subpoena which i would absolutely love to use. i have not to this point but all it does is it increases their interest in what they are doing and why they didn't show up. so they made a stupid mistake by not showing up today and i say shame on them. this is an introductory hearing. we are starting an important public discussion. all of us here are tremendously interested in this and you know, children's safety comes first always. so, we began and as the chairman has said, we are going to-- it is going to be the first of a number of hearings. children not to be taken seriously. they are not. they are part of an age that we are not a part of and technology, and it is dangerous for them. there are all kinds of horrible things that they can see that parents don't know about. if they don't know about it they don't know what the rules are so we have responsibilities and i

tangle the chair. >> thank you mr. chairman and i would note for the record that chairman rockefeller has a long and distinguished and successful career in protecting children. >> thank you mr. chairman and senator rockefeller for all the work you have done in this area. it is remarkable as my colleagues have noted how quickly technology has changed over the last few years. i still remember this. people would say if you want to program your vcr, ask your kid that now vcr's are a thing of the past. new technologies, devices, programs and applications that completely change the way we work and communicate. from gps and geolocation on smart phones to the ubiquity of text messaging and twitter to posting our photos on social networking sites, the world is quickly changing and no group adapts to new technology quicker than young people and as was noted by my colleagues, nearly 60 million kids aged two through 11 are active on line and make

up 9.5% of on line users. these numbers are growing as more and more young people are logging on. the average and child spends more than 11 hours a month on the internet and a 63% increase over five years ago. this is one of the more sad facts. one survey found the top five internet surveys for children under 13 are youtube, google, facebook, sex and. clearly the on line world has changed dramatically. i think if you look back in the coppa rules adopted 10 years ago that would not have been the case in you couldn't have checked what kids were checking in. they probably weren't checking into any of these things so it is very important we examine this world to ensure that it keeps up with the technology. i have heard a lot of stories in our state working with senator thune on the peer-to-peer legislation we have of changing technology that has been so

great in so many ways and innovation has severely hurt people's privacy rights and when it comes to kids we reach a whole new level. i am looking forward to working with my colleagues to work on this rule and make changes that are in the best interest of everyone. thank you very much. >> thank you senator klobuchar. i would like to say that for all of our witnesses, we have a very distinguished panel today and we could spend a lot of time introducing them and going through all their experiences and their degrees in all their backgrounds and it is a very impressive group, but that is all part of the record so i am going to just go down the line and introduce each one and ask each one to make a five-minute opening statement. what i would like for you all to do is pay attention to the mics in front of you to-- the lights in front of you and when five minutes is over we would like you to wrap it up. first i would like to introduce

jessica rich, the deputy director of bureau for consumer protection, the federal trade commission. second is timothy sparapani. director of public policy of facebook. next is mike hintze, the associate general counsel at microsoft. nexus katherine montgomery, ph.d.. she is professor of school of communications at american university. next is marc rotenberg, executive director of electronic privacy information center and last and certainly not least is that the children's table here. [laughter] our table was only so long this morning but anyway, we have berin szoka, senior fellow, director of the center for internet freedom and the progress and freedom foundation so thank you all for being here and ms. rich if he could lead us

off. >> mr. chairman and members of the committee i am jessica rich, deputy director of the bureau of consumer protection at the federal trade commission. i appreciate this opportunity to update you regarding the ftc's work to protect children's privacy and enforce the children's on line privacy protection act or coppa. we submitted a written statement today which represents the views of the ftc. the views expressed orally and my responses to questions or my own and do not necessarily reflect the views of the commissioner or any commission. the federal trade commission is deeply committed to helping create a safer, more secure on line experience for children. the commission's rule implementing coppa became effective 10 years ago. the statute and rule applies to operators of web sites and on line services directed to children under age 13 and two other web site operators that have actual knowledge that they are collecting information from

children. web site operators must provide notice their information collection practices and that limited the perception parental consent prior to the collection use or disclosure of personal information from children. operators also must give parents the opportunity to review personal information their children have provided. the commission has taken a multipronged approach to compliant and enforcement, education and implementation of statutory mandated coppa safe harbor programs. neighbors beside the commission is brought 14 law enforcement actions alleging coppa violations. the ftc's early locus on children sites collected extensive amounts of personal information providing notice to parents in obtaining their consent. more recent enforcement actions have focused on operators of both general audience and child directed social networking sites

and sites with interactive features that permit children to develop their personal information on line. a crucial complement to our law enforcement efforts is educating businesses about their responsibilities under the law. the ftc is published comprehensive compliance materials which are available on our web site. we also devote significant resources to entering individual requests from companies about compliance and conducting outreach to industry groups. are growing these efforts to prevent coppa violations before they occur. the commissions consumer education materials and to inform parents and children about the protections afforded by the rules so they know what to expect and what to look for as they navigate on line. these materials are available to the commissions on line safety portal, on guard on line.go. on guard on line provides practical and plain language information about other privacy topics in a variety of formats including articles, games quizzes and videos. our most recent addition is the

guide which senator wicker was kind enough to mention at the beginning. in light of significant changes to the on line environment, including the explosive growth of social networking, mobile web technologies and interactive gaming the commission recently initiated a rule. on march 24, the commission launched a public comment period aimed at gathering input on a wide range of issues including whether there will or definition of internet adequately covers mobile communication and interactive media, whether the definition of personal information is kept pace with technological development. that is whether certain information that isn't named are listed in the rules just a static ip address could allow them to contact the child. the effectiveness and another topic is the effectiveness of mechanisms used to authenticate parents to provide content or seek access to their children's information. to comment period for these questions posed on june 30.

on june 2 the commission post a public roundtable here in washington to hear from the stakeholders including children's privacy advocates, web site operators, businesses, academics, educators, parents, anyone who would like to come on these important issues. the commission take seriously the challenge to ensure that coppa continues to meet its originally stated girl even as children interact boos from stand-alone pcs to other devices. thank you and i look forward to your questions. >> thank you. mr. sparapani. >> chairman pryor and rockefeller, ranking member wicker and other subcommittee members thank thank thank you fr leadership and for inviting me to share facebook's respect of on child safety and how facebook's information provided safer on line environment for teens. from our inception we sought to provide a safer environment for all-- available on the web. facebook is not directed at

children less than 13 years of age residing in the u.s. and does not knowingly collect information for any children under 13 in the u.s.. nevertheless we take seriously our responsibility to protect children under 13 and enhanced team users on line safety. accordingly facebook was built with requirements in mind. our commitment to keeping children off the site starts by requiring those trying to establish an account to enter their age on the very first screen. this birthdate field prohibits children under 13 from establishing an account. this age-based technology places a persistent cookie on the device used to attempt to establish an underage account, preventing the user from attempting to modify their birthday. and facebook becomes aware of the count established a children under 13 we terminate those accounts all information. we emphasize two points today. first, facebook's real name culture and innovative technology enhance on line

safety and privacy for teens and two, congress should not overhaul of the coppa but rather support and encourage, not discourage or prohibit prohibit companies innovation to advance security and privacy. facebook's approach begins with the recognition that no-- and verify users on line or go as a result, facebook developed an innovative multilayer system to act as technological proxies for age verification. these layers are enhanced by facebook's culture which helps us identify fake accounts. before facebook facebook internet users were warned to avoid sharing their real names and information on line. facebook was the first major internet site that required people to build their profiles and networks using real names. this made facebook less attractive to predators and other bad actors who prefer not to use their real names and identities. people are also less likely to engage in negative, dangerous or criminal behavior when their

friends can see their name, their speech and information they are sharing. this creates accountability and deters bad behavior. since facebook users understand their actions are recorded digitally. when users violate our side rules would allow we can pinpoint corrective action to the specific account involves. a real name culture also empowers users to become community police and report violations. facebook users click the record button found throughout the service when they see an appropriate behavior. this substantially multiplies the number of people reviewing content and behavior which we think greatly enhances teen safety. further, facebook's innovative privacy tools allow users to exercise direct control and share what they want with whom they want and what they want. this empowers users of all ages to protect themselves on line. if the user feels uncomfortable connecting with a particular person she may decline that user. if the user feels it a friend is

annoying or-- which terminates the users connection and prevents further contact. further facebook's proprietary-- and combat emerging on line threats. although we do not generally discussed these matters publicly for fear that they may be circumvented or compromised, these technologies allow facebook to perform ongoing authentication checks. we look for behavior that does not fit the patterns created by the aggregate data from a 400 million users. let me tell you suspicious behavior does stand out which initiates a facebook inquiry and immediate remedial action. ..

advances when reviewing privacy and security policy and

technology at companies like ours that are trying to do the right thing. thank you. >> thank you. >> chairman rockefeller, chairman pryor, ranking member wicker, thank you for the opportunity to share views on the children's homeland privacy act. microsoft is a deep longstanding community including children who use our software and services. i want to begin by discussing microsoft comprehensive approach to protecting children's privacy online. i will then identify those areas where we've made progress over the last decade and highlight a couple of key challenges to remain. this hearing is timely. ten years ago this month the federal communications role was in effect. the data goal is to preserve the inactivity of children's experience on the internet while protecting the privacy. that goal remains the essential today. researchers have found that children gain important educational and social benefits

such as increased opportunities for loving and creativity while engaging in interactive activities online and children are realizing these benefits as the increasingly use new technologies to access the internet. including mobile phones, video game consoles and portable media players. but as we all recognize these interactive technologies often enable consumers to his close personal information online and children and of falling understand the terms of the trade-off involved. it is designed to address this issue. microsoft fully supports the objectives of enhancing parental involvement in protecting children's privacy. while children's use of the internet has evolved over the last decade of the objectives remain just hours if not more important today. privacy failure can have an impact on children's safety. therefore microsoft takes a number of steps to protect children's privacy and safety through our own products and services, educational initiatives and partnerships. first, microsoft requires

parental consent and offers parental control for a number of products and services including a xbox and instant message service. for example, the windows life family safety tool enables parents to limit their children's searches, block or allows web sites based on the type of content, restrict with whom the child can communicate and access detail activity reports of the websites their children visited and the games and applications the fewest. second, microsoft engages in educational efforts around the world to help parents and caregivers make informed decisions about childrens' internet use. third, microsoft partners with government officials industry members, law enforcement agencies and child advocates to address children's privacy and safety issues. the attachment to my written testimony provides more details on these initiatives. i would like to spend a few minutes talking. in the past decades we have made important progress in raising

awareness of children's privacy issues. foreseeable many website operators now limit the amount and types of information they collect from children and provide parents and children with educational resources and foster conversation about online privacy and safety. also by encouraging website operators to be more transparent about their privacy practices, and encouraging them to implement parental consent mechanisms we enabled the parents to take a more active and informed role in deciding how their children can to get a vintage of the internet's many benefits. we believe it provides a flexible could send framework that can accommodate children involving use of new technology. therefore we do not believe in a legislative amendment necessary at this time. rather the statute enables the ftc to update its rules and we appreciate the ftc efforts to review its implementation in light of new business models and new technologies. i would like to highlight to aspects of the ftc that we urge

to consider part of its review. first, the commission should provide guidance on how companies can better meet model letter but on the spirit of the law. microsoft goes beyond the letter of the law by proactively requesting agent information and seeking her parental consent for children's use of many other services even when the services are not targeted at children. we take this approach to encourage parental involvement in childrens' on-line activities and enable children to participate in and benefit from interactive activities on line. other companies take different approaches. we encourage the commission to use its copa will review process an opportunity to help website operators and online services to understand how they can honor the spirits of copa in the light of new technologies. second we urge the commission to work with technology companies and consumer advocates to develop more consumer friendly, effective and scalable but it's for obtaining parental content. the ftc explicitly approved fifer entel consent as much as for the disclosure of children's

information online. however the methods can be cumbersome for parents, do all still widely used services and rely on the children's self reporting of age. these issues become more pronounced as children increasingly access the services through mobile devices while providing the notice and obtain parental consent raises additional challenges. microsoft recognizes the task of improving the consent is not easy and there is no silver bullet solution. the ftc's ongoing copa will review provides a good opportunity for productive dialogue on alternative parental consent methods. we are committed to working within the short and long term with congress, the commission and other stakeholders to address privacy challenges raised by new technologies. thank you for the opportunity to testify today. >> thank you. dr. montgomery? >> chairman rockefeller, chairman prior, ranking members of the subcommittee, thanks so much for inviting me to testify about copa. it is a law that i care very

deeply about. during the 1990's while the president of the nonprofit center for media education i played a leadership role and passage of copa working with members of congress on both sides of the aisle as well as colish of prominent education health and consumer groups. and i think we need to remember that in the early days of the world wide web, which was a kind of wild west period, the business model of the one-to-one marketing combined with increasing volume of children as a target market for advertisers created a perfect storm for the marketers who want to use the internet to ticket vantage of young people. we and others documented many of those practices and if we need to remind ourselves of where we were, we can remember sites like the young investors cite that asked for a means of personal financial information from children or one of my favorites which was the batman site which asked children to be good

members of the gotham and fell off the census. that is what we were looking at the time and where the internet was headed. my colleagues and i consulted with a broad spectrum of stakeholders and clothing industry groups to craft a set of regulations that would successfully balance collective interest in nurturing the growth of the commerce while protecting the privacy of the children and i think copa served us all very well. it's created a level playing field by creating a law applies to every online commercial player from the largest children's media companies to the smallest start-ups and send a signal to the industry that if you are going to do business with our nation's children you will have to fall some rules and because it was passed during the early stages of the commerce its creative rules of the road that helped guide the devah limit of the digital marketplace and really curtail the egregious practices that were coming into place. i also think the safe harbor mechanism and is a very important because it permits self regulation but within the

context of government rules and enforcement authority by the ftc. but as others pointed out recent developments and online marketing really want renewed warrant by the ftc. today's children are growing up in an inner city and ubiquitous digital media environment 24/7 and many of the practices we've identified have been eclipsed by an entirely new generation of tracking and targeting techniques briefly i will highlight to of them. one is peter targeting which is an invisible process and a covert process that tracks individual users through cookies and other data files to collect information about them and to design personalized advertising to target them based on their psychological profiles and the behavioral profiles. this also raises the question of what constitutes personally identifiable information and not just a matter of if you are giving a name.

