of the committee, thank you for your attention, and I

look forward to our conversation this morning.

Mr. MARKEY. OK. Well, ‘‘Let It Be.’’ Now we will recognize Commissioner Tate. I think this is your first appearance before the

committee, and I would like to give you an opportunity.

Ms. TATE. Mr. Chairman, I am really less senior than Mr.

Adelstein.

Mr. MARKEY. No, we appreciate that, but what we are trying to

do, as we did in our opening statements, is to go back and forth.

Ms. TATE. How kind of you. I am sorry. Thank you.

Mr. MARKEY. Different parties.

Ms. TATE. It is my first time here.

STATEMENT OF DEBORAH TAYLOR TATE, COMMISSIONER,

FEDERAL COMMUNICATIONS COMMISSION

Ms. TATE. Good morning to Chairman Dingell. It was wonderful

to see him and Chairman Markey and Ranking Member Upton.

Thank you all for having us and especially for your leadership on

these issues, as Congresswoman Harman said, that are sometimes

life and death issues. It is also about our place in the global economy and indeed, our own national security and personal security.

I would like to commend the ongoing work of the subcommittee in

addressing issues from consumer privacy and spoofing to the DTV

transition, public safety, interoperability and of course, universal

service. This work is vitally important to all Americans, every one

of us.

And I am glad we are having this dialog today, and I am glad

we are going to continue to have these dialogs. I would like to

thank Chairman Martin for his strong leadership and my fellow

Commissioners for their commitment to trying to reach a consensus. We don’t always agree, but we do it agreeably. The communications marketplace does continue to evolve every single day.

Convergence, as we know, shakes the foundations of the old order,

not only for consumers, but also for the industries that we oversee

and of course, for we, the regulators, ourselves. It also creates real

benefits through the introduction of dazzling innovations, incredible competition, not just among providers but across new market

entrants and across platforms. It challenges us every single day to

adapt our regulations to keep pace.

One challenge involves our review, as you have heard, of our

broadcast ownership rules. As a State official, I didn’t have the opportunity to review the effects and form an opinion on the FCC’s

rules. Therefore as we continue to hold public hearings all across

the country, we were in El Segundo, CA, we were in Pennsylvania

and in my hometown of Nashville, I bring an open and inquiring

mind to the issue. I look forward to joining my colleagues as we

further the touchstone goals, your goals, of competition, localism

and diversity.

Other media related issues impacting children and families

present different challenges. The enforcement of your restrictions

on the broadcast of obscene, indecent and profane programming

probably draw the most attention to what we do. Thank you for

your work on the Broadcast Indecency Enforcement Act, increasing

27

our fining ability. I am pleased that the FCC is also taking a leadership role with other Members of Congress regarding the national

epidemic of childhood obesity through our task force, as well as our

study on the effects of violent programming and advertising on

children and the manner in which our children’s programming

rules will be applied to the new digital multicast world.

Certainly, as everyone here agrees, deployment of broadband is

one of the biggest challenges facing America and all of us here in

this room. I am committed, personally, to doing all I can to encourage that deployment that is so critical to our Nation, as new advanced services hold the promise of unprecedented e-commerce, distance learning, and e-health opportunities for all Americans, no

matter where they choose to live. I am encouraged that we are taking positive steps, and I look forward to working with the subcommittee.

The almost uncontrollable growth in the Universal Service Fund represents another challenge. We have now reached almost $7 billion in outlays, $4 billion in the high-cost fund. Two weeks ago I

was able to testify before the members of the Senate Commerce

Committee working as the chairman of the Joint Board on Universal Service to ensure the sustainability of the fund in order to

equip new generations of Americans to compete in this increasingly

global economy. I believe that the time is now to take action and

that we have made a great deal of progress in repair and revision

of the fund. I look forward to working with all the members of the

committee and my colleagues to ensure that all those, including

those in high-cost areas, have affordable, quality communications

and advanced services.

Like Congress, we have also been involved in protecting the privacy of confidential and delicate consumer information. We are now

poised to issue rules designed to ensure the privacy of consumer information maintained by telecom providers. And finally, like my

colleagues, I would like to touch on the issue of public safety. Last

year, when I went to our panel reviewing the impact of Hurricane

Katrina in Jackson, Mississippi, I heard firsthand the tragic and

personal accounts of that devastation and the clear message was

the need for interoperability and redundancy of networks.

I applaud the collaborative efforts that are ongoing with the entire communications and public safety industry. They have worked

hard to address difficult policy and technical issues. We also established a new Public Safety and Homeland Security Bureau to facilitate more effective communications, no matter the disaster that we

may face in the future, natural, terrorist or pandemic outbreak.

These are both exciting and yet very sobering times to be at the

FCC or to be on your committee.

I appreciate your invitation, and I look forward to any questions.

Thank you.

[The prepared statement of Ms. Tate follows:]

28

29

30

31

32

33

34

Mr. MARKEY. Thank you, Commissioner Tate. Commissioner

Adelstein, welcome back again, and whenever you are ready, please

begin your testimony.

STATEMENT OF JONATHAN S. ADELSTEIN, COMMISSIONER,

FEDERAL COMMUNICATIONS COMMISSION

Mr. ADELSTEIN. Well, thank you, Mr. Chairman, Congressman

Upton and members of the committee. I really appreciate the opportunity to testify here today. As Chairman Dingell noted, the

Commission is an arm of the Congress, and it is good to be reattached to the body here today. I truly believe we function better

to the degree that we are held accountable through oversight hearings like this. As an independent body of unelected officials, we will

serve the public better to the degree that we are responsible to the

people’s representatives that are here today.

I think today we have the opportunity, through technology, to

connect this country in profound ways. We need to provide for all

of our citizens, including those in rural areas, insular areas and

other high-cost areas, Native Americans, residents of our inner cities, minorities, those with disabilities, non-English speakers and

low-income consumers. And we can do all of this while protecting

the important privacy rights of consumers. We should upgrade our

communications infrastructure in every corner of this country and

make new technologies more widely available and affordable to everyone. All of our citizens should have the access, no matter where

they are, where they live or what challenges they face.

To promote the communications needs of everyone in this country, we should focus on improving access to broadband services,

modernizing universal service and promoting the public interest in

our media. As a Commissioner, I have traveled to a lot of unique

parts of this country, and I will never forget some of the things I

saw. I remember on the Gulf Coast of Mississippi, near Congressman Pickering’s district, we saw the devastation after Hurricane

Katrina, and the enormous damage there reminds us of the needs

of our public safety and national security communities, and those

have to remain foremost in our minds.

One of our central national priorities is promoting the widespread deployment of broadband. Even though we have made

strides, I am concerned that we are not keeping pace with our global competitors. This is more than a public relations problem. Citizens in other countries are simply getting more megabits for less

money. That is a productivity problem, and our citizens deserve

better, and we can do better. We have got to restore our place as

the undisputed world leader in telecom. It warrants a comprehensive national strategy.

As you noted, Mr. Chairman, according to the ITU, the digital

opportunity afforded to U.S. citizens is 21st in the world. It is not

enough to battle our way to 20th place. We should be No. 1. We

can start by improving our data collection to better ascertain our

current problems and develop better responses. We must increase

the status for investment and promote competition. We have got to

make broadband truly accessible to everyone, even if that means

communities tapping their own resources to the broadband systems. We must also work to preserve the open and neutral charVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
35

acter that has been the hallmark of the Internet, maximizing its

potential as a tool for economic opportunity, innovation and so

many forms of public participation that we see on the Internet

today.

Some have argued that our low broadband rankings are due to

our rural geography. I know a little something about that, coming

from South Dakota, but if that is the reason, I think we better redouble our efforts to make sure that we promote broadband in

rural areas of this country. In that regard, it is vital to keep universal service on a solid footing. As voice becomes just one application over broadband networks, we should ensure that universal

service evolves to promote advanced services, as Congress instructed us in the 1996 Act.

We must also do more to stay on top of the latest spectrum developments. Recent years have seen an explosion of new opportunities

for consumers, like Wi-Fi. We have the creative approaches, technical, regulatory and economic, to get spectrum into the hands of

all types of operators, large and small, particularly as we prepare

for the upcoming 700 MHz auction, one of the most important undertakings that this commission, I think, will conduct in my time

on it.

As for the media, let us never forget that the airwaves belong to

the American people. With our ownership rules, I think we need

to take far greater care than we have in the past before allowing

any further concentration. We need to open our airwaves to community-based and minority voices. We need to establish the public

interest obligations for broadcasters as they enter the digital age.

Finally, we were charged by Congress to perform as a law enforcement agency. We should be rigorous in enforcing all of the

laws under our jurisdiction. We have a lot of issues before us, including the do not call directory, the junk fax rules, indecency, payola, video news releases and all of our sponsorship identification

rules. We need to address them all vigorously. Mr. Chairman, I will

carry out Congress’s charge to keep the American public well connected and well protected. Thank you for the opportunity to testify,

and I look forward to responding to any concerns you might have.

[The prepared statement of Mr. Adelstein follows:]

STATEMENT OF JONATHAN S. ADELSTEIN

Mr. Chairman, Congressman Upton and members of the subcommittee, today we

have the opportunity through technology to connect this country in profound ways.

Americans should be able to maximize their potential through communications, no

matter where they live or what challenges they face. We need to provide for all of

our neighbors, including those in rural, insular and other high-cost areas, as well

as Native Americans, residents of our inner cities, minorities, those with disabilities,

non-English speakers, and low-income consumers.

We must upgrade our communications infrastructure in every corner of this country. And we must do a better job of making innovative communications technologies

more widely available and affordable. Understanding the communications landscape

requires us to take account of the rapidly-changing marketplace and to reach out

to diverse communities. To promote the communications needs of all Americans, we

should focus on improving access to broadband services, modernizing universal service, and protecting diversity, competition, and localism in our media.

A top priority became starkly clear when I visited the Gulf Coast of Mississippi

shortly after the devastation of Hurricane Katrina. The enormous damage to the entire region was unforgettable and remains a painful reminder that the communicaVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00043 Fmt 6633 Sfmt 6633 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
36

tions needs of our public safety and national security communities must remain at

the forefront.

One of our central challenges is promoting the widespread deployment of

broadband facilities to carry new and innovative services. This must be a greater

national priority than it is now. An issue of this importance to the economy and the

success of our communities warrants a coherent, cohesive, and comprehensive national broadband strategy.

Virtually every other developed country has implemented a national broadband

strategy. Even though we have made strides, I am concerned that the lack of a comprehensive plan is one of the reasons that the U.S. is nevertheless falling further

behind our global competitors. Each year, we slip further down the regular rankings

of broadband penetration. More troubling, there is growing evidence that citizens of

other countries are getting a much greater broadband value, in the form of more

megabits for less money. According to the ITU, the digital opportunity afforded to

U.S. citizens is not even near the top, it’s 21st in the world. This is more than a

public relations problem. It’s a productivity problem, and our citizens deserve better.

We must engage in a concerted and coordinated effort to restore our place as the

world leader in telecommunications by making affordable broadband available to all

our citizens. It will mean taking a hard look at our successes and failures and improving our data collection. A true broadband strategy should incorporate benchmarks, deployment timetables, and measurable thresholds to gauge our progress. It

is not enough to rely on poorly-documented conclusions that deployment is reasonable and timely.

We must re-double our efforts to encourage broadband development by increasing

incentives for investment, because we will rely on the private sector as the primary

driver of growth. These efforts must take place across technologies so that we not

only build on the traditional telephone and cable platforms, but also create opportunities for deployment of fiber-to-the-home, fixed and mobile wireless, broadband over

power line, and satellite technologies. We must work to promote meaningful competition, as competition is the most effective driver of lower prices and innovation.

This is increasingly important to ensure that the U.S. broadband market does not

stagnate into a comfortable duopoly, a serious concern given that cable and DSL

providers control 98 percent of the broadband market. We have got to make

broadband truly affordable and accessible to everyone, even if that means communities tapping their own resources to build broadband systems. We must also work

to preserve the open and neutral character that has been the hallmark of the Internet, maximizing its potential as a tool for economic opportunity, innovation, and so

many forms of civic, democratic, and social participation.

To accomplish these ends, we must be creative and flexible in our approaches.

Some have argued that the reason we have fallen so far in the international

broadband rankings is that we are a more rural country than many of those ahead

of us. If that is the case, we should strengthen our efforts to address any rural challenges head-on.

Congress and the Commission recognized early on that the economic, social, and

public health benefits of the telecommunications network are increased for all subscribers by the addition of each new subscriber. Federal universal service continues

to play a vital role in meeting our commitment to connectivity, helping to maintain

high levels of telephone penetration, and increasing access for our Nation’s schools

and libraries. I have worked hard to preserve and advance the universal service programs as Congress intended.

It is important that the Commission conducts its stewardship of universal service

with the highest of standards. It is important that we strive to consistently improve

our performance, while at the same time ensuring that even well-intentioned reform

efforts do not undermine the effectiveness of this critical program. Ensuring the vitality of universal service will be particularly important as technology continues to

evolve. Increasingly, voice, video, and data will flow to homes and businesses over

broadband platforms. In this new world, as voice becomes just one application over

broadband networks, we must ensure that universal service evolves to promote advanced services, which is a priority that Congress has made clear.

The Commission also must do more to stay on top of the latest developments in

spectrum technology and policy. Spectrum is the lifeblood for much of this new communications landscape. The past several years have seen an explosion of new opportunities for consumers, like Wi-Fi, satellite-based technologies, and more advanced

mobile services. But, we have to be more creative with a term I have coined ‘‘spectrum facilitation.’’ That means looking at all types of approaches—technical, economic or regulatory—to get spectrum into the hands of operators ready to serve consumers at the most local levels.

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We should continually evaluate our service and construction rules to ensure that

our policies do not undercut the ability of wireless innovators to get access to new

or unused spectrum. I want to promote flexibility and innovation, but since the spectrum is a finite public resource, I want to see results as well—particularly in the

area of wireless broadband, which has been a top priority for me while at the Commission. And I truly believe that our preparation for the upcoming 700 MHz auction

is one of the most important undertakings the Commission will conduct in all of the

time I have served.

This is a time of great change in telecommunications markets with the emergence

of new services, increased convergence, and seismic structural changes among the

market participants. For many residential customers, there is an emerging rivalry

between traditional telephone providers and new cable entrants, along with an increasing opportunity for use of wireless and VOIP services. Nonetheless, the Commission must continue to promote competition between providers and to be vigilant

about the potential impacts of increased consolidation in these markets. I have been

concerned about the adequacy and vigor of the Commission’s analysis in its consideration of recent mergers and forbearance petitions. I believe that the Act contemplates more than just competition between a wireline and cable provider and

that both residential and business consumers deserve more.

As for the broadcast media, we should never forget that the airwaves belong to

the American people. It is critical to preserve their access to what the Supreme

Court has called the ‘‘uninhibited marketplace of ideas.’’ As we review the ownership rules, we should first do no harm; we should take far greater care than we

have in the past before permitting any additional media consolidation. Also, to make

the media landscape look and sound like America, we need to open our airwaves

to community-based and minority voices and improve minority and women ownership. The success of our review rests upon the degree to which the American people

believe that their voices have been heard. Accordingly, transparency—relative to

public hearings, Commission studies, and the public release of the specific rules before they are finalized—is essential.

The FCC launched its localism proceeding in 2003 to assess whether TV and radio

broadcasters were addressing and satisfying the needs of local communities. The

Commission should complete its review, make real recommendations to Congress,

enhance public participation in the license renewal process, and propose other

meaningful regulatory changes for public comment. This proceeding should conclude

before, not after, our review of the broadcast ownership rules.

With less than 750 days to the end of analog broadcasting, I believe there is a

critical need for greater national attention on the impending DTV transition. More

focused leadership is needed. Currently, the DTV preparedness effort lacks a clear

national message and a coordinated set of industry activities. To begin to address

a general lack of public awareness, the Commission needs to take the following

steps: (1) develop a unified, coherent message among Federal, State, local and tribal

governmental entities; (2) coordinate the message and its delivery with the efforts

of the broadcast, cable, satellite, and consumer electronics industries; and (3) educate insular communities about the consequences and benefits of the impending

transition.

Failure to administer a comprehensive national DTV transition plan will almost

certainly result in a tsunami of consumer complaints to congressional and other government offices from viewers across the country. To better manage this potential national disruption, I would recommend establishing a clear chain of command. While

the NTIA is principally charged with administering the converter box program, the

FCC’s technical and consumer outreach expertise makes us especially well-suited to

spearhead a national consumer education initiative. The two agencies should work

collaboratively to develop a unified Federal message about the DTV transition and

to inform consumers about options they have to continue receiving broadcast programming after February 17, 2009.

The Commission must also be mindful of the role of cable services in the media

marketplace. The program access rules have played a key role in the development

of competitive multi-channel video providers. The Commission must quickly renew

its program access rules that prohibit exclusive contracts for satellite-delivered programming between vertically-integrated programmers and cable operators. The limitation will expire on October 5, 2007. Our examination of this issue should consider

the needs of new entrants into the video market, companies that are essential to

the future of video competition. The Commission should also look at our commercial

leased access rules, which require cable operators to set aside channel capacity for

commercial use by video programmers unaffiliated with the operator. We must take

a hard look to see what we can to do to ensure that we truly foster diversity in

video programming sources.

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Finally, we are charged by Congress to perform as a law enforcement agency, and

we should be rigorous in enforcing all of the laws under our jurisdiction. We have

numerous issues before us regarding consumer complaints about the Do-Not-Call directory and our Junk Fax rules, indecency, payola, video news releases and our

sponsorship identification rules. All of these laws are important, and all allegations

of wrongdoing demand our resolute attention.

Congress has charged the Commission with ensuring that the American public

stays well-connected and well-protected. I will do everything in my power to carry

out the law to promote these goals. Thank you for the opportunity to testify.

Mr. MARKEY. Thank you, Commissioner, very much. And now

making his debut before the Telecommunications and Internet Subcommittee, we welcome you, Commissioner McDowell. We look forward to your testimony. Please begin.

STATEMENT OF ROBERT M. MCDOWELL, COMMISSIONER,

FEDERAL COMMUNICATIONS COMMISSION

Mr. MCDOWELL. Thank you, Mr. Chairman, and I thank you,

Ranking Member Upton, and good morning to all the members of

the committee. Thank you for having us here before you this morning. After 16 years in the private sector, my 9-month tenure at the

FCC has been incredibly exciting. I have been deeply honored to

serve the American people in this position. I am also immensely

fortunate to work with such talented colleagues and staff.

Today is a wonderful time to be at the FCC. Revolutionary technological developments are yielding untold opportunities for newly

empowered consumers to improve the quality of their lives. This

newest wave of dynamic disruption transcends traditional regulatory paradigms. From broadband availability to the incredible

proliferation of wireless technologies, from universal service to localism and diversity in broadcasting, from wireless medical devices

that improve thousands of lives each day to the greatest entrepreneurial explosion in history known as the Internet, the issues

addressed by the FCC touch the lives of every American.

I endeavor to approach each issue with a consistent regulatory

philosophy; one that has served our Nation well since its inception;

one that trusts competitive free enterprise to serve consumers best.

Overall, I trust free people acting within free markets to make better decisions for themselves than those of us in Government. However, should the free market fail, governments should be poised to

serve the public interest by addressing such failure in a narrowly

tailored fashion. As we approach each matter before us, we should

remind ourselves that free markets and free ideas are the essence

of our free society and promoting freedom is the FCC’s core mission. And we are doing exactly that.

The Commission is adopting policies to encourage more freedom,

especially through increased broadband deployment for all Americans. While America’s rate of broadband deployment has more than

doubled during the Martin chairmanship, from 20 percent growth

and penetration per year to 40 percent growth last year, to a current growth rate of 52 percent, we are pressing hard for greater advancements. In fact, we are all working hard to make it easier for

entrepreneurs of all kinds to construct innovative broadband delivery platforms even faster.

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Opening these new windows of opportunity will create a new

wave of capital investment that will stimulate our economy and

make America more competitive across the globe. The construction

of these advanced platforms also will enhance American consumers’

ability to choose and therefore strengthen their freedom. All of us

will benefit as a result.

Among the highlights of my first 9 months was our advanced

wireless services auction last summer. It was phenomenally successful and brought in nearly $14 billion to the U.S. Treasury. Over

half of the successful bidders were small businesses or other designated entities. New uses for this spectrum will yield tremendous

benefits. Furthermore, our recently issued video franchising order

will enhance video competition and accelerate broadband deployment. And much more lies ahead, including launching the 700 MHz

auction, ensuring the DTV transition goes smoothly, appropriate

management of television white spaces, maximizing uses of the

public safety spectrum, adopting a digital audio broadcast standard

for HD radio, review of our broadcast ownership rules and universal service reform, just to name a few.

In short, from my new perspective at the FCC, America’s communications future has never had so much potential. Consumers have

never been more empowered. The marketplace is bursting with

more brilliant entrepreneurial ideas than ever before and the FCC

is working hard to create an environment where private enterprise

can meet an ever more sophisticated consumer demand as quickly

as possible. In so doing, we are promoting consumer freedom.

I look forward to meeting these challenges in partnership with

Chairman Martin and my colleagues on the Commission, and I look

forward to your continued direction, and your questions today and

beyond. Thank you very much.

[The prepared statement of Mr. McDowell follows:]

STATEMENT OF ROBERT M. MCDOWELL

Good morning Mr. Chairman and distinguished members of the subcommittee.

Thank you for providing us with this opportunity to appear before you this morning.

After 16 years in the private sector, my first 9 months on the FCC have exceeded

all of my expectations. I have been deeply honored to be able to serve the American

people in this capacity, and with such talented and dedicated colleagues and staff.

Today is a wonderful time to be at the FCC. Revolutionary technological developments are yielding untold opportunities for newly empowered consumers to improve

the quality of their lives. Similarly, new products and services are allowing businesses to improve their competitiveness and efficiency. This dynamic disruption

transcends traditional regulatory paradigms. From the FCC’s perspective, America’s

communications future has never looked brighter. Much work remains to be done,

however.

REGULATORY PHILOSOPHY

From broadband availability, to the incredible proliferation of wireless technologies; from universal service, to localism and diversity in broadcasting; from

wireless medical devices that improve thousands of lives each day, to the greatest

entrepreneurial explosion in history known as the Internet: the issues addressed by

the FCC touch the lives of every American. While advances in technology and competitiveness defy labeling under the regulatory stove pipes of old, I endeavor to approach each issue with a consistent regulatory philosophy; one that has served our

nation well since its inception; one that trusts competitive free enterprise to serve

the public interest the best.

Free markets and free ideas are the twin cornerstones upon which we built America. My approach to each issue that comes before the Commission is to focus on my

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belief that the fundamental mission of the FCC is to promote freedom. I want consumers to have the freedom to have their demands satisfied. I want entrepreneurs

to have the freedom to innovate and bring their products and services to market

so they can satisfy those consumers’ demands. Overall, I trust free people acting

within free markets to make better decisions for themselves than those of us in government. Government should not adversely interfere with the relationships between

consumers and entrepreneurs. Rather, government should try to remove barriers to

entry and allow competition to flourish. I believe that the public interest is best

served by following this approach.

There are circumstances, however, when the government should address market

failure to further the public interest so new entrepreneurial ideas have a chance to

compete in the marketplace and succeed or fail on their own merits—and their own

merits alone. Any remedies applied to market failure should be narrowly-tailored,

and sunsetted, to maximize freedom for all market players.

Today, disruptive new technologies pose challenges to existing providers of products and services—and to regulators and legislators. Part of the Commission’s job

is to help open new windows of opportunity to provide entrepreneurs new avenues

for technologies to compete in the marketplace. Given this disruption, the FCC has

to adapt and make a transition from legacy regulations that govern individual industries, to more nimble rules that ensure fair opportunities for all competitors. As

regulators, we must be careful to avoid inhibiting innovation and technological advances. The FCC must continue to tear down barriers to entry and clear out unnecessary regulatory underbrush. Consumers, through the marketplace, rather than

the Commission, should pick the winners. We should never lose sight of the fact

that the ultimate shareholders in every endeavor we undertake are America’s consumers. As the Commission analyzes these regulatory questions, we of course are mindful

that we operate within the parameters that you, Congress, have established for us.

On every issue, I first look to the relevant statute to determine whether the Commission has the authority to take the action proposed or implement a new policy.

A Record of Accomplishments

The Commission is adopting policies to encourage increased broadband deployment for the public. While America’s rate of broadband deployment has more than

doubled during the Martin chairmanship (from 20 percent growth in penetration per

year, to 40 percent growth last year, to a current growth rate of 52 percent), we

are pressing hard for greater advancements. Accordingly, we are making it easier

for entrepreneurs to construct new delivery platforms more quickly. Furthermore,

our policies are paving the way for the owners of existing platforms to upgrade their

facilities. The resulting new surge in capital investment will stimulate our economy

and will give American consumers new tools to strengthen their freedom by enhancing their ability to choose.

In just my nine month tenure, the Commission has taken important steps to promote competition in a number of areas. I believe that our actions will foster the ability of American consumers and businesses—whether located in urban or rural

areas—to have access to new, advanced delivery platforms.

Last summer, the Commission completed an auction for spectrum for Advanced

Wireless Services (AWS) in the 1710–1755 and 2110–2155 MHz bands, which are

ideal for the delivery of bandwidth-intensive wireless applications. This auction was

phenomenally successful and brought in nearly $14 billion to the U.S. Treasury. The

Commission’s action to establish a broad array of market sizes for AWS licenses attracted participation by many types of entities. In fact, of the 104 winning bidders,

57 identified themselves as small or very small businesses, rural telephone companies, and businesses owned by members of minority groups or women. This represents 55 percent of all winning bidders. Wireless growth is rising rapidly due to

robust competition and technological innovation. What was unimaginable just 10

years ago is now part of the daily routine of tens of millions of Americans. Innovative broadband services using advanced technologies allow customers to use new

multimedia phones to watch TV, download songs, receive information and access

content, such as sports, news and weather, at broadband speeds. I am committed

to providing meaningful opportunities for entities of all sizes to bring their bold and

innovative products and services into the dynamic wireless marketplace.

Over the last 13 years, since the Commission issued its first Wireless Competition

Report, wireless subscriber growth has grown exponentially, and competition among

numerous providers has flourished. The overall wireless penetration rate in our

country is now at 71 percent. Furthermore, our report estimates that revenue per

minute (RPM) declined 22 percent last year alone. RPM currently stands at $0.07,

as compared with $0.47 in December 1994—a decline of 86 percent. (By the way,

that 47 cents in 1994 would be 60 cents today when adjusted for inflation.)

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While these positive trends benefit American consumers, I will continue to work

to ensure that entities of varied types and sizes have meaningful opportunities to

enter and thrive in the wireless marketplace. The Commission must ensure that our

rules and policies pertaining to spectrum acquisition—whether at auction, through

partitioning or disaggregation, or through spectrum leasing, for instance—are implemented and enforced in a manner that provides regulatory certainty and encourages

market entry.

The Video Franchising Order the Commission issued earlier this month advances

the pro-consumer goals of enhancing video competition and accelerating broadband

deployment. The order strikes a careful balance between establishing a de-regulatory national framework to clear unnecessary regulations, while also preserving

local control over local issues. It guards against localities making unreasonable demands of new entrants, while still allowing those same localities to be able to protect important local interests through meaningful negotiations with aspiring video

service providers.

Many commenting parties, Members of Congress, and two of my distinguished colleagues have legitimately raised questions regarding the Commission’s authority to

implement many of these initiatives. I have raised similar questions. After additional study, I feel that we are on safe legal ground. The Commission has ample

general and specific authority to interpret and implement section 621 and to issue

these rules under several sections including, but not limited to, sections: 151, 154(i),

201, 303(r), 622, 706 and many others. Furthermore, a careful reading of applicable

case law shows that the courts have consistently given the Commission broad discretion in this arena, including the authority to grant interim regulatory relief as

we did with this order.

Although I would have liked to have provided the deregulatory benefits granted

to new entrants to all video providers, be they incumbent cable providers, overbuilders or others, the record in this proceeding did not allow us to create a regulatory parity framework just yet. I am pleased that the Commission has committed

to release an order addressing parity for all cable competitors no later than six

months from the release date of the Video Franchising Order.

While we have worked hard to help foster the rollout of new delivery platforms,

we have also endeavored to continue to make available to all Americans affordable

telecommunications services. The Universal Service system has been instrumental

in keeping Americans connected and improving their quality of life. However, this

system is in dire need of comprehensive reform. In June 2006, we adopted interim

changes to the Universal Service contribution methodology that were designed to

help bridge the gap between the deteriorating status quo and a more sustainable

Universal Service system of the future. The changes raised the interim wireless safe

harbor and required VOIP providers to contribute to the Fund. By setting appropriate safe harbors and allowing wireless carriers and VOIP providers, in determining their USF contribution, the option of either using the safe harbor, utilizing traffic studies, or reporting actual interstate revenues, we provide the right balance of

administrative ease and incentive to contribute based on actual interstate and international revenues. These interim measures also ensure that the Fund remains solvent for the near term and serve as an important first step toward broadening the

Fund’s contribution base to ensure equitable and nondiscriminatory support of the

Fund in an increasingly digital world. In October, we also instituted a 2-year rural

health care pilot program to determine the extent of the need for advanced services

to meet the rural health care objective, pursuant to section 254(h)(2)(A) of the Communications Act, and how we can tailor the rural health care support mechanism

toward that end.

Universal Service is intertwined with intercarrier compensation. We have to reform the current access regime; otherwise, it won’t survive. I believe that all carriers

should be compensated for the costs of carrying others’ traffic on their networks. We

have received comments on the ‘‘Missoula Plan’’ that was submitted by a NARUC

Task Force last June. I look forward to reviewing those comments. We need to step

back and see how competition and technology are changing the marketplace and examine where the current regime is in need of reform. We also need to promote efficiency, competition and technological innovation. It will be a long, cooperative process, but I look forward to working with all interested parties on this challenge.

FUTURE CHALLENGES

During this year in particular we have our work cut out for us. We are currently

in the process of analyzing the record and finalizing the rules for the commercial

portion of the 700 MHz spectrum band, which is well-suited for wireless broadband

applications. The results of last summer’s AWS auction, discussed above, provide

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good guidance as we design the band plan and implement the rules for the 700 MHz

auction. I hope to be able to enhance and improve upon the positive aspects of the

AWS auction to provide a second meaningful opportunity for participation in the

700 MHz auction. Along these lines, I am pleased to consider a draft order that proposes to classify wireless broadband Internet access service as an information service, which would clarify any regulatory uncertainty with respect to wireless services,

including those utilizing the 700 MHz band. Our comprehensive work in this area

is especially time-sensitive given Congress’s recent mandate that we commence auctioning the commercial 700 MHz spectrum no later than January 28, 2008, less than

1 year away. I am hopeful that we will complete our work this spring.

In addition, I am pleased that the Commission acted in December to seek public

comment on a proposal for a national, centralized approach to maximize public safety access to interoperable, broadband spectrum in the 700 MHz band. I expect that

this discussion will enhance the ongoing dialog regarding partnerships among the

public safety community and the commercial wireless industry, which is important

given Americans’ high expectations for reliable communications and effective coordination among emergency personnel as they undertake day-to-day activities and in

crisis situations. As Congress recently mandated that analog broadcasting cease in

the 700 MHz band (including the 24 MHz of spectrum it reserved for public safety)

no later than February 17, 2009, it is important that we complete our work in this

proceeding as soon as possible.

We are also moving forward to create the opportunity for additional unlicensed

operation in the ‘‘white spaces’’ of the TV broadcast bands. I am hopeful that our

actions will foster a chain of events that will lead to an explosion of entrepreneurial

brilliance toward creative uses for these bands. Mindful of our obligation to protect

all users from harmful interference, our Office of Engineering & Technology is already working hard to analyze and test new devices and associated standards. Of

course, the technology innovation spurred by the Commission’s leadership in the

white spaces proceeding plays a critical role in the wireless marketplace, including

fostering job growth and related business opportunities. For this reason, I am hopeful that advances in technology and wireless service applications will facilitate entry

of new and diverse players. Moreover, I am pleased that our timetable aims to ensure that new consumer equipment for these bands will be market-ready as soon

as possible.

I am excited about our work to prepare for the 700 MHz auction, public safety’s

forthcoming access to the 700 MHz band, as well as future deployment in the white

spaces, because I am hopeful that the competitive opportunities presented by these

proceedings will broaden the ability of entities seeking to enter the wireless marketplace. I am committed to ensuring that the Commission takes advantage of additional opportunities to spur technological innovation and increased access to advanced wireless services by a broad array of participants, including small businesses, rural telephone companies, and businesses owned by members of minority

groups and women, whether licensed or unlicensed.

This year, we are also advancing our comprehensive review of the Commission’s

broadcast ownership rules and are busy building a record. As you know, these rules

must strike a difficult balance. They must take into account the dramatic changes

that have occurred in the media landscape in recent years and, at the same time,

continue to promote our long-standing values of diversity, localism and competition.

We must also carefully address the issues presented to us by the Third Circuit in

the Prometheus decision. I hope we can develop a reasoned approach that resolves

the regulatory uncertainty that followed the appeal of the order the Commission

issued in June 2003.

I look forward to continuing our review of competition and the effects of consolidation among traditional media companies, as well as the emergence of new competing

services. I also am eager to attend more field hearings around the country to learn

more about competition, diversity and localism from the perspective of people with

first-hand knowledge of the realities of their local market—be they consumers,

broadcasters, programmers, artists, economists or academics. With respect to diversity, I am particularly concerned about the dearth of female and minority owners

of broadcast properties. I anticipate learning more about the causes of this situation,

especially as compared with other industries requiring similar amounts of capital

investment.

Hopefully, the Commission soon will release rules in our digital audio broadcasting proceeding. I applaud the ‘‘early adopters’’ of in-band on-channel (IBOC) technology for taking the initiative and embracing the capabilities of digital radio, particularly multicasting, to provide their listeners with better quality sound and expanded programming options, particularly for underserved and niche audiences. I

believe that the service rules and other licensing and operational requirements we

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develop will provide both the regulatory certainty and the flexibility that the industry needs to expedite the transition to digital radio and to provide higher quality

audio, diverse programming and innovative data services to the public.

I hope that the Commission will extend the de-regulatory benefits we are providing to new entrants in our recently adopted Video Franchising Order to all video

providers, both incumbents and overbuilders. Many of the statutory provisions we

interpreted in the video franchising proceeding are generally applicable to all cable

operators. I want to ensure that no governmental entities, including those of us at

the FCC, have any thumb on the scale to give a regulatory advantage to any competitor. Resolving these important questions soon will give much-needed regulatory

certainty to all market players, spark investment, speed competition on its way, and

make America a stronger player in the global economy.

Conclusion

In sum, from my new perspective at the FCC, America’s communications future

has never looked more promising. Consumers have never been more empowered or

savvy. The marketplace is teeming with more brilliant entrepreneurial ideas than

ever before. And the FCC is striving to create an environment where private enterprise can meet ever-more-sophisticated consumer demand as quickly as possible. In

doing so, we are promoting consumer freedom.

I anticipate meeting these challenges in partnership with my colleagues on the

Commission, and I look forward to your continued direction. Thank you.

Mr. MARKEY. Thank you, Commissioner McDowell, very much.

That concludes opening statements of the Commission, and now we

will turn to questions from the subcommittee members.

Mr. Chairman, you and I had an exchange of letters on the issue

of the National Security Agency obtaining consumer phone records

without legal process from certain phone companies. As you know,

the Communications Act prohibits disclosure of phone records except with approval of the subscriber or as required by law; the

Commission enforces this provision.

You wrote to me saying you would not open an investigation and

cited court cases involving civil liberties groups and state secrets.

An independent agency has its own duty to enforce its own governing statute. This NSA scandal is important to investigate, and communications laws are implicated. Mr. Chairman, are you now prepared to open an investigation? Have you reconsidered?

Mr. MARTIN. Mr. Chairman, as I have indicated back and forth

in our correspondence and in our personal discussions on this, the

Department of Justice in the United States Government has taken

a consistent position that the investigation of the phone records are

covered by their national security privileges, so that we would be

unable to get the underlying information from the carriers without

threatening that.

There have been several court cases that have ruled that these

are covered by national security, including not only that were

brought by private interest groups but by, for example, the Maine

Public Utility Commission. One of the things is, and you and I, our

personal discussions, we did discuss was confirming that the administration’s position and the United States’ position be the same

in relation to the FCC, as well. And I have tried to confirm, in correspondence with the department, that that would be the same position if we had any investigations that were ongoing. And so as

soon as I am able to confirm their response, I will provide that to

you, as well.

Mr. MARKEY. So you have written a letter to the Justice Department?

Mr. MARTIN. Yes.

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Mr. MARKEY. Will you give us the response to that letter when

you get it?

Mr. MARTIN. Sure, of course.

Mr. MARKEY. Can we receive a copy of the letter which you have

sent?

Mr. MARTIN. Of course.

Mr. MARKEY. I think we can predict the answer which you will

receive from Attorney General Gonzales, but I think it is important

that we have the Commission proceed in this dispute with the Justice Department. I think it is absolutely critical that the communications laws of the country be protected, and only at the point

at which there is a legally obtained court order should the consumer information which is now being compromised be made available to the Justice Department, so I commend you for that move,

and if Justice thwarts your efforts, we will, as a subcommittee, as

a full committee, pursue that with the Justice Department.

Now, section 10 of the 1996 Act enables telecommunications carriers to petition the FCC to forbear from a regulation or a provision

of the Act. If the FCC does not deny the petition within 15 months

it is deemed to be granted. I have noticed that the FCC has been

flooded with forbearance petitions over the last few years, primarily from the incumbents. Is the deluge of forbearance petitions

draining FCC resources that could be spent establishing a broader

FCC policy, such as broadband consumer protection, universal

service reform and disability access, is that currently the practice

that is occurring at the FCC, Mr. Martin?

Mr. MARTIN. We certainly have a significant number of forbearance petitions in front of the Commission. I mean, we have had

them in the past before, but we have a significant number of them,

as well, now.

Mr. MARKEY. So is that draining the resources that you have at

the FCC to do other work?

Mr. MARTIN. I am not sure that I would characterize it as draining the resources of the Commission. I mean, I would say that certainly I think that it is preferable for the Commission to end up

trying to address issues in the context of rulemakings whenever

possible, so I mean I think that that is preferable, but the Communications Act is very clear that parties are entitled to file forbearance petitions and if so, that we end up having to address them

and if we fail to, that they are deemed granted.

Mr. MARKEY. So if the forbearance petitions are not draining

your resources, then why are the majority of the FCC’s orders

issued in response to industry-initiated actions like forbearance petitions and license transfers? It appears to me that the industry,

not the FCC, is setting the FCC’s agenda and determining how the

FCC’s resources are allocated.

Mr. MARTIN. I think that the Commission has ended up trying

to address the issues that we think are the most critical going forward for a telecommunications infrastructure. I think we will continue to work hard to do that. We obviously try to and are required

to respond to forbearance petitions and try to respond to license

transfers in a very timely manner. Those are very important

issues, too, for the industry, so we do end up responding to them,

of course.

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Mr. MARKEY. That is not the way we observe what is going on.

Let me ask one final question. The FCC has an open rulemaking

since 1999 that addresses the public interest obligations of TV

broadcasting in a digital multicast environment. When will we see

those rules?

Mr. MARTIN. Well, the Commission has already indicated that all

of the rules that apply for the public interest obligations for analog

broadcasting are applied to digital broadcasting. We have also extended the children’s television obligations and clarified and extended those in additional broadcasting rules. We have an order before the Commission right now that is actually extending an enhanced disclosure requirement so that they would report more on

the kind of coverage they are doing at the local level.

The remaining issues that are in front of us as a result of the

comments that were filed in that original proceeding are actually

asking the local broadcasters to commit to certain kinds of minimum content provisions like free over-the-air broadcasting.

Mr. MARKEY. So when will we see the resolution of that? When

will we see the rule on the obligations of the broadcasters?

Mr. MARTIN. Well, I think we have addressed many of the rules

that were part of that proceeding. In other words, we have addressed them in piecemeal rather than in one omnibus order. The

one issue that is remaining is whether we are going to require minimum quantities of certain kinds of broadcasting. I am not convinced that that is necessary.

Mr. MARKEY. Well, will there be a conclusion to the 1999, this

rulemaking that has been open since 1999, will that rulemaking be

concluded this summer?

Mr. MARTIN. The 1999 proceeding wasn’t a rulemaking. It was

actually a notice of inquiry, so what we have done is start proposed

rulemakings as a result of that, that address the different rules.

That was actually only a notice of inquiry. We can do another report this year, if you would like, on the status of all of those, all

of the issues, but we have had to address each individual rule in

rulemakings. What we started in 1999 was just a general notice of

inquiry, not a rulemaking.

Mr. MARKEY. That is 8 years ago. I just think it is important for

this committee and the public to know what the obligation is going

to be on the broadcasters in this digital era, and I would urge the

Commission to resolve that this year. I turn to recognize the gentleman from Michigan, Mr. Upton.

Mr. UPTON. Thank you, Mr. Chairman. Chairman Martin, one of

the big successes in the last 2 years was, of course, the enactment

of the legislation moving from analog to digital that was included

in the reconciliation bill in the last Congress. Where are we on the

auction proceedings as it relates to the sale of the analog spectrum?

Mr. MARTIN. The legislation requires the Commission to commence the auction by the beginning of next year and then to deposit the proceeds into the Treasury by the middle of next year.

The bureau staff is working very hard to try to put us in a position

to start that auction even earlier. We would like to be in a position

to start it sometime next fall to make sure that we conclude it in

time to collect the monies and have it deposited by the statutory

date.

46

Mr. UPTON. In addition to setting the firm date for the transition, the DTV legislation funded the Digital Converter Box Program. It gave public safety 24 MHz of spectrum and a billion dollars for an improved emergency communications system. It made

60 MHz of spectrum available for wireless broadband and probably

will raise at least $10 billion for the Treasury. As you have heard

about the Cyren Call and the Frontline proposals, should those proposals move forward, would that jeopardize your timetable for the

auction?

Mr. MARTIN. The Cyren Call proposal would actually require legislative change. It would require Congress to decide not to go forward and auction all of the spectrum that we have been instructed

to auction, so that would actually require legislation in order for us

to not move forward. The Frontline proposal is a very recent proposal. We are still studying it. I don’t believe it actually would require any changes in us being able to go forward. I am not sure

that that actually does require any further changes.

Mr. UPTON. In 1999 the FCC granted deregulatory pricing flexibility for special access services when there was competition. Has

anything changed with that regard? And I understand that there

are a number of proceedings open on the special access issue. What

is the status of those proceedings?

Mr. MARTIN. We have got several proceedings that were open.

One was on applying what they call performance metrics to special

access, making sure that the carriers who were selling special access to other competitors were doing so in a way the competitors

could readily access those services. And as a result of the mergers

that have gone through and the conditions that have been imposed,

along with one of the forbearance petitions that we have addressed,

all of the incumbents are already subject to the kinds of performance metrics that were the subject of that proceeding, so they are

already subject to that because of conditions.

As a result, also, of some of those mergers, many of the incumbents are subject to certain kinds of price freezes on special access.

In addition, we do still have an open proceeding of whether the

Commission should re-impose direct price controls on special access, and that was opened in the beginning of 2005, and that is a

proceeding that the Commission still has in front of it. We have got

a record. There have been significant changes in the industry since

then because of some of the transactions and mergers that have occurred, and I think, probably, what makes the most sense from the

Commission’s standpoint is to try to say what has been the impact

of these changes in the industry into the underlying record in that

proceeding.

Mr. UPTON. Do you have a guess as to when that might be concluded?

Mr. MARTIN. I mean, I think on the special access proceeding, I

think the Commission either needs to conclude it based upon the

record prior to the mergers or to seek further comment. I think at

this time it would make more sense to seek further comment in the

next few months, this summer, so that we can see what the

changes are that have occurred because of the mergers last fall and

the previous fall, how that impacted the special access issue.

47

Mr. UPTON. Now, I understand that Liberty has agreed to be

subject to the same conditions as News Corporation after the sale

of DirectTV. Some of those conditions may not easily transfer. How

will the FCC approach the former News Corporation conditions as

it examines the sale of DirectTV?

Mr. MARTIN. Well, one of the most important conditions that was

imposed was making sure that News Corporation provided its regional sports, that it provided access to its regional sports networks

to other video competitors. To the extent that, for example, that

those regional sports networks are also being transferred to Liberty, then it would be important to make sure that those same kind

of conditions were imposed.

