U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

26–998PDF 2005

INTERNET PROTOCOL AND BROADBAND

SERVICES LEGISLATION

HEARING

BEFORE THE

SUBCOMMITTEE ON TELECOMMUNICATIONS AND 

THE INTERNET

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

NOVEMBER 9, 2005

Serial No. 109–68

Printed for the use of the Committee on Energy and Commerce

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

COMMITTEE ON ENERGY AND COMMERCE

JOE BARTON, Texas, Chairman 

RALPH M. HALL, Texas 

MICHAEL BILIRAKIS, Florida 

Vice Chairman 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

PAUL E. GILLMOR, Ohio 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

CHARLIE NORWOOD, Georgia 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

CHARLES W. ‘‘CHIP’’ PICKERING, 

Mississippi, Vice Chairman 

VITO FOSSELLA, New York 

ROY BLUNT, Missouri 

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

CHARLES F. BASS, New Hampshire 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE FERGUSON, New Jersey 

MIKE ROGERS, Michigan 

C.L. ‘‘BUTCH’’ OTTER, Idaho 

SUE MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

JOHN D. DINGELL, Michigan 

Ranking Member 

HENRY A. WAXMAN, California 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, Jr., New Jersey 

SHERROD BROWN, Ohio 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

ALBERT R. WYNN, Maryland 

GENE GREEN, Texas 

TED STRICKLAND, Ohio 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MIKE DOYLE, Pennsylvania 

TOM ALLEN, Maine 

JIM DAVIS, Florida 

JAN SCHAKOWSKY, Illinois 

HILDA L. SOLIS, California 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

BUD ALBRIGHT, Staff Director 

DAVID CAVICKE, Deputy Staff Director and General Counsel 

REID P.F. STUNTZ, Minority Staff Director and Chief Counsel 

SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET

FRED UPTON, Michigan, Chairman 

MICHAEL BILIRAKIS, Florida 

CLIFF STEARNS, Florida 

PAUL E. GILLMOR, Ohio 

ED WHITFIELD, Kentucky 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

CHARLES W. ‘‘CHIP’’ PICKERING, 

Mississippi 

VITO FOSSELLA, New York 

GEORGE RADANOVICH, California 

CHARLES F. BASS, New Hampshire 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE FERGUSON, New Jersey 

JOHN SULLIVAN, Oklahoma 

MARSHA BLACKBURN, Tennessee 

JOE BARTON, Texas, 

(Ex Officio) 

EDWARD J. MARKEY, Massachusetts 

Ranking Member 

ELIOT L. ENGEL, New York 

ALBERT R. WYNN, Maryland 

MIKE DOYLE, Pennsylvania 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

RICK BOUCHER, Virginia 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, Jr., New Jersey 

SHERROD BROWN, Ohio 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

JOHN D. DINGELL, Michigan, 

(Ex Officio) 

(II) 

C O N T E N T S 

Page

Testimony of: 

Bowe, Frank G., Professor, School of Education and Allied Human Services .................................................................................................................. 125

Clark, Tony, President, North Dakota Public Service Commission ............. 130

Ellis, James D., Senior Executive Vice President and General Counsel, 

SBC Communications ................................................................................... 20

Hassch, Harry, Executive Director, Community Access Center ................... 134

Kimmelman, Gene, Senior Director of Public Policy, Consumers Union ..... 140

Krause, Tim, Chief Marketing Officer and Senior Vice President, Government Relations, Alcatel North America ...................................................... 24

Mitchell, Paul, Senior Director and General Manager, Microsoft TV Division, Microsoft Corporation .......................................................................... 27

Praisner, Hon. Marilyn, Member, Montgomery County Council .................. 34

Putala, Christopher, Executive Vice President, Public Policy, Earthlink, 

Inc .................................................................................................................. 41

Rehberger, Wayne M., Chief Operating Officer, XO Communications, Inc . 64

Salas, Edward A., Staff Vice President, Network Planning, Verizon Wireless ................................................................................................................. 69

Wiginton, Joel K., Vice President and Senior Counsel, Sony Electronics ... 147

Willner, Michael S., President and Chief Executive Officer, Insight Communications ................................................................................................... 75

Wilson, Delbert, General Manager, Industry Telephone Company ............. 150

Yager, James, Chief Executive Officer, Barrington Broadcasting Company, LLC ...................................................................................................... 83

Material submitted for the record by: 

ADC Telecommunications, statement of ......................................................... 104

American Homeowners Grassroots Alliance, prepared statement of ........... 161

Edison Electric Institute, prepared statement of ........................................... 164

Nichols, Willard R., American Public Communications Council, prepared 

statement of ................................................................................................... 170

Richardson, Alan H. President and CEO, American Public Power Association, prepared statement of .......................................................................... 185

Wiginton, Joel K., response to questions from Hon. Cliff Stearns ............... 190

Willner, Michael S., response to questions from Hon. Jay Inslee ................ 192

Response to questions from Hon. Cliff Stearns .............................................. 195

(III) 

(1)

INTERNET PROTOCOL AND BROADBAND 

SERVICES LEGISLATION 

WEDNESDAY, NOVEMBER 9, 2005

HOUSE OF REPRESENTATIVES,

COMMITTEE ON ENERGY AND COMMERCE,

SUBCOMMITTEE ON TELECOMMUNICATIONS

AND THE INTERNET, 

Washington, DC. 

the subcommittee met, pursuant to notice, at 10:11 a.m., at 2123 

Rayburn House Office Building, Hon. Fred Upton (chairman) presiding. 

Members present: Representatives Upton, Stearns, Gillmor, 

Whitfield, Cubin, Shimkus, Wilson, Pickering, Radanovich, Bass, 

Walden, Terry, Ferguson, Sullivan, Blackburn, Barton (ex officio), 

Markey, Wynn, Doyle, Gonzalez, Inslee, Boucher, Towns, Gordon, 

Rush, Stupak, and Dingell (ex officio). 

Also present: Representative Buyer. 

Staff present: Howard Waltzman, chief counsel; Neil Fried, majority counsel; Will Nordwind, policy coordinator; Kelly Cole, majority counsel; Jaylyn Jensen, senior research analyst; Anh Nguyen, 

legislative clerk; Peter Filon, minority counsel; Johanna Shelton, 

minority counsel. 

Mr. UPTON. We have a lot ahead of us, so we are going to start 

just a little bit late. I will do my best with the gavel, remind members later, as they come, that they try to strictly adhere to the 5-

minute rule, for questions as well as the opening statements. Good 

morning. Today’s subcommittee hearing is on a staff draft to create 

a new statutory framework for Internet protocol and broadband 

services. The draft would update our communications laws to keep 

pace with the dramatic changes in technology and consumer demand which have transpired since passage of the 1996 Act. In my 

opinion, such an update is long overdue. 

In planning the subcommittee’s agenda for this Congress, I wanted to chart an ambitious course for enactment of reform legislation 

by the end of this Congress. This year, the subcommittee has held 

four hearings on how IP-enabled services are changing the face of 

communications and the voice, video, and data services marketplaces, which only underscores my desire to get this done in this 

Congress. Part and parcel of my desire to enact legislation this 

Congress, I want this to be bipartisan legislation. To that end, 

Chairman Barton and I, along with Ranking Member Dingell, 

Ranking Subcommittee Member Markey, and our staffs, have been 

working for months in good faith to achieve bipartisan consensus. 

2

And I believe that much progress has been achieved, and I am encouraged that we will, in fact, achieve bipartisan consensus. 

In light of a dwindling number of days potentially left in this legislative year, Chairman Barton and I decided that it was important 

to move the process along by publicly releasing this staff draft before us today and holding this legislative hearing. I appreciate the 

complete cooperation of both Mr. Dingell and Mr. Markey on this 

hearing, which resulted in our diverse and very lengthy list of witnesses and observers before us today. And I appreciate all of our 

witnesses for being here. I particularly want to welcome Mr. Hap 

Haasch, who is from my district in Kalamazoo, for being with us 

today on behalf of the Alliance for Community Media. 

I want to say that I look forward to continuing our bipartisan 

discussions with both Mr. Dingell and Mr. Markey—not to mention 

all the members on both sides of the aisle—as we move beyond this 

hearing and toward an eventual markup in this subcommittee and 

beyond. In order to quell the rumor mill, let me state for the record 

that we will not be marking up this bill next week. It was never 

our intention to do so, either in full or subcommittee. But let me 

make it clear, this bill is one of our top priorities, and I intend to 

work with Chairman Barton to move it. We have examined these 

issues for almost a year now, and it is time for subcommittee and 

full committee action. 

In terms of the substance, this staff draft rightly creates a new 

statutory framework for IP and broadband services that emphasizes a reliance on market forces in this competitive and dynamic 

sector, and I want to focus right now on one key element of that 

framework. The staff draft before us attempts to streamline the 

franchise process for broadband video service providers in order to 

expedite the entry of a new, third competitor into the video marketplace. Such competition, the sooner the better, will be good for consumers. 

Moreover, the staff draft makes sure that if we are going to depart from the legacy franchise model, that it is for a service which 

is different than today’s cable service. However, in creating a 

streamline franchise process for broadband video services, the staff 

draft attempts to preserve critically important elements of the legacy franchise mechanism, mainly, (1) a 5 percent franchise fee; (2) 

PEG carriage requirements; and (3) an explicit preservation of local 

government’s police powers related to the orderly and safe use of 

rights of way, including the time, place and manner for construction. 

In addition, this staff draft not only prohibits redlining, but also 

preempts State laws which prohibit municipalities from building 

their own broadband networks and offering their own broadband 

video services. That way, if a municipality wants to serve any or 

all it’s citizens, it can do so. And I would ask unanimous consent 

at this point to place on the record letters from the APPA and the 

Tropos Networks in support of the municipal broadband provisions 

in the staff draft. 

In closing, I want to stress that this is a staff draft, and that this 

public hearing is an opportunity to give members of this subcommittee and the public a chance to debate and learn more about 

the issues. The next step will be an open, public markup at our 

3

subcommittee and then full committee, not to mention open and 

public proceedings on the House floor, to say nothing about this 

interprocess. Between now and the next step, we have plenty of 

work ahead of us. We will continue to work with members on both 

sides of the aisle and all interested parties through the entire process. Again, I want to just remind my members of this subcommittee 

that we are going to limit ourselves strictly to the 5-minute rule, 

and I have served a good example by finishing 1 second early. 

Would recognize the ranking nmmber of the full committee Mr. 

Dingell for an opening statement from the great State of Michigan. 

Mr. DINGELL. Mr. Chairman, I thank you for your very kind recognition, and I am pleased to hear you discuss the staff draft. I am 

not sure whether you are indicating greater or lesser enthusiasm 

for this staff draft than I am. I had understood that we were working closely together, you, and Mr. Markey, and my good friend the 

chairman of the committee. But a funny thing happened on the 

way to this hearing, and we now find that we have a staff draft 

and all of the work that had been done by you and I, Mr. Barton 

and Mr. Markey, appears to have vanished somewhere into a black 

hole. I find that this is somewhat stressful as a trust that we have 

on this side, or the feeling that we have that there is a bipartisan 

effort to achieve a resolution of a problem, which we all agree exists with regard to updating the Telecommunications Act to assist 

us to have a better ball under which we could work. 

In order to assist you and my good friend the Chairman, I will 

see that our staff furnishes you and others in the industry with 

both our addresses on this side of the aisle and our telephone numbers so that you may know how to contact us. And we will also see 

that we have the different means of electronic communications that 

we have made available to you and to our friends in the industry 

so that you will know how to reach us about matters of this kind. 

We will either also instruct our staff to see to it that your staff has 

these telephone numbers because they appear to have forgotten to 

discuss with us the content of this draft. And although I will observe that parenthetically we were seeking to address these matters in good faith. 

I will be listening during the course of our future discussions to 

see whether similar good faith has been exercised on the Republican side of the committee, and whether this indicates to us that 

we may continue to work in a friendly, harmonious, open bipartisan fashion with our dear friends on the Republican side. 

Having said this, many of us have fought for a long time to remove barriers holding back competition in voice, video and 

broadband markets. The process leading to this draft legislation 

started well. In several bipartisan discussions, we found much common ground. Committee staff worked diligently and released bipartisan draft legislation in September. That was not perfect according 

to the minds of any participant, but it was progress. It reflected the 

need to find a meaningful balance between the policy issues and interests. The initial draft received mixed reviews and considerable 

comment, which we thought we were addressing in a suitable fashion. Yet nearly everyone appreciated the—process and found the 

draft workable. Staff began working on changes as appropriate. 

With regard to the initial draft, both the process and the substance 

4

were well on their way to what we thought would be a successful 

legislative achievement. 

The same cannot be said of this curious staff draft legislation 

now before us today. In stark contrast to our earlier efforts, this 

process and this staff draft was not inclusive or bipartisan, and, of 

course, the resulting product is, at best, a fine example of the 

staff’s predilection on these matters. I am extremely displeased at 

this kind of behavior by the majority, and I observe that it threatens in a very significant way what had been a good working relationship on this matter. 

Comparing the two versions, it is clear that changes swing consistently, if not universally, in the direction of only one group of affected stakeholders. Most other stakeholders are worse off. Moreover, the draft before us undermines long-standing objectives of fostering localism, competition and diversity. For each of the changes 

from the earlier bipartisan staff draft—and there are many—we 

must ask ourselves does this—the changes in this staff draft strike 

the right policy to usher in competition, innovation and investment 

that we all seek, and will this staff draft enable us to complete our 

business before the conclusion of this session, because good will has 

been somewhat afflicted by the results of these matters. Will the 

change have collateral effects on other parties? Will the change 

bring predictability and certainty to the marketplace? Or will it 

spawn more confusion and litigation? 

In asking these questions, a number of changes warrant close 

scrutiny. First, legitimate interests of the cities are not protected. 

The franchise fee provisions in the draft no longer keep our local 

governments financially whole. Although the draft retains the 5 

percent fee, it alters revenues on which the fee is paid in a way 

that could dramatically reduce revenues to our cities and towns. 

The rights of way provision place new restrictions on a city’s ability 

to manage its property. I would note that this was a matter of importance to me and my colleagues on this side because we felt that 

preserving the cities and their financial affairs intact was an important part of the resolution of the questions before us. 

Second, the draft marks a fundamental shift in basic and longstanding video obligations enacted to ensure competitive marketplace requirements that are statutory today, including must carry, 

retransmission consent, program excess, closed captioning, consumer electronics capability and compatibility, and retail availability are all relegated under the staff draft to waivable FCC regulations subject to a 4-year review that could result in their elimination. Does this committee intend to see this judgment over television policy to the whims of the FCC where we have suffered 

mightily over the years? 

Mr. UPTON. Mr. Dingell. 

Mr. DINGELL. Third——

Mr. UPTON. We—I tried to make it clear that we were going to 

try to limit our remarks to 5 minutes, and you are——

Mr. DINGELL. You have been——

Mr. UPTON. Two-and-a-half minutes over. 

Mr. DINGELL. You have been kind. 

Mr. UPTON. Very generous. 

Mr. DINGELL. I——

5

Mr. UPTON. Yes. 

Mr. DINGELL. [continuing] hope you realize that my enthusiasm 

for the——

Mr. UPTON. I just imagine if this had been the real bill. 

Mr. DINGELL. [continuing] staff draft will be further emphasized 

in the balance, but I will commend this reading to the Chair. 

Mr. UPTON. I look forward to reading every word. 

Mr. DINGELL. And I will ask unanimous consent that it be inserted into the record. 

Mr. UPTON. I would recognize the chairman of the full committee, Mr. Barton, for an opening statement. 

Chairman BARTON. Thank you, Mr. Chairman, and thank you for 

holding this hearing. I want to make a few extemporary comments 

in addition to my written statement based on what my good friend 

Mr. Dingell just said. This staff draft is a staff draft, but it is a 

staff draft that I and Mr. Upton approve. It is not a staff draft that 

Mr. Markey and Mr. Dingell approve. That is part of the process. 

We have worked with Mr. Dingell and Mr. Markey and their staffs 

for almost a year now, and those have been productive discussions, 

and there has been the normal give-and-take. There is a disagreement about this latest draft about when it was finalized, and Mr. 

Dingell and I are going to have a meeting on that and some other 

issues later this afternoon. 

But I don’t want there to be any misunderstanding, as chairman 

of the full committee, and Mr. Upton is chairman of the subcommittee, we want to legislate. We want to legislate in a bipartisan fashion. If you are going to legislate, you have got to make 

changes in drafts, and you have got to hold hearings on them. I 

made the decision last week that we were going to hold a hearing 

this week. Mr. Dingell disagreed with that decision, not necessarily 

because he didn’t want to hold the hearing, but because he and his 

staff had not had time to have input and make some suggestions 

about revisions to the final draft, and that is the right of him and 

his staff and Mr. Markey’s staff. But you cannot legislate if you 

don’t put it out to the public. 

Now the first staff draft that was put out in September, I believe, 

Mr. Dingell said had mixed reviews. Well, he is being a gentleman 

about it. It was uniformly knocked. It got nothing but negative reviews. Nobody was for it that I am aware of. Nobody talked to me. 

So we have made some changes, and we are going to make some 

changes to this draft. That is what this hearing is about. And we 

are going to continue to work with our friends in the Minority. This 

should be a bipartisan effort, but I don’t want anybody to be under 

any misunderstanding. The Energy and Commerce Committee, as 

long as I am Chairman, is about action. It is not about inaction, 

and sometimes we have to set timelines, and it is the chairman of 

the committee that makes those timeline decisions. So I bear total 

responsibility, and I told Mr. Dingell last week—I said, I don’t 

want you to take any ownership of this if you don’t want to. You 

can call it just what he just did, and he has got every right to do 

that. So I just wanted to set the record straight about that. 

Now, in my last 2 minutes and 23 seconds, I do want to thank 

you, Mr. Upton, for holding this hearing. We have had four hearings at your subcommittee on Internet protocol technology this 

6

year. We have heard from dozens of witnesses, and we are going 

to hear from several more today. They talked to us about the effects of new technology on voice, video and data markets, and they 

claim, and I believe that they are correct, that there is a need for 

a new, clear statutory framework to govern the delivery of such 

services. 

Our Nation’s telephone laws as they are currently structured are 

based on the principals of common carriage and the belief that only 

incumbents can truly own the facilities that connect Americans. On 

the other hand, the notion behind America’s cable law is that competition doesn’t exist, and since no competitive forces check, the action of a monopoly distributor of multi-channel programming in 

many markets, that responsibility must fall to the government. 

That is why we are here today. 

The advance of technology has left the Law behind. The statute 

no longer reflects the technological and competitive reality. Congress has a responsibility to update our communications laws. This 

is one of the committee’s highest priorities. Most of the folks out 

in the private sector that our governed by these laws are ready to 

go to work. If we do the new law right, there is going to be an explosion of jobs, growth and opportunity for American workers, and 

American consumers will get a wide array of new services that 

were unimagined just a few years ago. 

As we move forward in this process, I sincerely look forward to 

working with all members of the subcommittee and full committee 

on both sides of the aisle, especially my good friends Mr. Upton, 

Mr. Dingell and Mr. Markey, to try to perfect this draft. We do 

want to be bipartisan and we do want to move a bill. At one time, 

I had hoped we could move a bill before full committee this year. 

I am not sure that that is going to be possible now, but we can at 

least hold this hearing, take more comments, hopefully release another draft, and then maybe move to a legislative markup in subcommittee, and depending if we are here in December, we might 

actually get a markup in this subcommittee this calendar year. 

With that, Mr. Chairman, I am 4 seconds over and I yield back. 

Mr. UPTON. Note of the 4 seconds. Recognize the subcommittee 

Mr. Markey for 5 minutes for an opening statement. 

Mr. MARKEY. Good morning, Mr. Chairman. On September 15, 

after 8 months of negotiations on the part of the staff of Chairman 

Barton, Ranking Member Dingell, Chairman Upton, Mr. Pickering 

and myself, a bipartisan consensus staff draft was released. That 

draft, while not perfect, was balanced and designed to treat all parties equitably, meaning from the perspective of all parties, unfairly. 

It was offered as a starting point from which we could reflect on 

suggested changes from all affected parties and refine the draft 

through discussion and continued bipartisan collaboration. I want 

to thank Chairman Barton and Mr. Upton for the process over 

those months which led to that bipartisan consensus staff draft. 

I am dismayed by the process, however, over the last several 

days that has led to this hearing and to the latest staff draft, which 

is neither consensus nor bipartisan. While I understand that some 

may see the unveiling of the new Barton-Upton draft as moving the 

process forward, I think it is quite the opposite. On both the overall 

substance and the process, the Barton-Upton draft represents a sigVerDate 0ct 09 2002 12:11 May 08, 2006 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 F:\DOCS\26998.TXT HCOM1 PsN: JOEP
7

nificant step backward, and in my view, brings us further away 

from successfully legislating in this area, not closer. 

The new staff draft eliminates a provision that extended the prohibition on cable operators and telephone companies buying each 

other out in region. This has been the foundation of competition in 

this committee for many years. The cable industry challenges the 

phone industry, and the phone industry challenges the cable industry. It is a vital engine of progress for which this committee has 

been justifiably proud. While many of us may lament the prospect 

of a broadband duopoly in many communities, at least it is a duopoly. Deleting the provision which ensures competition between the 

cable and telephone industries is a terrible policy decision. 

The Barton-Upton draft also reduces the consumer protections 

required for national standards by the FCC from 11 areas to 4 

area. And it also adjusts the fundamental definitions in the bill. 

For example—for instance, the BITS definition is challenged in a 

way which raises questions as to whether re-sellers or aggregators 

of broadband service have any rights or any obligations to abide by 

network neutrality principles, consumer privacy protections, or consumer protection rules generally. The broadband video service definition is changed in a way that makes the platform which delivers 

the service a potential vehicle for discrimination. 

The Internet is a wonderfully chaotic, open, worldwide network 

or platform for innovation and an economic engine for the country. 

I don’t understand why we would tinker with a model that has 

been so widely successfully and embraced by thousands of companies and millions of individuals, and on it to slant public policy in 

favor of three companies simply so that they can deliver movies to 

peoples’ home. My Own Private Idaho was a movie. It is not supposed to be an articulation of America’s broadband policy. 

The Barton-Upton draft also changes the basis for calculating 

franchise fees for municipalities, a shift which will have negative 

financial consequences for communities across the country, and 

that undercuts financial support for public access television channels. 

In addition, the Barton-Upton draft deleted the placeholder that 

had been in the consensus draft that would have addressed the 

question of the extent and timeliness of the telephone companies 

offering broadband video service to both rural and under-served 

urban and suburban communities. 

The Barton-Upton draft also departs in a major way from the 

consensus draft by changing the obligations of Bell Company Video 

Services from statutory responsibilities to mere regulations. In 

other words, the rules governing must-carry, sports blackouts, close 

captioning, indecency rules, television content ratings, ownership 

limits, consumer equipment compatibility, equal employment opportunity rules, program access, close captioning and others, can 

now be waived by the Commission upon request by the Bell companies. 

If that were not sufficient to tilt the playing field enough, the 

draft adds an additional provision requiring the Federal Communications Commission, every 4 years, to eliminate such any of the 

rules which it finds in its subjective judgment that affects meaningful economic competition. 

8

I am willing, as I have been throughout the year, to negotiate in 

good faith and to develop a consensus piece of legislation. I am dismayed that the promising path that the 5-member offices were on 

toward that goal has been abandoned in the last week for what I 

see as a detour toward a likely legislative dead end. 

I thank the Chairman for calling today’s hearing, and I look forward to hearing from the witnesses. 

Mr. UPTON. I don’t know if I should say thank you or not. Mr. 

Whitfield is recognized for 3 minutes for an opening statement. 

Mr. WHITFIELD. Mr. Chairman, thank you very much, and I don’t 

think any of us are surprised that you and Chairman Barton have 

come forth with a new draft because, as Chairman Barton accurately stated, there was not anyone that appeared to be enthusiastic about the last draft. I actually am encouraged by this draft 

before the committee today because many of the provisions set 

forth offer important guiding principles toward improving our telecommunication laws in an era where we are witnessing the convergence of voice, video and data services on a single platform. Most 

importantly, the draft creates Federal standards for the deployment of broadband services, and I believe that elevating this issue 

from the local level to the Federal level accurately reflects the fact 

of the deployment of broadband services is a national priority. 

Without a doubt, consumers will benefit from these advanced services, and the draft before us today creates the necessary market incentives to make this deployment happen. And frankly, Mr. Chairman, I believe these changes are overdue, as we have witnessed 

time and time again by competition in the communications marketplace will bring much needed technological innovation and growth 

to our country, stimulating our economy and creating jobs. 

At the same time, consumers stand to reap tremendous rewards, 

I believe. It is competition and not excessive regulation or excessive 

mandates from the government that will stimulate lower prices, 

faster services, and expanded deployment. Although this draft, I 

think, has—it is quite obvious has not yet attained broad bipartisan agreement among the members of this committee, I do look 

forward to working with you and others on this subcommittee and 

the full committee to update our Federal communications laws for 

the Internet age. And I am optimistic that this committee can do 

so, and will not satisfy all of the special interest groups, but will 

certainly take into account all of their views and come out with a 

balanced final product. 

Mr. UPTON. Thank you. Mr. Boucher? 

Mr. BOUCHER. Thank you very much, Mr. Chairman. The draft 

which is before the subcommittee is a generally well-balanced proposal, and I think it is a useful starting point for this subcommittee’s work. It requires a regulatory light touch for Internet applications, much along the line that was recommended by the gentleman from Florida Mr. Stearns, and by me, in a bill that we previously introduced. 

The draft before us establishes a clear right for municipalities to 

offer telecommunication services. Broadband facilities will define 

the arteries of commerce in this century, much as canals, railroads 

and highways were the pathways for the economy of earlier eras. 

For many smaller communities, the municipal provider of 

9

broadband may be the only provider, or it may be a critical second 

provider, assuring that services are affordable. In larger communities, low-cost WiFi-based mesh networks can assure the wide 

availability of wireless high-speed Internet access when deployed 

by local governments. The draft assures that localities can offer 

these services as long as they abide by the same rules that they 

impose on private sector providers. 

I think it is essential that we provide franchising relief for multichannel video providers if we are serious about welcoming competition by the telephone companies in this market. The draft provides 

that relief while assuring that all providers pay local franchise fees 

and offer PEG channels. 

While I think the draft broadly strikes the right balance regarding municipal networks, the scope of permissible regulation of 

Internet applications and video franchising, I have concerns about 

the way the draft addresses network neutrality. This provision 

needs additional work. Following the Brand X decision and an FCC 

rulemaking, it is now clear that broadband platform providers need 

not accommodate unaffiliated Internet access providers. In the absence of that open access for unaffiliated ISPs, the need for a firm 

network neutrality provision is all the more apparent. It will be our 

only assurance that the Internet remains open and seamless as we 

expect it to be, and as the full utilization of that medium requires 

that it be. 

In simple terms, network neutrality will assure that any Internet 

user will be able to reach any website of his choosing and be able 

fully to enjoy the services that are offered by that website without 

interference by the broadband platform provider. The platform operator should not be permitted to manage the network in a manner 

that favors his content services to the disadvantage of the unaffiliated content provider who is Internet-based. 

The draft contains ambiguous language that permits the platform operator to offer enhanced quality of service to subscribers 

and to impose compacity limitations on subscribers. While I acknowledge the need for broadband providers who make substantial 

investments in building networks to be able to offer a high-quality 

service through their video, their VoIP, and their other offerings, 

the language should be modified to assure that the platform operator cannot interfere with the delivery of services from unaffiliated 

Internet websites and that sufficient bandwidth will be available 

on the platform to accommodate the unaffiliated services. 

Mr. Chairman, I look forward to working with you and with the 

members of the subcommittee and with interested external parties 

as we seek to achieve that goal. Thank you, and I yield back. 

Mr. UPTON. Mr. Gillmor? 

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

you for holding this hearing. And I want to applaud your hard 

work and your leadership, and Mr. Barton’s, in developing this revised draft bill. I also appreciate all the panelists being here. 

Mr. Chairman, we were both members of this subcommittee 

when Congress last updated the telecommunications law, and at 

that time the Internet was in its infancy, and cell phones were the 

size of masonry bricks, and Blackberry was only recognized as a 

fruit. None of us could have imagined the technical advances that 

10

have taken place since the Telecom Act of 1996 was signed into 

Law, advancements such as voiceover Internet protocol, on-demand 

media services, wireless web access to even the most rural of areas 

have Americans becoming increasingly dependent on the technology of the present, as they will become even more so on the 

technology of the future. And I am pleased to see that there have 

been so many positives, so many bipartisan forward-thinking provisions within this second discussion draft that attempt to address 

many of our future needs. 

As we begin the process of updating our current laws, I think we 

need to listen to the message that history left us: burdens from 

government-imposed regulations smothers the development of 

emerging technologies and limits long-term investment in this sector of our economy. The areas that are being addressed in the staff 

draft has become prominent largely due to government inaction. 

Recognizing that technological advancements are the driving force 

behind the future health of our Nation’s economy, it is vital that 

we also recognize our Constitutional oversight authority to make 

certain that this segment of our economy continues to grow. 

I think, as you do, that we ought not rush this process, but we 

have to be sure that we listen to all the stakeholders, including our 

constituents the American consumers, to ensure that we do out 

best to address the needs of this very fluid industry and to foster 

the spirit of competition. So I look forward to what emerges from 

these hearings, and, Mr. Chairman, I did want to commend you for 

your determination to assure that America continues to be the bellwether of technological advancement throughout the global marketplace. And I yield back all 16 seconds. 

Mr. UPTON. Mr. Doyle? 

Mr. DOYLE. Thank you, Mr. Chairman. Mr. Chairman, I have 

tried to approach these issues that come before this subcommittee 

with the goal of creating telecommunication policies that will lead 

to increased competition within industries and more benefits for 

consumers. 

IP technology has the potential to do just that in no time at all. 

This technology will change every aspect of competition within the 

telecommunications industry, and it is our job to see that as the 

state of competition evolves, we have policies in place that do not 

unfairly tilt the playing field in one direction or the other. Vibrant 

competition benefits us all because it benefits our constituents. I 

have said before that most of my constituents are probably more 

concerned about finding a way to get the same voice, video and 

data services they currently get only at a cheaper rate. However, 

the promise of IP technology is undeniable. We will see new services like video and voiceover IP that look, feel and act similar to 

old services like cable and satellite television and traditional phone 

service. 

The question is should we pass laws that treat the providers of 

these new services more favorably than we treat existing providers 

simply to encourage entry into the marketplace, or if regulatory obligations are reduced for a new entrant, should we then go back 

and reduce these obligations on existing providers? And if we do either of those things, what will be the affect on consumers? I look 

forward to hearing from out witnesses on this subject because I am 

11

reluctant to create winners and losers in this area simply based 

upon the services are delivered to consumers. 

I also want to highlight one issue that is very important to me 

as a Member of Congress who has 54 separate political subdivisions in my district, and that is the issue of franchise agreements. 

Franchise fees have been an important revenue source for municipal budgets since the beginning of cable television. And I know 

that some of our witnesses feel that the pace of negotiating franchise agreements can affect your ability to vigorously compete in 

the marketplace, however the system we have in place today ensures that local voices are heard, and that communities are compensated for the use of public right-of-ways. If a franchise process 

is streamlined, who will my city council members have to call if a 

problem arises with a provider? And will there be anyone to answer that call and give it the attention that it deserves? 

I have also heard that in addition to streamlining the franchise 

process, this discussion draft could drastically reduce the amount 

of money franchise fees generate for municipalities. A narrow definition of gross revenue that only includes money collected from 

subscriber fees and does not include other generally accepted forms 

of revenue such as advertising fees, will cost Pennsylvania municipalities millions of dollars. This would be a devastating blow to my 

district at a time when all of these political subdivisions are being 

forced to cut or reduce municipal services. 

In closing, Mr. Chairman, I want to thank our witnesses for 

agreeing to appear today. I look forward to hearing what they have 

to say, and I yield back my time. 

Mr. UPTON. Mr. Terry? 

Mr. TERRY. I waive. 

Mr. UPTON. Mr. Ferguson? 

Mr. FERGUSON. Thank you, Mr. Chairman. As this country migrates toward a completely digital communications system, I think 

it is important that we provide consumers and communications 

providers with legal and regulatory certainty to continue to offer 

new and innovative services. This discussion draft takes an important step toward that goal. Specifically, I commend you, Mr. Chairman, for your focus on the voiceover IP technology and Internet 

telephone providers. 

VoIP technology allows any broadband Internet connection to be 

a virtual telephone that provides consumers with affordable and innovative voice services. I know first-hand of the benefits of this 

technology for our economy as VoIP providers like Vonage which 

has created over 1,600 jobs in my State of New Jersey. They offer 

VoIP services as an affordable alternative to traditional wireline 

telephone service. 

Also of utmost importance is a competitive environment for consumers, an environment that provides them with the most options 

for their dollar, and assures that these new services are both affordable and attainable. To reach this goal, we need to establish a 

framework that ensures a level competitive playing field for all industries that provide these exciting new offering. By doing so, we 

will ensure that the consumer market gravitates to consumer demands and at the same time enables the development of sustainable and genuine competition for all of our constituents. 

12

I look forward to hearing from the witnesses present here today 

as to how we can achieve these goals as we move forward. And, 

again, I commend Chairman Upton, Chairman Barton, and others, 

who have worked on this important next step in the process. I yield 

back. 

Mr. UPTON. Mr. Gonzalez? 

Mr. GONZALEZ. Thank you very much, Mr. Chairman. And I am 

going to be brief, maybe not use—well, I have got 2 minutes so I 

will hurry then. But I will be a mind reader today, and I believe 

that I can read the minds of all the witnesses and everybody out 

there in the audience, and that is how do you stay out of the line 

of fire of what is going on up here regarding process. But please 

understand how important it is, please put it in context of where 

we are coming from on this particular issue of process. 

First of all, process will always determine the end product. We 

know that. So it is important that the Minority be part of the process. Majority does the majority’s will and does rule at the end of 

the day because they are the majority, but it does so by respecting 

the rights of the minority for a good reason, and hopefully that is 

what will happen here. 

Also understand that this particular staff draft in its consideration and the hearing today comes on the heels of a couple of other 

measures that were considered here, and that was the Energy Bill 

#2 and, of course, the Digital TV and Medicaid legislation which of 

course we believe was foisted upon the members of the Minority’s 

side without much input, and even during the process, we weren’t 

really, truly included in any significant measure. I don’t believe 

that it is too late. We are still in the process, and we will jump into 

the middle of it even if it is a later stage. And I yield back the balance of my time. 

Mr. UPTON. Thank you. Mr. Shimkus? 

Mr. SHIMKUS. I will pass, Mr. Chairman. 

Mr. UPTON. Ms. Blackburn? 

Ms. BLACKBURN. Thank you, Mr. Chairman. I want to thank you 

for holding the hearing today, and I want to thank you, and Chairman Barton, and your staff for the hard work that has gone into 

producing this draft. As you know, my colleague Representative 

Wynn and I introduced the Video Choice Act to streamline the 

process new entrants must undergo to offer video service. We believe that cutting red tape will not only lead to more choices for 

consumers, but will greatly increase broadband deployment in the 

country. It is my hope this draft, the subsequent bill, and an updated law will provide the needed relief for all new entrants. 

Since the U.S. has fallen to 16th in broadband deployment, the 

time to act is now. Today, if the local telephone company wants to 

string fiber to the home of every single constituent in my district 

and provide high-speed Internet access and voice telephone service, 

the company does not need to obtain any additional authority from 

the local government. However, under current law in most States, 

if that company later decides it wants to provide video over the 

same lines, it now has to go through local video franchising process 

in each and every locality. The process will take years; it will cost 

millions. In my opinion, it is a process that is counterproductive to 

achieving U.S. superiority in broadband deployment, access and 

13

usage. In today’s competitive communications world, the local franchising rules are out of place. The Texas legislature got rid of them, 

and now the phone companies are investing more in Texas, creating more jobs and more competition. Congress should do the 

same. Under the committee draft, the localities are indeed made 

whole by retaining franchise fees and PEG channels. Consumers 

will benefit from having faster, enhanced Internet access, competitive video service, more choice at lower cost. Local governments 

will have more revenue. It is the right policy and we should move 

quickly to make sure that franchise reform is adopted during this 

Congress. 

I look forward to hearing from our panelists. 

Mr. UPTON. Mr. Inslee? 

Mr. INSLEE. Thank you, Mr. Chairman. You know, while we are 

having this convergence in the industry in telecommunications, we 

would like to see some convergence in the Republican and Democratic parties. And I think that is very important in telecommunications policy for the long run, and that is why, although I am dismayed at the moment, I am hopeful that that will continue because 

I think it is very important that this industry, and the tremendous 

creative abilities it represents, are not disadvantaged ultimately by 

some partisan divide. So I hope this discussion continues. 

I want to make a couple comments about this draft. It is encouraging, I think, that there is some streamlining of the video franchise process. The competition in that marketplace, I believe, will 

benefit consumers. It is my hope that this market will drive a more 

robust broadband deployment. With that, though, I urge my colleagues to seek a franchise policy that really does keep local governments whole and maintains local government control of the 

rights of way. 

Second, one of the most important and positive aspects of this 

draft, I believe, is the provision seeking to maintain America’s 

Internet freedoms. Section 104, which is called the Net Neutrality 

Requirement, will help to ensure that Americans have unfettered 

access to the greatest possible choice of legal Internet content and 

services, and can connect any un-harmful device of their choice to 

the broadband network. This connectivity principle enshrined in 

this provision is good, but they must be further strengthened to 

give Americans an air-tight guarantee to Internet freedom. Internet access through a broadband video service is still Internet access, so it should also adhere to these Internet freedom requirements. 

Third, our concerns that much of the broadband regulations imposed in Internet services may unnecessarily capture services that 

do not need to be regulated. We should not regulate Internet services such as Google, Yahoo, Amazon or MSN. These hereto four unregulated services, such as free email, have made use of the Internet but have not made the actual connection to the consumer. We 

should be careful not to regulate any service that is not a substitute for capabilities to send and receive voice communications. 

With that, I look forward to restoring the bipartisan tradition in 

this industry. Thank you. 

Mr. UPTON. Mr. Sullivan? 

Mr. SULLIVAN. Thank you, Mr. Chairman. 

14

Mr. UPTON. You need to hit the button. 

Mr. SULLIVAN. Thank you, Mr. Chairman. It has been a long—

this—I thank you for holding this hearing. It has been a long time 

coming. The Internet has revolutionized our lives. It has had a dramatic impact on the way we communicate, and our laws must reflect those changes. Services based on Internet protocol are the 

wave of the future, and we can’t bury our heads in the sand. We 

must address the public policy concerns this technology raises within the telecommunications industry. 

The regulatory and technological world we face today is not what 

we faced 10 or 15 years ago, and that is a simple fact. I am pleased 

that this draft addresses consumer protection standards and ensures access to customers regardless of income. Also PEG requirements in this draft are comparable to current service providers, 

and the draft continues the current management of right-of-way. 

This is critical for our communities to have control over their operations, and it has appropriately been addressed in the language before us. 

The ability for IP to enable so many diverse technologies is a 

huge benefit for my constituents and all Americans. Competition—

fair competition drives innovation by driving down prices and increasing choices for consumers. Any barriers that impede competition should be eliminated. The fact of the matter is these technologies will affect us all. You, me, all of my constituents, everyone 

will benefit. The free market works if we will let it. 

I look forward to the testimony and I yield back. 

Mr. UPTON. Mr. Gordon? 

Mr. GORDON. I am ready to listen to the witnesses, Mr. Chairman. 

Mr. UPTON. Mr. Towns? 

Mr. TOWNS. Thank you very much, Mr. Chairman, to provide us 

an opportunity to get some additional information. As we stand on 

the verge of realizing the competition we had all envisioned in 

1996, I am anxious for everyone to benefit from current and future 

technological innovations. It is great to see the technology communities spurring the competition that the market needs, and we 

should strive for a regulatory framework that encourages it. By 

having multiple interests into the video services market, customers 

will have more benefits, positive investment in networks will be encouraged, and more jobs will be created. I am eager to see a widespread deployment of the technologies we have been discussing 

over the past year. 

The services and devices that have been shown to be are incredible, and their availability to everyone in every community is vital. 

I am confident that our industry friends recognize this and will 

govern themselves accordingly. My constituents are excited about 

the communication technologies that exist today and want to see 

more innovation, more choice, and, of course, lower prices in the future. I am pleased that the cable companies are aggressively competing against the Bells for telephone products, and that companies 

like Verizon, SBC, have plans to compete against the cable for 

video services. 

But for this innovation to occur, Congress needs to set the rules 

of the road, and we need to get it right the first time to prevent 

15

accidents. I hope we can advance this issue properly, and more importantly, in a bipartisan manner, Mr. Chairman. Let us keep in 

mind we should not create a regulatory burden that stops technology from initially reaching our constituents, but we must create 

a playing field that is level. We don’t want winners and losers. 

So on that note, Mr. Chairman, I yield back, and I am anxious 

and eager to hear from the witnesses. 

Mr. UPTON. Mr. Bass? Mr. Stearns? 

Mr. STEARNS. Thank you, Mr. Chairman, and I thank you for 

holding this hearing. It looks like you have a full house here, and 

I notice they are outside standing in the hallway. This is reminiscent of the Telecom Act of 1996. And I suspect after your first draft 

in September, you got everybody’s notice, and now with the second 

draft, there seems to be more concern. But, I want to compliment 

you because myself and the staff had some concerns about the first 

draft, and they are significant changes, we felt, and we helped 

bring about, and so I want to thank you for some of those changes. 

I think in the end what most of the people in the audience are concerned about is regulatory certainty and legal certainty, and that 

any business would appreciate because they can’t invest the capital 

unless they are pretty sure that they have this certainty. And so 

it is important that we continue to have these hearings, and I compliment you in having all of these panelists because a lot of members who won’t be here, I say to the audience, will be listening to 

them in our offices because of the importance of this bill. 

For the past couple years, my colleague Mr. Boucher and I have 

been working on getting new treatment for IP-enabled services and 

TV, and to a certain extent, we think we can accomplish these 

goals. I think to a larger degree the staff draft takes a significant 

step, as I said earlier, in this direction, but obviously I think we 

can still make improvements. I think my colleague—I agree with 

him when he contends that the Net Neutrality Standards in this 

draft should be strengthened. It is important to all of us. But, 

again, without this certainty and without this regulatory certainty 

and this legal certainty, we as Members of Congress will not give 

the industry the ability to innovate. 

And I have also said, Mr. Chairman, with the high-definition television, third generation wireless and broadband, that this economy will be transformed into a whole new economy, and the GDP 

will go forward at quantum jumps, and it will have a higher standard of living for all Americans. And this bill and what you are 

doing today, Mr. Chairman, is going to do that. So in a larger extent, this hearing today with all these panelists—witnesses, is really creating a higher standard of living for all of Americans and creating more jobs, higher paying jobs, and ultimately making this 

country more competitive. And I thank you, Mr. Chairman. 

Mr. UPTON. Mr. Rush? 

Mr. RUSH. Thank you, Mr. Chairman. Mr. Chairman, we have 

got a platoon of witnesses before the committee today, and I just 

want to reiterate and state without any unclarity that my position 

is that every crook and cranny of this nation should have access 

to the Internet services. And with that, Mr. Chairman, I will pass 

on my statement—on my official statement. 

Mr. UPTON. Mr. Pickering? 

16

Mr. PICKERING. Thank you, Mr. Chairman. And I want to thank 

the panelists and everyone that has been working on the two 

drafts. Let me say to my friends on the other side, there are many 

issues on the committee where we are simply not going to agree 

and will have philosophical and partisan differences. But the history of this committee has been on telecom that we have been able 

to work things out in a bipartisan way, whether it is energy, environment or health care, those are areas that perhaps we have irreconcilable differences. But on this particular area, telecom, where 

we have had some great accomplishments, I still believe that we 

can and should work in a bipartisan basis. For 71⁄2 months, staffs 

worked on the first draft, and sometimes when you work in that 

way and you try to do it as a member-led process, versus an industry-led process, the first reaction from industry is that no one likes 

it. Now you could say that is a good and fair thing, or you could 

say maybe we got it wrong. What we hope is in these hearings is 

to learn the differences between the first two drafts, use this draft 

and the first draft as a catalyst to reach consensus. I do hope, Mr. 

Chairman, that we reestablish and reengage in the bipartisan process of working together to find the common ground as we go forward. 

And let me set forward the principles that I hope that our process and our work will lead us to. It should be driven to establish 

clear preemption policy, clean entry policy, competition not just for 

one sector of communications but competition to expand and thrive 

in each sector of communications, and that we find a way to do 

that in a competitively neutral and a technologically neutral way. 

I do think that we can find that common ground. I think the bill 

makes improvements as we look at telco entry into cable and into 

video, and in that market, that will expand competition. 

At the same time, I have concerns that if we do not have a clear 

interconnection standard, or interoperability standard, that we will 

not have the corresponding ability to maintain competitive markets 

in voice and in data. It is very important that as we look at the 

engines of innovation and investment and competition, the Internet 

providers, whether they are content or whether they are voice, that 

we make sure that they are not subject to tolls or fees or the Internet freedom and that they still can provide competition both to 

video and telcos. 

At the end of this day, we want to say we have deregulated. We 

have set a cleaner policy, a clearer policy, but we have increased 

competition. And by increasing competition, you will increase investment and innovation in each sector. Those are the goals and 

the principles that I will be going by, and I think that this committee, whether it is energy or healthcare or whatever we have 

tried to do, the Chairman has tried to take a principle approach of 

increasing competition wherever we make policy. And I think that 

if we do that, we will come out ahead for the American people and 

for this committee, and we should not simply try to please one sector while leaving out every other sector. 

So that is the guidepost that I will be using, and I look forward 

to working with the Chairman and the rest of the committee with 

that bipartisan process and with those principles. Thank you, Mr. 

Chairman. 

17

Mr. UPTON. Mr. Stupak? 

Mr. STUPAK. Thank you, Mr. Chairman. This subcommittee has, 

and will continue, to have disagreements about policy issues, but 

we have largely kept partisan politics out of this subcommittee. It 

is a tradition we can be proud of, and I look forward to working 

with my colleagues on this draft as the process moves forward. 

I believe from our subcommittee hearings, as well as my many 

rural caucus forums, that we have a delicate job ahead of us. We 

must draft legislation in a way that doesn’t overly burden our 

brightest innovators with laws that can’t possibly change as fast as 

they innovate, but, at the same time, respects the importance of 

cities’ and States’ consumer protection laws and social obligations, 

including Universal Service Fund on which our communications 

law has been built. 

In addition, we won’t have done our job if any rewrite doesn’t 

recognize the special needs and challenges of rural communities 

and communication providers who serve those communities. 

Broadband is critical for our children, our hospitals, our public 

safety officers, and our businesses to thrive in the 21st Century. 

Our rural communities understand this as much as anyone. But 

while the commitment to rural communication providers and community leaders is unlimited, the resources are not. Congress has a 

duty to match rural America’s commitment. It is clear that we 

must do better. Despite advances in new technologies to help 

bridge the digital divide, broadband is still vastly under-deployed 

in rural America. 

The Communications Act of 1996 did a lot of great things. It 

spurred competition and brought us to where we are here today. 

Cable, phone, wireless competing and offering better services. The 

1996 Act also expanded the Universal Service Fund to bring 

broadband to community hospitals, schools, libraries, and it is time 

we take another look at the fund. USF faces challenges from the 

growing demands on the fund and a shrinking pool of contributors. 

We have to meet those challenges head-on. 

While the staff draft directs the FCC to study expanding the contribution base to include VoIP providers, I believe the language 

could be stronger to reflect the importance of the fund for rural 

America. I believe this draft is a good first step, but we need to be 

careful not to let the process get ahead of policy. That is why I look 

forward to hearing from our witnesses today and in the coming 

weeks about how we can refine the draft to better meet the needs 

of consumers, set out fair and clear rules, and promote competition. 

I look forward to working with the chairman, and Ranking Member 

Dingell, and my colleagues on the committee, to make sure that all 

communities, large and small, urban or rural, are connected to the 

future. Thank you, Mr. Chairman. I will yield back. 

Mr. UPTON. Thank you. Ms. Wilson? 

Ms. WILSON. Thank you, Mr. Chairman. I think it is pretty clear 

that we are on the cusp of returning to a duopoly in wireline service which makes any revisions that we undertake in the Telecom 

Act particularly important, and I think we need to very carefully 

think about the direction we are going on. 

The draft that we now have is a significant departure from the 

one that we saw earlier in the year, and that concerns me, particuVerDate 0ct 09 2002 12:11 May 08, 2006 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 F:\DOCS\26998.TXT HCOM1 PsN: JOEP
18

larly as the one that we saw earlier in the year, I think, was a bipartisan draft. And it concerns me if we move forward too quickly 

based on this current draft—piece of legislation and the imminent 

approval of the mergers of four large telecommunication companies 

into two huge telecommunication companies for wireline. 

I would also like to look at these problems and these issues from 

the perspective of consumers, and consumers have benefited tremendously from competition in telecommunications. We need to 

make sure that competition continues to be what drives innovation 

and low prices, and anything we do in the Telecom Act has to have 

that first and foremost. 

And I yield the balance of my time. 

Mr. UPTON. Mr. Wynn? 

Mr. WYNN. Thank you, Mr. Chairman. Mr. Chairman, with your 

indulgement, I am going to defer my opening statement, but I 

would like to take a moment to recognize one of the outstanding 

local officials from my district, the only woman on the panel before 

us today, the Honorable Marilyn Praisner. She is here wearing 

many hats. She is speaking on behalf of the National Association 

of Telecommunications Officers and Advisors, the National League 

of Cities, United States Conference of Mayors, and the National Association of Counties and Telecommunity. And I think that that reflects the fact that she has exercised over the years a great deal 

of leadership nationally as well as locally on telecommunication 

issues. I have had conversations with her about aspects of this bill 

and they have been very productive conversations. I know she is 

concerned about protecting the interests of local governments, particularly their revenues, their management of rights-of-way, and 

protecting consumers interests. I am sure she will share those 

views with the committee and we will be better for it. But I just 

wanted to say we are in the presence of an outstanding American 

and local leader, the Honorable Marilyn Praisner. Thank you for 

joining us today, Ms. Praisner. 

Mr. UPTON. Gentleman yield back his time? 

Mr. WYNN. Mr. Chairman. 

Mr. UPTON. Gentleman from Indiana? 

Mr. BUYER. I would ask unanimous consent for me to participate 

in this hearing to ask questions of the witnesses to give an opening 

statement. 

Mr. UPTON. Any member have an objection? Hearing none, the 

gentleman is recognized for an opening statement for 3 minutes. 

Mr. BUYER. Thank you, Mr. Chairman, not only for your work, 

but also that of the ranking members and their staffs. I agree with 

my colleague Mr. Towns when he has talked about getting it right, 

and I would say to my friend, Ms. Wilson, part of the problem we 

have—I don’t even want to call it a problem—part of the concern 

that you may have about you see major industries coming together, 

we caused that, because we over-regulated on voice and we deregulated on video. The deregulation on video spurred innovation and 

competition. There is an explosion based on conversions technologies and consumers are beginning to benefit. A the same time, 

you have got this over-regulation that Congress put place on voice 

and it has created great pains, so these are going to survive if—

and they are going to try to be innovative themselves. So as we 

19

move forward, I agree with my friend Mr. Pickering when he laid 

out some of his themes or principles because I have mine too, and 

that is respect the free markets. You do that to ensure a forum 

that is open, fair and competitive. (2), we need to deregulate for 

economic security, and that means that the pathways to foster innovation and competition. (3), I agree with themes that are being 

used out there in industry and around the hill, and that is to—if 

you must regulate, then do so on service, not on technology. And 

that is the error that we made back in the first Telecom Act. And 

I also agree with the theme about regulating on parity. Also about 

the empowerment of consumers to ensure there is choice. And, in 

fact, making sure that we have a good balance between our Federal 

and State jurisdictions on the consumer protection, and who are 

we—how are we going to increase the access and who all will participate in the USF. 

Last, I would mention is with regard to franchise fees. These 

franchise fees should not be an entry barrier to the marketplace. 

At the same time, I would think that cable would love to end what 

is happening out there in all these little towns and cities all across 

America whereby you enter the renegotiations and, oh, by the way, 

we need you to do this. We need some upgrade at the park. Can 

you help us with this and that? And they slip you the list. If that 

isn’t as close to blackmailing the marketplace, I have never seen 

it. So I am sure that you would love to end that out there, and, 

you know, I am intrigued and I like what Florida has done. 

I mean, Florida has an entertainment tax. We call it a fee. But 

if you just go to a straight fee on entertainment and let everybody 

openly compete, it has some attractive features to it. 

So let me be circuitous and I will end where I opened, and that 

was with Mr. Towns’ comments on getting it right. I want to thank 

all the witnesses for being here. I want to thank the committee 

staff. I—on the other side of Ms. Wilson, I was concerned about the 

first draft, so I think the second draft is a much more improvement 

than the first draft, but we still have a way to go, and I appreciate 

your being here, and let us keep it going. Yield back. 

