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Hearing of the Telecommunications and the Internet Subcommittee of the House Energy and Commerce Committee - H.R. 5353, The Internet Freedom Preservation Act of 2008


Location: Washington, DC

REP. MARKEY: (In progress from source) -- consumers ample choice. But until then, I strongly believe that we should enshrine basic principles of openness and fairness and ensure that the FCC is a cop on the beat, able to ensure these principles are upheld in the marketplace. In this way, we can preserve the best of what the Internet is, even as it evolves.

The bill is quite straightforward. It establishes overarching principles rather than regulations to guide policy in this area. It then requests an examination of the market and current practices, requires the FCC to hold several broadband summits around the country to solicit suggestions and opinion and, finally, tasks the FCC with reporting the results and any recommendations back to Congress.

I believe that this is an imminently reasonable path to pursue and I thank all of our witnesses for coming today to give us their views on the bill. I thank you.

And with that, the time of the chair has expired and the -- and I recognize the gentleman from Florida, Mr. Stearns, for an opening statement.


REP. MARKEY: Thank you, Mr. Scott, very much.

And now the chair will turn to recognize himself for a round of questions.

And I'll just begin by noting that two years ago, this subcommittee voted for Mr. Barton's COPE bill, then the Republican chairman of this committee, which codified the FCC's net neutrality principles by authorizing the FCC to enforce them. The legislation Mr. Pickering and I offer similarly codifies overarching principles and then tasks the FCC to conduct an examination to assess what is happening in the marketplace to conduct field hearings and to report back to Congress. This process will permit the FCC to see whether the principles can be fulfilled through competition, through regulation, or through case-by-case enforcement. But the notion that codifying principles is the same as establishing regulations is no more true here than it was when the Barton bill authorized enforcement of the FCC principles two years ago.

So let me begin with you, Mr. Scott. Let's talk about network management and how reasonable management can be employed. Your concern is that if network management effectively trumps the Internet freedom, something very valuable about the Internet is lost in that management process as opposed to legitimate management that the large companies can engage in. Please explain.

MR. SCOTT: Well, let me start by saying that we're not opposed to network management. I don't think anyone on the pro net neutrality side is opposed to network management. Network management has happened for years; it happens every day in every network.

What's different about this particular case that's before the FCC is network management that selects a particular piece of content or application and chooses to block or degrade that particular piece of content, irrespective of the time of day, irrespective of the size of the file, irrespective of whether that user is a heavy user or a light user. That's the kind of targeting and the kind of selectivity and the kind of choice-making by the network operator that we think should be left with the consumer.

REP. MARKEY: Okay, great.

Mr. Savitz, do you agree with that analysis?

MR. SAVITZ: (Off mike.)

Can you hear me now?

No, we agree with it 100 percent. I mean, I think the whole -- exactly as Mr. Scott said. We don't -- I don't disagree whatsoever with blocking unlawful content. I don't -- we don't disagree at all with managing capacity. It would just be anything that sort of discriminates against origin source or destination and makes it sort of an unequal playing field that doesn't allow somebody to create a business like we were able to create; that is what would bother us.


Mr. Peterman, do you agree with that analysis?

MR. PETERMAN: Yes, absolutely.


Ms. Combs?

MS. COMBS: Yes, I do.

REP. MARKEY: Yes, you do.

And Mr. Bainwol? Mr. Bainwol?

MR. BAINWOL: Oh, sorry. I'm reflecting. I'm a reflexive kind of guy.

REP. MARKEY: I will come back to you.

Mr. McSlarrow, in your testimony, you support the fair and open assessment of the FCC of network providers, and you acknowledge that the approach differs from other proposals that prescribed regulatory outcomes. And I thank you for noting the distinction.

Mr. Bainwol, you and Mr. McSlarrow both highlight that the Internet freedom principles only are accorded to consumers and entrepreneurs for lawful content, and I want to thank you both for seeing that in the bill and for saying that in your testimony.