Mr. UPTON. Last question that I have is, my time is expiring, is

we talked a little bit earlier, Internet video applications such as

YouTube and movie download services are an increasingly dramatic strain on the broadband networks. Broadband providers need

not only to build bigger pipes, but also they need to build smarter

pipes. Do you think that the broadband providers would make the

investment necessary to respond to the increasing strain on the

networks if they were subject to network neutrality requirements?

Mr. MARTIN. Well, I am certainly concerned that if we subjected

them to network neutrality requirements it could be a deterrent,

potentially, to some of their investment. I think we need to make

sure we have appropriate balance, the importance of a content development with infrastructure deployment, and I think that at this

stage we need to focus a lot on the infrastructure deployment incentives to make sure that we are providing for the opportunity for

carriers to invest in the underlying networks and recoup those in

the services that they are providing.

Mr. UPTON. Thank you very much.

Mr. MARKEY. Gentleman’s time has expired. The gentleman from

Pennsylvania, Mr. Doyle.

Mr. DOYLE. Thank you. Chairman Martin, you were a Commissioner in 2001 when the FCC announced that Mr. Dale Hatfield

was to write a report on enhanced 911 services, and you were there

when the Commission opened the docket for public comment in

March 2002, and you were still there when Mr. Hatfield filed his

completed report in October 2002. In fact, in April 2003 you gave

a speech to the FCC’s 911 Coordination Initiative where you said

that Mr. Hatfield’s first report on the enhanced 911 issue ‘‘contains

a number of important insights’’ and that you ‘‘strongly agree that

an unusually high degree of coordination and cooperation among

all stakeholders, both public and private, will be required.’’

In other speeches, you have said that ‘‘the importance of E–911

becomes more clear every day. The ability to track the location of

a 911 caller is vitally important. Too many lives are at stake.’’ So

911 and E–911 have been an important priority for you, is that correct?

Mr. MARTIN. That is correct.

Mr. DOYLE. Mr. Chairman, in 2005 you had been the chairman

since March, that is correct?

Mr. MARTIN. That is correct.

48

Mr. DOYLE. And I understand your agency contracted with Mr.

Hatfield to write a follow-up report around the fall of 2005, is that

correct?

Mr. MARTIN. He was on contract from 2000 on, and it was renewed periodically. In September, the bureau did extend that contract again in 2005. I think that actually his request that he do an

updated report had been in 2004, but yes, it was again extended

in 2005.

Mr. DOYLE. In contrast to the first report, the agency didn’t publicly announce that Mr. Hatfield had been retained by the Commission to conduct the second follow-up report. Your answer is you just

extended his first report, that is why it wasn’t——

Mr. MARTIN. We extended his contract. He actually remained on

contract every year.

Mr. DOYLE. But you did ask him to write a follow-up report?

Mr. MARTIN. I think that that was actually done in 2004, but yes,

there was a request that he try to work on a follow-up report and

continue to provide expertise.

Mr. DOYLE. Thank you. Mr. Hatfield reported his tentative findings to the Commission staff around the spring of 2006, and then

afterwards, it is my understanding your staff followed up on the

matter, and around that time, Mr. Hatfield was told to cease his

work and submit for his payment. Let me share with you, and I

am going to paraphrase here, what I understand to be some of the

tentative conclusions of that follow-up report.

First, that there is a strong need for a uniform method of testing

911 location accuracy. Second, that the FCC take greater steps to

address the problem of in-building accuracy, of in-building location.

And third, that the Commission do more to solve the rural 911 location problem. And I want to say that again, do more to solve the

rural 911 location problem, and that is critical, because in rural

areas without overlapping cell phone towers, this is a critical thing

that needs to be addressed, and I don’t think it can be denied that

these are critical issues for the public safety.

Commissioner Copps, let me ask you, were you aware of this follow-up report that Mr. Hatfield was asked to do and the fact that

the report was cancelled before it was written in its final form?

Mr. COPPS. No, sir, I was not aware of the report and only know

about the developments basically through the news media.

Mr. DOYLE. Thank you. Do you think some of the conclusions

which I have just read in the report are important conclusions were

there a further study by the Commission?

Mr. COPPS. I think so. I think if an engineer with the credibility

of Mr. Hatfield makes a suggestion, as you say he did, that maybe

we need to be looking at the capabilities of wireless in buildings

and the efficacy that, yes, that is important. We are talking about

the safety of human beings here.

Mr. DOYLE. How about you, Commissioner Adelstein?

Mr. ADELSTEIN. I would agree. I think that Dale Hatfield is one

of the best we have ever had. He was our chief technology officer.

His initial study was a seminal study that guided our efforts on E–

911 for many years. I think it is always helpful if these key factors

are weighed. I think all of the issues that he raised in his study

49

are very important. I think that study would be helpful to be made

public for the benefit of Congress and the public, as well as us.

Mr. DOYLE. Commissioner Tate, were you aware of this study?

Ms. TATE. No, sir, I was not.

Mr. DOYLE. Do you think the conclusions reached by Mr. Hatfield

could have been valuable to the Commission?

Ms. TATE. It sounds like they could have. I haven’t had the opportunity to see the report.

Mr. DOYLE. Mr. McDowell?

Mr. MCDOWELL. Me, as well, sir.

Mr. DOYLE. Now, Chairman Martin, I want to point out that Mr.

Hatfield gathered information by interviewing people, and since

folks universally thought his first report moved the Commission

and stakeholders in productive ways, they were looking forward to

this follow-up report. Now, in today’s newspaper, when you talked

to, or your spokesman spoke to the USA Today, it seems to me that

if I am quoting Tamara Lipper correctly, she said that you were

simply trying to save the taxpayers money by not having the report

come to conclusion. Now, the report cost, Mr. Hatfield was paid

$9,500, I understand, to get to the point where he got, and I am

not sure how much more it would have cost to put the report in

writing, maybe a couple more thousand dollars. In a budget of over

$330 million, sir, is that really the reason you told him to stop the

report?

Mr. MARTIN. I think that it is important to understand that in

this instance, actually, we had paid Dale Hatfield over $10,000 in

2004 to do an updated version of the report. We had actually paid

him, the contract in 2005 was for an additional $10,000 to do an

updated report. He never presented any of the initial findings to

us, and indeed, when I found out about the contract, which I wasn’t

aware of until the spring of 2006, we actually asked him could he

provide us a summary of his findings and where he was going on

his report, which he declined to provide to any of us. As a result

of his declining to provide any of the information of what he was

doing, I didn’t think it was important to renew the contract and

continue to pay him anymore for that money. We have never seen

the report, and if you have a copy or if anybody has a copy, we

would love to see it.

Mr. DOYLE. You are telling this committee, and I want you to

choose your words carefully, you are telling this committee that

Mr. Hatfield did not sit with committee staff and go over his preliminary findings and that he did not sit with Mr. Campbell of your

staff and go over these findings?

Mr. MARTIN. No. Yesterday, according to press accounts, Dale

Hatfield presented something to the bureau staff, but I was unaware of it and so was Mr. Campbell on my staff, and indeed, Fred

Campbell, on my staff, called him when we found out about the

contract and said could you provide us a copy of your report, and

a copy of your tentative findings, and he said no. So the bottom line

is we paid him for his contract, and if he has a report, we would

welcome it. We would welcome it. There has been no chairman who

has been any stronger on the importance of providing 911 to——

50

Mr. DOYLE. Isn’t it true that Mr. Campbell told Mr. Hatfield not

to finish the report, to stop his work where it was and to submit

his bill? Are you saying that is not true?

Mr. MARTIN. No. We said to submit his bill, and that we weren’t

going to continue to pay him anymore for it. We had paid him for

2 years, and we had no report. But he is more than welcome to provide the report if he would like to.

Mr. DOYLE. Isn’t that the same as terminating his contract? Why

wouldn’t you demand a report? Why would you pay someone

$10,000 and then not demand a report?

Mr. MARTIN. We would be happy to have his report if he wants

to provide it and if he provides it to us, we will be happy to provide

it to the committee, but we weren’t going to renew his contract

again and pay him again for the third time when we still didn’t

have a report.

Mr. DOYLE. Mr. Chairman, do you think the conclusions that he

reached in the report are important for the Commission to act on?

Mr. MARTIN. I think that the conclusions are ones that not only

do I think they are important for the Commission, we already had

the Commission working on it. We established a Homeland Security Bureau to work on these very issues, and indeed, the conclusion that is in the newspaper today that says 60 percent of the

time people are using wireless phones inside buildings is readily

available from J.D. Power and Associates, on Google’s Web site,

which I searched this morning——

Mr. DOYLE. If the Commission was already working on these

issues, sir, then why did you ask this gentleman to do a follow-up

report?

Mr. MARTIN. I didn’t ask him to.

Mr. DOYLE. Who did, Mr. Chairman?

Mr. MARTIN. Chairman Powell did in 2004.

Mr. DOYLE. And you weren’t aware of this?

Mr. MARTIN. No, I wasn’t.

Mr. DOYLE. So you don’t know what your bureaus are doing

when they let contracts out?

Mr. MARTIN. In 2004 I was a commissioner, not the chairman.

In 2005 they renewed it, and I didn’t know about it, no. And then

when I did become aware of it in 2006, I said that he is more than

welcome, as I said, to present the report to us. Mr. Hatfield is obviously an esteemed public servant. He spent many years on the

Commission, and we would welcome him to provide us his assistance, but I did not think it was necessary to continue to pay an

outside contractor who, by the way, is also a contractor to many of

the entities that lobby us, to continue to provide technical support

when I think we have the technical expertise to be addressing

these very issues. And indeed, I think it is important that we end

up moving forward on these issues, and we are.

Mr. DOYLE. I see my time is up, Mr. Chairman.

Mr. MARKEY. Gentleman’s has expired. The gentleman from Mississippi, Mr. Pickering.

Mr. PICKERING. Mr. Chairman, thank you. To all the Commissioners, I am grateful for your service and for your presence this

morning. As we look at where we are today in the post-implementation era of the 1996 Act and at the same time, after most, I beVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00058 Fmt 6633 Sfmt 6633 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
51

lieve, mergers have occurred and so the concentration and the transition to all-digital and mostly IP-based services and applications,

it is very important that we get the balance and the decisions and

the policies right as we go forward in a period of convergence and

hopefully continue the competition.

My questions are going to try to address those things that I

think will maintain healthy competition as we go forward. But the

first question that I have for the Commissioners deals with something that Congresswoman Harman brought up and that is the

interoperability as it relates to emergency services.

As we in Mississippi and in the Gulf region discovered after

Katrina, interoperability is a critical, vital service and after 9/11,

it was one of the key findings that we needed to implement. I hope

to work with this committee to introduce legislation that would set

up a process for the industry and the emergency response community to come up voluntarily with an interoperability standard. But

if there is failure to do so by a date certain, I would then hope to

ascertain with the FCC to have an FCC proceeding to do it on a

mandatory basis, if there is a failure to do it on a voluntary basis.

Chairman Martin, is that, in your view, an appropriate way to

achieve interoperability standards that we have yet to realize or

achieve since 9/11 and after the Katrina experience and lessons

from that storm?

Mr. MARTIN. I think it is appropriate. I think that it is always

preferable for the industry to try to find a way to address technical

issues like interoperability through their own standard setting

without the Government mandating a particular standard. However, this issue is too critical to allow for that to go unresolved over

an extended period of time, so at some point if there is an inability

to reach a common interoperability standard, I think it would be

appropriate at some point for the Government to go in and say that

we will mandate one because the industries are unable to come together on their own.

Mr. PICKERING. Commissioners Copps and Adelstein, would you

agree with that approach, as well?

Mr. COPPS. Yes, I think you have hit the nail on the head with

regard to that. My only addition to that would be it has been 5

years since 9/11. We still don’t have the interoperability. We have

had a lot of public sector/private sector dialog and talk about voluntary guidelines and voluntary standards. We don’t really have

the assessment to what extent they have been implemented by

going around and talking to first responders around the country.

I know it is not very wide so yes, getting this done is top priority.

Mr. ADELSTEIN. I certainly agree. I think it is an ongoing challenge for the Nation. It is critical that we promote widespread

large-scale interoperability. The FCC has tried to push interoperability through general allocation, but the public safety spectrum

is in different bands and always funding issues have presented

themselves. I think technology is one of the keys to solving the

problem. The national 700 MHz broadband solution is one way that

we could possibly work to find some creative solutions to this.

Mr. PICKERING. Thank you. I look forward to working with you

all to achieve those objectives. The next issue, in Communications

Daily yesterday, reports that the FCC is looking to reinstate a 30

52

percent cap on cable ownership. As we just completed the largest

mergers in telecommunications history, AT&T and Verizon, and as

you look at broadcast ownership, shouldn’t there be some type of

ownership parity between the different platforms? And does it

make sense to cap cable at 30 percent when you have Verizon and

AT&T and in the broadcast area no real equivalent of those types

of caps on ownership so the different platforms, as they converge,

can compete fairly and effectively? Do those caps make sense in today’s world?

Mr. MARTIN. Well, first I think it is important to understand that

the cap actually applies to both the cable companies and the telephone companies to the extent that they are providing video services. So it already does apply to each platform as they converge, so

that cap is not a cap on cable companies, it is a cap on providers

of multi-channel video services, so it would apply to the telephone

companies, as well.

And then the second thing is that Congress actually instructed

the Commission to adopt a cap on video ownership throughout the

country, in part because of the concern that if there was one provider of video services at the retail end, they actually might have

a monopoly power on the buying of content, and that same issue

doesn’t arise in the context of telecommunications. But again, it is

important to understand that this cap would apply to the telephone

companies, as well.

Mr. PICKERING. But only as it applies on video, is that correct?

Mr. MARTIN. That is correct. It will apply to any of the video providers, but it would apply to telephone companies when they are

providing video services, as well.

Mr. PICKERING. But on the video side, we don’t expect the Bell

companies to be able to get anywhere close to 30 percent in the

near future, would we?

Mr. MARTIN. I don’t know. We will leave it up to the marketplace

and see how they end up, what kind of progress they end up making, but what is important is that the reasons for the cap and also

that Congress instructed the Commission to establish a cap were

in part because of the concerns about the buying power of video

content, which isn’t present for Internet services because in that

sense, the pipe is open so that anybody can go get whatever content they want.

Mr. PICKERING. On the 700 MHz, Mr. Chairman, what do you see

as the timetable for moving forward on that auction on the rulemaking that would adopt the specifications for the 700 MHz auction, and what is your view on the size of the auction in varying

markets?

Mr. MARTIN. What we hear from parties is they are trying to

have at least 6 months from when we adopt the final rules for the

size of the markets to when we actually conduct the auction. It is

helpful for them to be able to finalize and establish their credit to

be able to participate in the auction. So for one, trying to participate in the auction sometime this fall, that would mean we want

to have the rules in place 6 months before, which would be about

April or May of this year we would like to be getting those in place.

I am hopeful that we will be able to do it, actually, at the April

meeting. I think it is actually critical that we continue to try to esVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00060 Fmt 6633 Sfmt 6633 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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tablish smaller and small geographic areas when we are auctioning

off spectrum to make sure that smaller entities are able to participate vibrantly in the auction and also that we can make sure that

people are buying spectrum in geographic areas that they will actually utilize so that we can make sure in rural areas it is getting

built out.

And then finally, I think and there has been increasing discussions about whether we should reconsider some kind of policies to

make sure that people are actually building out and utilizing the

spectrum that they are purchasing in geographic areas. There are

various proposals like use it or lose it, or actually build out requirements, but I think we have got to make sure that rural areas, this

spectrum is going to be incredibly valuable for the deployment of

broadband infrastructure, and we have got to make sure that people that are participating in this auction have every intention of actually building it out and utilizing it to serve those in rural areas.

And so I think we have got to do it on small bases and have strong

build-out requirements.

Mr. PICKERING. One last question. Commissioner McDowell, your

recusal policy ends when this year?

Mr. MCDOWELL. According to my ethics agreement with the Office of Government Ethics, it is a 1-year ban.

Mr. PICKERING. And that 1 year expires at what time?

Mr. MCDOWELL. June 1 of this year.

Mr. PICKERING. June 1. And at that point, would you be engaged

in all proceedings and involved in all proceedings at the FCC?

Mr. MCDOWELL. To this point, Congressman, of course I have not

actually cast a vote in such things as forbearance proceedings or

matters involving specific parties. I will consult with my ethics

agreement, the Office of General Counsel and the Office of Government Ethics as we go forward, but I anticipate being able to participate in more proceedings.

Mr. PICKERING. In your response to Senate questions, did you indicate that you would be available for all proceedings?

Mr. MCDOWELL. Ultimately, yes.

Mr. PICKERING. By June?

Mr. MCDOWELL. That was not specifically addressed. In all honesty, the footnote to Mr. Feder’s memo of December 8 speaks to the

appearance of a conflict issue perhaps lasting beyond June 1, and

so these are questions we still need to resolve beyond that.

Mr. PICKERING. We all need you to be involved in all proceedings.

Mr. MCDOWELL. I would love to be involved with all of them, believe me.

Mr. PICKERING. Thank you.

Mr. MARKEY. OK, the gentleman’s time has expired. The

gentlelady from California, Ms. Harman.

Ms. HARMAN. Thank you, Mr. Chairman, and thank you, too, all

of you, for your testimony. I hope we don’t wait another 4 years.

I would suggest, Mr. Chairman, that we have regular, ongoing conversations with our FCC Commissioners, not all of them in a formal hearing setting. I think it would be useful to have informal

meetings, as well. I know I personally have had informal meetings

recently with four out of five of the Commissioners, and I look forward to getting to know Commissioner Tate.

54

I want to go back to the issue I raised in my opening statement

and the issue that has been raised by Mr. Upton and Mr. Pickering

and that is the critical importance of making sure that the DTV

transition goes forward so that we make available 24 MHz of spectrum in the 700 range for public safety communications. All of you

have said that this is important. I just want to underscore the fact

that it is on your watch. You won’t be able to say that a prior

chairman didn’t do it, did do it, did something else. This is on your

watch, and the clock is ticking. As Mr. Pickering said, Katrina was

an embarrassment, especially since it came many years after 9/11,

and we should have fixed the problem. I am not blaming this on

you, but I am saying you are a central part of the solution. Does

anyone disagree with that? No. You have issued numerous notices

of proposed rulemaking. You were way into this. There was a very

helpful, at least to me, op-ed in the March 13 Wall Street Journal

called, ‘‘Failure to Communicate,’’ and Mr. Chairman, I would ask

unanimous consent to put this in the record. It is by Jerry Brito.

Mr. MARKEY. Without objection.

Ms. HARMAN. Thank you. What that op-ed points out is that, and

I am quoting, ‘‘Responders often cannot communicate with each

other because the Federal Government assigns to each of the

50,000 public safety agencies in the country,’’ that is every hometown fire and police department, ‘‘their own radio license and piece

of the spectrum with which to build out a communications system.’’

They point out that this affords great flexibility but that it comes

at a cost, which is that more often than not, systems can’t talk to

each other. Anyone disagree with this? No.

So we need to figure out a plan, and you are a critical part of

this, to move police and fire and emergency prevention services to

something that makes sense in the 21st century. Anyone disagree

with that? No. OK. My question then, is, in my 2 minutes, how it

is, with some specificity, that you are going to make a decision

about things like whether you split that 24 MHz band in half,

which is one of the things you are considering; whether you embrace some of these new ideas by Cyren Call and Frontline Wireless, which, as you said, you need to learn more about.

What it is that we do, what it is that you do, as experts in charge

of who gets licenses, to drive our earnest first responders to technologies that obviously fit much better the requirements of catastrophic attacks that we can expect or catastrophic natural disasters in the 21st century? Anyone is invited to comment.

Mr. MARTIN. Sure. I think that there are a few options in trying

to address the interoperability issue. I think that one is obviously

this Cyren Call proposal that has been put forth. Again, as I reiterated earlier, that would really be up to Congress to decide whether

to take away some of the spectrum that is being utilized for commercial auctions and provide it to public safety. We have put forth

a proposal that would actually establish a national licensee by a

non-profit that would be able to, then it would be license holder,

and it could ensure interoperability among all these different public

safety communities.

Ms. HARMAN. And if I could just interrupt, do you think there is

enough spectrum for that licensee to accomplish that task?

55

Mr. MARTIN. I think there would be enough for them to at least

be able to provide some basic broadband connectivity and then use

that broadband connectivity as a platform that could then address

the interoperability issues. It won’t fix all of the radios that have

already been bought that are not interoperable, but it would provide a piece of spectrum that could be utilized for broadband and

IP technologies that then could be an area where people could communicate, but it won’t fix all of the radios they have already

bought.

Ms. HARMAN. Does anyone else have a comment? I know my time

is up, Mr. Chairman. I just wanted to invite comment to my statement on the need for this.

Mr. COPPS. Well, I think we have a number of things. We have

to make sure the 800 MHz transition is working as it was intended

to work. In addition, all of these decisions that we originally needed on the 700 and we really have to know exactly where we are

and you asked an interesting question about the available public

safety spectrum and we all have kind of an intuitive reaction to

that, but what we really need to have is a really good inventory

of exactly what is being used and how extensively it is being used

and understand the problem before getting to the solution.

Ms. HARMAN. Thank you, Mr. Chairman. I just hope we don’t

keep learning forever. I think we need to find a solution very quickly and we are going to be 4 years later than Congress promised,

so let us get it right. Thank you.

Mr. MARKEY. The gentlelady’s time has expired. The gentleman

from Oregon, Mr. Walden.

Mr. WALDEN. Thank you, Mr. Chairman. Appreciate that. I have

a question involving the Universal Service Fund and all and I

guess part of it, it is my understanding that the FCC designation

of carriers eligible to receive Federal high-cost support has perhaps

ignored some applications for a number of years. It seems like the

companies deserve some sort of timely response, whether they are

approved or denied. And I am curious if you can explain why some

of these applications have been pending for a considerable length

of time and why?

Mr. MARTIN. The Commission is facing a significant financial

problem with the number of CETCs that are receiving Universal

Service money. When I arrived at the Commission, the first year

we gave out $1 million to eligible telecommunications carriers. Last

year we gave out $1 billion during my time at the Commission. So

you have seen a dramatic increase. We estimate that under the

current timeline, with no further applications being granted, we

will give out somewhere between $1.3 and $1.4 billion this year.

If we grant all the pending applications, some estimates are that

could be as high as $1.7 billion this year. The Commission is facing

a significant crisis in this area. The Universal Service joint board,

which is composed of State commissioners and Federal commissioners and also a State consumer representative, are considering

before it various proposals, including a proposal to cap the CETC

fund right now. They anticipate that they are going to make a recommendation to the full Commission sometime within the next 4

to 6 weeks.

56

And I think it is critical for us to see what that recommendation

is with the kind of growth that we are seeing, we should see what

that recommendation is before we further exacerbate the problem.

To the extent that we are not going to take any kind of steps to

address this issue, then you are right. We would need to grant all

the applications and address it from a financial standpoint, but I

think it is incumbent upon us, because we have this significant financial problem, to make sure we are moving very guardedly to try

to protect the fund, as it is. And I think that waiting to see what

the board’s recommendation is, is important. When we see that

kind of growth in a Government subsidized program in a very, very

short period of time, I think we have a potential of having a real

problem.

Mr. WALDEN. I spoke with a number of people about a different

issue, that involving white spaces, over the last few weeks, and I

am just curious, from your perspective, as Commissioners, your

views on white spaces and whether or not the technologies that are

emerging, I know they have just presented you with some new

equipment, literally, to be investigated, if there are concerns about

interference or not. My understanding, too, is you have come to the

conclusion, Mr. Chairman, that auctioning off this white space

spectrum probably wouldn’t make a lot of sense. Is that correct?

Mr. MARTIN. That is right. In general, I think that this spectrum,

the people utilizing the white spaces would not be the primary

users of the broadcast spectrum, and when you are a secondary

user, that is not usually the typical kind of license we auction off.

Usually, it is someone who is the primary user and has very defined rights. And in this instance, we would be actually auctioning

off the right to use it on a secondary basis and not interfere with

the primary broadcasters, and that is more typically what we do

on an unlicensed basis.

We are concerned about making sure they don’t have interference with the underlying broadcasters, and I think it is critical,

particularly when we are going through the DTV transition, that

we make sure we don’t allow for there to be any ongoing interference with those broadcasters in that context. And the technologies have improved such that communications devices are actually able to incorporate sufficient technical capabilities, and actually listen in a geographic area before they speak, and then they

could listen, as a broadcaster here, on channel 3 or channel 5, and

if there is, then don’t operate on that channel.

That is what the device that was just delivered to our engineering lab this week says that they have developed that kind of a

technical capability so that they will be able to make sure they are

not interfering in each market and take that same device from

market to market and have it not interfere. And to the extent that

it truly does work that way, then this will be a good breakthrough

to be able to utilize that white space.

Mr. WALDEN. All right. Let me shift gears to an issue that I

know all of you are concerned about, and so are we, and that is

broadcast media ownership and various proposals, not only in

broadcast but elsewhere across the spectrum and including, I understand, a recent submission to go to a 30 percent cap on cable.

57

I would be curious to know why you think that proposal would

withstand court scrutiny when the prior one did not.

But moreover, I know we allow duopolies in major markets for

television and yet I know in a district like mine, that is very rural,

it is actually some of the small or medium sized markets where the

broadcasters are struggling in deep competition for advertising dollars locally with cable and in some cases, radio. Their ad rates

aren’t much different and yet their costs are higher and I am just

wondering why we allow duopolies in major TV markets but not in

the smaller and medium markets.

Mr. MARTIN. The Commission has always tried to find a balance

between making sure that the broadcast companies are able to

make sure they are making enough money to stay in business and

continue to gather local news and at the same time, that we are

preserving the diversity of viewpoints and voices in each market.

And obviously, when there is a larger market and there is more

broadcast stations that are available, there is less of a concern

about making sure that we preserve the diversity of those. In the

smaller markets, it is more difficult to make sure that there are

enough different voices out there.

And I think that that creates a natural tension because in many

areas, in many small markets, that is actually where some kind of

increased consolidation is critical and that is why we are finding

this appropriate balance of how we make sure and preserve the

local voices that we have got and that they have enough financial

wherewithal to continue to gather news while at the same time we

preserve the maximum number of voices in that market that we

can. But it is ironic that yes, in areas that are smaller, there are

fewer voices, but that may also be the area where they are under

the most financial constraints.

Mr. WALDEN. I would concur.

Mr. COPPS. Can I make a comment there?

Mr. WALDEN. Sure.

Mr. COPPS. Much of the debate that we have had is whether you

look at this problem just holistically or individually. So you pass,

as Chairman Powell wanted to pass and did pass through the Commission, a law that just grants duopolies a green light, no questions asked and I think that is a bad idea. A duopoly, especially

in the multicast era, does have tremendous power if it has got 12

streams of broadcast into a small locality like that.

But we should have the ability, and I think we do, to look at

these things on a granular basis and I have never said, for example, that I am against all consolidation and I have seen areas

where maybe an area would be deprived of service without it, but

you have to do that, make that public interest finding on an individual basis, rather than just flash some green light to every combination that the mind of man or woman can devise.

Mr. WALDEN. I understand that and I don’t think any of us is

advocating that, but I usually disclaim here, as the only licensee

in the Congress, I have also seen the benefit of consolidation, what

you are able to do then to enhance programming opportunities in

small radio markets, which is what I am familiar with. And I see

that Clear Channel sometimes gets beat up as being this giant

radio holding company and yet I think they are less than 10 perVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00065 Fmt 6633 Sfmt 6633 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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cent of overall radio station ownership by stations and are actually

shedding 400 of their radio stations and 40-some of their TV, so

you see a sort of realignment going on out in the market to the

other competition that is out there. So my time is expired, Mr.

Chairman. Thank you, and I want to thank the Commission.

Mr. MARKEY. The gentleman’s time has expired. If I may, at this

point, recognize the gentleman from Texas, the ranking member of

the full committee, Mr. Barton. When I recognize two Democrats

over here in order to—so let me turn and recognize the gentleman

from Texas.

Mr. BARTON. Mr. Chairman, I thank you for your courtesy, but

I think I am the last person to arrive today. I would wait my normal turn because I am very late, and I appreciate your courtesy.

Mr. MARKEY. I don’t even think I would have to say, without objection, to have you recognized out of order. I don’t think there

would even be a thought, but I thank the gentleman. I will turn

and recognize the gentleman from Indiana, Mr. Hill.

Mr. HILL. Thank you, Mr. Chairman, and thank you, Chairman

Martin and the Commission members for attending today. I live in

a town of 18,000 people. It is the home of John Mellencamp, the

rock star, and the originator of that song, Small Town. My point

is I live in a rural area and healthcare is one of my top concerns.

I am aware that you recently announced a new $60 million rural

healthcare pilot program as part of the Federal Universal Service

Fund. I am very interested in this program, and I want to learn

more about whether telemedicine programs in Indiana can expect

to receive funds from this new program and on what basis.

I understand, from people in the rural telemedicine community,

that a staff person from the Commission recently spoke at a Capitol Hill conference, and when he was asked how the FCC will determine who gets the pilot program grants, he replied that the FCC

will be using the Goldilocks Rule, meaning whichever application

feels just right. I think this statement has caused a lot of confusion. This is an important opportunity for my constituents, so I

would like for you to clarify what that staffer meant by the

Goldilocks Rule.

Mr. MARTIN. I am not sure what they meant by the Goldilocks

Rule, and so I don’t know what they meant. What I can say is that

the Commission has a rural healthcare program that we have

never fully utilized, that we have about $400 million a year that

we set aside for rural healthcare programs, and we have never utilized more than about 25 percent of it in any particular year.

One of the things that I discovered in investigating this when I

became chairman is that many of the rural healthcare, the rural

programs, were not applying for additional funding, in part because

they needed to be able to aggregate to apply for programs on a regional or at least a statewide basis for a network. And the same

thing we saw in a lot of the Universal Service Schools and Libraries Program, that individual schools were having a hard time applying for money, but if we let school districts and/or States apply,

it actually helped facilitate money getting out to them.

So what we have done in the pilot program is allow for rural

healthcare programs, the rural healthcare applicants, to apply on

a regional network basis and also be able to fund a more signifiVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00066 Fmt 6633 Sfmt 6633 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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cant amount of the money that would be used to deploy an infrastructure to cover a statewide network or a regional network and

in some cases, it could even cross State lines.

And I think that that is going to allow these consortiums to be

put together to serve more of the rural healthcare needs in those

local rural small communities. And I think that we actually wanted

to encourage as many people to apply as possible because this has

been an under-utilized fund. We do have a certain amount of a cap

on the program of how much we can end up spending any particular year, so I think it will be difficult, and the Commission actually

debated this last fall about how are we going to determine among

the applicants that we get.

And I think it was something that was a significant amount of

debate last fall when we opened this program, we decided that it

was more critical that we make sure and get the program up and

going on a trial basis and do our best to judge which programs

seem like the most likely to succeed. And we also thought we would

try to make sure we picked them in several different geographic

areas so they wouldn’t all be in the same area of the country.

Mr. HILL. But you are not going to be making decisions based

upon if it just feels right, then, is what I hear you saying?

Mr. MARTIN. No.

Mr. HILL. OK. I have three questions I want to ask. I am assuming that all five Commissioners will have the opportunity to vote

on the recipients for these grants?

Mr. MARTIN. That is right.

Mr. HILL. OK. Second, given that there is a great demand for

this program in determining the recipients of the award, I assume

you will be relying on telemedicine experts and the assistance of

the national telemedicine organizations to peer review the applications before selections are made?

Mr. MARTIN. I am not sure that we have proposed putting them

out for peer review to outside consultants. We can consider that.

The applications haven’t even come in yet.

Mr. HILL. OK. But so you are not considering this at all?

Mr. MARTIN. I don’t think anybody had suggested that to us.

This is a suggestion that we will take back and consider whether

there is enough time to do that, but I think that might be a helpful

suggestion.

Mr. HILL. I hope that you will keep this in mind as you go

through the selection process, and I think this can be a very helpful, useful tool for you, especially for rural areas like mine.

Mr. MARTIN. Sure.

Mr. HILL. OK. Third, in many grant programs, the selection criteria are weighed to allow for objectivity and transparency in

awarding of the grants. Will the Commission be releasing the selection criteria analysis for each of the winning awards in the first

year so that applicants for the second year will better understand

the program’s requirements?

Mr. MARTIN. Sure. And ultimately, what we are hoping to do

with this pilot program is be able to get it established so that we

can extend it to everyone who applies after that.

Mr. HILL. OK. I yield back the remainder of my time.

60

Mr. MARKEY. Gentleman’s time has expired. Chair recognizes the

gentleman from Nebraska, Mr. Terry.

Mr. TERRY. Mr. Chairman, I appreciate all of you coming up here

today and engaging in discussions about our areas of interest that

overlap your authority. One of mine is reforming the Universal

Service Fund and using that as a tool, then, for ubiquitous

broadband roll-out within the rural areas. It seems logical to me

to, instead of us up here trying to recreate the wheel, a new program or tax credit program or whatever, we use what is already

in existence, already has an infrastructure within the FCC, not

only the telephone infrastructure, telecommunications infrastructure already existing in rural America, but also the dollars.

And it seems to me that by reforming and in essence, loosening

up Universal Service and keeping the dollars at the same, that we

can meet our goals that I think several of you stated during your

opening statements about having ubiquitous roll-out of broadband

throughout America so that all Americans have access to it. We

will define access in a minute. But I just wanted to ask a survey

of sorts, of the Commission, starting with Mr. Adelstein, about your

individual opinion about whether Universal Service is relevant

today and whether or not it could be used as a tool to help speed

up rollout of broadband throughout rural America.

Mr. ADELSTEIN. I think Universal Service absolutely can be critical to the rollout of broadband in rural America. Currently, it is

under our policy, no barriers. A lot of companies are using Universal Service support to develop systems that are capable of

broadband, but broadband isn’t a supported service, directly. I

think it is only a matter of time before that happens. It is going

to be sooner rather than later because voice is increasingly becoming just one application over broadband pipes. It doesn’t make

sense just to subsidize one application.

What we need to do is subsidize those pipes to make sure that

they are every bit as thick in rural parts of the country as in the

rest of the country, and we do need to bring costs under control in

certain aspects in order to move towards this system, but Congress

clearly envisioned that, in the 1996 Act, that we would move towards advanced services. It is mentioned five times in section 254

of the Act, and I think we need to take that into account, as a commission.

Mr. TERRY. Mr. Copps.

Mr. COPPS. Clearly, broadband could be and should be part of the

Universal Service Fund. This is the central infrastructure challenge by time, getting this out, so we need to have that strategy,

and we need to have that commitment. We have to have

broadband, then, not just benefiting from the fund but contributing

to the fund and increasing the base of the fund. It is not by now,

and the Commission has gone in the wrong direction with regard

to that. It still leaves the fund with considerable pressure on it, as

you know, so I think another thing that needs to be considered at

some point is extending the contributions from intrastate calls to

the Universal Service Fund. I think if we had broadband in intrastate, we made an effort to true up wireless and VOIP, that should

be most of the way there to putting the fund on a reasonably sound

basis.

61

Mr. TERRY. Very good.

Mr. MARTIN. I think that it is important to try to figure out a

way to utilize Universal Service monies for broadband infrastructure. Indeed, Commissioner Copps and I, when we were on the

joint board in 2002 and 2003, when the joint board considered this

and didn’t actually consider or allow it to be more directly utilized

for Universal Service broadband support. But we do face a crisis,

as I talked about, on the financial side today. Currently we anticipate that the contribution rate is going to rise, continue to rise directly just in supporting current voice services.

One of the reasons why I think we need to move to what I call

our reverse auctions methodology in distributing money is that we

would be able to say we are going to increase the level of service

that we are going to provide to a particular area, but we are not

going to provide for duplicative networks to be built to provide just

voice services. Right now, today, we use Universal Service funds to

support multiple networks providing only voice grade services. Instead, what I think we should be doing is providing Universal Service support for one carrier of last resort in an area, but that one

carrier of last resort, we should begin ratcheting up what we expect

them to provide to its customers, including broadband capability.

I think that the only way we are going to be able to do that and

cap the money where we are now, which I think was also one of

the things you said in the premise of your question, how we keep

the money the same, is we have got to start saying we want more

for the money we are giving you and we are not going to continue

to pay for duplicative networks to provide voice. Instead, we are

going to pay for one network, carrier of last resort, and provide

broadband over it.

Mr. TERRY. Commissioner Tate.

Ms. TATE. Yes. I want to thank you and Mr. Boucher for all your

work in this area and obviously, I think we have got some shortterm problems that need some reform quickly and I hope the joint

board is going to move on that, as the chairman said and Commissioner Copps and so I hope that we will be coming back with some

of those solutions and then some longer term solutions on both the

contributions and the distribution side.

Mr. MARKEY. OK. Quickly, please.

Mr. TERRY. Thank you again for all your work. I will be looking

at all credible ideas regarding reform of the Universal Service

Fund. As Commissioner Adelstein and Chairman Martin have already implied, there is already, sort of, indirect support of infrastructure, but we do need to fix the system first before we can talk

about increasing costs on the distribution side, so I eagerly await

the joint board’s recommendation.

Mr. MARKEY. The gentleman’s time has expired. The Chair recognizes the gentlelady from California, Ms. Eshoo.

Ms. ESHOO. Thank you for recognizing me, Mr. Chairman. In my

opening statement I made references to the AT&T-BellSouth merger. So I would like to drill down a little on this for the benefit of

the full committee. The question that I would like to ask, Commissioner Tate and the Chairman, is what is the authority that you

draw from to approve and then refuse to implement the agreement? And I would like you to describe, reference the exact proviVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00069 Fmt 6633 Sfmt 6633 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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sions of the Communications Act, sections of the FCC’s rules. Commissioner Tate can go first. And other legal authority to support

that action. But I ask because I think it is so highly unusual.

Mr. MARTIN. Sure.

Ms. ESHOO. You voted for it. There was a majority vote of the

Commission, and then, as I described it in my opening statement,

in my mind, it really mirrors these signing statements that are

really troubling to people in the country. Commissioner Tate first,

please. Can you tell us what authority you draw from to do that?

Ms. TATE. Well, I suppose first, this was presented by the companies to us.

Ms. ESHOO. You mean the companies told you that you should

issue that statement afterward?

Ms. TATE. No, the merger, itself.

Ms. ESHOO. Well, I am not talking about the merger. I am talking about the statement that you and the chairman issued on the

heels of a majority vote of the Commission, that you were not going

to honor parts of the agreement of the merger that you had just

voted for, so I am asking what legal authority, what authority do

you draw from to have that stand? I mean, it is yes and no. Which

one did you mean? The statement that you made after you voted

for it or before?

Ms. TATE. I voted for the merger.

Ms. ESHOO. And what about the statement? Let me ask you this.

What parts of the merger do you plan to enforce, and which parts

of the merger do you plan not to enforce? Because that is really

what that statement was about.

Ms. TATE. I think that oftentimes when we vote on something,

all of us, in fact, most every time we vote on something, there are

five statements in the record. We may not agree with everything

that is in the order that was adopted, and so I think that——

Ms. ESHOO. Well, you can always talk about what you may not

have agreed with in the vote. You have to develop consensus, we

all do. A lot of times, it is 51–49 or 49–51, whatever way we see

it, but I think it is rather extraordinary to commit to really not enforcing parts of the agreement of the merger that you voted for and

I am asking you what authority? What was the meaning of it? Why

did you say that?

Ms. TATE. There was one condition that would have proposed

that the company present a tariff to us.

Ms. ESHOO. Did you vote for that? You voted for it. It was in the

agreement.

Ms. TATE. Well, the tariff has not been filed, to my knowledge.

Ms. ESHOO. What about Chairman Martin? What parts of the

merger do you plan to enforce and what parts do you not plan to

enforce? Given your statement.

Mr. MARTIN. Well, sure. First, I don’t agree we were going to approve the merger and then refuse to enforce it. We are going to enforce it.

Ms. ESHOO. All of it?

Mr. MARTIN. Sure. And what legal authority I have for our statement is the order itself. The order itself says that while these conditions are voluntary and AT&T will comply with them, that it

does not change our policy, that it does not, in any way change our

63

precedent and that the Commission’s policy and precedent will still

go forward exactly as is. And its policy and precedent is that in

separate actions, if you file a tariff——

Ms. ESHOO. I have limited time. I have 33 seconds left.

Mr. MARTIN. The order itself is——

Ms. ESHOO. Let me go to Commissioners Adelstein and Copps to

comment on this.

Mr. COPPS. I would just note that, for purposes of judicial review,

that the conditions to a merger are treated as rules, and they are

subject to deference, and the question we are talking about here

doesn’t go to future proceedings, but it goes to the instant proceeding and enforcing this particular merger about this particular condition.

Ms. ESHOO. Commissioner Adelstein.

Mr. ADELSTEIN. Well, the normal process we use when there is

a difference of opinion about an event is to dissent. If there is

something somebody considers to be illegal or inappropriate in a

merger, generally, I dissent if I don’t think something is legal. And

I have done that on a regular occasion. It is better to try and work

it out in advance and get a consensus in advance rather than to

subsequently say that something won’t be implemented.

Ms. ESHOO. Thank you. I think my time has just about expired,

so thank you, Mr. Chairman. Very unusual.

Mr. MARKEY. The gentleman from Georgia, Mr. Deal.

Mr. DEAL. Thank you, Mr. Chairman. As you heard from my

opening statement, I am concerned about the retransmission consent as it is currently in place. I would like to ask some procedural

questions first and then maybe move to your views on the way the

system is currently operating. Chairman Martin, I guess I will ask

you these procedural questions first. It is my understanding that

when a content provider or programmer reaches an agreement with

a distributor cable company, that those contracts generally contain

nondisclosure provisions in the contracts. Is that generally the

rule?

Mr. MARTIN. That is correct.

Mr. DEAL. And does that mean that after the contract is concluded that they cannot disclose, even to the FCC, the terms and

conditions?

Mr. MARTIN. That is correct. We don’t even have the information

about that in many instances.

Mr. DEAL. Do you have authority to demand disclosure of that?

Mr. MARTIN. I would have to go back and research it and give

you an exact answer, but I am not sure we have authority currently.

Mr. DEAL. Well, that is after the contract is concluded. During

the course of the negotiations, are you made privy to the terms of

the offers and counter-offers?

Mr. MARTIN. No. The only instance in which we were was when

someone filed a complaint at the Commission, but other than that,

no.

Mr. DEAL. Do you have authority during that period to require

disclosure of it?

Mr. MARTIN. Again, I am not sure. I am not sure that we do because we don’t have a specific role in that, and the Commission has

64

determined that unless someone files a complaint with us about it,

I don’t think we do.

Mr. DEAL. Well, isn’t the overall test whether or not the negotiations are in good faith, and if you have no knowledge of what the

negotiations entail, how do you make a determination of good

faith?

Mr. MARTIN. That is right. What I meant is that we only evaluate whether it is in good faith or not if someone comes and complains that it is in bad faith.

Mr. DEAL. So if someone complains?

Mr. MARTIN. If someone complains, then it comes to our attention, but other than that, we are not privy to what is going on.

Mr. DEAL. So if a complaint is made, you then have authority to

require disclosure?

Mr. MARTIN. I think so. In the context of a complaint, I think we

would be, if someone was saying this is in bad faith, then we would

ask the parties about the allegations of bad faith. If that involved

the underlying prices, then we potentially could.

Mr. DEAL. And what would be the remedy if you determined that

the negotiations are not in good faith?

Mr. MARTIN. In 1999 or 2000, the Commission determined that

actually the only remedy was to order them to go back to the negotiating table and then engage in conducting good faith. The Commission actually determined that they didn’t have the authority to

order carriage at a certain price in the implementation of the Satellite Home Viewer Act; the Commission determined it didn’t currently have the authority to order that.

Mr. DEAL. And I believe, in the most recent Sinclair dispute, the

Media Bureau said they didn’t have authority to order arbitration.

Has the Commission, as a whole, made a similar determination?

Mr. MARTIN. They did in the context of the Satellite Home Viewer Act implementation, which was based upon the Cable Act retransmission consent negotiation standard, so they did. That is

why the bureau was able to do that, and the current appeal of that

decision is before the other commissioners now.

Mr. DEAL. All right, let me start down the road, then. Mr.

Adelstein, first of all, what is your overall view of the way retransmission consent is functioning, currently?

Mr. ADELSTEIN. Well, it provides broadcasters with the opportunity to negotiate compensation for their programming. I understand that. It is not clear whether Congress achieved its intent,

though, to prioritize the interests of viewers ahead of the cable operators and broadcasters. The FCC’s role is, as you said, to ensure

good faith negotiations. There has got to be a way that we do that.