Mr. UPTON. Thank you, Mr. Buyer. At this point, we are ready 

for our opening statements. Hooray. We are welcomed by Mr. Jim 

Ellis, Senior Executive VP and General Counsel of SBC; Mr. Tim 

Krause, Chief Marketing Officer and Senior VP of Government Relations of Alcatel North America; Mr. Paul Mitchell, Senior Director and General Manager, Microsoft; the Honorable Marilyn 

Praisner, Member of the Montgomery County Council, Montgomery 

County, Maryland; Mr. Christopher Putala, Executive VP of Public 

Policy for EarthLink; Mr. Wayne Rehberger, CEO of XO Communications; Mr. Edward Salas, Network Planning for Verizon Wireless; Mr. Michael Willner, President and CEO of Insight Communications, New York; Mr. James Yager, CEO of Barrington Broadcasting Company on behalf of the National Association of Broadcasters. Welcome you back as well. 

Ladies and gentlemen, we are prepared for your opening statements. I very much appreciated the opportunity to peruse them 

last night, and for a lengthy period of time, so thank you for getting them to us in advance. We will try to adhere to the 5-minute 

20

rule to our ability. I would note we are expecting votes about 11:45, 

so we will go as far as we can. 

Mr. Ellis, we will start with you. Your statements are made part 

of the record in their entirety, so go ahead, Mr. Ellis. 

STATEMENTS OF JAMES D. ELLIS, SENIOR EXECUTIVE VICE 

PRESIDENT AND GENERAL COUNSEL, SBC COMMUNICATIONS; TIM KRAUSE, CHIEF MARKETING OFFICER AND SENIOR VICE PRESIDENT, GOVERNMENT RELATIONS, ALCATEL 

NORTH AMERICA; PAUL MITCHELL, SENIOR DIRECTOR AND 

GENERAL MANAGER, MICROSOFT TV DIVISION, MICROSOFT 

CORPORATION; HON. MARILYN PRAISNER, MEMBER, MONTGOMERY COUNTY COUNCIL; CHRISTOPHER PUTALA, EXECUTIVE VICE PRESIDENT, PUBLIC POLICY, EARTHLINK, INC.; 

WAYNE M. REHBERGER, CHIEF OPERATING OFFICER, XO 

COMMUNICATIONS, INC.; EDWARD A. SALAS, STAFF VICE 

PRESIDENT, NETWORK PLANNING, VERIZON WIRELESS; MICHAEL S. WILLNER, PRESIDENT AND CHIEF EXECUTIVE OFFICER, INSIGHT COMMUNICATIONS; AND JAMES YAGER, 

CHIEF EXECUTIVE OFFICER, BARRINGTON BROADCASTING 

COMPANY, LLC 

Mr. ELLIS. Mr. Chairman Barton, Chairman Upton, Congressman Dingell and members of the committee, good morning, and 

thank you for the opportunity for SBC to present its views on the 

staff draft. 

Today competition and innovation have unquestionably changed 

the way we communicate, the way we use the Internet, in fact, 

even the way we watch television. It is happening in a continual 

pace, and it reflects the marketplace conditions that exist today. 

But despite these great strides, much of our industry remains subject to a shifting regulatory environment that inevitably is going to 

threaten some of this progress in various ways. That is why we 

support the staff draft. 

We believe it puts in place a more predictable national framework that will be important to the next generation services and 

networks. The staff draft reflects an important fact, a reality, and 

what is important to the future is less, not more, regulation. We 

have any number of examples from our industry that make that 

very clear. If you look at wireless, that is an opportunity where 

there was no pervasive regulation. The result has been an absolute 

flourishing of opportunity and new services in the wireless business. We have gone from 30 million subscribers just 10 years ago, 

to over 200 wireless subscribers in this country. There are more 

wireless phones today than there are wired phones. Rates have 

gone from 50-60 cents a minute not many years ago to pennies 

today. 

The same thing has happened with respect to the broadband 

market. It didn’t exist a few years ago, but we have seen it flourish 

with very light regulation, both by the States and at the Federal 

level. Today broadband services are—roughly 40 million subscribers have broadband services, and the rates reflect a decrease 

from $40-50 not many years ago to less than 20 today by SBC and 

a number of providers. 

21

Voice over the Internet services, VoIP, same thing. Minimal regulation. The service is flourishing. One incumbent that hasn’t been 

around very long has 1 million customers. Some say Skype is adding 100,000 a day around the world. That is the reality of the marketplace. Even with respect to traditional telephone services where 

the regulations encourage entry without legacy—burdening the 

new entrants with legacy regulations, have had a dramatic impact. 

We have seen that in long-distance. In 1984, $20 got you 50 minutes of long-distance. Today, that same $20 will get you unlimited 

long-distance. Same thing with respect to the whole package of 

local, long-distance and vertical services. In the last 5 years, those 

rates have gone down 30 to 40 percent when you include the bundling discounts. 

The one area where we have not seen competition be in any way 

affected—it has been impervious to competition—is the video services market. It has been 20 years since we had the Cable Act. In 

that 20 years, there has not been a single movement to have affective transformative competition in the video services market. Since 

1995, video/cable rates have increased by 80 percent since 1995. In 

the last 5 years, they have gone up 40 percent. That is three times 

the Consumer Price Index. And, unfortunately, the trend continues. 

In 2005, there have been more increases. 

This is why this legislation is important—the legislation as proposed. And I would also say it is also reflected in the BlackburnWynn and in the Boucher-Stearns bill. It all reflects that reality of 

marketplace experience and the importance of seeing to ease of 

entry of new competitors and without the burden of legacy regulation. 

SBC today is in the process of adding to its broadband network. We are going to spend $5 billion over the next 3 years to expand 

our broadband capability. We are going to do so to offer a number 

of applications. But, in particular, we will compete with the entrenched cable TV operators in our territory. The legislation is important to encourage that. We particularly think it is important in 

that it provides our right to enter that market on precisely the 

same set of rules that cable had when they came into telephony, 

namely without the burden of the legacy regulations. 

We thank the committee staff, the members for their work on 

this important piece of legislation. We hope you act promptly on 

the legislation. Thank you. 

[The prepared statement of James D. Ellis follows:]

PREPARED STATEMENT OF JAMES D. ELLIS, SENIOR EXECUTIVE VICE PRESIDENT AND

GENERAL COUNSEL, SBC COMMUNICATIONS INC. 

Good morning. Thank you, Chairman Upton, and members of the committee for 

offering me the opportunity to speak with you today about the committee’s draft reform bill. My name is Jim Ellis, Senior Executive Vice President and General Counsel for SBC Communications Inc. 

Two benefits of the bill stand out. First, the bill would establish a single, nationwide policy for the provision of broadband services, including VoIP. Second, the bill 

would tackle the issue of the extent to which cable franchise regulation, designed 

for the incumbent cable operators when they entered the market as monopolists, 

should apply to next-generation video services. By eliminating legacy franchise regulation for these broadband providers, the bill would create incentives for broadband 

investment, innovation and competition. 

It is with respect to this critical issue of video competition where further illumination is particularly warranted. SBC is making massive investments to continue its 

22

1 U.S. General Accounting Office, Report to the Chairman, Comm. on Commerce, Science, and 

Transportation, U.S. Senate: Telecommunications, Issues Related to Competition and Subscriber 

Rates in the Cable Television Industry, at 20 (Oct. 2003), available at http://

frwebgate.access.gpo.gov/cgi-bin/useftp.cgi?IPaddress=162.140.64.21&filename 

=d048.pdf&directory=/diskb/wais/data/gao (‘‘2003 GAO Report’’) (finding that cable rates have increased approximately 40 percent over a five-year period compared to the approximately 12 percent increase in the Consumer Price Index). 2See, e.g., Tony Gnoffo, Dissecting Comcast’s Rate Hikes, PHILADELPHIA INQUIRER, Mar. 13, 

2005, available at 2005 WLNR 3875285 (discussing rate hike taking effect in March and noting 

‘‘[f]or Comcast’s customers, rate increases have become an annual affair. Their regularity and 

steep trajectory—about 6 percent a year since 2001—have been a sore point.’’); Charter to Increase Some Rates Starting Next Month, KALAMAZOO GAZETTE, Feb. 11, 2005, available at http:/

/www.mlive.com/news/kzgazette/index.ssf?/base/news-12/1108138819196880.xml; Greg Edwards, 

Comcast Raising Cable Rates, RICHMOND TIMES-DISPATCH, Dec. 7, 2004 (Comcast has antransformation from a local phone company to a global provider of advanced network capabilities and innovative services. A critical part of that transformation is 

SBC’s entry into the video services market. Over a powerful new upgrade to its 

broadband networks, SBC will begin offering a next-generation video service that 

relies on Internet Protocol or ‘‘IP’’—the language of the Internet—and that will compete directly with, and we believe outperform, existing cable services. In doing so, 

SBC will not only offer consumers something they do not have today—a truly potent 

alternative to the cable incumbents—but also greater access to the newest in 

broadband technologies and services. 

Such an enterprise is not without substantial risk. Accordingly, any progressive 

legal regime should not impose on SBC and other new entrants legacy franchise 

rules designed for cable incumbents when they entered the market as monopolists. 

Doing so would utterly suffocate this much needed competition. Instead, the model 

should be cable’s entry into the voice market using IP technology—known as ‘‘VoIP.’’ 

There, cable faces none of the pervasive legacy regulation imposed on traditional 

voice service providers like SBC. As a result, cable VoIP is thriving and poised to 

become a mighty competitive force. 

As we sit here, SBC engineers and construction crews are building a new addition to SBC’s extensive broadband networks. We call this Project Lightspeed. It is a $5 

billion capital project that will drive 40,000 miles of additional fiber into SBC’s networks and result in an advanced, broadband network that relies on IP technology. 

Over it, SBC will offer an integrated suite of voice, Internet access, data and video 

services. In just its initial phase, Project Lightspeed will extend to approximately 

18 million households. This is the fastest and most aggressive deployment plan of 

its kind. 

One of the next-generation products that SBC will offer is an interactive, two-way, 

IP-based video service that will be unlike—and better than—the cable services 

available today. SBC’s network will not, as cable systems do today, simply broadcast 

hundreds of channels to each customer’s home for descrambling in a set-top box. 

Rather, SBC will give customers unprecedented control over the way they watch TV. 

This will mean three things to the consumer:

• First, the ability to interact in real time with the system to control the viewing 

experience. Subscribers will, for instance, eventually be able to watch a baseball 

game from multiple camera angles or watch several games live on the same 

screen. Or, the customer will be able to pause live TV, skip to more detailed 

information about the product being advertised at that moment, and then pick 

up the program where she left off. • Second, integration of the video experience with other services. Because the video 

service will communicate with other IP-based services, customers will be able 

to display on the TV secure, customized Internet content, such as real-time 

stock quotes or sports statistics, or display on the family’s dedicated TV channel 

digital photos stored with SBC’s Internet access service. 

• Third, control over the video service, not just with a remote control, but with other 

IP-based devices. For example, Project Lightspeed will eventually allow a customer, while away from the house, to use a mobile phone to alter parental controls, or tell the system to record a favorite show. 

In short, this is not plain-old-cable. It is a game-changing alternative to traditional cable service, and comes at a time when choice is much needed in the video 

marketplace. 

More than twenty years after the Cable Act, and notwithstanding the introduction 

of Direct Broadcast Satellite or ‘‘DBS’’ service, the video distribution market has yet 

to witness transformative competition. Cable prices have been rising over three 

times as fast as the Consumer Price Index (‘‘CPI’’).1 And that trend continues: 2005 

has already seen another round of price hikes.2

23

nounced rate increases for its Richmond customers ranging from 5.9% to 9.9% for standard analog service); Peter J. Howe, Comcast Will Raise Cable Rates in January, BOSTON GLOBE, Nov. 

24, 2004; Carolyn Said, Comcast to Raise Prices by 6 Percent Jan. 1, SAN FRANCISCO CHRONICLE, Nov. 25, 2004; John Cook, Comcast Plans to Raise Cable TV Rates, SEATTLE POST INTEL- LIGENCER, Nov. 24, 2004. 3 2003 GAO Report at 3, 10. Accord, Video Choice Act of 2005, S. 1349, 109th Cong., 1st Sess. 

§ 2(3) (2005) (citing GAO finding). 

4 U.S. General Accounting Office, Report to the Subcomm. on Antitrust, Competition Policy, 

and Consumer Rights, Comm. on the Judiciary, U.S. Senate: Telecommunications, Wire-Based 

Competition Benefited Consumers in Selected Markets, at 12 (Feb. 2004); see also id. at 15 (finding that ‘‘the monthly rate for cable television service was 41 percent lower compared with the 

matched market, and in 2 other [broadband service provider] locations, cable rates were more 

than 30 percent lower when compared with their matched markets’’). 

It does not have to remain this way. In 2003, the GAO found that the rates of 

cable incumbents facing competition from a wire-based video provider are approximately 15 percent lower than in the absence of such competition.3 A 2004 GAO report similarly found that the entry of a broadband service provider offering video 

service ‘‘induce[s] incumbent cable operators to respond by providing more and better services and by reducing rates and offering special deals.’’ 4

SBC’s Project Lightspeed is exactly the kind of wire-based competition that—according to the GAO and, frankly, common sense—will finally and truly challenge the 

chokehold that the incumbent cable operators have in this market. 

But entering the video services market to take head-on an entrenched, incumbent 

cable operator is a risky and costly enterprise—even under the best of circumstances. It requires enormous investment, which SBC is making without the assurance of a single customer. It is critical, therefore, that laws and regulations designed to protect the incumbent cable provider do not so increase the risk and cost 

for new entrants that competition is stopped in its tracks. That is, SBC seeks for 

its IP-based video service the same treatment that the cable companies enjoy when 

rolling out IP-based voice services: Freedom from legacy regulation designed for incumbents. 

As I mentioned, SBC is not building a cable system or offering traditional cable 

service; thus, it is not subject to the existing cable franchise regulations in the Act. 

Nonetheless, it is clear that the incumbent cable operators will seek to impede our 

entry by doing whatever they can to ensure that we face additional, city-by-city 

franchise requirements. If they are successful, this nascent video competition may 

well be snuffed out. SBC would, for instance, have to negotiate some 2,000 separate 

franchise agreements—each of which would take an average of 12-18 months to obtain—in order just to complete its initial three-year deployment plan. And, the franchising obligations will differ from municipality to municipality, making it not only 

enormously expensive but also entirely impractical for SBC and other new entrants 

to build out region-wide networks. Having to meet these requirements will radically 

change the already challenging financial calculus in deploying these IP-based networks and services. 

Lawmakers and other policymakers can best foster what promises to be unprecedented competition in the video market by taking steps to ensure that IP-based competitors, and indeed new entrants in general, are not saddled with unnecessary and 

nefarious legacy cable franchise regulations. 

You are likely to hear claims that SBC wants to avoid cable franchise regulation 

so that it can serve just a select few customers. Don’t believe this empty rhetoric. 

Our Project Lightspeed deployment, in just its initial phase, will reach millions of 

households in our territory—households that touch all different demographics. And, 

precisely because SBC is so serious about offering a robust alternative to cable, SBC 

is preparing to roll out an additional broadband video service called HomeZone. The 

service will for the first time integrate satellite video with powerful wire-based 

broadband capabilities. It will have many of the features of our IP-based video service and ultimately can be made available to every household in SBC’s service territory that has access to our DSL service—that’s some 80% of the households in our 

territory. SBC’s goal is no less than to offer a broadband-based, next-generation alternative to cable across our territory. 

Please make no mistake about: Video policy is broadband policy. The economics 

of deploying next generation broadband networks like Project Lightspeed rest heavily on the ability to capture video revenues. Therefore, Project Lightspeed is a 

broadband story, as it will enable greater bandwidths and a host of services, not 

just IP video, over a single platform. With the U.S. lagging behind other industrialized countries in broadband deployment, consumers and communities can only 

benefit from the type of network investment that will be made possible by robust 

video competition. The stakes simply could not be higher.

24

Mr. UPTON. Thank you. Mr. Krause? 

STATEMENT OF TIM KRAUSE 

Mr. KRAUSE. Chairman Upton, Ranking Member Markey, and 

members of the subcommittee, thanks for the opportunity to appear 

here today regarding the BITS Act. Alcatel endorses this legislation 

and requests the committee move it forward in the legislative process without delay. 

Alcatel is also a member of the Telecommunications Industry Association, and Alcatel believes the bill was consistent with the 

TIA’s convergence and broadband deployment policies. While 

Alcatel is a global company with 56,000 employees in 130 countries, it actually has almost 9,000 here in North America and has 

made over $17 billion in technology investments here. The North 

American market is vital to Alcatel and the entire technology industry because it is here that consumers are most demanding. And 

as a result, this market leads the world in innovation. That is why 

Alcatel’s global R&D centers for IP routing and enterprise applications are based in California, and our global R&D center for fiber 

to the home technologies are based in North Carolina. Alcatel’s the 

leader in broadband access technologies with over 70 million digital 

subscriber lines shipped to service providers. Alcatel’s been selected 

by SBC as its primary network infrastructure and video integration 

supplier for Project Lightspeed. It is also involved with numerous 

other telecommunications companies in the U.S. and around the 

world who are at various stages in their own plans to deploy 

broadband video services. 

The new broadband networks Alcatel will build for these companies are not mere conjecture. They are reality. We have all read the 

statistics. The U.S. is not the world leader in broadband deployment, either in terms of penetration or bandwidth. We think by 

creating a legal framework for the continued emergence of IP-enabled services going forward, we have the chance to position this 

nation to leapfrog international competition creating, in fact, an export market for our innovation in the form of products and services. 

The BITS Act will help make this possible in several ways. 

First, it generally protects nascent broadband services of all 

kinds, voice, video, data, from regulation at the Federal, State and 

local level. Second, the bill extends these protections to specific 

services such as VoIP and broadband video services in a socially 

conscious manner. The legislation preserves important public policies such as protecting consumers privacy, guaranteeing E911 access, and maintaining video programming safeguards. 

The bill creates a streamlined Federal video franchise process for 

broadband video services that will ensure—that can be a key driver 

of continued broadband deployment immediately. The BITS Act 

achieves this goal while protecting the ability of municipalities to 

manage their local rights-of-way as well as the video franchise revenue streams they have come to rely on. 

The new broadband networks Alcatel is building are unique in 

the U.S. market. These networks will enable two-way video services that allow for unprecedented subscriber interactivity, including 

robust parental controls for kid-friendly services, increased ethnic 

25

content, and other personalized applications not possible over existing video services. 

Those who ask whether broadband video services as defined in 

this legislation being deployed by companies like SBC and others 

are truly distinct from cable TV, I ask you to recognize the answer 

is yes. MSO’s are preparing to invest billions of dollars into their 

own networks in an effort to compete. If telecommunications carriers were simply rolling out cable TV, there would be no need for 

such an investment by the cable operators. It is this very type of 

facilities-based broadband competition that benefits consumers in 

both quality of service and in pricing. 

The BITS Act also includes important Internet neutrality principles. Alcatel fully supports their inclusion into this legislation as 

an important component of broadband consumer demand. 

Finally, I would like to take a moment to commend the bill’s authors for being sure to protect the rights of municipalities to enter 

the broadband market when they determine such action is in the 

best interest of their local communities. As Congressman Boucher 

knows, Alcatel was the main vendor to municipal fiber to the home 

building Bristol, Virginia, and we continue to work with municipalities in an effort to help them achieve their broadband potential 

where needed. 

Mr. Chairman, Ranking Member Markey, members of the subcommittee, thank you for the opportunity to appear here today. I 

look forward to discussing the issues and answering any questions 

later. 

[The prepared statement of Tim Krause follows:]

PREPARED STATEMENT OF TIM KRAUSE, CHIEF MARKETING OFFICER AND SENIOR

VICE PRESIDENT FOR GOVERNMENT RELATIONS, ALCATEL NORTH AMERICA

Chairman Upton, Ranking Member Markey, Members of the Subcommittee. Good 

morning. My name is Tim Krause, and I am the Chief Marketing Officer and Senior 

Vice President for Government Relations of Alcatel North America. 

Thank you for the opportunity to appear before you today regarding the 

Broadband Internet Transmission Services Act. Alcatel endorses this legislation, 

and requests the committee move it forward in the legislative process without delay. 

Alcatel is also a member of the Telecommunications Industry Association, and 

Alcatel believes the bill is consistent with TIA’s convergence and broadband deployment policies. 

The BITS Act will ensure the continued growth of the U.S. broadband market by 

creating legal and regulatory certainty for the services that flow over powerful new 

broadband networks. The result will be the continued introduction of Internet-based 

substitutes for traditional communications services by facilities-based and Internetbased providers alike, including converged triple-play offerings of voice, video, and 

data across traditionally distinct communications platforms. 

Alcatel is a global company with operations in 130 countries, 2004 revenues of 

12.3 billion Euros; and worldwide employees totaling 56,000. Alcatel has made over 

$17 billion in technology investments in North America. We have 8,800 employees 

in North America, and dedicate more than 20% of our North American revenue to 

research and development that we conduct in North America—a higher percentage 

than we reinvest worldwide. Our global R&D centers for IP routing and enterprise 

applications are based in California, and our global R&D center for fiber to the 

home technologies is based in North Carolina. Alcatel’s customers include traditional phone companies, mobile carriers, private and public enterprises, transportation networks, and satellite operators. 

The North American market is vital to Alcatel and the entire technology industry, 

because it is here that consumers are the most demanding, and as a result, this 

market leads the world in innovation. The legal and regulatory clarity that the 

BITS Act will provide will strengthen those qualities in the North American market, 

and better enable the manufacturing industry to compete in the face of the 

26

commoditization of products from low cost countries, and export new broadband innovations developed here at home abroad. 

Alcatel is the worldwide and North American leader in broadband access technologies, with over 70 million digital subscriber lines shipped to service providers. 

Alcatel has also been selected by SBC as its primary network infrastructure and 

services supplier for Project Lightspeed, which will deliver integrated IP Television 

and other ultra-high-speed broadband services to 18 million households by mid 

2008. Alcatel will enable SBC to provide this suite of services by building fiber deeper into the SBC network—using shorter copper subloops in existing neighborhoods 

and building fiber all the way to the premises in new housing developments. Equally as important, Alcatel will enable SBC to deliver multiple services with high quality over a single pipe to each home by leveraging the IP technologies it has developed. 

The new broadband network Alcatel is building for SBC is not mere conjecture, 

but a reality. Alcatel is already deploying such networks in countries across the 

globe, and that is why the BITS Act is critical for the future of communications in 

our nation. We have all read the statistics—the U.S. is not the world leader in 

broadband deployment, either in terms of penetration or bandwidth. Other nations 

have adopted policies that make broadband deployment a national commitment, 

while here at home the broadband market has been mired in almost a decade of 

legal and regulatory arbitrage that has held us back from reaching our full potential. By building on the gains of the Triennial Review and creating a legal framework for the continued emergence of IP-enabled services going forward, we can position our nation to leapfrog the international competition. 

The BITS Act will help make this possible in several ways: 

First and foremost, it establishes that broadband services of all kinds—voice, 

video, and data—are interstate in nature and not subject to onerous new regulations 

at the Federal, State, and Local level outside the confines of the bill itself. This is 

critical for establishing the certainty needed by facilities-based broadband service 

providers as well as Internet-based broadband service providers to take the financial 

risks of innovation in new services. 

Second, the bill extends those protections to specific broadband services that are 

replacing traditional services, such as VoIP and Broadband Video Services, but in 

a socially responsible manner that preserves long standing policies, such as protecting consumer privacy, ensuring consumers have access to dependable E911 service, as well as video programming safeguards. 

Most critically from Alcatel’s perspective, the bill creates a streamlined Federal 

video franchise process for broadband video services. By protecting the ability of municipalities to manage their local rights of way, as well as the revenue streams they 

have come to rely on from video service providers, yet ensuring broadband video 

services can be deployed without delay, the BITS Act ensures that broadband video 

services can be a key driver of continued broadband deployment unlike anything we 

have seen in the U.S. to date. 

The new broadband network Alcatel is building for SBC is truly unique to the 

U.S. market, and in terms of its broadband video service capabilities it is most definitely not cable TV. SBC’s broadband video service will be a two-way, interactive 

service that allows for unprecedented subscriber interaction with the service 

through the network. This interactivity enables features such as subscriber-programmed channels, with content such as home movies or photo albums, for instance, 

that can be made available to other subscribers. Subscribers watching sports programming will have access to numerous camera angles, data integrated from the 

Internet, and an unprecedented HD experience. 

The benefits of the two-way interactive network Alcatel is building for SBC hardly 

stop there. Parents will have unprecedented capabilities to monitor and control the 

content to which their children have access in a user-friendly environment. Subscribers of all backgrounds can have access to content that suits their tastes and 

interests, whether that is Spanish language programming and content, or other 

ethno-centric programming and services. Additionally, the powerful two-way, interactive network can deliver on the long-standing promise of telemedicine by making 

interactive healthcare a reality, and be equally as effective in the classroom. 

Utilizing IP technology to offer a broadband video service ensures that capacity 

for each subscriber is maximized, utilizing only that capacity needed to deliver the 

specific programming being viewed by a subscriber. This eliminates capacity challenges familiar with cable television services. In practical terms, once constructed, 

SBC could use its new broadband network to offer to its subscribers every single 

broadcast channel, if it chooses, in analog and digital, including all multicast digital 

channels. There is no lost opportunity cost for SBC in doing so, because it has essentially unlimited capacity to offer video programming over its new network. 

27

To those who openly question whether broadband video services as defined in this 

legislation are truly distinct from cable TV, I urge you to recognize the answer is 

an emphatic ‘‘yes!’’ 

One need only look at what the cable industry is doing in response to the investments being made by companies like SBC and Verizon. Our review of current MSO 

strategies indicates they are preparing to invest billions of dollars into their own 

networks in an effort to compete with the powerful broadband networks SBC and 

Verizon are deploying. If SBC and Verizon were simply rolling out cable TV, there 

would be no need for such investments by cable operators. It is this very type of 

facilities-based broadband competition that benefits consumers in both quality of 

service and in pricing. 

The BITS Act also includes important Internet Neutrality principles, which prohibit any service provider from denying subscribers access to lawful content available on the Internet, or from connecting devices to their broadband connections. The 

concept of Internet Neutrality, or ‘‘connectivity principles,’’ has long been advocated 

by the high tech community, and Alcatel fully supports their inclusion into this legislation. As a result, consumers accessing these new high-powered broadband networks will continue to be free to access the Internet-based content of their choosing. 

As broadband connections to the public Internet continue to increase in bandwidth, 

consumers will be increasingly empowered to watch video from alternative sources 

over the Internet if they so choose, or access any other Internet-based substitute for 

facilities-based broadband services they so desire. 

Finally, I would like to take a moment to commend the bill’s authors for being 

sure to protect the rights of municipalities to enter the broadband market when 

they determine such action is in the best interest of their local communities. As 

Congressman Boucher knows, Alcatel was the main vendor to a municipal build in 

Bristol, Virginia, and we continue to work with municipalities in an effort to help 

them achieve their broadband potential where needed. 

Mr. Chairman, Ranking Member Markey, Members of the Subcommittee, thank 

you again for the opportunity to appear before you today. I look forward to discussing these issues and answering any questions you may have.

Mr. UPTON. Thank you. Mr. Mitchell? 

STATEMENT OF PAUL MITCHELL 

Mr. MITCHELL. Chairman Upton, and Ranking Member Markey, 

and members of the subcommittee, I am very pleased today to testify on this far-reaching legislation. When I testified before the subcommittee earlier this year, I focused on how Internet technologies 

are transforming the consumer experience, especially in the area of 

broadband platforms delivering video and other advanced services. 

This hearing is important because it takes us from the big picture to the critically important details. How will the legislation encourage all players in the Internet world, network operators and 

content providers alike, to deliver advanced Internet content and 

services to consumers. In this area, I have two overarching observations. 

First, we are concerned that the definitions in the discussion 

draft could extend regulation to Internet services that have never 

before been regulated. And second, although the draft includes a 

section on net neutrality or connectivity principles, and we commend you for that, we are concerned that it does not give adequate 

assurance to consumers and to Internet content and service providers, that the marketplace, instead of Internet broadband access 

providers, will decide what content and services succeed or fail on 

the Internet. 

This concept of connectivity principles or net neutrality is not 

new, and it is the concept that helped fuel the Internet’s growth 

to the benefit of network operators, content providers and the public. It is not broken and doesn’t need to be fixed, but it needs to 

be maintained in the broadband era. As you now, Microsoft proVerDate 0ct 09 2002 12:11 May 08, 2006 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6602 F:\DOCS\26998.TXT HCOM1 PsN: JOEP
28

vides a wide array of current and next-generation Internet offerings, including MSN for news and entertainment, Hotmail for free 

email, and our Live Meeting service which enables businesses to 

communicate more effectively, and for gamers we have Xbox Live 

connecting gamers around the world when they play Xbox games. 

My group develops the technologies for the delivery of video content. Microsoft TV Foundation Edition is currently being deployed 

by Comcast in Washington State, and we also developed the IPbased TV platform products that SBC will soon deploy as part of 

Project Lightspeed, and that Verizon recently launched in Keller, 

Texas. 

Network operators are investing in infrastructure for the 

broadband future, but Microsoft and other Internet companies, like 

Amazon.com, eBay, Google, Interactive Corp., and Yahoo, are also 

investing billions to bring content and services to the public, and 

telecommunications carriers will be paid some of that money, too. 

These investments by companies on the ends of the network matter 

because consumers do not buy technology advances; they buy content and services. Congress should therefore adopt policies that encourage Internet content providers and service providers to bring 

new and evolving offerings to the public. 

In my earlier testimony, I set out goals that should guide any 

legislation to promote broadband Internet access and content, and 

they are as follows: the Internet services and products should remain largely unregulated; consumers should be able to access any 

Internet site and use lawful application, devices or content with 

broadband connections; and where they are subject to regulation, 

Internet and video services should be subject to exclusively—to 

Federal regulation. 

So looking at the staff draft, how does it stack up against these 

goals? First we recognize that what you are trying to do is incredibly difficult. We appreciate the complexity of these issues. But 

now, since many seem to agree that Internet services should remain largely unregulated, we believe that the definitions in the discussion draft reach broader than necessary. Services and products 

that ride the top broadband transport networks have never been 

subject to regulation before. In the definition of BITS, however, the 

discussion draft could be interpreted to extend regulations to Internet services such as MSN, Hotmail or Yahoo. These services have 

not been subject to regulation because they do not provide transport connection to consumers. We suggest the subcommittee revise 

the BITS definition to apply only to entities that provide or resell 

facilities for accessing content and services on the Internet. 

We are also concerned that the definition of VoIP is broader than 

necessary. Click-to-call features which enable an outgoing call with 

a mouse click on a web page could be covered by the definition even 

though they are not substitutes for phone service, and they are 

really only one-way services. Likewise, Xbox Live could be covered 

by the definition even though it is not a substitute for telephone 

service either. We see no reason, and we think consumers see no 

reason, why Xbox Live or Live Meeting—which is a product to enable virtual office meetings—should have to offer E911 capabilities 

or shoulder other telephone-like burdens since they only provide 

voice services in a contained environment. Instead, we suggest that 

29

the VoIP definition should cover only those services that are genuine substitutes for traditional phone service, such as those using 

phone numbers and offering interconnected services for sending 

and receiving calls to and from the public switch telephone network. 

Finally, the concept of net neutrality or connectivity principles 

should remain a core value in the broadband Internet world. The 

consumers’ ability to access any lawful content over dialup connections motivated Internet companies to invest, innovate, and compete in the Internet marketplace to the benefit of everyone. These 

principles give consumers, not network operators, the power to determine which services and products will succeed or fail. These enabling freedoms need to be maintained. 

We suggest two important improvements to the draft in this 

area. First, to ‘‘preserved authorities’’ language is ambiguous or 

overly broad and needs tightening in order to give the market adequate assurance. And, second, we believe the section on 

connectivity principles should apply to entities that provide or resell facilities for the transport of information and that provide a 

subscriber with Internet access or content derived from the Internet. The current definitions and provisions suggest that a company 

can both provide content from the Internet and not adhere to the 

connectivity principles. A company, of course, can choose to not include Internet content, in which case we think the connectivity 

principles should not apply. 

Thank you for the opportunity to appear again. You are undertaking important reforms, and I appreciate the opportunity to work 

with you on this legislation. I am happy to take your questions. 

[The prepared statement of Paul Mitchell follows:]

PREPARED STATEMENT OF PAUL MITCHELL, SENIOR DIRECTOR AND CHIEF OF STAFF, 

MICROSOFT TV DIVISION, MICROSOFT CORPORATION

Chairman Upton, Ranking Member Markey, and Members of the Subcommittee: 

My name is Paul Mitchell, and I am Senior Director and General Manager for the 

Microsoft TV Division at Microsoft Corporation. When I testified before the Subcommittee earlier this year, my statement focused on how current Internet technologies are transforming the consumer experience, especially in the area of 

broadband platforms being used to deliver video and other advanced services using 

IPTV technology. I explained how IP services and products today enable the delivery 

of voice, data, and video in new and innovative ways and represent a remarkable 

change in the history of how consumers communicate and access video and data information. 

Today’s hearing moves us from the big picture to the critically important details: 

how proposed legislation would promote or impede broadband deployment and the 

continued growth of Internet content and services in America. In short, how can legislative levers be used to promote continued investment in Internet content and 

services and enhance consumer benefit from these tremendous IP services and products. 

I will elaborate further but I have two overarching observations: First, the definitions in the bill could extend regulation to Internet services that have never been 

regulated before. Lest this Congress run the risk of impeding innovation by regulating new services, we suggest that the definitions need to be revisited. Second, the 

policy of ‘‘net neutrality’’—or the Connectivity Principles as Microsoft prefers to call 

them—has served consumers, content providers, and network operators exceedingly 

well over the past decade. These principles provide the certainty necessary for Internet companies to invest billions of dollars in new and innovative services and products which have added value to the underlying network. It also leaves it to the consumer in the marketplace to determine what services and products will succeed or 

fail. This policy is one of the fundamental reasons why the Internet has become 

30

what it is today. It does not need to be fixed. It only needs to be maintained in the 

broadband world. 

ROLE OF MICROSOFT IN IP-ENABLED SERVICES. 

Microsoft, as a technology provider, plays an important role for network providers 

and consumers alike as IP-based technologies and features are made available via 

a great diversity of devices, including PCs, TVs, mobile phones, and handheld devices. In our world, Internet or IP services and products generally mean those services and products that ride atop of or are connected to broadband transport networks. To name just a few examples, our MSN division delivers to computers, wireless phones, and handheld devices a variety of content, including news and entertainment, as well as other services such as downloadable music and video clips. In 

addition, consumers can sign up for Hotmail, a free email service, and MSN Messenger, a free instant messaging product. Our Live Meeting service enables a group 

of people in an enterprise environment or other setting to enjoy new options for realtime collaboration. Small groups and enormous groups can simultaneously talk 

among themselves, and either create or view a Power Point presentation, while the 

participants never leave their offices. This service increases worker productivity, 

using Microsoft software, broadband transport connections, and standard telephone 

connections. Our Xbox Live Service offers another example of how IP technology can 

be used to improve a consumer experience, in this case gaming, by allowing gamers 

to compete against each other over the Internet and enhance their gaming experience by talking to each other via a VoIP feature. 

My group, Microsoft TV, offers technology solutions to infrastructure and content 

providers. We developed the Microsoft TV Foundation Edition, which is currently 

being deployed by Comcast here in the U.S. It brings advanced programming-guide 

functionality, along with digital video recording (DVR) and a client applications 

platform to traditional cable networks. We also developed the IP-based TV platform 

products that SBC will soon deploy and that Verizon recently launched in Keller, 

Texas. These products enable delivery of a high-quality interactive video content 

service to consumers via the new facilities being deployed by these traditional telephone companies. The Microsoft TV products can be deployed over a variety of networks including a broadband cable, DSL, or even wireless networks. They will offer 

new interactive features for consumers, and we think consumers will find they create a very compelling experience. 

VoIP—which refers to the delivery of voice over an IP based platform—is an important development on the Internet. Microsoft plays a role in advancing this technology, too. VoIP is a technology that can be used in a variety of ways and presents 

a definitional challenge for policy makers. VoIP encompasses a great range of capabilities—from a feature in a gaming console such as Xbox, to a computer-to-computer communication, to a full blown VoIP telephone service that is capable of interconnecting with the PSTN and terminating calls to any telephone on the planet. 

As this Subcommittee considers the appropriate regulatory treatment for those 

VoIP services that are offered as a substitute for consumers’ traditional phone services—what you might call a VoIP Telephony service—it must ensure that other 

VoIP offerings or capabilities are not swept inadvertently into the mix. For instance, 

no one sees the VoIP feature that can be used with our Xbox Live gaming service 

as a substitute for their landline phone. The Xbox Live VoIP feature does not use 

telephone numbers, cannot be used in conjunction with a phone, cannot connect to 

the PSTN; it can only be used if you have an Xbox game console, and users are identified solely by their gamer tags and not their names. In short, the Xbox Live VoIP 

feature is simply too limited to be of use to consumers as a substitute for their existing telephone service. There is no sound policy basis for regulating Xbox Live like 

a telephone. No one is going to stop using plain old telephone service because 

they’ve become an Xbox Live gamer. 

CORE PRINCIPLES TO GUIDE LEGISLATION

The Subcommittee will no doubt hear today about the tremendous investments 

made by the network operators to promote broadband, and they should be commended for that commitment to the future. But the network operators are not alone 

in spending billions of dollars to deliver content and services to broadband Internet 

consumers. Microsoft and other Internet companies, such as Amazon.com, eBay, 

Google, Interactive Corp., Yahoo! and others, have also made billions of dollars of 

investments to make broadband Internet content, services, and products available 

to consumers and businesses, and some of that money is paid directly to telecommunications carriers. In the current calendar year, Microsoft alone is likely to 

spend over $7 billion on research and development—an amount that has gone up 

31

1FCC Policy Statement (Aug. 5, 2005); SBC-AT&T and Verizon-MCI Merger Approvals (Oct. 

31, 2005). 

by an additional billion dollars every several years over the course of our recent history. 

This fact is sometimes lost in this debate, but it bears remembering that consumers and businesses buy content and services made available by Internet companies, not just technologies. Consequently, we recommend policies that also encourage Internet content and service companies, as well as technology companies, to 

make the necessary investments for the broadband Internet future. 

When I testified earlier this year, I suggested four goals that should guide any 

legislative effort to promote broadband use and the future of the Internet. Let me 

briefly summarize those four goals: 

1. Internet-based services and products should remain largely unregulated. 

Internet-based services, that is, those services and products that ride atop or connect to the underlying broadband transport services, should remain largely unregulated and not be subject to the Communications Act. The success of the Internet as 

a tool for consumers and business has been remarkable, and Congress should proceed carefully so it does not inadvertently disturb this accomplishment. The choice 

of content and services available over the Internet is awe inspiring, and that stands 

out as a huge accomplishment of this medium. Thus, Congress should ask whether 

any proposed law or regulation that touches upon Internet services and products is 

necessary for the public good. 

2. Consumers should be able to access any Internet site and use any lawful 

application or device with a broadband Internet connection—just as 

they have been able to do in the narrowband world. 

This principle, which sometimes is referred to as ‘‘net neutrality’’ or ‘‘Connectivity 

Principles,’’ is really about letting consumers decide, and not network operators, 

what content and services succeed or fail on the Internet. Connectivity Principles 

are important as a policy matter because they determine whether consumers in the 

marketplace drive decisions on innovation and technology, or whether one lets the 

network operators steer those decisions. We are pleased that the network operators 

are investing in technology and innovation, and we are proud partners with them 

in offering content and services to the public. We just think that other companies 

should continue to be able to offer Internet content and services as well. 

In August of this year, the FCC adopted a Policy Statement endorsing the spirit 

and goals of the Connectivity Principles that several core Internet companies—Amazon.com, eBay, Google, Interactive Corp., Microsoft, Yahoo! and others—have long 

endorsed. Last week, the FCC voted unanimously to require SBC and Verizon to 

adhere to them, at least for two years. These principles have defined the Internet 

since it was launched. Specifically, they are:

• Freedom to Access Content. Consumers should have access to their choice of legal 

content. 

• Freedom to Use Applications. Consumers should be able to run applications of 

their choice. 

• Freedom to Attach Personal Devices. Consumers should be permitted to attach any 

devices they choose to the connection in their homes.1

These hallmarks of consumer expectations have been, and remain, fundamental 

to the success of the Internet. Those basic features defined consumer and company 

experiences on the Internet, and we agree with others in the industry that these 

principles should be carried forward to the Internet broadband future. 

3. If policy makers act, they should maintain a ‘‘light touch’’ and act only 

with respect to those services that give rise to present day policy questions. 

In order to avoid constraining the continued growth of IP services, any regulation 

imposed on IP services should be done with a light touch and only where there is 

a policy issue that needs to be addressed. For example VOIP is a technology that 

can be used in a variety of ways. To the extent policy makers are seeking to address 

a policy objective, they should not focus on all VOIP technologies. Instead they 

should focus only on those that present a policy question. If policy makers seek to 

preserve E911, we would suggest that they need not look at implementing E911 in 

the Xbox Live Service but instead may want to explore those VOIP services that 

are substitutes for existing telephone service. The principle to maintain is that, to 

the extent regulation is needed, policy makers should act with the lightest touch 

32

necessary to solve their policy objective in order to provide as much latitude for the 

continued innovation and growth of Internet services as possible. 

4. Where subject to regulation, Internet and video services should be subject exclusively to Federal jurisdiction. 

Congress should protect IP services and all video and broadband companies from 

conflicting and overlapping State and local regulation. These services are used as 

an integral part of interstate commerce, they utilize interstate or global networks, 

and they generally require the transmission of data and information across state 

lines. As a consequence, where subject to regulation, they should be exclusively 

within Federal jurisdiction. The FCC has correctly decided that VoIP is an interstate service, and that conclusion should apply to other IP-based services that are 

subjected to regulatory treatment, as well as to multichannel video programming 

services more generally. 

THE STAFF DISCUSSION DRAFT

To focus our comments on the 70-page draft bill, I will address how the Discussion 

Draft responds to each of the four goals we see for any legislation. For purposes of 

today’s testimony, I will comment on the weightiest issues. However, I am hoping 

my Microsoft colleagues will have the opportunity for broader conversations with 

the staff about narrower changes to the draft. 

1. Internet services and products should remain largely unregulated. 

The keystone of the draft legislation is found in the definitions, and we are concerned that in some places they sweep broader than necessary. Under current law, 

services and products that ride atop of or are connected to broadband transport networks have not been subject to regulation, while the underlying transport layer has 

been regulated for access, interconnection, intercarrier compensation, and other purposes. The Discussion Draft, specifically the definition of BITS, could be interpreted 

to extend regulations to Internet services, such as MSN, Hotmail, Google Mail, 

E*Trade, or Yahoo!. These services have never been subject to regulation because 

they do not involve transport of information and are simply destinations on, or information services made available via, the Internet. In addition, we would suggest 

that these services do not pose public policy questions such as those that might be 

posed by a BITs service. As a result, we think they should continue to be unregulated. We urge the Subcommittee to maintain its focus on those entities that provide 

facilities directly to subscribers that enable the subscriber to transport information 

to or from the Internet. This formulation would enable important societal regulatory 

objectives to be met while not extending regulation to new areas of the Internet. 

The definition of VoIP also sweeps more broadly than necessary. Some companies 

that provide online customer service are beginning to make use of so-called ‘‘clickto-call’’ capabilities. For example, you can talk to an operator at LensExpress (a contact lens fulfillment company) via the company’s 800 telephone service or via a oneway VoIP based call from your PC to the company’s phone bank. If the call is completed via the PSTN, the Discussion Draft would treat that capability as a regulated 

offering, subject to 911 requirements, USF fees, consumer protection rules, and the 

like. Yet, that feature is not a substitute for traditional phone service—it is only 

one-way. It is not the intent of LensExpress to be considered the provider of a phone 

service. The company only wants to simplify its customer service—and yet that capability arguably would lead to LensExpress being covered by the bill. Over the 

longer term, because the bill gives the FCC discretion to expand the definition of 

VoIP service, the bill’s provisions could be extended to the Xbox Live voice feature 

simply because Xbox Live uses an alternative ‘‘identification method’’ to create the 

voice connection between two Xbox gamers. In the area of VoIP, we urge the legislation apply only to those services that are a substitute for traditional voice service; 

that have a North American Numbering Plan number; that are interconnected with 

the PSTN; and that enable a user to send and receive calls to and from the public 

switched network. The 911 provision of the bill refers to these services as ‘‘send-andreceive’’ services (at Section 204). We recommend that this concept be used to define 

the class of VoIP services subject to any regulation, lest Congress stymie the development of VoIP capabilities while those capabilities are still emerging. 

2. Consumers should be able to access any Internet site and use any lawful 

application or device with a broadband Internet connection—just as 

they have been able to do in the narrowband world. 

Section 104 of the Discussion Draft addresses the Connectivity Principles. As I 

stated above, the concept that consumers can access the content and services they 

want on the Internet without interference or permission from the network operator 

33

is not new. That concept of Connectivity Principles is even older than the Internet 

itself. In fact, you can argue that without these principles, the Internet would not 

have evolved as it has. If you consider the Internet a remarkable engine of innovation and growth, then you should credit in part Connectivity Principles for that result. We think that policy—letting consumers decide—has served consumers, content providers, and network operators exceedingly well over the past decade. That 

policy is not broken. It does not need to be fixed. It only needs to be maintained 

in the broadband Internet world. 

We have joined in the past with other leading Internet companies, including Amazon.com, eBay, Google, Interactive Corp., and Yahoo!, to advocate for the continuation of Connectivity Principles, and we are pleased that the issue has been considered in the Discussion Draft. 

Two comments: First, the policy embodied in Section 104 on Connectivity Principles is an important one and we commend you for including this concept in the 

Discussion Draft. However, the provisions in Section 104 need improvement in specific areas. The ‘‘preserved authorities’’ language is uncomfortably ambiguous in 

some parts and overly broad in others. 

Second, and this is the critical issue: What entities need to adhere to Section 104? 

The version of the Discussion Draft that we have reviewed states that only those 

persons which provide BITS need to follow the net neutrality requirements. Those 

entities that provide ‘‘Broadband Video Service,’’ which includes ‘‘information derived from the Internet,’’ do not have to comply with the net neutrality requirements. 

Our view is that if a BVS provider does include Internet content or access, then 

of course the Section 104 Internet freedoms should apply. Alternatively, if they do 

not include Internet content or information derived from the Internet, then the 

Internet freedoms should not apply. 

We have heard that part of the reason for excluding BVS providers from Section 

104 stems from a concern for spam or viruses. Let me start by saying that we respectfully disagree with that claim as a technical matter. But more importantly, 

Section 104 contains clear language that enables a network operator to manage a 

network to ensure network security and reliability. Network management is an important function, but within the terms of Section 104, the network operators have 

the authority they need to guard against these possible problems. That is not an 

argument for exempting BVS providers that include Internet content from Section 

104. 

In short, those entities that provide subscribers with Internet content or information derived from the Internet should adhere to the core principles of net neutrality 

found in Section 104, and those principles should be clarified to provide consumers 

and content providers with clear and unambiguous protections. 

3. If policy makers act, they should maintain a ‘‘light touch’’ and act only 

with respect to those services that give rise to present day policy questions. 

As I explained above, we are concerned that the definitions of BITS and VOIP 

in the bill would extend regulation to Internet services that have never been regulated and that should remain unregulated because they ride atop the connection 

layer or they are not a substitute for traditional phone service. To illustrate: we do 

not see any reason why Xbox Live, a feature that enables persons playing a game 

to talk (well, ‘‘trash talk’’ to use the technical term), should have to offer E911 service. Similarly, we do not see why a collaborative work program, that enables users 

to review a document together and have a conference call to discuss it, should have 

E911 obligations. Or why Hotmail or MSN should have to register with all 50 states 

in order to continue to provide service. The changes to the definitions we recommend above would keep the focus on the activity that should be covered to 

achieve important societal objectives without going too far. 

I also want to address briefly the important issue of universal service funding. We 

recognize that the Discussion Draft refers this issue to the Commission, but we believe that the Commission should use a ‘‘connections’’ approach and not a numbers 

and other identifiers approach, nor the current system, in order to finance the USF 

system. A connections approach reduces arbitrage and captures all those persons 

who use the telecommunications infrastructure, and that is who should be contributing to its support. 

4. Where subject to regulation, Internet and other video services should be 

subject exclusively to Federal jurisdiction. 

We think that the current regime of having local and state governments license 

and regulate video distribution networks needs reform. The current system does not 

34

work for telephone companies trying to enter the business, and it does not work for 

cable companies already in the business. Both networks should not be subject to 

local and state regulation but should be covered by a federal regime. The same 

should apply to all Internet services. These are inherently interstate services that 

where regulated should be committed to the federal government for exclusive regulation. The Discussion Draft takes some steps in that direction, though it could be 

improved to ensure that cable companies today get out from under the burden of 

state and local regulation. 

Thank you for the opportunity to provide my views on this critically important 

legislative proposal. I look forward to your questions and to working with you and 

your staff going forward on these and other aspects of the draft.

Mr. UPTON. Thank you. Ms. Praisner? 

STATEMENT OF MARILYN PRAISNER 

Ms. PRAISNER. Thank you. 

Mr. UPTON. Oh. 

Ms. PRAISNER. Good morning, Chairman Upton, Mr. Markey, 

Chairman Barton, Mr. Dingell, and members of the committee. I 

especially want to thank my Congressman, Congressman Wynn, for 

his kind introduction and comments. I look forward to working—

continuing to work with you for our common constituents. 

For 3 decades, local governments have used cable franchising authority to achieve nearly universal deployment of broadband advance services, and to protect consumers within our authority. Let 

there be no mistake, local governments want competition as fast 

and as much as the market can sustain. While we do not believe 

that the local franchise process has impeded video competition, we 

have been prepared to explore different means of streamlining the 

process. However, we remain skeptical. 

Most recently in Texas, Telco’s were given what they wanted, 

fast-track franchising, but Verizon and SBC have to-date offered to 

provide competitive choice to less than 1 percent of Texas households. Is the Nation giving up current consumer protections and 

community benefits just to provide choice to a small percentage of 

the population? We continue to be concerned, as I know you are, 

about the digital divide. Local governments have come to the table 

in search of a legislative compromise. We remain clear about our 

broad parameters: preserve universal service, E911 local emergency alerts, and the Nation’s homeland security; protect our property rights and our authority for managing the Nation’s rights-ofway. Private, for profit and quasi-permanent occupancy are the 

most valuable real estate held by local government must be fairly 

compensated, both through social obligations to the community 

served and in rental fees. Preserve local governments’ right to provide broadband transport and communications services for itself 

and our constituents. Insure that a local Telco franchise is comparable in terms and conditions to a cable franchise. And provide 

for a consumer’s choice of broadband providers with guaranteed 

network neutrality. 

Local government organization staffs met with your collective 

counsel to craft a solution. The fruits of those labors was the first 

staff draft, or BITS I. While not perfect, BITS I was a good start. 

It reflected a non-partisan dialog with all the parties at the table. 

It evidenced a respect for and agreement with many of the essential items I cited. We were invited to assist in strengthening those 

35

areas where local government believed the staff draft had missed 

the mark. 

The revised staff draft, BITS II, on the other hand, breaks faith 

with those deal points. The telephone companies, to us, appear to 

get everything they asked for including fast-track franchising while 

avoiding most social obligations. Public safety standards are determined by the industry without proper oversight. Local government 

is permitted only to enforce what the industry deems important. 

This is an inappropriate Federal and private industry intrusion 

into the management of our streets and sidewalks. State and local 

government is not kept whole. 

BITS II limits rights-of-way fees to the recovery of management 

costs. Broadband video franchise fees are limited to 5 percent of 

subscriber revenue, not all video service-related revenues. So 

Telco’s not only get out from under franchising, they get subsidized 

use of local governments’ property. As a comparison, the Federal 

Government charges the full market price to use public spectrum. 

Community needs and interests are essentially abandoned. While 

cable must continue to provide local community needs and interests 

such as PEG I-Nets, and emergency alerts, the Telcos do not. Consumers lose choice and competition and there is no network neutrality. BITS would not even replicate the rental fees contained in 

the recent Texas franchising legislation. Needless to say, local government officials across the country are not pleased with the prospect of this bill moving forward as is. 

We welcome your introductory comments about the fact that this 

is a draft. We solicit the support of the bipartisan leadership and 

every member of this subcommittee for our efforts to protect your 

and our constituents. This bill, as it is currently worded, breaks 

faith with the promises we were made in exchange for our support 

for the national franchise solutions. We were promised consumer 

choice, fair competition, preservation of our rights-of-way authority, 

and keeping local governments whole. Without appropriate amendments, BITS II, as I said, breaks faith with those commitments and 

breaks faith with our consumers. 

We stand ready, Mr. Chairman and members of the committee, 

to continue to negotiate on appropriate legislation prior to markup. 

We will come back to the table this afternoon. We will stay and 

work with you through the Christmas recess if necessary to achieve 

the result that we all want: quality universal service for everyone, 

all consumers within our jurisdictions. Thank you very much. 

