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WHERE THE JOBS ARE: THERE’S AN APP FOR 

THAT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON COMMERCE, MANUFACTURING, 

AND TRADE 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

SEPTEMBER 12, 2012 

Serial No. 112–174 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

CLIFF STEARNS, Florida 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

Vice Chairman 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

CHARLES F. BASS, New Hampshire 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE

MARY BONO MACK, California 

Chairman 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

CLIFF STEARNS, Florida 

CHARLES F. BASS, New Hampshire 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

G.K. BUTTERFIELD, North Carolina 

Ranking Member 

CHARLES A. GONZALEZ, Texas 

JIM MATHESON, Utah 

JOHN D. DINGELL, Michigan 

EDOLPHUS TOWNS, New York 

BOBBY L. RUSH, Illinois 

JANICE D. SCHAKOWSKY, Illinois 

JOHN P. SARBANES, Maryland 

HENRY A. WAXMAN, California (ex officio) 

(II) 

(III) 

C O N T E N T S 

Page 

Hon. Mary Bono Mack, a Representative in Congress from the State of 

California, opening statement ............................................................................. 1 

Prepared statement .......................................................................................... 4 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 7 

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

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

Prepared statement .......................................................................................... 10 

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

Tennessee, opening statement ............................................................................ 12 

WITNESSES

Peter Farago, Vice President, Marketing, Flurry, Inc. ......................................... 13 

Prepared statement .......................................................................................... 15 

Stephanie Hay, Co-Founder, Fast Customer, and Resident Mentor, 500 

Startups ................................................................................................................ 32 

Prepared statement .......................................................................................... 34 

Rey Ramsey, President and Chief Executive Officer, TechNet ............................ 39 

Prepared statement .......................................................................................... 41 

Morgan Reed, Executive Director, Association for Competitive Technology ...... 48 

Prepared statement .......................................................................................... 50 

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WHERE THE JOBS ARE: THERE’S AN APP FOR 

THAT 

WEDNESDAY, SEPTEMBER 12, 2012 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND

TRADE, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 9:50 a.m., in room 

2322 of the Rayburn House Office Building, Hon. Bono Mack 

(chairman of the subcommittee) presiding. 

Members present: Representatives Bono Mack, Blackburn, 

Stearns, Bass, Harper, Cassidy, Guthrie, Kinzinger, Upton (ex officio), Markey, and Waxman (ex officio). 

Staff present: Paige Anderson, Commerce, Manufacturing, and 

Trade Coordinator; Charlotte Baker, Press Secretary; Matt Bravo, 

Professional Staff Member; Kirby Howard, Legislative Clerk; Brian 

McCullough, Senior Professional Staff Member, Commerce, Manufacturing, and Trade; Gib Mullan, Chief Counsel, Commerce, Manufacturing, and Trade; Andrew Powaleny, Deputy Press Secretary; 

Shannon Weinberg Taylor, Counsel, Commerce, Manufacturing, 

and Trade; Michelle Ash, Democratic Chief Counsel; Felipe Mendoza, Democratic Senior Counsel; and Will Wallace, Democratic 

Policy Analyst. 

OPENING STATEMENT OF HON. MARY BONO MACK, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mrs. BONO MACK. Good morning. 

One of the most promising areas of the U.S. economy involves 

the development, marketing and sale of mobile and online applications, commonly known as apps. Today we are going to take a close 

look at how the apps economy is shaping our future as individuals 

as well as a nation, and the Chair now recognizes herself for an 

opening statement. 

When it comes to mobile application software, I’m reminded of 

the hit song by country star Loretta Lynn: ‘‘We’ve come a long way, 

baby.’’ From the 1970s ‘‘cave age’’ concept of conducting banking or 

paying your utility bill by telephone, mobile apps have exploded in 

number and in sophistication. Today, there are apps to lose weight, 

quit smoking, examine your stock portfolio, review restaurants, 

watch videos, check up-to-date scores of your favorite sports team, 

witness breaking-news events worldwide, post on Facebook, Tweet 

to the world in 140-character bursts, and on and on. 

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According to a recent New York Times article, there were nearly 

8,000 mobile apps in 2008. Today, there are more than 1.3 million, 

and they are multiplying rapidly. Consider this: it is estimated that 

nearly 100 movies and about 250 books get released worldwide 

every week. That compares to nearly 15,000 apps. 

The health industry is a good example of this astonishing 

growth. The Baltimore Sun recently reported that there are now 

more than 40,000 mobile health apps contributing to an $800 million global business. And experts say we are only beginning to 

scratch the surface of a brand-new industry. 

Apps, of course, are software programs, small in size, that users 

load onto their mobile devices or use layered on top of a platform 

such as Facebook. But times have changed in a hurry, thanks to 

increasingly more powerful mobile devices and higher quality networks. Today, apps are purchased typically through an app store 

associated with a particular platform. The main platforms in today’s app economy are Apple iOS, Google Android, RIM Blackberry, 

Microsoft Windows, Amazon Kindle and Facebook. 

Approximately one-third of all apps are created by individuals or 

businesses with fewer than five employees. But both blue chip companies and traditional brick-and-mortar stores now have an app 

presence as well, developed either in-house or outsourced to a contractor. App developers range in size from one-person shops to 

large developers such as Zynga, with nearly 3,000 employees. 

The revenues generated by apps include the purchase of the app, 

in-app purchases like game credits, in-app advertising, and app-enabled commerce, such as the purchase of goods and services 

through an app. As a result, a new term, the ‘‘apps economy’’, encompassing all such commercial activity, has now become a part of 

mainstream America. 

Apple first launched the iPhone in 2007 and followed with the introduction of its App Store in 2008, which opened with 500 available apps. Four years later, Apple says its stores offer an astonishing 600,000 apps. And according to its Web site, Google’s Play 

store offers a similar number. 

Today, an estimated 90 million U.S. consumers spend approximately 60 minutes per day accessing the Internet on their 

smartphones, while another 24 million U.S. consumers spend 75 

minutes a day accessing the Internet on their tablets, much of this 

access being gained through the use of mobile apps. 

And if you think all of that sounds pretty impressive, well, consider this. Last Christmas, on December 24 and December 25, consumers downloaded a staggering 392 million apps. So as 

smartphone and tablet ownership continue to rapidly expand, current projections indicate the app economy will soon become a $100- 

billion-a-year business. 

In addition to the explosive growth of the apps economy in the 

United States, the outlook for apps as an export looks bright as 

well. More than 20 percent of all apps downloaded in China last 

year were created by U.S. developers. 

Clearly, this tremendous innovation offers high hopes for our 

economy. According to a study commissioned by TechNet about a 

year ago, there were over 44,000 app-related positions open in the 

United States at the time. And here’s another interesting finding 

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of that survey: researchers found that app jobs, while located in 

predictable places like New York and Silicon Valley, are actually 

dispersed throughout the country with an estimated two-thirds of 

all app-related employment falling outside of New York or California. 

So with that as a background, I am very anxious to hear from 

today’s panel. What have been the keys to the explosive growth 

and job creation in the mobile app economy? Are there Federal 

policies that present a roadblock to the sector’s growth and ability 

to create jobs? Are there policies the Federal Government should 

consider to foster further growth and job creation? And what is the 

outlook for both the immediate and long-term future? 

And while we are on the subject of roadblocks, we should remember how critically important wireless spectrum is in driving innovation in the mobile app sector. Mobile is the fastest area of 

broadband connectivity, and Congress must continue to explore 

ways to free up additional spectrum. I commend Chairman Walden 

for the important work he has already done on this issue, and I 

look forward to his spectrum hearing tomorrow. 

As for today’s hearing, it could not be more appropriately entitled: ‘‘Where the Jobs Are: There’s an App for that.’’ Because increasingly through American innovation and ingenuity we are rapidly becoming a world where there is literally an app for everything. 

[The prepared statement of Mrs. Bono Mack follows:] 

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Mrs. BONO MACK. And with that, I now recognize my good friend 

and my colleague from Los Angeles, Beverly Hills area—what is 

your name? Mr. Waxman—just kidding—for 5 minutes. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you, Madam Chair. There is an app to give 

you my name and the description of the cities that I represent. I 

want to thank you for holding this hearing. 

As we in Congress look for ways to accelerate job growth, it is 

essential to highlight growth industries and examine what makes 

them successful contributors to the national economic recovery. 

Although they barely existed 5 years ago, mobile apps have 

emerged as a particularly innovative part of the information technology sector in the United States and they now play a major role 

in American life. More than half of Americans with cell phones own 

a smartphone, giving them the advanced capabilities necessary to 

download and utilize some of the several hundred thousand apps 

that exist for work, education, organization, e-commerce and entertainment. These apps produce many benefits, like making us more 

productive by being able to edit documents on the run, keeping us 

in contact with friends and family through social media, or even allowing us to carry around a whole library of good books on a single 

device. Mobile apps also can have life-saving functions, particularly 

in the area of health IT, where there exist apps that help individuals check their blood pressure and/or their glucose levels. 

One notable benefit of the booming mobile apps industry is its 

impact on employment. A February study commissioned by 

TechNet estimated that mobile app development supported 460,000 

jobs nationwide, including computer and mathematical jobs in tech 

companies, non-tech jobs in the same companies, and jobs created 

outside the tech industry through spillover effects. 

These jobs have been critical to our home State of California, 

which has over 20 percent of the total jobs estimated by the 

TechNet study. I am pleased to see that mobile apps jobs are quite 

geographically dispersed, with benefits for many States and regions. 

With smartphone adoption expected to keep rising both here and 

abroad, U.S. app developers have the opportunity to continue to 

grow, and continued growth in the mobile app sector should lead 

to more jobs. 

This hearing can help us understand what is needed to ensure 

this continued growth. But one step is essential: we must continue 

to emphasize technical and foreign-language education so that existing and future companies in this sector have the personnel needed to be successful. 

A recent study concludes that emerging markets like Brazil, Russia, India and China will drive demand for the next 10 million 

apps. Our app developers need to be able to develop products for 

these markets. At the same time, it is important to remember that 

although the app economy is a bright spot, our goal as policymakers must be enduring prosperity across all economic sectors. 