In fact, there was a colloquy in the United States Senate during

the adoption of this bill that did indicate that we would have the

authority to enforce and ensure that there is a completion of these

negotiations. I think the FCC should protect the viewing public

through prompt resolution, binding arbitration, if necessary, and

interim carriage are things that are, according to legislative history, potentially within our authority to do if no consensus is

reached between the parties.

Mr. DEAL. Mr. Copps.

65

Mr. COPPS. I would agree with Commissioner Adelstein. Our latitude to act in retransmission consent is not wide, basically limited

to the good faith negotiations. We do need to protect the consumer,

and I think there is a need for an overall look at whether retransmission consent is working as it was originally intended to work

and whether it is really protecting small broadcasters, protecting

small cable. I think an argument can be made that maybe the way

it is working out now, it is really kind of encouraging consolidation

in the industry rather than competition.

Mr. DEAL. Chairman Martin.

Mr. MARTIN. I think our current authority is very limited as to

what we are able to end up doing when there is a complaint back

and forth. I think the concerns about the way the retransmission

consent is working with the broadcast providers is a symptom of

the larger problem of how content providers are increasingly charging consumers for all of the content that is included in the expanded basic cable package. And all of it being done without any

kind of transparencies as to how much consumers are having to

pay.

Mr. DEAL. I appreciate that part of your testimony. As you know,

it is a concern of mine.

Mr. MARTIN. And I think that you have to put it in the context

that the broadcasters are asking for sometimes significantly less

than many of the other cable content providers are asking for and

demanding when they are including expanded basic. I think that

some additional opportunity for consumers to see how much they

are paying for all of their content would be helpful across the

board, not just in broadcast, but in all of cable.

Mr. DEAL. Ms. Tate.

Ms. TATE. Yes. I think you all heard about one issue that had

come up, but generally, I think that the process is working and

that thousands of these agreements are being done every day. I do

think we need to continually review the roles that we have before

us.

Mr. DEAL. Mr. McDowell, you only get 10 seconds.

Mr. MCDOWELL. I am used to that, being the most junior member of the Commission. I do think we need an overall thorough

view of why the cost of content, overall, is going up, so as a preliminary matter, I agree with Commissioner Tate that the vast, vast

majority of retransmission consent negotiations are going well, and

we don’t read about them or hear about them, and that is good

news, but we do need to certainly focus to see if there is something

else that can be done. I hesitate to put the Government’s thumb

on the scale in this regard, but on November 26, when it came, for

instance, to the Mediacom Sinclair dispute, I did ask both CEOs of

both companies to come in and join me and Commissioner

Adelstein to see if we could help them facilitate in some way a private sector solution to this. I think it ultimately did help bring a

resolution to that problem, which came on the eve of the Super

Bowl.

Mr. DEAL. Even though you will never know what the negotiation finalized was?

Mr. MCDOWELL. Well, I think by the fact that both parties consented to an agreement, that is probably a sign that they can at

66

least tolerate the terms of their agreement, so that is a little ray

of hope.

Mr. DEAL. Thank you, Mr. Chairman.

Mr. MARKEY. OK, gentleman’s time has expired. Gentleman from

Michigan, Mr. Stupak, is recognized.

Mr. STUPAK. Well, thank you, Mr. Markey, for holding this hearing, and thank you, Commissioners, for joining us. As it has been

said, the last time we had all five Commissioners here was like

over 3 years ago. As chairman of the Oversight and Investigations

Subcommittee, I intend to work with Chairman Dingell and Chairman Markey to exercise vigorous oversight of the agency. I hope

our relationship can be productive, and that is why I was concerned, Chairman Martin, when I heard that you had a closed door

meeting with the Republican members of the Energy and Commerce Committee.

You should feel free to share with all of us things you have on

your mind at that meeting, and I look forward to having public and

frequent dialog with you. It is astounding what this one hearing

can lead to. According to press reports, the Commission is cleaning

house. The FCC has asked industry to withdraw petitions from as

far back as 1995. That is over 12 years ago. I am not even sure

we had e-mail on Capitol Hill in 1995. Congress makes laws and

we expect the FCC to enforce them. Leaving petitions sitting for 12

years doesn’t seem like enforcement to me.

So Mr. Chairman, my first question is ignoring consumer complaints is also not enforcement. The Commission is finally attempting to clean up approximately 70,000 do not call registry complaints from as far back as 4 years ago. So is it true the FCC is

now sending letters to Americans about their complaints saying, in

essence, we have received your complaint, but we need more information to act on it. Yes or no?

Mr. MARTIN. Yes, the Commission is sending letters to consumers who didn’t file enough information for us to act on the complaint, that can you give us more——

Mr. STUPAK. Do you close out the consumer complaint after sending out one of these request letters?

Mr. MARTIN. Yes. We say that we can’t act on it without getting

further information.

Mr. STUPAK. Well, I think that reflects pretty poorly on the Commission’s ability to create and enforce consumer protections. So let

me ask you this, turning to consumer protections, when the Commission reclassified DSL and cable modem services as information

services, the Commission failed to clarify what consumer protections applied to these services. That is over 54 million broadband

subscribers lacking consumer protections. In fact, the FCC asked

for comment on this issue in 2004 as it relates to VOIP and again

in 2005. Today, the Commission still has not issued consumer protection rules. Is the Commission going to establish consumer protection standards for broadband services?

Mr. MARTIN. I think the Commission has taken some steps to address some of the consumer protection issues that were raised in

that notice. We have taken individual actions on things like 911

and Universal Service and making sure that we updated our rules

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to reflect that already. We have also tried to take steps in the disability area, but I think we will issue generally rules, yes.

Mr. STUPAK. You expect some more rules to come out. When do

you expect them to be out?

Mr. MARTIN. I think we have tried to address them in order of

how critical they were, but I think we will probably be able to—

I would assume this year we will probably address the remaining

issues that are there.

Mr. STUPAK. OK. In 2006 I joined with several of my colleagues

on this committee in sending you a letter regarding small auction

areas for the 700 MHz auction that is supposed to be at the end

of the year. At a minimum, one band of this spectrum should be

auctioned by cellular market areas, rather than the economic area

groupings. This would break down the spectrum auction into 734

geographic areas, rather than six, which I think is very critical for

rural build-out. Mr. Chairman, do you support auctioning at least

one band by cellular market areas rather than the economic area

groupings?

Mr. MARTIN. I definitely support auctioning off multiple bands in

smaller areas than the largest groupings you identified.

Mr. STUPAK. And would you go with the cellular market areas,

then, which are 734 as opposed to the six biggies?

Mr. MARTIN. I think there is a current proposal in front of the

Commission that was put forth by a group of rural wireless providers who asked for a smaller——

Mr. STUPAK. When would you expect to issue an order on that?

Mr. MARTIN. That is the order that we need to be issuing to be

able to go forward with the auction, in April, to go forward with

the auction in October, and I think we will try to accommodate exactly what the rural wireless providers have asked for.

Mr. STUPAK. And you expect that to be in April?

Mr. MARTIN. Yes.

Mr. STUPAK. OK. Let me ask you another question on spectrum.

The Commission has before it a proposal called the Broadband Optimization Plan, BOP. This plan would re-band the 24 MHz for

public safety to allow public safety to do broadband in addition to

narrowband or voice communications within their newly allotted 24

MHz. It is my understanding that public safety is strongly in support of BOP. Mr. Chairman, do you support this plan, the BOP

plan, yes or no?

Mr. MARTIN. Yes.

Mr. STUPAK. How about the other Commissioners? Mr.

McDowell, do you support the BOP plan?

Mr. MCDOWELL. I am still examining it.

Mr. STUPAK. All right. Ms. Tate?

Ms. TATE. I had a meeting this week, but I am still looking at

it.

Mr. STUPAK. OK. Mr. Copps?

Mr. COPPS. I think the objective sounds good, but I need to look

at the details of it.

Mr. STUPAK. OK. Mr. Adelstein?

Mr. ADELSTEIN. Yes, we have looked at it. I think it is a very

good idea, and I am hopeful that I can support it.

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Mr. STUPAK. OK. Two out of five. We only need one more. Any

idea when some of these decisions will be made? Some of you indicated more information.

Mr. MARTIN. The decisions regarding the spectrum auction on

the commercial side need to end up being made, as I said, in April

or May for us to continue with the auction in the fall. I think that

that would then allow us to move forward with some of these public safety issues this year and probably in the timeframe of the fall,

while the auction is going on. We can then try to identify what the

public safety should be doing with these pieces of spectrum that

aren’t being auctioned.

Mr. STUPAK. All right. I represent small providers, and when Mr.

Hill speaks of a city of 18,000, that is the biggest city I have, so

that is big time. Should change that song to ‘‘Big City.’’ But my

small providers have provided a service in their communities and

they want it at a low price. The small cable systems in my district,

and we are talking about systems with fewer than 500 subscribers,

are very, very concerned about how some regulations that have

been put on them are going to impact their ability to offer

broadband or even stay in business.

I am a strong supporter of CALEA and giving law enforcement

tools they need, but I have heard concern from a number of my

small providers about the cost of CALEA for these very small systems. Northside TV Corporation in my district may have to drop

broadband now because the upfront costs for CALEA are approaching $10,000 plus $750 a month. I would like your response, in writing, about whether there is a way to allow the small systems a

waiver until they have a higher number of subscribers, maybe a

thousand.

And that is what I would like, in writing, because I would like

this to be given a little bit more thought, because these companies

are really the most responsive to local law enforcement because

they live in the communities, and many of these providers are actually municipal providers. So if you could, I would like that in writing, if I can.

And moving to interconnection, Mr. Chairman, while the vast

majority of Americans still receive their telephone service from incumbent local telephone companies, VOIP providers are making incredible progress in rolling out new products. Do VOIP providers

have guaranteed interconnection rights that will allow them to

compete?

Mr. MARTIN. Yes. Actually, the Commission just issued an order

reaffirming that in South Carolina, Time Warner was having difficulty getting interconnection with the local incumbent. We acted

on that order confirming that they do have those interconnection

rights, and they also have the rights to local numbers in that area

so they can compete.

Mr. STUPAK. OK, very good. I think I will follow that up with you

later. Just one more thing. I have been looking through the FCC

Inspector General reports and I have some questions on the report

about the FCC’s 2005 financial statements, and we will follow it up

at a later time.

Mr. MARTIN. Thank you.

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Mr. STUPAK. With that, I guess my time has expired. Thank you,

Mr. Chairman.

Mr. MARKEY. Right. Gentleman’s time has expired. Chair recognizes the gentleman from Illinois, Mr. Shimkus.

Mr. SHIMKUS. Thank you, Mr. Chairman, and I welcome the

Commissioners here. We all have our own little niche markets that

we address, and although it seems like there is nothing good going

on, I don’t know. We had, and Anna Eshoo was with me there last

night at the E–911 awards banquet. Usually one of you all are

there. Did anybody make it to the E–911 awards banquet? Commissioner Adelstein, you usually are there.

Mr. ADELSTEIN. We were actually preparing for this morning.

Mr. SHIMKUS. Good answer. Why I mentioned that is because we

have had some great successes with Government and industry nationally and locally working to get their own deployment, and there

are some great success stories. We have also had, and my colleague, Mr. Doyle, I am going to have to talk to him off of hearing

time, we have had Mr. Hatfield here numerous times throughout

those years. I am going to have to ask you, I was trying to follow

that line of questioning, and I just couldn’t understand what was

that all about, so if you would give me some time, I would be happy

to discuss it with you.

Because as far as the first time responders and the progress we

made in just my 10 years on 911 and then E–911 is just truly remarkable, and it is from working together, understanding that the

industry, the local governments and the PSAPs, all those have to,

and they are not all there at the same time. And so sometimes it

is the corporate entity that is well ahead, and sometimes it is the

PSAP that is well ahead, and sometimes the ILEC is behind, and

so there have been some positive success stories.

And hopefully, that will also encourage, we start with inoperability, and we try to encourage people to work together and push because most of us, especially in this committee arrangement, have

a hard time dealing with post–9/11 and their inability to communicate interoperably at Katrina. We are embarrassed by it, and we

just can’t sustain that again, I mean, as a nation and as public policy folks, so it sounds like there is a lot of interest in that.

I have a couple questions. One just follows up on what we moved

originally in the act on this side. It was inserted into the Safe Port

Act at the end of the year; a big success so far. But there is an advisory committee report that is due, it looks like October 14 of

2007. Chairman Martin, do you think that they will meet the

guidelines on that report by the time stated, and do you have any

ideas where they are headed?

Mr. MARTIN. I don’t have any ideas on where they are headed,

but I do think that the advisory committee has met several times

already. They have met as recently as earlier this week, and I am

confident that they will meet their timeframe for making those recommendations to us, and I certainly agree on the progress we have

made on 911 issues, in general, on both implementation for VOIP

911 and E–911.

Mr. SHIMKUS. And I am glad you mentioned VOIP because one

of the award winners last night was a former legislative staffer for

NENA who now works for Vonage, an IP provider, and of course,

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we had the 911 issue there, and it looks like Vonage is almost 95

percent covered, at least that is the bio that they told me to read

when I helped give this award, 6600 local communities, the PSAPs,

they work with Vonage to do that. That is a great success versus

where we were just last year.

Using Vonage as an example, if they are at 94 and they got 6

percent, you are looking at other IP providers, one of the dilemmas

is the inability for the IP providers to have the same limited liability protection as voice. Can you speak to that and what we might

be able to do to make sure—it is tough to be able to help first line

people in your industry if you know that even if you do all you can

to connect the dots and get people there, then you are going to be

sued for not being quick enough.

Mr. MARTIN. I think that the Commission has done all they can

on trying to make sure that voice providers are providing that service and are protected at the maximum most they can. We can’t do

anything else on limited liability. I have testified before that that

is actually one of the things I think will be helpful for Congress to

end up addressing. I know that was in your bill in the last Congress, in Senator Nelson’s bill on the Senate side, and I think that

is a very helpful thing to address, along with several other issues.

I think that it is critical to have an understanding that our voice

over IP 911 rules that we implemented shortly after I became

chairman in May of 2005, initially, all of the voice over IP providers said that it was on a timetable that couldn’t end up being done

and that this was something that was unreasonable, and as you

said, many of those same voice over IP providers today are at over

90 percent coverage, and it was by working hard, holding their feet

to the fire, working with the public safety community to make sure

that this ended up getting done. And indeed, I wasn’t there last

night, but I was at the E–911 Institute dinner last year, where I

received, on behalf of the Commission, their award for what we

have done in that area.

Mr. SHIMKUS. Thank you. And just to follow up, do you think

that the liability protection issue is a legislative fix that has to be

moved through here?

Mr. MARTIN. I think that is a legislative fix. I don’t think that

is anything that the Commission can end up doing.

Mr. SHIMKUS. Mr. Chairman, I recommend that we claim that jurisdiction from the Judiciary Committee and move it. I yield back.

Mr. MARKEY. Gentleman from Texas, Mr. Gonzalez.

Mr. GONZALEZ. Thank you very much, Mr. Chairman. How much

time do I have? I waived opening.

Mr. MARKEY. You have 8 minutes.

Mr. GONZALEZ. Eight minutes. I didn’t even notice. Thank you

very much. The first question, and I apologize, obviously, being in

the majority has many advantages, unfortunately, the drawback is

we are just expected to be many more places, but it is nice to have

a voice, believe me. The first question is going to be on Universal——

Mr. BARTON. Times are tough in the majority.

Mr. GONZALEZ. The good thing, it wasn’t a real hard act to follow. Let us go on. Universal Service Fund. Would you agree, and

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this is directed to the Chairman and to Commissioner Copps, the

revenue source is shrinking and that the recipient base is growing?

Mr. MARTIN. Yes, we did try to expand the revenue base just last

summer and trying to take into account voice over IP providers and

increase the rates for, the safe harbor rates for wireless, but yes,

in general, long distance rates or long distance revenue is shrinking, so we did try to expand the base there.

Mr. GONZALEZ. All right. And the recipient base is growing.

Mr. MARTIN. Oh, yes. I am sorry. Yes, the recipient base is growing.

Mr. GONZALEZ. Commissioner?

Mr. COPPS. Yes and yes.

Mr. GONZALEZ. All right. So then the question is what do we do

to address each of those particular points?

Mr. MARTIN. I think that we should move on the contribution

side to something that is both technologically neutral and broader,

and I think we should move to a numbers-based contribution system in which we assess telephone numbers, Universal Service contributions and telephone numbers. That not only expands the base

quite dramatically, but also establishes an economic value to telephone numbers.

As Congresswoman Harman and I have talked about many

times, people don’t see any reason why they shouldn’t be able to

take telephone numbers and hoard them, or they are using telephone numbers and area codes for gas pumps and ATM machines.

And because there is no economic value to them, they are utilizing

them in a wasteful manner that harms small business. I think we

should be assessing Universal Service based upon telephone numbers as a broader base, and that would be technologically neutral.

And then on the distribution side, I think we should be moving

to reverse auctions, which would allow for us to increase the capability that is being provided but get rid of the duplication that is

occurring on the distribution side today. And I think that that

would allow us to say we are going to provide funding for one carrier of last resort in an area and say for how little money can you

provide service and what quality of service can you provide as opposed to how many networks can we fund to just provide voice

services today.

Mr. GONZALEZ. Thank you.

Mr. COPPS. I agree on the need for a fix. I am not convinced that

we need to go quite that far, as I tried to indicate in response to

an earlier question. I think if we had authority to assess on intrastate, we would greatly reduce the contribution factor and expand

the revenue base. We have to decide what Universal Service is for

and if it is going to include broadband, and if indeed it is, then we

need to start collecting from broadband. Certainly, we have to do

something about the identical support I think that is given to competitive ETCs in the area. I think if you did those things, and we

have already tried to true up wireless and VOIP, and have vigorous

oversight of the fund and make sure we do an auditing of the fund,

I think we would be pretty well down the road toward a solution

to the problem of Universal Service.

Mr. MARTIN. Let me just add. I don’t disagree with Commissioner Copps on if we had the ability to assess intrastate revenue.

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Indeed, Commissioner Copps and I have both signed a letter to

Congress before suggesting that would be a helpful authority for

the Commission to have when we were both joint board members.

And Commissioner Adelstein, I believe, supports it, as well. So the

ability to assess intrastate revenue would be an additional potential source. We are prohibited now by statute and by law; a Fifth

Circuit decision in 1998 prohibits us from doing that, currently.

Mr. GONZALEZ. All right. Thank you very much. The second part,

and I apologize, since I was at another hearing, I wasn’t aware of

the previous questions. This happens often enough. So I may be repetitive. And for that I do apologize to the witnesses and to the

members of the committee. This question would go to Chairman

Martin and Commissioner Adelstein, and it goes to net neutrality.

I am sure that it has been touched on, and you know it is highly

controversial. As the markets play out, technology moves forward.

Business models change day to day. It is ever evolving.

And I understand that individuals say that keep the democratic

nature, small ‘‘d,’’ of the Internet, the open architecture and such.

But the truth, there are so many forces, dynamic forces out there.

I know everyone out there that may be reading about it and listening to it, they believe that their ability is going to be diminished

in sending an e-mail or doing a search. This issue is really not

about that. This issue is really about the commercial context of the

Internet and what it represents and the way of doing business, and

I mean, this is the most incredible thing that has happened, probably in the history of the United States.

See if you agree with me, because I was talking to somebody and

this is the information that they indicated was accurate, that

downloading a single half hour TV show on the Web consumes

more bandwidth than does receiving 200 e-mails a day for a full

year. Downloading a single high-definition movie consumes more

bandwidth than does the downloading of 35,000 Web pages. And I

guess you know where I am going.

In today’s technology, where we are today, as far as the capacity

and the ever increasing use of bandwidth on video and such, where

are we today as far as still being able to service the commercial

uses, the individual purposes of the Internet, and what needs to be

done in the future, if anything, to ensure that capacity will be

there? And I will go to Chairman Martin.

Mr. MARTIN. Well, certainly when you talk about net neutrality

concerns that people have raised, you are absolutely right. I mean,

the Commission has rules that say that network operators can’t

block consumers’ access to the Web sites and they can’t block consumers’ access to e-mail, so the Commission has principles in place

that we have demonstrated in the past we would enforce. What we

are trying to find is an appropriate balance on how you provide incentives for infrastructure deployment so that the people that are

wanting to hook up consumers to broadband networks are able to

do so in a way that they are still able to recoup some of those costs.

And I think you are raising the concern that consumers are demanding more and more video over their Internet or using more

and more of that underlying capacity, which is why continuing to

find and create a regulatory environment that allows for them to

invest in that infrastructure and then still be able to recoup those

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costs is critical to ensuring that we have a broadband deployment

like I think we need.

Mr. GONZALEZ. Thank you. Commissioner.

Mr. ADELSTEIN. Well, this is certainly a difficult issue. I think

that promoting broadband and freedom on the Internet go hand in

hand. Consumers have great appreciation for the ability to go

wherever they want, to have access to different applications providers and not to have a network operator that may have a dominant

position in the market be able to control their access to the Internet, so they consider that very important.

And we have been very careful in thinking about how network

management issues can be protected while ensuring the consumers’

rights to have the kind of freedom that they have come to enjoy on

the Internet are protected. Consumers, I think, really see this as

a remarkable source of innovation; a world of economic and social

opportunities opened up to them and we want to preserve that

open nature of the Internet that has always been its character. I

think the FCC’s work isn’t done on this.

I know Congress has done a lot of work on this. I think that we

have to continue to monitor the situation. I certainly think that we

need to explore the parameters of various network neutrality ideas.

We came up with one on our own in conjunction with AT&T with

regard to their merger that was something that after that was

adopted, AT&T’s stock hit an all-time high. So certainly, Wall

Street doesn’t see that proposal as in any way being an impediment to broadband deployment.

Mr. GONZALEZ. And thank you very much. All that accomplished

without legislation. I yield back.

Mr. MARKEY. OK, gentleman’s time has expired. The gentlelady

from Wyoming, Mrs. Cubin.

Mrs. CUBIN. Thank you, Mr. Chairman. In the audience today is

our representatives of a company called TCT Communications, out

of Basin, WY, and Basin, WY has a population of about, I don’t

know, around 500 people, I think. At any rate, this is the kind of

district that I am representing, and I think while reverse auctions

seems like a good idea on its face, unless it is properly set up, it

could be extremely harmful to companies like TCT and other small

companies.

And the problem boils down to this, as you know, as a matter

of policy, the current policy that we have would allow, for example,

just example, Verizon to bid zero on a reverse auction because they

could absorb the costs elsewhere, and what would happen, then, in

that case is they would win the auction, and companies like TCT

would have a big investment in the equipment and so on that they

have deployed, and so they would be left out of the USF completely. So I guess what I would like to know is, is there any possibility of eliminating the identical support rule? Is that reasonable

at all? Mr. Chairman.

Mr. MARTIN. Eliminating the identical support rule?

Mrs. CUBIN. Right. Or changing it to protect the companies that

actually have a large investment.

Mr. MARTIN. Oh. I think that whenever you talk about trying to

change our Universal Service distribution going forward, you have

to take into account the companies that have invested in their unVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00081 Fmt 6633 Sfmt 6633 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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derlying infrastructure based on the expectation that they are

going to continue to get Universal Service. So we would have to

find a way, when we make this kind of a change, to phase this in

so that people would be able to take that into account in their underlying capital infrastructure going forward. So I think we do

need to end up doing that.

Mrs. CUBIN. Did you say we need an update on that?

Mr. MARTIN. We need to phase that in. If we make the kind of

change I was talking about, we would need to phase that in over

time to allow and give people enough notice that they would be

able to still recover the costs of the investments they had made in

the past, so I think we would need to end up doing that.

Mrs. CUBIN. OK, obviously you think that would cover the entire

problem. How about you, Commissioner Copps? And by the way, I

think that I actually have 3 more minutes than is on the clock

since I didn’t give an opening statement. Mr. Copps.

Mr. COPPS. I think there is much to recommend in your statement of addressing the identical support rule. It won’t be easy to

do that, but I think that may be the preferable way to go, vis-avis a cap on the CETCs. A word on reverse auctions that you have

raised, because a number of questions have been raised. This has

been referred to the joint board, and there is no unanimity there

on this subject right now, I think it is fair to say. It raises a lot

of questions.

Some may see this as kind of a deregulatory initiative and all,

but it raises a lot of questions with regard to does it encourage

kind of minimal kinds of service rather than really investment?

What happens when the winner of the auction maybe leaves carrier

of last resort responsibilities and so on, and so I think we have to

be aware of that, and I think it implies some kinds of standards

so those who think it is less intrusion from the FCC may discover

that it is more intrusion, in the final analysis, to administer something as complicated as that.

Mrs. CUBIN. Thank you. I understand that the Commission’s recent notice of proposed rulemaking on program access says it does

not cover the issue of shared headends and that this committee, in

the COPE Act last year did pass that, so I wonder if the FCC, if

the Commission thinks that it is appropriate to amend their rule,

to change the order on this, or do you think legislation is necessary

if we wanted to get shared headends passed again?

Mr. MARTIN. The issue you are referring to is what they also call

the terrestrial loophole. In other words, the program access rule

doesn’t apply to content that cable operators distribute only over

the ground, that don’t use satellites to distribute. And currently,

that was the way statutory program access provisions were put in

place and so I agree that it presents some problems and challenges

for not being equitable in the way that that statute was implemented. I think that the Commission has traditionally been concerned that the statute was very specific on how the program access rule should apply, and I think that we didn’t think we had the

authority to extend it on the terrestrial basis to get to the so-called

loophole issues you are talking about. So I think if Congress addressed it like they did last year, obviously the Commission would

implement it. We have actually put conditions on some of the mergVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00082 Fmt 6633 Sfmt 6633 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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ers in the past but have tried to say that the same kind of rules

should apply to address in that manner.

Mr. MARKEY. The gentlelady’s time has expired. In order to claim

8 minutes, a member of the committee has to be here before the

conclusion of opening statements in order to claim the additional

3 minutes, and those are the rules of the committee that were in

order when the Republicans controlled the majority, and we are

just maintaining the same rules.

Mrs. CUBIN. Mr. Chairman, I was 30 seconds late because there

was an enormous backup of traffic on the George Washington Parkway and so therefore—I have a very expensive piece of evidence

that I would like to show, so I would ask unanimous consent for

an additional——

Mr. MARKEY. As the author of the controversial daylight savings

time amendment with Mr. Upton, I can understand there are some

people still making adjustments to the lost hour, and so since the

gentlelady was only 30 seconds late, I ask unanimous consent that

she be granted the 3 minutes.

Mrs. CUBIN. Thank you. And I won’t go over, but I do have a

chart. This is about DMAs. And I just want to point out how ridiculous DMAs in some areas are. The chart is a little confusing from

down there, I am sure, but what I want to point out to you is that

here is one DMA, this whole area. And here we have a Casper Riverton TV station area, but here this comes all the way from Denver. This DMA goes all around here, all the way up to the northern

part of the State, this distance is probably 700 miles, 600 or 700

miles, and we have a station here, we have one here. Then here

is another one. Rapid City is the area that broadcasters shared in

Wyoming, halfway across the State, and these are really vast

areas, and so the point that I want to make is that it makes no

sense the way these DMAs have been divided, and I wonder if the

Commission would comment on this and make any suggestions for

changing.

Mr. MARTIN. Sure, sure. The Commission has in front of it an

order I put in front of it last fall that would say that for situations

like this in which DMAs cross State lines, consumers in those

areas should be able to say that they want their local broadcast

stations covered even if their city is technically in another DMA.

For example, you are talking about Denver up to Casper, so it is

crossing State lines. The order in front of us would say that we

should, under those circumstances, say that the local broadcasters

should be carried by their local cable systems and their satellite

systems even if they were technically in a different DMA and so

I think that this is creating some confusion, and I think that the

Commission has a way to try to address it.

Mrs. CUBIN. But it is only person by person allowing them to——

Mr. MARTIN. Oh, no. We would do it city by city for the DMAs

that are crossing State lines and creating this confusion.

Mrs. CUBIN. Thank you. And thank you, Mr. Chairman.

Mr. MARKEY. The gentlelady’s time has expired. Chair recognizes

the chairman of the full committee, Mr. Dingell.

Mr. DINGELL. Mr. Chairman, thank you for your courtesy. These

questions are to Chairman Martin. Mr. Chairman, these questions

can be answered, I believe, yes or no. First, an agency should base

76

its action on a solid record that is fair and impartial and created

in an open and transparent manner. Do you agree?

Mr. MARTIN. Yes.

Mr. DINGELL. Mr. Chairman, at the meeting on December 20,

2006 the Commission voted to preempt local governments on cable

television franchising. Is that correct?

Mr. MARTIN. Under certain circumstances, yes.

Mr. DINGELL. Well, all right. At that meeting there was a disagreement about the sufficiency of the record of franchising abuses,

an issue on which you and another Commissioner differed. Is that

correct?

Mr. MARTIN. Yes.

Mr. DINGELL. Would you submit to us a copy of the relevant

parts of the record of that discussion, please?

Mr. MARTIN. Sure.

Mr. DINGELL. A month later, on January 26, Verizon stated, in

a letter to your office, that you requested that they submit an additional filing into the official record after the Commission voted on

the order. Is that true?

Mr. MARTIN. No, we actually asked for clarification after the city

of Tampa had written us a letter.

Mr. DINGELL. Was that done in writing, or was that done orally,

or was that done at the time the record was completed?

Mr. MARTIN. The city of Tampa wrote us after the hearing and

after the open meeting.

Mr. DINGELL. Was that in writing?

Mr. MARTIN. It was in writing.

Mr. DINGELL. Would you submit that to the committee, please?

Mr. MARTIN. Of course.

Mr. DINGELL. I have here a copy of the letter to the Commission

in response from Verizon, which I ask, Mr. Chairman, be inserted

into the record.

Mr. MARKEY. Without objection, it will be inserted.

Mr. DINGELL. Now, this document, then, was placed in the record

after the Commission had voted and adopted the item. That submission concerned the very matter on which you disagreed with another member of the Commission. Is that correct?

Mr. MARTIN. It was actually one of the issues we had disagreed

with one of the other members of the Commission.

Mr. DINGELL. Now, do you believe that asking outside parties to

submit new facts after a vote is an appropriate way to assume and

to assure a fair and impartial record upon which an agency vote

is based?

Mr. MARTIN. I think it was in this circumstance, because the city

of Tampa had first written us and had said something we relied

upon was inaccurate after the record had closed, so we asked, since

they had made an assertion after the record was closed that something was inaccurate, we asked for the other parties that were also

involved to submit theirs.

Mr. DINGELL. Was any other party to that proceeding afforded

the same right to make additional submissions?

Mr. MARTIN. The other parties that were involved in the city of

Tampa allegations were given that right then.

77

Mr. DINGELL. They were. Were they notified they were given that

right?

Mr. MARTIN. Yes. The city of Tampa and Verizon——

Mr. DINGELL. Was that done in writing, or was that done orally?

Mr. MARTIN. We called them and asked them for clarification in

light of the city of——

Mr. DINGELL. Would you submit the telephone log on that matter, please?

Mr. MARTIN. We will try to find the telephone log book.

Mr. DINGELL. Just a question. When you afford one party a right

and you notify the other, isn’t this a matter which should be done

formally and on the record and not just orally?

Mr. MARTIN. That is why we actually asked for Verizon to respond in writing and put that in the record.

Mr. DINGELL. But you didn’t ask in writing for the other participants to the proceeding to submit additional information on this

particular point, did you?

Mr. MARTIN. There were only two parties to it, the city of Tampa

and Verizon, and we wanted to make sure both had an opportunity.

Mr. DINGELL. But you never submitted that request to others in

writing to respond on the record to these points, did you?

Mr. MARTIN. No, I didn’t ask them in writing. I asked them orally.

Mr. DINGELL. OK. Now, I have a curiosity here. We have talked

about this business of preemption. The order that came out of the

proceeding that was recently held, the Commission says that the

order was based on removing unreasonable barriers to entry. Is

that language used anywhere in section 621?

Mr. MARTIN. Section 621 says that local franchising authorities

cannot unreasonably refuse to grant a second franchise.

Mr. DINGELL. Does it say unreasonable barriers anywhere?

Mr. MARTIN. No, it says unreasonably refuse.

Mr. DINGELL. All right. Now, the barrier justifies preempting

local law, but it does not make such requirements against State

law. Is that correct?

Mr. MARTIN. That is correct.

Mr. DINGELL. Now, I find this curious. The local units of governments are creations of the State, and as such, when they do such

orders within State law, their orders are respected under State

law, is that not so?

Mr. MARTIN. Yes. Obviously, if the State——

Mr. DINGELL. OK.

Mr. MARTIN. That would preempt what the local municipalities

have done.

Mr. DINGELL. So here, through some rather quaint process, you

appear to have said we will not preempt State action, but we will

preempt the action of a State subdivision. Is that correct?

Mr. MARTIN. We said that to the extent that the local communities were acting under the authority of the Telecommunications

Act, then we said that these were parameters around what would

be an unreasonable refusal to grant, to franchise. The States that

had acted separately, we said we didn’t have enough of a record to

determine whether or not those would violate the statute.

78

Mr. DINGELL. Let us look at this. The local community may act

under two authorities. One is the authority of the Federal Communications Act. The other is the authority that they are given and

have been given long ago by the States to supervise affairs within

their city boundaries, is that not so?

Mr. MARTIN. That is right.

Mr. DINGELL. So you have then preempted their action under the

Federal Communications Act. What have you done with regard to

local law? Have you also preempted that?

Mr. MARTIN. The State laws we did not preempt, so to the extent

that there were State laws that they were acting under, no, we did

not.

Mr. DINGELL. If a city acts under State law, are you preempting

the action of the city if they are acting under general authority

given them by the State?

Mr. MARTIN. No, the Telecommunications Act said that they

could not unreasonably refuse to grant a franchise and we said

that these would be the parameters of that. If they are acting

under separate authority, then no, that wasn’t involved.

Mr. DINGELL. I want this to be very, very clear on the record that

we will be submitting to you an inquiry on this particular matter

in writing because I want the record to be very clear on that. Now,

Mr. Chairman, I would like to submit a letter of inquiry in addition

to the matters before the committee and I notice that several members of the committee have made similar requests to me. I would

ask unanimous consent that the record remain open so that those

may be inserted in the record.

Mr. MARKEY. Without objection, so ordered.

Mr. DINGELL. And Chairman Martin, I assume that you will respond to the questions.

Mr. MARTIN. Of course.

Mr. DINGELL. Thank you. Now, yes or no. Will you complete the

2004 and 2005 VOIP and Broadband Consumer Protection proceedings by no later than 6 months from this time?

Mr. MARTIN. We will try to. I think I said that I thought we

could try to do it by the end of the year, but we will try to do it

in the next 6 months, of course.

Mr. DINGELL. Now, there is a very interesting matter that has

come to my attention. The FCC, in January 2005, began an investigation into potential violations of sponsorship identification rules

involving a certain commentator by the name of Armstrong Williams. He had a contract with the Department of Education that

stated that Mr. Williams would regularly comment on certain matters during television broadcasts in response to generous payments

by the Department of monies. Have you completed an investigation

on this matter?

Mr. MARTIN. We began an investigation of the 12 broadcasters

who are identified as ever having provided Armstrong Williams——

Mr. DINGELL. Have you completed an investigation?

Mr. MARTIN. We completed the investigation in relation to seven

of them who came back and said they did not put on any of the

Armstrong Williams shows in question. And there are three that

we have ongoing investigations and we sent further follow-up letters to——

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Mr. DINGELL. So you have an ongoing investigation going on at

the agency?

Mr. MARTIN. Yes.

Mr. DINGELL. I was on this committee years ago when we went

into the question of payola. Have you studied the history of that?

Mr. MARTIN. I would try, but not enough——

Mr. DINGELL. There was an interesting thing. It resulted in departure from public service by a large number of people, including

folks at the Commission. And if my memory serves me correctly,

it also resulted in some goodhearted folks going to jail. This sort

of reminds me of this. Is there other information you need on these

matters?

Mr. MARTIN. From at least one broadcaster, as I understand, we

did not get complete information on the most recent letter we just

received from them last week. So there is some more information,

but I will have to get back to you on the exact status of what information we need from the three——

Mr. DINGELL. Now, I do not want to help you with the substantive——

Mr. BARTON. Mr. Chairman, can I gently point out that the full

committee chairman’s time has expired?

Mr. DINGELL. I was looking. It says I got 1 minute 53 seconds

left.

Mr. BARTON. You are reading it wrong.

Mr. DINGELL. Well, Mr. Chairman, I know my colleague, the

ranking member, my dear friend, Chairman Barton, would like to

hear what I do, so I ask unanimous consent to proceed for 2 additional minutes?

Mr. MARKEY. No objection is heard. The Chair is recognized for

2 additional minutes.

Mr. DINGELL. Would you, Mr. Chairman, give us a full report in

writing as to the status of the investigation of the Federal Communications Commission on this matter? And I would like, in that

matter, to have you inform us what further information you need,

what your judgments might be with regard to Mr. Armstrong Williams’ settlement with the Department of Education and how close

the FCC is to concluding four major payola investigations in the

music industry. It seems like not just the musical industry, but

very frankly, the Government, engaged in a little payola. And we

would also like to have a statement as to whether you have adequate resources to address this, and again, we would like this report in the next 30 days, if you please.

Mr. MARTIN. Sure. Provided for both on the Armstrong Williams

investigation and the status of them.

Mr. DINGELL. Thank you, Mr. Chairman, and I hope this was informative to my dear friend from Texas for whom I have the most

enormous affection.

Mr. BARTON. I am totally enthralled.

Mr. MARKEY. We have a 15-minute vote on the floor followed by

two additional 5-minute votes. We have 5 minutes left to go to actually make those votes. I will leave it up to the gentleman from

Texas.

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Mr. BARTON. I would like to take my 5 minutes and then rush

to the floor and hope that the new majority will keep the vote open

for 3 additional minutes on the floor.

Mr. MARKEY. The gentleman is recognized for as long as he has

to take.

Mr. BARTON. Just 5 minutes, Mr. Chairman, because I was not

here at the opening gavel. First of all, I got to tell you, I am

bummed out that you are being so fair. I am being totally treated

fairly, and I guess I am used to being treated unfairly, i.e. given

exceptional treatment, so I have to commend you on being so fair

in the way you are treating the minority.

My first question is to the chairman of the FCC. I have had a

number of cable operators in to see me in the last couple of months,

and they are of the opinion, Chairman Martin, that you are picking

on them, that you are treating them unfairly and that the Commission is treating them unfairly on a whole series of issues, the most

recent of which is this issue of the national video franchising rule

which I am supportive of with the exception of the fact that the incumbent cable operators weren’t allowed to have those same new

rules. What is your answer to the concern that they have told me

about that they are being picked on?

Mr. MARTIN. Well, I don’t think we are picking on them, but I

have to admit, I have to confess, I think most of the industries we

regulate complain at one time or another that I am picking on

them whenever we don’t end up agreeing. As far as trying to end

up implementing, giving them the same relief on national franchises, we actually committed, the Commission committed that we

would address their issues within the next 6 months, and we

hadn’t actually sought notice on applying the changes that we were

talking about making to section 621 to them originally, and I didn’t

think we had the legal notice to actually apply the rules to them,

so we immediately sought that notice, and we will make a determination. We tentatively concluded that we will extend it to them,

and we will within the next 6 months.

Mr. BARTON. Commissioner McDowell, had you not recused yourself, is it a fair statement to say that you would not have voted to

impose some of the restrictions on the AT&T-Southwestern Bell

merger that were imposed?

Mr. MCDOWELL. Congressman, because I did not look at the

record, I have not even read the order or the statements, I don’t

know because I have not examined the record.

Mr. BARTON. All right, then I will ask Commissioner Copps and

Commissioner Adelstein, the House voted against network neutrality provisions similar to the provisions that you two gentlemen required for the merger by an overwhelming vote. Do you think it is

fair to impose those restrictions when the House had gone on

record on opposite views to what you two gentlemen supported in

the AT&T merger?

Mr. COPPS. I believe that the condition that was agreed to is a

merger specific agreement with a company that controls 22 percent

of the United States broadband facilities, has 12 million DSL customers in 22 States. This merger would accord significant new powers over the distribution of broadband, and I thought it was reasonable to be talking with them about getting assurances that the netVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00088 Fmt 6633 Sfmt 6633 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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works would be kept open. I think we came up with a very flexible

and a very basic network neutrality outcome.

Mr. BARTON. Even though the House had expressed a dissimilar

position?

Mr. COPPS. I repeat what I said. I think this was a merger that

was—and a condition that was merger specific. I think we are constrained to look or charged to look at these things that range rather widely. When we are considering a merger, we are supposed to

be concerned about the possibility of future harms, and if a merger

does not meet the public interest balance test, we can consider

ameliorative steps to deal with it, and I think that comes under our

public interest authority and section 303 authority——

Mr. BARTON. Mr. Adelstein, I am about to run out of time and

have to rush to the floor. What is your view on that?

Mr. ADELSTEIN. I think it is very important that we always defer

to Congress. I looked very carefully at what the Congress did. Of

course, what we ended up applying in the AT&T merger was not

identical to what the Congress or the U.S. House voted on. At the

same time, I do believe that it is important that we follow the law,

and in this case, the law requires us, in the case of merger review,

to apply a public interest standard. Here we were, creating the Nation’s largest wireline, broadband and wireless provider all in one

massive new package, and the question was whether or not the

public interest was served by ensuring that those large networks

remained open, and I thought ultimately they did. We were able

to work it out in conjunction with the parties in such a way that

they felt that they were able to conduct their business appropriately while adhering to that condition. Thank you.

Mr. BARTON. My last question, very quickly, Chairman Martin.

I support your reverse auction provision on the Universal Service

Fund reform, but I question the need for a Universal Service Fund

in today’s high tech society. Why do we need a Universal Service

Fund when more people have cell phones than have hard line

phones and there is no USF requirement at all for cell phones?

Mr. MARTIN. I think there are certainly some rural areas where

the cost is extremely expensive to deploy infrastructure. I think one

of the benefits of reverse auction is that it would allow us to lessen

our reliance on Universal Service over time, and that would give

us a sense of where we really need it and where we don’t.

Mr. BARTON. Thank you, Mr. Chairman.

Mr. MARKEY. The hearing will be in recess for approximately 25

minutes.

[Recess.]

Mr. MARKEY. Thank you all very much. The subcommittee will

reassemble, and the Chair will recognize the former Speaker, Dennis Hastert, to question the witnesses.

Mr. HASTERT. Thank you, Mr. Chairman. Yes, I wasn’t 30 seconds late, but I ask to put my statement in the record, if that is

possible.

Mr. MARKEY. Without objection.

Mr. HASTERT. Thank you very much. In reply to Mr. Stupak’s

comment a little while ago about a closed door meeting with the

Republicans, I just have to say some Republicans weren’t invited

to that closed door meeting, so I don’t know who all was in that,

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but anyway, I would like to talk to Mr. Martin. Chairman Markey

talked about this issue, intelligence agencies going into telecom

companies and getting information.

I need to talk very carefully, and I want to say what I am saying

is only what has been said in the open record, otherwise reprinted

in newspapers, because I can’t say everything, obviously, that I

know. But when that decision was made to do that, eight members

of the Congress, including the Senate and the House, Democrats

and Republicans, were read into that program, and there was a

question at the end, do you think we need legislative action to

move forward with this, and it was unanimous, at that time, in

that room, no, we don’t.

There was legal ability to do that. So it is not like this thing just

happened or somebody in the dark of the night with a bag over

their shoulder went in there and started doing this. I have to tell

you that this intelligence was probably one in every 15 billion

phone calls. It targeted certain individuals overseas that were calling into this country and then the calls that were related to that,

so I just want to say there should be a cautionary note on how you

look at this and what the basis of it was. I hope you would take

that under consideration. You don’t really have to comment on

that.

I would like to ask Commissioner Tate a couple things. I wrote

the telecom act in Illinois in 1984, before we had PCs, cell phones,

and all these things and one of the big issues was Universal Service, trying to keep Aunt Sally on the end of the line, so she could

get her grocery calls and call her sisters, so Universal Service is

an important thing.

When telephones kind of unbundled and competition came in,

one of the main issues of that was to get away from the cross-subsidies because, for instance, AT&T, in my area, not only put in

your telephone, they serviced it, they had long distance, they had

local telephones, and there was a great cross-subsidy from some of

those services that paid for other services, so back in the 1980s and

I remember, most of you don’t remember the 1980s, that was an

issue.

So we constantly have kept a cross-subsidy issue in there. Do you

agree that you should do away with cross-subsidies, that they

should be taken out of the system and entities ought to stand on

their own?

