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[Senate Hearing 110-1138]
[From the U.S. Government Publishing Office]

                                                       S. Hrg. 110-1138

                       THE FUTURE OF THE INTERNET

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

                                HEARING

                               before the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 22, 2008

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation

                  U.S. GOVERNMENT PRINTING OFFICE

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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                   DANIEL K. INOUYE, Hawaii, Chairman
JOHN D. ROCKEFELLER IV, West         TED STEVENS, Alaska, Vice Chairman
    Virginia                         JOHN McCAIN, Arizona
JOHN F. KERRY, Massachusetts         KAY BAILEY HUTCHISON, Texas
BYRON L. DORGAN, North Dakota        OLYMPIA J. SNOWE, Maine
BARBARA BOXER, California            GORDON H. SMITH, Oregon
BILL NELSON, Florida                 JOHN ENSIGN, Nevada
MARIA CANTWELL, Washington           JOHN E. SUNUNU, New Hampshire
FRANK R. LAUTENBERG, New Jersey      JIM DeMINT, South Carolina
MARK PRYOR, Arkansas                 DAVID VITTER, Louisiana
THOMAS R. CARPER, Delaware           JOHN THUNE, South Dakota
CLAIRE McCASKILL, Missouri           ROGER F. WICKER, Mississippi
AMY KLOBUCHAR, Minnesota
   Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
Lila Harper Helms, Democratic Deputy Staff Director and Policy Director
   Christine D. Kurth, Republican Staff Director and General Counsel
                  Paul Nagle, Republican Chief Counsel

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 22, 2008...................................     1
Statement of Senator Dorgan......................................     2
Statement of Senator Ensign......................................     6
    Prepared statement...........................................     6
Statement of Senator Inouye......................................     1
Statement of Senator Kerry.......................................     4
Statement of Senator Klobuchar...................................    61
Statement of Senator Pryor.......................................    10
Statement of Senator Rockefeller.................................     8
Statement of Senator Smith.......................................    11
    Prepared statement...........................................    11
Statement of Senator Stevens.....................................    12
Statement of Senator Sununu......................................     3
Statement of Senator Thune.......................................     9
Statement of Senator Wicker......................................    29

                               Witnesses

Bateman, Justine, Actress, Writer, Producer, and Co-Founder, 
  FM78.tv........................................................    41
    Prepared statement...........................................    43
Combs, Michele, Vice President of Communications, Christian 
  Coalition of America...........................................    30
    Prepared statement...........................................    31
Hahn, Robert W., Executive Director, Center for Regulatory and 
  Market Studies, American Enterprise Institute..................    33
    Prepared statement...........................................    34
Lessig, Lawrence, C. Wendell and Edith M. Carlsmith Professor of 
  Law, Stanford Law School.......................................    51
    Prepared statement...........................................    52
Martin, Hon. Kevin J., Chairman, Federal Communications 
  Commission.....................................................    13
    Prepared statement...........................................    15
McSlarrow, Kyle, President and CEO, National Cable & 
  Telecommunications Association.................................    44
    Prepared statement...........................................    45
Verrone, Patric M., President, Writers Guild of America, West....    38
    Prepared statement...........................................    40

                                Appendix

Cantwell, Hon. Maria, U.S. Senator from Washington, prepared 
  statement......................................................    65
Response to written questions submitted to Justine Bateman by:
    Hon. Jim DeMint..............................................    73
    Hon. Byron L. Dorgan.........................................    72
Response to written questions submitted to Dr. Robert Hahn by:
    Hon. Daniel K. Inouye........................................    69
    Hon. Olympia J. Snowe........................................    70
    Hon. Ted Stevens.............................................    70
Response to written questions submitted to Hon. Kevin J. Martin 
  by:
    Hon. Byron L. Dorgan.........................................    66
    Hon. Olympia J. Snowe........................................    67
    Hon. Ted Stevens.............................................    67
Response to written questions submitted to Professor Lawrence 
  Lessig by:
    Hon. Maria Cantwell..........................................    85
    Hon. Jim DeMint..............................................    87
    Hon. Byron L. Dorgan.........................................    84
    Hon. Daniel K. Inouye........................................    84
    Hon. Amy Klobuchar...........................................    86
    Hon. Olympia J. Snowe........................................    86
Response to written questions submitted to Kyle McSlarrow by:
    Hon. Maria Cantwell..........................................    75
    Hon. Jim DeMint..............................................    80
    Hon. Daniel K. Inouye........................................    74
    Hon. Olympia J. Snowe........................................    77
    Hon. Ted Stevens.............................................    76
Response to written questions submitted to Patric Verrone by:
    Hon. Jim DeMint..............................................    71
    Hon. Byron L. Dorgan.........................................    71

 
                       THE FUTURE OF THE INTERNET

                              ----------                              

                        TUESDAY, APRIL 22, 2008

                                       U.S. Senate,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:06 a.m. in 
room SR-253, Russell Senate Office Building, Hon. Daniel K. 
Inouye, Chairman of the Committee, presiding.

          OPENING STATEMENT OF HON. DANIEL K. INOUYE, 
                    U.S. SENATOR FROM HAWAII

    The Chairman. The Internet is one of the great success 
stories of the 20th century. It has been a key factor in the 
ability of the United States to steadily improve worker 
productivity for the past 15 years. Our economy and the quality 
of our lives have evolved significantly because of this network 
of networks.
    The Internet has created an era of transparency, making it 
even harder for the corporations and governments to escape 
scrutiny for actions that do not stand up to the light of day. 
Again, I would suggest that, because of this expanded flow of 
information, our Nation is much stronger.
    The Internet has also brought together communities of like-
minded individuals who share an interest in a hobby, in a 
unique culture, or in saving a few dollars when shopping for 
their families. In a country that is defined by its very 
diversity, I would suggest that this capacity to bring people 
together serves us well.
    Along with the great benefits, the Internet, unfortunately, 
has provided a new avenue for those who would seek to take 
advantage of the fellow citizens. Identity theft, violations of 
intellectual property rights, and any number of good old-
fashioned scams have been updated to the Digital Age, and we 
continue to struggle with the best way to protect our children 
from inappropriate content and inappropriate contact with those 
who would do them harm.
    Along with the problems facing individual Americans as they 
navigate the digital world, there are also challenges facing 
those who provide services and contact via the Internet and 
those who build and manage the network infrastructure necessary 
for the continued expansion and improvement of the Internet.
    I believe that the government has a responsibility to 
create a regulatory environment that will 1 day enable each and 
every American to have affordable access to reliable broadband 
service.
    To achieve this long-term goal, I've introduced the 
Broadband Data Improvement Act. This act is designed to give us 
a starting point. It will better define what ``broadband'' is, 
and it will provide us with accurate information on the current 
status of broadband deployment in the United States. This 
information is essential toward universal broadband deployment.
    Another significant responsibility of our government is to 
ensure that the Internet continues to grow and thrive. The 
issue of network neutrality and its offspring, 
nondiscrimination and network management, looms large in this 
debate. The central question here seems to be how to best 
balance the right of the American people to uncensored and 
unfettered access to Internet content and services against the 
desire of the Internet service providers to manage their 
networks in an efficient, profitable way.
    For several years now, policy discussions on this subject 
have been waged on a rhetorical battlefield. We are told that 
nothing less than the future of the Internet is at stake. Yet, 
even in this winner-take-all environment, we see the inklings 
of progress, the dialogue between cable and peer-to-peer 
services, the novel open-access requirements on the C-block 
spectrum, and the swift response of a wireless provider to a 
text-messenging snafu that thwarted political speech.
    It may be early for optimism, but progress deserves praise. 
In the meantime, I can assure you that this committee will 
continue to vigorously exercise its oversight authority over 
this important issue.
    And may I now recognize the Vice Chairman of the Committee, 
Senator Stevens.
    Senator Stevens. Well, since I came in late, I'll yield to 
my friends and come back later. OK?
    The Chairman. Then, may I call upon Senator Dorgan?

              STATEMENT OF HON. BYRON L. DORGAN, 
                 U.S. SENATOR FROM NORTH DAKOTA

    Senator Dorgan. Mr. Chairman, thank you very much. First of 
all, thanks for holding this hearing.
    As you know, Senator Snowe and I have introduced a piece of 
legislation, the Internet Freedom Act. And I want to mention, 
at the start of this hearing, that the creation and the 
development of the Internet is a remarkable thing in our lives, 
and it occurred under rules of nondiscrimination. It is an open 
architecture. The Internet has been completely open in its 
architecture. Anyone can go anywhere, anytime, under any 
circumstances, no gatekeepers, no tollbooths. And you also 
know, and we know, that there are those who have said, as this 
Internet has developed, that they would like to find ways to 
create tolls. And I've often quoted AT&T's old CEO, Ed 
Whitacre, who told Business Week, quote, ``They don't have any 
fiber out there, they don't have any wires, they don't have 
anything. They use my lines for free, and that's bull.'' Well, 
he is suggesting, there, as others have, that they will want to 
at some point, as providers, begin finding other streams of 
revenue, and doing that by establishing various tiers and so 
on, and they can do that if there are not rules against 
discrimination.
    My feeling is that innovation in the Internet will be 
stifled dramatically--innovation in our country will be 
stifled--unless we restore the nondiscrimination rules.
    Mr. Martin will testify today--the Chairman of the FCC--
that the four principles they have are principles he believes 
probably reaches something close to nondiscrimination. It's 
very interesting that we were told previously in these 
discussions that we didn't need to restore nondiscrimination 
rules because the FCC would be able to resolve this. Now, in a 
filing to the FCC, one of the largest providers in the country 
alleges the FCC does not have the authority. So, I think that, 
in itself, raises the question of, Why on earth should Congress 
not act to restore the nondiscrimination rules under which the 
Internet was created in the first instance? That is the purpose 
of the piece of legislation that I and Senator Snowe have 
introduced.
    I know this is a controversial issue, but it certainly 
should not be. When should it be controversial to decide that 
there shall be nondiscrimination? I mean, those that oppose 
this apparently have to be taking the side, ``We want to permit 
discrimination, in one form or another.'' That's a preposterous 
position, in my judgment. My hope is that this hearing will 
give us additional information with which to evaluate this 
issue and then pass our legislation.
    The Chairman. I thank you very much.
    Senator Sununu?

               STATEMENT OF HON. JOHN E. SUNUNU, 
                U.S. SENATOR FROM NEW HAMPSHIRE

    Senator Sununu. Thank you very much, Mr. Chairman.
    I'm obviously looking forward to the testimony of the 
witnesses. I agree with many of the previous statements, 
certainly one that--the one that the Internet's a remarkable 
thing. I think we can all agree with that. But, I find the 
title of the hearing, ``The Future of the Internet,'' at least 
somewhat interesting, in that if the Internet's taught us 
anything, it's that it's pretty presumptuous to predict what 
its future will be. And we don't have to look much further than 
the ground that's littered with, sort of, the corpses of dot-
com businesses, 2001, 2002, 2003, and, from that, competitive 
destruction. We've seen a lot of growth and innovation in 
Internet-based services, content distribution, greater and 
greater deployment of fiber and methodology, wireless systems 
for distributing and providing customers with access to 
broadband. But, even so, this is an industry and a technology, 
an infrastructure that is in its infancy, and we should be 
very, very cautious about imposing regulations based on what we 
think competitors will do in the future and how we think 
consumers will respond when competitors do things that we think 
they might do. That is not the basis for sound regulation.
    If there are anticompetitive practices that we can 
identify, we should act. And we already have a lot of statutes 
in existing law to deal with anticompetitive practices. If 
people aren't properly disclosing the way they operate and what 
they're doing to content, blocking access to Websites without 
disclosing that, I don't think we should do that in any case, 
but if people are acting in a way that misleads consumers, we 
should act. And we have the power to act.
    But, writing regulations based on how we think competitors 
might behave and how we predict customers might act and respond 
to that behavior is dangerous, indeed, because what we risk 
doing is enacting regulations that guarantee that the Internet 
will always look like what it used to look like, and I don't 
want the Internet to be locked in to 2008 or 2005 or 2001 or 
1996, when we--when others wrote the Telecom Act that set the 
groundwork for a lot of what we're doing today. We need to let 
people innovate, let people invest, be on guard for practices 
that deny consumers access, that deny consumers benefit, that 
stifle innovation. But, we shouldn't base regulation on the 
predictions of politicians, certainly, or even those in 
industry, necessarily, because we've seen, time and time again, 
that some of those that we determine to be the most brilliant 
in industry today turn out to be foolish in their investments 
in their prediction of where technology is headed.
    Thank you, Mr. Chairman.
    The Chairman. I thank you very much.
    Senator Kerry?

               STATEMENT OF HON. JOHN F. KERRY, 
                U.S. SENATOR FROM MASSACHUSETTS

    Senator Kerry. Thank you, Mr. Chairman. And thank you for 
holding this hearing on this really important issue.
    And I want to thank Chairman Martin for coming aboard, at 
the last moment here, to join us, which I think is really 
important, and we appreciate it.
    And we also appreciate all of the other witnesses who have 
traveled to Washington in order to share thoughts with us on 
this today.
    This is an issue on which there have been a lot of words 
expended, a lot of platitudes and politics, and I suppose it's 
almost cliche now, Mr. Chairman, to say that, you know, the 
Internet is the future. I listened to my colleague from New 
Hampshire, just now, talking about, you know, how we shouldn't 
get in the way of this competition, et cetera. But, in recent 
years, frankly, policy has received too little attention.
    And, you know, all of us do know how extraordinary the 
story of the Internet is, the capacity it has to foster 
innovation, to serve as a forum for unfettered social and 
political discourse, and to allow for an extraordinary 
dissemination of information and knowledge in the country. But, 
frankly, you know, anyone still wondering whether our long-term 
and national investment in basic science and technology, which 
we talk about a lot in this Committee, is worth it, gets their 
answer every single day when they simply log in to check their 
e-mail and really take for granted something that began nearly 
40 years ago as a DARPA experiment. And those of us sitting on 
this Committee when we wrote the 1996 Telecommunications Act 
will all remember that we were way behind the curve, in the 
sense that the entire discussion here was about telephony, not 
data, and within 6 months, almost, that Act was bypassed. But 
as the Internet, through its own freedom, its own ability to 
innovate, through the open architecture and the platform that 
has allowed this extraordinary innovation, as it has grown and 
become pervasive in our lives, the fact is that the debate over 
the need to ensure some very basic principles--principles, not 
nit-picking, you know, regulatory structure, but basic 
principles about how and when network providers can manage 
content is becoming more and more politicized and polarized.
    During the last go-around on this issue, in 2006, we were 
told by the major cable and phone companies that net neutrality 
was, quote, ``a solution in search of a problem, a response to 
blocking and interference with Internet content which no 
network operator would ever attempt.'' That's what we were 
told.
    I listened to my colleague from New Hampshire, just now, 
tell us, you know, ``Don't get in the way of something that 
isn't happening or that might change the things that we can't 
predict.'' But, it's not a question of changing something we 
can't predict; it's happened. It has happened.
    On the heels of this claim, before this Committee, we found 
out that AT&T censored politically charged words during a live 
broadcast of Pearl Jam concert in August 2007. A month later, 
Verizon rejected a request made by NARAL to use the network for 
text-messaging political content. And, finally, in October of 
2007, Comcast admitted--and you have to sort of look at the 
sequence of their statements. You know, it's interesting, if 
you follow them, because ultimately what they told us again 
they weren't doing, it was proven they were doing. And they 
admitted to interfering with a subscriber's attempts to share 
files online using BitTorrent technology.
    So, to whatever degree people were alleging, Mr. Chairman, 
that this was a solution in search of a problem, it has found 
its problem. And we have an obligation to try to guarantee that 
the same freedom and the same creativity that was able to bring 
us to where we are today continues as we forward.
    Now, even though I want to acknowledge, the companies that 
I've just mentioned appropriately took steps to address each of 
these issues. And we applaud that, ad we appreciate their 
response. But, we can't expect, nor should the American people, 
the users of this incredible technology, expect that we have to 
rely on a discretionary and occasional political pressure or 
scrutiny from Congress, or from the FCC, or a vocal and 
organized group of advocates, in order to regulate the 
industry. That ought to happen because we have a set of 
standards and expectations in place. And I think Senator 
Dorgan's bill, which I'm a cosponsor of, is the approach that 
makes sense.
    I also appreciate that the FCC is looking closely at this 
issue, held hearings in Cambridge and last week, in Palo Alto. 
And I hope that they're going to see fit to act in a way that 
will protect these open networks.
    The cable companies and the phone companies, Mr. Chairman, 
tell us that, because of capacity restraints, there's a need 
for some level of reasonable network management. And there is 
an aspect to this claim that can ring true on the surface, but 
I think that is something of a cautionary claim, and we ought 
to put it to the test today, and take notice that you can 
establish a set of principles that don't violate that ability.
    One other point I'd like to make, Mr. Chairman. Despite the 
fact that the Internet was born in this country, and this 
Committee has presided over its growth, America has been in a 
precipitous free-fall when it comes to our global broadband 
ranking. And this is just--it's not only disgraceful and 
unacceptable, it's just--it defies any kind of rational 
approach to the economy that we have in this country, and want 
to have in the future.
    The Organization for Economic Cooperation and Development 
has dropped the United States from fourth to fifteenth in 
broadband rankings of industrialized nations. The International 
Telecommunications Union ranks the United States 21st, tied 
with Estonia, in its digital opportunity index. The debate over 
net neutrality and America's global broadband ranking are 
linked, and I think it's important that we discuss the link.
    When we talk about reasonable network management, we're 
also talking about the concept of scarcity. We lack the 
infrastructure to deliver highspeed broadband to every 
household, and the public's demand for content, such as video 
streaming, is exceeding the ability to deliver it.
    More than 3 years ago, 4 years ago now, actually, the 
President told us this country needed, and would have, a 
broadband strategy, a plan, by 2007. Well, it's 2008, and we 
are legitimate in asking the question, Where is the plan? Where 
is the sense of urgency? Entire swaths of our country, 
including most of the western part of Massachusetts, have 
little or no access to broadband, and we're placing our 
businesses and workers at a huge economic disadvantage every 
day because of this, Mr. Chairman.
    So, I hope we're going to start implementing the large-
scale public investment for broadband, the incentives that we 
need to put in place, so that we can have universal broadband 
in America, and we need to pass legislation, like your 
Broadband Data Improvement Act, so we can get the kind of 
accurate data we need to know exactly what we're up against. I 
hope our witnesses this morning will share with us thoughts 
about that linkage and its importance as we proceed forward.
    Thank you, Mr. Chairman.
    The Chairman. I thank you very much.
    And, Senator Ensign?

                STATEMENT OF HON. JOHN ENSIGN, 
                    U.S. SENATOR FROM NEVADA

    Senator Ensign. Thank you, Mr. Chairman.
    I would ask that my full statement be made part of the 
record----
    The Chairman. Without objection.
    Senator Ensign.--and I'll just try to summarize, with a 
couple of points.
    [The prepared statement of Senator Ensign follows:]

    Prepared Statement of Hon. John Ensign, U.S. Senator from Nevada
    Thank you, Mr. Chairman and Vice-Chairman Stevens for calling this 
hearing today on an issue that is very important to me, the future of 
the Internet. As you know, the Internet has become an indispensable 
part of our economy and an integral part of our society. It is a source 
of innovation, information, entertainment, new wealth, and 
communication. Every American's life has somehow been touched and made 
better by the Internet in some way, and it only becomes more ubiquitous 
and vital as it matures.
    Largely unfettered by government laws and regulations, the Internet 
owes much of its success to innovators and entrepreneurs having the 
freedom to imagine, explore, and create new uses for the Internet. This 
openness has flourished without the heavy hand of government 
intervention, although the continued preservation of the Internet's 
openness is at the core of the network neutrality debate. Perhaps no 
issue is more contested or more central to the Internet's future than 
this one.
    I continue to believe that the competitive market will be the best 
steward of the Internet's famed openness, as it has been since the 
Internet was first opened to the public. Businesses must be able to 
freely determine how best to provide their content or services to 
users. Internet service providers must be allowed to reasonably manage 
their networks to ensure the best possible experience for users. We 
must avoid burdensome government regulations that micro-manage network 
operators or that limit the ability of companies to provide what their 
customers want and need. Such intervention could stifle the dynamic 
marketplace that has given us fiber-to-the-home networks, search 
engines putting the information of the world at our fingertips, 
wireless broadband devices, and streaming on-demand high definition 
video.
    Even so, government does have a significant role to play in guiding 
the future of the Internet. Most observers agree that if there was more 
competition for broadband access the network neutrality issue would be 
rendered all but moot. Rather than imposing new government mandates 
that could reduce the private sector's investment in our Nation's 
broadband infrastructure, Congress should work with industry to find 
ways to encourage increased capital investment and to promote the entry 
of new Internet providers.
    A related problem facing network operators is that of increased 
congestion, driven in large part by the transmission of pirated 
content. Government must work with interested stakeholders to determine 
what network management activities are practical, fair, and in the 
public interest. Congress' ability to focus attention and shine 
sunlight on these issues, like this hearing will do today, will be one 
of our most effective tools to foster such cooperation.
    Restrictive government mandates and meddlesome regulations are not 
the answer to the challenges facing the Internet today. Indeed, such 
responses may serve to smother creative new uses for the Internet and 
to slow the expansion of advanced broadband networks. The FCC has 
adopted a set of broadband policies that seek to preserve openness, 
protect against harmful discrimination, and promote innovation. In 
conjunction with these worthwhile principles, Congress should also work 
to ensure that Internet companies can profit from their endeavors, 
protect their investments, and provide better and more responsive 
services. I believe these are goals on which we can all agree, and we 
must not let partisan politics distract us from the task at hand.
    Thank you again, Mr. Chairman, for holding this hearing today. I 
look forward to the testimony of our distinguished panel of witnesses.

    Senator Ensign. One of the things that we see around this 
place, one of the worst laws that I think that we ever pass, is 
the law of unintended consequences. We set out trying to do the 
right thing, but we end up with severe consequences of things 
that we never foresaw.
    It is my fear of regulating the Internet that this law of 
unintended consequences will come up to bite us very, very 
severely specifically because of some of the things that my 
colleague Senator Sununu talked about--is that we can't 
predict--the technology is changing so fast, entrepreneurs are 
out there, coming up with different ways of doing things on the 
Internet, and what the Internet is going to look like 5 years 
from now, there isn't anybody in America who can predict that. 
And if they have somewhat of a guess that--they'll be 
multigazillionaires if they're able to predict what it's going 
to look like.
    But, when you look at--when we should regulate, when the 
government should be looking at regulating is mainly when 
market forces aren't working, when the market forces aren't 
allowing for competition. Regulation is basically to protect 
consumers. If the market isn't doing an efficient job of that, 
a lot of times it's time for government to step in. In every 
one of the cases that my colleagues have talked about, 
especially Senator Kerry, the market forces corrected it. He 
admitted that. Every single one of the cases that he talked 
about, the companies took action to correct that.
    So, I think that we need to be very, very careful as we 
proceed with any type of laws or regulations dealing with the 
Internet. And I think the FCC would also be well advised to be 
very, very cautious in anything that they bring forward.
    And so, I appreciate Chairman Martin being here today, 
because what we are dealing with can have some fairly profound 
consequences on the future of commerce in the United States. We 
want to be--I agree with--by the way, with Senator Kerry about 
us, you know, not having the deployment of broadband in the 
United States that we should have. I would say that if we would 
have passed my bill from a couple of years ago, we would have a 
lot better deployment of broadband in the United States, but 
that's another story for another day.
    The bottom line is, this Committee--I think one of the 
important parts of this Committee is to bring out things that 
may be happening in the marketplace so that we don't have to do 
regulation. A lot times, one the greatest powers that we have 
as Senators is the power to convene, the power to shine light 
in places, and to bring out--to make sure that there is 
transparency. And in a lot of cases, when you do that, you 
don't need to regulate, because just the threat of regulation 
can make the market do the right thing.
    And so, I think it's important that we're very, very 
cautious, because once regulations are put into place, once 
laws are put into place, they're very difficult to change. So, 
we ought to be very, very cautious as we proceed, and making 
sure that if the market is correcting itself, that we ought to 
allow the market to do its job.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Rockefeller?

           STATEMENT OF HON. JOHN D. ROCKEFELLER IV, 
                U.S. SENATOR FROM WEST VIRGINIA

    Senator Rockefeller. Thank you, Mr. Chairman. I'll try to 
be brief.
    I'm glad of this hearing. Chairman Martin, I'm happy to see 
you. You're not looking very cheerful right now, and you 
usually do, so I want you to be glad that you're here.
    So, ``The Future of the Internet''--lofty title, lots of 
things implied. I think it's useful to look forward. It's also 
useful to look back. I want to do that.
    Forty years ago, as John Kerry said, DARPA--and it was the 
``network of networks,'' that's what it was called at that 
time, and later became the Internet. The Internet started with 
the Government, as today the relationship between Internet and 
the government continues. In fact, I believe it is a myth that 
the Internet is not regulated. It is regulated, in a variety of 
ways. We have rules to protect consumers against the nuisance 
of unwanted e-mail solicitation or spam, we require voice 
communications providers that use the Internet to offer 9-1-1 
emergency service to their users, we require providers of these 
services to support our Universal Service policy. We have 
programs that put the Internet in our schools, programs to 
support the use of telemedicine, and laws that seek to 
diversify the range of broadband Internet service providers.
    So, in short, Congress--we do pay attention to the 
lifeblood of the Internet, and we should. We want to foster an 
environment where it can grow and thrive and where the core 
values that have always driven our communications policy--and 
there are three: consumer protection, universal deployment, and 
competition--continue to propel us forward into the Internet 
Age even farther.
    So, this is what I see at issue in the future of the 
Internet. Will we take these values and see to it that they 
inspire the next generation of great innovation? Will we 
squander them with a misguided notion that all is well--we can 
do that if we want--and that the unfettered market will serve 
the interests of our largest businesses and our individual 
consumers alike?
    Taking the matter of broadband, that Senator Kerry was 
talking about, I am frustrated beyond any description by the 
lack of it in so many parts of a, granted, very rural and 
difficult State of West Virginia. I, for one, am very worried. 
The Internet and broadband represents our next great 
infrastructure challenge. It's on a par with the interstate 
roads, railroads, port projects that defined our commerce in 
the last century. But, we have yet to treat the deployment of 
broadband with any kind of seriousness that it deserves its 
spotty, industrial, you know, high return, and then 
occasionally somebody throws out, ``Well, we'll put it in this 
rural county,'' and I can't buy that. I simply can't buy that. 
The world is passing us by, building more robust systems with 
greater bandwidth, more possibilities for education, 
entertainment, and entrepreneurship. This is not something to 
be proud of in this country. The time has come for a different 
discussion, a discussion that recognizes the viable role of the 
government in ensuring open broadband networks for all of our 
citizens, a discussion that brings along with it the prospect 
of real consumer protection, a discussion that truly fosters 
competition, and a discussion that ensures that the Internet 
will remain a creative source that takes inspiration and 
benefits from the great genius of our citizens.
    I think we have a lot of work to do on this. I look forward 
to it. And I thank the Chair.
    The Chairman. Thank you very much.
    Senator Thune?

                 STATEMENT OF HON. JOHN THUNE, 
                 U.S. SENATOR FROM SOUTH DAKOTA

    Senator Thune. Thank you, Mr. Chairman and Mr. Vice 
Chairman, for calling today's hearing on the future of the 
Internet, or, more specifically, the outlook for additional 
regulation on network providers.
    Without question, the Internet's become an essential part 
of most Americans' daily lives. In fact, just a few years ago, 
individuals and businesses used the Internet to simply exchange 
information over e-mail and to post information on static 
Websites. Today, advances in technology and broadband 
deployment has led to an online revolution and transformed the 
role of the Internet in our everyday lives.
    Peer-to-peer networking, iTunes, YouTube, and downloading 
HD videos were hardly envisioned just a few years ago. And by 
2010, the average household will be using 1.1 terabytes of 
bandwidth each month, which, incidentally, Mr. Chairman, is an 
amount equal to 1,000 copies of the Encyclopedia Britannica. At 
that rate, just 20 homes would account for more bandwidth than 
the entire Internet in 1995.
    Now, throughout this period of exceptional innovation, 
there's been very little regulation on the Internet. At this 
time, and by most accounts, the Internet is thriving. In 
several respects, the light regulatory touch of the Federal 
Government, as succeeded. Revenues from Internet sales of goods 
and services have grown to more than $135 billion in 2007, 
which represents a 20-percent increase from 2006. And, in fact, 
in the last year, online video viewing has increased 66 
percent. Moving forward, Congress should continue to incentive 
broadband access nationwide, with particular emphasis on rural 
areas where broadband is essential to economic growth. And 
Congress also ought to be promoting investment in innovation in 
Internet networks through a variety of business models, and 
ensure the free flow of information through advanced networks.
    I appreciate the testimony that we're going to receive 
today from today's witnesses. Your input on this important 
issue is going to be critical and help this Committee adjust 
our policies in accordance with the very dynamic Internet 
community.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    Senator Pryor?

                 STATEMENT OF HON. MARK PRYOR, 
                   U.S. SENATOR FROM ARIZONA

    Senator Pryor. Thank you, Mr. Chairman.
    Mr. Chairman, last time you offered for me to make an 
opening statement and I declined, Senator Sununu came over and 
criticized me for not making an opening statement.
    [Laughter.]
    Senator Sununu. I just wanted to hear from you.
    [Laughter.]
    Senator Pryor. So, I guess I'm reminded of a saying that 
Congressman Marion Berry from Arkansas has, where he says, 
``Everything has been said, but not everybody has said it.'' 
And I think that----
    [Laughter.]
    Senator Pryor.--the opening statements that we all have 
made today really cover the issues I want to talk about.
    But, I do want to thank Chairman Martin for coming in. It's 
always great to have you before the Committee. And, Chairman 
Martin, I want to especially thank you for the courtesy visit 
that we had several days ago, and I just appreciate the tasks 
and the challenges you have there, and look forward to hearing 
your thoughts on the future of the Internet. And, obviously, 
rural broadband is very, very important to many of us on this 
Committee, and I look forward to hearing your thoughts on that.
    Thank you.
    The Chairman. Thank you very much.
    Senator Smith?

              STATEMENT OF HON. GORDON H. SMITH, 
                    U.S. SENATOR FROM OREGON

    Senator Smith. Thank you, Mr. Chairman.
    In the interest of time, I'll put my longer statement in 
the record, with your permission----
    The Chairman. Without objection.
    Senator Smith.--and my colleagues' assent.
    Let me just sum my concerns into three parts. I think the 
question, moving forward, is whether the public interest is 
served by heavy-handed government regulation or policies that 
will empower agencies with the agility and tools to go after 
unfair and anticompetitive behavior on the Internet.
    It's my belief that innovation and investment are 
encouraged through less, rather than more, government 
regulation. I also believe that anticompetitive behavior on the 
Internet must be met with swift and decisive responses from 
Federal agencies charged with policing such conduct. I, 
finally, Mr. Chairman, want to emphasize one piece of this 
debate that I think we need to keep in mind as the debate moves 
forward. I think that intellectual property rights must be part 
of any discussions that consider the future of the Internet. 
Illegal content distribution over the Internet is a large part 
of the economic harm caused by piracy each year.
    Thank you, Mr. Chairman, and I'll put the rest in the 
record.
    The Chairman. Without objection.
    [The prepared statement of Senator Smith follows:]

  Prepared Statement of Hon. Gordon H. Smith, U.S. Senator from Oregon
    Thank you, Chairman Inouye, for holding this important hearing on 
the Future of the Internet.
Competitiveness
    I think we are all well aware on this Committee that several 
nations are now outpacing the United States in broadband deployment. 
There are severe economic consequences in failing to keep pace with the 
broadband infrastructure being deployed in other parts of the world. If 
we do not invest in the broadband, companies will move jobs overseas 
where the infrastructure meets their needs in the 21st century. 
Innovative technologies will be invented elsewhere. It is vital to our 
continued competitiveness in the global marketplace that we have a 
frank discussion on our Internet policies today in order to restore our 
global leadership in broadband networks tomorrow.
    Congress must act now to define a national broadband strategy. At a 
minimum this strategy must include: (1) identifying where broadband is 
and where it is not; (2) reforming funding mechanisms to support 
broadband, (3) maximizing spectrum efficiencies to expedite deployment 
of wireless broadband solutions and (4) removing barriers to community 
broadband deployment. I am proud to have introduced bi-partisan 
legislation that advances each of these objectives.
Net Neutrality
    I think we are all also aware on this Committee that it has proved 
difficult to enact any real national broadband policies with the 
specter of a net neutrality debate looming. My hope is that today's 
public discussion on net neutrality will reveal that there is more 
common ground here than some folks would suggest and perhaps a path 
down which we can proceed for the common good. For instance I think we 
could all agree that our Internet policies should:

   advance innovation at the edges as well as investment in 
        networks;

   allow for legal peer-to-peer file sharing applications while 
        strictly safeguarding against the theft of intellectual 
        property online; and

   empower network operators with the freedom to address 
        increasing congestion in their pipes while rigorously ferreting 
        out and punishing anticompetitive behavior.

    We should settle the debate about the ends and get serious in the 
debate about the means--how we go about encouraging broadband 
deployment and preserving the open and interconnected Internet. The 
question moving forward should be about whether the public interest is 
served through heavy handed government regulation, as some have 
proposed, or policies that will empower agencies with the agility and 
tools to go after unfair and anticompetitive behavior on the Internet. 
I continue to believe that innovation and investment are encouraged 
through less rather than more government regulation. I also believe 
that anticompetitive behavior on the Internet must be met with swift 
and decisive responses from the Federal agencies charged with policing 
such conduct.
Piracy
    Finally, I think that intellectual property rights must be apart of 
any discussion that considers the future of the Internet. Illegal 
content distribution over the Internet is a large part of the economic 
harm caused by piracy each year. In 2005, American workers saw an 
estimated 141,000 jobs lost and $5.5 billion in lost earnings as a 
result of motion picture piracy. The economy's losses from illegal 
music downloading were likewise reported at around $3.7 billion in 
2007.
    With the Chairman's permission, I would ask that the Motion Picture 
Association and the Recording Industry Association comments (that were 
filed at the FCC) be made part of the record. These comments focus on 
challenges copyright holders face to ensure intellectual property 
rights are protected over the Internet.
    I welcome panelists here today and thank you for your testimony.

    The Chairman. And now, I call upon the Vice Chairman.