We must promote growth that restores middle-class security and 

8 

improves economic mobility for the poor. While we in Congress 

work to control the Federal deficit, we also must continue to make 

targeted investments in education, innovation and infrastructure 

that can benefit all sectors of the economy. 

On a day when Apple is announcing its new iPhone and 

Samsung is getting the benefit of the spillover from its legal victory 

and more people are looking to see what is going to be available 

for Christmas shopping, it is appropriate that today is the day we 

are holding this hearing, and I thank you, Madam Chair, for convening the hearing. Thank you so much. 

Mrs. BONO MACK. Thank you, Mr. Waxman, and I will look for 

the ‘‘Where’s Waxman’’ app later today in the App Store. 

The Chair now recognizes—— 

Mr. WAXMAN. It is close to ‘‘Where is Waldo.’’ 

Mrs. BONO MACK. I set you up good for that one. 

The Chair recognizes Mr. Upton for 5 minutes. 

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

Mr. UPTON. Well, thank you. 

You know, there are not a lot of bright spots perhaps in our overall economy, but one of the brightest is the birth and the growth 

of the app marketplace. It is one of the most exciting areas of technology with tremendous growth in recent years, growth that experts agree we can continue to see. 

It is hard to imagine life before the iPhone appeared 5 years ago, 

or the iPad which debuted just 2 years ago. Now these devices and 

the apps we use are an essential part of our lives for sure. The 

Apple store launched with only 500 apps in 2008 but now offers 

over 600,000, while the Android store offers over 600,000 apps as 

well. That is growth of 240,000 percent, and folks continue to buy 

these apps in staggering numbers. According to one industry group, 

there were more than 11 billion downloads of mobile apps in 2010 

with projections that downloads are going to grow to nearly 77 billion worth $35 billion by 2014. 

What is more exciting than the explosive proliferation of these 

apps are the jobs that are being created. Everyone from large companies to small businesses, to the stay-at-home mom are developing these apps and generating income. Furthermore, the wealth 

being generated by apps isn’t locked into one or two particular geographic areas. The highest concentrations of app developers are in 

California and New York, but there is an app developer in nearly 

every town in between with approximately two-thirds of app-related employment falling outside of those two regions. So if you 

have the talent and you have a computer, you can develop an app 

and compete in the marketplace. 

Without a doubt, this is an area of exceptional promise, but it is 

not without fragility. Innovation and job creation can be as easily 

stifled by regulations in this field as any other, if not more so. So 

it is in that vein that I look forward to hearing from our witnesses 

today. Are there any policies you would like Congress to consider? 

Are there any policies currently in place or under consideration 

that are stumbling blocks to further growth and innovation? How 

can we as policymakers maintain an environment that fosters the 

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innovation, creativity, growth and economic success that this sector 

currently enjoys? 

So I look forward to your testimony, and I yield the balance of 

my time to Marsha Blackburn. 

[The prepared statement of Mr. Upton follows:] 

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OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE 

Mrs. BLACKBURN. I thank the chairman for that, and Madam 

Chairman, I thank you for the hearing today. I think this is absolutely so timely and is an area where there is agreement, and I am 

pleased that we are putting some focus on this. 

I think that from what you have heard today, you all know and 

we know that the growth of the apps economy, if you will, is truly 

dependent on free enterprise, the private sector. It is looking for 

that individual initiative for how you solve a problem, whether it 

is the Where’s Waxman? app or the What’s New for Christmas app 

that he may want to pull down and see what he can find for Christmas. The thing is, this entire economy was not born at the altar 

of big government. It was borne out by individuals that have a 

great idea and are looking for a way to pull that through to the 

marketplace. 

Now, what we do have to realize that in order to have a productive apps economy, we have got to have spectrum and be able to 

launch these applications whether they are for consumer shopping 

or for consumer health or safety, any number of things. This entire 

marketplace is young, it is revolutionary, it is disruptive to traditional business processes, and I think it is very exciting. 

So thank you all for being with us. Madam Chairman, thank you 

for turning our attention to the issue. Yield back. 

Mrs. BONO MACK. I thank the gentlelady, and the Chair now 

turns our attention to the panel. We have one panel of witnesses 

joining us for today’s hearing. Included on the panel are Peter 

Farago, Vice President of Marketing at Flurry, Inc.; Stephanie 

Hay, Co-Founder of Fast Customer, and Resident Mentor, 500 

Startups; Rey Ramsey, President and CEO of TechNet; and Morgan 

Reed, Executive Director of the Association for Competitive Technology. 

Each of our witnesses has prepared an opening statement. They 

will be placed in the record. Each of them will have 5 minutes to 

summarize their statement in their remarks. 

So good morning, and thank you all very much for coming and 

for being here. To help you keep track of time, if you are not familiar with it already, there should be a timing clock on the table. 

When the light turns yellow, you will have 1 minute to come to a 

conclusion—or behind us. Thank you for pointing that out. So all 

you have to do is make sure that you push the ‘‘on’’ button on your 

microphone before you start to make sure the audience at home 

can hear you as well. 

So with that, Mr. Farago, you are recognized for 5 minutes. 

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STATEMENTS OF PETER FARAGO, VICE PRESIDENT, MARKETING, FLURRY, INC.; STEPHANIE HAY, CO–FOUNDER, FAST 

CUSTOMER, AND RESIDENT MENTOR, 500 STARTUPS; REY 

RAMSEY, PRESIDENT AND CHIEF EXECUTIVE OFFICER, 

TECHNET; AND MORGAN REED, EXECUTIVE DIRECTOR, ASSOCIATION FOR COMPETITIVE TECHNOLOGY 

STATEMENT OF PETER FARAGO 

Mr. FARAGO. Thank you, and good morning. 

Chairwoman Bono Mack, Ranking Member Butterfield and distinguished members of the subcommittee, thank you for the opportunity to appear before you this morning. My name is Peter Farago 

and I am the head of marketing for Flurry, a high-tech startup 

based in Silicon Valley, specifically San Francisco. 

In 2007, when I joined the company, I was its eighth employee. 

We now have over 100 employees in multiple offices. Flurry helps 

mobile developers build, measure, advertise and monetize their applications in the new app economy. One way to think of us is that 

we don’t make the apps that everyone uses; we help make the apps 

that everyone uses better. 

Flurry has over 75,000 customers, most of which are entrepreneurs and startups. Because of that broad customer base and 

the over 200,000 apps using our services, Flurry has unique insight 

into the state of the current app economy as well as where it is 

headed. 

While my written report provides numerous trends and insights 

about the app economy, I would like to highlight three of them. 

First, we are moving faster than any industry ever before; second, 

there are real opportunities for job growth; and third, the United 

States has significant opportunities to increase exports. 

The new app economy represents the greatest, fastest adoption 

of any new consumer technology in the history of mankind. Smart 

devices are being adopted 10 times faster than the PC revolution 

of the 1980s, two times faster than the Internet boom of the 1990s, 

and three times faster than the most recent social network phenomenon. This rate of adoption outpaces that of all other notable 

technologies any of us can think of including electricity, radio, television, VCRs, microwaves, cell phones, dishwashers and even 

stoves. And Flurry estimates that the world is only about a quarter 

of the way into the adoption cycle of this new consumer technology. 

Our study found that 60 percent of app startups have the majority of their employees in the United States, and a recent Kaufman 

study concluded that the main driver of all new jobs comes from 

startups in their first year. There is unprecedented opportunity for 

America to capitalize on exploding international markets. The 

United States has 315 million active wireless devices of which 170 

million are smart devices. However, the last year, while the United 

States has added 30 million smart devices, China has added 100 

million. From our study, 70 percent of all companies surveyed already generate some revenue outside the United States and 94 percent strongly agree that the app economy will be increasingly international. 

So how do we turn these trends into opportunities? To capitalize 

on these trends, Flurry believes the ecosystem needs robust infraVerDate Aug 31 2005 15:51 Jan 14, 2014 Jkt 037690 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 F:\112-17~2\112-17~1 WAYNE
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structure, access to an educated technology workforce, and maintained low barriers to entry. Of these, I would like to highlight access to talent. 

At Flurry, we literally cannot find the talent we need fast enough 

to fill all the open positions we have. While we have 100 employees 

now, we have 50 open positions. Additionally, our survey shows 

that our customers share our pain. Only 24 percent of respondents 

believe that their company can recruit enough skilled software developers. Eighty-four percent of respondents strongly agree that 

their company’s success is dependent on software development talent. Unless we solve this problem, America will not be positioned 

to fully capitalize on this unique moment in time. 

We in the tech industry as well as policymakers need to work 

hard to find creative solutions to fully realize the potential we have 

before us. This should include partnering to ensure better university education, better professional retraining, continuing education 

and easing the ability to bring and keep international talent in the 

United States. At Flurry, we look forward to continuing to play our 

role in making applications even better, help our customers grow 

their businesses, and provide the consumer with the best possible 

experience. 

I thank you for your time, and I look forward to your questions. 

[The prepared statement of Mr. Farago follows:] 

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Mrs. BONO MACK. Thank you very much. 

Ms. Hay, you are recognized for 5 minutes. 

STATEMENT OF STEPHANIE HAY 

Ms. HAY. Thank you. Thank you for having me here. Good morning. 

My name is Stephanie Hay and I have been an enthusiastic leader in the tech community since moving to Alexandria from Ohio 

nearly 10 years ago. In 2003, while working in communications at 

George Mason University, I began building Web sites and creating 

templates to simplify how 30 departments managed their content 

online. Imagine being able to publish content on the Internet instantaneously from anywhere. The speed and flexibility had me 

hooked. I left Mason for World Championship Sports Network 

where I got my first taste of startup life which included 2 a.m. 

working sessions from my couch, coordinating with remote teams 

in Manhattan and Los Angeles, changing priorities fast. 