Mr. Peterman, you also have an interest in fighting piracy. If you could, please give us your take on how support for network neutrality and fighting piracy are not mutually exclusive principles and why it is essential to your industry that piracy is fought vigorously and that this legislation would not inhibit that at all.

MR. PETERMAN: Absolutely. We have examples. Last year -- the nature of our show is we produce our episodes, and then the Disney Channel holds those episodes for a lot of the season, unlike adult programming, where you generally have a new episode every week. As many of you who have kids know, your children have an amazing ability to watch the same show over and over and over. This is wonderful for me, and it's wonderful for Disney, because it means that the same number of episodes that could last a much shorter amount of time can be extended over a whole season. We had a stockpile of episodes that had not aired yet, and somehow some of those episodes, the discs that contained those episodes made there way to private citizens, and those episodes before they were on the air were on YouTube.

We are very opposed to piracy. What we are fighting for is the ability to own and control our content, and obviously, piracy works directly against that. But we believe that this bill does not in any way inhibit the attempt to stop piracy, and we believe that innovation will continue to find alternative ways to protect copyrights.

REP. MARKEY: Thank you, Mr. Peterman.

My time has expired.

The chair recognizes the gentleman from Florida, Mr. Stearns.


REP. STEARNS: Thank you, Mr. Chairman.

You mentioned the Barton bill two years ago that we passed. That bill was called the COPE Act. I just would probably point out that it only gave the FCC authority to enforce the four principles that were in the bill; it did not authorize a rulemaking. This bill not only authorizes a rulemaking, it goes further and beyond the four FCC principles, and so, Mr. Chairman, if it turns out that you were supporting the COPE bill, we'd be very happy to move the entire COPE bill in this Congress with you as the chairman.

That being said, Mr. Chairman, I ask unanimous consent to put into the record an editorial by The Wall Street Journal, April 12th, entitled "An Alternative to Network Neutrality."

REP. MARKEY: If that's the editorial attacking me by The Wall Street Journal editorial page -- yes, it is -- with great pride -- (laughter) -- I ask unanimous consent that it be placed in the record. I think on that day, they actually had two editorials attacking me in The Wall Street Journal editorial page.

REP. STEARNS: Well, thanks for your magnanimous support here.

I also ask unanimous consent that two letters from various groups be included with the record from the American Conservative Union, the National Taxpayers Union, Freedom Works, Citizens Against Government Waste, and Americans for Tax Reform, if I could, Mr. Chairman.

REP. MARKEY: Without objection.

REP. STEARNS: And I would say to Ms. Combs that we have -- that's going into the record -- is a letter talking about network management is critical to stop pornographers and pedophiles from having unfettered access to consumers' Internet connection. And this is signed by Gary Bauer, the president of American Values; David Keene, of course, the president of the American Conservative Union; also the Catholic Family and Human Rights, Austin Ruse; the; Tradition, Family and Property, Mr. Preston Noell; and then Derek Hunter, Media Freedom Project. So there obviously are some disagreements here. They feel that network management is important.

When you look at this debate and the difficulty understanding what net neutrality means, what I think, after listening to Mr. Scott and others here, Mr. Peterman, that network management is fully understood. I'm reminded of the Supreme Court's decision that in a theater, you don't have freedom of speech; you can't yell "fire." So there is a sense of network management even with freedom of speech. And so, Ms. Combs mentioned that Comcast would not allow the downloading of the King James' version Bible. You know, obviously, if you were in a situation where your business and somebody was downloading peer-to-peer telemedicine some X-rays and some critical things that were needed for doctors for cancer research on a patient, you would have to make that decision if somebody was downloading Herodotus' 13 volumes of history, or in this case, you can get a free copy of the King James Bible in any hotel, motel room in the country, and they might have to make this network decision, just like in a theater, a person is "network managed" not to yell "fire" when there's no fire.