[The prepared statement of Hon. Marilyn Praisner follows:]

PREPARED STATEMENT OF HON. MARILYN PRAISNER ON BEHALF OF NATIONAL ASSOCIATION OF TELECOMMUNICATIONS OFFICERS AND ADVISORS, NATIONAL LEAGUE OF

CITIES, UNITED STATES CONFERENCE OF MAYORS, NATIONAL ASSOCIATION OF

COUNTIES, AND TELECOMMUNITY

I. INTRODUCTION

Good Morning, Chairman Upton, Mr. Markey and Members of the Subcommittee, 

my name is Marilyn Praisner. I am a member of the County Council of Montgomery 

County, Maryland. I appear on behalf of the National Association of Telecommunications Officers and Advisors (‘‘NATOA’’), the National League of Cities (‘‘NLC’’), the 

36

1 NLC, USCM and NACO collectively represent the interests of almost every municipal or 

county government in the U.S.. NATOA’s members include telecommunications and cable officers who are on the front lines of communications policy development in hundreds of cities nationwide. TeleCommUnity is an alliance of local governments and their associations which are 

attempting to refocus attention in Washington on the principles of federalism and comity for 

local government interests in telecommunications. Councilmember Praisner is chairman of the 

Telecommunications and Technology Steering Committee for the National Association of Counties; Chair of the Executive Committee for SAFECOM; Chair of TeleCommUnity and Former 

Vice-Chair of Local State Government Advisory Committee to the FCC. 2Please understand that local governments are under plenty of pressure every day to get 

these agreements in place and not just from the companies seeking to offer service. In separate 

studies both the FCC and GAO documented in markets where there is a wire-line based competitor to cable that cable rates were, on average, 15% lower. United States General Accounting 

Office, Telecommunications Issues in Providing Cable and Satellite Television Service, Report to 

the Subcommittee on Antitrust, Competition, and Business and Consumer Rights, Committee 

on the Judiciary, U.S. Senate, at 9, GAO-03-130 (2002)(‘‘GAO 2002 Study’’), available at

www.gao.gov/cgi-bin/getrpt?GAO-03-130; In re Statistical Report on Average Rates for Basic 

Service, Cable Programming Service, and Equipment, Report On Cable Industry Prices, MM 

Docket No. 92-266, 17 FCC Rcd 6301, Table 6 (2002)(‘‘2002 Cost Report’’). 3For over thirty years local governments have granted incumbent cable operators and competitive broadband providers non-exclusive franchises to use public property to provide cable 

service and non-cable services. Grants of exclusive franchises, which were rare, were prohibited 

by the 1992 Cable Act. 47 U.S.C. § 541(a)(1). New entrants and incumbent cable operators are 

using new and upgraded systems to offer bundled combinations of video programming, Internet 

access, and telephone service to increase per subscriber revenues. 4Many states have level playing field statutes, and even more cable franchises contain these 

provisions as contractual obligations on the local government. So when a new provider comes 

in and seeks a competitive cable franchise, there is not much to negotiate about. If the new competitor is seriously committed to providing as high a quality of service as the incumbent, the 

franchise negotiations will be neither complicated nor unreasonably time consuming. It is also 

important to recognize that every negotiation has two parties at the table. Some new entrants 

have proposed franchise agreements that violate the current state or federal law and open local 

franchise authorities to liability for unfair treatment of the incumbent cable operator vis-a`-vis 

new providers. Some also seek waiver of police powers as a standard term of their agreement. 

Local government can no more waive its police powers to a private entity than the federal government can waive the constitutional rights its citizens. 5See Subsec. (a)(1). Pub. L. 102-385, § 7(a)(1)) 

United States Conference of Mayors (‘‘USCM’’), the National Association of Counties 

(‘‘NACo’’) and TeleCommunity.1

II. THE ROLE OF CABLE FRANCHISING

For three decades local governments have used cable franchising authority to 

achieve nearly universal deployment of broadband advanced services and to protect 

consumers to the extent we have authority. We also know that only wire line competition reduces cable rates 2 and enhances service.3 Therefore, let there be no mistake, local governments want competition, as fast and as much as the market and 

some state laws will sustain.4

In an effort to promote competitive cable offerings, in 1992, Congress amended 47 

U.S.C. 541(a)(1) to ban the granting of exclusive cable franchises and imposed an 

affirmative obligation on franchising authorities to ‘‘not unreasonably refuse to 

award an additional competitive franchise . . .’’ 5 There have been very few cases filed 

37

6 As of October 26, 2005, an electronic search of the Westlaw system reveals 13 published 

opinions which cite Section 541(a)(1). The 13 published opinions represent 11 different controversies. Two of the controversies have trial court and appellate court opinions. Of the 11 different cases; • Two were brought against the US government acting as a cable operators on military bases 

(Americable International, Inc v. Dept of Navy, 129 F.3d 1271, (D.C. Cir. 1998) (Navy’s refusal 

to grant a SMATV contract, does not rise to a § 541(a)(1) violation.); Cox Cable Comm., Inc. v. 

United States, 992 F.2d 1178 (11th Cir.1993) (11th Circuit found a violation when Robins Air 

Force Base granted an exclusive cable franchise to Centerville Telecable, the winner of a competitive bidding process.); • Four of the cases saw local government citing to the section as a justification for their actions. Twice local government has unsuccessfully cited Section 541(a)(1) as means to defeat exclusive franchises that pre-dated the Cable Act. (James Cable Partners v. City of Jamestown, 

43 F. 3d 277 (6th Cir. 1995); Service Electric Cablevision v. City of Hazleton 2005 WL 2020452 

(M.D.Pa. 2005). Once it was used to defend against a claim of favoring a competitor over an 

incumbent (Cable TV Fund v. City of Naperville and Ameritech New Media, Inc., 1997 WL 

280692 (N.D. Ill., 1997) and once to demonstrate that the cable franchising process did afford 

due process standards. Liberty Cable v. The City of New York, 893 F.Supp 191 (S.D. New York, 

1995) • One case was brought against a private developer. 

While there are not a great many common threads in the Section 541(a)(1) cases, there are 

two absolutes. 

A party must ask for a franchise before an LFA can be found to have unreasonably denied 

the grant of a second franchise. ‘‘A natural reading of § 541 requires that Houlton Cable apply 

for a second franchise before it can ask this Court to review whether it is reasonable to refuse 

one.’’ NEPSK, Inc. v. Town of Houlton, 167 F.Supp.2d 98, 102 (D.Me 2001) See also NEPSK, 

Inc. v. Town of Houlton 283 F. 3d 1 (1st Cir., 2002); The requesting party must be asking for 

a new franchise and not a renewal. In I-Star Communications Corp. v. City of East Cleveland, 

885 F.Supp. 1035 (N.D.Ohio 1995). the District Court for the Northern District of Ohio held that 

I-Star did not state a claim for relief pursuant to § 541(a)(1) because the case concerned the 

City’s efforts to revoke I-Star’s existing franchise, not a denial of an application for a ‘‘second 

competitive franchise.’’ 7 In thirteen years, only twice has a local government LFA been found to violate or potentially 

violate Section 541(a)(1). In one case the violation was a matter of semantics and in the other 

the finding was procedural. In Qwest v. Boulder 151 F.Supp.2d 1236 (D. Colorado, 2001) Qwest 

was providing cable programming in Boulder through a revocable permit granted by the city. 

In addition to Qwest, TCI was also providing cable in the city by means of a revocable permit, 

while Wild Open West, a third provider, was offering cable in the city by means of a franchise. 

Testimony was presented to explain that Qwest and TCI operated under a revocable permit 

rather than a franchise as the city’s charter required a vote of populace for the issuance of a 

franchise. Wishing to avoid the expense of such an election, Qwest sued arguing that the election provision was preempted by § 541(a)(1) and the Court agreed. In Classic Communications 

Inc. v, Rural Telephone Co, 956 F.Supp. 896 (D. Kansas, 1996) Telecommunications company 

and its telephone and cable television subsidiaries brought suit for refusal to grant cable television franchises to cable television subsidiary. The Kansas District court denied the cities’ motion to dismiss stating: whether the Cities’ refusal was unreasonable is not an issue at this stage 

of the litigation. 8 Franchising is not a Barrier to Competition 

The concept of franchising is to manage and facilitate in an orderly and timely fashion the 

use of property. For local governments, this is true regardless of whether we are franchising 

for the provision of gas or electric service, or whether we are providing for multiple competing 

communications services—all of which use public property. As the franchisor—we have a fiduciary responsibility that we take seriously, and for which we are held accountable. 

Franchising is a National Framework with an Essential Local Component—Franchising is essentially a light touch national regulatory framework with local implementation. The 1992 

Cable Act authorizes local governments to negotiate for a relatively limited range of obligations 

that are imposed upon cable operators. Virtually none of these obligations are mandatory. Each 

one is subject to decision-making at a local level. 

Local Franchising is Comparatively Efficient, and Must Be Fair to Protect All Competitors—

Franchising is not intended to be complex or time-consuming, but fair to incumbent, competitor 

Continued

pursuant to Section 621(a) 6, and even fewer of these claims have found fault with 

local franchise authority grants or refusals.7

III. IS THE 4TH TIME THE CHARM?

Much like you, local governments have been gravely disappointed with the telephone industry’s past promises-made versus reality-delivered. Three times before, in 

1984, 1992, 1996, the telephone industry promised Congress it would enter the video 

services business. Each time Congress amended the laws to permit the entry. Now 

they ask again. 

While local government will never agree that the local franchise process has impeded video competition, we are prepared to explore different means of streamlining 

the process.8 We are, however, skeptical. 

38

and consumers. In some communities, operators bring proposed agreements to the government 

based on either the existing incumbent’s agreement or a request for proposals, and with little 

negotiation at all an agreement can be adopted. In other communities, where the elected officials have reason to do so, a community needs assessment is conducted to ascertain exactly what 

an acceptable proposal should include. Once that determination is made, it’s up to the operator 

to demonstrate that they can provide the services needed over the course of the agreement. 

The Current Framework Safeguards Against Abuse and Protects Competition—The current 

framework ensures that all competitors face the same obligations and receive the same benefits, 

ensuring a fair playing field. Federal safeguards protect against abuse. Local government is generally prohibited from requiring a provider to use any particular technology or infrastructure 

such as demanding fiber or coaxial cable. They can require that certain minimum technical 

standards be adhered to and that systems are installed in a safe and efficient manner. Local 

government ensures compliance with the National Electric Safety Code to protect against threat 

of electrocution or other property damage. Local rules can also require that signal quality be 

up to federal standards, and that systems are maintained to provide subscribers with state of 

the art transmissions. Similarly, it is local government that inspects the physical plant and ensures compliance on all aspects of operations. We work closely with our federal partners and 

cable operators to ensure that cable signal leaks are quickly repaired before there is disruption 

or interference with air traffic safety or with other public safety uses of spectrum. 9 A copy of the memo local government shared with the bi-partisan staff is attached hereto 

as Appendix A. The memo reflects that there was much to embrace in BITS I and most of local 

government’s comments sought to perfect the bill, not kill the legislation. 

Most recently in Texas, telcos were given what they wanted, fast track franchises. 

But Verizon and SBC, months after the law was put on the books, have offered to 

provide competitive choice to less than one percent of Texas households. Is the nation giving up the consumer protections and community benefits in the current franchising system just to provide choice to one percent of the population? 

IV. THE SOLUTION ON THE TABLE

Local government came to the table in search of a legislative compromise and we 

remain clear about our broad parameters:

1. Universal service, E-911, local emergency alerts and the nation’s homeland security in an IP era must be preserved. 

2. State and local governments’ property rights and our authority for managing the 

nation’s rights-of-way must be kept whole. Private, for-profit, and quasi-permanent occupancy of the most valuable real estate held by government must be 

fairly compensated—both through social obligations to the community served 

and in rental fees. 

3. Local governments must have the right to provide broadband transport and communications services to themselves and to their constituents to further important community interests. 

4. The local telephone company franchise should be comparable to the terms and 

conditions applied to their cable competitors. 

5. Consumers need choice of broadband providers with guaranteed network neutrality. The owner of the broadband pipe should never discriminate among service providers nor limit the consumer’s access to those services. 

IV. BITS I

The national local government organizations directed our staffs to meet with your 

collective counsel to craft a solution. The fruit of those labors was the first staff 

draft, or ‘‘BITS I.’’ 

BITS I, while not perfect, was a good start.9 It reflected a non-partisan dialogue 

with all the impacted parties (federal, state, and local governments, industry and 

consumers) at the table. It evidenced a respect for and agreement with many of the 

essential elements outlined on the above issues. And, we were invited to assist in 

strengthening those areas where local government believed the staff had missed the 

mark. 

V. BITS II

The revised staff draft, BITS II, on the other hand, breaks faith with those deal 

points. Though it provides for local government provisioning of broadband transport 

and services and makes an effort to preserve narrow-band universal service, E911 

and homeland security in the IP era; the draft is seriously flawed. In this draft the 

telephone companies get everything they have asked for including fast track franchising, while avoiding most social obligations ‘‘and everyone else loses.

1. Public safety standards are determined by the industry without proper oversight. 

Local government is permitted only to enforce what the industry deems imporVerDate 0ct 09 2002 12:11 May 08, 2006 Jkt 000000 PO 00000 Frm 00042 Fmt 6633 Sfmt 6621 F:\DOCS\26998.TXT HCOM1 PsN: JOEP
39

tant. This is a ridiculous intrusion by the federal government and the private 

industry into the management of local streets and sidewalks. 

2. State and local government is not kept whole. BITS II limits rights-of-ways fees 

to the recovery of management costs. And Broadband Video franchise fees are 

limited to 5% of subscriber revenue, not 5% of all video service related revenues 

which is standard today. In other words, Telcos not only get out from under 

franchising, they get subsidized use of local government’s property. As a comparison, the federal government charges a full market price to use public spectrum. Again, by these provisions, Congress clearly expresses favoritism towards 

one segment of the industry by granting subsidized rights to access public property, and local government revenues are severely curtailed in the process. 

3. Community needs and interests are essentially abandoned. While cable must continue to support local community needs and interests such as PEG I-Nets and 

emergency alerts, the telcos do not. This results in governmental discrimination 

favoring one class of video provider and a reduction in community benefits. 

4. Consumers lose choice and competition. Broadband competitors can buyout their 

competition. There is no network neutrality. 

Collectively, these changes break faith with the promises of the Committee leadership and the promises of the industry. BITS II would not even replicate the rental 

fees contained in the recent Texas franchising legislation. We can only assume that 

Texas members want to preserve the compromise the industry agreed to not less 

than two months ago in Austin. 

VII. HISTORICAL AND CURRENT ROLE OF SOCIAL OBLIGATIONS

Finally, I welcome this opportunity to discuss with you the important social obligations inherent in current video regulation, and to explain why these core functions 

must be preserved, no matter the technology used to provide them. These include 

the allocation of capacity for the provision of public, education and government access channels, prohibitions on economic redlining, and a basic obligation that local 

government evaluates and the provider meets the needs of the community, including 

public safety needs. 

PEG Channels 

Historically and today, locally produced video programming performs an important civic function by providing essential local news and information. Under the existing law, local government can require that a certain amount of cable system capacity and financial support for that capacity be set aside for the local community’s 

use. This capacity is most often used in the form of channels carried on the cable 

system and are referred to as PEG for public, educational and governmental channels. Once the local franchise authority has established the required number of 

channels and amount of financial support required to meet community needs, they 

then determine the nature of the use, which may be mixed between any of the three 

categories. Public channels are set aside for the public and are most often run by 

a free-standing non-profit entity. Educational channels are typically reserved for 

and are managed by various educational institutions. Government channels allow 

citizens to view city and county council meetings, and watch a wide variety of programming about their local community that would otherwise never be offered on 

commercial or public television. Whether it is video coverage of the governmental 

meetings, information about government services or special programs, school lunch 

menus, homework assignments or classroom instruction, the video programming 

used to disseminate this information allows all of us to better serve and interact 

with our constituents. Government continues to make innovative uses of this programming capacity as new interactive technology allows even better information to 

be available to our constituents. 

Many of you and your peers use this vital resource as a means to report back and 

to interact with your constituents at home. Local and state officials also use this 

important medium, and we want to ensure that it continues to be available now and 

in the future. 

It may be possible that through deliberative processes such as this hearing, we 

will identify new technological opportunities to assist us in our outreach to our citizens, but I suggest to the Committee today that these public interest obligations 

continue to serve an important purpose and must be preserved, regardless of the 

technology that allows us to make the programming available. I hope that you’ll join 

with me in calling for the continuation of such opportunities in the new technologies 

that are evolving today. Certainly I should hope that you would not follow the tantalizing concept of reducing obligations on providers without careful consideration. 

40

Economic Redlining 

One of the primary interests of local government is to ensure that services provided over the cable system are made available to all residential subscribers in a 

reasonable period of time. These franchise obligations are minimal in light of the 

significant economic benefits that inure to these businesses making private use of 

public property. While there may be those who find this provision unreasonable—

we find it to be essential. Those who are least likely to be served, as a result of 

their economic status, are those who we need most to protect. This deployment 

helps to ensure that our citizens, young and old alike, are provided the best opportunities to enjoy the highest quality of life—regardless of income. The capacity that 

broadband deployment offers to our communities is the ability of an urban teen to 

become enriched by distance education opportunities that until recently couldn’t 

possibly capture and maintain the interest of a teen (much less many adults). And, 

that’s just the beginning—the possibilities are endless, as is the creativity of those 

in local government on making the most they can with the least they have. 

Public Safety & Community Needs 

Local leaders often focus on the needs of their first responders when evaluating 

community needs. The current law provides that local governments may require the 

development of institutional networks as part of the grant of a franchise. This network is specifically for the purpose of serving non-residential areas such as government facilities including police, fire, schools, libraries and other government buildings. This infrastructure is typically designed to use state of art technology for data, 

voice, video and other advanced communications services. It has proven effective not 

only for day to day training and operations—but essential in emergencies, including 

the events of September 11, 2001. 

For example, the City of New York uses an INET for distance learning among city 

educational institutions, for city-wide computer network connectivity, for criminal 

justice applications (video arraignments), for employee training including first responder training, and for ensuring redundant intelligent communications capabilities for all of its police, fire and first responder needs. This network is constantly 

being improved upon, but functioned in many important capacities during the losses 

suffered on September 11, 2001. This network not only offers capacity for the city 

all year round, but redundancy in times of an emergency. 

Again, many Members of Congress live in communities that have required the deployment of these services, and are planning and using this infrastructure and the 

services to protect and serve the needs of their citizens. For instance the communities of Palo Alto, California, Marquette, Michigan, Laredo, Texas and Fairfax 

County, Virginia are all examples where the local government has determined that 

use of an institutional network is in the best interests of their community. 

VIII. CONCLUSION

Local government officials across the country are going to be very unhappy if this 

bill moves forward. We solicit the support of the bi-partisan leadership and every 

member of this Subcommittee for our efforts to protect your and our constituents. 

We also appeal to your sense of fair play. This bill breaks faith with the promises 

we were made in exchange for our support of a solution. We were promised consumer choice, fair competition and preservation of our rights-of-way authority, and 

that local governments would be kept whole. BITS II reneges on all three promises. 

Any Member who supports BITS II without amendment will break faith with local 

government and consumers. 

Local government is ready to continue to negotiations on appropriate legislation 

prior to markup. We will come back to the table this afternoon and work through 

the Christmas break, if necessary, to achieve such a result. 

Thank you. I look forward to answering any questions you may have 

APPENDIX A 

Local Government Initial Comments to the House Staff Draft of 9-15-05

Local Governments support the following: 

• Local government determines public access channel (PEG) obligations and bonding requirements and Video provider must satisfy local authority before offering 

service. 

• All new technology providers must pay franchise fees. 

• Subjecting the new class of ‘‘Broadband Video Service’’ and services integrated 

with it to a franchise fee. 

41

• The definition of gross revenue is an acceptable compromise. 

• The draft takes a sound approach to right of way damage or facilities abandonment, but some management changes are needed. 

• Municipal broadband provision is sound, provided no cross subsidization language 

is added. 

• Concepts of network neutrality/open access. 

Local Governments have the following concerns: 

• The FCC is the wrong place for right-of-way and franchise fee dispute resolution. 

The FCC lacks capacity and expertise. The present court enforced mechanism 

works and is appropriate. 

• To remain whole and to protect public safety networks, local governments require 

compensation for current in-kind services received via franchising in addition 

to the current franchise fee. 

• Local government must be able to protect its citizens’ interests and its rights 

under local, state, and federal law through effective enforcement provisions. For 

example, local government must be able to conduct audits and collect documents 

appropriate documentation to monitor operator compliance. 

• The draft should include clearer and broader savings clauses, including clauses 

that more precisely protect local authority with respect to: taxes, zoning with 

respect to cell towers, damages immunity for actions related to PEG/right of 

way, and state and local consumer protection laws. 

• While local government understands the concern, and is willing to help develop 

streamlined procedures for franchising, local government has strong reservations about any mechanism whereby the federal government grants access to locally owned property. 

• Public access (PEG) capacity and use must evolve and advance with advances in 

commercial services and technology. Providers must be obligated to interconnect 

to receive PEG programming. 

• While generally a strong proposal, a few adjustments are necessary to protect 

local government’s ability manage the right-of-way such as allocation of relocation and management costs. Companies may not create their own safeguards to 

protect the public health, safety, and welfare. 

• Local government believes that competition is important for all users. Congress 

should mandate non-discrimination based upon income, race, ethnicity, etc. 

Local elected leaders are in the best position to make decisions about build out 

obligations.

Mr. UPTON. Thank you. Mr. Putala? 

STATEMENT OF CHRISTOPHER PUTALA 

Mr. PUTALA. Thank you. Thank you, Mr. Chairman Upton, 

Chairman Barton——

Mr. UPTON. Can you—you got to hit that button. 

Mr. PUTALA. Is that better? 

Mr. UPTON. That is better. 

Mr. PUTALA. Thank you, Chairman Upton, Chairman Barton, 

Ranking Member Markey, members of the subcommittee. 

EarthLink is the Nation’s largest independent Internet service provider, and we appreciate the opportunity to testify today. 

At the outset, let me say that the staff discussion draft takes, in 

our view, steps toward an appropriate regulatory framework for 

broadband communications. However, the staff—the draft also 

takes some half-steps that should be improved, as well as some 

missteps that should be reversed. 

EarthLink’s comments on the discussion draft focus on three key 

goals. Goal one, keeping the consumer’s ability to choose his or her 

service providers foremost in mind, the draft wisely includes provisions to ensure that broadband transmission providers do not interfere with the customer’s lawful use of the Internet—the net neutrality provisions. The threat of Internet discrimination is a real 

and present danger to consumers. A recent report from CIBC, a reVerDate 0ct 09 2002 12:11 May 08, 2006 Jkt 000000 PO 00000 Frm 00045 Fmt 6633 Sfmt 6602 F:\DOCS\26998.TXT HCOM1 PsN: JOEP
42

spected investment bank, goes so far as recommending to Telco and 

cable companies, a top-10 list of anti-competitive network discrimination techniques. Given that threat, we believe the current draft 

should be improved. 

For example, making it clearer that while different speeds and 

different pricing of Internet service can be offered to all consumers 

to accomplish network management, but once a consumer has purchased the right to use the express lane, they should be able to use 

that express lane for all applications, not just those applications 

their BITS provider would prefer. Network owners must not be allowed to favor their own customers, their own applications, once 

folks are in their express lanes. 

Another way to ensure that the consumer is in charge is by adding a provision for stand alone broadband, known in less-polite circles as naked DSL. Too many consumers are forced to buy regular 

voice phone service when they buy DSL service. Why should a consumer who wants to use VoIP instead of traditional phone service 

have to spend $25 to $50 a month for phone service he doesn’t 

want in order to get broadband service. The staff draft should be 

modified by adding a new provision to guarantee that consumers 

have the option of purchasing standalone broadband without being 

forced to buy regular phone service. 

I agree with Mr. Ellis about following the wireless success. Over 

the past decade, this committee has time and again gotten it right 

when facing issues relating to the wireless industry. 10 years ago, 

wireless was a duopoly, but this committee took actions to encourage new facilities, protect interconnection rights, and give the wireless industry reasonable time to comply with a host of government 

mandates. We were awarded with a vibrant, competitive wireless 

marketplace. We are pleased to know that the staff draft takes an 

important step to encourage new broadband facilities by eliminating current and future prohibitions on municipal broadband initiatives. EarthLink is proud to be leading the effort to unwire 

America’s cities with WiFi technology, delivering the Internet wirelessly and affordably. 

EarthLink is 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, powered by the 

equivalent of just 600 light bulbs, 135 square miles will be lit by 

the promise of affordable broadband access. 

The wireless example also highlights an important misstep in the 

staff draft relating to the lack of protections guaranteeing interconnection and traffic exchange. 10 years ago, wireless faced the 

same situation Internet voice traffic does today: relatively few folks 

on a wireless network trying to get connected to lots of folks on the 

incumbent telephone companies’ network. Recognizing their advantage, the phone companies often required wireless to pay for calls 

into their network and for calls from their network. In other words, 

head I win, tails you lose, for the incumbent because wireless had 

no negotiating leverage. 

Fortunately, Congress took significant steps in 1993 and 1996 

that recognized that given such a disproportion of market power, 

a small network was never going to have even the chance to beVerDate 0ct 09 2002 12:11 May 08, 2006 Jkt 000000 PO 00000 Frm 00046 Fmt 6633 Sfmt 6602 F:\DOCS\26998.TXT HCOM1 PsN: JOEP
43

come a big member. Unfortunately, the staff draft does too little to 

address this practical problem. While the requirement to interconnect is included, there is no meaningful enforcement. FCC arbitration is possible, but with no criteria or standards to define anticompetitive behavior. We are aware that the staff draft has a major 

shortfall in this respect and we urge that it be corrected. 

Let me close with the third goal, a plea for a regulatory timeout. 

Over the past 3 years, Telecom rules have been in a constant state 

of flux. The staff draft remains largely silent on the old debate of 

the past decade. I ask the subcommittee to take a modest additional step, a step to an affirmative timeout. The FCC has identified a clear investment-based path to full deregulation. If an ILEC 

builds fiber to even 500 feet of a customer’s home or business, they 

are entirely free of any loop unbundling obligations. 

Congress should call a lengthy timeout against further piecemeal 

litigation over loop unbundling, allowing EarthLink and others to 

make investment decisions based on what is happening in the marketplace, not what is happening in regulator’s offices. 

Thank you for the opportunity to testify. We look forward to your 

questions. 

[The prepared statement of Christopher Putala follows:]

44


26998.001
45


26998.002
46


26998.003
47


26998.004
48


26998.005
49


26998.006
50


26998.007
51


26998.008
52


26998.009
53


26998.010
54


26998.011
55


26998.012
56


26998.013
57


26998.014
58


26998.015
59


26998.016
60


26998.017
61


26998.018
62


26998.019
63


26998.020
64

Mr. UPTON. Thank you. Mr. Rehberger? 

STATEMENT OF WAYNE REHBERGER 

Mr. REHBERGER. Good morning, Chairman Upton, Chairman——

Mr. UPTON. You need to hit that mike button as well. 

Mr. REHBERGER. Good morning, Chairman Upton, Chairman 

Barton, and members of the committee. Thank you for inviting me 

here today. Today I am testifying on behalf of XO Communications. 

We are the largest competitive CLEC in the U.S. today, and 

COMPTEL, the competitive communications industry trade association, of which XO is a board member. I ask that COMPTEL’s 

analysis of the staff draft, which is included in my written statement, be included as part of the record. 

For decades, it has been the innovation of entrepreneurial companies coupled with marketing open regulation—market opening 

regulations, cost-based compensation for network access, that have 

brought choice, lower prices, and new technologies and services to 

the customer. If we look back a little bit, we know that the Bell 

companies had DSL technology years before the 1996 Telecom Act, 

but they never deployed that technology until Covad aggressively 

deployed it. Until recently, the Bell’s had no incentive to offer VoIP 

technology, until Vonnage paved the way in the consumer market, 

and companies like XO offer VoIP products to business customers. 

As I mention in my written statement, there appears to be several mistaken assumptions underlying the draft regulation related 

to Telecom. First, the draft seems to imply that packet-switched 

Internet and circuit-switched network, or PSTN networks, are 

physically separate networks. Consider the following: in your home 

today, there is a wall jack that connects the PTSN providing plain 

old telephone service to you. If you plug your computer into that 

same jack, you have dialup Internet access. And if you plug a digital subscriber line modem into that very same jack, you can have 

high-speed Internet access. That high-speed Internet access also allows you to get voice over the Internet protocol, or VoIP, calls over 

the exact same wall jack. Nothing has changed except for the electronics that are attached to the wall jack and the wires. However, 

under this draft, regulations will differ based on the use of packetor circuit-switching. In particular, Section 105 appears to protect 

the competitor’s access to unbundled network elements and co-locations but it seems to restrict such rights to only the circuit-switch 

world. Furthermore, a telecommunication service qualifies for this 

protection, possibly meaning that only the provision of circuitswitch voice would qualify. It is not clear how innovate companies 

who operate one integrated network and provide both services 

would be able to comply with two different regulatory regimes. 

The second assumption is that voluntary commercial negotiations 

for interconnection under Section 103 of the draft will provide access to the incumbents’ networks at rates and terms that will continue to force their competition and innovation. Decades of telecommunication history have proven otherwise. Without the backstop of the 1996 Act, which requires that interconnection be on 

just, reasonable and non-discriminatory terms and conditions, provide—and it provides effective enforcement mechanism, commercial 

65

agreements alone would not have provided a viable option for competitors. 

To compete, XO and other competitors have been building fiber 

rings in the metro areas to carry traffic that is aggregated from numerous business customers, and we also build long-distance networks to carry aggregated traffic between metropolitan areas. But, 

in the business market, it is a fact that fewer than 10 percent of 

the office buildings in the U.S. have alternative fiber connected to 

them. Instead, for over 90 percent of the buildings and those customers, the incumbents and competitors alike use the connection to 

the building that is owned by the ILEC. Speaking from XO’s own 

experience, I can assure the committee members that where the 

FCC has granted relief of certain interconnection requirements, or 

access to unbundled network elements, on many occasions, the Bell 

companies have either refused to negotiate for use of their networks, imposed conditions that have driven up customer prices, or 

have made it uneconomical for us to compete. In some instances, 

XO may be able to negotiate marginally better terms, given our 

size and scale, but that won’t be the case for the hundreds of other 

competitors who are smaller than we are. 

My final point to the committee is that the staff draft would 

carve out the telecommunications industry as the only network industry in America that does not operate under some form of highly 

regulated network sharing. Competing electricity providers share 

transmission access, competing rail providers share rail access, and 

competing natural gas suppliers share pipelines. In fact, the network sharing rules embodied in the 1996 Act have benefited the 

telecommunications industry for over 10 years. They are the reason 

we continue to experience the industry innovations and customer 

choice we have today. Why should we all of a sudden treat the telecommunications industry different based on the next popular technology. 

Mr. Chairman, thank you for the opportunity to appear before 

the subcommittee today, and I am happy to answer any questions. 

[The prepared statement of Wayne Rehberger follows:]

PREPARED STATEMENT OF WAYNE REHBERGER, CHIEF OPERATING OFFICER, XO 

COMMUNICATIONS, INC. 

Mr. Chairman and Members of the Committee, thank you for inviting me here 

today. I am Wayne Rehberger, Chief Operating Officer of XO Communications, Inc. 

of Reston, Virginia. Today I am testifying on behalf of XO Communications and 

COMPTEL, the competitive communications industry trade association of which XO 

is a board member. 

BACKGROUND ON XO COMMUNICATIONS

XO Communications is the largest independent competitive local exchange carrier 

providing telecommunications and broadband services. Originally formed in 1996, 

XO has expanded its telecommunications offerings from its original 4 small markets 

to 70 metro area markets in 26 states. Our company provides a comprehensive 

array of voice and data telecommunications services to small, medium, and large 

business customers. Our voice services include local and long distance services, both 

bundled and standalone, other voice-related services such as conferencing, domestic 

and international toll free services and voicemail, and transactions processing services for prepaid calling cards. XO data services include Internet access, private data 

networking, including dedicated transmission capacity on our networks, virtual private network services, Ethernet services, and web hosting services. 

XO has invested heavily in building its own facilities spending over $8 billion and 

constructing over 1.1 million miles of fiber. We have metro fiber rings to connect 

66

customers to our network, and we own one of the highest capacity and scalable IP 

backbones in the industry, capable of delivering data end-to-end throughout the 

United States at speeds up to 10 Gigabits per second. 

BACKGROUND ON COMPTEL

Founded in 1981, COMPTEL is the communications industry association of choice 

and represents competitive service providers and their supplier partners. Based in 

Washington, D.C., COMPTEL advances its members’ businesses through policy advocacy, education, networking, and trade shows. COMPTEL members are entrepreneurial companies building and deploying next-generation networks and services to 

provide competitive voice, data, and video services. COMPTEL members create economic growth and improve the quality of life of all Americans through technological 

innovation, new services, affordable prices and customer choice. COMPTEL members share a common objective: advancing communications through innovation and 

open networks. For decades, it has been the innovation of entrepreneurial companies coupled with market opening regulations that have brought choice to customers 

and new technologies and services to the market. The Bell companies had DSL 

years before the 1996 Act, but did not deploy this technology until Covad aggressively deployed DSL. Same is true for VoIP. The Bells had no incentive to offer 

VoIP, until Vonage paved the way. This tradition of competitive innovation is continuing with the numerous companies that are creating new ways to serve customers using cutting edge technologies. For these reasons, I appear before the Subcommittee to voice significant concerns with the staff draft 

STAFF DRAFT

In my testimony today, I will make the following points about the discussion 

draft. 

1) The discussion draft is based on a number of mistaken assumptions. 

2) The discussion draft would create ‘‘gatekeepers’’ to the Internet. 

3) The discussion draft adopts an approach that has been rejected for every other 

networked infrastructure industry in the United States. 

Mistaken Assumptions 

The draft is based on a number of mistaken assumptions, which include the following:

1) That the packet-switched Internet and the circuit-switched Public Switched Telephone Network (PSTN) are physically separate networks; 

2) That competitors can easily build networks that reach end users; and 

3) That voluntary negotiations without rules or enforcement will work. 

A simple example illustrates why the first assumption is mistaken. In your home 

today there is a wall jack that connects to the PSTN. If you plug a phone into that 

jack you have voice service. If you plug a fax machine into that same jack, you have 

an analog data service. If you plug your computer into that same jack, you have 

dial up Internet access, and if you plug a digital subscriber line (DSL) modem into 

that very same wall jack, you have high speed Internet access. That high speed 

Internet access also allows you to get Voice over Internet Protocol—VoIP—from the 

exact same wall jack from which you have gotten circuit-switched voice service for 

years. 

So, what changed? Clearly the wall jack did not change, nor did you get new wires 

strung to your house. All that changed were the electronics that you and the phone 

company attached to that wall jack and wires. The problem is that the draft bill 

aims to change the regulatory regime based on the type of electronics attached by 

differentiating between the uses of packet switching different from circuit switching. 

XO, like many competitive companies, uses a combination of packet and circuit 

switching in providing services. Under this draft, my company would be forced to 

operate under two separate and incompatible federal regimes. 

What the above example illustrates is that the Internet is not a separate network. 

Rather it is the term used to describe a multitude of interconnected networks that 

all use a common protocol to communicate. XO’s network is part of the Internet, as 

are the networks run by AT&T, SBC, MCI, Verizon, Global Crossing, Bell South, 

Level 3, Qwest, British Telecom, and many others. These networks are interconnected today because section 201 of the Communications Act and the Commission’s rules ensure that any party can get interconnection on just, reasonable and 

non-discriminatory terms. 

It’s important to understand that the Internet is simply the next evolution of the 

PSTN. Less efficient circuit switching is being replaced with more efficient packetswitching, just as copper and coaxial cable are being replaced with fiber because 

67

fiber is cheaper to maintain and has far greater bandwidth. Like new parts added 

to an older car to ‘‘supe it up’’ and make it go faster, fiber and newer electronics 

have been plugged into the existing networks to convey information faster. It’s improved, but it’s not a new network. Same with the old car that contains a new fuel 

injection system or new tires: it’s improved, but it’s not a new car. 

The second mistaken assumption is that anyone who wants to compete can build 

a network that reaches end user customers. COMPTEL members can assure you 

that nothing is further from the truth. In fact, the only ubiquitous wireline networks that exist today were all built in a monopoly environment. The incumbent 

phone companies like Verizon, SBC, BellSouth, and Qwest each had decades in 

which to build out their networks to all homes and businesses. Likewise, the incumbent cable companies like Comcast, Time Warner, Cablevision, and Cox all had at 

least a decade of protected franchises in which to construct their networks to residential users. In contrast, wireline competitors to the incumbent phone and cable 

operators have had to build their networks in the face of a competitor who already 

has a network and customers, and consequently a revenue stream with which to pay 

for upgrades and improvements to the network. 

The story is somewhat different for wireless services, but only slightly. In that 

case new PCS licenses were granted before the two existing cellular licensees were 

firmly entrenched, but even so the two largest network operators are owned by incumbent phone companies who were holders of the original cellular licenses. 

Another telling example is the current state of facilities based competition in the 

business market. XO operates exclusively in the business market today, which is 

more concentrated. It is a fact that fewer than 10 percent of the office buildings in 

the U.S. have alternative fiber connected to them. Instead, for over 90 percent of 

the buildings, incumbents and competitors alike use the high speed fiber connection 

to the building that is owned by the incumbent. In this largely deregulated business 

marketplace, the market has decided that it is not economically efficient to build 

multiple networks to connect to the same building. Instead, what XO and other competitors have been doing in an efficient and cost effective manner is building fiber 

rings in metro areas to carry traffic aggregated from numerous business customers, 

and also building long distance networks to carry aggregated traffic between metropolitan areas. What this illustrates is that the assumption in the bill that those who 

want to compete in offering communications services to business and residential 

customers can simply build their own network is mistaken due to basic economically 

realities. 

Finally, some view the voluntary commercial negotiations for interconnection 

under Section 103 in the draft as a solution to provide access to incumbent’s networks at rates that will allow the competitor to compete. Again, a simple review of 

actual behavior in the marketplace demonstrates that this assumption is also mistaken. 

Today all interconnection with networks that reach end users has been accomplished by rule of law. Competitive carriers like XO get interconnection to incumbent phone companies through under sections 201 and 251 of the Communications 

Act. Cable companies also get the interconnection they need to provide Internet access and VoIP through section 251, and also make use of special access circuits 

available under section 201. Wireless carriers get access to the incumbent phone 

networks under sections 201, 251, and 332(c) of the Communications Act. Each of 

these sections not only require interconnection of networks, they also require that 

such interconnection be on just, reasonable, and non-discriminatory terms and conditions and provide enforcement mechanisms. Yet for packet switched services this 

draft essentially eliminates those requirements. 

In the absence of such requirements, the market has already demonstrated repeatedly that voluntary commercial negotiations will not work. The requirements 

cited above were adopted by Congress in 1934 because AT&T was refusing to interconnect independent providers, in 1993 because incumbent phone companies were 

refusing to interconnect to wireless carriers, and in 1996 because incumbent phone 

companies were refusing to interconnect with competitors. Competitors have also 

found it difficult to negotiate their way onto cable networks. Currently, none have 

been able to do so. 

Interestingly, the draft bill itself recognizes that voluntary negotiations will not 

work to provide competition with respect to video services. Section 304(a)(1)(E) of 

the bill would require the FCC to apply to Broadband Video Service providers the 

same programming ownership restrictions and regulations that are currently imposed on cable operators. Those programming provisions were adopted by Congress 

precisely because cable operators were refusing to permit competing satellite providers to have access to programming shown on cable networks. The Bell Companies, as new entrants into the video marketplace, need those access requirements 

68

in order to offer competing video service. If it is okay for the Bell companies to use 

their network ownership to deny access to competitors except where voluntary 

agreements provide such access, why then shouldn’t the cable operators be able to 

use their interests in video programming to deny video content to Bell Companies 

except where the Bell Companies can negotiate such access on a voluntary basis? 

COMPTEL and XO understand the need for those programming access provisions 

to provide video competition, and believe that the need for those provisions underscores the need to continue similar requirements to ensure competition in communications marketplace. 

Finally, speaking from XO’s own experience, I can assure the committee members 

that in every instance in which the Regional Bell Operating Companies have been 

relieved by the FCC of statutory requirement regarding interconnection or access to 

unbundled network elements, they have either refused to negotiate at all with respect to allowing XO or other competitors to use their networks, or else have imposed onerous terms and conditions that drive up customer prices and limit competition. In some instances, XO may be able to negotiate, given its size and scale. However, subjecting the entire industry to a one-size fits all negotiation regime would 

amount to the equivalent of trying to negotiate with a school bully for your lunch 

money while he has you in a headlock. 

Internet Gatekeepers 

Because of its reliance on false assumptions, the draft bill would result in the establishment of ‘‘gatekeepers’’ to the Internet. This bill would create a world where 

the few companies that control the network portals that reach end-users, the ‘‘onramps’’ to the Internet, would be able to control access to the Internet from both 

the consumer perspective and from the perspective of companies that must connect 

to the Internet to conduct business. The reason they would be able to exert this control is that everyone who seeks to offer content and services over the Internet—

whether it is Amazon seeking to sell books, Yahoo! or Google offering search services 

and content, Disney seeking to offer movies, Vonage seeking to offer VoIP, or XO 

offering communications to businesses—all of us need to reach end users in order 

to offer our services. Those who control the access to end users ultimately control 

the Internet if there is no obligation to permit competitors to access those end users 

on reasonable terms and conditions. 

The ‘‘net neutrality’’ provisions in section 104 of the draft bill would do nothing 

to prevent incumbent network operators from acting as gatekeepers for two reasons. 

First, because the interconnection requirements in section 103 of the draft bill include no requirements for direct interconnection on reasonable and non-discriminatory terms and conditions, providers of content and services that compete with those 

offered by the network operator that controls access to the end user, the network 

operator will simply demand uneconomic terms and conditions that effectively prevent competitors from offering services over the operator’s network. And for those 

competitors that nonetheless attempt to provide service notwithstanding uneconomic 

interconnection terms and conditions, the exceptions in section 104(b) for network 

management, security, and provision of video or premium services eviscerate the 

consumer protections purportedly provided in section 104(a). 

The U.S. Economy Is Made Up Of Various Shared Networks 

I think it is essential point out that the staff draft would carve out the telecommunications industry as the only networked industry in the history of America 

that does not operate under some form of regulated network sharing. The electricity, 

gas, railroad and airline industries all operate under a shared network structure 

that requires network owners to provide access to their competitors in exchange for 

cost plus a reasonable profit. It should apply the same principle to the communications industry of today, and the future: access to all public networks upon reasonable request at just and reasonable terms, rates and conditions. 

The draft before us today would allow competition only if competitors were to first 

build redundant infrastructure to every home and business in America. But time 

and again Congress has decided that such redundancy is uneconomical. Furthermore, rational market players would never undertake such an endeavor. As I mentioned earlier, XO has invested over $8 billion in its own facilities. However, even 

with this extensive network, we are nowhere close to having ubiquitous on-net coverage. To build such a network would require over $100 billion and many decades 

to construct—not to mention monopoly rights like the Bells have had. Instead, we 

reach most customers by procuring facilities or circuits from other providers. 

Competitors want the right to build facilities when they determine it makes economic sense to do so. In fact, XO is committed to building additional facilities, but 

only if sufficient customer revenue exists to justify the cost. However, that is very 

69

different from being required to build facilities to every customer to whom one wishes to offer service. If there were no existing facilities, obviously someone wishing to 

offer service must construct them. But that is a very different proposition from what 

competitors face today. Today every existing home and business has at least one 

wireline communications network already constructed to it. Well over 90 percent of 

those customers, both business and residential, are passed by at least one 

broadband pipe—fiber, coaxial cable, or DSL capable copper wire. In light of these 

existing facilities, the only rational way for competition to exist is by sharing the 

existing infrastructure—regardless of whether that infrastructure was built by an 

incumbent or a competitor. 

Sharing infrastructure is not an unusual concept. In fact, it is the norm rather 

than the exception. Congress did not require that alternate energy providers build 

a second or third set of electrical wires into each home in order to provide competition in energy pricing. Instead, the grid is shared in exchange for cost plus a reasonable profit. Competing railroads are required to allow the use of their tracks by 

their competition. Gas suppliers must share a common pipeline. Why? Because basic 

economic realities make it uneconomical to build redundant networks to end users. 

Telecommunications is no different and should not be treated differently. 

CONCLUSION

As my testimony illustrates, the problems created by the draft bill are numerous 

and complex. If adopted it would create gatekeepers for the Internet, with negative 

consequences that would ripple through all segments of our Information economy. 

The bill would re-establish a monopoly over communications services for most businesses in this country, and at best would create a duopoly for most residential consumers. I urge the committee to adopt positive and constructive legislation that will 

give all competitors, and Internet users, access to communications networks. This 

legislation need not be complex. It should adopt basic rules that apply to all communications providers that use public rights of way or spectrum—be they incumbents 

or competitors and regardless of whether they use packet-switching, circuit-switching, or copper, coaxial cable, fiber, or wireless. The core principles should be service 

upon reasonable request, non-discrimination, interconnection, unrestricted resale, 

and net neutrality, with federal rules enforced by State commissions. 

The bottom line is that the vibrant and competitive Internet that we all increasingly rely on today is the result of over 30 years of pro-competitive decisions by Congress and the FCC. Those decisions regulated the transmission networks that make 

up the Internet, while leaving the applications provided over those networks unregulated. By removing the basic regulations governing the transmission networks, 

this bill would permit private parties—namely the limited number of private parties 

who built ubiquitous networks in a monopoly environment—to use those networks 

to control access to the Internet. One only has to refer to recent comments made 

by SBC’s CEO, Ed Whitacre in a recent Business Week interview: ‘‘Why should they 

[competitors] be allowed to use my pipes?’’ This statement, alone, shows how anticompetitive forces can have a debilitating effect on competition and innovation. 

Attached to my testimony is an analysis COMPTEL had prepared which details 

specific problems with those provisions that are of the greatest interest to 

COMPTEL members. In the interests of time, I respectfully request that 

COMPTEL’s analysis be included in the record as part of my testimony. Thank you 

for allowing me to testify today on behalf of XO and COMPTEL.

Mr. UPTON. Thank you. Mr. Salas? 

STATEMENT OF EDWARD A. SALAS 

Mr. SALAS. Good morning, Mr. Chairman and members of the 

subcommittee. 

Mr. UPTON. You need to hit that button as well—mike button. 

Mr. SALAS. Good morning. 

Mr. UPTON. No. It is not working? Sorry. 

Mr. SALAS. Good morning, Mr. Chairman and members of the 

subcommittee. Thank you for holding this hearing today. I am Edward Salas, Vice President of Network Planning for Verizon Wireless. I am responsible for network strategy, planning, purchasing, 

and administration. I am here representing Verizon Wireless. 

70

Verizon Wireless thanks you and your colleagues for your time 

and effort put forth in working to craft legislation that updates our 

Nation’s telecommunications laws. We also appreciate the attention 

that you gave to the concerns raised by Verizon Wireless on the 

first draft. Specifically, we applaud your efforts in streamlining the 

far-reaching national consumer standards, welcome the progress toward improved net neutrality provisions, and appreciate changes to 

the FCC’s role. We believe that these revisions were clearly a step 

in the right direction, and it is Verizon Wireless’s hope that as the 

committee continues this drafting process, consensus is reached on 

a bill that fosters competition, removes unnecessary government 

regulation, and allows a deregulated market to bring benefits to 

consumers. 

The wireless industry has been a critical driver of the national 

economy, generating tens of millions of new jobs, building new communications infrastructure, and serving more than 190 million 

Americans. With certain modifications, the draft bill can lead to 

even more benefits to consumers and the economy. 

Today I will share with you some of our specific concerns. I hope 

that we will have the opportunity to share with you some additional concerns and suggestions as your legislative efforts continue. 

(1) Verizon Wireless is making major investments in broadband 

wireless technology. Verizon Wireless is a firm believer in the 

broadband future. We were the first company to roll out what we 

consider real 3G services, and we are leading the industry in 

broadband deployment. We first deployed our EVDO service in October 2003 in San Diego and Washington, D.C. We have invested 

well over $1 billion in expanding our EVDO offering to encompass 

more than 170 major metropolitan markets and 84 major airports 

across the nation, and we will continue to expand the customers’ 

ability to access this amazing technology. 

(2) Wireless broadband relies on IP technologies and leverages 

our circuit-switch technology as well. For voice and narrow-band 

data, our network operates over traditional circuit-switch facilities. 

Our EVDO broadband service is fundamentally an IP-based technology working over a standard non-IP air interface, but all of our 

EVDO-based devices have a circuit-switch capability to support all 

of our basic voice and legacy services. Many of our competitors also 

deliver their services over a single integrated wireless network, 

seamlessly weaving high-speed and lower-speed capabilities, as 

well as packet- and circuit-switch technologies. 

(3) The draft bill maintains the old silo approach for new technologies. Verizon Wireless agrees that IP-enabled services are the 

platforms of the immediate telecommunications future. On the 

other hand, the draft bill is structured along the lines of the regulatory model for landline services that has been in place for decades. Consumers don’t know or care whether the wireless services 

they buy are deployed over a packet technology or a circuit-switch 

one. They simply want the services and they want them to perform 

reliably. Attempting to regulate such packet-switch digital services 

and applications in silo-like regimes where service is provided over 

a single platform may be regulated and taxed differently, will create an administrative and regulatory nightmare. 

71

(4) The draft bill does not expressly encompass mobile wireless 

services. Verizon Wireless is also concerned that the bill could be 

read to omit wireless altogether from the landmark deregulatory 

approach that would apply to BITS providers. The draft bill appears to require that a BITS provider must use a packet-switch 

transmission service. As I noted earlier, Verizon Wireless, and 

other wireless companies, currently provide broadband service over 

an integrated platform of both packet- and circuit-switch technologies. The two cannot be segregated. It is time to remove the 

regulation for wireless packet technology. Why should the analysis 

differ merely because the broadband technology at some times and 

in some places may rely on a hybrid circuit-switch-packet technology. If the committee agrees, the simplest path to that result is 

to modify the definitions of BITS provider to include all services 

that are offered in conjunction with BITS. 

(5) The net neutrality provisions should recognize the uniqueness 

of wireless services. We have some—we do have some concerns 

about the net neutrality, or access to BITS, in Section 104 of the 

draft legislation because they do not appear to acknowledge the 

critical technology distinctions between wireline and wireless networks. The air interface on a wireless network is significantly more 

bandwidth-limited than wireline’s dedicated fiber optic or copper 

facilities, and must be shared by all users in a defined geographic 

area. Network performance and resource availability in the wireless environment is thus much more sensitive to variations in 

usage than a wireline network. In order for us to ensure the integrity and reliability of our network, and to provide consumers with 

the best available online experience, we cannot support unrestricted access to the Internet for downloading any and all applications or the connection of devices not approved for use on our network. Verizon Wireless does not block customers from accessing the 

Internet as long as they are lawful and not associated with any security or misuse risk. We believe we must control the amount of 

resources that any individual customer can demand from our network. The draft legislation is right to preserve the BITS provider’s 

authority to protect the security and reliability of its network and 

broadband transmission services, but it is not clear how this authority will be reconciled with provider’s duty not to block access 

to any lawful content, application or service provided over the 

Internet, and to permit subscribers to connect and use devices of 

their choosing. At least in the wireless environment, the device is, 

in fact, an extension of the network. 

(6) Congress should make clear that wireless is to be subject to 

Federal regulation. While it is clear that we are trying to achieve 

the same result of a national deregulatory framework, it is our belief that we may be subject to entirely new, uncertain, complex reregulatory regime. It would retreat from and reverse the deregulation that has so served the Nation’s economy and wireless customers. Now more than ever, States are attempting to reassert utility-type regulation over the wireless industry. Ironically, at the 

same time, the industry has been deploying national networks offering national rate plans that offer unparalleled benefits for consumers. States threaten to undermine these benefits by imposing 

a patchwork of burdensome and inconsistent rules. Congress can 

72

simultaneously recognize the benefits of competition and prevent 

the harmful impacts of State-by-State regulation of a national industry by completing the deregulation began in 1993. The Federal 

Government is in the best position to oversee this national industry 

which serves the public across and without regard to State lines. 

In conclusion, the committee took the first step in 1993. You 

have a unique opportunity to buildupon that success. Verizon Wireless hopes that as your legislative process continues, you keep in 

mind the technical complexities of the wireless network, and allow 

us the freedom to maintain our network resources and the ability 

to secure our network. We look forward to working with you in this 

process. 

[The prepared statement of Edward A. Salas follows:]

PREPARED STATEMENT OF EDWARD A. SALAS, VICE PRESIDENT, NETWORK PLANNING, 

VERIZON WIRELESS

Mr. Chairman and Members of the Subcommittee, thank you for holding this 

hearing today. I am Edward Salas, Staff Vice President of Network Planning for 

Verizon Wireless. I am responsible for network strategy, planning, purchasing and 

administration. I am here representing Verizon Wireless. 