the marketers are able to know who you are and get to you and charge you and the second is mobile marketing which people of mengin and one of the important things is it combines behavioral targeting with location targeting and the research i've done on a children's food marketing and the obesity crisis has found company's greeting discount coupons that will be sent to children's cellphone when they get very fast food restaurant. so what we need to do these inshore the ftc and i am working with the agency to update the law and of to the rules as it was intended and designed to do. finally i do want to say that while copa established safeguards for the youngest consumers in the digital marketplace adolescents have no such protection. we know they are avid users of social networks like facebook and myspace and others and in many ways they're living their lives on line and they are increasingly relying on these

social network and search for personal information and handling sensitive personal issues they are coping with in their lives. so i would argue i am not arguing for a parental verification system like copa but i do think the need is a fair reformation and marketing practices that taylor to the unique needs and vulnerabilities of adolescence so i hope the committee will send a message to the ftc that copa remains important but needs to be updated and then if the ftc should develop specific recommendations for and developing for adolescents as part of the initiatives on online privacy. thank you. >> thank you thank you for a much mr. chairman and members of the committee i appreciate the opportunity to be here today. we are a nonprofit research organization and we also teach privacy law at georgetown and i wanted to begin by thanking professor montgomery for the

leadership role she played helping to ensure the passage of the act. we wrote to the ftc back in 1995 and asked the commission to look at the business practice the been false collection of use of personal information and children and fall with that letter when the hearings and subsequent work are the consumer coalition congress did in fact pass important legislation and we think that legislation sets up a principle that in this new line of fire and it's important to protect young people from the exploitation and manipulation of their personal information. and since the time copa has been enacted the most obvious change is the emergence of the social network services kids live longer by and exchanging information with their friends and that information is then collected and used for marketing purposes and while there are

disclosures to the friends who appear to them to be very transparent and to give them a great deal of control over what they choose to post or not post what's going on behind the scenes in terms of the transfer of the data by companies such as facebook to their advertising partners to the application data element partners and not to the third party websites the proposed to transfer information is much more opaque. now facebook said earlier and i think this is true the most part they tried to discourage the use of the service by children of the age of 13 said they remain compliant with copa but with the haven't addressed and i think the critical question now before the committee is how we deal with a collection and use of this personal information on teenagers children between the ages of 13 whose data is being collected in this online environment and then disclosed to martyrs' and others for purposes completely unrelated to the reasons that they made it

available. the problem is more serious still because in this setting the user has to rely on the privacy policies and privacy settings they are presented with. that is essentially the only way any self-regulatory environment you are going to get privacy protection and what we are seeing increasingly is the company's having collected the data are in teenagers will change the privacy. they will change the privacy settings for the purpose of making the data more easily accessible to business partners and marketing purposes. this is a problem copa never anticipated and i think it is the single biggest problem facing children in the online the world today. self-regulatory approach that relies on privacy cities and privacy policies is not working. and it's also not working in part i regret to say because i don't think the federal trade commission has been as aggressive as it needs to be to

go after what are essentially unfair and deceptive trade practices. they do a very good job on the educational side, no doubt about it. they've provided a very good material to the families and the teachers and educators and others about what people need to do to protect the safety of the children online. but they have not done enough to enforce the unfair and deceptive trade practices and i think the need to do more. i want to tell you briefly one extraordinary story of complaints we filed with the federal trade commission last year that was offering a product ostensibly for parental control but was supposed to protect kids online from risks and dangers parents might be worried about. the same company was gathering the data for the product that they made available for marketing purposes and this is how they describe their own product. every single minute they are aggregating the social media outlet such as chat and chat rooms, blogs an instant message websites to extract meaningful

user generated content from your target audience, the teams. they are talking to a marketing firm about how you're able to surreptitiously gather information on kids on line. we went to the ftc had said to the ftc you need to shut down this company. the ftc acknowledge the receipt of the complaint but never acted on it but the story doesn't end there. when the department of defense learned about how the product operated and they were a time planning to make it a long line to the military families through online store, they said this poses a risk of privacy and security risk to the military families and we will not make available. in other words, the department of defense acting on information that anyone who had taken a close look at the product would have quickly realized was a serious problem need an appropriate decision. the ftc which has authority and expertise to police copa never acted. i think in both of these areas we need to update to the loss of

that the protections for teenagers those between 13 to 18 from the misuse of the commercial information and also for the ftc to get much more aggressive on enforcement. education isn't enough in this area. they have to go after the companies that are not acting appropriately when they collect and use personal data. thank you very much. >> thank you. >> mr. chairman and mr. ranking member. mr. chairman, mr. ranking member, think you for inviting me today despite sitting at the kids table i am a senior fellow with the freedom conditions and you can test imagine how young my colleagues must be. but i commend the steady to the committee for studying copa and the federal trade commission for the study of the copa rule which is an important distinction we should keep in mind. as was claimed for internet jr as we have referred to it cites directed to children 13 copa requires sites either age verify all users or limits the functionality of the site to

potential friend for making personal information publicly available including the sharing of user generated content. copa poses the same requirement on the general audience sites when the actual knowledge they are collecting information from a user under 13 or again enabling the chairman believes the venture reformation. because of the separation and the cost of the to verification copa may have unintentionally limited the choice and competition in the marketplace for the children's content by driving the consolidation in that marketplace. on the other hand, copa has been reasonably successful in fulfilling the congress our original goal enhancing print one falls that to protect children's online privacy and safety. whatever the trade-off i am here today to caution against expanding copa beyond its original limited purpose. copa's unique flexibility and subtlety and its intentional narrowness and my concern here is modest about innovation but also about free speech. copa is flexible because it potentially applies to the entire internet regardless of access device used in putting services scarcely imaginable in

1988. copa as seóul because it requires verifiable parental consent, not only side and service operators gather pacelli information from kids for their own use, but also of the enable children to make that information publicly available online. even more so, however, is copa's creative solution to the problem of age verification. and in the mashaal i would say that 13 is just right. unlike the similarly named try online protection act, copa requires your action off sites clearly directed at children only and again where the actual knowledge whereas copa the required age verification of all users for any site offering contant harmful to minors. back in 1998 congress considered but wisely chose not to apply copa to adolescence. recent efforts to expand have put online privacy child safety free-speech and anna mehdi on a collision course. several states proposed what we called copa to coicou extending

them to under 17 or 18 but once the age threshold rises above 13 it becomes increasingly difficult to distinguish sites directed at children below the threshold from the general audience sites. with a seemingly small change, copa would essentially converge with copa and extend beyond the discreet internet jr to require a to verification for the sites used by many adults and indeed other states have proposed extending copa to all of the social network sites. but requiring adults and older teens to prove their age by identifying themselves constitute a prior restraint on anonymous communications and this would raise the same concerns that cause the courts to strike down copa to read the of verifications' would reduce online privacy by requiring more information to be collected both from adolescence and from adults which would include a credit card and information. while coppa's dalia will plan and not in a string the regulation under coppa the shouldn't put them in the awkward position of becoming repositories for troves of information in the name of

protecting privacy. northwood coppa expansions katulis ansi for online. some have argued a to verification could protect children by allowing sites to create safe spaces that exclude predators. unfortunately, there really is the technology for reliable age verification simply doesn't exist. even the ftc made it clear they don't consider coppa's parental at its such as the credit cards as equivalent to alj verification. coppa the expansion could also undermine the viability of online sites and services. as you heard here today, some consider the marketers to be the real predators. even though advertising is what we have called the great benefactor to fund the overwhelming majority of online content and services. coppa all the place to the collection of prez on information that could potentially allow the contacting of children under 13 and a network advertising initiative already requires verify all parental consent for behavioral advertising to children under 13. but if coppa were expanded to require general of the inside funded by tayler advertising to tailor verify all users, it

would do to the income approach foundage copa to read in part to become a coppa extension would raise costs for small or new sites and services geared towards miners and interim this could discourage innovation, let trees and raise prices for consumers and as i mentioned before, also a potentially restrict speech. ultimately, concerned about the tailored advertising would be less of a private your safety and one about advertising scholar of the american enterprise has called the fear of persuasion. the idea to get for cizik benet kaput and grows more so with increased relevance. as he has noted by age ten or so children at a full understanding of the purpose of advertising and equally important act of suspicion of what advertisers say. if the government has a role to play in addressing the concerns about the tayler marketing it relies on educating kids about advertising to help them become smarter consumers to be of last week the fcc launched such an education campaign with its tutorial website. the ftc excels in consumer education and should be encouraged in these efforts as a less restrictive alternative to communication. finally briefly i want to

caution that h.r. 4173 passed by the house in the fall would give the ftc the capability to unilaterally change coppa including the age range and i would simply suggest such changes should be made by congress and not the ftc. if congress wants to help the ftc implement coppa it should consider additional funding for education and indeed for enforcement. thank you for inviting me to testify. >> thank you. i want to thank all the witnesses for your testimony and we are going to start off with senator rockefeller. >> thank you, mr. chairman. i have this odd feeling about this panel except you and you and you. it's like we are discussing some kind of a breakfast cereal good for you or not and children are somehow already disappeared from this process, and it comes down i think, and the both of you,

microsoft and facebook, had a good things to say, but you always end up with the idea will we will do this by ourselves. and we really don't need the government telling us what to do. and i have to leave very shortly because i have to give a speech on cybersecurity to a business group. cybersecurity is the nation's number one national security threat ahead of 9/11, dirty bonds, weapons of mass destruction according to all analysis. the private companies, this is parallel, they always said at the beginning, some of you saw that i've been working on this for two years. we could do this ourselves. we don't want the government to be involved in this. we know that couldn't happen because we know that they even have any idea what they were doing about how to take on cybersecurity. some of the larger companies did to a certain extent but most part they didn't.

that's like parents. we want parents to make these judgments which is like seeing people don't know how average fare millie's have to live where people are trying to keep down to jobs and they don't, you know, they themselves might not be skill on the internet and an event they're tired and have things to do so we have to do this for the parents. let's not let ftc do this let's let the congress do that. maybe that was the idea because he thought congress wouldn't be of a tacit. i thought your testimony was not particularly helpful to be honest with you. i thought both of your testimonies were terrific because you are focused on the problem. and either one of you, we haven't discussed really what the problem is. the problem is the kids are watching filth. they're watching phil from the

end of lascivious horrible things and we are trying to argue about 13, as you said should be 18 or 22 or whatever and the companies here are in favor of cleaning this up but not at the expense of being regulated. they want to do it themselves. they would appreciate working with the ftc a little bit. the clear message is they want to do it themselves. my clear messages i don't really think they do. i think that money tromps on this. money always trumps when it comes to information. money always trumps. this committee has come up with so many scam hearings in the last year or so where money drives that behavior and then kids and people that internet users and pop up all these things are left to the side. so i would like you to describe what damage do you think is

being done to children by the inaction? i agree with the ftc they are not heavily staffed or funded and we need to change that. we are trying to protect them from being wiped out all together under the financial services thing and i think we have. i think we have done that. what is the damage that you see being done to a generation of kids coming up with parents who are reportedly hovering over watching every move they make when you know perfectly well they are not? >> senator, i think the primary problem is that young people are being coaxed to reveal a great deal of intimate information and the data is gathered and collected and disclosed to strangers for any purpose that generates commercial value and as a parent of two teenagers, i have a problem with that.

i think technology is great and i want my kids to grow up and be technologically literate and make smart decisions on line because i can't always be there. they need to have the tools and experience to make those decisions for themselves. but i know that there is a point where i can't help them and they can't figure it out of the business practices are designed to conceal from them what is going on and that is why i think the congress needs to act. i think the congress needs to give kids the ability to control how the information about them is being used by others. my time is up. >> i would agree. we have created, the industry has created a system of ongoing monitoring and surveillance of teenagers encouraging them and it taps into the natural the telemental needs to reach out to their peers and to become independent encouraging them to get out a lot of information and tracking everything they do

without their knowledge. salles socializing them into a system where privacy is not valued and i think that is a very deep loss to the society and i do want to respond to what was said about advertising. we are not talking about traditional advertising by the way we are talking about by rall advertising and the environment and interactive gaming and after cars and things that are not what you traditionally think about as advertising. and recent research has found teenagers can be quite susceptible to this advertising and not necessarily aware of all of this and they don't know what is being done behind the scenes. >> thank you very much, mr. chairman. >> senator rockefeller, could i make a brief comment, please? >> i want to apologize if i gave the impression that microsoft doesn't want the government

involvement and we want to do this on our own. it is not the case. we've been supportive of them all to us to approach of online not just for kids but all consumers including support for comprehensive federal legislation which we think is essential. since the self regulation play a role in the best practices we can play a role in education, regulation and enforcement as well and we are very supportive of all of that. >> thank you, mr. chairman. >> senator record. >> thank you for a much and this is a very serious topic for implications for the next generation. i appreciate chair's willingness to get into the weeds on this and i think the testimony of all of our panelists has been helpful.

