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43–110 PDF 2009

S. HRG. 109–1054 

RECONSIDERING OUR COMMUNICATIONS LAWS: 

ENSURING COMPETITION AND INNOVATION 

HEARING

BEFORE THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE 

ONE HUNDRED NINTH CONGRESS 

SECOND SESSION 

JUNE 14, 2006 

Serial No. J–109–85 

Printed for the use of the Committee on the Judiciary 

( 

(II)

COMMITTEE ON THE JUDICIARY 

ARLEN SPECTER, Pennsylvania, Chairman

ORRIN G. HATCH, Utah 

CHARLES E. GRASSLEY, Iowa 

JON KYL, Arizona 

MIKE DEWINE, Ohio 

JEFF SESSIONS, Alabama 

LINDSEY O. GRAHAM, South Carolina 

JOHN CORNYN, Texas 

SAM BROWNBACK, Kansas 

TOM COBURN, Oklahoma 

PATRICK J. LEAHY, Vermont 

EDWARD M. KENNEDY, Massachusetts 

JOSEPH R. BIDEN, JR., Delaware 

HERBERT KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

MICHAEL O’NEILL, Chief Counsel and Staff Director 

BRUCE A. COHEN, Democratic Chief Counsel and Staff Director 

(III)

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page

Brownback, Hon. Sam, a U.S. Senator from the State of Kansas, prepared 

statement .............................................................................................................. 111 

DeWine, Hon. Mike, a U.S. Senator from the State of Ohio ................................ 3 

Durbin, Hon. Richard J., a U.S. Senator from the State of Illinois, prepared 

statement .............................................................................................................. 197 

Kennedy, Hon. Edward M., a U.S. Senator from the State of Massachusetts ... 2 

Kohl, Hon. Herbert, a U.S. Senator from the State of Wisconsin ....................... 6 

prepared statement .......................................................................................... 200 

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont .................... 4 

prepared statement .......................................................................................... 221 

Specter, Hon. Arlen, a U.S. Senator from the State of Pennsylvania ................. 1 

WITNESSES

Cohen, David L., Executive Vice President, Comcast Corporation, Philadelphia, Pennsylvania ............................................................................................... 13 

Cerf, Vinton G., Vice President and Chief Internet Evangelist, Google Inc., 

Herndon, Virginia ................................................................................................ 12 

Kovacic, William E., Commissioner, Federal Trade Commission, Washington, 

D.C. ........................................................................................................................ 10

Kuhns, Jeff C., Senior Director, Consulting and Support Services, Pennsylvania State University, University Park, Pennsylvania ................................... 22 

Levin, Blair, Managing Director, Stifel Nicolaus & Company, Inc., St. Louis, 

Missouri ................................................................................................................ 18 

McCormick, Walter B., Jr., President and Chief Executive Officer, U.S. 

Telecom Association, Washington, D.C. ............................................................. 15 

Morris, Paul, Executive Director, Utah Telecommunications Open Infrastructure Agency (UTOPIA), West Valley City, Utah ............................................... 20 

Putala, Chris, Executive Vice President of Public Policy, EarthLink, Inc., 

Washington, D.C. ................................................................................................. 16 

Sensenbrenner, Hon. F. James, Jr., a Representatives in Congress from the 

State of Wisconsin ................................................................................................ 7 

QUESTIONS AND ANSWERS 

Questions submitted to Paul Morris by Senators Feingold and Specter (Note: 

Responses to questions were not received as of the time of printing April 

16, 2009) ................................................................................................................ 43 

Responses of Vinton Cerf to questions submitted by Senators Specter, Kohl, 

Feingold and Brownback ..................................................................................... 45 

Responses of David Cohen to questions submitted by Senators Specter, Feingold and Kohl ....................................................................................................... 60 

Responses of William Kovacic to questions submitted by Senators Kohl and 

Feingold ................................................................................................................ 67 

Responses of Jeff C. Kuhns to questions submitted by Senators Specter and 

Feingold ................................................................................................................ 76 

Responses of Blair Levin to questions submitted by Senators Specter, Kohl 

and Feingold ......................................................................................................... 78 

Responses of Walter McCormick to questions submitted by Senators Specter, 

Feingold and Kohl ................................................................................................ 84 

Responses of Chris Putala to questions submitted by Senator Specter, Kohl 

and Feingold ......................................................................................................... 93 

Page

IV

SUBMISSIONS FOR THE RECORD 

AEI-Brookings Joint Center for Regulatory Studies, Robert Hahn, Executive 

Director and Scott Wallsten, Senior fellow, Washington, D.C., joint statement ...................................................................................................................... 99 

Cerf, Vinton G., Vice President and Chief Internet Evangelist, Google Inc., 

Herndon, Virginia, statement and biographical ................................................ 114 

City of Philadelphia, Loree Jones, Secretary of External Affairs, Philadelphia, 

Pennsylvania, statement ..................................................................................... 125 

Cohen, David L., Executive Vice President, Comcast Corporation, Philadelphia, Pennsylvania, statement ............................................................................ 127 

Consumer Federation of America, Mark Cooper, Washington, D.C., statement 187 

Kovacic, William E., Commissioner, Federal Trade Commission, Washington, 

D.C., statement .................................................................................................... 202 

Kuhns, Jeff C., Senior Director, Consulting and Support Services, Pennsylvania State University, University Park, Pennsylvania, statement ................ 215 

Levin, Blair, Managing Director, Stifel Nicolaus & Company, Inc., St. Louis, 

Missouri, statement ............................................................................................. 224 

McCormick, Walter B., Jr., President and Chief Executive Officer, U.S. 

Telecom Association, Washington, D.C., statement .......................................... 232 

Morris, Paul, Executive Director, Utah Telecommunications Open Infrastructure Agency (UTOPIA), West Valley City, Utah, statement ............................ 235 

News Multichannel, New York, New York: 

Feb. 20, 2006, article ........................................................................................ 239 

March 6, 2006, article ...................................................................................... 241 

Progress & Freedom Foundation, Kyle Dixon, Ray Gifford, Tom Lenard, Randolph May, and Adam Thierer, Washington, D.C., report and attachments .. 243 

Putala, Chris, Executive Vice President of Public Policy, EarthLink, Inc., 

Washington, D.C., statement .............................................................................. 265 

Sensenbrenner, Hon. F. James, Jr., a Representatives in Congress from the 

State of Wisconsin, prepared statement ............................................................. 283 

Von Coalition, Bethesda, Maryland, letter ............................................................ 288 

Wall Street Journal: 

Business World, article .................................................................................... 291 

March 7, 2006, article ...................................................................................... 292 

Wsj.com, June 12, 2006, commentary .................................................................... 295 

Washington Post: 

March 13, 2006, article .................................................................................... 297 

June 12, 2006, article ....................................................................................... 299 

(1)

RECONSIDERING OUR COMMUNICATIONS 

LAWS: ENSURING COMPETITION AND INNOVATION

WEDNESDAY, JUNE 14, 2006 

UNITED STATES SENATE,

COMMITTEE ON THE JUDICIARY,

Washington, DC. 

The Committee met, pursuant to notice, at 9:30 a.m., in room 

SD–226, Dirksen Senate Office Building, Hon. Arlen Specter, 

Chairman of the Committee, presiding. 

Present: Senators Specter, Hatch, DeWine, Cornyn, Brownback, 

Leahy, Kennedy, Biden, Kohl, and Feingold. 

OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S. 

SENATOR FROM THE STATE OF PENNSYLVANIA 

Chairman SPECTER. Good morning, ladies and gentlemen. It is 

9:30 and the Judiciary Committee will now proceed with a hearing 

on the communications laws, ensuring competition and ensuring innovation at the same time. We have the unusual pleasure of having 

the distinguished Chairman of the House of Representatives Judiciary Committee, the Honorable F. James Sensenbrenner. This is 

unique, and we welcome our distinguished colleague to this hearing. We also have on the first panel Commissioner William E. 

Kovacic of the Federal Trade Commission. 

Our hearing today involves a great many very complex issues— 

issues which have been taken up by the Commerce Committee in 

the House of Representatives and by the Commerce Committee in 

the Senate. But there are very important antitrust issues involved, 

and I believe it is appropriate for the Judiciary Committees in both 

the House and the Senate to play a significant role in the formulation of the legislation because significant parts come within our jurisdiction. I have discussed the issues with Chairman Ted Stevens, 

and we have worked out a coordinated plan to meet these important matters. 

The considerations involve very substantial market change. 

Intermodal competition is exploding. Cable companies are providing telephone and Internet services in direct competition with 

the Bells, which used to have a monopoly. Developing techniques 

such as fiber to the home and broadband over power lines will likely expand the number of competitors in the markets for telecommunications services. Those who provide Internet access, 

known as information services, are currently not regulated as common carriers under court decisions. Now that competition exists, it 

2

is entirely possible that the antitrust laws will be sufficient to protect consumers and competition in this important market. 

The new telecom services have spawned an entire economy now amounting to more than $100 billion annually. These services have 

made enormous amounts of information available to Americans at 

little or no cost. Free line encyclopedias now make it possible for 

students to do research without leaving home. Vigorous democratic 

debate, once thought to be idealistic, now takes place online on 

blogger and on public interest websites. The innovators in this new 

economy are understandably concerned about the state of competition in the market for telecom services. They depend upon cable 

and the Bells to access their customers and the audiences they 

wish to receive. They are concerned that their access could be cut 

off, degraded, or become an expensive barrier to entry. Telecom reform also has taken on the issue of vertical integration between entities which sell programming, particularly sports teams, and companies that provide video service, cable satellite, and new phone 

companies.

We have quite a number of complex considerations which this 

Committee will be taking up. Net neutrality is very, very high on 

the agenda. We have the issue of video program access. Vertical integration between program vendors and cable satellite companies 

has raised concerns about access. We have the issue of the broadcast and audio flag. We have considerations on municipal 

broadband. We have issues relating to the distribution of child pornography.

Without objection, my full statement will be made a part of the 

record. I have tried to make it brief here because we have a very 

distinguished opening panel and we have many witnesses on the 

second panel. 

Let me yield at this time to Senator Kennedy for an opening 

statement.

STATEMENT OF HON. EDWARD M. KENNEDY, A U.S. SENATOR 

FROM THE STATE OF MASSACHUSETTS 

Senator KENNEDY. Thank you, Mr. Chairman, for calling this extremely important hearing on reform of our telecommunication 

laws. All Americans should have equal access to modern telecommunications technology and should be able to enjoy the full 

lawful Internet content of their choice. Consumers should also be 

able to shop around and find the best price and the best product 

to fit their needs. It is a fundamental and critical part of our economic growth. 

Internet technology has the potential to bring us closer together, 

to reduce costs for families to communicate with their loved ones 

across the country and overseas through e-mail and even phone 

calls over the Internet. And we must continue to do all we can to 

stay on track with the pace of other industrialized countries in this 

new era of technology. If we are not careful, we will wake up one 

day soon to find that America has been left behind while other 

countries leap ahead with higher bandwidth and neutral 

broadband platforms. 

The Internet has broken down barriers in information, communications, and commerce, and the Judiciary Committee should 

3

maintain its jurisdiction and oversight over these evolving matters. 

This Committee has long had a significant role in defining the legal 

standards governing telecommunications, and it should continue to 

do so. It is essential to expand access to the Internet for all Americans, regardless of income or zip code. Effective leadership can 

make sure that the continued growth and expansion of the Internet 

makes our workers more productive, our schools better, our communities safer, and our day-to-day lives easier. 

For decades, the Judiciary Committees of Congress have relied 

on the antitrust laws to prevent monopolies from dictating our 

country’s communication laws, and today’s hearing is an important 

opportunity to define the Committee’s ongoing role in this all-important debate. 

I look forward to working with my colleagues to see that proposals are fair to both consumers and industries. We need to keep 

the focus on policies that will benefit the economy as a whole. 

Chairman SPECTER. Thank you, Senator Kennedy. 

Ordinarily, the opening statements are made by the Chairman 

and Ranking or designee, but the Chairman of the Subcommittee 

is with us today, and I would yield for an opening statement to 

Senator DeWine. 

STATEMENT OF HON. MIKE DEWINE, A U.S. SENATOR FROM 

THE STATE OF OHIO 

Senator DEWINE. Mr. Chairman, thank you very much for calling 

this very important hearing today. As the Senate considers rewriting the telecommunications laws, we are taking on many complicated and important issues. It is no exaggeration to say that the 

telecommunications revolution has reshaped the way we live our 

day-to-day lives. From cell phones to BlackBerrys and from the 

Internet to satellite television and radio, all of us are communicating and obtaining information more rapidly and certainly in 

different ways. As these changes occur, our old regulatory framework is increasingly obsolete. In some instances, it actually hinders 

the progress of this dynamic market sector. It is time, Mr. Chairman, to update our telecommunications laws for a new century, 

and it is essential that competition be the driving force for our 

growth and innovation. 

The changes in this market have been dramatic. In recent years, 

for example, the cable television companies have started to offer 

high-speed Internet and telephone services while telephone companies are beginning to roll out video services. It is clear that these 

businesses are beginning to think of themselves less as phone companies or cable companies and more as providers of content. 

Whether that content is Internet traffic, phone calls, or television 

shows.

This convergence of services offers a unique opportunity to increase competition that we simply cannot pass up: All the players 

are attempting to compete in each other’s markets, and we must 

help them achieve that goal. However, the path from here to there 

may not be such an easy one to travel because the issues we face 

are certainly very complex. 

For example, we have heard a lot lately about net neutrality. 

Many of the Internet service providers, including many phone and 

4

cable companies, have expressed an interest in finding new ways 

to ‘‘manage’’ their networks. The net neutrality debate revolves 

around how and how much the network providers can control the 

way their networks are used. It also involves who pays and how 

much they pay for using those networks. We must address, Mr. 

Chairman, this issue, I believe, very carefully. We may well be at 

an inflection point, the point at which the future of the Internet is 

determined.

Action or inaction may dictate the degree of investment and the 

pace of competition and innovation generated by the Internet for 

years to come. This Committee must make every effort to ensure 

that the legal framework for this industry provides the best possible platform for competition and innovation. 

Another important issue that must be addressed is the process 

for video franchising. As the phone companies enter into video 

services, they tell us that current franchise requirements delay how 

quickly they can enter specific markets and begin to provide another choice for consumers. At the same time, the cable companies, 

who were required to get franchises in each of the towns and cities 

they serve, argue that all the players in this industry should be 

treated the same way, regardless of the technology they use. At 

some point soon, we must resolve these conflicting views in the 

market, and we must do it in a way that encourages free and fair 

competition.