Verizon Wireless thanks you and your colleagues for the time and effort put forth 

in working to craft legislation that updates our nation’s telecommunications laws. 

We also appreciate the attention that you gave to the concerns raised by Verizon 

Wireless on your first draft. Specifically, we applaud your efforts in streamlining the 

far-reaching national consumer standards, welcome the progress toward improved 

net neutrality provisions, and appreciate changes to the FCC’s role. We believe that 

these revisions were clearly a step in the right direction, and it is Verizon Wireless’ 

hope that, as the committee continues its drafting process, consensus is reached on 

a bill that fosters competition, removes unnecessary government regulation, and allows a deregulated market to bring benefits to consumers. 

Verizon Wireless views our appearance here today as an opportunity to share our 

views on your revised staff draft, and offer some insight on what we believe it will 

take to promote wireless competition, incent continued investment that benefits the 

economy and subscribers, and remove regulatory impediments that thwart innovation. This is the right time, and the right opportunity, to complete the deregulatory 

process for mobile radio services that Congress began in 1993 with passage of the 

Omnibus Budget Reconciliation Act. Congress had the foresight to recognize that removing wireless services from traditional, cradle-to-grave utility regulation would 

unleash the competitive marketplace to deliver benefits to consumers. Congress’ expectation proved accurate. The wireless industry has been a critical driver of the 

national economy, generating tens of millions of new jobs, building new communications infrastructure, and serving more than 190 million Americans. With certain 

modifications the draft bill can lead to even more benefits to consumers and the 

economy. 

Today, I will share with you some our principal concerns. I hope that we will have 

the opportunity to share with you some additional concerns and suggestions as your 

legislative efforts continue. 

1. Verizon Wireless is Making Major Investments in Broadband Wireless Technology. 

I first want to describe the actions our company is taking to offer broadband services to our customers. There is no doubt that broadband has enormous potential capabilities to deliver many features and capabilities to wireless consumers. Voice, 

text messaging, email, streaming video, emergency alerts, location services, and 

Internet access are only some of the amazing capabilities that this technology promises. Verizon Wireless is a firm believer in the broadband future. We were the first 

company to roll out what we consider real ‘‘3G’’ services, and are leading the industry in broadband deployment. We first deployed our ‘‘EVDO’’ service in October 2003 

in San Diego and Washington, D.C. EVDO, derived from the CDMA 2000 technology 

family, increases peak data download speeds up to 2 Mbps, and typical, user-experienced download speeds range from 400 to 700 kbps. With EVDO, users can access 

exciting video applications via their handsets over our VCast service, or access the 

Internet through a wireless modem ‘‘aircard’’ that is inserted into a laptop computer. We have recently reached agreement with three major computer manufacturers to incorporate this capability directly into their laptops. We have invested well 

73

over $1 billion in expanding our EVDO offering to encompass more than 170 major 

metropolitan markets and 84 major airports across the nation, and we will continue 

to expand the customers’ ability to access this amazing technology. 

2. Wireless Broadband Relies on IP Technology and Leverages Our Circuit Switched 

Technology as Well. 

It is important to understand that Verizon Wireless and other wireless providers 

are using both IP and non-IP interfaces in their networks. For voice and 

narrowband data, our network operates over more traditional circuit switched facilities; at other times and places we operate in packet mode. Our EV-DO broadband 

service is fundamentally an IP-based technology working over a standard non-IP air 

interface, but all of our EVDO based devices have a circuit switched capability to 

support all of our basic voice and legacy services. Many of our competitors also deliver their services over a single, integrated wireless network, seamlessly weaving 

high-speed and lower-speed capabilities, as well as packet and circuit-switched technologies. The mix of packet and circuit technologies—and high-speed and lowerspeed services—varies widely not only among wireless companies, but also in different geographic areas served by the same company. Moreover, that mix is constantly evolving as each wireless competitor works to offer the latest services to its 

customers including voice, Internet access, games, photos, music, and video services. 

3. The Draft Bill Maintains the Old Silo Approach for New Technologies. 

Now I’d like to talk about how the draft bill fits or doesn’t fit with the reality 

of integrated, ever-evolving technology of wireless broadband. On the one hand, the 

draft bill rightly focuses on IP-enabled services, where the technology is going, not 

where it has been. Verizon Wireless agrees that IP-enabled services are the platforms of the immediate telecommunications future. On the other hand, the draft bill 

is structured along the lines of the regulatory model for landline services that has 

been in place for decades. Therefore, it incorporates the burdens of where we have 

been, rather than where we are going. It adopts multiple new classifications and 

definitions and applies different regulatory regimes to each. Verizon Wireless has 

concerns about this approach. The draft does not grapple with the rapid technological change, particularly in wireless, that eradicates these distinctions. Consumers don’t know or care whether the wireless services they buy are deployed over 

a packet technology or a circuit-switched one. They simply want the services and 

want them to perform reliably. Attempting to regulate such packet switched digital 

services and applications in silo-like regimes, where services provided over a single 

platform may be regulated and taxed differently, will create an administrative and 

regulatory nightmare. 

Our concern is that these regulatory distinctions will have the unintended consequence of impeding the innovations and growth of even newer services that are 

arising precisely because the distinctions among services to users are blurring. 

4. The Draft Bill Does Not Expressly Encompass Mobile Wireless Services. 

Verizon Wireless is also concerned that the bill could be read to omit wireless altogether from the landmark deregulatory approach that would apply to ‘‘BITS’’ providers. The draft bill appears to require that a BITS provider must use a packetswitched transmission service. As I noted earlier, Verizon Wireless (and other wireless companies) currently provides broadband service over an integrated platform of 

both packet and circuit-switched technologies. The two cannot be segregated. 

If the committee believes that it is time to deregulate competitive telecommunications services—a view Verizon Wireless strongly endorses—it needs to craft a definition of a BITS provider that includes all wireless technologies. If it is time to remove regulation for wireless packet-technology, why should the analysis differ merely because the broadband technology at some times and in some places may rely 

on a hybrid circuit-switched-packet technology (1xRTT has circuit switched layer 

and a packet layer)? In our view, the right course is to recognize it is time to remove 

the last vestiges of common carrier, utility-type regulation from wireless. If the 

Committee agrees, the simplest path to that result is to modify the definition of 

BITS provider to include all services that are offered in conjunction with BITS or 

carried on the same network platform as BITS. 

5. The Net Neutrality Provisions Should Recognize The Uniqueness of Wireless Services. 

If Verizon Wireless in fact qualifies as a BITS provider, we applaud the general 

approach of the draft bill to treat us as an interstate, national service. We do have 

some concerns about the ‘‘net neutrality’’ or ‘‘Access to BITS’’ in Section 104 of the 

draft legislation, because they do not appear to acknowledge critical technology distinctions between wireline and wireless networks. The air interface on a wireless 

74

network is significantly more bandwidth limited than wireline’s dedicated fiber optic 

or copper facilities, and must be shared by all users in a defined geographic area. 

Moreover, various mobile applications place varying demands on this resource as 

well as the traditional load characterized by the raw number of customers operating 

in a cell. Network performance and resource availability in the wireless environment is thus much more sensitive to variations in usage than a wireline network. 

We will certainly offer subscribers service plans that involve varied and reasonable bandwidth and capacity limitations and services that protect consumers from 

unwanted content or messages. However, in order for us to ensure the integrity and 

reliability of our network, and to provide consumers with the best available on-line 

experience, we cannot support ‘‘unrestricted’’ access to the Internet for downloading 

any and all applications, or the connection of devices not approved for use on our 

network. Verizon Wireless does not block customers from accessing the Internet as 

long as they are lawful and not associated with any security or misuse risk. But 

we believe we must control the amount of resources that any individual customer 

can demand from our network. As managers of that resource, we need that flexibility so that we can provide our subscribers with the most reliable, consistently excellent mobile on-line experience that our network will support. 

The draft legislation is right to preserve a BITS provider’s authority to ‘‘protect 

the security and reliability of its network and broadband transmission services,’’ but 

it is not clear how this authority will be reconciled with the provider’s duty not to 

block access to ‘‘any lawful content, application or service provided over the Internet,’’ and to permit subscribers ‘‘to connect and use devices of their choosing.’’ At 

least in the wireless environment, the ‘‘device’’ is in fact an extension of our network. In fact, under FCC rules, every one of our handsets, PDAs and air interface 

cards is licensed by the Commission and must comply with strict technical requirements. If we must allow customers to attach devices ‘‘of their choosing,’’ how can 

we be sure that we comply with the terms of our FCC licenses? We are not talking 

about plugging fax machines onto a landline network but about devices with complex and dynamic functionality that not only manage the applications we sell but 

enable basic radio connectivity and participate with the network in managing RF 

power settings. We test and certify every device on our network with great care and 

diligence. This process cannot be abdicated to the consumer. 

Consumers have multiple choices of wireless services as well as multiple 

broadband choices. In this context, there is no need to encourage consumers to second-guess the decisions of wireless network operators on how to run the network. 

We will respond to consumer demand for connectivity in the most efficient and effective ways available on our network. If we do not offer customers the features and 

capabilities they demand, they will ‘‘vote with their feet’’ and switch to a competitor. 

We are incented to provide the services that customers want. 

The net neutrality provisions should not substitute for the incentives we and 

other wireless carriers have to serve consumers. Either such provisions are going 

to be too rigid and inflexible—discouraging innovation—or they are going to be too 

vague—leading to uncertainty and litigation. While the draft bill allows us to take 

‘‘reasonable measures’’ to protect the security and reliability of our network, who is 

going to determine when a measure is ‘‘reasonable’’? We thus recommend that Section 104 be modified to make clear that wireless BITS providers have the right to 

manage their network and the devices that can be used with that network. 

6. Congress Should Make Clear that Wireless is To Be Subject to Federal Regulation. 

While it is clear that we are trying to achieve the same result of a national deregulatory framework, it is our belief that we may be subject to an entirely new, 

uncertain, complex and re-regulatory regime. It would retreat from and reverse the 

deregulation that has so served the nation’s economy and wireless customers. As 

creatures of a deregulatory environment, the simple thought of new regulatory compartments and obligations gives us pause. Verizon Wireless does believe that a national deregulatory regime for wireless is possible—and much simpler. 

Now, more than ever, states are attempting to reassert utility-type regulation on 

the wireless industry. Ironically, at the same time the industry has been deploying 

national networks and offering national rate plans that offer unparalleled benefits 

for consumers, states threaten to undermine these benefits by imposing a patchwork 

of burdensome and inconsistent rules. Left unchecked, these re-regulatory efforts 

will force wireless carriers to follow different rules in different states and undo the 

benefits of deregulation—a result antithetical to Congress’ goal in 1993. We have 

some states attempting to dictate the contents of our bills—an effort that will inevitably lead to varying, inconsistent requirements in different states. In 2005 alone, 

18 states attempted to impose their own regulatory regimes on us. We have others 

attempting to control our rates, despite Congress’ clear command in 1993 that the 

75

market, not public utility commissions, should regulate rates. Still other states are 

not taking any action. Exclusive federal oversight and regulation, where necessary 

to protect consumers, is the right approach for the wireless industry. 

Congress can simultaneously recognize the benefits of competition and prevent 

the harmful impacts of state-by-state regulation of a national industry by completing the deregulation began in 1993. The federal government is in the best position to oversee this national industry, which serves the public across and without 

regard to state lines. Verizon Wireless urges the Committee to clarify that the deregulatory provisions in Section 101 apply to all wireless services. This will help ensure that, as we and our competitors make further investments in national 

broadband services that benefit the public as they work and travel across the nation, we are regulated consistently, and at a national level. 

Conclusion: The Committee took the first step in 1993. You have a unique opportunity to build upon that success. Verizon Wireless hopes that as your legislative 

process continues, you keep in mind the technical complexities of the wireless network and allow us the freedom to maintain our network resources and the ability 

to secure our network. We look forward to working with you in this process.

Mr. UPTON. Thank you. You are going to hear the buzzers ring 

here in a second. We are about ready to have three votes, so I 

think at this time—yes. That is right. I think we are going to take 

a short recess, and we will come back at 12:35. We will begin with 

Mr. Willner at 12:35. 

[Brief recess.] 

Mr. UPTON. I hope you got lunch. 

Mr. WILLNER. No. 

Mr. UPTON. We didn’t either. 

Mr. WILLNER. We are equally hungry. 

Mr. UPTON. I would have said one if I had known those three 

votes would have taken a little bit longer. Mr. Willner? 

STATEMENT OF MICHAEL S. WILLNER 

Mr. WILLNER. Thank you, Mr. Chairman, and the rest of the 

members of the subcommittee, and thank you for inviting me to 

speak on behalf of the National Cable and Telecommunications Association. I am pleased to address the issues surrounding the BITS 

bill. 

Ladies and gentlemen, I will remind you once again, it is the 

cable industry that has invested more than $100 billion to bring 

new and advanced 21st Century services to millions and millions 

of American homes, and we did so without any government handouts. We agree with you that new technologies like IP are changing 

the competitive landscape for all communication services. A fresh 

look at the regulatory framework established in 1996 is indeed in 

order, but we are concerned about the bill’s technology specific 

focus. 

If Insight’s chief technical officer has to check with a barrage of 

regulatory lawyers before he decides to add new features and functions to our network, that would stifle innovation. If a technical design of our network determines how we are regulated, that will 

skew investment toward technologies that meet regulatory rather 

than marketplace demands. How is that good for consumers? 

We believe that any review of current law should be guided by 

three basic principles. First, like services should be treated like, 

and all providers of those services should play by the same rules. 

What matters to consumers is not the technology used to provide 

services, but the services themselves. Second, there should be minimal economic regulation. Cable’s investments in digital television, 

76

broadband, and VoIP did not require the carrot of regulatory benefits, just the promise of new customers signing on for the service. 

And finally, we believe that local governments have an important 

role to play in ensuring that video service providers make services 

available to all citizens in a timely and fair fashion. 

Unfortunately, the current draft creates different regulatory regimes for like services. Regulatory treatment would turn on whether a provider uses packet-switch transmission or not, whether particular offerings are—and I am going to quote—‘‘subsumed in or 

subsuming’’ others, and whether a customer can ‘‘integrate’’ 

‘‘customizable voice and data capabilities’’ with ‘‘two-way’’ video 

programming. You know, sitting here today, I don’t think any of us 

in this room has the same idea of what all those terms mean. 

There are two dangers with having the government picking technology winners and losers, particularly in a field as rapidly changing as telecommunications. The initial technology choice may be 

wrong, and government cannot anticipate what is just around the 

corner. For example, the FCC came close to mandating analogue 

high-definition television in the 1980’s, and 30 years earlier chose 

a color television standard that was incompatible with existing 

black and white televisions before reversing itself. That probably 

significantly slowed down the development of color TV. 10 years 

ago, ATM and ISDN were hot transmission protocols, but mandating them would probably have prevented the rise of IP and today’s Internet as we have grown to know it. 

Technology is not relevant to drawing regulatory distinctions 

among multi-channel video distributors. Many of the services and 

features SBC identifies as IP-based are provided already by cable 

companies without using IP, including subscription video on demand, multiple camera angle viewing of live sporting events, live 

traffic, weather reports. Cable operators will undoubtedly increase 

the use of IP. We already use it in certain applications. But the 

competitive market, not the regulatory environment, should prompt 

that action. 

The draft bill also creates more regulation at a time when competition should result in less regulation, adding three new silos to 

the existing ones for voice, video and data, means that providers 

could fall into 1 or more of 6 different regulatory categories. I am 

particularly concerned about the bill’s first-time ever regulation of 

Internet access services in the form of net neutrality. In the absence of any evidence that cable operators have or are blocking customer access to content, a government mandate is indeed premature. The open-ended nature of this unnecessary mandate will 

definitely trap broadband providers into a morass of litigation for 

years to come. 

The cable industry has always worked closely with this committee, and we stand ready to work with you to craft revisions to 

the Telecommunications Act that reflect not only today’s realities, 

but also anticipates tomorrow’s developments. 

You know, I will tell you, as a cable operator in States like Indiana and Kentucky, you learn a lot about basketball, and one thing 

I have learned is that whether you are a Hoosier fan or a Cats fan, 

nothing makes both sides more angry than the referees deciding 

who is going to win the game. It should be the players on the field. 

77

And with this draft, I am afraid that Congress is becoming dangerously close to wearing a black-and-white striped shirt—vertical 

striped shirt, as the referees in this game. 

Thanks again for inviting me to testify. I will end it on that note. 

[The prepared statement of Michael S. Willner follows:]

PREPARED STATEMENT OF MICHAEL S. WILLNER, PRESIDENT AND CEO, INSIGHT

COMMUNICATIONS

Mr. Chairman and Members of the Subcommittee, thank you very much for inviting me to speak with you today on behalf of the National Cable & Telecommunications Association regarding the new discussion draft legislation addressing Internet Protocol (IP)-enabled and broadband services. 

As you know, the cable industry has invested significantly—more than $100 billion since 1996 and nearly $10 billion this year alone—to bring advanced video, 

high-speed Internet access, and now voice services to tens of millions of Americans 

across the country. My own company, Insight Communications, has invested hundreds of millions of dollars upgrading and building systems in the last eight years. 

Broadband is virtually rolled-out to all areas served by the company. Four markets 

have circuit-switched telephone service and the rest are in the process of rollingout IP telephony. Cable therefore has a fundamental stake in the ongoing efforts 

to revise the Communications Act. 

The discussion draft is an ambitious effort to devise a national framework for advanced voice, video, and data services. NCTA agrees with you and others on the 

Committee that new technologies like IP are changing the competitive landscape for 

all communications services. The use of IP, for example, can facilitate true intermodal competition in all services. The transition from analog to digital video, while 

not yet complete, is already providing consumers with a more robust array of services and the ability to customize what they watch and when. Other technological 

developments will offer the ability to access content and information anywhere. 

Given the scope and pace of these advances, it is appropriate to take a fresh look 

at the regulatory framework established in 1996—not in order to codify a particular 

technology as the touchstone of policy, but to reform and hopefully reduce regulation 

for all providers in way that does not impede future advances. With respect to multichannel video in particular, competition warrants a comprehensive re-examination 

of the existing regulatory framework adopted more than 20 years ago when the 

video marketplace was far less competitive. 

While we agree that a fresh look at regulation is needed, we have serious concerns 

with the direction and approach of the draft bill. In particular, it treats functionally 

equivalent services differently, conferring a regulatory advantage on particular technologies. Rather than simply deregulate where market forces warrant, the bill erects 

a complex new scheme for IP-based and other ‘‘integrated’’ services. Regulatory 

treatment will turn on whether a provider uses packet-switched transmission or not; 

whether particular offerings are ‘‘subsumed in or subsuming’’ others; and whether 

a customer can ‘‘integrate’’ ‘‘customizable voice and data capabilities’’ with ‘‘twoway’’ video programming. The bill is also overregulatory, including first-time-ever 

regulation of the Internet in the absence of market failure that might justify that 

regulation. 

The uncertainties inherent in this approach and the government micromanagement it invites are unlikely to provide the stable regulatory framework that promotes investment and innovation. By contrast, when Congress largely eliminated 

economic regulation of the cable industry in 1996 and largely got out of the way 

of our broadband deployment, cable responded with $100 billion in new investment 

and an array of advanced services that consumers have embraced. 

PRINCIPLES FOR REVIEWING CURRENT LAW

We believe that any review of current law should be guided by three principles. 

First, like services should be treated alike, and all providers of those services 

should play by the same rules. What matters to consumers, and what should matter 

to policymakers, is not the technology used to provide services, but the services 

themselves. 

Second, there should be minimal economic regulation, allowing competition to rely 

on market forces wherever possible. The market has worked well to ensure that new 

developments enabled by technological advances and the integration of advanced 

services reach consumers. While the Bell companies have touted the integrated features they will offer if granted favorable regulatory treatment, cable offers those 

78

services and features today—and did so as soon as the market showed interest, regardless of regulatory benefit. 

For example, just last week, Sprint Nextel, Comcast, Time Warner Cable, Cox 

Communications and Advance/Newhouse Communications announced the formation 

of a joint venture, designed to accelerate the convergence of video, wireline, wireless 

and data communications products and services and bring exciting new capabilities 

to subscribers. Customers will be able to purchase a ‘‘Quadruple Play’’ or any combination of services, have access to a wireless ‘‘third screen,’’ and enjoy other features that integrate cable and wireless services all on a single device. Time Warner 

customers in some markets today can have a caller ID flash on their television 

screens when they get a telephone call. Cablevision customers can check their home 

voicemail from any Internet connection in the world. 

The market has responded well to the new services cable offers. There are over 

26 million digital cable customers—up from 12 million in 2001. Upgraded cable systems can offer telephone service over the same cable line that already carries digital 

video, high speed Internet, and other advanced services to consumers. As of the end 

of the Second Quarter of 2005, major MSOs—including Insight, Cox, Charter, 

Comcast, Cablevision, and Time Warner, along with other cable operators—served 

approximately 4.4 million residential cable phone customers across the country. 

These developments did not require regulatory prompting; they were driven by 

market demand. Companies facing fierce competition will respond to what consumers want, as providers continuously seek to differentiate themselves and their 

products and services. Their response should not be driven, or even affected, by a 

need to fit a service into a particular regulatory box. A regulatory scheme that successfully encourages innovation will not require providers to spend time debating 

which side of the line a service feature puts them on. 

Finally, certain universally recognized social responsibilities must remain in place 

for all providers of communications services. In the context of voice services, those 

responsibilities include 911 and E-911, cooperation with law enforcement, and support for universal service within a competitively neutral regime. On the video side, 

new services and features should not be developed for, and available to, just the 

wealthiest subscribers—it should be an important part of the role of all providers 

to ensure that their service reaches every segment of society. While regulation 

should be no greater than what is necessary to ensure the fulfillment of those responsibilities—and there is room to make them consistent across providers—these 

important public protections should not be abandoned. 

CONCERNS WITH THE DISCUSSION DRAFT

Measured against these objectives, the discussion draft raises a number of concerns. 

First, the draft bill creates different regulatory regimes for like services based on 

technological distinctions. There are two dangers with having the government picking technology winners and losers, particularly in a field as dynamic as communications—the initial technology choice may be wrong, and government cannot anticipate what’s around the corner. A technology-based approach creates a perverse incentive for providers to select the technologies they use based on a particular regulatory result even if they do not necessarily respond to consumer demand most effectively and efficiently, and it may lock them into particular technologies long after 

those technologies have outlived their usefulness. 

It wasn’t too many years ago, for instance, that this Committee was close to endorsing an analog version of HDTV that would have required as much as 12 megahertz of bandwidth for each video channel. Fortunately, digital technology emerged 

quickly enough to prevent enactment of that policy. Another example from history, 

this one involving a transmission technology, is perhaps even more relevant to the 

current effort. Ten years ago, asynchronous transfer mode (‘‘ATM’’) was considered 

a primary protocol for networks (strongly promoted by the telephone companies), 

and IP was thought to be not as applicable for the transmission of data. If Congress 

had mandated ATM, it would have dramatically slowed the growth of the Internet, 

and IP’s growth would have been hampered. 

A more current example that shows the flaws of technology-based regulation is 

the use of IP to deliver video programming. Some have argued that IP video should 

be subject to a new regulatory regime, but the fact is that cable operators already 

use IP transport at various points in their networks, including cable modem service 

and backbone networks. There is no technical limitation to cable operators adopting 

IP technologies in their retail video services. Such services are being field tested by 

Time Warner in San Diego and are being studied by the engineering departments 

of all of the major multiple system operators, including Insight. 

79

SBC has also proposed to use IP in its video distribution network, reportedly to 

transport and deliver video to the customer premises. At least in part, this appears 

to be a function of the limited bandwidth available to SBC over its existing copper 

facilities to transmit video to the home, which required SBC to find a means to deliver only a few channels at a time to the customer rather than all channels as cable 

has traditionally done. Significantly, many of the services SBC identifies as IPbased are being provided by cable companies today without using IP, including subscription video-on-demand service, multiple camera angle viewing of live sports programs, live traffic and weather feeds. 

The point is that as it becomes useful to introduce IP (or any other new technology) into the distribution of video services, all providers, including current cable 

operators, will do so. The regulatory scheme should be structured to encourage, not 

interfere with, that natural progression. By contrast, a law that favors particular 

technologies over others will skew this progression and risks deterring innovation 

and undermining efficiency. Government should not be in the business of picking 

technology winners and losers. That should be left to the market. 

The same danger arises if Congress anoints a particular service for favorable regulatory treatment, as the discussion draft does with broadband video. The features 

and functions that policymakers demand may not be the same ones that the marketplace wants. In the interest of favorable regulatory treatment, providers may end 

up devoting significant resources to developing services that consumers have no interest in. In that case, providers and consumers lose. The market, not the government, should drive the course of innovation and investment. 

Second, the draft bill favors regulation over market forces. Indeed, it complicates 

the existing regulatory framework by adding three new regulatory ‘‘silos’’ in addition 

to the existing ones for voice, video, and data. Providers could fall in one or more 

of six different regulatory silos, each with different, and not always consistent, responsibilities. With regard to video, the bill’s ‘‘broadband video service’’ would be the 

fifth category of multichannel provider—after cable, DBS, wireless cable, and open 

video systems—exacerbating rather than simplifying the current existing competitive imbalance among such providers. 

With respect to broadband services, the bill appears to impose forced access obligations on facilities-based Internet access providers, overturning the Supreme 

Court’s Brand X decision and the FCC’s recent Wireline Broadband Order. Forcing 

facilities-based providers who have chosen not to hold themselves out as common 

carriers to share their facilities with competitors will deter investment in new networks. By interfering with the property rights of those providers, it also raises a 

significant takings issue. While perhaps inadvertent—the problem arises from the 

fact that the definition of BITS now encompasses both the offering of ‘‘pure’’ transmission as well as Internet access service—it is an issue that need not be reopened 

at all. 

What is not inadvertent is the first-time-ever regulation of Internet access services themselves in the form of a ‘‘net neutrality’’ requirement. While the recent revisions to the bill, such as allowing BITS providers to take reasonable measures to 

protect network reliability, impose some limits on this regulation, there remains a 

grave danger that these regulations will lock providers into certain business or technology arrangements and hamper their ability to respond to market needs. 

In particular, what constitutes ‘‘impair[ing]’’ or ‘‘interfer[ing] with’’ the use of content or services would be the source of constant litigation or the threat of litigation, 

creating a persistent and deadening overhang to the deployment of broadband services. Anyone unhappy with the terms of their business deal with a broadband provider would inevitably race to the FCC or the courthouse alleging a violation. Given 

the inherent open-endedness of concepts like ‘‘impairment’’ or ‘‘interference,’’ a provider would have no way of knowing whether the practice complained of will be 

found to be reasonable or an instance of unlawful interference. Under such a 

scheme, providers will have little incentive to innovate or to differentiate themselves 

in the marketplace. 

The fact is that nearly everyone in the industry engages in some activity that arguably would fall under the bill’s definition of ‘‘interfer[ence]’’ with content or access. For example, several years ago, in an effort to discourage the posting of commercial messages (‘‘spam’’) on its multiple message boards, Yahoo! adopted a policy 

of blocking access to Web addresses advertised in spam messages. While some 

viewed this as a consumer-friendly move, others suggested that Yahoo!’s motive was 

to hinder competitors—and, in fact, Yahoo acknowledged that ‘‘some of the Web 

sites... blocked from its finance section [were] competitors.’’ Yahoo! and other web 

portals also have agreements with certain content providers to feature their content 

or links to particular sites. Microsoft requires people to use Internet Explorer to 

view streaming video on its MSNBC web site. If the government installs itself to 

80

police these kinds of business arrangements, it will seriously compromise the ability 

of network and content providers to devise new offerings and respond to market demands. 

Finally, with respect to matters where continued regulation is necessary, particularly in the area of interconnection between new broadband networks and the public 

switched network, the staff draft does not provide sufficient safeguards. While the 

cable industry generally supports reducing regulation, the public switched network 

presents a special case: since the vast number of voice customers will use that network for the foreseeable future, no voice competitor can be successful unless its subscribers can terminate calls to that network and receive calls that originate on it. 

There is, very simply, nothing quite like the public switched network. DBS operators did not need to interconnect with cable systems to compete (Congress did conclude that they needed access to cable programming, however), and the ‘‘network 

of networks’’ architecture of the Internet is distributed rather than centralized. So 

long as the PSTN maintains its unique position for voice services, however, the Bell 

companies who control it will have a correspondingly unique incentive and ability 

to frustrate competition by impeding interconnection with other voice providers, regardless of whether those providers use IP or some other technology. New entrants, 

by contrast, lack the incumbents’ customer base and bottleneck control. As Congress 

recognized in 1996, interconnection with the incumbents must be available on just, 

reasonable, and nondiscriminatory rates, terms, and conditions if broadband competition is to succeed. 

AN ALTERNATIVE APPROACH

The starting point for reform of our communications laws should be to identify 

the problem that needs to be fixed and then to develop a focused response. Legislation focused on IP or any other particular technology sidesteps this fundamental 

question and, as I’ve suggested, will skew investments and inevitably become obsolete. 

The communications marketplace is changing before our eyes, almost weekly. Entrepreneurs, inventors, service providers, and investors are not waiting for legislation to point the way to the next big thing. What is needed is a regulatory framework that recognizes these changes—and the sheer pace of change—by streamlining 

existing law where there is competition and by giving the FCC the tools to adapt 

the remaining requirements to new competition as it develops. The current environment offers the opportunity to reexamine and reevaluate all current regulation of 

voice, video, and data and remove barriers or burdens that are unnecessary because 

of the enhanced competition that IP and other technologies make possible. 

For those regulations deemed necessary to retain at this time, legislation could 

set a clear path for their reexamination and removal as they, too, become outmoded. 

The FCC’s forbearance authority could be extended beyond telecommunications 

services and the Commission could be required to forbear from all unnecessary regulation, taking into account competition from functionally equivalent offerings, regardless of technology or regulatory classification. Of course, any new framework 

should also ensure that providers continue to fulfill important social responsibilities. 

We believe that this approach, designed to reflect the new competitive world and 

grow with it, would far better serve the needs of competitors and consumers than 

the approach suggested in the draft bill. To the extent the Committee intends to 

pursue the approach outlined in the draft bill, however, we would offer the following 

input about the draft provisions. 

SPECIFIC COMMENTS ON THE BILL

Above I outlined our general concerns with the discussion draft. More detail on 

each of these concerns follows below. 

Like Services Are Not Treated Alike 

As noted above, we have serious concerns with subjecting services that are functionally the same to different—and in some cases, very different—regulatory treatment. The draft bill is built on technology-specific distinctions that may not have 

real relevance in the marketplace or enhance competition or functionality. By way 

of example:

• packet-switched transmission is subject to the bill, while circuit-switched transport is subject to existing law; 

• the definition of ‘‘packet-switched service’’ appears to require the separate routing 

of every packet, but not all packet-based protocols perform routing functions for 

every packet; 

81

• requirements applicable to a BITS provider are limited to facilities-based providers, placing such providers at a competitive disadvantage vis-a`-vis non-facilities-based broadband providers, such as Microsoft, Yahoo!, eBay, and other 

‘‘edge’’ providers (in addition to Earthlink and other ISPs), who are mounting 

competitive challenges to facilities-based communications providers; 

• the bill excludes ‘‘any time division multiplexing [TDM] features, functions, and 

capabilities’’ from the definition of BITS, even when the service (such as cable 

modem, DSL and FTTH) utilizes TDM and TCP/IP; 

• there are different interconnection rules for VoIP providers and providers of conventional telephone service; and 

• the bill foresees the use of ‘‘successor protocol[s]’’ only to ‘‘TCP/IP’’, but TCP is 

only one of many IP protocols. 

In each of these cases, there does not appear to be any rational basis for selecting 

only certain IP technology for favorable treatment, when the service being provided 

may or may not benefit from that technology and the subscriber may or may not 

even know it is being used. We believe the bill should eliminate such distinctions. 

Similarly, under the draft bill, broadband video service must be offered in a manner that allows subscribers to ‘‘integrate’’ the video aspects of the service with 

‘‘customizable, interactive voice and data features,’’ even if a subscriber never uses 

these features and receives only video programming service that looks exactly like 

a cable service. The draft bill also removes certain obligations only from broadband 

video service, rather than consider whether they no longer make sense for any provider of multichannel video. 

Many of NCTA’s members may already be offering ‘‘broadband video service’’ as 

it is currently defined and would therefore qualify for and benefit from some or all 

of the bill’s favorable regulatory treatment. As noted above, some cable systems 

have integrated their video and telephony service features to allow television viewers to receive caller ID on their television screens. 

Whether or not a cable company’s offering meets the definition of broadband service—and the myriad undefined attributes of this service make it impossible to know 

for sure—we do not believe the bill’s approach provides a sound foundation. While 

it is true that all ‘‘broadband video service providers’’ would be treated the same, 

in fact broadband video providers would be treated differently from cable operators 

against whom they compete solely on the basis of technological distinctions like the 

‘‘integration’’ of ‘‘customizable, interactive’’ voice and data features. Even if customers forgo those features in favor of multichannel video that is functionally indistinguishable from cable service, the broadband video service provider retains its regulatory advantage over a cable operator. 

In an industry as dynamic as video, moreover, technology-based distinctions will 

rapidly become obsolete. Any new legislative framework should be able to guide industry and government through changes in technology. The discussion draft, by contrast, will likely need to be amended even before it passes into law to account for 

new development that will inevitably emerge in the coming months. Competitive 

forces should and will propel providers to use the technologies that enable them to 

offer the services and features consumers want. Government interference in that 

natural process is far more likely to hinder than encourage this result. 

The Bill is Overregulatory 

We also believe the draft bill unnecessarily imports too much traditional utility 

regulation to competitive broadband services. It imposes numerous requirements on 

VoIP, BITS and broadband video services even where the competitive need to attract customers to these new services has proven sufficient to discipline competitors’ 

conduct, and no market failure justifies a change in regulatory treatment. While the 

consumer protection standards in the discussion draft have been narrowed, for instance, they remain overbroad. The result is the imposition of extensive new and 

burdensome regulatory requirements for services that have flourished without government involvement and without any demonstration of market failure. Truth-inbilling and other requirements—many of which have served as vehicles for unwarranted class action lawsuits—are unnecessary, particularly if providers remain subject to State laws of general applicability. In some cases, such as the bill’s privacy 

and disabilities’ access requirements, the draft imposes even stricter standards on 

broadband providers than those imposed on traditional providers. 

By defining BITS to include Internet access service, moreover, the bill would impose these obligations, along with federal registration obligations and other utilitystyle requirements designed for monopoly common carriers, on facilities-based Internet access providers such as cable who only recently won the right to be free from 

regulation. 

82

By far the most extreme example of unnecessary regulation, however, is the imposition of so-called ‘‘net neutrality’’ requirements on BITS providers. As discussed 

above, we believe the net neutrality requirement is a solution in search of a problem 

and would represent an unprecedented regulation of Internet services. Cable operators are not blocking consumers’ access to Internet content, applications, or services 

or restricting the attachment of customer equipment. Although there have been 

claims that cable could use control of its broadband network to act 

anticompetitively, there has been only a single unproved allegation that a cable operator has done so. The cable broadband network is also designed to accommodate 

any gaming devices, or any other computing device the customer wants to use. 

Cable companies have no incentive to block content, applications, or services and 

thereby drive customers to DSL, satellite broadband, or other competitors waiting 

in the wings. 

The harm to society from a net neutrality requirement would vastly outweigh any 

potential benefit. Requiring cable operators to offer cable Internet service in a particular way may lock them into business or technology arrangements that prevent 

them from responding to customers’ changing interests or marketplace reality. As 

I explained earlier, a broad requirement ‘‘not to block, impair, or interfere with the 

offering of, access to, or the use of any lawful content, application, or service’’ will 

open the door to a constant stream of complaints from cable’s competitors dissatisfied with the terms of proposed business arrangements and seeking to use government involvement as leverage in their negotiations with cable companies. 

Nearly every commercial arrangement between facilities-based Internet service 

providers and Internet content providers could be challenged as ‘‘impairing’’ access 

to competing content, effectively precluding cable operators from enhancing the 

value of their Internet access service. Hearing and resolving complaints would tie 

up scarce government resources and impose substantial uncertainty in the industry 

at the time when it needs regulatory stability to develop this new business. 

If the requirement that providers allow subscribers to ‘‘connect and use devices 

of their choosing in connection with BITS’’ is retained, the bill should clarify that 

the subscribers’ right is limited to, for example, the right to connect any device to 

the cable modem and does not allow uncertified cable modems or other uncertified 

devices to be connected directly to the cable network. Manufacturers of devices that 

connect to a cable modem must bear a reasonable responsibility to ensure that their 

equipment evolves and is compatible with new network technologies such as VOIP. 

Networks cannot and should not be required to evolve—or hold back on use of a 

new technology—to suit the specifications of individual equipment manufacturers. 

The discussion draft could also be read to impose new and unnecessary interconnection obligations on any cable operator that offers cable modem service, requiring them to agree to interconnection demands from telecommunications carriers and 

private (BIT) networks, as well as other BITS providers. Without any government 

mandate, cable operators have entered into peering arrangements to enable their 

cable modem customers to reach any site or person on the Internet. There is no need 

to turn this market-driven practice into a government mandate or to require cable 

operators to interconnect their broadband facilities to every other network. 

The Bill Lacks Adequate Safeguards Against the Exercise of Market Power 

While overregulatory in certain regards, in other respects the discussion draft 

omits critical safeguards. In particular, the bill eliminates many of the regulations 

that were instituted specifically because competition proved insufficient to protect 

against the unfair exercise of market power, even where market conditions have not 

yet changed in a manner that would justify a change in law. For example:

• The bill does not require incumbent carriers that control Internet backbone facilities to provide access to those facilities on a just, reasonable and nondiscriminatory basis. Telephone companies that both control Internet backbone facilities and offer retail Internet access in competition with cable operators have the 

incentive and the ability to discriminate against cable operators in the rates, 

terms, and conditions under which Internet backbone service is provided. 

• The bill does not ensure that VoIP providers can interconnect with an ILEC at 

any technically feasible point. 

• The bill does not ensure that VOIP subscribers’ listings will be included in the 

ILEC directories (including those of independent telephone companies as well 

as the Bells). 

• The bill lacks clear standards for facilities-based VoIP providers to interconnect 

with ILECs or provide any meaningful government oversight of these interconnection negotiations. ILECs will continue to provide service to the vast majority of households for the foreseeable future. Without standards and a supervisory mechanism in place, ILECs will have every incentive to delay or impede 

83

negotiations for the exchange of traffic with VOIP providers. The elimination of 

oversight by the FCC or State Commission heightens this danger even further. 

• The bill does not guarantee VOIP service providers’ right of access to pole attachments at nondiscriminatory rates, terms and conditions. 

Nor does the bill provide for effective enforcement of the prohibition on redlining 

practices by BVS providers, despite indications that some competitors seeking to 

enter the market intend to deploy service based on the income of area residents. 

By placing the obligation on the FCC to oversee and resolve every allegation of local 

redlining by a broadband video service provider in every municipality in the country, the bill effectively frees BVS providers of any oversight, since the FCC clearly 

is not equipped with staff or resources to undertake such a role. Complaints would 

not be resolved in a timely manner, allowing the provider ample opportunity to benefit significantly from its discriminatory policies. Further weakening the prohibition 

is the fact that the bill allows providers to self-define their own service areas, allowing them to cherry pick wealthy communities for their service rollout. 

We urge the Subcommittee to consider the important role that local governments 

can play in overseeing the deployment of multichannel video systems. While the discussion draft preserves local authority over rights-of-way, local governments should 

also be able to ensure that all of their citizens receive service in a timely and fair 

fashion, that services meet community needs, and that customer service standards 

are met. 

As a Whole, the Bill Creates Substantial Regulatory Uncertainty 

The sheer scope of the discussion draft and the undefined nature of many of its 

core provisions mean that, if enacted, it will inevitably result in protracted legal battles, significantly diminishing the likelihood that the bill will succeed in its goal of 

successfully moving communications policy into the Internet era. In many aspects, 

the bill actually appears to be a step backwards. 

For example, as noted above, the bill seems to overrule both Brand X and the 

FCC’s recent DSL order by subjecting BITS providers to a forced access requirement. The cable and Internet access industries have only just finished years of litigating this issue. Likewise, the telecommunications industry has just finished years 

of litigating the UNE and interconnection provisions of the 1996 Act. Communications companies cannot focus resources and efforts on developing new services and 

technologies when the regulatory bar keeps changing. They cannot face ten more 

years of litigation. Any rewrite must make it the highest priority to provide clear 

guidance and regulatory stability, so that all industry members may take the necessary steps to bringing new offerings to consumers. 

Thank you again for the opportunity to appear before you today. The cable industry stands ready to work with you and your colleagues to craft revisions to the Communications Act that reflect today’s realities and tomorrow’s developments. I look 

forward to your questions.

Mr. UPTON. Mr. Yager? 

STATEMENT OF JAMES YAGER 

Mr. YAGER. Thank you, Mr. Chairman, Mr. Markey, and members of the subcommittee. I am here today on behalf of the National Association of Broadcasters, and as the owner and operator 

of 5 mid-sized television stations in markets like Flint, Michigan; 

Quincy, Illinois; Columbia-Jefferson City, Missouri; and Amarillo, 

Texas. 

Television broadcasters believe that technology and business 

models being discussed today will inject much needed competition 

into the multi-channel video marketplace. Enhanced competition 

will give broadcasters new platforms for distributing their local 

programming. That is good for our viewers and good for your constituents. It gives them more options. So we support the committee’s effort to spur competition. 

However, as the committee moves forward, we urge you to be 

mindful of your long standing goal of promoting localism by preserving a vibrant system of free over-the-air local television. I don’t 

think anybody disagrees, local television is part of the very fabric 

84

of communities across this country. Viewers rely on our stations for 

local news, sports, weather and political coverage. Before, during 

and after disasters, over-the-air television provides a lifeline of 

emergency information. So as Congress develops the ground rules 

for IP video, the policies that promote localism today should also 

govern the relationship between broadcasters and video over 

broadband providers. When Congress enacted the 1992 Act, it was 

concerned that video distributors have an incentive to delete, reposition, or even refuse to carry local stations. Congress also acknowledged that a vibrant over-the-air system requires access to cable 

households. With these concerns in mind, Congress crafted the current must-carry retransmission consent system. 

This two-sided coin has strengthened localism. The must-carry 

rules guarantee that even the smallest station in the most remote 

market is not blocked out of cable households. The flip side of the 

coin is retransmission consent. It recognized that cable operators 

derived great benefits from local broadcast programming. So the 

1992 Act gives stations the option to negotiate carriage terms with 

cable operators. Together, the retransmission consent and mustcarry laws have been a win-win for both viewers and for local television. It therefore makes sense that must-carry and retransmission consent should be applied equally to video broadband providers. 

Other rules are important to localism and also must be preserved. Congress has long recognized network affiliate stations 

rights to be the exclusive provider of network programming in their 

markets. Congress and the Commission have acknowledged the importance of stations’ exclusivity for syndicated programs. Local advertisements sold by stations during network programming, like 60 

Minutes, or Lost, and during syndicated programming like Oprah 

Winfrey, fund local programming, and local news, and local weather, and local sports. 

Mr. Chairman, as NAB testified in April, Congress developed 

this framework to ensure that cities as large as New York and as 

small as Marquette, Michigan, can have their own unique broadcast voices. Unfortunately, the staff draft would put these principles in continual jeopardy by requiring that rules be reviewed unnecessarily and potentially rolled back every 4 years. Why do laws 

like must-carry that Congress enacted in 1992, that have been reaffirmed not once, but twice, by the Supreme Court, and that have 

benefited millions of viewers, suddenly need to be defended every 

4 years? This will only inject uncertainty into the market and unduly harm viewers. 

The notion that the FCC might repeal retransmission consent 

while leaving in place the cable compulsory license is particularly 

troublesome to broadcasters. Absent retransmission consent, a 

video transmission would simply take a broadcast signal and profit 

from it. Meanwhile, the government would set the rate by which 

the broadcaster is compensated, and the station would never have 

the opportunity to negotiate its carriage terms. Under the staff 

draft, broadcasters would face this specter every 4 years. 

Setting aside the 4 year review process, the staff draft has other 

shortcomings. Many of the ground rules that apply to cable, like 

must-carry and retransmission consent, are in statutory form. The 

85

1 In June 2004, the four largest cable operators served about 58 percent of all U.S. cable subscribers. Eleventh Annual Report, Annual Assessment of the Status of Competition in the Market 

for the Delivery of Video Programming, 20 FCC Rcd 2755, 2763 (2005) (‘‘Eleventh Annual Report’’). This consolidation will only increase in the future, as Comcast and Time Warner are acquiring Adelphia’s systems. 

staff draft orders the FCC to create supposedly parallel rules for 

the new broadband services, but a statute is a statute and a regulation is a regulation, and we all know statutes are much stronger 

than regulations. They provide certainty. What is in statute for 

cable should also be in statutory form for the new video distributors. 

Mr. Chairman, our industry and your constituents stand to gain 

much through enhanced competition in the video distribution market. We are ready to work with the committee in achieving that 

goal, while simultaneously strengthening America’s system of free 

local over-the-air television. Thank you. 

[The prepared statement of James Yager follows:]

PREPARED STATEMENT OF JAMES YAGER, CHIEF EXECUTIVE OFFICER, BARRINGTON

BROADCASTING COMPANY

Thank you, Mr. Chairman, for the opportunity to appear before the Subcommittee 

on Telecommunications and the Internet today. I am James Yager, Chief Executive 

Officer of Barrington Broadcasting Co., testifying on behalf of the National Association of Broadcasters (NAB). NAB is a nonprofit incorporated association of radio and 

television stations and broadcast networks, which serves and represents the American broadcasting industry. 

The television broadcast industry is pleased to be testifying about the proposed 

legislation, which is intended to encourage the deployment of new and innovative 

Internet services such as broadband video services. Broadcasters see great promise 

in what this new video distribution platform will offer. Broadband video services 

have the clear potential to introduce much needed competition into the multichannel 

video programming distribution market. We generally see this as a positive development for consumers, broadcasters and other program providers. 

As we embrace new technologies, however, it is vital that the legislation adopted 

continues to recognize the fundamental policy of localism that underlies our American broadcasting system and the importance of maintaining a robust system of 

local, over-the-air television. Congress, the Federal Communications Commission 

(FCC) and the courts have all explicitly recognized that public access to healthy, 

free over-the-air broadcasting is an important federal interest. For this reason, NAB 

submits that long-standing policies designed to promote localism, competition and 

diversity—including carriage and retransmission consent for local broadcast signals 

and the protection of local program exclusivity—must extend equally to all multichannel platforms. The proposed legislation needs to ensure that broadband video 

service providers are subject to requirements in these areas truly comparable to the 

requirements already applicable to other multichannel video programming distributors (MVPDs), such as cable and satellite operators. As presently drafted, however, 

the legislation fails to ensure that these important policies apply to new broadband 

service providers in the same manner as they apply to other MVPDs. The legislation 

also opens the door to premature elimination of these still needed national policies. 

NAB urges that the legislation be amended to correct these specific, limited problems. 

The Deployment of Broadband Video Services Has the Potential to Benefit 

Consumers and Programming Providers, Including Broadcasters. 

Television broadcasters generally support efforts to speed the deployment of new 

and innovative Internet services, including broadband video services. Particularly in 

light of continuing consolidation and increasing national and regional competition 

in the cable industry, 1 a new video distribution platform offers great promise. 

Broadband video services have the clear potential to introduce much needed competition into the MVPD marketplace. We see this as a positive development for consumers, broadcasters and other program providers. 

Consumers may benefit from the development and deployment of another, competitive distribution platform capable of bundling a variety of services, including 

voice, Internet access and video services. With regard to video services especially, 

86

2GAO, Issues Related to Competition and Subscriber Rates in the Cable Television Industry, 

GAO-04-8 at 9-11 (Oct. 2003). In 2004, the FCC reported, in markets where cable operators 

faced effective competition from wireline overbuilders, the average monthly cable rate and price 

per channel were, respectively, 15.7 percent and 27.2 percent lower than those averages for 

cable operators in communities without effective competition. Eleventh Annual Report, 20 FCC 

Rcd at 2773. 3See, e.g., Petition to Deny of America Channel, LLC, MB Docket 05-192 (filed July 21, 2005); 

Petition of TCR Sports Broadcasting Holding, LLP to Impose Conditions Or, in the Alternative, 

to Deny Parts of the Proposed Transaction, MB Docket 05-192 (filed July 21, 2005). 4See Attachment, Testimony of Gregory Schmidt, Vice President of New Development and 

General Counsel for LIN Television Corporation, on behalf of NAB, before the House Commerce 

Committee, April 20, 2005 (NAB Testimony). 5See NAB Testimony, pp. 3-10. 6Turner Broadcasting System, Inc. v. FCC, 512 U.S. 622, 662-63 (1994). 

past studies have shown that competition from satellite providers has not been effective in restraining price increases for cable television. For example, the General 

Accounting Office (GAO) found that cable rates in markets with competition from 

a provider using a wire technology (such as local telephone company) were about 

15 percent lower than cable rates in similar markets without wire-based competition. Competition from satellite operators did result in improved quality and service, 

but did not result in a significant lowering of cable television rates.2 The deployment 

of a new, competitive MVPD service may also benefit consumers by providing additional, diverse programming options. 

Video programming providers, including broadcasters, may also benefit from the 

timely deployment of a new video distribution platform. The emergence of another 

platform for the distribution of video programming will provide programmers with 

an additional outlet for reaching viewers and therefore with greater opportunities 

for success in the marketplace. Some cable programming networks and regional 

sports networks have recently expressed concern to the FCC that large, consolidated 

cable operators are increasingly able to exclude independent programming networks 

from their systems and, thus, from the marketplace.3 The rapid deployment of a 

competitive video distribution platform could help ameliorate such problems. 

Local television broadcasters may also similarly benefit from the emergence of another competitive MVPD service. A new video distribution platform will represent 

another outlet for broadcast programming, including local news and information. 

Given broadcasters’ dependence on advertising revenue (and thus on reaching as 

many viewers as possible), the expansion of our opportunities for reaching consumers should be regarded as positive. The development of another video distribution platform for carrying broadcast programming would also encourage the development of innovative digital television programming, including multicast and high definition (HD) programming. If local stations feel confident that their HD and 

multicast programming will be carried by broadband video providers, broadcasters 

will be encouraged to make the substantial investments needed to bring their 

multicast service plans to fruition. In the end, it is consumers that will benefit by 

receiving a greater variety of programming, including local programming, from 

multicasting broadcast stations via a broadband service provider. 

Policies Necessary for Preserving Free, Over-the-Air Local Broadcasting 

Must Apply in the Same Manner to All MVPDs. 

As NAB has testified in the past, our American television system is an important 

part of our national identity.4 Unlike other countries that offer only national television channels, the United States has succeeded in creating a rich and varied mix 

of local television outlets that give individual voices to more than 200 communities. 

But, local over-the-air TV stations—particularly those in smaller markets—can survive only by generating advertising revenue based on local viewership. If new technologies can erode local viewership by overriding program exclusivity rights of local 

stations and offering the same programs on stations imported from other markets, 

or effectively block their subscribers’ access to local signals, the viability of local TV 

stations—and their ability to serve their local communities with high quality programming—could be lost. 

Over the past decades, Congress and the Federal Communications Commission 

have adopted and maintained certain requirements on MVPDs to preserve localism 

and local station program exclusivity. These are the principles that underlie the 

policies of syndicated exclusivity, network non-duplication, must-carry and retransmission consent.5 As Congress has recognized, and the Supreme Court has upheld, 

preservation of our system of broadcasting is ‘‘an important governmental interest.’’ 6

87

7 NAB Testimony, pp. 2-12. 

8 Report of the FCC, Retransmission Consent and Exclusivity Rules: Report to Congress Pursuant to Section 208 of the Satellite Home Viewer Extension and Reauthorization Act of 2004 (Sept, 

8, 2005). 9See 47 U.S.C. §§325, 534, 535. 10Specifically, Section 304(a)(2) requires the FCC to review these regulations applicable to 

video broadband providers every four years and directs the FCC to eliminate those regulations 

to the extent the FCC determines they are no longer necessary as the result of economic competition. 11See Turner, 512 U.S. at 662-63 (finding that Congress adopted must carry to serve these 

three important governmental interests). 

Earlier this year, NAB explained in other congressional testimony why must 

carry, retransmission consent and local program exclusivity are more necessary 

than ever to maintain our system of locally-based, free over-the-air broadcasting and 

why these policies should be applied to new technologies such as video over 

broadband.7 Since that time, the FCC has again recognized the importance of the 

retransmission consent and program exclusivity policies and recommended to Congress that no changes be made.8 NAB incorporates that testimony and reemphasizes 

here today that these long-standing requirements that apply to traditional MVPDs 

such as cable and satellite operators should apply in a comparable manner to new 

platforms that provide comparable video services. 