i think it's important that we hear a variety of viewpoints and all sides to this and i do think that there is a way to -- there must be a way to have it both ways to encourage innovation and to protect privacy of children's information at the same time. so i will ask the panel what do they think about what i just said? has the law reduced innovation and cost consolidation on childrens website? have we created a barrier to entry into the children's websites market? has filled all result donner limitations on content

specifically for children? so if we could just start with ms. ridge and good on the panel that will be my question. islamic obviously tama keeps helping me with the button. that is one of the key issue is that we are going to look at in the review is specially since i was one of the goals of coppa is to preserve that axa's even if kids were protected. we did review that issue the last time we reviewed coppa which was 2005 and we published a report, we said a report to congress and said at that time all of the call mentors and people we spoke to in the research we conducted indicated it had not half that children were being protected and they still have access and innovation wasn't being stifled but we are very interested in the answers to those questions today. >> speaking only for facebook i can say i have seen a strange disincentive because of the law. my testimony was focused on trying to identify the

innovative things facebook has done for the teenage users of the site but what you didn't hear me say is we are not spending a lot of energy on the under 13 side because they are typically not on our site there is a linus drawn between 13 and over and 13 and under and i think that line has created a disincentive for companies to work towards innovative on the side and we need to look at that. i think that is the point i was trying to make in my testimony, senator. >> i look forward to seeing what comes out of the ftc current role review. i can speak for our own company that yes, some of the parental consent mechanisms required under coppa can be challenging and sometimes frustrating to implement, but i think that for the most part it has not discouraged us from continuing to provide services to the general audiences including the young children and some specifically tailored to children as well. it does create additional work

and it's a barrier to entry in some cases because any time that you are designing a finite process where there is a speed bump or even significant barrier having to involve the parent yes, consumers will go away and go elsewhere. but we think for the most part is the right thing to do involving the parent is the right thing to do creating those speed bumps so you can inform children about the appropriate use of the surface is and help educate parents as the right thing to do. irc on the whole coppa has been successful encouraging website to the right thing even the author is a cost involved. >> one of the goals of the law was to minimize the mass of data collection that was becoming state-of-the-art in the early days and the .com boom and e commerce and that is where the business was headed so what we were able to do and i repeat

that we worked within the industry to come up with the set of principles that what honor the privacy rights of young people but at the same time not interfere with the healthy development of e commerce. but if you are going to markets the kids what we are able to establish is there needs to be some operating principle here and i think the industry has done a very good job of working that out. it wasn't easy to sit around the room and try to give okay how do we do this. the final verification mechanism was a tricky one, it was not easy to do but the idea was first enable the parents to know what their children are doing and secondly, make the industry aware that they have a responsibility when they are collecting personal information from children. we've seen a healthy growth of lots of websites for kids, lots of terrific content areas and i think that has been a very good

development and i am happy about it. as i said i think that the search team -- kids will become automatically mature at 13 as any parent can tell you. but at that time we decided let's create this cui earmarks for where we both have these guidelines, and now i think that we've seen a whole new be flat with the weather that raises the issue about okay again and not the same model but what can we do to ensure that they are treated fairly in this marketplace. >> senator bayh wanted to say i appreciate your question about the relationship of innovation and privacy and i suspect we are going to you're a lot more about this and if i can say directly the relationship is not generally understood i don't see this as a trade-off. my wife is a public-school teacher when we talk about innovation and privacy we think in terms of the privacy of safeguards that enable children to to get into of new technology

in other words in the absence of privacy protection i think we diminish the opportunity for technical literacy and training and education that the parents would like to see happen. the innovation people are talking about is what they are not singing explicitly is on the marketing side did not like the privacy rules because they don't want to do the types of behavioral targeting brandt based targeting get your child to friend and advertising figure targeting and that is why they object to the privacy rules but it would take a step back and talk about technical literacy bringing more children to the on-line environment, creating great products and services so that they get excited about new technology. privacy actually plays a very big part in helping to make that happen. sprick let me follow-up,

mr. rotenberg. use if you have children. i take it your teenage? >> yes, sir. >> you might telling us how old they are? >> 15 and 16. >> in terms of knowledge about the protections children need you are probably in a percentile of 99.9 nationwide. what do you -- is it that big of a case what do you need the government to do for your above age 13 children that it's not doing now because you are a good parent. >> i appreciate that, sir, but i mean the government to step in to control the things we can't control in other words if we sit down with our children and go through the privacy settings and say this makes sense or doesn't

make sense or that is your call and that is how the understand privacy protection and then the next week the company says we have a whole new approach now we are going to do something different and we are left with this sense that the tools of the company provided us to try to safeguard our privacy and the privacy of our children i basically become meaningless. so i am not saying the pair and stop the an important role. i think the parents do. but i am saying that it cannot be made so difficult and the businesses cannot hide the way they are collecting this data as they do because there is nothing that the accuser the parents can do to change that. that is completely on the business side and it's done because there is no regulation. there's nothing that prevents them from saying to all of teenagers who 50 on right now the of the great idea and we want to go ahead and do this or not tell them to go ahead and do it. can control that. >> thank you. you can respond to that but also

respond to the question of innovation and privacy. spec what may be clear about three points. first there are always trade-offs involved in the organization and hear the tree of is not simply the question of economics versus privacy but indeed the tree often false free speech. and again, i stress that is because the collection as the term is used in coppa does not just apply to the collection as we need in the colloquial sense such as used for marketing purposes but it is a sharing of information, the enabling of sharing generated contant so when i talk here about the trade-off i want to be very clear i am talking about the ability of users to join the tools and innovation and those tools that allow them to share and communicate and collaborate and this is the flourishing of webb to plato and that is what is at stake here if coppa were to be expanded which age scope so my question is i want to emphasize one of the duties of coppa and is it gives the ftc

flexibility sitting the rule within congress of the ftc has given the need to define the personal information on the internet and i encourage you to do so. my caution however is we ought to be very careful about having congress reopen the door to the one thing that the ftc cannot on its own change which is the age scope and i mentioned the financial reform legislation only because it could indeed get a future ftc ability to change things like the age scope which again presents a trade-off in terms of free speech. my final point is there was a rich mosaic of parental control tools and software messaging available today. my colleague, adam at the progress and freedom foundation published a comprehensive compendium of the tools and again and again in the context of the bill as senator rockefeller referred to, of wanting to prevent or censored kids from accessing the courts have repeatedly said that the tools need not be perfect but

the government regulation must yield to the tools where they exist so our point has been to highlight that these tools exist and we should be encouraging innovation and not just in the sharing of information bill also in the controls available to the parents as well as all users to take really control over their own information and how it is shared and so our answer in a nut shell is the solution to all of these concerns should first and foremost the enforcement of the existing law which applies to again children under 13 and then also education and empowerment and the government has a role to play on every important one and the ftc does this extremely well in highlighting those tools, methods and education and i encourage you to do so but again, caution against changing the statute itself. >> thank you >> thank you for being here. i know you have to slip to another meeting with and you for your leadership and we will leave the record open for a few days for the senators to submit

their questions as they want to. what we think all the witnesses and i want to think facebook and microsoft for being here because i know not everyone in this industry chose to come today but let me start if i can with a question for facebook. in your written testimony, you talk about facebook's culture of authentic identity. could he be leverett on the little that? >> yes, senator, i'm glad you asked. one of the interesting things that happened when facebook was first launched his we defied conventional wisdom at the time about privacy and security. we decided the beginning we were going to ask people to put their real names and build their profile around that and i have to tell you it has been the ball spring of a number of advantageous security privacy benefits for users of all ages of our site it is unconventional at that time that what it meant

is it could distort and peter to identify bank accounts quickly and able to target corrective action at inexplicit accounts and more importantly and there's this community effect that takes place where individuals feel some sort of preparation when they take an action that is tied to the name. it tends to discourage that speech of bad behavior, etc. so we've been the beneficiary of these deficient what we refer to as a name culture. >> you also mentioned in your testimony that you didn't want to see any changes to coppa >> we are not really needing changes at this point because we feel we have done a very good job of implementing the statute. >> you are saying that is true from your company. you are saying that is true industrywide. is a pretty good actor? >> no, of course not and there

certainly are companies that are out fliers. they're always will be at that is frankly why we need stepped up ftc enforcement find the bad actors and take action. >> your view is we've the statute as is but beef up the enforcement. >> that is the right approach. the ftc folks to the generally good job and they would do better to have more resources. it's really easy to focus on the microsoft and facebook and goebel and -- because we argued and we can show up and testify. it's the companies that don't have people here in washington and don't have lawyers on staff that probably deserves the lion's share of attention and they don't get because the press and focus on them and can't be found. >> tell me like dee dee to one like the age 13 and why that should change? what general inclination of the behavior of children's issues should make it 18 and under or something like that, move it up a few years. but tell me why you like 13. >> senator first all i expertises privacy and not so much child psychology or social development, so i can only speak from this perspective.

we have found that teenage users have really had a very successful experience of facebook. there socialized well. they learned the rules of behavior. they are able to actually advance themselves and learn about the world around them. >> would not want to see us deny teenagers the opportunities of living in a digital society. i think that there would hamper kids are not our country and cut them back children of the same age and other countries if we were able -- if we were to prevent them from having access to the site or services. >> thank you. dr. montgomery did you have a comment on that? >> yes, and on but agreed social networks and the internet in general are terrific tools for the young people and i'm also the mother of a teenager and on a can see what a great role the new digital technologies are playing in her life and they really do tap into the key

developmental task of adolescents and adolescents are exploring their identities and they are trying to reach out to their peers and separate from their parents this is something the need to do and be more autonomous, so i can see that in a number of my colleagues have done terrific research the documents that and i think that is great. and i think the problem is teams are out there in very public and transfer and sometimes the parents, social networks. but the business practices of data collection and surveillance that is taking place on facebook and other social networks is not transparent. it is a black box in many ways and i would not be talking about restricting teams from having access to these platforms. i think we need to give them that access. they are very important. but what i would be calling for and what i do call for is for

the government to play a role in ensuring that all of the social networks and all of the platforms, mobile and otherwise that young people are engaged in our operating by a set of rules. these rules can be crafted in a way that will balance free speech and balance business and innovation when we started talking about coppa and what people said we will never be able to do this, this is impossible we were able to work it out, and again, not the model that we have for coppa, not the model of parental verification and restricting access. but a separate set of principles that i think we could work out that would apply to teenagers. >> >> let me ask you, dr. montgomery, are there a set of principles that exist right now, is there a model, rule, out there that we could apply here? do we have to start this from scratch? >> i think it's a at the very least, some of the international principles for example, that

mark can talk to about data minimization and transparency and of the things that would expect. you know, i don't see a model out there as yet. i think we're in getting some of these things as we did with copa but i think this is the right moment to do so. >> and while i'm on you, dr. montgomery, should we leave age 13 as is or should we change it? >> i think copa operates well as it is that i'm not necessary talking about revisiting the actual legislation, but i do think we are to think about what protections we could provide for teens. again, i think we need to be careful about the model that we create, but i don't want to see teams totally ignored. >> okay. mr. sparapani, let me ask you, you all apparently have a very

important, how often is that use? what are the numbers on that? >> senator, i don't have the numbers are immediately funny but i have to tell you it's enough to keep a huge team of employees busy all day day and night from around the world. you have 400 users, which we do, and they are trained to guess they have become comfortable with self reporting what they consider to be inappropriate behavior by others on the site. it does produce a large quantum of reports but, of course, we triaged those that we take the ones that might have law enforcement in terms of responding. we put the ones that concern potential threats to life and limb, and it only happens rarely, but we put those and prioritize those. so these other reports about other malicious behavior or inappropriate speech, drop down a certain nod. >> does your company have policies that go beyond copa? it sounds like you all have similar policies, but go beyond the loss to? i guess the one place where i would suggest with respect to

our marketing practices. i want to distinguish facebook from virtually all of the companies are not, and from some of the generalized discussion that's been happening about marketing to teenagers. with respect to marketing to teenagers, facebook never, ever shares information with the advertiser about individual users. doesn't matter the age of the user. what we do is when we get a request to advertise on our site by a company, we offer the ad but we never share the actually personally identifiable information without advertising company. i think it's important -- >> do you get information about your users but not specific information? >> that's right. is important and i think it's helped our company succeed. and i hope other companies will follow our lead on that. >> mr. hintze, let me ask you, i know that mark resolved, through your various software products offers a lot of parental controls.