Ms. TATE. If I could be so bold as to say that we are going

through this process right now with the joint board, and we are

trying to kind of look at both short-term and longer term solutions,

and I think that we should look at implicit type of subsidies and

that there are just so many issues that we need to look at, and

what I am trying to say is I am hoping to build a consensus across

the joint board for us to make some recommendations to the full

Commission.

Mr. HASTERT. Well, to make my point, and I only have a little

bit of time, the basic issue of Universal Service, as we have it in

the telephone act today, basically is a cross-subsidy. My district is

an interesting district. I have the suburbs of Chicago and some of

the—so there is really a lot of country. Actually, my suburban folks

are paying for the subsidy to keep people connected out in the

83

country, and today, with the diversity of ways of getting information across wires and across the air, I am not sure there is a real

issue out there and I think who is paying for what and what is fair

and what is not fair, and we ought to take a look at that.

And finally, very quickly, Mr. Martin, can you respond whether

you think that the decisions to what Commissioner Adelstein refers

to as harmed or helped the competition when he talked about the

AT&T-BellSouth merger. I really should ask Mr. Adelstein first,

but I don’t have the time. Are those helpful or those issues help

create competition, or does it undercut competition?

Mr. MARTIN. I think I was certainly concerned with some of the

conditions and whether they were really going to facilitate competition. I know I expressed my concern with some of the net neutrality requirements that were put forth and that they might actually

undermine some of the incentives to invest in the underlying network infrastructure, so I am not sure that they actually helped, in

that sense.

Mr. HASTERT. OK. Sorry, Mr. Adelstein, I have run out of time.

I would like to have your report, too, but maybe I can get it some

other way. Thank you, Mr. Chairman. I yield back.

Mr. MARKEY. Thank you. I thank the Speaker. The gentleman

from New York, Mr. Engel.

Mr. ENGEL. Thank you, Mr. Chairman. I have a bunch of questions. I am going to try to go fast, and some of them have been

touched on by other people, but in my opening statement I talked

about DTV, and I had a bill before the last Congress addressing

DTV consumer education, and in my opening statement I mentioned that in 2008, only $1.5 million was allocated for outreach,

and I think that that is not significant, so I would like to ask the

chairman, are you prepared to do what it takes to lead and coordinate a real robust consumer education campaign, and what do you

intend to do besides the Web site? Are you going to implement programs like advertisements on buses and subways and things that

are very visible so the American public knows what is really happening with DTV?

Mr. MARTIN. Well, I am certainly prepared to try to work with

all the industries to make sure that they also are helping us put

forth a vibrant consumer education campaign, and I met with some

of the broadcasters and their proposals they put forth just in the

last few weeks to try to educate consumers about it. The Commission has actually asked for money in the past, in our budgetary request and this year, as well. Last year we asked for some money,

not even $1.5 million, for DTV education, and we actually didn’t receive any funds for it.

This year we do have a request in there and we will use that to

get the information as widespread as we can if we do get those resources. But I would also point out that it is not just the FCC that

is a part of the Federal Government that is trying to educate consumers. And one of the reasons we didn’t get money last year is

NTIA has the primary responsibility for educating consumers about

the DTV transition, and they actually have additional resources. So

we have tried to work with them in making sure that we were coordinating with them and are doing everything we can to support

them in their educational efforts.

84

Mr. ENGEL. Well, let me ask you, let me change and ask you

about broadband penetration that Chairman Dingell sort of

touched on some of this, but this committee is obviously committed

to the acceleration of broadband deployment. The Commission recently ruled on streamlining the franchising process, and will this

ruling accelerate the deployment of broadband? And let me throw

in another one, Mr. Martin. In your recent testimony before the

Senate Commerce Committee, you spoke of your interest in having

the FCC assure that competitors have access to provide video service to apartments and condominiums and would give obviously a

choice and probably lower prices to my constituents, who live in

these multiple dwelling units. So I want to ask you about that,

what authority does the Commission have to prevent future exclusive access agreements and enforcement of such existing agreements?

Mr. MARTIN. I think our efforts to make sure that competitors

are able to deploy infrastructure to provide video is an important

component of broadband penetration rights, as well. The ability to

deploy infrastructure and provide services over those, including

video services, is critical to making sure that they have the opportunity and the incentive to invest in the underlying infrastructure

and recoup those investments. And there are several economic

studies that were provided to the Commission in the record that

said that actually one of the most important things you could do

to help facilitate broadband investment is also making sure that

that investment can be utilized to provide video services.

I think that that is not only in trying to streamline our franchise

reform process that we did, but also as you mentioned, the MDU

issue. It has got to be that consumers that live in apartment buildings have the same opportunity to have a choice of video providers

as people who don’t live in apartment buildings, and so I think we

do have to make sure that those consumers aren’t locked, so to

speak, and have exclusive contracts that they are not able to end

up having the same kind of opportunities, so I actually think the

Commission needs to take action on that front, as well.

Mr. ENGEL. Thank you. Let me ask Mr. Adelstein a question. I

mentioned, in my opening statement and I think the chairman also

touched on it, our new governor, who was then attorney general,

Eliot Spitzer, investigated alleged pay for play practices between

major record labels and radio stations, and there were multi-million dollar settlements with several labels and two broadcasters,

and last week, according to numerous press reports, the FCC

reached a $12.5 million settlement with these groups. It included

some FCC oversight and a separate airtime arrangement for local

independent music, so I would like to ask you if you can comment

on that, and has the Commission identified other broadcasters

based on the Spitzer documents who might have engaged in similar

practices, and does the Commission intend to investigate these, as

well?

Mr. ADELSTEIN. Well, we are on the verge of an historic settlement on this issue. I would like to commend the leadership of our

chairman, Chairman Martin, for working with us to really come up

with a package that I think will hopefully take care of the payola

issue for some time to come. It is historic in nature; it is comVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00092 Fmt 6633 Sfmt 6633 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
85

prehensive. It does only deal, however, as you noted, with four of

the largest radio groups that were implicated. There are a number

of other broadcasters who also, there is allegations in the Spitzer

documents, have engaged in practices that may violate Commission

rules, and I am hopeful, I have talked to the chairman, that we are

going to investigate all of those, as well.

Mr. MARTIN. We will. The settlement that we have reached deals

with the four largest. There are several others, as you indicated,

at least, and we will deal with all of the broadcasters in a similar

manner.

Mr. ENGEL. Thank you. And finally, one quick thing. We had testimony last week about the merger between XM and Sirius. I wonder if anyone would care to comment on that. The proponents of

the merger say that satellite radio was just one part of entertainment, not in its own entity, and I am wondering if anyone feels

they can comment. I know it has got to come before you, but I

would be interested in hearing anyone’s thoughts. I think that is

a reasonable statement, by the way.

Mr. MARTIN. The applications haven’t even been filed with the

Commission yet, and I know we all review the record and review

the applications when we get them.

Mr. ENGEL. OK. Thank you. Thank you.

Mr. DOYLE [presiding]. The gentleman’s time has expired. The

gentleman from California, Mr. Radanovich.

Mr. RADANOVICH. Thank you, Mr. Chairman. I was going to state

how bad the traffic was on the GW Parkway this morning, and it

was really, really bad. This always works for Cubin, so——

Mr. DOYLE. I ought to give you 30 more for that.

Mr. RADANOVICH. I have three questions. Just wanted to make

sure that—and it should not need extra time, but would like to

make sure that these get answered. And welcome to the committee.

I really appreciate the fact that you are here. Chairman Martin,

wireless telephony is an interstate device. It has flourished in a deregulatory environment and become a great example of a competitive market. It now appears that having to comply with many different sets of local and State regulations, although well-intentioned, is hindering the wireless service. I am wondering if you

could comment on that, and should the FCC set certain Federal

standards regarding wireless services to address this problem?

Mr. MARTIN. The Telecommunications Act tries to create a careful balance in which many of the wireless issues are done at the

Federal level. States do have certain general consumer protection

laws that still apply on the wireless side. There are petitions in

front of us saying that some of the State laws that you have referenced have gone too far and gone beyond just general consumer

protection laws and go towards the specific regulation of wireless

prices, which would be something that would be in front of the

FCC, not in front of State commissions.

And so we have pending petitions on it that the Commission

hasn’t acted on, and I think it is something that we have all struggled with. The only other insight I might have is that to the extent

that the Commission did preempt some of the State actions, we

would then be taking on the burden of establishing what would be

86

an appropriate regulatory framework from a consumer protection

standpoint on the wireless side.

So I think that to the extent that we did act, that means that

we would be saying what would be appropriate or inappropriate in

terms of like early termination fees, which is one of the issues that

is in front of us. And I think that that is something that we should

make sure we are thinking through cautiously deciding because I

think once you take on that responsibility, then it is a responsibility that we also craft what is an appropriate regulatory framework,

as well.

Mr. RADANOVICH. Assuming that we both want a deregulated

framework if it is the best for service for the consumer, there are

a couple ways we could achieve that, I am sure, through the FCC

or through bills passed by the Congress. In your view, do you think

that is going to be necessary? Do you think the FCC can make it

happen on their own?

Mr. MARTIN. I am not sure. Obviously, if Congress ends up acting

to address this issue, that means that there isn’t an issue in front

of the Commission to decide anymore in this controversial issue,

and I think whenever Congress can try to help clarify, provide

guidance and clarify for us is helpful, so I always think that is a

helpful thing on the contentious issues.

In the absence of congressional action, the Commission will try

to determine is the current petition something that we should be

addressing; is itwithin our jurisdiction or is it within the States?

And I think it is something that is timely for us to go in and address. I had a joint meeting, actually, with the consumer interest

groups, AARP, the Consumers Union, and the wireless industry

just in the last few weeks, saying that if we are not able to come

up with a joint resolution, it is probably time for the Commission

just to decide this one way or another.

Mr. RADANOVICH. All right, thank you. My next question is for

Commissioner McDowell. Welcome to the committee. Yesterday the

NTIA issued rules for the converter box program, which was designed to help consumers who may want to continue using analog

television with rabbit ears after the transition. At the same time,

the Media Bureau recently denied waivers for some cable companies to seek to offer low-cost set-top boxes, which some might use

with analog televisions after the transition. Does it make sense to

help reduce costs for the small number of over-the-air consumers

and then raise them for the much larger number of those using

cable service?

Mr. MCDOWELL. Well, of course, those two types of set-top boxes

are for different functions and different policy goals. The Commission, at the bureau level, has acted on some waiver requests to the

separation ban, which, of course, Congress set up in 1996. The

Commission, of course, a few years ago, invited companies to go

ahead and file waiver requests, and many have done so, and we

are, as a commission at the bureau level, are working on a number

of those, and some have been denied at this point. I think where

we all want to go, whether it is the cable industry or the consumer

electronics industry or those of us at the Commission, would like

to see downloadable security as the standard in the future, so

whatever we can do to get there more quickly, the better.

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Mr. RADANOVICH. So the Commission is open to making sure that

the end result is the consumer gets that at the cheapest price possible, those that are being provided through the cable operators do

afford that same type of attention, I would think, as well, right?

Mr. MCDOWELL. Correct. And there is a balancing here. There is

low end set-top box waiver requests, as well. Those issues have not

come up to what we call the eighth floor of the Commission level,

at this point, but we will look at that more if it does.

Mr. RADANOVICH. OK, thank you. Mr. Chairman, may I ask

unanimous consent for just one more question? It should only be

a minute or two. OK, thank you, sir. Chairman Martin, can you

please tell us what evidence the FCC has other than the Madison

River issue of broadband operators blocking or degrading content

on their networks, and given the lack of evidence, which I think

you might find—I am giving you the whole question here—it seems

that preemptive rules in this area are premature and could stifle

innovation. What harm do you think would occur if Congress overreaches in this area of net neutrality?

Mr. MARTIN. Well, I certainly agree that we don’t have any current evidence of there being any blocking capabilities and that

rules and restrictions in the absence of evidence of particular harm

could have an adverse impact on the ability and incentive for network operators to deploy additional infrastructure.

Mr. RADANOVICH. Perfect. Thank you. Thank you, Mr. Chairman.

Mr. DOYLE. The gentlelady from California, Mrs. Capps.

Mrs. CAPPS. Thank you, Mr. Chairman. Thank you, again, to the

Commissioners, each of you, for coming. We waited a long time, I

guess, and now we are really putting you through an ordeal of a

long, long session, but it is an important one. As you know, Chairman Martin, the U.S. has been falling down in the world rankings

in terms of broadband deployment.

This has been mentioned several times already today, that according to the International Telecommunications Union, we are

now down to 21st in the world in terms of digital opportunity,

whereas in 2001, we were in the top five. That is very remarkable.

The part of this I wanted to ask is the fact that the FCC doesn’t

even have a good measure for which areas of the country have

broadband. The Commission is still using a measure based on

broadband availability to one customer in a ZIP code. It is deceptive on the face of it, because as you know, ZIP codes can be quite

large geographic areas covering almost States, entire States, some

of them.

And the fact that one household has cable broadband, say, on one

edge of the ZIP code doesn’t give everyone else who lives there the

ability to get broadband. The GAO has sharply criticized this methodology in a 2006 study. My question to you is why hasn’t the FCC

done more to make sure it knows which areas need service? Does

the fact that there is one broadband subscriber within an entire

ZIP code mean that that ZIP code is being served? Mr. Martin.

Mr. MARTIN. No, it doesn’t mean that the fact that one subscriber

in an entire ZIP code being served doesn’t mean that they are all

being served, and actually, I agree with many of the concerns and

have, when I was a Commissioner, spoken out about the concerns

I have with the way we collect data on ZIP codes and the fact that

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the speed of only 200 kilobits counting as broadband is insufficient

with the technology changes. The Commission actually has, and

they just adopted an order I circulated last fall, in September, that

would do a notice of proposed rulemaking to ask how we change

both of those issues. They were issues that I remember being debated when I was a staffer working for Commissioner FurchtgottRoth when those standards were adopted in 1998 as being insufficient. That was one of the things he advocated at the time, and it

was something that I think we should be changing, so it is something that Commissioner Copps and I have actually——

Mrs. CAPPS. I appreciate your concern. Why has it taken this

long?

Mr. MARTIN. I can’t describe exactly why I think it took the other

Commissioners a little while to review the item. It took us a while

to come up with the proposal once I became chairman, but I think

this is something that we need to change.

Mrs. CAPPS. And just last September you even then began to

question? How long had you been chairman, Mr. Martin?

Mr. MARTIN. I was chairman for a little over a year when I put

that item forth, and when I came on board, I addressed some of

the other issues that I thought were of the utmost importance: public safety, 911 on VOIP. We have several mergers that we were

doing, and then in the spring of last year, I asked the Bureau to

begin examining how we could reform our collection of data, and

it is something that I think that actually I have had an ongoing

dialog with the other Commissioners about that I think we all

agree needs to be reformed.

Mrs. CAPPS. This is our watch. Well, let me follow up with another question. The FCC’s measures are also inadequate in other

ways, as you probably are aware. The fact that a few households

have broadband access in a ZIP code doesn’t mean that they even

have access to the two most common pipes of DSL and cable. And

your definition of broadband, just 200 kilobits a second downstream, doesn’t make sense in a world where consumers in other

countries have access to speeds that are 50 or even 100 times faster. So here is my follow-up question. Do you believe 200 kilobits a

second is an effective measure of broadband?

Mr. MARTIN. No. And actually, the first thing I did when I was

chairman, in our first year, we actually, for the first data collection,

for the first time collected data on more than just 200 kilobits in

five different tiers of speeds. That was the first thing that we did,

and it was that collection of data that enabled us to put forth, in

our Notice of Proposed Rulemaking, the fact that that was insufficient.

Mrs. CAPPS. OK.

Mr. MARTIN. So we did make changes the first year, and we are

going to continue to make those changes.

Mrs. CAPPS. All right. I appreciate that. Let me give another side

an opportunity to respond. Commissioner Copps, would you comment on the FCC’s definition of broadband and statistics on deployment, and do you believe the FCC should keep statistics on

broadband prices and penetration by socio-economic group?

Mr. COPPS. Just to put it in context of what we are actually talking about, if you were going to download a 90-minute movie from

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a studio and you were proceeding 171⁄2 hours to download that. If

you were one of the lucky customers in Japan where you have up

to 50 megabits, you could download that movie in 4 minutes. Just

think about the difference there and what we are talking about.

Mrs. CAPPS. What do you think is taking so long? This is such

an embarrassment.

Mr. COPPS. I don’t know. We are 10 years, we are 10 years way

too late. Just the differences in bandwidth. Even if we could measure the bandwidth we have right now, what are we going to do to

get the strategy to get real bandwidth out there, so that we can be

competitive?

Mrs. CAPPS. Let me ask you and/or Mr. Adelstein to follow up

with something Mr. Stupak got into that is so important, about

consumer protections like slamming and disclosure of consumer information that were lost for broadband providers after the FCC

ruled it was governed by title I. Could you comment on this, if you

feel like the topic has not been exhausted and the status of rulemaking on broadband consumer protection?

Mr. ADELSTEIN. When we issued the order that took broadband

out of title II and all the protections for disabilities and consumers

that involves and went to title I, we launched a Notice of Proposed

Rulemaking, but we still haven’t acted on a number of provisions.

Very important questions are still out there and I think it is urgent

that we act, and I appreciate the fact that the chairman said he

was going to try to get that done within 6 months, I believe. I think

it is incredibly urgent. I think it should have been done already,

but I think we recognize the urgency of moving forward and making sure there are consumer protections that go forward into this

title I world.

Mrs. CAPPS. Any other comments from you, Mr. Copps, on that

issue, or do you think that is saying it sufficiently?

Mr. COPPS. Yes, ma’am.

Mrs. CAPPS. I have brought up fairly large topics. I have a little

bit more than a minute. If any of the rest of you Commissioners

I didn’t get to would like to speak to the ways that we could get

better statistics on deployment of broadband, I would appreciate

any comment.

Mr. ADELSTEIN. I spoke with the chairman’s office about just

this, and I think we all benefit, and we all agree that we need more

ways to slice and dice and gather that data and get more detail,

so I think that will be to everyone’s benefit and I think you probably have agreement that the more data we have in front of us, the

better.

Mrs. CAPPS. I will yield back, Mr. Chairman, and with the comment that this, to me, underscores the fact that we ought to be

meeting with these Commissioners much more often than we have.

Mr. DOYLE. I thank the gentlelady. Mr. Stearns.

Mr. STEARNS. Thank you, Mr. Chairman. Chairman Martin, I

had the opportunity to write a letter to you on June 30, 2006. We

urged the Commission and many of us had signed this letter and

the letter urged the Commission to immediately commence its review and revision of the local radio ownership rules so that free,

over-the-air local broadcast radio remained an important part of

the new world of audio communications, and I guess my question

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is just dealing with broadcast media ownership. I guess the industry is still operating under broadcast ownership restrictions that

the courts have found invalid. Can the FCC justify any broadcast

ownership restrictions? If so, when will we see them? I give you

lots of latitude on this question, too.

Mr. MARTIN. The Commission did commence a review of the ownership rules last summer. We have committed to doing several public hearings around the country, and it is about 10 different studies

on the various aspects of media ownership, and I am hopeful that

we will be able to send back up to the Third Circuit, who overturned our other set of rules, you know, revisions to our media

ownership rules. The industry is still operating under the rules

prior to that decision, and those were rules that were put into effect previously and in the case of radio, for example, had been

upheld. Those were not ones that had been overturned, and it was

only the changes that got overturned, so the rules they were operating under were ones that were legal at the time.

Mr. STEARNS. OK. The second question is the FCC has classified

broadband services over wire, cable and powerlines to be information services. I guess in the interest of parity, when will the Commission apply these same rules to wireless Internet access services?

Mr. MARTIN. There is an item pending before the Commission to

do that. It has been for several months, and I notified the other

Commissioners if we didn’t end up adopting it before, we might do

that at the next open meeting, which is next week.

Mr. STEARNS. Now, if anybody, other Commissioners would like

to comment further on these questions, feel free to. Otherwise, I

will just direct them to Mr. Martin and if anybody else would like

to say anything dealing with that.

Mr. DOYLE. The Chair would note that we have three votes coming up. We are going to finish Mr. Stearns and Ms. Solis and Mr.

Inslee, if possible, and then we will wrap up.

Mr. STEARNS. The third question, I guess again, for Chairman

Martin is, in September 2005 the FCC classified DSL as an information service. Between June 2005 and June 2006 there was a 38

percent increase in DSL and fiber lines in the United States and

a 58 percent increase in terms of overall U.S. broadband numbers.

Where would we be if the FCC had not deregulated DSL?

Mr. MARTIN. Obviously, I don’t know for sure where we would be,

but I would say that I think that our provision of making sure that

DSL was treated in the same regulatory manner as cable modem

services and in a less regulatory manner, the information services,

was critical to allowing and encouraging further DSL deployment

and further DSL penetration. Prior to our implementation of that

rule, cable subscribers to broadband, the cable companies were

signing up customers 2 to 1 to DSL services and after we put those

two services on equal footing, they have actually been subscribing

1 to 1.

So it has been more equal competition between cable and telephone companies in their deployment of broadband services since

we deregulated telephone companies, put them on the same level

playing field as cable companies, and I think that has been critical

to fostering a competitive environment in which they have both

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been able to rollout additional services and increase their penetration rates.

Mr. STEARNS. Yes. And for that, I think Congress compliments

you, and I guess maybe a larger question, what could we do in the

future to get even more competition for broadband deployment? Is

there something like this that you think should be done and you

might just give us some insight?

Mr. MARTIN. I mean, I think that the next, the other thing that

is critical that I see on the immediate horizon, is making sure we

are putting the same kind of regulatory environment in place for

wireless services, which could be an additional platform. That is

why it is critical that we go on and clarify, prior to the auction,

that wireless broadband services are also subject to a less regulated set of rules, the information services rules, not telecommunications rules, and then we make sure we auction spectrum in such

a manner that guarantees that consumers are going to receive the

benefits of wireless broadband build-out.

The spectrum that we are going to be auctioning later this year

is some spectrum the technical characteristics of which make it

very unique in the capability of providing broadband services. So

we want to make sure we are doing everything we can, from a regulatory standpoint, to make sure it can be an additional broadband

competitive platform, and I think that is the most important thing

I can see us doing in the very short run.

Mr. DOYLE. Gentleman’s time has expired. Chair recognizes Mr.

Inslee.

Mr. INSLEE. Thank you. I would like to ask you about white

spaces, which might be the best thing in human evolution since the

White Album, so we are really excited by this. We have heard at

least three of the Commissioners express support for moving forward on white spaces, and we are happy about that. I would like

to ask you to comment about your thoughts on extending this to

portable devices, to extend this great work that is going on in white

spaces to portable devices, presuming we can do this without interference, so if I could just ask you each to tell us if you support

white space usage through portable devices and what circumstances? Thank you.

Mr. MARTIN. Yes, I support it as long as it is not creating interference with the current licensees. We actually just received our

first piece of equipment for testing, that would be portable devices

that could be utilized in the white space spectrum, earlier this

week, I think it was yesterday, actually. And our labs will be undergoing testing. We anticipate we will be able to finish that testing by summer, by mid to late summer, and that will allow us to

then finalize our rules for white spaces sometime in the fall.

Mr. INSLEE. I want to make sure Representative Solis can talk.

Does anybody have anything to say sort of contrary to that view

on the panel? I appreciate that. Is there any reason, assuming that

we do show a lack of harmful interference, is there any reason that

the Commission should delay sale and use of these devices until

after the DTV transition, February 17, 2009? Is there any reason

that we would want to delay that?

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Mr. MARTIN. No. Once they have been able to go through our engineering labs and demonstrate that they are not going to create

interference, then we wouldn’t want to hold that up artificially.

Mr. INSLEE. Great. I would like to ask about media consolidation.

My area of western Washington has been a real hotbed of interest

in this, and we have talked to the Commissioner about potentially

holding an official hearing to make sure that western Washington

can weigh in on this issue. Have we made any progress on that?

Is there any way I can work with you to get that going?

Mr. MARTIN. Obviously, we would be happy to continue to try to

work with you to end up scheduling our hearings. We have three

hearings left. I know we are going to try to do one in Tampa. We

just announced yesterday that we are going to do a hearing in

Tampa, that all the Commissioners had weighed in on as an appropriate place to end up doing it. There are several different requests

from members of Congress to go back to your home State, to Illinois and to Chicago and a few other requests, as well.

Mr. INSLEE. I will look forward to that. That is a hopeful yes,

thank you. I would like to yield to Congresswoman Solis.

Ms. SOLIS. Thank you. First of all, I would like to thank Commissioners Adelstein and Copps for coming to Los Angeles, my campus

at USC, and having a hearing on media consolidation. I can’t tell

you how important it was to address those 200 to 300 people that

came that wanted to hear exactly what was going on with media

consolidation. So first of all, I just want to say thank you.

And I want to begin my questioning to Mr. Adelstein. I am very

troubled by the 621 order passed by the Commission in December,

mainly because I think it disadvantages low income and minority

communities, and I would like to get your opinion, if you can explain your position on the FCC’s limitation on build-out requirements in your 621 Order in the face of clear evidence that buildouts are critical to effective anti-redlining enforcement.

Mr. ADELSTEIN. Well, I was troubled by it, as well, because the

law says that we can only limit build-out in terms of the time of

the build-out. Section 621 of the Act clearly says that the only limitation that Congress placed upon the build-out is the time which

they can build-out to all citizens of a community. I think our order

went further. I think our order went further than the law allows

us to do. Now, if Congress wants to tell us that we can limit buildout, that is another thing, but that is not what Congress said; that

is what the FCC said. I think the result is not only unfortunate in

terms of policy, but it could also result in us being overturned in

court, which would create only more confusion and chaos and certainly not help broadband build-out.

Ms. SOLIS. Thank you. My next question is for Chairman Martin.

Thank you, also, for being here. I understand from a recent study

on female and minority ownership of broadcast stations, just 3 percent of those are licensed, full-powered television stations that is

female and minority-owned and 5 percent or fewer than 5 percent

are actually owned by women. In my opinion, the FCC has been

grossly negligent in their efforts to address diversity in media ownership.

Most analyses of a la carte cable programming find that an a la

carte regime would likely lead to a decrease in diversity and minorVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00100 Fmt 6633 Sfmt 6633 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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ity interest programming, particularly with programs like Vet,

CTV, Lifetime Television, Oxygen Network, could be dramatically

affected. Mr. Chairman, are you suggesting that programs targeting minorities and women have such little value that we should not

care if they survive?

Mr. MARTIN. No, but I am suggesting that I think consumers

should be able to control some of their own content that is coming

into their homes and choose which channels they want to purchase,

like they do in other markets, and indeed, the hundred percent rise

in cable rates that has occurred over the last 10 years means that

I think it is critical that the Commission and that policy makers

talk about what is going on with the increasing cable prices.

Cable operators are saying that up to 40 to 50 percent of those

increases are a direct result of content providers asking for increases in the amount that they are supposed to charge their consumers, and I think that if content providers want to provide that

content for free, then they should be carried. But to the extent that

they want to increase the charges that they were putting on end

users, end users should be able to have some control over that

when they are seeing their prices rise 10 and 15 percent every

year.

Ms. SOLIS. Well, I understand the marketplace has a lot to do

with the decisions that are made, but as I just reported, we have

very few representations of women and minority owners in this

media, in this spectrum, and I don’t think that by making it more

challenging for programming that actually shows the diversity of

our country is going to help make any improvement. But my next

question is, moving on to another aspect of diversity, I understand

you have an Advisory Committee on Diversity for Communications

in the Digital Age, which was established in 2003, to recommend

practices to increase diversity. By its charter, the committee is required to meet at least two times a year. Is that correct?

Mr. MARTIN. I don’t know, but I assume. I don’t know how many

times they are supposed to meet.

Ms. SOLIS. OK, you became chairman in 2005. Can you tell me

how many times the Diversity Committee met in 2005?

Mr. MARTIN. No, I can’t.

Ms. SOLIS. OK, it is my understanding, also, that the committee

met formally December 10, 2004, then again by teleconference on

April 25, 2006, and in person December 21, 2006. The committee

was in violation of its charter in 2005, and in 2004 the committee

adopted several recommendations. Looking at their Web site, I

counted 20 recommendations from 2004, including several spectrum related resolutions. Can you tell us how many of the 2004

recommendations the Commission acted on?

Mr. MARTIN. The Commission actually hasn’t acted on them, and

I just recently proposed that the Commission take several steps

that would act on some of them. For example, extending the opportunity time for construction permits for designated entities, allowing designated entities more easily get around what we call our

debt and equity rule, which means that they would be able to more

easily partner with the largest groups. And more importantly, I

have been working with some of the consumer advocates on this

area to try to say why don’t we utilize the opportunity for broadVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00101 Fmt 6633 Sfmt 6633 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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casters to move from an analog to a digital world to allow them to

lease some of their capacity to designated entities like minorities

and women.

Ms. SOLIS. Can you please provide the committee with the information on those recommendations?

Mr. MARTIN. Absolutely. Those recommendations are all before

the Commission.

Ms. SOLIS. Thank you, OK. My next question, before my time is

up, I would like to direct to Commissioner Tate. Welcome, Commissioner. As one of the only women Commissioners on the FCC, I

wanted to get your opinion about the portrayal of women on television, particularly in the Spanish language programming, as seen

in the U.S., which is important and does not reflect, in many cases,

our standards of what is appropriate. Does the FCC monitor the

content of Spanish language television or Spanish language radio

aimed at U.S. Hispanics, and specifically, how many Spanish language analysts, whose specific role is to monitor Spanish language

TV and radio, does the FCC employ?

Ms. TATE. As you know, Congresswoman, we take complaints,

and so we have a complaint driven process. It is not that we are

monitoring or censoring any type of content or programming. I am

not sure whether or not we have specific Spanish language speakers. I know that we do in our complaint area, but I will be glad

to check and get back with you on that. And yes, I share your concerns about how women are portrayed across the media.

Ms. SOLIS. OK. And does the FCC have a process in place to review or assess its internal infrastructure that supports monitoring?

I guess you kind of are not, to your knowledge are not aware of

that or maybe Chairman Martin?

Mr. MARTIN. We don’t have ongoing monitoring of content. What

we do is respond to individual complaints that are filed, and in that

context we do have translators who can help us for content that

there are complaints about for Spanish language content.

Ms. SOLIS. Mr. Chairman, I would like to just submit the rest of

my questions.

Mr. MARKEY. Without objection, I would ask the Commission to

respond to those questions.

Ms. SOLIS. Thank you very much.

Mr. MARKEY. The gentlewoman from California’s time has expired. We apologize to the members. There are now another series

of roll calls on the House floor and this room is going to be used

for another hearing immediately after the conclusion of this hearing, so we apologize to the members.

Mr. DOYLE. Will the chairman yield?

Mr. MARKEY. I would be glad to yield to the gentleman.

Mr. DOYLE. Yes, I just very briefly want to get on the record to

piggyback on what Mr. Radanovich and Mr. Deal said with regard

to the waiver request for cable set-top boxes. There are seven requests pending. Some have been sitting there over 200 days. This

has the potential to save consumers hundreds of millions of dollars.

I think this is something that the Commission should vote on, and

I would ask the chairman of the Commission and all of the Commissioners to consider voting on the set-top boxes. Thank you, Mr.

Chairman.

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Mr. MARKEY. The gentleman’s time has expired. With the thanks

of the committee to the Commission, we appreciate the attention

that you have paid to these issues. You can see that almost every

member of the committee came and stayed and the level and intensity of interest is very, very high, and we will be inviting you back

on a regular basis.

Mr. MARTIN. We will look forward to it.

Mr. MARKEY. But we thank you so much for your attention to our

interests today.

Mr. MARTIN. Thank you, Mr. Chairman.

Mr. MARKEY. This hearing is adjourned.

[Whereupon, at 1:35 p.m., the subcommittee was adjourned.]

[Material submitted for inclusion in the record follows:]

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FAILURE TO COMMUNICATE

By Jerry Brito

Wall Street Journal

March 13, 2007

For more than two decades, the Nation’s first responders to emergencies have had

to contend with radio communications that were not up to the task. Each time a

major calamity such as the Oklahoma City bombing, 9/11 or Hurricane Katrina

throws a spotlight on the problem, a blue-ribbon panel is convened. And each time

the panel invariably offers the same prescription: more funding and more radio

spectrum for public safety agencies.

It’s no different this time around. Responding to the 9/11 Commission’s recommendations, Congress has given public safety communications 24 MHz of the 80

MHz of electromagnetic spectrum that will become available as television migrates

from analog to digital signals over the next 2 years. The rest is to be auctioned, and

first responders will also get $1 billion in equipment grants from the proceeds of

the auctions.

Senator John McCain has upped the ante, introducing legislation early this month

to allocate half of the spectrum now slated for commercial auction to public safety.

Meanwhile, a bill to implement the 9/11 Commission recommendations that recently

passed the House and is right now being debated in the Senate, establishes yet another public safety-communications grants program that could cost billions.

But this kind of treatment has never solved the problem. It targets the symptoms,

not the disease. First, responders often cannot communicate with each other because the Federal Government assigns to each of the 50,000 public safety agencies

in the country—that’s every hometown fire and police department—their own radio

license and piece of the spectrum with which to build out a communications system.

This is undoubtedly beneficial in so far as it affords localities great flexibility to

build a system that best suits their needs. But it comes at a cost: More often than

not the custom systems can’t ‘‘talk’’ to each other.

Fortunately, the FCC has recognized the drawbacks of the old way of doing business, and in an ongoing proceeding it has put forth the idea of creating an interoperable, national broadband network, using 12 of the 24 MHz of spectrum that Congress has allocated for public safety.

Meanwhile, Nextel founder Morgan O’Brien has been pushing a new venture,

called Cyren Call, to create a public-private network for first responders. His interoperable network would be built by the private sector, and first responders would

subscribe to it just as consumers subscribe to cell phone networks. An added bonus:

The capacity that public safety agencies don’t use on the network would be available

to commercial subscribers, increasing the network’s overall customer base and

thereby improving economies of scale.

This would be a terrific proposal, but for a couple of serious hitches. Cyren Call

would build the network on 30 MHz of spectrum now designated for auction, but

which would instead be sold to a nonprofit corporation at a discounted rate. The

drawback? The Federal treasury would needlessly lose out on the revenue from an

auction; and consumers would needlessly do without the new services and lower

prices that commercial carriers would offer if that portion of the spectrum were sold

at full market value. Why needlessly? Because, as the FCC proceeding affirms, a

national broadband network for first responders can be built over spectrum already

designated for public safety use.

Frontline Wireless, another private initiative, is backed by former FCC Chairman

Reed Hundt. It involves building an interoperable network over spectrum purchased

at auction; but Frontline wants the FCC to restrict that spectrum to public safety

use. The restriction would dramatically reduce what the spectrum would fetch for

the treasury at auction. Senator McCain’s bill would facilitate both types of approaches.

Here is a better idea: Offer Cyren Call, Frontline and others the opportunity to

bid on spectrum already restricted to public safety use. That would allow firms to

build national interoperable networks without affecting how much spectrum will be

available for commercial use. At the very least, if spectrum now slated for commercial auction must be used, the government should identify an equal amount of existing public safety spectrum that can be auctioned commercially once the new public

safety networks are built.

Whatever path we take, we should ensure that at least two competing networks

are built. This works well for wireless services such as cell phones; subscribers to

one service have no trouble speaking to subscribers on another while prices are kept

low.

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A private-sector national network for public safety first responders is not an untested idea. In the U.K., the national network that supports police, fire and over

a hundred other public safety services is owned and operated by O2, a private firm.

We can do even better, using competition to spur the innovations that monopoly

rarely provides.

January 26, 2007

Ex Parte

Ms. Marlene H. Dortch

Secretary

Federal Communications Commission

445 12th Street, SW

Washington, DC 20554

Re: Implementation of section 621(a)(1) of the Cable Communications Act

of 1984 as Amended by the Cable Television Consumer Protection and Competition Act of 1992, MB Docket No. 05–311

Dear Ms. Dortch:

Verizon submits this letter in response to a request from Chairman Martin’s office. On March 6, 2006, Verizon filed an errata in this docket correcting its earlier

comments concerning its negotiations with a franchising authority in Florida over

PEG support. Verizon corrected its comments to state as follows:

When Verizon rejected this demand [to meet the incumbent operators cumulative

payments for PEG, which would exceed $6 million a year over 15 years,] and asked

for an explanation, the LFA provided a summary ‘‘needs assessment’’ in excess of

$13 million for both PEG support and equipment for an expansion of its I-Net.

The March 6, 2006 filing further corrected one paragraph of the earlier declaration attached to Verizon’s comments in order to state:

For example, one franchising authority in Florida demanded that Verizon match

the incumbent cable operator’s cumulative PEG payments, which would exceed $6

million over the 15-year term of Verizon’s proposed franchise. When Verizon rejected

this demand and inquired as to its basis, the LFA stated it was Verizon’s portion

of a $13 million ‘‘needs assessment’’ for both PEG and equipment for an expansion

of its I-Net. THe LFA stated this was based on a back-of-the-envelope ‘‘needs assessment.’’ Negotiations with this LFA are still ongoing.

Attached is a copy of the ‘‘summary ‘needs assesment’ ’’ referenced by Verizon

in the March 6 filing. This document was provided to Verizon by the city of Tampa

during the course of franchise negotiations.

Respectfully submitted,

Dee May

Vice President, Federal Regulatory

Verizon

1300 I Street, NW

Washington, DC 20005

PEG AND I-NET COMMUNITY NEEDS OVER THE NEXT 15 YEARS NOT CURRENTLY

BEING MET

PEG Capital:

Public Access—$500,000

Educational Access—$500,000

Gov’t Acess—$500,000

Total—$1.5 million

I-Net Related Expansion and Equipment Costs:

Total—$4,775,000

Public and Educational Access Operational (over 15 years)

Public—$2,850,000

Educational—$4,500,000

Total—$13,625,000

(289)

OVERSIGHT OF THE FEDERAL

COMMUNICATIONS COMMISSION—PART 2

TUESDAY, JULY 24, 2007

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON TELECOMMUNICATIONS

AND THE INTERNET,

COMMITTEE ON ENERGY AND COMMERCE,

Washington, DC.

The subcommittee met, pursuant to call, at 9:30 a.m., in room

2123 of the Rayburn House Office Building, Hon. Edward J. Markey (chairman) presiding.

Members present: Representatives Doyle, Harman, Gonzalez,

Inslee, Towns, Rush, Eshoo, Stupak, Engel, Green, Capps, Solis,

Dingell, Upton, Hastert, Stearns, Deal, Shimkus, Wilson, Pickering, Fossella, Radanovich, Walden, Terry, Ferguson and Barton.

Also present: Representative Blackburn.

Staff present: Amy Levine, Tim Powderly, Mark Seifert, David

Vogel, Neil Fried, and Courtney Reinhard.

OPENING STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH

OF MASSACHUSETTS

Mr. MARKEY. Good morning. I want to thank everyone for being

here today. I especially want to thank the five commissioners of the

Federal Communications Commission for testifying this morning,

especially the chairman, who has had recent eye surgery which has

inhibited his ability to read. We appreciate your willingness, Mr.

Chairman, to come and to answer questions today. The Commission has several important issues with which it is wrestling. For

instance, the Commission has the central role to play in the overall

digital television transition, and we look forward to working with

the Commission on this matter.

The Commission is also contemplating whether to adopt or modify recommendations from the Federal State Joint Board on Universal Service. The recommendations, in my view, risk putting equitable comprehensive reform out of reach yet again. I hope the

Commission will choose to tackle this issue forthrightly and more

broadly, because the temporary measures imposed by the Joint

Board are anti-competitive and ultimately anti-consumer.

I also want to mention the special access proceeding, and I want

to commend the chairman for quickly putting this issue out for renewed comments. I want to commend Commissioners Copps and

McDowell and Adelstein for their recognition of the need to reach

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a resolution of this proceeding on a timely basis, ideally in this

September.

And also looming at the Commission are several forbearance petitions. These petitions seek widespread relief of obligations that

incumbent carriers have to discharge for competition policy. The effect of granting these petitions would be to usurp congressionally

enacted statutes in a sweeping manner. I have great concern about

the effect on competition and consumers that these petitions pose,

and I trust the Commission will weigh the public interest carefully

while considering whether to grant or to deny these petitions.

And finally, the Commission must soon establish rules for the

upcoming auction of valuable frequencies which will become available for other uses when broadcasters relinquish them as part of

the digital television transition. I want to commend Chairman Martin for proposing, in his plan for this so-called 700 MHz auction,

a beachhead for consumer choice and innovation in the wireless

marketplace. Creating a platform for entrepreneurial activity and

investment is vital in this sector.

In context, Chairman Martin’s plan is quite modest. It does not

propose requiring existing wireless licensees who serve over 200

million consumers today to permit openness for wireless applications or allow consumers to switch from carrier to carrier and take

their phone with them. Neither does the chairman’s proposal encompass such consumer-friendly and innovation-fostering service

rules for the entirety of the 700 MHz auction.

Rather, it is a proposal covering roughly one-third of the spectrum to be auctioned, and frankly, I would prefer the Commission

went further in order to better unleash the disruptive nature of

market forces into the wireless and applications market, but the

chairman has clearly made a good start to open things up. And this

new openness is desperately needed. The problem today is that for

millions of consumers, the term mobile phone has become an

oxymoron, like jumbo shrimp or Salt Lake City nightlife. There are

no such things. It isn’t really mobile because you can’t take it with

you when you switch carriers. Moreover, exorbitant early termination fees also make consumers feel trapped.

This scenario undermines the congressional and Commission policy. Today millions of consumers pay monthly fees on their wireless

bills for number portability. What is the point of charging consumers for the ability to take their phone numbers with them if they

can’t take their new $500 phone with them to a new carrier? I

mentioned at our last hearing that this inability fosters a Hotel

California-type wireless service. You can check out any time you

like, but you can never leave with your phone.

As the Commission proceeds on this matter in the coming week

or so, it should be guided by the law Congress enacted for the auction process. The objectives in the law underscore that Congress

knew that simply throwing more spectrum into the marketplace by

selling it to the highest bidder does not, in itself, create the highest

value for consumers. Moreover, absent sufficient competition, the

sale of more licenses for additional spectrum does not, in itself,

mean innovative new services and gadgets will necessarily arrive

for all consumers in all neighborhoods or arrive in timely fashion.

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The Commission has a rare opportunity to promote consumer

choice, foster innovation, re-inject competition into the wireless

marketplace and advance the deployment of broadband services

and applications. I look forward to working with all of the commissioners towards the achievement of these objectives. Again, we

thank you for coming to our hearing. The chairman’s time has expired, and I will turn and recognize the ranking member, the gentleman from Michigan, Mr. Upton.

OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN

Mr. UPTON. Well, thank you, my friend and chairman of the subcommittee and certainly welcome to all of the members of the FCC.

This hearing today is particularly timely, and I look forward to the

testimony and engaging in questions following.

The most pressing topic this morning certainly is the upcoming

700 MHz auction and in particular, what has been revealed in the

press about the banded plan that is being considered by the Commissioners. The proposal now circulating sounds like an experiment. Sounds as though the Commission is asking the question is

there a business model to support a so-called open access approach

to wireless, but I see it as a gamble, and at stake is the success

of the DTV transition, billions of dollars in taxpayer funds and

public safety. This seems like far too much to put on the line, and

I have always been a staunch defender of the taxpayers.

Our folks back home should not be asked to take a flier and see

whether this business plan will necessarily work. Free market does

work best, and successful auctions work best without encumbrances, and if Google is really right, that there is a market demand for their business model, they should be lining up to bid in

a fair auction without the requirements. Google is, after all, one of

the richest companies in the country, with a market cap of more

than $160 billion. That is $40 billion more than Verizon, and if

Google wins the auction, it is free to operate the network as it proposes.

You can try to mitigate the risk by having a very high reserve

price, but now you are price fixing in addition to rigging the auction for particular business models and parties. And even with the

reserve price, you are unlikely to get the $20 billion overall proceeds that the industry believes that you might otherwise raise.

Every nickel below that price is a subsidy provided by the taxpayers without ever asking them whether they want to invest. Government shouldn’t be in the business of subsidizing entry into a

competitive marketplace.

And this industry is very competitive. Four national wireless providers, AT&T Mobile, Sprint, T-Mobile, Verizon Wireless, as well as

several large regional providers such as Alltel and US Cellular. Indeed, 98 percent of consumers in 2005 lived in counties served by

at least three facilities-based providers and 94 percent lived in

counties served by at least 4, according to the FCC. Average minutes of use per month have grown from 140 in 1993 to 740 in 2005,

while the cost per minute has dropped from 44 cents in 1993 to just

7 cents in 2005.