The Proposed Legislation Fails to Apply Vital Regulatory Policies Comparably to Video Broadband Providers and Permits the FCC to Eliminate Long-Standing Policies Necessary to Preserve Our System of 

Broadcasting. 

Section 304 of the proposed legislation purports to apply certain video regulations 

(including must carry, retransmission consent and program exclusivity) to 

broadband video service providers in a manner comparable to other MVPDs. As 

drafted, however, the legislation does not ensure that broadband video providers offering an MVPD service functionally equivalent to the services currently provided 

by cable and satellite operators will in fact be subject to comparable requirements. 

As drafted, the legislation prematurely gives the FCC broad discretion to eliminate, 

with regard to video broadband providers, long-standing policies necessary to preserve our system of free, locally-based over-the-air broadcasting. It also may unintentionally grant authority to the FCC to undercut current statutory requirements 

on cable and satellite providers. 

As an initial matter, NAB notes that Section 304(a)(1) of the legislation directs 

the FCC to ‘‘adopt for broadband video service providers comparable regulations as 

apply to’’ MVPDs in a variety of areas, including must carry and retransmission 

consent. This language would create a disparity in that certain requirements (such 

as must carry and retransmission consent) will only be regulatory requirements for 

video broadband service providers, while these are statutory obligations for cable operators.9 Regulatory requirements are clearly not comparable to statutory requirements. It could be argued that the FCC could waive such a regulatory requirement, 

while it may not, of course, waive any statutory requirement adopted by Congress. 

Thus, the FCC could possibly waive important policies such as must carry on the 

request of a video broadband provider without appropriate Congressional input, 

while Congressional action is clearly necessary to alter such requirements for a 

cable operator. This cannot be deemed to constitute ‘‘comparable’’ regulation. To correct this inconsistency in regulatory treatment, the legislation should make statutory for broadband video providers any requirement that is statutory for other 

MVPDs. 

Another provision of the draft legislation is even more troubling. Section 304(a)(2) 

permits the FCC to eliminate any of the regulations applicable to broadband service 

providers (including must carry and related policies) adopted pursuant to Section 

304(a)(1) of the legislation.10 This provision will give the FCC virtually unfettered 

authority to overturn policies that Congress has previously determined to be essential for preserving the benefits of free, over-the-air local broadcasting (especially for 

those who do not subscribe to an MVPD); for promoting widespread dissemination 

of information from a multiplicity of sources (particularly sources, such as broadcasters, not under the control of cable operators); and for promoting fair competition 

in the market for television programming.11 While competition may eventually be 

sufficient to warrant some deregulatory modifications, it is not so evidently on the 

horizon that Congress should hand over its oversight of these important obligations 

to the FCC. To prevent the FCC from exercising this amount of undue discretion, 

88

12 NAB also notes that, in other contexts, quadrennial review requirements have not lead as 

expected to the elimination of regulations made unnecessary by increased competition, but has 

instead lead to extensive legal challenges of FCC actions and almost permanent legal uncertainty for communication service providers. For example, the FCC attempted, as statutorily required, to review the broadcast multiple ownership rules in 2002, but its revised rules were 

challenged in court. Most of these revised rules have consequently not gone into effect, but have 

been sent back to the FCC for further consideration and explanation. The FCC has not yet even 

begun this consideration of its 2002 review on remand, but is required by statute to conduct 

a new quadrennial review in 2006. There is no reason to believe that a quadrennial review process in the context of broadband service providers would operate any more efficiently or effectively. 

the ‘‘quadrennial review’’ requirement in Section 304(a)(2) should be eliminated 

from the legislation.12

In addition, this legislation may unintentionally allow the FCC in the future to 

eliminate requirements such as must carry, retransmission consent and local program exclusivity even with regard to other MVPDs, such as cable operators. As 

cable operators continue to upgrade their facilities so they can offer broadband 

Internet services, two-way services and/or interactive services, they may arguably 

fall under the definition of a ‘‘broadband video service provider’’ in Section 2(a). In 

such case, Section 304(a)(2), which permits the FCC to eliminate regulations adopted for broadband video service providers, would potentially allow the FCC to eliminate the long-standing requirements regarding must carry, retransmission consent 

and program exclusivity even for those providers traditionally regarded as cable operators. This loophole could therefore undercut express statutory requirements for 

must carry and retransmission consent that Congress adopted for cable operators 

in 1992 in order to preserve our system of free, locally-based television broadcasting. 

The legislation should be amended so that cable operators cannot simply recategorize themselves as broadband video service providers and thereby do an end run 

around long-standing policies that Congress and the Supreme Court have recognized 

as important. 

Conclusion. 

Broadcasters see great potential in the development of broadband video services 

to increase competition in the MVPD marketplace, thereby benefiting consumers, 

broadcasters and other program providers. However, in seeking to encourage the 

more rapid deployment of broadband video services, Congress should extend to this 

new multichannel platform long-standing policies that have successfully promoted 

competition and diversity in the video market for many years. As presently drafted, 

the proposed legislation fails to apply policies vital for the preservation of locallybased, free over-the-air broadcasting (including carriage and retransmission consent 

for local broadcast signals and local program exclusivity) to new broadband service 

providers in the same manner as they apply to other MVPDs. The legislation even 

permits the FCC unduly broad discretion to eliminate must carry and related policies that Congress has long believed were needed to maintain our system of television broadcasting. NAB urges the Subcommittee to amend this legislation to correct these specific, limited problems.

Mr. UPTON. Mr. Yager, I know you have been here before, which 

is why you were right on 5 minutes. It was perfect. 

Mr. YAGER. Thank you, sir. 

Mr. UPTON. Thank you. At this point, we are going to do questions from the panel. Again, I am going to be—try to be pretty honest with this—yes. Ms. Praisner, I know that there is not a copy 

of the draft, I don’t think, in front of you——

Ms. PRAISNER. There is. 

Mr. UPTON. Oh, there is? Okay. 

Ms. PRAISNER. Yes, sir. 

Mr. UPTON. Well, I want to talk a little bit about the franchise 

fees, which, of course, get passed along to the consumer on their 

monthly bills. 

Ms. PRAISNER. Right. 

Mr. UPTON. If you look at the staff draft on page 30, beginning 

at line 14, Section 303d, as in David, it says this, ‘‘franchise fee assessment by local franchising authority permitted. The local franVerDate 0ct 09 2002 12:11 May 08, 2006 Jkt 000000 PO 00000 Frm 00092 Fmt 6633 Sfmt 6602 F:\DOCS\26998.TXT HCOM1 PsN: JOEP
89

chising authority may collect a franchise fee from a broadband 

video service provider for the provision of broadband video service 

within the local franchise area of such authority. Amount (2), for 

any 12-month period, such franchise fee shall not exceed 5 percent 

of such broadband video service providers gross revenues in such 

period from the provision of broadband video service to subscribers 

in such local franchise area.’’ And if you skip down to line 31, line 

10, it continues—the draft continues, it says, ‘‘Definition of Gross 

Revenues.’’ Maybe—I don’t know if you have found it. 

Ms. PRAISNER. Page 31. 

Mr. UPTON. Page 31, now, line 10. 

Ms. PRAISNER. Uh-huh. 

Mr. UPTON. It says, ‘‘For purposes of this subsection, the term 

gross revenues means all consideration of any kind or nature, including, without limitation, cash, credits, property’’—means a lot—

‘‘in-kind contributions (services or goods) collected from the subscriber and attributable to the video programming package provided by the broadband video service provider as part of the 

broadband video service in such local franchising area.’’ Now, based 

on what I just read, yes or no, would you acknowledge that the 

staff draft preserves by its very term the local franchising authority to collect 5 percent of gross revenues collected from the subscriber that is attributable to the video programming package part 

of the broadband video service offering? Does it not say that? Yes 

or no. 

Ms. PRAISNER. It says that for the piece that it allows us to collect, but it does not allow that 5 percent to extend to all of the 

areas in which, under the cable franchises that we have now, there 

is the capacity to collect. So there isn’t the advertising fees, the 

Home Shopping Network fees, whatever those——

Mr. UPTON. Property, in-kind contributions, cash, credit, et 

cetera. Let me talk about the PEG issue for a second. 

Ms. PRAISNER. Okay. 

Mr. UPTON. Again, I would like you to read along with me, since 

you have got it there, from the text. On page 34, beginning at line 

21, it talks about PEG, Public, Educational, Governmental use. 

‘‘Local franchising authority may designate broadband video service 

provider capacity for public, educational or governmental use in the 

local franchising area so long as such use is comparable to the obligations the local franchising authority applies, (1) to any cable operator in such local franchising area, and (2) in any other 

broadband video service provider in such areas.’’ So, again, yes or 

no, based on what I just read, would you at least acknowledge that 

the draft does, by its very terms, permits a local franchise authority to designate capacity for PEG from a broadband video service 

provider which is comparable to that which a cable operator in the 

local franchise area is also providing? 

Ms. PRAISNER. Yes, it——

Mr. UPTON. Okay. 

Ms. PRAISNER. [continuing] provides for PEG channels. 

Mr. UPTON. Finally, I would like to talk a little bit about the 

rights-of-way management. Once again, if you read on page 61——

Ms. PRAISNER. Uh-huh. 

90

Mr. UPTON. [continuing] starting at line 11, it says this, ‘‘Use of 

rights-of-way and easements: in using public rights-of-way and 

easements that have been dedicated to compatible uses, a BITS 

provider, a VoIP service provider, or a broadband video service provider, shall ensure that, (1) safety, functioning and appearance of 

the property and the convenience and safety of other persons not 

be adversely affected by the installation or construction of facilities 

necessary for such service. (2) The cost of installation, construction, 

operation, relocation or removal of such facilities be borne by such 

provider or subscriber to such provider’s service, or a combination 

of both, and (3) the owner of the property shall be justly compensated for any damages caused by the installation, construction, 

operation, relocation, removal of such facilities by such provider. 

(B) Preservation of Authority. No provision of this title shall be 

construed to prohibit a local franchise authority already—or other 

unit of the State or local government—from (1) enforcing the requirements of paragraphs 1, 2, and 3, (2) from imposing reasonable 

restrictions, and on time, place or manner by which provider constructs, alters, or maintains facilities that use public rights-of-way 

and easements.’’ Question, again yes or no, based on what I read, 

would you acknowledge again that this staff draft does by its very 

terms preserves the local franchises’ authority right to control the 

use of rights-of-way, including as it relates to safety, functioning 

and the boiler plate language that has been there before? 

Ms. PRAISNER. I am sorry, Mr. Chairman. 

Mr. UPTON. Does it not? 

Ms. PRAISNER. On that issue, I have to say no. I do not believe——

Mr. UPTON. Well——

Ms. PRAISNER. [continuing] and perhaps it is a clarification of 

language that is necessary. And, again, we would be more than 

willing, as I indicated, to discuss this. But, if you look on lines 15 

and 16——

Mr. UPTON. Okay. 

Ms. PRAISNER. [continuing] it says, as we read this—and as I 

say, it may be that the language needs to be tweaked, and we are 

happy to talk with you, but it says the video service provider shall 

ensure. It seems to me that that leaves an impression that the determination of what is safety, functioning and appearance, et 

cetera——

Mr. UPTON. But it——

Ms. PRAISNER. [continuing] but——

Mr. UPTON. My time is expiring, but especially we added this 

provision that says that the local franchise authority, or other 

unit—it does—‘‘no provision shall be construed to prohibit a local 

franchising authority, or other unit, from enforcing requirements’’ 

of that paragraph of subsection A. 

Ms. PRAISNER. Well——

Mr. UPTON. So——

Ms. PRAISNER. [continuing] again, sir, it——

Mr. UPTON. Look——

Ms. PRAISNER. [continuing] maybe we need to work together on 

tweaking the language. That is not the——

Mr. UPTON. I look forward——

91

Ms. PRAISNER. [continuing] way we read it. 

Mr. UPTON. I look forward to doing that. I yield now. My time 

is expired. I got to be the—it is 6:30? No. Yes. It says 5. I have 

got another 5 minutes. I didn’t touch it. Someone else did. I would 

recognize Mr. Markey. 

Mr. MARKEY. That I am destroying the evidence. 

Mr. UPTON. Yes. 

Mr. MARKEY. Mr. Yager, in the bipartisan consensus draft, 

broadcasters were essentially held harmless. I worked hard with 

Mr. Dingell to ensure a balanced level playing field between the 

cable and Bell companies. The Barton-Upton draft upsets that balanced approach. From the broadcast perspective, this is obviously 

a step backward, and you would like to see those provisions restored to the previous consensus position that obligations for both 

wireline video competitors should be the same. Is that correct? And 

could you expand, please? 

Mr. YAGER. Okay. That is correct. We believe in a level playing 

field for all——

Mr. YAGER. We believe in a level playing field for all video service providers. We are sure that that will ensure the public of a free 

choice of local television for both your constituents and our viewers. 

Mr. MARKEY. Would you prefer the language in the first staff 

draft? 

Mr. YAGER. I will have to say I am not familiar with the language in the first staff draft, but as you described it, I would prefer 

that language over the other language——

Mr. MARKEY. Okay. Thank you. 

Mr. YAGER. [continuing] that you described. 

Mr. MARKEY. Okay. Thank you, Mr. Yager. Mr. Ellis, SBC’s CEO 

was quoted recently in Business Week. I would like to give you an 

opportunity to contradict your boss on how SBC will treat access 

to the Internet and Internet content. But I want you to do so in 

the context of a statement in your testimony which says, and I 

quote, ‘‘the video service will communicate with other IP-based 

services. Customers will be able to display on the TV secure, customized Internet content.’’ My question is will this Internet content 

be of the consumers’ choosing or SBC’s choosing? 

Mr. ELLIS. I appreciate the opportunity to contradict the chairman of my company, but I am not going to do that. To answer your 

question, the SBC has been very clear in many forms, including before this committee, that we will not block access that we provide 

to the Internet based on the content received over that access. So 

that is point No. 1. And point No. 2, with respect to the provision 

of services over our broadband facilities, the customer is going to 

have the option to utilize the facilities to access the content of their 

choosing. Now, I don’t know how much clearer I can be about that. 

Mr. MARKEY. Yes. Will that be all Internet content? 

Mr. ELLIS. Will it be all what? 

Mr. MARKEY. All Internet content. 

Mr. ELLIS. All? If you are sitting in one of our houses that is 

served by our broadband facilities and you are at your computer, 

you can access whatever content tomorrow that you can today. 

There is no——

Mr. MARKEY. Through the TV? 

92

Mr. ELLIS. Through the TV application will depend on the development of that capability, but we will fully expect that you will sit 

at your TV and you will have the capability, if you want, to watch 

half your screen being the video that comes out and the other half 

the screen, if you want to surf the web. 

Mr. MARKEY. Okay. So the question, again, keeps coming back to 

who will choose. 

Mr. ELLIS. The customer will choose which they want. But maybe 

what this gets to—and let me be very straightforward and candid 

about it—the provision of the video service that we propose to offer 

in competition with cable will not utilize the public Internet for a 

number of reasons. We cannot get the content providers, the video 

providers, the movie providers to agree to let us use the public 

Internet for distribution of their programming. There is privacy 

reasons; there is delay reasons; there is quality reasons; there is 

pop-up ads that come. So the video content will not access the public Internet. 

Mr. MARKEY. Okay. So if we drafted language and inserted it 

into the bill that said that Internet content will be within the exclusive control of the consumers’ choice, would you support that 

language in legislative form? 

Mr. ELLIS. I would. I might need to see it in context, but——

Mr. MARKEY. Well, that is the question I have been asking you 

for 3 minutes, but the context is what you are about to do. 

Mr. ELLIS. Let me say it this way: today, if you are our customer 

for Internet-access service, you have the choice——

Mr. MARKEY. Would you support——

Mr. ELLIS. [continuing] to access whatever——

Mr. MARKEY. Would you support that language being written 

into legislative form that the consumer is king and that the consumer has the choice of going to any Internet content that they 

want, unimpeded by SBC. Would you support that language? 

Mr. ELLIS. Yes, in principle, I do. I want to see the language, because I want to be very clear that they have that capability today; 

they will have it tomorrow. I have no objection to that. 

Mr. MARKEY. Okay. I hope we have a second round. I thank 

the——

Mr. UPTON. I don’t know that we are going to do a second one, 

you may do questions in writing, because we have got another long 

panel after this. I broke the Markey rule by going to two panels, 

but you came up with this list of witnesses that I wanted to accommodate you on, sir. 

Mr. MARKEY. I was afraid it was the last hearing we were ever 

going to——

Mr. UPTON. And you are probably——

Mr. MARKEY. [continuing] have on the——

Mr. UPTON. [continuing] right. 

Mr. MARKEY. And I didn’t want to——

Mr. UPTON. You probably had lunch and then you came back. 

Anyway——

Mr. MARKEY. Well, three companies are in the private room, and 

then I wanted to give everyone else a shot here. 

Mr. UPTON. Mr. Barton? 

93

Mr. BARTON. Thank you, Mr. Chairman, and thank you folks for 

being here, and thank you for letting us go vote and come back, 

and I know that wasn’t easy. Let us assume that your choices on 

Federal telecommunication policy changes boil down to draft one 

and draft two, and that is the only choice you get. You can be for 

the first draft and against the second, or for the second and against 

the first, or against both, but you have got to vote for one of them. 

How many of you folks would vote for draft one, the one that we 

put out in September? Okay. We have got one, two, three, four, 

five, six, seven, eight—we got nine voters in draft one. How many 

for draft one? Two, three, two-and-a-half. How many for draft two? 

Two. How many for neither draft? So you want us just to throw in 

the towel and say we can’t do it? 

Ms. PRAISNER. Excuse me, sir, if I might comment. I don’t think 

so at all. I think you have the parties’ attention, and you have all 

of us at the table, and I think there was significant work as we 

worked through our staff. Some local government spent 12 hours 

with your staff—I think they told me. At least that is what they 

told me—in discussing of this one. 

Mr. BARTON. Well the——

Ms. PRAISNER. So my point is, of the two, if that is my choice, 

this one is more preferable. Do we have work to do on both? I believe we do, and we are ready, local governments are ready. We 

have already indicated that. We are ready to work with you collaboratively, bipartisanly, however you phrase it, we are ready. 

Mr. BARTON. Well, on draft 1, we got no positive comments. 

None. Cities didn’t say they liked it. Microsoft didn’t say they liked 

it. The Bells didn’t like it. The ILECs didn’t like it. We got none. 

So I am glad to know now that you have seen draft two, some of 

you like draft one. I guess in a way that is progress. 

Ms. PRAISNER. May I comment, sir? 

Mr. BARTON. But we have gotten a lot of positive comments on 

draft two. I am a little surprised I didn’t see more hands go up for 

draft two, but maybe you all think it is a trick question. 

Ms. PRAISNER. May I comment, sir? 

Mr. BARTON. Well, I want to ask my folks down there on the end 

from Southwestern Bell, I want to ask you a question that is kind 

of similar to the Markey question. The reason we made the change 

from draft one to draft two on Internet accessibility is that our content providers all told us that if we didn’t make some sort of a 

change, the content providers were going to be susceptible to Internet viruses, and that the content providers wouldn’t provide content. Now, I promised Mr. Markey and Mr. Dingell that we wanted 

to have total access in this new era. In all these new services, we 

wanted to have access to them, but we took to heart, at least I did, 

that we didn’t want to open up to the providers of the content that 

their systems could get infected with these viruses. So the tradeoff 

that we attempted to make was that you could protect—if you were 

a provider of video services or data services, or whatever it was 

that you were providing, that you could protect that, but that there 

would be an icon on the computer, on the television screen, wherever it is that the consumer was accessing it, that when they wanted to click over to the Internet, they had to click one time, whatever the icon that—Southwestern Bell has a different icon than 

94

Microsoft or whatever, but it would be there, and even Joe Barton, 

as dumb as I am in high-tech, I could figure out which icon got me 

to the Internet, and I could click on it and I would have full access. 

Now that is the concept that we tried to put in the bill. I am going 

to ask my friend at Southwestern Bell if that concept, if it is in the 

bill, gives the content providers the ability to protect their systems, 

but it gives the consumer the ability to do what Mr. Markey said 

we need to do? 

Mr. ELLIS. Absolutely. You did it much better than I, but that 

is what I was saying. 

Mr. BARTON. All right. Now, my friend at Microsoft, are you satisfied with that? 

Mr. MITCHELL. The way you just described it is certainly technically capable and would hit the connectivity principles of net neutrality that we have advocated. So, yes. 

Mr. BARTON. I mean, that is what we are trying to do. That is 

the reason there is a change in the draft. It is not a change that 

has been accepted by Mr. Dingell and Mr. Markey. To their credit, 

they preferred the original language, and so we tried to keep the 

principle but protect the network, and if we haven’t done it, we will 

keep trying, so that is our principle. 

Mr. MITCHELL. Yes. I would only comment that I think the principle is the right principle. I think probably everyone at the table 

would agree at some level the language does need some tweaking 

as to how that actually works so that it is as clear as you have articulated. 

Mr. BARTON. Okay. My time has expired. Thank you, Mr. Chairman. 

Mr. UPTON. Mr. Stupak? 

Mr. STUPAK. Thank you, Mr. Chairman. I thank you to the panel 

for being here. It was a lengthy panel and you sat through all the 

openings and glad to have you here today, and hopefully we can 

get this bill moving in more of a working together tone. Let me ask 

about this one, though. In the transition from traditional titles to 

the new BITS titles, it is not clear to me in this draft how providers make the transition from existing regulatory regimes to the 

new titles under this draft. For example, what if a cable operator 

has some customers under a Title I cable—I am sorry, a Title VI 

cable franchise, but also offers new services that qualify under the 

broadband video service definition. Is that provider required to get 

two franchise? Mr. Rehberger, do you want to hit that one? Would 

I be required to get two franchise? 

Mr. REHBERGER. I think you hit upon one of the things that, not 

only I, but a couple of the other folks on this panel have talked 

about today. It makes no sense from a technology point of view the 

way we see it. I guess we would be a BITS provider today, because 

we provide Internet——

Mr. STUPAK. Right. 

Mr. REHBERGER. [continuing] we provide VoIP-type technology. 

We are underlying providers to many of the VoIP providers that 

have been mentioned. So, clearly, we wouldn’t understand what we 

fell under. If we provided a bundle of Internet access and voice 

services over a single T1 access line, would then—and that T1 acVerDate 0ct 09 2002 12:11 May 08, 2006 Jkt 000000 PO 00000 Frm 00098 Fmt 6633 Sfmt 6602 F:\DOCS\26998.TXT HCOM1 PsN: JOEP
95

cess line happened to be under uni-pricing, is that uni-pricing or 

is the uni-pricing gone because now we are a BITS provider——

Mr. STUPAK. BITS provider. 

Mr. REHBERGER. [continuing] and, you know, we don’t get unipricing under the BITS regime the way we see it. So it clearly is 

not something that we understand, and we don’t understand why 

the staff believes there has to be a, you know, a division of the 

technology. What if the next technology comes out that——

Mr. STUPAK. Sure. 

Mr. REHBERGER. [continuing] is somewhat different than VoIP, 

different than the packet-switch network, are we going to go ahead 

and develop another regulation for that? I think it goes back to 

what I heard here on my left which is the service that we are offering, it is not the underlying technology. 

Mr. STUPAK. Okay. Well, let me ask you this then: I have heard 

from some of my smaller companies that their ability to interconnect will be weakened under this draft, do you see that? 

Mr. REHBERGER. Yes, I do. I mean, if you go back—not to cite 

out of the bill, but if you go back and look at the access and colocation rights, it says those access and co-location rights for the 

purpose of providing telecommunication service, which again, 

maybe it is a clarification, but to that language, it says to us those 

rights wouldn’t exist under providing BITS service, even though 

they exist under telecommunication service. We think that, you 

know, what this does is provide the ILECs themselves a way to essentially eliminate the uni-structure, which everyone forgets was a 

compromise in, you know, the 1996 Act, around having everyone 

getting their long-distance, and so that is what we think this does. 

It may not be the biggest piece of the bill as we talk about the 

video, but it is a very, very important bill to us. And if I could add 

one more point, it is that the idea that this is less regulatory than 

where we are today, I just don’t see it. It is another set of regulations on top of the 1996 Act. 

Mr. STUPAK. In my opening, I mentioned quite a bit about the 

Universal Service Fund because we you rely upon it in northern 

Michigan and throughout rural America. Do you support broadening the contribution base for Universal Service Fund? Do you 

support allowing Universal Service Fund be used for deployment of 

broadband? Anyone want to comment on that? Ms. Praisner? You 

would support that obviously as a municipality because——

Ms. PRAISNER. Yes. 

Mr. STUPAK. All right. Anyone else care to comment on that? 

Mr. REHBERGER. I would. We would support broadening the base 

on Universal Service Fund. 

Mr. STUPAK. Well, let me ask you this then. In the first draft, 

we had the, you know, questions of how are you going to fund USF. 

Are you willing to live with a franchise fee agreement in your first 

draft which basically was based on a definition of gross revenues 

that included advertising, video-on-demand and other revenue associated with the video offering? Anyone want to comment on that? 

Care to touch that? Mr. Ellis, SBC, you were talking a little bit 

about that today. 

Mr. STUPAK. Would you support that in the first draft as——

96

Mr. ELLIS. No, we are not okay with the first draft. We would 

prefer, obviously, the second draft that ties the 5 percent to revenues derived from the provision of the video services. 

Mr. STUPAK. How would you fund the Universal Service Fund? 

Mr. ELLIS. The Universal Service Fund, we don’t have a problem 

with expanding it, so long as it is done in a competitively neutral 

way. 

Mr. STUPAK. Thank you, Mr. Chairman. 

Mr. UPTON. Mr. Whitfield? 

Mr. WHITFIELD. Thank you, Mr. Chairman. And Ms. Praisner in 

her statement made the comment that in Texas that Telcos were 

given what they wanted with fast-track franchises, and then she 

went on to say that Verizon and SBC, months after the law was 

put on the books, have offered to provide competitive choice to less 

than 1 percent of Texas households. And then she asked the question, is the Nation giving up the consumer protections and community benefits and the current franchising system just to provide 

choice to 1 percent of the population. And, Mr. Ellis, I would ask 

you, how would you respond to that criticism? 

Mr. ELLIS. Well, I guess with, first, a little bit of amazement. It 

has been literally weeks since the legislation passed. We have filed 

an application for all of the city of San Antonio metropolitan area. 

It incorporates 22 communities. That is our initial deployment 

schedule. Within a matter of weeks from the time the legislation 

was passed, Verizon went in to Keller, Texas. It has been talked 

about. And within days of Verizon selling its services, the incumbent cable operator dropped its rates 30 percent and added new 

features. I think it speaks volumes for the importance of this kind 

of legislation and the practical impact that the legislation can bring 

about, not just in Texas, but nationally. We are going to get well 

beyond 1 percent, but this is—after 35 years, it has taken the cable 

to buildup to essentially their footprint. We are literally weeks into 

this process. 

Mr. WHITFIELD. Ms. Praisner, I know that you are certainly interested in lowering consumer prices, and Mr. Ellis has made the 

argument here that with that competition that they have provided, 

that in that instance, they did lower consumer prices. Would you 

respond to that, or——

Ms. PRAISNER. Yes, sir. 

Mr. WHITFIELD. [continuing] any kind of——

Ms. PRAISNER. It is my understanding—and I welcome where 

SBC or Verizon may be going, but it is my understanding from conversations with folks in Texas that the numbers and areas where 

they are going are at a low percentage of the overall population of 

Texas. They may get there eventually, but not in this initial time 

period. 

Mr. WHITFIELD. Okay. I wanted to ask Mr. Willner, whose company provides a lot of cable service in our area, and I am certainly 

not an expert in this issue, but I would like for you and Mr. Ellis 

both to respond to this question, Mr. Willner, if you would help me 

get a better grasp of this. If cable’s VoIP, or voice over Internet protocols services, should be treated differently than the Bell’s legacy 

telephone services, why shouldn’t the Bell’s broadband video servVerDate 0ct 09 2002 12:11 May 08, 2006 Jkt 000000 PO 00000 Frm 00100 Fmt 6633 Sfmt 6602 F:\DOCS\26998.TXT HCOM1 PsN: JOEP
97

ices be treated differently than cable services? Would you respond 

to that? 

Mr. WILLNER. Sure. I would submit that, to the extent that we 

are competing for broadband services with similar services, that we 

should have parody in a deregulatory environment, and that is—

that would be fine with us. And the cable industry has supported 

parody in a deregulatory fashion, and we continue to support that. 

Mr. WHITFIELD. Mr. Ellis? 

Mr. ELLIS. We would support the treatment of our entry into the 

video business on the same terms which cable came into the telephony business, in other words, without the burdens of the legacy 

regulation. And by that, I am specifically meaning without any of 

the obligations that surround the obtaining of a franchise. If we 

have to go through the franchise process that exists today in the 

communities we intend to serve, it will take us, at the rate of one 

franchise a week, 40 years, and that is if we can negotiate with the 

2,200 communities, one a week, which is—that is impossible. It 

would take 40 years. The process—it can’t work. 

Mr. WHITFIELD. Yes. Well, Mr. Willner, would you be opposed to 

some streamlined national system to deal with this franchising 

issue? 

Mr. WILLNER. No, I actually disagree with Mr. Ellis. I think that 

in order to evaluate the differences between us entering the telephone business and their entering the video business, we really 

have to define the competitive world that cable operators live in 

today. I heard earlier a number of people make some comment that 

we don’t have any competition in our core business, and I can assure you, Mr. Whitfield, I wake up every morning thinking about 

what Dish Network and what DirectTV is going to do to us that 

day in Henderson, Kentucky and everywhere else that we operate, 

because they are extremely competitive. And the reason why people 

confuse the fact that we are not already in a competitive business 

is because they use a different platform. It would be the same 

thing as suggesting that Barnes & Nobles brick and mortar shops 

at the shopping mall don’t feel that they are competing with Amazon.com because they don’t have any bookshelves, but they sell the 

same books. We are already in a very competitive field. Going into 

the telephone business where there is a legacy network hooking 

into where over 80 percent—soon to be probably closer to 90 percent when these mergers are completed—of the telephone subscribers are hooked into the existing 100-year-old telephone monopoly infrastructure. We need certain rules in place in order to force 

the Bells, based on historical experience, to interconnect with us on 

a fair and economically sound basis for consumers to have choices. 

So I think there are some differences. The differences primarily are 

we are already competing with two, and in some cases more, competitors for our core video business, and there is very little competition in the phone business. That is where the failure in the previous acts had been, and that is what we have to work on making 

sure it takes root. 

Mr. WHITFIELD. Mr. Ellis, the——

Mr. ELLIS. Well, I just—quick couple points. It is pure fact that 

cable rates have been unconstrained. Everyone in this room can 

tell their own stories, but the facts are up 40 percent in the last 

98

5 years. They are unconstrained by whatever quote competition exists. The second point I would just make, that reverse is true in 

the telecommunications world. The rates have gone down on virtually every service that all providers offer. It is a highly competitive market. And the third thing I would say, if you want to talk 

about the difference between cable and telephony, we have an obligation to permit resale of our service, co-location, unbundling, and 

there is a whole laundry list. Cable has a completely closed system, 

absolutely closed. They don’t require or permit co-location. They 

don’t require or permit resale, and so on. Completely different 

thing. We are not asking to impose on them the legacy regulations. 

We are not asking that, never have. All we are saying is let us 

have the same rules apply to our entry into the cable, into the 

video service business, that they had when they came into telephony, and that is no legacy regulation applicable to them. 

Mr. UPTON. Mr. Boucher? 

Mr. BOUCHER. Thank you very much, Mr. Chairman. I have a 

microphone here. I am challenged by technology. In the wake of the 

Brand X decision by the Supreme Court which held that cable 

modem service is an information service and that unaffiliated 

Internet access providers do not have to be accommodated on the 

cable modem platform and in the further wake of the FCC’s new 

rule that applies that same principle to telephone companies supported broadband platforms, it is now clear that unaffiliated ISPs 

do not have to be accommodated on broadband platforms. And that 

brings into particular focus the need for a firm principle of network 

neutrality that would simply say that any user of the Internet has 

the right to access any website of his choosing and fully enjoy the 

services provided by that website without interference by the operator of the broadband platform. Now broadband platform operators 

are going to have some incentive to manage. They, for example, 

might want to favor their own content in competition with the context offered by the unaffiliated content provider. And the principle 

of network neutrality is designed to make sure that doesn’t happen, 

that there is no interference, that there is no favoring of the 

broadband operator’s content to the disadvantage of the unaffiliated content provider and to the disadvantage of the broadband 

platform’s customer. And so I have a couple of questions about this. 

Let me say at the outset, Mr. Ellis, that I acknowledge that when 

a broadband operator makes substantial investments in the network and deploys these facilities at considerable cost, that operator 

ought to have the assurance that he can deliver a reliable product, 

a high-quality product, whether it is VoIP or video, or something 

else, to the customer, and you have a right to expect that. On the 

other hand, because you are offering DSL service, your customer 

has a right to expect that some part of the capacity of that 

broadband platform is going to be devoted to his Internet access opportunities and that it be a considerable enough portion of the total 

capacity that when he wants to access an unaffiliated video provider, for example, there is still an opportunity for that signal to 

come in. And when he wants to access an unaffiliated VoIP provider, he can do that as well. And so my first question to you—and 

I want to engage also Mr. Mitchell, Mr. Putala and Mr. Krause in 

this conversation—but my question to you is do you acknowledge 

99

that basic principle, that you ought to be able to offer your service 

at high-quality, but your Internet customer ought to be able to 

reach any website and have sufficient capacity on your pipe in 

order to enjoy those services? 

Mr. ELLIS. Absolutely, and just so I am clear, if you obtain our 

service, you will have the ability to access the site of your choice 

over the public Internet, and we will not interfere with it in any 

way, as long as it is lawful content. I want to make it clear that 

is to be distinct from the provision of the video that will be completely segregated, kept apart from, the public Internet. 

Mr. BOUCHER. Right. I understand that. That is your business 

model. What about the capacity that will be available on your platform for the public Internet access part? How will that compare to 

the capacity that you are going to utilize for your closed video service? 

Mr. ELLIS. For individual customers, there is ample capacity that 

will be out there. That is not an issue. Today, you get 1.5 Megabits. 

We strive to provide that depending on where you are. We will 

have ample capacity, and if a customer wants more than 1.5, they 

want to go to 3, we will sell it to them. But I make clear to people 

in my simple way of looking at this, that there is three parts to 

this Internet. There is the part we provide from the house to——

Mr. BOUCHER. My time is limited, Mr. Ellis. I think you answered my question. Based on that answer, I assume you would 

not disagree with a requirement that you not unreasonably restrict 

the amount of capacity that is available for the DSL service you are 

going to be selling? 

Mr. ELLIS. In—our position on this, like so many other things, 

that heavy-handed regulation shouldn’t be there. It ought to be 

commercial terms negotiated with all providers. 

Mr. BOUCHER. All right. I see some heads shaking on the panel 

here. Let me engage Mr. Mitchell, Mr. Putala, Mr. Krause, if you 

would like to respond to what Mr. Ellis has said and perhaps address the general assembly. 

Mr. UPTON. Quickly. 

Mr. KRAUSE. Yes, I want to say something very quickly, which 

is Mr. Ellis makes an important point, which is there is a very important distinction between what is delivered on the public Internet compared to what is a managed service that uses Internet technology but is in fact more akin to the intranets that we all access 

today. So as long as there is a very clear distinction between the 

two, and a separation, logical or physical, between the two, this is 

critical to the delivery of the IP video service because otherwise you 

won’t get the content authored to you from the Hollywood studios. 

Mr. BOUCHER. And it is a capacity issue with regard to the public 

side of that, isn’t it? 

Mr. KRAUSE. Yes, it is. In fact, the public side of the Internet, 

the Internet is essentially a best effort service. So when we say we 

offer 3 Megabits, the subscriber doesn’t actually get 3 Megabits of 

sustained bandwidth. They get some very small percentage of that 

and it is allowed to peak. That is what is the Internet. The managed intranet is very different from that. It is actually a sustained 

guaranteed bandwidth so that the service provider can deliver the 

quality that the studio requires to deliver the content. 

100

Mr. BOUCHER. All right. Mr. Mitchell, Mr. Putala, would you care 

to comment? 

Mr. MITCHELL. I would have made the same comment as my colleague to my right, Mr. Krause. 

Mr. BOUCHER. All right. Mr. Putala? 

Mr. PUTALA. Absent a real commercial incentive, it is real hard 

to get to the deal that Mr. Ellis described. What we are concerned 

is not so much that they are going to block, but it is a question 

of prioritization and what happens within the guise of 

prioritization. If Mr. Ellis has got his own video packets and his 

own VoIP packets going over his switch, same customer—SBC customer for VoIP and for video and he always puts his VoIP packets 

ahead of his video packets—because that is what the technology requires—okay. That is fine. But if it is an EarthLink voice customer, 

let us make sure there is language in there to protect the fact that 

EarthLink customers, when their VoIP packets cross along on the 

same pathway, that they also get jumped ahead of the video packets so it is the same level of service, just for different customers, 

and that would——

Mr. BOUCHER. If there is adequate capacity on the public side 

however, that is not a problem, because over that adequate capacity, your VoIP service can travel, right? 

Mr. PUTALA. If it is——

Mr. BOUCHER. As long as it is adequate? 

Mr. PUTALA. As long as it is adequate, it is not a problem. 

Mr. BOUCHER. Okay. So my final question, Mr. Chairman—thank 

you for your——

Mr. UPTON. Be very quickly. 

Mr. BOUCHER. If I may, would the 3 of you who have just answered agree that some requirement that adequate capacity be reserved in these instances for the public side would be appropriate? 

Mr. UPTON. Yes or no? 

Mr. MITCHELL. Yes. 

Mr. ELLIS. Yes. 

Mr. BOUCHER. Mr. Krause? 

Mr. KRAUSE. Yes. 

Mr. BOUCHER. Okay. Thank you. Thank you, Mr. Chairman. 

Mr. UPTON. Mr. Shimkus? Strike him out. I just—as a deferral 

who has no opening statement gets 3 minutes. 

Mr. SHIMKUS. I know. I am going to be—I know everything that 

I want to be asked has been asked already. Just give me an idea, 

did we—did anyone ask any questions on E911 yet? Okay. I will 

just stay on that vein then because you all know that Anna Eshoo 

and I worked very diligently with the public responders in pushing 

enhanced 911. We all know that there is a concern about identification/location based upon VoIP. There is an expectation by the public, and that is an expectation this committee will want to fulfill. 

And I know there is, based on the opening statements which I was 

present for, I know that there is some concern technologically about 

the ability to do that. But, a statement, and then I will let people 

respond. I would just say that I—you can’t always speak for all 

members of the committee, but I think once we move a process, 

that the expectation that someone uses and calls 911 over any medium will have the expectation that people can know where they 

101

are at. And that is what I hope you all will address, and I will open 

it up to anyone who may want to comment on that. 

Mr. PUTALA. Congressman, knowing of your leadership on the 

911 topic, we at EarthLink are doing our level best to comply with 

all the very abbreviated deadlines that the FCC has asked us. I 

think we are at about 94 percent compliance in terms of letting our 

customers know. We have done repeated emails to try and let them 

know of the capabilities of the service. We are only going to be 

marketing the 911 service where the infrastructure allows it. And 

that raises an important point that is addressed in the draft about 

the central importance of making sure that there is non-discriminatory access to the 911 infrastructure controlled by SBC and others, 

and there is an important omission in the staff draft. I think I understand the reason, but I would be remiss not to note it, of ensuring the same kind of regulatory parody, the same kind of liability 

parody that has been—I think it was included in your underlying 

legislation, and we hope that at the end of the day, I hope that 

VoIP providers will have the same thing as wireless, wireline in 

terms of the liability protections. 

Mr. SHIMKUS. Anyone else? 

Mr. REHBERGER. Yes. Congressman, if I may, I agree on the liability portion of that bill. Very important for us. And then, second, 

we are fortunate in that our customers are businesses and they 

stay in one place, so we don’t have an issue. Although, we are 

working very hard with some of the VoIP providers who we—they 

use our underlying network to make sure that they can provide 

E911 services to their customers. 

Mr. SALAS. Congressman, I would just add that this capability 

will not happen by accident. It will require, I think, continued focus 

and development on standards to make this work I think the way 

you intend for it to work. 

Mr. SHIMKUS. Well, and we just got a great organization grouping caucus with both members on bipartisan members in the House 

and Senate, of course, and in the industry working well together 

that and we want to applaud that. Yes, ma’am, you wanted to say 

something? 

Ms. PRAISNER. Yes, sir. Thank you. I wanted to share that from 

my perspective and from the local government officials, obviously 

this is a critical issue as well, having our constituents and our consumers know that when they make that 911 call, it connects with 

the right place. My—some of the colleagues who have reviewed the 

legislation have raised some concerns about the fact that the legislation does not include an EASS video requirement for 911 so we 

obviously would want to work and look at that issue. 

Mr. MITCHELL. The only comment that I would make is just to 

note that there are distinctions in different types of VoIP services 

as I noted earlier, and to make certain that we don’t end up with 

something where click-to-calls for Xbox Live or similar kinds of 

uses of the technology somehow become burdened by E911 and 

similar obligations. 

Mr. SHIMKUS. Mr. Chairman, with that I want to thank the 

panel. I know they have been long-suffering and I appreciate them 

being here, and I yield back. 

Mr. UPTON. Mr. Inslee? 

102

Mr. INSLEE. Thank you. Mr. Ellis, I wanted to ask you about—

Mr. Boucher’s last question was a question of, basically, should 

there be a maintenance of some minimal level of public access—access to the public Internet over these pipes, and the other folks answered yes, and your comments, as I understood them, were helpful in that regard. And that is why I appreciate you being here 

today to expound on them. But, if you could really clarify a little 

bit what you see where your vision is in that regard, providing consumers with level or levels of access to public Internet. You made 

a reference that if there was a larger amount available, you would 

sell it to them, I presume, for a higher price. I guess the question 

is I have, do you envision some regulatory or statutory minimal 

level of access to the public Internet over your pipes, and if there 

is a minimal level, do you envision tiers where you would sell for 

additional cost this additional level of service as far as just—I don’t 

know—the pipe you take up. 

Mr. ELLIS. I guess my personal vision of how this service—our 

service will work is like this. We will provide, using these facilities, 

a video alternative—that is one piece the facility will use for that. 

In addition, we will provide to our customers the same thing we 

have today, that is the capability to access the public Internet and 

the content of their choosing. That is how I envision this going forward. I think as a practical matter, a level of 1.5 Megabits that we 

offer today with DSL, there will be many, many people who will 

want more, and we will offer that. Will there be an additional 

charge? Sure. The more bandwidth they want, the more the charge. 

But I would—the point I tried to make earlier, your focus—and the 

focus is on one-third, the point from the house to the backbone. 

Then there is the backbone, and there are 17 or 18 backbones and 

it goes all over the world. And then there is the downside. We control and offer one-third of that. We assure quality 1.5 Megabit, or 

try to. But what happens on the rest of that Internet, the lowest 

common denominator is the flow-through that a person gets, and 

the dissatisfaction, I submit, that is going to grow as more applications, more sophisticated, is not going to be solved by focusing on 

one-third. It is going to be the other two-thirds as well. I don’t 

know if that helps, but that is where my personal view of the focus 

of the future and where everybody is going to have to invest in the 

infrastructure. Not just the ILECs, not just the cable people, but—

the applications providers, to make sure that entire flow-through 

gives the kind of quality that will support the kind of applications 

that are out there. 

Mr. INSLEE. And what effects of this bill would you encourage to 

look at in that regard to encourage those investments on the other 

part? 

Mr. ELLIS. I am—as I said, there are probably things if I had 

written this bill or draft, I would have done differently, but we are 

happy with the bill in its present form. 

Mr. INSLEE. Thank you. Mr. Mitchell, I wanted to ask you, just 

continuing talking about net neutrality, do you think there are any 

providers of broadband Internet access that should be exempted 

from net neutrality, or should this be a universal principle? 

Mr. MITCHELL. I think we have been pretty clear that we view 

the net neutrality as pretty much a universal principle for proVerDate 0ct 09 2002 12:11 May 08, 2006 Jkt 000000 PO 00000 Frm 00106 Fmt 6633 Sfmt 6602 F:\DOCS\26998.TXT HCOM1 PsN: JOEP
103

viding Internet access to consumers across the board. You know, 

with—that has been the basis of the Internet success today. In fact, 

I think Vint Cerf today, the father of the Internet as perhaps we 

know it, is receiving a Presidential Medal as a result of, you know, 

getting us to this point. These principles of being able to go anywhere and use whatever content, clearly within the limits of the capabilities of the devices you have—my phone doesn’t do as well as 

my PC on the Internet—but that is a universal principle that 

should be applied. 

Mr. INSLEE. Thank you. Thanks, Chairman. Yield back. 

Mr. UPTON. Yes, before we yield to Ms. Blackburn, I just want 

to make two unanimous consent requests. One from Mr. Ferguson 

to put in a statement from ADC Telecommunications and one from 

Mr. Markey to enter in a Vint Cerf, founding father of the Internet—I thought that was Al Gore. Put a letter in from him as well. 

Without objection? 

Mr. MARKEY. Mr. Chairman, could I briefly be recognized, and 

because Mr. Mitchell made reference to Vint Cerf, and he is receiving the Medal of Freedom today, and his letter to us, as Mr. Mitchell said, says to us today, ‘‘My fear is that as written, this bill 

would do great damage to the Internet as we know it. Enshrining 

a rule that broadly permits network operators to discriminate in 

favor of certain kinds of services and to potentially interfere with 

others would place broadband operators in control of online activity. Allowing broadband providers to segment their IP offerings and 

reserve huge amounts of bandwidth for their own service—that is 

SBC—will not give consumers the broadband Internet our country 

and economy need. Many people will have little or no choice among 

broadband operators for the foreseeable future, implying that such 

operators will have the power to exercise a great deal of control 

over any applications placed on the network.’’ I ask that it be included in the record. 

Mr. UPTON. Good. Without objection. 

[The information referred to follows:]

104


26998.021
105


26998.022
106


26998.023
107


26998.024
108


26998.025
109


26998.026
110

Mr. UPTON. Ms. Blackburn? 

Ms. BLACKBURN. Thank you, Mr. Chairman, and I am glad you 

have this statement from ADC Telecommunications. I was going to 

ask for that permission and I will not make a comment about Al 

Gore being the father of the Internet, saying as Tennessee—Ms. 

Praisner, I think I would like to come to you, please. In your testimony under Roman Numeral VI.1, you say that everyone loses because local governments will not have proper management of their 

streets and sidewalks, and I will have to tell you I am pretty disappointed in hearing that come from you because it looks disingenuous. But, I want to tell you that I think that this, in no way, undermines the ability of cities to manage their rights-of-way, and I 

think you can go to page 61 of the bill, Section 406, and see that 

it specifically states that you will ‘‘continue to retain explicit authority to manage your rights-of-way.’’ Mr. Putala, to you, please, 

sir. I imagine a lot of this, you are sitting there thinking they are 

fighting over franchise fees and everything is going to go wireless 

so it is a debate that is going to be out there at some point in time. 

Very quickly to you because time is limited and we are going to 

have a vote and others have questions, your project on the 

EarthLink municipal networks that you were doing with Wireless 

Philadelphia, I would love to have from you, if I could please, sir, 

something about cost, about the revenue that you will pay to the 

wireless Philadelphia Project to help bridge the digital divide, and 

what you see as the cost-savings—the amount of time that you will 

save in putting that network up over that 135 square mile area, 

and then also what you think the savings overall will be for the 

community. And I will not ask you to expand on that right now, 

but I will ask you to submit that to us. 

Mr. PUTALA. It is fine. I can give you very briefly. $15 to $20 million of capital expenditures on our nickel. We will be sharing hundreds of thousands of dollars with Wireless Philadelphia to provide 

computers and others to the lowest income Philadelphia residents. 

We will be charging a retail rate of somewhere in the neighborhood 

of $20. We are going to charge a wholesale rate that will be available to anybody who wants to bring customers to our network for 

about half that, about $10. That same $10 half-price offer will be 

available to lower income Philadelphia residents. The speeds will 

be about 1MB up and down, which is faster than the slower 

versions of DSL, but slower than the faster versions. 

Ms. PRAISNER. Okay. But no franchise fees and fussing over 

right-of-way, right? 

Mr. PUTALA. We operate on God’s Highway, but I will note——

Ms. BLACKBURN. So I will tell you what, I am going to tell you, 

sitting here, listening to this and being a Tennesseeian, I think if 

we were discussing the Federal interstate highway system, that 

there would be somebody out here trying to reserve a lane for 

horses and buggies, I tell you. The status quo is there are some 

who are trying to preserve that. Ms. Praisner, I want to come to 

you, if I will. Ma’am, if I have a question——

Ms. PRAISNER. Okay. 

Ms. BLACKBURN. [continuing] if you would let me——

Ms. PRAISNER. Oh. 

Ms. BLACKBURN. [continuing] ask the question——

111

Ms. PRAISNER. Sure. 

Ms. BLACKBURN. [continuing] for you. Under Roman Numeral 

VI.3, you state community needs are essentially abandoned, and it 

is my understanding that the committee draft requires any new entrant to meet those needs and provide the PEG channels, and I believe that new entrants may even provide more. Coming from an 

area where there are plenty of content producers, they are probably 

going to provide more in order to entice consumers to choose their 

products, so I would like for you to very quickly, in 30 seconds, tell 

me how you think this abandons community interests. 

Ms. PRAISNER. Well, we are talking about two different things. 

You are talking about what you may offer as a commercial provider 

to entice someone to subscribe. I am talking about the franchise 

process which allows a local government to identify what are the 

community needs through the franchise process. And then in the 

process——

Ms. BLACKBURN. Okay. If—is that what you mean by meeting social obligations? 

Ms. PRAISNER. Yes. 

Ms. BLACKBURN. Because you have mentioned that you think 

there needs to be fair compensation through social obligations to 

the community, and that is under point 4 of your testimony. So if 

you want to submit something in writing to further explain what 

you see as the social——

Ms. PRAISNER. I——

Ms. BLACKBURN. [continuing] obligation——

Ms. PRAISNER. [continuing] would be more than——

Ms. BLACKBURN. [continuing] in addition to the——

Ms. PRAISNER. [continuing] happy to. 

Ms. BLACKBURN. [continuing] franchise fee and the——

Ms. PRAISNER. And I will also provide testimony in response to 

your comments about page 61——

Ms. BLACKBURN. Okay. 

Ms. PRAISNER. [continuing] I discuss when you——

Ms. BLACKBURN. That will be wonderful. Another thing, in your 

testimony, point two, footnote four, want to go there because you 

say, ‘‘let there be no mistake, local governments want competition 

as fast and as much as the market when some States will—laws 

will sustain.’’ There is a footnote there, footnote 4, and when I went 

to the footnote, you discuss level playing statutes and that also 

some cable franchises contain these provisions as contractual obligations on local governments. Now, my question to you is this, are 

you hearing from your members who would like to offer an additional cable franchise that might not be identical but they are prohibited from doing so because of the level playing field laws or any 

competitive contracts that cities might have signed simply to try to 

get a cable provider into their area? And I would assume that you 

are hearing what you are hearing from your members who want 

some relief from anti-competitive laws like these, that you are 

probably hearing from them, too. So when can this committee—

when can you get me some data from your organization to document the scope of the problem as you see it, and let us know how 

many cities want to offer an additional franchise but are reluctant 

to do so out of fear of being sued and pulled into court and having 

112

to spend taxpayer money to defend themselves simply because they 

want to offer one service? If you will, please submit that. And I am 

out of time. I am over. Thank you and I yield back. 

Mr. UPTON. Mr. Gonzalez? 

Mr. GONZALEZ. Thank you very much, Mr. Chairman. My apologies for being absent for much of the testimony. The—but I assure 

the witnesses that we have your written statements and, along 

with staff, we closely go over those. My question will be to Mr. 

Ellis, and the second question to Ms. Praisner. Mr. Ellis, of course 

we have the Texas experience. Texas Senate Bill 5 regarding franchise authority that was passed recently, and I would like to know 

what SBC has done under that particular legislative scheme. Of 

course, we are looking at it at the Federal level in preemption, but 

what has SBC done. And if you will also go over the chronological 

order of when that bill was actually passed and when you all have 

submitted an application and where we are today. And then I, 

quickly, Ms. Praisner, wanted to tell you about what I am already 

receiving from the city of San Antonio questioning the FCC’s authority, or their interpretation that this proposed draft allows the 

FCC to take over basically disputes that—as far as right-of-way 

disputes and the concerns. And I apologize again if you have gone 

over that, but those are the questions. Mr. Ellis, I appreciate it. 

Mr. UPTON. You need to turn that mike back on. There is a button there someplace. 

Mr. ELLIS. As you indicated, Congressman, the Texas legislation 

was passed about 60 days ago, and since that time, we have filed 

our initial application for the city of San Antonio, 22 communities, 

essentially the entire metropolitan area of San Antonio. We will—

that was recently approved. I think in the last week we got the 

Texas Commission’s approval, and we will go forward with deployments starting in December will be our initial trial. We will start 

offering commercial service sometime in the middle of the year. 