do you know what percentage of your users actually utilize the parental controls? do you have a rough percentage of what that might be? >> i don't have the actual numbers with the. i think it probably depends on the service itself. things like xbox live, for example. the parental controls are really built-in as part of the account creation process. so when a parent buys an xbox in signs up on xbox live subscription, part of that transaction of creating secondary account for their children, put those parental choices in front of the user. it's quite a high percentage users who are children where their parents are utilizing those controls, to some level, and there's all kinds of different knobs and dials in their, and how deep parents go, probably depends on the parent. but a large percentage of users are using them. other services, you know, we got this windows live family safety

which is a free download to help control, help kids surfing the net and help search services. there's a challenge of educating parents and making them aware of these tools. something we try to do, but it's always hard to reach those peers. one of the reasons why we have implemented a rental consent process, even in cases where copa doesn't explicitly require the general audience site, for example, we think that's an opportunity to provide that kind of education to parents to get them these tools and information in front of them. so it really depends across the surface. >> let me ask about you call it windows live family safety, let me ask about that product. that's free? >> yes, it is. >> how do parents find out about that? >> we provide messaging in a variety of different ways. we have worked with the number of organizations, children's organizations to provide information through those, the

boys and girls clubs and other organizations like that. we have provided information to our own sites. we have got dedicated webpages around privacy and children's safety on our websites, provide information to parents. there's a variety of means that we tried to get the word out on these different tools that are available to parents, get them educated about the risks of children online and the risk those children face in the tools available to them. >> i think would be helpful to parents, and you may already be doing this, i'm just not aware of it with this product, but i think it would be helpful to parents if you guys could take the offensive and aggressively, to the, periodically from time to time whatever is appropriate, offer almost like a parents to get on how to stay safe online. there's a lot of aspects of that. i mean, identity theft, there's a lot of kind of fraud issues. there's just privacy issues with kids. you know, just run through the

gamut. this microsoft office offer that kind of in one place kind of semi regular reminders that these tools are available and you need to update your settings, et cetera, et cetera? do you all do that? >> we do have proper etiquette. we do have the equivalent of a toolkit available. we've got a website that has a list of resources available to parents and information available to them to help educate themselves and their children about the risks online. again, the challenge is making them aware of that and there certain things that were done in the past, sort of quasi- marketing campaign to parents, try to get that information in front of them. there's obviously more we can do in the future. >> personally i'm not a huge internet user. i use it probably every day but not extensively every day. usually not very extensively at all, but i wasn't aware of that. will find kind of like average

john q. barrett year i did know that was out there. i would hope that microsoft and other companies would think about what it is doing more progressive and letting people know. let me go ahead and ask them mr. szoka about the age of 13, you want to keep 13 where it is? >> senator, yes. i think you as the most important question of the day. the point i tried to raise this is perhaps the least well understood aspect of copa. the point here is not necessarily just to deal with child psychology, although 13 does happen to the agent which jewish kids are bar mitzvah, the confirmation is given in the catholic church. romeo and juliet were 13. are reasons why 13 historically has been an age of transition and it was chosen by congress to the point we're trying to stress in our work is the far more important reason for keeping it at 13 is when you raise the age above 13, the copa framework

breaks down. because again as i said, copa basically applies in two ways. it applies to sites that require to presume that all of their users might be a child, and then again where sites have actual knowledge that if you were to set that at 18, for example, you would end up in a position where a site that might be considered directed at adolescents who might be afraid the ftc would find them to be so, our site differ profoundly from sites that are today like club penguin where it is directed only at kids at 13. adults use those sites that teens use as well. so as a practical matter if you extend the framework to a higher age you would for the first time have the government be requiring age verification of large numbers of a to users. we've already been down that road before. the courts have clearly held in litigation about the child online protection act, copa, to do so would be unconstitutional because it would be on the freedom of speech right without having to identify themselves

through use of a credit card, but also the free speech rights of the sites themselves to reach an audience which is diminished by the roadblock of age verification. i want to be clear from my perspective this is the most important issue that we've talked about here today, understanding why the age for coppa must be kept at 13 for the framework of what i think is a really great statute otherwise to function effectively. >> thank you. mr. bellinger, do you agree that coppa breaks down if you change the 13? >> i've been sitting here listening to mr. szoka's comments and i'm just very confused. i actually helped litigate against them copa, which was the act to raise a concerns and the entire action on the same page. but it is almost completely unrelated to the discussion we're having about age verification and coppa. as mr. sparapani explain, every person of any age who wants a

facebook account has to come in the first instance, provide information about their actual date of birth. that's how they make the determination whether someone is about 13 or below 13. presumably, they could do the exact same line drawing exercise at age 18. so this argument doesn't make any sense to me. but what mr. sparapani said, which i think is something that needs to be considered more carefully, and i understand what he is coming from. he said basically facebook made a decision for children under 13, we just don't want to have them as users. it's too complicated, and because of the copa obligations were just going to say, you know, wait a few years basically. and he suggested in his answer that if congress were to extend the line to 18, perhaps that would make the same decision now for kids between the ages of 13 and 18, which is obviously not what we're suggesting.

we are not saying that teenagers shouldn't be on social network services. we are saying that companies that provide social network services to teenagers should have some legal restrictions on the collection and use of data about those children. i think that can be done without too much difficulty. it would probably be based on coppa. i want to make some changes but that's the main legislative recommendation i would make. create some legal protections for teenagers, don't discourage them. i agree with others. it's a good service, but as it is right now, it's not providing adequate protection. >> let me ask about age verification. i know some companies may differ with me on this, but my impression is that there's really not a way that exist yet to truly get rocksolid age verification.

and filling in your birthdate obviously, kids can just put in a different name and then maybe off to the races. am i wrong on that? is there not a really good, solid way to do age verification yet? or tell me, tell me what -- >> it's always been a challenge, and i think you're exactly right to say that there is no rocksolid way to do it. there are a number of different techniques. facebook itself i think has developed some pretty good systems to do age verification. i think they're probably get it right at a very high level, which is to say i would be very surprised if there were a large number of accounts for kids under 13. there may be some out there. i suspect that's true, but i don't think it's a very large number. and i think a similar, you know, effort to move the age line to 18 will probably be some people who get, you know, in under. but i don't think that's reason not to do it.

and i think it would be a mistake actually to say well, because we can't get 100% we should just give up. >> senator, if i may respond that you are exactly right that there is no perfect method age verification but there is another important distinction went to understand you. when you sign up for a site like facebook today you are indeed as mark mentioned, required to provide your age but you can indeed senator, as you mentioned, lie. the critical difference here is as the sites function today, sites like facebook and the many other sites, it's not just about facebook but indeed about every site that potentially allows sharing and posting of comments such as the log i read, for example, when you sign up for the site you are not required to verify your age for the use of a credit card that this is the key issue. my point is if we were to move to a world where coppa apply to children under 18 you have large number's of sites that enable sharing by users of information about themselves, so-called user-generated content, to have

age verify. that's a fundamental difference from the current regime were sites ask for age, and they block you as they're required to do and it's at that point you start to run into precisely the same constitutional issues as were raised in copa because copa in a nutshell required certain sites to a sum, again, although users might be children and, therefore, require all users to verify themselves with a credit card or similar tool. >> dr. montgomery, let me ask you about the state of academia on this. and that is, are there studies out there where people have really analyzed, you know, maybe child psychology or you know, how the industry really operates? i mean, is that a body of academic work on this that the subcommittee can look at to get some insights on how things really work out there? >> there's a growing body of

research about how young people are interacting with online social networks and other digital media. the macarthur foundation has funded a good deal of work and at any. not have it i have to say has really taken into account or look at the commercial dimensions of the digital -- >> dooming privacy? >> or the privacy. now, there are some studies emerging on privacy but they're not looking at the whole picture of digital marketing. i will say also that the expert in the food marketing area, and i working very closely with a number of them, because of the concerns about childhood obesity and the role of food marketing in that crisis, have begun to pay more attention to the digital marketplace. and i've been doing a lot of research in that area and working with experts who are looking at at a lesson development and the role of adolescence in the digital marketplace, because they're very much at risk for childhood obesity. and they're not necessarily in a

position to be asking their parents about their decisions about foods. and we know that many of those food marketers are using behavioral targeting and behavioral profiling to target interactive games and in other kinds of online settings. precisely those kids who may be most vulnerable to that kind of marketing. so we are working with a number of people to conduct more research in that area. i would be happy to supply the committee with some of that research. >> i would like to see that. so when you're talking about the best of marketing, tell me, give me a scenario where that works. it sounds like to me that may be walking industry and there's a fast food restaurant and he make it a message on his or her found that they should go in there, get a coupon or something. tomie -- >> that is where location marketing is going, and that is, you know, first of all of you know who the individual consumer is.

as we are finding, you know, it isn't always necessary to know the name. you simply need to know who that person is, using a particular mobile phone, and, you know, what the ages any other demographic characteristics, as well as behavioral characteristics. what kind of sites they go to and masses of amount of data that are being pulled together by various tracking technologies. and yes, the idea and we have seen some trials with this, with some of the fast food companies, would be, you know, that when you are near that restaurant, you would get a coupon that could say, you know, you can get a discount for this particular kind of product. we are also looking at interactive games and the kinds of profiling and targeting going on there. so let's say you're a pizza lover, you're also addicted to an active games, and interactive games online content target you when you are most, you know, aroused by the game and offer

you pizza and even provide you with direct access to an online site to order that pizza. and we know also that we're looking at a lot of a lot of apps on those that i have an iphone that enable you to order things when we. so this kind of impulse, all of that is tied into behavioral targeting. >> so let me ask a follow-up there. you mentioned the iphone which is an apple product, so you're the manufacture of the phone, but you also -- what about the wireless companies and cell phone companies themselvethemselves, at&t and verizon of the world, are they providing this type of information to marketers? are they giving agent things like that? do we know that? >> mark, you may be able to answer that better, but they fall under a certain set of policies that are, that apply to those companies that are separate from the online

companies. >> were not specifically aware of how the telephone companies collected data on customers, but there was a very interesting proposal to do a so-called deep packet inspection bikes internet service providers which would reach much more deeply into the personal activity of people online, literally looking at all the e-mail traffic they were sending in trying to take pointers to commercial activity out of the. i do want to make just on this point, one for the comment. i think mr. sparapani was correct when he said earlier that facebook doesn't disclose user data to advertisers. that's right, but facebook does disclose user data to application developers. so that when a facebook user installs a facebook app, yeah, favorite cities or snowball fight or whatever it is, facebook at that point is making a decision to send a lot of the users social graph over to the

company. and what they announced just recently us to do something very similar with third party websites like cnn and pandora. so it's not the whole story, i think at least in this situation, to say in terms of facebook that the data doesn't go to advertisers but there are other ways the data is released. >> thank you. and ms. rich, i haven't forgotten about you. [laughter] >> let me ask you a few questions. first, did you have any follow-ups on anything you heard that you want to clip i? >> i do have one follow-up from something marc rotenberg said in his first data, which is i agree wholeheartedly that enforcement by the ftc both of copa and jenna and privacy is important we are very proud of our enforcement record. just in the last year even six months, we have brought more data security cases which purchase at close to 30 data security cases that we brought. we have issued an online

behavioral advertising report, and at least one case involving deceptive tracking. we have done a cases designed to promote the integrity of self-regulation, and i could go on and provide you, mr. chairman, with more i did want to comment on that. >> in your statement, you said -- let me think about this right -- whether the rules definition of internet adequate encompasses certain technologies like mobile communicate should. i don't know if you remember that. is the ftc looking at what we mean by internet today? the definition of internet and mobile technology. are you reevaluating all that in light of the technological innovations to? yes. there was a standard definition that was very sci-fi sounding back they're using in all the

statutes, the worldwide communist, infrastructure and, you know, very strange definition. and it's not clear whether that encompasses just traditional online activities, or whether it would extend to interactive activities that don't actually go through the internet. so we're looking at that very seriously. >> knowing what you know now in terms of the state of technology, but also what ftc has to do with the statute and limited statute, would you recommend that the senate revisit some of those definitions in the underlying wall right now? >> we are taking a hard look at that, and in a few months will have the benefit of hopefully many, many commas on it. and at that point we'll figure out what our next move is, whether it's something we can address or not address in the rule, meaning we had the authority under the statute of our weather is something we have to come back to congress on. >> one of my staff guys you just

gave me a little device that's a nintendo ds which is interesting that i don't know if it is his or his jobs that as a bogeyman attached to. but anyway, it has a phone on and i don't know if it plays musical exactly what, but obey as he is a little game. and has a game cartridge in there. it also, very easily and very quickly allows the child to connect to the internet. you know, it has the camera, you can do shopping in that type of thing. hugo, this is a device that obviously didn't exist just a few years ago, and i guess i would encourage that as you're looking at this, think of all the applications and maybe not, yeah, i think it's probably hard to make a list of all the devices, but functionality of the. if it's connecting to the internet, if it's mobile and things like that.

because hopefully the electronics industry will continue to innovate and continue to do great things and bring things on the market. and hopefully ftc goes through your process, you will define things in such a way that you will work with us to define things in such a way that when new products like this come onto the market, you know, the statute captures that and we don't get out of date. >> and i just say that we have two of those in our house. one for my 12 year old and one for my nine year old. and when it does access the internet i think we would be safe to say that's covered, because it is accessing the internet. but the question is if they're just picking to each other and not to the internet, there's functionality that just can tell, yeah, machine to machine. is that covert? >> right. just as an example, the federal trade commission has to think through.