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Indeed, the FCC itself stated in its most recent wireless competition report that competitive pressure continues to drive carriers to

introduce innovative pricing plans and service offerings and to

match the pricing and service innovations introduced by rival carriers. The market is also extremely innovative. The Apple iPhone

is only the latest. For example, T-Mobile is already offering a WiFi enabled device, and Verizon has a BlackBerry that we know

works both here in this country, as well as in Europe.

The auction proposal insulates bidders from competition. I don’t

know how many potential bidders will decide not to participate if

the auction rules are adopted, but I promise you that some will and

that auction will have been distorted, and the taxpayers can be

harmed. The right way to go about this is to adopt rules that are

free of encumbrances; write the rules that won’t have the effect of

distorting the auction. Let the business folks determine what the

business models are. An unencumbered auction would not preclude

a company or investor from using an open access business model,

but don’t conduct the experiment at the expense of the American

taxpayer.

Chairman Martin and Commissioners, I hope that your takeaway from today’s hearing is that the plan we read about isn’t

quite ready for prime time. I hope that you revise the plan to ensure that these valuable frequencies aren’t encumbered and avoid

the distorting effects that the plan is otherwise going to have. And

I appreciate being here. Mr. Chairman, I look forward to the testimony and the questions.

Mr. MARKEY. The gentleman’s time has expired. The Chair recognizes the gentleman from Pennsylvania, Mr. Doyle.

OPENING STATEMENT OF HON. MIKE DOYLE, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

Mr. DOYLE. Thank you, Mr. Chairman, and thank you for convening this hearing. And welcome to the members of the Commission. When you came before the committee in March, I questioned

each of you about wireless enhanced 911. E–911 can truly save a

person’s life in an emergency, and I am glad that the Commission

is acting to improve E–911 standards. And I am especially glad

that we will be looking at critical issues, such as improving location

accuracy inside buildings.

There are some concerns, however, that the draft proposal bites

off more than it can chew, and I hope that you can fix those concerns by the time you finish the item. Our time is short, so I am

going to apologize for only giving you a taste of the issues I am

looking at these days, things like these forbearance requests,

which, if granted in my district, will directly and negatively hurt

the competitive industry who has been playing by the rules, and

it will hurt my constituents that they serve.

Things like special access. If it were up to me, I would change

the name to critical access because that is how critical those pipes

are to providing competitive wireless and Internet service. Things

like piecemeal attempts to reform the Universal Service Fund,

when it really needs an overhaul. Things like cable box waivers

that would split the baby and provide both competition and lowVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00300 Fmt 6601 Sfmt 6601 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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cost boxes. I asked for a vote on that issue in the last hearing, and

I still haven’t seen one yet.

Roaming open-source software defined radios and my opposition

to the XM-Sirius merger, these are all very important issues. But

make no mistake, the auction of the old DTV spectrum is almost

certainly one of the most critical decisions the FCC will make in

decades. This auction is a test for each of you that history will long

remember. Unless this upcoming auction delivers Americans a new

broadband competitor, history will record it not just as a missed

opportunity but as a failure.

I want to walk out of here confident that all five commissioners

are doing everything possible to bring us new broadband competition for Internet services and wireless devices. America needs an

open broadband platform, one that new entrepreneurs can use to

get their idea out to the market. An open platform that can give

regional and local carriers a national footprint. An open platform

that can guarantee us robust competition, even if an incumbent

makes the highest bid.

America, take note. For once we really have a good public policy

proposal being advocated by a wide variety of interests, a wholesale

marketplace that is open for all devices and applications. Technology policy doesn’t have to be lost in partisan bickering. The people who play ball on this field aren’t right or wrong just because

they have a D or R next to their name. This country is thirsting

for us to get together and do the right thing for the American people. If the FCC takes advantage of the opportunity it has in this

auction and creates an open wholesale market, then it will have

done the right thing for the American public. Give us new

broadband competition, give us an open platform. Mr. Chairman,

I yield back.

Mr. MARKEY. The gentleman’s time has expired. The Chair recognizes the gentleman from Nebraska, Mr. Terry.

Mr. TERRY. Thank you, Mr. Chairman. I have an excellent written statement on the necessity for comprehensive universal service

reform that I would like to submit.

Mr. MARKEY. Without objection, it will be included in the record,

and the gentleman yields back his time, reserves his time. The

Chair recognizes the gentlelady from California, Ms. Harman.

OPENING STATEMENT OF HON. JANE HARMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Ms. HARMAN. Thank you, Mr. Chairman, and good morning to

all. I know that there are many subjects being discussed today, but

no one will be surprised that I want to focus on the 700 MHz opportunity. Last week a new 50-page national intelligence estimate

painted a grim picture for our national security. Al-Qaeda has regrouped, enjoys a safe haven in the Pakistani tribal areas and has

the intent to deploy nuclear, chemical or biological agents against

U.S. targets if it can acquire them.

Near simultaneous coordinated attacks on American soil are not

a movie treatment. They are a real threat. Even if we suffer low

tech attacks, such as vehicle-borne attacks or suicide attacks, they

could be enormously disruptive. The question is are we ready? Six

years after 9/11, I look at our first responders’ emergency commuVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00301 Fmt 6601 Sfmt 6601 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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nications capabilities, and the answer is a resounding no. Since

that day, we have done little to shore up disparate, non-interoperable systems across this country. Billions in grant dollars have not

taken us far enough. Six years after 9/11, we are still not ready.

I have worked hard on the interoperability problem since the

towers fell. As a result of the DTV transition, which some of us

pushed for by 2006, the FCC has a historic opportunity to fix this

gaping hole in our nation’s security, and all of you know that. I applaud the proposal for a nationwide broadband network for first responders outlined in the draft auction order, and as you are aware,

Mr. Pickering, whom I don’t see yet, and I have been sending you

letters, making phone calls, meeting with you and in other ways

trying to encourage you to stick to its basic outlines or something

perhaps even better.

This unprecedented opportunity will not come again soon, and

none of us can afford to let it slip by. The public-private partnership idea is sound. It is a win-win, and without it, I think we will

have a lose-lose. I think we will end up with very pricey operable

communications networks all over the country, but then when we

face the big one, which could be a California earthquake or these

terror attacks, we will not have one nationwide interoperable network that we will need.

Chairman Martin, recently your wife gave birth to a baby boy.

I know this, and I saw his cute picture on your cell phone. That

is an advantage of cell phones. We finally got the images up. Your

cell phone works; that is good. I congratulate you on this recent addition to your family, and I think there are some other babies

among all of you. I notice Commissioner McDowell, too, has a new

baby. But here is my point. These new children should inspire us

to try our hardest, in the brief time we have in public service, to

enact policies that will keep them safe. And unless we do the right

thing about this once-in-a-lifetime opportunity on interoperable

communications, I think we will have squandered that opportunity.

Yield back the balance of my time.

Mr. MARKEY. The gentlelady’s time has expired. The Chair recognizes the gentleman from Illinois, Mr. Shimkus.

OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

Mr. SHIMKUS. Thank you, Mr. Chairman. I will be brief. I want

to associate my comments with Ms. Harman and some of the work

that Anna Eshoo and I have been doing on E–911 and this interoperability. It is really key, and I appreciate her passion and her

focus. I will just briefly talk about the issue of putting restrictions

on spectrum that goes up for auction, and here is my concern, and

I will have it in a question later on, is that based upon the testimony we had a couple weeks ago, many folks said that obviously,

that makes it, for some, less likely because you are putting restrictions on the spectrum.

And my concern is if that shifts them to some of the rural, small

market areas and bumps out smaller carriers that are going to

compete in rural America, that is my concern. They don’t bid on

the big block because of restrictions. It frees them up to come into

other areas, and then they can cherry pick away from some of the

295

really rural areas where we really want to encourage and

incentivize coverage. So that is where my questions will be. You all

have a lot on your plate. I appreciate the work you do, and I yield

back my time, Mr. Chairman.

Mr. MARKEY. The gentleman’s time has expired, and the Chair

recognizes the gentleman from Illinois, Mr. Rush.

OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

Mr. RUSH. I want to thank you, Mr. Chairman, for recognizing

me, and I want to thank you also for calling this hearing. I want

to welcome our witnesses. It is always good to have our friends

from the FCC here before this committee. Mr. Chairman, in the

years that I have sat on this committee and on this subcommittee,

I have consistently voiced my concerns over the lack of diversity in

ownership interests in the telecommunications industry. This lack

of women and minority ownership is particularly disturbing to me

in the wireless and broadcasting industry, given that spectrum is,

indeed, a public asset that ultimately belongs to the American people.

Mr. Chairman, it is bad enough that we have so little diversity

in telecom sectors, such as high-speed data services and that so few

women and minorities own chunks of infrastructure that delivers

those services. But given the Federal Government and the FCC,

that they play such a critical role of determining how our public

airwaves are distributed to private interests, the lack of women

and minority participation in broadcast, wireless and satellite companies is downright shameful. It is a sign, quite frankly, that this

Congress and that this commission simply do not care.

And I hope that we can reverse this trend of indifference. People

of color make up almost 35 percent of the population, and this percentage is rapidly increasing. Yet, the participational rates of people of color and the ownership of the public airwaves is markedly

disproportionate to the general population and has actually fallen.

Nationally, minorities own no more than 3 or 4 percent of the radio

and television broadcast industry, and minority ownership of wireless services is nearly zero. How is this possible? How can this be

acceptable to this commission or to this Congress?

Under section 309(j) of the Telecommunications Act, the FCC is

required to promulgate rules for, and I quote, ‘‘disseminating licenses among a wide variety of applicants, including small businesses, rural telephone companies and businesses owned by members of minority groups and women.’’ As we approach the upcoming

700 MHz auction, I, for one, want to hear how the FCC is going

to do a better job of promoting minority and women-owned businesses and their ownership interest in the public spectrum.

Mr. Chairman, I am tired of seeing the same faces consistently

playing the big roles, getting all the big goodies in these auctions

and reaping, thereby, billions of dollars. It is time that other businesses from disadvantaged backgrounds be able to sit at the table

and carve up the pie and not be left with mere crumbs. I thank

you, Mr. Chairman, and I yield back the balance of my time.

Mr. MARKEY. The gentleman’s time has expired. The Chair recognizes the ranking member of the full committee, Mr. Barton.

296

OPENING STATEMENT OF HON. JOE BARTON, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. BARTON. Thank you, Mr. Chairman. I have been flagged on

one of my earmarks, so I am going to have to go to the floor sometime pretty early in the hearing to try to de-flag the flag, and so

it is not an insult to our distinguished commission, but I may have

to leave briefly. But I am glad we have all five of our Commissioners here. I know it is tough to come over here to the House

when you could be over in the Senate, you know, a little more

media coverage over there, little fancier cufflinks, but we are the

people’s body, and we have every right to have your eminences before us, and we appreciate your willingness to come, and we appreciate Chairman Markey’s willingness to hold the hearing.

I have a couple of issues that I would like to raise and I hope

to be here to ask some questions. The first one is the Universal

Service Fund. I think it is broken, and I don’t think it can be fixed.

I would repeal it if I had a majority of the votes; I don’t. But I do

hope that we can reform it. Last year, this fund assessed about $7

billion on users of our telephone system and I believe sent about

$6 billion of those dollars back out to various subsidies. We have

a very perverse system in which, in some cases, the more cell

phones you have, the more subsidies you get, and the less efficient

the market becomes.

I know that the Joint Board has sent in a reform suggestion that

you cap the number of funds that can be given to a particular program or a particular carrier. I wish you guys would really bite the

bullet and just go ahead and really restructure the program. I have

talked to most of you on an individual basis, and you all nod your

heads and agree that something needs to be done. So maybe this

is the year that that can happen.

The second issue I want to raise is the upcoming 700 MHz auction. I am very disappointed that apparently a majority of the Commission, including our chairman, wants to put conditions on this

auction. I know that there is a diversity of political affiliation on

the Commission, and that is as it should be. People like me, that

have an R by our names, we generally, and I, specifically, support

free markets. I think the less fetters you have in terms of conditions on an auction and the more open the process, the better it

is going to be. I think, also, you are going to get more money if you

do it that way.

I am very disappointed that Chairman Martin has come up with

this plan. It is not quite as bad as the Frontline plan, but I don’t

think it is as good as an absolute, no-condition auction. Now, I

heard what my good friend from Chicago Mr. Rush said, and I

think he has got some points, and maybe we ought to, at some

point in time, look at some minority set-asides and things like that.

Over time, a market-based principle will set the general conditions

on what you have to have in terms of the ability to compete and

in terms of financing the bid that you come up with. Then let whoever has the most innovative way to use the spectrum do it. If that

doesn’t work, you can always take it back, and over time, that is

going to give us the best telecommunications system that is possible.

297

I am told that the votes are there for the Martin plan. Maybe

this hearing today may change a couple of minds, who knows? So

anyway, Mr. Chairman, those are my general concerns. I do appreciate you holding this hearing, and I think it is very important we

have the Commission before this subcommittee. We spend a lot of

time arguing over healthcare policy and energy policy and environmental policy, but right now, telecommunications policy is driving

the economy of our country, in terms of innovation and productivity, really is telecommunications policy. So this is big stuff. With

that, Mr. Chairman, I appreciate your willingness to hold the hearing, and I yield back.

Mr. MARKEY. Thank you, Mr. Chairman. Thank you, Mr. Barton.

The Chair recognizes the gentleman from Michigan, Mr. Stupak.

OPENING STATEMENT OF HON. BART STUPAK, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN

Mr. STUPAK. Thank you, Mr. Chairman, and thank you for holding this hearing. I would like to welcome our distinguished panel

of witnesses today. Having all five commissioners before our committee twice before the August recess must be a record. This is a

very timely hearing as the Commission is expected to finalize the

rules for the 700 MHz auction by the end of the month. These rules

will have a great impact on the future of public safety communications and broadband service in rural America, two areas I care

deeply about.

Press reports indicate the Commission may require the winner of

one block of spectrum to build its network to the specifications of

public safety in an effort to construct a nationwide public safety

network. I support this proposal and commend the chairman for

taking this bold step. I also urge the Commission to finalize the

band plan for public safety spectrum in a way that does not penalize first responders by putting them on a different frequency than

their Canadian and Mexican counterparts.

Turning to the issue of rural broadband, the 700 MHz auction is

often talked about being the savior of rural broadband deployment.

This will only be the case if the rules are done right. I wish to urge

the commissioners to give small and regional carriers the chance

to compete in both the lower and upper bands of the 700 MHz auction. These carriers are located in rural America, they know rural

America and they want to serve rural America. They should be allowed, to the maximum extent possible, an opportunity to compete

with the national carriers.

Finally, I supported the strong requirements proposed by the

chairman this spring. I am hopeful the Commission will take a

measured approach when weighing industry’s concerns with the

need to make sure wireless broadband is actually deployed in rural

America. I was less encouraged by the Joint Board’s recent proposal to cap USF wireless support. As I said at a subcommittee

hearing earlier this month, temporary policies at the FCC tend to

become permanent.

The cap would permanently freeze wireless service in areas of

the country where service is woefully lacking. The chairman has indicated he wants to act quickly on this issue, but I encourage the

Commission to act comprehensively on wireless support rather

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than choose the easy option of simply freezing support. I look forward to delving into these and other issues during the questions,

and I yield back the balance of my time, and thank you again to

the Commission for being here.

Mr. MARKEY. The gentleman’s time has expired. The Chair recognizes the gentleman from New Jersey, Mr. Ferguson.

OPENING STATEMENT OF HON. MIKE FERGUSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY

Mr. FERGUSON. Thank you, Mr. Chairman. Thank you and Mr.

Upton for holding this hearing. I want to extend a warm welcome

to Chairman Martin and the commissioners. Thank you very much

for being here, and thanks for your important work at the Commission. Quite a bit has happened in the telecommunications arena in

the past 4 months, both in the private sector, and the public sector

and I look forward to hearing your views on all of these different

issues and topics.

One issue that has received a lot of attention, lately, is the pending 700 MHz auction. In about a half a year’s time, the FCC is set

to begin auctioning 60 MHz of spectrum. It is extremely important,

I believe, that this auction proceeds uninhibited by conditions or by

regulation. From the billion dollars allocated to help our first responders to buy interoperable equipment to the $1.5 billion for converter boxes, we have made a commitment to the American taxpayers to maximize the revenue that the auction will generate.

While I am on the subject of adverse effects of regulation, I want

to briefly address a couple of other issues that, in turn, have significant impact on my constituents in New Jersey. The first relates

specifically to the DTV transition, something all of us want to

make sure that we get right. Chairman Martin decided recently to

propose dual carriage obligations on cable operators, despite the

fact that the Commission twice rejected dual must carry.

Many thought that this issue was behind us, yet somehow, in the

latest DTV proposal, this issue has been revived. Last session the

leadership of this committee negotiated an agreement with the

cable industry for limited dual carriage during the DTV transition.

Putting up what, frankly, I would consider, possibly, an unconstitutional roadblock, at this point, is hardly the way to facilitate a

seamless DTV transition.

The second issue concerns Chairman Martin’s integrated set-top

box waiver decision. Some waivers were granted, others were not,

creating a marketplace where some consumers will be forced to pay

more than others for the same service. I am particularly troubled

by the denial of Comcast’s request to offer a low-cost set-top box

that could actually encourage consumers to switch to digital television without using a Government subsidy.

In my district, Verizon offers video, and they received a waiver,

which I support. Cablevision offers video; they received a waiver for

different reasons, and I support that, as well. But Comcast, which

counts a huge number of my constituents also as customers, didn’t

receive a waiver. So I have constituents paying more for a set-top

box from Comcast that has no different functionality than the box

Verizon or Cablevision provides. It is pretty tough for me to try and

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explain this to my constituents or explain some rationale for why

there is this discrepancy.

Whether we are talking about the 700 MHz auction or the DTV

transition or fostering a competitive telecommunications marketplace, selective regulation and conditional policy making are not

the answer. I strongly urge the Commission to avoid this route as

you move forward. Again, I welcome you all here today. I look forward to hearing your views. I certainly appreciate the important

work that you do on behalf of our country, and I thank you, Mr.

Chairman, and I yield back.

Mr. MARKEY. The gentleman’s time has expired. The Chair recognizes the gentleman from New York, Mr. Towns.

OPENING STATEMENT OF HON. EDOLPHUS TOWNS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW

YORK

Mr. TOWNS. Thank you very much, Mr. Chairman. Let me thank

you for holding this hearing and also Ranking Member Upton and

to thank the five commissioners for coming again. Of course, we

look forward to the testimony. I also would like to thank each of

the witnesses for their long record of public service. Each of you

have shown great dedication, and I applaud and congratulate you

for that. I hope your testimony will assist us in understanding the

future of the industry and how our constituents may be affected by

upcoming events and how our constituents may be affected by

these things. And we must keep the constituency in mind as we

move forward.

I am pleased with the exceptional growth and innovation taking

place in this sector today, but we must look at ways to improve diversity. The issue can no longer be ignored because it is one of fairness and we must be about fairness at all times. As we move forward, I will work with my colleagues to make sure the FCC is

hearing all sides of the issues and relying on sound technological

study to make its decisions.

The primary beneficiary of its work should be the American consumer. I will work with my colleagues to make sure they have the

choices they want. I will also work with this committee to make

sure the industry has the certainty it needs to take risks and make

the investments to create jobs and revenue. I look forward to hearing your thoughts on these and other issues, and of course, Mr.

Chairman, I think that we need to continue the dialog because we

need to know a little more about ways and methods how we can

bring other people in, and I think that we are not focusing on that

enough and that the same folks are just sitting at the table over

and over again, so we need to make certain that some new people

are brought in, and the only way we can do it is through this process. So thank you very much, and on that note, I yield back.

Mr. MARKEY. The gentleman’s time has expired. The Chair recognizes the gentleman from Florida, Mr. Stearns.

OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORDIA

Mr. STEARNS. Good morning, and thank you, Mr. Chairman. Let

me compliment you on the number of hearings you are having. We

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thank this particular group of individuals or witnesses for their forbearance for waiting through our opening statements. You know,

we see with the iPhone that sort of the convergence of all the different wireless, cable, phone, everything is coming together, and so

the auction of the 700 MHz is going to also work in that area. We

saw incredible innovation of deployment of next generation mobile

broadband, voice, video and data last year, with the advanced wireless services auction. We saw both new and existing licensees

spend almost $14 billion, creating three more nationwide licensees

which will compete against the four existing nationwide carriers,

not to mention additional regional carriers. And of course, we have

the auction now of the 700 MHz.

I think a lot of folks on both sides have talked about the imposition of the open access rules. I think that is one of the key areas

that we would like to hear what your rationale is for it. I think we

have been a little critical on this side. We wrote a letter to you,

Mr. Chairman; I think 12 of us signed it recently asking for a little

bit more information on the open access rules. We think, obviously,

they would affect the auction for one business model over another

and depress the auction revenues that are earmarked for important

things such as deficit reduction, the public safety operability

grants, and so I look forward to hearing from not just the chairman, but all of you, how you feel about this.

One broad theme which I think members of this committee are

interested in is the rules and procedures the Commission just uses

in general, and particularly, I am interested to see why the FCC

has refused to implement some procedures or standards for the

proper disposition of forbearance petitions. As co-author of this provision in the 1996 telecom act, I am well aware of Congress’s intent

in this matter to deregulate based on proper analysis of the competitive market, so that is another area that I hope to hear some

of your comments on.

I believe, given the increasing number of forbearance petitions

being filed with the FCC, there needs to be some formal process established to govern the implementation of the forbearance statute.

The FCC has the authority to do so, it just doesn’t appear to want

to do it. Perhaps it doesn’t have the will, it is not the consensus,

so it is just an area I would like to talk about. So those are the

areas, Mr. Chairman, that I have in my opening statement. Thank

you.

Mr. MARKEY. Gentleman’s time has expired. The Chair recognizes the gentlelady from Silicon Valley, Ms. Eshoo.

OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Ms. ESHOO. Thank you, Mr. Chairman, for holding the hearing.

Good morning, Mr. Chairman, and the commissioners. It is good to

have the FCC here again. I want to congratulate you, Mr. Chairman, on your new child, and I hope that everything has settled in

your household. I know that there was obviously a lot of joy with

the new child, but there were a series of things that kind of rocked

your household, so I hope all is well now.

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I want to begin by acknowledging the Commission’s efforts to ensure that consumers have a choice. I think it is very important

across the board but certainly in set-top boxes that they use to receive cable service. I think I raised this the last time the commissioners were here. While I think it has taken much, much longer

than I would have preferred to implement these provisions of the

1996 telecom act, competitive alternatives are now appearing in

the marketplace, and I think that that is very good.

Now, if the press accounts are accurate, the Commission is also

considering a plan for the 700 MHz auction next year that includes

open access service rules for a portion of the spectrum. This represents what, about a third, I think, of the spectrum, so this is

very, very important. Now, it is a curiosity to me to hear how some

members describe what is being considered. I think where some

have really been restrictive about access, now opening it up is

being called restrictive, so there is a play on words here. But I

think I would like to go with the dictionary’s definition of open and

encourage the Commission to look at it that way, as well. I think

that these are the kinds of requirements or rules of the road for

the future, that certainly the subcommittee chairman and some

other members have really encouraged and advocated for some

time.

There are, I think, many other aspects of the Commission’s work

that really give me pause, though. In particular, I am concerned

about the Commission’s recent implementation of section 10 of the

1996 act, commonly known as forbearance, and I think there has

been at least one member, maybe others, that have raised this.

Under section 10, if the FCC does not deny a petition for forbearance from enforcement of any portion of the act within 1 year of

the date it is filed, the petition is deemed granted.

The forbearance process has recently been used by large telephone companies to terminate the enforcement of key provisions in

the act that were designed to spur competition and promote innovation. I think that this has really kind of twisted into a pretzel,

what the Congress’s intent was at the time. And I really don’t see

how the full commission can defend this. This is an area that really

needs work, and by the way, I don’t think these are partisan

issues. I think that we really have to clean this up.

Finally, I want to call my colleagues’ attention to—if you haven’t

read it—we will distribute this, an op-ed last month that Commissioner Copps wrote about public broadcast licenses, so I would like

to place that into the record. I would recommend it to my colleagues’ attention, and I think that there are obligations that come

with the license renewal. I know I am past my time. I am glad that

you are here and look forward to asking you questions. Thank you,

Mr. Chairman, for your forbearance.

Mr. MARKEY. The gentlelady’s time has expired. The gentleman

from Georgia, Mr. Deal, is recognized.

OPENING STATEMENT OF HON. NATHAN DEAL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA

Mr. DEAL. Thank you, Mr. Chairman. I would like to welcome

the commissioners back again and to thank you at the outset for

responding to my post-hearing questions last time. As you may reVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00309 Fmt 6601 Sfmt 6601 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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call, one of the questions that I was concerned about was the most

efficient and timely use of the white space spectrum after the DTV

transition. In your responses, there was almost unanimous consent

that an unlicensed approach would be a most efficient and beneficial use of the spectrum for the American people. As you may

know, Representative Inslee and I have introduced legislation

which would allow for the operation of unlicensed devices in television white space.

Commissioner McDowell, in your opening statement, you mentioned you expected the Commission’s Office of Engineering and

Technology to issue a report on its testing of the white space devices later this month. I believe Chairman Martin has set the deadline of July 31. I am eager to hear if you plan to meet that deadline

and if the report will include a full analysis of the feasibility of the

devices.

As I have said in the past, I believe it is important for the Commission to conclude its testing in a timely fashion so that we can

move to facilitate the use of unlicensed white spaces, as they will

lead to increased broadband access for millions of Americans and

enable a wide range of innovative wireless devices and services. It

is my belief that a deregulated open white space spectrum will

allow for greater innovation and the development of new devices

and tools which will enable more economical broadband deployment

in rural and underserved areas and ensure the efficient utilization

of unused spectrum.

Before concluding, I would like to mention something that Ms.

Eshoo also mentioned and that is the number of forbearance petitions which are currently pending at the Commission. I would like

to encourage you to rule on these petitions using the normal full

administrative processes rather than allow these petitions to go

through without proper consideration. As you know, many companies with varying interests, including a number located in my home

State of Georgia, are concerned with how these petitions could affect them and their consumers. I would encourage you to give full

consideration to all of the parties as you consider these forbearance

petitions. Mr. Chairman, I thank you, and I thank all the commissioners for being here today, and I yield back my time.

Mr. MARKEY. The gentleman’s time has expired. The gentlelady

from California, Ms. Solis, is recognized.

OPENING STATEMENT OF HON. HILDA L. SOLIS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Ms. SOLIS. Thank you, Mr. Chairman, and I appreciate the hearing that you are having today and I am especially pleased to see

our FCC commissioners. And I am interested in hearing from the

chairman and our commissioners about a number of topics, especially the ongoing consumer education campaign in advance of the

digital television transition. Households with over-the-air television

sets and no cable or satellite service, as you know, will be the most

impacted by the DTV transition. These households, in my opinion,

are disproportionately low-income and Spanish speaking. And I

hope that each of you will address outreach efforts to households

with limited Internet access and language barriers and outline creVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00310 Fmt 6601 Sfmt 6601 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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ative solutions to ensure that consumers are not left behind in the

digital transition.

I am also concerned about the recent decisionmaking process at

the FCC. The automatic approval of forbearance petitions without

action by the FCC runs contrary to congressional intent. And in addition, if the FCC does not act on such a petition and it is deemed

granted, any benefits to consumers could be overshadowed by the

questionable process. Another matter pending at the FCC, in my

opinion, is the sale of the Tribune Company, which owns a number

of media outlets, including the Los Angeles Times in my area. The

Commission has an important duty in reviewing the sale to ensure

that local interests and the public interest are well served. And I

have concerns about the current proposed structure of the Tribune

sale because it places a heavy debt burden on employee stock ownership plans without giving those employees a true voice on that

board of directors or input on the governance of the company.

Finally, I look forward to learning more about the forthcoming

rules of the 700 MHz auction. We all know that this auction could

be the turning point in our country to close the digital divide and

ensure broadband Internet access for all. But this goal can’t be realized if the auction rules allow for continued consolidation of spectrum licenses with a few large companies. I was pleased at some

of the chairman’s recent proposals to allow for open access on some

of that spectrum.

And I urge the Commission to go forward and adopt rules that

would promote diversity amongst spectrum license holders, promote innovation and new technology and increase public safety. I

hope that the auction rules regarding designated entities will strike

a good balance between small business. Thank you again, and I am

pleased that our witnesses are here today. I yield back the balance

of my time.

Mr. MARKEY. The gentlelady’s time has expired. The gentlewoman from New Mexico, Mrs. Wilson, is recognized.

Mrs. WILSON. Thank you, Mr. Chairman. I will waive my opening statement.

Mr. MARKEY. The gentleman from Mississippi, Mr. Pickering, is

recognized.

OPENING STATEMENT OF HON. CHARLES W. ‘‘CHIP’’ PICKERING, A REPRESENTATIVE IN CONGRESS FROM THE STATE

OF MISSISSIPPI

Mr. PICKERING. Mr. Chairman and to the panel, I look forward

to the hearing today. Let me first go through the issues that I

would like to address. First, the 700 plan and then talk about specialized forbearance. But on the 700 plan, as we try to measure

whether the 700 plan addresses the needs of the country, there are

several criteria that I use. One, does it increase the security of our

country? For the individual, does it increase individual choice, freedom and property rights? For the market, does it increase competition, innovation, investment? And for the country, from rural areas

to urban areas, does it build the infrastructure that we need for

our economy to grow and for commerce to flourish for Small Town,

Mississippi or New York City?

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And I think on each of those criteria, the 700 plan increases, enhances, improves and makes progress on all of those serious, very

important objectives for our Nation and criteria as we judge the

policy. That is why I want to commend the chairman for putting

together something that does build out a public safety network

using a private sector partner. For giving individuals the property

rights and the freedom to control their device and to open up what

happens with very important devices from the BlackBerry to other

things that can be greatly beneficial to the individual.

As we look at free markets, and this is as a conservative, if you

look at the most innovative, where capital flows, where innovation

and investment is greatest, it is traditionally in open systems. The

interstate system is probably the greatest success story of creating

the level of economic growth over the last generation. The Internet,

natural gas, energy systems that are open, produce the investment

and the competition and the choice for free market capitalism to

work.

And so for those on my side of the aisle, when somebody says

open it, do not think that this somehow contradicts our core beliefs,

principles and philosophy. It enhances our core beliefs, philosophy

and principles. And what the chairman is doing today is strengthening markets, enhancing capital, increasing innovation and investment. And so I want to commend him, philosophically and in

principle and for the boldness of what he is trying to accomplish

and achieve.

And then I would also like to say, as someone from a small State,

the requirements to actually build the infrastructure so that we

can have broadband in Mississippi and broadband anywhere in the

country, just like the interstate system, it will enhance commerce

and growth from all parts of the country and all sectors and all

segments. This is a balanced, good plan. I look forward to working

through the rest of the week with my colleagues and with the Commission in making sure that this very important policy decision,

probably the most important wireless decision of the next decade,

is completed in a good way.

I do have other issues. The special access decisions should be

done in a timely way, a proper analysis is done and I look forward

to the time that I will have for questions on forbearance and Universal Service and thank you, Mr. Chairman.

Mr. MARKEY. The gentleman’s time has expired. The gentleman

from Texas, Mr. Gonzalez, is recognized.

OPENING STATEMENT OF HON. CHARLES A. GONZALEZ, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. GONZALEZ. Thank you very much, Mr. Chairman. Welcome,

the chairman and members of the FCC. I am more concerned, I

guess, today, and I hope to remain through the whole hearing, regarding the auction, and I guess the question that I would have

and I think is going to be addressed in your testimony is what predominates. One is are you going to try to get us as much money

as possible, and the reason for that is Congress has already spent

that money, and it would be really nice if you could give us more

than we spent, or is it really going to be about giving consumers

more device choices and spurring innovation, or could it be a

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scheme or a plan to assure the greatest investment in build out,

maintenance and improvement of the network. I just want to hear

your thoughts on those.

The other thing is putting things in context. My fear is this thing

about open access means so much to so many different people, and

I am afraid it is being misrepresented because I am not real sure,

and I am hoping that you address some of the elements that are

out there right now in circulation and that is we understand, from

the network point, what open access may mean or may not mean.

What I am thinking, in terms of manufacturers and software application providers, how they might impact choice and innovation.

And what I mean by that is are you going to be able to dictate to

Apple and iPhone a different system than iTunes when it comes to

music now that we have a convergence and we know what the

iPhone is?

There is a story today in the Post about Nokia buying Twango,

acquiring Twango, a closely held media sharing Web site and it

says Nokia will divide its cell phone business into three units: mobile devices, services and software, and a markets division. Twango

service is free, but Nokia plans to add elements for which customers will have to pay, so now I am going to have a device maker

that has some sort of other consideration, and I am sure one is

going to be tied to the other.

Will it restrict the ability of the manufacturer or an application

provider or software provider to enter exclusive contracts, because

surely, that would have some sort of a chilling effect on choice and

innovation. To all MySpace subscribers, would it address the limits

that are imposed on them on software tools that they could use in

their pages? How about Bear Stearns or a private enterprise that

is not going to sync their existing systems so that people can use

their iPhones?

All of that, people really believe that this open access is going to

address all of that. Open access will also allow me to use Google’s

Checkout as opposed to eBay’s PayPal. Will it make sure that

Microsoft’s operating system Vista doesn’t mitigate against a

search engine as provided by Google? There are truly people out

there that believe you are going to address all that with this open

access model, so I would like for you all to actually maybe go beyond networks into the other aspects of the Internet. Thank you

very much, and I yield back.

Mr. MARKEY. The gentleman’s time has expired. The Chair recognizes the gentleman from Illinois, Mr. Hastert.

OPENING STATEMENT OF HON. J. DENNIS HASTERT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

Mr. HASTERT. Thank the chairman. I would certainly like to welcome the FCC commissioners here today and welcome the timeliness of today’s hearing, Mr. Chairman. We all know that within

the next couple of weeks the Federal Communications Commission

will adopt rules that will affect prime real estate in the communications sector, ultimately changing the way spectrum is used

here in the United States. I was here in 1993. I was on this panel

in 1993. I know what the legislative intent of the 1993 act said. I

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also know things have changed a lot since 1993. You have to look

at all those other issues.

I guess I won’t be as flowery as my good colleague from Mississippi was, but in 1993, when Congress passed the Omnibus

Budget Reconciliation, Congress moved spectrum allocation to an

auction-based method to ensure that spectrum is efficiently allocated to those who valued it most. As a result, the auction-based

method generated billions of dollars in revenue for the Federal

Government, then produced numerous economic benefits for people

in this country. These benefits are present in the competitive wireless market today, innovative service offerings.

Now the FCC has another opportunity to do what Congress intended with the 60 MHz of spectrum cleared by the digital television transition. Without onerous service conditions, the auction

can also raise billions of dollars for taxpayers and enable carriers

to provide the next generation of wireless broadband services.

Instead, I am disappointed to hear that Chairman Martin has

been circulating a plan that will impose regulations, such as open

access, to more than half of the 60 total MHz up for auction. Imposing mandates on 32 MHz that will harm consumers, provide

less for all and crowd out the small and rural carriers from bidding

in the auction. Rather than help the goals Mr. Martin claims to

achieve, he structures the most important auction of the century to

tilt in favor of a business model that has not committed to bidding

unless they receive all of their conditions.

The FCC is charged to manage and secure our Nation’s most secure resource, and I urge the Commission to review its rules and

policies and open the auction to a market that will utilize the spectrum most efficiently. This is the only way to ensure that the auction proceeds on schedule. I look forward to hearing the answers

from the Commission today. Mr. Chairman, I thank you and yield

back my time.

Mr. MARKEY. The gentleman’s time has expired. The Chair recognizes the gentleman from Texas, Mr. Green.

OPENING STATEMENT OF HON. GENE GREEN, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. GREEN. Thank you, Mr. Chairman, and I want to welcome

our FCC commissioners to the first hearing where we have had our

commissioners for the new Congress and thank the chairman for

holding the hearing. There are a number of important issues on the

horizon that the FCC will be acting on and involved with, and it

is important that our subcommittee provide that oversight. The

DTV transition is fast approaching. I look forward to hearing what

the Commission has been doing to ensure that the transition goes

smoothly. This transition has the potential to impact tens of millions of people. We need to make sure Americans are aware it is

coming.

It seems that there has not been a widespread public awareness

campaign. With the transition less than 2 years away, we need to

ensure that these pockets of the population who heavily rely on

over-the-air broadcast, the elderly, the low-income and non-English

speaking households, know the transition is coming and how to

apply for the converter box coupon. The DTV transition is also

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going to open up spectrum, part of which will be designated to the

public safety communications network. I look forward to hearing

more about the 700 MHz plan for public safety communications

and the Commission’s plans for promoting a public-private partnership to build a nationwide network.

Last week the National Telecommunications and Information Administration announced nearly $1 billion in public safety interoperable communications grants, and I am pleased that NTIA awarded

these grants in a manner many of my colleagues, as well as mayors

from some our Nation’s largest cities, supported by giving priority

to urban area security initiative tier 1 cities. The funding for these

grants, which will come from the sale of the 700 MHz, will provide

significant support for tier 1 cities to improve their communication

systems.

One of the most widely covered issues lately has been the part

of the proposal that would impose open access on the largest blocks

in the upper section of the 700 MHz spectrum to be auctioned.

Spectrum is a limited commodity and 700 spectrum even more so

because of its unique characteristics. Placing conditions on any

block in the upcoming auction would limit the number of bidders

and benefits a limited number of companies. The current plan,

however, of an open access block has not appeared to please any

possible bidders.

I understand the intention of the plan is to promote new competition in wireless broadband, and I am concerned about the intents

by companies and groups to pressure the FCC to go even further

than it already has to condition a block or blocks of spectrum that

will limit what license winners can do with the spectrum and limit

the number of bids on that block. Open access and wholesale are

terms that should be included in a business model and not imposed

on companies through a Government auction.

Two of the last issues I would like to mention that I contacted

the FCC about in the last year are cable set-top box waivers and

the XM-Sirius merger. That is why I wrote to each of you expressing my concern that if the FCC did not grant certain waivers of the

rule, costs for the set-top boxes would rise, resulting in fewer customers having access to digital programming and slowing the transition to all digital platforms. Since then, the Media Bureau has rejected numerous waiver requests, and I am concerned this will

make it harder and more intrinsic for cable companies to bring digital services to their customers.

Just 2 years ago, the FCC recognized how important availability

of low-cost, limited function set-top boxes would be to advancing

the digital transition. With cable companies working with electronics manufacturers to develop and download security software,

Mr. Chairman, I would also mention that 72 of my colleagues

joined me in signing a letter to the FCC concerning the XM-Sirius

merger, and I appreciate the Commission discussing that. Thank

you.

Mr. MARKEY. The gentleman’s time has expired. The Chair recognizes the gentleman from Oregon, Mr. Walden.

Mr. WALDEN. Thank you, Mr. Chairman. I just want to welcome

the commissioners. I will waive my opening statement and reserve

the extra time for questions. Thank you.

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Mr. MARKEY. The Chair recognizes the gentlelady from California, Mrs. Capps.

OPENING STATEMENT OF HON. LOIS CAPPS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Mrs. CAPPS. Here we are again, Mr. Chairman, as you promised.

Thank you for holding this second subcommittee FCC oversight

hearing, and welcome back to all five of the commissioners. I believe the FCC is a more effective agency when this subcommittee

aggressively exercises its oversight responsibility, and I hope that

everyone agrees with that. The last hearing I asked Chairman

Martin and Commissioner Copps about the FCC’s lack of important

data on broadband deployment and the inadequacy of the speed the

FCC uses for broadband.

While this subcommittee considers a legislative solution to these

problems, I would like to urge the Commission to collect more useful data on broadband penetration by looking deeper than the

standard of one subscriber per ZIP Code and updating the definition of broadband to a sensible speed. There is some urgency, I believe, because unfortunately, our Nation continues to fall in international comparisons of broadband deployment. I hope the FCC

will take the opportunity afforded by the upcoming 700 MHz auction, as my colleagues have mentioned, as well, to increase the

competition in the broadband market.

I want to commend Chairman Martin for proposing the inclusion

of wireless Carterfone rules in a portion of spectrum to be auctioned. At our last hearing, Professor Tim Wu of Columbia Law

School told the subcommittee that the United States is the leading

innovator in most areas of developing technology with the major

exception being the wireless base. It seems to me that applying

Carterfone to a portion of the spectrum might help us to rectify

that situation.

I also want the FCC to continue to consider other conditions with

the auction including, perhaps, wholesaling requirements. I also

would urge the Commission to require anonymous bidding so as to

reduce the chance that companies can collude to keep out competitors. I know there are other plans to increase broadband availability pending at the Commission and call upon you to fully consider

that.

Two other brief matters to discuss briefly. They are not brief. I

believe the Commission should work for greater transparency in

the special access market. Competitive local exchange carriers,

wireless providers and other companies pay special access fees to

access incumbent networks. The FCC should ensure that these fees

are fair and not set or collected in a manner that reduces competition. Finally, as a public health nurse, I want to commend the work

of the FCC’s task force on obesity. I am particularly pleased that

the 11 companies who have entered into a voluntary initiative to

restrict their food advertising to children have agreed not to mix

healthy and unhealthy messages. That was an issue I raised in an

earlier subcommittee hearing on images kids see on the screen. We

actually had one that mixed.

Instead, the companies will not advertise unhealthy food to children under 12, period. We must make sure, however, that the food

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companies’ definition of unhealthy food is sensible and I also want

to ask the commissioners in the task force to work to bring media

companies to this table, as well. So I thank the commissioners

again and to our chairman. I yield back.

Mr. MARKEY. The gentlewoman’s time has expired. The Chair

recognizes the gentleman from Michigan, Mr. Dingell.

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN

Mr. DINGELL. Mr. Chairman, thank you. I commend you for this

hearing, and I am delighted to welcome the five members of the

Federal Communications Commission to the committee. I am particularly pleased, Chairman Martin, that you are here this morning. I am aware that you recently underwent emergency eye surgery and that you have had some real honest problems in terms

of reviewing much of the material that you would normally do in

advance of this hearing. I hope my colleagues will keep this in

mind when they ask questions of the chairman. I certainly will,

and Mr. Chairman, I wish you a speedy recovery.

I also want to thank the members of the Commission for being

here. Thank you, ladies and gentlemen. And I would like to thank

you all for the recent full consumer actions that the FCC has taken

since our last oversight hearing. Ensuring a smooth DTV transition

is one of the most important tasks facing the Commission. While

much work remains to be done, I am particularly pleased that the

FCC brought enforcement actions against TV manufacturers for

importing non-DTV compliant sets and against retailers for failing

to properly label analog sets.

The Commission has also re-chartered its consumer advisory

committees and increased their focus on the DTV transition. I commend you, ladies and gentlemen, for that. The most immediate

issue at the Commission, in my view, is the 700 MHz auction. I understand that the chairman has circulated a draft order that includes some variation of the Carterfone or device portability rules

for one block of spectrum. If done correctly, these rules could provide great consumer benefits. Given the proposal’s limited scope,

this would be an opportunity to open one small slice of the public’s

airwaves to greater consumer choice and to much greater technological innovation. The Commission must, however, be careful, as

I am sure they know, to ensure that this proposal does not result

in increased costs to consumers.

I am also interested to know how the Commission will address

the needs of public safety communications. The answer is through

the auction. Improving communications interoperability must be a

priority as the Commission completes the rules. This is a crucial

issue for the public safety community and indeed, for the country.

I am concerned about the Commission’s process relating to waiver

requests on integrated cable set-top boxes. The statute requires the

Commission to grant waiver requests within 90 days of when the

application is filed. Many requests were pending for much longer

than that. The statute allows the Commission to grant a waiver,

when necessary, to assist the introduction of new or improved services.

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In some cases, however, the Commission determined that even

though a waiver request did not meet this statutory requirement,

the Commission could grant waivers pursuant to other means. I

find this a matter of great concern. I am concerned that this procedural maneuvering has not been fair, open and transparent to all

policies involved and to all parties involved. It certainly does not

give me comfort in how that has been done.

Finally, 1 year ago today, Senators Inouye and Dorgan, Chairman Markey and I sent a letter to the chairman concerning forbearance petitions. I was concerned then, as I am now, that it is

possible that a forbearance petition could be deemed granted when

a minority of the commissioners support it. We ask the Commission

to take steps to see that such procedural failure does not occur

again. I hope the Commission provides details today on how it will

avoid the problem of action through inaction in the future.

Mr. Chairman, I thank you and your associates and colleagues

at the Commission for being here today, and I look forward to hearing your testimony. Mr. Chairman, I thank you for your courtesy.

I yield back the balance of my time.

Mr. MARKEY. The gentleman’s time is yielded back, and we now

recognize the gentleman from Washington State, Mr. Inslee.