                STATEMENT OF HON. TED STEVENS, 
                    U.S. SENATOR FROM ALASKA

    Senator Stevens. Thank you, Mr. Chairman.
    I would like to welcome Chairman Martin. I think it's very 
important, particularly--we look forward to hearing some 
comments concerning your meetings in Harvard and Stanford.
    Senator Kerry said that this is a problem seeking a 
solution, but from my point of view, this is a solution seeking 
some justification. And I certainly hope that the FCC, as well 
as the Congress, are very careful about taking this first step 
of going back to really intense--intensive regulation of the 
Internet. That's what ``net neutrality'' means to me. 
Eventually, there would be extension of regulation to the point 
where it would be, really, interference with the dynamics of 
the Internet and its future.
    I do believe that there are many comments out there. For 
instance, I'd like to file, for the record, the article 
entitled, ``Network Neutrality and the False Promise of Zero-
Priced Regulation,'' by C. Scott Hemphill and a group of very 
erudite people at Columbia.*
---------------------------------------------------------------------------
    \*\ The document is retained in Committee files and also can be 
found at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1119982.
---------------------------------------------------------------------------
    And it does seem to me that this public discussion that's 
going on is good for the system. But, to take action based on 
it, either by the Congress or by the FCC, at this time, I 
think's entirely unwarranted. The action that Senator Kerry 
mentioned, that was called to attention, the public 
indignation, the outcry from the industry showed that the 
system will right itself if someone really tries to interfere 
with the free access and, really, fair treatment of everyone 
using the Internet. So, I do not believe that this is a time to 
try to put in a law or into a regulation a concept of net 
neutrality that is not validated yet. If something comes along 
that really deserves such attention, it will be broad enough 
and a great enough incentive for us to stop this political 
division over the concept of net neutrality. It is a political 
division now, and it's getting more so. It's unfortunate, 
because I do not think that communications law ought to come 
about because of political division in an election year.
    Thank you very much.
    The Chairman. Thank you very much.
    Mr. Chairman, you've heard a full spectrum of views of the 
Committee. Now it's your turn, sir.
    Chairman Martin?

         STATEMENT OF HON. KEVIN J. MARTIN, CHAIRMAN, 
               FEDERAL COMMUNICATIONS COMMISSION

    Mr. Martin. Well, thank you. And good morning, Chairman 
Inouye, and Vice Chairman Stevens, and all the members of the 
Committee. I appreciate you allowing me to testify before you 
today.
    I thought it important to update the Committee on the work 
in progress of the Commission with respect to the future of the 
Internet, particularly after our en banc hearing on the issue, 
just last week.
    Over the past decade, the Internet has had a powerful 
impact on the economy and on the lives of American citizens. We 
witnessed the fruits of increased innovation, entrepreneurship, 
and competition that this technology has helped deliver. Any 
rules of the road in this area must maintain an open and 
dynamic Internet, preserving it as an engine of productivity 
and innovation that benefits all Americans.
    The Commission is obligated to preserve and promote the 
vibrant and open character of the Internet. In 2005, the 
Commission adopted an Internet policy statement containing four 
key principles. The goal was to clarify how we would evaluate 
broadband Internet practices on a going-forward basis. 
Specifically, the statement says that, ``To encourage broadband 
deployment and preserve and promote the open and interconnected 
nature of the public Internet, consumers are entitled to access 
the lawful Internet content of their choice; consumers are 
entitled to run applications and use services of their choice, 
subject to the needs of law enforcement; consumers are entitled 
to connect their choice of legal devices that do not harm the 
network; and consumers are entitled to competition among 
network providers, application service providers, and content 
providers. Now, the Commission explicitly noted that these 
principles allow for reasonable network management.
    As the expert communications agency, it was appropriate for 
the Commission to adopt, and it is the Commission's role to 
enforce, this Internet policy statement. The Supreme Court, in 
its Brand X decision, specifically recognized the Commission's 
authority to adopt regulations to protect broadband Internet 
access.
    I do not believe any additional regulations are needed at 
this time, because we have a complaint and adjudication 
process, but I do believe that the Commission has the 
responsibility to enforce the principles that it has already 
adopted. Indeed, on several occasions, the entire Commission 
has reiterated that it has the authority and will enforce these 
current principles.
    For example, in 2006, when I appeared before this 
committee, then-Chairman Stevens asked me whether the 
Commission had the existing authority to take action if a 
problem developed, and I responded that the Commission had 
authority, under Title I, to enforce consumers' unfettered 
access to the Internet when, one year ago, the Commission 
committed to enforcing our existing principles--specifically, 
the Commission stated that, quote, ''The Commission, under 
Title I, of the Communications Act, has the ability to adopt 
and enforce the net neutrality principles it announced in the 
Internet policy statement.`` In fact, we have already taken 
enforcement action in response to other complaints. In the 
Madison River complaint, the Commission ordered a telephone 
company to stop blocking Voice-over-IP calls.
    The Commission should address issues of appropriate network 
management using a consistent framework. There are several 
factors that I believe the Commission should consider:
    First, the Commission should consider whether the network 
management practices are intended to distinguish between legal 
and illegal activity. The Commission's network principles only 
recognize and protect a user's access to legal content. The 
sharing of illegal content, such as child pornography or 
pirated material, is not protected. Similarly, applications 
that are intended to harm the network are not protected.
    Second, the Commission should consider whether the network 
service provider has adequately disclosed its network 
management practices. A hallmark of whether something is 
reasonable is whether an operator is willing to precisely and 
fully disclose what it is they are doing. Application designers 
need to understand what will and will not work on a particular 
network, and consumers must be fully informed about the exact 
nature of the service they are purchasing, and any potential 
limitations on that service. For example, has the consumer been 
informed that certain applications used to watch video will not 
work properly when there is high congestion?
    Additionally, consumers need to be assured that the 
broadband network operators are able to deliver the speeds of 
service that they are purchasing, and that if Internet access 
is sold as an unlimited service, do consumers understand that 
if they use too much of it, they can still be cutoff?
    Now, finally, I believe the Commission should consider 
whether the network management technique arbitrarily blocks or 
degrades a particular application. Is the network management 
practice selectively identifying particular applications or 
content for differential treatment? If so, I believe we should 
evaluate these practices with heightened scrutiny. The network 
operators should bear the burden of demonstrating that the 
practice furthers an important interest and is narrowly 
tailored to serve that interest. Such an approach would not 
mean that any action taken against a particular application 
would automatically be a violation. Rather, it would trigger a 
more searching review of both the particular concern and 
whether the network management solution was tailored to resolve 
that concern in as narrow a manner as possible. Such practices 
should not be overly broad in their application so that they 
become over- or under-inclusive. For example, if the concern is 
about stopping illegal content, a network provider should not 
block a particular application to all users if that application 
transmits both legal and illegal content. Rather, it should 
filter all of the illegal content and permit the flow of 
material that is legal.
    An analysis considering the factors I've identified would 
recognize the importance of legitimate network management 
techniques while providing a framework to analyze whether 
carriers' actions are reasonable on a case-by-case basis.
    Now, consumers have recently alleged that certain 
operators--and specifically, Comcast--are blocking and/or 
degrading consumers' access to the Internet by targeting 
specific peer-to-peer applications. The Commission is still 
investigating these complaints, and we have not yet determined 
whether the actions violated our principles protecting consumer 
access to the Internet. At our hearings in Boston and Stanford, 
we heard from several engineers and technical experts. 
According to the testimony at those hearings, Comcast appears 
to have utilized Internet equipment that blocks certain 
attempts by subscribers to upload information using particular 
legal peer-to-peer applications by pretending to be the 
subscriber's computer and falsifying a reset packet to end that 
communication. It also degrades the corresponding attempts to 
download information using the same peer-to-peer applications. 
Specifically, based on the testimony we have received thus far, 
some users were not able to upload any content that they 
wanted.
    It does not appear that this technique was used only to 
occasionally delay traffic at particular nodes suffering from 
network congestion at that time. Indeed, based on the testimony 
we have received thus far, this equipment was typically 
deployed over a wider geographic area or system, and it is not 
even capable of knowing when an individual cable segment of the 
network is congested. This equipment blocks uploads of a 
significant portion of subscribers in that part of the network, 
regardless of the actual levels of congestion at that 
particular time.
    Now, as the Commission continues its examination of the 
complaints before it, it's critically important to make sure 
that we are fully informed, and we need to fully understand 
what impact the operators' actions are having on consumers' 
broadband experience so that we may better evaluate the 
reasonableness of any network management practice.
    Thank you, again, for the opportunity to be here, and I 
look forward to answering any questions that you might have.
    [The prepared statement of Mr. Martin follows:]

         Prepared Statement of Hon. Kevin J. Martin, Chairman, 
                   Federal Communications Commission
    Good morning, Chairman Inouye, Vice Chairman Stevens, and members 
of the Committee. Thank you for inviting me here today to provide my 
thoughts on the future of the Internet and the Commission's current 
role on some of the issues being discussed today.
    Over the past decade, the Internet has had a powerful impact on the 
economy and on the lives of American citizens. We have witnessed the 
fruits of increased innovation, entrepreneurship, and competition that 
this technology has helped deliver. As policymakers, any rules of the 
road in this area must maintain an open and dynamic Internet that will 
allow it to continue to be an engine of productivity and innovation 
that benefits all Americans.
I. FCC Principles Protecting Consumer Access to the Internet
    The Commission has a duty to preserve and promote the vibrant and 
open character of the Internet as the telecommunications marketplace 
enters the broadband age. In 2005, the Commission adopted an Internet 
Policy Statement containing four principles. The Commission's goal was 
to clarify how it would evaluate broadband Internet practices on a 
going forward basis.
    Specifically, the Commission established the following principles:
    To encourage broadband deployment and preserve and promote the open 
and interconnected nature of the public Internet,

   Consumers are entitled to access the lawful Internet content 
        of their choice;

   Consumers are entitled to run applications and use services 
        of their choice, subject to the needs of law enforcement;

   Consumers are entitled to connect their choice of legal 
        devices that do not harm the network;

   Consumers are entitled to competition among network 
        providers, application and service providers, and content 
        providers.

    The Commission explicitly noted that these principles were subject 
to reasonable network management.
    The Commission was seeking to protect consumers' access to the 
lawful online content of their choice. The intent of these principles 
was to foster the creation, adoption and use of broadband Internet 
content, applications, and services, and to ensure that consumers 
benefit from that innovation.
II. FCC's Role in Protecting Consumers and Enforcing Our Principles
    As the expert communications agency, it was appropriate for the 
Commission to adopt, and it is the Commission's role to enforce, this 
Internet Policy Statement.
    In fact, the Supreme Court in its Brand X decision specifically 
recognized the Commission's ancillary authority to impose regulations 
as necessary to protect broadband Internet access.
    I do not believe any additional regulations are needed at this 
time. But I also believe that the Commission has a responsibility to 
enforce the principles that it has already adopted. Indeed, on several 
occasions, the entire Commission has reiterated that it has the 
authority and will enforce these current principles.
    For example, in 2006 when I appeared before this Committee, then 
Chairman Stevens asked me whether the Commission had the existing 
authority to take action if a problem developed. And I responded that 
the Commission had authority under Title I to enforce consumers' access 
to the Internet.
    Moreover, almost exactly 1 year ago, the Republican Majority of the 
Commission, with the Democrat Commissioners concurring, committed to 
enforcing our existing principles and the policy statement. 
Specifically, in April 2007, the Commission expressly stated:

        The Commission, under Title I of the Communications Act, has 
        the ability to adopt and enforce the net neutrality principles 
        it announced in the Internet Policy Statement. The Supreme 
        Court reaffirmed that the Commission ``has jurisdiction to 
        impose additional regulatory obligations under its Title I 
        ancillary jurisdiction to regulate interstate and foreign 
        communications.'' Indeed, the Supreme Court specifically 
        recognized the Commission's ancillary jurisdiction to impose 
        regulatory obligations on broadband Internet access 
        providers.\1\
---------------------------------------------------------------------------
    \1\ Broadband Industry Practices, WC Docket No. 07-52, Notice of 
Inquiry, 22 FCC Rcd 7894, 7896, para. 4 (2007) (internal footnotes 
omitted).

    Finally, the Commission has already taken enforcement action in 
response to other complaints. In the Madison River complaint, the 
Commission ordered a telephone company to stop blocking VoIP calls.
    Contrary to some public claims about Commission's approach 
generally, for the Commission to take enforcement action against a 
telephone company for blocking and degrading a particular application 
but refuse to pursue enforcement action against a cable company 
blocking or degrading a particular application would unfairly favor the 
cable industry.
    I believe that the Commission must remain vigilant in protecting 
consumers' access to content on the Internet Thus, it is critically 
important that the Commission take seriously and respond to complaints 
that are filed about arbitrary limits on broadband access and potential 
violations of our principles. Indeed, I have publicly stated that the 
Commission stands ready to enforce this policy statement and protect 
consumers' access to the Internet.
III. Framework for Evaluating Reasonable Network Management 
        Complaints
    The Commission should address issues of appropriate network 
management using a consistent framework. There are several factors that 
I believe the Commission should use when analyzing complaints and 
concerns about network management practices by broadband operators.
    First, the Commission should consider whether the network 
management practices are intended to distinguish between legal and 
illegal activity. The Commission's network principles only recognize 
and protect user's access to legal content. The sharing of illegal 
content, such as child pornography or content that does not have the 
appropriate copyright, is not protected by our principles. Similarly, 
applications that are intended to harm the network are not protected.
    Second, the Commission should consider whether the network service 
provider adequately disclosed its network management practices. A 
hallmark of whether something is reasonable is whether an operator is 
willing to disclose fully and exactly what they are doing.
    Adequate disclosure of the particular traffic management tools and 
techniques--not only to consumers but also to the designers of various 
applications and entrepreneurs--is critical.
    Application designers need to understand what will and will not 
work on a particular network. For example, does an application 
developer know that the operator may actually insert reset packets 
during a session masking the network operator's identity?
    Consumers must be fully informed about the exact nature of the 
service they are purchasing and any potential limitations associated 
with that service. For example, has the consumer been informed that 
certain applications used to watch video will not work properly when 
there is high congestion?
    Particularly as broadband providers begin providing more complex 
tiers of service, it's critical to make sure that consumers understand 
whether broadband network operators are able to deliver the speeds of 
service that they are selling. For example, if Internet access is sold 
as an unlimited service, do consumers understand that if they use too 
much of it they can still be cutoff?
    Finally, the Commission should consider whether the network 
management technique arbitrarily blocks or degrades a particular 
application. Is the network management practice selectively identifying 
particular applications or content for differential treatment? If so, I 
believe that we should evaluate the practices with heightened scrutiny, 
with the network operator bearing the burden of demonstrating that the 
particular practice furthered an important interest, and that it was 
narrowly tailored to serve that interest.
    Such an approach would not mean that any action taken against a 
particular application would automatically be a violation. Rather, it 
would trigger a more searching review of both the particular concern 
and whether that network management solution was tailored to resolve 
the particular harm identified to the network in as narrow a manner as 
possible.
    In a manner similar to the way in which restrictions on speech are 
analyzed, network management solutions would need to further a 
compelling or at least an important/legitimate interest and would need 
to be tailored to fit the exact interest. Such practices should not be 
overly broad in their application so that they become over or under 
inclusive. For example, if the concern is about stopping certain 
illegal content, a network provider should not block a particular 
application to all users if that application transmits both legal and 
illegal content.
    Such an analysis would recognize the importance of legitimate 
network management techniques while giving the Commission the framework 
to analyze carriers actions on a case-by-case basis. As we move into an 
era in which network operators are taking particularized actions 
against individual applications and content, the Commission should 
evaluate such practices under sufficient scrutiny to ensure that 
whatever actions the operators are taking are actually furthering a 
legitimate purpose and are narrowly tailored to serving that legitimate 
purpose.
IV. Pending Comcast Complaint
    Consumers have alleged that certain operators, and specifically 
Comcast, are blocking and/or degrading consumers' access to the 
Internet by distinguishing between applications.
    The Commission has heard from several engineers and technical 
experts who have raised questions regarding the network management 
techniques used by Comcast for peer-to-peer traffic.
    The Commission is still investigating these complaints and we have 
not yet determined whether the actions violated our principles 
protecting consumer access to the Internet. However, Comcast appears to 
have utilized Internet equipment from Sandvine or something similar 
that is widely known to be a relatively inexpensive, blunt means to 
reduce peer-to-peer traffic by blocking certain traffic completely. In 
contrast, more modern equipment can be finely tuned to slow traffic to 
certain speeds based on various levels of congestion.
    Specifically, this equipment: (1) blocks certain attempts by 
subscribers to upload information using particular legal peer-to-peer 
applications by pretending to be the subscriber's computer and 
falsifying a ``reset'' packet to end the communication, and (2) 
degrades the corresponding attempts to download information using the 
same peer-to-peer applications.
    Based on the testimony we have received thus far, I think it is 
important to clarify a few points.
    Contrary to some claims, it does not appear that cable modem 
subscribers had the ability to do anything they wanted on the Internet. 
Specifically, based on the testimony we have received thus far, some 
users were not able to upload anything they wanted and were unable to 
fully use certain file sharing software from peer-to-peer networks.
    Contrary to some claims, it does not appear this network management 
technique is ``content agnostic.'' Indeed, Comcast has publicly stated 
that it will migrate to a ``protocol'' (content) agnostic approach to 
traffic management in the future, and thus conceded that the techniques 
currently in use are not ``content agnostic.''
    Contrary to some claims, it does not appear that this technique was 
used only to occasionally delay traffic at particular nodes suffering 
from network congestion at that time. Indeed, based on the testimony we 
have received thus far, this equipment is typically deployed over a 
wider geographic or system area and would therefore have impacted 
numerous nodes within a system simultaneously. Moreover, the equipment 
apparently used does not appear to have the ability to know when an 
individual cable segment is congested. It appears that this equipment 
blocks the uploads of at least a large portion of subscribers in that 
part of the network, regardless of the actual levels of congestion at 
that particular time.
    Finally, contrary to some claims, it is not clear when they will 
actually stop using their current approach. They claim that they will 
deploy this new solution by the end of the year but it is unclear 
whether they will be finished deploying their solution or just starting 
that migration. Indeed the question is not when they will begin using a 
new approach but if and when they are committing to stop using the old 
one.
V. Next Steps
    As the Commission continues its investigation into the complaints 
before it, the most important and first step that we can take in 
fulfilling our responsibility is to make sure that we are fully 
informed. At the very least, we need to obtain greater information to 
more fully understand what is happening and what impact operators' 
actions are having so that we may better evaluate the reasonableness of 
any network management practices at issue.

    The Chairman. Thank you very much.
    Chairman Martin, you've just testified that you believe the 
FCC has sufficient enforcement authority to resolve network 
neutrality issues. Now, if you proceed to use this authority, I 
suppose you would expect subsequent litigation challenging your 
ability to act in this area. If your answer is yes, do you 
believe that additional authority from the Congress is 
necessary, or is there sufficient authority at the present 
time?
    Mr. Martin. I think that the Commission has sufficient 
authority. I did ask several witnesses at the hearing in 
Cambridge, at Harvard, about whether they thought we had the 
authority. Some of the carriers testified that they did. 
Verizon responded that they thought we did have the authority. 
Comcast said they wanted to get back to us, and they've 
subsequently filed a letter saying they do not believe we have 
the authority.
    I believe we do have the sufficient authority to do that, 
but I believe you are right, that there may be subsequent 
litigation by some of the carriers as a result. At least that's 
what they seem to indicate in their most recent response to me.
    The Chairman. Senator Stevens?
    Senator Stevens. Mr. Chairman, I have a conflict, and I 
would hope that I'd be able to submit my questions for the 
record for all the witnesses.
    Thank you.
    The Chairman. Without objection.
    Senator Dorgan?
    Senator Dorgan. Mr. Chairman, thank you very much.
    Before Senator Stevens leaves--he indicated that 
nondiscrimination rules represented intensive regulation. The 
Internet was created----
    Senator Stevens. I said it would lead to intensive 
regulation. It would lead to----
    Senator Dorgan. Right, the restoration. But, my point was, 
we're restoring----
    Senator Stevens. It would lead to intensive----
    Senator Dorgan.--we are restoring that which previously 
existed. My question is the nondiscrimination requirements with 
respect to service, that preceded your determination by the 
FCC, that ``information services shall not be subject to the 
nondiscrimination rule,'' did that nondiscrimination 
requirement represent intensive regulation, in your judgment, 
as the Internet was created and developed and flowered?
    Mr. Martin. I'm not sure that nondiscrimination represented 
intensive requirements. I believe that some of the common-
carrier regulations that went beyond that, that were attached 
to that telecommunications service category, might----
    Senator Dorgan. Right, but I'm talking now about the 
nondiscrimination rules----
    Mr. Martin. No, I don't think it means that it leads to an 
intensive requirement. I would say that I would be cautious 
about a pure nondiscrimination requirement, because there are 
positive attributes of discrimination; for example, in saying 
that voice packets might be preferable because of the need for 
that being able to be delivered on a timely basis----
    Senator Dorgan. I understand that.
    Mr. Martin.--over other kinds of data.
    Senator Dorgan. No, I understand that. And I understand the 
issue that you've raised about the management of the system and 
various things. I think Senator Snowe and I and others, like 
Senator Kerry, who have tried to advance this legislation 
understand the need to be able to manage the system, but, my 
point is we've heard a lot this morning about--that this is re-
regulation and potentially intensive regulation. My point, very 
simply, is that to restore that which previously existed in the 
earlier formation of the Internet--it was not intensive 
regulation, it simply said that, over the entire range of these 
services, the nondiscrimination rules would apply.
    Now, I'd like to ask you--first of all, as you have 
indicated, Comcast has filed a decision they have made that--or 
at least their interpretation--that you do not have the 
authority on the matter that is before you with respect to 
Comcast. Isn't that correct?
    Mr. Martin. That's correct.
    Senator Dorgan. So, at this point, a very large provider, 
who, with a lot of legal resources, says you don't have 
authority--well, let me ask you, Do you believe that you need 
this authority? You believe you have it. I assume you believe 
you have it, and you believe you need it, correct?
    Mr. Martin. That's correct. I think----
    Senator Dorgan. So----
    Mr. Martin. I think it's important that we have that.
    Senator Dorgan. So, what if a court says they agree with 
Comcast and you don't have it? You will come to us and ask that 
we restore that capability?
    Mr. Martin. Obviously, I think it is important that we have 
the ability to ensure that consumers have unfettered access to 
the Internet, and if a court said that we did not have that 
authority, I think someone needs to be ensuring----
    Senator Dorgan. So, would giving you that authority be 
regulating, as some of my colleagues have suggested--re-
regulating----
    Mr. Martin. I don't----
    Senator Dorgan.--intensive regulation?
    Mr. Martin. I don't believe that just merely providing us 
the authority, without requirements that we do anything with 
it, particularly adopting rules, would be re-regulating. No, 
sir.
    Senator Dorgan. Now, let me talk about a network service 
provider--the Commission should consider whether the network 
service provider adequately disclosed its network management 
practices. I distinguish on ``management practices,'' as I 
understand that, that they may have a whole class of services 
that they have to manage in a certain way--voice versus data, 
and so on. But, let's say that a network service provider 
disclosed to me, as a consumer--and I'm living in a part of the 
country where I have probably one or two opportunities to get 
my broadband, so very little competition, which is the case in 
most parts of this country, I might say--and the network 
service provider came to me and said, ``Well, here's the way we 
do business. You can get to most of the Internet pretty well, 
but I'm a provider that has said to the largest content sites 
out there, `You've got to pay me a little bit in order to be 
delivered to the homes that I service,' so you should just know 
that I've got a little toll that I apply to certain areas.'' 
Would that adequately disclose, to consumers, practices that 
you would think are fine?
    Mr. Martin. I think that it's important that there be 
adequate disclosure. Adequate disclosure doesn't make the 
practice fine; we'd still have to evaluate whether or not it 
was a reasonable practice. But, I certainly think that failing 
to disclose it is an unreasonable practice. And I think that's 
the way I would describe it. So, in your hypothetical, if a 
carrier was not disclosing to consumers that they were 
preventing you from going to a Website unless that Website paid 
them, I think that that would be a problem. However, if they 
disclosed it, we would have to analyze the exact facts of what 
they were doing to determine whether it was a reasonable 
action.
    Senator Dorgan. But, Chairman Martin, you believe you need 
the authority to take action in these cases. I'm trying to 
understand what kind of provocations would incite you to 
action. But----
    Mr. Martin. Well----
    Senator Dorgan.--let me, just for a moment, and then I'm 
going to ask you to answer----
    I want to describe, Mr. Chairman, why I think this is 
important. And I want to do it--I'll use a big content 
provider, Google. OK? Google's a behemoth out there, right? 
Didn't used to be. And my understanding is, in I believe it was 
1998, Larry and Sergei, two guys that were in a dorm room, 
moved to a garage that had a garage-door opener, because it was 
such an exciting thing. They had eight employees, or whatever 
it was, and they moved to a garage with a garage-door opener. 
Ten years later, that company is larger than General Motors, 
Ford Motors, and Coca Cola, combined, in market valuation. Now, 
that's pretty unbelievable.
    The question is this. When Whitacre or somebody says, ``You 
know, I want to start charging a company that big for the 
pipes,'' well, you start charging for pipes and charging 
content providers and so on. Are there other kids in a college 
dorm room out there that have another new idea that will never 
have access to the rest of this country if we've got content 
providers that say, ``I'm at the end of the funnel, and I'm, by 
God, going to decide who gets through and who doesn't get 
through, based on how much money I get, who gets put in a bus 
lane, who gets put in a fast lane,'' just describing the 
determination of how they want to treat content. My question is 
whether this doesn't inevitably defeat the opportunity--
unfettered opportunity for innovation in this country. And 
again, I will say, those who have argued so vociferously this 
morning against the Internet Freedom Act are saying, ``We don't 
like the issue of nondiscrimination.'' By virtue of their 
argument, they must be standing up for discrimination. If so, 
what kind? What will that mean? How will that change the 
Internet?
    So, I'm trying to--first of all, I appreciate your being 
here, and I appreciate your testimony. I believe what you are 
saying is that you believe you need authority to take action in 
these areas. And I'm just telling you, one of the biggest 
content providers says, ``You don't have that authority.'' So, 
shouldn't you ask us to do something to get that authority, in 
the event that this is unclear and you spend the next 3 or 4 
years in court?
    Mr. Martin. Well, as I said, I believe we do need the 
authority. I think that we do have the authority to do it. I 
think the courts have said that. But, I certainly agree with 
you, we need the authority. I think you asked me to give you 
some sense of what actions I think would be unreasonable, and I 
certainly think if a network operator was saying that every 
time you type in ``Google''--you wanted to go to Google, they 
were redirecting you to Yahoo!, because Yahoo! was paying them 
and Google wasn't, I think that would be a problem. And I think 
that would be a problem whether they disclosed it or not. 
Merely telling consumers that they were doing that would not 
turn it into a reasonable practice. So, that's the kind of 
action I think we would need the authority to take action 
against.
    Senator Dorgan. Mr. Chairman, I've taken longer than I 
should, but I have one final point. The issue of discrimination 
is a very important provision here. A provider, in my judgment, 
could decide to deliver voice packets faster for a certain 
reason, based on prioritization, in order to manage their 
network, and that would not be discrimination. They can do that 
without being discriminatory. But, a provider that decides, as 
the fellow from--I was reading, this morning, about the fellow 
from England who's setting up a company, Virgin something or 
another, saying, ``You know, I'm''--I don't think I have the 
quote here, but he's essentially saying, ``Look, I have every 
right to be charging the content folks out there.'' I know 
that's another country, but it's exactly the same principle of 
why we're trying to determine how we might legislate, here, to 
restore that which always existed in the creation of the 
Internet: nondiscrimination rules.
    I find it unbelievable that this is controversial. Who on 
earth is standing up for discrimination? I mean, it's just 
unbelievable to suggest that this is some sort of intensive 
regulation. It is not. It is a restoration of something that 
has great common sense. Open architecture of the Internet, open 
innovation, and nondiscrimination rules that always existed 
prior to the FCC taking action identifying it as an information 
service. Let's finally do the right thing.
    And, Mr. Chairman, I've taken more than my time. I 
appreciate it.
    The Chairman. Senator Kerry?
    Senator Kerry. Thank you, Mr. Chairman.
    Let me pick up, a little bit, if I may, Chairman Martin, on 
some of this line of questioning.
    First of all, it seems to me obvious, on the face of it, 
that, as an administrative agency, if there is a lack of 
clarity as to whether or not you have authority, and you are 
already on notice by a major player in this sector that they 
believe you don't, you're looking at a lawsuit.
    Mr. Martin. I think that's right. That carrier has said 
that they do not want us to take action, and that we don't have 
the authority to do it, and it's in a complaint that's in front 
of us today.
    Senator Kerry. And isn't it standard procedure within the 
legislative process that if there is a lack of clarity as to 
something within a federally constituted agency, that it is up 
to the Congress to--if it has an intent it wants to have 
enforced, to clarify what that intent is?
    Or to state the intent, ab initio, that--from the 
beginning.
    Mr. Martin. Sure. Absolutely. I think part of the reason--
--
    Senator Kerry. Well, don't just gloss over that. You say, 
``Sure. Absolutely.'' I mean, that's a very fundamental point.
    Mr. Martin. No, I think it is, but I also think Congress 
has given us that authority. And I guess I'm not as deterred, 
potentially, by the lawsuit. Almost every action the Commission 
takes, we get taken to court, where someone challenges our 
authority.
    Senator Kerry. Well, here are the differences----
    Mr. Martin. That's the reason why I'm probably not as 
hesitant, in that sense.
    Senator Kerry. Well, you see, I think what's happened is, 
there's a lot, obviously, that's in a gray area here, that, in 
effect, the Internet policy statement has four fundamental 
principles, which I think are good principles. I'm not arguing 
with them. In fact, they are encompassed within the 
legislation. But, let me give you, sort of, a side-by-side on 
them. Your principles that you keep referring to in the 
Internet policy statement are, ``To encourage broadband 
deployment, preserve and promote the open interconnected nature 
of the public Internet, consumers are entitled to access the 
lawful Internet content of their choice.'' So, you have ``a 
content of their choice.'' Now, that's--they're entitled to it. 
There's not a lot of clarity in that.
    In our legislation, we say, ``With respect to any broadband 
service offered to the public, each broadband service provider 
shall''--required--``not block, interfere with, discriminate 
against, impair, or degrade the ability of any person to use a 
broadband service to access, use, send, post, receive, or offer 
any lawful content, application, or service made available via 
the Internet.'' Do you have any disagreement with that?
    Mr. Martin. I think that the only hesitation I have is 
that, when you say they're not allowed to discriminate, as I 
said, there are some good techniques, for example, favoring 
voice packets over data packets to make sure that the voice 
communications can occur in a realtime basis. I think that one 
of the things that I've talked about in the past, that would 
concern me is if it were an explicit requirement that had no 
flexibility to it.
    Senator Kerry. And you view that as discrimination. But, if 
you were to take out the word ``discriminate'' or further 
describe the word ``discriminate'' adequately, do you have any 
objection to that fundamental objective of that word?
    Mr. Martin. No, I think it's very similar to our 
fundamental objective.
    Senator Kerry. All right.
    The second one you have is that--``Encourage broadband 
deployment, preserve, promote the open interconnected nature of 
the public Internet. Consumers are entitled to run applications 
and use services of their choice, subject to the needs of law 
enforcement.'' We all agree with that.
    Here's paragraph 2 of the bill, ``Shall not prevent or 
obstruct a user from attaching or using any device to the 
network of such broadband service provider only if such device 
does not physically damage or substantially degrade the use of 
such network by other subscribers.'' Do you have an objection 
to that?
    Mr. Martin. Again, I think it's very similar to what we 
adopted.
    Senator Kerry. So do I. But, it's a law.
    Mr. Martin. Yes.
    Senator Kerry. Third, ``To encourage broadband deployment, 
preserve and promote the interconnected nature of public 
Internet, consumers are entitled to connect their choice of 
legal devices that do not harm the network.'' That's part of 
what we just read. That's number three of yours, correct?
    Mr. Martin. That's correct.
    Senator Kerry. Do you agree with that in the same 
paragraph?
    Mr. Martin. Of course.
    Senator Kerry. Fourth--and these are the only ones you 
have--fourth, ``Internet consumers are entitled to competition 
among network providers, application and service providers, and 
content providers.'' So, you want competition in the field. So 
do we.
    We say, ``Enable any content, application, or service made 
available via the Internet to be offered, provided, or posted 
on a basis that is reasonable and nondiscriminatory, including 
with respect to quality of service, access, speed, and 
bandwidth; be as at least equivalent to the access speed, 
quality of service, and bandwidth that such broadband service 
provider offers to affiliated content''--in other words, we 
want fair competition--``applications, or services made 
available via the public Internet; and (c) does not impose a 
charge on the basis of the type of content, applications, or 
services made available via the Internet into the network of 
such broadband service provider.'' In other words, that's real 
neutrality; we're not going to have a content that starts 
playing games with people's, you know, type of content or the 
application, because that does become discriminatory.
    Now, do you disagree with any of those?
    Mr. Martin. Again, it had some of the nondiscriminatory 
language, and I think that I'd have some of the same concerns I 
had before.
    Senator Kerry. Well, let's presume that we could sharpen 
this word ``discriminatory''----
    Mr. Martin. Right.
    Senator Kerry.--so that we understand exactly what we're 
trying to prevent, and we don't become inadvertently--the law 
of unintended consequences--we don't create something that, in 
fact, is beneficial to the system, where you're actually making 
a choice between something that everybody would agree, in terms 
of the provision of service, is positive. It's hard to see how 
that would happen and have a free market and be letting the 
market decide, but assume we tried to do that. Would you have 
an objection with the fundamental direction of that?
    Mr. Martin. I don't have an objection to the fundamental 
direction.
    Senator Kerry. So----
    Mr. Martin. I have one question about the--part (c), I 
think you said, where they weren't----
    Senator Kerry. Yes.
    Mr. Martin.--allowed to charge anything. I'm not sure I 
understood the full implications of that. There are providers 
today, not even the network providers, but some people who host 
servers on the edges of the network, for example, to try to 
increase the speeds for consumers downloading information from 
those servers. And I don't think I'd want to limit network 
operators', for example, ability to provide that same 
commercial service that is being provided by others today.
    Senator Kerry. We wouldn't want to do that. I would agree 
with that. But, we also don't want to have a situation where a 
network provider is creating tiers and actually, you know, 
preventing people from getting access under certain----
    Mr. Martin. Oh, as I said to Senator Dorgan before, I 
agree. I don't think they should be able to say to a Google, 
``Unless you pay me, I'm going to redirect your traffic to 
Yahoo!'' I think that's right.
    Senator Kerry. Well, it seems to me that we ought to be 
able to skin this cat; I mean, we ought to be able to find a 
way to deal with this one concept, that reasonable people ought 
to be able to find a way to protect the public interest here 
and to provide you with sufficient clarity as to what the 
congressional intent is and what is expected, so that everybody 
knows what rules we're playing by.
    Right now, if I were in the business, I would be tempted to 
want to sue you, because there is a discretionary gray area, 
there's a complete lack of clarity as to why you might be 
deciding what you're deciding, what you're basing it on. And in 
the absence of the clarity of that congressional intent, I 
think we're inviting delay.
    To speak to, I think, Senator Ensign, when I was out of 
here, mentioned that I had mentioned that the company corrected 
it. Yes, they did. But, you want to not have a situation where 
you have to find an advocacy group that calls it to our 
attention and screams about the unfairness, and months go by, 
and, after a while, you correct it. It would be better for 
everybody, wouldn't it, if you had that established and clear 
and everybody knows where the money is going to flow, how the 
capital is going to be repaid? There's a kind of certainty in 
the marketplace that comes from that, isn't there?
    Mr. Martin. Oh, I agree that certainty about our ability to 
enforce this is only positive. As I said, I think the 
Commission has been clear that we will be enforcing our current 
principles, which are fundamentally in the same direction. As 
you said, I think there are some issues that reasonable people 
would continue to work on, but that even with some differences, 
fundamentally they're in the same direction.
    I think the Commission has tried to provide the clarity 
that we will enforce it, but I don't disagree that making sure 
that the Commission has the authority is not, in and of itself 
wrong; there's nothing wrong with that. It's something the 
Commission has already said that we intend to be doing.
    Senator Kerry. Well, I congratulate you on that. I think 
the basic principles you've laid out--I think they're 
incomplete, and I don't think they allow you to go the distance 
here or to provide the marketplace the clarity it needs and 
deserves. But, I do think it's moving in the right direction, 
and I certainly applaud you for holding those principles.
    I'd like to see us, Mr. Chairman, hopefully, provide that 
clarity and that certainty to the marketplace.
    I think we ought to try to find a way to work with you--and 
I'm sure you're willing to work with us--to, maybe, you know, 
work on how we define that discriminatory concept a little bit 
more.
    Mr. Martin. Thank you.
    Senator Kerry. Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Pryor?
    Senator Pryor. Thank you, Mr. Chairman.
    Chairman Martin, let me ask--you mentioned, in your 
statement, the Madison River Communications case. And as I 
understand it, you have at least a couple of other matters that 
have come before you, and, I guess, are pending now. One is 
Comcast, where they were delaying some messages; I'm not quite 
sure of all the details on that. And Verizon apparently--
currently has matters pending before your Commission. How is 
that working? Right now, we're--you're doing this on a case-by-
case basis. How is that working?
    Mr. Martin. Well, as I said, we've adopted the principles 
that I was just going through with Senator Kerry, and I believe 
that we're enforcing those through an adjudication process. I 
think that is how we would probably enforce, any kind of 
similar principles. And I think that it, thus far, is working 
fine. The Commission has acted in the past, as I testified to, 
in the context of stopping a telecommunications carrier from 
limiting the consumer's access to a Voice-over-IP service. I 
think that we have, as you said, two complaints with us now, 
that I think the Commission will take action on, as well.
    Senator Pryor. Because there's no statute on this issue, 
are you seeing companies trying to test the water and figure 
out what the boundaries are?
    Mr. Martin. You know, we weren't. And, indeed, when the 
Supreme Court upheld our information service classification, 
they explicitly stated that they believe we had authority under 
Title I of the statute, so we had statutory authority to adopt 
any rules we would deem necessary to adequately protect 
consumers' broadband access rights. So, I believe we do have 
that statutory authority.
    Up until the hearing at Harvard, and Comcast's subsequent 
letter, I don't believe there had been anyone who had asserted 
that we did not have that authority.
    Senator Pryor. OK. And you mentioned, you know, Madison 
River and Comcast and Verizon. Are you confident that those are 
the only three companies out there that are trying to restrict 
content in some way?
    Mr. Martin. Those are the only ones that have been brought 
to our attention. I believe Vuze released a press release 
yesterday saying that they thought that the equipment that was 
being used to block applications to peer-to-peer by Comcast was 
also more prevalent in the network. There was an analysis done 
of domestic networks and of networks abroad. So, that 
particular practice may be more prevalent. We don't have any 
specific facts or allegations against another company.
    Senator Pryor. Now, when BellSouth and AT&T merged--I 
guess, last year; I don't remember exactly when that was, the 
Commission required them to do a--what--a 2-year, I guess you 
say, moratorium, or a 2-year requirement on certain business 
practices. Is that company--is AT&T behaving differently than 
the rest of the market right now?
    Mr. Martin. Well, there are no allegations against them 
right now, so we're not aware of anything that they are doing, 
and there aren't any allegations that they were, for example, 
interfering with peer-to-peer content or blocking the uploading 
ability of individuals using peer-to-peer, or degrading the 
ability for someone to download using peer-to-peer.
    Senator Pryor. Let me ask about investment out there. 
Because I have a lot of rural areas in my State, as do many of 
the Senators here today, you know, I know that investment--the 
money tends to go where the people are, where the business is. 
And, you know, one of the concerns I have is that the 
investment in rural broadband will not flow in such a way that 
rural broadband will really have equal access to more urban 
areas in this country. Do you share that concern?
    Mr. Martin. Oh, sure. I think it's a significant challenge 
to make sure that we have policies in place that are trying to 
ensure that, ultimately, people who live in rural areas don't 
get left behind those that live in urban areas. And I think 
that that actually was embodied in Congress's enactment of the 
universal service provisions of the Telecom Act, where they 
said that people there should be entitled to advanced services, 
ultimately similar to what's provided in urban areas.
    Senator Pryor. Are there policies that you need to change, 
or that the Congress needs to change, relating to broadband 
that would allow more investment to flow out to rural America?
    Mr. Martin. We've tried to change some policies. We 
actually recently adopted provisions for gathering more 
information to establish the current floor of what people have, 
very similar to Chairman Inouye's bill, to try to gather more 
information. We actually also adopted rules recently to change 
the definition of basic broadband to increase the speed for it. 
That was something that I voted for, along with the two 
Democratic commissioners, to increase the speed of what 
constitutes basic broadband. I think that those are important 
to evaluate where we actually are. Another policy change that I 
think that we need, and have supported in the past, is 
legislation that would, for example, remove some of the 
franchising limitations that may have stifled the carrier's 
ability to invest in networks to be able to provide a 
competitive video alternative. Bidding on video services is an 
important component of that infrastructure investment, and I 
think that's an important policy change that I've supported in 
the past, that I think that Congress could end up doing.
    Senator Pryor. That's all I have, Mr. Chairman. Thank you.
    The Chairman. Thank you very much.
    Senator Smith?
    Senator Smith. Thank you, Mr. Chairman.
    And, Chairman Martin, thank you for being here. I--as I 
listen to our--my colleagues and our questions to you, it seems 
like it's--it could easily be framed as those who are for 
discrimination, those who are against discrimination. I don't 
really see it that way. What I see it as is that we're all pro-
deployment of more broadband to urban and rural areas. And as I 
contemplate how to best encourage deployment, not just to urban 
areas, but to rural areas, as well, I can't think of anything 
that would be more discouraging to investment in rural 
broadband deployment than if we take a regulatory approach 
right up front. My own judgment is that if you can pursue the 
adjudicatory approach swiftly as these cases arise, then we 
will do--we will provide the market certainty that Senator 
Kerry is talking about. That's the objective, as I see it; not 
whether you're for or against discrimination. We want the 
Internet to be open.
    Now, I understand that you're holding several investigative 
hearings about some complaints that occasionally do arise. I'm 
not going to ask you particulars on that, but you apparently 
questioned a network operator as to whether the FCC has the 
authority to pursue these investigations, to which, I believe, 
the response was, no, you do not. They later clarified their 
response, that the Powell Principles, what I believe are the 
floor of consumer rights on the Internet, were simply a 
statement of policy and not regulations; hence--and hence, not 
subject to enforcement through, say, injunctions or 
foreclosures. Now, I've read your statement, and I know that 
you disagree with the position articulated at that field 
hearing. My question to you is, Does the FCC have the authority 
to enforce the Powell Principles? Or, put another way, must the 
Powell Principles be codified?
    Mr. Martin. Well, I think that we do have the authority, 
and, indeed, the Commission has expressly stated that. Almost a 
year ago, in April of 2007, the majority of the Commission very 
expressly stated that we have the authority to both adopt and 
enforce the network neutrality principles it announced in the 
Internet policy statement.
    Senator Smith. Have Federal courts affirmed that?
    Mr. Martin. It hasn't come before the courts----
    Senator Smith. Is there litigation heading that way?
    Mr. Martin. Well, I think that the concern that has been 
raised is, as a result of Comcast now claiming that we don't 
have that authority, will that lead to litigation. As I said, 
lots of the actions the Commission takes end up in the courts, 
run through litigation, and we follow whatever the courts end 
up clarifying.
    But, I believe that the Supreme Court, in its Brand X 
decision, very clearly articulated that we had ancillary 
authority, under Title I of the 1996 Telecommunications Act, to 
take these actions.
    Senator Smith. On a separate but related matter, you 
currently have an open proceeding that considers industry 
network management practices. It seems that much of the network 
congestion is derived from massive amounts of illegal print 
pirated material. I surmise from your statement that narrowly 
tailored network management practices designed to protect 
intellectual property is an acceptable practice by network 
operators. Can you be more specific as to what types of network 
management should be allowed to combat trafficking in illegal 
materials?
    Mr. Martin. Well, there have been several carriers who have 
talked about, and been in discussions with, content providers 
about putting on filters that would distinguish between 
material that had the appropriate copyright and those that 
didn't stop pirated content. I think that's fundamentally 
different from a network management practice that focused on a 
particular application, that actually said, ``We're going to 
stop this kind of practice, peer-to-peer practice, or more--
even more particularly, any kind of peer-to-peer using this 
certain technology.'' I think those kinds of practices would be 
both over- and under-inclusive; it would stop some use of that 
technology to distribute legal content, and it wouldn't catch 
other technology that was still distributing illegal content.
    So, if your goal is to stop pirated content, you would need 
to put some kind of filter on that would try to identify that. 
Our Internet principles are only designed to protect the access 
to legal content, and that would be a perfectly reasonable kind 
of network management practice.
    Senator Smith. Thank you, Mr. Chairman.
    The Chairman. Senator Wicker?