i could actually spend a lot more time asking questions, because this is very interesting and i know that we have our members here have to move on to either speaking on the floor or other committee meetings they have to get to. so let me just do this at this point. let me just ask the panel if there isn't anything anyone would like to say before we close down the hearing, because we've had a little bit of back and forth and i want to give everybody a chance to respond or make one last final point. so is there anybody that wants to add anything? >> very briefly, mr. chairman. i want to thank you for holding this hearing. i think there are a lot of people who appreciate copa and believe it plays an important role in safeguarding online privacy, but also feel that given new technologies and new business practices, something more probably needs to be done. this is a very good place to start that discussion. specs are, if i may disagree the, i want to stress in my test copa is mutual.

i think one example is exactly right, we may not need changes to the statute. the ftc will look at that but i think the ftc probably has the flexibility to apply the internet very probably too although services that are touched upon an integrated into the internet. so again i want to stress or my concert is not what the ftc updating the rules consistent with the statute, just simply about making broad changes to the statute to have greater consequences for speech. >> yes. i again thank the committee for holding this hearing. it's very heartening for me to hear, having struggled with many others in the '90s to get this law passed. and that it has been a success. and i'm very pleased about that and i'm very pleased to be working with the ftc to ensure that copa is able to address the continuing rapid changes in the digital marketplace. but again, i would just like to

make a plea that we, as a society and the government and industry, not ignore the needs of the nation's teenagers. >> i again would like to thank you for holding this hearing today, and the members of the committee for participating. and a lot of discussion today around kids and a lot of discussion today around teams. and the age not covered currently by copa. i think our position and a number of the other panelist that copa may not be the right vehicle to address the team issues. the issues that teens face online are somewhat different from those that other children's face, are different. but others have expressed the need for some legal protection in teens and we agree. so we would encourage the committee to continue to look at the privacy issue more generally, maybe not in the framework of copa but looking at privacy legislation that would address privacy protections, not

only for teens but for adults as well. >> what's new from our perspective, since the dawn of copa is that we're entering a moment i think an information age for the first time when we have the opportunity to -- for technology to we still privacy in peoples online through new tools. and that sort of user control model that facebook on a number of our companies like us are trying to push forward is a really new thing and actually holds real promise for user privacy. what's more difficult is getting users to understand the new tools and use them in a wise manner and you, frankly, find them and exercise them. is especially hard with teenagers. that's someplace i think we will spend some energy. but again, thank you, senator. >> i will echo the thanks for you, mr. chairman, and the other panelists for engaging on these important issues, and also say that we should have a lot more to report after our comment period closes and that we have our workshop in june.

so we look for to talking some more. >> let me ask the ftc one last question. and that is, as part of your evaluation, are you also looking at your manpower slashed resources there at the commission? some of the witnesses have said that if you have more resources you could do more enforcement and be more effective in enforcing copa? are you all invite waiting that as well as well as the quest yes, we are spent and will you come back to the senate with a recommendation on that? >> sure. >> thank you very much. and i guess in closing i would like to say we will be the record open for two weeks. so don't be surprised if some of the senators our staff here want to submit some more questions, because there's somebody go into because i've taken too much of her time already. but will probably submit some of these over the next couple of weeks. we would ask you to get those back to us as quickly as you can. and always work with our staff.

but in closing i would like to say this, this may be one of those areas i think that senator wicker kind of alluded to earlier. doesn't old abraham lincoln was the says government should do for people what people can do for themselves. and this is an area where we want people participating in the marketplace and using this technology and enhancing their lives and doing all these great things, but we just have to make sure that marketplace is secure, that the right to privacy parameters are there, the right legal structure is there. where the right enforcement. we have to make sure that marketplace is working because people can't do this for themselves. i think there's a level of government, certainly private sector, the private industries done a lot of great, good actors in it but there's some bad actors as well. so we're trying to find that balance. but anyway, thank you all for your participation today. i know chairman rockefeller appreciates it, and i do to and all the subcommittee. thank you very much. with that we will adjourn the

meeting. thank you. [inaudible conversations] [inaudible cversations] >> a senate hearing on fy 2011th budget request for amtrak and the federal railroad administration. will hear about plans for high-speed rail projects and safety group and. patty murray of washington chairs the appropriations subcommittee on transportation. this is just under two hours.

>> and the budget request of the national railroad corporation are abducted will be hearing testimony from two panels at this point. the first panel will include be administered of the federal rail administration, mr. joseph zabel. the second panel will consist of three witnesses, and tracks president and ceo mr. joe gordon, amtrak inspector general, ted alves, and ms. ann calvaresi barr. i want to welcome all of our witnesses at this time, and thank you for being here this winter i look forward to hearing all of your testimony. efficient rail transportation in america ties are committed together. it creates jobs and boost the economy and reduces the prices of goods being shipped. and it helps commuters around the country get to work. that's why i'm so glad this administration has expressed a level of interest in rail transportation.

we haven't seen any longtime. they understand the important role railroads but in our transportation system. this subcommittee has seen too many budget request from previous administrations that would have guaranteed the bankruptcy of amtrak which would've been devastating to commuters and communities across the country. i know families in my home state of washington deeply value our amtrak service, cascade line. has set a new record for ridership this year. and i personally heard from a lot of people who depend on it. i know that committees around the country value their rail service as well. that's why i'm so glad this year the administration's request for grants to amtrak would support the railroad, although it does not meet all of the needs identified by amtrak itself. in addition the administration is again requesting $1 billion for grants to support inner-city and high-speed rail. this funding builds on the 10 and a half billion dollars provided for these purposes for the fiscal year 2010 appropriations act, and the

american recovery and reinvestment act. including 590 million to improve high-speed rail in washington state. finally, come rail transportation is being included with roads and mass transit in discussions about the nation's larger network of transportation. in the recovery act were able to provide states with the flexibility of invest their formula grant in freight and passenger rails. transportation has also played an important part in the tiger grant program that i thought to include but we still need to recognize that all of this work as well as recent proposals for additional funding is happening at a time when financial constraints are increasing, and likely to become even greater. as families across the country look for ways to tighten our belts, leaders here in washington, d.c., need to redouble our efforts to get his spending under control and reduce our debt and deficit. that's why the budget president obama sent to and the budget resolution recently passed in the senate budget committee goes

a step further by reducing the spending by an additional $4 billion. we owe it to future generations do not burden them with debt. but we also owe it to them to continue making the investments we know will strengthen our economy and make our country more competitive long-term. that's what i'm looking carefully for areas to cut spending, but i also know that lower spending levels will make it more difficult for congress and for this committee in particular to find ways to pay for important infrastructure programs. i know many people think the answer to this problem lies in funding -- finding a source of funding outside of the annual appropriations process. the highway program and the highway trust fund offer an easy example of a dedicated and what is historically been a stable source of funding for transportation infrastructure. but we should all understand that the financial constraints are just as real outside of the appropriations process. the highway trust fund has been threatened with insolvency for more than two years, and we

still have not seen any realistic proposals to stabilize the trust fund throughout the next authorization period. this subcommittee has turned to appropriating funds directly from the general fund in order to provide additional investment in our nation's roads and transportation infrastructure during the current fiscal year. so there is no silver bullet, and there's no way to avoid making difficult decisions of setting priorities. widely the administration's budget request would make important investments in rail transportation, there are still significant concerns about this subcommittee will have to consider for fiscal year 2011. the administration has failed to request any funding for positive train control and important new technology for preventing rail collisions and derailment. the administrations budget request for grants to amtrak does not address the railroads need to modernize. during this thing will have the opportunity to look at those important issues. in addition will be able to get additional details on the

administration's effort to improve rail safety and specifically its progress in implementing a risk-based safety program. however, one of the biggest question is how well the new leadership at the federal railroad administration and the amtrak can manage our investment in rail transportation over the long-term. the very beginning of the obama administration, the fra was cast with a warning italian dollars in grants for inner-city and high-speed rail. the program was brand-new and is part of the recovery act and needed to be set up immediately. at into these challenges the fra had never before administered such a significant grant programs. recent rail legislation has also added significantly to the agency's workload. and 48 needs to manage its new responsibilities and build the workforce that has the skills necessary to successfully complete all of that work. amtrak also has new leadership and there's a new level of cooperation between its board and management teams. they have worked aggressively to

complete a new strategic plan, build a system for prioritizing capital needs and develop a plan for modernizing its fleet. but the real test of amtrak's new leadership team will be as the rail implements its new plans. this subcommittee needs to see that the leadership at the fra and that amtrak administer their programs and manage their funding effectively and responsibly. both organizations face significant challenges in the years ahead but we cannot afford to waste taxpayer dollars or squander this unique opportunity to make our railroads work better for commuters, businesses and communities across the country. with that i will turn it over to mike ranking member,. >> i get very much and i join you in welcoming all of our witnesses today, and i thank you for outlining the tremendous budget squeeze that we're going to be facing this year. and is going to take a great deal of work to deal with the challenges we have and the

limits which are placed on it. and as the chair said, making already a bad situation worse and the congressional budget office projects that the national debt will balloon to 90% of the economy by 2020. if interest payments on the debt remained at the same interest rate level, will have to pay $800 billion. nobody who knows anything about finance thinks we won't have a significant increase in interest rates went our debt gets that high. in other words, we are drowning in debt, and the situation is going to get worse. the decisions we make on the budget and appropriations will be critical for the future economic growth of our nation. went to find the right balance spending to fund critical national priorities. and, madam chair, as you have already described, our general

revenue programs compete against one another. transportation versus housing. both programs have strong proponents as well as very compelling needs. and they seek to maximize funding for their priorities. high-speed rail, amtrak and fleet are all in direct competition for funding with other transportation. priorities as well as critical housing and community development programs for the poor. tide is also in this same pool seeking significant funding for the coming year, 250 month for choice neighborhoods, 350 for transforming rental assistance. in addition these programs in total are likely to cost several million dollars more in each subsequent fiscal year. at the same time, hud is proposing the elimination of dedicated funding for housing programs that help the elderly and disabled. these are very important programs. they are great need an obviously great support in congress for them. how we balance those funding

needs, both old and new, programs and hud are difficult, whatever allocation we received for the year, let alone in competition with substantial old and new transportation funding request, and especially rail, which are likely to acquire not just significant but huge increases in the subsequent fiscal years that personally i grew up as a railroad than but i always loved trains. first time i got a chance to ride on a train i loved it. i wrote on a day. i got to be governor, i started state funded for amtrak. there was nothing were to take my very young son from jefferson city to kansas city, or to the state fair. so i can hit as a rail thin. but the same time, if we increase for funds for transportation projects like amtrak, when we have these other needs, we are at a very real way in the danger of railroading the poor and using limited general

revenues to pay for rail rather than housing programs. and housing programs are not optional. we have people who depend on housing. and we can't walk away from the. i think it's important, first, to take a look at the unprecedented amount of money rail projects will receive. no one can deny that there's a lot of money going to funding the rail these days, the passage of the are a a. in fact, the biggest win within the department of transportation, governmentwide has been the fra. they are trying to manage, grants beyond their wildest dreams. when the passenger rail and investment improvement act of 2008 was signed into law. who would have anticipated the rail would be the beneficiary of so much general revenue? paid for by the american taxpayer. these are not dedicated funds as the chair has pointed out, paid for by users of passenger rail or for that these are general funds paid by all our taxpayers. and track received a record

143 billion in 2009 for capital grants by a high-speed rail received 8 billion with an additional 2.5 billion in 2010. fra at some expense in managing amtrak grants. but a whole new can and has a billion dollar program on top of amtrak and all of the safety broke rams, they are responsible for overseeing has to be a work in progress for any administration. this influx of billions of taxpayer dollars, i'm not sure american taxpayers not only get what they're paying for but also know what they're paying for. with billions of more taxpayer dollars poured into amtrak, which is, let's be honest and has had major problems in the past that i want to ensure that these dollars are not victims of waste, fraud, and abuse. to ensure that taxpayers get the oversight and transparency they deserve. i have asked the general accounting office to review the first 8 billion awarded for high-speed rail grants.

i believe the american taxpayers need to know how the administration chooses the project to fund their money. that includes how projects are reviewed, rankin scored within the department. taxpayers also deserve to know how the department applies its criteria for selection. and the process used in evaluating a wardy's. they need to know how the score is given to each of these projects selected and those which are rejected for fun in the first or. it's critical for our committee to understand the nature of the projects funded and to what extent they represent departure from or continuation of existing rail service and that works, and how they will fit in in the national rail plan to the committee on september 15 of this you. what's the future of rail in america? what does he unprecedented amount of new funding mean? this to me as a very important question. the american public and the private sector are unclear. if the recent funding for rail in america is just a blip or is

the real issue to say. are we looking to fund beyond the $1 billion proposed per year by the ministration for high-speed rail, are we supportive of amtrak's new fee proposal which over the period 2040 will cost approximately $23 billion in $2009? when taxpayer dollars are always scared. where is the money coming from? will become for critical programs under hud are funding needs of traditional transportation programs like highway, roads and bridges? last year 1 billion budget for high-speed rail turned into 2.5 billion when we went to conference with the house. this was due in part to artificially inflated budgets for transportation without any details or plans for a national infrastructure bank. when the national infrastructure bank failed to get it garnered congressional support, we had general fund money on the table which in my view should've gone to to critical programs to help struggling families for deficit reduction rather than the rail

industry. if congress goes even further to find high-speed rail this year, we are railroading the poor to pay for passenger rail. especially true this year when there's not a unified national rail plan that includes passenger rail, high-speed rail, amtrak, state rail plans, freight rail, and a cost to complete as we. right now it comes to rail, no one has a complete picture. we are looking, what we're looking to build, a map, how are going to pay for our how much it'll cost us. under last use appropriations bill, we were supposed to get the plant on september 15. that plan should contain a map, which quarters have been identified, we need cost estimates for these corridors and we should have benchmarks and idea about incremental improvements along existing rail networks will benefit the traveling public. they have to be fully integrated with the state rail plans and amtrak existing lines.