So my question is for Mr. McSlarrow. Isn't network management just simply like putting up a yield sign at an intersection? Periodically, we know, as we come across the 14th Street Bridge -- you know how much traffic there is, and sometimes one lane works over another, but traffic in one direction -- if you have all this traffic, don't you have to make a decision for network management? And you might answer the Christian Coalition's concern about this King James version, in which she said that it was discriminated against.

MR. MCSLARROW: I mean, it's interesting. In the same way, I guess, everybody's decided we're against illegal content being distributed, everybody says they're for network management, and then here we have a case, as was mentioned before, where you had essentially an artificial test of whether or not you could upload a King James Bible from one computer to another, as if -- and apparently they didn't understand that peer-peer networks are by definition many multiple sessions across hundreds, even thousands or tens of thousands of PCs around the country or even the world. The test was designed for failure. All you had to do was put the King James Bible on any Web hosting service that you get with any broadband provider service, and you can stream it. You could do it today.

So the point is, no one was blocking a particular content. That is absurd. There is a legitimate issue that at times of peak congestion -- and different operators -- and it's hard for me to get into a specific company's case -- different operators do it differently. But in general, at times of peak congestion, they will manage the traffic. The vast majority of that traffic's going to be peer-to-peer, and it's not irrelevant that the vast majority of the peer-to-peer traffic will in fact be pirated content.

So it is, in my view, a reasonable method of not just managing the traffic but, more importantly, ensuring that all the other consumers you are serving get a superior experience perhaps to delay imperceptibly some of the uploads -- we're not even talking about downloads. But the real point here is, I'm not going to hang my hat on saying that the way someone does it today is absolutely 100 percent the best way. The real point is, the private sector is actually working together to see if we can do all of these things better.

MR. : (Off mike.)

MR. SCOTT: Here's how I think it should work. You can address people who are using high bandwidth by reducing the speed on that connection in a uniform basis agnostic to what is coming out of that connection, whether they're downloading a YouTube video or downloading peer-to-peer. What's interesting about this particular case is that it was directed at a particular application, regardless of whether that application was being used for a large file or a small file, regardless of whether that user was a heavy bandwidth user or a light bandwidth user. That's the kind of network management, the specific targeting, that we're talking about that's inappropriate.


REP. MARKEY: Great. The gentleman's time has expired.

The chair recognizes the gentleman from Illinois, Mr. Shimkus.

REP. SHIMKUS: Thank you Mr. Chairman. Nice job downstairs. I always wonder when we agree who's messing up, who's wrong.

REP. MARKEY: Okay. We're going to start the gentleman over again. Just so everyone understands what's going on, because it's hard for people to understand the way that the committee is organized. Downstairs simultaneously, this committee has jurisdiction over energy and over telecommunications, and it's broken into two separate subcommittees, so right below this hearing right now, there's another hearing going on on the impact that biofuels, corn-based biofuels being put into gasoline tanks, is having on the price of food and impact on the environment. So about half of the members of this subcommittee are also members of that subcommittee. So the members are running back and forth between the two subcommittees as the hearings are transpiring. And while Mr. Shimkus and I do not agree on the issue before this hearing on net neutrality, we do agree upon the issue of biofuels and how that issue should be handled, and so that is what he's referring to, so that everyone can understand, because it's been about eight members who have made reference to the other hearing.

With that, the gentleman is recognized for five minutes for his questions.

REP. SHIMKUS: Thank you, Mr. Chairman.

I also want to kind of clear up -- my colleague Mr. Pickering mentioned in his questioning that current law does not allow network management, but that is not the case, and I would like to quote a policy statement from the FCC where they state: "Accordingly, we are not adopting rules in this policy statement. The principles we adopt are subject to reasonable network management." So just to get that on the record.


REP. MARKEY: Will the gentlelady just yield briefly? She has 35 seconds left. Will the gentlelady yield?

REP. SOLIS: Yield, yes.