                 STATEMENT OF ROGER F. WICKER, 
                 U.S. SENATOR FROM MISSISSIPPI

    Senator Wicker. Mr. Chairman, I will simply submit 
questions for the record and allow you to move on to the next 
panel.
    Thank you.
    The Chairman. Without objection.
    Senator Dorgan?
    Senator Dorgan. Mr. Chairman, I just wanted--as we allow 
Chairman Martin to leave, I wanted to hold up the two pieces, 
because several of us have spoken of this.
    This is--it describes the docket, ``The Internet policy 
statement did not create enforceable rules.'' This, from 
Comcast Corporation to the FCC, number one.
    Number two, again, comments about the FCC's authority, by 
Comcast, at their filing, ``The Commission's statutory 
authority to regulate broadband Internet services is limited. 
The exercise of Title I authority over network management 
practices would also constitute an abrupt departure from the 
Commission's numerous consistent and successful precedents. 
Absent a reasoned explanation for its conduct, such a sharp 
departure from established Commission policy would be arbitrary 
and capricious, in violation of the APA.''
    The reason I wanted to put that up is, you know, the 
allegation is made--and I understand this may or may not be 
right, but at least it creates the question of uncertainty, 
here, about whether your principles are enforceable by you. I 
don't know whether they are or not, but I think most of us 
would believe that, whether the codification of these 
principles or the passage of the Internet Freedom Act, 
something is necessary to make certain that we resolve this. 
This--I mean, you say you have the authority, but you may well 
not have the authority. You may not find that for years. You 
may be litigating for a long period of time.
    Chairman Martin, I appreciate your coming.
    And, Mr. Chairman, thank you for allowing me to describe 
what we had previously discussed.
    Senator Smith. Mr. Chairman, if I may respond, I'd be happy 
to introduce a bill with Senator Dorgan to codify the Powell 
Principles.
    Senator Dorgan. Well, it's short of what we need to do, but 
I--you know, I think we can talk about that in the context of 
an Internet freedom bill and other things.
    The Chairman. Thank you very much, Chairman Martin----
    Mr. Martin. Thank you.
    The Chairman.--appreciate your participation.
    Our next panel, made up of the Vice President of 
Communications, Christian Coalition of America, Ms. Michele 
Combs; the Executive Director of the American Enterprise 
Institute, Center for Regulatory and Market Studies, Dr. Robert 
Hahn; the President of the Writers Guild of America, West, Mr. 
Patric Verrone; Actress, Writer, and Producer, Ms. Justine 
Bateman; the President and CEO, National Cable and 
Telecommunications Association, Mr. Kyle McSlarrow; and 
Professor Lawrence Lessig, of Stanford Law School.
    [Pause.]
    The Chairman. And the Chair recognizes Ms. Michele Combs.
    Ms. Combs, welcome to the Committee.

 STATEMENT OF MICHELE COMBS, VICE PRESIDENT OF COMMUNICATIONS, 
                 CHRISTIAN COALITION OF AMERICA

    Ms. Combs. Good morning, Mr. Chairman and distinguished 
members of the Committee on Commerce, Science, and 
Transportation. My name is Michele Combs, and I am the Vice 
President of Communications for the Christian Coalition of 
America. Thank you for inviting me to testify today.
    Use of the Internet has allowed the Christian Coalition to 
amplify the voices of millions of hardworking pro-family 
Americans in a way that has revolutionized their ability to be 
heard and engaged in political process. Consequently, the 
reason the Christian Coalition supports net neutrality is 
simple. We believe that organizations such as the Christian 
Coalition should be able to continue to use the Internet to 
communicate with our members and a worldwide audience without a 
phone or cable company snooping in our communications and 
deciding whether to allow particular communication to proceed, 
slow it down, block it, or offer to speed it up only if the 
author pays extra to be on the fast lane.
    Unfortunately, in the last 6 months we have seen network 
operators block political speech, block content, and block the 
most popular applications on the Internet. In every instant, 
the network operators have claimed that these actions were for 
network management purposes.
    As you know, in October 2007 the news organization, 
Associated Press, reported that Comcast was blocking consumers' 
ability to download the King James Bible using a BitTorrent 
technology. It has also been pointed out that Comcast's bad 
behavior just so happens to block access to video distribution 
applications that compete with Comcast's own programming. If 
Comcast were to create a Christian family channel, would the 
FCC allow it to block access to a competing product from the 
Christian Coalition that was distributed by a BitTorrent 
application?
    I have heard the cable companies argue that network 
neutrality rules would prevent them from protecting consumers 
from child pornography and other illegal content. I am not a 
network engineer, but it is my understanding that every major 
net neutrality proposal would allow the network operators to 
block illegal content. No one I know opposes that. The cable 
companies' argument is disingenuous, and, frankly, it offends 
me, and I respectfully suggest that it ought to offend you.
    Right now, the cable companies are not subject to network 
neutrality regulation, yet family groups continue to criticize 
the amount of pornography that cable companies make available 
on their systems, and even profit from. Yet, the cable industry 
would have us believe that if you impose network neutrality 
rules, suddenly they're going to try and block illegal content, 
but would be hindered. Let's remember, it was the King James 
Bible that Comcast blocked, which caused the current 
controversy.
    At the FCC hearing in Palo Alto last week, one witness 
noted that if Comcast removed just two pay-per-view pornography 
channels and allocated that space for the public Internet, it 
would solve their so-called bandwidth problems. Why do you 
think the pornography industry has not supported network 
neutrality? Arguably, any unsavory producer of content should 
be worried that its content could be disadvantaged in a non-
neutral network. I suggest that the answer is, the pornography 
industry knows that it will be able to pay premium prices to be 
on the fast lane, with exceptional quality of service provided 
by the cable industry. You know who won't have the deep pockets 
to compete in this non-neutral world? Nonprofit family 
organizations like the Christian Coalition.
    The Christian Coalition does not seek burdensome 
regulations. We generally believe that less government is 
better than more government, and we do not believe that 
government should censor speech. But, let's be clear, right now 
the telephone and cable companies are investing in and using 
the exact same censorship and content discrimination 
technologies that are being used by the Chinese government to 
censor speech. In fact, the Chinese government is currently 
using the same technologies to block the Christian Coalition's 
speech from being received by its citizens. The FCC should make 
it clear that it will not allow cable and phone companies to 
use these technologies to block the lawful speechwriters of the 
Christian Coalition and others.
    Increasingly, faith-based groups are turning to the 
Internet to promote their political rights to engage in what 
Ronald Reagan called ``the hard work of freedom.'' We should 
not let the phone and cable companies interfere with that work. 
We should all try to make the Internet a safe environment for 
our future, our children, and our grandchildren.
    [The prepared statement of Ms. Combs follows:]

Preprared Statement of Michele Combs, Vice President of Communications, 
                     Christian Coalition of America
    Good morning, Mr. Chairman and distinguished members of the 
Committee on Commerce, Science, and Transportation, my name is Michele 
Combs, and I am the Vice President of Communications for the Christian 
Coalition of America. Thank you for inviting my organization to testify 
at this hearing on the ``Future of the Internet.''
    The Christian Coalition of America is the largest and most active 
conservative grassroots political organization in the United States. We 
offer people of faith a vehicle to be actively involved in shaping 
their government. Christian Coalition of America is a political 
organization, which is made up of pro-family Americans who care deeply 
about becoming active citizens for the purpose of guaranteeing that 
government acts in ways that strengthen, rather than threaten, 
families.
    Our hallmark work lies in voter education. Prior to the last 
election, the Christian Coalition of America distributed a record 70 
million voter guides throughout all 50 states. These non-partisan 
guides gave voters a clear understanding of where various candidates 
stood on the issues important to them. With this knowledge, millions of 
voters went to the polls to make their voices heard.
    Use of the Internet has allowed the Christian Coalition to amplify 
the voices of millions of hard-working, pro-family Americans in a way 
that has revolutionized their ability to be heard and to engage in the 
political process.
    The Internet connects people all over the world in a manner, scope, 
and ease of use that would be impossible anywhere but online. It 
provides a voice for even the most modest members of society to 
disseminate ideas on a scale traditionally reserved only for the most 
powerful.
    Consequently, the reason the Christian Coalition supports Net 
Neutrality is simple. We believe that organizations such as the 
Christian Coalition should be able to continue to use the Internet to 
communicate with our members and with a worldwide audience without a 
phone or cable company snooping in on our communications and deciding 
whether to allow a particular communication to proceed, slow it down, 
block it, or offer to speed it up if the author pays extra to be on the 
``fast lane.''
    Unfortunately, in the last 6 months, we have seen network operators 
block political speech, block content, and block the most popular 
applications on the Internet. In every instance, the network operators 
have claimed that these actions were for ``network management'' 
purposes.
    Verizon Wireless Blocking Political Speech. Last fall, Verizon 
Wireless censored text messages sent by the pro-choice advocacy group, 
NARAL, to its own members who had voluntarily signed up to receive 
them. When NARAL protested, the phone company claimed the right to 
block any content ``that, in its discretion, may be seen as 
controversial or unsavory.'' When this did not satisfy the concerned, 
Verizon Wireless said not to worry, because the company would also 
block the speech of pro-life advocates such as the Christian Coalition.
    After news of Verizon's censorship hit the front-page of the New 
York Times--sparking a loud public outcry--the company quickly 
backpedaled, issuing an apology and blaming the blocking on a ``dusty 
internal policy,''--while still reserving the right to block text 
messages in the future at its own discretion.
    AT&T Blocking Political Speech. In August 2007, AT&T censored a 
webcast of a concert by the rock band Pearl Jam just as lead singer 
Eddie Vedder started talking about politics. The company claimed it was 
a glitch--as were at least three other instances when AT&T cutoff 
political speech during live concerts.
    Comcast Blocking Access to the King James Bible. In October 2007, 
the news organization Associated Press reported that Comcast was 
blocking consumers' ability to download the King James Bible using a 
popular file-sharing technology. Comcast at first denied that it was 
engaging in such discrimination. After independent tests confirmed that 
Comcast was indeed engaging in this behavior, Comcast claimed that it 
was simply conducting routine network management. This ``routine 
network management'' has launched two petitions at the Federal 
Communications Commission, a consumer complaint at the FCC, at least 
two class action lawsuits, an investigation by a state attorney 
general, and countless complaints in the blogosphere. Yet Comcast 
continues to argue it has the right to discriminate against such 
applications. It is my understanding that it now argues that the FCC 
has no legal authority to do anything about it. And, I understand that 
some cable companies have argued to the FCC that not even Congress has 
the Constitutional authority to protect consumers from such bad 
behavior.
    It has also been pointed out that Comcast's discriminatory conduct 
just so happens to block access to video distribution applications from 
companies like Vuze that compete with Comcast's own programming.
    If Comcast were to create a Christian family channel, would 
Washington allow it to block access to competing programming 
distributed through the Christian Coalition website?
    While the cable companies complain to the FCC about their rights to 
``manage their network'' without interference, I ask you to consider 
the speech and commerce rights of organizations like the Christian 
Coalition, NARAL, consumer groups, technology companies, and millions 
of users of the Internet.
    I have heard the cable companies argue that network neutrality 
rules would prevent them from protecting consumers from child 
pornography and other illegal content. I am not a network engineer, but 
it is my understanding that every major net neutrality proposal, 
including legislation offered by Senators Dorgan and Snowe, would allow 
the network operators to block illegal content. No one I know opposes 
that.
    It seems that the cable companies' argument that they are merely 
engaging in ``legitimate network management'' is disingenuous, and 
frankly it offends me. And I respectfully suggest that it ought to 
offend the Committee.
    Right now, the cable companies are not subject to a network 
neutrality regulation, yet family groups continue to criticize the 
amount of pornography that cable companies make available on their 
systems and even profit from. Yet, the cable industry would have us 
believe that if you impose network neutrality rules, it will suddenly 
clean up the Internet?
    Let's remember, it was the transmitting of the King James Bible 
that Comcast blocked, which caused the current controversy. It was not 
as if the company was trying to protect consumers from inappropriate 
content.
    Why do you think that the pornography industry has not supported 
net neutrality? Arguably, any unsavory producer of content should be 
worried that its content could be disadvantaged in a non-neutral 
network. I suggest that the answer is that the pornography industry 
knows that it will be able to pay premium prices to be on the fast lane 
with exceptional quality of service provided by the cable industry.
    You know who won't have the deep pockets to compete in this non-
neutral world of special deals? Non-profit, family organizations like 
the Christian Coalition.
    The Christian Coalition does not seek burdensome regulations. We 
generally believe that less government is better than more government. 
And, we do not believe that governments should censor speech. But let's 
be clear. Right now, the telephone and cable companies are investing in 
and using the exact same censorship and content discrimination 
technologies that are being used by the Chinese government to censor 
speech.
    In fact, the Chinese government is currently using these same 
technologies to block the Christian Coalition's speech from being 
received by its citizens. The Christian Coalition is merely asking 
Congress to create simple rules of the road that make it clear that it 
will allow cable and phone companies to block the lawful speech rights 
of the Christian Coalition and others.
    Increasingly, faith-based groups are turning to the Internet to 
promote their political rights, to engage in what Ronald Reagan called 
``the hard work of freedom.'' We should not let the phone and cable 
companies interfere with that work.

    The Chairman. Thank you very much, ma'am.
    Dr. Hahn?

         STATEMENT OF ROBERT W. HAHN, Ph.D., EXECUTIVE

           DIRECTOR, CENTER FOR REGULATORY AND MARKET

             STUDIES, AMERICAN ENTERPRISE INSTITUTE

    Dr. Hahn. Thank you, Chairman Inouye and Ranking Member 
Stevens and distinguished Members of this Committee. I am 
pleased to appear before you today to present my views on a 
small subject: The Future of the Internet.
    I'm an economist who has studied regulation for more than 
25 years. I now direct the AEI-Reg Markets Center. I've also 
served on the faculties at Harvard and Carnegie Mellon.
    Most of you saw ``The Graduate,'' in which Dustin Hoffman 
was told, in one word, the key to the future: plastics. Well, 
at the risk of making a similar mistake, I want to leave you 
with two words today: pricing freedom.
    Let me begin with a fictional story about the importance of 
``pricing freedom.'' Imagine there was a firm named Oogle, and 
it wanted to bring together sellers and consumers on the Net 
through text advertising. The only problem was that Oogle had 
to figure out a way to make money to invest the billions needed 
to bring all these folks together and to become a leader in 
Internet search.
    Oogle's insight was to charge advertisers a penny each time 
a consumer clicked on an Internet ad, and charge consumers 
zero. This was brilliant, and Oogle revolutionized the 
Internet, as we know it, and made lots of money.
    But, now imagine, in the interest of so-called ``advertiser 
neutrality,'' the advertisers effectively lobbied Congress to 
stop Oogle from charging them and only charged consumers 
instead. Would we have the Internet, as we know it? I seriously 
doubt it.
    Oogle was successful, in part, because it was given the 
pricing freedom to figure out what economic model would work 
best for consumers, sellers, and itself. The same logic holds 
true in the world of net neutrality.
    Net neutrality is a policy proposal that would regulate how 
network providers manage and price the use of their networks. 
While the concept sounds great, I believe that it is downright 
dangerous.
    Proposed legislation would mandate that Internet service 
providers exercise no control over the content that flows over 
their lines, and would bar those providers from charging 
content providers for certain enhancements, such as priority 
delivery, like FedEx offers. Applications ranging from 
telemedicine to online games could be jeopardized by such 
regulation.
    The AEI-Brookings Joint Center issued a position paper on 
net neutrality, signed by 17 distinguished economists, and I'd 
like to discuss two of our recommendations.
    First, firms should be allowed to experiment with different 
pricing schemes for providing Internet access, just like the 
hypothetical company Oogle did. One key advantage of giving 
Internet service providers pricing flexibility is that it gives 
them an incentive to lower broadband access prices for 
consumers, a point several legislators seem to have missed. A 
second advantage is that it gives them an incentive to develop 
enhanced service offerings that will enable realtime 
applications to flourish.
    Our second recommendation was that Congress and Federal 
regulators should promote policies that foster Internet 
innovation. One such policy is spectrum liberalization. 
Highspeed Internet that uses wireless networks may be the next 
big thing. The FCC should make additional licensed spectrum 
available for flexible use as soon as possible so these 
networks can be improved.
    Both Congress and the FCC should refrain from imposing 
special conditions on spectrum licenses, such as the recent 
openness requirement that was introduced in the last FCC 
auction. This requirement would allow third parties with 
wireless applications to piggyback on a licensee's network at 
no charge. While openness, like net neutrality, may sound good, 
the cost of mandatory openness for end users is likely to be 
significant and has never been compared against the benefits.
    My bottom line is that the issues raised in the net 
neutrality debate can be effectively addressed by allowing 
Internet pricing freedom, fostering more efficient use of 
spectrum, and using antitrust authority where appropriate.
    Allowing pricing freedom is likely to be the best way to 
ensure efficient innovation on the information superhighway.
    Thank you very much.
    [The prepared statement of Dr. Hahn follows:]

 Prepared Statement of Robert W. Hahn,* Executive Director, 
Center for Regulatory and Market Studies, American Enterprise Institute
---------------------------------------------------------------------------
    \*\ Robert Hahn is Executive Director of the Reg-Markets Center and 
a senior fellow at AEI, and a non-resident senior fellow at Brookings. 
He would like to thank Caroline Cecot and Molly Wells for research 
assistance. This testimony builds on research that I have done with a 
number of colleagues, including Robert Crandall, Robert Litan, Hal 
Singer, and Scott Wallsten. The views expressed in this paper reflect 
solely those of the author and do not necessarily reflect those of the 
institutions with which he is affiliated.
---------------------------------------------------------------------------
1. Introduction
    I am pleased to appear before this Senate Committee to present my 
views on the future of the Internet. I have studied and written about 
regulation for more than two decades. I also have done a great deal of 
work on telecommunications and Internet regulation.\1\
---------------------------------------------------------------------------
    \1\ See William J. Baumol et al., Economists' Statement on Net 
Neutrality (AEI-Brookings Joint Center for Regulatory Studies, Related 
Publication No. 07-08, 2007) [hereinafter Baumol et al.]; Elizabeth E. 
Bailey et al., Economists' Statement on U.S. Broadband Policy (AEI-
Brookings Joint Center for Regulatory Studies, Related Publication No. 
06-06, 2006) [hereinafter Bailey et al.]; Robert Hahn & Scott Wallsten, 
The Economics of Network Neutrality, 3 The Economists' Voice, n. 6, 
article 8 (2006); Robert Hahn & Robert Litan, The Myth of Network 
Neutrality And The Threat to Internet Innovation, Milken Inst. Rev. 28, 
First Quarter (2007); Robert Hahn et al., The Economics of Wireless Net 
Neutrality, 3 J. Competition L. & Econ. 399, n. 3 (2007); Robert Hahn & 
Anne Layne-Farrar, Is More Government Regulation Needed to Promote E-
commerce?, 35 Conn. L. Rev., n. 1 (2002); Robert Hahn & Anne Layne-
Farrar, The Law and Economics of Software Security, 30 Harv. J. L. & 
Pub. Pol'y 284, n. 1 (Fall 2006); Robert Hahn et al., Bandwidth for the 
People, 127 Pol'y Rev. 67, (October/November 2004).
---------------------------------------------------------------------------
    About a decade ago, I helped organize a cooperative effort between 
the American Enterprise Institute and the Brookings Institution to 
study regulation. The result was the AEI-Brookings Joint Center for 
Regulatory Studies, which I directed. I now direct the AEI Center for 
Regulatory and Market Studies, which is the successor to the Joint 
Center.\2\
---------------------------------------------------------------------------
    \2\ All Reg-Markets Center and Joint Center publications can be 
found at http://www.reg-markets.org.
---------------------------------------------------------------------------
    A primary objective of the center is to hold lawmakers and 
regulators more accountable by providing thoughtful, objective analysis 
of existing regulatory programs and new regulatory proposals. The Reg-
Markets Center and the Joint Center have been at the forefront of 
outlining principles for improving regulation and enhancing economic 
welfare.\3\
---------------------------------------------------------------------------
    \3\ See Arrow et al., Is There a Role for Benefit-Cost Analysis in 
Environmental, Health, and Safety Regulation?, 272 Science 1569, n. 
5268 (1996).
---------------------------------------------------------------------------
    In its short history, the Internet has grown at an astounding pace. 
This growth is seen in the bandwidth consumed by the video sharing site 
YouTube. By some estimates, YouTube consumed as much bandwidth in 2007 
as the entire Internet combined in 2000! \4\
---------------------------------------------------------------------------
    \4\ Steve Lohr, Video Road Hogs Stir Fear of Internet Traffic Jam, 
N.Y. Times, Mar. 13, 2008, at 1.
---------------------------------------------------------------------------
    That growth is expected to continue. Traffic on the Internet is 
expected to nearly double every 2 years.\5\ Much of this growth will be 
driven by peer-to-peer network traffic, which is expected to quadruple 
by 2011.\6\ Internet traffic will also continue to grow as high-
definition video and other traditional commercial video services are 
delivered via IP within a single network.\7\ Consumer video services 
are expected to grow from 18 percent of consumer Internet traffic to 43 
percent.\8\
---------------------------------------------------------------------------
    \5\ Cisco Systems White Paper, Global IP Traffic Forecast and 
Methodology, 2006-2011, Jan. 14, 2008, at 1, available at http://
www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/net 
implementation_white_paper0900aecd806a81aa.pdf (``After a brief mid-
decade slowdown, IP traffic will nearly double every 2 years through 
2011. Total IP traffic will nearly quadruple in the four-year period 
from 2007 to 2011.'' at 1. ``Consumer IP traffic generated by the 
transport of cable and IPTV video-ondemand (VoD) content will grow 
faster than consumer Internet traffic.'').
    \6\ Id. at 2 (``Peer-to-peer traffic still dominates Internet 
traffic and growth is not slowing. traffic is not expected to decrease 
over the forecast period. Instead, it will nearly quadruple from 1,330 
petabytes per month in 2006 to 5,270 petabytes per month in 2011, 
driven by the global increase in high-speed broadband penetration, the 
increasing use of peer-to-peer for standard-definition video file 
exchange, and the advent of high-definition video file exchange and 
television content via peer-to-peer.'').
    \7\ Id. at 1 (``Consumer IP traffic generated by the transport of 
cable and IPTV video-on-demand (VoD) content will grow faster than 
consumer Internet traffic. Consumer IPTV and IP VoD traffic will grow 
at a CAGR of 81 percent, while consumer Internet will grow at a rate of 
42 percent.'').
    \8\ Id. (``In 2011, only 57 percent of consumer IP traffic will be 
Internet traffic, while 43 percent will be traffic generated by the 
delivery of traditional commercial video services over IP within a 
single operator's network. This is a dramatic shift from the 
composition of 2006 consumer IP traffic, over 82 percent of which is 
Internet traffic.'').
---------------------------------------------------------------------------
    Since I only have 5 minutes, let me cut to the chase. As America's 
lawmakers, you have the ability to dramatically affect the future of 
Internet growth and innovation.
    That's both good news and bad news. The good news is that if you 
choose policies wisely, and regulate with a very light hand, we will 
continue to enjoy the immense benefits that this medium has offered all 
of us. If, on the other, you choose policies that dramatically 
interfere with the workings of the marketplace, you could significantly 
reduce the pace of Internet innovation, leading to losses for consumers 
that could be in the billions of dollars. Applications ranging from 
telemedicine to online games could be jeopardized by regulation that 
seeks to bar contracting for prioritized delivery--a critical 
ingredient for these applications to run effectively. Without the 
ability to set prices freely, these applications, along with their 
associated benefits for the economy, may never be introduced. But, 
fortunately, you have the opportunity to make wise choices.
    So how to choose policies wisely, some of you may ask? That is a 
good question, and one that I would like to focus on today. I am an 
economist, so my basic answer is that you need to look carefully at the 
benefits and costs of various policy interventions, and choose those 
for which you believe the benefits are likely to exceed the costs.
    In the interest of time, I would like to focus my remarks on the 
issue of net neutrality. I will conclude with a couple of observations 
about the current controversy over network management, which is related 
to the net neutrality issue.
2. Network Neutrality \9\
---------------------------------------------------------------------------
    \9\ This section draws heavily on the AEI-Brookings net neutrality 
statement. See Baumol et al., supra note 1.
---------------------------------------------------------------------------
    Network neutrality is a policy proposal that would, among other 
things, regulate how network providers manage and price the use of 
their networks.
    Net neutrality proponents assert that if Internet service providers 
are allowed to charge content providers for enhanced service offerings, 
those content providers that cannot afford the ``toll'' will be forced 
to exit--thus impairing innovation at the ``edges'' of the Internet. In 
contrast, net neutrality opponents suggest that allowing 
experimentation with new business models is the key to: (1) Internet 
innovation at both the ``core'' and the ``edge'' of the network, and 
(2) the deployment of more intelligent networks needed to handle 
rapidly growing Internet traffic.
    Congress has introduced several bills on network neutrality over 
the last few years.\10\ Proposed legislation generally would mandate 
that Internet service providers exercise no control over the content 
that flows over their lines, and would bar service providers from 
charging content providers for certain enhancements such as prioritized 
delivery. For example, senators Byron Dorgan and Olympia Snowe 
introduced network neutrality legislation in 2006 and again in 2007, 
which, had it passed, would have prevented any contracting between 
access providers and content providers.\11\ Several scholars have 
uncovered the unintended consequences of such a prohibition, including 
higher prices of Internet service for end users and decreased 
innovation in application markets.\12\
---------------------------------------------------------------------------
    \10\ H.R. 5273, 109th Cong.  2(10) (2006). S. Res. 2360, 109th 
Cong.  4(a)(6) (2006).
    \11\ Dorgan, Snowe Take Another Stab at Net Neutrality Legislation, 
TR Daily, Jan. 9, 2007.
    \12\ See, e.g., Robert Litan & Hal J. Singer, The Unintended 
Consequences of Net Neutrality, 5 Journal on Telecommunications and 
High Tech Law 533 (2007).
---------------------------------------------------------------------------
    These proposals must be considered carefully in light of the 
underlying economics. My basic concern is that most proposals aimed at 
implementing net neutrality are likely to do more harm than good.
Analysis
    Regulation of prices and services has often resulted in costs that 
exceed benefits, especially in competitive markets. Highly dynamic 
markets, such as those for high-speed Internet services, pose 
particular problems because they change so quickly. In such dynamic 
markets, it is difficult for regulators to determine appropriate prices 
because technology and consumer demands are difficult to forecast; and 
introducing price regulation risks discouraging the healthy process of 
risk-taking innovation--which is especially important in 
telecommunications.
    The market for high-speed Internet services, or broadband, is the 
key concern. Before jumping to conclusions about market power, one 
should look carefully at the data. And the data suggest that there is 
robust and growing competition in the market for highspeed Internet 
services in both the wireline and wireless space. Prices for digital 
subscriber line service dropped by roughly one-third between 2001 and 
2006. In the case of cable modem service, the quality-adjusted price 
declined significantly, as cable connection speeds increased 
significantly while prices held steady. In March of this year, the FCC 
reported that high-speed lines increased by 22 percent during the first 
half of 2007, from 82.8 million to 100.9 million lines in service, 
following a 27 percent increase, from 65.3 million to 82.8 million 
lines, during the second half of 2006.\13\ Virtually the entire U.S. 
population lives in a zip code where a high-speed service provider 
operates, and numerous service providers compete in the major 
population centers. And this is to say nothing of the boom in handheld 
devices, like blackberries, that provide wireless access to the net.
---------------------------------------------------------------------------
    \13\ FCC, High-Speed Services for Internet Access as of June 30, 
2007, released March 2008.
---------------------------------------------------------------------------
    In most, but not all, cases, I believe these markets are workably 
competitive. Moreover, even if some service providers could exercise 
some market power, the multi-sided nature of the market and the 
geographic scope of most Internet content means that they still have 
powerful incentives not to block content. In particular, providers need 
content in order to attract subscribers. If a provider restricted 
access, its product would be less valuable and attract fewer 
subscribers. The point is that even firms with market power in one part 
of the market will not necessarily be able to control content.
Recommendations
    I offer two recommendations related to pricing flexibility and 
facilitating more competition.
    Recommendation 1: Firms should be allowed to experiment with 
different pricing schemes for providing Internet access.
    One advantage of giving Internet service providers pricing 
flexibility is that it will give them incentives to make new 
investments in network intelligence, which will support a range of 
real-time applications from telemedicine to online games. Without such 
innovations, these real-time applications may never see the light of 
day.
    Another advantage of pricing freedom is that it can lead to lower 
subscription prices for end users. Most economic models of ``two-sided 
platforms'' show that platform owners have strong incentives to 
subsidize the most price-sensitive customers, which in this case would 
be end users.
    There is not one right way to charge different customers in these 
high-speed markets. That is precisely why broadband providers should be 
allowed to charge market prices on both sides of the market, unless 
there is a clear showing that the optimal pricing policy from the 
perspective of platform owners is not consistent with the socially 
optimal pricing policy. Not only do we lack empirical proof of this 
proposition, there does not appear to be any theoretical basis.
    Recommendation 2: Congress and Federal regulators should promote 
policies that increase the opportunities for competition and foster 
Internet innovation. One such policy would be spectrum liberalization.
    High-speed Internet connections may be provided using wireless 
networks. Much valuable spectrum, however, is not available for its 
most productive uses. The Federal Communications Commission should make 
additional licensed spectrum available for flexible use as soon as 
possible and allow it to be traded so that spectrum can be allocated to 
its highest-valued applications.\14\
---------------------------------------------------------------------------
    \14\ See Bailey et al., supra note 1.
---------------------------------------------------------------------------
    Both Congress and the FCC should refrain from imposing special 
conditions on spectrum licenses, such as the recent openness 
requirement that was introduced in the last FCC spectrum auction for 
certain licenses. This requirement would allow third-parties with 
wireless applications to piggyback on the licensee's network at no 
charge. While openness may sound good, the cost of mandatory openness 
is significant, and to this day, has never been compared against the 
benefits.
    One measure of the size of the costs imposed by an open-platform 
requirement is provided by the recent FCC spectrum auction itself. 
Bidders offered less for the C-block than for other, roughly comparable 
spectrum. Indeed, one other block went for almost triple the price per 
potential customer.\15\ Multiplying these price differences by the 
population in the United States (286 million) and the size of the C 
block (22 megahertz), we can infer that bidders estimated that the 
openness requirement would reduce the value of the C block by between 
$2.5 billion and $12 billion. That lower value translates into lower 
auction revenue, which from a pure budgetary perspective, is not good 
news for taxpayers.
---------------------------------------------------------------------------
    \15\ Spectrum in the A block sold for about $0.40 per ``megahertz-
pop'' (a measure of spectrum quantity adjusted for the potential 
population it can serve) than spectrum in the C block. Similarly, B-
block spectrum sold for an average of $1.91 more.
---------------------------------------------------------------------------
3. Network Management
    The issue of managing high-speed Internet networks has been in the 
news lately. Congressman Ed Markey introduced the ``Internet Freedom 
Preservation Act of 2008.'' \16\ At about the same time, the Federal 
Communications Commission held hearings at Harvard to consider whether 
network management practices of Internet providers should be regulated 
in some way. The Commission released a policy statement promoting open 
access to the Internet. The policymakes an exception for ``reasonable'' 
network management, but does not define what is meant by reasonable.
---------------------------------------------------------------------------
    \16\ See Robert Hahn, The Internet Freedom Act (Reg-Markets Center, 
Policy Matters No. 08-03, 2008) for an analysis of this proposal.
---------------------------------------------------------------------------
    A key catalyst for the interest in this seemingly arcane subject is 
the recent controversy stemming from Comcast's decision to limit its 
customers' use of BitTorrent, a file-sharing application. Most scholars 
agree that a firm like Comcast should not be allowed to simply 
disconnect a user from the network, or slow the delivery of content, 
unless the firm and user agreed to those contract terms upfront.
    But a funny thing happened recently in this controversy that should 
give lawmakers and regulators reason for optimism in the marketplace. 
That funny thing was that Comcast and BitTorrent came to an agreement. 
Comcast also reached an agreement with Pando Networks, the leading 
managed peer-to-peer content delivery service, which will lead to the 
creation of a peer-to-peer ``Bill of Rights and Responsibilities'' for 
peer-to-peer users and Internet service providers. Such agreements 
provide a path for resolving thorny network management issues in a 
voluntary and collaborative market-driven process.
Conclusion
    The issues raised in the net neutrality and network management 
debates can be effectively addressed by using antitrust authority where 
appropriate, allowing Internet pricing flexibility, and fostering more 
efficient use of spectrum to facilitate entry into the broadband 
market.
    My basic message is that government should allow firms to 
experiment with different business models for Internet services. 
Allowing such market flexibility is likely to be the best way to ensure 
efficient innovation on the information superhighway.