we should know the full cost of the equipment necessary to run this. today, to be quite honest, despite our inquiries we don't know what we're building, how much it will cost, and whether or not rail investment in america is here to stay without dedicated funds because the cost seems to be going out the roof. the proposal so far is just ahead of general revenue with no funding source attributed to it. when our country as i've indicated earlier is going further and further into debt. the worst part is that under the recovery act and grants in 2010 we don't even know what they are building, or whether the use of taxpayer dollars for this purpose is an appropriate use of funds because, as i said, we don't have a plan. in march, secretary lahood testified before us on the budget and claimed that quote when president eisenhower signed the interstate highway bill, nobody knew how we're going to pay for it so i'm not going to

sit and say that i know where all the money is going to come from for high speed rail, closed quote. i was impressed with that statement. but it turns out that statement is simply false. according to research done by transportation weekly, the national interstate map predated the interstate at, the map predated the act by 10 years. in 1944 highway act directed 48 states to designate jointly a map for a national system of interstates up to 40,000 miles. the states designated 37,700 miles. and the map was approved by congress in august, 90% of them have remained pretty much unchanged although added must have been designated and constructed throughout the years. on the cost of the map, congress did have an idea of the cost because colleges as of the department of commerce to conduct a comprehensive highway study, cost study and submit by february 95. congress required updated state-by-state cost estimate of

the interstate system every four years. where your national rail plan to september 1 15th them include detailed map, a cost to complete estimate, i'm afraid i must assume the answer to that, those questions is no. for that reason this use appropriations bill, i ask that you provide is with a description of the funds necessary for you to complete a true costs and a true cost to complete the study math. we have to have that. in addition i would like your input, mr. administered, i'm how much he believed a study would cause them habits can be worked into your current plans for completion of the national rail plan. until we have this information, my view it would be irresponsible for the committee to give the highest he'd rail program any additional funds. along with the high-speed rail plan would've amtrak's which would be included in the national rail plan. and i think you will agree. i think the department would

include amtrak's capitol needs. i am pleased that for the first time and tracks submitted a five year capital budget plans along with its annual appropriations request. however, assume we get a comprehensive plan we find an addendum to the plan. which is a sizable investment of 446 million in the amtrak's fleet. is amtrak going to amend the capital budget request to include fleet? where we can see what priority new fleet of place versus amtrak's traditional capital requirements? and americans with disability act requirement? when we're dealing with general fund appropriations i think we need answers to these questions before we go by the resource. and tracks in our committee an addendum on march 22 of this year. it's not been cleared by a lengthy and not part of amtrak's regular idea capital plan. these are additional capital funds and track is seeking for its aging fleet. it's not included in all the planning. and include in the budget on

with which we have to work. i am thankful that, don't get it wrong, they finally said at a fleet plan. at least there is a plan and cost to complete estimate unlike our national rail plan and high-speed rail plan. but once again there are no funding sources identified other than general funds, and loans with paid interest by the general fund. noted these loans are going to be a burden on future general revenue. once again, amtrak is competing and potentially other forms of transportation. and potentially railroading the poor if the subcommittee would agree to pay $446 in additional capital for a fleet. or agree to incur additional debt service using general funds for loans they may take out on fleet in 2011 and beyond. all of these resources should be contained in one comprehensive national rail plan. if you agreed with amtrak's fleet plan, congress will agree

over the next 30 years to pay for 23 billion in 2009. 46 billion escalate dollars, or more to provide replacement for it to amtrak system by 2040. whichever approach is taken it will be a very costly endeavor to acquire the fleet replacement the same time attempting to build high-speed rail, and in the mind of the administration, enhanced state services. was a priority? we've got to establish a priority. rail supporters have to know that there are limits, even in the best of times to these pie in the sky request and to those others who are rail fans, or used to be. i would have to say. given our current deficit we have to admit the initial request of 446 million outside of the budget capital plan is inappropriate. why is amtrak asking for replacement of locomotives and single level long distance cars? replacing aging locomotives along the northeast quarter

might be acceptable because it leads to operate on a much lower cost per mile for passenger subsidy and other route for amtrak. but long distance service last only a 147 million riders with a cost per passenger subsidy of $153. replacement of long distance cars and amtrak's fleet in $2009 is $4 billion. these are the most costly routes in the current amtrak system and amtrak is proposing to ask for some of these cars first. were is the proposed were supposed to come from, who will pay? would be the taxpayer? once again at the expense of the poor? if amtrak chooses to go below about the subcommittee would have to pay for debt service far into the future. we are really building the poor in the future to pay for real. long after i have steps aside. general fund would be needed to pay for out year budget for funding decisions that would be made now. my closing note in all this doesn't even touch the safety

side in time that funding needs for positive train control by 2015. last year our committee provided 50 million in grants for positive train control. a new regulation is estimated cost of boards of 13 billion to 15 billion for the rail industry alone and to going for the transit industry, and there's nothing in the budget for the safety program. that 12 tone and color growing federal budget we just can't throw federal funds and projects willy-nilly. we need to answer these tough question. we need a roadmap for the future, and we need to balance taxpayer dollars. i apologize, madam chair, for the time but i think the magnitude of the problems for prioritizing problems we face these are some answers. without i look forward to the testimony of the administrator. >> thanks very much, senator bond. i appreciated. mr. szabo, we'll turn to you for your opening statements. >> very good. thank you, madam chair, ranking

member bond, and members of the subcommittee. appreciate the opportunity to appear before you today and to discuss fiscal year 2011 budget request. our $2.9 billion request reflects the administration's commitment to keeping the national rail transportation system safe and supports the administration's pledge to provide traveling public with sound transportation alternatives to flying or driving. without question if this is a transformational time in fra. the impact of the rail safety improvement act which requires more than 40 rule-making studies and reports, the passenger, the passage of the passenger rail in proven and investment act and its new initiatives in bringing the states it as partners and to devote of passenger rail, and then of course the american recovery and reinvestment act has just set about and unprecedented tie in our agency.

over the past year and fra has executed its rail safety regulatory commission while simultaneously implementing an entirely new line of business. the design and management of multibillion-dollar high-speed rail grant program. in this transformation does not come without obstacles, challenges, and lessons learned. considering fra's fiscal year 2011 budget request, i hope the committee recognizes the care that was taken to present a request that supports our key mission, rail safety. while also enhancing our capacity to manage high-speed rail program. and i want to emphasize that when we put this budget together, we didn't just take last year's budget and start making adjustments to it. we sat down with a blank sheet of paper, and started from scratch taking a look at all of our new requirements, all of our priorities, and from their developing a fresh budget. for fiscal year 2011, we are

proposing a strong blend of safety program and has but and technical budget changes. currently, all of fra's administrative and operational expenditures and several safety related programs are funded under a single account in tighter safety and operation. in fiscal year 2011, we propose to eliminate this account and break into two new accounts, railroad safety, and federal railroad operations. the proposed new account, the structure is more transparent and will provide greater insight into the cost of fra's safety specific drug ram activities and internal administrative operations. programmatically, under the new rail safety account of a total of 49.5 million is requested to carry out a fra's mission-critical safety functions and activities. ew . federal railroad operation

account to fund the administrative activities such as payroll, infrastructure, and other shared cost and provide the necessary human resources to ensure sound stewardship of the safety programs. this includes 62 new position that will enable fra to make progress on the administration's high speed rail initiative. finally, fra budget activity include the rail safety user fee which is modeled after the fra administered fee in 1991 and 1995. fra estimated that $50 billion could be generated for the salaries and benefit cost of up to 330 of our r >> benefit clause of up to 330 of our safety inspectors across the country. a total of 40 million is requested to support fra will research and development

program, specifically in this year 2011 fra will focus added resources on railroad system safety, train control testing and evaluations, and the newly authorized whale cooperative ive research program. although the foundation for a federal state partnership began with the passage of pria it was a million dollars provided and is truly advanced high-speed peed rail initiative. this year's $1 billion request continues funding to advance passenger rail infrastructure and includes up to $50 million for program administration and oversight activities, $50 million for planning grants, and 30 million for high-speed rail research and development. fra and amtrak have shared a strong partnership for decades. the fiscal year as 2011 the of the budget for amtrak is a reflection of this administration's continuing support of this relationship. within the overall request 563

million is requested for amtrak operations to support their ongoing efforts to reshape the company by undertaking meaningful reforms. a total of 1.052 billion is requested for amtrak's capitol knees and debt service. this includes 28.91 million. so finally 22 million is requested for direct grant to the amtrak office of inspector general. the past 18 months have just been filled with exciting challenges. it has been a great challenge. even though it has been set that challenge, it has been done. we are continuing to enhance the safety of our nation's off rail systems while also driving toward this vision of investment in high-speed passenger rail. with that, i look board to the

committee's questions. >> thank you very much, mr. szabo, for your testimony. let me start by mentioning that last february amtrack announced a plan for replacing the aging fleet. can you explain to the committee why there was no additional funding for replacing the fleet? >> anytime you're putting a budget together there are a lot of very, very hard choice and difficult choices that have to remain clearly we think that plan is an excellent plan. it is a good vision. it has the opportunity to invigorate domestic manufacturing. we are sitting down with amtrak and trying to discuss some financing alternatives. >> they have structured their fleet plan so that it can support a domestic industry for

manufacture and rail equipment by spreading the orders over a 30-year period. their demand for rail equipment may be large and enough to support a domestic injury. right now we don't have any domestic manufacturer. that could help revitalize a very important sector of american manufacturing and support the kind of jobs we all want to see to get our economy back on track. for this plan to work manufacturers have to believe that amtrak really is going to be a reliable source of funding. i know they are looking at a variety of ways to pay for the plan and have requested funding from this committee. understand that it may apply for a loan. can you share with us what kind of financing you think would help give our domestic manufacturers the kind of assurance they need to be confident that amtrak will actually be able to purchase rail equipment? >> let me say first, madam

chair, that you are absolutely on the mark. in order to reinvigorate domestic manufacturing there needs to be the belief that this is going to be sustainable. you know, the secretary polled in all of the foreign manufacturers, domestic manufacturers kamal rail manufactures in a summit back in december. if we heard one thing it was a clearly articulated need to ensure that these orders can be smoothed out over an amount of time so that you are not constantly going through these peaks and valleys. if the orders were truly smoothed out over time and they believed it was sustainable this would be what it would take to truly make the investment as a businessman that they would be to make into a plant and equipment and sink these costs into establishing these types of sphere facilities. as far as financing solutions,

we are at the table with amtrak. it is going to have to take a bland. i am not sure that there is this one single silver bullet that is going, you know, just saw all the problems for financing. certainly there is the potential for possibly a loan, commercial lending, direct appropriations. we need to take a look at all of the alternatives and make sure that we come up with a sound financing plan. >> this is really important. this committee is a strong supporter of infrastructure spending. that is what we do. we believe in it. we have to have consistent priorities and narrow that is going to be consistently there if we want domestic manufacturers to begin to develop that. if we have a funding source we get a request this year. i don't think that is going to be enough for a domestic manufacturer to make a decision.

wouldn't you agree? >> i would agree. your marks directly aligned with what we heard from the manufacturers back in december. they need to know that there is stability. >> what i am saying to you is we all need to have a concrete plan, not just an appropriation here or there. if we want to really achieve the goal of cutting some of us want to achieve. >> i agree. there is to be the appropriate mix. we need to find with that is. >> let me turn to another issue because under the rail safety improvement act railroads are supposed to imply a positive train controls. it was mentioned in an opening statement. we know that is an important safety technology designed to prevent a train collisions and derailments. this will cost billions of dollars. now, you announced, i think, $15 million in 2010 appropriations for rail safety technology grants.