Mr. INSLEE. I will reserve my time, Mr. Chairman. Thank you.

Mr. MARKEY. The gentleman’s time has been reserved, and by

unanimous consent, the gentlelady from Tennessee, although she is

not a member of this subcommittee, can be recognized to make an

opening statement. Without objection, you are so recognized. Welcome.

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE

Mrs. BLACKBURN. Thank you, Mr. Chairman, and again, I appreciate your consideration for allowing me to participate by unanimous consent in the hearing today, and I am looking forward to the

testimony from our commissioners. I think the time is certainly

ripe for rigorous oversight of the FCC, and you are currently presiding over a host of issues. I think it is a staggering docket of critical issues that will shape the long-term future of American communications law, including wireless spectrum, the auction, wide ranging broadband expansion proposals, digital TV transition and so

many other issues. It is therefore critical for Congress to remain

actively engaged in the Commission’s regulatory process and today’s committee hearing is an excellent opportunity to follow up on

several outstanding issues that were raised during this subcommittee’s work on March 14 in that oversight hearing.

Our colleagues have an active interest in several issues that will

arise as we move forward, but I think none is more pressing than

the 700 MHz auction that is upcoming. Mr. Chairman, as you

know, it is well known to all our colleagues that the Commission

will soon determine the rules that will govern this auction. The

auction was authorized by Congress during the Deficit Reduction

Act of 2005, which I believe is an important factor that many times

gets glossed over as we discuss this issue and have a debate, and

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it is important that the Commission establish a fiscally responsible

free market oriented process that will govern the auction.

Anything else may threaten the goals that Congress passed and

the president approved in 2005, which is to save the taxpayer

money and to reduce the deficit. The Commission therefore has an

opportunity to accomplish this goal while at the same time spurring innovation in the wireless market. Neither of these goals will

be achieved, however, if the Commission imposes burdensome and

unnecessary open access regulations or licenses on our licensees

that might jeopardize the potential for revenue generation and corporate interest in the auction.

The auction process enacted by Congress and implemented by

the Commission has developed a track record of success in the

wireless industry for over a decade, and as a result, wireless licenses were granted to entities that provide billions of dollars in

proceeds for the U.S. Treasury and made efficient use of spectrum

as determined by the market during this time. The auctions were

successful due to an FCC-governed process that did not saddle licensees with burdensome regulation.

Mr. Chairman, let us keep our eye on the ball and achieve the

goals that Congress established in the Deficit Reduction Act and

ensure that the 700 MHz auction will drive the next wave of innovation in the wireless market and make it a success. I yield back.

Mr. MARKEY. The gentlelady’s time has expired. While the

gentlelady was speaking, the New York delegation arrived at our

hearing, and we will begin by recognizing the gentleman from New

York, Mr. Engel.

OPENING STATEMENT OF HON. ELIOT L. ENGEL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW

YORK

Mr. ENGEL. Thank you very much, Mr. Chairman, for holding

this important hearing. I would like to thank the commissioners for

their time today and am pleased to welcome them back to the committee. I especially thank Commissioner Copps, who I met at the

Harry Potter screening not long ago. I would like to start by thanking Chairman Martin and the commissioners for granting experimental authority to the Metropolitan Television Alliance to operate

a digital television system on select channels in New York City.

Several of my colleagues on the committee, including the distinguished chairman and ranking member of the subcommittee and

my New York colleagues on the committee, Congressmen Towns

and Fossella, joined me in sending a letter to the FCC requesting

they expedite and grant a temporary authorization to MTVA, and

shortly after the application was approved. I believe it is an important step to ensure that there are adequate digital signals from the

Empire State Building. Obviously, New York has had a great problem with this since September 11. Needless to say, we do not want

to leave the largest media market in the dark in February 2009,

and I thank the Commission for their efforts to help New York.

Today we will hear many of our colleagues bring up an array of

important issues that is within the FCC’s jurisdiction. One issue

that is of particular importance to me is the state of the DTV transition. The FCC has been tasked with the responsibility of the sucVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00319 Fmt 6601 Sfmt 6601 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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cess of this transition. While I am pleased to learn of some of the

recent actions taken by the Commission to educate the consumer

of this historic transition, I believe more needs to be done. I always

mention this. That is why I introduced the National Digital Television Consumer Education Act. I am pleased to report that the Association of Public Television Stations have endorsed this important bill. Mr. Chairman, I ask unanimous consent to submit their

letter of support for the record.

Mr. MARKEY. Without objection, it will be included.

Mr. ENGEL. Thank you. Last week, NTIA and the Department of

Homeland Security announced the distribution of a $1 billion interoperability grant program that I, along with several of my colleagues on this committee, Mr. Stupak and others, set aside in the

last Congress. The funding for this important program will come

from the upcoming 700 MHz spectrum auction. This is just one example of how important the revenue from the auction will be. I

urge the Commission to keep that in mind as they set out to create

rules for the auction. I encourage the Commission to generate the

largest amount of revenue from the auction and that it is reflective

of the true value of the spectrum.

I am also concerned about placing unlicensed personal and portable devices in the TV band and the potential interference that can

arise. Since 9/11, New York has had problems with its TV towers,

making consumers in the market more susceptible to interference.

Given the risks involved, I encourage the Commission to thoroughly test these new devices in areas like New York to guarantee

there will be no interference to DTV receivers.

Finally, I would like to point out that just yesterday, Sirius and

XM satellite radio announced that should the proposed merger be

completed, they will be able to offer consumers a variety of programming options that can better fit individual tastes and financial

flexibility in choosing their programming choices, so I again welcome the Commission today at this hearing. I am eager to hear

what the commissioners have to say about these important issues

and look forward to the opportunity to engage them during my

question time. I thank you, Mr. Chairman.

Mr. MARKEY. The gentleman’s time has expired. The Chair recognizes the gentleman from New York, Mr. Fossella.

Mr. FOSSELLA. No statement.

Mr. MARKEY. And I think that all time now for opening statements from members of the subcommittee has been completed, so

we will turn to our very distinguished panel, the Federal Communications Commission, and first we will recognize the chairman of

the Commission, Chairman Kevin Martin. We know that over the

last month or so you have been in a competition with Job for all

of the bad things that can happen to one family, but in my conversations with you, they all seem to be turning out well in the end

and for that, we are all glad, and we don’t mean to add to your

woes yet today, but perhaps compared to what you have been

through, this now is something that doesn’t quite seem as onerous.

We hope so, anyway. So we welcome you, sir, and whenever you

are ready, please begin.

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STATEMENT OF HON. KEVIN J. MARTIN, CHAIRMAN, FEDERAL

COMMUNICATIONS COMMISSION

Mr. MARTIN. Thank you, and thank you for your comments about

my personal situation. I appreciate it very much. Good morning,

Chairman Markey and Ranking Member Upton and all the members of the committee. Thank you for inviting me to be here with

you this morning. I will offer some brief comments, and then I look

forward to hearing your thoughts and answering any questions you

may have. Let me also say that I appreciate your flexibility and understanding in providing me some additional time to respond to

your recent written questions in light of the recent eye surgery that

I have had.

When I last appeared before you, I explained that the Commission was focused on accomplishing several critical goals: increased

broadband deployment, encouraging wireless deployment, promoting competition, protecting consumers and enhancing public safety.

We have continued to vigorously pursue these objectives during the

past few months, and I look forward to continuing our dialog on the

Commission’s efforts.

This morning I would like to spend some time updating you on

two key issues that have been at the forefront of Congress’s attention and the Commission’s agenda: the upcoming spectrum auction

of the 700 MHz band and the DTV transition. Both of these issues

present both great opportunities for consumers and difficult challenges for policy makers. In implementing Congress’s directive to

reallocate the airwaves, the Commission must balance often competing interests while maintaining its focus on serving the public

interest and the American people.

The upcoming 700 MHz auction presents the Commission the opportunity to address several important policy goals. I believe I have

put forth a fair and balanced plan that will help facilitate next generation wireless broadband services in both urban and rural areas;

establish a public-private partnership to deploy a wireless

broadband network for public safety that will address the interoperability problems of today’s system; and provide a more open

wireless platform that will facilitate innovation and investment.

One of the most important steps we can now take to provide affordable broadband to all Americans is to facilitate next generation

wireless broadband service. A coalition of companies that support

a national wireless broadband alternative, Intel, Skype, Yahoo,

Google, DirecTV and EchoStar, urged the Commission to structure

the auction in such a manner that it would maximize the opportunity for a new national wireless broadband service to emerge.

They urged the Commission to make available at least one 11 MHz

paired block offered over large geographic areas with combinatorial

bidding so that national services could be established. I put forward a proposal that would meet these requirements. My proposal

will also significantly increase opportunities for small and rural

carriers to obtain spectrum at the auction as well. The proposed

plan would provide for a variety of geographic license areas and

spectrum block sizes. I am also proposing stringent build-out requirements, the strictest build-out that the Commission has ever

proposed, to help ensure that the rural and underserved areas of

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the country will benefit from the provision of new services that this

spectrum can facilitate.

Meeting the needs of public safety is critically important. Recent

crises like 9/11 and Hurricane Katrina have made us well aware

of the problems that are created when public safety officials cannot

communicate with one another. To that end, my proposal for the

upcoming auction would help create a truly national interoperable

broadband network for public safety agencies to use during times

of an emergency. Many national and local public safety organizations expressed support for a public/private partnership approach.

A national commercial licensee would work together with a national public safety licensee to build such a shared network. Providing for shared infrastructure will help achieve significant cost efficiencies, while maximizing public safety access to interoperable

broadband spectrum. My proposal would also include a number of

requirements and procedures to safeguard services to public safety

entities and address concerns about the success of the partnership.

Finally, I have proposed that the license winner for about onethird of the spectrum be required to provide a platform that is

more open to devices and applications. Consumers would be able to

use the wireless device of their choice and download whatever software they want to use on this platform. Currently American consumers are too often asked to throw away their old phones and buy

new ones if they want to switch cell phone carriers. And when they

buy that new phone it is the wireless provider, not the consumer,

who chooses the applications the consumer will be allowed to use

on the Internet using that new handset. Wireless consumers in

many other countries face far fewer restraints. For example, they

can take their cell phones with them when they change carriers,

and they can use widely available Wi-Fi networks available in their

homes, and at the airport or at other hot spots, to access the Internet.

The upcoming auction provides us a rare chance to promote a

more open platform, encourage wireless innovation without disrupting the existing networks or business plans. To be clear, I have

not proposed to apply these same principles to the entire 700 MHz

band or to the other existing networks. Nor have I proposed to

apply network neutrality obligations, unbundling or mandatory

wholesale requirements for this or any other block. I do believe,

however, this modest step can help ensure that the fruits of innovation on the edges of the network swiftly pass into the hands of

consumers. In addition, the Commission must recognize that spectrum is a unique public asset, and we must obtain a fair return on

that asset for the American people.

To ensure that a fair price is paid, I have proposed a reserve

price for this block of spectrum, as well as an overall reserve price

for the entire auction. These reserve prices, which are based on the

winning bids for the spectrum in our most recent AWS auction, will

safeguard the value of the spectrum for the American taxpayers.

The second issue I would like to highlight briefly this morning

is the broadcaster switch to digital television, digital technology

itself. The transition will enable viewers to enjoy movie quality picture and sound, multiple program choices and interactive capabilities. Success, however, depends upon ensuring the appropriate poliVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00322 Fmt 6601 Sfmt 6601 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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cies are in place to minimize the burdens and the costs borne by

consumers. It also depends upon Government and industry working

together to promote consumer awareness. As I recently assured

you, Chairman Dingell and Chairman Markey, the Commission is

working consistent with its statutory authority and budgetary capacity to ensure that no American is left behind in this part of the

digital revolution.

The Commission, therefore, has initiated several rulemaking proceedings designed to facilitate the upcoming transition. In one recent proceeding the Commission proposed to ensure that cable subscribers do not lose access to broadcast signals because of the digital transition. About 50 percent of cable subscribers today, at least

32 million people, 32 million households, subscribe to analog and

not digital cable. These consumers are at risk of losing their ability

to watch broadcast television after the digital transition unless the

Commission acts. And just last week the Commission adopted a notice of proposed of rulemaking on several DTV education initiatives

that were originally suggested by Chairman Dingell and Chairman

Markey.

In addition to our policymaking activities, we have also been vigorously enforcing our digital transition-related rules. I recently presented my colleagues with a notice of apparent liability against

several large retailers for violating the Commission’s television labeling requirements. These fines in the aggregate total over $3 million. And finally, in addition to our policy and enforcement activities, we have devoted resources to promoting consumer awareness

of the upcoming transition, through education and outreach efforts.

The Commission must keep working to ensure that through the

upcoming wireless auction and digital transition, consumers are

able to experience the best that technology has to offer. This means

that we must work to both minimize the negative impact of the

digital transition on consumers and introduce more competition

and innovation in the wireless broadband market. By doing so, we

can ensure that consumers can reap the vast rewards that the digital revolution offers. The Commission’s ultimate trust and responsibility is, after all, the public interest, and it is from the public’s

airwaves that these opportunities flow. In both the 700 MHz auction and the DTV transition, we cannot lose sight of that goal.

Thank you very much, and I look forward to your questions.

[The prepared statement of Mr. Martin follows:]

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Mr. MARKEY. We thank you, Mr. Chairman, very much. And now

we will recognize the other commissioners, each for 5 minutes, to

make opening statements if they should so desire. We will begin by

recognizing Commissioner Michael Copps. Welcome, sir.

STATEMENT OF MICHAEL J. COPPS, COMMISSIONER,

FEDERAL COMMUNICATIONS COMMISSION

Mr. COPPS. Thank you, Mr. Chairman, and thank you all, members of the committee, for being here this morning. Let me use a

few moments to focus on the same three priorities that I talked

about last time we gathered together, public safety, media and

broadband, because these are priorities that just do not go away.

First, public safety. The 700 MHz auction raises a lot of difficult

issues, and you have raised many of them this morning. But the

most important, by far, is how we use this auction to enhance the

safety of the people. We have here a once-in-a-lifetime opportunity

to provide the Nation’s first responders with access to a nationwide

interoperable broadband network. My first preference, by far,

would have been a dedicated federally-funded network reserved

solely for first responders. At this late date, that is apparently not

to be.

Given this reality, I believe that pursuing a shared public/private

model becomes the right choice. The challenge is to make sure that

this network actually works for public safety. To me, this means

it is built to public safety standards and that its effectiveness cannot be curtailed by commercial decisions, and it means strong ongoing FCC involvement all along the way. I can support public safety

negotiating a network sharing agreement with a commercial licensee, but if that agreement is not sufficiently protective of public

safety’s interest, I believe the Commission must retain the right to

reject it. I would rather go back to the drawing board than approve

an arrangement that would compromise our Nation’s first responders. This is one proceeding where we must not fail.

Second, media. This is so important to me because it is so important to our democracy. The good news is that the world has

changed since the Commission’s misguided media ownership proceeding 3 years ago. We can aim higher now. We still need to be

vigilant about stopping bad new rules from being adopted, but I

think there is an opportunity now and a real hunger out there to

go back and change some of the bad old rules that helped get us

in this mess in the first place. We can start with the FCC licensing

process. Let us get back to an honest to goodness licensing system

that doesn’t grant slam dunk renewals but looks at whether a licensee is really doing his job to serve the local community. The

FCC’s lax licensing process no longer provides any incentive for

broadcasters to do the right thing. Those that serve their local communities and those that do nothing receive the same rubberstamp

renewal. It is time to end the free ride and require that all broadcasters meet certain minimum public interest obligations.

The other media issue desperately requiring our attention is the

DTV transition. This one should keep us up at night. Huge and potentially very disruptive changes are on their way to TV consumers. Yet a survey earlier this year found that 61 percent of consumers still have no idea that the transition is coming and what is in

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it for them. Contrast this with a report from the UK, where 8 in

10 are already aware of the switchover, and their transition runs

from 2008 to 2012.

The first message that consumers hear cannot be about how to

get a converter box for a transition they have never heard of before.

We first need to explain to them why the transition is happening

and how it benefits them. To the extent that consumers feel that

this is something the Government is doing to them rather than for

them, we will face a very messy backlash. So we had better do outreach in a more serious way. Web sites and pamphlets are fine, but

they are not going to get the job done. The best way to reach analog television viewers is through analog television programming.

And I want to thank Chairman Dingell and Chairman Markey for

their suggestion that we consider mandatory public service announcements by broadcast licensees. That is a great idea.

Third, broadband. Our biggest infrastructure challenge as a Nation is bringing broadband to all of our citizens, and we are not

doing a very good job. By any measure, no matter how you cut the

salami or slice the baloney, Americans are getting too little

broadband at too high a price. The 700 MHz auction could help

turn this around. If we get it right, this auction offers the prospect

of new competition, innovation and consumer choice, perhaps even

a third broadband pipe. Here is another huge step we could take:

include broadband as part of comprehensive Universal Service

Fund reform to keep our Nation competitive in the global economy.

And I am going to end this statement like I ended my statement

the last time, on the closed meeting rule. Think about this for a

minute. This hearing is probably the only time before we five commissioners vote on the 700 MHz proceeding, with all of its farreaching implications, the only time we will be able to talk about

it together. Wouldn’t it make more sense and wouldn’t it be better

for the country if we had some opportunity to sit down and have

a full and frank discussion of all of these important proposals and

all their implications? So I respectfully suggest again that you consider modifying the closed meeting rule so that more than two of

us can meet and talk at one time.

Thank you for your attention, and I look forward to our conversation this morning.

[The prepared statement of Mr. Copps follows:]

TESTIMONY OF MICHAEL J. COPPS

Chairman Markey, Congressman Upton, members of the subcommittee: Thank

you for the invitation to return here this morning. In this brief statement, I will

focus on the same three priorities I discussed with you last time we gathered together—public safety, media, and broadband. They just don’t go away.

First, public safety. Before us now is the 700 MHz auction. It raises many difficult

issues, but the most important by far is how we use it to enhance the safety of the

people. We have here a once-in-a-lifetime opportunity to provide the Nation’s first

responders with access to a nationwide, interoperable broadband network. My first

preference—by a long shot—would have been a dedicated, federally-funded network

reserved solely for first responders. At this late date, that is apparently not to be.

Given this reality, I believe that pursuing a shared public-private model becomes

the right choice. The challenge is to make sure that this network actually works for

public safety. To me, this means it is built to public safety standards and that its

effectiveness cannot be curtailed by commercial decisions. And it means strong, ongoing FCC involvement all along the way. I want to make one thing clear at the

outset. I can support public safety negotiating a network sharing agreement with

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a commercial licensee. But if that agreement is not sufficiently protective of public

safety’s interest, I believe the Commission must retain the right to reject it. I would

rather go back to the drawing board—whatever the political consequences for doing

so—than approve an arrangement that would compromise our Nation’s first responders. In my visits with many of you, I have shared my belief that the FCC was

less proactive and aggressive than it should have been following 9/11. Chairman

Martin, to his credit, is working to reverse that, and I am working with him, and

all of my colleagues, to make sure we get this particular proceeding right. We cannot—we simply cannot—fail.

Second, media. This is so important to me because it is so important to our democracy. Whatever great issues confront us—war and peace, health care, the education

of our children, you name it—are filtered through the media. And Americans are

rightly concerned when they feel that more and more of the information they receive

is filtered for them by fewer and fewer big media giants.

The good news is that the world has changed since the Commission’s misguided

media ownership proceeding 3 years ago. We can aim higher now. We still need to

be vigilant about stopping bad new rules from being adopted, but I think there is

an opportunity now—and a real hunger out there—to go back and change some of

the bad old rules that helped get us in this mess in the first place. With apologies

to one past FCC Chairman, television is not a ‘‘toaster with pictures,’’ and it’s high

time we cast that 1980s world-view aside and get to work creating a public interest

standard for the 21st century.

We can start with the FCC licensing process. Let’s get back to an honest-to-goodness licensing system that doesn’t grant slam-dunk renewals but looks at whether

a licensee is really doing its job to serve the local community. Did the station air

programs on local civic affairs? Did it meet with local citizens to receive feedback?

Is its children’s programming really educational? And let’s put that information up

on the Web so citizens can know how their airwaves are being used. Of course many

broadcasters want to serve their local communities. But the pressures of consolidation and the unforgiving expectations of Wall Street have made that difficult. Just

as bad, the FCC’s lax licensing process doesn’t provide any incentive for broadcasters to do the right thing. Those that serve their local communities and those

that do nothing receive the same rubber-stamp renewal. It’s time to end the free

ride and require that all broadcasters meet certain minimum public interest obligations.

The other media issue desperately requiring our attention is the DTV transition.

This one should keep us up at night. Huge and potentially very disruptive changes

are on their way to TV consumers—yet a survey earlier this year found that 61 percent of consumers still have no idea that the transition is coming and what’s in it

for them. The first message consumers hear cannot be about how to get a converter

box for a transition they’ve never heard of. We first need to explain to them why

the transition is happening and how it benefits them. To the extent consumers feel

that this is something the government is doing to them rather than for them, we

will face a very messy backlash.

So we had better do outreach in a more serious way. Web sites and pamphlets

are fine, but they’re not going to get the job done. The best way to reach analog

television viewers is through analog television programming. I want to thank Chairman Dingell and Chairman Markey for their suggestion that we consider mandatory

public service announcements by broadcast licensees. I hope that the Commission

will act quickly on this suggestion, among others they made, and that this Committee will maintain its extremely beneficial oversight of the Commission’s DTV consumer education efforts.

Third, broadband. My view of how we are doing has not changed much in the last

four months. Our biggest infrastructure challenge as a nation is bringing broadband

to all of our citizens, and we’re not doing a very good job. Since we last convened,

the OECD ranked the United States 15th in broadband penetration, down from 12th

in 2006. But if you don’t like that study, there are many others conducted by international organizations, industry associations, think tanks and business analysts

that have us at 21st, 11th, 12th, or 24th. By any measure, we’re getting too little

broadband at too high a price. The 700 MHz auction could help turn this around.

If we get it right, this auction offers the prospect of new competition, innovation and

consumer choice—perhaps even a third broadband pipe. Here’s another huge step

we could take: include broadband as part of comprehensive Universal Service Fund

reform to keep our nation competitive in the global economy.

I’ll end where I ended last time—the closed meeting rule. Think about this: today

is probably the only time before we vote that the five Commissioners will be in the

same room to talk about the 700 MHz auction with all its far-reaching implications.

Wouldn’t it be better if we had some opportunity for full and frank discussion of

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these important proposals? So I respectfully suggest that you consider modifying the

closed meeting rule so that more than two of us can meet and talk at one time.

Thank you for your attention, and I look forward to our conversation this morning.

Mr. MARKEY. Thank you, Commissioner. And now we will hear

from Commissioner Deborah Tate. Welcome.

STATEMENT OF DEBORAH TAYLOR TATE, COMMISSIONER,

FEDERAL COMMUNICATIONS COMMISSION

Ms. TATE. Good morning, Chairman Markey and esteemed members of the subcommittee. I have a brief opening but would request

that my written statement be submitted for the record.

Mr. MARKEY. Without objection.

Ms. TATE. Thank you. I appreciate, obviously, the opportunity to

appear before you all today. As I have stated before, I firmly believe that it is important for us to maintain a dialog about the

issues that we are discussing today and those that we will discuss

in the future at the FCC. At the outset I would like to commend

Chairman Dingell and Chairman Markey, Ranking Members Barton and Upton, for their continued leadership in striving to meet

the challenge of shaping our communications policies to keep up

with the ever-changing digital world, in the best interest of the

American public.

As noted, just since the last time that we were here before you

just a few months ago, the communications marketplace has continued to evolve, with new ideas, new concepts, new devices and

new technologies being announced almost every day. This constantly challenges us to adapt our regulations to these market

changes. In doing so, wherever possible my goal is to promote balanced, technology-agnostic regulation, which provides incentives to

continued investment and encourages innovation.

Today, I would like to take a moment to focus on three major

areas. First is the important work that we do on behalf of children,

families and consumers, including the areas of media and childhood

obesity, as well as broadcast programming for children, both encouraging programming that is positive and family-friendly and

healthy, as well as programming which may be having a negative

impact on our children, specifically that we recently provided a violence report to Congress and appreciate Chairman Markey’s hearing on that topic as well.

Other consumer-focused initiatives include soliciting input to

broadcast ownership and localism across the country and our efforts to ensure that the public is fully educated regarding the DTV

transition. We have also initiated steps to improve access to communications services for those with disabilities; to strengthen our

safety and privacy rules; to protect the stealing of citizens’ most

private information.

Second, I would like to discuss the Commission’s efforts at continuing to increase the deployment of broadband to all parts of this

country. We launched two initiatives that will allow the Commission to gain an even better picture of broadband deployment, where

it is and where it is not across the country, along with more accurate data. And I look forward to hearing more from you today, as

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we continue to discuss the historic upcoming 700 MHz auction,

which does present us with unprecedented and exciting opportunities for truly ubiquitous broadband to all corners of the Nation and

for all Americans to access new innovations for their work, for entertainment, for education and for healthcare, as well as for our

Nation’s global competitiveness.

Last, I want to touch on I think what we all believe is the most

important issue the Commission deals with, and that is public safety and homeland security. The upcoming 700 MHz auction also presents a unique opportunity to facilitate the establishment of this

nationwide interoperable broadband communications network for

the benefit of State and local public safety users and in the end,

for every single American citizen.

Moreover, the Commission is evaluating whether we are measuring wireless E–911 location accuracy in the most appropriate manner and whether other new communications services should be required to send more accurate information. The Commission also

continues to implement various recommendations of our independent panel reviewing the impact of Hurricane Katrina. As I heard

in Mississippi, the dissemination of this vital information and

interoperable communications are indeed the backbone of our defense not only against natural disasters but attacks on our homeland and the possibility of a pandemic health-related or environmental attack.

Again, I appreciate your invitation, and I am pleased to answer

questions.

[The prepared statement of Ms. Taylor Tate follows:]

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Mr. MARKEY. Thank you, Commissioner, very much. And now we

will hear from Commissioner Jonathan Adelstein. Welcome.

STATEMENT OF JONATHAN S. ADELSTEIN, COMMISSIONER,

FEDERAL COMMUNICATIONS COMMISSION

Mr. ADELSTEIN. Mr. Chairman and members of the subcommittee, thank you very much for inviting me to testify here today and

discussing the challenges ahead of us. My goal is certainly to keep

all of our communities connected and to bring the latest technologies into the reach of everyone in this country.

One of our central national priorities that this committee has

talked about so much is performing the widespread deployment of

affordable, truly high-speed broadband. Broadband allows our citizens to expand their economic, their educational, and their

healthcare opportunities. As we saw last night in Charleston by

way of the YouTube debate, it is revolutionizing the way that citizens participate in the democratic process. To make sure that all

of our citizens can reap the benefits of these opportunities, we need

to make sure that broadband is the dial tone of the 21st century,

available and affordable to everyone.

While we have made progress, we have failed to keep pace with

our global competitors. For Americans in rural areas, for low-income consumers and small businesses, the problems are even more

acute. The problem lies in that citizens of other countries are getting a much better broadband value in the form of more megabits

for less money. This is more than a PR problem. It is a major productivity problem for our economy, and we have got to do better.

It is time to stop making excuses and to start making solutions. We

have got to engage in a concerted effort to restore our place as the

world leader in telecommunications. All of our citizens need access

to affordable, true broadband, capable of carrying voice, data and

video.

An issue of this importance to our future warrants a comprehensive national broadband strategy. A true broadband strategy

should incorporate benchmarks, deployment timetables and measurable thresholds to gauge our progress. As Congresswoman Capps

noted, we need to set ambitious goals, beginning with updating our

current anemic definition of broadband at just 200 kilobits per second to something more akin to that used by our global competitors

in other countries that are magnitudes higher. We need more reliable specific data than the FCC currently compiles, as you also

suggested, so we can better ascertain our current problems and develop responsive solutions. We should give Congress and consumers

a clear sense of the price per megabit and better mapping of

broadband availability, as you have suggested, Mr. Chairman. Our

strategy has got to include incentives for investment, promote competition, and preserve the open character of the Internet. We have

got to channel universal service support also toward broadband deployment. I detail in my written testimony many more steps that

Congress can take outside the purview of the FCC, implementing

a truly national broadband strategy.

Another critical component for promoting broadband and providing competition is maximizing the potential spectrum-based services. We have heard a lot this morning about the upcoming 700

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MHz auction and how we can use that to best facilitate the development of broadband. We have a historic opportunity with this auction to make sure that we do facilitate the emergence of a third

broadband channel—I don’t call it a pipe, I call it a third

broadband channel—into the home, because in this case we are

talking about wireless. That could provide a truly high-quality national wireless broadband network, identifying spectrum on which

to establish a meaningful open access environment to promote

badly needed broadband competition over these airwaves. The spectrum also gives us new opportunities, as my colleagues have said,

to come to grips with our Nation’s public safety dilemma.

In our immediate agenda we face key issues, including media

ownership, particularly among women and minorities, as Congressman Rush noted, public interest and localism obligations. I have

traveled to hearings across the country and in many of your districts. I have participated with some of you, such as you, Congressman Inslee. We have heard from the people, and I can report that

the concern remains very high among many of our citizens about

the negative impact of consolidation on competition, localism and

diversity. With 18 months before the end of the analog broadcasting era, we need greater national attention on the impending DTV

transition, as Congressman Engel noted. While we have made some

progress, more focused leadership is certainly needed from us at

the FCC. I think the failure to run a well-coordinated transition

plan would lead to a tsunami of consumer complaints from

disenfranchised viewers. And you would certainly hear from them

in Congress, we would hear about it at the FCC, and all the affected industries would hear as well.

And as Congresswoman Solis noted, we need to reach especially

out to hard-to-reach communities, such as those that don’t speak

English as their primary language, elderly, minorities, many other

communities that need special attention to make sure that they all

hear about it and those communities particularly that rely heavily

on over-the-air television.

To better manage this potential disruption, I recommended that

the FCC take strong action. We should establish a clear national

message among Federal, State and local and tribal governments,

we should coordinate the array of industry activities, and we

should create a Federal DTV transition task force, once and for all.

FCC action on these initiatives is already overdue, and we certainly appreciate the leadership of Chairman Dingell and Chairman Markey. The letter that you sent us has certainly encouraged

us along, and I think we are better along the way as a result of

your efforts on that front.

Congress charged us with keeping the American public well connected and well protected, and I will do everything I can as a commissioner to make sure that I implement the laws as you have intended. Thank you for your leadership, and thank you for the opportunity to testify here today. Thank you.

[The prepared statement of Mr. Adelstein follows:]

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Mr. MARKEY. Thank you, Commissioner, very much. And our

final commissioner, Rob McDowell. Whenever you are ready, sir,

please begin.

STATEMENT OF ROBERT M. MCDOWELL, COMMISSIONER,

FEDERAL COMMUNICATIONS COMMISSION

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

Upton, Mr. Shimkus and other distinguished members of the subcommittee. Thank you for inviting us to appear before you this

morning. Since we last met on March 14, the Commission has

taken a number of significant steps that are bringing new technologies to consumers, increasing competition and lowering prices.

Before us are some of the most important issues ever reviewed by

the FCC, so it is timely that we appear before you today to answer

your questions and exchange views on these critical matters.

This year in particular the Commission is in an excellent position

to ensure that the wireless marketplace is open to an even wider

variety of entities. I have been focusing on creating new opportunities for all types of spectrum license applicants as well as unlicensed operators. In March, I supported our action to classify wireless broadband Internet access service as an information service

and therefore create regulatory parity. This determination, which

the Commission had previously taken for Internet access over cable

modem, wireline and powerline facilities, will maximize innovation

and consumer benefits by ensuring that the market-driven framework established by Congress is fully realized as wireless services

continue to flourish and evolve.

With respect to spectrum license applicants, the chairman recently circulated a draft order setting forth service rules and other

policies pertaining to the 700 MHz band. In my deliberations over

this important proceeding, I am considering many ideas that could

provide meaningful market entry opportunities, including the pros

and cons of various geographic market sizes, different ideas for dividing the available spectrum, geographic-based versus populationbased build-out requirements, and creating the proper mix of incentives that would facilitate a public/private partnership to build and

operate a nationwide broadband public safety network. As always,

I look forward to hearing your views on these important issues.

With respect to unlicensed spectrum use, the Commission’s Office

of Engineering and Technology, or OET, as we call it, is completing

its testing of several devices developed for use in the spectrum located in between TV channels, also known as the white spaces. I

understand that OET is on course for reporting these testing results later this month and to make them available for public comment. Our goal is to finalize rules this fall. I am optimistic that

technological innovation in this area will yield progress towards

many of the public policy goals being discussed today, including

some issues being analyzed in the 700 MHz proceeding.

In the media sector we have made several strides to further the

digital transition. I was pleased to support several Commission actions that will enable progress in the digital transition for television and radio. We have provided a progress report on the digital

TV transition and proposed deadlines and procedures to facilitate

the broadcasters’ final steps toward meeting the February 17, 2009

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deadline and required that retailers disclose to consumers that

analog tuner televisions will not be able to receive over-the-air

broadcast signals without a converter box, after the transition.

For radio, we adopted an historic order that established rules for

in-band, on-channel technology. These flexible rules will expedite

the transition to terrestrial digital radio and provide higher-quality

audio, diverse programming and innovative data services to the

public, on free over-the-air stations. We also have made strides toward regulatory parity among competitors in the multi-channel

video distribution marketplace, by opening a proceeding on exclusive contracts for video service in multiple-dwelling units and

issuing an order on building access for such providers.

With the advent of the triple play of video, voice and high-speed

Internet access being offered by cable, telephone and other companies, it is important that the Commission’s regulations treat similarly-situated competitors the same when possible. In the wireline

arena we have received the Joint Board on Universal Service recommendation to adopt an interim cap on the amount of support a

competitive eligible telecom carrier can receive. I am studying the

positions of the parties in that proposal and look forward to receiving more recommendations regarding fundamental reform later

this year. And I thank my three colleagues who serve on that joint

board, Chairman Martin and Commissioners Copps and Tate, for

their tireless efforts in pursuit of meaningful universal service reform.

Regarding special access, we recently acted to refresh the record

of that proceeding, an updated record that better reflects today’s

marketplace. It will hopefully provide us with the data necessary

to render a timely decision. And finally, we initiated a Notice of Inquiry concerning the state of the market for broadband and related

services. This should provide us with a record to judge whether additional policies regulating the Internet are warranted or not.

In conclusion, I am still optimistic that America’s communications future is very bright. I look forward to continuing to work

with my fellow commissioners and you, the Congress, to resolve

these important issues so that our policies bring new technologies

to American consumers. Thank you.

[The prepared statement of Mr. McDowell follows:]

STATEMENT OF ROBERT M. MCDOWELL

Good morning Mr. Chairman and distinguished members of the subcommittee.

Thank you for providing us with this opportunity to appear before you this morning.

Since we last met in March, the Commission has taken a number of important actions that I would like to highlight for you.

WIRELESS

We have been busy on the wireless front. This year in particular the Commission

is in an excellent position to ensure that the wireless marketplace is open to a wide

variety of entities. We have been working hard to create new windows of opportunity for all types of spectrum license applicants, as well as unlicensed operators.

In March, I supported our action to classify wireless broadband Internet access

service as an information service and, therefore, create regulatory parity. This determination, which the Commission had previously taken for Internet access over cable

modem, wireline and powerline facilities, will maximize innovation and consumer

benefits by ensuring that the market-driven framework established by Congress is

fully realized as wireless services continue to flourish and evolve.

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With respect to spectrum license applicants, following the Further Notice of Proposed Rulemaking adopted in April, the Chairman recently circulated a draft order

setting forth service rules and other policies pertaining to the 700 MHz band. As

you know, Congress has mandated that this spectrum be auctioned no later than

January 28, 2008. As a result, I am currently actively considering many ideas intended to stimulate meaningful opportunities, including, for instance, geographic

market sizes, construction requirements, and possible incentives for the private sector to partner with public safety agencies. As always, I am interested in hearing

your views regarding this important proceeding, and I am pleased to have an opportunity to do that in person today.

With respect to unlicensed spectrum operators, at this time, the Commission’s Office of Engineering & Technology (OET) is completing its rigorous testing of a number of protocol devices developed for unlicensed use in the spectrum located in between the TV channels. I understand that OET is on-track for reporting these testing results later this month and that the chairman intends that the Commission

finalize rules this fall. Of course, the technology innovation spurred by the Commission’s leadership in the white spaces proceeding plays a critical role in the wireless

marketplace, including fostering job growth and related business opportunities. I am

optimistic that technological innovation in this area will yield progress toward many

of the public policy goals being discussed today.

I am hopeful that our work to prepare for the 700 MHz auction and future deployment in the white spaces, along with the certainty created by our action to classify

wireless broadband Internet access service as an information service, will broaden

the opportunities available to entities seeking to enter the global wireless marketplace, whether as licensees or as unlicensed service providers.

MEDIA

In the media sector, we have made several strides forward as well, particularly

with respect to the digital transition for both television and radio, as well as taking

steps toward regulatory parity among competitors in the multichannel video distribution marketplace.

In March, we adopted a historic order for the radio industry. In the order, we

adopt service rules and other licensing and operational requirements for terrestrial

digital radio using in-band, on-channel (IBOC) technology. Our rules provide both

the regulatory certainty and the flexibility that the broadcasting industry needs to

expedite the transition to digital radio and to provide higher quality audio, diverse

programming and innovative data services to the public on free, over-the-air stations. Our Order enables broadcast entrepreneurs to bring to the marketplace this

powerful new technology—which enables a single station to provide multiple

streams of programming—to the benefit of all American consumers.

In April, I was pleased to support several Commission actions taken to further

the digital television transition. First, in a Notice of Proposed Rulemaking, we provided a progress report on the digital transition and proposed deadlines and procedures to ensure that the February 17, 2009 transition date is met and to offer regulatory flexibility to broadcasters to facilitate their construction of digital facilities by

the deadline. Since Congress established the transition deadline, the Commission

has moved beyond simply ensuring that stations were capable of operating in digital

to focus on facilitating broadcasters’ construction of their final, post-transition channel facilities. In this Notice, we analyze and consider the specifics on when stations

may and must cease analog operations, when they may and must begin operating

on their post-transition digital channel and what regulatory flexibility we can provide to ensure that the complicated, coordinated switch to DTV becomes a reality.

To address the issue of consumer education about the DTV transition, we also

issued an order that requires that retailers disclose, at the point of sale, that televisions that include only an analog tuner will not be able to receive over-the-air

broadcast signals without a converter box after February 17, 2009. The disclosure

requirements we adopted will ensure that consumers have this material information

before they make a purchase. One of the biggest challenges the Commission faces

over the next 2 years is moving our Nation from analog to digital television with

minimal consumer disruption. Consumer education about the transition to DTV has

been limited so far. This order takes a big step forward to educate consumers.

Given Congress’s DTV deadline for broadcast stations, the natural next step for

the Commission is to review how cable operators will carry the broadcasters’ digital

signals. In April, I was pleased to support a notice of proposed rulemaking in which

we seek comment on the obligations of cable operators, after the conclusion of the

digital transition, to ensure that the digital signals of ‘‘must carry’’ stations are not

materially degraded and are viewable by all cable subscribers, as required by law.

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Even though broadcasters will be all digital by the deadline, some analog cable

equipment will remain in cable systems and in the homes of cable subscribers. Accordingly, we must address how to ensure that cable subscribers are able to view

the higher quality signals provided by the broadcast stations in their communities.

The notice initiates our review.

The Commission also has been working to achieve regulatory parity between incumbent telephone companies, incumbent cable companies and new entrants into

the voice, video and data markets. To help create an environment where investment, innovation and competition can flourish, it is imperative that government

treat like services alike, preferably with a light regulatory touch. With the advent

of the ‘‘triple play’’ of video, voice and high-speed Internet access services being offered by cable, telephone and other companies, it is important that the Commission’s regulations treat all competitors the same when possible.

In March, we issued a notice of proposed rulemaking to uncover whether there

is a need for the Commission to regulate exclusive contracts for the provision of

video services to multiple dwelling units (MDUs) and whether the Commission has

the authority to craft such regulations. In the notice and in an order adopted in May

on access to wiring inside MDUs, we examine building access issues in a platform

neutral manner with respect to all video providers, be they telephone companies, incumbent cable providers, over-builders or others. I hope that competition for all

services, and across all platforms, does not stop, literally, at the doorstep of apartment and office buildings across America.

PUBLIC SAFETY AND HOMELAND SECURITY

In addition to considering the public safety matters related to the 700 MHz band,

which I discussed earlier, I have supported a number of recent actions in support

of public safety and homeland security efforts. First, in May, I voted to approve a

Notice of Proposed Rulemaking that invites comment and debate on a proposal that

would require licensees subject to our Enhanced 911 rules to satisfy a more stringent location accuracy requirement. Certainly it is of paramount importance that

E911 service satisfies the needs of public safety personnel, as well as the expectations of America’s wireless consumers, and I am hopeful that our inquiry will serve

as a positive start to a challenging task.

Also in May, the Commission took steps to increase the reliability, security and

efficacy of the Nation’s Emergency Alert System (EAS) network to enable Federal

and state authorities to communicate rapidly with the public in times of crisis. Specifically, we adopted an order that: requires EAS participants to accept messages

using Common Alerting Protocol (CAP) when CAP is approved by FEMA; requires

common carriers providing video service to participate in EAS as broadcasters and

cable and satellite providers already do; and permits the transmission of state-level

EAS alerts that are originated by Governors or their designees. This Order establishes a framework for the next generation of EAS, which through innovative technologies will provide a redundant, more resilient system for delivering emergency

alerts. The upgraded EAS that CAP will enable also will ensure better outreach to

all Americans, including non-English speakers and persons with hearing and vision

disabilities.

I also supported our action to move forward on a number of the recommendations

made by the Independent Panel Reviewing the Impact of Hurricane Katrina on

Communications Networks. I found this action to be particularly constructive in

that our efforts regarding emergency preparedness have broad applicability, given

the need to plan for not only natural disasters such as hurricanes, but also for incidents like terrorist attacks, influenza pandemic outbreaks and industrial accidents.

Any of these emergencies could result in sudden and significant shortages of personnel, a surge in communications traffic, possible disruptions to communications networks (due to increased telecommuting during an influenza pandemic, for example),

and lack of manpower to immediately repair affected communications networks. I

am pleased that we have built upon the lessons learned from the Hurricane Katrina

disaster to promote more effective, efficient response and recovery efforts, as well

as heightened readiness and preparedness.

SATELLITE

In April, I was pleased to support a constructive step forward to create new opportunities for more competition in the satellite industry. The services offered in the

17/24 GHz band will include standard-definition and high-definition formats, and

will provide a mix of advanced, multi-media services to residential and business

subscribers located not only in the continental United States but in Alaska and Hawaii as well. I am particularly pleased that these new rules require operators to

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construct each satellite to accommodate the provision of service to Alaska and Hawaii in the event the satellite reaches, or is moved to, an orbital location that would

provide this coverage. Because of our light regulatory touch, this action will ease

the ability of diverse entrants to introduce exciting new services to American consumers living in urban, rural and insular areas.

WIRELINE

We have received the Federal-State Joint Board on Universal Service recommendation to adopt an interim, emergency cap on the amount of universal service high-cost support that competitive eligible telecommunications carriers receive.

The Joint Board is considering more fundamental reform recommendations to the

Universal Service Fund which we expect to receive sometime this fall. Now that

comments on the interim cap recommendation have been filed with the Commission,

I look forward to working with my fellow Commissioners to forge a solution to the

crisis facing the Universal Service Fund.

On July 9, the Commission requested parties to refresh the record in the special

access proceeding. I support this opportunity for parties to supplement their comments to reflect the mergers and the GAO Special Access study so that we will have

a complete record to determine the best approach. I would support an effort to make

a decision at a time when the Chairman sees fit.

In March, I supported a Notice of Inquiry that asks broad questions about the

state of the market for broadband and related services, whether abuses are occurring in the market that affect the offering of content on the Internet or the development of new technologies, and the ultimate effect on consumers. This gives parties

who fear market failure an opportunity to present evidence, of which we have none.

It also gives those who argue that the market is working well and no further regulation is needed to make their case. Now that comments have been filed, I am reviewing the record to see whether additional policies related to regulating the Internet

are warranted.

In summary, I continue to be optimistic that our Nation’s communications future

holds great potential for consumers. I look forward to working with my fellow Commissioners, with your continued guidance, to bring new technologies to the marketplace.

Mr. MARKEY. Thank you, Mr. Commissioner. And now the Chair

will recognize himself for a round of questions.