    The Chairman. I thank you very much, Dr. Hahn.
    And now may I call upon Mr. Verrone.

          STATEMENT OF PATRIC M. VERRONE, PRESIDENT, 
                 WRITERS GUILD OF AMERICA, WEST

    Mr. Verrone. Thank you, Chairman Inouye, Vice Chairman 
Stevens, members of the Committee, all of you. My name is 
Patric Verrone. I am the President of the Writers Guild of 
America, West. We represent nearly 8,000 writers of motion 
pictures, broadcast and cable television shows, and, as of a 
few weeks ago, new media. And the question is asked, ``Who 
writes this stuff?'' the answer is, for better or for worse, 
``We do,'' including ``The Graduate.''
    [Laughter.]
    Mr. Verrone. I had hoped to bring some of the Southern 
California weather with me, but it appears its flight was 
delayed. This is not a problem for today's hearing.
    We are here to talk about the subject of the future of the 
Internet. As you know, we at the Writers Guild recently 
completely a 100-day strike over the place of entertainment 
writers in that future. Also, I believe, I am the only 
panelists to have written a feature film scrip about a robot 
poker tournament in space Vegas in the year 3009, so I think my 
expertise on the future is unquestionable.
    [Laughter.]
    Mr. Verrone. Future of the Internet--thank you for 
laughing--the future of the Internet is a cautionary tale. I 
begin by invoking the Ghost of New Media Past. It is, of 
course, April, so, naturally, Dickens' ``Christmas Carol'' 
comes to mind.
    A hundred years ago, new media was motion pictures; 75 
years ago, radio; 50 years ago, it was broadcast television. I 
started working in the entertainment industry about 22 years 
ago, writing for Johnny Carson. And, like other 7-year-olds at 
the time, I saw almost 30 separate companies independently 
producing and distributing television on the new media of cable 
TV. Yet, today we are down to about seven vertically integrated 
conglomerates controlling, not only cable TV, but also 
broadcast TV, film, radio, and even the news. Concentration of 
power was triggered by a series of policy choices; most 
recently, about 15 years ago, when the FCC began a process of 
unraveling the financial and syndication rules of FIN-SYN, 
allowing production and distribution to be jointly owned. As a 
result, media companies have consolidated, conglomerated, and 
congealed into a handful of multinational entities that today 
employ nearly everyone working in our industry.
    The axiom in Hollywood is that content is king, but those 
who control access to the king control the kingdom. Because of 
Federal regulations, or lack thereof, that control is in the 
hands of neither the consumer-viewer nor the content creators, 
but, rather, the distributors.
    Which bring us to the Ghost of New Media Present; namely, 
the Internet. The jurisdiction and compensation for our content 
on the Internet was what we fought for and won in our recent 
strike. But, what was most notable about the strike was not 
what we won; rather, how we won it. We used the Internet to win 
the Internet. When traditional media is in the hands of the 
same corporations that employ you, it's a little hard to get 
your message out. We had 4,000-person rallies that got less and 
later coverage on the local news than a dog wedding.
    As such, the Internet proved to be a powerful tool for 
communication. E-mails, blogs, Websites, podcasts, video clips 
were passed along the Net, giving our members updates and 
informing the world about our cause. In an era of so-called 
``reality television'' and user-generated content, the studios 
had hoped to show that they could create programming without 
writers, yet the strike proved that we could use the Internet 
to create programming without the studios.
    The Internet holds incredible potential to resurrect a 
vibrant industry of independent creators with free access to, 
and distribution of, democratic, with a small ``d,'' content.
    And so, we look to the Ghost of New Media Future. Will the 
Internet's open and free-speech forum be turned into a walled 
garden of content control? Will entertainment information and 
marketing platforms be available to all, or just to those who 
can afford to pay for them? Will the new media be dominated by 
the gatekeepers that dominated the old media, be they 
multinational monopsonies of TV and film or regional duopolies 
of cable and television service? Stay tuned. Hopefully, there 
is a happy ending, one which is open to diverse, independent, 
and original voices and visions, where consumers can pick and 
choose for themselves the content and services they want, where 
content is king, and the king roams free.
    This future, we believe, relies on net neutrality. The 
policy decisions that triggered the consolidation of old media 
have not yet been made for new media. There is still time to 
protect the rights of content producers and consumers. We need 
to dethrone the gatekeepers and once more make content king.
    We, at the Writers Guild, West, believe that the Internet 
Freedom Preservation Act ensures that future. We support it. We 
also support public investment in the broadband networks. The 
show must go on, and it must be taken on the road.
    In an industry filled with oxymoron, from jumbo shrimp to 
Hollywood accounting, we believe we must win a fight for 
neutrality.
    I will reserve the rest of my time if any of you have any 
screen plays that you'd like me to read.
    [Laughter.]
    [The prepared statement of Mr. Verrone follows:]

          Prepared Statement of Patric M. Verrone, President, 
                     Writers Guild of America, West
    Thank you Chairman Inouye, Vice Chairman Stevens, and members of 
the Committee.
    My name is Patric M. Verrone, and I am the President of the Writers 
Guild of America, West. We represent nearly 8,000 writers of motion 
pictures, broadcast and cable television shows, and, as of a few weeks 
ago, new media.
    Thank you for inviting me to speak on the subject of ``The Future 
of the Internet.'' As you know, we recently completed a 100-day strike 
over the place of entertainment writers in that future. Also, I believe 
I am the only panelist to have written a film about a robot poker 
tournament in space Vegas in the year 3009 so I think my expertise in 
the area is unquestionable.
    The future of the Internet is a cautionary tale. I begin by 
invoking the ghost of new media past. A hundred years ago, that was 
motion pictures. Fifty years ago, it was broadcast television.
    I started working in the entertainment industry 22 years ago. 
Almost thirty separate companies independently produced and distributed 
television on the ``new media'' of cable TV. Today we are down to about 
seven vertically integrated conglomerates, controlling not only cable 
TV, but also broadcast, film, and even news.
    This concentration of power was triggered by a policy choice. About 
15 years ago, the fcc began the process of unraveling the financial and 
syndication rules (or FIN-SYN) allowing production and distribution to 
be jointly owned.
    As a result, media companies consolidated, conglomerated, and 
congealed into the handful of multinational entities that today employ 
nearly everyone working in our industry and decimating independent 
production and content diversity.
    The axiom in hollywood is that ``content is king'' but those who 
control access to the king, control the kingdom. Because of Federal 
regulations--or lack thereof--that control is in the hands of neither 
the consumer nor the content creators, but the distributors.
    This brings us to new media present--namely, the Internet.
    Jurisdiction and compensation for our content on the Internet was 
what we fought for--and won--in our strike. What was most notable about 
our strike was not what we won, but how we won.
    We used the Internet to win the Internet.
    When traditional media is in the hands of the same corporations 
that employ you, it's hard to get your message out. We had four 
thousand attend rallies that got less--and later--coverage on the local 
news than a dog wedding.
    As such, the Internet proved to be a powerful tool for 
communication. E-mails, blogs, websites, podcasts, and video clips were 
passed along on the net, giving our members updates and informing the 
world about our cause.
    Through the ``speechless'' campaign, a series of online videos in 
which no words were spoken, the public saw the crucial role writers 
play in media creation.
    In an era of so-called reality television and user-generated 
content, the studios hoped to show that they could create programming 
without writers, but the strike proved only the opposite: that writers 
could create programming without studios.
    The Internet holds incredible potential to resurrect a vibrant 
industry of independent creators with free access to, and distribution 
of, democratic (with a small d) content.
    And so we look to the new media of the future.
    Will the Internet's open and free speech forum be turned it into a 
walled garden of content control? Will entertainment, information, and 
marketing platforms be available to all or just those who can afford to 
pay for them? Will the new media be dominated by the gate keepers that 
dominate the old media (be they multinational monopsonies of TV and 
film or regional duopolies of cable and telephone service)?
    Thankfully, there is a happier ending. One which is open to 
diverse, independent, and original voices and visions. Where consumers 
can pick and choose for themselves the content and services they want. 
Where content is king, and the king roams free.
    But this future relies on ``net neutrality.''
    The policy decision that triggered the consolidation of old media 
has not yet been made for new media. There is still time to protect the 
rights of content producers and consumers. We need to establish clear 
net neutrality rules to ensure that the Internet remains a level 
playing field for all. We dethrone the gatekeepers and once more make 
content king.
    We at the writers guild west believe that the Internet freedom and 
preservation act ensures that future and we support it.
    In an industry filled with oxymorons from jumbo shrimp to Hollywood 
accounting, we must win the ``fight for neutrality.''

    The Chairman. I thank you very much.
    Now may I recognize Ms. Bateman.

STATEMENT OF JUSTINE BATEMAN, ACTRESS, WRITER, PRODUCER AND CO-
                        FOUNDER, FM78.tv

    Ms. Bateman. Thank you, Chairman Inouye, Vice Chair 
Stevens, and other members of the Committee. I want to thank 
you for your service to this country, first of all, and I'm 
honored to be asked to testify today.
    Net neutrality and an open online marketplace are critical 
to the future of the Internet and to the preservation of our 
rights. My name is Justine Bateman, and I am an actress, 
writer, and producer. I've acted in many projects, from TV's 
``Family Ties'' to, more recently, ``Desperate Housewives,'' 
and am a founding partner of FM78.TV, a new online media 
venture.
    When I started acting, in the early 1980s, creativity in TV 
and film was still rampant, and the innovation of ideas and 
performance were exalted. The demise of this creative setting 
is directly proportional to the increase of media 
consolidation, which is, in large part, due to the repeal of 
the financial interests and syndication rules. Now we have too 
many executives, too many notes, until there is no artistic 
voice, no point of view, and little entertainment value left in 
the projects we work on. On top of this, there are fewer jobs.
    In today's TV market, a show like ``Family Ties'' would 
never make it to TV. Media companies not only have a monopoly 
over distribution, but they insist on ownership and control of 
content which strongly interferes with the production of high-
quality creative product.
    Corporate consolidation has actually pushed the audience 
away from the traditional media outlets and driven them to the 
Internet and videogaming world. In May 2007, the online video 
market reached 8 billion streams. Download revenue from TV and 
film is expected to reach $3 billion in 2010. And gaming 
reported a $17.9-billion revenue in 2007. This is why, a few 
months ago, I, along with three other content creators, started 
FM78.TV to make and distribute professional high-quality 
content directly for the Internet. We hope we can find a 
faithful audience online, as other Internet innovators have, 
and not be stymied by a private taxation, if you will, by the 
telecom companies.
    The Internet has been defined by innovation. The Internet 
itself was a product of American innovation. Google was 
created, as has been said, in a garage, by two college 
students; eBay was created by a hobbyist. How successful might 
those two sites have been without the freedoms we enjoy on the 
Internet today?
    In entertainment, I believe we're on the verge of a 
creative renaissance, and the Internet is the grid upon which 
the renaissance can rest, because, unfortunately, the business 
grid of TV and film today cannot support that. Traditional 
media is now like a swimming pool over which a pool cover has 
been placed, causing those wild ducks that used to swim around 
at night in your pool to go elsewhere. And that's a true story 
about my pool, and I'm sorry we don't see those ducks anymore. 
Those ducks, I'm sure, have now found an open body of water in 
which to swim, much like we content creators have found open 
distribution on the Internet. And the idea of your site 
succeeding or failing being based on whether or not you pay the 
telecom companies enough to carry your material or to allow 
quick access is appalling. And, honestly, I can't help but 
think of extortion when I imagine that kind of arrangement.
    Net neutrality will allow for we, creators, to continue 
owning and controlling our content in a way we have not been 
able to since the repeal of the financial and syndication rules 
of our industry. A whole new class of small-business owners 
will emerge, providing thousands of new jobs in a sector that 
desperately needs them. And with innovation comes competition, 
and net neutrality would ensure a level playing field for that.
    I've heard the arguments against net neutrality. First and 
foremost, I do not believe that net neutrality is government 
regulation. By requiring the telecom companies to allow access 
and to not discriminate against any legal content on the 
Internet, the government is clearly stating its intention for 
all Americans to continue to freely access content on the Web.
    And, second, piracy is obviously a major problem around the 
world. And, of course, the Internet has exacerbated the problem 
of illegal downloading. I applaud the work of the MPAA, the 
copyright allowance, and others to ensure creators are 
protected. I understand the threat of piracy, that the content 
I create can be stolen. All new-content creators understand 
this. But, the solution is not in establishing new rules that 
may prevent me from competing at all. Instead, let the market 
continue to find solutions, such as digital watermarking, and 
define ways to generate income from sponsors that decrease the 
financial problems of piracy, but does not restrict 
competition.
    In conclusion, I want to tell you, I am a big fan of 
capitalism. I know these companies here want to make money, as 
do I. They are, after all, being responsive to their 
stockholders and their interests. But, trying to restrict 
Internet--constrict Internet access, I don't believe that's a 
viable revenue option.
    And, frankly, not to steal any thunder from the Christian 
Coalition, but the idea of these corporations coming together 
to attempt to constrict access reminds me of the story of the 
Tower of Babel, where large forces conspired to unite and do 
what they pleased. The fear was that ``now nothing they propose 
to do will be withheld from them.'' Well, we know how that 
story ended.
    Frankly, I don't believe for a second, that any on this 
Committee really, truly want to block or constrict the flow of 
information, education, or creativity to the American people. 
And I hope your support of net neutrality will dramatically 
illustrate to the American public your continued support of 
their freedoms.
    Thank you very much for your time and for the honor of 
addressing you.
    [The prepared statement of Ms. Bateman follows:]

   Prepared Statement of Justine Bateman. Actress, Writer, Producer, 
                        and Co-Founder, FM78.tv
    Thank you, Chairman Inouye, Vice Chair Stevens, and other members 
of the Committee. I first want to thank you for all your service to 
this country and I am honored to have been asked to testify today. Net 
neutrality and an open online marketplace are critical to the future of 
the Internet and to the preservation of our rights.
    My name is Justine Bateman and I'm an Actress, Writer, and 
Producer. I have acted in many projects, from TV's ``Family Ties' to 
more recently, ``Desperate Housewives,'' and I am a founding partner of 
FM78.tv, a new on-line media venture.
    When I started acting in the early 1980s creativity in TV and film 
was still rampant and innovation of ideas and performance were exalted. 
The demise of this creative setting is directly proportional to the 
increase of media consolidation, which is in large part due to the 
repeal of the financial interest and syndication rules. Now we have too 
many executives and too many notes given until there is no artistic 
voice, no point of view, and little entertainment value left in the 
projects we work on. On top of this there are fewer jobs. In today's TV 
market a show like Family Ties, may never make it to TV. Media 
companies not only have a monopoly over distribution, they then insist 
on ownership and control of content which strongly interferes with the 
production of hi-quality, creative product.
    Corporate consolidation has actually pushed the audience away from 
the traditional media outlets and driven them to the Internet and video 
gaming world. In May 2007, the online video market reached 8 billion 
streams. Download revenue from TV and film is expected to reach $3 
billion by 2010. And gaming has reported a $17.9 billion in revenue for 
2007.
    That is why a few months ago, I, along with three other content 
creators, started FM78.tv--to make and distribute professional, high-
quality content directly for the Internet. We hope we can find a 
faithful audience on-line as other Internet innovators have and not be 
stymied by a private taxation, if you will, by the telecom companies. 
The Internet has been defined by innovation; the Internet itself was a 
product of American innovation. Google was created in a garage by two 
college students. EBay was created by a hobbyist. How successful might 
those two sites have been without the freedoms we enjoy on the Internet 
today?
    In entertainment, I believe we are on the verge of a creative 
renaissance and the Internet is the new grid upon which this 
renaissance can rest, because unfortunately the business grid of TV and 
film today cannot support that. Traditional media is now like a pool 
over which a pool cover has been placed causing those wild ducks that 
used to swim around in your pool to go elsewhere. (True story about my 
pool. I'm sorry we don't see those ducks anymore.) Those ducks now I'm 
sure have found an open body of water in which to swim, much like we 
content creators have been found open distribution on the Internet. And 
the idea of your site succeeding or failing based upon whether or not 
you paid the telecom companies enough to carry your material or allow 
quick access is appalling. Honestly, I can't help but think of 
extortion when I imagine that kind of arrangement.
    Net neutrality will allow for we creators to continue owning and 
controlling our content in a way that we have not been able to since 
the repeal of the financial and syndication rules. A whole new class of 
small business owners will emerge, providing thousands of new jobs in a 
sector that desperately needs them. And with innovation comes 
competition. Net neutrality would insure a level playing field for 
that.
    I have heard the arguments against net neutrality.
    First and foremost, net neutrality is NOT government regulation. By 
requiring the telecom companies to allow access and to not discriminate 
against any legal content on the Internet, the government is clearly 
stating its intention for all Americans to continue to freely access 
content on the Web.
    Secondly, piracy is obviously a major problem around the world and 
of course the Internet has exacerbated the problem of illegal 
downloading. I applaud the work of the MPAA, the Copyright Alliance and 
others to insure creators are protected.
    I understand the threat of piracy; that the content I create can be 
stolen. All new content creators understand this. But the solution is 
not establishing new rules that may prevent me from competing at all.
    Instead, let the market continue to find solutions, such as digital 
watermarking, and to find ways to generate income from sponsors that 
decrease the financial problems of piracy but does not restrict 
competition.
    In conclusion, I want to tell you that I am a big fan of 
capitalism. I know these companies here want to make money, as do I. 
They are after all being responsive to their stockholders and their 
interests. But trying to constrict Internet access? I don't believe 
that that is a viable revenue option. Frankly, and not to steal any 
thunder from the Christian Coalition, but the idea of these 
Corporations coming together to constrict access reminds me of the 
story of the Tower of Babel where large forces conspired to unite and 
to do what they pleased. The fear was that ``now nothing they propose 
to do will be withheld from them.'' (Gen 11:4). Well, we all know how 
that story ended. Finally, I don't believe for a second that any of you 
want to block or constrict the flow of information, education, or 
creativity to the American people and I hope your support of net 
neutrality will dramatically illustrate to the American public your 
continued support of their freedoms. Thank you very much for your time 
and for the honor of addressing you all.

    The Chairman. I thank you very much, Ms. Bateman.
    Mr. McSlarrow?

STATEMENT OF KYLE McSLARROW, PRESIDENT AND CEO, NATIONAL CABLE 
                & TELECOMMUNICATIONS ASSOCIATION

    Mr. McSlarrow. Thank you, Mr. Chairman and distinguished 
members of the Committee.
    We've heard from several representatives of the content 
community, or those whose voices want to be heard. And I want 
to come back to that in a second. But, I do think, as many 
members have said in their opening statements, it's important 
to think about all of this from the perspective of the 
consumer.
    When a consumer sits down in front of a computer and turns 
on their broadband service, what is it they actually 
experience, and what have they experienced over the last 5 
years? Over the last 5 years, they sit down, it's always on, 
they have an increasing array of Websites, they have blog 
sites, they have social networking sites, they have all kinds 
of applications--obviously, we've talked about Google a number 
of times today--search engines, applications that people didn't 
even dream about. And when they sit down at that computer, it 
all just works. It's always on. It's there. People love their 
broadband service.
    On the other side of that computer, it's the Wild, Wild 
West. You have spam, viruses, denial-of-service attacks. One my 
larger members defeats, every 2 days, a billion spam e-mails. 
And one of my smaller operators does a billion each month. 
You've got the problem, in certain areas of networks, where 
just a very few people are consuming such enormous amounts of 
bandwidth that it's actually slowing down the system for the 
vast majority of users. And it's a small enough number 
sometimes that network operators are actually on a first-name 
basis with these folks. You've got the emergence of peer-to-
peer traffic, which--as I've said previously, technology is 
agnostic; it's not bad or good, it's the uses to which you put 
it. Peer-to-peer is often used by many of my companies who 
partner with peer-to-peer, but it's also an emerging 
engineering challenge that people are only coming to grips 
with, and you've got every network operator in the country--
phone companies, cable companies, wireless operators--who are 
trying to manage congestion on the network, and trying to 
manage, particularly, peak congestion.
    Now, I said I would come back to the idea of the voices 
that want to be heard. And, with all due respect, I've heard 
many statements--some today, and others before this hearing--
that describe a world that is a complete fantasy. Every single 
person here has a blog or a Website or has content that has 
distribution and has enabled consumers, millions of them around 
this country, to enable that content. And no one is blocking 
them. The cable industry invested over $100 billion to provide 
this country's first nationwide broadband system. We are in 
front of 92 percent of American households. They don't all take 
it, but it's there.
    We want as much content, we want as many applications to 
succeed as possible. That's what makes our broadband service 
attractive to consumers. And if we ever engaged in conduct that 
consumers were outraged about, they do have a choice: they can 
go somewhere else. There's at least a phone company, and 
usually there's a satellite provider, and now, with the 
spectrum being auctioned, there's going to be emerging wireless 
broadband services. We all know this.
    At bottom, the debate that we've had today has been about 
whether or not network management, per se, is some nefarious 
practice that has anticompetitive overtones. First of all, let 
me just say, there is not just a little or a modest amount, 
there is zero evidence that any operator is engaging in 
anticompetitive conduct. The case just hasn't been made.
    You can criticize, justly--and lots of people have--whether 
or not the network management techniques used today are the 
best ones. I think that's fine. I'm not the least defensive 
about it. And I should note that many telephone/cable 
operators, Internet applications, providers, peer-to-peer 
networks are coming together to try to see whether or not there 
are better ways of: (a) providing disclosure to consumers, and 
(b) developing new techniques. That's all good. But, that's all 
taking place in the marketplace.
    So, at bottom, I don't think there's a problem. I think 
this committee is absolutely right to continue exercising 
oversight. Shining a spotlight on this is a good thing. But, I 
don't think we're at a stage where there is any market failure 
that justifies government intervention.
    Thank you very much.
    [The prepared statement of Mr. McSlarrow follows:]

       Prepared Statement of Kyle McSlarrow, President and CEO, 
            National Cable & Telecommunications Association
    Good morning, Chairman Inouye, Ranking Member Stevens and members 
of the Committee. My name is Kyle McSlarrow and I am the President and 
Chief Executive Officer of the National Cable & Telecommunications 
Association. NCTA represents cable operators serving more than 90 
percent of the Nation's cable TV households and more than 200 cable 
program networks. The cable industry is the Nation's largest provider 
of high speed Internet access, making cable broadband service available 
to 92 percent of Americans, and has invested $130 billion to build a 
two-way interactive network with fiber optic technology. Cable 
companies also provide state-of-the-art digital telephone service to 
more than 15 million American consumers. Cable operators are committed 
to delivering an open and satisfying Internet experience to their 
customers, and the dramatic growth in cable broadband subscribers is 
evidence of their success in doing so.
    The cable industry has consistently demonstrated its commitment to 
policies that ensure all Americans have access to affordable broadband. 
We supported, for example, proposals advanced by Senator Dorgan and 
Senator Stevens to create a fund tailored to expanding broadband into 
unserved areas. We support Senator Inouye's Broadband Data Improvement 
Act, because we believe that improving Federal data collection and 
dissemination regarding where broadband services have been deployed in 
the United States is necessary in order to achieve the goal of 
ubiquitous broadband availability for all Americans. And we continue to 
support:

   Tax credits or other tax incentives to providers that build 
        out in rural areas that are unserved by an existing broadband 
        provider.

   Reform of the RUS broadband loan program so that funding is 
        targeted specifically to unserved areas.

   Expansion of the FCC's Lifeline and Link-Up Programs to help 
        ensure that broadband access is extended to low-income 
        households.

   Public-private partnerships to provide broadband in unserved 
        areas.