i want to know what you hope to accomplish with that funding and the additional challenges that need to be resolved so that we can deploy. >> what we intend to do with this initial 50 million is instead of giving grants and to a single railroad or a small combination using it for those kind of things that can be broadly shared, those initial costs that, in essence, would benefit the industry as all. frankly, that was part of the reason why we did not make an additional request for 2011. we wanted the opportunity to roll out the initial 50 million in 2010, kind of test the waters with that. then the opportunity exists for these broader based funding programs at the dot whether it is that tiger grants, whether it is through the high-speed rail program, or whether it is through the proposed of a structure bank, you know, for

the funding of a positive train control. >> senator bond mentioned you're talking billions of dollars. do you have a plan? >> at this point does funding requirements belong to the railroads. certainly we are looking at those alternatives that might offer some help, but again, the responsibility at this point the lie to those rail carriers that they regulation applies to. >> well, according to f. r. a. regulations will roads have to deploy a positive train control on any line that carries passengers or certain hazardous materials in 2008. for a lot of reasons these routes shift before the 2015 deadline. in that case the original rationale for deploying positive train control, most lines may no longer exist. novell rose will be given the

opportunity, i understand, to is apply for an exemption along those lines. can you share with the committee what criteria you will use to determine whether or not to grant an exception? >> the key is that it is all about safety. there has to be a baseline from where you start. we believe that the regulation we have drafted as a sufficient level of flexibility. we start with where we are at today, but as those routes change there is the ability to come in and verify, you know, the carriers would need to verify the fact that the routes have changed. it allows for the appropriate level of checks and balances that as modifications are made for us to ensure that there are the appropriate modifications and the public safety is maintained. >> thank you very much. >> think you very much. i am concerned that you have

talked about we need to find some alternatives we don't know what they are. we have a request for $446 million out side of the budget. for amtrak. yet we don't, we don't know how that is going to be paid for. we don't have our budget allocation. i can guarantee you that we are going to have to start making some hard choices because there are a whole lot of wonderful things out there for roads, but we need some specifics to know what your priorities are. number one, if you have plans for the alternative source of funding, what are they? don't just tell us alternatives. we are breeding what we have. if you're going to give us more money, how are you going to get is more money? >> i would say we just recently

said down and started the discussions with amtrak. again, we need to flesh out what those alternatives are and get you the answers. >> i can't prove any dollars that have not been flushed out are fleshed out, whichever way you put it. but you know, ara, ara gave amtrak 1.3 billion. apparently the ig of amtrak is going to tell us that these programs are, perhaps to my not gonna meet the february 17, 2011, time line. would you comment on the oversight at fra? making these grants to amtrak. >> let me say this. a first of i had a sit-down with

the amtrak ig just this week. we discussed some of his findings on the report. we welcome that. you know, that is the purpose of the ig is to uncover potential areas of problems. whether the problems exist today or whether it is the potential of developing. they did identify one that they have concern with regarding the extraordinary measures that fra is requiring. >> double overtime, i understand. >> and i think the key is what they said was it has the potential. we are comfortable that through our discussion with amtrak and threw the oversight that we are providing that we are going to achieve that appropriate balance between the need to quickly create jobs. that was the intent of these projects while also ensuring that there isn't any way. >> what did you do in advance? you are talking about the ig.

have you ever turned down a grant? >> i don't know, but i can get you that answer. in the past year i have not. we can get an answer of what at ras history is. >> maybe you can tell us what criteria you use a legitimate you exercised in making that money available as you provide that for the record. what criteria did you go t hrough? in your view shared the five-year capital plan include other real assets? it is that going to be part of the plan? >> let me say this. one of the challenges historical the in preparing our budget request is that historically there has been a mismatched cycle between fra budget request

and the budget that amtrak has prepared. the kidneys is that is changing, which means their budget cycle will be more in sync and hours. so in the future when fra makes its budget application to this committee it will be based on more sound facts rather than us trying to estimate what we believe amtrak might need and in their budget being developed a month or two later. >> mr. administrator, i suggest that is your problem, not ours. >> i am saying, the good news -- >> we are up against the wall now. are there things in your browser request that you have submitted that you would like to reduce to offset to cover some of the 406 million for your requests for amtrak? >> we believe we have a very

sound budget request that appropriately direct. >> so we should absolutely ignore the foreigner 46 million requests ran track? >> i don't think you ignore any information. >> look. >> sir, please allow me to answer. as i said when we develop our budget there is always difficult choices that we have to make. and so we make some decisions and we present our vision to see you see. that doesn't mean that he should never ignore new information or additional information or different information that somebody else brings you. >> i assure you, mr. administrator, we will have to do that. what we want to have going in fact is your best assessment. if you think the budget should be amended to take account of the the $446 million request

from amtrak or some part of that we would ask you to provide that to us. at least we would have some grounds to know. we need to look at your budget request as a whole. coming in gives us mixed signals on what the administration's priorities are. based on what you said and what we have seen in the past i would have to say that this committee is being asked by the administration to find other things, but not, but to the exclusion of the amtrak request. so that is something you are going to have to resolve, whether you think that some of the requests for locomotives on the northeast corner should be included and other projects that you requested should be eliminated to make rum. finally you are telling me that positive train control and all of that is totally the freight

rail, the 13 billion, average real responsibility and you're not going to recommend money for it. >> that's not what i said. what i said was we do have other funding alternatives that are available to these broad based transportation programs whether it is the tiger grant process for passenger rail, potentially through the high-speed rail program, through the proposed infrastructure bank, or even through loans. so we do have some alternatives. again, the responsibility. we can get some help. we can get some help. the responsibility does remain with those rail carriers. >> i hope we will see that in the plan. i am sure that the rail carriers will want to know how much they will be expected to pick up. thank you, madam chair. >> thanks, madam chairman. one thing i think that is generally acknowledged, and that is, amtrak is critical for our society to function. critical.

you know, when you see a disaster like a september 11th or hurricane katrina it is amtrak that is called upon to move americans out of harm's way. in the northeast amtrak operates the only high-speed rail service in the country. as a matter of fact, if we did not have an track running them in the northeast you would have to run 243 more flights every every day with the congested airspace. you would also have to add 30,000 more cars. 30,000 more cars on highway 995. amtrak offers so many positive additions to our well-being. included in that is the commitment that all of us have made here. that is to create jobs. and you're not going to build

rail cars overnight. and how long does it take, do you think, mr. zsabo, from the time the equipment is ordered until the time it is delivered? >> actually, i could give you a more accurate line. >> you >> i would say probably from order to delivery roughly three years. >> the fact of the matter is that as we look at what amtrak has reduces our dependence on foreign oil and the reduces the cost of operating. and so many things and also says you can get there on time. you can get where you are going on time. 98 percent of the time if you take amtrak. i took an airplane the other day, madam chairman. it was a 45 minute flight up to laguardia airport, but it took as an hour-and-a-half to tick off. so that made it a heck of a lot

longer. amtrak's fleet of cars rapidly deteriorated. the average age of an amtrak passenger car is over 24 years old. some are more than 60 years old. i regard that as young has nothing to do with what happens in a row car. i ask you, do we -- how essential is it in your judgment for us to get to replacements for the cards that we have on the road right now in order for amtrak to be be functioning railroad we would like to see? is it important? >> it is important for both the safety standpoint as well as a real liability standpoint. >> critical? >> it's getting very close to critical. >> we are not yet at criticality?

>> is close. >> you are too well informed. ride the railroad. if you ever take the railroad? >> every chance i can get. >> how often is that? >> a couple of times a month. and in chicago several times a month. >> i do its every week. i can tell you, my handwriting was never my best skill. but when i get off of the amtrak train and i tried to right some things that i have to take care of it is barely readable because it shakes, rattles, and rolls. it is ridiculous. if we want to make this railroad the thing that america should be proud of invest like china or spain or countries that are far less able to do these things and we.

we are like a third or even a fourth rate country in terms of railroading. it is shameful what happens. so i agree with my colleagues. we need that 400 plus million-dollar renew equipment. we have got to get those orders out there. how much cash does it require on the barrel head in order to get these orders going? when you pay deposit nike want to buy a car. >> roughly $70 million. >> okay. so that sounds like a start to meet. we ought to work like the devil. i heard you say that there is no silver bullet. these are difficult decisions. all of that, those tales of woe,

they are interesting, but they don't get the job done. so we look -- i wrote a new rail safety law that mandated that railroads install positive train control on certain routes by the end of 2015. it created a grant program to help railroads meet this city requirement. the president's budget in the minutes funding with this critical grant program. what is the administration going to do? help public and private railroads meet this deadline. are they going to do anything about it? >> yes. we would have of funding available to potentially the tiger program for the passenger railroad's, possibly the high-speed rail program, the proposed infrastructure bank. we do believe that there are some options out there. >> do you have in the idea as to the amount of resource are finding that might be available? >> again, it would depend on the amount of money that is made

available, these different pools. it would vary over time. >> everything depends on something else. we know that. we have a rail bridge known as the portal bridge. it is over 100 years old. critical need of being replaced. one of the biggest factors is delays on the northeast corridor is the portal bridge. what is at ras plan to replace this bridge so that a high-speed rail service on the northeast car can be seriously developed? >> well, as i think you are aware through our high-speed rail program we have already allocated 30 and a half million dollars which is being managed by 16 and a half million from the state of new jersey to find the final design of the replacement of the bridge. we will continue to work with the state dot tennessee what alternatives atives are appropr.

>> madam chairman, one last thing. the last was completed 1978. in order for the corridor to receive this kind of high-speed rail investment will need to be updated. do you know what the status of this review is, and when it will be complete? >> yes. the secretary of last four submissions to establish the northeast corridor study commission that has been established and will be putting together the appropriate plans to bring the corridor to the next step, to the next level. we are committed to that. >> madam chair, thank you very much. some of that, we will have a record open so that questions.

>> absolutely. thank you. funding for high-speed rail has dramatically changed the work load at the fra. we can't forget that the fra is a safety organization. you are requesting 26 new positions for rail sectors and safety staff. can you describe for us your work for strategy? >> roughly half of those will be field inspectors, and then the remaining will be at headquarters being utilized to make the shift away. you know, we have to always maintain a strong inspection program while we also shift to the more creative approaches through our risk reduction programs in the direction that the congress and thus on under the rail safety improvements act. and so the remaining half would be the band's straight that we need to put together our new rail safety initiatives.

>> okay. you have proposed covering part of that with $50 million in user fees from the industry. that is a lot of money, especially when we are asking them to do positive train control. can you explain the rationale for charging user fees? >> well, it is not unprecedented when it comes to safety inside the dot. not only is it utilized in a couple of other modes, but there is some history of using it as are a. as you might be aware we have such a user fee to the mid-90s from a 90-95. and so again, their is a basis for doing this. we believe it is appropriate to try and come up with revenue sources and that in some way we try and supplement the cost of the road safety program. again, it is about public safety and ensuring we have the resources and inspectors we need to keep the nation's railroads say if. >> okay. in another arena before the

recovery act states did not expect the federal government to provide a significant amount of money for high-speed rail. in less than two years that the root government has not committed to an end a half billion dollars. that is an important long-term investment. we all know it is not realistic to expect high-speed rail corridors to begin operations in the next year. can you give us an idea of what time frame you think will be necessary to see the development of high-speed rail corridors and the beginning of service? >> at think you need to keep in mind that congress developed this program has a stake driven process. and so it is the states and the regions that develop their vision for their service, and then they apply to the better government for capital money to construct. i would say each of those states and regions are in a different maturity level as far as where they are at with their plans. in the case of those that got some of the early awards these

are state dot s that have been investing and planning in rail through the state programs for many years. in the case of california, the case of your state, washington state, north carolina, the states have been at this for almost a decade. you know, 200-mile an hour service like california is going to take a long time to build out. there can be small pieces that can be up and running and carrying passengers much more quickly. frankly it is corrected b projects more like the midwest plant, the midwest regional rail initiative that can have service at 110 miles per hour quickly in the next couple of years as yeat continues. >> you requested a billion dollars. can you tell us how much you expects to use for inner-city projects and high-speed rail corridor? >> under the 2.5 billion we

allocated roughly about 85 % of that to high-speed rail and roughly about 15% more toward the inner-city projects. if you take a look at the percentages on the 8 billion that we put out, you know, roughly, i want to say roughly about 45% was in that category of true high-speed rail of over 150 m.p.h. roughly another 40 percent went to what i would call emerging h igh-speed rail, those in that 110-125 miles an hour category. and in roughly about 15% into the smaller projects and conventional service. so that seems to be, you know, a good balance, good match. >> well, in order to decide which projects you are going to find through this program you are going to have to rely on forecasts of writers ship levels and revenues and public at benefice. so far we have not seen you develop these strong

requirements. we know that you are starting to develop best practices. can you tell us what you're doing to make sure grant awards are based on sound forecasts and projects based on cost and benefit? >> clearly it has been from day one a merit driven process. we do make these types of analysis. again, there has to be an acknowledgment that this is a brand new program in its infancy. in less than a year's time. >> are you developing those? >> precisely. precisely. and that's kind of like a back to a lot of it is about the lessons learned. when it comes to radishes. >> will we see this in writing? >> ultimately we will be developing rules. again, we are just going through the grant guidance. we really need to get this first round under our belts, you know, and experience.

we have to execute the first round before we can start taking a look at this tweaks the need to be made. >> i have one more question. under the americans with disabilities act all amtrak traces are supposed to be accessible by july 26 this year. and trek is already admitted that it will not be able to meet that deadline as a bid of five-year effort to invest in station of bergman's. do you believe that over the years amtrak did everything it could have done to comply with ada? >> at think as this committee is polio where historically no administration has ever made the ada requests. it really put them behind the eightball. that is one of the reasons why we came for this year and have, in fact, made the $22 million request to start funding those legitimate needs. >> thank you.

senator bond. >> thank you, madam chair. i would just no one thing as a former governor. i can tell you that looking to the states to make massive investments in high-speed rail is not bowing to happen anytime soon until the states did out of the holes they are and. in california you mentioned, probably is an somewhere out there between greece and spain. having budget problems. madame chair, i am going to submit questions in writing for the record. i need to have a lot more specifics, firm priorities, amounts, not just we are going to work on a plan, but the plan, criteria, priorities before i can support any of these requests and need to know how they fit in our overall budget. thank you for your testimony, mr. administrator. we have other witnesses.