Naturally, issues like these are ones that this Committee as well 

as the Antitrust Subcommittee has examined extensively over the 

last decade. As Chairman of the Antitrust Subcommittee, I have 

worked with the Ranking Member, Senator Kohl, to maintain competition in the telecommunications industries by holding numerous 

hearings on the cable, satellite, and telecommunications industries, 

as well as scrutinizing a range of mergers in these industries. All 

of this investigation and examination has reaffirmed to me that 

free, fair, and vigorous competition is certainly the best way to assure that we get innovation and good pricing for businesses and 

consumers.

It is essential that this Committee continue to play a leading role 

in any telecommunications reforms and that we emphasize competition to guarantee that our laws and regulations effectively meet 

the challenges of this emerging marketplace. 

Thank you, Mr. Chairman. 

Chairman SPECTER. Thank you very much, Senator DeWine. 

We have been joined by our distinguished Ranking Member, Senator Leahy, and I yield to him now for an opening statement. 

STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR 

FROM THE STATE OF VERMONT 

Senator LEAHY. Thank you, Mr. Chairman. I am glad you are 

having this hearing. I was one of only five Senators to vote against 

the 1996 Telecom Act. I argued that the Act’s promise of promoting 

competition and increasing innovation was a false promise, and I 

argued that the Act allowed local regional Bells to easily reunite 

with unregulated local monopoly powers. I pointed out that rural 

consumers would be worse off, that cable and phone rates would 

increase, and that mergers would reduce competition. I was told I 

5

was wrong. Unfortunately, I was right. We should not make the 

same mistake again. 

Many Americans today have no choice whatever in broadband 

services, while others have only two options. The Internet is the ultimate marketplace of ideas. Everyone has equal access. Every 

voice can speak and be heard. A better idea, a better service, a better application wins on its merits. It has opened windows to the 

world in one-room schoolhouses in Vermont and new doors of 

knowledge and opportunity to children from Africa to Indonesia. I 

have worked from the start of the Internet age to keep the Government’s hands off the Internet. The Internet was largely conceived 

in the United States. When the U.S. Government seeks to regulate 

the Internet, the rest of the world watches. A triple play of being 

able to offer video TV and movies, telephone, and Internet service 

raises the risk that telephone or cable companies will bundle all 

three services together and not allow each service to compete on its 

own merits. I think this Committee has to ensure that the Internet 

stays open and free to everyone. 

The resolution of the issues raised today will determine who is 

in control of electronic access to our homes and small businesses. 

Will consumers be in control or will it be just a few large corporations that control that information link? 

This is not a hypothetical question. Corporations have legal duties to their shareholders to maximize shareholder returns. Even if 

it means gouging the consumers, they are going to do it. The Supreme Court’s Brand X decision effectively permits broadband service providers to discriminate against competing content applications and other service providers. One executive from AT&T has 

made it clear he wants to control that last mile into the house. 

Discrimination includes slower exchange of traffic from 

unfavored content providers, direct blocking of lawful websites, and 

even added fees for access. This would be such a dramatic change 

from what has made the Internet what it is today. 

In fact, it is both enlightening and, from a consumer perspective, 

frightening to review the assertions of a White Paper issued by 

Cisco Systems. They made clear that Cisco is poised to offer companies such as Verizon, AT&T, Comcast, Time Warner, and others 

the ability ‘‘in real time’’ to know the identity and profile of the individual subscriber, what the subscriber is doing, where the subscriber resides, and their service level. Is there any privacy left in 

America?

The major telecom and cable providers are threatening to refuse 

to invest in improvements or expansions unless they can reap big 

profits by charging rates based on how the Internet is used. 

I believe they are going to make these investments anyway. Certainly Verizon will make those investments, according to Vice 

Chairman Larry Babbio. He has said they are in the middle of 

spending billions of dollars on upgrades, with its posted revenue of 

$68 billion last year. He said they have the goal of bringing fiber 

to ‘‘every home it serves,’’ not the last mile, ‘‘not to the curb, but 

to the home.’’ 

Verizon and AT&T certainly have some money to reinvest. They 

have bought back hundreds of millions of dollars worth of their 

6

stock, and paid dividends of $13 billion. I would like to put in the 

record the financial data on those firms, Mr. Chairman. 

Chairman SPECTER. Without objection, it will be made part of the 

record.

Senator LEAHY. The issues raised in Chairman Stevens’ bill are 

squarely within the jurisdiction of this Committee. I do not think 

we can allow competitors in this highly concentrated market to 

compete only for affluent, urban residents. Chairman Sensenbrenner ran into a similar situation in the other body, and looking 

at the Chairman’s face, he knows exactly what I mean. 

So I look forward to working with members of this Committee to 

put forward a strong bill along the lines of Chairman Sensenbrenner’s effort to protect consumers, competition, and the Internet. Let’s keep the Internet open for everyone. It has worked pretty 

well so far. Let’s not screw up a good thing. 

Chairman SPECTER. Thank you, Senator Leahy. 

Senator Kohl, the Ranking Member of the Subcommittee. 

STATEMENT OF HON. HERB KOHL, A U.S. SENATOR FROM THE 

STATE OF WISCONSIN 

Senator KOHL. I thank you, Mr. Chairman, for holding this hearing today. Besides food and energy, perhaps no industry is as important to millions of American consumers as telecommunications. 

From making a phone call to watching television to using the Internet, the telecommunications industry touches every American dozens of times every day, and we all depend on choice and competition to deliver these services at the lowest possible price and at the 

best possible quality. We have today reached an important point in 

the telecommunications industry, and the policies we adopt will affect competition in this crucial industry for years to come. 

Many industry critics believe that the enormous gains in innovation and competition we have all seen are now threatened by the 

emergence of a few dominant telecom companies. As we revise our 

telecom laws, our Committee, as the guardian of antitrust law and 

competition policy, has a crucial role to play. It can start by ensuring that our antitrust enforcement agencies are at full strength to 

protect competition in the telecom industry. 

Under current law, the Federal Trade Commission is prevented 

from exercising any jurisdiction over telecom common carriers. This 

common carrier exemption should be repealed so that the FTC can 

protect consumers from unfair methods of competition in this industry, as well as in any other. 

Another crucial issue that we must consider is net neutrality. 

Many fear that the relatively few large phone and cable companies 

that provide high-speed Internet access for millions of consumers 

could become the gatekeepers with respect to Internet content. We 

need to ensure that consumers have unfettered access to all Internet content free from discrimination, and we must prevent 

broadband providers from being able to determine winners and losers in the information superhighway. At the same time, broadband 

providers need to be able to manage their networks so that the profusion of video content does not degrade the Internet experience for 

everyone.

7

Road blocks to video competition also need to be addressed. The 

deployment of video services by the phone companies brings the 

prospect of much needed competition for video, but the requirement 

of obtaining literally thousands of local franchises threatens to seriously retard this promising development. We need to ensure that 

local franchise requirements are not a barrier to competition, while 

at the same time respecting the role of States and municipalities. 

Also central is the existence of robust program access law so that 

these new competitors have access to the must-have programming 

necessary to compete. 

In sum, Mr. Chairman, consumers have benefited from an abundance of new technologies and new choices over the past 25 years. 

Yet today’s wave of telecom consolidation means that we need to 

be wary that new dominant providers do not stifle competition and 

harm consumers. We must do everything we can to ensure that 

competition in telecom does not go the way of the rotary telephone 

and the telegram. 

I thank you, Mr. Chairman. 

Chairman SPECTER. Thank you, Senator Kohl. 

Thank you very much, Chairman Sensenbrenner, for joining us 

here today. 

Chairman Sensenbrenner has represented the 5th Congressional 

District of Wisconsin since his election in 1978; prior to that time, 

served 10 years in the Wisconsin State Legislature; has a bachelor’s degree in political science from Stanford and a law degree 

from the University of Wisconsin at Madison. I thank him for his 

cooperation on some very, very tough issues, work on the PATRIOT 

Act and other matters, and immediately after the Senate passed 

our version of the immigration bill, I went to see Chairman Sensenbrenner to make our plans for a conference. 

Thank you for being with us, and we look forward to your testimony.

STATEMENT OF HON. F. JAMES SENSENBRENNER, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WISCONSIN

Representative SENSEBRENNER. Thank you very much, Mr. 

Chairman, Ranking Member Leahy, and Committee Members. I 

am here in the unique position today to ask this Committee in the 

United States Senate to save the country from the impulsivity of 

the House. 

[Laughter.]

Representative SENSEBRENNER. You do not hear that very often. 

Senator KENNEDY. You are not talking about immigration, are 

you?

[Laughter.]

Representative SENSEBRENNER. There are two sides to that coin, 

Senator.

Before I begin, I would like to make an important point about 

the antitrust laws. Some antitrust critics contend that fidelity to 

the free market is somehow inconsistent with a commitment to 

antitrust. However, as a strong conservative who adheres to the 

primacy of free markets, I believe that the antitrust laws preserve 

8

the integrity of the free market upon which economic vitality depends. The communications industry is no exception to this rule. 

The principled application of the antitrust laws in the communications market has facilitated competition, reduced prices, encouraged the deployment of new technologies, and enhanced consumer choice for millions of Americans. The House Judiciary Committee conducted its first hearing on communications and antitrust 

policy in 1957, when it examined a DOJ/AT&T consent agreement 

addressing anticompetitive conduct in this industry. 

In ensuing decades, both the House and Senate Judiciary Committees conducted several additional hearings on communications 

competition and antitrust enforcement and oversaw the historic 

1982 Modification of Final Judgment that made long-distance calling an affordable reality to millions of Americans. It is crucial to 

note that the Ma Bell monopoly operated in highly intensive regulatory regimes for decades, but the antitrust laws provided the procompetitive remedy that regulation could not, did not, and cannot 

provide alone. However, following the consent decree, local service 

was still the exclusive province of Bell companies that inherited 

virtual monopoly control of the local exchange. 

Throughout the 1980s, the Committee on the Judiciary conducted 

extensive hearings concerning the implementation of the 1982 decree and anticompetitive aspects associated with continuing monopoly control of local service. In the early 1990s, the Committee conducted several hearings on this issue, and in 1995, the Committee 

examined the Justice Department’s responsibility to aggressively 

monitor competition in the telecom field. 

The congressional record that gave rise to the 1996 Telecommunications Act was shaped by four decades of House Judiciary Committee involvement in monitoring the application of the 

antitrust laws in the communications field. In order to reaffirm the 

centrality of the antitrust laws in the liberalized regulatory regime 

established by the 1996 Act, Congress preserved an explicit antitrust savings clause in the legislation. 

Section 601(c)(1) of the 1996 Act provided that: ‘‘. . . Nothing in 

this Act or the amendments made by this Act shall be construed 

to modify, impair, or supersede the applicability of any of the antitrust laws’’. 

Despite the inclusion of this antitrust savings clause, a record of 

considerable judicial confusion has developed in our Nation’s 

courts. In 2000, the Seventh Circuit issued the Goldwasser decision, ignoring the plain language of the antitrust savings clause 

and holding that the Telecom Act ‘‘must take precedence over the 

general antitrust laws’’. In 2004, the Supreme Court embraced the 

reasoning of the Goldwasser court in Verizon v. Trinko. The decision stated: ‘‘One factor of particular importance is the existence of 

a regulatory structure designed to deter and remedy anticompetitive harm. Where such a structure exists. . . it will be less plausible that the antitrust laws contemplate such additional scrutiny. 

. . ’’. The Court concluded: ‘‘against the slight benefits of antitrust 

intervention here, we must weigh a realistic assessment of its 

costs’’.

This is precisely the judicial analysis that Congress precluded in 

the 1996 Act, and this holding has done violence to remedial antiVerDate Nov 24 2008 10:18 Apr 17, 2009 Jkt 043110 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43110.TXT SJUD1 PsN: CMORC
9

trust enforcement and competitive gains in the telecommunications 

marketplace. This assault on congressional intent and the antitrust 

laws should be of concern to members of both bodies of Congress, 

but particularly to those who serve on committees charged with 

overseeing their implementation. 

In recent years, the Internet has become a vital communication, 

information, and commercial medium for millions of Americans. 

For many years, the Federal Trade Commission was precluded 

from enforcing the Federal Trade Commission Act’s competition-enhancing protections in the facilities-based broadband Internet marketplace. In its Brand X decision last year, the Supreme Court 

upheld an FCC determination that these services were outside of 

its regulatory ambit, thus permitting a more assertive role by the 

FTC in promoting competition in the marketplace. 

According to FCC data released in April, 98.2 percent of Americans access high-speed broadband lines by cable modem or DSL 

connections. This lack of competition presents a clear risk that 

broadband providers will leverage dominant market power to discriminate against competitors, and pre-select, favor, or prioritize 

Internet content over their networks. 

Regrettably, the legislation recently passed by the House invites 

the risk of competitive abuse by depriving those injured by this 

misconduct from an effective antitrust remedy. Specifically, H.R. 

5252 provides the FCC with ‘‘exclusive’’ authority to define and adjudicate discriminatory broadband practices. This authority displaces the antitrust laws and the vital pro-competitive and pro-consumer purposes they advance. 

It is of little consolation that the House accepted a floor amendment containing a nearly verbatim recitation of the antitrust savings clause contained in the 1996 Act effectively circumvented by 

the Trinko court. In fact, the amendment passed by the House is 

weaker than the savings provision contained in the 1996 Act for 

two important reasons. First, it is a ‘‘rule of construction’’ by its 

own terms, while the savings provision in the 1996 Act contained 

no such limitation. Second, the amendment is narrower because it 

applies only to one section of H.R. 5252, while the savings provision in the 1996 Act applied to the entire 1996 Act and subsequent 

amendments thereto. I voted against this amendment because I 

concluded that it provides little more than a proven road map for 

judicial circumvention of a substantive antitrust remedy for competitive misconduct in this field. In addition, to preserve an explicit 

antitrust remedy for broadband discrimination, I authored and my 

Committee passed H.R. 5417, the Internet Freedom and Nondiscrimination Act of 2006, by a bipartisan vote of 20–13. 