    We support these initiatives because we recognize that the 
government can play an important role in making certain that the 
economic and social benefits of broadband connectivity are extended to 
all areas of this country, and we look forward to working with you 
further to achieve these goals.
    But while broadband deployment to every community in America merits 
the full attention of policymakers, legislation calling for ``network 
neutrality'' or government intervention into the operation of networks 
would undermine the goals of broadband deployment and adoption. The 
development of the Internet, expansion of broadband networks, and 
creation of innovative Internet applications we have seen would not 
have occurred at such a rapid pace if providers were restricted in how 
they could engineer their networks to accommodate these dynamic 
developments. The government's consistent light regulatory touch since 
the introduction of broadband has worked. And only that continued 
regulatory freedom is likely to spur the investment and innovation that 
consumers have come to expect.
    Today, I would like to focus on three points that illustrate why 
the Internet and broadband services should not be subject to greater 
and more intrusive government regulation.
    First, cable broadband providers have demonstrated and remain 
committed to providing Americans the very best broadband service 
available.
    Second, every cable modem subscriber today can access the content 
he or she seeks over the Internet. Broadband providers do not block 
access to content. Reasonable network optimization techniques not only 
enable the growth and development of the Internet, they protect 
consumers and their legitimate expectations.
    Finally, the national policy of leaving the Internet unregulated 
has been a resounding success. Government intervention in broadband 
network management would only slow the pace of innovation and prevent 
the natural development of traffic solutions that is already occurring 
today.
I. Cable Brought Broadband to America
    The industry's commitment to the deployment of broadband is 
reflected in the plain statistics. By any benchmark, the cable industry 
is leading efforts to spur broadband use and deployment.
    Investment. The cable industry has done more to stimulate broadband 
growth and innovation than any other industry. Cable operators have 
invested $130 billion in private capital since the passage of the 
Telecommunications Act of 1996 to build broadband networks across the 
United States. Today 92 percent of American households, or about 117 
million homes, have access to cable broadband service,\1\ including 96 
percent of American homes to which cable television service is 
available.\2\ This investment and expansion took place without any 
government subsidies.
---------------------------------------------------------------------------
    \1\ National Cable & Telecommunications Association, Broadband 
Deployment Statistics (reporting that cable broadband had passed 
117,700,000 U.S. housing units as of December 2007) available at http:/
/www.ncta.com/Statistic/Statistic/CableBroadbandAvailability.aspx.
    \2\ High-Speed Services for Internet Access: Status as of June 30, 
2007, Report, Industry Analysis & Tech. Division, Wireline Competition 
Bureau, at 3 (Mar. 2008) available at http://hraunfoss.fcc.gov/
edocs_public/attachmatch/DOC-280906A1.doc (``2007 High Speed Internet 
Access Report'').
---------------------------------------------------------------------------
    Competition. The cable industry's efforts to deploy broadband have 
stimulated tremendous investment in the provision of Internet access by 
competing providers, first by telephone companies and now wireless and 
satellite companies. This competition has spurred cable broadband 
providers and their competitors to develop better and better networks 
and applications to meet consumer demand and compete for their 
business. As former FTC Chairman Timothy Muris has explained, 
``competition [among providers] spurs producers to meet consumer 
expectations because the market generally imposes strict discipline on 
sellers who disappoint consumers and thus lose sales to producers who 
better meet consumer needs. These same competitive pressures also 
encourage producers to provide truthful information about their 
offerings.'' \3\
---------------------------------------------------------------------------
    \3\ Statement of Timothy J. Muris, Foundation Professor, The George 
Mason School of Law, before the Workshop on Broadband Connectivity 
Competition Policy, U.S. Federal Trade Commission, Feb. 28, 2007, at 
12; see id. at 13 (``Introducing new sellers--i.e., competition--can 
only improve things from the consumer's perspective. Either the new 
producer offers the consumer a better deal (e.g., lower price, better 
quality), or it does not get the sale. This ability to shift 
expenditures imposes a rigorous discipline on each seller to satisfy 
consumer preferences.''); id. at 14-15 (``Competition motivates sellers 
to provide truthful, useful information about their products and drives 
them to fulfill promises concerning price, quality, and other terms of 
sale . . . In a competitive market, a consumer deceived by one seller 
on one purchase can always turn to a different seller the next time.'') 
(internal citations omitted); id. at 16-17 (noting significant 
competition in broadband access market).
---------------------------------------------------------------------------
    Most notably, as the availability of broadband service has grown, 
the price-per-megabit has fallen significantly, and the speeds cable 
broadband offers have shot up dramatically. When cable first offered 
high-speed broadband service as an alternative to dial-up access in the 
mid-90s, the speeds were approximately 1-1.5 Mbps. Today, most cable 
operators offer broadband speeds topping 5 Mbps and some operators, 
such as Cablevision and Comcast, offer speeds up to 50 Mbps. Comcast 
and Cox Communications also offer a service that provides for 
``boosts'' of higher speeds that double the throughput on an on-demand, 
capacity-available basis.
    Now the cable industry is on the verge of making the next leap--
from ``broadband'' to ``wideband''--with a technology which can enable 
dramatically higher download and upload speeds well above 100 Megabits 
per second. Several weeks ago, for example, Comcast launched a 
``wideband'' service in Minneapolis-St. Paul that offers speeds of 50 
Megabits per second. Comcast expects to have wideband available to 20 
percent of its systems by year-end 2008 and to all homes passed by mid 
2010.
    Increased Use and Demand. The high quality and easy availability of 
cable broadband has led to the widespread adoption of broadband use. 
Today, the cable industry has more than 35 million broadband 
customers.\4\ Overall, approximately 64 million broadband households 
nationwide have broadband service, and that number continues to grow.
---------------------------------------------------------------------------
    \4\ National Cable & Telecommunications Association, Broadband 
Deployment Statistics (reporting that the total cable high-speed 
broadband customers reached 35,600,000 as of December 2007) available 
at http://www.ncta.com/Statistic/Statistic/Statistics.aspx.
---------------------------------------------------------------------------
    New Content, Web Services, and Applications. The efforts of 
broadband network providers to build larger and faster networks have 
helped ensure the success of countless numbers of new Internet 
businesses and applications--online video services, social networking 
websites, data-sharing services, and online interactive game services, 
to name a few. Despite concerns about alleged limited access to 
broadband, use of Internet video on demand has grown at the most 
dramatic rate. In July 2006, 107 million Americans watched video online 
and about 60 percent of Internet users downloaded more than 7 billion 
videos off the Internet.\5\ In February 2008, nearly 135 million U.S. 
Internet users spent an average of 204 minutes viewing 10.1 billion 
online videos. YouTube represented 34 percent of those online videos, 
or nearly 3.5 billion in total.\6\ To put it into context, in 2006, 
YouTube consumed as much bandwidth as the entire Internet consumed in 
the year 2000.\7\
---------------------------------------------------------------------------
    \5\ FCC Adopts 13th Annual Report to Congress on Video Competition 
and Notice of Inquiry for the 14th Annual Report, News Release at 4 
(Nov. 27, 2007) available at http://hraunfoss.fcc.gov/edocs_public/
attachmatch/DOC-278454A1.pdf.
    \6\ Todd Spangler, Net Video Views Topped 10 Billion in February, 
MultiChannel News, Apr. 16, 2008.
    \7\ Michael Dell, Founder and Chairman, Dell Inc., Keynote Address 
at 2007 Consumer Electronics Show (Jan. 9, 2007) (transcript available 
at media.podtech.net/media/2007/01/PID_001851/Podtech_v_1875-ces-2007-
dell-launches-.html).
---------------------------------------------------------------------------
    Television networks are now offering cable modem and other 
broadband customers video online, such as NBC Universal and News 
Corp.'s new Hulu service. Book retailers are now offering online 
digital novels; and music sales websites, such as iTunes, continue to 
grow. Social networking websites, where users share home videos, 
pictures, and music content, are also on the rise--in 2007, an 
estimated 126.5 million people in North America participated in an 
online social networking website.\8\ Internet commerce also continues 
to grow. Last year, over $135 billion was spent purchasing goods and 
services over the Internet.\9\
---------------------------------------------------------------------------
    \8\ Jon Swartz, Social-networking sites going global, USA Today, 
Feb. 10, 2008.
    \9\ Quarterly Retail E-Commerce Sales, 4th Quarter 2007, U.S. 
Census Bureau News Release (Feb. 15, 2008) available at http://
www.census.gov/mrts/www/data/pdf/07Q4.pdf.
---------------------------------------------------------------------------
    For years, net neutrality proponents have argued that without 
government intervention, broadband providers would stifle competing 
services and content providers; Internet development and usage would 
stagnate; and consumers would be unable to use their broadband 
connections to download video or access other emerging applications. In 
fact, cable's investment in broadband has driven innovation and 
investment in new content and applications at the edge--the exact 
opposite of what was predicted by advocates of net regulation.
    There is no better proof that there presently exists no ``problem'' 
needing a ``solution'' than YouTube. YouTube would have been a pipe 
dream in 2002. Six years later, however, YouTube--the proverbial ``two 
guys in a garage'' who allegedly could not survive, let alone thrive, 
unless the Internet were regulated--has become a multi-billion dollar 
enterprise. And YouTube is now owned by Google, which itself has grown 
to become one of the largest companies in the world with a market 
capitalization of $169 billion.
    Here's an incontrovertible truth: the staggering growth of these 
companies would not have occurred without cable's investment in and 
deployment of the reliable high-speed broadband service that provides 
the ecosystem in which Google, YouTube, Yahoo! and other Internet 
services can flourish.
II. Network Optimization Enhances and Enables the Internet Experience
    In 2006, I testified before this Committee and stated that cable 
operators do not and would not block subscribers' access to any lawful 
content, applications or services. That statement remains true today. 
Cable modem subscribers have the ability to do anything they want to on 
the Internet. They can download or stream videos, upload and send 
pictures to friends, or call family across the world. They can also 
attach gaming devices, or any other computing device they want to use 
to the network. They can use file-sharing software from peer-to-peer 
networks. If they couldn't do what they wanted, they would soon not be 
cable modem subscribers. They would go to our competitors.
    Cable subscribers can enjoy the most advanced and cutting-edge 
Internet sites and applications because of the extensive efforts cable 
operators constantly undertake to make all content and applications 
flow smoothly and work seamlessly together over the network. In 1999, 
there were only 2 million households with broadband service in the 
United States; today there are approximately 64 million. This is a 
great success story--but with this success comes the need to manage the 
network so that every household has good user experience.
    Cable providers built a smart infrastructure that has the 
capability to evolve and meet the challenges of multimedia, file 
sharing, and other bandwidth-intensive applications. But cable 
broadband subscribers currently enjoy the full benefits of broadband 
only because cable operators manage their networks on a content-
agnostic basis to provide seamless connectivity, deter spam and 
viruses, and make sure that a tiny minority of users don't slow down 
the Internet for everyone else. Various estimates are that as few as 5 
percent of customers use from 50 to 90 percent of the total capacity of 
the network. In Japan, it is estimated that 1 percent of Internet users 
consume 47 percent of the total Internet traffic.\10\ Faced with these 
voracious bandwidth consumers, cable operators may engage in 
reasonable, content-agnostic network management practices--triggered by 
objective criteria based upon network traffic levels--to ensure that 
the relatively few customers who utilize bandwidth-heavy applications 
do not degrade or otherwise adversely affect broadband Internet access 
for the vast majority of customers.
---------------------------------------------------------------------------
    \10\ George Ou, citing Haruka Saito, Japanese Counselor for Telecom 
Policy, http://blogs.zdnet.com/Ou/?p=1063.
---------------------------------------------------------------------------
    There have been some recent concerns that network management 
practices affecting certain high-bandwidth-consuming peer-to-peer (P2P) 
applications are ``discriminatory.'' P2P traffic can consume a 
disproportionately large amount of network resources--far, far more 
than any other Internet use. If even a small fraction of customers are 
using these bandwidth-intensive applications at the same time, it can 
interfere with the ability of the vast majority of all other customers 
in that area to surf the web, watch streaming video, make voice-over-IP 
calls, or engage in other routine uses of the Internet.
    Providers can't build their way out of this problem--in spite of 
increasing capacity, many P2P protocols are written specifically to 
commandeer as much bandwidth as is available. Instead, providers 
optimize their networks in order to balance the needs of all of their 
customers. Far from inhibiting access, smart network techniques protect 
the ability of our customers to make the greatest and most flexible use 
of the Internet. They are a reasonable response to an identified 
congestion problem that has the benefit of allowing all other 
applications--particularly latency-sensitive applications like VoIP and 
streaming video--to work better. As the Institute for Policy Innovation 
recently stated, ``[i]n almost all cases, network management today is 
unnoticed by consumers. The opposite, a total lack of management, would 
not be true. If network operators were precluded from managing their 
networks, consumers would be negatively affected.'' \11\ Sound network 
management is essential to ensuring a stable broadband platform. 
Google, Yahoo!, Amazon, and service providers like Vonage could not 
carry on their businesses if bandwidth-consuming applications were 
allowed to block customers from accessing their Websites or completing 
their transactions. Because of network management, such businesses can 
develop business models that hinge on the expectation that their 
service will not be crowded out by congestion caused by heavy 
bandwidth-using software. Far from being ``neutral,'' a network that is 
not managed simply allows those who want to demand all the bandwidth 
for themselves to do so unchecked.
---------------------------------------------------------------------------
    \11\ Broadband Industry Practices, WC Docket No. 07-52, Institute 
for Policy Comments at 2 (filed Feb. 13, 2008).
---------------------------------------------------------------------------
    Reasonable network management practices are also vital to combating 
the well-documented, illegal distribution of copyrighted material on 
the Internet. We cannot ignore the problem of piracy. It is a problem 
that affects not just broadband service providers, legitimate broadband 
application providers and content providers, but also law-abiding 
consumers. Ultimately they are the ones that bear the burden of 
congestion caused by those who abuse their network access to engage in 
the widespread distribution of infringing works. Technology is 
agnostic, but, according to one source, 90 percent of P2P downloads are 
pirated material.\12\ Broadband providers, content owners and others 
all have a stake in exploring technology solutions that address piracy 
in ways that respect our customers' expectations and respect the 
copyright owner's rights, not simply to curtail congestion but for 
reasons of fairness to those who invest in content and make an 
important contribution to our economy. Government action that would 
inhibit development of innovative approaches to thwarting piracy and 
enhancing the online experience for the vast majority of Internet users 
would harm content creation and ultimately consumers.
---------------------------------------------------------------------------
    \12\ Associated Press, Peer-to-peer networks go legit, but piracy 
is still rampant, siliconvalley.com, March 14, 2008, available at 
http://www.siliconvalley.com/latestheadlines/ci_8575851.
---------------------------------------------------------------------------
    So, is there evidence that these challenges are insurmountable and 
require more government regulation? Quite the contrary. The same 
technological innovation that gives rise to some of these challenges 
has produced creative ways to fight spam and viruses. The same private 
sector collaboration that allowed the countless number of networks that 
make up the Internet to exchange traffic and engage in peering, has and 
continues to focus on new challenges.
    Some P2P developers are creating new ways to make that technology 
more bandwidth-efficient and network-friendly, so that it may continue 
to emerge as a useful way to distribute legal content. Cable companies 
and other broadband providers are working hard to find ways to address 
concerns about network congestion and create consumer-friendly options 
that allow the majority of users to access content at the speeds 
needed. The ``P4P Working Group''--a collaborative industry effort to 
develop network management solutions that benefit cable and other 
broadband operators, P2P software firms, and consumers--is one such 
effort.
    Broadband providers have also begun testing and dialogue with P2P 
applications providers to make networks and P2P applications friendlier 
to one another. For example, Verizon has been working with Pando 
Networks, a P2P software developer, and the P4P Working Group to 
develop a more bandwidth efficient file sharing protocol.\13\ Just last 
week, Comcast and Pando announced their intention to lead an industry-
wide effort to create a ``P2P Bill of Rights and Responsibilities.'' 
\14\ And Comcast and BitTorrent recently reached an agreement in which 
Comcast pledged to adopt a capacity management technique based on 
individual users' consumption during peak periods rather than based on 
a particular protocol.
---------------------------------------------------------------------------
    \13\ Peter Svensson, Verizon Gets Cozy With P2P File-Sharers, March 
14, 2008, available at http://biz.yahoo.com/ap/080314/p2p_verizon.html.
    \14\ Stephen Lawson, Comcast, Pando Call for Pact on P2P Rights, 
Apr. 15, 2008, available at http://news.yahoo.com/s/pcworld/20080416/
tc_pcworld/144680.
---------------------------------------------------------------------------
    Broadband providers and Internet content and service providers have 
mutual incentives to develop workable solutions that enhance customers' 
Internet experiences. Cable operators' tremendous investments have laid 
the foundation for robust broadband networks that have spurred the 
remarkable explosion of new services and innovations on the Internet. 
In turn, the vast array of applications and services now available on 
the Internet drive more and more people to become broadband users.
III. The Government Should Continue to Refrain From Regulation
    Congress should resist calls to interfere with broadband providers' 
freedom to manage their respective networks in order to satisfy the 
evolving needs of American consumers. Cable modem service has never 
been subject to regulation. Six years after the FCC classified cable's 
broadband offering as an unregulated information service \15\ and 
nearly 3 years after the FCC determined that no regulation was needed 
to encourage broadband deployment and preserve and promote Internet 
usage and demand,\16\ there has been no evidence of any practices that 
would change those conclusions or warrant government intervention 
generally or specifically with respect to permissible network 
management activities. The disaster scenarios voiced by network 
neutrality proponents for many years have never happened. In fact, the 
opposite has happened--the Internet is booming without regulation. 
There is quite simply no problem requiring a government solution.
---------------------------------------------------------------------------
    \15\ Inquiry Concerning High-Speed Access to the Internet Over 
Cable and Other Facilities, 17 F.C.C.R. 4798 (2002), aff'd sub nom. 
Brand X Internet Servs. V. FCC, 545 U.S. 967 (2005).
    \16\ Appropriate Framework for Broadband Access to the Internet 
over Wireline Facilities; Review of Regulatory Requirements for 
Incumbent LEC Broadband Telecommunications Services; Computer III 
Further Remand Proceedings: Bell Operating Company Provision of 
Enhanced Services; 1998 Biennial Regulatory Review--Review of Computer 
III and ONA Safeguards and Requirements; Inquiry Concerning High-Speed 
Access to the Internet Over Cable and Other Facilities; Internet Over 
Cable Declaratory Ruling; Appropriate Regulatory Treatment for 
Broadband Access to the Internet Over Cable Facilities, Policy 
Statement, 20 FCC Rcd 14986,  4 (2005); FCC Press Release, ``FCC 
Adopts Policy Statement; New Principles Preserve and Promote the Open 
and Interconnected Nature of Public Internet'' (rel. Aug. 5, 2005).
---------------------------------------------------------------------------
    Under the guise of preventing discrimination, ``net neutrality'' 
proponents would have the government determine which network management 
techniques are permissible. But putting every network management 
strategy up for debate before regulators would severely hamper the 
ability of network providers to ensure high-quality and reliable 
Internet access for their subscribers. Depriving network operators of 
certain bandwidth management tools only makes the network less 
efficient for everyone. Ultimately, interfering with an operator's 
ability to manage its network would harm consumers and prevent them 
from accessing the content they desire. Adept network optimization 
techniques are fundamental to creating and preserving the stable 
``ecosystem'' for online service providers that ensures an optimal 
customer experience.
    Government intervention in a fast-changing technological world 
could result in very real problems developing very quickly. Network 
management practices are constantly changing and evolving--as networks 
grow, consumer usage patterns change, and new technologies emerge. It 
would be impossible for any regulation to keep up with these changes. 
Nor does the government have the expertise or resources to second-guess 
the thousands of network management decisions broadband network 
engineers must make every day. It is far more likely that government 
interference in the development of the market could foreclose or 
prevent the emergence of cross-industry efforts that are more likely to 
get the solutions right.
Conclusion
    Misplaced concerns over legitimate and reasonable network 
management practices do not justify the enactment of open-ended 
regulation of the Internet, particularly where the costs of such 
regulation are foreseeable and substantial. Given the growth of 
broadband competition and the breathtaking pace of technological 
change, government intervention is unwarranted. As the Federal Trade 
Commission has warned, regulation of Internet access at this stage of 
market development could have ``potentially adverse and unintended 
effects,'' \17\ including reduced product and service innovation. And 
net neutrality requirements would frustrate the Federal policy of 
``preserv[ing] the vibrant and competitive free market that presently 
exists for the Internet . . ., unfettered by Federal or State 
regulation.'' \18\ Today's hands-off policy has given us the 
flexibility to innovate and respond to consumer demand. By contrast, 
proposals for ``net neutrality'' amount to regulation of the Internet 
that would undermine--not promote--consumer choice and welfare.
---------------------------------------------------------------------------
    \17\ Broadband Connectivity Competition Policy, Federal Trade 
Commission Staff Report, at 11 (June 2007) available at http://
www.publicknowledge.org/pdf/FCC-05-151A1.pdf.
    \18\ 47 U.S.C.  230(b)(1).
---------------------------------------------------------------------------
    Thank you again for inviting me to speak to you today.

    The Chairman. Thank you very much.
    And our last witness, Professor Lessig.

STATEMENT OF LAWRENCE LESSIG, C. WENDELL AND EDITH M. CARLSMITH 
             PROFESSOR OF LAW, STANFORD LAW SCHOOL

    Mr. Lessig. Thank you, Mr. Chairman.
    I had the honor to be at this Committee's first hearing, 5 
years ago, when the words ``network neutrality'' were uttered. 
And it's extraordinarily rewarding to see the progress that's 
been made in the understanding around this issue in the last 5 
and a half years.
    But, I do want to start by remarking what strikes me as a 
fundamental misunderstanding about the history of the Internet, 
which is pressed by the Senators who were to my left earlier 
today; in particular, by Senator Sununu.
    The Internet began in a context where its code, the 
architecture of the Internet, and the regulation of government 
through Title II in the narrow-band Internet context, created a 
platform of fundamental neutral competition. The technology was 
incapable of allowing ISPs to discriminate among content and 
applications, and the government took a very active role in 
guaranteeing that Internet service providers provided neutral 
access to the Internet.
    Now, of course, that context has changed dramatically. 
Because of changes in regulation, instead of having about 6,000 
ISPs in this nation, we essentially have, in any district, one, 
maybe two. And so, that context has radically changed. But, as 
it has changed, it has changed, not just because the law has 
changed; it's changed because the technology has increasingly 
enabled providers to discriminate among content and 
applications.
    So, imagine, for example, if the electricity grid, which, 
right now, is a neutral platform--when you plug your Sony TV 
in, it doesn't know the difference between that and a Panasonic 
TV--imagine if it, when you plugged it in, asked the question 
to the television set, ``Are you Sony or are you Panasonic?'' 
and the price differs depending upon whether you're Sony or 
Panasonic, or whether it's a television or a radio, or whether 
it's public TV or private TV. The point is, it's possible the 
electricity grid would become discriminatory in exactly that 
way. And the question is what Congress would do if, in fact, 
that's where the electricity grid went.
    Now, another point that's been made consistently by those 
who oppose network neutrality regulation is, we should sit 
around and wait to see the discrimination; and when we see the 
discrimination, let's do something about it. But, that point 
fundamentally misunderstands how investment decisions are made 
in Silicon Valley. In Silicon Valley, investment decisions are 
made today depending on what the investors believe the network 
will look like in 5 years. And if, today, they believe the 
owners of the network will have the freedom to pick and choose 
which applications will run or which content will be permitted, 
they will not invest in applications today which are 
fundamental and different from the kind of applications the 
network owners want to allow.
    So, it's fundamentally mistaken to say that there's no cost 
to competition or innovation or the economy from doing nothing. 
The cost is the extraordinary uncertainty investors face about 
what the future of the network will look like and what exactly 
their opportunity to compete will be.
    Now, finally, to the Senators who are still on my right 
here, I would say I support, fundamentally, the move to enact 
network neutrality legislation. I think, 5 years into this 
debate--it's actually 10 years since this issue was first 
framed--is long enough, and Congress needs to take a very clear 
policy position that supports an infrastructure of abundance 
for the network and does not envision the network becoming a 
network where owners try to leverage scarcity to produce value.
    But, it's extraordinarily important that, whatever 
regulation is placed on this network be as minimal and clear as 
possible. And I get very anxious with the use of words like 
``reasonable'' in this context, without clear specification of 
the problem.
    So, in my view, the core problem is addressed by the four 
principles that Chairman Powell originally envisioned, and 
Chairman Martin has adopted, plus one more. And that one 
additional principle would ban discriminatory tiering by 
network owners for providers of content and applications. And 
those, it seems to me, define the minimal regulation necessary 
to guarantee the principle to continue an environment of 
extraordinary competition that the Internet originally gave us.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Lessig follows:]

    Prepared Statement of Lawrence Lessig, C. Wendell and Edith M. 
            Carlsmith Professor of Law, Stanford Law School
Introduction
    Mr. Chairman, and members of the Committee, my name is Lawrence 
Lessig, and I am a Professor of Law at Stanford Law School. For more 
than a decade, I have been studying the relationship between technology 
and Internet policy, and in particular, the relationship between the 
architecture of the Internet and innovation. I am honored to have the 
opportunity to address the question that is before this Committee--the 
future of the Internet.
    This is the third time that I have addressed this Committee about 
essentially the same question. In October, 2002, I testified about 
``network neutrality.'' That was, I believe, the first time that idea 
had been presented to this Committee. In February, 2006, I testified at 
a hearing devoted to ``network neutrality'' exclusively. And in my 
view, the question before this Committee today, ``The Future of the 
Internet,'' is directly tied to the future of network neutrality.
    Yet while these questions are not new, in my view, Congress has yet 
to address them adequately. For the reasons I outline below, this 
failure to act continues to threaten the growth and economic vitality 
of the Internet. Thus, I would urge Congress to enact legislation that 
sets the basic framework for this critical economic infrastructure in a 
way that assures the greatest innovation and economic growth. That 
framework would embed a design principle that gave birth to the 
Internet--network neutrality.
``Network Neutrality''
    The term ``network neutrality'' was introduced into the academic 
debate by Professor Tim Wu in early 2003.\1\ But the idea behind the 
term has been a central focus of network theorists since the early 
1980s. ``Network Neutrality'' builds upon a fundamental recognition 
about the relationship between a certain network design (what network 
architects Jerome Saltzer, David Clark, and David Reed called the 
``end-to-end'' \2\ principle) and economic innovation. As former FCC 
Chief Economist, Professor Gerald R. Faulhauber, described the 
relationship at a Stanford conference in 2000,
---------------------------------------------------------------------------
    \1\ Tim Wu, Network Neutrality, Broadband Discrimination, 2 J. 
Telecomm. & High Tech. L. 141 (2003).
    \2\ 29 See J. H. Saltzer, David Clark, and David Reed, 
``End-to-End Arguments in System Design,'' available at /
web.mit.edu/Saltzer/www/publications/endtoend/endtoend.pdf>; David P. 
Reed et al., ``Active Networking in End-to-End Arguments,'' available 
at /Web.mit.edu/Saltzer/www/publications/endtoend/
ANe2ecomment.html>.

        ``if I translate this into . . . economics, [``end-to-end''] in 
        engineering is the equivalent of . . . perfect competitive 
        market [in] economi[cs]. It's the thing that makes it all 
        transparent, open, [where] anybody can do anything.'' \3\
---------------------------------------------------------------------------
    \3\ Conference Proceedings, The Policy Implications of End-to-End, 
Stanford University, December 1, 2000, available at /
cyberlaw.stanford.edu/e2e/ papers/e2e.panel5.pdf>.

    ``End-to-end'' or, to update the language, ``network neutrality'' 
is the equivalent of perfect competition because it creates an 
environment, or platform, upon which competition among applications and 
content happens with minimum interference by the network or platform 
owner. Like a traditional marketplace, or a modern stock market, a 
neutral network assures that in the negotiation between buyer and 
seller, or innovator and consumer, the network itself plays little or 
no substantive role. All the power within this negotiation is shifted 
to the edge, to those economic actors directly responsible for 
innovation and growth in network applications and content--namely, 
consumers and innovators.
    The original Internet achieved this architecture of competition 
unintentionally. The framers of the network's original design were not 
economists. They were not focused on building an engine of economic 
growth. Yet that was the consequence of a technical design intended to 
facilitate development flexibility. A network designed to enable anyone 
to develop new applications to run was also a network designed to 
maximize competition among applications and content.\4\
---------------------------------------------------------------------------
    \4\ See Barbara van Schewick, Architecture and Innovation 
(forthcoming MIT Press, 2008). See also Lessig, The Future of Ideas 34-
35 (2001).
---------------------------------------------------------------------------
    The reason for this is simple but technical: under the Internet's 
original design, there was no easy way within the network to 
discriminate among applications or content. The network was built 
without the knowledge to discriminate built in. Just as the Post Office 
can't cheaply pick and choose which letters to deliver based upon the 
sentiments expressed in the letters, so too the original Internet 
couldn't easily pick and choose which packets of data to send based on 
the content of those packets. It was blind to that content. That 
blindness encouraged a wide range of innovation.
    This technical feature of the original network is now changing. 
Network owners increasingly have the ability to in effect open the 
Internet's letters--to peek inside the packets, and choose which go 
faster, or which get blocked. And while there are plenty of legitimate 
reasons why a network owner might need to ``manage'' network behavior, 
there are anti-competitive, or strategic reasons as well. Which reason 
motivates a network owner turns upon the business model that the 
network owner has adopted--either a business model of abundance and 
neutrality, serving whatever legal applications and content users and 
innovators want, or a business model of scarcity and control, 
leveraging financial return out of the scarcity their gate-keeping role 
allows them to create or maintain. If policymakers were confident 
network owners were following a model of abundance, there would be less 
reason to be concerned about how they manage the packets on their 
network. But because policymakers are uncertain about the ultimate 
motive for this ``management,'' extensive inquiry into the technical 
questions of network management become important.
    In my view, Congress could substantially simplify this area by 
setting a strong policy in favor of networks with a business model of 
abundance and neutrality. A clear set of network neutrality principles 
would do just that. If Congress made it perfectly clear that the FCC 
had the charge and authority to assure that the providers of this 
critical economic infrastructure were deploying this infrastructure 
with abundance in view, businesses would conform to that requirement. 
The economic question here is much more important than the financial 
returns to one particular industry. A powerful and vibrant broadband 
infrastructure is crucial to the economic growth of the Nation 
generally.
    In addressing the question before this Committee, I would offer 
four points to consider.
1. The question of effective regulation for critical economic 
        infrastructure did not begin with the Internet.
    Though the Internet is certainly ``new'' within the history of 
critical economic infrastructures, the regulatory questions it raises 
are as old as the Republic. Throughout our history, policymakers have 
weighed how best to encourage the spread of critical economic 
infrastructure, recognizing that sometimes subsidy is required, and at 
other times, simple regulation is sufficient. The Post Office, for 
example, was perhaps this Nation's first communication infrastructure, 
and as many have noted, the Federal Government played a critical role 
in assuring that that infrastructure supported the rapid growth of 
commercial newspaper and periodical publications, both for economic and 
political reasons.\5\ Likewise with the telegraph, railroads, 
electricity, the national highway system, and telephones: In each case, 
the policy question was how best to encourage broad scale, and 
relatively inexpensive infrastructure to support critical economic 
growth. How, in other words, to encourage an infrastructure of 
abundance rather than an infrastructure of scarcity.
---------------------------------------------------------------------------
    \5\ See, e.g., Paul Starr, The Creation Ofthe Media 83-113 (2004).
---------------------------------------------------------------------------
    Throughout this history, to achieve abundance it has sometimes been 
necessary to limit the freedom of infrastructure providers. Common 
carrier regulation did that substantially. But even without common 
carrier regulation, some limits have been essential to assuring that 
the interests of those who build this economic infrastructure are 
aligned with the interests of the Nation that depends upon it.
    One critical limitation has been upon the ability of infrastructure 
owners to discriminate. Consider, for example, the infrastructure for 
electricity. As I have testified before, the electricity grid is a 
fundamentally neutral network. Innovators (like Sony, or Panasonic) are 
invited to develop applications (televisions, and radios) that use that 
network. They don't need permission from the network owners (PG&E, 
Commonwealth Edison) to deploy those innovations. When you plug your 
television set into an outlet, the network doesn't ask (as it well 
could, given modern technology) whether the television set is made by 
Sony or Panasonic. It doesn't ask whether the function of the appliance 
is to provide television or radio service. Instead, so long as 
application developers develop appliances that comply with the 
protocols of the network, the electricity grid will provide service to 
those appliances neutrally. That doesn't mean for free--for obviously, 
we all pay for the electricity we consume. It doesn't mean unmetered--
obviously, we pay more if we use more. But it does mean that Sony 
doesn't need to pay a special tax to PG&E for the right to develop Sony 
television sets, or digital music players. Sony, in this model, is free 
to innovate without permission from the infrastructure owners--the 
electricity network.
    We could of course imagine a different system. And indeed, we could 
well build that different system into our electricity grid right now. 
The electricity grid could be architected to ask the application who 
made it, or what its function is. The network could then decide whether 
or how to serve electricity depending upon the answer to that question. 
Providers of appliances could then be taxed depending upon the 
elasticity of demand for their products. Electricity providers could 
then enjoy greater revenue for their product from this tax.
    I take it there are few who believe that this alternative 
electricity system would be better thanthe system we have today--even 
though economists could well describe the conditions under which this 
alternative may well be more ``efficient.''
    My point, however, is not about whether those conditions obtain, 
either for the electricity grid, or the Internet. It is instead to 
emphasize the value of being conservative in policymaking in both 
contexts. Anyone arguing that the electricity network should be rebuilt 
to permit PG&E to discriminate among applications using its network 
should bear a significant burden before that change was allowed. And 
likewise for anyone arguing that the core competitive feature of the 
original Internet should be altered: he or she too should bear a 
significant burden before that change is allowed to alter the critical 
competitive environment that the Internet presents.
    Giving up on network neutrality would be like permitting PG&E to 
tax appliance manufacturers for the privilege of using electricity on 
its network: No doubt, that would be a boon for PG&E, and its 
shareholders. It would not be a boon for the economy.
2. Policymakers should adopt policies that drive network providers 
        toward business models of broadband abundance rather than 
        business models that exploit scarcity.
    There are at least two clear business models for broadband 
deployment--one that drives to broadband abundance, the other that 
leverages broadband scarcity to maximize network provider returns. 
There is a critical economic justification for government to try to 
tilt broadband providers toward the model of abundance.
    Again, the broadband Internet is infrastructure. Like electricity 
grids, and national highways, it supports a wide range of economic and 
social activity. As scholars have demonstrated, private actors 
providing public infrastructure but focused on private gain alone would 
rationally maximize their own return at the expense of this broader 
public gain.\6\ Interventions that create the incentive among 
infrastructure providers to support these broader interests produce 
real economic return to the economy, even if they mean less financial 
return to the infrastructure providers.
---------------------------------------------------------------------------
    \6\ See, e.g., Brett M. Frischmann and Barbara van Schewick, 
Network Neutrality and the Economics of an Information Superhighway: A 
Reply to Professor Yoo, 47 Jurimetrics J. 383-428 (2007); Brett M. 
Frischmann, An Economic Theory of Infrastructure and Commons 
Management, 89 Minn. L. Rev. 917, 1007 (2005).
---------------------------------------------------------------------------
    For example, consider by contrast policy decisions affecting the 
growth of cable. Though cable television obviously provides valuable 
free speech opportunities and economic return through the incentives it 
creates to produce new content, it is plausible that cable television 
is not a core infrastructure technology, since it does not generate a 
diverse range of technology and applications building upon the cable 
platform. For this reason, it may well have been sensible for Congress 
to grant to cable owners an almost unlimited range of freedom to 
structure production decisions as they want, and develop cable 
offerings and prices as the market will bear. The product of these 
policy decisions is obviously not uncontested--families continue to 
resist the bundling of cable providers, making it hard, for example, 
for parents to select a mix of content that minimizes advertising; 
consumers generally resist significant price increases; developers of 
independently produced content point to the radical drop in 
independently produced television content after the relaxation of 
government ownership regulations. All of these ``problems'' are the 
predictable result of allowing cable owners the degree of economic 
freedom the law now permits them. And while I share with many the wish 
that things were different, I can well understand that there are 
limited public policy reasons for regulatory intervention.
    But when the platform is not just a video delivery system, but 
instead, a general purpose digital innovation platform, the 
justification for regulatory intervention changes dramatically. In the 
world of entertainment, cable TV is just one option. But in the world 
of digital communication infrastructures, the Internet is everything. 
And assuring that this infrastructure gets built with maximum capacity 
at the lowest cost, and with minimal burdens on application and content 
developers, is a critical public policy objective.
3. Investment decisions by venture capitalists are driven by 
        expectations offuture, not present, behavior.
    In both of the earlier hearings at which I was invited to testify 
about network neutrality issues, critics of regulation argued that 
there was no reason to intervene, because there was no actual evidence 
of discrimination. In the 2-years since my last testimony, however, 
network owners have provided this Congress with a significant number of 
examples of exactly the kind of harmful discrimination that network 
theorists have long predicted. In 2005, the FCC was forced to intervene 
to stop a DSL provider from blocking voice-over-IP technologies. In 
2007, AT&T technologists acted to block the audio of Pearl Jam 
performer as he criticized the President in a webcast carried by AT&T. 
Verizon has been accused of blocking text messages that it found too 
controversial. And most recently, Comcast has been shown to be blocking 
particular Internet applications that might compete with its video 
service, using network management practices not approved by any 
independent standards body. If ``network neutrality'' was ``a solution 
in search of a problem'' in 2002, and 2006, the network owners have 
been very kind to network neutrality advocates by now providing plenty 
of examples of the problem to which network neutrality rules would be a 
solution.
    But there is one very practical point that this debate about 
whether there is significant current discrimination misses. Venture 
capitalists don't chose whether to invest in new innovation based upon 
what is happening on the Internet today. They base their decisions upon 
what they expect behavior on the Internet will be tomorrow. They 
decide, for example, whether to fund a new Internet application today 
based upon whether they believe the entrepreneur will be able to deploy 
that application profitably in 2 or 5 years. That question in turn will 
depend upon whether network owners will be free to discriminate against 
that application in the future. Or more generally, whether network 
owners will be free to tax that application, to extract some portion of 
that application's profit. If venture capitalists believe that network 
owners will have that freedom tomorrow, then for a certain range of 
innovations, they will choose not to invest in that innovation today.
    It is for this reason that I and others have consistently argued 
that Congress could well be slowing the growth of the Internet economy 
by not setting today a clear principle about the rules that will govern 
Internet innovation tomorrow. This ``wait and see'' attitude ignores 
that sector of the economy that can't afford to wait and see: 
investors. The ``wait and see'' argument is thus oblivious to the real 
economic costs that uncertainty here creates.
    If Congress were clear in its direction to the FCC about the policy 
the FCC is required to implement, then any uncertainty about network 
owner behavior could be eliminated. And any costs from that uncertainty 
could also be eliminated. So long as a simple and clear rule signaled 
to the markets that network owners would be in the business of 
producing abundant broadband by encouraging innovation rather than 
leveraging value from scarcity, markets would react to that signal in a 
way that encouraged greater investment in new innovation.
4. Congress should direct the FCC to implement, with the minimal 
        regulatory intervention necessary, a policy that drives network 
        providers to a business model ofabundance.
    It has been my view for the past decade that Congress needs to 
signal a clear policy supporting neutral and abundant broadband growth. 
Without doubt, however, such a policy can go too far. The objective of 
regulators must be the minimum intervention necessary to steer 
broadband providers to a business model of abundance rather than 
scarcity, while recognizing the limited competence of regulators in any 
field of new technological innovation. That limited competence means 
regulators should focus on the behavior that they can monitor well, 
using the levers they have over that regulable behavior, so that they 
can have confidence about behavior at the layers of the network that 
they can't regulate as well.
    Congress can achieve that end by setting out clear neutrality 
principles in legislation, while charging the FCC with the 
responsibility for carrying those principles into effect. Congress' 
principle, again, should be to encourage broadband abundance, by 
steering providers away from a business model that leverages scarcity. 
But in pursing that clear legislative objective, the FCC should proceed 
in a careful and limited way, escalating regulatory intervention only 
when existing strategies have been proven to fail. Put differently, if 
a clear objective has been set by Congress, then an FCC strategy of 
``shock and awe'' is both unnecessary and counter productive. Instead, 
the interventions by the FCC should be directed to the end of 
convincing broadband providers that the legislative policy choice of 
Congress will be achieved. A consistent regulatory practice to that end 
will convince investors of the only profitable broadband investment 
strategy. That will drive providers to the economically optimal 
broadband strategy.
    As I testified in 2006, in my view that minimal strategy right now 
marries the basic principles of ``Internet Freedom'' first outlined by 
Chairman Michael Powell, and modified more recently by the FCC, to one 
additional requirement--a ban on discriminatory access tiering. While 
broadband providers should be free, in my view, to price consumer 
access to the Internet differently--setting a higher price, for 
example, for faster or greater access--they should not be free to apply 
discriminatory surcharges to those who make content or applications 
available on the Internet. As I testified, in my view, such ``access 
tiering'' risks creating a strong incentive among Internet providers to 
favor some companies over others; that incentive in turn tends to 
support business models that exploit scarcity rather than abundance. If 
Google, for example, knew if could buy a kind of access for its video 
content that iFilm couldn't, then it could exploit its advantage to 
create an even greater disadvantage for its competitors; network 
providers in turn could deliver on that disadvantage only if the non-
privileged service was inferior to the privileged service.
    Put differently, ``fast lanes'' on the Internet are only valuable 
if ``slow lanes'' are really slow. Depending upon the market, this fact 
can create a perverse incentive among network providers not to build 
the fastest network possible.
Conclusion
    As I testified in 2002 and 2006, the Internet was the great 
economic surprise of the 20th century. No one who funded or initially 
developed the network imagined it would have the economic and social 
consequences that it has had.
    But though the success of the network was a surprise, policy-makers 
have yet to learn just why it was a success: Built into its basic 
design was a guarantee of maximum competition. A free market in 
applications was coded into its architecture. The growth of that 
network followed from this basic design. The world economy benefited 
dramatically from this growth.
    The threat facing the Internet today is that network owners will 
convince regulators to go back on that original design. Through 
regulatory policies that permit broadband providers to act however 
their private interests dictate, these regulatory policies would 
threaten the economic potential of the network generally. New 
innovation always comes from outsiders. If insiders are given both 
technical and legal control over innovation on the Internet, innovation 
will be stifled.
    Unlike many other industrialized nations, we in the United States 
have failed to preserve the extraordinary competition among ISPs that 
characterized early Internet growth. But despite that loss in access 
competition, network neutrality still provided significant opportunity 
for application and content competition. The changes now being spoken 
of by the effective duopoly of broadband providers will weaken that 
application and content competition.
    It is my view that any policy that weakens competition is a policy 
that will weaken the prospects for Internet and economic growth. I 
therefore urge this Committee to secure and supplement the work begun 
originally by Chairman Powell, and continued now by Chairman Martin, by 
enacting legislation that sets a clear policy to protect the 
environment for Internet innovation and competition.