Was there some other—we intend to go—we intend, in a 3-year period, to offer video services to approximately half our customer 

base, about roughly 18 million customers in 3 years. 

Mr. GONZALEZ. Okay. Well, thank you very much, Mr. Ellis. I 

just wanted to point out under the Texas experience and that SBC 

and other similarly situated companies are wasting no time obviously to go through the license application, which has been streamlined. Obviously, you have a State standard now. And then to offer 

those services. I know that legislation was promoted, and just that 

it is being taken advantage of. And then to Ms. Praisner? 

Ms. PRAISNER. Yes, sir. The concern that the Texas municipalities have raised is what happens within the dispute process, and 

with the issue of having to go to the FCC when—and having the 

FCC in essence be court of last resort as opposed to the court process which exists at this point. So I think that is the concern that 

they were raising to you and the concern that has been raised. We 

have very little experience obviously with the Texas legislation at 

this point, and hope that SBC will allow us, as they said—I am not 

sure if it is 18 million households, what percentage of the population that is as well. That is the other issue we raised. 

Mr. GONZALEZ. Let me ask you, Ms. Praisner, real quickly—I do 

have a little bit of time left. When it comes to right-of-way disputes 

113

and anything that is, I guess, supplanted by, you know, Federal authority where you have the FCC actually being the final arbiter of 

any—is there anything similar to that in any other municipal 

scheme where you would have a Federal agency of this nature that 

would come in and actually act in that capacity? 

Ms. PRAISNER. No. I just checked with folks behind me because 

I couldn’t think of any. Not that I am aware of. 

Mr. GONZALEZ. All right. All right. Thank you very much. I yield 

back the balance of my time. 

Mr. UPTON. Mr. Bass? 

Mr. BASS. Thank you, Mr. Chairman. And, like my friend from 

Texas, I want to apologize for not having been here for a lot of the 

hearing. It has been a very busy day. But this is an exceedingly 

important hearing on a very important bill, updating telecommunications. The bill is complicated and there may be some issues involving its interpretation, how it would be—how it would work. I 

hope that my friend from Michigan, the Chairman, will be—will 

have a prudent go-slow attitude about this and that we don’t move 

overly expeditiously so we make sure we know what we are doing, 

because we know from the Act of 1996, there are problems that 

came about which might have been resolved had we made a few 

little corrections. As I said a minute ago, or I started to say a 

minute ago, that one of the flaws of the 1996 Act was that in some 

instances it failed to provide the FCC the authority to issue some 

of the rules that were needed to enact their interpretation of what 

Congress intended, and ultimately the legislation itself was sufficiently obscure on its own to cause telecommunications policy process to include what basically became routine visits to the judicial 

branch, and basically slowing down the progress of telecommunications growth. I am sure this provided plenty of work for telecommunications lawyers, but it has been one of my—one of the two 

objectives that I have had in approaching this legislation, that it 

provide the business community and the providers with regulatory 

certainty and avoid this routine of—circle of going to court every 

time the FCC makes a decision. My question to the panelists are 

are there any specific areas in this staff draft that we are looking 

at today that you think will cause more litigation, either through 

uncertainty, the incumbent providers in industry looking to draw 

out maximum benefit or actual confusion on the legislative intent? 

In other words, uncertainty, incumbent providers in industry looking to draw out maximum benefit or actual confusion on the legislative intent? Yes, sir. 

Mr. REHBERGER. I may be repeating myself for the other members, but since you asked the question, I pointed out that separating the technology—packet-switching technology, circuit-switching, voice versus data, to me creates a whole set of questions and 

a whole set of interpretations that the telecommunications lawyers 

will gladly debate for years to come if the bill is enacted like it is. 

Our company, as I have mentioned, we sell data, voice, Internet, 

VoIP-type products all in one. I wouldn’t know which regulations 

apply and which didn’t. I wouldn’t know if the co-location obligations that the ILEC had under the 1996 Act would apply to me now 

as a circuit-switch or a packet-switch or a BITS player. I wouldn’t 

understand if the ILECs would continue once they were BITS playVerDate 0ct 09 2002 12:11 May 08, 2006 Jkt 000000 PO 00000 Frm 00117 Fmt 6633 Sfmt 6602 F:\DOCS\26998.TXT HCOM1 PsN: JOEP
114

ers to have to offer special access tariffs. So I think that is the area 

that is most confusing, and I will say it again. I think for some reason the—there has been a long hard battle, as you have alluded to, 

since that Act in every major level of judiciary, and I think we have 

gotten to a point now where neither is happy, and maybe that is 

the point we will stay. I think this is going to open up, again, the 

wound and create a lot of—a lot more time in the courts. 

Mr. BASS. Anybody else? 

Mr. WILLNER. If I could just expand on that a little bit. We 

talked a little bit earlier about network neutrality issues, which is 

a subject that is really in fact being governed by the marketplace 

today. I mean, I don’t think my company, I don’t think Mr. Ellis’ 

company, would commit marketing suicide by doing things to consumers that other people aren’t doing. The question then is really 

is there a need for preemptive legislation for a problem that doesn’t 

yet exist, and in fact the marketplace will probably govern much 

more effectively, which will then give a lot of litigators, a lot of regulatory attorneys the opportunity to try to reinterpret what network neutrality really means under any statute that was trying to 

be preemptive in the first place. So it is solving a problem that 

doesn’t exist, and therefore—there is language that is ambiguous 

because we don’t know exactly what we are solving for, and is it 

really not something that should be dealt with if the problem 

should develop in the competitive world? 

Mr. ELLIS. Congressman, I would only add that the Telecom Act 

of 1996 was billed as a deregulatory act. That was its promise. The 

summer of 1996, FCC came out with its first order. It was 700 single-spaced pages. It had 1,400 footnotes, and since that time, there 

have been literally thousands and thousands of rules and regulations to implement that deregulatory act. Any time you replace a 

marketplace with rules and regulations, there will be litigation. 

Mr. BASS. So you think this bill is overly regulatory? 

Mr. ELLIS. I think it is to a degree, but as I have said, we support the bill. We understand the pragmatic situation, and it is 

probably the best that we can do. 

Mr. BASS. All right. I yield back. 

Mr. UPTON. Gentleman’s time has expired. Mr. Radanovich? 

Mr. RADANOVICH. Thank you, Mr. Chairman. I, first of all, want 

to thank the Chairman and the committee staff for your hard work 

and leadership on providing this draft and moving the process forward. However, the draft legislation before us is silent regarding 

digital content protection, and in fact some content owners are concerned that Section 104 of the discussion draft might even impede 

the ability to work cooperatively with BITS and BVS providers to 

implement anti-piracy measures. My question, when I get through 

with this, will be for Mr. Ellis. I think I would like to get your opinion on this. The imperative of protecting copyrighted work, both for 

the sake of the individual artist and the continued growth of our 

economy, requires that BITS and BVS providers be given unambiguous authority to take preventative and other measures against infringing activity by subscribers that are intent on breaking the law. 

This might mean requiring its devices used to connect to their service include copyright protection technology, or being able to block 

access to peer-to-peer networks, overwhelmingly used for infringeVerDate 0ct 09 2002 12:11 May 08, 2006 Jkt 000000 PO 00000 Frm 00118 Fmt 6633 Sfmt 6602 F:\DOCS\26998.TXT HCOM1 PsN: JOEP
115

ment, or even terminating the service of subscribers who are repeat 

infringers. I would appreciate—Mr. Ellis, can you tell me your 

views on this matter, and whether or not you would agree with 

suggestions for clarifying the authority of service providers to employ anti-piracy measures? 

Mr. ELLIS. Our position is very clear. This came up in our company with respect to the copying of the songs and all of that. We 

went to court rather than be the policeman of that. We are not in 

a position—don’t want to be in the position of blocking access to the 

content. On the other hand, if somebody is doing something against 

the Law, then we would be—we would support and facilitate somebody else in enforcing those rights. We don’t want to be the policeman. We don’t want to block our customers access. 

Mr. RADANOVICH. You don’t want to be the cop and I understand 

that, but you do support legislation that would fix that? 

Mr. ELLIS. Yes, we would be supportive of that. 

Mr. RADANOVICH. Okay, thank you. My second question is for 

Ms. Praisner. Thank you for being here today. I do want to draw 

on your statement that local government will never agree that local 

franchise process has been impeded by—has impeded video competition. The New York Times recently suggested that there were 

33,000 local franchise authorities in the United States, and the 

Wall Street Journal recently reported that Verizon alone has 

launched franchise negotiations in about 300 communities for its 

new video service, but has only secured about 14. That article also 

reports that in some of those communities, budget strapped local 

officials are greeting Verizon with expensive and detailed demands, 

including in New York State where Verizon faces requests for seed 

money for wildflowers and a video hookup for Christmas celebrations. Holliston, Massachusetts is seeking free television for every 

house of worship. Others want flower baskets for light poles, and 

that is just a few of about—of what the 300 communities in which 

Verizon is attempting to secure franchises. It says nothing about 

any of the other 32,700 franchise authorities across the country 

and their possible requests. So my question is, in light of those examples from the Journal article, will you still never agree that the 

local franchise process has impeded video competition, the very 

same video competition that you stipulate reduces cable rates and 

enhances services? 

Ms. PRAISNER. Yes, sir, I will still never agree because the information in those articles is just not factually correct, and I do have 

the information that can respond to those. We did go out and find 

information. There is a provision within the Massapequa Park, 

which is in New York, franchise agreement for capital support payment for $27,000, which is the same as a cable provider, but there 

is no provision for any kind of planting of wild flowers. There are—

and I can tell you from my experience as a member of the Local 

State Government Advisory Committee for the FCC. We found ourselves in the same situation with cable—with cellular tower and 

with the rollout of digital television. Continuously the FCC would 

hear of accusations, outrageous statements of what local government was requiring, and, in fact, it led us to ask the FCC to have 

the applicants or the complainant notify—formally notify a local 

government when its name was used so that the local government 

116

would have an opportunity to provide the facts. And in every situation that we have dealt with at the local-state government level 

with the FCC, the facts turned out to be on the local governments’ 

side. So we are trying to respond to the Wall Street Journal, and 

we will—hope to do so. It depends upon whether the Wall Street 

Journal will print our article. And we are also trying to respond to 

the New York Times. 

Mr. RADANOVICH. If you could——

Ms. PRAISNER. I did——

Mr. RADANOVICH. [continuing] provide the response to the committee——

Ms. PRAISNER. I will be more than happy to do so. Let me just 

say that——

Mr. RADANOVICH. Actually, I am out of time. 

Ms. PRAISNER. Oh, okay. 

Mr. RADANOVICH. Thank you very much. 

Ms. PRAISNER. Thank you. 

Mr. RADANOVICH. Thank you, Mr. Chairman. 

Mr. UPTON. I will note that a reporter from the Wall Street Journal just left the room before you answered that question, so——

Ms. PRAISNER. Time——

Mr. UPTON. I don’t know if they wrote this—if he is the author 

of that story or not, but I will—I am sure he will be looking for 

some of us a little bit later. I am going to give 1 minute since there 

are not Democrats that have not asked questions. I am going to 

yield 1 minute to Mr. Markey to ask a final question——

Mr. MARKEY. Thank you. 

Mr. UPTON. [continuing] and then I will——

Mr. MARKEY. Thank you. 

Mr. UPTON. [continuing] proceed. 

Mr. MARKEY. Thank you, Mr. Chairman. Mr. Ellis, I just want 

to clarify, I think that what you are saying is that when you are 

offering access to consumers to the public Internet, that consumers 

can go where they want and access any lawful Internet content, 

but that the broadband video service is not necessarily going to 

offer consumers access to the public Internet per se. Is that correct? 

Mr. ELLIS. That is pretty close. 

Mr. MARKEY. Okay. Thank you. That helps us to understand the 

playing field on this. And, Mr. Mitchell, in your testimony, you say 

we have heard that part of the reason for excluding BDS providers 

from Section 104 stems from a concern for spam or viruses. Let me 

start by saying that we respectfully disagree with that claim as a 

technical matter. 

Mr. MITCHELL. As a technical matter, that refers to whether or 

not it is possible to combine an access to the public Internet with 

a private-managed service on the same device. And as a technical 

matter, it is possible to do that. 

Mr. MARKEY. And so on that, you would disagree with——

Mr. MITCHELL. Right. 

Mr. MARKEY. [continuing] any assertions that that would be a 

technical obstacle. 

Mr. MITCHELL. There are examples of things that do that today. 

We have had MSN TV2 which is a product that is in the market 

that delivers the public Internet service to a television set. I think 

117

the issues that Mr. Ellis has referred to regarding the ability to negotiate for content rights on a private-managed network are legitimate issues, that is they are legitimate business concerns. But 

purely as a technical ground, is it possible to do this in a secure 

manner? Yes, it is possible to do it in a secure manner. 

Mr. ELLIS. That is right. 

Mr. UPTON. Your 1 minute is rapidly finishing up. Mr. Krause, 

did you want to respond? Do you agree with that? 

Mr. KRAUSE. Yes, we have a much more conservative view on 

that, probably, than my colleagues at Microsoft. We have a lot of 

experience around the world where there are other IP video deployments going on. We are very mindful of the security issue and we 

spend a lot of time on it. In fact, you know, we all know our PC 

experiences here, don’t have to be reminded of them, but I will say 

that it is a very important point with the content community. 

There are real security issues if you bring the public Internet into 

convergence with the intranet. Our companies don’t let us do it. 

You don’t have it on your laptop. It is a big issue and you probably 

open yourself up to some very serious security issues if you combine the functionality of one——

Mr. MARKEY. If the content community did not object, would 

there be a problem in sending it through? 

Mr. KRAUSE. If the content——

Mr. MARKEY. If the content community did not object, Mr. 

Krause. 

Mr. KRAUSE. I am not such a big fan myself of the content communities so to speak, but the customers will object because you 

have the difference between your PC experience being a one-on-one 

experience, and I can deal with being—getting a pop-up ad on my 

PC about Viagra——

Mr. MARKEY. You just said people—you couldn’t do it because the 

content community wouldn’t let you, and now I am proposing that 

they do let you, and you are saying, well, I am not a big fan of the 

content community. Well, they are on your side now. They are saying they will let you do it, and now you are saying you still won’t 

want to do it, and I think that is the real problem, and I——

Mr. KRAUSE. No, I——

Mr. MARKEY. [continuing] am siding with Microsoft on this one. 

Mr. KRAUSE. They have a valid——

Mr. MARKEY. I think Microsoft and the rest of these companies 

are all closer to the truth than you are, Mr. Krause. 

Mr. UPTON. I think we will finished this conversation another 

time. 

Mr. KRAUSE. Okay. 

Mr. UPTON. Mr. Stearns? 

Mr. STEARNS. Thank you, Mr. Chairman. Mr. Ellis, let me ask 

you a question. You have been out there with deployment and fiber 

technology over the last several years. Let us say we don’t pass a 

bill here and we do nothing. You are not going to stop, are you? 

I mean, you are going to continue going forward, are you? Aren’t 

you, or now you are not? 

Mr. ELLIS. We are not going to stop. 

Mr. STEARNS. Right. So, I mean, whether we pass a bill or not, 

companies like yourself will still continue deployment? 

118

Mr. ELLIS. We are going to continue deployment. 

Mr. STEARNS. Okay. 

Mr. ELLIS. Will we do it as fast? Will it be as wide-spread? I gave 

you examples. 

Mr. STEARNS. That is the question. 

Mr. ELLIS. It is going to be 40 years at one a week. That is what 

it is going to take if we negotiate one franchise a week. I mean, 

you know, we don’t want that. We want clarity, certainty——

Mr. STEARNS. Okay. We got——

Mr. ELLIS. Let us say this bill doesn’t——

Mr. STEARNS. What is your 5-year plan for deployment? 

Mr. ELLIS. What is what? 

Mr. STEARNS. 5-year plan for deployment? 

Mr. ELLIS. We have a 3-year plan. 

Mr. STEARNS. What is your 3-year plan? 

Mr. ELLIS. We are going to go 3 years to half the homes in our 

operating territory. 

Mr. STEARNS. And how big——

Mr. ELLIS. 50 percent in 3 years. 

Mr. STEARNS. [continuing] is that? How big is that? 

Mr. ELLIS. How big is that? It is 18 million homes. 

Mr. STEARNS. In 11⁄2 years? 

Mr. ELLIS. In 3 years. 

Mr. STEARNS. In 3 years, okay. Uh-huh. Uh-huh. 

Mr. ELLIS. That is our game plan. If we don’t get this legislation 

or get a Texas-type in each of our States——

Mr. STEARNS. Okay. Now, let us say we do pass this legislation 

and it is pretty much like you like, what will your 3-year plan look 

like then? 

Mr. ELLIS. Without the legislation? 

Mr. STEARNS. With the legislation. 

Mr. ELLIS. With the legislation? Well, we are going community 

by community with the initial places——

Mr. STEARNS. Well, I am just—Mr. Ellis, I am just trying to get 

a contrast between what your 3-year plan is without this legislation and what you perceive your 3-year plan would be——

Mr. ELLIS. If it——

Mr. STEARNS. [continuing] with this legislation. 

Mr. ELLIS. If we do not have this legislation, we will deploy first 

in Texas because we have the State statute that lets us deploy 

without going through the franchise process. We will go to every 

single place we can in Texas first, and that is roughly about 40 percent of our homes. That is an estimate. That is where we will go 

first, and then we will go to the next State that passes a legislation 

if there is——

Mr. STEARNS. So you will go State by State? 

Mr. ELLIS. Yes. 

Mr. STEARNS. Okay. Mr. Putala, Mr. Rehberger has a quote here 

that staff has put in place and I will just quickly read it. ‘‘The assumption in the bill that those who want to compete in offering 

communications services to business/residential customers can simply build their own network is mistake due to basic economic realities.’’ So I think Mr. Rehberger went on to say that a rational marketplace would never undertake such an effort, but, I think, Mr. 

119

Putala, the question is isn’t EarthLink going to—actually doing 

this right now? And what would be your response to his comment? 

Mr. PUTALA. We would note that we are trying to build out a new 

WiFi municipal network. They are working in partnership with cities around the country. But, we still rely on commercial arrangements with folks like SBC so that we can reach the vast majority 

of our members. The municipal WiFi initiatives are literally—we 

don’t break ground in Philadelphia for another few months. We are 

trying to build out these new networks to have new options, new 

pipes, to more homes, which I think improves everybody’s market 

conditions. 

Mr. STEARNS. Would I be fair to say though, based upon what 

you are doing in Philadelphia, that you are sort of contradicting 

what Mr. Rehberger says or not? Do you agree with him or disagree with his statement? 

Mr. REHBERGER. Might I clarify? 

Mr. STEARNS. Well, I am going to give you a chance. 

Mr. REHBERGER. Okay. 

Mr. STEARNS. I am just trying to put it to Mr. Putala——

Mr. PUTALA. I don’t——

Mr. STEARNS. So he basically says that you are irrational for 

doing this because it doesn’t make economic sense——

Mr. PUTALA. Well——

Mr. STEARNS. [continuing] yet I think you are doing this—

EarthLink is doing this in Philadelphia. 

Mr. PUTALA. COMCAST also said we were irrational for doing it 

in Philadelphia. 

Mr. STEARNS. Okay. 

Mr. PUTALA. But it is going to be a challenge. It is going to be 

hard, and I think that we are years away from having the same 

kind of ubiquitous connections to—with multiple pipes to 

everybody’s home——

Mr. STEARNS. So you agree with him then? You would agree with 

him or disagree with him? 

Mr. PUTALA. I would agree with him that the challenges of building out new networks are significant indeed. 

Mr. STEARNS. Okay. Mr. Krause, my understanding is that 

Alcatel’s services as a vendor for WiFi and other wireless systems. 

You have services for these. Do you agree with Mr. Putala and Mr. 

Rehberger in billing out these particular WiFi systems? 

Mr. KRAUSE. There are a number of technology domains in which 

we are involved, both wireless and wireline, so we are involved 

in——

Mr. STEARNS. Yes. 

Mr. KRAUSE. [continuing] the WiMax partnership. 

Mr. STEARNS. Does it make economic sense for you to do this? Do 

you sort of feel it does make economic sense, or are you saying that 

you perhaps agree with Mr. Rehberger and perhaps with what Mr. 

Putala’s saying, it just makes no economic sense, but they are still 

going ahead. I mean, what is your position here? I mean, can you 

come out——

Mr. KRAUSE. On the wireless? 

Mr. STEARNS. Yes. 

120

Mr. KRAUSE. Yes, on the wireless side, especially given the recent 

movement on the digital television transition so that we are opening up some spectrum. There are some great technologies becoming 

available that will make reasonable business cases possible for delivering certain kinds of service over wireless networks. 

Mr. STEARNS. Okay. Mr. Salas? Here you are at Verizon Wireless 

and how do you feel about this? Do you think there is economic reality you are not paying attention to, or are you able to go ahead 

with WiFi wireless services? 

Mr. SALAS. We have evaluated WiFi and what it takes and what 

it can provide and we have not found what we thought to be a compelling business case, and so we continue to watch. I have built a 

number of networks in my career. It is complicated. It is difficult. 

And there definitely is no free ride here, so I am anxious to see 

how others here pull this off and actually deliver a working system. 

Mr. STEARNS. Okay. Mr. Rehberger, I will let you have the last 

word on that. 

Mr. REHBERGER. Well, the essence of my comments really related 

to a ubiquitous network around the country, similarly situated to 

what the Bell companies have today, not only for consumers, but 

businesses, and my only point was this is why we need for competition. We need network sharing and we need network sharing with 

the right regulatory framework so that companies like ours and 

others like ours can share the network that—somebody used the 

word 100-year monopoly, okay, it took to get the Bells to build that. 

Nobody is going to build that same network again. Clearly, in certain cities, even in certain towns, there is an ability based on the 

geography, based on even the atmospherics, okay, in terms of using 

wireless, where there is an ability that you can build out certain 

pockets. But just as an example, you know, if a cell tower has—

and I don’t know these terms—but a cell tower might have two, or 

three or four T-1s with a service and cover a few city blocks. There 

are probably a thousandfold times worth of telecommunication 

packets in voice that would—that you could never service with a 

cell tower. So you are going to need fiber. You are going to need 

landlines. And you are going to need access, okay, to the last mile 

to the customer. And that is the issue from a telecommunications 

standpoint. We think this bill somehow—this, you know, this idea 

that if you become a packet provider, you no longer have the uniaccess which was under the Telecom Act of 1996, and there are implications that Bell companies can take away or have the ability 

not to offer even special access tariffs. It takes the competitors out 

of business. And those are the protections that caused the innovation and price cutting that Mr. Ellis mentioned at the beginning of 

his testimony. It wasn’t the R Box that voluntarily cut prices. It 

wasn’t the R Box that rolled out new technology. It was the vendor, 

it was the companies like ourselves in the early days like MCI and 

later on the Celex, that really brought to fore this technology 

change you are seeing today. 

Mr. UPTON. Thank you. Ms. Cubin? 

Mr. STUPAK. Mr. Chairman, what about this side? 

Mr. UPTON. Everybody has had questions there. These members 

have not asked any questions yet. You have asked 5 minutes, 

right? 

121

Mr. STUPAK. Right. But I thought you said you were going to add 

1 minute. 

Mr. UPTON. Well, Mr. Markey asked for 1 minute to clarify an 

earlier question. 

Mr. STUPAK. Okay. And then I will ask——

Mr. UPTON. You have——

Mr. STUPAK. [continuing] for 1 minute to clarify a question I 

asked earlier after Ms. Cubin. 

Mr. UPTON. Okay. Ms. Cubin? 

Ms. CUBIN. Thank you, Mr. Chairman. I—everything I do here 

has to do with rural America and trying to make sure that rural 

America is served as well as urban America, and that we have all 

of the same benefits. Mr. Mitchell, I would like to start with you, 

and you said that you are providing broadband video software and 

equipment to Comcast, Verizon and to SBC. Do you have any rural 

customers right now? 

Mr. MITCHELL. We do not. Actually, just for clarification, we 

don’t supply equipment, just software. 

Ms. CUBIN. Oh, just software? 

Mr. MITCHELL. And at this point, our customers—our announced 

customers are Comcast, Verizon and SBC in this country. 

Ms. CUBIN. Realistically, can mid- or small rural companies buy 

your technology today? 

Mr. MITCHELL. Yes, absolutely. The——

Ms. CUBIN. Now, realistically? 

Mr. MITCHELL. Realistically, our technology is in the—the IP 

technology is in the early roll-out stages, and it will take some time 

to scale that out, but ideally we would like every operator to be 

able to take advantage of the software and to be able to support 

them in that role-out. 

Ms. CUBIN. Well, ideally, I would like that too, and I will be 

watching. 

Mr. MITCHELL. Yes. 

Ms. CUBIN. Mr. Yager, many of the small Telcos in my district 

tell me that they have a very difficult time, if not impossible time, 

to negotiate retransmission agreements with their programming. 

You know, I mean with networks. Is there a reason that you can 

tell me from any of these perspectives why that is? 

Mr. YAGER. Not really. I can’t, not knowing the specifics. 

Ms. CUBIN. Well, I don’t want to name any specific networks, but 

what I’m kind of thinking is that there are a lot of little small companies that they just don’t want to be bothered with. 

Mr. YAGER. Well, under the Law, if the cable system has less 

than 1,000 subscribers, there is no re-tranmission consent or mustcarry requirement in effect. And so as you get into rural areas, for 

the most part, the smaller cable companies are not affected at all 

by must-carry or retransmission. 

Ms. CUBIN. I am talking about over 1,000 customers. 

Mr. YAGER. Okay. If it is over 1,000, without knowing the specifics, I know of only—the gentleman on my right has just negotiated a contract with somebody who withheld their services for 7 

or 8 months, but I don’t know of any in the Wyoming area who 

have withheld their service from the cable companies. I mean either on retrans or must-carry. 

122

Ms. CUBIN. Okay. I am not—well, I will check further into that 

because——

Mr. YAGER. That would be——

Ms. CUBIN. [continuing] I have received complaints and the complaints are directed at actually a specific network, and so I will just 

talk to you privately as to——

Mr. YAGER. That is fine. 

Ms. CUBIN. [continuing] whether or not——

Mr. YAGER. I would be happy to——

Ms. CUBIN. [continuing] that is——

Mr. YAGER. [continuing] look into it for you because——

Ms. CUBIN. Okay. 

Mr. YAGER. I am not aware of any in Wyoming at all that have 

withheld. 

Ms. CUBIN. Okay. Small companies want to pool their resources 

and share a head end. Does NAB have any policy prohibiting this 

at all? 

Mr. YAGER. No, we do not. If they—but if they pooled their resources, shared a head end, and hand over 1,000 subscribers, then 

they would be subject to retransmission and——

Ms. CUBIN. Exactly. 

Mr. YAGER. [continuing] Must-carry requirements. 

Ms. CUBIN. Right. Do broadcasters have any concerns about their 

signals being carried on an IP network? 

Mr. YAGER. Again, we are looking for a level playing field for everyone, and the answer is, providing that the playing field is level, 

that we have retrans and must-carry rights across all video providers. No, we do not have any problem with that. 

Ms. CUBIN. Good. Thank you, Mr. Chairman. I don’t have anything further. 

Mr. UPTON. Mr. Walden? 

Mr. WALDEN. Thank you, Mr. Chairman. Mr. Yager I want to follow up on that because I am trying to figure out—I am a, you 

know, I am a radio guy, not a TV guy so stick with me on this 

video stuff. I am trying to figure out though if local—and the local 

is a really important issue for broadcasters, especially television 

broadcasters, and if your programming is put up on the Internet 

somehow, and I can dial into your station here in Washington, 

D.C., and watch whatever you have, isn’t that a problem? 

Mr. YAGER. Well, that is a major problem if the Internet takes 

a network program into an area that we are——

Mr. WALDEN. Right. 

Mr. YAGER. [continuing] licensed for with our network or contracted——

Mr. WALDEN. Right. 

Mr. YAGER. [continuing] with our network. That would be a 

major problem. 

Mr. WALDEN. And so how do you stop that in this environment? 

Mr. YAGER. Technically, I can’t speak to it, but we have stopped 

it so far. I mean, Internet providers are not carrying network programming outside—a matter of fact, I am not sure if they are even 

carrying it. There was a case, as you all know, that New Orleans, 

when Katrina hit——

Mr. WALDEN. Right. 

123

Mr. YAGER. —WWL and WDSU put their continuous news coverage on the Internet but there was no network——

Mr. WALDEN. That is locally originated. 

Ms. YAGER. All local originated programs. 

Mr. WALDEN. But is there any prohibition of an IP provider from 

doing——

Mr. YAGER. Yes. If an IP provider were to take our signals without our permission and put them on there, they would be violating 

the retransmission consent laws and that is where we would have 

control over who gets to see our network——

Mr. WALDEN. All right. So you are not too concerned about that 

issue. 

Mr. YAGER. Well, I am always concerned about the pirating of 

our signals, and as Congressman Cubin knows, and I would be 

very concerned in Wyoming that the Colorado or Denver stations 

be brought into all of Wyoming in stations——

Mr. WALDEN. Right. 

Mr. YAGER. [continuing] in Cheyenne and Casper would then—

would lose their network-based service——

Mr. WALDEN. But that is——

Mr. YAGER. [continuing] and would lose its syndicated programming rights before we contact for people like Oprah Winfrey Show 

and——

Mr. WALDEN. Yes. I mean, I have enough of those issues with 

XM and Sirius dropping programs——

Mr. YAGER. I understand that. 

Mr. WALDEN. [continuing] in on top of where I thought I had 

market exclusivity for the product I am buying. But, that is another subject for another day. Mr. Mitchell, do you support 

broadband video service providers being required to integrate 

Internet access into the broadband video service? Is that something 

Microsoft supports? 

Mr. MITCHELL. I don’t think that forcing an integration of disparate services together is the right way to go. For one thing, it is 

not clear that consumers actually want that force-cum combination. 

I think making it available, having an option, is perhaps a nice 

thing if it makes good business sense. But, legit, just forcing it together, no. 

Mr. WALDEN. Okay. One of the concerns I obviously hear about, 

in addition to every city in my district, I have gotten the same 

paragraph from—individualized, of course—but concern about franchise fees and about PEG and all of that. I even—some of them apparently have my Blackberry address so I will have to figure that 

out. But, Mr. Mitchell, I wondered—the other issue that comes up 

a lot is E911, and how are the E911 requirements tailored, if the 

E911 requirements play to VoIP, do they have any—do you have 

any concerns about types of services that can be included in the 

bill’s definition of VoIP? Do other people have comments on that 

issue? 

Mr. MITCHELL. Well, I think my sort of overarching comment regarding any services like E911 that are—like 911—that are attached to phone service as we know it today, traditional telephone 

service, that you apply the E911, or, you know, future versions 

through services that are substitutive—substantially substitutive, 

124

so my examples are, you know, the Xbox, Instant Messaging clients, Xbox Live Game Services that do not make sense to apply 

those kinds of provisions to because they are not substantive——

Mr. WALDEN. Well, if it works like a phone——

Mr. MITCHELL. If you have the expectation that you pick it up 

and you dial 911 and you get somewhere, you pick it up and you 

dial 1-800-Dominos, you get Dominos. You know, then it is a 

phone. 

Mr. WALDEN. All right. 

Mr. MITCHELL. So——

Mr. WALDEN. Substitution test. Ms.—is it Praisner? I am sorry. 

Ms. PRAISNER. Praisner. 

Mr. WALDEN. At the beginning, how many franchise fees—one of 

the—and this is really difficult stuff for me because you have incumbent providers that go clear back to Marconi. Not Mr. Yager 

himself, but Marconi, and then everybody says then——

Mr. PRAISNER. You and I won’t care then. 

Mr. WALDEN. [continuing] comes in—I mean, you don’t pay a 

franchise fee to have broadcast signal, but cable shows up with 

wire and they, you know, disturb your streets and whatever they—

he doesn’t, but others probably have, and—what about satellite 

video providers? You don’t have a franchise on them, do you? 

Ms. PRAISNER. No. They also don’t provide local PEG channels. 

Mr. WALDEN. That is true. 

Ms. PRAISNER. And that is the big——

Mr. WALDEN. Is that really the issue here? 

Ms. PRAISNER. Well, that is part of the issue. 

Mr. WALDEN. The other part is just the revenue——

Ms. PRAISNER. The right-of-way issue and the way you calculate 

a social obligation and participation in that social obligation. 

Mr. WALDEN. All right. All right. Thank you. 

Ms. PRAISNER. Thank you. 

Mr. WALDEN. I am out of time. Thank you, all. I appreciate your 

testimony. 

Mr. UPTON. Before we adjourn this panel, Mr. Stupak has one 

last question to clarify. 

Mr. STUPAK. I thank you, Mr. Chairman. I appreciate the courtesy. Since in the 1996 Act, myself and Mr. Barton wrote the rightof-way provision that became part of the 1996 Act. So I want to ask 

Ms. Praisner, because Ms. Blackburn asked a question about the 

rights-of-way and I don’t—I was watching in my office and I didn’t 

think you had a chance to explain it, and I want to make it—explain to us all how it works in the real world. 

If you look at page 61 of the draft, it says that the service provider shall ensure the safety of the property. So even if the local 

government has the opportunity to enforce the provision after in effect, how does it work in the real world? Could you explain that 

for us? Because I think it would be——

Ms. PRAISNER. Well——

Mr. STUPAK. [continuing] beneficial for most of us. 

Ms. PRAISNER. [continuing] right now, of course, there is an—

franchise agreement with the local government with requirements 

for the right-of-way management issues and requirements as far as 

when they come in for permits what, where, and how they will dig, 

125

and a variety of issues. And there is also the relationship that has 

some obligations because it is a contractual relationship for rent of 

the local right-of-way. 

The concern with that language is that although there is language on the next page that seems to suggest that the local government has some capacity, the way this is written is—and as I indicated to the Chairman, we are more than happy to work through. 

The way this is written, it is the local—it is the provider who shall 

ensure and I am not sure to whom and how and it would seem to 

me that it should be the local government setting the requirements 

from a public safety perspective. Because our rights-of-way right 

now are obviously a very important issue. They always have been. 

But in this era of post-9/11, the issues of public safety and access 

through those rights-of-way are even more critical. 

Mr. STUPAK. Thank you. And thank you, Mr. Chairman. 

Mr. UPTON. Just one note. I think that that is the same language 

we got from the Cable Act. I think it is pretty much identical. But 

we will continue to work and I am happy to say we are going to 

hear again in about 5 seconds, the votes. There it is. See? And this 

panel is now excused. And we have a series of votes on the House 

floor, so we will start the second panel at 3:10. 

[Brief recess] 

Mr. UPTON. I know other members are watching from their offices as I often do at this point. So now that they see we are going 

to get started, they are going to listen attentively and come down 

and ask questions. It has been a long day. I understand at least 

one of you has to leave early to get a plane to go back. So we will 

start the time clock. 

Again, we appreciate the testimony that has come in. And I 

should say for those watching, we are joined by Dr. Frank Bowe, 

Professor, School of Education and Allied Human Services, from 

Hofstra University; Mr. Tony Clark, President of the North Dakota 

Public Service Commission, on behalf of the National Association 

of Regulatory Utility Commissioners; Mr. Harry ‘‘Hap’’ Haasch, 

great guy from the good State of Michigan, Executive Director of 

the Community Access Center in Kalamazoo for the Alliance for 

Community Media; Mr. Gene Kimmelman, Senior Director of Public Policy, the Consumers Union; Mr. Delbert Wilson, General Manager of Industry Telephone Company; and Mr. Joel Wiginton, Vice 

President and Senior Counsel for Sony. Dr. Bowe, let us start with 

you. Welcome. 

STATEMENTS OF FRANK G. BOWE, PROFESSOR, SCHOOL OF 

EDUCATION AND ALLIED HUMAN SERVICES; TONY CLARK, 

PRESIDENT, NORTH DAKOTA PUBLIC SERVICE COMMISSION; HARRY HASSCH, EXECUTIVE DIRECTOR, COMMUNITY 

ACCESS CENTER; GENE KIMMELMAN, SENIOR DIRECTOR OF 

PUBLIC POLICY, CONSUMERS UNION; DELBERT WILSON, 

GENERAL MANAGER, INDUSTRY TELEPHONE COMPANY; 

AND JOEL K. WIGINTON, VICE PRESIDENT AND SENIOR 

COUNSEL, SONY ELECTRONICS 

Mr. BOWE. Thank you, sir. Mr. Chairman, thank you for the 

hearing and for inviting me. And I do want to extend that also to 

the members on both sides. I’m appearing today on behalf of a 

126

large number of organizations, people with disabilities, a very wide 

range of groups. And we all want to say we are very deeply appreciative of the language in the staff draft. Both the first draft and 

the second draft have some very positive, extremely meaningful 

language, in Section 207 and 405 especially. But it is very important language and it was not weakened at all from the first draft 

to the second draft. The disability community is really very, very 

delighted to see that. And we also want to tell you in light of all 

the comments this morning about some bipartisan friction here, 

but we have to end the friction at all between minority and majority sides. On the disability language, we have seen them working 

together very cooperatively and very effectively. 

I want to say that going back with the 1996 Act, people with disabilities have always had to look to this Congress for accessibility 

language even though there are all kinds of millions of people with 

disability. Although so many disabilities, so many different levels 

of need, that we have never been able to get what we need from 

the marketplace. Rather, what we need here is a final accessibility 

language, and it is very important that we get it. 

The third point I want to make is that the language that we 

have, accessibility now in the many—applies specifically and almost exclusively to the public’s telephone network. But people with 

disabilities today are using the Internet. We are using technology 

that did not exist in 1996. And so we increasingly—we are living 

in a world beyond statutory and regulatory provisions for accessibility for people with disabilities. So we firmly need legislation, 

very important to us that there be a law in making. 

And you may remember, Mr. Chairman, because you came to a 

demonstration that I did here in Rayburn. I did another one on the 

Senate side. And we have shaped most demonstrations about 512—

second, which is about one-third as big. Then Mr. Ellis was talking 

about providing to his customers. So we are able to get disability 

accessibility including for the—at the level that we now have DSL 

and cable modems. We are about to achieve it, however—and I 

really can’t emphasize this enough, but technology continues to 

evolve so rapidly and so exponentially that you count on—law making passed on while the technology is right in front of you. You 

have got to do the law making based on the technology you know 

will be coming, and technologies that you may not know be coming. 

In other words, we have learned very much from the many—we 

really cannot have law making about the last wave. We have really 

got to try to make it about the next one. 

Give you an example, more and more videos now are being 

streamed over the Internet, and this is an example, this hearing. 

A number of people have told me they are not here but they are 

watching it on the Internet. Just one example of something that 

absolutely not in existence in 1996, which raises all kinds of questions, and one of which, very simply, is what about captioning? And 

we have captioning on television, cable, and satellite. All are captioned. But when you get to Internet streaming, it is not captioned. 

We now have some 30—phones and other PDA devices, not captioned. That raises all kinds of questions, so we feel very strongly 

at Mr. Markey’s—the caption on your video is really much too important to spill over to the FCC’s discretion, and for the FCC to 

127

have a chance to review it every 4 years. This should not be the 

case. Captioning should be something that is brought into the statute as it is in the 1996 Act. It should be in the statute. 

And while I am speaking of the 4-year review, that really should 

be two. Technology is developing so rapidly that to have a 4-year 

review is really much too infrequent. 

People with disabilities, what we need is high-speed—we need it 

on all connections, and I can’t emphasize that enough. When I do 

sign language with someone else, I am doing peer-to-peer. I am not 

doing—through the end of the cable architecture. It is a whole different arrangement than if I am doing peer-to-peer, I have to have 

high-speed in all directions and not just upstream and downstream. 

We will benefit in everyday communications and education on 

healthcare and in employment if we have these technologies, if we 

have them available everywhere, and if they are affordable. So 

thank you, Mr. Chairman and Mr. Markey. 

[The prepared statement of Frank G. Bowe follows:]

PREPARED STATEMENT OF FRANK G. BOWE, DR. MERVIN LIVINGSTON SCHLOSS

DISTINGUISHED PROFESSOR, HOFSTRA UNIVERSITY

Good afternoon, Mr. Chairman, Congressman Dingell and members of the Committee. My name is Frank Bowe, and I am pleased to appear today to provide invited testimony on the second staff draft of a bill to revise and extend the landmark 

Communications Act of 1934. I am a professor at Hofstra University, on Long Island. I am testifying on my own behalf. This testimony is supported by the Alliance 

for Public Technology, American Association of People with Disabilities, American 

Council of the Blind, American Foundation for the Blind, Association of Late-Deafened Adults, California Coalition of Agencies Serving the Deaf, Hard of Hearing, 

Inc., Communication Services for the Deaf, Deaf and Hard of Hearing Consumer Advocacy Network, Deaf and Hard of Hearing Service Center Inc., Inclusive Technologies, National Association of the Deaf, Northern Virginia Resource Center for 

Deaf and Hard of Hearing Persons, Self Help for Hard of Hearing People, TDI (also 

known as Telecommunications for the Deaf Inc.), WGBH National Center for Accessible Media, and World Institute on Disability. These organizations together represent millions of Americans with disabilities who have a vital interest in making 

sure that the communications technologies of today and tomorrow will meet their 

communication needs. 

Members of the Committee, our community has already come before you once this 

year to address accessibility issues, when Karen Peltz Strauss testified to the Subcommittee on Telecommunications and the Internet on April 27. My testimony 

builds upon her statement, with the important advantage of being able to applaud 

your staff draft’s treatment of the issues she discussed. 

Permit me to preface my remarks by noting that Americans with disabilities are 

daily using, and greatly benefiting from, Internet-enabled communications technologies that have emerged since enactment of the 1996 Telecommunications Act. 

When I demonstrated broadband two weeks ago in the Dirksen Senate Office Building, Senator Conrad Burns of Montana spoke movingly about a 12-county area in 

his State that did not have a single physician. Broadband, the Senator reported, is 

crucial to the well-being of his constituents. To illustrate, in the 1970s Howard 

Rusk, a pioneer in rehabilitation medicine, told me that life expectancy for people 

with quadriplegia was about five years post-injury. Today, it is a great deal longer, 

due to increased knowledge about how to treat such secondary conditions as autonomic dysreflexia. But that expertise is not universal among primary-care providers. 

It resides at the Rusk Institute at NYU, the Shepherd Center in Atlanta, and at 

the Rehabilitation Institute of Chicago. Broadband extends their ability to provide 

quality care to Dearborn, Michigan, and Cheyenne, Wyoming. To use another example, dermatoscopy takes pictures several skin layers deep. Broadband instantly 

transmits the images to a specialist. As a result, a dermatologist in Dallas/Fort 

Worth can diagnose a skin condition of a patient in Clearwater, Florida, as accurately as can a local one. 

Likely, those dozen counties in Montana do not have a single sign-language interpreter, either. Broadband can connect consumers with interpreters irrespective of 

128

geographical location. This has the added advantage of eliminating the wasted travel time of interpreters, making them more available to meet our needs. 

Let me shift now to consumer use of the Internet and of broadband. A report this 

year by the Pew Internet and American Life Project found that 68 percent of adults 

use the Internet. The Census Bureau reported, on the same day that I demonstrated 

broadband in the Senate, that home access to the Internet has now passed the halfway mark nationwide. A large and rapidly growing proportion are broadband subscribers who use it not only for shopping but also for public policy participation, 

education, and communication with family, friends, and coworkers. For a glimpse 

into the near-term future, consider that the teen site MySpace.com had more hits 

in August than did Google: 9.4 billion page views. New users of the site are signing 

up at a rate of better than three million a month. This is yet another indication 

that broadband is here to stay. 

Here is my point: Consumers are driving the broadband engine. They are rapidly 

making broadband an indispensable part of the fabric of everyday life in this country. Consumers should have a seat at the table as broadband policy is set. That is 

why I so much appreciate the fact that the staff draft offers much-needed disability 

consumer protections. It is also why I appreciate this invitation to testify today. 

People with disabilities, simply stated, believe that broadband should be available 

everywhere, at affordable rates. Our aim should be to accelerate the creation of a 

broadband umbrella that covers the country. Our policy should be to regulate evenly 

across platforms, so as to ensure disability access across all communication platforms. This means applying the same standards to wireline, wireless, cable, and satellite providers and suppliers. That, in turn, necessitates federal rules for accessibility. 

People with disabilities, as well as their families—the Census Bureau reported 

this summer that 21 million American families include at least one person with a 

disability—friends, coworkers, and others, not to mention my students, will win 

with rapid deployment everywhere of broadband, particularly fiber to the curb and 

even to the home, featuring high speeds in all directions. It is not enough just to 

have it downstream, with much slower speeds upstream. Bidirectional peer to peer 

interactions at high speed enable each of us to be creators, and not just consumers, 

of broadband-provided content. While many of us use, and benefit from, today’s level 

of DSL and cable-modem broadband, as I demonstrated to this Committee in June, 

and to the Senate Commerce Committee last month, high-speed connections in both 

directions, with rapidly refreshed frames, greatly improve video communications, 

particularly in sign language. In this as in other areas, we must bear firmly in mind 

a lesson learned from the 1996 Act: legislation needs to address, and foster, tomorrow’s technologies and not just today’s. 

With advanced telecommunications products and services, our daily lives will be 

improved, as we access more information, make better-informed consumer choices, 

and enjoy much richer and more rewarding interactions with family and friends. 

Our education will no longer be limited to geographically proximate institutions. 

Our employment will be supported and our ability to work flexible schedules enhanced. 

Critical to these improvements are the disability consumer protections contained 

in the staff draft. The organizations supporting my testimony today greatly appreciate inclusion of protections in this draft to ensure that broadband products and 

services are accessible to and useable by people with disabilities. For example, the 

staff draft requires that video be captioned when it is streamed over the Internet, 

as it increasingly is. Currently, section 713 of the Communications Act mainly requires captioning only for broadcast, cable-cast, and satellite television programming, largely because Internet video was not available in 1996. Similarly, the staff 

draft, in section 207, defines relay services to include video, and not just text, communications for people who are deaf, hard of hearing, and/or speech-impaired. It 

calls for interoperability of Internet-enabled relay services, including video relay. 

When Congress amended the Communications Act in 1996, it added section 255, 

calling for equipment and services to be accessible to and useable by people with 

disabilities. But to date, that section has been interpreted to apply only to the public 

switched telephone network, not to the Internet. This was, of course, because scarcely anyone used the Internet for voice or video communications in 1995 and early 

1996. The staff draft, in section 405, extends these accessibility requirements to 

broadband products and services. And, recognizing that today’s telecommunications 

products are electronic, into which accessibility can easily and readily be incorporated during the design stage, the staff draft requires that makers and providers 

of new broadband products and services provide access unless doing so would 

present them with an undue burden. The 1996 Act, reflecting an earlier era, one 

characterized by already-existing products and services, allowed a lower readily 

129

achievable standard. As Ms. Strauss noted in her April testimony, the fact that today’s communications Internet Protocol technologies rely more on software-based solutions makes it easier, faster, and less costly to implement access features than 

had been possible with many previous telecommunications technologies 

All of this matters, and matters urgently. Just three out of every ten adults with 

disabilities today are employed. Broadband promises to help because it is alwayson, high-speed, voice/video/data communications. Many deaf and hard of hearing 

Americans are using instant messaging daily, now video as well as text. They are 

signing to each other, using digital video cameras and webcams. Signing over video 

connections offers the closest possible functional equivalence to voice telephony between persons who can hear. In the workplace, IM and video conferencing permit 

instant accessibility. They lower the cost to employers of accommodating a worker 

who is deaf, by alleviating the need for interpreting services except for formal, inperson meetings. 

The House draft access language for broadband equipment and services is vital 

for people who are blind or visually impaired who must often struggle with graphical-only interfaces or other inaccessible equipment and service which, increasingly, 

restrict access to vital broadband communications. In addition, because broadband 

is digital, it also speeds up conversion of written material into formats that people 

who are blind can use—large print, speech, and even Braille. This lowers the cost 

to employers and educators of accommodating people who are blind or visually impaired. 

And of course broadband supports telecommuting. While some Americans with 

disabilities may not opt to telecommute, others will, because broadband helps people 

with chronic health conditions or physical disabilities to expend far less energy in 

nonproductive commutes and to leapfrog those transportation and architectural barriers which remain. 

With respect to education, the 2004 reauthorization of the Individuals with Disabilities Education Act explicitly permits video conferencing for Individualized Education Program (IEP) team meetings. Teens with disabilities may participate in 

video conferencing sessions, as may parents with disabilities, through broadband-enabled access, including remote interpreting and document accessibility. As a university professor, I am daily reminded how colleges increasingly use electronic media 

for everything from course registration to assigned readings to submission of student work. I found it necessary this fall to write, for Hofstra University, a primer 

on how to make our Internet2-based digital environment accessible to students, staff 

and faculty with disabilities. I see a similar need here. Broadband, if made accessible in the ways envisioned by the staff draft, will greatly contribute to the postsecondary education of people with disabilities. 

Broadband, I am convinced, will not only improve the quality of medical care for 

our most vulnerable citizens but also will help to conserve public resources. To illustrate, while people with disabilities account for 16% of Medicaid beneficiaries, because their annual medical costs are higher than are those of Medicaid recipients 

who do not have disabilities, their care accounts for 43% of Medicaid spending. In 

2003, for example, Medicaid costs for persons with disabilities added up to $80 billion. Broadband will help us to enhance quality of services while also constraining 

costs. It will do so by enhancing preventative care, by permitting better monitoring 

of people’s health, and by enabling them to live and work more productively. 

Broadband helps older Americans live at home longer, by affording them instant 

contact with family and caregivers, reducing costs of institutional care. Similarly, 

wireless broadband supports independent living in the community of persons with 

intellectual disabilities and many with mental and emotional disorders. This includes individuals who were deinstitutionalized pursuant to the Supreme Court’s 

1999 decision at Olmstead. Two cell phones, the TicTalk, from Enfora, and the Firefly, from Firefly Mobile, are illustrative. Each has just a few buttons. Each is preprogrammed with numbers for family, employer and emergency support personnel. 

By touching just one button, a person can instantly be in two-way communication 

to ask questions, receive directions, and request in-person assistance. These cell 

phones promise to allow a small team of counselors to provide independent-living 

and employment support to a large number of individuals in a community, at much 

lower per-person, per-year support costs than are otherwise available. Manufacturers could add two-way video to these handhelds, for even easier and more effective 

two-way communication. 

Before I close, let me not overlook universal service. I know that this Committee 

and the Federal Communications Commission as well prefer to deal with universal 

service next year rather than this. Universal service is absolutely essential to the 

continued vibrancy of our Nation’s public communications. We must find ways to 

protect and preserve it despite present threats to its funding base as our nation 

130

shifts to Internet-enabled communications technologies. Specifically, we must make 

sure that providers of these technologies are equally bound to contribute to the support of universal service programs, including relay services, that are designed to 

make communications accessible and affordable for all Americans. 

In closing, let me thank you for considering our views and, in the staff draft, for 

responding to the needs of people with disabilities. For Americans with disabilities, 

a new national policy on broadband is urgently needed. Many of the communications 

technologies we use today, and those we are excited to think about using tomorrow, 

have and will emerge in the post 1996 Telecom Act ‘‘world’’. Critically important disability access provisions will exist only if Congress enacts an updated framework for 

telecommunications. 

Thank you.

Mr. UPTON. Thank you. We appreciate your testimony, for sure, 

and appreciate your wonderful work in this issue over the years. 

And I have—I know Mr. Engel and I, Mr. Markey, too, have all appreciated your leadership and participated in your demonstrations. 

Mr. Clark? 

Mr. BOWE. Thank you. 

STATEMENT OF TONY CLARK 

Mr. CLARK. Thank you, Mr. Chairman. It is an honor to be here, 

and I thank you for the invitation—and Mr. Markey as well. It is 

especially an honor to be before your committee because, although 

I have been proud to call North Dakota home for about the past 

20 years, there are an awful lot of Clarks, both present and past, 

who call Michigan home, so it is a State that I certainly have a 

very warm spot in my heart for. 

Today I am here to represent——

Mr. UPTON. You are supposed to go like this. 

Mr. CLARK. All right. 

Mr. UPTON. Where you are from. 

Mr. CLARK. Alpina, Towwes, and all points in between. It can be 

somewhat of an intimidating thing to try to represent quote/unquote the view of the States or the State Commissions, because it 

is sort of like asking someone, well, what is the view of Congress. 

Well, we are an organization and association which is made up of 

50 different States, some of us Republicans, some of Democrats, 

some appointed, some elected. So what I will try to do in just a 

very brief overview of our written testimony is to highlight those 

points where there seems to be some consensus amongst State regulators, and to the extent that there may not be consensus, if I 

offer sort of my own opining as one State official, I will try to identify that as well. 

Clearly, telecommunications markets are changing, and the old 

regulatory constructs that we have had, both at the Federal and 

State level, are crumbling around that technological innovation 

that has happened. And in response to that, State regulators have, 

I think, a very commendable job of trying to assess where the markets are today, what are roles are and perhaps should be, and what 

the Federal role is and perhaps should be in any future Telecom 

Act. We have come out with a set of principles that we think 

should be embodied in any changed to the Telecommunications Act 

of 1996, and I would just really highlight two main points that 

State Utility Commissioners seem to have general agreement upon. 