In 2010, after several years in project management at agencies, 

I started my own consultancy. I also became more involved locally, 

taking board positions at the Art Directors Club, speaking at DC 

Tech and RefreshDC, and co-organizing the DC Lean Startup Circle, which today includes 1,200 entrepreneurs. 

In short, tech is my livelihood job and I have created jobs because of it too. For example, in 2010 alone, my first year in business, I hired five people as subcontractors. I co-launched Workspace Design Magazine. This monthly online publication is about 

the evolution of work and it now employs three people. I also 

founded NovaCowork, a group of nearly 150 entrepreneurs who 

meet each Wednesday at Iota Cafe in Clarendon where companies 

have been launched, jobs created and partnerships are formed. You 

are welcome to attend. 

In fact, the startup I co-founded in 2011, Fast Customer, came 

from one of those meet-ups. Paul Singh, Aaron Dragushan and I 

built a mobile app that with a single tap connects you directly with 

a human in customer service at more than 3,000 companies. We 

are using mobile technology to change customer service calls for 

the better, and we have hired eight people to help us. 

When we decided to raise money, 500 Startups, an accelerator 

and fund in Silicon Valley, led our seed round. I am now a resident 

mentor there as well, coaching startups on everything from positioning to pitching. I mention 500 Startups because it is deploying 

smaller sums of cash faster and it is actively working to involve 

more women, two characteristics that are atypical within the traditional venture capital world. Plus nearly a third of its portfolio includes women-led startups, three of the six partners at 500 are 

women, and they launched a campaign in July to bring more 

women into the angel investing community through coaching and 

educational programs. 

These organizations like 500 Startups are committed to taking 

on this challenge of supporting female founders with useful apps 

and that I can be a part of influencing that future is invigorating. 

Plus with more women like Facebook Sheryl Sandberg and Yahoo’s 

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solve to catapult other smart women into decision-making positions 

within tech. 

Of course, I am here today because I believe you can help too. 

Earlier this year, I spoke with Jennifer Boss, a tech-savvy woman 

whose job with the DC Mayor’s office is to identify new innovations 

fit for public-sector applications. Fast Customer is a DC-founded 

company that already connects callers to agencies such as the IRS, 

which generates thousands of calls annually. Surely we could not 

only help agencies better connect with their people but politicians 

with their constituents. Again, the possibilities are endless. However, we, like Instagram, which just sold for $1 billion, operate 

without a dedicated enterprise sales staff so after a few promising 

conversations about how we could modify Fast Customer for realworld pilots in the public sector, we were then placed into the 

standard procurement process required of any vendor who wants to 

do business with the government. This was startling because they 

had approached us yet we and they were hampered by procurement 

rules that couldn’t accommodate new products like ours. We 

couldn’t demo an out-of-the-box product with clear public-sector 

features because it didn’t exist so we were forced to end discussions. 

The contrasting reality is that we already were in talks with 

telecom giants in the public sector including Verizon, Comcast and 

Telstra. These companies recognized that innovation and agile 

process in which we mobile startups work, which meant we could 

continue building, learning and iterating at the speed of mobile, 

the speed of our world today. That we might expand internationally 

before we could meet rigid expectations in our own backyard is discouraging but we believe there are massive opportunities to be realized if government removes barriers that hinder our tech companies and brilliant people from engaging with the public sector. 

What can we do together to find compromise and more quickly 

bring tech innovations into our government? Thank you. 

[The prepared statement of Ms. Hay follows:] 

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Mrs. BONO MACK. Thank you very much, Ms. Hay. 

Mr. Ramsey, you are recognized for 5 minutes. 

STATEMENT OF REY RAMSEY 

Mr. RAMSEY. Thank you very much. Madam Chairwoman and 

the committee, I applaud you for having this session and it is very 

important. 

My name is Rey Ramsey. I am the CEO of TechNet. I appreciate 

you all mentioning the study that we put out last year. That study 

has sparked a lot of conversation looking at the amount of jobs. I 

mean, the headline from that study is that almost 500,000 jobs 

have been created since 2007. And so what I want to do is, since 

my testimony has already been submitted, I just want to talk to 

you about a few things that I think are really important and highlight those issues. 

We have gotten to this place, which is a pretty good place for the 

country to have this number of jobs and growing. We have gotten 

here because it has been a wonderful confluence of several things 

happening. One, you have the technology itself, much of which has 

been proudly invented in the United States. You also have this consumer demand for ease of transaction where consumers in so many 

different ways are saying make this easy for me and meet me 

where I am, this sort of mobile sensitivity. We now have 50 percent 

of all the phones are smartphones. That is up from 17 percent just 

a few years ago, so explosive growth. And so with this confluence 

and with entrepreneurs like Ms. Hay and others that are out there 

inventing and looking for economic activity, we have got several 

great benefits: jobs at the top of the list, economic activity. But 

when you look at all the advantages, you step back and you say 

there are two things from a policy perspective we need to focus on. 

One is, how do we continue to maximize what is happening, how 

do we continue to take advantage of this, are there things that policymakers can do. And then with your other set of eyes, take a look 

at, are there any threats to this, and you say to yourself, what do 

we need to do to mitigate potential threats, and I just want to comment on a few things. 

One is, and I think the way to look at this from my perspective 

is from a policy perspective, there are two things. One would be 

focus on the necessary infrastructure to keep this going and then 

the second issue I would say is an issue of access. So I just reduce 

it to that. If I am in an elevator with you, I would say it is infrastructure and it is access. 

Under infrastructure—and you have heard part of it—and it all 

revolves around capital. You have human capital, which you heard 

earlier, which is the workforce issue. One of the things that will 

impede the growth even in the apps economy—because people tend 

to think of the apps economy as only the little guys, the small companies. Well, they have a need for workforce but so do large companies as well. So we are in a human-capital crunch being able to get 

the kind of workforce that we need and that is a string policies all 

the way from our school systems all the way through to college, 

how many engineers, how many systems programmers and even 

some of our targeted training programs. So I think it creates an opportunity to take a look at that human-capital ecosystem and say 

40 

how is it working for this, how are we utilizing community colleges, 

are there training programs that could be targeted. Look at existing agencies and ask ourselves whether it is the SBA and others, 

have they caught up with the apps economy and then ask the fundamental question: if there is an entrepreneur out there and she 

is sitting at home and she is thinking I can get into this too, and 

that is one of the beauties of this, where could she go in our communities or in our society to get in the game, and that gets to the 

access issue. 

There are segments of the population that could join this job explosion, create additional income for their homes and for their families if they knew about what existed or if we had programs that 

were targeted to get to them. We still need to see more women participating in this workforce and in these opportunities, so that is 

just a question of outreach. 

Back to the issue of infrastructure, without getting into all the 

details, Congresswoman Blackburn started off by saying ‘‘spectrum.’’ That is crucial. Broadband, crucial. We still have too many 

rural areas of the country where people aren’t able to take advantage because they don’t have the broadband connections, the issue 

of broadband adoption. So there are some infrastructure issues that 

from a policy perspective we need to make sure are in place along 

with workforce issues. There are some other issues like previously 

and other sorts of things. Just making sure that when we look at 

any of these policies that we look at them through the prism of will 

this continue this movement toward job creation and economic activity or will there be unintended consequences. 

The last thing I will say is, what is exciting about this app economy is that it is not only having great benefits in the commercial 

sector, it is having terrific benefits from a social innovation perspective where it is helping with health care, issues like diabetes 

and people’s drug regimens and other things like that. So it is a 

double win for society. 

Thank you very much. 

[The prepared statement of Mr. Ramsey follows:] 

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Mrs. BONO MACK. Thank you, Mr. Ramsey. 

And Mr. Reed, welcome back to the subcommittee. It is nice to 

have you back. You are recognized for 5 minutes. 

STATEMENT OF MORGAN REED 

Mr. REED. Thank you, and I have to say before I even get to my 

time which is that don’t steal all our people for your big companies. 

Us small folks still need employees. We have to be able to compete. 

Chairman Bono Mack, Ranking Member Butterfield, distinguished members of the committee, my name is Morgan Reed and 

I am the Executive Director of the Association for Competitive 

Technology, a trade association representing over 5,000 app makers 

from around the world. Our members are on the forefront of the 

most exciting tech sectors to emerge in a generation. You may have 

already heard these numbers but they bear repeating. We are a 

$20 billion industry today that didn’t exist 4 years ago, and analysts expect us to hit $100 billion by 2015. 

Now, we all know about the rise of smartphones, and I have already seen several of you checking your email, and we know about 

reading maps and looking at sharing photos and managing everyday activities through wireless devices. But what we are seeing 

now is an apps economy that is moving beyond games and consumer tools to become a critical part of enterprise, health and financial services. 

In order to provide the committee with new insights, we conducted a study we called Apps Across America in preparation for 

the hearing, and I thank several of you for quoting us on some of 

the numbers that we have gotten out of here, but to focus on a couple, we all know that small businesses are the engine of job creation occupying over 70 percent of the top-selling apps, and we 

found this is even more pronounced in highly innovative activities 

where large revenue sources are available. This is a phenomenon 

happening outside of Silicon Valley, and with all due respect to 

California, I love the fact that we have got developers in Louisiana, 

in Mississippi, in Michigan, and I like the fact that we are seeing 

the spread move around. 

In your briefing folder, you will find a set of baseball cards that 

we created to underscore this point. There is one for every district 

represented, and I couldn’t find any of that horrible gum we all had 

as kids, but I tried. You know, Marsha Blackburn was here, and 

I want to focus on the way that these folks are looking at it. You 

know, from her district, we have a true MVP. They have had over 

30 million downloads on apps that they have created. This company in her district, Mercury Intermedia, huge success. This is a 

MVP, a perennial all-star. In New Hampshire, we have Police Pad. 

Zco is building an enterprise app that puts iPads in police cars and 

replaces all of those laptops that you see in cars—better battery 

life, more efficient, all sorts of new sensors, great tool. These guys 

are definitely an all-star. In Bono Mack’s district, we have got a 

rookie card, and with Apps 111, this is a company that I am looking forward to becoming more successful. And just like any rookie 

card, I don’t just want the card to become successful, I want the 

business to become successful. I would love for members to be able 

to trade that card. I remember when they started. Now they are 

49 

100,000 people or there are 50,000 people. So when you look at this 

deck of cards in front of you, this is your MVPs, this is your starting lineup of your small business community today. 