we will be communicating with you. they keep. >> thank you very much. that will conclude our questions at this time. there will be questions from the committee that we will need responses from you in writing. thank you very much for your testimony. i would like the second panel to come forward. >> thank you. [inaudible conversations] [inaudible conversations]

>> i would like to welcome our second panel. mr. boardman, we will begin with you. you want to turn your microphone on, please. >> thank you, madam chair. i appreciate the opportunity to speak with you today. before i begin the discussion about amtrak's funding needs i would like to share with the committee some good news that was announced on april 8th. amtrak is on pace to break its annual ridership record carrying a best-ever 13.6 million passengers during the first six months in the fiscal year of 2010. and with the historically busiest summer travel season and comparing march 2010 to 2009 ridership increased by 13-and-a-half% to a record

24 million passengers. in addition every single amtrak route carried more passengers with several experiencing double-digit growth. furthermore one of the, i think, important things to see today is that we have had other wins. a win with moody's. moody's has upgraded the rating for amtrak from a2 to a1 just this last month. there have been no material weaknesses found in our audits. this is the first time since 2004 that has occurred. ridership on long-distance trains increased by 16% in march and as of 52% for the first two quarters of 2010. in every one of the services whether the missouri river runner where senator bond is, up by 24.2% from march us. 15.8% for the first half of amtrak year. cascade increased by 11.4%. march saw a 6.7% increase for the first six months of the

fiscal year. these numbers reinforce what so many of us know about passenger rail. if you provide a safe, reliable, user-friendly system the travelling public will use it. i would like to spend time talking about what i think is the most important piece of what we are asking for. i know in the last tank there were several questions. it is the and track equipment plans and needs which is buying your table right now. and just as an introduction, the fleet truly used the key for customer reception and willingness to use our system. the operating reliability is particularly important. the cost of maintaining a fleet is critical for us for the future. the railroad belongs to you. the hawks to the united states. it belongs to the administration and congress and has for the last 40 years. we cover 80 percent of our

operating costs from revenue. we are the most efficient railroad in the united states. we cover nine of our capitol costs, just like highways, capitol's support comes from the federal government. the payment on debt comes from the better government. that will continue to be that way for as long as you, the owners of this railroad is side to operate a railroad. amtrak has suffered in sufficient federal capital investment over the full 40 years that has been here. been around for 20 years in every administration has failed and every congress as failed to deliver what it passed as a lot to fund the ada requirements for amtrak. tsk that is not the case with highway. it is not the case in the rest of the modes. these amounts are not pitted against the floor. these mounds are pitted against

highways and 80 aviation and rail. nowhere is there more evidence in the realm car fleet and much of what of the. the strategy, the average age was already set to be 25 years old or more than 25 years. the fleet needs to be recapitalized. domestic production is needed both for employment and to secure a nation as we enter a much higher cost of energy for the future. we need a road and passenger railroads. on the first table, just identifying for you the plan car look, the procurement is red and yellow lines. the yellow lines are the cars. the yellow lines of the local waters. the two heinlein's are when you replace train like s services. in the second table what ec is the average annual miles in thousands that the cars operate

for amtrak. on the far right of this table what you might be is that all of the amtrak cars are operating in some cases 180,000 miles a year in comparison to all the transit operators on the side of the table. tri rail being the most at 66,000 miles a year. the utilization then for amtrak, all of these amtrak cars is much higher than any other operation in the united states, period. and they are all older. if you look at the third page you find the same kind of information for the average annual mile locomotive mileage. what you see is the closest competitor is bnsf which has an 83,000-mile annual locomotive.

for amtrak 160,000. almost double is what the mileage is for our private railroads. the most compelling slide on it does you have in front of you is the last one. it is a snapshot of the present it is the locomotive that we are talking about replacing which is the electric locomotive on the northeast corridor set. the 1980's category. a couple of minutes ago. the heritage baggage car that was built in the 1950's. it is the sleeper cars which are the newest ones on this lead. that heritage diner, which is the same age i am. so it is one of the things that keeps speed down. you can only operate 177 kilometers per hour, 125

excuse me. when we replace these we will be able to immediately go to 200 kilometers per hour. which then reduces the time it takes to travel on the northeast corridor. and then the coaches and lounge cars from '81-'83. this is the florida silver star. i think it really demonstrates what we need for urban fleet for the future. thank you for the opportunity to speak. >> thank you very much, mr. boardman. mr. jones. >> good morning, madame chair, ranking member, and members of the subcommittee is that they do for the opportunity to discuss amtrak's 2011 budget request. i would like to start by thanking mr. carver, amtrak's chairman, board of directors, president boardman, and members of the subcommittee for the support i have received during the past five months of amtrak's new inspector general. i am also pleased to report that amtrak management and the oig

have agreed to a new relationship policy stand that the inspector general of the present administration found that the new policy is consistent with the letter and spirit of the ig. i want to thank the subcommittee for including this very helpful requirement in last year's appropriations act. today i will discuss this a bit to get opportunities amtrak has to provide increased levels of high-quality passenger rail service and more important challenges management must address to take advantage of these opportunities. first, the opportunities. the passenger rail investment and improvement act fundamentally changed amtrak's role within the national passenger rail system. rather than relying on amtrak to lead development of new

intercity passenger rail services alone. calls on states supported with federal grants to share and developing new corridor and high-speed rail services. as a result amtrak will become one of many choices to provide rail services rather than the on a practical option. the first challenge is that amtrak knees to organize properly and i operate more efficiently. amtrak is making organizational changes to help it successfully compete for new contracts and has taken steps to operate more efficiently. to illustrate the company has made significant progress implementing reliability centered manus practices in response to a 2005 beaux ig report. using reliability centered minutes on the a sell-off late reduce costs and generated

$16 million in new revenue in 2009. amtrak should continue applying this minutes concept across its fleet. however, amtrak can do more. for example, we recently identified a opportunities to adopt european best practices including better asset management systems and more advanced technologies. second, amtrak knees to improve its human capital management practices. in a may 2009 report we had several recommendations that mannesmann agreed to implement. as a result amtrak is focusing on strategic work force planning including at into buying its critical skills and competencies', implementing a total compensation philosophy and improving recruitment and retention practices. fully implementing these corrective actions will require a concerted effort over several years. third, significant i t investments always involves

risk. amtrak has four major technology initiatives under way and has taken a number of measures to address the risk including establishing discipline procedures to guide both project management and technology development forming an independent team to enforce standards and implementing reviews to ensure projects meet quality standards before proceeding to the next development phase. to ensure that these projects stay on track and achieve anticipated benefits amtrak should closely watched progress, address the emerging problems quickly. the fourth challenge is managing associated with the recovery act project. specifically amtrak may have to take measures that could reduce productivity, adversely impact product quality or significantly minimize railroad. when amtrak faces this issue int

because the terms of the fra grant are stricter than the terms in the act. the act requires amtrak to take measures to complete the project by february 2011. the fra grant on the other hand requires amtrak to take continuing measures and even extraordinary measures to complete the project by that date. as a project based slippages amtrak is now considering taking extraordinary measures to meet the completion date. these measures include adding second or third shift which studies indicate have a negative impact on productivity and reducing the scope of projects which reduces the benefit associated with the final product. although the term and extraordinary measures has not been defined we do not believe that amtrak should take actions that would significantly reduce productivity and adversely impact the quality of the final product, or significantly

diminish railroad operations. madame chair, this concludes my testimony, and i will be happy to answer any questions. >> thank you very much. >> chairman, members of the subcommittee, thank you for the invitation to discuss ongoing efforts to strengthen the nation's passenger rail network as you know recent legislation calls for significant investment in rail, an investment that calls for rigorous oversight and taxpayer dollars are used wisely. my statement today focuses on fra expanded role and responsibilities under pria and the rail safety improvement act. the challenges of our eighth faces and effectively carrying out this new role and the progress amtrak has made in improving its operating and capital financial management processes. pria and the safety act dramatically expanded fras world.

together these mandates call for fra to develop a multibillion-dollar high-speed rail program and 200 takes several new safety and passenger rail service enhancement initiatives. under the tasks set out for frar the development nt of performance metrics for minimal passenger real requirements such as on-time performance levels and the establishment of a discretionary grant program to develop trade technologies. this expanded role presents several challenges, especially as they relate to implementing the high-speed rail program. to insure program success fra must develop a sound implementation strategy. fra has developed project selection criteria. it has yet to provide a grant applicants with the detailed methodologies needed to adequately complete their application. for example, fra has not issued guidance on how to prepare

projects writer should and revenue costs and public benefits for high-speed in inner-city passenger rail. without such guidance fra is not positioned to effectively assess the merits of roe grant application and insure sustainability of the service. fr8 must also enhance its internal policies and practices in order to effectively oversee these larger project grants. according to the ofp plans for a program monitoring and administration are in development. finally fra must obtain adequate staff with the right skills to oversee program implementation. the recovery at greatly accelerated fra rollout at the high-speed road programs. further exacerbating the challenges. within ten months fra was required to issue a strategic high-speed rail plan from

internal guidance and process all applications. balancing other responsibilities with this traditional responsibility creates even more challenges for fr and. for example, pria requires fra to coordinate with hundreds of private and public state college to establish certain national rail plan that addresses into connectivity with other modes of transportation, inform the development of state rail plans, and recognizes the needs for sustainable funding mechanism. at the same time that are a must not lose sight of its traditional responsibilities, chief among them insuring rail safety and oversight of amtrak. effectively managing these critical real programs will require sustained focus and oversight by fr8 and the da t alig. we have begun to shift resources

accordingly. specifically we have underway and evaluation of best practices for forecasting high-speed rail rider ship and revenue, cost, and public benefit. an audit of the infrastructure access agreement between the states and freights to ensure access agreements, adequately address costs schedule and performance goals. and a quantitative analysis of amtrak delays that will help fra ensure investments yield the highest return. given the important role amtrak plays in inner-city passenger rail our work on amtrak financial management is relevant to fra effort. amtrak established key performance indicators to measure the efficiency and effectiveness some of its operational and financial performance. amtrak developed a cross recovery indicator to measure the portion of expenses covered

by revenues and ridership. this approach appears to be a more efficient way to monitor and improve operating and financial performance than its previous approach of tracking savings from specific reforms. our ongoing work also indicates that amtrak's has improved its long-term capitol planning, specifically in fact has developed long-term plans for its fleet and infrastructure, a transparent process for prioritizing its capitol needs and guidance on conducting posts reviews of its reviews of its capital investment. clearly amtraks's success hinges on effective implementation. in closing while we were dedicating additional resources to oversee fra and its standard row we are encouraged that the amtrak 0ig under its new

leadership will enhance its oversight. chairman murray, this concludes my prepared statement. i will be happy to answer any question that you are other members of the subcommittee may have. thank you. >> thank you very much. under amtrak's new leadership we have seen some important improvements in how the railroad has been managed. instead of limiting its focus to getting through each day the managed team now has a strategic vision and has directed to look at long-term planning. amtrak's overall capital plan and the accompanying fee plan reflect the new priority on strategic decision making, but amtrak is still making separate requests for capital plans and for its plans. if you do not get all of the funding you have requested how are you going to decide on funding between these two separate plans? >> i think you are referring to, basically we are almost a billion dollars over with the request came in from the administration.

it is of capital. we are talking about of lead and we are talking about all the projects that are capital related on the northeast corridor and on ada and all the other projects that are needed. so as amtrak has done in the past and as amtrak means to look today to the future we look at every opportunity for us to gain those dollars. one of them being the appropriation process and and administrator talked about it, we are in discussion with the. even going out into the commercial market to borrow money. but in the end it all comes back to congress. all capital is subsidized by congress in one fashion, form, or another, dislike of capital for the highway or aviation side is subsidized through congress. they have a different methodology. they have a program that provides users funds for

highways, but those user bonds also are distributed to transit which are not necessarily -- and we talked about it a little bit earlier. they are not paid for by the transit rider. their paid for under the same structure that the highway receives those bonds and the same way that aviation receive those funds. it all comes back to the congress in making a decision. the need for amtrak is to put on the table congress what our capital needs are. we have not been bashful about doing that because we need to rebuild the road. >> in addition to replacing your aging locomotive and railcars, as i talked about earlier, this could revitalize a domestic industry from manufacturing relevant and help the funds focus on manufacturing jobs. but realizing that goal, as i mentioned earlier, is going to require companies to have the confidence that amtrak has reliable, long-term funding for its fleet plan.

what will it take, do you believe, for u.s. manufacturers to believe that passenger rail equipment is a viable line of business. >> that commercial on television this is buy my product, found my plan. >> so you need to know -- they will need to know. >> yes. there is a new understanding across the world today, i think, that we are in a very different competitive environment for not only the economy, but for energy, for the future. and every country today is looking at how they are going to solve this problem. rail becomes a key part of that. we have already seen that as a key part in terms of what the investments are with transit. transit needs to be connected to the rest of the world, to the rest of the country. there are two key elements that amtrak trains to the table. one is its work force, its chief competitive advantage and the people that operate this road and know what needs to be de.