Mr. Chairman, I commend you for scheduling today’s hearing 

and thank you for the invitation to testify. As the Senate Judiciary 

Committee asserts its role in this body’s consideration of communications legislation, I urge its members to ensure that the antitrust laws and the agencies that enforce them are provided a clear, 

continuing, and unambiguous role in promoting and defending the 

pro-competitive goals for which they were established. 

I thank you. 

[The prepared statement of Representative Sensenbrenner appears as a submission for the record.] 

10

Chairman SPECTER. Thank you very, very much, Chairman Sensenbrenner, for coming over. We know how busy you are, and you 

are obviously free to leave, but not before we wish you a happy 

birthday.

Representative SENSEBRENNER. Thank you, Mr. Chairman. I am 

not eligible for Medicare yet. 

Chairman SPECTER. Thank you. 

Senator LEAHY. Happy birthday, Jim. 

Representative SENSEBRENNER. Thank you, Pat. 

Chairman SPECTER. We now turn to Hon. William Kovacic, Commissioner on the Federal Trade Commission. He previously had 

served as General Counsel to the FTC, a professor at George Washington University School of Law, a bachelor’s degree in public and 

international affairs from Princeton, and a law degree from Columbia University. 

Welcome, Commissioner Kovacic, and the floor is yours. 

STATEMENT OF HON. WILLIAM E. KOVACIC, COMMISSIONER, 

FEDERAL TRADE COMMISSION, WASHINGTON, D.C. 

Mr. KOVACIC. Thank you, Mr. Chairman, members of the Committee. I am grateful for the opportunity to present the Federal 

Trade Commission’s testimony on the Commission’s role in promoting the interests of consumers in the offering of broadband 

Internet access services. My written statement provided to you offers the testimony of the Commission itself, and my spoken remarks today offer my own views and not necessarily those of my 

colleagues.

As you know, the FTC is the only Federal agency with general 

jurisdiction over both antitrust policy and consumer protection in 

most sectors of our economy. This combination of responsibilities is 

a unique and valuable attribute. By this institutional design, Congress has given the FTC flexible, adaptable, and formidable tools 

to address fast-changing commercial phenomena that defy easy 

classification into the discrete categories of regulatory oversight 

that our system of economic regulation has developed over the past 

century.

The development of the Internet as a conduit of information is 

precisely such a phenomenon. On many occasions in the past decade, the FTC has used its distinctive mix of authority to promote 

consumer interests in the area of Internet access services. For example, with its consumer protection mandate, the FTC has investigated and prosecuted Internet service providers for allegedly deceptive billing, advertising, and marketing of Internet access services. In exercising its antitrust responsibilities, the agency has required parties to transactions, such as AOL’s merger with Time 

Warner, to take steps to ensure Internet access. 

When it carries out its antitrust and consumer protection duties, 

the FTC typically shares jurisdiction with the Federal Communications Commission. The two agencies cooperate extensively to ensure that the exercise of their concurrent authority serves consumer interests effectively. In appearing before you today, I make 

one basic request. Congress presently, as all of you have discussed, 

is giving close attention to various issues associated with communications policy and Internet access services. As it considers new 

11

legislation, I ask that the Congress preserve the Federal Trade 

Commission’s jurisdiction to address antitrust and consumer protection concerns posed by the development of the Internet and 

other features of the information services economy. 

For decades, the common carrier exemption from the FTC’s jurisdiction has precluded the application of the FTC’s authority to various features of the communications services sector. New legislation 

should ensure that the limits in the common carrier exemption do 

not expand to encumber the Commission’s enforcement programs 

and other activities involving access to Internet services on behalf 

of consumers. 

Allow me to end by thanking the Committee and the Congress 

for its attention to these important jurisdictional considerations. In 

my eyes, there is no contribution more vital to the modern success 

of the Federal Trade Commission than the commitment of Congress to make periodic legislative improvements to the institutional 

framework through which the Commission seeks to safeguard consumer interests. And I wish that Chairman Sensenbrenner were 

here so that I could thank him and the members of the Committee, 

and indeed the Members of the Senate, to express my gratitude for 

one recent manifestation of this commitment, namely, the support 

of the Senate and Chairman Sensenbrenner’s Committee for the 

proposed U.S. Safe Web legislation. As it contemplates new statutory reforms regarding Internet access, I am confident that the 

Congress will continue to act in the wise tradition of ensuring that 

no jurisdictional barriers impede the ability of the FTC to exercise 

its antitrust and consumer protection powers on behalf of consumers.

I welcome your questions and comments. 

[The prepared statement of Mr. Kovacic appears as a submission 

for the record.] 

Chairman SPECTER. Thank you very much, Commissioner 

Kovacic. I think that our panel’s questioning of you would be enhanced if we heard from the witnesses first, if you would not mind 

waiting until they have testified. 

Mr. KOVACIC. Pleasure, sir. 

Chairman SPECTER. All right. Then we will proceed now to the 

panel, and we will begin the questioning after the panel testifies, 

and we will have questions for the Commissioner at that time. 

Our first witness on the panel is Mr. Vinton Cerf, Vice President 

of Google Corporation, co-designer with Robert Kahn of the TCP/ 

IP protocols and the basic architecture of the Internet, for which 

he received the Presidential Medal of Freedom, previously served 

as Senior Vice President of MCI and Vice President of the Corporation for National Research Initiatives, holds a Ph.D. in computer 

science from UCLA. 

As is our custom, gentlemen, we have 5 minutes for each panelist, and as you can see, we have very substantial representation 

from the Committee here today, so we would appreciate your observing the time limits. The floor is yours, Mr. Cerf. 

12

STATEMENT OF VINTON G. CERF, VICE PRESIDENT AND CHIEF 

INTERNET EVANGELIST, GOOGLE INC. 

Mr. CERF. Thank you very much, Mr. Chairman, and thank you, 

members of the Committee. I have to tell you, sitting and listening 

to the comments that have been made so far, my respect for your 

concerns and your ability to express them has increased dramatically. I am very, very grateful to know that this Committee has 

chosen to look carefully at the issues before us. 

I am not an antitrust expert, and as the Chairman points out, 

I am an engineer. But I have spent the last 35 years of my life 

helping to make the Internet happen, and I am deeply, deeply troubled by the current situation in which we may lose the openness 

of the Internet as a consequence of some decisions made last year 

and with legislation that is being considered in the present time. 

For the first time in history, the openness and the innovation of 

the Internet is now threatened by the market power of broadband 

carriers. Last summer, the nondiscrimination safeguard governing 

the Internet’s broadband on ramps were removed by a decision of 

the FCC. What Google and our colleagues seek to reestablish is a 

small but vital part of what was taken away: nondiscrimination 

safeguards for access to the Internet over broadband on ramps. 

Those safeguards have been fundamental to the Internet’s development and evolution since its inception. 

The broadband carriers now possess significant unconstrained 

market power. The most recent figures from the FCC show that the 

phone and cable operators together control on the order of 99 percent of the broadband market. Potential alternatives like 

broadband over power line and wireless and satellite make up a 

half of 1 percent of the broadband market today, and, in fact, their 

share of the market has actually gone down since these statistics 

have been kept. So those do not represent any near-term alternatives to the two primary providers of broadband service. 

In fact, cable and telephone broadband providers only compete in 

half of the markets. The other half either has no choice at all because it has no broadband or it has a choice of only one or the 

other, of cable or DSL from the telcos. 

The carriers’ words and deeds demonstrate that this threat to 

Internet openness is very real. The phone companies and the cable 

companies possess both the ability and the vocally expressed intention to limit how consumers and producers utilize the Internet’s on 

ramps. Their intentions appear to be to artificially reduce the capacity that consumers have to access the Internet. They intend to 

charge providers of Internet service doubly; that is to say, they 

charge the consumers for access to the broadband network and 

they advertise it as broadband access, and then they turn around 

and say, well, you will not really have access to all of the 400 million servers on the Internet unless some of those servers have paid 

us to carry their traffic over our broadband—over your broadband 

access.

The consumers are going to lose their choices. The broadband access providers are, in fact, saying that they will unilaterally pick 

and choose what content and services consumers can see and use 

on the Internet. This debate is not really about the current crop of 

Internet application providers. It is really about the many potential 

13

new innovators, new entrepreneurs, each one of which could become a Google or a Yahoo! or an eBay in the future. 

More than 100 companies have banded together to talk about retaining and preserving the openness of the Internet. When the 

Internet was designed, it was designed with several simple principles in its construction. One was end-to-end openness. The endto-end principle allowed any applications to be implemented on top 

of the network and any underlying transmission and switching system to be used to provide a service. Moreover, when the Internet 

was accessed by dial-up, everyone had a choice of any ISP they 

wanted. With the broadband situation, they have either a choice of 

one or two or none at all or only one. 

At this point, because I am about to run out of time, Mr. Chairman, let me simply emphasize that this Committee has the opportunity to put back in place consumer choice and the creation of 

marketplaces that will otherwise be utterly destroyed by the potential market power exercised by the cable and telcos. 

Thank you very much. 

[The prepared statement of Mr. Cerf appears as a submission for 

the record.] 

Chairman SPECTER. Thank you very much, Mr. Cerf. 

Our next witness is Mr. David Cohen, Executive Vice President 

of Comcast Corporation, previously partner and Chairman of 

Ballard Spahr, one of the Nation’s 100 largest law firms, was chief 

of staff to Mayor Rendell in Philadelphia; bachelor’s degree from 

Swarthmore and summa cum laude graduate of the University of 

Pennsylvania Law School; and his most important title is Philadelphia lawyer. 

Welcome, Mr. Cohen. 

STATEMENT OF DAVID L. COHEN, EXECUTIVE VICE PRESIDENT, COMCAST CORPORATION, PHILADELPHIA, PENNSYLVANIA

Mr. COHEN. Thank you, Mr. Chairman, Ranking Member Leahy, 

and members of the Committee. Sometimes that is not the best 

way to be known, but coming from another Philadelphia lawyer, I 

will accept that in the complimentary fashion that was intended. 

I appreciate the opportunity to appear here today to offer the 

cable industry’s perspective on the state of competition in the video 

and broadband marketplace. These markets are functioning extremely well today. Almost every home in America can choose from 

at least three multi-channel video providers, and with the entry of 

the Bells into video, these choices will continue to grow. 

Similarly, in the video content business, the number of cable networks has increased from just under 100 to nearly 500 over the 

past decade. In high-speed data, in less than a decade, service has 

been deployed to over 90 percent of all U.S. households, and 84 million Americans now have broadband in their homes. Wireless, satellite, and electric power companies are also fighting for a share of 

the broadband marketplace. In our view, this robust competition is 

proof positive of the well-known, if ungrammatical, maxim: ‘‘If it 

ain’t broke, don’t fix it’’. 

With that, let me turn to the worst new idea in Washington: regulating the Internet under the cloak of ‘‘network neutrality,’’ a 

14

vague and misleading term. Numerous cable companies, such as 

Comcast, have invested billions of dollars of private, at-risk capital 

to construct networks that give consumers access to broadband 

Internet services, applications, and content. These networks have 

enabled thousands of companies to enter the electronic commerce 

marketplace, but we must remember that the broadband marketplace remains in its infancy. No one can tell you exactly what our 

business model will be 3 years from now, 5 years from now, or 10 

years from now. We need the ability to continue to invest, to innovate, and to experiment in order to maximize consumer choice and 

the consumer experience on the Internet. 

Now, certain large e-commerce companies are pushing for regulation of the Internet, trying to turn network operators into common 

carriers or dumb pipes. We do not believe Congress should grant 

their wish, nor do we think their proposals would help consumers. 

Let me just give you three quick overview perspectives as to why. 

First, these companies are demanding regulation based on hypothetical problems. They do not have evidence to justify regulating 

the Internet, so they dream up horrible hypothetical harms and try 

to panic Internet users into supporting their cause. As the Wall 

Street Journal and many others have declared, network neutrality 

regulation is a solution in search of a problem. 

Second, these companies have predicted many times before that 

the sky would fall unless Government regulated the Internet. They 

have been wrong before, and they are wrong now. I will just give 

you one example. Back in 2002, 4 years ago, Microsoft CTO Craig 

Mundie testified, that ‘‘One cannot ignore the ominous signs that 

network operators will frustrate consumers’ ability to go anywhere 

on the Internet. It would be a mistake for policymakers not to address these concerns’’. 

Nearly 1,300 days have passed since that dire prediction, and 

there is still no evidence of a problem. Yet from the time of the first 

‘‘net neutrality scare’’, Microsoft’s annual revenues have grown by 

over $10 billion per year. Meanwhile, the market cap of Google has 

soared from nothing to approximately $117 billion. Everyone 

should have these kinds of problems. 

Third, proponents of regulating the Internet are opening a Pandora’s Box that will hurt network providers, consumers, and the ecommerce companies themselves. For example, if new regulations 

were imposed, they can impede our ability to stop viruses and 

spam that hurt the overall customer experience. At the same time, 

new regulations could thwart our ability to offer new services and 

applications to consumers and dry up investments that need to be 

made to continue to advance the interests of the Internet. 

It is interesting to note that the Wall Street Journal and the 

Washington Post, two papers that rarely see eye to eye on any 

issue, absolutely agree that neutrality regulation is a bad idea. 

And, fortunately, proposals for heavy-headed regulation were 

soundly rejected in a bipartisan vote on the House floor last week. 

That is the same sound course we advocate in the Senate. 

Mr. Chairman and Ranking Minority leader, we appreciate very 

much your holding these hearings to hopefully shed some light on 

an issue that has generated a lot of heat but not much light, and 

I look forward to taking your questions. 

15

Thank you. 

[The prepared statement of Mr. Cohen appears as a submission 

for the record.] 

Chairman SPECTER. Thank you very much, Mr. Cohen. 

Our next witness is Mr. Walter McCormick, President and CEO 

of United States Telecom Association. At the law firm of Bryan 

Cave, more than 500 lawyers, he chaired the regulatory affairs, 

public policy, and legislation practice. He had been General Counsel with the U.S. Department of Transportation, degrees in journalism and law from the University of Missouri. 

Thank you for coming in today, Mr. McCormick, and we look forward to your testimony. 

STATEMENT OF WALTER B. MCCORMICK, JR., PRESIDENT AND 

CHIEF EXECUTIVE OFFICER, U.S. TELECOM ASSOCIATION, 

WASHINGTON, D.C. 

Mr. MCCORMICK. Mr. Chairman, thank you very much, and, Mr. 