Now, we all now about Apple’s innovation and the ubiquity of 

Android but, you know, it is worth mentioning that it is not just 

those two. BlackBerry is the go-to platform for security-focused customers and earns more frankly for our developers per app than any 

other platform, and of course, just last week Microsoft and Nokia 

kind of upped the game, unveiling the Lumia 920, which featured 

wireless charging, which I am so happy for, and of course had near 

field communications so that you can actually purchase goods and 

services directly from your phone without having to pull out your 

credit card at all. And of course, today after this hearing, we will 

see what Apple does to up the game again. They have got Passbook 

on there that allows mobile payments to pay for coffee at 

Starbucks, but what I love is it features an app that allows you to 

check in at the airport directly built into a secure feature on the 

phone. 

So what is next? Mobile health care apps are going to change the 

way doctors interact with patients. Companies like AirStrip have 

built an app that allows doctors to monitor fetal heart rates in 

women in labor directly on their iPad. Enterprise will use phones 

and tablets at every level. Aegis Software has built an app that allows them to monitor an entire factory floor directly from the iPad. 

And I brought this. This is July’s Fortune magazine cover, and 

it has declared the death of cash. Well, you would say, how is that 

possible? But PayPal, Intuit and Square have turned a mobile 

phone or an iPad into a point of sale and a cash register. See those 

little things on the top? Swipe your card and away you go. That 

is your cash register. 

You know, in the movie Princess Bride, the protagonist famously 

responded to the word ‘‘inconceivable’’ with the retort ‘‘You keep 

using that word. I do not think it means what you think it means.’’ 

But for the future of the apps economy, ‘‘inconceivable’’ is the most 

appropriate word. Industry and government cannot yet conceive of 

the ways that apps will become part of our lives. From basic consumer uses to health, travel, education and even talking to one another, our app economy built by small businesses seeing and meeting a specific need has endless and inconceivable possibilities. We 

hope to keep creating never before conceived of products and we 

hope the government can be a partner where needed, take advantage of products where they help service the public, and take a 

light-touch approach everywhere else. 

Thank you for your interest, and I look forward to your questions. 

[The prepared statement of Mr. Reed follows:] 

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Mrs. BONO MACK. Thank you very much to the panel, and the 

Chair will now recognize herself for the 5 minutes for questions, 

and I will also point out to anybody standing that there are plenty 

of seats available. If they say ‘‘reserved’’ they were reserved for 

you, so welcome. 

I just wanted to start with something kind of shameless, and 

that is showing everybody this amazing photograph of my grandson, Little Sonny, and the only reason I am doing this is, I was 

babysitting him a few nights ago and he decided to have a crying 

fit, so I did anything any good grandmother would do is, I went 

right to the App Store and downloaded a baby soother. It didn’t 

really work, but my point was that we are becoming habituated. 

You have a problem; you go to the App Store and you find a solution to any problem you might have. 

Now, not unique to babysitting, you know, guys should baby-sit 

their grandbabies too, but I am going to start with you, Ms. Hay. 

What is the key to getting more women involved in this area of 

tech? 

Ms. HAY. I think it is outreach. I think most women I have met 

have almost always had another woman or a man mentor them, 

myself included, bringing them into the tech scene. There are a lot 

of women in tech groups in DC I know of. It is a matter of that 

sort of grassroots effort on the ground and at the same time making some programs that help to educate women on the opportunities that exist out there for them in tech. There is a general, I 

think, fear that women have that it is almost a badge of honor that 

men wear in Silicon Valley that they are going to be an entrepreneur, and if they fail, that is OK, and women generally tend to 

be more conservative. They take a more strategic approach to ensuring that they are building a business that is going to last and 

it is going to be fruitful. So I think, you know, balancing the programs that are available to them so that they can move a little 

more quickly and comfortably into the tech space I think would be 

a great step in the right direction. 

Mrs. BONO MACK. All right. Thank you. Others have testified 

that apps jobs do not require being located in specific geographic 

locations and in fact are being created all across the United States. 

This is again to you, Ms. Hay. Do you see any future risk to the 

ability of app developers not located in the major cities producing 

apps because they are not part of a technology cluster? 

Ms. HAY. I don’t, no. In fact, Fast Customer, we have an entirely 

distributed team so I have a developer in Reston and then we have 

staff in Florida, Arizona, Hawaii and one right now walking around 

Cambodia somewhere. So for us to be successful, I think, in the mobile economy because of its speed requires a smart team, requires 

resources, doesn’t require a specific geographic location, and it 

doesn’t mean that we don’t get together as we do in fact every 

quarter some amount of time to get together because, you know, 

getting together in person, great ideas can happen in a way that 

is more organic than what you can accomplish on line but that is 

also not a prerequisite to success. 

Mrs. BONO MACK. Thank you. 

Mr. Farago, a number of observes have compared the growth of 

the app field to the tech bubble of the 1990s. Would you agree with 

62 

that, and do we face a danger of a burst here, and if so, are there 

any steps the industry or policymakers should take to avoid that? 

Mr. FARAGO. Yes, we talked about this a bit. We don’t feel there 

is a direct comparison to the Internet era and that we don’t face 

a bubble for several reasons. I would say first if you think about 

the amount of broadband-connected consumers at that time, there 

were about, I believe, 30 million. Now there is over 1 billion, so we 

have a totally different size market, to begin with. Secondly, you 

know, in that era, the real way to make money was to collect a 

bunch of eyeballs and then hope that advertising revenue would 

follow. In this era, advertising really hasn’t kicked in as a revenue 

model and we are already seeing, you know, by our estimations, 

app developers last year made about $5 billion worldwide directly 

to them, 80 percent of which was made from what we call premium 

sales selling an app, you pay $2 before you get it, or in-app purchase or microtransaction, you buy add-on content afterward. This 

year we are forecasting developers directly will make about $10 billion, double that again around 80 percent or plus. Advertising will 

take off and add a layer and so that will certainly help. 

Also, if you compare the economic climates, you know, really, arguably, the app economy was built—you know, flowers have 

bloomed on top of the rubble of the largest worldwide financial collapse any of us can remember, and whereas, you know, it was pretty much the go-go time in the 1990s where there was a lot of venture capital flowing. So you have almost what has been proven to 

be a really recession-proof business model to begin with, or economy, really. 

And finally, customers are able to pay and not just willing to 

pay, they have demonstrated they can. Every one of these devices 

has a credit card or gift card associated with it on average whereas, 

you know, back in the Internet days, you know, products, you 

know, all the services people assumed would be free and there 

wasn’t that kind of payment-enabled market. 

Mrs. BONO MACK. Thank you, and my time is expired so the 

Chair now recognizes Mr. Harper for 5 minutes. 

Mr. HARPER. Thank you, Madam Chair, and thank you to each 

of you folks for taking time out of your busy schedule to be here, 

and Mr. Reed, thank you for pointing out the cards, particularly 

Mississippi State University athletics. I don’t think you had time 

in your testimony to say anything about State beating Auburn 28– 

10 Saturday, but perhaps we can cover that. Perhaps we can find 

some statistics on the game on that app. 

I also want to say, Ms. Hay, thank you for the work you are 

doing. I have a 20-year-old daughter. I have made it a point to 

make sure that she has opportunities to meet with successful 

women. It helps her in that regard and so thank you for that effort. 

I think that you may be getting a call from her some time in the 

future when she is visiting. 

I do want to talk to you if I can for just a second, Mr. Farago, 

if I may. You said in your testimony, you mentioned the recent survey that was done by Flurry which found that 71 percent of the 

companies polled agreed with the statement that they needed more 

employees with technical training, and I wanted to bring to your 

attention the work that Mississippi State University has been 

63 

doing in the app field. Over the past several years, Dr. Rodney 

Pearson, who is a professor at Mississippi State in the Department 

of Management and Information Systems, I know he has worked 

diligently to develop courses in programming as well as business 

and entrepreneurial classes to prepare students for a job in the app 

sector or at least for an interest in the app field. Dr. Pearson and 

Mississippi State have been seen by many as a business and app 

incubator. So a few questions I have. One, is Mississippi State a 

special case or do you see many other universities offering similar 

courses at this time? 

Mr. FARAGO. Well, you know, I don’t have specific anecdotes 

about other universities but those kinds of innovative programs are 

exactly what we need. I think it is a supply-and-demand issue. I 

think that, you know, mostly when you grow up in the United 

States, you think about being a doctor or a lawyer, you know, 

maybe go to business but the technology field, growing the awareness of technology, encouraging those to get involved, K–12, making sure the foundation of fundamentals is there enables, I think, 

you know, great programs like the one Dr. Pearson is leading at 

Mississippi State to be possible. By the time that student comes to 

that university, they can and will be able to take advantage of, you 

know, what is a great, lucrative job field. 

Mr. HARPER. How do you see this playing into the future growth 

of the app sector, this being offered in this university and perhaps 

others? Where do you see that taking the future, meeting those 

needs that you see in the app sector? 

Mr. FARAGO. Yes, if I understand your question correctly, you 

know, I see it inside the United States as enabling a concept we 

call stake shoring. You know, it was mentioned that California and 

New York are the two main hubs for technology innovation and 

clustering of technology workforce talent. At the same time, I believe the median house costs about half a million dollars in each 

of those markets. You know, much like you have a match program 

for folks coming out of medical universities to go to all kinds of 

places around the United States to offer the same level of care, I 

think that the concept of stake shoring can really help, and as universities look to become more competitive in the education market, 

a lot of universities like Mississippi State can and should invest in 

the kinds of programs to attract that talent, and that will keep 

more talent in the local economy and allow that entrepreneurship 

to basically spread across the United States. 

Mr. HARPER. How do we encourage other universities to be involved in this field and to move in that direction? 