    The Chairman. Thank you very much.
    Senator Dorgan?
    Senator Dorgan. Professor, what you just described, the 
four principles plus the nondiscrimination piece, is exactly 
what I and others described was necessary when last we took up 
this issue, I believe, in a markup. And I believe the vote was 
10 to 10--it was tie vote, anyway, either 11 to 11, or 10 to 
10--to advance the amendment on net neutrality, or Internet 
freedom. I want to make just a couple of brief comments.
    First of all, I don't--well, there's been some discussion 
here that might lead someone to believe this--I don't think 
this is a discussion, at the moment, about bad actors. There 
are a lot of good companies out there, they've invested a lot 
of money. I'm going to, this evening, turn on a switch and 
watch a great hockey game, I hope, on television. I get my 
Internet provided by the same company. I mean, there are a lot 
of good companies out there doing a lot of things.
    I think it's also the case, however, that the companies are 
bigger, stronger. I think, when you have fewer competitors, 
major competitors in the marketplace, there is a clogging of 
the arteries of the marketplace. And, Dr. Hahn mentioned 
antitrust enforcement. I would say, if anybody can find the 
names of anybody that's really enforcing antitrust laws, be 
sure and send them here.
    [Laughter.]
    Senator Dorgan. I've threatened to put the pictures of 
public employees we're paying for antitrust enforcement on the 
side of milk cartons, because it appears to me that they have 
vanished for a good number of years. So, there is no antitrust 
enforcement of any consequence at all.
    I want to ask a couple of questions. Obviously, Mr. 
McSlarrow, when you were sitting in the audience, you would 
have fully expected me to ask this question of you. The 
Chairman of the Federal Communications Commission comes to us 
and says, ``Here are our principles, and we believe we have the 
authority to make them stick.'' Comcast says, ``We don't 
believe you have the authority to make them stick. We don't 
believe you have that authority at all.'' What's the position 
of the Cable Association?
    Mr. McSlarrow. I appreciate the question, because I think 
the Chairman is modestly confused. The letter that people have 
talked about from Comcast is very precise. The question posed 
was whether or not the FCC has authority today to enjoin 
conduct under any existing rule. And it's not even a close 
call. The answer is no. The policy statement that everybody 
keeps talking about, which we supported, in terms of the 
principles embodied in it, is, by its terms, not a rule and not 
enforceable. And the Chairman himself, the day it was issued, 
said it's not an enforceable document. That is the question 
they answer.
    Different question, broader question going to the one I 
thought you asked earlier, whether or not the FCC has generic 
authority. And there, both the Supreme Court and the FCC itself 
has said it's an open question. They have a proceeding, where 
they have teed up whether or not, and to what extent, they have 
ancillary authority to regulate in this space. And I'm not 
going to assume what the answer is, except to say I think they 
have some authority. It's probably more limited than people 
might imagine. But, whether or not there's a rule on the books 
today, there's----
    Senator Dorgan. Do you support--does your industry support 
the four principles?
    Mr. McSlarrow. Not only do we support the four principles, 
they embodied our practice----
    Senator Dorgan. Do you believe that----
    Mr. McSlarrow.--prior to----
    Senator Dorgan.--they should be enforceable?
    Mr. McSlarrow.--statement. No. I don't.
    Senator Dorgan. You support them, but don't believe they 
should be enforceable?
    Mr. McSlarrow. No, I think if--if there is anticompetitive 
conduct or deceptive advertising, I think there are rules on 
the books that should and could be enforced.
    Senator Dorgan. Professor Lessig, we've heard from some of 
my colleagues and others today, ``Let the marketplace decide. 
The marketplace will take care of all this.'' I mean, the 
marketplace is a wonderful allocator of goods and services. 
Having taught some economics, I think it's a terrific allocator 
of goods and services. But, I also believe that the marketplace 
needs a referee from time to time. But, ``Let the marketplace 
decide,'' what's wrong with that argument?
    Mr. Lessig. Well, the marketplace is extraordinarily 
important, but we have never, historically, relied upon the 
marketplace alone when we're talking about critical economic 
infrastructure for the Nation. And that's exactly what the 
Internet is. The Internet is not just entertainment, it's not 
just like the cable system's entertainment component. It is, 
instead, infrastructure. And to make sure that infrastructure 
encourages the widest range of competition, you need to 
guarantee the platform is open to that competition.
    The technology used to do that. Now that the technology 
doesn't do that, there's an important reason for the government 
to insist on that neutrality.
    Now, I must insist--my colleague Dr. Hahn has uttered what 
is a fundamental confusion about what this issue is about, by 
his initial example about Oogle and whether Oogle is free to 
charge for advertising. Oogle is at the edge of the network. It 
is one of the competitors on the network. I fundamentally 
support the right of every competitor on the network to 
discriminate however it wants. Let it build its own business 
model.
    Senator Dorgan. You're talking about content providers.
    Mr. Lessig. That's right. What we're talking about is the 
platform itself and whether that highway should be able to 
discriminate against Ford trucks in favor GM trucks or in favor 
of American trucks versus Toyota, foreign trucks. The point is, 
that highway has to be neutral. And that what has encouraged 
the competition which defines the growth of the Internet.
    Senator Dorgan. I'm going to ask you to respond, Dr. Hahn, 
but I want to ask you a question as you respond, because you 
started by saying, ``What we really need here is just price 
freedom.'' So, let me ask you this question. Let's assume the 
American Enterprise Institute creates a site, because you want 
to make some money, and the site is the American Enterprise 
Institute for T-Shirt Sales. And your popular T-shirt that 
you're selling has a slogan that says, ``Free Monopolies from 
Regulation.'' And the provider takes a look at that and says, 
``You know, we don't like that you're implying somehow that 
we're a monopoly, so we won't prevent you from getting your 
site out, but you're going to have to pay us a little extra to 
get your site up, because we don't like you personally, number 
one; number two, we don't like the message of your T-shirt, and 
we've just decided to charge you more in order to get your 
message out.'' So, is that OK? I mean, the marketplace would 
then try to figure out what happens to you?
    Dr. Hahn. I think the answer is that you need to look at 
the broader context. As you pointed out with antitrust earlier, 
it's important to look at the competitive structure of the 
market. And in this case, we're talking about, I think, the 
broadband market. So, let me cite a little data that's in my 
testimony.
    Prices for digital subscriber lines--that's DSL service--
dropped by roughly a third between 2001 and 2006. In the case 
of cable modem service, the quality-adjusted price declined 
significantly as cable connection speeds increased 
significantly, while prices held steady. The FCC reported that 
highspeed lines increased by 22 percent during the first half 
of 2007, from 82 million to over 100 million, following a 27-
percent increase, from 65 million to 82 million, during the 
second half of 2006. This strikes me, this suggests to me that 
the industry is subject to a lot of dynamic competition. It's 
not a perfectly competitive lemonade stand, but we need to look 
at how the industry is actually behaving and what their----
    Senator Dorgan. But----
    Dr. Hahn.--incentives to invest are.
    Senator Dorgan. But, Dr. Hahn, you didn't respond to my 
question. In any event, with response to the statistics you've 
described, I could show you data from Asia that shows you pay 
half as much to get ten times the speed. So, I mean, I think 
that is not germane to the question here.
    But, I do ask the question again. Let's assume that you've 
set up your American Enterprise T-Shirt Shop because you feel 
monopolies are being discriminated against, you don't want 
monopolies to be regulated, and so, the service provider--and, 
by the way, there aren't a lot of service providers, you 
probably have a choice of one or two in your hometown where 
you're trying to get this going--and they say, ``You know, we 
just don't like you, personally, and we don't like your T-
shirts. We're going to charge you something, a little extra 
than we charge others. That's our choice. It's my company. It's 
my choice.'' What's wrong with that?
    Dr. Hahn. Well, it could violate antitrust laws. You'd need 
to--you'd need to take a serious look at that. But, my point 
is, not only do you have robust competition in the broadband 
market, you have competitive threats from wireless and 
satellite, as Mr. McSlarrow said. So, you need to look at the 
market in the broader context and see what's actually----
    Senator Dorgan. Well, Dr. Hahn, though, no one would 
suggest there's robust competition in the marketplace for a 
good many Americans. Half of North Dakotans have only two 
choices with respect to providers. I mean, you, no one can 
really suggest there's robust competition. There's certainty 
robust competition out there in every direction with respect to 
content providers. I mean, there are people today, in some 
garage someplace, with stars in their eyes, because they're 
starting up a company, and they want to provide content. But, 
that is not the case with providers. And so----
    Dr. Hahn. It may not--I'm sorry.
    Senator Dorgan. Yes, I would ask a couple of other 
questions. But, I want you to be able to respond.
    Dr. Hahn. It may not be the case in North Dakota. I concur 
with you. But, if you look at the pattern over time, there 
seems to be more competition from different kinds of 
industries. And if you look at major metropolitan--major 
population centers throughout the U.S., they're served by 
multiple providers, according to the----
    Senator Dorgan. Yes. Well, you know, we had a hearing on a 
different subject recently. We had a guy sit at that table from 
California, and he said, ``In my office in California''--he was 
talking about cable television--``In my office in California,'' 
he said, ``we have basic tier service with 48 channels''--and I 
believe he said 42 of them are owned by the same five or six 
major companies that we would expect. So, he said, you know, 
this issue of many voices from one ventriloquist. So, whether 
it's cable to Internet, we do have more, most everyone would 
say we have more concentration.
    I want to, without abusing my time, say, Mr. Verrone, I 
wish you'd do some writing for me from time to time. Your 
testimony was interesting and compelling.
    And, Ms. Bateman, thank you, as well. And I understand that 
in this area of independent material on the Internet and cable 
and so on coming from independence is dramatically decreased. 
So, I understand the question that you pose to this committee 
about competition on the side of those that are trying to 
continue to provide content.
    You want to respond, either you or Ms. Bateman?
    Mr. Verrone. Well, I want to thank you for complimenting my 
testimony. I just hope my staff has run out and reserved the 
URL for Oogle.com, because I have a feeling it's going to be 
popular after Dr. Hahn's testimony.
    Clearly, when we talk about the fundamental considerations 
here of competition, and when you're dealing in the industry in 
which Ms. Bateman and I work, we've found, over the past 20 
years, that there's been a consolidation of the distribution. 
When the production and distribution providers congeal and 
consolidate, then you limit the independent voices. And one of 
the arguments made at the time was, ``Well, you know, there's 
the Internet. Just because the same people own cable and 
broadcast and satellite and--well, you can always go out and 
get access and get your views published through the Internet.`` 
And now it's a case of some of the same companies with whom we 
were bargaining during our negotiation that are looking now to 
control that content distribution. And so, it is, it is very 
much of a piece of media consolidation in this country and on 
this planet that the Internet be protected as a free and open 
means of expression.
    Senator Dorgan. Mr. Chairman, a vote has now started, and I 
will submit a series of questions to witnesses, and ask that 
they respond in writing.
    But, I do just want to say that the substantial increased 
consolidation, and that's undeniable, there's just dramatic 
consolidation; that's another subject that I've been involved 
in. It does require, it seems to me, without tarnishing 
everybody as bad actors--that's not the intent, it's not my 
intent--it does require us, however, as a governing body to 
thoughtfully regulate. Not to inhibit, not to try to stop 
innovation, but to thoughtfully regulate on behalf of the 
public interest. The public interest here is important.
    So, I want us to progress. I want us to be a country that 
has the best access in the world, the best content, and have 
companies that provide us wonderful things as we want to access 
Internet and cable and so on. But, I do think there's an 
essential need here--and I think we've described it this 
morning with the Chairman of the FCC, and the need to have some 
certain regulatory capability. And I hope this hearing 
demonstrates that.
    I apologize that we have less time than we had hoped, but I 
will submit questions in writing.
    The Chairman. Senator Klobuchar?

               STATEMENT OF HON. AMY KLOBUCHAR, 
                  U.S. SENATOR FROM MINNESOTA

    Senator Klobuchar. Thank you very much, Mr. Chairman. I am 
up against the vote, so I'll try my best, here.
    Professor Lessig, in your remarks, or your prepared 
remarks, you talked about how, ''Unlike other industrialized 
nations, we, in the United States, have failed to provide the 
high level of competition among Internet service providers that 
characterized early Internet growth.`` And could you talk a 
little bit more about that and what other industrialized 
nations are doing that we aren't doing? And how does your own 
view of this relative lack of competition affect this debate?
    Mr. Lessig. Sure. So, our competitors--Japan and Europe, in 
particular--adopted essentially the regulatory strategy that we 
adopted in 1996. But, in Japan, in particular, they made that 
regulatory strategy actually work. So, it sustained enormous 
competition among ISPs, providing increasing service at lower 
cost for broadband access. And so, in Japan right now, there's 
a significant opportunity to select among competitors if your 
broadband service is no good or you don't like the blocking 
that's existing on the broadband service. And that's a critical 
part of what's made that market work so well.
    The United States adopted a different strategy. We backed 
away from the open access requirements that were originally 
part of the vision for broadband provision on Title II, and 
never imposed it under Title VI, and one predicted consequence 
of that would be, we'd have exactly the consolidation that 
we've had. And now, I think it's just not credible to assert 
that there's real competition in access to broadband at the 
fast levels that we're talking about.
    In my city, San Francisco, not a backwater, even though I 
come from South Dakota, not a backwater in provision; I have 
one choice--exactly one choice--for fast broadband, and that's 
cable. So, we have lost that competitive opportunity.
    And just recognize how much more difficult that makes 
Chairman Martin's job; because when you don't have competition 
among ISPs, then, when there's a problem, the only choice the 
consumer has is to come to the government and say to the----
    Senator Klobuchar. Well----
    Mr. Lessig.--government----
    Senator Klobuchar.--how about this idea that I think Mr. 
McSlarrow was referencing, and maybe in discussions I've had, 
that wireless and satellite companies will enhance competition? 
Do you think that that's true, that that will eventually 
happen?
    Mr. Lessig. I don't think that the satellite is going to 
deal adequately with the latency problem, with the slowness 
problem for certain applications. It might be that wireless, if 
deployed correctly, will. But, still, we need to recognize, 
it's a tiny fraction of 1 percent right now out there, and we 
need to have real competition in the major markets right now in 
order to get the kind of growth that is necessary.
    Senator Klobuchar. And do you think that--I'd say this 
does. I'm very interested in wireless providers, and have been 
working on this Cell Phone Bill of Rights. Currently, the FCC 
doesn't have a consistent policy that applies to the different 
platforms when it comes to this. And if Congress is going to 
maximize the value of Internet policies, do you think that 
these policies should apply to both wired and wireless Internet 
providers?
    Mr. Lessig. I do. I think the open-access requirement 
that's been suggested, in the context of wireless, would be 
very good to encourage lots of competition here. Now, the 
contexts are different. The platform in wireless was never the 
neutral, open platform that the Internet was. So, in the 
Internet context, we're talking about preserving something. In 
the wireless context, we're talking about adding a kind of open 
access--openness. But, I think it would be valuable to do it, 
especially because Congress has not supported the idea of 
expanding the amount of unlicensed wireless. The greatest 
growth in applications in wireless has been, for example, in 
the Wi-Fi space, unlicensed wireless spectrum. And by not 
encouraging a wider growth in that, I think that we risk not 
using the wireless technology in the most efficient way to spur 
broadband growth.
    Senator Klobuchar. I'm just--and, Dr. Hahn, maybe you're 
going to comment on this, but you know, seeing my daughter, at 
age 12, and her friends, legally downloading some of these 
things and all these movies at once, and all these things--I do 
understand why you could suddenly have this sudden rush on the 
system. And one of things I wanted you--I know you're going to 
answer what he said, but could you talk about--a little bit 
about the fast lane and the slow lanes, and how fast the fast 
lane is, compared to the slow lane? I always seem to be on the 
slow lane. So, that's why I was wondering.
    Dr. Hahn. So do I. Can I respond to Professor----
    Senator Klobuchar. Yes.
    Dr. Hahn.--Lessig and your question, first?
    I'm currently working on this problem, related to openness 
and wireless. And I suspect that several other economists are, 
as well. And my own view is that it wouldn't be prudent to make 
public policy decisions before we actually have a serious cost-
benefit analysis of this issue. And one hasn't been done yet.
    But, I believe the economic impacts of a requirement to 
have--of an openness requirement in the wireless space, which 
is already an intensely competitive space, by any measure, is 
likely to raise--likely to be to raise basic cellular rates. 
So, I think you want to look at that really, really closely 
before you do that, because that could have adverse income----
    Senator Klobuchar. OK.
    Dr. Hahn.--implications.
    Senator Klobuchar. And the fast lane/slow lane?
    Dr. Hahn. On your fast lane--give me your question----
    Senator Klobuchar. How much faster is the fast lane? What's 
the difference between them?
    Dr. Hahn. Well, it depends. I mean, I know some people who 
actually use dial-up modem, so there's a huge difference.
    Senator Klobuchar. Yes.
    Dr. Hahn. But, one point I'm--wanted to make with respect 
to fast lane and slow lane--I realize discrimination is a 
politically incorrect word, at least in this chamber, but from 
an economist's point of view, they don't necessarily view it as 
a bad thing. And, in fact, there is already discrimination out 
there. If you were--if you were asked, ``Do you want a very 
fast lane?'' from one of the Internet service providers, you'd 
have to pay a few dollars more a month than if you want the 
medium-fast lane. So, we do have some forms of discrimination 
now, and it--we have forms of price discrimination all over the 
place, and economists generally view it as a reasonable way of 
paying for the fixed costs of investments and giving firms an 
incentive to invest in future broadband networks.
    Senator Klobuchar. Well----
    Dr. Hahn. So, it has positive, as well as negative, 
impacts.
    Senator Klobuchar. Thank you.
    I just have one last question. I'll, maybe, submit some 
more, because we have this vote going on.
    But, of you, Ms. Bateman--I'm a former prosecutor, so I'm 
interested in sort of a different issue on the future of the 
Internet, which is the ability of the creative community to 
ensure that your content is protected and is not going to be 
used in violation of copyright laws and otherwise stolen or 
pirated or co-opted. And I know that you talked--I don't know 
if you talked about it, I came in at the tail end of your 
remarks, but in your prepared remarks, about the digital 
watermarking could be the solution to prevent piracy. Do you 
want to talk a little bit about that?
    Ms. Bateman. I'm not as well versed on the technological 
aspects of those, but I know there are--I mean, I think, from 
the first day that the VCR machine was introduced, there were 
concerns about, you know, taking the data off the initial 
delivery system and sharing it with other people. So, I can't 
answer that question, technologically, but I do know that there 
are ways to countermand that, financially, by, you know, having 
relationships with sponsors and so forth. And, in that sense, 
you would want--actually want your stuff scraped and put on 
other servers, so that that sponsor's ads or embedded--or 
incorporated product is spread around.
    I understand that there are some people who wouldn't want 
that to happen. And it's an ongoing problem, and it's a problem 
with CDs and, like I said, tapes and DVDs, and it's not just 
the Internet.
    Senator Klobuchar. Thank you very much.
    The Chairman. Ms. Combs, Dr. Hahn, President Verrone, Ms. 
Bateman, President McSlarrow, and Professor Lessig, on behalf 
of the Committee, we thank you very much. Because of the 
constraint of time, we will have to adjourn at this moment, but 
I will be submitting questions to all of you. I hope you can 
get a response to me.
    The record will be kept open for 3 weeks. If you do have 
any amendments you'd like to make to your statements, or 
addendums, please feel free to do so.
    [Whereupon, at 12:14 p.m., the hearing was adjourned.]
                            A P P E N D I X

Prepared Statement of Hon. Maria Cantwell, U.S. Senator from Washington
    Thank you, Chairman Inouye and Vice Chairman Stevens for calling 
this important hearing.
    There are a number of critical issues when discussing the future of 
the Internet; one is Internet governance. What should the role of 
Internet Corporation for Assigned Names and Numbers (ICANN) be and what 
should the role of the U.S. Government be within ICANN?
    Another series of questions surround IPV6, the successor to the 
current version of the Internet Protocol, for general use on the 
Internet. Why is the new protocol's adoption so slow? And, taking a 
step further back, how critical is its adoption in the first place to 
the continued growth of the Internet?
    And then there is Internet security, Internet safety, Internet 
privacy, Internet pricing models, Internet advertising, more broadly, 
Internet monetization, and the list goes on and on.
    But the most fundamental issue regarding the future of the Internet 
is how to ensure that consumers in all part of the country have a 
choice of multiple, independently-owned providers for high-speed 
Internet access.
    For example, if there is a well-functioning market for residential 
consumer broadband services, the discussion over net neutrality would 
take on a different tone. In an efficient market, if a consumer doesn't 
like the price or the terms of service, he or she can walk over to a 
competitor. In today's market, by contrast, most consumers have one or 
two independent choices for broadband. These broadband providers have a 
huge amount of market power and consumers do not have much recourse.
    Such limited choices limit the value of greater disclosure by 
broadband providers regarding things such as its network management 
practices. If a consumer believes the practices cited in the small 
print are restrictive and unreasonable, they may get upset, but what 
options do they really have in a market plagued by imperfect 
competition?
    And that leads me to net neutrality.
    I appreciate the fact that a broadband provider will be limited in 
the rate of return it can provide its shareholders if all it provides 
consumers is the commodity transport of packets. I realize that these 
providers now typically bundle broadband access with voice, video, and 
data services riding over the broadband connection.
    I also understand that there is a need for reasonable network 
management to ensure quality of service to customers. Sometimes each 
class of packets--voice, video, and data--needs to be treated 
differently. And, sometimes the system architecture used by the 
broadband provider places unique constraints on the system. But, 
without transparency, who's to say what is reasonable?
    So, where do you draw the line?
    A few years back, the FCC issued its four net neutrality 
principles. At the time they were released, it was clear that these 
were principles and they were not enforceable. While the Commission 
does have ancillary authority under Title I of the Communications Act, 
it is a real stretch to claim that it can be applied to enforcing the 
net neutrality principles. Given this reality, I was not surprised, 
when a cable system operator recently criticized for using network 
management practices contrary to the net neutrality principles, 
replied, in effect, the emperor has no clothes.
    This company's response only confirms the need of a fifth, 
enforceable net neutrality principle of non-discrimination. It could be 
as simple as the amendment offered by Senators Snowe and Dorgan during 
the mark up of the Telecommunication Act of 2006.
    With enforceable non-discrimination language, there will be a 
greater level of trust by consumers and businesses that a broadband 
provider's network management practices are just that--network 
management.
    No need to remind anyone here that the Internet has thrived, in 
large part, because innovation has always been on the edge of the 
network and did not have to be blessed by the network operator. We 
should keep it that way.
    If network operators, under the guise of network management, assert 
a stronger role, you will see their business arrangements squeeze out 
innovation by unaffiliated parties. The temptation may prove to be too 
strong. And when Internet start-ups seek venture capital funding, 
investors will be hard-pressed to consider any company not affiliated 
with a network operator.
    Of even greater concern is for the potential for broadband network 
operators to leverage control over the transmission of packets through 
their network and act as a gatekeeper for content. While I oppose the 
illegal distribution of copyrighted material, this is just not the 
right way of going about it. It raises a whole host of privacy concerns 
and will no doubt lead to protracted litigation.
    I look forward to hearing from the panel.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Byron L. Dorgan to 
                          Hon. Kevin J. Martin
    Question 1. Recently, Comcast announced that it is engaging in 
conversations with Bit Torrent, Inc. and Pando Networks, which 
distribute content through Bit Torrent applications.
    a. Does this demonstrate that the marketplace is addressing the 
concerns raised by consumers?
    b. Do you think that the response may have been influenced by the 
political scrutiny?
    c. Do deals cut with these individual companies solve the problem?
    Answer. I am pleased that Comcast has reversed course and agreed 
that it is not a reasonable network management practice to arbitrarily 
block certain applications on its network. I also commend the company 
for admitting publicly that it was engaging in the practice and now 
engaging in a dialog with BitTorrent. Unfortunately, Comcast originally 
disavowed any knowledge of any action to block certain applications on 
its network and only came forward after repeated requests and 
heightened public scrutiny.
    I hope that the negotiations will result in a solution that 
preserves consumers' ability to access any lawful Internet content and 
applications of their choice. That ability is fundamental to preserving 
the open marketplace and innovation that characterizes the Internet.
    I am concerned, though, that Comcast has not made clear when they 
will stop this discriminatory practice. It appears this practice will 
continue throughout the country until the end of the year and in some 
markets, even longer. While it may take time to implement its preferred 
new traffic management technique, it is not at all obvious why Comcast 
couldn't stop its current practice of arbitrarily blocking its 
broadband customers from using certain applications. Comcast should 
provide its broadband customers as well as the Commission with a 
commitment of a date certain by when it will stop this practice. Unless 
and until it does so, it is ignoring the concerns raised by consumers.
    I believe that the Commission must remain vigilant in protecting 
consumers' access to content on the internet. Thus, it is critically 
important that the Commission take seriously and respond to complaints 
that are filed about arbitrary limits on broadband access and potential 
violations of our principles.

    Question 2. In the last Congress, when this Committee was 
considering network neutrality legislation in the telecom legislation, 
the phone and cable companies argued that Congress did not need to 
enact rules of the road to protect consumers from discrimination. They 
stated that they would never censor political speech or block lawful 
applications and content. They said that consumers' concerns about such 
bad behavior was unfounded and was a ``solution in search of a 
problem.'' We now have seen some high profile examples of network 
operators censoring speech and blocking applications. Are the concerns 
that were raised last year still a ``solution in search of a problem?''
    Answer. As the expert communications agency, it was appropriate for 
the Commission to adopt, and it is the Commission's role to enforce, 
its Internet Policy Statement. Indeed, on several occasions, the entire 
Commission has reiterated that it has the authority and will enforce 
these current principles.
    In 2007, the Commission committed to enforcing our existing 
principles and the policy statement. Specifically, in April 2007, the 
Commission expressly stated:

        The Commission, under Title I of the Communications Act, has 
        the ability to adopt and enforce the net neutrality principles 
        it announced in the Internet Policy Statement. The Supreme 
        Court reaffirmed that the Commission ``has jurisdiction to 
        impose additional regulatory obligations under its Title I 
        ancillary jurisdiction to regulate interstate and foreign 
        communications.'' Indeed, the Supreme Court specifically 
        recognized the Commission's ancillary jurisdiction to impose 
        regulatory obligations on broadband Internet access 
        providers.\1\
---------------------------------------------------------------------------
    \1\ Broadband Industry Practices, WC Docket No. 07-52, Notice of 
Inquiry, 22 FCC Rcd 7894, 7896, para. 4 (2007) (internal footnotes 
omitted).

    I believe that the Commission has a responsibility to enforce the 
principles that it has already adopted. Indeed, the Commission has 
already taken enforcement action in response to other complaints. In 
the Madison River complaint, the Commission ordered a telephone company 
to stop blocking VoIP calls.
    Unfortunately, as you point out, there have been several incidents 
or problems in which carriers have been accused of blocking 
applications. I believe that the Commission must remain vigilant in 
protecting consumers' access to content on the internet. Thus, it is 
critically important that the Commission take seriously and respond to 
these complaints that are filed about arbitrary limits on broadband 
access and potential violations of our principles.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Ted Stevens to 
                          Hon. Kevin J. Martin
    Question 1. Is the FCC aware of any instances where an operator has 
discriminated against content on a religious or political point of 
view?
    Answer. In September 2007, the press reported that Verizon Wireless 
rejected a request from NARAL Pro-Choice America to make Verizon's 
mobile network available for a text-message program that allowed people 
to sign up for text messages from NARAL. The activities attributed to 
Verizon Wireless, however, involved wireless text messages rather than 
access to Internet content. The Commission has sought public comment on 
a Petition for Declaratory Ruling filed by several public interest 
groups to clarify the regulatory status of text messaging services, 
including short-code based services sent from and received by mobile 
phones.
    In addition, it has been reported in the press that AT&T muted 
remarks made by singer Eddie Vedder of the rock group Pearl Jam 
criticizing President Bush during a live Webcast of a Pearl Jam 
performance.

    Question 2. Given the size, complexity and cost of the broadband 
networks, how quickly can a network operator reasonably be expected to 
migrate to new management technologies? At what cost?
    Answer. The Commission has the dual responsibilities of creating an 
environment that promotes infrastructure investment and broadband 
deployment and to ensure that consumers' access to content on the 
Internet is protected. In order to meet these responsibilities, I 
intend to explore more fully what constitutes reasonable network 
management practices, including the important ability for network 
managers to block the distribution of illegal content, including 
pirated movies and music and child pornography. I note, however, that 
the Commission has not mandated the adoption of any particular network 
management technology.

    Question 3. What are the unique challenges that are faced by 
smaller rural providers who may have more stringent capacity issues--is 
this an area where one size fits all?
    Answer. The Commission has not mandated the adoption of any 
particular network management technology and we would need to consider 
all of the facts including the capacity issues and unique challenges of 
rural carriers. Rather, I intend to explore more fully what constitutes 
reasonable network management practices, including the important 
ability for network managers to block the distribution of illegal 
content, including pirated movies and music and child pornography.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Olympia J. Snowe to 
                          Hon. Kevin J. Martin
    Question 1. The FCC has held two hearings, one at Harvard and one 
at Stanford, to hear from expert panelists regarding broadband network 
management practices. At Harvard, you mentioned that service providers 
should be allowed to take reasonable steps to make efficient use of 
their networks but that such management policies must be disclosed. 
Many witnesses at that hearing also voiced concern about the lack of 
disclosure and transparency. Since the Comcast-BitTorrent incident, 
Comcast has revised its terms of service and issued a new acceptable 
use policy. Does this change in Comcast's TOS provide enough 
information to consumers or developers that may want to create new 
applications or services to work over the Comcast network?
    Answer. First, the Commission still has the Comcast complaint in 
front of it. I was pleased that Comcast has reversed course and agreed 
that it is not a reasonable network management practice to arbitrarily 
block certain applications on its network. I also commended the company 
for admitting publicly that it was engaging in the practice and for 
engaging in a dialog with BitTorrent. I am concerned, though, that 
Comcast has not made clear when they will stop this discriminatory 
practice. It appears this practice will continue throughout the country 
until the end of the year and in some markets, even longer.
    I have proposed a framework for analyzing complaints and concerns 
about network management practices by broadband operators. First, the 
Commission should consider whether the network management practices are 
intended to distinguish between legal and illegal activity. The 
Commission's network principles only recognize and protect users' 
access to legal content. Second, the Commission should consider whether 
the network service provider adequately disclosed its network 
management practices. A hallmark of whether something is reasonable is 
whether an operator is willing to disclose fully and exactly what they 
are doing. Adequate disclosure of the particular traffic management 
tools and techniques--not only to consumers but also to the designers 
of various applications and entrepreneurs--is critical. Finally, the 
Commission should consider whether the network management technique 
arbitrarily blocks or degrades a particular application.
    If a network management practice selectively identifies particular 
applications or content for differential treatment, the Commission 
should evaluate the practice with heightened scrutiny, with the network 
operator bearing the burden of demonstrating that the particular 
practice furthered an important interest, and that it was narrowly 
tailored to service that interest.

    Question 1a. Can the company provide more disclosure and not 
infringe upon proprietary or sensitive company information that would 
be useful to consumers and developers?
    Answer. While we have not yet acted on the Comcast complaint, 
adequate disclosure of the particular traffic management tools and 
techniques must be provided to the designers of various applications 
and entrepreneurs.

    Question 2. The Commission is still investigating complaints 
regarding the Comcast-BitTorrent blocking or degrading incident and has 
yet to determine whether the actions violated the FCC's principles 
protecting consumer access to the Internet. However, you stated with 
respect to the incident it does not appear that cable modem subscribers 
had the ability to do anything they wanted on the Internet, it wasn't 
content agnostic, and the questionable network management technique was 
being triggered regardless of the actual levels of congestion at that 
particular time. Given this evidence and the testimony of the various 
witnesses at your two hearings, it seems as if the activities of 
Comcast were in clear violation of at least two of the FCC's 
principles--``Consumers are entitled to access the lawful Internet 
content of their choice'' and ``are entitled to run applications and 
use services of their choice,'' does the Commission agree?
    Answer. The Commission is still investigating these complaints and 
we have not yet determined whether the actions violated our principles 
protecting consumer access to the Internet. However, Comcast appears to 
have utilized Internet equipment from Sandvine or something similar 
that is widely known to be a relatively inexpensive, blunt means to 
reduce peer-to-peer traffic by blocking certain traffic completely. In 
contrast, more modern equipment can be finely tuned to slow traffic to 
certain speeds based on various levels of congestion. Specifically, 
this equipment: (1) blocks certain attempts by subscribers to upload 
information using particular legal peer-to-peer applications by 
pretending to be the subscriber's computer and falsifying a ``reset'' 
packet to end the communication, and (2) degrades the corresponding 
attempts to download information using the same peer-to-peer 
applications.
    Based on the testimony we have received thus far, I think it is 
important to clarify a few points. Contrary to some claims, it does not 
appear that cable modem subscribers had the ability to do anything they 
wanted on the Internet. Specifically, based on the testimony we have 
received thus far, some users were not able to upload anything they 
wanted and were unable to fully use certain file sharing software from 
peer-to-peer networks. Contrary to some claims, it does not appear that 
this technique was used only to occasionally delay traffic at 
particular nodes suffering from network congestion at that time. 
Indeed, based on the testimony we have received thus far, this 
equipment is typically deployed over a wider geographic or system area 
and would therefore have impacted numerous nodes within a system 
simultaneously. Moreover, the equipment apparently used does not appear 
to have the ability to know when an individual cable segment is 
congested. It appears that this equipment blocks the uploads of at 
least a large portion of subscribers in that part of the network, 
regardless of the actual levels of congestion at that particular time. 
Finally, contrary to some claims, it is not clear when they will 
actually stop using their current approach. They claim that they will 
deploy this new solution by the end of the year but it is unclear 
whether they will be finished deploying their solution or just starting 
that migration. Indeed the question is not when they will begin using a 
new approach but if and when they are committing to stop using the old 
one.