Chairman and members of the Committee, I appreciate the opportunity to testify today. 

To contrast myself with Mr. Cerf, who indicated that he is an engineer, not an antitrust policy expert, I am not an engineer. My 

background is in law and public policy, particularly competition 

policy, economic regulation, and antitrust. And as a result of this 

background, I have deep respect for the rigor, the dispassion and 

the intellectual discipline of antitrust analysis, an analysis that examines trade practices without regard to the technology in question 

but, rather, with regard to the behavior in question. So whether 

one is examining practices of the telephone industry, the motion 

picture industry, or the software industry, the analysis is the same. 

Applying this analysis, one must ask these questions: First, is 

there competition in the relevant market? Do consumers have a 

choice? Today they do. The world has changed in the 24 years since 

AT&T was broken up and in the 10 years since the passage of the 

1996 Act. Today you can make a telephone call on a landline 

phone, on a wireless phone, on a cable phone, or on an Internet 

phone. You can obtain high-speed Internet access from your telephone company, your cable company, your wireless company, your 

satellite company. In coffee shops, in airports, on college campuses, 

and in many municipalities, you can access the Internet via WiFi 

hot spots. Electric utilities are beginning to invest in delivering 

broadband over power line. Others are entering the market using 

unlicensed spectrum. And the Government is about to put new 

spectrum out for bid. 

Then, one might ask, do telephone companies have a dominant 

market share of the high-speed Internet access market? No, they 

do not. DSL represents a minority share of the high-speed Internet 

access market. In fact, our share of the high-speed Internet access 

market is less than Google’s market share of the search engine 

market and far less than Microsoft’s share of the business software 

operating systems market. 

Then, one might ask, do telephone companies have market 

power? Which we know is defined as the power to control price. 

Clearly not. As a result of the growth of competition, the price of 

high-speed Internet access is dropping precipitously. Our compaVerDate Nov 24 2008 10:18 Apr 17, 2009 Jkt 043110 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43110.TXT SJUD1 PsN: CMORC
16

nies have service offerings now at less than $15 per month. There 

is a veritable price war going on. Google is in a partnership with 

EarthLink to offer an ad-supported service in San Francisco for 

free. As a result of this competition and lower prices, broadband 

penetration is increasing, particularly among middle-class Americans and minorities. 

So, finally, one must ask, Is this market contestable? Certainly 

it is. Google itself has shown that it is. As mentioned, Google is 

partnering with EarthLink to provide Internet access in San Francisco. Google is reported to be an investor in Current Communications, which is deploying broadband over power line in Cincinnati, 

Dallas, and other cities. Clear Wire Communications is deploying 

wireless Internet access in Jacksonville and other cities. The FCC 

reports that the number of broadband providers is exploding. Indeed, the number tripled in just 1 year, from 485 to over 1,200 

from June 2004 to June 2005. Today, Americans living in 75 percent of zip codes have three or more providers. In California, the 

PUC has authorized broadband over power line, noting that in 

major metropolitan areas, such as San Francisco, Los Angeles, and 

San Diego, they are up to 23 providers. 

So then what is the antitrust problem? Today, there is no problem. No broadband provider in the country is blocking, impairing, 

or degrading consumer access to the Internet. The FCC has issued 

an Internet policy. The policy says that it has both the authority 

and the will to enforce and says that consumers will have the ability to access the websites they choose, run the applications they 

choose, and attach the devices they choose. And the FTC has made 

clear that it has jurisdiction to assure a pro-competitive environment. So what is really being debated here is whether the Government should manage competition on the Internet, whether Congress should accept Google’s vision of how the Internet marketplace 

should operate, which would result in loading all costs on consumers and prohibiting any prices being charged to Google. This is 

not a competition policy issue. It is a business plan issue. And it 

is something that Congress should refrain from legislating. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. McCormick appears as a submission for the record.] 

Chairman SPECTER. Thank you, Mr. McCormick. 

Our next witness is Mr. Christopher Putala, Executive Vice 

President of Public Policy at EarthLink. He served on the Judiciary 

Committee staff under Senator Biden, has a bachelor’s degree from 

Bates and a master’s degree in public policy from Harvard. 

Thank you for coming in today, Mr. Putala, and the floor is 

yours.

STATEMENT OF CHRIS PUTALA, EXECUTIVE VICE PRESIDENT 

OF PUBLIC POLICY, EARTHLINK, INC., WASHINGTON, D.C. 

Mr. PUTALA. Thank you, Mr. Chairman, members of the Committee, Senator Biden. EarthLink is the Nation’s largest independent Internet service provider, a publicly traded company 

headquartered in Atlanta. We are proud to provide Internet access 

and services to more than 5.3 million consumers throughout the 

country. Thank you for the opportunity to testify today. I ask that 

17

my full statement be made part of the record, and I will summarize.

Today, there are three major communications policy issues facing 

Congress: First, how will the Bell companies enter the television 

business? Second, how will cable and others in the Internet voice 

business connect to the telephone network? And, third, how will 

the Internet work if equal access laws and regulations around since 

its inception are allowed to fade away? 

The answers to all three fundamentally concern market power 

and what to do about it. To the first two questions, can the Bells 

and the cable companies offer specific legislative solutions to correct actual and potential discriminatory abuses of market power? 

But when it comes to the issue of net neutrality, the implications 

of market power have largely been ignored, and that is why today’s 

hearing and the leadership of the Judiciary Committee is so important.

Taking the first question of Bell entry into the television business, the Bell companies argue that cable has too much market 

power and not enough competition in television services, and so 

they seek changes in program access rules that make sure that 

cable has to make the sports and other programming available to 

the Bells on a nondiscriminatory basis. The reason is clear. The 

Bells need access to content if they are to compete against cable. 

A new competitor is just not going to have very good luck starting 

a new television service in Philadelphia if they cannot broadcast 

the Phillies. Nor would one have very good luck in Vermont if they 

cannot broadcast the Red Sox. So the Bells are today fighting to 

significantly expand nondiscriminatory program access rules; in 

other words, television neutrality. 

On the second question concerning how voice over the Internet, 

or VoIP, interconnects with the public telephone network, cable argues that the Bells have too much market power over telephone 

networks, so they ask Congress to require nondiscriminatory interconnection rules so the new technology of voice over the Internet 

has access to the telephone network. The reason is clear. New VoIP 

companies are not going to have very good luck starting a new telephone service if it is too expensive for their customers to send or 

receive calls for the millions of Bell company telephone customers; 

in other words, telephone neutrality. 

I respectfully suggest that these same equal access, nondiscrimination goals guide Congress as it considers net neutrality. 

Rules that have governed the Internet from the start require equal 

and open access over the last mile precisely because consumers 

lack robust choices. That remains so today. Cable modem service 

and Bell company DSL together account for 95 percent plus of all 

residential and small business broadband connections nationwide. 

In the face of the Bell, cable, broadband duopoly, there is a need 

for equal access protections, nondiscriminatory rules so that powerful incumbents cannot put their thumb on the scale of competition. 

What happens when the bits line up to come down that last stretch 

of Internet pipe to my house? Will my EarthLink Internet voice 

bits go to the back of the line because the Bell does not want 

EarthLink to be a high-quality substitute for its telephone service? 

If EarthLink creates an Internet video service, does cable put my 

18

video bits at the back of the line to protect its own video service? 

Would either of them let Google video jump ahead of EarthLink 

video simply because Google paid a fee to have the first claim on 

the last mile of Internet bandwidth? The market should decide who 

can sell television, telephone, and Internet services. Incumbents 

with a stranglehold on vital inputs should not. Just as the Bells 

argue for equal access to programming and the cables argue for 

equal access to the telephone network, the Internet should be governed by nondiscrimination and equal access. 

The other important way to confront the net neutrality issue is 

to encourage as many new broadband providers as possible. One 

place to start is for Congress to eliminate current and future prohibitions on local broadband initiatives. EarthLink is proud to be 

leading the effort to unwire America’s cities with WiFi technologies, delivering the Internet wirelessly and affordably. 

EarthLink has already partnered with the city of Philadelphia to 

build, own, and manage at our cost a wireless network to provide 

broadband to the entire 135 square miles of Philadelphia. This will 

be the Nation’s largest municipal WiFi network. EarthLink is 

working with Milwaukee, Wisconsin; New Orleans; San Francisco; 

Anaheim; and many others to expand this new technology as far 

and as wide as possible. 

In closing, EarthLink’s WiFi network will practice what we 

preach. We will offer fair, reasonable, and nondiscriminatory 

wholesale rates to all others who seek to bring customers to these 

new networks. 

Thank you for the opportunity to testify. I look forward to questions.

[The prepared statement of Mr. Putala appears as a submission 

for the record.] 

Chairman SPECTER. Thank you very much, Mr. Putala. 

We will now turn to Mr. Blair Levin, Managing Director and 

Telecommunications, Technology, and Media Regulatory Analyst 

for Stifel Nicolaus, as well as its predecessor, Legg Mason; was 

chief of staff of FCC Chairman Reed Hundt; had been a partner of 

the North Carolina law firm of Parker Poe; a summa cum laude 

graduate of Yale College and a law degree from Yale. That is second best, Mr. Levin, to being a Philadelphia lawyer. The floor is 

yours for 5 minutes. 

STATEMENT OF BLAIR LEVIN, MANAGING DIRECTOR, STIFEL, 

NICOLAUS & COMPANY, INC., ST. LOUIS, MISSOURI 

Mr. LEVIN. Thank you. In considering telecommunications investment innovation, I would offer four points. 

First, regulation is not the primary driver of investment decisions for network infrastructure. In this network neutrality debate, 

some argue that any regulation will hurt network investment, but 

this confuses a piece of the puzzle with the entire puzzle. Decisions 

involving such investment involve numerous factors. For example, 

looking at one puzzle piece, one could argue that the 1992 Cable 

Act suppressed investment in cable infrastructure. But looking at 

the whole puzzle, the Act facilitated the rise of DBS, stimulating 

cable investment to offer improved video service and broadband, 

which in turn stimulated telco upgrades. The point is not that all 

19

regulation stimulates investment, but the opposite is also untrue. 

And I think we err in judging a policy on the single metric of capital investment in a single industry. 

Which leads to my second point, which is that the task of public 

policy ought not to be to maximize investment in one part of an 

economic value chain but to allow the market to optimize investment throughout the value chain. The Nation’s economic policy 

should create a rising standard of living. That requires investments 

that drive economic growth. This debate is part of competition for 

investments as different parts of the broadband value chain seek 

rules to improve their return on capital. Some suggest Government 

should not be involved, but the Government has often intervened 

in value chain disputes to help jump-start new industries and stimulate competition. Some of these regulations worked well; others 

didn’t. Some were required at a particular time but over time outlived their usefulness. The prior speaker mentioned some other disputes that are essentially value chain disputes. And with each, 

Government sought to stimulate growth throughout the value 

chain by regulating access to a key input. The facts are different 

with each, but with broadband, if a network owner wants to develop new applications or services, nothing stands between it and 

the consumer. A network owner has three ways to earn a return 

on investments: selling basic access, premium access, and its own 

applications. By contrast, applications providers have only one way 

and rely on others to reach a critical mass of customers. Uncertainty about if, how, and at what cost that happens decreases the 

odds of funding, which is no small thing for our Nation’s economy. 

A key driver of economic growth has been Internet innovations, 

none of which were developed by network owners. So to make sure 

that innovations continue, we need investment throughout the 

value chain and not just at one point. 

Which brings me to my third point, that the primary threat to 

the market being able to optimize investment is a non-transitory 

bottleneck in any critical part of the value chain that restricts economic growth. Public policy should address bottlenecks that prevent a rising standard of living. Some bottlenecks, such as temporary bottlenecks that can be bypassed, do not require Government actions, but others might. 

Antitrust experts, which I know this Committee is familiar with, 

have identified certain harms potentially—I emphasize ‘‘potentially’’—relevant here, such as preventing new entrants from entering through adjacent markets, allowing those with the bottleneck 

to leverage dominance into a related market, or impeding technology developments by concentrating technology leadership. 

In the current debate, these concerns are raised principally 

around last-mile wireline broadband facilities. Even network neutrality proponents agree that having five providers eliminates the 

need for regulation. Conversely, if there were only one provider, 

most would favor network neutrality rules. Thus, the issue boils 

down to different views about the appropriate rule when we have 

two, three, or four providers. This is, of course, more complicated 

than simply picking a number of national broadband competitors 

which, if reached, trigger an end to the rules, but it is not the problem of a long-term national monopoly. It involves discrete geoVerDate Nov 24 2008 10:18 Apr 17, 2009 Jkt 043110 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43110.TXT SJUD1 PsN: CMORC
20

graphic and product markets. For example, there is a relatively 

smaller risk, in my view, of anticompetitive behavior affecting lowbandwidth applications such as e-mail and search. But for applications requiring high bandwidth and low latency, such as online 

gaming and streaming video, there is a greater risk, though not a 

certainty, of anticompetitive behavior. 

Analyzing specific risks and, if necessary, a spectrum of potential 

remedies is the task of expert agencies, but I would hope that as 

they look at it, they keep in mind the long-term strategy, which 

brings me to my concluding point, that the greatest guarantor of 

the kinds of benefits that network neutrality principles have delivered in the past and the greatest driver of investment are the 

same: an opportunity for new, ubiquitous broadband networks. 

Ultimately, we want a broadband environment characterized by 

survival of the fittest, selected by the market, rather than survival 

of the friendliest, selected by network owners. We have already 

benefited from such an environment in the Internet ecology. We 

should want it to continue. There are different paths there, but ultimately the most reliable path is more, bigger, cheaper, and ubiquitous broadband through new, probably wireless, broadband facilities. And if we get those policies right, network neutrality will be 

a debate largely of interest to historians rather than legislators. 

Thank you very much. 

[The prepared statement of Mr. Levin appears as a submission 

for the record.] 

Chairman SPECTER. Thank you very much, Mr. Levin. 

Our next witness is Mr. Paul Morris, the Executive Director of 

the Utah Telecommunication Open Infrastructure Agency, known 

as UTOPIA, a coalition of 14 Utah cities created to build an open 

broadband network to all homes and businesses within the member 

cities. UTOPIA must have been suggested by my distinguished colleague, Senator Hatch. 

Senator HATCH. Anybody who knows anything about Utah knows 

how great it is. 