Mr. FARAGO. You know, I think there is probably a couple ways. 

I mean, I think education of educators is a good start. I mean, I 

think a hearing such as this one, sharing those statistics, the educational field from my experience is pretty connected as a cohort, 

as a group. I think that government could definitely help with 

maybe partnering with the private sector, for example, and there 

could be matching programs to create more endowments and, you 

know, education, you know, basically paying for a student’s education. You could creatively after the fact help—you know, if you 

have a company that is investing in an area local to a university 

and they have a partnership with that university, for example, you 

64 

know, there could be some sort of increased modest taxation of that 

developer’s salary to pay back, you know, what was a gift basically 

for the cost of education and so on. There are a number of ways 

I think those who have skin in the game, private sector and university, can get together and figure those things out. 

Mr. HARPER. I want to thank each of you for being here. With 

that, I yield back, Madam Chair. 

Mrs. BONO MACK. Thank you very much, and the Chair recognizes Dr. Cassidy for 5 minutes. 

Mr. CASSIDY. I had a really nice conversation yesterday with a 

couple of app developers from my own State, and just a couple 

things that I would like your perspective on, not that there will be 

necessarily be an answer, but clearly we are coming to you for your 

perspective, which is key. One of the things we have had several 

hearings on is privacy. They kind of alerted me to the fact that is 

really an issue: who owns the data? If I put a picture up, do I own 

the picture or does the app developer or does the server? Who owns 

the data? So any thoughts on the privacy? Because, again, when I 

get a 50-page document and I click ‘‘I agree’’ at the very bottom, 

I have not read those 50 pages, I have just clicked ‘‘I agree’’ and 

I almost think that might be a strategy by the attorneys to get me 

to agree; they just overwhelm me. Once I actually read it, and it 

was so redundant, some of the pages were literally cut and pasted 

multiple times and we are thinking this is just a strategy to overwhelm me, and it frankly works all the time. 

So that said, what are your thoughts as to who should own that 

data? How personalized should we allow it be? Because that is 

something that we have pursued in this committee, that discussion. 

Mr. MORGAN. Well, I think it is kind of two questions in one. You 

have a question of who owns what, and that is an important question. We have always in this country had a kind of a pretty 

straightforward attitude towards information that I willingly provide. If you think of this way, if you had a 13-year-old daughter 

and she walks into Forever 21, or I guess I should say 16-year-old 

daughter walking into Forever 21 and they get her information and 

her email address to send her information, it had nothing to do 

with online, it didn’t have anything to do with a mobile app, but 

Forever 21 now has information. They have the store that she 

bought at, what she purchased, her email address, and Forever 21 

considers that part of their information, and again, she didn’t read 

through a 50-page click memo or anything, she just signed up right 

there in the store. So we have had a pretty good tradition in this 

country of allowing folks to enter into those kinds of agreements 

freely because they benefit from it. 

So you have that question of, you know, who owns the data and 

how do they collect it, but I think the other side is, what we are 

focusing on is, how do we do a good job of being transparent, which 

you pointed out wasn’t done well in the example you cited. A 50- 

page document is not transparent. So what we are working with 

developers on, and in fact this Friday, I will be speaking to an audience of about 500 developers at Mo Def Tablet here on the East 

Coast and I will be talking about ways to increase transparency to 

build better trust. So on the trust aspect, we need to do a better 

job. We are working on it, and in fact, we are participating with 

65 

the White House as part of the NTIA multi-stakeholder process to 

find best practices and common ground between the entire stakeholder community to find ways to take a small device and present 

a 50-page chunk of information in a way that is absorbable, understandable and usable by consumers. And I think once we get there, 

we will be able to help your person who commented about 50 pages 

have a better sense of what is happening and be more comfortable 

with it. 

Mr. RAMSEY. I would like to comment on that. Obviously, it is a 

complex issue and, you know, as my colleague here, Mr. Reed, said, 

you know, you have got the transparency issue and you have got 

the consent issue, and they are interwoven. What is important 

while we are trying to sort through how to get to a common understanding of consent and transparency is to keep a few things in 

mind that we need to do along the way. One is, we need to make 

sure that everybody understands what the business models are and 

how these business models rely on certain data. They are not mutually exclusive, but we need to understand that because there are 

unintended consequences. So all this growth that we are describing, whether it is small businesses or larger businesses, are all part 

of this ecosystem of mobility, and that is really what the issue is. 

I mean, we are having this conversation about apps but it is really 

all about the mobile revolution, and apps are a part of the mobile 

revolution. 

The other issue would be, we have got to do more to have citizens 

understand, consumers understand not only what their rights are 

but what their responsibilities are and that they are leaving behind 

a digital footprint all the way from—— 

Mr. CASSIDY. So you are suggesting that indeed the developer or 

the server does own the data. If there is a digital footprint, you are 

suggesting that footprint is no longer mine? 

Mr. RAMSEY. It is data that exists, and the question is where 

that data will reside, so I am not using the word ‘‘ownership.’’ It 

is about where the data resides. 

Mr. CASSIDY. So that picture that she just showed us, could that 

be used by the person where she stores it as a Gerber baby commercial without her permission? Do you follow what I am saying? 

So is that picture of her grandchild—by the way, she is the bestlooking grandmother I have ever seen. With that said, that picture 

of her grandchild, could that in turn—do her daughter and son-inlaw or whatever, or does the person on whom it is stored get to sell 

it to Gerber as the next image? 

Mr. RAMSEY. I can’t comment on whether or not they are going 

to sell her—the Congresswoman owns her picture. The question is 

where that resides, and it resides in multiple places so it is not a 

question of who owns it, it is more about what the data is being 

used for and understanding for the Congresswoman in this example what does she know, which means, you know, in favor of her 

knowing what the basis of the bargain is, and that is the transparency that I am talking about, what her rights and responsibilities are. That is what I am trying to sort out. It is not about that 

another company would own the picture. 

66 

Mr. CASSIDY. I am still not sure that we know that the company 

could not use that picture, but I am way out of time, and I had another question but I will yield back. 

Mrs. BONO MACK. We will do a second round after we go through 

everybody the first time, and thank you very much for the questions, and the Chair recognizes Mr. Kinzinger for 5 minutes. 

Mr. KINZINGER. Well, thank you, Madam Chair, and I thank you 

all for coming out. I think this is a very important issue we are 

discussing. 

You know, one of the concerns as we have seen apps develop, we 

obviously see and many of you have testified that it is really going 

to be generating GDP growth. It is kind of the next generation of 

where we are seeing a lot of jobs come in. I have a lot of cool apps 

on my phone that I use for a lot of various things, and you know, 

if you ever find yourself with the need for any kind of data or any 

kind of organizational tool, you will find it on your phone somewhere. Somebody has created it. So I think it is an outstanding obviously driver of the future. 

First question to Ms. Hay. What areS the chief barriers as you 

look at the environment out there? What would you say is the chief 

barrier for somebody who wants to develop an app to enter or to 

expand their business and what do you hear from some of these entrepreneurs as far as what are their frustrations, where are their 

concerns, what is their wish list for the future of this? 

Ms. HAY. Well, I think it depends on the scope of the kind of 

project they want to work on, so in talking to some app developers 

who are prototyping a small idea to really solve a very niche problem, there are relatively few barriers. Being able to ask Google the 

right question to get the answers is really the barrier. But I think 

for the larger companies that are trying to solve more widespread 

educational, health care types of problems where there are embedded relationships with big guys like Google, Microsoft, I think the 

barrier to entry is having the skill set in the case I was talking 

about with Fast Customer, having the skill set to be able to have 

the—build the relationship, be able to survive long enough, a long 

enough financial runway to be able to develop those relationships 

over time and really be able to influence change. So I think that 

that barrier is a much more social, even economic one than technical for sure. 

Mr. KINZINGER. I guess I will ask the rest of you maybe the same 

question to see if you are all in agreement or if any of you have 

an idea in mind of saying hey, here is how we make it easier without, you know, I guess the wild West of it. Mr. Ramsey, do you 

have any input on that question about any barriers that exist? 

Mr. RAMSEY. Yes, Mr. Congressman, I think, you know, as was 

mentioned earlier, you think of the barriers sort of fall into their 

demographics, geographic demographics, demographics based on 

gender, demographics based on race, and so what we have to do 

from a policy perspective is make information more available so 

that there are women, minorities and others who but for not knowing what is available to them could be in business. And so one of 

the things is just making information available. If there are programs like the Congressman from Mississippi was saying at the 

college, we need from an access perspective to make sure that 

67 

women would know about that program. And so what I find, and 

I have done work in inner cities and other places where people just 

don’t know about what is out there. And then I think the second 

thing is just making sure the basic infrastructure is in place so 

when we look at the broadband maps, you can’t do this if you don’t 

have the right access. You can’t do this if spectrum is an issue, you 

know, in your area. So from a broad policy perspective, you have 

big infrastructure issues to make sure in place, and then from an 

access outreach, a big part of that is comfort and information, having people feel comfortable. 

Mr. KINZINGER. So if you had your wish list, it would be 

marrying the ability to get to the Internet with the skill set to do 

what is important to present this app of course with the folks who 

may have the idea. So somebody that may not have access to spectrum may have a great idea and they have no idea how to get that 

out of their head into action. 

Mr. RAMSEY. That is exactly right, and this just mirrors what 

happens in the offline world when someone is just sort of living 

their life, they view an opportunity and they go, oh, well, there is 

a need here, I am going to open up a laundromat, oh, there is a 

need here, I am going to—— 

Mr. KINZINGER. And how do I get there. 

Mr. RAMSEY. And so it is how do you get there, and a lot of people are still learning that there is not the barrier to entry that 

there might have otherwise been and so this access to information 

is really important. 

Mr. KINZINGER. And I just have 40 seconds left. I want to ask 

Mr. Reed and Mr. Farago if you guys have input on that as well. 