The first is that whatever happens on a going-forward basis 

should be technologically neutral, that the means of transmission 

131

really shouldn’t be the important and the driving factor. And to the 

extent that there are regulations that are placed on telecommunications, the things that State Utility Commissioners look at as 

really the most important factors where there probably will be the 

most regulatory intersect on some level or another is where there 

are an essential service provided. And when we say essential service, honestly, what we are probably talking about is some sort of 

either POTS—plain old telephone service—or a replacement for 

that sort of one basic primary line that consumers have access to, 

where there is critical infrastructure involved and where there is 

some sort of market power. Where any one of those things doesn’t 

exist, the need for regulation goes away. States have been stepping 

back in dramatic fashion from economic regulation, and we would 

anticipate that that would continue to be so. 

Once there is determined that there should be some sort of regulation, then what we have asked is that there be an analysis of core 

competencies, who does what best. We have stepped forward and 

said that we really believe that old end-point jurisdictions, interstate versus intrastate, it just doesn’t make much sense anymore 

in today’s Telecom market. Really what we should be looking at is 

who does what best? What level of government? And to that end, 

we have said that we think the Federal Government job does a 

pretty good job probably of setting some standards, and maybe 

more of that has to take place, but that State government and 

State commissions have really historically been the best at adjudicating specific issues and enforcement measures, at building 

records, and at carrying forward in a very fact-specific manner anything that may come up that we can’t predict today. 

As far as sort of what we see good in the draft, what we see potentially needing some more work, we do appreciate that it establishes a baseline on some social service policies like E911, Universal Service, and we appreciate the fact that it does acknowledge 

the core competency of State commissions, which is often enforcement, although we would like to see perhaps more flexibility for 

States to deal with specific situations. And where we see more 

work needed is something that has been talked about a number of 

times here today, but is concern about that just throwing in a new 

silo which could create these same types of arbitration that we 

have seen in the past rather than looking at things from a more 

structural and holistic standpoint. 

With that, I will look forward to any questions you might have. 

[The prepared statement of Tony Clark follows:]

PREPARED STATEMENT OF HON. TONY CLARK, PRESIDENT, NORTH DAKOTA PUBLIC

SERVICE COMMISSION AND CHAIRMAN, TELECOMMUNICATIONS COMMITTEE, NA- TIONAL ASSOCIATION OF REGULATORY UTILITY COMMISSIONERS

Chairman Upton, Ranking Member Markey and members of the Subcommittee, 

thank you for the opportunity to testify today. I am Tony Clark, chairman of the 

NARUC Telecommunications Committee and president of the North Dakota Public 

Service Commission. NARUC represents State utility commissions in all 50 States 

and US territories, with oversight over telecommunications, energy, water and other 

utilities. 

We appreciate the opportunity to share our perspective and insights about the 

staff discussion draft on Internet protocol and broadband services, which we view 

as the beginning of an important dialogue at this Subcommittee about the appropriate legal and regulatory framework to encourage innovation and protect consumers in today’s evolving communications market. 

132

The telecommunications industry as we know it is undergoing tremendous transformation and restructuring. The long-distance industry has mostly disappeared and 

once mighty competitors are being absorbed by their former adversaries in the local 

phone business. New players have emerged in the nascent ‘‘nomadic’’ VOIP industry 

and a growing number of younger consumers are ‘‘cutting the cord’’ to use their 

wireless phone as their only phone. 

Today’s marquee battle is the grand duel between cable and baby Bell companies 

over who will dominate the ‘‘triple play’’ or ‘‘quadruple play’’ market of voice, video, 

data and wireless bundles, but this battle could easily give way to one between the 

network owners and the ‘‘edge’’ providers like Yahoo!, Google and Microsoft whose 

next wave of disruptive technologies could turn today’s giants into commodity providers. Or new wireless broadband offerings could flood the market with ‘‘last mile’’ 

transmission options, driving prices down and leading to another round of consolidation. Just last week, Sprint-Nextel announced a joint venture with four cable companies to deliver TV shows on cell phones, and BellSouth’s chief technology officer referred to a search engine company as a serious potential competitor. 

NARUC’s members have embraced this new paradigm of innovation and change 

because we see it as a powerful engine of economic development and consumer empowerment in each of our States. Recognizing these seismic changes and a corresponding interest from Congressional leaders to reexamine the foundations of the 

Communications Act, NARUC commissioned a Legislative Task Force last year to 

take stock of the current legal and regulatory baseline and make recommendations 

on whether and how it should be revised. After listening to numerous stakeholders 

and intensive internal discussions, the Legislative Task Force reached two important conclusions: 

The first was that any broad reform must be technology neutral. Even the leading 

luminaries and entrepreneurs in the telecommunications industry don’t know where 

today’s transformation will lead or end. In the chaos that is the genius of modern 

capitalism, they are constantly placing bets, forming new ventures, making midcourse corrections and sometimes losing big money when things don’t turn out as 

expected. With that in mind, it struck us as untenable for policymakers to build a 

framework around any kind of technology, even a widely deployed one like Internet 

protocol. Such an approach would invariably choose winners and losers and ultimately distort investment decisions as capital and energy flowed to products in the 

best regulatory ‘‘silo.’’ 

The second conclusion was the development of our ‘‘functional federalism’’ concept, 

which is the idea that if Congress is going to rewrite the Telecommunications Act, 

it doesn’t have to be bound by traditional distinctions of ‘‘interstate’’ and ‘‘intrastate,’’ or figure out a way to isolate the intrastate components of the service. Instead, a federal framework should look to the core competencies of agencies at each 

level of government—State, federal and local—and assign regulatory functions on 

the basis of who is properly situated to perform each function most effectively. In 

that model, States excel at responsive consumer protection, efficiently resolving 

intercarrier disputes, ensuring public safety, assessing the level of competition in 

local markets and tailoring national universal service and other goals to the factspecific circumstances of each State. Economic regulation is necessary only where 

there is market power and if robust competition one day removes the need for economic regulation of all types, we believe that will be a good thing. 

This is not actually a new model. For the past several years, wireless carriers 

have been governed under Section 332 of the Act, which does not declare wireless 

to be interstate, but rather assigns appropriate functions to State and federal authorities. It assigns spectrum management functions to federal authorities, includes 

a rebuttable presumption of competitiveness for wireless carriers, and allows states 

to handle consumer protection and other terms and conditions of service. Wireless 

carriers are also allowed to avail themselves of State arbitration procedures for 

interconnection to the wireline phone network. Under this model, the wireless industry has already eclipsed the traditional phone business in total number of subscribers and is only growing stronger. 

While NARUC’s members are still analyzing the discussion draft, we want to 

raise a number of high level issues and serious concerns. First, we are concerned 

that this discussion draft is very technology specific by according special status to 

any service or infrastructure that utilizes ‘‘packet switching.’’ While packet switching is supplanting circuit-switching and time-division multiplexing today, something 

else that may or may not be a successor protocol is invariably in the queue behind 

it. While it might take longer and require more dialogue among disparate stakeholders, we encourage you instead to pursue a technology-neutral approach that 

looks to the salient features of each service, such as whether it has market power, 

whether it is interconnected to the Public-Switched Telephone Network (PSTN) or 

133

its successor, and whether it is selling access to networks supported by universal 

service. 

Consumer protection: 

We commend the staff for recognizing State expertise and experience and the vital 

role we play in handling consumer complaints. A recent survey found that in just 

20 State commissions, over 230,000 consumer complaints had been handled in 2004. 

These complaints are generally resolved on a one-for-one basis and the majority 

take only a few weeks through informal processes. 

We are concerned, however, that the discussion draft takes a ‘‘one-size-fits-all’’ approach when it comes to consumer protection standards, without providing flexibility to the State agencies that enforce them. This is unfortunate because the same 

dynamism that brings exciting new products and services to consumers also produces a host of new complaints and novel misunderstandings, especially for products 

supplanting traditional phone service. 

A particular case in point has been the national do-not-call list, enacted two years 

ago with great fanfare. Federal agencies, although they receive thousands of complaints a week, have issued only six (6) fines since its enactment, and States have 

provided the bulk of its enforcement. Even more importantly from the consumer’s 

viewpoint, telemarketers were quick to exploit a patchwork of loopholes and 

‘‘workarounds’’ to the federal rules and the calls kept coming. It fell to a handful 

of States to say that ‘‘no means no’’ could not be circumvented just because the consumer had made a purchase from the company 18 months ago or because the call 

was pre-recorded (which might actually be more annoying). Without that State flexibility, consumers would be in a much worse position. 

NARUC doesn’t object to federal consumer protection standards, but we do object 

to an approach that makes those standards a ‘‘ceiling’’ on State action and fails to 

give those who help consumers the tools, authority and flexibility they need to get 

the job done. 

Interconnection: 

We commend the staff for including interconnection rights between and among 

BITS, VOIP and telecom providers. In a networked industry, fierce competitors will 

always have to cooperate to operate a seamless network of networks, but there are 

frequent perverse incentives for one carrier or another to frustrate interconnection 

for anti-competitive reasons. 

We are very concerned, however, that the draft federalizes the traditional State 

role of mediating, arbitrating and enforcing those interconnection agreements. Current law already includes a provision for the FCC to arbitrate interconnection agreements when the State commission does not act, but the isolated instances where 

this has been necessary have not generally gone well. In one case, a cable company 

in the competitive phone business had to spend 3 years and over $2 million to arbitrate an interconnection dispute at the FCC, even though it was eventually vindicated on every issue. Sending such disputes to federal courts or another forum 

would be even more onerous, with discovery rules and a multi-year process for resolving disputes that could be adjudicated in a matter of weeks at a State commission. We are concerned about the ripple effect that a backlog of such cases would 

have on the entire industry, especially when some traditional phone providers are 

already seeking to deny interconnection altogether to new competitors. The ability 

to interconnect seamlessly into the traditional phone system is the linchpin of success for many VOIP services. 

Connectivity principles: 

We applaud the staff for including proscriptions against blatant digital protectionism by network owners. Many broadband providers are under tremendous investor pressure to drive as many customers as possible to their proprietary voice, video 

and data products. While consumers can benefit from ‘‘intelligent networks’’ and 

compelling proprietary products, we hope the network owners’ competitive strategies 

will turn on price, quality and features—not impairing competitors’ products or imposing artificial bandwidth limits on consumers. 

Public Safety: 

We support the inclusion of an obligation for VOIP providers to provide 911 / E911 capabilities to their consumers, and we commend the staff for preserving State 

and local assessment authority to continue supporting and upgrading the PSAP systems, but we are very concerned that the bill includes no State role to enforce those 

obligations and leaves the mediation and arbitration of interconnection to such facilities at the federal level. As discussed above, federalizing all the arbitration cases 

could lead to a dangerous backlog of arbitration requests. The need for a fast and 

134

effective dispute resolution procedure is even more acute with the 911/E-911 system 

because the provider that controls the trunk lines and selective router has a 100% 

monopoly over these elements, and competitors need that access to do business—

and it is always a local call. 

Universal service: 

NARUC supports efforts to more equitably distribute the funding base of the federal Universal Service Fund (USF) in a technology-neutral manner, although we believe such efforts must be accommodated by similar efforts to ensure the long-term 

sustainability of State programs. Today, universal service is a jointly shared responsibility between the States and the federal government, with 26 State programs distributing about $2 billion—or 28% of the overall national commitment to universal 

service. This joint approach benefits both ‘‘net donor’’ and ‘‘net recipient’’ states because it lessens the burden on an already sizable federal program and permits another option when federal disbursement formulas that ‘‘work’’ in the aggregate do 

not adequately serve a particular state or community. 

Our concern is that any expansion of the federal base without a complementary 

clarification of State authority could create tremendous funding gaps. The impact 

of those gaps would fall disproportionately on consumers who rely on State programs, and would raise thorny questions about the equity of federal disbursement 

formulas. 

Conclusion: 

In conclusion, we appreciate your thoughtful consideration of our input and look 

forward to continuing a fruitful dialogue over the discussion draft and all the issues 

that it raises with the members of the Energy and Commerce Committee. As a next 

step, we would be pleased to work with you and your staff on an approach that preserves the strong points of the discussion draft before us, but is technology neutral 

and includes more vigorous and flexible procedures for consumer protection, interconnection, public safety and universal service.

Mr. UPTON. Okay. Thank you. Mr. Haasch, welcome. 

STATEMENT OF HARRY HAASCH 

Mr. HAASCH. Does the microphone work? Hello? Good afternoon, 

Chairman Upton. Good afternoon, Chairman Upton, Mr. Markey, 

and members of the subcommittee. I am sorry. I don’t think I need 

two. Take one. My name is Hap Haasch and I am the executive director of the Community Access Center in Kalamazoo, Michigan. 

And I want to thank Chairman Upton for inviting me to testify 

today on behalf of the Alliance for Community Media, a national 

membership organization representing 3,000 public education and 

government access centers across the country. 

Local PEG programmers produce 20,000 hours of new programming per week. That is more new programming than all of the 

broadcast networks combined. As you observed, Mr. Chairman, 

back in 1999, the Community Access Center in Kalamazoo provides 

a diverse programming schedule that can’t be found anywhere else, 

reflecting a cross-section of society, and offering an empowering 

voice to those that may not otherwise have a chance to be heard. 

We believe the November 3 staff draft bill however might directly 

and substantially threaten the future of PEG programming 

throughout the nation. My testimony focuses primarily on the 

draft’s PEG aspects. However, the Alliance supports the testimony 

of Counsel Member Praisner on behalf of local government organizations heard earlier today. 

Let me give you a couple of examples of significant PEG programming around the country that are replicated in almost every 

community. The Kalamazoo Community Access Center, the one 

that I manage, we have provided PEG access programming for 25 

years. We now average 2,100 hours per month of new programVerDate 0ct 09 2002 12:11 May 08, 2006 Jkt 000000 PO 00000 Frm 00138 Fmt 6633 Sfmt 6602 F:\DOCS\26998.TXT HCOM1 PsN: JOEP
135

ming. 315 hours of that programming are brand new first-run. Just 

now, my staff is putting together a 4-camera live production shoot 

at the Kalamazoo Public Library, the major fundraiser of that organization in the community, that will combine staff, volunteers and 

interns for a 2-hour production that the local broadcast networks 

might give 30 seconds to. 

During the 2004 election season, Chicago Access Network Television, CAN TV, ran 160 hours of local election coverage, including 

information on candidates for Presidential, Senatorial, Congressional and local elections. Media bridges in Cincinnati, Ohio, cablecast more than 15,000 hours of local programming, including programming for more than 80 religious organizations. Cambridge, 

Massachusetts, produces 50 hours of live programming per week, 

shows that include Crime Time, produced by the Cambridge Police 

Department. In Southern Oregon, Rogue Valley TV is the public access organization for 4 cities and 3 counties. They produce Rules 

of the Road by the Medford Police Department, a 1-hour monthly 

live call-in program primarily on traffic and pedestrian law. Albuquerque, New Mexico, Sandia Prep School begins its third year of 

producing the program Speak Out. It is the students that produce 

the program and provide all technical work on the series that features high school debate, dance, music performances including the 

orchestra. 

PEG access is only possible if there are adequate funds to support it. The overwhelming majority of PEG funding comes from two 

sources. The first is monetary and in-kind support from cable operator that is above and beyond the 5-percent franchise fee. That is 

a critically important point. The second revenue stream for PEG 

access is a contribution by the local franchising authority of a portion of the 5-percent franchise fee for PEG. The November 3 House 

draft bill, however, would eliminate one of those sources of revenue 

and substantially reduce the other in our estimation. The combined 

elimination of PEG grants and the substantial reduction of franchise fee revenue available for PEG would result in a funding reduction for PEG access that could be nothing short of catastrophic 

for some centers across the nation. 

Through the cable franchise process on capacity—PEG capacity 

issues, local communities, particularly in the renewal phase of 

their relationship, have analyzed their PEG access channel capacity needs and then adjusted their capacity in the final agreement 

coming out of renewal. The draft bill, however, would essentially 

kept PEG access capacity at current levels. This would have a particularly harsh effect on communities with older franchise agreements, many of which might currently have relatively few channels 

set aside for PEG. This is in an environment where there is exponentially increasing channel capacity on these new systems. 

In conclusion, you are right, Mr. Chairman, when you said that 

community access centers give a media voice to those who might 

otherwise not be heard. Across the nation, PEG access centers put 

television in the hands of the people, not as passive consumers—

a word I heard often this afternoon—but as speakers and information providers. In its current form, the draft legislation threatens 

to silence those voices because it would undermine the continued 

financial viability of PEG access centers, particularly those funded 

136

1 47 U.S.C. § 531. 2 47 U.S.C. § 542(g)(2)(C). 3See, 47 U.S.C. §§546(a)(4)(B) and 546(c)(1)(d). 

above and beyond the franchise fee. We therefore ask that the draft 

be revised to ensure the continued viability of PEG access, the only 

truly genuine form of localism and diversity in the television medium. 

The Alliance looks forward to working with you in making the 

necessary changes on the legislation to protect PEG access. Thank 

you for inviting me. 

[The prepared statement of Harry Haasch follows:]

PREPARED STATEMENT OF HARRY ‘‘HAP’’ HAASCH ON BEHALF OF THE ALLIANCE FOR

COMMUNITY MEDIA

Good morning, Chairman Upton, Mr. Markey and Members of the Subcommittee. 

I am Harry ‘‘Hap’’ Haasch, Executive Director of the Community Access Center 

serving the cities of Kalamazoo and Parchment and the townships of Oshtemo, Comstock and Kalamazoo, Michigan. I want to thank Chairman Upton for inviting me 

to testify today on behalf of the Alliance for Community Media, a national membership organization representing 3,000 public, educational and governmental (‘‘PEG’’) 

cable television access centers across the nation. Those centers include 1.2 million 

volunteers and 250,000 community groups and organizations that provide PEG access television programming in local communities across the United States. Local 

PEG programmers produce 20,000 hours of new programs per week—that’s more 

new programming than all of the broadcast networks combined. As reported in yesterday’s New York Times: 

‘‘For every hour of ‘‘Desperate Housewives’’ on ABC, the nation’s 3,000 publicaccess television channels present dozens of hours of local school board meetings, Little League games and religious services. Not to mention programs like 

‘‘The Great Grown-Up Spelling Bee,’’ a spelling bee for adults that raises money 

for the Kalamazoo, Mich., public library . . .’’

The Center for Creative Voices recently released a report that shows that as large 

group owners control more local broadcast stations in a market, local programming 

disappears, replaced by nationally produced programs that seek to draw larger audiences through more inflammatory material. Media consolidation furthers this trend. 

The report also found, however, that locally controlled programming is more responsive to community needs. 

Congress has traditionally recognized the need to foster localism in communications. At a time when studies show that less than 0.5% of programming on commercial television is local public affairs, PEG centers serve the people in your home 

town, city, and district. 

The November 3 Staff draft bill, however, would directly and substantially threaten the future of PEG programming throughout the nation. My testimony focuses 

only on the draft bill’s provisions that would most directly impact PEG funding and 

capacity. There are other provisions in the draft bill that the Alliance and its members find troubling and we support the testimony of Councilmember Praisner on behalf of local government organizations on those issues. 

I. PEG PROGRAMMING—THE LAST REDOUBT OF LOCALISM. 

The federal Cable Act authorizes local franchising authorities to require cable operators to set aside capacity on their systems for PEG use,1 and to require cable 

operators to provide, over and above the 5% cable franchise fee, funds for PEG capital equipment and facilities.2 The amount of PEG capacity that is set aside on a 

particular system, as well as the level of funding provided by the cable operator, 

is locally determined, based on each community’s determination of its own particular cable-related community needs and interests.3

The PEG provisions of the Cable Act are intended to provide all members of a 

community with access to the medium of television. Indeed, PEG is the only way 

that average citizens and community groups have assured access to communicate 

to their community via television. Particularly in this era of mass media consolidation, PEG access ensures that locally-produced programming, of interest to and tailored to the particular local needs of the community, has an outlet on television. 

PEG access has served that purpose exceedingly well. Among other things, PEG 

provides:

137

• The only nmediated coverage Congress Members receive in the home district. 

A number of members of Congress use Public Access channels to communicate 

directly with their constituents. 

• Church Outreach—Religious programming represents 20-40% of programming 

at most Public Access centers. For the shut-in and infirm, this is often the only 

means by which they can participate in local services. 

• Coverage of local cultural activities, particularly in smaller communities that 

do not receive commercial media attention. Examples include coverage of local 

historical, art and music events. 

• The ability to maintain the local cultural identities of our towns, cities and 

counties. Examples include coverage of local high school football games, local 

parades and other civic events. 

• Local Governmental Programming—Coverage of city/town/county council 

meetings, and local police, fire, and public safety programming. 

• Local Education Programming—Cablecast of public school and local college 

educational programming. 

• Technical training and jobs. PEG operations employ more people of color in 

management and technical positions than in all commercial media industries 

combined. PEG centers also provide vocational training in television camera 

and production work for local high school and college students. 

• News for military families—Army Newswatch is the most-syndicated program 

on PEG channels, with carriage on over 300 PEG channels nationwide. 

Let me provide you with some specific examples: 

The Kalamazoo Community Access Center (‘‘CAC’’) has provided PEG access programming for 25 years. CAC operates 5 PEG channels providing 2,100 programming 

hours per month. For 16 years, CAC has provided ‘‘live’’ multicamera coverage of 

the annual United States Tennis Association’s Boys 16 and 18 Championships from 

the campus of Kalamazoo College. The coverage is dawntodusk for 11 days, and requires hundred of volunteer hours in challenging weather conditions. This coverage 

is made possible by the availability and use of a fiber institutional network that 

links the Kalamazoo College campus and the CAC master control facility. CAC volunteer Dave Williams helped produce the ‘‘Banned Books ReadOut’’ program that 

featured a selection of wellknown local personalities reading selections from a number of popular books, including Ray Bradbury’s Fahrenheit 451, Maya Angelou’s I 

Know Why The Caged Bird Sings, and Mark Twain’s classic Huckleberry Finn. The 

program was made possible with the cooperation of the ACLU—SW Michigan Chapter and the Kalamazoo Public Library. 

At the Community Television Network in Ann Arbor, Michigan, the public access 

center created a program in partnership with National Kidney Foundation focused 

on the risks of kidney disease among African American men and women. African 

Americans are seven times more likely to get kidney disease compared to white 

Americans. The award winning program has been cablecast on PEG channels 

throughout the state of Michigan. 

In Illinois, a fledgling statewide public affairs network called The Illinois Channel 

originates in part out of Rep Shimkus’ District, bringing C-SPAN type of coverage 

of state government to nearly 1.3 million Illinois cable homes. The entire distribution network of The Illinois Channel is due to the existence of PEG channels. 

During the 2004 election season, Chicago Access Network Television (‘‘CAN TV’’) 

ran 160 hours of local election coverage, including information on candidates for 

presidential, senatorial, congressional, and local judicial elections, as well as indepth interviews by The Illinois Channel with state district candidates. CAN TV devotes its resources to local programming with an annual budget that wouldn’t buy 

a single thirtysecond commercial during the Super Bowl. Those modest resources 

are put at risk by this legislation. In an earlier article on CAN TV’s election coverage, the Chicago Tribune reported that, ‘‘Chicago’s five access channels bring no 

small measure of serious politics, especially involving those large shut out heretofore 

from mainstream commercial media, including blacks, Hispanics, and, of course, Republicans.’’ (We are talking about Chicago.) 

Media Bridges in Cincinnati and Hamilton County, Ohio, cablecasts more than 

15,000 hours of local programming produced by and for greater Cincinnatians by organizations like the Contemporary Arts Center, the Lifecenter Organ Donor Network and Literacy Network of Greater Cincinnati and more than 80 area religious 

organizations. According to a 2003 study, the 96 cents per subscriber per month in 

PEG access support that provides the majority of Media Bridges’ financial support 

is multiplied almost seven times to provide an economic impact in greater Cincinnati of more than $5.3 million per year. This draft bill would eliminate that support. 

138

In New Jersey, PEG stations are working with county governments to incorporate 

emergency public notification via the over 150 stations throughout the state. The 

system will allow communication from any emergency command location or mobile 

disaster unit to the communities effected via any specific town PEG station, a group 

of stations covering a specific area, or all the stations covering an entire county. 

This system will have the ability to interrupt programming instantly with text notices that include health hazard notifications, aid station locations, and evacuation 

instructions. The notices can also be removed and/or updated as needed with the 

same efficiency. This system will provide a vital and much needed service that will 

fill the communications gap that local governments need keep the public informed 

and safe in the event of any emergencies from a local level crisis to supporting national disaster organizations through the use of PEG stations. This capability will 

be lost under the draft bill as a result of the reduced PEG funding and the 

orphaning of institutional networks systems. 

Community Television of Knoxville, Tennessee (CTV), has served the residents of 

Knoxville and Knox County for 30 years. For only $24 per year, the typical volunteer community producer at CTV receives training and unlimited use of PEG equipment (including cameras, studios, and editing equipment) to produce and air their 

own television programs. There is no other means by which community residents 

can find such an inexpensive way to effectively reach 110,000 community households with information pertaining to local issues, local resources and matters of interest to them, from support for victims of Alzheimer’s disease and their families, 

to foster care, law enforcement, and youth recreation. 

Every week, Cambridge (Massachusetts) Community Television produces 50.5 

hours of live programs on its BeLive set—shows that include Crime Time, produced 

by the Public Information Officer of the Cambridge Police Department, Bed Time 

Stories, Muslims Inside and Out, Local Heroes, and two smoking programs, one 

against, and one for smokers’ rights. Even though Cambridge is a city of over 

100,000 residents, it is in the shadow of the Boston media market, and the commercial television stations and daily newspapers consequently do not cover the local 

elections. As a result, Cambridge Community Television’s election programming is 

the only place that residents can tune in to learn more about local candidates. 

In southern Oregon, Rogue Valley TV is the PEG access organization for four cities and three counties. Since 1999, the Medford Police Department has produced 

monthly the Medford Police Department’s Rules of the Road, a one-hour live callin program primarily on traffic and pedestrian laws. The police average 30 phone 

calls per show as Medford residents jam phone lines waiting to talk with their local 

police officers. Without use of institutional network fiber and equipment purchased 

with PEG funds, the program would never reach homes in Medford, Eagle Point and 

Jackson County, and the phones would be silent. 

Albuquerque, New Mexico’s Sandia Prep School just sent 30 students through 

Quote... Unquote’s public access television orientation as this top academic school 

begins its third year of ‘‘Speak Out.’’ Students produce the program and provide all 

technical work on the series that features high school debates, dance and music performances, including the orchestra. The student producer from an earlier year used 

his experience to win a scholarship to a top college. Sandia students are dependent 

on equipment purchased from a separate cable franchise PEG capital fund; their 

program is sent to subscribers through the cable system’s fiber optic institutional 

network. Quote... Unquote training, facilitation and programming staff are funded 

from cable television franchise fees, which would be substantially reduced by this 

legislation. 

II. THE NOVEMBER 3 STAFF DRAFT WOULD SUBSTANTIALLY REDUCE, AND ULTIMATELY

ELIMINATE, FUNDING FOR PEG ACCESS. 

PEG access is only possible if there are adequate funds to support it. The overwhelming majority of PEG funding comes from two sources: (1) monetary and 

inkind support for PEG capital facilities and equipment from the cable operator over 

and above the 5% cable franchise fee that is required by the local franchise agreement; and (2) contribution by the local franchising authority of a portion of the 5% 

cable franchise fee to PEG. 

In Kalamazoo, for example, PEG funding comes from both of those sources: the 

Access Center receives 35 cents/month/subscriber for PEG support and, in addition, 

the communities contribute 40% of their franchise fees to the Access Center. In Cincinnati and Hamilton County, Ohio, the Access Center receives 96 cents/subscriber/

month in PEG support from the cable operator as required by the local franchise 

agreement. 

139

4 Compare 47 U.S.C. § 542(g)(2)(C) with Draft Bill, § 2(a)(9) (PEG access grants not excluded 

from ‘‘franchise fee’’ definition). 5See Draft Bill, § 304(b). 6 47 U.S.C. § 542(b). 7Draft Bill, § 303(d)(3). 8Draft Bill, § 304(b)(1)(A). It might be argued that § 304(b)(1)(A) allows for PEG capacity 

growth, since it requires the broadband video service provider to provide PEG capacity comparable to the incumbent cable operator, and the incumbent operator’s PEG capacity obligations 

might be increased in subsequent cable franchise renewal proceedings. But that would not likely 

occur if the draft bill became law because: (1) the incumbent cable operator would probably no 

longer be willing to agree to increase PEG capacity without an effective franchise process assurance that the broadband video service provider has to match that increase; and (2) the incumbent operator would, over time, likely become a broadband video service provider itself and thus 

become immune from the Cable Act renewal process. 

The November 3 House Staff draft bill, however, would eliminate one of those 

sources of funds to support PEG, and substantially reduce the other. 

A. The Loss of PEG Capital Support Obligations. 

Unlike the Cable Act, which allows local franchising authorities to require a cable 

operator to provide PEG access capital facilities and equipment funding over and 

above the 5% franchise fee, the draft bill would exempt broadband video service providers from such an obligation.4 Moreover, the draft bill’s PEG provisions place no 

obligation on, or ability to require, broadband video service providers to fund PEG 

access production facilities and equipment.5 The result is clear: Unlike incumbent 

cable operators, broadband video service providers under the draft bill cannot be required to provide the local community with any monetary support for PEG beyond 

the 5% franchise fee. That would also mean that, over time, the incumbent cable 

operator would no longer provide such PEG support, as it would no doubt refuse 

to continue to incur a cost from which its broadband video service provider competition has been immunized. Alternatively, the incumbent cable operator would eventually transform itself into a broadband video service provider, thereby freeing itself 

directly from its PEG support obligations. 

B. A Reduced Franchise Fee Revenue Base Would Reduce Local Franchising Authority Financial Support for PEG. 

The draft bill, unlike the Cable Act,6 restricts the ‘‘gross revenue’’ base for the 5% 

franchise fee to revenue ‘‘collected from subscribers.’’ 7 As a result, non-subscriber 

revenues, from sources such as advertising and home shopping channels, would be 

excluded from the franchise fee revenue base under the draft bill. That would represent anywhere from a 10% to 15% reduction in the franchise fees that local governments currently receive under the Cable Act. And non-subscriber revenues—especially advertising revenues—are one of the fastest growing revenue streams in the 

current cable franchise fee revenue base. In those communities, like Kalamazoo and 

many others elsewhere, where the local government contributes a portion of its franchise fee revenues to fund PEG access operations, the reduced franchise fees caused 

by the draft bill would result in a substantial reduction in the funds that PEG access centers currently receive from cable franchise fees. 

The combined elimination of PEG grants and the substantial reduction of franchise fee revenue available for PEG use that would occur under the draft bill would 

result in a funding reduction for PEG access that would be nothing short of catastrophic for many, if not most, PEG access centers across the nation. 

III. THE NOVEMBER 3 STAFF DRAFT WOULD LIMIT PEG CAPACITY TO CURRENT LEVELS, 

THEREBY DEPRIVING COMMUNITIES OF THE ABILITY TO TAILOR PEG CAPACITY TO

CHANGING, AND OFTEN GROWING, COMMUNITY NEEDS. 

Under the Cable Act, the number of channels set aside for PEG use is determined 

individually by each local community based on its particular PEG needs and interests. Perhaps more importantly for the discussion here, the current Cable Act allows 

local communities, through the cable franchise renewal process, to reassess their 

PEG needs periodically, and to increase the channel capacity set aside for PEG 

where demand warrants. 

As you might expect, the number of PEG channels set aside varies widely from 

community to community. This is precisely the sort of local self-determination and 

flexibility that one would expect—and that should be cherished—if the localism that 

PEG programming embodies is to survive. The draft bill, however, would short-circuit this process. It would essentially cap PEG access capacity at current levels.8

That would mean that local communities would be locked into current PEG capacity 

140

limits—limits that were often set years ago when the incumbent cable operator’s 

franchise was last renewed. 

But there is no reason to suppose that PEG capacity needs are static. In fact, 

those needs typically grow over time, as the local community’s interest in PEG programming grows, and the volume of PEG programming grows. 

The draft bill’s effective ceiling on PEG access capacity would have a particularly 

harsh effect on communities with older franchise agreements, many of which may 

currently have relatively few channels set aside for PEG. The draft bill would deprive these communities of the ability to increase PEG access capacity and thus forever sentence them to inadequate PEG capacity to meet their future needs. 

CONCLUSION

Across the nation, PEG access centers put television in the hands of the people, 

not as passive consumers, but as speakers and information providers. As Chairman 

Upton observed back in 1999: 

‘‘The Community Access Center provides a diverse programming schedule that 

can’t be found anywhere else, reflecting a cross-section of society and offering 

an empowering media voice to those who may otherwise not have a chance to 

be heard.’’

In its current form, the draft legislation threatens to silence these voices because 

it would undermine the continued financial viability of all PEG centers nationwide. 

We therefore ask that the draft be revised to ensure the continued viability of PEG 

access, the only truly genuine form of localism and diversity in the television medium. The Alliance looks forward to working with you in making the necessary 

changes to the legislation. 

Thank you for the opportunity to speak to you today, and I would be happy to 

answer any questions you may have.

Mr. UPTON. You bet. Thank you. Thank you for being here. Mr. 

Kimmelman, welcome back. 

STATEMENT OF GENE KIMMELMAN 

Mr. KIMMELMAN. Thank you, Mr. Chairman, members of the subcommittee. On behalf of Consumers Union, the print and online 

publisher of Consumer Reports, we once again thank you for inviting us to discuss the staff draft. 

I would urge you to think about this legislative process as you 

go forward with an eye toward what is going on in the marketplace 

and what consumers are experiencing. We have a cable company 

in most communities; we have a telephone company in most communities; and we have the hope for more players coming in. And 

you will note that just last week, one of the major new consolidated 

players that reduced the number of cell phone providers we have, 

Sprint-Nextel, which was going to be a new broadband third choice 

for consumers, decided to cut a 20-year contract with 4 major cable 

companies to offer its broadband services in conjunction with one 

of the two dominant players. What we see happening over and over 

again is that it is the two dominant players, the Telco and the 

cable company, who still reign supreme. And something is particularly wrong in the marketplace when, on order to get voice over the 

Internet competitively, you have to go SBC or Verizon and you 

have to buy their DSL service and their voice service, whether 

switched or VoIP, before you can pick a competitor. And something 

is also wrong in the marketplace when in order to get a high-speed 

Internet service over cable, you have to go to the cable company 

and use its high-speed service to pick another—if you can even pick 

another. And something is really wrong in the marketplace with 

the explosion of all the video programming out there when the consumer can’t pick the channels he or she wants to get, has to take 

the package of channels offered by the cable company, or the satVerDate 0ct 09 2002 12:11 May 08, 2006 Jkt 000000 PO 00000 Frm 00144 Fmt 6633 Sfmt 6602 F:\DOCS\26998.TXT HCOM1 PsN: JOEP
141

ellite company, or the telephone company. Can’t eliminate payment 

for channels the consumer finds distasteful and inappropriate because it is bundled by the dominant video provider. 

Now, the staff draft does a number of important positive things, 

but unfortunately it doesn’t address these critical problems, and 

may create significant new problems just like these for the Internet 

by putting too much power in the hands of broadband video providers, whether they be a former cable company or former telephone company, to control what consumers get, how they get it, 

what applications, how they are packaged, what you pay for them, 

with inadequate public enforcement mechanisms. 

Now, clearly on the positive side of here, what you have done is 

enormously important in allowing communities to build their own 

broadband open networks. This addition to the marketplace would 

bring, we hope, expanded choices, greater diversity, and opportunities for minority-owned and controlled content, if cities choose to 

take advantage of it. And clearly it is critical that you are opening 

the door and speeding up the process for video competition from 

telephone companies. That clearly will benefit consumers if you address this problem of how programming is packaged. That requires 

further intervention, unfortunately, than what the staff draft currently proposes. 

But in opening the door to video competitions, so critical for consumers who see cable rates continue to go up almost 3 times the 

rate of inflation, as Mr. Ellis pointed out, it is absolutely essential 

to make sure that the wonderful open attributes of the Internet are 

not closed off at the same time. And, unfortunately, some critical 

definitions, some critical matters where there are discrimination 

issues and issues of how services are offered, are not adequately 

defined in the draft, and are left to private negotiation rather than 

public obligation. We are concerned that you are effectively eliminating reasonable prices, terms and conditions, provisions from 

Title I and Title II of the Communications Act. 

And, finally, I would like to point out that when it comes to Federalizing consumer protections, I urge you to think about this really carefully. Imagine what happens when a consumer complains 

about a service they never requested, which you have covered 

under your consumer protection provisions. They complain about—

do you really want them to have to go to the FCC to have to rely 

on an agency that I don’t believe anyone on this committee has 

ever thought does its job very effectively, efficiently and certainly 

not in a timely fashion? Is that a meaningful way of resolving a 

complaint about something you didn’t request? And then even 

worse, what if your bill is inaccurate or you think your bill is inaccurate? I am sure you have got many constituents who feel this 

way quite often. Under the staff draft, not only can they not go to 

their State regulators or local officials, but the FCC isn’t even empowered to look at that issue. I think——

Mr. UPTON. Just to interrupt you. I will stop. I think we have 

written this so that they can go to the PUCs to do that, to enforce 

the Law. 

Mr. KIMMELMAN. The moment the company says we disagree 

with that, it is back at the FCC. There is nothing you can do. But 

142

1 Consumers Union is a nonprofit membership organization chartered in 1936 under the laws 

of the state of New York to Provide consumers with information, education and counsel about 

good, services, health and personal finance, and to initiate and cooperate with individual and 

group efforts to maintain and enhance the quality of life for consumers. Consumers Union’s income is solely derived from the sale of Consumer Reports, its other publications and from noncommercial contributions, grants and fees. In addition to reports on Consumers Union’s own 

product testing, Consumer Reports with more than 5 million paid circulation, regularly, carries 

articles on health, product safety, marketplace economics and legislative, judicial and regulatory 

actions which affect consumer welfare. Consumers Union’s publications carry no advertising and 

receive no commercial support. 2The Consumer Federation of America is the nation’s largest consumer advocacy group, composed of over 280 state and local affiliates representing consumer, senior, citizen, low-income, 

labor, farm, public power an cooperative organizations, with more than 50 million individual 

members. 

on a bill that is inaccurate, it is not even covered by the provision. 

I mean, I would just hope——

Mr. UPTON. You can clarify that. 

Mr. KIMMELMAN. Okay. I would hope you would want to because 

as much as it is important to streamline the process here of new 

entry and new players, it is absolutely critical for consumers to 

have a place to go that is convenient and that will deal in a timely 

fashion with their concerns. 

In conclusion, Mr. Chairman, we think that there is much work 

that needs to be done on this legislation, but there are important 

issues that you are addressing. And we hope that you will continue 

to work with all outside players to try to craft legislation that both 

brings competition, brings us more video players, more choices in 

the marketplace, but does not undercut critical principles of Internet access. Thank you. 

[The prepared statement of Gene Kimmelman follows:]

PREPARED STATEMENT OF GENE KIMMELMAN, SENIOR DIRECTOR OF PUBLIC POLICY

AND ADVOCACY, CONSUMERS UNION

Consumers Union 1 and Consumer Federation of America 2 appreciate the opportunity to testify on the broadband policy discussion draft. We are grateful to Chairman Barton and members of this Subcommittee for their leadership on these important consumer issues. 

For decades, consumers have suffered under monopolistic cable pricing that has 

resulted in skyrocketing cable bills and fewer consumer choices. And despite the 

promise of more competition in wireless and wire line phone services, consumers 

have seen more consolidation and fewer marketplace choices. But the advent of 

broadband now offers tremendous opportunity to inject new and potentially vigorous 

competition into the telecommunications marketplace that has become increasingly 

concentrated over the past decade. 

We welcome the Committee’s interest in fostering greater consumer choice by allowing communities to offer affordable broadband services to their residents. The 

draft provision prohibiting preemption of municipal broadband services helps ensure 

that communities do not face additional roadblocks to affordable broadband access 

for their residents. 

If communities build open broadband systems, consumers will no longer be held 

hostage to the dominant phone or cable provider—they should be able to get video, 

voice and Internet services from many sources. Broadband, whether offered by the 

municipality or other provider, can break the anticompetitive spiral by loosening the 

stranglehold that dominant telephone and cable monopolies have enjoyed for decades. But in order for that opportunity to be realized, broadband policies must facilitate the entrance of new or alternative market players that offer voice, video and 

data services widely available from cable, telephone companies or any other delivery 

system. 

However, given the enormous consolidation in wire line and wireless communications services, this draft fails to deliver the policies necessary to ensure that consumers will receive meaningful growth in price competition in what has become the 

most important telecommunications service—broadband connectivity. The draft’s 

failure to confront the last mile bottlenecks created by the dominant providers’ exVerDate 0ct 09 2002 12:11 May 08, 2006 Jkt 000000 PO 00000 Frm 00146 Fmt 6633 Sfmt 6621 F:\DOCS\26998.TXT HCOM1 PsN: JOEP
143

isting control over competition may in fact foreclose opportunities for future meaningful competition in broadband. 

Worse, the draft takes a step in the opposite direction, relieving incumbent monopolists of key obligations while giving them unprecedented ability to restrain 

broadband competition, and therefore phone and video competition, offered by new 

market entrants. Technological change must not result in the abandonment of fundamental values embraced over 70 years of telecommunications policy—values like 

nondiscrimination, participation in decision making, and protection of both new 

market players and consumers from abuse. 

This draft hands over unprecedented power to broadband providers to discriminate among potential competitors and prevent their own customers from freely accessing content on the Internet and to use applications and devices of their choice. 

As it purports to promote competition in voice, video and data services, it virtually 

ensures that the two dominant incumbents will compete at most with each other 

while squeezing out third party competitors. It preempts the ability of localities to 

require new video entrants to build out their services to all consumers without imposing any national requirements for true competition. It federalizes all decisions 

on consumer protection while unfairly limiting the types of standards the Federal 

Communications Commission is authorized to establish. It precludes enforcement of 

even those limited standards by the states and gives consumers the unsatisfactory 

remedy of a drawn-out federal complaint resolution process. Consumers will be left 

with no where to turn and no remedy for relief. 

In short, the American consumer is being asked to give up a great deal in exchange for another promise of competition at some distant point in the future. Consumers have had their pockets picked too many times to be fooled again. Twenty 

years of broken promises make us skeptical that the sacrifices being asked of the 

public by this discussion draft will ever be offset by competitively driven reductions 

in prices or improvements in service quality. History tells a different story: one of 

increasing concentration, skyrocketing cable bills, and bigger bundles of expensive 

services forced on consumers by both the cable and telephone industries. 

Our specific comments on the draft follow: 

NONDISCRIMINATION & NETWORK NEUTRALITY

The promise of broadband is its ability not only to provide consumers with unlimited access to diverse sources of information and online services, but also to offer 

competitive alternatives to dominant telephone and video services providers through 

voice and video over Internet. But that competition will be stifled if broadband 

Internet transmission service providers are allowed to effectively block consumer access to both content and competitive services that use the provider’s service. Unfortunately, the discussion draft, in its current form, does not prevent that. 

Section 104 codifies the principle that broadband providers should operate their 

networks in a neutral manner but simultaneously provides extensive exceptions, inviting network operators to discriminate against content, applications or devices 

that they do not own or control. The draft opens a wide door to discrimination. 

The draft bill allows broadband Internet transmission service (BITS) providers to 

discriminate against content, devices and applications they do not own so long as 

they can justify such discrimination under the guise of network management. This 

loophole is expanded for broadband video services that integrate Internet capabilities or those who provide enhanced service quality by declaring that they ‘‘may not 

unreasonably’’ impair, interfere, restrict or limit applications or services, but offers 

no standard for what is ‘‘unreasonable’’ and contemplates no rulemaking to do so. 

There is a significant danger that ‘‘reasonable’’ discrimination may be nothing more 

than a desire to maximize revenue by blocking competition. Processes to resolve discrimination complaints allow BITS providers to block content or restrict use of devices and applications as complaints are resolved. This foot-dragging strategy is the 

model that the industry used to strangle head-to-head competition in the past decade. 

Giving network operators the power to dictate services opens the door to the 

‘‘cablization’’ of the Internet. Cable and telephone company giants are encouraged 

by this bill to bundle more services together in take-it-or-leave-it packages and to 

make it harder, not easier, for competing communications service providers and 

Internet applications developers or service providers to reach the public. Both cable 

and local telephone industries have a long history of using their market power to 

stifle competition and undermine consumer choice. In the past decade, the cable inVerDate 0ct 09 2002 12:11 May 08, 2006 Jkt 000000 PO 00000 Frm 00147 Fmt 6633 Sfmt 6621 F:\DOCS\26998.TXT HCOM1 PsN: JOEP
144

3 Bureau of Labor Statistics, Consumer Price Index (November 2005). From 1996 until September 2005, CPI increased 28.7% while cable prices rose 63.8%, 2.3 times faster than inflation. 4Organization for Economic Co-operation and Development (OECD), OECD Broadband Statistics, December 2004. Available at http://www.oecd.org/document/60/

0,2340,enl2649l34225l2496764l1l1l1l1,00.html ; International Telecommunications 

Union, Broadband Statistics, April 13, 2005. Available at http://www.itu.int/osg/spu/newslog/

ITUs+New+Broadband+Statistics+

For+1+January+2005.aspx 5 ‘‘At SBC, It’s All About ‘Scale and Scope,’ ’’ Business Week, November 7, 2005, http://

www.businessweek.com/magazine/content/05—45/b3958092.htm 6 47 U.S.C. §§201-202. 

dustry has inflated monthly cable bills by more than 60 percent 3 and forced consumers to pay twice for Internet service if they want an Internet service provider 

other than the cable owned entity. The result has been thousands of Internet service 

providers out of business. 

Telephone companies have followed a similar path with respect to local competition. Dragging their feet on market opening, they made it virtually impossible for 

competing local exchange carriers to get into the market. Once the Bells were let 

back into long distance, they slammed the door on competition and bought up much 

of what remained of the competitive local exchange carrier industry. At the same 

time, they have tied their high-speed Internet service (DSL) to voice, much like the 

cable operators tied Internet service to their high-speed communications. This duopoly dribbles out bandwidth increasingly in bundles that are unaffordable for most 

Americans. As a result, over the past half decade, America has fallen from third to 

sixteenth in penetration of high speed Internet access 4 and what we call high speed 

is vastly slower than what the rest of the world does. 

Giving the duopoly more power to control the consumer and undermine competition will not solve the problem, it will make it worse and it will have the added 

cost of further undermining innovation in broadband services. Learning a lesson 

from the cable operators, who have been free to close their network for years, the 

CEO of SBC, the nation’s largest telephone company, has already declared his intention to use the new-found freedom to discriminate against and charge fees of 

Internet applications and service providers.5 By imposing limits on download speeds 

and declaring certain applications unacceptable, the cable operators sent a strong 

signal that they would control the services that flowed through the cable wires. 

Innovators abandoned the space and innovation moved abroad. With the telephone 

companies now poised to pursue the same anticompetitive, anti-innovation strategy, 

a long shadow has been cast over the Internet applications market in America. 

The importance of ensuring nondiscrimination in Internet access and traffic cannot be underestimated. It’s important to understand that the Internet only grew and 

thrived because of two mandates of openness. First, the Internet protocols were developed as open protocols under government direction. The agencies that operated 

the Internet required the interconnecting networks to adopt and abide by these open 

protocols. Second, the underlying transmission medium, the telephone network, was 

required by law and rule to be operated in a nondiscriminatory manner under sections 201 and 202 of the 1934 Communications Act 6, which make it unlawful for 

a provider to impose unjust and unreasonable rates, terms and conditions on other 

providers. This draft bill effectively repeals those provisions by making them inapplicable to BITS and BITS providers and yet provides the Commission with no authority to promulgate rules or standards for non-discrimination on networks. Moreover, the minimal interconnection obligations for BITS and BITS providers included 

in the bill are not even subject to a standard that requires interconnection based 

on a public interest standard. Instead, interconnection agreements are left solely to 

the discretion of the dominant network provider and the unaffiliated provider seeking interconnection, with no standards for what they must include and what is prohibited. 

Strong, enforceable nondiscrimination provisions are essential to continued 

growth and competition in not just broadband service, but also for continued innovation in Internet content, services, and applications. The draft bill not only fails to 

provide standards for what impairment, interference or blocking is considered ‘‘unreasonable,’’ it provides no meaningful remedy for those unaffiliated providers 

whose applications, services or content is restricted by a BITS provider. And it 

places the burden of proving that interference is ‘‘unreasonable’’ squarely upon those 

whose rights are violated—businesses with far less power than the dominant incumbent and consumers, who are entirely powerless under the bill’s complaint procedure. 

Though the draft gives the Federal Communications Commission the authority to 

order continuation of service while a discrimination complaint is being resolved, the 

145

authority is discretionary. More likely, the dominant incumbent will block the applications, content or device provider during the months-long complaint investigation 

and resolution process, undermining the viability of the competitive business. Because of the history of network discrimination, the draft should place the burden 

of proving that blocking, impairment or interference content, services or applications 

is reasonable by requiring the BITS provider to bring a complaint to the Commission and mandate service continuation until permission to impair is provided. Until 

that case is effectively made, the services, content and applications should not be 

interfered with. 

Additionally, considering that broadband networks will become the major means 

of communications in this country, the Committee should retain a strong public interest standard for interconnection agreements and authority for the Commission to 

mandate interconnection when it is in the public interest. 

NATIONAL FRANCHISING

While we applaud the goal of expanding competition to cable monopolies, if Congress establishes a national franchise for competitive video services in order to foster more competition, it must also provide for strong, uniform, minimum national 

standards that meet the needs of communities. In particular, this must include provisions to meet community programming needs, ensure build-out and prevent redlining—all negotiating authorities previously provided to localities but effectively 

eliminated by the draft. If communities are forced to forfeit their rights to ensure 

fair treatment of and service to their residents, this bill must also establish adequate national standards in place of those local rights. Without these requirements, 

the promise of more competition will be just another empty one. 

In the absence of explicit requirements that the Bell-entrants build out and make 

their services available to all consumers in a local franchise area, we fear competitive video services will come only to ‘‘high-value’’ consumers—those capable of paying for the full bundle of services that the Bells wish to offer. The favoring of 

upscale consumers to the exclusion of low-income, minority and ethnic groups in the 

provision of consumer services has long been a concern in the communications industry and is of growing concern in advanced telecommunications services given the 

importance of broadband access to functioning in today’s society. The anti-redlining 

provision (Section 304(c)) is a symbolic step in the right direction to ensure that lowincome communities—those most in need of price relief that broadband competition 

can bring—are not excluded by broadband video service providers. 

Unfortunately, by providing sole enforcement power to the Commission and preempting local and state authorities in this area, we have strong concerns that the 

prohibition will be largely meaningless. The Commission will be charged with monitoring compliance in potentially thousands of communities, with no new resources 

dedicated to that enforcement and no adequate date on which to base its determinations. Moreover, the enforcement provision lacks specificity both as to how the Commission will monitor compliance by broadband video service providers and how 

quickly it will take action to remedy nonperformance by providers. We urge your 

consideration of shared or sequential monitoring and enforcement of anti-redlining 

provisions by the Commission, the states and localities. And it is unclear whether 

discrimination based on race, ethnicity or other exclusions based on a ‘‘lack of projected demand for service’’ would be allowed under the draft legislation. 

However, even enforceable anti-redlining provisions may be incapable of ensuring 

service to low-income populations so long as the burden lies with authorities to 

prove that income is the sole reason that service has been withheld as provided for 

in the draft. The combination of the lack of build-out requirements for new video 

service providers, together with relatively weak anti-redlining enforcement and the 

absence of meaningful local franchise negotiating authority, will prevent communities from taking action to ensure that all of their residents enjoy the benefits of 

competition. 

If legislation is to forfeit local franchising authority rights, it should also establish 

national mandatory minimum build-out requirements for new market entrants in 

the local franchise area in which they intend to provide service. If timely build-out 

is not required, then the Committee should require new entrants to provide financial resources to local communities or states for use in fostering alternative means 

of ensuring broadband competition and service to the entire community rather than 

to high-value customers alone. Those resources could be used to establish community broadband networks, competitive commercial services to areas underserved by 

the new entrant, or other means of assistance to help low-income consumers access 

advanced telecommunications services at affordable prices. Though Section 409 respects the rights of communities to build their own networks, it eliminates only one 

146

barrier—preemption. It provides no resources to assure municipalities can establish 

these networks. This is particularly a problem for communities with large low-income populations. 

APPLICATION OF VIDEO REGULATIONS TO BROADBAND VIDEO SERVICE PROVIDERS

Although the draft appears to apply current pro-competitive video rules (e.g. access to programming, ownership limits, must-carry) to new broadband video service 

providers, it opens the door to eliminating important statutory and regulatory protections within four years without a demonstration that such rules no longer serve 

the public interest. By allowing the few requirements Congress imposed on cable 

monopolies to promote competition—which enabled the satellite industry to grow 

and broadcasters to deliver quality local television programming—to expire without 

a thorough demonstration that all public benefits derived from these rules can clearly be attained through market forces, the draft would undermine some of the most 

important avenues for achieving diverse and competitive sources of television news 

and information. There is simply no reason to let the Commission eliminate these 

important pillars of public safety without Congress first initiating such modifications through targeted legislation. 