    Question 3. It seems unclear when Comcast will actually stop using 
their questionable approach to network management. The broadband 
provider has vaguely claimed they will deploy a new network management 
solution by the end of the year but it seems as if they are continuing 
to use their current method. What is the Commission's time-frame with 
concluding its investigation?
    Answer. I am hopeful that the Commission will conclude its 
investigation into the Comcast complaint by this summer.

    Question 4. Isn't it concerning that Comcast is continuing to 
employ discriminatory network management practices, which many experts 
have called unreasonable?
    Answer. I am concerned that Comcast has not made clear when they 
will stop this discriminatory practice. It appears this practice will 
continue throughout the country until the end of the year and in some 
markets, even longer. While it may take time to implement its preferred 
new traffic management technique, it is not at all obvious why Comcast 
couldn't stop its current practice of arbitrarily blocking its 
broadband customers from using certain applications. Comcast should 
provide its broadband customers as well as the Commission with a 
commitment of a date certain by when it will stop this practice.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                            Dr. Robert Hahn
    Question 1. Since 2003, the FCC has been reclassifying broadband 
services as Title I services under the Communications Act. In 2005, the 
Supreme Court upheld this approach in its Brand X decision. In light of 
the FCC's reclassification of broadband services and the Supreme Court 
subsequently deciding that this approach passes legal muster, do you 
believe the FCC has adequate authority to stop broadband network 
providers from engaging in unfair discrimination?
    Answer. Let me preface my remarks by saying that I am an economist 
and not a lawyer. I do believe that the FCC has adequate authority. I 
also believe that, to the extent there are antitrust issues, the FTC 
and DOJ can play constructive roles.

    Question 2. Broadband capacity plays an important role in the 
network neutrality and network management discussion. To this end, I 
would like to ask two questions: Can we worry less about discrimination 
or content favoritism if there is more broadband network capacity?
    Answer. This question avoids the most critical question in the 
broadband debate--namely, what is the most efficient way in which 
network owners can expand capacity. A ``dumb'' large pipe that treats 
all packets the same may cost significantly more than an intelligent 
smaller pipe that prioritizes some traffic over others. The higher 
costs associated with the dumb pipe will likely be passed on to 
broadband subscribers in the form of higher monthly subscription fees. 
Regulators should not mandate this outcome because it would likely be 
inefficient and hurt consumers.

    Question 2a. Can broadband network providers add capacity fast 
enough to meet consumer demand?
    Answer. In the absence of a market failure, regulators should not 
concern themselves with such issues. The market can be counted on to 
satisfy demand. Some of the legislative proposals limiting pricing 
freedom are likely to slow the introduction of innovative technologies 
that can best meet consumer demands.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Ted Stevens to 
                            Dr. Robert Hahn
    Question 1. Who benefits from network neutrality regulation?
    Answer. This depends on the kind of network neutrality regulation. 
If we assume net neutrality regulation prevents a platform provider 
from charging a content provider a positive price for enhanced quality 
of service, then my sense is that there would be three important 
economic impacts: (1) Higher bills for end users (i.e., consumers and 
businesses that use the Internet will likely pay more than they would 
otherwise because the platform provider cannot recover costs of the 
network from the content providers); (2) Fewer applications that depend 
on enhanced quality of service would come to market; and (3) Some 
content providers would benefit who do not need a higher quality of 
service because they would not be charged by the platform for providing 
end users with access to their content.
    Regarding item (1), more research needs to be done to estimate the 
economic impacts on consumers, but preliminary research I have done 
with Hal Singer suggests that the adverse price impacts on end users 
could be substantial.
    Regarding item (2), consumers who desire applications that require 
a higher quality of service to perform effectively will be less likely 
to have that opportunity with net neutrality regulation. Examples 
include online gaming and telemedicine. There would be social losses 
and losses to consumers from a reduction in investments aimed at 
improving quality of service.

    Question 2. Net neutrality proponents argue one set of rules for 
everyone, but doesn't network neutrality impact different consumers 
differently and different networks differently?
    Answer. The impact of particular regulations is an empirical 
question. Nonetheless, I think it is fair to say that different 
consumers will be impacted differently as will different networks. I 
would need to have more precise economic data to say more about this.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Olympia J. Snowe to 
                            Dr. Robert Hahn
    Question 1. It has been stated numerous times that there isn't 
sufficient broadband ISP competition. While some markets (more 
metropolitan and urban areas) do have robust competition, most markets 
have an effective duopoly that controls access to high speed Internet 
connections. How would you assess the current direction of broadband 
competition given the emergence of wireless broadband and broadband 
over power lines (BPL) services? Is competition growing?
    Answer. This depends on how you define competition. Data I cited in 
my testimony, contained in the FCC reports, suggest that competition in 
the wireline broadband space is growing. Moreover, competition between 
wireline and wireless networks is growing. So, for example, I may use a 
BlackBerry to get my e-mail or access the Internet, and I might also 
use my mobile phone. My view of the general ``broadband market'' is 
that it is highly dynamic and consumers are benefiting. I cite price 
and quality of service data in my testimony that makes this point.

    Question 2. Why isn't there more competition in the Broadband 
space? What barriers to entry are hindering new entrants?
    Answer. I see a lot of competition in the broadband space. In my 
testimony and in AEI-Brookings publications, I make suggestions on 
lowering some barriers to entry. One area that could lead to greater 
competition in broadband is the auctioning off of more spectrum to the 
private sector.

    Question 3. What specific recommendations do you have for us to 
craft effective policy that would promote more competition in this 
market space?
    Answer. Let's recognize that regulation that aims to prevent a 
platform owner from contracting with a website for enhanced quality of 
service at a positive price will not likely generate more competition 
among platform owners. Let's also recognize that regulation has costs 
as well as benefits. Moreover, most economists who have looked at 
proposals for net neutrality appear to agree that the benefits of such 
regulation are likely to fall short of the costs.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Byron L. Dorgan to 
                             Patric Verrone
    Question 1. Are network operators a potential threat to new video 
services on the Internet?
    Answer. Network operators are indeed a potential threat to the 
proliferation of new video services on the Internet. The WGAW believes 
that the public interest is served by the existence of diverse new 
media platforms that offer original made-for-online content. Many such 
sites have been launched and many more are in the works. We must, 
however, ensure that these new ventures are not placed at a 
disadvantage by network operators that discriminate or in any way 
impede the ability of consumers to access their content. Certain 
network operators have already admitted blocking or otherwise 
interfering with certain types of web traffic. The WGAW believes the 
actions of some network operators have set a dangerous precedent and 
must be immediately counteracted.

    Question 2. Should network operators who are also in the business 
of selling content to their subscribers have the power to discriminate 
against competing services?
    Answer. Absolutely not. This type of interference is a threat to 
the vitality of the Internet.
    The concern of the WGAW and its members is that the service 
providers will use their resources to create a ``walled garden'' on the 
Internet, effectively blocking access to sites that can not afford to 
pay for distribution, or allowing favored content providers access to a 
``fast lane.'' The Internet is the next frontier in the distribution of 
news and entertainment content. If we want to avoid the problems that 
have resulted from the extreme consolidation of the Nation's broadcast 
system, we must allow the Internet to remain true to the principles of 
openness that animated its creation. We must ensure that independent 
production and a diversity of viewpoints are not crowded out of the 
Internet. SB 215 will do just that.
    We are also concerned that a lack of competition among Internet 
service providers could ultimately leave Americans with fewer choices 
than what is now available on broadcast and cable television. One can 
imagine a circumstance in which high speed Internet service to a 
community is offered by only one company. Should that company also be a 
content producer, or be affiliated with or have an exclusive 
arrangement with a content producer, the access of consumers to diverse 
viewpoints could be threatened. We share the Senator's belief that 
democracy relies on diverse viewpoints. Maintaining the Internet as an 
open forum will ensure that Americans have access to an inexhaustible 
source of information and entertainment.

    Question 3. Are we in danger of seeing the old media cartel 
reappear in new media?
    Answer. It is not difficult to envision how ``old media'' 
conglomerates could use their economic power to carve out significant 
market share on the Internet, to the detriment of independent producers 
and small start-ups. The major media companies are actively pursuing 
online business. Hulu.com and iTunes are two of the most prominent 
examples of the major studios attempting to capture online market 
share.
    There is a lesson to be learned from the old media consolidation. 
As I mentioned in my remarks, the companies that control distribution, 
and now production, have used their market power to own and control the 
content writers create. If we do not protect the openness of the 
Internet, we will merely recreate that increasingly closed system, in 
which distributors use their ability to turn the spigot off and on as a 
means of controlling content. The dominant players in the new media 
cartel may be the same conglomerates that control traditional media, or 
they may be Internet service providers that use their distribution 
prowess to establish the same hierarchical business model. In either 
case, such consolidation will be detrimental to small producers, 
content creators and the American public, which is best served by 
fostering access to a diversity of views.
                                 ______
                                 
     Response to Written Questions Submitted by Hon. Jim DeMint to 
                             Patric Verrone
    Question 1. In your testimony, you argue that the Internet will be 
``turned into a walled garden of content control'' without net 
neutrality. Of course, currently, there are no net neutrality 
regulations. In fact, there has been no such regulation on the entire 
broadband industry for years. Further, cable modem services have never 
been under such regulations. Have you seen a decrease in the quality, 
quantity. consumption. or availability of content created by your 
organizations members online currently compared to 1 year ago? Five 
years ago? Ten years ago?
    Answer. Over the past few months we have experienced an exponential 
growth in the quality, quantity, consumption and availability of online 
content. Content made for traditional media is being reused on the 
Internet, and new sites have proliferated online with original made-
for-Internet material. The members of the Writers Guild are poised to 
take advantage of these new platforms as a means of distributing the 
next generation of audiovisual content. But as I said in my testimony, 
in order for writers to create content and compete, we must maintain 
open access to the Internet.
    The growth and impact of online content were illustrated during our 
recent strike against the major media companies. During the work 
stoppage, dozens of writers began producing Internet content. These 
works took many forms: historical analyses, strike updates, parody. 
Some clips posted by WGAW members received as many as 500,000 online 
hits.
    Writers' interest in producing and distributing original content on 
the Internet will not subside now that the strike has ended. The Guild 
is actively negotiating collective bargaining agreements with 
independent companies that plan to concentrate on new media production.
    The WGAW supports net neutrality as a means of protecting the 
environment that has allowed this new market to emerge. Your question 
presupposes that `net neutrality' is government regulation. We have a 
different view. SB 215 is not government regulation, but a prophylactic 
measure to preserve an open access and prevent the regulation of the 
Internet by private companies that have the technical capability to 
control distribution channels.

    Question 2. How do the revenues received by your members from the 
Internet distribution of their works compare to 1 year ago? Five years 
ago? Ten years ago?
    Answer. While we have seen significant growth in revenues received 
by members from Internet distribution. the exact results have been 
difficult to ascertain. Prior to our recent negotiations with the 
studios, the compensation due for material reused on the Internet was 
in dispute. With the ratification of our new agreement, there is now a 
negotiated compensation structure for reuse of material on the 
Internet. Just as important, we succeeded in negotiating broad access 
rights allowing us to monitor the volume of Internet distribution as 
the market develops.

    Question 3. Can you share any example of fellow writers' work being 
blocked by an Internet provider?
    Answer. While we do not have an example of a fellow writer's work 
being blocked, the WGAW is extremely concerned about the dangerous 
precedent being set by certain Internet service providers. Comcast, 
AOL, AT&T and others have all been accused of, and in some cases have 
admitted, network management practices that interfered with consumer 
access to legal content. The WGAW has learned from its past experience 
with media consolidation that we must be diligent in our efforts to 
ensure that these providers are not allowed to restrict the ability of 
Americans to access content.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Byron L. Dorgan to 
                            Justine Bateman
    Question 1. Are network operators a potential threat to new video 
services on the Internet?
    Answer. Internet connection providers are of course a vital part of 
the Internet experience and an absolute necessity in connecting to it. 
There is certainly the impression given by these companies that they 
would very much like to be in the primary business of constraining that 
Internet experience. There simply cannot be the continuation of 
innovation we have witnessed so far on-line with the private interest 
constraints that have been suggested by these Internet providers. The 
``constraint business'' these providers suggest are absolutely threats 
to new video services. Supply and demand need to be the deciding 
factors in a new Internet venture's success or failure just like in the 
brick-and-mortar business landscape. In addition, the blocking and 
impeding of web traffic that has been perpetrated by specific Internet 
providers establishes a dangerous precedent and clearly demonstrates 
the need for the Federal Government to require preserving the Internet 
as the free and open marketplace it is today.

    Question 2. Should network operators who are also in the business 
of selling content to their subscribers have the power to discriminate 
against competing services?
    Answer. No. If Time/Warner, for example, wants to be in the 
Internet provider business (as they are) they need to abide by those 
rules (that will hopefully encompass Net Neutrality). If they also want 
to be in the content provider business (as they are), they are welcome 
to be and to then abide by those rules--you have to be good enough and 
interesting enough for people to tune in and to continue to tune in. I 
do not believe that wearing two hats means you suddenly disregard any 
rules of those hats; it means you now have two sets of rules.
    By the way, is this practice currently allowed with regard to the 
Cable TV services they provide? Are they allowed to block or impede 
access to programming just because it's not a Time-Warner show or on a 
Time-Warner network?
    Conversely, if each Internet customer had two or more Internet 
providers to choose from, then perhaps there would be providers 
supplying only their material, but the most successful provider with 
the most customers would always be the one offering all the Internet 
has to offer.

    Question 3. Are we in danger of seeing the old media cartel 
reappear in new media?
    Answer. I absolutely believe that the media corporations are 
spitting mad that they do not have control over the distribution on the 
Internet and that their current and suggested future practices only 
hint at the control they wish they could exert over it.
    For the entire life of TV and film production until recently, the 
studios and networks have had almost absolute control over 
distribution. That held not only the content providers attention, but 
also that of the advertisers.
    But at the same time, al! the media consolidation of the last 15 
years has taken the studios and networks out of the decision positions 
for the most part and put corporate businessmen, far removed from any 
knowledge about entertainment production, in the decision seats 
instead. As a result, quality and content have been pillaged in 
exchange for cold, hackneyed, overused concepts in our TV shows and 
films. The entire focus of these newly formed Media Collections is to 
dominate the market and increase financial performance. This in itself 
is not an unproven business tactic, but it doesn't work in the 
entertainment business.
    So to answer your question, yes, I believe that the media 
corporations, in an effort to stem this mud-slide of failure they find 
themselves in, want to position themselves on the Internet in the same 
dominant way as they've enjoyed off-line. The fact of the matter is 
that this is not how you regain success in entertainment. The way you 
regain success in entertainment is to create compelling programming 
that people want to see over and over again.
    So, even if they got their wish and ``took over the Internet", 
nobody would watch, just like they're not watching TV and films like 
they used to. And we would all be looking for a new way to share our 
ideas with one another. Once that was established, they would then try 
to dominate that and so on and so on.
                                 ______
                                 
     Response to Written Question Submitted by Hon. Jim DeMint to 
                            Justine Bateman
    Question. Under a net neutrality regulatory regime, no online data 
(including video) could be prioritized. What impact would such a regime 
have on the success of your project, FM78.TV, if you could not 
guarantee that its content reach end consumers with the quality you and 
they desire?
    Answer. The lack of prioritization for data, including video, is 
exactly what FM78.TV and other online media ventures will rely on in 
order to be competitive in the new online marketplace. Our biggest 
worry is that the current set of content producers, mainly the major 
media companies, will use their largesse to secure a preferred place on 
the Internet. Should they be able to do that, companies such as mine, 
which lack the resources to pay for preferential service or 
prioritization, will be unable to compete with the extraordinary 
resources of the major media companies. If there is a `fast lane' on 
the internet, I worry that only those companies with the financial 
capacity will be able to spread their content to the public.
    The Internet service providers have already expressed their desire 
to maximize revenues be creating systems where they can provide 
preferential services to certain content companies in exchange for fees 
or compensation. Such a scheme could literally mean that a company such 
as mine is unable to compete. FM78.TV would prefer to maintain the open 
marketplace the current Internet structure provides. This will allow 
small business to compete with the large corporations that want to make 
the Internet the latest iteration of broadcast television--where 
control over distribution is used to own and control content.
    If your question is intended to highlight the lack of broadband 
capacity in the United States, then I share your concern. I too am 
worried that companies like mine can not flourish until more Americans 
have access to high-speed, high-quality Internet service. The fact that 
we have allowed private companies to build out the current broadband 
network is extremely regrettable and I believe will be a problem for 
generations to come. Unlike the airwaves that have been deemed public 
and have been monitored by the Federal Government, we have allowed the 
next generation of information to be solely controlled by the companies 
that have laid the groundwork, with nearly no oversight and with no 
governance. In such a scenario, the least we can do is insure that the 
companies that control the pipes are not able to interfere with the 
legal content and information that American's are able to access.
    I hope the Federal Government, along with state and local 
governments, will use every means at their disposal to facilitate the 
build of the country's broadband infrastructure. Several independent 
sources have expressed concern that the United States is quickly 
falling behind other developed countries in terms of access to high 
speed Internet service. The competitiveness of our economic future 
depends upon more Americans having greater access to high speed 
internet. As a nation, we must prioritize greater commitment to 
insuring that American continues to lead in the new economy, and 
insuring that every American has access to high speed Internet is 
critical to that endeavor.'
    1 find it troubling that certain telecommunications companies are 
claiming that net neutrality will stifle the infrastructure 
development. The same companies that make such a specious argument are 
the same companies that continue to generate record profits. 
Additionally, net neutrality simply preserves the ability for companies 
such as mine to distribute content on the net--it does nothing to 
interfere with the companies ability to charge consumers for the 
services.
    I sincerely hope governments will prioritize the rapid development 
of the broadband infrastructure just as I sincerely hope that the 
founding principle of the internet--an open marketplace--will be 
preserved for generations to come.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                             Kyle McSlarrow
    Question 1. Since 2003, the FCC has been reclassifying broadband 
services as Title I services under the Communications Act. In 2005, the 
Supreme Court upheld this approach in its Brand X decision. In light of 
the FCC's reclassification of broadband services and the Supreme Court 
subsequently deciding that this approach passes legal muster, do you 
believe the FCC has adequate authority to stop broadband network 
providers from engaging in unfair discrimination?
    Answer. Whether or not the FCC has the legal authority to regulate 
network management practices and otherwise enforce ``net neutrality'' 
requirements is currently an open question that is being considered by 
the FCC in an ongoing proceeding. I would also note that the FCC is not 
the only agency that may have authority to address these issues. In 
particular, the FTC has claimed authority to address anticompetitive 
practices by network operators.

    Question 2. Broadband capacity plays an important role in the 
network neutrality and network management discussion. To this end, I 
would like to ask two questions:
    Can we worry less about discrimination or content favoritism if 
there is more broadband network capacity?
    Answer. Broadband consumers expect reliable and high-quality 
service at a reasonable cost that enables them to access lawful content 
over the Internet--and that is what cable broadband service provides. 
Cable broadband subscribers are able to enjoy the full benefits of 
broadband because cable operators manage their smart networks on a 
content-agnostic basis to provide seamless connectivity, deter spam and 
viruses, and make sure that a tiny minority of users who utilize 
bandwidth-heavy applications don't slow down the Internet for everyone 
else.
    While cable broadband providers are constantly upgrading their 
capacity, the addition of capacity does not obviate the need for 
reasonable network management practices. For instance, as I explained 
in my testimony, many P2P protocols are written specifically to 
commandeer as much bandwidth as is available, meaning that providers 
cannot build their way out of the problems caused by these high-
bandwidth applications. The best way to ensure that customers have the 
capability to access applications at desired speeds is to continue to 
allow broadband providers to manage their networks so as to ensure the 
best results for their customers.

    Question 2a. Can broadband network providers add capacity fast 
enough to meet consumer demand?
    Answer. Cable broadband providers are constantly upgrading their 
broadband networks to satisfy customer demand for fast and efficient 
access to new content and new applications, and to win and retain 
customers in the face of increased competition from many alternative 
providers. As I noted above, however, the addition of capacity does not 
eliminate the need for providers to manage their networks to ensure the 
best possible broadband experience for their customers.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Maria Cantwell to 
                             Kyle McSlarrow
    Question 1. In your written testimony you raised concerns that any 
net neutrality rules may slow broadband roll out and adoption. Yet, you 
also cite the fact that cable already passes by 92 percent of 
households. Are you saying, in effect, that net neutrality rules will 
further slow consumer adoption of broadband? I thought it is content, 
applications, and price that drive consumer adoption of broadband.
    Answer. We are very proud of the fact that cable providers have 
deployed broadband to more than 92 percent of households in the United 
States using private risk capital. However, cable broadband providers 
are constantly upgrading their networks to meet consumer demand and to 
ensure a stable and reliable broadband platform for providers of online 
content and applications that increasingly need greater transmission 
capacity and higher speeds. Regulations that would dictate or rule out 
particular business models or impede a broadband provider's ability to 
manage its broadband network could deter investments in these upgrades, 
to the detriment of consumers and service providers alike.

    Question 2. Do you believe there to be a competitive market for 
high-speed Internet access in our country? If so, how many providers do 
there need to be in a market for you to consider that market to be 
competitive?
    Answer. The market for high-speed Internet access is very 
competitive. Cable operators, telephone companies, satellite providers, 
wireless network operators, mobile service providers and others are 
investing and competing with each other to offer the most compelling 
and innovative service.

    Question 3. Does your organization believe that the FCC's four net 
neutrality principles are enforceable by the agency? If not, then why 
not?
    Answer. The FCC's four net neutrality principles are not binding 
and enforceable today, because they were not adopted as rules. Whether 
or not the FCC has the legal authority to adopt such rules or to 
regulate network management practices is currently an open question, 
and is being considered by the FCC in an ongoing proceeding.

    Question 4. Does your organization believe that the FCC can use its 
ancillary authority under Title I of the Communications Act to enforce 
its four net neutrality principles? If not, then why not?
    Answer. Whether the FCC has ancillary authority to enforce its net 
neutrality principles is being considered in the proceeding mentioned 
above.

    Question 5. As you know, in a footnote to the FCC's four net 
neutrality principles, there was an escape clause which provides 
network operators a pass if they can show if they are performing 
``reasonable network management practices.'' What does NCTA consider to 
be ``reasonable network management practices?'' Does the FCC need to 
define the term further?
    Answer. Cable customers enjoy the full benefits of broadband 
because cable operators manage their smart networks on a content-
agnostic basis to provide seamless connectivity, deter spam and 
viruses, and make sure that a tiny minority of users do not slow down 
the Internet for everyone else. In order to ensure a stable and 
reliable broadband platform, cable operators must have the continued 
flexibility to adopt and implement content-agnostic network management 
practices that are reasonable with respect to their particular 
networks. ``Reasonable network management'' practices also depend on 
the types of issues that a particular network is facing. Any government 
definition of reasonable network management practices would invite 
confusion and litigation and would serve only to inhibit providers from 
effectively addressing future network issues. Regulations or a 
government definition of acceptable network management practices could 
also inhibit the development of innovative approaches to thwarting 
piracy and enhancing the online experience for the vast majority of 
Internet users.

    Question 6. My understanding is that one of the ideas the FCC is 
considering is for broadband providers to disclose their network 
management policies in its terms of service. I am not sure what that 
will accomplish because the idea will only work if there is a 
competitive market for high-speed Internet access, where consumers can 
switch providers if they do not like the terms of service. Does NCTA 
support greater consumer disclosure of network management practices in 
plain English and in readable size font? If a network management 
practice is disclosed to consumers, such as blocking or delaying 
packets, does it make it OK for a network operators to do it?
    Answer. As I have frequently stated, the cable industry is always 
looking at ways to improve upon its disclosure of information to 
consumers in order for such disclosure to be as clear and helpful as 
possible. Cable operators believe that keeping their subscribers 
informed about network management practices is a critical element of 
customer service, but best left to individual company's policies, 
rather than government rules. NCTA member companies use a variety of 
methods to manage their networks and are therefore best suited to 
determine how to appropriately disclose that information. Cable 
companies periodically review and revise their disclosure statements to 
ensure that they are complete and easily understandable, and they do so 
without any government mandate. Given the intense competition for 
broadband customers that cable faces from telephone companies and other 
providers, cable operators strive to ensure that their terms of service 
are fair and reasonable.

    Question 7. Bit Torrent uses peer-to-peer file sharing technology 
to deliver video content online. My understanding is that the 
technology is an efficient way to deliver content. Won't the cable 
industry's transition to DOCSIS 3 point 0 and Switched Digital Video 
ease some of the bandwidth constraints?
    Answer. The transition to DOCSIS 3.0 and switched video technology 
will enhance the efficiency of broadband networks, but it will not 
eliminate the need for sound network management practices. Network 
operators will still need to address and eliminate viruses and spam, 
and they will still need to ensure that tiny minority of heavy users 
does not degrade service for the vast majority of customers. Further, 
as I explained in my testimony, many P2P protocols are written 
specifically to commandeer as much bandwidth as is available, meaning 
that added capacity can't eliminate problems caused by these high-
bandwidth applications. The best way to ensure that customers have the 
capability to access applications at desired speeds is to continue to 
allow broadband providers to manage their networks so as to ensure the 
best results for their customers.

    Question 8. Some public interest groups argue that the reason a 
cable system operator might want to degrade the lawful peer-to-peer 
video delivered online is for competitive reasons. How do you respond?
    Answer. Those charges are wholly without foundation. In just the 
last few years, the use of Internet video on demand has grown at a 
dramatic rate. In July 2006, 107 million Americans watched video online 
and about 60 percent of Internet users downloaded more than 7 billion 
videos off the Internet. In February 2008, nearly 135 million U.S. 
Internet users spent an average of 204 minutes viewing 10.1 billion 
online videos. YouTube represented 34 percent of those online videos, 
or nearly 3.5 billion in total. To put it into context, in 2006, 
YouTube consumed as much bandwidth as the entire Internet consumed in 
the year 2000.
    Competition has driven cable operators to invest in faster and more 
reliable networks to meet consumer demand for video and other 
bandwidth-intensive applications. Cable's investment in and deployment 
of the reliable high-speed broadband service that provides the 
ecosystem in which Google, YouTube, Yahoo! and other Internet services 
can flourish.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Ted Stevens to 
                             Kyle McSlarrow
    Question 1. What do consumers expect a network operator to provide 
for them in terms of service and network management?
    Answer. Broadband consumers expect reliable and high-quality 
service at a reasonable cost that enables them to access lawful content 
over the Internet. Cable operators have demonstrated their commitment 
to providing Americans the very best broadband service available, and 
remain committed to doing so. Cable broadband subscribers enjoy the 
full benefits of broadband because cable operators manage their smart 
networks on a content-agnostic basis to provide seamless connectivity, 
deter spam and viruses, and make sure that a tiny minority of users who 
utilize bandwidth-heavy applications don't slow down the Internet for 
everyone else.

    Question 2. If a particular bandwidth service or application uses 
more bandwidth than others, why shouldn't the business owner of that 
application or service have to pay a fee?
    Answer. It may very well be appropriate for a provider of such a 
service to bear a portion of the costs of delivering the service to its 
users. The alternative would be for the network provider to pass those 
costs on to all subscribers, including those who do not user the 
service. This could put unnecessary upward pressure on the rates for 
broadband service and impede broadband adoption. Network and service 
providers need the flexibility to design and implement business plans 
that allow them to innovate and respond to consumer demand.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Olympia J. Snowe to 
                             Kyle McSlarrow
    Question 1. In a news.com August 2007 article, a Comcast spokesman 
``flat-out denied'' Comcast was filtering or ``shaping'' any traffic on 
its network. He went on to state the company doesn't actively look at 
the applications or content that its customers download over the 
network. Obviously, the Comcast-BitTorrent incident seems to conflict 
with that assertion. In another incident last year, Comcast 
disconnected several high-usage broadband customers. Comcast did 
contact them prior to discontinuing their services warning to curb 
excessive bandwidth consumption or risk a one-year service termination 
but didn't clearly reveal how much bandwidth consumption is allowed. 
Why didn't Comcast provide more appropriate disclosure with these two 
incidents?
    Answer. As this question is most properly directed to Comcast, we 
have shared the question with the company and it has provided the 
following response:

        Comcast works hard to ensure that its customers have 
        appropriate disclosure about its need to manage its network in 
        order to prevent certain uses of the network from degrading the 
        experience of other customers. Comcast's network management 
        activities, both with respect to BitTorrent and with respect to 
        excessive users, are consistent with the disclosures its 
        customers receive in the Terms of Service (``TOS'') and 
        Acceptable Use Policy (``AUP'') they are obligated to review 
        before they may use the service. For years, Comcast's TOS has 
        specified that Comcast High-Speed Internet service is subject 
        to ``speed and upstream and downstream rate limitations,'' and 
        that the service may be used only for ``personal, residential, 
        non-commercial purposes.'' Similarly, for years Comcast's AUP 
        has prohibited the use of the service that ``restrict[sl, 
        inhibit[s], or otherwise interfere[s] with the ability of any 
        other person . . . to use or enjoy the [s]ervice, including . . 
        . generating levels of traffic sufficient to impede others' 
        ability to send or retrieve information.'' And, for years, 
        Comcast's AUP has required customers to ensure that their ``use 
        of the Service does not restrict, inhibit, interfere with, or 
        degrade any other user's use of the Service nor represent . . . 
        an overly large burden on the network'' Comcast has openly and 
        readily acknowledged that it manages its network, including 
        managing traffic that causes congestion as well as reserving 
        the right to terminate service of those customers who abuse 
        their service after due notice.

        ``Transparency'' on network management issues is incredibly 
        complicated given that Internet applications and services 
        change constantly. Nevertheless, Comcast works to ensure that 
        its disclosures on matters such as network management and 
        excessive usage are timely and in sufficient detail to ensure 
        transparency to our customers while not providing a roadmap to 
        those who would seek to defeat these reasonable network 
        management efforts. Mindful of the views of its customers--and 
        of policymakers--who have urged that the challenges of network 
        management and excessive usage he explained better to 
        consumers, Comcast revised its AUP and FAQs earlier this year 
        to provide even greater transparency on these subjects. We 
        provide more details in our response to the next question.

        Ultimately, Comcast's network management practices are 
        undertaken to ensure that its customers continue to receive the 
        world-class service that they have come to expect from Comcast.

    Question 2. Comcast has also recently changed its Terms of Service 
in January where it now states the company ``uses reasonable network 
management practices that are consistent with industry standards'' and 
it temporarily delays peer-to-peer sessions during ``periods of high 
network congestion'' which seem vague. Could you elaborate on what the 
``industry standards'' are because it seems as if the techniques 
Comcast employed with BitTorrent were non-standards based practices--
such as spoofing or falsifying IP packets and infringing on consumer 
privacy by inspecting consumers' data to determine which were from the 
P2P application?
    Answer. As this question is most properly directed to Comcast, we 
have shared the question with the company and it has provided the 
following response:

        To effectuate its current bandwidth management, Comcast `s 
        network issues instructions called ``reset packets''--which 
        involve a communication between two IP addresses (and, 
        importantly, not between two people)--to temporarily delay the 
        initiation of new P2P file uploads at times of network 
        congestion.

        A ``reset'' is nothing more than a bit in the TCP packet header 
        that is used to signal that there is an error condition within 
        the network and that a new connection needs to be established; 
        the new connection is automatically established by the 
        application or service initiating the connection. The use of 
        resets is commonplace. AT&T has noted that ``[t]he `reset' 
        command has been [around] for more than a quarter century'' and 
        ``is commonly used to enable one computer to abort a TCP 
        connection with another computer for any of a number of 
        reasons, such as when the communications between the two 
        computers become unsynchronized.'' And Richard Bennett, a noted 
        network engineer, recently described a reset packet as ``the 
        only machine language [P2P protocols] understand [and] this 
        type of technique is common in the networking and software 
        industry where alternatives don't exist.'' It is the same 
        message that the computer receives when any number of problems 
        occur during a P2P file transfer, and the computer requesting 
        the file automatically knows how to process this message and to 
        retry its request (assuming it has not already downloaded the 
        file from other computers) without the user having to take any 
        additional action, just like a fax machine does when it 
        receives a busy signal. To most end users, these communications 
        will be virtually imperceptible, and, especially in the case of 
        properly functioning P2P protocols, will have no perceptible 
        effect on the end user's experience.

        Comcast does not inspect the content of data packets traversing 
        its network, and does not treat data packets differently based 
        on their content. Rather, Comcast, like many other ISPs, 
        inspects the data packets only to the extent necessary to 
        determine whether the packet will cause damage to the network 
        or otherwise degrade the consumer experience. Inspecting data 
        packets to determine whether they are sent by a particular P2P 
        protocol that causes excessive congestion is no different than 
        inspecting the packets to determine whether they contain 
        malicious code, such as viruses, worms, spam, or other firms of 
        malware. Other network functions, including, in some cases, 
        proper routing of the packets, also require this kind of packet 
        inspection. In all cases, such inspection is reasonably limited 
        to look no further than necessary than to determine whether the 
        transmission is using a P2P protocol that causes excessive 
        congestion that can degrade other customers' Internet 
        experiences. There are no privacy implications in such packet 
        inspections.

        Finally, we are engaging with the broad Internet community 
        through the Internet Engineering Task Force (IETF) to review 
        how and why we implemented our current bandwidth management 
        practices, and to consult with them on alternative approaches, 
        including efforts to make P2P technologies more bandwidth-
        efficient.

    Question 3. Don't certain networking protocols and standards, such 
as Transmission Control Protocol (TCP), already employ congestion 
control mechanisms, so why add an additional layer?
    Answer. Different network operators have different reasons for 
employing their particular set of network management techniques and 
strategies. The merits, feasibility, and effectiveness of using 
particular congestion management techniques such as traditional TCP 
congestion controls versus using more innovative approaches are very 
complex technical issues that many of the greatest minds in the 
Internet community are currently debating. NCTA's member companies work 
hard to ensure that their customers receive a world-class service, and 
need the flexibility to use the network management practices that best 
address their particular circumstances to continue to deliver the type 
of service that their users expect and deserve.