Mr. REED. Well, I want to follow up with what Rey said, and I 

think there are some characteristics. I want to look a little further 

into the future. Spectrum is a huge part of it. If I can’t get my app 

into an enterprise—and I want to remind you that I think the big 

areas—we are moving away from 99-cent apps into where we are 

talking about critical applications for business, for health, for financial services. So the problem is, if I don’t have the infrastructure, I can’t get in there. The second thing is, if I’m new in mobile 

health, I need to make sure that the FDA moves quickly and that 

they do a fast approval process. And finally, as I look down the 

roadmap, I need to make sure that when I get my app into the 

marketplace, that it doesn’t get stolen. So we have all those issues, 

and those are places where the government can play a role. 

Mr. KINZINGER. Mr. Farago, did you have anything to add? Just 

a handful of seconds. 

Mr. FARAGO. Yes. I mean, I think the issues we see are probably 

more business-oriented. Smaller companies don’t have the resources. That is why I think there is a lot of third-party service 

providers like ours who can basically put a small company on equal 

footing with a much larger company that has resources. So many 

of the services will basically augment the developer’s activity. They 

can focus on creating great content. 

But there is a significant problem on the larger side of the spectrum with big companies where they don’t think mobile first. They 

are not as nimble and fast as companies. They are kind of suffering 

from what we call the innovator’s dilemma, and they don’t, you 

68 

know, sort of appreciate all the possibilities. So companies on average that do better in the mobile ecosystem are doing a better, 

smarter job of leveraging what is on the phone. Open Table restaurant reservation uses location to immediately give you a reservation, for example, in the area you are now, and it is companies 

who think like that who are doing better. 

Mr. KINZINGER. Well, thank you, and I am over my time and I 

appreciate it and yield back. 

Mrs. BONO MACK. Thank you. The Chair recognizes Mr. Guthrie 

for 5 minutes. 

Mr. GUTHRIE. Thank you, Madam Chairwoman. Thank you for 

being here today. I was at another meeting on spectrum, so I am 

sorry I missed some of the testimony but something important to 

what you guys are talking about today as well. And I know in the 

written testimony, Mr. Ramsey, and I will open this to everybody, 

you used the term ‘‘freedom to innovate,’’ and so I guess my question would be, what restrictions are—we need to maintain the freedom to innovate or you are going to have less innovation is what 

you are saying, and what is actually—I mean, what restrictions are 

you concerned about, particularly? I think you just said the FDA 

process and medical apps. What things could government do intentionally or unintentionally—and I can start with Mr. Ramsey or 

any of you—to restrict your ability to innovate in the app world? 

Mr. RAMSEY. Again, I think it is more of making sure barriers 

are not in place and so as both—— 

Mr. GUTHRIE. Such as? 

Mr. RAMSEY. So if there is no broadband available, if there is not 

adoption in your community, if you run into spectrum where you 

can’t get on, these types of barriers—and then over time if you 

can’t acquire a workforce, and so it is more about making sure barriers aren’t in place than it is about let us push something, you 

know, toward you, and the area of push would be making sure 

human capital is available, making sure there are training programs, making sure people know what is available at the community college, at the university, and those sorts of things, but a lot 

of this is making sure we remove barriers. 

Mr. GUTHRIE. That is a good question, and I was going to ask 

Mr. Farago something along that line since we already got there. 

Are most people in the app world, are they engineer graduates 

from Stanford or in Silicon Valley? What do you find talent? Because this is something that, you know, most States want to have 

jobs that people can do to make living. Where do you find talent? 

Mr. FARAGO. Yes, I mean, you know, I think from anywhere. The 

bar is pretty high at our company, you know, the core. You know, 

it is not—in the startup world, it is also about risk tolerance. I 

mean, there is a certain kind of person. I carry my school debt. You 

know, I didn’t go to certain big companies because I really wanted 

to be an entrepreneur so I am eating my debt still. So, you know, 

there are enough people who are passionate in the startup space 

but probably the population is more on the business side. The technical side is where we struggle to fill enough of the open positions 

we need. They traditionally come from the best universities in the 

world. In the United States, you have MIT, Cal Tech, Cal, Carnegie 

Mellon. I am sure I am leaving out some fantastic universities— 

69 

Stanford. We have a lot of graduates from a lot of those places. And 

on average, I would say we are getting ours from probably the 

cream of the crop, the universities of the world, and a lot of people 

with advanced degrees. That is primarily who we end up hiring on 

average. That is a lot of where they are coming from. 

Mr. GUTHRIE. So there is not, in your space, the technical degree? You are looking for degreed engineers from the best schools 

in the world? 

Mr. FARAGO. That is true, but I should also say, you know, Flurry is a little bit of a unique business. We are a business-to-business 

company, and we build a lot of very highly scalable technical infrastructure which requires people who have a lot of what we call 

backend experience, infrastructure experience, and it is very different than someone conceiving of a very useful entertaining kind 

of consumer experience who can leverage all that infrastructure. So 

I would say, you know, we are atypical in that we are building a 

lot more scalable systems that we have to imagine tens of thousands of other companies leveraging seamlessly that we provide to 

them so we have a little bit of a different nut to crack. 

Mr. GUTHRIE. Ms. Hay? 

Ms. HAY. Thank you. I have two comments. Number one, around 

your first question, I think one of the fears in a lot of app developers is that they are going to be sued by the big guys who have 

a lot more money, big legal counsel, ready to when they are innovating just pounce on them immediately and squash that. 

Mr. GUTHRIE. Are there examples of that? Has that happened? 

Ms. HAY. Oh, yes, absolutely. So on anything, somebody might be 

on their way up and then someone they don’t know exists comes 

along with a lot more money and says hey, that is infringing on 

this thing that we did 7 years ago and therefore now you are dead. 

So that is, I think, an issue that will continue to get more and 

should get more attention. 

And the second part is, I think, when it comes to finding people, 

the computer science major that may have 10 years ago been all 

the rage is a dime a dozen. It is not about finding people, it is 

about—because most of these people, who are very talented technically, want to be entrepreneurs because of the app economy. So 

they are not trying to go get hired, they are trying to hire people. 

So now you have got a scenario where folks like Living Social are 

really capitalizing on this here locally because they were having a 

hard time finding developers in the specialized programming that 

they have so they created a program, a 3- to 4-month-long program 

called Hungry Academy and brought people in, many of whom were 

women who had no technical skills, had never actually built anything before and paid them to learn how to build on their program, 

and the early results just a couple weeks ago that they finished 

was that these people could walk right into their jobs and work on 

the program in a way that people who were hired and had to be 

onboarded could not. 

Mr. GUTHRIE. So you are talking about people coming in, are 

they coming in with some degree or are they coming in like high 

school graduate? 

Ms. HAY. Apprenticeship style. 

Mr. GUTHRIE. But they are showing up with just the base skill? 

70 

Ms. HAY. Correct. 

Mr. GUTHRIE. That is great. 

Ms. HAY. They don’t have a technical skill otherwise. 

Mr. GUTHRIE. That is wonderful. That is absolutely wonderful. 

Thanks. 

Mrs. BONO MACK. Thank you. The Chair recognizes Mr. Bass for 

5 minutes. 

Mr. BASS. Thank you, Madam Chairman. Apps are intellectual 

property. They are patented or copyrighted? 

Mr. REED. Some. It depends. Trademarks, the full panoply of law 

applies. Some of their ideas are copyrighted. Some of it is copyright, some of it is patent, some of it is trademark. 

Mr. BASS. So when Ms. Hay talks about getting slammed down, 

that is the basis of the problem, basically you’re copying somebody? 

Mr. REED. Well, I think it is actually worth noting that it is a 

double-edge sword. She is right. Sometimes the big companies come 

in and slam us down. But the other problem we have is when a 

big company bigfoots us, which is the reverse problem, which is, we 

do something truly innovative and then a large company essentially copies what the small guy has done but he has the marketing 

power and the wherewithal to really just own that space. And so 

on one hand we need to watch out for the guy who comes behind 

us but we also need to make sure that we have got covered our 

ability to go to the big guy and say hey, don’t crowd us out, we 

want an opportunity to compete. 

Mr. BASS. Is there any role for us in dealing with that issue? 

Mr. REED. Yes, I will start and then I will hand it over to Rey, 

but we definitely have needs when it comes to improving the quality within the patent and trademark system. Patents can be useful 

but the quality is from time to time questionable, and with pendency at 2 years, you know, that was halfway through the beginning 

of the app economy and they are still working on patents. 

Mr. GUTHRIE. Go ahead. 

Mr. RAMSEY. Mr. Congressman, I would just say, you know, I 

don’t want to turn this into a discussion of sort of the patent, you 

know, laws. 

Mr. BASS. Because it is in the jurisdiction. 

Mr. RAMSEY. Right, and it is also very complex, and I just want 

to again urge that we continue to look at the apps economy as part 

of a broader ecosystem that builds on mobility, that includes the 

entrepreneurs, big, small, codependent ecosystem where they exist 

on each other’s platforms, each other’s marketing ability, you know, 

etc. We have got about a dozen app stores. Those stores reside with 

so-called large companies who then work with big carriers. We are 

all part of this ecosystem and it is important to remember that. We 

at TechNet represent both small companies and entrepreneurs. We 

have many startups and we also have large companies, and we 

focus on policies that will create an ecosystem where they will both 

thrive, and that is important to the U.S. economy. 

Mr. BASS. Is the app economy going to go like the economies of 

all industrial produces—engines, autos, computers and so forth— 

and become consolidated and commoditized? 

Mr. RAMSEY. Yes, I think what—again, I don’t have the crystal 

ball, Congressman, but what is happening when we look at the 

71 

apps economy right now is we are segregating off a number of different specific jobs and small businesses but what is happening is, 

over time there will be this ubiquity that all companies will basically be transacting in some mobile application way. So as this continues, it will be seamless so big companies that you think of will 

have apps, little companies have apps. It is just the way to reach 

the consumer. This is being driven by consumers saying meet me 

where I am and give me a service in a way that I want that service. So it creates opportunities for anyone in business. That is the 

way this is moving. 