REP. MARKEY: Yes, again, I just want to make it very clear that on copyright protection, we all agree. There is no debate on this committee at all on vigorous 100 percent enforcement of copyright; whether it's software developed in Silicon Valley or in my district for business use, whether it's some recording artist, some television show, a movie, we want it to be protected, copyright. But when the means of conduit change, when you move from radio to television, to cable, now to the Internet, we have to be constantly making sure that it's not used in an anti-competitive way against content, against copyright-protected content. So distinguish between content protection -- we all agree it's 100 percent -- and then competition, new means of conduit carrying it, that sometimes can lead to anti- competitive activity against content that doesn't have an affiliation with the large telephone or cable companies. That's the distinction, and I just want to clarify that once again for the record.

The chair recognizes the gentleman from Mississippi, Mr. -- I'm sorry -- the chair recognizes first -- I didn't recognize -- I did not realize the gentleman from Mississippi had already been recognized. The chair recognizes the gentlelady from California, Ms. Capps.

REP. CAPPS: I thank you Mr. Chairman, and I'm overstaying my time, my own limit, so I'm going to restrict myself just to one question. This is a very interesting panel, so I want to thank you all.

Mr. Yoo, as you know, innovation on the Internet evolves at such a rapid pace, oftentimes leaving policymakers and even Internet service providers playing catch-up. Looking toward the future, do you ever see a time when the supply of broadband access will be able to keep up with demand, or do you believe that to currently be the case?

MR. YOO: The deployment rates suggest that we may see a keep up with demand in the backbone. They're adding tremendous services in the core. The big problem is in what we call the last mile -- whoever provides the connection locally. We're seeing increasing diversity of providers in the wireless space, and the 700-megahertz auction is going to add some new providers in that space. The big problem is is no one is -- can foresee the future perfectly, and everyone will configure even local -- even if there's extra bandwidth, they'll build it where they think the people are going to be. They're going to guess right sometimes. They're going to guess wrong sometimes. And YouTube -- we've talked about it -- is now 20 percent of all Internet traffic, and no one saw that coming. And it's very difficult for them to be perfect in terms of adding capacity, because sometimes -- no one's that good, so sometimes you end up using other techniques to deal with the fact that you've actually done your best, but you've misestimated the demand.

REP. MARKEY: I thank the gentlelady, but if I may just reclaim in the general, just finishing off the balance of the gentlelady's time.

Actually, no one saw it coming. That is, that YouTube would consume so much, except for Chad Hurley -- except for the kid who invented it, except for the kid that said, hey, look at that aperture, look at the Internet, look at this wonderful thing that I might be able to do. So except for this proverbial kid in a garage who comes up with the idea that revolutionizes this entire industry, you're right. No one for sure saw it at a big telephone company or a big cable company. That's 100 percent for sure. And it's not to say that that's a bad thing, because they have a role -- they have a very important role to play. But the innovation historically comes from the proverbial kid in the garage, this young graduate student or even younger that's always thinking about how to create new ways of providing content over the means of a conduit that's being created.

So I just again want to make it clear that we're trying to protect young Chad Hurley, young Marc Andreessen, okay, and that the whole point is that the innovation is driven by these millions of kids that are all at home, that are manipulating, thinking about these technologies every day. And at the same time, we want to protect the copyright of any content which is produced. All right? But we don't want it to get managed out of existence.

The chairman of AT&T sat here in 1978 in a hearing -- I've been here for 32 years on the committee. And we were then debating whether or not someone should be able to go to a store and buy a phone that wasn't a black rotary dial phone and to plug the phone into the wall. And the chairman of AT&T said here, oh my goodness, if that ever happened up in Boston, it could bring down the whole phone system of Boston, if someone could go to a phone store and buy a phone rather than rent it from us for three dollars a month, which my mother, Mrs. Markey, had rented that black rotary dial phone for three bucks a month for 40 years. She paid about 1,200 bucks to rent the black rotary dial phone.