    Question 4. MIT Scientist David Clark recently voiced frustration 
about the lack of availability of data and information on network usage 
from the Internet service providers in order to conduct studies on some 
of the network problems that exist. Mr. Clark gave one example where he 
could not get one domestic ISP to provide any useful information for 
his study on residential high-usage broadband users--this in light of 
offering to keep the ISP's data completely anonymous. There also seemed 
to be similar reluctance from industry with crafting national broadband 
mapping policy--to improve the accuracy of the data so consumers and 
businesses know where broadband is offered and ISPs know where demand 
is. Why this constant reluctance, even when the data would remain 
anonymous?
    Answer. We know and respect Dr. Clark's work. Various of our 
companies have spoken with Dr. Clark and others in the academic 
community about the challenges of sharing such data, and we are hopeful 
that this can be worked out with all ISPs. For ISPs, understanding 
customer usage patterns is an important part of devising solutions for 
network management. Of course, network usage data is confidential and 
competitively sensitive, and there may be privacy issues raised by 
allowing third parties to have access to such data. Moreover, any 
network management solution needs to be designed to function with the 
specific technology each provider has implemented in its network.
    We respectfully disagree with the suggestion that the cable 
industry has been reluctant to craft a national broadband mapping 
policy. The cable industry has consistently demonstrated its commitment 
to policies that ensure all Americans have access to affordable 
broadband. Cable supports Senator Inouye's Broadband Data Improvement 
Act because we believe that improving Federal data collection and 
dissemination regarding where broadband services have been deployed in 
the United States is necessary in order to achieve the goal of 
ubiquitous broadband availability for all Americans. And cable 
companies have cooperated with programs under the aegis of Connected 
Nation on state broadband mapping efforts.

    Question 5. If we don't have this information then how can we 
properly address the problems we're facing, whether from standards 
development, regulatory, or a policy perspective?
    Answer. As noted above, cable fully supports broadband mapping 
legislation, but we believe that network usage data is better evaluated 
by individual network providers.

    Question 6. You've stated ``various estimates are that as few as 5 
percent of customers use from 50 to 90 percent of the total capacity of 
the network.'' But where is the industry data to support this claim?
    Answer. The following from the FCC record:

    AT&T Comments, WC Docket No. 07-52, at 14-15 (quoting David 
Vorhaus, Yankee Group, Confronting the Albatross of P2P 1-2 (May 31, 
2007)):

   P2P traffic ``constitutes approximately 60 percent of all 
        traffic that traverses the public internet'';

   ``BitTorrent alone accounts for roughly 40 percent of all 
        bandwidth'';

   ``[i]n times of peak usage, bandwidth-hogging users sharing 
        large files over P2P can push networks to their absolute 
        limit''; and

   ``[t]his problem is poised to worsen in the coming years'' 
        because, ``[a]s content owners migrate more video content to IP 
        networks, bandwidth demand will inevitably skyrocket.''

    ``In the absence of the broadband management practices, as few as 5 
percent of users dictate the terms on which the remaining 95 percent of 
users get access to broadband.'' CTIA Reply Comments, WC Docket No. 07-
52, at 3 (citing CTIA Comments at 12 (citing Steven Levy, ``Pay Per 
Gig'', The Washington Post, D1 (Jan. 30, 2008) and David Vorhaus, 
Confronting the Albatross of P2P, Yankee Group (May 31, 2007)).
    ``In a recent study of average data usage on its high speed 
wireless EvDO mobile broadband network, Sprint Nextel learned that a 
subset of end users, approximately 3 percent, accounted for more than 
50 percent of the total data usage on the network. During busy hours, a 
mere 1 percent of end users generates 42 percent of data traffic and is 
affecting performance for all other users. While the demands of these 
users may not have a significant impact at 3 a.m., they do affect the 
other 99 percent of end users during the peak busy hours of 8 p.m. and 
midnight. If Sprint Nextel took no action to manage its network two or 
3 percent of its total end users could exhaust the network, leaving 
little or no capacity for the remaining 98 percent.'' Sprint Reply 
Comments, WC Docket No. 07-52, at 6.
    NBC Universal Reply Comments, WC Docket No. 07-52:

   Five percent of Internet users consume at least 60 to 70 
        percent of network capacity through P2P file sharing. 90 
        percent of this traffic consists of illegal, pirated content. 
        Too many parties in this proceeding are ignoring the obvious 
        reality that the scale of illegal conduct is enormous and the 
        Commission must allow network operators to combat this. (1-2)

   Commission Deborah Taylor Tate referenced piracy in her 
        opening statement on February 25, 2008, and her concerns are 
        well-founded. There is overwhelming and undisputed evidence 
        that massive copyright infringement takes place on P2P 
        networks. (3)

   In 2005 CacheLogic presented figures to the Federal Trade 
        Commission that P2P represented 60 percent of Internet traffic 
        at the end of 2004 and is still growing. (5)

   A Sandvine report had similar conclusions. In Europe 
        upstream P2P traffic represents up to 85 percent of all 
        bandwidth consumed on broadband provider networks. Downstream 
        P2P traffic represents about 60 percent of bandwidth consumed. 
        In the U.S. and U.K. upstream traffic amounts to 76 percent and 
        downstream 48 percent. (5)

   Time Warner Cable announced that fewer than 5 percent of its 
        users account for 60-70 percent of their network capacity--all 
        through P2P applications. Other commentators have noted that 
        this can reach as high as 90-95 percent during peak times. (5-
        6)

    ``As the record makes clear, P2P traffic constitutes a clear 
majority of all Internet traffic. . . . Indeed, several observers 
suggest that P2P traffic now accounts for about 60 percent of all 
Internet traffic.'' USTA Reply Comments, WC Docket No. 07-52. at 6 
(citing numerous sources including Christopher S. Yoo, Network 
Neutrality and the Economics of Congestion, 94 Geo. L. J. 1847, 1878 
n.145 (2006) (citing six sources which attribute up to 73 percent of 
upstream traffic and 60 percent of overall traffic to peer-to-peer file 
sharing)).
    ``A study of Internet traffic between August and September 2007 
confirmed that P2P applications produce more Internet traffic than all 
other applications combined and represent up to 89 percent of traffic 
in certain parts of the world. The restrictive ruling that certain 
parties in this proceeding request would, in effect, hinder the ability 
of content providers to offer their services to all subscribers just to 
satisfy the unreasonable network demand of a fraction of end users.'' 
Viacom Reply Comments. WC Docket No. 07-52, at 12.
    ``Numerous groups have highlighted the significant--negative--
impact of P2P on America's broadband infrastructure. Estimates are that 
as much as 90 percent of traffic at a given time can be occupied by 
just a small percentage of users of P2P. Other analyses have shown that 
as few as 15 users within a geographic area using P2P can demonstrably 
degrade the Internet experience for the rest of the community. The 
Yankee Group estimates that P2P `can push networks to their absolute 
limit' during times of peak usage. According to the network engineer 
Richard Bennett, `[t]he fundamental design goal of BitTorrent is to use 
up all available bandwidth.' Others contend that P2P `will sop up the 
majority of available bandwidth.' '' National Black Chamber of Commerce 
et al. Reply Comments, WC Docket 07-52, at 3-4.
    George Ou 4/14/08 Written Testimony Generally

    Question 7. Can you provide the raw data to support this or 
elaborate on the sources of the estimates you cite?
    Answer. See above.

    Question 8. Comcast has made the assertion that the FCC has no 
legal power to stop them from engaging in what it calls ``reasonable 
network management'' even if Comcast's behavior was deemed inconsistent 
with the Internet Policy Statement. Further more, Comcast states that 
given cable modem service is an information service not a 
telecommunications service, that any attempt to justify an injunction 
on Comcast based on a statutory provision that is explicitly limited to 
common carriers would violate the Communications Act and be arbitrary 
and capricious. If this is true, how can the FCC effectively prevent or 
enforce, in a swift manner, unreasonable or discriminatory practices 
related to broadband or network management?
    Answer. There is no doubt that the FCC's Internet Policy Statement 
is not binding and enforceable today. Indeed, the Chairman of the FCC 
acknowledged that fact explicitly when the FCC issued it, expressly 
stating that the FCC was not adopting enforceable rules. Whether or not 
the FCC has the legal authority to adopt enforceable rules that 
regulate network management practices is currently an open question, 
and is being considered by the FCC in an ongoing proceeding. I would 
also note that the FTC has also claimed authority to address 
anticompetitive practices by network operators.
                                 ______
                                 
     Response to Written Questions Submitted by Hon. Jim DeMint to 
                             Kyle McSlarrow
    Question 1. Many people today have cited a time when ``net 
neutrality'' principles were enforced through common carrier 
regulations. Have cable modem services ever been treated under common 
carrier regulations?
    Answer. No. There was a short period in which the underlying 
transmission component of cable modem service was considered a common 
carrier offering, but only in the 9th Circuit, as a result of that 
court's ruling in AT&T v. City of Portland, 216 F.3d 871 (2000). 
Notably, even this ruling did not apply common carrier regulation to 
cable modem service itself. Less than 2 years after City of Portland, 
the FCC issued a declaratory ruling holding that neither cable modem 
service nor the underlying broadband transport was subject to common 
carrier regulation. In NCTA v. Brand X Internet Services, 545 U.S. 967 
(2005), the Supreme Court not only upheld the FCC's ruling, but also 
held that the ruling superseded the 9th Circuit's decision.

    Question 2. We hear a great deal about a lack of availability of 
broadband service in the United States, but your testimony indicates 
that cable broadband service is now available to 92 percent of 
Americans. How many years has it taken to reach this level?
    Answer. Cable operators have invested $130 billion since 1996 to 
build fiber optic networks that have brought high-speed Internet access 
to more than 92 percent of the United States.

    Question 3. How much public subsidy has been used to reach this 
level?
    Answer. Other than a small amount of funding through the E-Rate 
program to wire schools and libraries, cable operators have relied on 
private risk capital to deploy their networks.

    Question 4. How do you feel the efforts of the cable industry 
comport with Mr. Lessig's model of abundance?
    Answer. Contrary to Mr. Lessig's suggestion, cable operators in 
fact have adopted a ``business model of abundance and neutrality,'' in 
which providers offer ``whatever legal applications and content users 
and innovators want.'' If cable operators pursued the model of 
``scarcity and control'' he claims we do, they would soon lose 
customers to other providers of broadband service. It is clearly 
unnecessary to enact legislation imposing any particular business 
model, and doing so would deprive network operators of the flexibility 
they need to innovate and respond to customer demand.

    Question 5. Many people belittle the competition that exists 
between cable companies and telephone companies in the broadband market 
today, as well as the competition provided by wireless and satellite 
providers. Could you provide your view on the state of competition, and 
what impact that competition has on consumers?
    Answer. Broadband services arc intensely competitive, with cable 
operators, telephone companies, satellite providers, wireless network 
operators, mobile service providers and others investing, innovating 
and competing with one another. In this environment, cable operators 
are striving to give consumers the best Internet experience they can, 
at the best value.

    Question 6. You've stated ``various estimates are that as few as 5 
percent of customers use from 50 to 90 percent of the total capacity of 
the network.'' But where is the industry data to support this claim?
    Answer. There are no hard and fast rules with regard to estimates 
of bandwidth consumption, thus the reasoning behind referencing a range 
in the testimony. One reason for the wide range of estimates reported 
may be the difficulty in detecting certain types of protocols of 
Internet traffic. Some P2P clients now incorporate protocol obfuscation 
using encryption and similar methods to hide from detection. Therefore 
some of the studies or estimates may not actually be detecting all of 
the P2P and other bandwidth intensive activities that are actively 
taking measures to fly under the radar.
    The core of the bandwidth consumption statement came from an 
Ellacoya Networks study.\1\ It should be noted that this finding was 
not exclusively addressing P2P, but it did cite P2P as the primary 
high-bandwidth application. The testimony also cited recent experience 
in Japan, where 1 percent of broadband users, using P2P, account for 
roughly 47 percent of total consumption, and 10 percent of users, using 
P2P, account for 75 percent of total consumption.\2\ Many other studies 
and knowledgeable entities have disclosed findings about inordinate 
bandwidth consumption, often as a result of P2P usage. Included among 
these are:
---------------------------------------------------------------------------
    \1\ No free lunches on the Net; Research conducted by Ellacoya 
Networks shows that up to 5 percent of broadband subscribers can 
consume nearly 90 percent of network bandwidth, primarily by using 
high-bandwidth applications such as streaming media and, especially, 
file sharing. These demands are more than doubling network capacity 
requirements each year. http://news.cnet.com/2010-1034_3-
6068868.html?part=rss&tag=6068868&subj=news.
    \2\ Testimony of George Ou; FCC Broadband Industry Practices 
Hearing; Stanford University; April 17, 2008; ``Recently, the Japanese 
Ministry of Internal Affairs and Communications released a study 
showing that just 1 percent of Japan's broadband users using P2P 
account for roughly 47 percent of Japan's Internet usage. Furthermore, 
only 10 percent of Japan's broadband users using P2P account, on 
average, for 75 percent of all Internet usage.'' http://
www.lanarchitect.net/Files/Network_Management_n_Internet.doc

   ipoque study \3\
---------------------------------------------------------------------------
    \3\ Nocturnal P2P transmissions account for 95 percent of Internet 
traffic; http://arstechnica.com/news.ars/post/20071128-nocturnal-p2p-
transmissions-account-for-95-percent-of-internet-bandwidth.html link to 
ipoque study; http://www.ipoque.com/userfiles/file/
Internet_study_2007_abstract_en.pdf

    P2P apps can account for an astonishing 95 percent of 
---------------------------------------------------------------------------
            all nighttime traffic

    P2P sucks up anywhere between 49 and 83 percent of all 
            Internet traffic during the day, and can spike much higher 
            at night

   Virgin Media \4\
---------------------------------------------------------------------------
    \4\ Virgin Media website--Traffic Management--how do we know this 
will work?
      During our busiest times in the evening, we have noticed 
that some applications (for example Peer to Peer file sharing 
applications) use significant amounts of bandwidth, often at the 
expense of critical Internet services like browsing the Web or using e-
mail.

      We found that this small minority of customers were 
actually downloading enough information to significantly affect the 
service for other customers' broadband service. To put it another way, 
just 5 percent of customers were accounting for around 70 percent of 
data downloaded at peak times.
    http://www.virgin.net/allyours/faqs/traffic_faqs.html#cut_costs

    5 percent of customers accounting for 70 percent of 
---------------------------------------------------------------------------
            data downloaded at peak times

   Yankee Group analyst David Vorhaus \5\
---------------------------------------------------------------------------
    \5\ When Capacity is Never Enough; http://www.multichannel.com/
article/CA6544099.html

    Cable operators report that 60 percent to 75 percent of 
            their Internet traffic is being generated by P2P file-
---------------------------------------------------------------------------
            sharing.

    Vorhaus estimates that 5 percent to 10 percent of 
            Internet users are generating 80 percent to 90 percent of 
            this P2P traffic.

   UC Irvine \6\
---------------------------------------------------------------------------
    \6\ Bandwidth! How The Residential Network Is Handling It; http://
resnet.uci.edu/band
widthFAQ.asp

    Prior to installing traffic management hardware, about 
            2 percent of the residents would use over 90 percent of the 
            available bandwidth, causing slowdowns and poor performance 
---------------------------------------------------------------------------
            for everyone.

   Cisco Systems \7\
---------------------------------------------------------------------------
    \7\ Global IP Traffic Forecast and Methodology, 2006-2011-Cisco 
Systems; http://www.cisco
.com/en/US/solutions/collateral/ns341/ns525/ns537/
net_implementation_white_paper0900
aecd806a8laa.pdf

    P2P comprised 54 percent of global Internet traffic in 
---------------------------------------------------------------------------
            2007

   CacheLogic \8\
---------------------------------------------------------------------------
    \8\ P2P File Sharing--The Evolving Distribution Chain-CacheLogic 
presentation; note chart on slide 3; http://www.cisco.com/en/US/
solutions/collateral/ns341/ns525/ns537/net_implemen
tation_white_paper0900aecd806a81aa.pdf

    More than 60 percent of consumer Internet traffic is 
---------------------------------------------------------------------------
            P2P

    And finally, it should also be noted that SafeNet Inc. estimates 
that 90 percent of P2P downloads are still of illegally copied 
content.\9\
---------------------------------------------------------------------------
    \9\ Peer-to-peer networks go legit, but piracy is still rampant; 
http://www.siliconvalley.com/latestheadlines/
ci_8575851?nclick_check=1&,forced=true
---------------------------------------------------------------------------
    In addition, see the following from the FCC record:

    AT&T Comments, WC Docket No. 07-52, at 14-15 (quoting David 
Vorhaus, Yankee Group, Confronting the Albatross of P2P 1-2 (May 31, 
2007)):

   P2P traffic ``constitutes approximately 60 percent of all 
        traffic that traverses the public internet'';

   ``BitTorrent alone accounts for roughly 40 percent of all 
        bandwidth'';

   ``[i]n times of peak usage, bandwidth-hogging users sharing 
        large files over P2P can push networks to their absolute 
        limit''; and

   ``[t]his problem is poised to worsen in the coming years'' 
        because, ``[a]s content owners migrate more video content to IP 
        networks, bandwidth demand will inevitably skyrocket.''

    ``In the absence of the broadband management practices, as few as 5 
percent of users dictate the terms on which the remaining 95 percent of 
users get access to broadband.'' CTIA Reply Comments, WC Docket No. 07-
52, at 3 (citing CT1A Comments at 12 (citing Steven Levy, ``Pay Per 
Gig", The Washington Post, D1 (Jan. 30, 2008) and David Vorhaus. 
Confronting the Albatross of P2P, Yankee Group (May 31, 2007)).
    ``In a recent study of average data usage on its high speed 
wireless EvDO mobile broadband network, Sprint Nextel learned that a 
subset of end users, approximately 3 percent, accounted for more than 
50 percent of the total data usage on the network. During busy hours, a 
mere 1 percent of end users generates 42 percent of data traffic and is 
affecting performance for all other users. While the demands of these 
users may not have a significant impact at 3 a.m., they do affect the 
other 99 percent of end users during the peak busy hours of 8 p.m. and 
midnight. If Sprint Nextel took no action to manage its network two or 
3 percent of its total end users could exhaust the network, leaving 
little or no capacity for the remaining 98 percent.'' Sprint Reply 
Comments, WC Docket No. 07-52, at 6.
    NBC Universal Reply Comments, WC Docket No. 07-52:

   Five percent of Internet users consume at least 60 to 70 
        percent of network capacity through P2P file sharing. 90 
        percent of this traffic consists of illegal, pirated content. 
        Too many parties in this proceeding are ignoring the obvious 
        reality that the scale of illegal conduct is enormous and the 
        Commission must allow network operators to combat this. (1-2)

   Commission Deborah Taylor Tate referenced piracy in her 
        opening statement on February 25, 2008, and her concerns are 
        well-founded. There is overwhelming and undisputed evidence 
        that massive copyright infringement takes place on P2P 
        networks. (3)

   In 2005 CacheLogic presented figures to the Federal Trade 
        Commission that P2P represented 60 percent of Internet traffic 
        at the end of 2004 and is still growing. (5)

   A Sandvine report had similar conclusions. In Europe 
        upstream P2P traffic represents up to 85 percent of all 
        bandwidth consumed on broadband provider networks. Downstream 
        P2P traffic represents about 60 percent of bandwidth consumed. 
        In the U.S. and U.K. upstream traffic amounts to 76 percent and 
        downstream 48 percent. (5)

   Time Warner Cable announced that fewer than 5 percent of its 
        users account for 60-70 percent of their network capacity--all 
        through P2P applications. Other commentators have noted that 
        this can reach as high as 90-95 percent during peak times. (5-
        6)

    ``As the record makes clear, P2P traffic constitutes a clear 
majority of all Internet traffic. . . . Indeed, several observers 
suggest that P2P traffic now accounts for about 60 percent of all 
Internet traffic.'' USTA Reply Comments, WC Docket No. 07-52, at 6 
(citing numerous sources including Christopher S. Yoo, Network 
Neutrality and the Economics of Congestion, 94 Geo. L. J. 1847, 1878 
n.145 (2006) (citing six sources which attribute up to 73 percent of 
upstream traffic and 60 percent of overall traffic to peer-to-peer file 
sharing)).
    ``A study of Internet traffic between August and September 2007 
confirmed that P2P applications produce more Internet traffic than all 
other applications combined and represent up to 89 percent of traffic 
in certain parts of the world. The restrictive ruling that certain 
parties in this proceeding request would, in effect, hinder the ability 
of content providers to offer their services to all subscribers just to 
satisfy the unreasonable network demand of a fraction of end users.'' 
Viacom Reply Comments, WC Docket No. 0752, at 12.
    ``Numerous groups have highlighted the significant--negative--
impact of P2P on America's broadband infrastructure. Estimates are that 
as much as 90 percent of traffic at a given time can be occupied by 
just a small percentage of users of P2P. Other analyses have shown that 
as few as 15 users within a geographic area using P2P can demonstrably 
degrade the Internet experience for the rest of the community. The 
Yankee Group estimates that P2P `can push networks to their absolute 
limit' during times of peak usage. According to the network engineer 
Richard Bennett, `[t]he fundamental design goal of BitTorrent is to use 
up all available bandwidth.' Others contend that P2P `will sop up the 
majority of available bandwidth.' '' National Black Chamber of Commerce 
et al., Reply Comments, WC Docket 07-52, at 3-4.
    George Ou 4/14/08 Written Testimony Generally
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Daniel K. Inouye to 
                       Professor Lawrence Lessig
    Question 1. Since 2003, the FCC has been reclassifying broadband 
services as Title I services under the Communications Act. In 2005, the 
Supreme Court upheld this approach in its Brand X decision. In light of 
the FCC's reclassification of broadband services and the Supreme Court 
subsequently deciding that this approach passes legal muster, do you 
believe the FCC has adequate authority to stop broadband network 
providers from engaging in unfair discrimination?
    Answer. I do believe that Brand X means the FCC has the authority 
to stop broadband network providers from engaging in unfair and 
innovation-harming discrimination. But I believe that network providers 
will challenge that authority, unnecessarily delaying the FCC's efforts 
to protect against discrimination. I therefore think clarifying 
legislation by Congress would be helpful.

    Question 2. Broadband capacity plays an important role in the 
network neutrality and network management discussion. To this end, I 
would like to ask two questions: Can we worry less about discrimination 
or content favoritism if there is more broadband network capacity?
    Answer. Yes, we can worry less, at least about discrimination or 
favoritism. The FCC must continue to be concerned about blocking 
certain applications.

    Question 2a. Can broadband network providers add capacity fast 
enough to meet consumer demand?
    Answer. There is no technical reason providers can't add capacity 
to meet consumer demand. My concern is that providers are withholding 
capacity until they are confident of a regulatory environment in which 
they can discriminate in ways that will ultimately harm innovation.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Byron L. Dorgan to 
                       Professor Lawrence Lessig
    Question 1. Are we in danger of seeing the old media cartel 
reappear in new media?
    Answer. Yes. The pattern of new media captured by old is as old as 
media, and the pattern of that recapture is well settled. Current 
practices by network providers match that pattern, and without 
sufficient resistance by the FCC, the incentive will certainly be to 
reestablish that ``cartel.''

    Question 2. Does current law or agency authority provide adequate 
protections to prevent the Internet from becoming a closed network 
similar to cable television, instead as opposed to the open platform 
the Internet was developed to be?
    Answer. Authority alone won't prevent anything. Unless the FCC 
takes a clear policy stand, expressed in enforceable regulations, 
ideally backed up by a clear demand by Congress, network providers will 
continue to angel for a network over which they exercise a power to 
discriminate that can't help but weaken innovation in applications and 
content.

    Question 3. Is the current regulatory structure sufficient to meet 
the needs of the Internet?
    Answer. The FCC has the means, if it has the will. But I believe it 
is a mistake to trust the future of the Internet to the policy 
preferences of unelected FCC commissioners. It is Congress's job to set 
the policy of the FCC, and Congress has not adequately charged the FCC 
with the requirement that it assure network neutrality.

    Question 4. Representatives of the phone and cable companies have 
consistently argued that if Congress were to impose a nondiscrimination 
rule, network operators would not deploy broadband networks. Isn't this 
a false choice? Why can't we have an open Internet and world class 
deployment?
    Answer. Network providers in every major industrialized nation 
comparable to the United States face more restrictive regulatory 
obligations than are being discussed in network neutrality regulations, 
yet providers in those countries have deployed better--faster, 
cheaper--broadband networks. This does suggest these representatives 
have presented a false choice--unless there is some reason to believe 
American network providers are less capable than, for example, French 
network providers.

    Question 5. Recently, Comcast announced that it is engaging in 
conversations with Bit Torrent, Inc. and Pando Networks, which 
distribute content through Bit Torrent applications. Does this 
demonstrate that the marketplace is addressing the concerns raised by 
consumers?
    Answer. Not in a way that would in any sense address the 
competitive and innovation concerns raised by Comcast's behavior. If 
innovators have to strike a deal with network providers be-fore their 
innovation can be released on the network, innovation on the Internet 
would be radically constrained.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Maria Cantwell to 
                       Professor Lawrence Lessig
    Question 1. The last time you testified before the Committee, you 
expressed concerns about the potential `cablelization' of the Internet. 
Two years later do you see signs that it is occurring?
    Answer. Absolutely. By ``cablelization,'' I meant the move to an 
Internet where providers: (1) face no legal obligation of neutrality or 
access, and (2) operate under a norm that expresses the idea that the 
network owner has an absolute right to control the content (or 
applications) on ``their'' network. Both aspects of that definition 
have only been reinforced in the past 2 years.

    Question 2. In your testimony, you cite the electricity grid as a 
fundamentally neutral network. As you know, there are a handful of 
trials being conducted overseas where broadband providers are charging 
consumers on a per-packet basis similar to how utilities price 
electricity on a per-kilowatt hour basis. Do you believe such an 
Internet business model is viable? Would charging on a per-packet basis 
provide a financial disincentive for the small group of heavy bandwidth 
users that some broadband providers are concerned about?
    Answer. I certainly do believe that business model is viable, and 
that it would not violate the appropriate norms of network neutrality, 
even while I very much hope that it does not become the dominant model 
for providing access to the Internet. My concern is that by failing to 
impose ``open access'' obligations on broadband providers, both cable 
and telecom, we don't have sufficient ISP competition to guarantee that 
alternatives to this per-packet model will have a chance to flourish.

    Question 3. I have heard you argue that ``fast lanes'' on the 
Internet are only valuable if ``slow lanes'' are really slow. This 
approach can create a perverse incentive among network providers not to 
build the fastest network possible and an incentive to maintain 
bottlenecks. In light of the response Verizon has received from Wall 
Street for its FIOS rollout, do you believe that broadband providers 
have the incentive to upgrade their networks?
    Answer. It is clear Wall Street will reward investment decisions 
that maximize the short term return to broadband providers--whether or 
not those decisions maximize long term broad-band growth for the 
Nation. For that reason, I think it is a fundamental mistake for 
Congress to look to Wall Street's ratings as a guide for good public 
policy. The innovators who would lose from a non-neutral network (the 
next Google's, or Facebooks), don't yet have Wall Street analysts 
focusing on them. Congress should insist on a broadband policy that 
benefits long term innovation and growth, and once that policy is set, 
adjust incentives in providers are not building networks sufficiently 
quickly.

    Question 4. Dr. Hahn argues in his testimony that experimentation 
with new business models is the key to Internet innovation at both the 
``core'' and the ``edge'' of the network, and the deployment of more 
intelligent networks needed to handle rapidly growing Internet traffic. 
In your opinion, would net neutrality rules prevent innovation at the 
core of the network or prevent the deployment of more intelligent 
networks?
    Answer. I was confused by Dr. Hahn's testimony, as he was using the 
term ``core'' and ``edge'' in a way that is inconsistent with the 
standard terminology among network theorists and economists. As these 
terms are ordinarily used: It is clear that network neutrality 
regulations would have absolutely no effect on innovation in ``edge'' 
technologies. The only ``core'' technologies network neutrality 
legislation would affect would be those that harmed network neutrality. 
Thus, for example, some quality of service techniques would be 
inconsistent with network neutrality principles, but all would not.

    Question 5. If U.S. network operators do end up charging content 
providers a second fee for delivering a differentiated quality of 
service to their customers, I am deeply concerned that net-work 
operators in other nations will follow suit. Given that, in many 
nations, the government owns a percentage, if not all, of the single, 
largest network provider, American companies exporting on-line content 
and services will find themselves paying an additional tax, and thus be 
placed at a competitive disadvantage with preferred content and service 
local champions. Do you know how other nations view net neutrality?
    Answer. Most other nations have not had to confront network 
neutrality concerns because they have imposed a more onerous set of 
regulatory obligations, similar to the ``open access'' regulations that 
the FCC imposed on telecom providers in the late 1990s. Because those 
regulations tend to create significant ISP competition, the need to 
police neutrality on the network has proven to be less. If these other 
nations remove ``open access'' requirements, however, I would be 
concerned about the effect on American providers for precisely the 
reasons outlined.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. Amy Klobuchar to 
                       Professor Lawrence Lessig
    Question 1. You said in your prepared remarks that today's venture 
capitalists need certainty about the future of the internet. That is, 
they need to now today how the Internet will be managed tomorrow. 
Without that certainty, you claim these venture capitalists will be 
less likely to invest in new Internet technologies. What will give 
these venture capitalists certainty?
    Answer. The only thing that would provide this certainty is if the 
policymaker charged with setting Internet and communications policy 
generally set this policy as a fundamental principle for communication 
regulators. In my view, it is Congress, and not the FCC, that is 
charged with setting that policy.

    Question 2. Can you provide an example, or examples, of innovators 
holding back on inventions and/or advancements in Internet technology 
because of uncertainty surrounding the future of network neutrality?
    Answer. As these are innovators whose ideas die on the venture 
capitalist's boardroom table, they are not public or common knowledge. 
My own research in this area has been informed by these venture 
capitalists, and their own account of the factors they use to evaluate 
funding proposals. The basic economics behind their calculation is not 
obscure, however: Increased strategic freedom for network providers 
increases the strategic risk for investments. Increased risks lowers 
the number of efficient investments.
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Olympia J. Snowe to 
                       Professor Lawrence Lessig
    Question 1. It has been stated numerous times that there isn't 
sufficient broadband ISP competition. While some markets (more 
metropolitan and urban areas) do have robust competition, most markets 
have an effective duopoly that controls access to high speed Internet 
connections. How would you assess the current direction of broadband 
competition given the emergence of wireless broadband and broadband 
over power lines (BPL) services? Is competition growing?
    Answer. Competition is growing, but I don't believe quickly enough, 
or with the right business model. The long term threat to the Internet 
comes from platform providers with a business model that depends upon 
leveraging value out of Internet applications and content. The long 
term solution is broadband providers who, like providers of 
electricity, have no interest in the content or applications running on 
the network.

    Question 2. Why isn't there more competition in the Broadband 
space? What barriers to entry are hindering new entrants?
    Answer. No doubt the most important barrier is the high cost of 
building infrastructure. But the government could take steps to 
encourage more competition. Securing more reliable access to local 
right of ways would be one. More unlicensed (or effectively so) 
spectrum would be another. A return to some of the ``open access'' 
policies of the late 1990s would be a third. I would strongly encourage 
the first two.

    Question 3. What specific recommendations do you have for us to 
craft effective policy that would promote more competition in this 
market space?
    You have mentioned that this innovation has come primarily from the 
``edge'' or ``end'' of the network through application competition. And 
that the original Internet embraced an ``end-to-end'' design, meaning 
the network itself was to be as simple as possible, with intelligence 
for the network provided by applications that connected at the edge of 
the network. But given this ``edge innovation'' has created new 
Internet services and applications, and content has become more dynamic 
and larger as well as more time-sensitive with the increasing 
prevalence of voice and video traffic, doesn't the network itself have 
to become more intelligent to deal with the dizzying array of content 
and to ensure efficient delivery of the content and successful use of 
the applications and services?
    Answer. No. The truth of the end-to-end design didn't depend upon 
the simplicity of the applications on the network. It reflects a 
technical judgment about where in the network it is most efficient to 
locate network-like services (the ``ends''). But the consequence of 
that technical design was a platform that maximized the range of 
competition that was possible on that network.

    Question 4. There has been an explosion of bandwidth intensive 
content--primarily with video. Broadband providers seem to constantly 
be playing catch-up in upgrading their infrastructure to meet the 
growing demand. While broadband providers can do more, what are content 
and application providers doing in developing new technologies to 
assist in dealing with the near-term bandwidth shortage that may exist 
in certain areas--such as utilizing compression technologies or using 
multicasting over P2P?
    Answer. P2P itself is a technology to more efficiently use network 
resources, by sharing the performance requirements among a number of 
different uses. But more fundamentally, I don't think the government 
can do anything in particular to encourage one kind of technical 
development over another, and nor should it. The most (and least) the 
government should do is create the right competitive environment for 
the market in applications and content to flourish.

    Question 5. Are content and applications providers designing their 
products around current network constraints that exist?
    Answer. Yes, as they always will, as there will always, on the 
margin, be a constraint. The problem is the constraint now is so 
significant that the work-arounds are too severe, weakening competitive 
opportunity.
                                 ______
                                 
     Response to Written Questions Submitted by Hon. Jim DeMint to 
                       Professor Lawrence Lessig
    Question 1. When you testified before this Committee in 2006, you 
stated that network neutrality has been part of telecommunications law 
for 40 years. However, the Internet backbone has never been subject to 
network neutrality regulations or principles. And Mr. McSlarrow's 
member-companies have never been subject to network neutrality 
regulations or principles.
    How could network neutrality principles be such an integral part of 
how the Internet has operated when neither backbone providers nor cable 
modem services, which still have more broadband customers than any 
other type of broadband service, have ever been subject to network 
neutrality requirements?
    Answer. It is correct that backbone providers haven't been subject 
to legal regulation. But the competitive environment they have operated 
within has never given them the incentive to discriminate in ways that 
weaken the end-to-end character of the Internet's design. My point was 
that Title II Internet services--the core of early network growth--had 
been subject to a range of regulations that drove providers away from a 
discriminatory business model, which effected neutrality.

    Question 2. I know you work with Tim Wu on these issues. Dr. Wu 
made the following comment in The Economist a year ago when talking 
about net neutrality:
    Answer. ``The public reaction has already been as powerful and 
effective as any law,'' says Timothy Wu, a professor at Columbia Law 
School who is credited with coining the term ``net neutrality''. The 
debate has put the telecoms companies on notice that they are being 
watched closely, he says, and has forced them to make public pledges 
not to block or degrade access. ``Shame can have more power than 
litigation,'' says Mr Wu. ``The market and consumers can control bad 
practices, but consumers actually have to be aware of what is going on 
for that to happen.''

    Question 3. Why can't the market (including Internet companies, 
application providers, consumers, and a vigilant FCC, monitoring 
activities) work in ensuring that bad actors are stopped?
    Answer. Investment decisions will be based upon the expectation of 
the competitive environment at the time when the investment needs to 
earn a return. My view is that a clear Federal policy would more 
effectively signal the competitive environment in the future than the 
(often fickle) attitudes of public activism. Of course, there's no way 
to be certain. It may well be that the activists would be sufficient. 
But that work is complemented by clear Federal policy signaling the 
values this infrastructure will require.

    Question 4. Why do we need more regulation today?
    Answer. In my view, the government should adopt a minimal 
additional regulation to assure that business models that depend upon 
scarcity do not develop. That addition would complement the Internet 
Freedoms currently embraced by the FCC, by adding a requirement that 
any tiering done by an Internet provider be offered on similar terms to 
any other provider. So if a provider charges a premium price for video 
content, it would have to offer that same price to anyone. That 
additional regulation focuses upon contracts; it doesn't require 
additional supervision of technology. And it puts significant pressure 
on a business model that envisions leveraging rents out of network 
scarcity.

                                  
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