Chairman SPECTER. Mr. Morris serves as Chair of the Utah 

League of Cities and Towns Telecommunications Task Force, had 

been city attorney for West Valley City in Utah; a bachelor’s degree 

from Brigham Young University and a law degree from the same 

university.

We appreciate your coming in, Mr. Morris, and we look forward 

to your testimony. 

STATEMENT OF PAUL MORRIS, EXECUTIVE DIRECTOR, UTAH 

TELECOMMUNICATIONS OPEN INFRASTRUCTURE AGENCY 

(UTOPIA), WEST VALLEY CITY, UTAH 

Mr. MORRIS. Thank you very much. UTOPIA is an interlocal entity created by 14 cities in Utah, with nearly 500,000 residents. We 

are constructing one of the Nation’s largest community broadband 

projects.

These municipalities formed UTOPIA to provide every household 

and business within their boundaries access to a next-generation, 

high-speed, competitively priced broadband connection. There are 

two key reasons for this investment: first is to promote economic 

development; second is to enhance the quality of life for residents. 

21

UTOPIA member communities concluded that the best way to 

achieve these goals was through the construction of an all-fiber 

network that operates on a wholesale basis and leaves it to the private sector to provide the telecommunications services to the customer—a true public/private partnership. 

As you are aware, local leaders across the country have become 

actively engaged in supporting the deployment of new broadband 

infrastructure in their cities. Some communities are supporting 

wireless projects while others are focused on the fiber-to-the-premises infrastructure, like UTOPIA. Some are doing it on a retail 

basis, others on a wholesale basis, and some are a hybrid of the 

two. Many of these projects involve public/private partnerships. 

The common thread is that each community believes upgrades to 

its broadband infrastructure are essential to its economic vitality. 

About 4 years ago, a few local officials in Utah began exploring 

the best way to provide advanced telecommunications services 

within their jurisdictions. They acted on the conviction that their 

communities needed access to services that would be second to 

none, both in terms of bandwidth capacity and competitive pricing. 

These local leaders carefully examined the options, and after extensive evaluation, they have concluded that a fiber-to-the-premises 

network was the best alternative for both current and future applications and that it should be operated on a wholesale basis. At this 

point, 25,000 homes and businesses are ready for service. Over 

4,200 have signed up with one or more of our four current private 

service providers, and more are signing up daily. 

The UTOPIA network is different from the broadband infrastructure typically found in our country for three significant reasons: 

First, the symmetry. Users can send information just as quickly 

as they can receive it. Traditionally, the focus has been on 

download speeds, but human communications for entertainment, 

business activity, social cohesion, and family unity needs to be 

interactive. Giving individuals the ability to send as quickly as 

they receive can be transformational. 

Secondly is capacity. A fiber network has incredible bandwidth 

capacity, enabling new applications such as inexpensive, high-quality video conferencing, distance learning, high-definition IPTV, telemedicine, and telework. For example, we currently are working 

with private companies to test three new applications that require 

the bandwidth that an all-fiber network can support. Two of these 

tests are being conducted by an international media company and 

involve a whole new way of viewing video content. The third is an 

inexpensive, high-quality video chat that is easy to install and use. 

Third is wholesale. Both the symmetry and bandwidth capacity 

of the network enable the implementation of UTOPIA’s philosophy 

of operating the network as a wholesale public infrastructure. 

Much like an international airport constructed by a municipality to 

enhance the local economy, UTOPIA is building the electronic airport but not ‘‘trying to fly the planes’’. This allows for robust competition, the introduction of new services, and innovation. 

As you consider the legislative proposals pending before you, we 

believe that it is prudent to recognize the vital role Government 

has played in the development of all major infrastructure in the 

history of the United States, from railroads and canals to water, 

22

sewer, and power systems, from highways to the current telecommunications networks. Municipalities have a key role to play as 

we work together to provide the most competitive and advanced 

telecommunications system in the world. 

We believe that legislation that recognizes this role and allows 

municipalities to chart their own course should be supported. Specifically, the original draft of SB 2686 dealing with municipality 

participation in broadband developments was of great concern to 

us. However, the provisions in the current Staff Discussion Draft 

is a great improvement, and we support its concepts. Similarly, the 

telecom reform bill passed by the House last week had similar language that is a positive approach. 

Also, there has been much debate over network neutrality. While 

UTOPIA has not taken a position on network neutrality as applied 

to other networks, our network solves this problem without the 

need for regulation. We understand the concern over the public policy implications raised in the debate, but with an ample supply of 

bandwidth coupled with multiple service providers freely competing 

for the consumer’s dollar on a network such as ours, the free market will resolve the issue. One of our concerns is the scope of the 

language of some network neutrality proposals and its implications 

as applied to an open network. 

Thank you for your time, and I look forward to any questions you 

may have. 

[The prepared statement of Mr. Morris appears as a submission 

for the record.] 

Chairman SPECTER. Thank you very much, Mr. Morris. 

Our final panelist is Mr. Jeff Kuhns, Senior Director, Consulting 

and Support Services and Information Technology Services at Penn 

State University, also serves as an instructor at Penn State’s College of Communications; bachelor’s in science and business management from Indiana University of Pennsylvania and a master of 

arts in telecommunications policy from Penn State. 

We appreciate your being here, Mr. Kuhns, and look forward to 

your testimony. 

STATEMENT OF JEFF C. KUHNS, SENIOR DIRECTOR, CONSULTING AND SUPPORT SERVICES, PENNSYLVANIA STATE 

UNIVERSITY, UNIVERSITY PARK, PENNSYLVANIA 

Mr. KUHNS. Thank you, Mr. Chairman, members of the Committee. I am directly involved in managing the telecommunications 

and Internet needs of the university. I am testifying today on behalf of EDUCAUSE and Internet2, the organizations that jointly 

represent the interests of higher education and universities in telecommunications policy. 

I would like to focus my remarks on the importance of keeping 

the Internet open to all—the issue of net neutrality. Universities 

are extremely large producers and users of Internet content. Universities such as Penn State, for instance, depend upon the Internet to engage in distance learning, to provide telemedicine, and to 

engage in new research. 

All these services and activities could be wiped out if the providers of broadband capacity are allowed to close down the Internet 

or give preferential treatment to their own services. 

23

Penn State has over 80,000 students, and about 80 percent of our 

students live off campus. Penn State’s online program offers more 

than 50 degree and certification programs to students on all seven 

continents. We have online students who have never taken a college course before. These online programs are especially valuable 

to persons with disabilities and to members of the military stationed overseas. Many of these off-campus students use cable 

modem service or DSL to take advantage of these online programs. 

In short, the availability of affordable, high-speed, nondiscriminatory Internet services is absolutely essential for my university 

to meet our educational goals in the 21st century. 

Our experience working with advanced networks has taught us 

that the Internet works best if the user, not the network owner or 

operator, determines what information is transmitted over the network. Once the user has paid for his or her bandwidth, the user 

should be able to go to any Web page, use any lawful application, 

equipment, or service, and send any lawful content. 

Allowing a gatekeeper to monitor, screen, manipulate traffic 

would ruin the Internet as we know it. Instead of the open, freewheeling forum for discourse and commerce that we enjoy today, 

the Internet would become the private playground of a few network 

owners—which face little competition and thus have significant 

market power—whose incentive will be to steer users to the products and services that they own. 

The debate over net neutrality is sometimes distorted by those 

who oppose legislation. Let me state a few points very clearly. 

First, now that the FCC has eliminated the net neutrality requirements for broadband providers, a cable or phone company 

could block access to a Senator’s website or an online journal simply because they disagree with the viewpoint being expressed. At 

a minimum, Congress must act to prohibit blocking or intentional 

degradation of Internet traffic. 

Second, there is one central principle that underlies the entire 

net neutrality debate: nondiscrimination. Network owners should 

not be able to give preference to their own services over those of 

their competitors. Network operators should truly be neutral. 

Third, as network managers ourselves, we understand the need 

to be concerned with security attacks, spam, and overall congestion, but these should not be used as excuses to discriminate. 

Fourth, giving preferential treatment to certain Internet traffic, 

as the telephone and cable companies desire, is not only unfair, it 

inherently degrades the quality of service provided to others. 

And, fifth, if economic tollbooths are allowed for content and applications to access the Internet, then soon only the richest content 

providers will be able to make their material available. 

We are aware that some providers argue against net neutrality 

by saying that they must give priority to certain kinds of Internet 

bits, such as video, in order to assure a high-quality experience for 

their customers. Let me respond to these arguments by telling you 

about the experience at Internet2. 

When Internet2 first began to deploy its Abilene network, the engineers started with the assumption that they should find technical 

ways of prioritizing certain kinds of bits, such as streaming video 

or video conferencing, in order to assure that they arrive without 

24

delay. For a number of years, Internet2 seriously explored these 

various quality-of-service schemes. At the end of the day, we found 

it was far more cost-effective to simply provide more bandwidth. 

Today, the Internet2 Abilene network does not give preferential 

treatment to anyone’s bits, but its users routinely experiment with 

streaming high-definition TV, hold thousands of high-quality twoway video conferences simultaneously, and transfer huge files of 

scientific data around the global without loss of packets. 

A simple design enables and encourages innovation. 

We urge Congress to restore the net neutrality principle that 

governed the Internet since its inception. The future of American 

education, innovation, and competitiveness is at stake. 

Thank you. 

[The prepared statement of Mr. Kuhns appears as a submission 

for the record.] 

Chairman SPECTER. Thank you very much, Mr. Kuhns. 

Before proceeding to the questions, let me make a comment 

about some administrative matters. We have been advised the Majority Leader has set a vote tomorrow for 10 o’clock, and in consultation with the Ranking Member, Senator Leahy, we would like 

to start our Judiciary Committee meeting at 9. We have a very 

heavy calendar. I have been requested by quite a number of members to move legislation of particular interest to individual members, and that will be accommodated to the maximum extent possible. We are going to arrange a room, try to arrange a room off 

the floor tomorrow—not the President’s Room, which is terribly 

crowded and terribly hot, as we all know, but one of the larger 

rooms, 207 or 211, so that when the vote is over, we can adjourn 

to that room. We all know how hard it is to get members to come 

back from the floor to this room. But our business is very, very 

heavy, and we will undertake that arrangement. 

Senator LEAHY. Mr. Chairman, if I might, I would urge the staff 

to notify each one of the Democratic Senators that we are doing 

this. I think you are absolutely right. With our schedule, we do 

have a large agenda. If we want to get into it, we should do that. 

So I am urging everybody to be here at 9. I have rearranged my 

schedule for that, and I know others will, and I think to make it 

easier for the Chairman to have a quorum as quickly as possible, 

my side will be prepared to start moving as soon as that quorum 

is here. 

Chairman SPECTER. Well, thank you again, Senator Leahy, for 

your cooperation. We could conclude our Committee business in 75 

minutes if we started at 9. We could finish by 10:15, and they will 

hold the vote a little while for us. Once we get the group together— 

an experienced Chairman, Senator Biden has some doubts about 

that.

Senator BIDEN. It is interesting. I never heard anybody say ‘‘75 

minutes’’.

Chairman SPECTER. Well, that is the way we count time in Russell, Senator Biden. Wilmington is a lot more sophisticated. 

[Laughter.]

Chairman SPECTER. We will now turn to the questioning rounds 

with 5 minutes for each Senator. I will begin with you, Commissioner Kovacic. The Commerce Committee bill stakes out jurisdicVerDate Nov 24 2008 10:18 Apr 17, 2009 Jkt 043110 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43110.TXT SJUD1 PsN: CMORC
25

tion for the FCC, Federal Communications Commission, by directing it to monitor competition in the market for Internet service and 

report to Congress annually. That seems to me to be a pretty direct 

encroachment upon antitrust regulation by the Federal Trade Commission or perhaps the Department of Justice. So what is your 

view of that? 

Mr. KOVACIC. We have not discussed this specific measure. As 

you know, the development of the new proposals has been quite 

fluid and changing. 

Chairman SPECTER. Well, let us have your personal view. I 

would expect it to be pretty much in opposition to that. Tell me 

why.

Mr. KOVACIC. My strong recommendation, were I having this 

conversation with your colleagues, is that the legislation make absolutely clear that no encroachments upon the antitrust jurisdiction 

certainly of the FTC or the Department of Justice take place, and 

with the clearest drafting possible, I would want it to be clear that 

traditional antitrust oversight would still be available as a means 

for overseeing competition problems in this area. 

Chairman SPECTER. Mr. Cerf, the cable companies and the telephone companies have taken sharp issue with network neutrality 

and have urged us to see if there is a problem which develops. 

What would you think about a case-by-case adjudication to see if 

there is an antitrust violation or if there is inappropriate conduct 

and take it up in that manner as opposed to legislation? When you 

deal with legislation in a matter like this, it is extraordinarily difficult, candidly, when you have the giants on both sides of these 

issues. And what I have seen—I think my colleagues would agree— 

we usually have a better resolution if we can bring the parties together and craft something which is agreeable on all sides. It is 

very easy to get the Congress to do nothing and very hard to get 

the Congress to do something, and we might structure a case-bycase adjudication with some standards as to how that would be applied. What would you think about that as opposed to blanket legislation on neutrality? 

Mr. CERF. Having given 30 milliseconds of thought to your question, let me just say— 

Chairman SPECTER. Well, with your background that should be 

sufficient.

[Laughter.]

Mr. CERF. All cylinders are firing. 

First of all, I think it is terribly important to understand how the 

Internet actually works and how business is supported by it. Because of the absolutely neutral and open access that the Internet 

has fostered over its 15-year history in the commercial form, it has 

been possible to aggregate markets that would otherwise not exist. 

The simple point here is that if consumers are able to go anywhere 

and do anything on the net that they choose, they form a market 

for services that otherwise could not be aggregated. They can come 

from anywhere. All billion users of the Internet all over the world 

are potential customers of services that are brought up on the network. Any potential constraint on the freedom to go to these various services on the net may actually have a serious impact on the 

business models that will work. 

26

I would be nervous about a case-by-case analysis, to be quite 

honest with you, Senator. It seems to me that when you get into 

case-by-case analyses, you almost never get to a conclusion. I would 

be a lot more comfortable, frankly, with legislation that made it 

very clear— 

Chairman SPECTER. But when you talk about a case-by-case 

analysis, I have to disagree with you. You come to conclusions. You 

can come to a faster conclusion there than trying to get legislation 

which provides a general rule. Mr. Cerf, let me ask you to supplement your answer in writing because that is a very important 

point, and I would like to have your full thinking. In fact, I would 

like to have the full thinking of the entire panel on it, but I want 

to ask one more question here and stay within the 5 minutes of the 

Chairman.