And AT&T -- the old AT&T, the Bell Labs AT&T -- even though they had like already won like three to four Nobel prizes, in theory, when you said can you -- can someone buy a phone and plug it into the phone jack in the living room? "No, it'll bring down the whole system."

Network management principles, they explained to us, are very important. "We just can't have anyone making a phone and anyone plugging it into the wall, because it would ruin our network management."

"How long will it take you before you figure that out so people can buy other phones?"

And he said, "Well, about 10 more years.


And so I said, "Mr. Chairman, we've got to break up AT&T, if it takes you 10 years to figure out how people can buy a different phone except that which is leased as a black rotary dial phone in the living room. "

So network management has always been used by the big companies, always, from the very beginning. It's a principle. That's one of the underlying principles of the big communications companies, that network management is used as the first argument against innovation, against the consumer having more choices. And so that was actually the hearing at which I began my efforts to break up AT&T, and it was just me and one other member of this committee, by the way, back then, long ago and far away. There's a couple of people in the room who remember that.

REP. : Mr. Chairman, could you yield just a second?

REP. MARKEY: I'd be glad to.

REP. : Which president broke up AT&T?

REP. MARKEY: Actually this is scary, okay, to think that it was Ronald Reagan --

REP. : Thank you, Mr. Chairman.

REP. MARKEY: -- who broke it up, and -- which shows, again, the bipartisan nature of this whole issue, okay. It's competition versus openness, innovation.

Let me turn and recognize now the gentlelady from California, Ms. Eshoo.


REP. MARKEY: Great. The gentleman's time has expired.

And the chair will recognize himself.

And just to close the hearing and to say that I value my partnership with the gentleman from Mississippi. This issue should really not be Democrat/Republican; it should just be an evaluation of what is needed in order to ensure that we see the innovation out in the marketplace without giving protection to the pornography, the piracy, the other practices that legitimately should be looked at as areas that are still subject to the traditional laws. And I don't think there's going to be any compromise on that.

But let me just say that Comcast, AT&T, Verizon and Time Warner have 66 percent of the market. And most Americans, 94 percent of all Americans, only have a choice between their telephone company and their cable company for broadband service.

So, you know, Mark Twain used to say that history doesn't repeat itself, but it does tend to rhyme. So it's not exactly like 1978, but it's something that rhymes with 1978. It's very close to 1978. It's a digital duopoly that we have now, rather than just one telephone company. But it still is restrictive, and unnecessarily so, in terms of the incentive that we need to create for entrepreneurs, for new ideas to enter into the marketplace.

Back then in 1978, as part of network management AT&T used to argue that the cable company should not be able to put their wire on top of the telephone pole, that they should have to build their own poles across America. Now, these poles, because of the financial state of the cable industry, would probably have been three feet tall right next to the telephone pole back in 1978.

So network management, okay. But we want this revolution, this cable revolution, so we mandated that for a reasonable charge that the telephone company would have to give the cable industry access to it.

When a company called MCI came along and said we have this new phone service, AT&T said, "That's fine, but you'll have to dial 23 digits before you actually reach the phone number that everyone has memorized." Network management -- too hard for us to figure it out. And we had to, through regulation and laws, make it possible for MCI and Sprint, these other companies that we now know, to be able to compete. Otherwise network management would be used as the block. The same thing is true for telephone; same thing is true et cetera, et cetera.

So here, in no way do we want to impose burdens upon AT&T, upon Comcast, upon Time Warner, upon Verizon that are excessively burdensome. We don't. But we want to make sure at the same time that principles are established that allow the companies that don't own these wires to be able to innovate and to be able to reach millions of consumers across the country while compensating the phone company and the cable company reasonably for the use of their wires. That should be the principle.

And in fact, while the DSL technology sat for years in the laboratories of the phone companies, beginning with the 1996 act, there was a massive deployment because of the kind of Darwinian paranoia-inducing principles that were built into the 1996 act. But everyone abided by those long-standing principles against unreasonable discrimination, from '96 on, until the Federal Communications Commission reclassified that service in 2005.

