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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 

( 

(II) 

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

DANIEL K. INOUYE, Hawaii, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

JOHN F. KERRY, Massachusetts 

BYRON L. DORGAN, North Dakota 

BARBARA BOXER, California 

BILL NELSON, Florida 

MARIA CANTWELL, Washington 

FRANK R. LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas 

THOMAS R. CARPER, Delaware 

CLAIRE MCCASKILL, Missouri 

AMY KLOBUCHAR, Minnesota 

TED STEVENS, Alaska, Vice Chairman 

JOHN MCCAIN, Arizona 

KAY BAILEY HUTCHISON, Texas 

OLYMPIA J. SNOWE, Maine 

GORDON H. SMITH, Oregon 

JOHN ENSIGN, Nevada 

JOHN E. SUNUNU, New Hampshire 

JIM DEMINT, South Carolina 

DAVID VITTER, Louisiana 

JOHN THUNE, South Dakota 

ROGER F. WICKER, Mississippi 

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 

(III) 

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 

Page

IV 

Response to written questions submitted to Professor Lawrence Lessig by— 

Continued 

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 

(1) 

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 

2 

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 openaccess 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. 

3 

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 dotcom businesses, 2001, 2002, 2003, and, from that, competitive destruction. We’ve seen a lot of growth and innovation in Internetbased 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 

4 

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 

5 

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 textmessaging 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 freefall when it comes to our global broadband ranking. And this is 

6 

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 

7 

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-tothe-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 

8 

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, proVerDate Nov 24 2008 12:29 Jul 03, 2012 Jkt 074893 PO 00000 Frm 00012 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\74893.TXT SCOM1 PsN: JACKIE
9 

grams 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. 

10 

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. 

11 

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; 

12 

*The document is retained in Committee files and also can be found at http://papers.ssrn.com/sol3/papers.cfm?abstractlid=1119982. 

• 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.*

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 

13 

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 

14 

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 

15 

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 dyVerDate Nov 24 2008 12:29 Jul 03, 2012 Jkt 074893 PO 00000 Frm 00019 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\74893.TXT SCOM1 PsN: JACKIE
16 

1 Broadband Industry Practices, WC Docket No. 07–52, Notice of Inquiry, 22 FCC Rcd 7894, 

7896, para. 4 (2007) (internal footnotes omitted). 

namic 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

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 

17 

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. 

18 

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 

19 

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. 

20 

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 

21 

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 

22 

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. 

23 

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. 

24 

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—— 

25 

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. 

26 

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 

27 

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 

28 

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. 

29 

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 ExVerDate Nov 24 2008 12:29 Jul 03, 2012 Jkt 074893 PO 00000 Frm 00033 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\74893.TXT SCOM1 PsN: JACKIE
30 

ecutive 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 

31 

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. 

32 

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 prolife 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? 

33 

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 

34 

* 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 

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

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 

35 

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. 1See 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). 2 All Reg-Markets Center and Joint Center publications can be found at http://www.reg-markets.org. 3See Arrow et al., Is There a Role for Benefit-Cost Analysis in Environmental, Health, and 

Safety Regulation?, 272 SCIENCE 1569, n. 5268 (1996). 4Steve Lohr, Video Road Hogs Stir Fear of Internet Traffic Jam, N.Y. TIMES, Mar. 13, 2008, 

at 1. 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 implementationlwhitelpaper0900aecd806a81aa.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.’’). 

two decades. I also have done a great deal of work on telecommunications and Internet regulation.1

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

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

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

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

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 

36 

9This section draws heavily on the AEI-Brookings net neutrality statement. See Baumol et 

al., supra note 1. 10 H.R. 5273, 109th Cong. § 2(10) (2006). S. Res. 2360, 109th Cong. § 4(a)(6) (2006). 11Dorgan, Snowe Take Another Stab at Net Neutrality Legislation, TR Daily, Jan. 9, 2007. 12See, e.g., Robert Litan & Hal J. Singer, The Unintended Consequences of Net Neutrality, 5 

Journal on Telecommunications and High Tech Law 533 (2007). 13FCC, High-Speed Services for Internet Access as of June 30, 2007, released March 2008. 

