>> i understand your concern and as a taxpayer i agree with you but we don't have any legal mechanism to put any type of price caps on this. >> but they're used to be price caps when the price went up and -- no, so how we protect the government interest in this oil and gas they owned? >> these are leasing questions and i am sorry to say that i'm going to ask -- >> rm your pay. >> i am not thoroughly familiar with these issues but hearing you describe it and hearing the magnitude of the dollar's it's a serious problem, and i will learn more about it and get back to you with answers. >> i don't want to give up at this point, you need to get back

to us because this isn't going away. >> by understand. deval law that they put in effect certain production levels would go royalty free and thatw is the only thing the law said.w it didn't provide other mechanisms for -- >> [inaudible] >> the law does not allow -- >> it sounds like the legislation would have to be changed. >> so it's the conagra's fall. they put it in with the impression this was low-priced oil now when it goes of higher we will collect royalties but we want to keep the industry going because the price of oil was 20 or $30 a barrel and now that it's over $100 a barrel everyone assumes that in fact the head of chevron says we ought to be paying this but we are not. i just have one last question.

mr. gould, 29 years -- over the past five years your audit and compliance per and collected 110 million from companies that under report and the gao told us in this excellent hearing the chairman simpson called that really you just take the numbers that the companies give you so you can deal that with the fh ho but in fact they get on time reporting because they need to know what the value of their inventory is but you are less interested with the implication. so you would think that the federal government might invest in more careful auditing on the industry. and the irs, for every dollar we spend on program integrity going after people who it looks like they haven't paid their fair share we collect $10. of one to ten is a good ratio.

do you know the ratio is another words if we put more money into more careful auditing of the oil and gas industry would it be more revenue to the taxpayer? >> yes it does come and actually our compliance program historic plea averages one to four. >> so every dollar you put in you get back about $4? >> that's correct. >> mr. chairman, thank you. it's a good hearing. >> [inaudible] >> thank you, mr. chairman. in wyoming's experience auditing really does improve collections for a period of time and then declines for obvious reasons. compliance improves and so the collection declines because of compliances ramp up so we have

that experience as well. a couple of questions. mr. braun which, is the word approved correctly? >> i'm glad you asked the question. we do the evaluation as to whether continent resources are sufficient in the context of individual applications that are submitted by operators, and the operator has discretion which of these to containment groups to designate or it doesn't have to designate either of the two groups said these are the best way to describe these are resource alternatives available to individual operator's they can then include in their individual a applications for permits. they can designate one, they can designate another, they can

designate both or if they have resources of their own they don't have to designate any. so we have reviewed and reviewed the test results of the capping stacks, the devices that can actually be put on top of the run away wells and we are7# satisfied those have the?c7c?a?c capabilities the groups have said they would.7c7c7c7c7a7c7a but each assessment needs to be in the context of an individual the application which has its own pressure configuration and everything else. >> great. that's an informative. now how many permits are ready and waiting approval now that february 17th has passed and the containment devices and i assume they are included as part of the permit now. >> the individual operator designates the containment resources that they are designating as available to them that they have contracted for. they are available in the case

of a blowout. >> how many permits fit that description? they are awaiting approval now that february 17th -- >> we've granted to. we have a relatively small number of permits that are pending. i have my best estimate is we will have additional permits the will be granted in the next few days. responsive to chairman simpson's comment about predictability, we are seeing now that we granted the first to deep water permits there's more coming in so the number of the permits now exceeds ten for the first time since the deepwater horizon. so i think that shows the industry says okay this agency is going to approve permits, continent capabilities are now available so we are going to move forward. so looking around the corner, the thing i am concerned about

frankly given the lack of resources is whether we have sufficient permitting personnel who are going to be available to process what i anticipate will be the surge in the permit applications. we were hopeful when the president's $100 million supplemental request for fiscal year 2011 that that kind of help would be on the way that you know better than i through the series that hasn't been forthcoming. so we are working on various alternatives to try to bridge the gap to make sure we have the resources we need and one of the things i've done recently is reach out and try to see whether we could get retired petroleum engineers from the industry who would be willing to come on a temporary basis to help our permitting personnel. they would be under the control

of our people, no retired people from the industry would have the final authority to improve the permits. but they would be manpower. that would help us do that. so that's just one alternative we are considering but it is our effort to act and to think about these issues before the crisis hits and a bottleneck develops, so i talked to the top executives of some companies asking to reach into their ranks of retirees to see if we can get some help. >> you are proposing a 4-dollar fee on the non-producing wells. i have some questions about that, for example, what does the industry pay on average for the lease of option? >> it could be millions or billions of dollars. i don't have an acre figure. >> and they are usually ten

years? and what is the annual rental? >> annual rental i guess would depend. it's a sliding scale. to be clearing sure you know this is only paid until production begins. and then a royalty rate is assessed. sprigg and the royalties are? >> i don't have the percentages in front of me. >> when you lease at an auction to the rates vary? >> yes, they have. >> do they vary based on the date the? >> i'm not sure, let me get back to you on that. as the mcginn wyoming we usually put them out at 16%. if nobody picks them up than we have an over-the-counter process at 12.5% but even that its subject to change so i was just curious -- >> to turn the tables on the collection i think he probably has a better idea about the rate we collect.