Mr. Cohen, the issue of vertical integration between program 

vendors and cable and satellite companies has raised very serious 

concerns that competing cable and satellite companies will not be 

able to access programming sold by the vendors. The FCC regulations would prohibit exclusive contracts. How would that affect 

Comcast, which owns the Flyers, the Sixers, and the Phillies—my 

red light just went on. 

Mr. COHEN. I hope I have more than negative 3 seconds to respond to that. 

Chairman SPECTER. The red light governs me, not you. I may 

govern you if you go too long. 

Mr. COHEN. I am sure. But I am used to that. Just a quick overview comment, then a specific response. 

I referenced in my oral statement that in the last decade, the 

proliferation of competition in the video marketplace has resulted 

in a veritable explosion of cable channels, from fewer than 100 to 

about 500 today. The other key statistic, though, is that at the time 

the Telecommunications Act was drafted and the program access 

and program carriage protections were put into law, about 50 percent of those cable networks were vertically integrated, that is, 

they were networks in which a cable distributor had an attributable financial interest. Today, that statistic is less than 20 percent, and for Comcast, less than 7 percent of the programming that 

we carry is vertically integrated programming. So the market has 

worked extremely well in the ensuing decade to distribute on a 

much wider basis the availability of programming. 

In terms of sports, the key and most important exclusive sports 

programming that exists today is DirecTV’s NFL Sunday Ticket 

package. Most other sports programming, with one critical exception that I will reference which relates to Comcast—is not made 

available on an exclusive basis but, in fact, is available across all 

distributors. That one exception, which the Senator is well familiar 

with, is Comcast Sportsnet in Philadelphia, which, pursuant to the 

terrestrial exemption under the program access laws, does not have 

to be made available to cable’s competitors. 

Notwithstanding that, we do make that programming available 

to RCN, an overbuilder that is a competitor. The only competitor 

we do not make it available to is satellite, which has been challenged twice in front of the FCC, once in front of the courts. We 

have been successful on all three of those occasions in defending 

27

our rights to make that programming available on an exclusive 

basis in Philadelphia. But it has not proved to be a dominant 

model, and my submission to this Committee would be that it is 

not something that rises to the level of the need for legislative reform of the program access rules. 

Chairman SPECTER. Thank you, Mr. Cohen. 

Senator Leahy. 

Senator LEAHY. Thank you. 

Mr. Cerf, I would like to get your reaction to something Mr. 

Cohen said. Incidentally, before I do that, I want to point out I do 

not think keeping open access to the Internet is regulation. I think 

it is just the opposite of regulation. There are two current net neutrality bills, the Snowe-Dorgan-Leahy bill and the Sensenbrenner 

bill. They make clear that cable companies can aggressively prevent spam and security threats, along with open access. 

Now, Mr. Cohen said that regulation of the Internet would prevent cable companies from protecting the Internet. I noticed you 

were making some notes during that time. What is your response? 

Mr. CERF. I think we should distinguish between freedom of 

choice to go anywhere and do anything on the network and doing 

things that are either illegal or things that harm the network. I 

don’t have any objection to someone introducing filtering and other 

mechanisms that protect us at the appropriate levels in the architecture of the Internet’s layered structure. What I would be concerned about is abuse of the ability to detect these kinds of things 

and use them in order to prevent people from getting access to 

services that they legitimately expect to reach. I would distinguish 

and divorce those two things from each other. 

Senator LEAHY. A spam filter or a virus protector, those are entirely different. 

Mr. CERF. Those things, frankly, can take place at higher levels 

of protocol than carrying bits on the underlying cable or the underlying DSL. 

Senator LEAHY. And, Commissioner, let me ask you a couple of 

questions. In my opening statement, I said I had two concerns in 

the context of competition in broadband service: first, unfair practices that discriminate among content providers and block consumer access to lawful websites; second, the so-called triple play 

that occurs when a broadband provider offers TV and video, telephone, and Internet. 

If a single provider were to force consumers to buy the package 

of all three services, that bundling would be anticompetitive. It 

would impede the ability to substitute service providers. It means 

that each cannot compete on their own. 

Does the Federal Trade Commission have the ability to investigate and resolve such issues as this if it arose in the context of 

the broadband access market? 

Mr. KOVACIC. Our belief is, in light of Brand X and related developments, the answer is yes, Senator. 

Senator LEAHY. I worry in the broadband access market about 

anticompetitive practices and so on. In the mobile telephone industry, subscribers are confronting penalties if they seek to change 

providers. The FTC has considerable expertise in recognizing anticompetitive behavior. What potential anticompetitive practices 

28

should we be thinking about as we consider competition in the 

broadband access market? 

Mr. KOVACIC. Certainly where you have a dominant incumbent 

supplier, questions about access, vertical integration, exclusion, 

foreclosure are legitimate conceptual concerns that may be borne 

out in specific fact circumstances. I think continuing review of consolidation mergers that affect the number of providers is a further 

area of legitimate concern. 

I would add to my earlier comment, Senator, that as we move 

into the role of that traditional telephony providers offer, this is an 

area where I would endorse Senator Kohl’s observation and the observation that a number of your colleagues have made, that a valuable step in the direction of improving our capacity to deal with 

these specific issues would be a repeal of the common carrier exception.

Senator LEAHY. Thank you. 

Mr. Putala, it is good to see you back in this Committee room. 

You spent a lot of time here before. 

Mr. PUTALA. Thank you, Senator Leahy. 

Senator LEAHY. You know that this competition is part of the 

central concern of the Committee. Several of the panelists argue 

that there is competition. A Washington Post editorial citing FCC 

data, which has been criticized, states that people residing in 60 

percent of zip codes in the United States can choose from among 

four broadband service providers, but according to a more recent 

GAO report, 98 percent of households that have Internet connections get their access from either a DSL line or the cable company. 

I guess I am in the small part that cannot get any of these. Your 

company’s municipal broadband deployments are among the investments that give hope for real effective competition. 

What do you see as the primary barrier to entry for competing 

broadband access providers? What are the prospects for true competition in the current duopoly? 

Mr. PUTALA. I think they are very difficult. Much of the competition that is cited by Mr. McCormick is actually a reflection of the 

fact that there are commercial agreements between folks like 

EarthLink and Bell companies such as Verizon, Bell South, et 

cetera.

The rules that required a fair negotiation to get to make those 

commercial agreements are going away. So that is yet another kind 

of barrier to entry that is making it more difficult for there to be 

providers of equal status, even though they may be sharing various 

network elements. 

As a result, if we are going to let those go away, we also need 

to do everything we can to encourage the growth of new networks. 

Something that EarthLink has faced as we try to get into the market with a new technology, a new network in Philadelphia, is that 

many of the Bell companies and cable companies have sought to 

pass State laws outlawing municipalities from doing their own 

broadband developments or even entering in partnerships with private companies to build networks that would cover their particular 

area.

29

Senator LEAHY. Thank you, Mr. Chairman. I will submit my 

other questions for the record. Both my time and my voice seem 

to have run out at the same point. 

Chairman SPECTER. Thank you very much, Senator Leahy. 

Under our early-bird rules, in order of arrival, we have Senator 

Cornyn, Senator Biden, Senator Brownback, and Senator Hatch. 

Senator Cornyn. 

Senator CORNYN. Thank you, Mr. Chairman, and I want to thank 

the panel for your testimony. This has been very informative. I 

guess the challenge for us and the trepidation that we feel is in 

part, I guess, characterized by a quotation that I heard from Abraham Maslow, who said, ‘‘To the person whose only tool in their 

toolbox is a hammer, they tend to regard every problem as a nail’’. 

And, of course, the hammer that Congress has is regulation and 

taxation, and those seem to be the two things that are exactly what 

the Internet does not need more of. 

But I would like to ask, first of all, perhaps Mr. Cohen and 

maybe Mr. McCormick a question, and then I would like to ask Mr. 

Cerf a question as well. 

The Internet has already allowed for the creation of a lot of innovative business models, such as subscription services, online sales 

and shopping, advertising partnerships, and the like. Would the 

passage of network neutrality provisions inhibit the development of 

new business models in the marketplace, Mr. Cohen? 

Mr. COHEN. Senator, in our opinion, the opinion of the cable industry and the wireline competitors, the answer to that question is 

that there is a substantial risk that that would occur. I come from 

a little bit of a governmental background, too, and I view that any 

decision whether to regulate needs to involve a balancing of the 

scales of what are the benefits of regulating and what are the risks 

of regulating. I think one thing everyone on this panel agrees with 

is the explosive growth of the Internet and the innovation that has 

occurred, all in the absence of regulation of the Internet to make 

it neutral. It has occurred because of the natural competitive state 

that exists and that has fostered that type of competition and innovation. So I do not see much of a benefit but I see real risks of unintended consequences, of the drying up of capital investment, of 

removal of incentives for investment and innovation that could enable the Internet to continue to grow, to thrive, and to continue to 

evolve over time. 

Senator CORNYN. Since my time is so short, let me go to Mr. Cerf 

on this question, if I may, please. Google obviously filters information during searches on their site and joins in corporate agreements to favor websites during searches, in other words, to feature 

certain websites based on those agreements. Would Google also like 

us to regulate its ability to create new business models and trying 

to develop its service? 

Mr. CERF. First of all, I wonder about the model that you might 

have in mind as a consequence of having asked that question. 

Google runs algorithms which try to provide responses to searches 

which are relevant to the queries. That is completely independent 

from the advertising which is put up. Those are quite separate and 

distinct.

30

The advertising that is put up goes up on the basis of auctions 

which take place in real time. During the time that a query is 

being made, we are also running auctions against the—I don’t 

know how many hundreds of thousands of ads that are potential 

competitors to appear on the page. The auction determines which 

ads come up, and that auction is not done on anything other than 

a fair and nondiscriminatory basis. So certainly we would not want 

you to be telling us how to run our business. On the other hand, 

we believe in neutral and open processes, which is how we run our 

operation now. 

Senator CORNYN. Mr. Putala, let me ask you, I am intrigued by 

the development of broadband over power line. I come from a State 

where rural electrification, championed by Lyndon Baines Johnson, 

is a big deal, and obviously we have large, expansive rural areas 

where it is hard to get other types of service. Could you elaborate 

on the broadband over power lines and how far that technology has 

come along and how competitive it is in the marketplace with other 

means of delivering Internet services? 

Mr. PUTALA. EarthLink is an investor in that technology. We are 

looking for any alternative technologies that we can find. According 

to the FCC, in 2005, out of the 43 million broadband connections 

to the home, there were 4,872 which were broadband over power 

lines. So while there are new technologies emerging, we cannot lose 

sight of the fact of what a head start the Bell companies and the 

cable companies have in terms of delivering broadband to the 

home.

I also would like to take a little bit of issue with a comment of 

Mr. Cohen saying that the Internet did not have any rules. Well, 

in fact, the Internet did have rules. It grew and built under the 

concepts called by some ‘‘common carriage,’’ which really means 

nondiscrimination, fair access, equal access. Those are the rules 

which allowed everything from the Vermont Teddy Bear Company 

to Google to build applications on the edge of the Internet which 

have become a major generator of economic growth in this country. 

So it is just simply not accurate to say there was not a regulatory 

structure for the Internet. There was, and it was nondiscrimination.

Senator CORNYN. I thank each of you for your responses. 

Thank you, Mr. Chairman. 

Chairman SPECTER. Thank you very much, Senator Cornyn. 

Senator Biden. 

Senator BIDEN. Thank you, Mr. Chairman. 

Is there any preferential treatment now? You are all worried 

about preferential treatment. You want to make sure that we have 

this neutrality rule. What is the problem now? 

Mr. MCCORMICK. Senator, on the Internet networks, there is no 

preferential treatment. Clearly, there is preferential treatment 

with regard to the search engines. In fact, just yesterday there was 

an article that ran that Google’s algorithm is such that if you type 

in ‘‘net neutrality’’ at Google, you will see advertisements for It’s 

Our Net Coalition or other sites that they might be pointing to. So 

what you are seeing is with regard to search engines, you are seeing exactly the opposite of any kind of neutrality or common carriage. You are seeing— 

31

Senator BIDEN. That is really not my question. 

Mr. MCCORMICK. So there is some—there is favoritism there. 

Senator BIDEN. Those of you who are concerned about the need 

for a net neutrality rule, is it something that is happening now or 

is it something that is going to happen or could happen? 

Mr. MORRIS. Senator, I would like to reply to that. I am not 

aware of any blocking that has occurred, at least for universities 

today. But the rules just changed last year, and I believe that both 

AT&T and Verizon are still under discrimination requirements as 

part of their recent acquisitions. So that is the current state. 

We also know that Bell South and AT&T have made statements 

about potentially doing these sorts of activities, and my own experience in working with Verizon has been that although we have tried 

to hold talks with them, they have been less than forthcoming in 

talking with us. And each time we have talked with them, they 

have never agreed that they would not do this. 

So I am concerned, and I think that concern is justified. 

Senator BIDEN. The reason I ask the question, it would seem to 

me if the fears you have are real and they occur, there will be a 

virtual explosion in this country. You will not have the audience we 

have here. The Chairman will be required to hold this hearing in 

the largest room in the Capitol, and there will be lines wandering 

all the way down to the White House if that occurs. 

I think it is a legitimate concern. I just wonder whether or not 

this need for preemptive action is as urgent as is being argued. I 

do not doubt—by the way, it is not that I trust you guys. I do not 

trust anybody. I do not trust any of you. Because I noticed, by the 

way—I mean in terms of go out there and ‘‘do the right thing,’’ 

every one of you has your own interest at stake. That is fine. That 

is good. And every one of you tried to alter competition in the field 

in which you compete wherever you are. For full disclosure, David 

Cohen is a close personal friend of mine, and Chris Putala is a 

close personal friend who worked for me for years. Both your companies, I mean, David, if you could see to it that EarthLink could 

not compete in Pennsylvania, you would make sure they could not, 

I suspect. Maybe I am wrong. Maybe I am wrong. And I suspect 

EarthLink would try to figure out a way to hedge—and I know 

Google would. But you are wonderful guys. You know, my 4-yearold granddaughter says, ‘‘Google it, Pop’’. 