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

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

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 highspeed 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. 

37 

14See Bailey et al., supra note 1. 15Spectrum 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. 16See Robert Hahn, The Internet Freedom Act (Reg-Markets Center, Policy Matters No. 08– 

03, 2008) for an analysis of this proposal. 

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

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. 

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. 

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, 

38 

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 polVerDate Nov 24 2008 12:29 Jul 03, 2012 Jkt 074893 PO 00000 Frm 00042 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\74893.TXT SCOM1 PsN: JACKIE
39 

icy 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. 

40 

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.’’ 

41 

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? 

42 

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. 

43 

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. 

44 

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. 

45 

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 

46 

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/edocslpublic/attachmatch/DOC–280906A1.doc (‘‘2007 High Speed Internet 

Access Report’’). 

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. 

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 

47 

3Statement 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). 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. 5FCC 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/edocslpublic/attachmatch/DOC–278454A1.pdf. 6Todd Spangler, Net Video Views Topped 10 Billion in February, MULTICHANNEL NEWS, Apr. 

16, 2008. 7Michael 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/ 

PIDl001851/Podtechlvl1875-ces–2007-dell-launches-.html). 8 Jon Swartz, Social-networking sites going global, USA TODAY, Feb. 10, 2008. 9Quarterly 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. 

lose sales to producers who better meet consumer needs. These same competitive 

pressures also encourage producers to provide truthful information about their offerings.’’ 3

Most notably, as the availability of broadband service has grown, the price-permegabit 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. 

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

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

For years, net neutrality proponents have argued that without government intervention, broadband providers would stifle competing services and content providers; 

48 

10George Ou, citing Haruka Saito, Japanese Counselor for Telecom Policy, http:// 

blogs.zdnet.com/Ou/?p=1063. 

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 highspeed 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 bandwidthheavy applications do not degrade or otherwise adversely affect broadband Internet 

access for the vast majority of customers. 

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 

49 

11 Broadband Industry Practices, WC Docket No. 07–52, Institute for Policy Comments at 2 

(filed Feb. 13, 2008). 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/ 

cil8575851. 13Peter Svensson, Verizon Gets Cozy With P2P File-Sharers, March 14, 2008, available at 

http://biz.yahoo.com/ap/080314/p2plverizon.html. 14Stephen Lawson, Comcast, Pando Call for Pact on P2P Rights, Apr. 15, 2008, available at 

http://news.yahoo.com/s/pcworld/20080416/tclpcworld/144680. 

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. 

Reasonable network management practices are also vital to combating the welldocumented, 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. 

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. 

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. 

50 

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). 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). 

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. 

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 crossindustry 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. 

Thank you again for inviting me to speak to you today. 

The CHAIRMAN. Thank you very much. 

And our last witness, Professor Lessig. 

51 

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 

52 

1Tim Wu, Network Neutrality, Broadband Discrimination, 2 J. Telecomm. & High Tech. L. 

141 (2003). 2 29See J. H. Saltzer, David Clark, and David Reed, ‘‘End-to-End Arguments in System Design,’’ available at <http://web.mit.edu/Saltzer/www/publications/endtoend/endtoend.pdf>; 

David P. Reed et al., ‘‘Active Networking in End-to-End Arguments,’’ available at <http:// 

Web.mit.edu/Saltzer/www/publications/endtoend/ANe2ecomment.html>. 

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 ‘‘endto-end’’ 2 principle) and economic innovation. As former FCC Chief Economist, Professor Gerald R. Faulhauber, described the relationship at a Stanford conference in 

2000, 

53 

3 Conference Proceedings, The Policy Implications of End-to-End, Stanford University, December 1, 2000, available at <http://cyberlaw.stanford.edu/e2e/ papers/e2e.panel5.pdf>. 4See Barbara van Schewick, ARCHITECTURE AND INNOVATION (forthcoming MIT Press, 2008). 