Mr. REED. Congressman Bass, it is worth noting that the largest 

app development shop on the East Coast is actually in your district. Zco is incredibly successful. Now, you haven’t heard of it, but 

I promise you that apps that are used by Members of Congress 

here and that are probably on whatever smart device you have 

were actually made by Zco. So on one level, there is going to be 

consolidation, but on the other level, as Peter talked about earlier, 

the low barrier to entry means that the apps that you might see 

branded with a big name are actually written by a little guy, and 

I think that is important to remember as we do this consolidation, 

that low barrier means I can build it even while consolidation is 

happening. 

Mr. BASS. We are going to have a spectrum hearing tomorrow in 

another subcommittee. To what extent is access to spectrum or insufficient spectrum a major factor in this industry? 

Mr. RAMSEY. We are together. Mr. Reed and I are both going big. 

It is a big issue, and it would be one of those things that would 

circumvent this growth in this area if we don’t solve that issue. 

Mr. BASS. I don’t have any further questions, Madam Chairman. 

Mrs. BONO MACK. Thank you, Mr. Bass. The Chair is pleased to 

recognize Mr. Markey for 5 minutes. 

Mr. MARKEY. Thank you, Madam Chair, very much. 

I will just throw this in because, you know, apps very commonly 

access our sensitive information, our location, our phone books, 

photos, web browsing history, and apps often do this without prior 

notice and even when the app isn’t actively being used, and this 

morning I introduced legislation, the Mobile Device Privacy Act, 

that requires app sellers to disclose if monitoring software is installed when a consumer downloads an app. Mr. Cassidy is concerned about this. This is a bipartisan concern. And the bill also 

requires consumers to affirmatively consent before the monitoring 

software begins collecting and transmitting information so they 

should know what is happening. Otherwise there really are significant societal issues that have to be discussed, have to be debated 

on this committee. We have to understand it. That is something 

where you don’t need to have a degree in computer science. You are 

saying gathering all this information about a 13-year-old girl, you 

know, and to be used for what purpose, and what notice was given. 

So all of this absolutely has to be discussed. Those are just the values that are our grandparents passed down, you know, and keep 

getting passed down. This is not anything that is more complicated 

than that. 

Mr. Reed, I worked with Kevin Martin, the Chairman of the 

FCC, to make sure that when we were doing the 700 megahertz 

72 

auction that we set aside a certain percent of it that could be bid 

for but only by a company that had an open architecture so that 

any app could get on board, and that wound up being the Android. 

So what role did that play in opening up the app market knowing 

now that there was no gateway whatsoever, that you had an aperture through which you sitting at home, you know, your own little 

company, your own little idea? Did that really propel this revolution, in your mind? 

Mr. REED. I think that you have to look at the ecosystem in its 

entirety. While there is some interesting things that happened because of the 700 megahertz auction, I think what really—if you 

really look at it, what the change that occurred that really propelled us was the ability of our product to get in front of a consumer. 

Mr. MARKEY. No, I know that. What I am saying is, if you were 

just a smaller person, you didn’t know how to negotiate with Apple 

and you just wanted to get your app out there, didn’t that make 

it simpler for you to do so and increase by maybe 100,000 the numbers of them that could get out there almost immediately without 

having a gateway. 

Mr. REED. I guess the reason that I would touch on that is, I 

think that it is worth noting for this committee a really important 

part about how the platforms play a role because the problem you 

are describing is—we didn’t have a problem getting our app out. 

There was the Internet. I could put anything out anywhere. It was 

finding a way to actually get it in front of people. So I understand 

your point but I—— 

Mr. MARKEY. Do you understand what I am saying, Ms. Hay? 

Mr. Ramsey, could you comment on that? 

Mr. RAMSEY. Yes, Congressman. I would say unequivocally that 

the principles of openness were important and continue to be important for this sector and moving forward, and that was one of the 

key elements. As you well know, there have been other issues connected to the notion of openness that continue to be important. 

Mr. MARKEY. And I appreciate that. That is my concept. Open architecture is important and the iPhone was a closed architecture. 

So that is just the bottom line. It gets more open as they see competition, they see all these apps going over to the other devices. Do 

you agree with that, Mr. Farago? 

Mr. FARAGO. I mean, as far as I understand the question, you 

know, I agree that it’s easier than it has ever been for small entrepreneur—— 

Mr. MARKEY. That was the goal of moving over to 700 megahertz. 

Mr. FARAGO. No, no, it has been great. It has reduced barrier to 

entry and I would say if you compare it to the manufacturing world 

where you have to pay for manufacturing and distribution, you 

have to have a professional sales force that negotiates with Best 

Buy or whomever and—— 

Mr. MARKEY. How many jobs do you think the 700 megahertz 

created? How many jobs, do you think? 

Mr. REED. I think it is too hard to parse that. 

Mr. MARKEY. Is it, like, 25 jobs? Give us a magnitude, an order 

of magnitude. What do you think it did? This is a committee hearVerDate Aug 31 2005 15:51 Jan 14, 2014 Jkt 037690 PO 00000 Frm 00076 Fmt 6633 Sfmt 6633 F:\112-17~2\112-17~1 WAYNE
73 

ing on jobs and you are here testifying saying, you know, you want 

to create more jobs. So what did the 700 megahertz do in terms of 

creating more jobs so we have some basis for knowing what our 

goals should be or what the objective should be. 

Mr. REED. I am happy to take that question back, and we will 

sit down with smart people and come up with some numbers. 

Mr. MARKEY. I think that is important. I think we should answer 

that question because obviously that was the goal that was presented to me by your counterparts 5 years ago in terms of moving 

over that spectrum and making sure it was open for an architecture that would invite hundreds of thousands of people who otherwise might never have been able to get through the maze of working in corporate America. 

Mr. Ramsey? 

Mr. RAMSEY. Yes, I would say, Congressman, again, there hasn’t 

been a study of that, which I think it would be worthwhile looking 

at, but I would add, in keeping with that, that every time the FCC 

does an auction, it has a job implication connected to it and so it 

is crucial and so that was crucial spectrum to get out as well as 

some of the next in line spectrum as well. 

Mr. MARKEY. All I am saying is, it might have created 50 or 

100,000 jobs because of the openness of that architecture, and it is 

scattered in 50 States and 435 Congressional districts because it is 

obviously—— 

Ms. HAY. I can say that people have moved from iOS development to Android development because of the innovation that is possible on that open architecture. 

Mr. MARKEY. And I appreciate you telling us that, and that is 

really what this is all about. It is about job creation, and we have 

always operated in a bipartisan basis here, you know, in order to 

accomplish that goal, thinking it through and trying to be smart 

as we go forward, and Mr. Cassidy and I and I think others also 

have privacy concerns as we get into this world deeper and deeper 

as well. 

I thank you, Madam Chair. 

Mrs. BONO MACK. I thank the gentleman, and I also look forward 

to seeing the text of your bill and working with you, and remind 

the gentleman that years ago I introduced an anti-spyware effort 

which was very much along the same lines of what you are talking 

about. 

Mr. MARKEY. No, I do. I appreciate that. 

Mrs. BONO MACK. So I look forward to seeing your bill and working on it. The Chair recognizes myself for 5 minutes for a second 

round of questioning. 

But just to follow on Mr. Markey’s line of questioning, I am an 

Apple person. It took a long time for me to convert from PC to 

Apple. I mean, once I got to Apple, I couldn’t go back. But I have 

chosen to be an Apple person and I have chosen to use iTunes, and 

a lot of my friends are Droid people. I mean, we had that choice. 

But to sort of counter what Mr. Markey is saying, I knew that 

there was sort of a walled garden approach in the App Store for 

Apple yet I figured that they knew what they were doing, that they 

were protecting both the growth of their platform, that my apps 

somehow had the stamp of approval from Apple and I felt I wasn’t 

74 

shopping in the wild, wild West of the open source. So I chose that, 

and that was my choice, my decision, and like everybody else, I 

guess we all play Words with Friends on different platforms but I 

think it is important to note that people make a choice and I had 

that opportunity. 

But I just want to turn a little bit to spectrum. Clearly, that is 

very important to all of us. I was wondering if anybody wants to 

comment on the thinking of whether we need more licensed or unlicensed spectrum and should it be in big blocks and what should 

guide our thinking tomorrow? Do you have some questions and 

thoughts you’d like to see tomorrow for our hearing? 

Mr. RAMSEY. Madam Chairwoman, just a couple of quick things 

and maybe I will stop in now for this hearing tomorrow on spectrum. But I think it is clear that we need both licensed and unlicensed. They both play a role in this ecosystem and the FCC’s proposals around incentive auctions, in my opinion, is an innovative 

way of taking a look at how we can better aggregate larger blocks 

of spectrum and more efficiently get it out there into the marketplace. Obviously that requires some give and take with other folks. 

And I just want to go back to what Mr. Markey had brought up 

because it is too easy to commingle the words ‘‘open’’ and I don’t 

think—I can’t speak for the Congressman because he just walked 

out, you know, or myself when I was talking about openness. The 

principles of openness were not to say that Apple wasn’t open because they are adhering to net neutrality principles and so I think 

all these platforms give consumers choice like the choice that you 

have exercised. So I don’t want sort of the old fight of net neutrality and openness to be commingled with the terminology. The 

principles of openness have continued to be adhered to by all these 

platforms we are describing whether it is Facebook and Google and 

Apple, so they have all been doing I think a very good job in that 

regard. 

Mrs. BONO MACK. Mr. Reed, would you care to comment on spectrum? 

Mr. REED. I will be really short and echo what he said and say 

I want more and I want it now, and unlicensed and licensed are 

things that we need to work on. Licensed is really important because, bluntly put, I need guys in hardhats digging trenches, pulling fiber and putting up towers, and so ultimately that means that 

I need companies that are willing to spend the money to build the 

infrastructure that I will be on top of, so get me there and get me 

there now because that is what we are going to need. 

Mrs. BONO MACK. Would either of you like to comment on competitiveness with Europe and what Europe is doing, and if we 

might lose sort of this race in this area? I guess a number of European and Asian countries are being substantial amounts of spectrum to market for commercial use. If we fail to keep pace, will we 

lose our leadership role in this area? 