CONSUMER PROTECTION

The bill’s preemption of state regulation over BITS, VOIP, and broadband video 

services is a significant concern. States are frequently the first line of defense for 

consumers in resolving complaints about fraud, inadequate service, pricing and 

other anti-consumer behavior. Instead the bill requires the Commission to establish 

national consumer protection standards for these services. As unsettling as federal 

preemption of all state regulation or enforcement is, equally troubling is the omission in this most recent draft of several directives for Commission standards included in earlier iterations of this legislation. Omitted provisions include limitations 

on early termination fees, requirements for customer service standards and the 

maintenance of consumer complaint records. If the Commission is allowed to preempt state regulation and enforcement, it must be required to issue comprehensive 

standards that fully protect consumers rather than be limited to the minimal mandates in the bill. 

In addition, because the draft allows telecommunications companies to redefine 

themselves as BITS, BITS providers, or broadband video service providers, they are 

able to skirt existing state and local consumer protection standards for traditional 

services. 

By preempting states from developing their own consumer protection standards 

and then simultaneously preventing their final enforcement of national standards, 

the bill significantly weakens consumer protections. States will have only the ability 

to issue compliance orders when providers violate Commission standards. They can 

take no enforcement action of their own, raising serious concerns about the timeliness and resolution of consumer protection violations given Commission resources. 

And if a consumer complaint does not clearly fall under a national standard, consumers will be forced to wait for subsequent Commission action in order to resolve 

their problems. 

Finally, the complaint process envisioned by the draft threatens to leave consumers, municipalities and states without resolution of concerns for many months 

as the Commission forwards the complaint to the offending party, awaits an answer, 

investigates the complaint and then mediates or arbitrates the issue. At a minimum, any legislation should provide states with the ability to enforce federal standards and allow states the flexibility to protect consumers against new forms of abuse 

while awaiting Commission action to formulate final rules. 

RIGHTS OF MUNICIPALITIES TO PROVIDE BROADBAND NETWORKS

We offer our strong and unqualified support for Section 409, which prohibits state 

preemption of municipal broadband networks—a critical component of any legislative package that seeks to increase consumer access to advanced telecommunications services. The provision is essential to any legislation that seeks to foster 

competition in data, video and voice services, and expand affordable high-speed 

Internet access to all Americans. 

Hundreds of communities have responded to the lack of affordable broadband access by creating their own networks through public-private partnerships, offering 

new opportunities for entrepreneurs. Community broadband networks offer an important option for communities in which broadband services reach only certain areas 

or are offered at prices out of reach for many consumers. Equally important, the 

147

mere possibility that a community may develop a broadband network helps discipline the marketplace. 

Efforts to prohibit these community networks stifle competition across a range of 

telecommunications services, stall local economic development efforts, and foreclose 

new educational opportunities. Section 409 of the draft ensures that communities 

that want to foster broadband access are not precluded from doing so. 

SUMMARY

We applaud the Committee’s efforts to modernize regulation to foster broadband 

competition, technological innovation and adoption of high-speed Internet. Unfortunately, the approach of this draft heads in exactly the opposite direction: it will 

hamper competition, stifle innovation, and do little to promote ubiquitous affordable 

access to advanced services. We look forward to working with you to address these 

issues as the Committee continues its work.

Mr. UPTON. Thank you. Mr. Wiginton? 

STATEMENT OF JOEL K. WIGINTON 

Mr. WIGINTON. Thank you, Chairman Upton, for inviting us to 

testify. My name is Joel Wiginton. I am Vice President and Senior 

Counsel at Sony Electronics for Government Affairs. It is about almost 6 hours after this hearing started, so rather than read my 

testimony verbatim, I will just give you the 5 top highlights of my 

testimony. We are a leading consumer electronics manufacturer, including the manufacture of televisions, from soup to nuts, in Pennsylvania, and personal computers in San Diego. There are five 

main points. 

My first is that our industry, and consumers in general, will substantially benefit from a truly competitive video service market. In 

particular, we are encouraged by the competition potentially offered by new entrants such as the ILECs, and we want to applaud 

the committee for your efforts to realize this competition. 

Second, and perhaps the most important for our industry and 

consumer electronics consumers, is that we need to truly realize 

right of attachment as envisioned by Section 629 of the Telecommunications Act. We were pleased that the draft bill extends 

the principles of 629 to broadband video service providers, but 

what we really need is an explicit right to attach. Absent an explicit right, there will be little competition for consumer electronics 

devices that attach to the networks, and consumers will have little 

choices as well because service providers can use their monopoly 

power over that network to control the devices that attach to that 

network, and how consumers can use those devices. 

Consumer choice will suffer for three main reasons. One, there 

will be little competition for consumer prices for devices that attach 

to the network. Two, there will be little competition for features 

and functions for devices that attach to the network. And, three, 

there will be little innovation and little incentive for consumer electronics device manufacturers to create new consumer-friendly products that attach to the network. 

Our third point, we are quite pleased that the draft bill applies 

the net neutrality principles to the broadband Internet access services. We want to point out though that if these principles are violated, we want to ensure that there is meaningful enforcement of 

these principles by the Federal Communications Commission. 

Fourth, we do have some concerns with the mandatory 4-year 

sunset review provision of the bill. As Mr. Stearns said in his openVerDate 0ct 09 2002 12:11 May 08, 2006 Jkt 000000 PO 00000 Frm 00151 Fmt 6633 Sfmt 6602 F:\DOCS\26998.TXT HCOM1 PsN: JOEP
148

ing statement, what we want to do with this bill is create regulatory certainty. And while this provision will ensure employment 

for myself—lawyers and lobbyists like myself in perpetuity—it really does do the exact opposite for people in my industry. It creates 

a systemic intolerable uncertainty for the consumer electronic industry. 

And, finally, while we very much support the spirit of the bill 

and its attempt to create meaningful access for persons with disabilities to broadband services, we do have some concerns with the 

precise language of the bill. That said, we think that a compromise 

is easily obtainable, and we want to work with the committee and 

members of the disability community to create a provision that effectively creates access for persons with disability. 

Thank you very much, and we look forward to any questions. 

[The prepared statement of Joel K. Wiginton follows:]

PREPARED STATEMENT OF JOEL K. WIGINTON, VICE PRESIDENT AND SENIOR

COUNSEL, SONY ELECTRONICS INC

INTRODUCTION

Chairman Upton and Ranking Member Markey, my name is Joel Wiginton, and 

I am Vice President and Senior Counsel for Government Affairs at Sony Electronics 

Inc. We are a leading manufacturer of consumer electronics devices, including televisions, DVD players, and personal computers. My company appreciates the opportunity to express its views on the staff discussion draft creating a statutory framework for Internet protocol and broadband services. 

Over the past several years, consumers nationwide have benefited from a revolution in consumer technology—a revolution that has allowed for an ever-increasing 

array of products to interconnect and access the power of IP-enabled services 

through the Internet. Consumers enjoy ‘‘on-demand’’ access to all types of content 

using a vast array of consumer electronics devices. This revolution has fueled the 

U.S. economy and helped to maintain our country’s leadership in innovation and entrepreneurship. 

Policymakers have long recognized the value of unfettered access to communication services. FCC regulation in the 1970s and 1980s fostered the growth of the 

Internet by prohibiting telephone companies from preventing the offering of ‘‘enhanced services’’ and allowing consumers to attach their own devices to the network. 

Further, Congress recognized the importance of consumer choice when it enacted, 

in 1992, Section 624A of the Communications Act mandating compatibility between 

consumer electronics and cable television systems and, in 1996, Section 629 mandating the commercial availability of navigation devices connecting to multichannel 

video programming systems. 

PROMOTING MARKET-BASED COMPETITION AND PRESERVING THE MARKETPLACE FOR

EDGE TECHNOLOGIES

As an industry, we are excited about the potential for new, competing broadband 

services, including new video programming services. We believe that these new services should be able to flourish and not be saddled with burdensome and inappropriate legacy regulations. At the same, we believe that the success of broadband 

services depends on preserving the existing paradigm between consumer electronics 

manufacturers, service providers, network operators, content developers, and the 

government. This paradigm includes a commitment to open and unfettered consumer access to content, services and applications, and protecting consumers’ ability 

to connect devices of their choice. 

High-speed broadband networks offer a platform for innovation that will thrive if 

application developers, device manufacturers, and network providers are free to differentiate their offerings and invest in new technologies without restrictions imposed by other industry players. We believe, therefore, that innovation will flourish 

only if device manufacturers have certainty that their products will be able to connect to IP networks and broadband services. 

If this freedom is not preserved in the broadband world, then network service providers will be able to dictate CE product design and functionality and to favor equipment of their own design and making over equipment provided by unaffiliated parVerDate 0ct 09 2002 12:11 May 08, 2006 Jkt 000000 PO 00000 Frm 00152 Fmt 6633 Sfmt 6621 F:\DOCS\26998.TXT HCOM1 PsN: JOEP
149

ties in the competitive marketplace. Using proprietary standards and restrictive licensing terms, service providers will be able to control the consumer experience, determining what devices consumers can use and how they use them. If service providers exercise this ability, the retail marketplace for ‘‘edge network’’ technologies 

like TiVo and portable video players, and the incentive to create new technologies, 

will no longer exist. 

Although we are hopeful that detailed regulations will not be as necessary with 

respect to emerging technologies as has been the case in the past (for example, with 

cable television), we believe that it is essential for Congress to direct and empower 

the FCC to ensure that consumer devices that can attach to broadband services will 

become commercially available. Consumers ultimately will benefit from the resulting array of choices available to them. 

ENFORCEMENT MECHANISMS FOR ‘‘NET NEUTRALITY’’ PRINCIPLES SHOULD BE INCLUDED

IN THE LEGISLATION. 

We also would like to express our continued support for applying ‘‘net neutrality’’ 

principles to broadband Internet access services. Section 104 in the draft bill applies 

these principles to such services. However, we believe that to ensure adherence to 

these principles, swift and appropriate action must be taken if they are violated. Additionally, we hope that service providers do not take unjust advantage of the exemptions in Section 104 to avoid complying with the principles. 

ENSURING THE COMMERCIAL AVAILABILITY OF DEVICES THAT ATTACH TO BROADBAND

VIDEO SERVICES

As discussed in the introduction, in 1996 Congress recognized the importance of 

consumer choice when it enacted Section 629 mandating the commercial availability 

of navigation devices connecting to multichannel video programming systems. We 

are pleased that the current draft bill directs the Federal Communications Commission to develop comparable regulations to apply to broadband video services providers. 

As the Commission develops these regulations, we believe that it is vital for such 

regulations to include an explicit ‘‘right to attach’’ competitive devices. The language 

set forth in Section 624A and Section 629 does not include a clear right to attach. 

We ask, therefore, that the FCC be directed to include in its regulations an explicit 

right to attach commercially available devices to broadband video services so long 

as they do not harm the network or enable theft of service. 

Further, licenses for these technologies that allow the attachment of devices to 

broadband video services should not impose unrelated or unnecessary burdens on 

licensees, such as prohibiting designing the same device to attach to a separate 

broadband Internet service if the consumer has subscribed to such a separate service. We respectfully request the addition of amendatory language prohibiting 

broadband video service providers from imposing such limitations in their licenses. 

In addition, to ensure that the current ‘‘two-way plug and play’’ negotiations 

among cable providers and CE manufacturers are not stalled or undermined, we ask 

that language be added to the bill stating that until the Commission enacts new 

regulations, the current regulations implementing Sections 624A and 629 for cable 

operators shall continue to apply to covered multichannel video providers (cable) 

even after they qualify to be treated as broadband video service providers. 

ACCESS TO PERSONS WITH DISABILITIES

The consumer electronics industry supports the goal of ensuring that persons with 

disabilities have access to products that attach to broadband services. However, we 

believe that the current draft bill, instead of working toward that goal, will work 

against it. 

The draft bill widens the scope of existing accessibility laws by including any and 

all devices used to access broadband Internet, voice and video service. It also creates 

a new undue burden standard that would require every manufacturer, on a case by 

case and potentially a product by product basis, to prove an undue burden. The uncertainty, compliance, and potential litigation costs would greatly impact manufacturers’ ability to develop new, innovative devices that attach to broadband services. 

Current telecommunications law (Section 255) stipulates that manufacturers must 

provide products that are ‘‘accessible to and useable by persons with disabilities, 

where readily achievable.’’ The ‘‘readily achievable’’ standard is defined as ‘‘easily 

accomplishable and able to be carried out without much difficulty or expense.’’ The 

current committee draft legislation defines an ‘‘undue burden’’ as meaning ‘‘significant difficulty or expense.’’ Thus, although the factors used to evaluate whether a 

150

feature or function is ‘‘readily achievable’’ or an ‘‘undue burden’’ are similar, the 

analysis could result in a radically different level of obligation for manufacturers. 

This difference could be critical for the ability of manufacturers to provide products with a variety of different features and functions that meet the needs of different markets. Under current law, manufacturers of telecommunications consumer 

products have been able to provide products with bare-bones capabilities at low cost 

and other products with enhanced capabilities at a fair market price. CEA is concerned that the change to an ‘‘undue burden’’ standard would result in a regulatory 

environment that would require every product be equipped with any feature that 

a single high-end product might be able to employ. The unfortunate result would 

be that manufacturers could become fearful to innovate in accessibility features, and 

hold back innovations that would otherwise have benefited consumers with disabilities. 

We are committed to working on compromise legislative language that would address the needs of the disability community, while not unreasonably impacting manufacturers and harming the overall economy. 

CONCLUSION

Sony, and indeed CE manufacturers generally, support bringing true competition 

to the market for video services as soon as possible. We particularly support the efforts of new facilities-based entrants like the ILECs. Marketplace competition for 

video services will bring consumers lower prices and allow manufacturers to develop 

new and innovative products for consumers to access these services. 

Again, thank you for the opportunity to address the Committee on these important matters. We look forward to continued cooperation with the Committee and 

other interested parties.

Mr. UPTON. Thank you very much. Mr. Wilson? 

STATEMENT OF DELBERT WILSON 

Mr. WILSON. Good afternoon, and thank you for inviting me to 

testify before you today. I am the general manager of Industry 

Telephone Company, which is headquartered in Industry, Texas. 

Our service area encompasses 226 square miles. We have three 

telephone exchanges providing service to approximately 2,352 access lines. That is a density of only 10.3 subscribers per square 

mile. In addition to local service, Industry Telephone Company also 

provides Internet and inter-exchange services. Through its extensive infrastructure investment, Industry Telephone Company is a 

key driver to the local economy and rural development throughout 

its service area. 

Americans today uniformly rely on communications infrastructure and services to satisfy their commerce, security and entertainment. Moving forward, these needs will be met via a combination 

of two-way voice, video and data options. Consequently, deploying 

advanced infrastructure that is fully capable of offering such services should become the hallmark of our national communications 

policy. Unfortunately, as currently crafted, we are not convinced 

the draft legislation that is the subject of today’s hearing would effectively establish such a foundation. Rather than setting a stage 

that would yield a ubiquitous broadband capable network the 

President and so many others of us seek, we fear the structural approach to this draft emphasizes regulatory silos that are not fully 

in sync with the convergence taking place in the industry. But 

more importantly, we particularly fear the approach could ultimately undermine the Nation’s long-standing commitment to universal service. Without a strong commitment to this policy and the 

mechanisms necessary to carry it out, it is possible the dramatic 

vision this draft hopes to evoke may never materialize. 

151

A recent example of the importance of maintaining a strong universal service policy is demonstrated by the recent experience of 

ATCA member Cameron Communications in Sulphur, Louisiana. 

All 11 of Cameron’s exchanges were devastated by Hurricane Rita. 

In the aftermath of that disaster, Cameron’s challenges are significant, yet thanks to the Universal Service support, they are not insurmountable. While Universal Service support helped to build a 

pre-hurricane Cameron system, it has taken on an even more important role in the post-devastation period. With nearly all of its 

business and residential revenue base temporarily walked-out, the 

Universal Service support it receives is sustaining the system during this time of extreme need. By the way, Cameron is home to the 

Nation’s Strategic Petroleum Reserve, which is of grave importance 

to all Americans. 

We are particularly concerned that the draft unnecessarily ignores that the communications industry is converging into an industry where carriers will be offering bundled voice, video and data 

services. What is needed is a broad definition of communications 

services that is not technology specific. A regulatory regime is necessary that regulates like services in a like manner regardless of 

the technology used. This regime must account for the high-cost 

networks and protect the integrity of the infrastructure that all of 

these providers equally rely upon to offer their services. This is the 

only way to preclude the sort of arbitrage that has already been allowed to occur under today’s regulatory classification scheme, and 

that would surely continue on the approach envisioned by this 

draft. 

We are also concerned with the draft’s interconnection provisions. While some of the earlier draft’s more troubling aspects in 

this regard have been eliminated, we continue to believe more clarity is called for. The rural industry has always been in a difficult 

position when it comes to negotiating such matters, because, frankly, there is little incentive for others to come to the bargaining 

table with a small rural carrier. 

In addition, if the regulatory silo approach of the draft is preserved, we believe the interconnection and the reciprocal compensation arrangements discussed above should be clarified to apply to 

all titles of the Act. If regulatory equity among industry segments 

is truly the committee’s objective, then this is a must. 

The draft in question today is complex and requires careful review. We intend to continue our scrutiny of its details, and we will 

certainly be happy to provide the committee with additional viewpoints as they emerge. In the meantime, it is important that the 

committee is fully aware of the rural sector’s thoughts regarding 

any rewrite of our communications statutes. These details are outlined in my written statement. 

In terms of a broader rewrite of the Communications Act, we 

would implore the committee to remain cognizant of these specific 

areas that are so critical to rural carriers and the consumers they 

serve. If you are able to do that, you will have successfully ensured 

the creation of an environment that will sustain the Nation’s commitment to ensuring all Americans with access to comparable, affordable communications services now and in the future. Thank 

you, Mr. Chairman. 

152

[The prepared statement of Delbert Wilson follows:]

PREPARED STATEMENT OF DELBERT WILSON, GENERAL MANAGER, INDUSTRY TELE- PHONE COMPANY ON BEHALF OF INDUSTRY TELEPHONE COMPANY AND NATIONAL

TELECOMMUNICATIONS COOPERATIVE ASSOCIATION

Good morning! ITC is a company headquartered in industry, texas. Our service 

area encompasses 226 square miles. ITC has 3 telephone exchanges providing service to approximately 2,352 access lines. That is a density of only 10.3 subscribers 

per square mile. In addition to local service itc also provides internet and interexchange services. Through its extensive infrastructure investments, itc is a key 

driver of the local economy and rural development throughout its service area. 

ITC is representative of the nation’s rural incumbent local exchange carriers. The 

good things we stand for and do make rural communities a better place in which 

to live and work. And make no mistake about it, our efforts contribuite directly to 

making the nation as a whole stronger and more secure. That is why I am honored 

to be appearing today on behalf of the hundreds of similarly situated rural carriers 

represented by the national telecommunications cooperative association—and more 

importantly, on behalf of their several thousand employees and several million subscribers. 

Throughout the debate surrounding the communications act rewrite, the initiative’s most ardent advocates have repeatedly cited deregulation and competition as 

the keys to maintaining america’s communications preeminence. Their theme revolves around the ideas that: ‘‘absolute competition and deregulation are always in 

the public interest; the communications era can only evolve to the next level with 

a hands-off policymaking aprroach; and the universal service oriented foundations 

of our past must be abandoned in favor of preferential treatment for specific emerging technologies and concepts.’’ 

The nation’s rural carriers do not agree with this premise. The flaw with all these 

theories is that neither alone nor in tandem will any of them produce the results 

their advocates so desperately seek. In fact they will not even be capable of maintaining the status quo. And in the aftermath of recent natural disasters as well as 

the subversive threats our nation faces today, these communications can mean the 

difference between life and death. 

How many of you are aware of the critical role rural communications systems play 

in the aftermath of these types of events? As we speak, one such NTCA member 

continues its scramble to rebuild its system in the aftermath of huricanes Katrina 

and Rita that hit the Louisianna and Texas coasts. Cameron communnications in 

Sulpher, Louisianna, represents a critical economic and security link in Sulphur, in 

Cameron Parish, in Louisanna, and yes even in the United States. 

Cameron’s service territory covers the states largest parish from a geographic perspective but perhaps it’s smallest from a demographic perspective. Thankfully for 

all Americans, Cameron, like all NTCA members, views their mission as one based 

in the moral obligation of placing service ahead of profits. This is a particularly critical point considering the challenges Cameron faces today. This small rural system 

has been tasked with bringing communications service to the nation’s strategic petroleum reserve which is located within its territory. In addition, there are major 

liquified natural gas facilities and a host of other petroleum related businesses in 

Cameron’s territory that are relying on them to provide crucial services. If that were 

not enough, Cameron is also responsible for providing services to the National 

Guard, the Federal Emergency Management Agency, the Red Cross and other releif 

organizations currently operating in the area. 

Cameron’s challenges are significant. Yet thanks to universal service support, 

they are not insurmountable. While universal service support helped to build the 

pre-hurricane cameron system, it has taken on an even more important role in the 

post-devestation period. With nearly all its business and residential revenue base 

temporarily wiped out, the universal service support it receives is sustaining this 

system during this time of extreme need. 

But that is just one example of rural carriers being prepared, as well as responding to natonal needs in the aftermath of significant events. How many of you are 

aware that it was a small rural system in the central plains that the Federal Government turned to for help in the immediate aftermath of the events of September 

11, 2001. As efforts were launched to position the Vice President in a secure location, NTCA member venture communications, based in Highmore South Dakota was 

called to help with the effort. Again, because they were prepared, they were able 

to quickly establish secure communications in a remote location that the security 

intersts of that time mandated. And again, they were largely able to do this due 

to our national commitment to universal service. 

153

My point is there are more critical policy footings than compettition and deregulation that must remain in place to ensure the existence of a robust nationwide ubiquitous communications network—a network capable of supporting advanced services 

and responding to our nation’s economic and security needs. Full cost recovery, fair 

access and interconnection are critical to a strong and useful communications foundation. Without them, there will be no network, be it wireline, wireless, or some 

other medium, to provide consumers with access to IP-enabled or broadband oriented services. 

With regard to cost recovery, there are primarily two issues to keep in mind—

universal service, and intercarrier compensation. These are not industry regulations 

as so many would like us to believe. They are industry responsibilities. In general, 

the industry as a whole believes that the way in which funds are collected and distributed for universal service and intercarrier compensation must be changed to ensure our network continues to thrive. The solutions for both are fairly simple ones. 

For universal service, we must refrain from ever linking its support mechanisms 

to general revenues, as its current industry funded approach is well proven. In 

additon, the base of contributors should be expanded and its distribution should be 

cost based to ensure accountability and credibility. This is contrary to the current 

rules where competitive providers receive suport based on the incumbents costs, regardless of their true cost of service. 

With regard to intercarrier compensation if any service provider uses another provider’s network that service provider must compensate the other provider for the 

use of their facilities—at an appropriate rate. This notion is not complex; it is simply ensuring that all players stand up to their responsibilities of having the opportunity to partake in our capitalistic marketplace. 

Many call intercarrier compensation or access charges an implicit subsidy. I call 

it a legitimate operating cost for a telecommunications provider. We have invested 

tens of millions of dollars to serve rural communities. If a carrier would rather come 

and build their own network instead of using ours for a nominal fee, they are welcome to do so. As an internet provider myself, I compensate the owner of the Internet backbone that I must utilize to offer internet services to my customers. I view 

this as a legitimate cost for providing internet services to our customers. I recognize 

and accept that without use of their network I could not provide these services for 

my customers. I am therefore fortunate that the network resources are available to 

help me in providing my customers with the full array of advanced services that 

are available today. 

Tell me, why should a new service provider be able to access this network for 

free? Much of this debate seems to be focused on whether new IP-enabled service 

providers should pay access charges. To those of us that toiled to finance the deployment of infrastructure the question is: why should they not? I understand that we 

don’t want to bog down new entrants with unnecessary regulations, but allowing 

them to skirt industry responsibilities is simply wrong. If a new provider’s business 

plan can’t accommodate playing by the rules and upholding industry responsibilities, then they probably shouldn’t be playing. After the 1996 Telecom Act, we saw 

a large influx of new telecom entrants. Unfortunately, many did not have sound 

business plans and were soon out of business or in bankruptcy thus, hampering investment in the telecommunications industry as a whole. We don’t want to recreate 

the boom/bust scenario of that period by artificially incentivizing unsound businesses that cannot operate without benefitting from regulatory arbitrage. 

Americans today uniformly rely on communications infrastructure and services to 

satisfy their commerce, safety, security, entertainment, and leisure needs. Moving 

forward, these needs will be met via a combination of 2-way voice, video, and data 

options. Consequently, deploying advanced infrastructure that is fully capable of offering such services should become the hallmark of our national communications 

policy. 

Unfortunatley, as currently crafted, we are not convinced the draft legislation that 

is the subject of today’s hearing would effectively establish such a foundation. Rather than setting a stage that would yield the ubiquitous broadband capable network 

the president and so many others of us seek, we fear the structural approach of this 

draft emphasizes regulatory silos that are not fully in sync with the convergence 

taking place in the industry. But more importantly, we particularly fear this structural approach, whether by design or accident, could ultimately undermine the nation’s long-standing commitment to universal service. Without a strong commitment 

to this policy, and the mechanisms necessary to carry it out, it is possible the dramatic vision this draft hopes to evoke, may never materialize. 

We are particularly concerned that the creation of three new regulatory classifications for communications infrastructure as suggested in this draft unnecessarily ignores that the communications industry is converging into an industry where carVerDate 0ct 09 2002 12:11 May 08, 2006 Jkt 000000 PO 00000 Frm 00157 Fmt 6633 Sfmt 6621 F:\DOCS\26998.TXT HCOM1 PsN: JOEP
154

riers will offer voice, video and data. What is important is the one pipe that carriers 

will offer their services over, not what technology is utilized. What is needed is a 

broad definition of communications services that includes all services, regardless of 

the technology used to deliver the service or the regulatory classification of the service that are capable of supporting 2-way voice communications, data, video and any 

new advanced services used to communicate. A regulatory regime is necessary that 

regulates like services in a like manner regardless of technology used. This regime 

must account for high cost networks and protect the integrity of the infrastructure 

that all of these providers equally rely upon to offer their services. This is the only 

way to preclude the sort of arbitrage that has already been allowed to occur under 

today’s regulatory classification scheme and that would surely continue under the 

approach envisioned by this draft. 

Our overriding concern with the structural approach of the bill notwithstanding, 

the drafters have identified and attempted to address several areas that are of specific concern to the rural sector of the industry. Yet we fear many of these may require additional clarification as well. For example, while its reference to interconnection duties in sections 103 and 203 are appropriate, and the drafters have deleted some of the troubling provisions from the earlier draft, we continue to believe 

more clarity is called for to ensure they truly accomplish what is necessary from 

a rural provider perspective. The rural industry has always been in a difficult position when it comes to negotiating such matters because frankly there is little incentive for others to come to the bargaining table with a small rural carrier. The degree 

to which matters such as this can be given more clarity will benefit all rural americans. 

In addition, if the regulatory silo approach of the draft is preserved we believe 

the interconnection, and reciprocal compensation arrangements discussed above 

should be clarified to apply to all titles of the act. If regulatory equity among industry segments is truly the committee’s objective then this is a must. The draft in 

question today is complex and requires careful review. We intend to continue our 

scrutiny of its details and will certainly be happy to provide the committee with additional viewpoints as they emerge. In the meantime, it is important that the committee is fully aware of the rural sector’s thoughts regarding any rewrite of our communications statutes. 

Earlier I had alluded to the fact that in our mind any rewrite initiative must ensure the ability of carriers to fully recover costs and to have fair access and interconnection capabilities. Indeed, moving into this debate we put forth the following 

specific concepts that we believe must govern the construction of communications 

policy for the future which is based on the following general principles: 

Regulatory approach—

• Must be approached from a flexible perspective. Placing all carriers on an equal 

regulatory footing is an admirable goal yet one that does not equate total deregulation. 

• The rural sector has, and will, necessarily continue to rely upon the preservation 

of a certain level of regulation that is inclusive of industry responsibilities that 

all must live up to. 

• Typically, a federal/state partnership works best to meet the needs of rural consumers. 

Universal service—

• General issues: 

• The universal service fund must continue to be an industry funded mechanism, 

and neither supported through general tax revenues nor subjected to the federal 

anti-deficiency act. 

• Contribution issues: 

• The base of contributors must be expanded to include all providers utilizing the 

underlying infrastructure, including but not limited to all providers of 2-way 

communications regardless of technology used. 

• Support shall be made available for the cost recovery needs of carriers deploying 

broadband capable infrastructure. 

• The contribution methodology must be assessed on all revenues or a revenues hybrid that ensures equitable and nondiscriminatory participation. 

• The regulatory authority to modify the scope of contribution obligations as technology evolves must be clarified and strengthened. 

• Distribution issues: 

• Support must be used to construct, support, and maintain networks to benefit all 

consumers and must not be voucher, auction, or block grant based. 

• Support must be based upon a provider’s actual cost of service. 

155

• Support must not be used to artificially incite competition. • The rural and non-rural fund distinctions must be maintained. • Rules must be streamlined to encourage acquisitions of adjacent underserved exchanges. 

Intercarrier compensation—

• Carriers must be compensated for all traffic utilizing their networks. • Carriers must identify their traffic to discourage arbitrage and phantom traffic. 

Identifying information must be passed along by all intermediate carriers. • Appropriate transitional time frames are necessary to ensure continued access to 

quality/affordable communication services in rural areas. 

Network access/interconnection—

• All providers must continue to have the obligation to allow other providers to 

interconnect with their networks. • Default rates, terms, and conditions for access to and use of network facilities 

must be maintained as technology evolves. • Rural providers must have realistic access to spectrum. 

Video content—

• Providers must have non-discriminatory access to video content at reasonable and 

non-discriminatory rates, terms, and conditions regardless of distribution technology used. • Non-disclosure, tying, and exclusive programming agreements regarding rates 

must be prohibited. • Predatory pricing by large incumbent cable operators must be prohibited. 

In terms of a broader rewrite of the communications act, we would implore the 

committee to remain cognizant of these specific areas that are so critical to rural 

carriers and the consumers they serve. If you are able to do that you will have successfully ensured the creation of an environment that will sustain the nation’s commitment to ensuring all Americans with access to comparable affordable communications services now and in the future. Thank you. 

Mr. UPTON. Well, I want to thank all of you for staying this long. I hope you didn’t 

line have sitters this morning. I saw some early this morning when I came in at 

7. And I do want to just note for the record that—and in spite of not having a lot 

of members now—remember we started very early this morning—we have had 28 

members on both sides of the aisle participate, which is not quite a record, but it 

shows the interest, obviously, of this legislation, and I don’t think anyone quite figured that it would last this long with the number of votes that we had today. And 

I would just make a motion that all members of the subcommittee have a couple 

days to submit questions in writing that you might be able to respond. We will keep 

the record open to include that, if it happens. 

I have a couple of questions before I yield to either one of my Democratic colleagues or the Vice Chairman of the subcommittee Mr. Bass. I want to start, I 

guess, first of all with Mr. Bowe. Again, we appreciate your participation today. I 

have two questions. I will ask them both and then let you respond. One, in your 

testimony, you state that home access to the Internet has just passed 50 percent. 

How many people with disabilities would you estimate that are currently unable to 

access and use the Internet today due to the accessibility issue? That is No. 1. My 

second question is the bill—this draft would require manufacturers and service providers to make broadband equipment and services accessible to people with disabilities unless doing so would cause an undue burden. In your opinion, how will the 

change from today’s readily achievable standard to the undue burden standard impact the lives of people with disabilities? 

Mr. BOWE. Thank you, Mr. Chairman. To take them in order, first, the proportion 

of Americans with disabilities who are not able to access the Internet because of 

accessibility issues specifically—we don’t have a particular number. I can give you 

some guesses, but——

Mr. UPTON. Okay. 

Mr. BOWE. [continuing] I can’t give you a specific number. I would guess something in the order of 20 to 30 percent, and the reason I say that is that is a—issue 

specific to different—or different web sites. Most web sites and most places that you 

go to on the web are not accessible for people with learning disabilities and people 

who are blind. The vast majority do not comply with standards for accessibility. 

That being so, your bill does not get into regulating that, so I don’t want to go too 

far with the 20-percent number. There are others who is having to do with affordability and having to do with the availability of the basic equipment. Those issues 

are beyond the question that you asked me. But if you ask about public school children with disabilities, those nearly 100 percent of them gain access every school day 

156

because they do it from school. Once you help people leaving in school and living 

in adulthood, give affordability so that would reduce your number. Okay. 

And your other question on me, undue hardship defense of manufacturers. First 

of all, the 1996 Act, as you well know, required that excessive parody—was readily 

achievable, but we are now in—of any effort with the manufacturers of hardware 

and software and the providers have services have been asked to make access accessible if they can do it, and if they can’t, to please explain why they can’t. I think 

by now they certainly have experience—9 years of experience with us. Now, but I 

also want to make the point that today’s technologies, from the cell phones that we 

use, to PDAs, even to desktops, we are not talking about machines that have a 

shelf-life in months, maybe up to a year. And also we have things that are very, 

very heavy in software that if I want to put a new version of a cell phone or a new 

version of a PDA, what I do is just plug in some new card. Now with all of these 

cases, you can make something accessible, much easier, much faster and much 

cheaper than you could in 1995 and 1996. For all—undue burden standard is not 

a—difficult standard for them to meet. I don’t think it would have any reasonable 

impact on them at all. 

Mr. UPTON. Okay. Thank you. I know my time is expired. Mr. Bass has waited. 

I have some other questions, but I will yield to Mr. Bass for 5 minutes. 

Mr. BASS. Thank you. I thank the Chairman, and I think I am only going to ask 

one question, a general question, so you can continue. Mr. Wilson, you dealt more 

than—I don’t have a specific question for you. You dealt more than anybody else, 

I believe, in the issue of rural services and how this bill would affect that, and I 

am reviewing your testimony now. I am wondering whether there are any aspects 

of this staff draft, any additions that we might be able to make, any leverage points, 

or incentives, or thoughts or anything that we might employ that would maximize 

the deployment of advanced services to rural communities like the 179 or 180 or 

so that I represent in New Hampshire? 

Mr. WILSON. Well, sir, I think—speaking on behalf of rural companies—I think, 

you know, we are very interested in going forward with advanced networks to offer 

all these new services to our customers. I think the main thing we need going forward is a stable environment of—you know, things are still uncertain and it is very 

difficult to make investments because we don’t know what is going to happen. Everything is just a flux these days. We need—stability and a strong Universal Service 

policy, something we can count on before—and where we can make investments and 

recover those costs, we as rural carriers will build those networks to deliver those 

advanced services to the rural consumers across this country. In many cases, we are 

already well under way doing that. 

Mr. BASS. Does anybody else have any comments on it or not? Then, finally, Mr. 

Wilson, the—I am reading your summary. The provision allowing for new government networks to compete with existing carriers has always been a concern to the 

rural industry and is inconsistent with their position in that regard. You are not 

referring to Section 409 the government authority to provide services, is that what 

you are referring to, or something else? 

Mr. WILSON. I am totally not sure of exactly what Section. 

Mr. BASS. Okay. 

Mr. WILSON. But, no, sir, we do not agree with government competing with us 

in networks. I just don’t believe our tax dollars be used against us that way than 

providing dollars——

Mr. BASS. If we weren’t involved, would you have a problem with it? 

Mr. WILSON. Well——

Mr. BASS. If the municipalities had—if there was no provision—if a small community, for one reason or another, they couldn’t get the kind of services that larger 

communities could get and the community itself decided to undertake the challenge 

of providing broadband high-speed services itself, and they charged their customers 

for that. It wasn’t—they didn’t use money that they were collecting for the recycling 

center or for plowing roads and so forth, would there be a problem with that? 

Mr. WILSON. In most cases that I am aware of in rural communities, our rural 

carriers are very attentive to their customer base and delivering services such as 

you are talking about here. I just think that we should always be careful in opening 

the door to allow government municipalities, or state, or whatever, to be in competition with us, you know. After——

Mr. BASS. Do you think a rural community that is advised by whatever providers 

that exist that they just don’t want to do it because it’s not cost effective, that those 

citizens should be denied the ability to look for alternatives that might include a 

municipal plan? 

Mr. WILSON. I couldn’t—I would have to agree with you there, that just because 

they are rural citizens, they should not be denied the access to such things if the 

157

provider fails to provide that service. I think you would have to be very specific in 

the case where the carrier of the—the local exchange carrier has failed to do so or 

refuses to do so, but I think in—again, in the cases I know of in the rural areas, 

I don’t know of a case where a municipality already served by a rural company that 

the rural companies have not been attaining to meet their customers’ needs, because 

we are very—you know, they are our neighbors, our friends, we live with them, and 

we hear from them regularly and we try to do our best to serve them. That is what 

we are all about is service to our customers. 

Mr. BASS. Any other comments? 

Mr. KIMMELMAN. Mr. Bass, I think that what we are finding is there are a lot 

of communities in which people do not have access to adequate broadband service, 

prices are high, or in some cases services isn’t even available. One of the most admirable portions of this bill, I believe, is allowing communities to step in. And, as you 

heard this morning from EarthLink, they are paying for building a network in 

Philadelphia. They are building out—it is on their own nickel, and they are offering 

services as low as $10 a month for broadband access—wireless access. I would love 

to see private enterprise do that, but where they won’t, it certainly is enormously 

helpful to have the community band together and do it itself. 

Mr. BASS. Thank you, Mr. Kimmelman. I yield back. 

Mr. UPTON. Mr. Markey? 

Mr. MARKEY. Thank you, sir. Thank you, Mr. Chairman. I apologize. Mr. 

Kimmelman, is there a concern from a consumers standpoint that the net neutrality 

right, the freedom to access all Internet content, or the ability to get higher bandwidth may still be available but simply for an extra fee or a higher price, how do 

you suggest that we address that very real consumer concern? 

Mr. KIMMELMAN. Well, first off, Mr. Markey, I think it is very important that if 

you look at the structure of the staff draft, that a lot of traditional terms of communications policy from Title I and Title II may no longer exist on the way it is written. We don’t know what reasonable and unreasonable is under this draft. By the 

way, certain parts of the Communications Act appear to have been wiped out. But 

even if they are what they traditionally have been, it is left to private negotiations 

to work this our. And one major concern we have is that broadband providers start 

doing what cable companies have traditionally done, which is to say that you can 

have certain channels, but you have to buy these other channels to get it. You can 

have Internet access, but you have to buy our Internet access before you can buy 

something else. Pay me once, pay me twice, pay me three times. Now that may not 

be absolute blocking of applications and services, but it certainly is unfair and inflating prices for consumers. 

Mr. MARKEY. In the previous draft, we had a provision which prohibited a 

broadband video service provider from requiring a financial interest in a program 

service as a condition for carriage. The new draft deletes the prohibition. Do you 

think that that is a good policy decision? 

Mr. KIMMELMAN. I think it is quite dangerous, Mr. Markey. You will recall in the 

1992 Cable Act, Congress put in such a provision related to cable because of previous abuses in the cable industry where channels could not be carried, they would 

not be carried, by the dominant cable companies unless the dominant company was 

allowed to own an equity stake in it. I think it was a wise choice to do then with 

cable, and it would be wise to do with any broadband provider that has a dominance 

over its platform. 

Mr. MARKEY. Mr. Barton asked the first panel if they preferred the first draft—

bipartisan draft or the second draft—the one that we are talking about right now. 

Which of the two drafts did each of you prefer? Let us go down the list, the first 

draft or the second draft, if you had to pick one of the two? 

Mr. BOWE. I will pick option number 3. 

Mr. MARKEY. No, no, no. No, I know. 

Mr. BOWE. Because——

Mr. MARKEY. I understand. 

Mr. BOWE. [continuing] with respect are identical——

Mr. MARKEY. I understand what you are saying. I know where you are going. Mr. 

Clark, first draft or second draft? 

Mr. CLARK. Oh, gosh. I mean, neither one meets the standards of——

Mr. MARKEY. I understand that. 

Mr. CLARK. [continuing] the framework——

Mr. MARKEY. Which one heads further in the right direction? 

Mr. CLARK. I will go with two. 

Mr. MARKEY. No. 1, Mr. Haasch? 

Mr. HAASCH. No. 1. 

Mr. MARKEY. Mr. Kimmelman? 

158

Mr. KIMMELMAN. No. 1. 

Mr. MARKEY. No. 1. 

Mr. WIGINTON. No. 1. 

Mr. MARKEY. No. 1. 

Mr. WILSON. I would have to abstain because we don’t like neither of them. 

Mr. MARKEY. Well, but you know what, my mother once said to me, Eddie, people 

aren’t going to compare you to the Almighty, only to the alternative. Okay. And that 

is how life is going to be. Okay? And that is how it is for you, Mr. Wilson, right 

now. No. 1 or No. 2? 

Mr. WILSON. If we are able to have more input in the process——

Mr. MARKEY. Yes. 

Mr. WILSON. [continuing] and get some of the concerns that we have addressed? 

Mr. MARKEY. Yes. 

Mr. WILSON. Probably No. 2——

Mr. MARKEY. Okay. 

Mr. WILSON. [continuing] if we are going to work with you. 

Mr. MARKEY. Okay. Thank you. That is very helpful to me. So the issues here 

now that I would like to move on to are the PEG access issues. The corporations 

rely on fees from franchise fees to fund operations over the length of the agreement. 

What concerns do you have, Mr. Haasch, if a franchisee qualifies for a national franchise prior to the expiration of a franchise agreement? What effect on your—will 

this have on your revenue expectations? 

Mr. HAASCH. Well, clearly, that is if the bill goes forward with the modified gross 

revenue definition for a new entrant in the market. If the incumbent transitions to 

that new model, they also would be subject to the revised gross revenue definition, 

and therefore in essence reducing the compensation amount coming to the local government. That is the primary concern. I need to step back and also point out that 

under existing law, there is compensation from a cable operator that funds a PEG 

access operation above and beyond franchise fees. To us, to the Alliance, that is one 

of the glaring financial considerations in this bill. 

Mr. MARKEY. Okay. Mr. Clark, I just want to do a quick recapitulation of the vote. 

Did you really intend on voting for the No. 2 and not the No. 1? 

Mr. CLARK. Let me explain that. The—Congressman Markey, our Association—

from an Association standpoint, the one thing that probably is preferable in one to 

two is that there are some more interstate interconnection nexus at that point and 

the State Commissions have more interconnection rights under the first one. From 

a personal standpoint, the reason that I picked two is because I think two does—

and, again, this is not an Association view, but if I had to pick one or the other, 

I think two does a little bit more, perhaps, to allow for the tearing down of barriers 

to entry on the video side, and from a personal standpoint, the reason that I place 

a high value on that is I really believe that in the future Telecom market, video 

is going to drive a tremendous——

Mr. MARKEY. And I appreciate——

Mr. CLARK. [continuing] amount of—so that is the reason for that. 

Mr. MARKEY. And you think that would be the—are you a Democrat or a Republican, by the way? 

Mr. CLARK. I am a Republican. 

Mr. MARKEY. A Republican? Okay. That is helpful also to know. And you might 

be moving up, because I don’t think you really do represent all of NARUC, Mr. 

Clark——

Mr. CLARK. Yes. 

Mr. MARKEY. [continuing] although I appreciate the fact that you are expressing 

your personal view here, I sincerely doubt that that is NARUC’s position. So my 

view here—Mr. Bowe, you want to stick with number 3? 

Mr. BOWE. I would just like to add, from the disability point of view, we are in 

legal limbo. We are in a world of technology with no accessibility protection whatsoever. What we need, we need legislation. We need bipartisan cooperation. 

Mr. MARKEY. I am with you. 

Mr. BOWE. We need you to write a law and send it to the President. That is what 

we need. 

Mr. MARKEY. I wrote the close captioning language in the 1990, you know, bill 

dealing with new televisions. I wrote the language in——

Mr. BOWE. I saw you make that first step there. 

Mr. MARKEY. [continuing] the Telecommunications Act. You know I agree with 

you and——

Mr. BOWE. Absolutely. 

Mr. MARKEY. Okay. Thank you. Well, anyway, right now it is 6-4 in favor of the 

first draft over the first two panels, which is a good sign. And, Mr. Clark has a perVerDate 0ct 09 2002 12:11 May 08, 2006 Jkt 000000 PO 00000 Frm 00162 Fmt 6633 Sfmt 6621 F:\DOCS\26998.TXT HCOM1 PsN: JOEP
159

sonal preference. I am not sure that NARUC is thrilled across the country with that 

position, but, nevertheless, we will—all right, we will let that sit. So, you know, here 

is what we have—and I appreciate, Mr. Chairman, that we are still—we are sitting 

here now pretty much alone, but I don’t know—have you already asked your questions? I don’t know——

Mr. UPTON. Mr. Bass is going to get one more question. 

Mr. MARKEY. Okay. Great. Thank you. The one thing, just so I can, you know, 

lay this out—the one thing that I am most interested in is ensuring that we don’t 

have a repetition of what happened back in 1996. Mr. Ellis, on the first panel, began 

by criticizing the regulations that were put on the books pursuant to the 1996 Act. 

Now, the Chief Counsel of SBC at the time, and all of regional companies, came 

into my office, and they begged us to pass the 1996 Act. And there was a good reason why, because they were tired of Judge Green’s regulations, which were many 

more than 700 pages long over the preceding 15 years, and begged us to pass it. 

Now, Mr. Ellis seems to be upset that there was a 14 point checklist in the bill 

that they endorsed, and that there were rulemakings for all 14 points that were 

mandated in the bill. And so what was disturbing to me, to be honest with you, was 

that after the bill passed, SBC then brought a law case calling the legislation a bill 

of attainder, trying to strike down the entire bill so that they would be free from 

the judicial constraints of Judge Green and then free from the restraints in Congress. Now, you can imagine how upset people who had spent the preceding 6 years 

of their lives negotiating with SBC, and negotiating with the other Bells, became. 

And so there has to be, as we are going forward, no terminal logical inexactitude 

in what it is, that the users and consumers of all these new services are entitled 

to by law. It cannot be left to vague language subject to subsequent interpretation 

that could delay indefinitely the actual benefits flowing to consumers. 

But everyone should know this, that the 1996 Act was a complete success. 80 percent of all Americans now have broadband going past their front door. On the day 

that the bill passed, no homes in America had broadband. And this despite the fact 

that the Bells fought for the first 3 or 4 years any real progress on their front, but 

because it was happening from the CLECs and the cable companies and others, they 

had to join in. So now our chore is to make sure that the consumers derive the benefits from this interest which the cable—which the telephone companies now have, 

which I think is great. It doesn’t help me when the Bells say that it will take them 

40 years to deploy this service. From the moment in 1978 in this committee when 

we repealed the ban which the telephone companies had on the cable companies 

using their telephone poles, and we mandated that the telephone companies had to 

let the telephone companies had to let the cable companies use their telephone 

poles, it only took 10 years for the cable industry to wire 80 percent of America. 

The Bells sit here telling us it will take them 40 years for them to do that, 30 years 

later. Which, again, leaves observers wondering whether or not they—whether and 

how high their sincerity coefficient is. 

And, by the way, the cable companies served every single customer in America, 

which the Bells say they can’t do. They need 40 years to do something without 

promising that they are going to serve every consumer. So if we can get a definition, 

if we can get some guarantees with regard to what it is exactly that consumers are 

going to get, what protections competitors are going to get, then I think we all are 

willing to be open-minded as we were in that first staff draft. But it cannot be a 

world in which ambiguity, obfuscation, lack of definition, characterizes what it is 

that is the final product. 

And so I thank you, Mr. Chairman, for this hearing. I think it has provided an 

enormous public service. Your witnesses were great and I hope that it is not our 

last hearing. I thank you, Mr. Chairman, very much. 

Mr. UPTON. Thank you, Mr. Markey. I have one more question that I want to ask 

Mr. Haasch, and that is I want to get a better understanding of the 5-percent franchise fee as it relates to the PEG programming. From your experience from your 

testimony, you indicated that 40 percent of the contribution of the franchise fees for 

PEG in Kalamazoo—or comes to the facility in Kalamazoo, is that on the higher 

end, on average, or the lower end for a lot of communities? 

Mr. HAASCH. It is tough to say. The community I came from, Ann Arbor, Michigan, over here——

Mr. UPTON. You can go like this. This is called the Big House. 

Mr. HAASCH. The Big House? 

Mr. UPTON. Yes. 

Mr. HAASCH. 100 percent were dedicated to cable-related but——

Mr. UPTON. That is the question I wanted to come back to. How many communities actually contribute maybe 100 percent of that fee? Is that a majority? Is it 

75 percent? 

160

Mr. HAASCH. It certainly is not a majority, certainly not. I believe the Kalamazoo 

model, where a percentage anywhere in the 40- to 60-percent range that goes to the 

access, and the balance goes to the community’s general fund. I believe that is the 

prevailing structure. Ann Arbor and the few other communities that I know of 

where 100 percent is dedicated to the cable programming, I believe they are the minority, although I do know that in talking with Ms. Praisner this afternoon, that 

community also dedicates 100 percent——

Mr. UPTON. Really? 

Mr. HAASCH. [continuing] for their—yes. 

Mr. UPTON. Well, would you say that you would prefer—do you think there would 

be general support that all of the monies of—that municipalities receive are dedicated to the PEG channels? Is that a good thing or a bad thing——

Mr. HAASCH. I know——

Mr. UPTON. [continuing] or percentage-wise, or where do you think it ought to be? 

Mr. HAASCH. From the PEG community, certainly, although I had this conversation——

Mr. UPTON. What do you think is a reasonable request? 

Mr. HAASCH. The concern is dictating to local government how they use that revenue. Revenue, although philosophically and conceptionally, I think a strong argument can be made that you are reinvesting in the system because you are creating 

local content, and I believe that is the hook of any discussion on that train. 

Mr. UPTON. And I know that she is gone, but what do you think the cities would 

say, what level might they be able to support, would you guess, since you talked 

a little bit about her? 

Mr. HAASCH. I hesitate to speculate, but in the even splits. If you are going to——

Mr. UPTON. 50? So you would say that 2.5 percent——

Mr. HAASCH. If you are going——

Mr. UPTON. [continuing] at least as a minimum——

Mr. HAASCH. [continuing] if you are going to——

Mr. UPTON. [continuing] to have to go to the PEG channels. 

Mr. HAASCH. If you want to pursue that discussion with local government, I would 

suggest starting in that area. I—there would be a mixed bag of support. 

Mr. UPTON. Okay. Well, it is 4:20. Mr. Clark and I are late for our 4:10 plane, 

so we will how he does. It might not be a lot of people flying to North Dakota today. 

I am not sure. But I want to—we appreciate all your testimony. 

Mr. BASS. Can I ask one more question, Mr. Chairman? 

Mr. UPTON. Yes. Mr. Bass. 

Mr. BASS. And if it is not relevant to this panel, just don’t answer it, but I am 

curious to know if anybody has any perspective on the one—for video, on the one—

on the Federal franchise versus 50 franchises or State-wide franchise issues. Does 

anybody—the bill has a single franchise provision for video. Is there concern about 

that or are there alternatives? If nobody wants to respond to it, you can leave. 

Mr. WILSON. From the rural companies point of view, that is a real issue for us. 

Mr. BASS. Okay. 

Mr. KIMMELMAN. I would just say, Mr. Bass, that we are agnostic. The communities, we think, have done a good job in a number of areas, but we also see there 

is not enough competition for video. We need to speed something up. So whether 

you create a scheme whereby it would be up to the States or you do it federally, 

what is important to us is there needs to be substantial local input in meeting community needs, whether it is Federalized or whether you delegate it back. But, we 

do believe it is critical that you look to speeding up competition for video. 

Mr. HAASCH. I would reiterate Mr. Kimmelman’s point about community needs, 

and from the Alliance’s viewpoint, as long as PEG access and the development and 

funding and support for local content, Federal versus State model, from the Alliance’s standpoint, is neutral. 

Mr. BASS. Thank you, Mr. Chairman. 

Mr. UPTON. Thank you all for being here. Hearing is adjourned. 

[Whereupon, at 4:22 p.m., the subcommittee was adjourned.] 

[Additional material submitted for the record follows:] 

161


26998.027
162


26998.028
163


26998.029
164


26998.030
165


26998.031
166


26998.032
167


26998.033
168


26998.034
169


26998.035
170


26998.036
171


26998.037
172


26998.038
173


26998.039
174


26998.040
175


26998.041
176


26998.042
177


26998.043
178


26998.044
179


26998.045
180


26998.046
181


26998.047
182


26998.048
183


26998.049
184


26998.050
185


26998.051
186


26998.052
187


26998.053
188


26998.054
189


26998.055
190


26998.056
191


26998.057
192


26998.058
193


26998.059
194


26998.060
195


26998.061
196


26998.062