When you go into a store to buy a TV, the person in the store

doesn’t ask you: ‘‘Do you subscribe to Verizon or Comcast or Time

Warner? Do you have DirecTV? Do you have cable?’’ You just buy

the TV set, and you assume it is going to work with all of them.

So my question to the commissioners is this: Chairman Martin has

a proposal that for one-third of the spectrum, that Carterfone principles will apply for that part of the spectrum. You will be able to

take your device that you purchase with you from one service to

another. But no matter what device you buy, you will be able to

use it on that part of the spectrum. Do you agree with that, Commissioner Adelstein?

Mr. ADELSTEIN. Well, I certainly do. I have looked at what is

going on in Europe and Asia, and they have much more flexibility

there. We had a group of frustrated entrepreneurs from Silicon

Valley that came before us.

Mr. MARKEY. So your answer is yes?

Mr. ADELSTEIN. Yes.

Mr. MARKEY. You do support?

Mr. ADELSTEIN. Yes.

Mr. MARKEY. Commissioner Copps?

Mr. COPPS. Yes, I do, as one of the folks who pushed for principles of access.

Mr. MARKEY. Your answer is yes?

Mr. COPPS. My answer is yes.

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Mr. MARKEY. Commissioner Tate?

Ms. TATE. I know that you want me to have an answer, Mr.

Chairman, but at this point I really don’t. I am still weighing all

the commenters. I have a meeting with Google and other people

this afternoon that I haven’t met with since the chairman’s item

was put out on the floor. So as to this I have an open mind.

Mr. MARKEY. As a consumer, would you want to be able to use

any device that you purchase with the cell phone service that you

have?

Ms. TATE. As a consumer, yes, sir.

Mr. MARKEY. Thank you. Commissioner McDowell.

Mr. MCDOWELL. Thank you, Mr. Chairman. I am still studying

the issue as well. I would like to see the marketplace go there. The

question is whether it goes there through a natural evolution or

through a Government mandate.

Mr. MARKEY. We waited for 100 years for the marketplace to give

people a choice of black rotary dial phone in everyone’s living room

or something else, and the marketplace never went there because

the telephone companies never gave people that option. So this is

the opportunity for the Federal Communications Commission to

give people an option to do so.

Mr. MCDOWELL. I understand it is an open situation. It is very

fluid. I have an open mind on all of this, but I do look at the fact

that we have about 10 Wi-Fi enabled phones that are usable on

any Wi-Fi network. Some are proprietary. That would be probably

on the order of about 14 phones there in the industry. I believe

that the walled garden model is one that is doomed to fail. Just go

ask America Online about that. But at the same time——

Mr. MARKEY. So right now your answer is yes or no?

Mr. MCDOWELL. I am considering all of the arguments.

Mr. MARKEY. OK, please do so, and please let me keep my phone

and let me take it wherever I want. I would ask that of you. Commissioner Tate, in your joint letter with Chairman Martin to me

about childhood obesity and children’s TV advertising you stated,

‘‘restrictions on the type of advertising that airs during children’s

programming may be necessary, absent sufficient industry guidelines.’’ We recently had 11 food companies come forward with voluntary pledges, but other than Disney, which I praise, and Sesame

Workshop, which I do as well, we do not have similar commitments

from broadcasters or, importantly, cable programmers such as

Viacom and Time Warner. Do you continue to believe that the

Commission may have to act in this area if the media companies

do not take voluntary action soon?

Ms. TATE. Well, I continue to be optimistic that they will. And

in fact, the reason that our childhood obesity task force, I think,

was so important is because it did bring together not only the food

and beverage companies and all of those folks that are involved in

the food preparation in our country, but it also brought together

the advertisers and the media.

Mr. MARKEY. So is your answer a yes, that you think that we

may have to——

Ms. TATE. My answer is that I would like to wait until September to see what comes out of our obesity task force.

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Mr. MARKEY. And if they don’t, if the media companies don’t

make any commitment to protect children, do you think the Commission will have to act?

Ms. TATE. I would certainly be open to reviewing it at that point.

Mr. MARKEY. I would strongly urge that that be the case. And

Chairman Martin, millions of consumers pay a wireless termination fee of $175 or $200. This inhibits the ability of a consumer

to switch carriers. Often a consumer has a fee renewed when a consumer extends service, or adds minutes to a plan, without getting

a new phone. Do you think that these plans are unfair, too high,

anti-competitive? Could you give us your view?

Mr. MARTIN. Sure. I am concerned about some of the practices

that are going on in the wireless industry, as it relates to early termination fees, particularly when you talk about early termination

fees, that the arguments for why the carriers are all imposing them

is to recoup the cost of the equipment and yet that equipment is

something that the consumers are not allowed to take with them

afterwards. So I think that there are some practices I am concerned about.

Mr. MARKEY. Would it undermine your wireless Carterfone proposal if that particular issue is not fixed?

Mr. MARTIN. I don’t think it would necessarily undermine it, but

I think it is something that the Commission is going to have to look

at trying to address in a comprehensive way, anyway.

Mr. MARKEY. And I hope that you do that as well. I just, again,

feel that consumers are put in a very unfair position in their relationship with their phone companies. Let me now turn and recognize the gentleman from Michigan, Mr. Upton.

Mr. UPTON. Well, thank you, Mr. Chairman, and I apologize to

the commissioners for having stepped away. We had an important

issue on the House floor that dealt directly with my State, and I

needed to participate, and we will have a vote on that a little bit

later this afternoon.

Chairman Martin, it is clear from Google’s filing this last Friday

that they probably have no intention of participating in the auction

unless you give them all of the conditions that they are asking for.

So if that is the case, why not just drop the conditions and have

a fair auction rather than jeopardize the spectrum and the auction

proceeds, with the complicated reserve price and perhaps delay and

even the need for a re-auction of that part of the spectrum?

Mr. MARTIN. The proposal I have put forth isn’t designed to facilitate the entry of any one particular company. Indeed, it isn’t the

plan that has been proposed or supported by any company. I think

it is actually, though, the plan that is in the best interest——

Mr. UPTON. So everyone is against it?

Mr. MARTIN. I am not sure consumers will be against it. I actually think consumers will like the ability to take devices from one

service to another. The criticisms that have come forth from the

wireless industry about consumers not wanting to be able to take

devices from one network to another are very similar to the criticisms they put forth saying that consumers didn’t want to take

their telephone number from one service to another. And they all

said that if consumers wanted that, the wireless industry would

have provided it on its own. As soon as the Commission required

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it, 32 million consumers switched wireless carriers and took their

telephone number with them. I think this is another example of

where, just because the wireless companies haven’t offered, it

doesn’t mean consumers won’t want it. While I admit that there

isn’t a company that supports what I propose, I think consumers

will.

Mr. UPTON. Well, all of us are aware of the difficult business environment that newspapers are experiencing today, and we know

that the Tribune Company has filed for a temporary waiver to the

FCC’s cross-ownership rule so that in fact it can reorganize. I know

that you have received letters and comments from both sides of the

aisle, including just from this committee, Mr. Rush, Hastert,

Shimkus, as well as Senators Reid, Durbin, Schumer, asking to

move expeditiously, and certainly, as you know, I have associated

myself with their comments. Are you able to give us the status and

the potential timeframe for where things may be in terms of reviewing this and taking some action?

Mr. MARTIN. Sure. That merger application was filed. The comments have just finished coming in on that. We try to review those

kind of mergers within 180 days, which would put this merger,

that would put the Commission considering this transaction sometime in the fourth quarter of this year. And while it is very complicated and obviously raises a lot of controversial issues, I would

hope that we would be able to try to meet that same kind of timeframe that we have tried to do on other complicated and contentious mergers.

Mr. UPTON. By some estimates, the unencumbered auction could

bring in as much as $20 billion. The CBO number was a little

lower than that, but I think many of us think that we will be able

to hit that $20 billion. But if we have this proposal with the minimum reserve price with an encumbered provision, there are a number of folks who actually think that that price may be less than

that, in terms of the calculations. If the reserve price isn’t met,

which spectrum gets re-auctioned and when? And if there is a reauction, if that does happen, how are you going to be able to meet

the statutory requirement that the proceeds be deposited by June

30, 2008, in terms of making the accommodations that you will

have to make?

Mr. MARTIN. Well, if the reserve price isn’t met, then all of the

commercial spectrum would end up being re-auctioned, with the exception of the public safety private partnership, to make sure that

that piece that was already put forward to address the public safety needs, which is the most critical and most important issue, is

maintained. All of the rest would be re-auctioned without the imposition of that condition.

Mr. UPTON. And how quickly could that happen?

Mr. MARTIN. We think that the auction would easily be able to

still be completed in time to have the proceeds provided under the

statutory timeframe by the middle of next summer, about a year

from now.

Mr. UPTON. OK, thank you. I yield back.

Mr. MARKEY. The gentleman’s time has expired. The Chair recognizes the gentleman from Pennsylvania, Mr. Doyle.

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Mr. DOYLE. Thank you, Mr. Chairman. Chairman Martin, in

April of this year you said, ‘‘Depending on how we structure the

upcoming auction, we will either enable the emergence of a third

broadband pipe, one that would be available to rural as well urban

America, or we will miss our biggest opportunity.’’ In June you told

the USA Today that you wanted an auction where consumers can

‘‘use any wireless device and download any mobile broadband application with no restrictions.’’ And in the draft order on the DTV

spectrum auction, you established a reserve price of $4.6 billion,

showing you are committed to making sure this auction pays the

Treasury. I think these are three very important principles, and I

agree with each one of them, and none of them are mutually exclusive. I ask you today, do you still agree with these principles, Mr.

Chairman?

Mr. MARTIN. I do, I do.

Mr. DOYLE. Thank you. I have looked at a lot of proposals for the

DTV spectrum auction and the only idea that meets each of those

three tests is a wholesale model. Now, AT&T endorses open devices; that is great. But that is one part of the problem. Open platforms, like wholesale, fix the other part of the problem. People tell

me that might be fine, but it won’t draw enough bidders to meet

the reserve price. Well, Google put up and made the opening bid.

Tell me, Commissioner Copps, because my time is limited, what do

you think of the wholesale model generally and what Google and

others like Frontline, Free Press, and the Wireless Founders Group

are asking for specifically?

Mr. COPPS. Well, I think it is time for us to use part of the spectrum, this one-third of the spectrum, to be a little creative and to

be a little innovative to try a new model. Others have gone down

this line in other countries, to their benefit and to our discomfort.

We need, as several members have pointed out, to encourage new

entrants. We need small business and rural consumers. We need

minorities. These auctions have been somewhat stacked in favor of

incumbents over the years, with the tremendous resources they

have. If we are going to ever get innovation and creativity, this is

the time to do it, so I think that is why we ought to be entertaining

these proposals for wholesale open access.

Mr. DOYLE. Chairman Martin, do you agree with that?

Mr. MARTIN. I am concerned about the imposition of the additional wholesale requirement. It is not only that you want someone

to meet the reserve price, but you also want to have the maximum

incentive for them to invest in the underlying wireless network. I

am concerned about the impact that a wholesale requirement

might make on their willingness to invest in the build-out of that

network. I don’t think that the kind of open platforms, where you

have to be open to devices and software, should in any way impede

their ability to invest in the underlying towers for a network. But

I am concerned that if they have to sell the access to those towers

at a discounted price, they might be less willing to build out the

network. So that is why I am concerned about that additional condition.

Mr. DOYLE. Commissioner McDowell, if we don’t wholesale, how

can we guarantee a new competitor, a new entrant, into the market?

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Mr. MCDOWELL. Well, Congressman, I have been focused on

smaller market sizes, and I think that addresses a lot of the public

policy concerns here. If we have a variety of market sizes, small,

medium and large, for small, medium and large bidders to bid on,

we have a home for the large carriers, a home for the medium sized

carriers and then a home for entrepreneurs. This is a last 20-mile

technology, not a last mile technology, and it holds tremendous potential, but it also holds tremendous potential that we might have

a local, small-town entrepreneur or a regional entrepreneur like

Stelera, who testified before this committee a couple of weeks ago,

that may be interested. So we are talking about a third broadband

pipe. Actually, we have the potential here for six more broadband

pipes to go to American consumers, depending on which band plan

you want to pick. So if we have small, medium and large market

sizes available, I think that would solve the open access issue that

folks are looking at. It would solve the build-out provision, the

build-out concerns, as well. And also let us not forget what we are

doing in the white spaces. Our white spaces proceeding is really all

about open access and will hopefully be a constructive, positive,

disruptive force.

Mr. DOYLE. Thank you. And Commissioner Adelstein, 30 seconds,

because I have one more question I want to ask you all. Do you

think that wholesaling locks in a business model, or does it guarantee, no matter who wins, new competition?

Mr. ADELSTEIN. I think it is more likely to guarantee new competition. The beauty of wholesale is, no matter who wins, and the

large incumbents could win as well as Google or anybody else, that

they have to provide open networks. They have to provide for competition and all kinds of new entrants with new applications and

new ideas can get involved, can use that small—small licensees as

well. Small operators can use that on a wholesale basis. I think it

really opens up a whole world of competition.

Mr. DOYLE. Thank you. One final question for the panel. In 2004

the FCC issued a report to Congress on a low-power FM interference testing program, after getting public comment on the engineering studies it commissioned. After reviewing all the facts, the

data and potential for interference, the FCC said in the report,

‘‘Congress should readdress this issue and modify the statute to

eliminate the third adjacent channel distance separation requirement for LPFM stations.’’ Does anyone disagree with that? Mr.

Chairman, let the record show that the silence was deafening. My

friend Lee Terry and I have a bill to allow the FCC to expand the

benefits of low-power FM on to more places on the radio dial across

the country. This has been critical during emergencies like Hurricane Katrina, to religious groups trying to spread their message,

and to community groups interested in serving their communities.

It is my hope that the Commission will continue to support these

stations until and after we get this bill signed into law. And I yield

back.

Mr. MARKEY. The gentleman’s time has expired. The Chair recognizes the gentleman from New Jersey, Mr. Ferguson.

Mr. FERGUSON. Thank you, Mr. Chairman.

Mr. MARKEY. Excuse me. I am sorry. The gentleman from Nebraska, Mr. Terry. I apologize to the gentleman.

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Mr. TERRY. I love it. Thank you, Mr. Chairman. First, I want to

ask Chairman Martin about the joint board’s recommendation that

caps CETC carriers. I have written a letter suggesting that was a

proper move at the right time. I am wondering if the entire board,

if the FCC is discussing how to handle that recommendation.

Mr. MARTIN. Sure. We certainly are, and I plan on trying to address some kind of, and potentially multiple kinds of, reform for

the Universal Service Fund, and I think that trying to establish a

cap is an important measure in trying to control the growth that

occurred on the CETC side. Since I came to the Commission, the

first year I was there, they received about a million dollars. Last

year they received a billion dollars in universal service subsidy

support. And at that kind of growth rate, I am concerned we can’t

afford to continue to do that, so some kind of change has to be

done. I think a cap is one option. I would support that. There may

be other options, but I would support something to control the

growth of the fund.

Mr. TERRY. I appreciate the comment about supporting something. In the Terry-Boucher Bill, one of the issues with just generically new entrants, we feel that we should look at actual cost.

Mr. MARTIN. Yes.

Mr. TERRY. And I will open it up to anyone on the board if they

want to discuss the caps versus actual costs or maybe even a combination of them.

Mr. MARTIN. I think that that would, I think, require everyone

to plot their own actual cost. To meet the same kind of standard

that is done for the incumbents would be another good reform. I

think either one would control the growth of the fund, and so I

would support either, but I can——

Mr. TERRY. What are you hearing from your comments, from the

comments submitted to the FCC?

Mr. MARTIN. I think that there are obviously some that are concerned about, some companies that are concerned about it, but I

think that it is important for the Commission to try to take some

measure of reform to control the growth in the fund. So I hope that

we will get support for one of those kind of proposals.

Mr. TERRY. Commissioner Copps?

Mr. COPPS. I think it is time for the Commission to catch up with

folks like you and others in Congress who have urged general comprehensive universal service reform. I have suggested that one

thing that Congress could do would be to give us the authority to

collect on intrastate funding, but also, we need the inclusion of

broadband on both sides of the equation. I would support the idea

of getting rid of the identical support rule and doing audits, and

I think if we would do those four things, we would have a pretty

good running start on doing something serious about universal

service and crafting it for the 21st century.

Mr. TERRY. I respect and appreciate those criteria. Commissioner

Adelstein?

Mr. ADELSTEIN. Well, I think the Boucher-Terry Bill is loaded

with provisions that would help us to secure the future of universal

service and make sure that it was run in a fiscally responsible

manner at the same time. Certainly expanding broadband into supported services makes imminent sense. I think expanding the conVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00375 Fmt 6601 Sfmt 6601 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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tribution base is something that would make it better for everybody. We need to tighten CETC criteria, as you suggested. I think

it is a great idea to eliminate the identical support rule. It doesn’t

make any sense to have people pay to their universal service on the

basis of somebody else’s costs and not their own. Three years ago

I called for that, and I dissented over on the joint board. I can’t believe we didn’t do it, and I think it is well overdue that we control

costs through that mechanism immediately.

Mr. TERRY. I appreciate that. Commissioner Tate?

Ms. TATE. Yes, Congressman, and I want to thank you for all

your efforts on your bill, and I want to make clear that when the

joint board made this decision, certainly it wasn’t looking at this

as a long-term solution and said that in its decision. And I agree.

Certainly we need to target this to unserved areas, which was the

entire purpose underlying that and that it doesn’t make sense to

fund multiple carriers when we have decided that an area is a

high-cost area to serve. So the other thing, I guess, that I wanted

to say is regarding the joint board recommendation and that is that

it is really when you asked the chairman about the comments, it

has really spurred a lot of excellent comments, some suggestions of

pilots in areas and certainly back to your point of having more costbased subsidies.

Mr. TERRY. I appreciate that. Commissioner McDowell?

Mr. MCDOWELL. Thank you, Congressman. There are a couple of

items, in particular, in your bill that I like, which is to base support on actual cost and thereby eliminate the identical support

rule. I think the identical support rule is illogical. As well as allow

the targeted use of support to more specific wire centers, at the

wire center level. I came to this job with five principles in mind regarding USF reform, and No. 1 on that list is to slow the growth

of the fund; also to broaden the contribution base, among others;

make sure it is competitively neutral; and I think anything we can

do to go in that general direction is positive and constructive.

Mr. TERRY. Very good, since all of those principles are inherent

to this bill. Chairman Martin, are there any parts of the discussion

of universal service reform that are necessary for Congress to do

versus what you can do on your own at the FCC?

Mr. MARTIN. There are several proposals for us to expand the

contribution base in a more technologically neutral manner. We

can move to collecting universal service estimates based upon telephone numbers. That is within our current authority. Several people have proposed that the Commission should also expand that to

look at including inter- and intrastate revenue so that it would no

longer try to make that distinction. That is something the Commission could not do; Congress would have to do.

Mr. TERRY. All right, so we would have to do that. All right. Any

other items that you feel that you would prefer, at least, to have

legislative——

Mr. MARTIN. On this or any issue, I always prefer to have legislative guidance on exactly what you end up doing. But even if not,

I think we have the authority to do most of the other proposals,

most of them.

Mr. TERRY. Thank you, Chairman. Commissioner Adelstein?

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Mr. ADELSTEIN. One thing that we could really use congressional

help on is adding intrastate revenues into the base. That would

make the base much larger and much fairer for everybody. I think

it is also important that we, as you suggested, exempt universal

service from the Anti-Deficiency Act and that is something we

could use help from Congress on. And of course we would welcome

your guidance on clarifying how support for CETCs could be handled.

Mr. TERRY. Anybody else?

Mr. COPPS. I think that legislative involvement is necessary from

the statutory standpoint on intrastate contributions. I think it is

desirable but not necessary in clarifying to all of us the proper role

of broadband in the universal system, where I think we already

have authority but have been a little bit reluctant to exercise that

authority.

Mr. TERRY. Very good. I appreciate that. Mr. Chairman, I will

yield back my time.

Mr. DOYLE [presiding]. I thank the gentleman. The Chair now

recognizes the chairman of the full committee, the gentleman from

Michigan, Mr. Dingell, for 5 minutes.

Mr. DINGELL. Mr. Chairman, thank you. This question, members

of the Commission, is for all the commissioners. I am pleased that

the Commission is considering adopting rules that would enhance

consumer choice in the wireless device and application markets. I

am concerned, however, that this new approach could possibly lead

to higher prices for consumers, either for services or for handsets.

Now, ladies and gentlemen, because of the limits on time, I

would very much appreciate a yes or no answer to this question,

and we will start with the chairman. Are all of you confident that

this proposal will not result in higher consumer costs? Mr. Chairman?

Mr. MARTIN. I don’t think that it will result in higher consumer

costs, particularly when you allow for competition in those

handsets.

Mr. DINGELL. Could the other commissioners please respond?

Mr. COPPS. Yes, I am confident.

Mr. DINGELL. Commissioner?

Mr. ADELSTEIN. Yes.

Mr. DINGELL. Madam Commissioner, yes or no?

Ms. TATE. I hope that it will not.

Mr. DINGELL. Hope. Sir?

Mr. MCDOWELL. No, I am not confident, Mr. Chairman.

Mr. DINGELL. Now this question, again, for all commissioners.

Members of the Commission, this relates to blind bidding. One of

the goals of the auction that is going to occur on the 700 MHz band

should be to facilitate new entry into the broadband market. That

is congressional policy, and I am sure that it is the policy of the

Commission. Some have argued that the incumbent providers

might just bid at the auction to keep new entrants out. One way

the Commission could avoid this problem is to implement blind bidding. Mr. Chairman and then other members of the Commission,

can each of you please tell me if you have considered adopting

blind bidding at this auction?

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Mr. MARTIN. Yes, I have considered and I think that we should

increase the use of blind bidding for this auction, over what we

have done in the past.

Mr. COPPS. On balance, yes.

Mr. DINGELL. Sir?

Mr. ADELSTEIN. I am supportive of blind bidding for this auction.

Mr. DINGELL. Madam Commissioner?

Ms. TATE. I think that more information can help carriers on

knowing how best to bid.

Mr. DINGELL. Thank you. Commissioner?

Mr. MCDOWELL. Yes, I have considered it.

Mr. DINGELL. Now, Chairman Martin, 1 year ago Mr. Markey,

Senators Inouye, Dorgan and I wrote in concerning the Commission’s treatment of a petition for forbearance filed under section 10

of the Act. This section, as you know, provides that any petition not

acted upon by the Commission, within the applicable timeframe,

shall be deemed granted. Now, could you give me a yes or no answer to this? Could a petition for forbearance be deemed granted

even when the majority of the Commission opposes it?

Mr. MARTIN. When the majority of the Commission opposes it?

Mr. DINGELL. Yes.

Mr. MARTIN. No. In the Commission our internal processes have

already provided that we would circulate an item prior to that forbearance deadline, that statutory deadline, and give the Commission an opportunity to vote on it. And if the majority of the Commission voted on it in a certain way, the Commission would have

to act that way.

Mr. DINGELL. Well, if, however, Mr. Chairman, the Commission

does not act upon the petition within the applicable timeframe, it

is going to be deemed granted, isn’t it?

Mr. MARTIN. Yes, sir, and I would say that, while I have been

chairman and while I am chairman, I would always give the majority of the Commission an opportunity to vote, and we always have.

The one instance in which there was a forbearance that was granted was because we were without a majority of the Commission, because we were missing Commissioner McDowell. He had not joined

the Commission and/or was recused. So as a result, the Commission was tied 2–2. It wasn’t that I didn’t put forth an item; I did.

The problem was there was no majority of the Commission, one

way or another.

Mr. DINGELL. Members of the Commission, your comments,

please.

Mr. COPPS. Could that happen? Yes. Should that happen? No.

And I think we really need to have clarity, long-term, rather than

just relying upon the instincts of one particular chairman along the

line.

Mr. DINGELL. Thank you. Commissioner?

Mr. ADELSTEIN. Certainly it could happen. If the chairman decided that he was in the minority, that he would not allow it to

come to a vote. We have heard that Chairman Martin would operate differently, and I very much respect and appreciate that, but

we should have procedures in place that would require a vote on

this up or down so that it couldn’t be defeated by a minority.

Mr. DINGELL. Thank you. Madam Commissioner?

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Ms. TATE. I thank Chairman Martin for his thoughtful comments. I agree that he is correct and that the circumstance that

you all are both discussing was just a very unique one.

Mr. DINGELL. Commissioner?

Mr. MCDOWELL. I will also associate my comments with Chairman Martin’s, as well. However, I hope, on a going-forward basis,

we have a chance to vote on all forbearance petitions.

Mr. DINGELL. Thank you, ladies and gentlemen. One last question. I am concerned that new approaches at the Commission,

adopting rules that would enhance consumer choice, might lead to

higher costs. Is this a worthwhile apprehension or not? Mr. Chairman?

Mr. MARTIN. I think it is obviously worth being concerned about,

but I think that the benefits outweigh the costs or the concerns, in

allowing consumers to be able to pick and choose or being able to

take their devices when they go with them and have a more open

platform. I think the benefits outweigh the costs on that.

Mr. DINGELL. Members of the Commission, please.

Mr. COPPS. I think, on balance and over the long run, that consumer choice and competition will lead to lower prices.

Mr. DINGELL. Commissioner?

Mr. ADELSTEIN. I think a competitive market would ultimately

result in, hopefully, lower prices for consumers.

Mr. DINGELL. Thank you. Madam Commissioner?

Ms. TATE. We all hope that there would be lower prices, but we

can’t control what the market will do.

Mr. DINGELL. Thank you. Commissioner?

Mr. MCDOWELL. We should always be concerned if a Commission

action results in higher prices.

Mr. DINGELL. Thank you. Mr. Chairman, thank you for your

kindness.

Mr. DOYLE. Thank you. The Chair now recognizes my good friend

from Texas, the ranking member of the committee.

Mr. BARTON. Thank you. Thank you, Mr. Chairman. It is good

to see you in the Chair. Let me start off on a positive note. Commissioner Copps had a suggestion at the end of his written testimony, that we modify the closed meeting rule so that the commissioners could, more than two of them could meet at a time, and I

support that. I don’t know if we need to do anything legislatively,

but if we do, I will be happy to work with the majority, if it is their

will. I think you guys should get together and talk about things.

It could be a good thing.

I want to start off with the chairman, Mr. Martin, on this 700

MHz auction. I have got all kinds of quotes here from my staff,

things you have said about how fierce the marketplace is and how

intense the competition is and how the competitive marketplace is

the best way to get improved results instead of some sort of a regulatory approach. And yet on this auction you have come up with

this modification that puts conditions. Why shouldn’t we just let

Google bid? If they have got a better idea, why don’t they go into

the marketplace and bid their $4 billion or $5 billion or whatever

it is and let them use their spectrum like they want? Why should

we set some conditions on it?

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Mr. MARTIN. The conditions that I proposed aren’t designed to

help any particular bidder, Google or anyone else. Indeed, there is

no particular company that likes, necessarily, what I have proposed. Google is as upset about non-inclusion of some of the wholesale requirements as other companies are upset about the inclusion

of an open handset or a device portability requirement. I think the

reason I proposed that is not about any of the companies but about

the consumers. In the past, although the wireless market is competitive, particularly on the voice side, the Commission has still

had to impose certain rules to protect consumer interest, like the

ability to take numbers from one carrier to the next.

Mr. BARTON. But I mean, why wouldn’t you just let whatever entity bid and if they want to do some of these things, let them use

the spectrum like they claim? I still don’t see why that is a bad approach.

Mr. MARTIN. I think that I am concerned that, actually, in the

current environment, there hasn’t been any wireless providers who

have been willing to provide that kind of option for consumers, just

like there wasn’t any wireless provider who allowed any consumer

to take their number with them. And ultimately we had to take

some intervention to make sure that consumers had the ability to

take numbers with them when they changed service providers, and

I think that it may require the Government to provide some kind

of impetus to allow consumers to be able to take their cell phones

that they have purchased with them as well. We are talking about

a requirement that consumers often had to pay $400 for a device

that becomes virtually useless if they try to take it to another carrier, and I think that that is not appropriate for consumers.

Mr. BARTON. There is nothing. If you have an open, unfettered

auction, it doesn’t prevent who wins it, if they want to make their

product line so that anybody that uses their services can use any

product, we don’t prevent that.

Mr. MARTIN. We don’t prevent that, and I am not sure that, it

could very well be the incumbents, even with this open handset requirement and an incumbent wins that auction. I am not concerned

about this for any particular company. I am concerned about trying

to allow consumers to have the option of being able to have a more

open platform where they can take their devices and they are in

an unlocked nature.

Mr. BARTON. Well, you must have some concern about your conditions, because you are going to apparently set a minimum bid.

And in case, if the minimum bid is not met, you are going to come

back with an unfettered auction.

Mr. MARTIN. I was concerned, and I was concerned about your

concerns about the impact, which is why I made sure and put a

high minimum bid on there, because I was concerned about the letter that you wrote, saying that any of these kind of conditions

might actually lead to lower prices.

Mr. BARTON. I am impressed that you are aware that I wrote you

a letter.

Mr. MARTIN. I am always well aware.

Mr. BARTON. That is progress.

Mr. MARTIN. And I make sure that we actually set the highest—

we took the highest bid that anyone was willing to pay for any of

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the spectrum in the most recent AWS spectrum. And there were

people that pay for different amounts of spectrum, depending on

how large an area we were auctioning off. We took the highest bid

possible, and we said, on that basis, if we multiplied that by the

amount of spectrum auctioned off here, how much would that be?

And that is the opening bid. So we took the winning bid in the last

auction, and that is the starting bid for this piece of spectrum.

Mr. BARTON. Let me ask Commissioner McDowell a quick question. Do you have any concerns that by setting these conditions on

this spectrum in this particular auction, that we set a precedent for

future auctions?

Mr. MCDOWELL. If I understand the question correctly, certainly

there is a precedent set, whatever we do in this auction. As someone said earlier, this is the most important auction of the century,

so what we do here is crucial for what we do going forward. When

I was first looking at this auction, I was looking at the AWS auction, perhaps, as a model where a majority of the winning bidders

who walked away were small businesses or women and minorityowned businesses, and I thought that was a good way to go initially. So I certainly had concerns going forward that what we do

here will have a tremendous effect.

Mr. DOYLE. The gentleman’s time has expired.

Mr. BARTON. Could I ask one more? It is just kind of a yes or

no. We have a bill, H.R. 608, that would require more public outreach for the DTV transition. It has been introduced by myself and

Mr. Hastert and Mr. Upton. Does the Commission have a position

on that, Chairman Martin? It is pretty straightforward education.

Mr. MARTIN. We certainly appreciate any additional efforts on

consumer outreach, on the DTV transition, so we are supportive of

that.

Mr. BARTON. Thank you. Thank you, Mr. Chairman.

Mr. DOYLE. The Chair now recognizes the gentleman from Illinois, Mr. Rush.

Mr. RUSH. Thank you, Mr. Chairman. This is a question to all

the commissioners, and I want to be fairly brief because I have a

number of questions. Can each of you describe, for this committee,

how you believe the rules that will govern the upcoming 700 MHz

auction will promote women and minority ownership? Beginning

with Commissioner Adelstein.

Mr. ADELSTEIN. Yes. The most important aspect of it is the designated entity rules. I think they are a little bit tight, frankly, to

make it easy for small companies to come in. They were changed

in the last auction, and we should review those. One other element

that would be very helpful for women and minorities, because this

is going to be very, very expensive spectrum, this is beachfront

property, it is going to go for a lot of money, as the chairman just

said. What we might need to do is put a wholesale requirement on

it so that small businesses can participate, small businesses can

come in and have access to spectrum on a wholesale basis, and that

would be probably the best opportunities for small business and entrepreneurs to really get a piece of this action.

Mr. RUSH. They don’t currently exist?

Mr. ADELSTEIN. There is no current proposal before us about

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374

panies want that to be an open, completely open spectrum on the

22 MHz. And if that would happen, I think it would really facilitate

entry by women and minorities.

Mr. RUSH. Commissioner Copps?

Mr. COPPS. Well, the DE rules that Commissioner Adelstein

mentioned, the 25-percent bidding credit and then having a diversity of market sizes, license sizes, available for people to bid on, I

think all of those would help. But it is such a glaring problem and

it is so needed for us to make some progress on this front.

Mr. MARTIN. I think it is important for us to both try to have

a variety of geographic and spectrum sizes so that smaller bidders

can participate, and we have done that. And I also think it is important that we have DE bidding credits, which we do have, up to

25 percent.

Ms. TATE. Obviously, as the only woman, I do share your concerns. We do have the bidding credits in place. I am hopeful that

maybe women and minorities will be able to bid, because of the mix

of sizes of licenses and sizes of geographic areas.

Mr. MCDOWELL. Again, I will also associate my comments with

my distinguished colleagues. One concern I do have is, should the

upper band, as it is now drafted, be deemed too encumbered for

larger players to bid on, they may go down to the lower band where

those smaller market sizes are and the smaller spectrum blocks are

and outbid the smaller entities or minority-owned entities. So I

think that is something we all need to look at.

Mr. RUSH. Are there currently any participants right now in any

of the auctions? Do you have any current applications from minorities and also from women? Can we ascertain a specific number

right now?

Mr. MARTIN. We can’t ascertain a specific number right now, because where we are in the process, all the people haven’t come forward who want to qualify to participate in the auction, so we can’t

do that.

Mr. RUSH. It has been suggested that if you lessen the geographical service area that carriers bid for, bid on for spectrum, this will

allow smaller players and startup companies to take part in the

auction. Otherwise only a handful of companies will be able to actually come up with the capital to bid on spectrum that serves too

much territory. It is argued that shrinking the service area would

help women and minority-owned businesses to compete. Can you

comment on that?

Mr. MARTIN. Sure. I think it is important that we try to provide

an opportunity for some smaller pieces of spectrum, some smaller

geographic areas for smaller entities to participate but also provide

some on a larger basis, because it is important for different kinds

of services. Particularly trying to provide them on a larger geographic area can be important for people who are trying to come

and compete on a new nationwide basis. So I think that we have

got to design an auction that has a large percentage of the spectrum that is being sold on a smaller basis and a large percentage

of it is being sold on a large basis. So I think it is important that

we try to find an appropriate balance.

Mr. RUSH. And merger review. The FCC has been accused of

‘‘bootstrapping’’ and using its authority to approve the transfer of

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licenses to impose other conditions, reportedly for the public good,

on the merged entity. Has the Commission ever used this authority

to promote women and minority ownership?

Mr. MARTIN. There have been instances in which the Commission has required divestitures. Prior to my time at the Commission,

the Commission had required some divestitures that I know had

gone to some women and minority companies. Certainly when

Chairman Kennard was there I know that occurred. I don’t recall

off the top of my head the exact context of the order, whether it

specifically required it in that context, which requires the

divestitures, and they ended up in those hands. I don’t know.

Mr. RUSH. Under your tenure?

Mr. MARTIN. No, no, I am sorry. That was under Chairman

Kennard. Under our tenure we have required divestitures, but we

haven’t required it to any particular company.

Mr. RUSH. Commissioner Copps, do you have something?

Mr. COPPS. Yes. Under the merger standard we have authority

to range rather widely across the whole spectrum of public interest

considerations, and one of those is clearly diversity, and this is an

area where we not only can but need to act more proactively.

Mr. RUSH. Did you have something?

Mr. ADELSTEIN. I would just add that when we look at the vast

array of mergers among media companies, that media ownership

by minorities is at horribly low levels, 3 percent, when a third of

the country is minority, 3 percent own these licenses, and we have

got to do something about it. So allowing further consolidation of

the media only takes these licenses further out of reach of women

and minorities, and I think we have to be very cautious about allowing any further media consolidation. And anything we do to

change the rules on media ownership should ensure that we enhance and not detract the level of minority ownership in this country.

Mr. DOYLE. The gentleman’s time has expired. The Chair now

recognizes the gentleman from New Jersey, Mr. Ferguson.

Mr. FERGUSON. Thank you, Mr. Chairman. Thanks again to

Chairman Martin and all of our commissioners for being here

today. Chairman Martin, while the committee has been successful

in implementing the E–911 with a class of VOIP provider that is

so-called interconnected, there seems to still remain a significant

gap. Today there are VOIP services being marketed at Radio Shack

and Wal-Mart and other stores every day as a replacement service.

These services are not interconnected, yet they offer outbound calling. They offer calls to regular everyday telephone numbers. Can

you explain why these services are not required to also require

911?

Mr. MARTIN. To be a replacement service for your local telephone, you have to be able to do two things, you have to be able

to call someone, and someone has to be able to call you. For that

to occur, you have to be interconnected into the telephone network.

So what we have said is, if it is a replacement of your local telephone, then they should be required to provide 911. But if it is only

a service that does one side of that, if it only makes calls or only

receives calls, then it can’t be a replacement for your telephone because it only has half of those services. So we haven’t required 911

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services of them. The one outstanding issue that remains before

the Commission is what if someone—what if a service operator

tries to combine those aspects, so they are trying to sell you inbound and outbound together? We have actually got an outstanding

notice on looking at shouldn’t we extend 911 to those kind of service providers, because they would be combined in a way that it

would be able to be a substitute. And I think that that would be

a good step, and I have talked about that with the other commissioners, and I think that would be a good thing for us to do.

Mr. FERGUSON. I would encourage that. It just seems that there

is a history here of treating like service alike, and we can get muddled up in some of the specifics and some of the details, but clearly,

I have got a spreadsheet, right, a VOIP overview of two carriers,

comparing, just for instance, Vonage and Skype, Skype, which is

now an unregulated service. I mean, they both require broadband.

They both can be used in multiple locations. They both can be used

with traditional phones. You can have local and long distance calling. You can now have international calling on both. You can both

make calls to traditional phone numbers. I mean, it goes on and

on. I mean, these are like services, it seems, and it just seems a

fair-minded person would say like services ought to be treated

alike.

Mr. MARTIN. I completely agree. The reason why we didn’t apply

it at first to Skype was because they weren’t offering both outbound and inbound calling. They were only offering outbound calling. So I think that when they start to offer both, we should apply

the same rules to them.

Mr. FERGUSON. Yes. Well, it just seems to me that, to be fair,

that would make a lot of sense. Commissioner McDowell, turning

then back to the spectrum, I referenced the spectrum auction in my

opening statement. What happens if the winner of the spectrum

concludes that certain devices and applications just won’t work on

its network and that, notwithstanding, the open access requirement that has been proposed, won’t the FCC, won’t you all be

forced to get back involved in all sorts of technical specifications on

networks and devices and applications? I mean, couldn’t we avoid

that?

Mr. MCDOWELL. Congressman, you pointed out a very relevant

issue: one of the unintended consequences of a possible encumbrance is the waiver process that comes after we have a licensee.

So will licensees or winning bidders be filing waivers if they can’t

accommodate the rules? That is a legitimate question to ask and

one of the questions that I am weighing in my deliberations.

Mr. FERGUSON. Well, I appreciated something that you had mentioned before. I, myself, am of the view that good spectrum management should allow entrepreneurs, rather than the Government,

to determine how best to maximize our limited spectrum resources.

Do you think that a departure, the Commission’s seeming departure from this mentality, can be implemented? I mean, is this going

to foster more flexible and market-oriented spectrum? It seems

what I am hearing is a bit of a departure from this mentality that

has been relatively consistent in the past. Is that wise at this

point?

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Mr. MCDOWELL. Well, another one of the questions I am asking

is not only is the marketplace starting to dissolve the walled gardens, which, as I said earlier, I think is a business model that is

doomed to fail, but we have the introduction of Wi-Fi enabled

handsets. But we also, in the wireless industry as it currently exists, have about 40 resellers, we call them MVNOs, out there now.

Does that mean a wholesale model, mandate, rather, is not required? That is something we need to continue to analyze.

Mr. FERGUSON. And as my last follow up, I mean, the Commission took a proscriptive approach when it wrote the rules to multichannel, multi-point distribution service, interactive video and data

services, digital electronic message service. Each of these services

failed. Don’t you worry that the same fate awaits the open access

regime that has been proposed?

Mr. MCDOWELL. A fair question, Congressman.

Mr. FERGUSON. Do you?

Mr. MCDOWELL. Yes, absolutely.

Mr. FERGUSON. Thank you.

Mr. DOYLE. The gentleman’s time has expired. The Chair now

yields to my friend from California, Ms. Eshoo.

Ms. ESHOO. Thank you, Mr. Chairman.

Mr. DOYLE. Will the gentlelady yield for a second?

Ms. ESHOO. Certainly.

Mr. DOYLE. The Chair just wants to make an announcement that

at 12:15, the House is scheduled to make six votes, so I would encourage Members—we are going to try to stay within the bounds

of the clock here and see if we can’t get this all in before votes are

in, if possible. If not, we will come back. The gentlelady.

Ms. ESHOO. Thank you, Mr. Chairman. Nice to see you in the

Chair. First to Chairman Martin. This is certainly my own observation, but I did note that you issued a press release in early June,

on the Second Circuit Court of Appeals decision relative to the indecency issue, and I think you conclude your press release by suggesting that a la carte would somehow solve the situation. I don’t

know what that has to do with it. But my unsolicited advice is, because I looked again yesterday, you still have that press release up,

and I don’t really think it is becoming of an FCC chairman to have

something like that, I mean, in terms of the language it contains.

So that is unsolicited advice, and we will just go from there.

At a recent public hearing that you had, Mr. Chairman, on localism in Portland, ME, you stated that ‘‘establishing and maintaining

a system of local broadcasting that is responsive to the unique interests and needs of individual communities is an extremely important policy goal for the Commission. Indeed, along with competition

and diversity, localism is one of the three goals underlying the

media ownership rules.’’ First, I think it is terrific that you had the

field hearing and I understand that you have another one coming

up in September in Chicago, and I think the more you do those,

the better off people are in the communities. So I would congratulate you for doing them and hope you do more beyond Chicago.

Now, we know that broadcasters are given the right to use the

public airwaves that are worth billions and billions of dollars, in

exchange for serving the public interest. Now the primary tool at

your disposal is to enforce these obligations. If they are not enVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00385 Fmt 6601 Sfmt 6601 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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forced, then that obligation is not brought to bear and with that

you have approval of broadcast licenses. But I think that that has

really become a ministerial act. I observed that a broadcaster’s license is up for renewal, isn’t it like once every 8 years? That is a

golden moment when that comes up. That is like essentially once

in a decade, once in a decade, 10 times in a century, essentially.

So what evidence does the Commission have before it to ensure

that broadcasters have really fulfilled their public interest obligations? What does a broadcaster have to provide? What is your yardstick for measuring this obligation? It is very important. It is a critical obligation, and I think it is really being diminished. So how do

you measure it?

Mr. MARTIN. There has been an increase in concern about how

we should be measuring——

Ms. ESHOO. Well, I know there is an increase in concern. That

is why I am asking you the question.

Mr. MARTIN. That is right.

Ms. ESHOO. I don’t think anything is being done, most frankly,

but maybe you can whet our appetite about what you plan to do.

Mr. MARTIN. Well, actually, I can tell you what I have already

proposed to do, and it has been proposed before the commissioners

and sitting there for a long time, that I proposed at about the same

time we testified last time, that the Commission go on and require

broadcasters to disclose more of what they are doing. We don’t

adopt, actually, minimum requirements about what they are doing

on a local level for a certain amount of local news or a certain

amount of local programming. So we don’t have a minimum

amount they have to report on their license renewal process, but

we do have—I would propose that we have a whole new set of categories that they should have to do, they should have to fill in during that process.

Ms. ESHOO. Are you going to put that in front of the Commission?

Mr. MARTIN. It is in front of the Commission, and it has been for

quite some time, and I am anxious——

Ms. ESHOO. But when do you plan to actually act on it?

Mr. MARTIN. I am anxious for the other commissioners to. It has

been on circulation, and they can vote at any time. If they don’t

end up voting, at some point I will put it before a meeting, but we

do have some others that we have statutory deadlines on.

Ms. ESHOO. That is good information. Commissioner Copps, do

you want to comment on the quality of this yardstick by which public interest will be measured?

Mr. COPPS. Yes, I think before we can enforce public interest obligations, we need to understand what those public interest obligations are. Most of them have been frittered away since the 1980s,

so there is precious little left for broadcasters to really get hold of

and say this is what is expected of us and this is what we have

to do if we are going to get a re-license from the Federal Communications Commission.

So I want us to disclose our exceptions in addition to them disclosing, which I think is a great idea and I am for disclosing their

activities. We have to disclose what our expectations are for their

activities and that is where we have failed.

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Ms. ESHOO. Well, that is what I thought.

Mr. DOYLE. The gentlelady’s time has expired.