Mr. RAMSEY. Madam Chairwoman, I would say there are a couple of things we have to look at. One is obviously government itself 

has a lot of spectrum and we have got to look at how efficiently 

that is being organized, how much the government needs so we can 

get that online. Then we have got the issue of making sure we can 

acquire inefficiently used spectrum that broadcasters are utilizing 

75 

or not utilizing, and that is where the auctions come into play, so 

we have got to get that back on online. And then lastly, we will 

not—even with the most efficient allocation of spectrum from the 

government, let us say the government does everything perfect, 

with this explosive growth in the use of these devices, which are 

all using greater and greater amounts of spectrum, innovation and 

technology itself is going to be one of the ways we are going to get 

through this. Spectrum sharing, other sorts of forms of technology 

like that are going to help us get through this problem. So we are 

going to—this is where the private sector will continue to be important. The very companies—and this is why I was emphasizing 

early—that do not have this distinction between big and small, 

these so-called small are going to be relying on some of these other 

companies to continue to create innovation around spectrum that 

is going to enable them to flourish. So at the end of the day, we 

are all in this together. So better allocation from the Federal Government, the use of technology to get that out, taking spectrum 

that is not being used smartly by the broadcasters, the all-of-theabove approach will keep America competitive with that. 

Mrs. BONO MACK. Thank you. 

Dr. Cassidy, you are recognized for 5 minutes. 

Mr. CASSIDY. Again, Madam Chair just spoke of how I would 

choose to use Apple if I choose to use Apple. Another thought I had 

though is that clearly Apple can censor what is placed upon their 

App Store. There were some social conservatives put something up 

there, boom, Apple took it off. It disagreed with their philosophy. 

On the flip side, I gather they don’t allow pornography. And so 

there is a certain censorship that takes place. Now, you could 

argue this is a private company but at some point if their market 

share becomes so great, then does it begin to have a responsibility 

beyond that of a private company? And so I toss that again because 

you guys think about this, and I am just—— 

Ms. HAY. Apple has very detailed guidelines for what it accepts 

in the store. It is a 1- to 2-week-long review process for most of us 

developers. So if we find out that something we have done inadvertently is violating some terms and conditions, which they consistently update as well, then it is back to the drawing board, it 

is changing whatever the offending feature is. So, you know, doing 

business in the App Store with Apple is a more detailed process 

versus Android where you are able to sort of explore whatever the 

operating system is put it up there and people can then choose to 

download it in the wild, wild West. 

Mr. CASSIDY. Now, do you see a concern, though, because, again, 

I forget it was but some social conservative group put something 

up and it was struck down. It offended somebody. Now, they may 

take everything that is Republican theoretically or everything that 

is Democrat. Now, they say of course that wouldn’t happen, but 

again, there is one group at least that felt like it happened to them, 

and do they become a quasi-public entity? 

Mr. REED. Well, I think it is important to note that Android in 

fact is rising to the level of having the largest market share, and 

they have a true wild, wild West. In fact, some of the apps that 

are on there are problematic for us and we have talked to other 

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thing illegal or how do we get apps that are on the completely wide 

open atmosphere in a place that we can deal with them. I think, 

though, the reverse side is, I am going to be very coldly logical 

about this from my own perspective. My folks make more money 

on the curated store model because of what the chairman said, and 

that is, they find the trust relationship at the curated store whether it be Apple or the Xbox platform—— 

Mr. CASSIDY. But that is not really my concern. 

Mr. REED. Right, but I mean, we—so from our own perspective, 

I like it. I like the curated store because small—— 

Mr. CASSIDY. But I am not arguing curated versus non-curated. 

What is the obligation in terms of allowing free speech for something which again has maybe not dominant market share but 49 

percent or something like that, pretty substantial? 

Mr. REED. Actually, at this point in time, Apple—the Android 

has actually a larger market share globally. 

Mr. CASSIDY. But I am saying, if it is 40 percent, I mean, it is 

still substantial. 

Mr. REED. I think we are so far away from Apple being a public 

entity that I am not quite sure. I think a private industry has the 

right to keep pornography or other material off their—— 

Mr. CASSIDY. And what about socially conservative views? 

Mr. REED. So far, I think that is something that if there was a 

major issue around that, that is something that I am sure Congress 

would bring to the attention and I am sure the Democrats would 

do likewise if their apps were kept off the platform as well, and I 

think let us take that on a case by case. When it happens, let us 

address it. But overall, I do think I want to preserve the right for 

private industry to make decisions about what they put in front of 

my kids and in front of adults. 

Mr. CASSIDY. Mr. Farago? 

Mr. FARAGO. Yes, I mean, I don’t have a lot to add to what has 

already been said. I think the way we view it or I view it as Apple 

and Amazon and Google are running stores like a retailer. This 

just happens to have a digitally distributed product on a virtual 

store shelf. So if I go into Macy’s or Bloomingdale’s or Safeway grocery stores on the West Coast, I expect that there has been a 

buyer, there has been a review—— 

Mr. CASSIDY. It is only a little bit of a difference, if I may I interrupt, because it isn’t as if you can go to one Apple Store versus another Apple Store. There is only one Apple Store. And so the paradigm is a little bit different than Dillard’s versus Macy’s versus 

Sachs. 

Mr. FARAGO. I might respectfully point out, if I use an Xbox 

home console, Xbox Live Arcade, which is their digital platform is 

run by them, and if I am a Microsoft Xbox user, that is the only 

store from which I can purchase goods. 

Mr. CASSIDY. A little less pervasive. The pervasiveness is the 

issue. 

Mr. FARAGO. Well, I think that, you know, a store if it is successful and has a lot of customers coming into its large like Walmart 

sized or even bigger, you know, I still think they are fundamentally 

a private entity running a store and they have a right to decide 

which goods get on the shelf. 

77 

Mr. CASSIDY. I am out of time. I agree. Yield back. Thank you. 

Mrs. BONO MACK. Thank you, Doctor. 

Mr. Bass, you are recognized. No further questions? 

All right. Well, I am just going to ask one brief question of the 

panel in lieu of a third round, if I might, and nobody really touched 

on cloud technologies and its importance, and I would just like to 

open up briefly if we can keep this last round to 2 minutes or so 

if anybody wants to talk about—I think Mr. Farago, you specifically talked about, what you said, the nearly endless storage cloud 

technology offers and how it contributes to the handheld devices 

now being super devices. How important is the cloud to the app 

world and how important is security of the cloud to ensure consumer confidence. So the last question of the day. 

Mr. FARAGO. At a high level they are both fundamentally, I 

mean, deeply important. They are critical. You know, this device 

has limited storage. I mean, they are really supercomputers in your 

pocket now, but what makes—one of the many things that make 

this kind of experience special for consumers is that not only is 

there a lot of data that one—you know, your picture for example, 

of your grandchild could probably be accessed from several different devices. It lives somewhere for you, and that is a real convenience for customers. That requires storage. If you can’t fit 

enough things in your house, then you may go get a public storage 

locker somewhere locally. And so it is just a place to hold more 

things universally for consumers and then they like to access those. 

The other piece obviously in between the device and the cloud is 

the sort of the highway, the bandwidth and spectrum we have been 

talking about that is also critically important. Security of that data 

is highly important and consumers need to have trust that Apple 

with iCloud and many other cloud services. Box is a very popular 

company for enterprise now, Drop Box, places where you can place 

something and then get it later or place something for someone else 

to get, a file or a picture or whatever. You know, you want to believe that your property, a picture of your grandchild, is safe and 

secure, so it is critically important. 

Mrs. BONO MACK. Thank you. Anybody care to chime in? 

Ms. HAY. Yes. I think the cloud has been monumental to the app 

marketplace. The safety that comes from being able to use Amazon 

web services versus trying to come up with some sort of encrypted 

way of handling credit card numbers as an independent app developer or business owner, I mean, there is just no comparison. So 

now as an independent or small business owner, I am able to leverage cloud services like this, particularly in e-commerce, I think, 

that are safe, that conform to all the guidelines that are required 

of protecting that sort of data, and at the same time costing very 

little so I am able to actually launch more products, I am actually 

able to innovate more. So I think the cloud has been absolutely 

monumental in the economy here. 

Mrs. BONO MACK. All right. 

Mr. REED. I think the only part I would add to bring it back to 

policy for a moment is, we need your help, and I know this isn’t 

the committee of jurisdiction that deals with it but we need all 

Members of Congress to help us on some of the antiquated laws 

that govern our electronic privacy in the cloud because unfortuVerDate Aug 31 2005 15:51 Jan 14, 2014 Jkt 037690 PO 00000 Frm 00081 Fmt 6633 Sfmt 6633 F:\112-17~2\112-17~1 WAYNE
78 

nately they go back to the era where things stored in the cloud 

were less valuable than stuff stored on your desktop, and the problem that it creates for us from a business perspective is when I go 

to a risk-averse company and I say buy my small-business-created 

product because you can trust the cloud storage that we are using 

at Amazon AWS or anyone else, their answer is, yes, but what is 

our legal responsibilities, is it the 6th Circuit Court, is it ECBA, 

and they don’t buy our product, not because our product wasn’t 

awesome, it was because our product—they couldn’t have the legal 

risk that exists right now around some of our privacy protection 

laws. So we ask all Members of Congress to help us as an industry 

with ECBA reform and making sure that we have clear, concise 

ways to speak to risk-averse lawyers about why the cloud is a safe, 

logical place to store their data. 

Mrs. BONO MACK. Thank you very much. That is going to conclude our hearing for the day, so I want to thank the entire panel 

for being with us today. You have been very gracious. We look forward to working with all of you moving forward. 

At this point I am going to remind members that they have 10 

business days to submit questions for the record. I ask the witnesses to please respond promptly to any questions they may receive. 

And with that, thank you again very much and the hearing is 

now adjourned. 

[Whereupon, at 11:19 a.m., the subcommittee was adjourned.] 

Æ