So I just wonder. I guess my concern is whether or not this is 

premature and whether or not, as the Chairman said, when we 

deal with such powerful collective entities, I mean, you represent 

an incredibly powerful, economically powerful chunk of the economy on both sides of this issue. And usually when we get into those 

kinds of legislative initiatives, they end up looking at the end of 

the day not very attractive. That is my generic concern. My instinct 

is that I like the notion of the neutrality rule. I just wonder whether or not we can write it in a way that does not cause an explosion. 

The flip side of it is, the other side of me says if you all divert 

from the major carriers, if the cable companies, et cetera, in fact, 

began to impose the things we are concerned about, the dome of 

the Capitol will literally blow off. I mean, you will have more 

bloggers in here than you have people in America. 

32

So that is why I raise the question about whether or not there 

is preferential treatment now, but I would like to ask one question 

in my 8 seconds left. Isn’t it true, Mr. McCormick, that no matter 

how you structure the pricing of network access, it is ultimately the 

consumer who is going to pay the bill? So why does it matter 

whether you pass the cost on through Google rather than directly 

to the consumer? 

Mr. MCCORMICK. Well, what we have seen in every other market 

is that there are a variety of innovative pricing packages, and that 

competition and creativity that goes into coming up with innovative 

and creative pricing practices benefits the consumer. So what we 

are doing is trying to get away from legislating absolutely just one 

pricing and package. 

Senator BIDEN. But the bottom line is the bottom line. Whatever 

the cost is, the consumer is going to pay. They are going to pay it 

through Google. They are going to pay it through you. I mean, isn’t 

this a bunch of malarkey? I mean, the fact of the matter is you are 

not going to absorb the cost. The cost is going to be passed on to 

the consumer, isn’t it? Or am I missing something? Does it matter 

to me whether I pay the extra X percent in my bill through Google 

or through another—I mean, what difference does it make? 

Mr. MCCORMICK. Well, it makes a huge difference. It makes a 

huge difference in the area of competition because what you will 

have with the market freedom is you will have competition at all 

levels, and you will have those pricing and package options. 

For example, today if you order something from Lands’ End, you 

have a choice of getting it by 2nd Day Air. You do not pay as much 

for 2nd Day Air if you order it through Lands’ End because they 

buy in bulk. Under the Google model, the consumer is going to be 

charged a flat fee. There is never going to be any kind of that bulk 

purchasing. There is not going to be any kind of that marketplace 

innovation. So there are consumer savings that result from allowing companies to enter into these kinds of innovative pricing packages.

Senator BIDEN. My time is up. 

Chairman SPECTER. Thank you very much, Senator Biden. 

Senator Feingold has advised that he has a pressing problem and 

would like to be recognized at this time, but others have waited, 

and I would put that issue to Senator Brownback. 

Senator BROWNBACK. If you have got a real pressing issue, go 

ahead.

Chairman SPECTER. And I would ask Senator Hatch if he would 

defer.

Senator HATCH. Yes. 

Chairman SPECTER. The floor is yours, Senator Feingold. 

Senator FEINGOLD. Well, in light of that kindness, I am just 

going to read my statement because I do not think it is fair to Senator Brownback for me to take up the whole time. 

Mr. Chairman, thank you for holding this hearing today on the 

important issue of ensuring competition in our communications 

law. I hope that the Judiciary Committee will make this hearing 

one of a series addressing consumer and competition concerns in 

the telecom field. There are a number of significant issues we 

should look at, such as media consolidation, preemption of State 

33

rights, and anticompetitive practices in the radio and concert industries.

In fact, as I think about this issue of Internet competition, it 

makes a lot of sense to me to consider it through the lens of the 

problem with the radio and concert industries that I have been concerned about for some time. 

Ten years on, the radio and concert industries have not recovered 

from the 1996 Telecommunications Act, which I opposed. The massive consolidation that resulted from that law took a toll on the 

local flavor of radio, and it also allowed the problem of payments 

for air play, or payola, to reemerge. Within the radio industry, payola effectively created a two-tiered system of the labels and artists 

with the resources to purchase air time under the table and those 

who could not or would not. Consumers looking for diversity and 

localism were the big losers. 

I see some parallel potentially developing if we allow Internet access providers to create another pay-for-play system and become de 

facto gatekeepers to the Internet. Without a nondiscrimination requirement, certain websites on the Internet could gain an unfair 

advantage. For example, the major record labels, the music stores, 

might be able to pay what the broadband providers demand to 

prioritize their music distribution while smaller rivals might not. 

The independent labels and musicians who found a niche on the 

Internet after consolidation and payola drove them from radio 

could again face an unfair pay-for-play system. 

Moreover, without protections, Internet users could have fewer 

choices as only those content providers who could afford to pay the 

corporate toll keepers would be able to offer a competitive level of 

service. We need to make sure that the Internet retains its crucial 

role as an open forum for the free exchange and dissemination of 

information. While antitrust protection such as net neutrality’s 

nondiscrimination concept might not be needed if we had truly 

competitive markets, the current landscape, which amounts to an 

emerging duopoly, does not meet this threshold. Perhaps this will 

change if WiFI, municipal broadband, or other technologies become 

widely available and competitively priced. But for the time being, 

the principle of nondiscrimination is a very important one. 

I also understand that there are legitimate reasons for 

broadband providers to prioritize one type of data over another to 

manage their network efficiently. I support the core net neutrality 

proposals I have seen that allow for this legitimate management of 

the network while preserving the basic principle of equal access to 

the Internet. 

Mr. Chairman, thank you for this opportunity, especially thanks 

to Senator Brownback for his courtesy. 

Chairman SPECTER. Thank you, Senator Feingold. 

Senator Brownback. 

Senator BROWNBACK. Thanks, Mr. Chairman. Thanks for holding 

the hearing, and I want to start off first asking, Mr. Chairman, for 

my opening statement and a series of articles and ‘‘Dear Colleagues’’ to be entered into the record. 

Chairman SPECTER. Without objection, they will be made a part 

of the record. 

Senator BROWNBACK. Thank you, Mr. Chairman. 

34

[The prepared statement of Senator Brownback appears as a submission for the record.] 

Senator BROWNBACK. I want to start off by saying thank you to 

the panel. It is good information. But also, we had nearly 5 percent 

economic growth the first quarter of this year, and I think you guys 

are no small part of that phenomenal economic growth that is taking place in this economy. A lot of the efficiencies are based on 

Internet, the quick use of information, the growth in the Internet, 

it is a phenomenal tool, and it has been phenomenally successful 

and useful. There are things I do not like about it. There are things 

that invade into my home that we are still figuring out how to try 

to get smarter than our kids, which is really tough to do—not because my kids are so smart but I am so slow. It is just a fantastic 

time that we are in. And the ability to get the information so quick 

from so many different sources is fantastic. So that 5-percent GDP 

growth or near 5-percent GDP growth that we had the first quarter, thank you. I hope we have a whole bunch more quarters like 

that.

Having said that, Mr. Chairman, I also want to note—and this 

is in that stack of material I am submitting—the American Enterprise Institute and Brookings Institution, two entities which generally diverge on policy conclusions, issued a paper in April of this 

year through their Joint Center for Regulatory Studies, which concluded this—and I want to quote one line of that. ‘‘Mandating some 

form of net neutrality would be inconsistent with sound economic 

management of the Internet’’. This is AEI and the Brookings Institution together that made that statement. 

I think what they are saying is something that just gets a check 

in me, that anytime you go to regulate something that has been so 

phenomenally successful and grown so much in this economy, there 

are just a lot of signals that go off pretty fast, saying, Now wait 

a minute, what are you guys going to do here with something that 

has really been working very well? And that is in the stack of 

things, and that is why I have real hesitancy about some of these 

proposals that are coming forward, the Markey amendment on the 

House side that was soundly defeated by a broad bipartisan vote. 

I would ask real quickly, if I could, because my time is very 

short, of these net neutrality proposals such as the Markey amendment, who is going to be in charge of enforcing and interpreting 

these net neutrality laws? Mr. Cohen? And if you could answer 

quickly on that. 

Mr. COHEN. Yes, sir, one sentence. I can answer with respect to 

the Markey amendment. In the Markey amendment enforcement 

authority was given to the FCC. 

Senator BROWNBACK. So FCC is going to enforce and interpret 

these laws. 

Mr. COHEN. Correct. 

Senator BROWNBACK. Would the panel agree with that? 

Mr. PUTALA. And that is the status quo of how the Internet has 

grown for the last 20 years. There have been rules which have enforced nondiscrimination, and that really is the status quo. The 

change is what happens if those nondiscrimination rules are allowed to fade away, as they will under recent Supreme Court and 

FCC decisions. 

35

Mr. COHEN. If I could, in one sentence, just to be clear, those 

rules—

Senator BROWNBACK. All right. One sentence, real quick. 

Mr. COHEN. Those nondiscrimination rules were never applied to 

cable. They did apply on the Bell side to DSL. They did not apply 

to cable. 

Senator BROWNBACK. We have been trying to get them off the 

Bell side and telephone for some time so we could have a freer 

marketplace of competition. 

Let me ask another question here. A number of you noted in 

your written testimony discussion of so-called bottlenecks, which 

the company with the power to deliver online content could impede 

or block that content in a discriminatory way. And that is the sort 

of thing, when you are raising that, I am listening, I am hearing 

you. That also reminds me of the old railroad system and the one 

that people talk about of a model for this being the new super highway.

Are there any specific examples today that any of you can cite 

of an actual bottleneck that has happened today? 

Mr. PUTALA. There was the Madison River case of a small phone 

company blocking the voice over the Internet traffic of a competitor. But, again, it is sort of the same thing that Mr. Cohen is concerned—

Senator BROWNBACK. Chris, let me go ahead and—okay. Thank 

you. Is there an additional one— 

Mr. MCCORMICK. Senator, that is not—that was not a case of a 

bottleneck under traditional antitrust law. Under traditional antitrust law, a bottleneck is a sole provider, it is an essential service, 

and you have no other option. And what you have in the highspeed Internet access market is that nationwide you have a very 

competitive market. Second, a bottleneck requires that the market 

not be contestable, and technology has brought us to the place 

where every market in the country is contestable with regard to 

high-speed Internet access. So the answer is— 

Senator BROWNBACK. So you would argue that there is not an example, and this is not an example. 

Mr. MCCORMICK. There are no bottlenecks. 

Mr. CERF. Actually, I think I am going to disagree with Mr. 

McCormick on this one. The issue here, as Mr. Putala points out, 

is that we had open access, nondiscriminatory access and behavior 

on the Internet for all the time that it has been in existence. When 

the rules changed last year, the threat of bottlenecking and the 

threat of blocking or interfering arose. There had been public 

threats made by the telcos that they would, in fact, take advantage 

of the removal of those constraints in order to limit where consumers could go and what they could do on the net in exchange for 

payments from service providers who would gain advantage by paying those companies for access to the broadband facilities. 

I hope you all remember that the way the Internet worked all 

the way up until now and continues to work is that everyone pays 

for their access to the net, and then they do whatever they want 

to with it. It is so different from the traditional telephone system 

where the caller paid for all of the costs. In the Internet world, evVerDate Nov 24 2008 10:18 Apr 17, 2009 Jkt 043110 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43110.TXT SJUD1 PsN: CMORC
36

erybody pays for access to the system, and then they do what they 

want to with it. 

Senator BROWNBACK. Mr. Chairman, thank you, and I would just 

note that I think this is legislation in search of a problem. Things 

have been phenomenally successful on expanding of opportunity on 

the Internet, and it continues to happen, and I would hope we 

would not go in with a regulatory arm on this. 

Thank you, Mr. Chairman. 

Chairman SPECTER. Thank you very much, Senator Brownback. 

You have been very patient, Senator Hatch. Since I am the only 

one waiting, you may take a little extra time if you want. 

Senator HATCH. Well, I am very grateful for that. 

Let me just say from my perspective there appears to be a wide 

variety of views regarding what net neutrality is and what goals 

it is intended to serve. I was impressed by Mr. Levin’s analysis of 

the relevant considerations in his testimony and agree with his 

point that Congress should carefully consider the specific problems 

we intend to address in crafting a targeted solution. 

To that end, I would be interested in addressing this to the whole 

panel, those who care to comment, and I would like to hear from 

the witnesses who support some kind of net neutrality about the 

specific problem or problems that justify a net neutrality mandate. 

For the witnesses who oppose net neutrality, I would like you to 

address with particularity precisely what things the phone and 

cable companies intend to do that would be prohibited by net neutrality.

So, Mr. Cerf, should we start with you? And then we will just 

go across. 

Mr. CERF. Our fundamental concern, once again, is for the consumers and users of the Internet to have access to any site on the 

net that they chose to go to. They paid for that. That is what they 

were told when they bought broadband access to the Internet, that 

they were able to go virtually anywhere, run any applications. 

The biggest concern I have at this point is that in the absence 

of some form of protection, the broadband providers will be able to 

discriminate against the consumers as to which products and services they are able to reach, and that is our primary worry. 

Senator HATCH. Thank you. 

Mr. Cohen? 

Mr. COHEN. Senator, I wish I could tell you what we might want 

to do in the future that could be implicated by net neutrality regulation, but I am going to be honest enough to say that I cannot tell 

you that. Our position is that there is no way to predict what our 

business model and what the potential innovations on the Internet 

will be a year from now, 3 years from now, 5 years from now, and 

that the risks of regulating the Internet to protect against a hypothetical harm of drying up investment and of drying up innovation 

are too great a price to pay. Let’s allow this market to evolve. 

And I would say I think there are at least three protections to 

make sure that the evils that Mr. Cerf and others have talked 

about do not occur: the protection of the market, the protection of 

the antitrust laws and the FTC to police this market, as it does in 

other markets in abusive cases, and ultimately the threat of legislative action of this Committee and of this Congress being able to 

37

intervene. I do not think we would ever get to the point of the 

dome of the Capitol blowing off as Senator Biden referenced because I think if there was ever any abusive conduct that was not 

policed by the market, the FTC, the Department of Justice, or the 

antitrust laws, Congress could at that point act to protect consumer 

interests.

Senator HATCH. Okay. Mr. McCormick? 

Mr. MCCORMICK. Senator, I would associate myself with the comments of Mr. Cohen and say that there is no blocking, there is no 

impairing, there is no degrading of access. Both the FCC and the 

Federal Trade Commission have indicated that they have authority 

under the respective statutes and jurisdiction to take action should 

there be a problem that arises. 