Ms. ESHOO. What my question was, what is the yardstick by

which the broadcasters are measured by? If you don’t have that,

they can say anything that they want and I think this almost oncein-a-decade exercise is—the opportunity is lost. So thank you, Mr.

Chairman.

Mr. DOYLE. Thank you. The Chair now recognizes the gentleman

from New York, Mr. Fossella.

Mr. FOSSELLA. Thank you, Mr. Chairman. Chairman Martin, regardless of what happens with the revenue raised, I guess you can

guarantee that—you all talked about the importance of public safety—that billion dollars or so with respect to the grant program will

be guaranteed, the funding will be there guaranteed?

Mr. MARTIN. Well, sure. I mean, we have said that the 22 MHz,

what I proposed nationwide, has to raise at least $4.6 billion; that

the overall auction has to raise at least $10 billion. If it doesn’t,

it gets re-auctioned without those conditions, and the reserve prices

will always be over a billion. So yes, I think that that will——

Mr. FOSSELLA. And if it were not to meet the reserve price, you

would have sufficient time to re-auction, and the money would be

there pursuant to congressional intent?

Mr. MARTIN. Yes, we will be starting the auctions at the end of

this year, the beginning of next year, so in December or January,

and we are required to deposit the proceeds in the Federal Government about this time next year.

Mr. FOSSELLA. So regardless of what happens——

Mr. MARTIN. I think we would be able to end up doing the reauction and complete that.

Mr. FOSSELLA. It has been touched upon a little bit. I guess I will

ask just a fundamental question regarding the conditions placed on

the auction. To what degree are consumers taxpayers or taxpayers

consumers? My understanding is that the fair market value of the

spectrum is upwards of about $20 billion. Is that a rough estimate

or is that an accurate estimate of what the spectrum is left

unencumbered?

Mr. MARTIN. I am not sure I can say that that is an accurate estimate. CBO had scored it somewhere between $10 billion and $15

billion. I believe CBO had already allocated $10.3 billion, and they

had technically scored it at around $121⁄2 billion. It was their best

estimate. But you are right, some in the industry say it could go

as high as $20 billion, but I think that I would probably have to

say that, at this point, the best estimates would probably be CBO’s.

Mr. FOSSELLA. Again, I ask the question about consumers and

taxpayers. Different people can approach it and say, what is going

to be best for the consumer, whoever wins the auction and obtains

the spectrum, and then they put it into the marketplace. It is in

the eyes of the beholder. But to what degree and how do you—I am

just curious as to the mindset. How do you balance foregoing a potential half a billion dollars or a billion dollars or $11⁄2 billion that

would—nor to the benefit of taxpayers, assuming that the auction

was unencumbered as opposed to this is best for consumers, so we

are going to leave that billion or billion and a half on the table?

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Mr. MARTIN. The Commission’s primary responsibility is to manage the spectrum to make sure it is being efficiently utilized for the

overall economic growth of the country, but we certainly want to

make sure we get a fair return on it. But that doesn’t mean we just

simply maximize the amount of revenue an auction could obtain.

For example, we have build-out requirements that say people have

to use the spectrum we auction, because we know that when you

put wireless services out, the overall economy benefits. And it

would be a bad thing from a spectrum management standpoint if

we sold it to people and they didn’t use it. However, economists

would argue and game theorists argue that actually incumbents

would pay a premium to be able to buy spectrum and not use it,

because that would prevent others from competing with them. So

we have to balance consumer and taxpayer interest to get a fair return but not to purely maximize the return.

We also try to take the spectrum and divide it into smaller

pieces. Actually dividing the spectrum into smaller pieces results in

lower overall auction revenues. Every auction we have had in the

past, the companies are willing to pay a premium for larger geographic sizes and larger pieces of spectrum. But we intentionally

divide it up into smaller pieces, because we also want to make sure

that there are opportunities for others to be able to participate. So

maximizing taxpayer revenue or auction returns can’t be the only

goal. And indeed, Congress told us that we should balance all of

these goals.

Mr. FOSSELLA. Fair enough. You raised a point. Do you think incumbents would buy this and park it somewhere?

Mr. MARTIN. Without any kind of requirements at all, yes, I

would be worried about that, and indeed there have been auctions

in the past where there has been some spectrum that hasn’t been

utilized throughout the whole geographic areas they bought, because we didn’t have sufficient——

Mr. FOSSELLA. So again, getting back, and I understand your responsibilities under the law, but is there a way, has anybody done

some internal analysis as to what that opportunity cost is to the

Treasury, by imposing these conditions?

Mr. MARTIN. I think it is difficult to estimate what the opportunity cost is on that. I can tell you that you also have to balance

this compared to the other proposals and plans that the Commission had considered and the other commissioners had supported.

And I would say that actually the most—our internal economists,

based upon past auctions, say that the most significant thing that

would have a negative impact on the amount of money that was

being raised was actually to take this 22 MHz and break it up into

smaller blocks, that that would cost the taxpayers several billion

dollars, based upon the returns on the AWS auction. So I think

that you do have to balance this proposal with others and I think

that the benefits of having 22 MHz together provide a significant

financial incentive for companies to be able to bid on a larger geographic area and on large pieces of spectrum, that it would balance

out some of the open access conditions. Some of the other proposals

that don’t have that also break the spectrum up into smaller

blocks, and our economists do say that that will result in lower

overall revenues, definitely.

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Mr. FOSSELLA. But let me be clear. With respect to the conditions, there is no determination as to what that value lost is?

Mr. MARTIN. No. And I don’t know if there is any way to give

you—to quantify for you that——

Mr. FOSSELLA. Is one way just to auction it unencumbered?

Mr. MARTIN. Well, even then we wouldn’t be able to quantify it,

because we wouldn’t be able to——

Mr. FOSSELLA. Let us compare it to what——

Mr. MARTIN. There is no way to end up comparing——

Mr. FOSSELLA. Mr. Copps——

Mr. MARTIN. We want to make sure and get, like I said, the fair

return, and I think that, in the AWS auction, all of the winning

bidders, if that was put on, this 62 MHz of spectrum that we are

going to auction, it would result in raising about $10 billion, which

we have guaranteed as a minimum threshold.

Mr. FOSSELLA. Mr. Copps, Commissioner Copps. I am sorry. You

were shaking your head. Did you want to offer something?

Mr. COPPS. No, I am in agreement. I think it is hard to balance.

You have to think about the long-term benefits too. The statute

says encourage new services, encourage competition and efficient

use of the spectrum. If those things really take off, you get new entrants and competition, and the gains to the economy would be significant.

Mr. FOSSELLA. I have some time left, but I know my colleagues

would like to ask questions, so I will yield back. Thank you.

Mr. DOYLE. Thank you. The Chair now recognizes the gentlewoman from California, Ms. Harman.

Ms. HARMAN. Thank you, Mr. Chairman. I apologize to the witnesses for stepping out, but as always around here, there are conflicts every hour of the day. I gather from staff that no one has

really drilled down on this brilliant idea of the public/private partnership. We did just have a conversation, or you did with Mr.

Fossella, about revenues and revenues lost. But first, I want to

state a proposition and see if you agree with me, and my proposition is that it is not just about money. Money is part of what we

are going to get out of this, no question, but I believe that no matter how many billions of dollars we spend and how big the grants

are to each region or county for their special flavor of local interoperability, we will not get to national interoperability unless we

have an architecture that pulls them all together. Does anyone disagree with that?

Mr. COPPS. Amen.

Ms. HARMAN. Amen? Ah. Well, we are having a revival meeting,

that is good, with Commissioner Copps. Right. Therefore it is critical, and whether the forcing mechanism is the public/private partnership or as I think someone on—I am not sure who suggested it,

an all-public format or whatever it is, that we help these communities, who each have different ideas, get to national interoperability, somehow. Agreed?

Mr. MARTIN. Agreed.

Ms. HARMAN. Agreed. And that is where we get into this notion

of specific protections or some list of requirements for the entity

building out the public/private partnership, right?

Mr. MARTIN. That is right.

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Ms. HARMAN. OK. So now my question is, if we go this route, and

I favor this route, what enforcement mechanisms will there be, or

should there be, to make certain that the private entity complies

with the requirements? Will it be a condition of the license? Can

you revoke the license? Will the conditions be written in the order?

How will you do oversight? I know that Commissioner Copps said,

I think it was Commissioner Copps, that there has to be ongoing

oversight, and that is certainly something I would agree with, and

I would think that everyone here would.

Mr. MARTIN. There would be ongoing oversight of the process,

but I think, most importantly, that we do have, for example, very

strict build-out requirements to make sure that this is being built

out to serve those public safety entities, this piece. We have explicitly written into the license a condition of forfeiture if they fail to

meet those build-out requirements. And then, if they did have to

forfeit the license, the public safety entities are provided the right

to purchase those assets automatically. So that is one of the, for

example, one of the safeguards we have put in to make sure that

this is actually going to be built out to solve the interoperability

problem and that the public safety interests are protected.

Ms. HARMAN. How do we have confidence that the public safety

entity, if there is this foreclosure, that is what it sounds like, will

have the competence or the financial viability to be able to build

out the network according to the specifications that are in the

order?

Mr. MARTIN. I would say that I can’t guarantee that. What I

would say is that what we are trying to do is find the best alternative of the ones that are within the Commission’s authority to

try to solve the interoperability problem. I think what Commissioner Copps referenced and what you referenced was that the Government could also provide the funding to build out an exclusive

public safety network that would be run and owned by public safety entities. And if Congress chose to do that and if the Government

chose to do that, obviously that would be something that would be

in the public safety’s interest, and they would have the expertise,

and they would own those assets. But in the absence of that option,

which doesn’t appear to be materializing for public safety, what we

have put forth is something that I think will do the best we can

within our context. But we can’t address all of the issues and we

have got certain safeguards to try to protect it, but I can’t say that

it guarantees that they would have that local know how.

Ms. HARMAN. Well, I hear you. I think Commissioner Copps

wants to comment, too, and my time is running out, but I understand how you got to where you are, and I have been closely following this, as I said, with Mr. Pickering, who is going to make me

into a conservative, by his terms, on this issue, and he did point

out, to remind us all, that being conservative can also mean supporting open access, but this just has to work. And I know my time

is over, Mr. Chairman, but could Commissioner Copps comment on

what I have just said?

Mr. COPPS. I just think the public safety requirements have to

be known by whoever is going to bid and win this partnership.

They have to know what is going to be expected of them going in.

And then, second, and I can’t stress this too much, there is the imVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00390 Fmt 6601 Sfmt 6601 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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portant, critical, ongoing role of the FCC to make this happen and

to have the power, when there is a standoff and the decision is not

being made, to make the decision. Now that may entail a more

proactive FCC than we have had in recent years, but this is not

going to work without that kind of authority for us.

Mr. DOYLE. The gentlelady’s time has expired.

Ms. HARMAN. Thank you, Mr. Chairman.

Mr. DOYLE. The Chair now recognizes the gentleman from Georgia, Mr. Deal.

Mr. DEAL. Thank you. In light of the anticipated votes, I will be

brief. Mr. Chairman, you had indicated that the lab would be on

target to issue a report on the white spaces by the end of this

month, which I believe is a week from today. In your estimation,

are they on track to complete that deadline?

Mr. MARTIN. Yes, they are. They will issue their report on the

initial testing of all of those white spaces devices.

Mr. DEAL. And do you anticipate that their report will be thorough in terms of the feasibility of devices, so as not to cause interference?

Mr. MARTIN. I think it will definitely be thorough. I think that

when we release the report, I am sure that both broadcasters and

the companies that put forth those devices will want to go confirm

them for themselves and work with our engineers. But yes, I think

it will be thorough.

Mr. DEAL. And will you try to make sure that the engineers are

available to those companies?

Mr. MARTIN. Oh, absolutely.

Mr. DEAL. And to our staffs, to answer any questions that may

be left unresolved?

Mr. MARTIN. Absolutely.

Mr. DEAL. And then I understand you are anticipating that you

would implement rules or regulations by October to follow up on

this report, is that correct?

Mr. MARTIN. That is right.

Mr. DEAL. I yield back, Mr. Chairman. Thank you.

Mr. DOYLE. Thank you, Mr. Deal. The Chair now recognizes the

gentleman from Michigan, Mr. Stupak.

Mr. STUPAK. Thank you, Mr. Chairman. I have got a number of

concerns. Commissioner Adelstein, if I can start with you, if I may.

On the 700 MHz auction, rural carriers are becoming increasingly

concerned that the open access conditions on the upper band will

make the lower band more attractive and possibly squeeze them

out. Being from a rural area, I am concerned about that. Would you

care to comment on that?

Mr. ADELSTEIN. Well, I think it is a real concern. I have always

advocated a mix of licenses for rural companies, for small and

midsize companies, and as a matter of fact, the priorities on this

auction as it was originally proposed that there was no what are

called EAs in the lower block, and we managed to get a paired EA

in there that could be available for them. But in this case, what

we have been presented with is the opportunity to do open access,

but it has been tied to a large spectrum block, and in some senses

that is somewhat frustrating. I certainly am concerned about this.

We need to find a balance, and there are certainly tradeoffs when

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you talk about the need for a large 22 MHz block in the upper, to

facilitate the entry of a national player, with the needs of the

smaller and midsized companies.

Mr. STUPAK. Well, this open access issue would also affect new

entrants and minority-owned businesses that Mr. Rush spoke of?

Mr. ADELSTEIN. The open access actually could be a very helpful

provision for small and midsized companies. It would allow them,

if there was a wholesale component to it, to be able to buy access

to that spectrum on a wholesale basis and use that in a very limited region.

Mr. STUPAK. Commissioner Copps, you mentioned the transition

to digital TV. In my district they just see it as a scheme to buy

more televisions. They don’t see it as really necessary. So we have

a great education to do in this committee, and I think the FCC has

to join with us in letting people know that you really have to do

a digital transition, that it is technology, it is not just to get you

to buy a new TV.

Mr. COPPS. Right.

Mr. STUPAK. But let me ask you this. You were the only joint

board member to dissent on the USF cap. I have concerns about

the cap proposal, in that it could freeze deployment of wireless

areas in parts of the country that need it, like rural areas. Can you

please explain why you dissented?

Mr. COPPS. Well, for a number of reasons. Number 1, I think the

decision got us off the target of comprehensive Universal Service

Fund reform, and I think, with the length of time that the referrals

have been pending since 2002 and 2005, respectively, we should be

dealing in comprehensive proposals right now. I think this particular cap would have had the maybe unintended but damaging effect

of just getting everybody fighting with everybody else, between

technologies, and we really didn’t need to have that. We are supposed to be looking toward comprehensive reform. I am worried

that some areas and some localities would be shut off new wireless

possibilites, at the same time that we are sitting here talking about

the importance of wireless and 700 MHz. So there were a number

of concerns that I had.

Mr. STUPAK. Thank you. Chairman Martin, I want to ask you a

little about local-into-local deployment. It is proven to be mutually

beneficial to satellite operators and broadcasters, but according to

the latest FCC filings, EchoStar has local-into-local service in 170

television markets, while DirecTV has local-into-local service in

142, and there is a total of 210 television markets. So that leaves

at least 40 markets where satellite is not carrying the local broadcast channels. Several of these markets are in my district and are

not carried. Do you think the DTV transition provides an opportunity for satellite companies to deploy local-into-local, nationwide,

to all television markets? Broadcasters have a date certain that you

have to switch to digital television. Do you support a date certain

for local-into-local rollout? And one more, if I may. Do you support

making deployment of local-into-local into all media markets a condition of the Liberty Media acquisition of DirecTV?

Mr. MARTIN. I do think that it would be helpful, from a consumer

perspective, for carrying the local broadcast signals by those platforms. So I have always thought that that was positive from a conVerDate 11-SEP-98 10:30 Jul 09, 2008 Jkt 000000 PO 00000 Frm 00392 Fmt 6601 Sfmt 6601 Q:\DOCS\110-18 SCOM1 PsN: SCOM1
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sumer perspective and a policy perspective. But Congress actually

made the determination that it is opposed to a pure must-carry regime, like was imposed upon cable. They were going to impose a

regime that allowed what was called a carry one, carry all provision, where if a satellite distributor decided to carry one, it had to

carry them all. And that was in part because of the more limited

bandwidth that satellite has. So while from a policy perspective I

think that is a good thing, I think the Commission needs to respect

Congress’s balance of those interests, where they determined that

we wouldn’t require all local-into-local, but rather have a carry one,

carry all provision on a market-by-market basis and that is why

the Commission has tried to——

Mr. DOYLE. The gentleman’s time has expired. The Chair now

recognizes the gentleman from Mississippi, Mr. Pickering.

Mr. PICKERING. Thank you, Mr. Chairman. My first question, Mr.

Chairman, deals with the public/private sector partnership. Specifically, if we expect a private sector company or entity to bid and

then build a system, billions of dollars at stake, and with the public

safety community to have the certainty that they will have a national network in a very timely way, when we have security, safety

and lives at stake and as my other colleagues have mentioned, that

we have not really resolved interoperability or made much progress

since both 9/11 and Katrina. So timeliness and urgency of getting

this built is very important, and what I see as an important component of that is an effective dispute resolution mechanism between

the private and the public partner. How do you envision that dispute resolution working in a very timely and certain way, Mr.

Chairman?

Mr. MARTIN. One of the things that I think that the Commission

has learned by watching some of the challenges with the re-banding processes that occurred in the 800 MHz frequencies is that the

disputes between the public safety and the private entities, without

an effective dispute resolution process, can actually drag on, that

re-banding process. So unlike in that area where we actually send

it off to a mediator to try to mediate those differences, what we are

saying here is that there will be 6 months to negotiate between

those public and private entities but that all of those unresolved

issues will be decided affirmatively by the Commission and that

the Commission must approve that public safety and private partnership and all of those unresolved issues, in order for them to get

the license to end up being in this process. So that, I think, forces

the Commission to act very promptly, after the 6 months, if there

are any unresolved issues.

Mr. PICKERING. Do you have timetables on the Commission to resolve disputes?

Mr. MARTIN. I mean, no, but if my other commissioners have

some suggestions on what they would like, I will put something in

there for a guarantee when we resolve it.

Mr. PICKERING. I think it is very important to have tight timetables so that there is certainty, both to the private partner and

to the public safety. And whether it is an FCC or a binding arbitration process, there has to be certainty and there has to be a very

tight timetable. The second question I have, Mr. Chairman, is that

we want bidders and builders, not buyers and squatters, and this

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is just too valuable a spectrum to have speculation or warehousing.

And so my question to you is your benchmark at 41⁄2 years is 35

percent of the geographic area to be built out. What happens if a

company does not meet that 4-year target? What is the enforcement mechanism at that point?

Mr. MARTIN. Our enforcement mechanism is slightly different for

the public/private partnership piece of spectrum than in the rest of

the commercial spectrum.

Mr. PICKERING. And my particular question here is on the rest

of the commercial spectrum.

Mr. MARTIN. The rest of the commercial spectrum. On the rest

of the commercial spectrum we do have a series of enforcement

mechanisms and penalties for failing to meet those, so that, for example, the timeframe for your license and for the rest of your

build-out is shortened, as one of the penalties, for example, to automatically keep saying if you fail to meet it. But we do have certain

kinds of penalties, and I would just point out again that the buildout requirements in this, that we have proposed, or that I have

proposed, are the strictest build-out requirements that the Commission has ever proposed in any auction.

Mr. PICKERING. I would just encourage the Commission to make

sure that you have real teeth in your enforcement, so that somebody who buys with no intention of building cannot fail at 41⁄2

years and still hold the spectrum until 7 or 8 or 10 years without

ever building. So I do hope that you have a tough enforcement

mechanism, whether it is a use or lose or some other mechanism,

so that that spectrum can be put back out by somebody who will

truly build out the broadband for all parts of the country. The next

question concerns special access, Mr. Chairman. What is your timetable on addressing special access? When do you think that the

analysis will be complete, and what time do you think the Commission will act upon that question?

Mr. MARTIN. The Commission just put out the notice recently.

The comments and reply comments aren’t in yet, but we put on an

extremely tight timeframe for comments or reply comments to

come in. And as soon as those comments come in, I will. I circulated an options memo to the commissioners previously on this

issue, which is how we ended up in a notice situation, and I will

follow that up with another options memo for the commissioners to

give input, and then I will instruct the Commission staff to do it

as quickly as possible after that. I think September was the timeframe that Chairman Markey had encouraged us to try to act.

Mr. PICKERING. I want to commend you on publicly stating that

the full Commission will vote on the forbearance. And then, finally,

I would like to just express my concerns on the possibility of a USF

cap on the wireless side. And these are my concerns: 700 MHz and

broadband wireless build-out is tied to USF, and you should not see

the policy as separate. Mr. Chairman, could I ask for 15 seconds?

Fifteen seconds. So the build-out of the 700 is tied to USF. And so

with aggressive build-out requirements, we need USF for rural

areas to achieve those build-out requirements. And second, I am

concerned that a temporary stop gap could become permanent and

take away the incentive for comprehensive reform. And the wireless sector is the more efficient lower cost, and I just don’t want

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to see them disadvantaged in the long term. And with that I yield

back.

Mr. DOYLE. Thank you. The gentleman’s time has expired. The

gentleman from Texas, Mr. Green.

Mr. GREEN. Thank you, Mr. Chairman. Again, I know it has been

a long morning for our commissioners. Chairman Martin, you mentioned in your testimony a number of retailers that are not properly marketing analog television sets, and other companies have

still been importing sets without a digital tuner. One, I am disappointed to hear this, and how widespread is this problem? And

in addition to fines, has the Commission taken any other steps to

respond to these problems?

Mr. MARTIN. I would say that our investigation is that the importation of televisions that don’t meet our tuner requirements has

been somewhat limited. That has not been as widespread a problem. We have found that it has probably been more of a widespread

problem that our recent orders requiring retailers to identify televisions that have more limited capability, that retailers were less

aware of and less in compliance with that rule. But it has been significant, but it has been more. The number of televisions was significant, that were coming in, but the number of companies that

were in violation was relatively few. So I am more optimistic that

our significant fines in that area will address that issue, and we

will hopefully try to deter anybody else from trying to bring in televisions without those tuners.

Mr. GREEN. OK. So the few companies, they have been dealt

with, and so we will no longer see, I guess, these televisions being

imported that do not have the digital tuners?

Mr. MARTIN. We imposed significant fines, and I am hopeful of

that, but we will continue to try to investigate that and act on any

other complaints that we get.

Mr. GREEN. And I know you have heard it in other opening statements from members, on your outreach and how effective you believe the Commission is being in reaching our elderly, our low income and our non-English speaking households, and is there a plan

by the Commission to actually target these groups to make sure

they know that the digital will be required?

Mr. MARTIN. I think that our outreach to individual groups directly has been more limited, as our congressional budgetary oversight committee is aware. We have asked for funding for that directly in the past. We had not gotten it in the past, but it is in our

budget, and it has been approved this year, actually even more

money than we asked for. That will allow us to do the kind of direct outreach you are talking about, to particular populations that

are more likely to be unaware, like the elderly, and I am more

hopeful that——

Mr. GREEN. OK, thank you. Commissioner Copps, one of the

problems we have in our Houston area that public safety has experienced involves not only interoperability but the current infrastructure is not reliable under extreme conditions. For example,

handheld devices aren’t able to penetrate smoke to communicate

with one another during, for example, a refinery fire. Can you

elaborate on your tests and what feedback you are getting from

public safety on their needs from the 700 MHz network? Given the

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characteristics of the 700 MHz, do you think it could resolve some

of these issues?

Mr. COPPS. Well, I think we are in the process of trying to gather

data and information like that, and we put out a notice recently,

asking for better input on the ability of wireless phones to operate

in buildings and some other questions too. So I think we need to

better understand not only the capacities and the capabilities but

the limitations of this, and I look forward to the comments on that

proceeding.

Mr. GREEN. Two weeks ago the ITC ruled on a patent dispute between Broadcom and Qualcomm, essentially freezing the import of

numerous handsets bound for the U.S. Verizon recently settled,

agreeing to pay $6 for a handset. However, public safety is still not

able to obtain these handsets. Have you looked into the matter,

and do you perceive that the action threatens our public safety

communications?

Mr. MARTIN. Oh, I am sorry.

Mr. GREEN. Yes.

Mr. MARTIN. The Commission has looked into that matter. We

weighed in at the ITC with our concerns that the kind of ban on

the importation of any of these devices could actually have a negative impact on the public interest. We weighed in there, and we

subsequently weighed in at the administration with the same facts,

concerns and our concern with that ban.

Mr. GREEN. OK, I appreciate it. Thank you, Mr. Chairman.

Mr. DOYLE. Thank you. Gentleman yields back. The Chair now

recognizes the gentleman from California.

Mr. RADANOVICH. Thank you, Mr. Chairman, and Commissioners, to the hearing. I do have a couple questions of Commissioner Tate. Commissioner Tate, advocates of the open access conditions on the spectrum say that there has been a market failure.

In your opinion, has there been a market failure in the wireless industry, and if so, what is the evidence?

Ms. TATE. I wasn’t sure that the item drew that conclusion, that

there was a market failure. I thought that the item specifically

talked about the issue of device portability, and I am trying to be

responsive, but I truly do have an open mind, and part of being

here today was to hear from you all about what you do think. I

have meetings all the rest of the week with commenters, since we

have just received the item. So I wasn’t aware that that conclusion

was drawn.

Mr. RADANOVICH. All right. In its April 700 MHz order, the FCC

acknowledged that the congressionally mandated competitive bidding process ensures that spectrum licenses are assigned to those

who place the highest value on the resource, will be suited to put

the licenses to their most efficient use. But if the FCC opposes open

access conditions, it would be substituting its own judgment for

that of the market via the congressionally mandated competitive

bidding process. Can you tell me if that is a good idea, and if so,

why?

Ms. TATE. Well, I think that as the chairman pointed out, that

not only are we talking about the value of the spectrum and maximizing the value of the spectrum but whether or not value equals

dollar signs. And so in some cases, it may be that we need to look

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at other public policy aspects, and that has to do with consumer

choice and portability of the devices. But as I said, I am still open

as to where I am at the conclusion of the day and how I am going

to vote.

Mr. RADANOVICH. Very good. All right, thank you to you and also

to the panel of witnesses. Yield back, Mr. Chairman.

Mr. DOYLE. Thank you. Chair now recognizes the gentlelady from

California, Ms. Capps.

Mrs. CAPPS. And I want to complement the vice chair, my seat

mate. Nice elevation. I have a question for the three Commissioners who serve on the Task Force on Media and Childhood Obesity. Chairman Martin, I believe it is, and Commissioner Copps

and Commissioner Tate. The major concession so far has been an

initiative announced by the Council of Better Business Bureaus.

Among 11 companies that represent two-thirds of food advertising

targeted at children, these companies have committed to not advertise to children under 12 unless the food products meet a nutritional standard.

First of all, kudos to the industry for recognizing that this is a

problem. My question, however, is the standard that is chosen by

the companies, themselves, and whether or not this is sufficient.

This is my question to each of you. Do you believe that a uniform

standard would help, in this case, the children’s health situation?

So Commissioner Martin, Chairman Martin, to start. Brief, maybe.

Brief answers from the three of you.

Mr. MARTIN. Standards are always helpful in trying to evaluate

it, but I think that this has been important that these companies

have been willing to do this on a voluntary basis.

Mrs. CAPPS. I agree.

Mr. MARTIN. And I also have not heard yet from all of the advocacy groups about what they think about the standard that was

drawn by these companies, so I would say I need to hear from them

before I could give you a final answer on it.

Mrs. CAPPS. That is good and I just want to say it is nice to give

the industry first crack at it and now you are waiting, I hear, to

hear back a little more from some of the advocacy groups and you

are willing to entertain the possibility of standards? Depending on

what they say?

Mr. MARTIN. Yes, we have certain limitations on who the companies are. R30 is actually a media company which is actually much

more limited with what they were willing to agree to. But yes,

within the companies that are within our purview, yes.

Mrs. CAPPS. How about you?

Mr. COPPS. Well, if you are going to have a uniform standard, I

guess the first thing you have to be sure of is, is it a commitment

that really reflects something meaningful. But I applaud the fact

that the food companies are beginning to step up. I think it is becoming clear now that the media companies have some considerable work to do to match and hopefully even exceed that performance.

Mrs. CAPPS. So you are not opposed to having some standard

come from outside the industry and the media?

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Mr. COPPS. I think that is something that we could look at depending upon the range of commitments that we get from both the

food industry and the media industries.

Mrs. CAPPS. OK, thank you. And Commissioner Tate.

Ms. TATE. Yes, Congresswoman. I had the opportunity to go actually tour Kellogg and they have standards that deal with, for instance, the WIC Program or with HHS standards or standards for

the food that goes into public schools. So there are multiple standards that they are dealing with, and I guess I would just want us

to be careful that the entities, the Federal entities, that they already work with—in many cases, they are actually using Government food standards, and so I think that that is one thing that we

ought to look at before we move forward on oh, let us develop another standard for the companies.

Mrs. CAPPS. That is a good point. Another topic and a little bit

of time. Chairman Martin, at the oversight hearing in March I

asked you why the Commission hadn’t completed a rulemaking to

reinstate consumer protection, such as restrictions on slamming

and the disclosure of private information, which was lost when the

FCC reclassified broadband as an ‘‘information service’’ subject to

title I rather than title II of the Telecommunications Act. At that

time, the rulemaking had been languishing for about a year and a

half, and now it has been about 2 years, so can you give us an update on the status of that rulemaking? And again, I want to follow

up with a couple of other commissioners.

Mr. MARTIN. We have taken several important steps to address

many of the issues that were first identified in that rulemaking, so

we have adopted, for example, just two meetings ago, we adopted

some significant consumer protections for the disabled, which was

one of the issues.

Mrs. CAPPS. Yes.

Mr. MARTIN. So instead of taking it as just one rulemaking, we

have taken the disparate pieces and have been trying to work on

each one of them, so we did that on public safety and 911, on disabilities, and I anticipate we have already taken some steps on privacy, to extend our privacy rules. I think we will continue doing

that and will complete the comprehensive—hopefully, we will be

able to have had addressed all of those issues by the end of this

year.

Mrs. CAPPS. Excellent. Mr. Adelstein, do you want to comment?

Mr. ADELSTEIN. I certainly hope we would. It has been 2 years

since that has been pending, and we have already reclassified other

services, so we are spending our time doing all these reclassifications without putting consumers first, and when we saw major privacy issues, we talked about privacy, as this committee has, and

there hasn’t been a comprehensive solution to the privacy issue.

Truth in billing, slamming, cramming, access to persons with disabilities we have done, but we have universal service issues that

also aren’t dealt with. We just heard about a major discontinuance.

We haven’t dealt with that issue. We have got outage reporting,

rate averaging, there are all these issues regarding how consumers

are affected that we haven’t dealt with, and I am pleased to hear

the chairman say we are going to do that expeditiously.

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Mr. DOYLE. The gentlelady’s time has expired. As you see, we

have votes on the floor, and we want to try to finish this hearing

so we don’t keep our commissioners here another hour.

Mrs. CAPPS. Thank you.

Mr. DOYLE. The Chair now recognizes the gentleman from Florida.

Mr. STEARNS. Thank you, Mr. Chairman. Chairman Martin, the

first question I have for you is a position that you had dealing with

network neutrality and trying to bring that into your position on

wireless broadband and infrastructure. At the last oversight hearing you said that you opposed network neutrality conditions in the

wireline context because it deterred investment in broadband infrastructure,

Mr. MARTIN. Yes.

Mr. STEARNS. But wireless broadband infrastructure is even less

developed than wireline broadband infrastructure. I would think

you would be more worried about chilling wireless investment with

your proposed auction’s conditions, which I mentioned in my opening statement earlier.

Mr. MARTIN. I am concerned about imposing network neutrality

requirements on wireline infrastructure, and I would also be equally concerned about network neutrality requirements on wireless infrastructure. That is why I haven’t proposed network neutrality requirements on wireless. Indeed, on the wireline infrastructure

today, you can plug in a phone that you buy from the phone company or you can plug in a phone that you buy from Radio Shack

or one from Best Buy and all of them work. And that works today

on the wireline infrastructure, and there is no network neutrality

that applies to wireline infrastructure.

Network neutrality deals with actually the selling of that capacity under a more restricted basis. What I am proposing to do on

wireless is exactly what already occurs on wireline today, and that

is why I agree with the statement that network neutrality should

not apply to wireline, and that is why I am not proposing network

neutrality applied to wireless. I couldn’t be proposing network neutrality requirements on wireless, or those would be requirements

that would be network neutrality on wireline and we have determined that they are not.

Mr. STEARNS. Are there any conditions that you foresee that

would change dealing with wireless broadband infrastructure that

might change your thought on this? I think what you are saying

is that network neutrality that applied is not necessarily applicable

in the same context.

Mr. MARTIN. I don’t think that what we have proposed, these

kind of open Carterfone type rules are network neutrality at all.

Mr. STEARNS. OK.

Mr. MARTIN. Indeed, they are not considered network neutrality

in the wireline context, nor should they be considered network neutrality in the wireless.

Mr. STEARNS. OK, let me go on. I have a letter here. It has approximately 140 small and regional wireless carriers that say

Chairman Martin’s auction proposal will raise the spectrum costs

for smaller providers. In fact, they think it, perhaps, would shut

them out altogether. The reason is that larger providers will bid on

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the smaller licenses which don’t have conditions. I ask unanimous

consent that this letter be submitted into the record, Mr. Chairman.

Mr. STEARNS. And Commissioner Tate, you have built your career on rural issues. Do you support this proposal, knowing that it

possibly could hurt small and rural wireless providers?

Ms. TATE. Well, in looking at the spectrum as the plan presently

before us in this item, it has the same or even a similar mix of licenses, both in terms of geographic areas and in the size of the licenses.

Mr. STEARNS. Do you support this proposal?

Ms. TATE. I am sorry, I really am trying to be responsive.

Mr. STEARNS. OK.

Ms. TATE. But I have not decided how I am going to vote.

Mr. STEARNS. This letter was sent to you on July 16, and it was

addressed to yourself as well as all of them, and so my question

is, I guess——

Ms. TATE. No, sir. I don’t want to do anything that would harm

rural areas.

Mr. STEARNS. OK.

Ms. TATE. I want broadband to go into rural areas.

Mr. STEARNS. I understand.

Ms. TATE. Right now, the item that is proposed and the way that

the band plan is lined out has a generous mix of different sizes of

geographic——

Mr. STEARNS. Would you say you agree with this 50 percent of

the time?

Ms. TATE. I would be happy to read the letter and get back with

you later today.

Mr. STEARNS. So you haven’t read the letter?

Ms. TATE. I have not.

Mr. STEARNS. Even though it was addressed to you July 16?

Ms. TATE. I am sorry. I have not——

Mr. STEARNS. No, I understand. We have got a pig in a basket.

Commissioner McDowell, what are your thoughts?

Mr. MCDOWELL. I share those concerns outlined in the letter. I

have spoken with many small carriers from across the country,

that they are concerned they might be shut out of this auction, so

that is something I am carefully considering as we go forward.

Mr. STEARNS. OK. I guess the other two commissioners might

want to comment on this, too? And I guess are you worried about

the little guy, the 140 signatures on here or——

Mr. MARTIN. Sure, I am worried about the little providers, but

I think we need to have a mix of areas of spectrum, and what we

are doing in this 700 MHz auction is distributing spectrum in geographic areas that is very similar to what we have done in the past

with a mix of them for small areas for some small providers to compete; midsize areas and some larger areas.

Mr. STEARNS. Mr. Chairman, we are almost out. Can I just ask

the other two commissioners if they agree with what is in this letter or not?

Mr. DOYLE. Yes, yes or nos.

Mr. STEARNS. Just yes or no. Commissioner Copps.

393

Mr. COPPS. I can’t give you a yes or no. Do we have concerns

about that? Am I going to be doing my dead-level best to make sure

that this auction is good for rural consumers, rural companies and

rural America? Yes.

Mr. STEARNS. I think that letter raises some real concerns we

have to watch out for in this, but it is difficult. We are trying to

get a good mix and balance of the different license sizes.

Mr. DOYLE. The gentleman’s time has expired.

Mr. STEARNS. Thank you.

Mr. DOYLE. Without objection, the Chair recognizes the gentlewoman from Tennessee.

Mrs. BLACKBURN. Thank you, Mr. Chairman, and I will be brief.

I want to thank all of you for your time today, and I want to thank

you for your willingness to have discussions with us as we have

seen you and the issues that come out. And I am going to go right

where Mr. Stearns was and follow on with this, with our small regional and rural carriers. This is terribly important to us, so let me

ask the question this way, and then each of you give me a yes or

no.

Isn’t spectrum from these carriers and the citizens they serve

more important or as important to you than giving the open access

experiment to Google? So is it as important to you to give rural carriers access, the small rural and regional, as it is to have this experiment with Google? So Commissioner Adelstein, you first.

Mr. ADELSTEIN. Well, I do think they are both important, and I

think we need to find the right balance between the two in the

final item.

Mrs. BLACKBURN. OK.

Mr. COPPS. Yes, and I hope we have an auction that will accommodate both.

Mrs. BLACKBURN. Chairman Martin?

Mr. MARTIN. I don’t agree with the premise that this is an experiment for Google, but what I will say is that rural consumers are

just as important as the urban——

Mrs. BLACKBURN. OK. Commissioner Tate?

Mr. MARTIN. And all consumers being able to take devices with

them is important.

Mrs. BLACKBURN. OK. Commissioner Tate?

Ms. TATE. I am very concerned about rural consumers.

Mrs. BLACKBURN. OK.

Ms. TATE. I do not know how I am going to end up voting.

Mrs. BLACKBURN. OK. Commissioner McDowell?

Mr. MCDOWELL. Yes.

Mrs. BLACKBURN. Thank you, sir. OK, Chairman Martin, you

made a statement during your comment that you had to balance

consumer interest and taxpayer interest, and sir, I would recommend or would offer to you that those are one and the same,

and we have to be willing to say that our taxpayers deserve the

maximum return from their investment in the Deficit Reduction

Act. And we all know that we are looking at something that really

smacks of corporate welfare for a company with a $170 billion market cap, if we are not very careful about how we approach this, and

that is why I think the comments about an important experiment

are of concern to many of us here.

394

So as you look at this, I have been so curious about Google’s offer

to bid up to $4.6 billion in a reserve price for the 22 MHz. That

is really curious to me, because I look at it, and I go back and I

look at the 10 MHz of the 3G spectrum that was given to Nextel

3 years ago, and now we have 22 MHz on the block, and this is

higher quality, and it is coming available nearly 4 years following

the 3G auction, and you would think that it would be worth more.

At the same time, we go in and we look at the discussions around

the advanced wireless service auction and the rules that were set

forth there in phase I of the 4G auction process. And I would like

to ask you, are you aware of any proposal during the rulemaking

process for AWS that sought open access for the spectrum?

Mr. MARTIN. I am not aware of any proposal during that AWS.

There might have been, but I am not aware of any.

Mrs. BLACKBURN. OK. Well, thank you. I will tell you, that concerns us that we see now you are looking at having this experiment

in the open access proposals that are there, because we know that

what has changed during that period of time is probably not a lot

except the expansion of the wireless market to additional industry

players. You are seeing increased competition in the regional and

local markets and lower prices and an increase of service for consumers.

So our question becomes what makes the 700 MHz auction different from AWS, and why do potential bidders and competitors to

the folks who bid on that spectrum deserve open access restrictions

that are not standard industry practice today?

Mr. MARTIN. I am interested in consumers being able and deserving of the ability to have more flexibility with the telephones that

they are buying, and I am concerned about the industry practices,

as you called them, today, just like I think the consumers, in the

end, were deserving of being able to take their telephone number

with them when they switched carriers. I think that they are deserving of being able to take the telephone that they have had to

buy and pay for with them as well. And so I think that I am concerned about that practice as the industry practice today. Yes, I

am.

Mrs. BLACKBURN. OK, thank you very much. I will yield back,

Mr. Chairman.

Mr. MARKEY [presiding]. The gentlelady’s time has expired. And

unfortunately there are five roll calls that are now going to be conducted in order out on the House floor, so we will have to bring

this hearing to a conclusion. Before I do, though, I ask Commissioners Tate and McDowell whether or not they would support applying Carterfone protections for consumer devices in this slice of

the spectrum that the chairman wants to set aside. And I don’t

know if you have had time to think about it in the last 3 hours.

You can firm up your views. Are you still undecided on that?

Ms. TATE. Perhaps when we leave today, all the carriers will announce that they are opening all their devices and we will all be

able to take them with us.

Mr. MARKEY. Right after that non-caloric hot fudge sundae is announced as well, as the new solution to dieters. Commissioner

McDowell?

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Mr. MCDOWELL. Throughout this whole proceeding, Mr. Chairman, I am keeping an open mind. I am still responsive to all arguments, right now, leaning against the proposal, however, on that

aspect of it.

Mr. MARKEY. Well, let me just say this in conclusion. First of all,

it was a great hearing, and we very much appreciate the commissioners when they come up here. You can see that there is an incredible amount of interest in everything that you do. I have been

on this committee for 31 years. I remember back when I arrived

here in 1976, that Carterfone was a huge issue. AT&T was still arguing how onerous a burden this would be upon them, as it was

fully being implemented, that people could actually go to a phone

store and buy a different color phone than black, that they could

buy another kind of a device and actually plug it into the phone

jack. And AT&T was making this incredible argument as to how

actually potentially it could bring down the entire phone system of

greater Boston or New York if the wrong kind of phone was purchased and put in any individual jack anywhere in America. And

that actually was the key hearing for me that I actually announced

that I was now in favor of breaking up AT&T, because it really

doesn’t do any good if you can win all of these Nobel prizes in basic

research in Bell Labs but you can’t figure out how to have some

other company just plug in a phone into the same phone jack and

be able to talk to their mother somewhere in the rest of the country.

And so Carterfone, to me, was the big moment, as is kind of the

application of those same principles here in the wireless marketplace. When people buy one of these $500, $600, and there is no

question, it is going to wind up $700, $800 devices, that they ought

to be able to take it with them. I found that, in the 8th grade at

the Immaculate Conception Grammar School, they explained this

concept of anthropomorphism, which is applying human qualities

to inanimate objects. And as we all know, this new sophisticated

iPhone is now a part of people’s families. It is no longer just a device. It is every single human interaction that these people have is

now programmed into these devices, and it is a very expensive device, and people should not be forced to swallow the cost of it.

Similarly, back in 1993, when this committee was moving over

200 MHz of spectrum, in working with the FCC we were able to

devise something that said that the first and second companies, the

two incumbents, could not bid for the third, fourth, fifth and sixth

license that we were creating across the country, unless they did

not own a license in any one of those marketplaces. And in that

way, we would have the extra competition, the third, fourth and

fifth and sixth companies in every market, there would be a real

pressure to innovate, a real pressure to lower prices, a real pressure to force the first two companies to move to digital from analog.

They were both still analog in 1993. And guess what happened?

Once the Federal Communications Commission adopted those

policies, all of a sudden, by 1995, 1996, the first two companies

were announcing their digital plans, their lower price plans. No

longer 50 cents a minute; now 10 cents a minute or lower. And that

was because a plan was put together that would benefit consumers,

benefit innovation, benefit entrepreneurs who were ready to move

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and ready to make the changes. And I think you are at that same

historic juncture as that Carterfone decision and that decision in

1993, 1994 to move to real competition out in the marketplace and

a competition which unleashes all of this creativity that is pent up.

We know it is. We know it is there. We know that what we are

seeing in other countries in the world would happen here if we created the conditions for it. That is real competition.

And so to you, I think the challenge, as it always is, is to create

a paranoia-inducing Darwinian competition out in the marketplace

for devices, for applications, for the American consumer but also for

all of those entrepreneurs across the country. And I do hope, sincerely, that you respond to the historic challenge. It has been the

FCC over the years that has led the charge in opening up to the

American people and its entrepreneurs all of these opportunities.

As former Chairman Barton said earlier, it is the sector which

is leading the country right now, and we have a chance to make

it lead the world as well. In these particular areas we are not right

now, but with, I think, a little bit of flexibility on the part of the

Commission and some recognition of the opportunities that would

open up for entrepreneurs and for consumers across the country,

then I think it would make a real difference.

So I thank you for all of your attention to these issues. And without objection, a letter from Mr. Dingell and myself and the Commission’s response will be entered into the hearing record regarding franchising issues, at this point in the record.

Again, with thanks of the subcommittee and an invitation for you

to return in the fall to discuss, in a follow-up hearing, all of these

issues that we have been discussing today and especially to you,

Mr. Chairman, given the circumstances under which you are testifying today. With the thanks of this committee, this hearing is adjourned. Thank you.

[Whereupon, at 1:10 p.m., the subcommittee was adjourned.]

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