And so that's really what we're talking about, a whole history here that kind of changes in 2005. And we have to find a way of reconciling this so that we have the smaller voices, we have the smaller entrepreneurs who are able to act.

And by the way, I just want to add, Mr. Yoo, that it wasn't the founders of Google, actually, who discovered how YouTube would work. It was the proverbial kid in the garage. So I want to say that as well. Not only AT&T and the cable companies, but also even this large company Google didn't invent it. It was a smaller entrepreneurial, younger person -- and so all of this is central to the long-term well being of our country.

But you know what I've decided to do -- let me just finish here. Without objection, a statement of support for the bill from the National Association of Realtors as well as from the Independent Film and Television Alliance are entered into the record.

I'm going to give each one of you 30 seconds, very quickly, to tell us what you want to remember. It can only be 30 seconds because of action on the House floor.

Let me begin with you, Mr. McCormick, if you would tell us what you want the committee to remember.

MR. MCCORMICK: Mr. Chairman, as you proceed forward please do so in a way that does no harm to innovation and investment.

MS. COMBS: We just want to keep the Internet fair and neutral and these discriminatory material that's -- we don't want any more discrimination on the Internet.

REP. MARKEY: Mr. Bainwol?

MR. BAINWOL: We're going to roll up our sleeves and get to work with our colleagues in the ISP community to try to solve the piracy problem and we'll report back to you, sir.

REP. MARKEY: Thank you, Mr. Bainwol.

Mr. Peterman?

MR. PETERMAN: The Internet has been an extraordinary opportunity, artistically, economically, informationally, educationally. We urge you to err on the side of openness, keeping it open and letting opportunity for all flourish, rather than concentrating power into smaller groups.


Mr. McSlarrow.

MR. MCSLARROW: We want our customers to do anything and go anywhere on the Internet. We think we can do that without government regulation and we do think that a full examination, as you suggested, will show that that's the case.

REP. MARKEY: Mr. Savitz?

MR. SAVITZ: An open network that's fair and equal for all so other entrepreneurs can do what we were able to do at Shoebuy.


Mr. Yoo?

MR. YOO: There's growing empirical evidence that the kind of openness actually deters investment in networks. And what we're seeing is an incredible increase in the variety of uses in the network and technologies. One-size-fits-all is a big -- threatens all the variety and the chances of developing -- letting the network evolve.

REP. MARKEY: And Mr. Scott.

MR. SCOTT: I would say continue your efforts to build consensus around these important consumer protection principles. They belong in the law. And as you talk with your colleagues about this important issue going forward, assure them it's a question of when and not if we'll have rules protecting consumers and the free market.

And it's not just about how we're going to explain to industry why we need consumer protections in the law. It's how we're going to explain to the public if we don't have them in the law. That's where I'd leave it.

REP. MARKEY: I thank you, Mr. Scott. I subscribe to that view. My mother always said, "Try to start out where you're going to be forced to wind up anyway." So we eventually will have rules, so let's try to figure out what they should be. Let's make them reasonable.

We already passed legislation two years on a bipartisan basis with the Republican leadership of the committee supporting it; the bill that the gentleman from Mississippi, Mr. Pickering, and I are co- sponsoring with other members of the committee are (sic) based upon that bill that already passed. So it's not something that's radical and it's not something that in our opinion would have any undue influence -- any improper influence on the large carriers.

But I think the strength of our position, if I can say this to the gentleman from Mississippi, is that the arguments that are being used against us are arguments about another bill that we do not support. And that's where they have to go if they're going to attack our bill.

We need to have the principles understood, this debate aired out and for us to pass the legislation -- that's our intention -- without harming -- without harming -- the cable industry or the telephone industry. We think we can strike that proper balance. We thank this distinguished panel for your excellent testimony today.

This hearing is adjourned.

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