With regard to our business plans, it is impossible to know what 

the future will hold, so we do not have specific business plans that 

I could discuss with you, because we do not have them. They are 

in development. But what net neutrality legislation would do would 

be to require that, in effect, those business plans would have to 

conform with regulations that would be drafted by the Federal 

Communications Commission. 

The bills that have been introduced say you shall not discriminate among bits. We simply do not know what that means. We do 

assign certain priorities to private networks that operate on the 

Internet, such as banking networks for security and privacy, governmental networks for security, health care networks for privacy 

and for a quality of service to make sure that they are always on 

in the case of monitoring patients. 

It is questionable whether we could do that if all bits have to receive the same priority, a bit for watching a movie or an e-mail, 

and we do not know what it means if a bit is an e-mail message 

versus an instant message. Are those the same bits, or are those 

different bits? 

So in an effort to try and address a problem that is a what-if 

problem, a hypothetical problem that has not arisen, the language 

of these proposals casts extraordinary uncertainty over those of us 

who are attempting to build networks and to manage networks. 

Senator HATCH. Mr. Putala. 

Mr. PUTALA. Another what-if problem is Mr. Cohen’s concern 

about how their voice over the Internet products will be connected 

to Mr. McCormick’s Bell networks. Mr. Cohen favors legislation 

calling for just, reasonable, and nondiscriminatory terms and conditions, Government regulation of the commercial transaction between Mr. Cohen’s voice over the Internet product and Mr. McCormick’s telephone network. Mr. McCormick is concerned about how 

he gets access to programming, sports and other things, and wants 

nondiscriminatory terms and conditions when it comes to getting 

the programming that the Bell companies will need if they are 

going to compete in the television space—again, a what-if problem. 

In both cases, they are looking for very specific Government 

rules, Government laws, enforced not just by an after-the-fact review by the FTC, not just by an after-the-fact review by the Justice 

Department, but by up-front aggressive enforcement by the FCC. 

That nondiscriminatory element is the thing that has driven the 

growth of the Internet and that is really the kind of same protecVerDate Nov 24 2008 10:18 Apr 17, 2009 Jkt 043110 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43110.TXT SJUD1 PsN: CMORC
38

tions that should stay in place so that we can continue the growth 

of the Internet. 

Senator HATCH. Mr. Levin. 

Mr. LEVIN. Well, thank you for your comments. As an analyst, 

I am more interested in predicting policy than advocating it, but 

let me just mention a couple of kind of targeted notions that others 

have suggested to address certain harms. One is a concern—which 

I do not think this will happen, but if it did happen, it would be 

very problematic for the economy—that if there is a degradation of 

what we might think of as the best efforts or public Internet. In 

other words, if the network companies want to increase or kind of 

have a high-speed lane, first-class, you know, that is one thing; but 

if the current best efforts Internet were to be slowly over time degraded, that would create a lot of problems for the kind of innovation that we have seen in the past. So some have suggested, including another Wall Street analyst, Craig Moffit, who is very critical 

of network neutrality rules, suggested—and I think I kind of agree 

with this—it would be good to have some kind of safety net protection of a best efforts Internet. You can do it in a variety of, I think, 

very nonintrusive ways in terms of monitoring it and if there is a 

problem that develops, then Congress can act. Again, I do not think 

that will happen, but if it did happen, it would be problematic. 

Second, Mr. Cerf mentioned that consumers are buying really 

large—you know, they are buying access to the whole Internet. Another thing is to have a certain kind of FTC type of consumer disclosures where, if a company is providing—they have to tell the 

consumer what bandwidth speed they are getting for the entire 

Internet, and to the extent that there is discrimination, that that 

be disclosed to the consumer. Some think tanks have addressed 

that.

Then, finally, I would just mention, as Chairman Specter mentioned earlier, if you had case-by-case kind of analysis but with 

very kind of clear metrics and with quick timetables and those 

kinds of things, that may be a way of addressing some of the antitrust issues or some kind of the potential harms of certain kinds 

of bottlenecks, which maybe actually do not exist today, but as we 

move to the higher-speed bandwidth, it has the possibility of existing. So those are the kinds of things being discussed. 

Senator HATCH. Mr. Morris? 

Mr. MORRIS. Our concern is the language of these bills is it 

might apply to an open network like UTOPIA. We are providing 

100-megabit big fat pipe to each home and business that is symmetrical, and my reading of the bill that passed the House Judiciary Committee was very problematic. While it was designed to 

apply to the people at the other end of the table, the way it was 

worded is it would be unlawful for us, the wholesale pipe owner, 

to allow these private service providers on our network to violate 

those rules. And so we would become the enforcer of what they are 

doing when we are just moving their bits back and forth. And the 

whole point of being wholesale and open is to leave it to the private 

sector to provide their services. 

So when you get into the actual wording and trying to define network neutrality, it can cause some real problems, as that specific 

bill would cause to an open network. 

39

Senator HATCH. Mr. Kuhns. 

Mr. KUHNS. Senator, since I am here from a Big Ten university, 

I hope you will allow me a short sports analogy. I think we all 

agree there should be fair play in competitive sports, but if we did 

not have rules in place and penalties when those rules were broken, I suspect at times there would be examples of unfair play. 

But what we are asking you to do is reinsert the nondiscrimination rules that used to be there and make it clear that you are not 

allowed to block or in any way discriminate access to, utilization 

of, or equipment attached to the network. 

Senator HATCH. Mr. Kovacic, you can sum it up. How is that? 

Mr. KOVACIC. Senator, we ask that when specific, concrete problems do emerge, that we have your assistance in maintaining the 

fullest jurisdictional platform to address them on the consumer 

protection and competition policy side of our authority. 

Senator HATCH. And you feel you can do that without legislation? 

Mr. KOVACIC. We think we have both of those powers to apply 

in this area, with the small qualification that questions are going 

to continue to arise where traditional telephony is involved, but 

there, again, we ask your consideration of a solution that would fix 

that, too. 

Senator HATCH. Well, thank you. 

Mr. Chairman, I have gone way over. I have other questions, but 

I will submit them. 

Chairman SPECTER. Thank you very much, Senator Hatch. 

Just a few more questions before we adjourn, gentlemen. Mr. 

Kuhns, I understand your contention about nondiscriminatory 

practices. There may be a tendency for cable companies and telephone companies to create a preferential class for faster access to 

some of the dominant customers. If that were to happen, what 

would the consequence be for someone like Penn State, educational 

institutions? That goes to the thrust of your concern about no preferential treatment. 

Mr. KUHNS. Yes, sir. We are in favor of seeing as large capacity 

networks built as possible and delivered into every home, because 

what we want to do is deliver educational content to everyone, regardless of where they are at. To do that well means that we need 

high-capacity networks so that we can deliver educational content 

that is not just text but includes audio, video, other forms of visualization that make it easier to learn. So we are very much in favor 

of having the capacity growth these people have talked about. But 

if they start to charge on a tiering basis, then we worry very much 

that we are not going to be able to afford to put that content out, 

content that would help the entire country. 

Chairman SPECTER. Mr. McCormick, when we talk about all the 

competition—Internet, power lines, wireless, satellite—those really 

go to what may happen in the future. Currently, we have the cable, 

we have the phone lines. You do not have a monopoly but a duopoly. Is that really sufficient competition to give the kind of assurances that Mr. Cerf is looking for? 

Mr. MCCORMICK. Well, first of all, Mr. Chairman, it could hardly 

be named a duopoly. I mean, if you look at traditional analysis, 

again, do we have market power, power to control price? Clearly we 

do not. People have Internet access if they have a view of the 

40

southern sky via satellite. They have wireless providers in every 

market. And they have wireline and cable providers in many markets.

So what we are seeing is a marketplace with massive investment 

and increased competition, but most importantly, under antitrust 

analysis the issue is: Is the market contestable? There is not a 

market in the United States that is not contestable. Technology has 

brought us to the place and the FCC through unlicensed spectrum 

has made it possible for anybody who wants to go into this business to be able to go into the business. 

So we believe that you have a marketplace in a traditional antitrust analysis that is competitive, is contestable, and, therefore, 

should be allowed to innovate and develop. 

Chairman SPECTER. Mr. Levin, is there really sufficient competition at the present time? Or as you project the future, to the extent 

you can, when will there be more competition to really have sufficient competition to allay Mr. Cerf’s concerns? 

Mr. LEVIN. I am not an antitrust expert, but I in my professional 

career have had— 

Chairman SPECTER. No, but you are a technology expert. 

Mr. LEVIN. Well, that is a good question as to what I am an expert in, but I appreciate your characterization of it. I suspect my 

kids, who use the Internet far better than I, would disagree with 

you, but I appreciate that. 

I have been impressed in a variety of positions, including at the 

FCC and in other situations, by the ability of antitrust economists 

to really make distinctions about markets and what a relevant 

market is. And I certainly agree with Mr. McCormick and Mr. 

Cohen. The markets are changing rapidly. What we used to think 

of as the Internet, the narrowband Internet, really is not sufficient 

for the kind of economic growth that we want to have in this country. And, increasingly, there will be desires for faster and faster 

speeds.

So going to your specific question, I think as you can see in the 

actual marketplace performance where about—I believe the number is 98 percent are getting either cable or—are getting broadband 

from either cable or phone companies, there is a big variety of reasons for that. There is certainly hope, I know, at the FCC that 

there will be a new, ubiquitous broadband network that will really 

compete with that. Earlier in the year, we had hopes that there 

would be investment—or they would have had hopes that there 

would be investment by some of the DBS providers. Both DirecTV 

and EchoStar made some indications that they were going to invest 

in one. They now more recently announced that they are investing 

in WildBlue, but I do not believe that particular investment is 

going to change the dynamic in most of America. That service is 

not going to be as fast and it is not going to be priced the same 

way.

It may be that the auctions coming up this summer produce 

something, but I do not really think so. I think the next really 

great hope in terms of kind of ubiquitous networks would be the 

2008 auctions of the so-called 700-megahertz spectrum. Or it may 

be that what Mr. Putala’s company, EarthLink, is doing in cities 

provides it. But as a Wall Street analyst, I would say that the curVerDate Nov 24 2008 10:18 Apr 17, 2009 Jkt 043110 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43110.TXT SJUD1 PsN: CMORC
41

rent market hold by DBS and cable is likely to hold for the foreseeable future. It is probably the best way of answering your question. 

I do not see anybody taking market share away from them because 

I do not think anybody—there is a variety of reasons. It has to do 

with bundling. It has to do with performance characteristics. It has 

to do with price. I do not see people taking market share from 

them.

The question of are the markets contestable, I really would leave 

to antitrust economists. 

Chairman SPECTER. Okay. Thank you very much, Mr. Levin. 

Senator HATCH. Could I ask just one last question? 

Chairman SPECTER. Senator Hatch, go ahead. 

Senator HATCH. Just one last question to whoever wants to answer it. There has been a fair amount of debate regarding the benefits and detriments of a two-tiered Internet where some traffic is 

given priority over other traffic. It seems to me that some types of 

services might need such priority to work well. For example, it is 

essential to have little or no delay for a high-quality voice over IP 

service while it is not necessary for things such as e-mail traffic. 

I would like to hear any witness who cares to express views 

about the issue of a two-tiered Internet. Would it really be harmful 

if things like VoIP services receive priority on the Internet as long 

as that priority was offered to all VoIP providers on nondiscriminatory terms? 

Mr. CERF. Thank you very much, Senator, for a cogent question 

on this issue of two-tier distinctions. I think that if certain classes 

of traffic were recognized, regardless of the source or destination 

that needed special treatment, I would not have much objection to 

that at all because if that is—if everyone’s traffic of a certain type 

gets properly treated so as to provide the performance that is needed, then it is not an issue. The problem is if only certain parties’ 

traffic is treated in that fashion, that raises major issues from my 

point of view. 

I should tell you, however, that it is not clear, based on what we 

heard from our academic colleagues, that you actually need to 

spend a lot of time carefully crafting the performance of the network. Over the weekend, I installed video conferencing on—I have 

a cable broadband service. I installed a video conferencing capability on an end-to-end basis through an arbitrary set of networks 

and did not require any special treatment at all. If you use Skype 

or Google Talk or any of the other voice over IP systems, you will 

discover you often get better quality than you would normally get 

from a telephone system, and certainly from the wireless system, 

to first order. 

So I guess I would argue, sir, that you do not necessarily need 

to have those special treatments, but if you do, it should be applied 

on a nondiscriminatory basis so that all sources or sinks of those 

kinds of traffic get the same treatment. 

Senator HATCH. Chris, how about you? 

Mr. PUTALA. Senator, I think you succinctly made the central 

point. There is some traffic that requires kind of a faster lane, but 

once you are in the faster lane, there should not be discrimination 

among VoIP providers, among video providers, and you made the 

42

fundamentally important point about what, in essence, the debate 

is about. 

Mr. KUHNS. Senator, just one last comment. From a fairness 

standpoint, what you described would be fine, but in doing that, in 

building those kinds of tiering, you are adding complexity to the 

hardware that is required; you are adding complexity to the management of the network; and so you are adding cost that is not necessary. Just make the network faster using open, standards-based 

approaches, and we will not have these problems. 

Senator HATCH. Thank you very much. 

Thank you, Mr. Chairman. 

Chairman SPECTER. Thank you, Senator Hatch. 

Thank you, gentlemen. I think this hearing has shed a considerable amount of light on the subject, not too much heat, and I think 

the public involvement—C–SPAN is a good carrier. It is going to 

be on tomorrow morning at 3 a.m. 

[Laughter.]

Chairman SPECTER. If you want to see yourselves. I say in a joking way that the Judiciary Committee has a monopoly on the 3 

a.m. spot. We have the greatest following of insomniacs in America. 

But we have a lot of hearings, and on a serious theme, we thank 

C–SPAN for the job they are doing in informing the public. And 

this touches everybody. It touches a lot of people. And you saw the 

very extensive participation by the Committee. This is a very 

strong showing for the Judiciary Committee, with all the other assignments everybody has and all the other problems around. 

We may call you all in on a less formal basis, having had the 

public exposure, to see if there is some way to bring the competing 

interests together, short of legislation, or perhaps agreed-upon legislation with standards which can accommodate a lot of very competitive interests. 

That concludes our hearing. 

[Whereupon, at 11:45 a.m., the Committee was adjourned.] 

[Questions and answers and submissions follow.] 

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