See also Lessig, THE FUTURE OF IDEAS 34–35 (2001). 

‘‘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

‘‘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

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 

54 

5See, e.g., Paul Starr, THE CREATION OFTHE MEDIA 83–113 (2004). 6See, 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 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. 

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 infrastrucVerDate Nov 24 2008 12:29 Jul 03, 2012 Jkt 074893 PO 00000 Frm 00058 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\74893.TXT SCOM1 PsN: JACKIE
55 

ture providers to support these broader interests produce real economic return to 

the economy, even if they mean less financial return to the infrastructure providers. 

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 

56 

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. 

57 

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. 

58 

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. 

59 

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 

60 

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, 

61 

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. 

62 

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. 

63 

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 

64 

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.] 

(65) 

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. 

66 

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 startups 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: 

67 

1 Broadband Industry Practices, WC Docket No. 07–52, Notice of Inquiry, 22 FCC Rcd 7894, 

7896, para. 4 (2007) (internal footnotes omitted). 

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

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 poliVerDate Nov 24 2008 12:29 Jul 03, 2012 Jkt 074893 PO 00000 Frm 00071 Fmt 6601 Sfmt 6621 S:\GPO\DOCS\74893.TXT SCOM1 PsN: JACKIE
68 

cies 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 

69 

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. 

70 

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. 

71 

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-foronline 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? 

72 

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 

73 

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 curVerDate Nov 24 2008 12:29 Jul 03, 2012 Jkt 074893 PO 00000 Frm 00077 Fmt 6601 Sfmt 6621 S:\GPO\DOCS\74893.TXT SCOM1 PsN: JACKIE
74 

rent 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 

75 

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, 

76 

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 

77 

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 

78 

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 bandwidthefficient. 

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 

79 

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) 

80 

• 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 regulaVerDate Nov 24 2008 12:29 Jul 03, 2012 Jkt 074893 PO 00000 Frm 00084 Fmt 6601 Sfmt 6621 S:\GPO\DOCS\74893.TXT SCOM1 PsN: JACKIE
81 

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/2010–1034l3–6068868.html?part=rss&tag=6068868&subj=news. 2Testimony 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/NetworklManagementlnlInternet.doc 

tion 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: 

82 

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-ofinternet-bandwidth.html link to ipoque study; http://www.ipoque.com/userfiles/file/Internetlstudyl2007labstractlen.pdf 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/trafficlfaqs.html#cutlcosts 5When Capacity is Never Enough; http://www.multichannel.com/article/CA6544099.html 

6 Bandwidth! How The Residential Network Is Handling It; http://resnet.uci.edu/band 

widthFAQ.asp 7Global IP Traffic Forecast and Methodology, 2006–2011-Cisco Systems; http://www.cisco 

.com/en/US/solutions/collateral/ns341/ns525/ns537/netlimplementationlwhitelpaper0900 

aecd806a8laa.pdf 8P2P File Sharing—The Evolving Distribution Chain-CacheLogic presentation; note chart on 

slide 3; http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/netlimplemen 

tationlwhitelpaper0900aecd806a81aa.pdf 9Peer-to-peer networks go legit, but piracy is still rampant; http://www.siliconvalley.com/ 

latestheadlines/cil8575851?nclicklcheck=1&,forced=true 

• ipoque study 3

»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

»5 percent of customers accounting for 70 percent of data downloaded at peak 

times 

• Yankee Group analyst David Vorhaus 5

»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

»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

»P2P comprised 54 percent of global Internet traffic in 2007 

• CacheLogic 8

»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

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)). 

83 

‘‘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 

84 

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? 

85 

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? 

86 

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? 

87 

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 

88 

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. 

Æ