islamic 18 and three-quarters. >> that's pretty generous. and the private sector leasing that's going on in the formation in the wyoming which is shale oil royalties running between 15 to 20%, the highest i've ever heard in the last few months is 20%. almost no one is getting that. but that's better than most people on the private land. also leases held have the continued paid annual rent even on the leases awaiting permits. does your legislative proposal charge of 4-dollar per acre fee on the non-producing wells include the wells that have been waiting on you over the last year? >> i'm not sure. i think it is one of the subjects of the discussion and we certainly recognize that

interruptions in the process that have been caused by the need for regulatory changes and the subsequent slow down in the permit process should be recognized in this process so those issues are in the process of being worked through. >> very good. regarding civil penalties. as understand, the bureau has a civil penalty per incident. -- >> which i think is inadequate. >> and you might be right but i'm curious to know what criteria for the civil penalties , what the criteria should be. so under what circumstances are they levied? >> there is a complicated system frankly too complicated within the agency for referring who violations for the consideration of civil penalties and then the decision on civil penalties. one of the things we are doing in response to the reviews in the reports on us is to look at

this whole structure of the civil fine referrals and assessments. my own impression, my own view is that it's terribly inefficient and it's quite inadequate. so we have one of our implementation teams formed in response originally to the secretary safety oversight report looking at exactly that issue that is enforcement issues and civil fine issues so my view that the $35,000 ceiling is inadequate is based on my intuitive sense that when we have serious violations for companies making large revenues that $35,000 at its peak is completely inadequate to detour violations. completely inadequate to detour serious violations. >> and are the subject to rulemakings the criteria under which the civil penalty is

issued? >> they are subject to the rulemaking that although we can make the cost of living adjustments within the narrow limits the brought raising of the ceiling requires less selection. >> okay. what -- what additional congressional authority would be required? >> i think legislation specifically raising the ceiling -- >> all right. and you have the criteria on the rules right now. >> we have criteria again, right now those are subject to review and my view is that will probably substantially change over the next several months. >> you have a number in mind of the per incident penalty? >> why don't. >> i was on the natural resources when you came in and were new and we talked about your background and was if i

recall forensic -- don't you have a kind of forensic background? >> i dabbled in forensic science but only somebody running the investigations. my background as was noted had been in law enforcement. >> very good. my time is probably up, isn't it, mr. chairman? very good. okay. thank you. >> i want to thank you very much for being here and for everything you. also tuesday 32 and applaud you basically for something that was very important you did last year of course the deepwater horizon management, how this bill last year was taken care of and how you did all the necessary work dealing with it. it was an exemplary set of circumstances and we applaud you and thank you very much for what you've done. a lot of progress has been made, but a lot of things need to be

done. conflicts of interest that plagued the former minerals management service. all of these things that need to be taken care of. just as a curiosity, in the context of what mr. moran said a moment ago, he was asking something and you said you couldn't do it because there was a restriction in the rules, would you be kind enough not now, i'm not asking you to that now, but would you provide me with a play on the restrictions, with the restrictions are that you have to deal with? i think this is something that we should be looking into and trying to address. >> mr. chairman, for the record -- >> [inaudible] >> we will provide a detailed summary. >> thanks very much. i appreciate it. i wanted to ask you a specific

question as the price of oil continues to increase, we are once again during the call for more drilling on public land and in the public water. yet, before we go down that road it's important to understand exactly what is being done, how much has been allocated and what is being done on the land they have in their control. oil and gas companies as i understand currently hold 80 million acres under lease in the industry is producing on 12 million of the 80 million. for offshore specifically, there are a total of 30 million acres under lease but the industry is producing on only 6.5 million of the 38 million acres. that means less than 25% of the acres lease on the federal land and water are actually being used, actually producing. all the rest is just staying aside and apparently it has been for some time. before we rush to open up the

new tracks for oil and gas exploration and criticized the pace of which the department is issuing new deepwater drilling basis, and i think that has bee: put out, that criticism which to me frankly doesn't make any sense, i think we need to make sure countries are taking advantage of the permits they already have. so your budget proposes a 4-dollar per acre feet on the non-producing oil and gas to incentivize the current holdersw to utilize existing permits. however, that's going to require legislation here and it's going to be questionable as to whether or not this operation is when to be willing to do it. we will see how that goes. but in the meantime, what else can your department be doing to make sure these companies actually develop the lease is they have? >> as you probably know the

president addressed this in his press conference last friday, and he directed the department of the interior to report back in two weeks on the potential policy alternatives might be available to further incentivize the industry to develop the land that are already under lease. so at the interior department, we are at work trying to put together the report will be delivered to the president and we are exploring a wide range of options and there will be delivered on time at the end of next week. >> what do you think so far? >> i think that there are a variety of techniques we might use. we've already tried to work with developing incentives through the process, for example the notion of shorter pieces, so there isn't as large of a risk that companies will not work aggressively to develop the properties under the lease in that short a period of time there's an incentive for them to do it faster. another possibility that we

talked about and experimented with is changing the royalty rate and charging a lower rate if the property is developed very quickly so they pay a rate for a shorter period, the royalty starts kicking and sooner because the development is sooner and to try to incentivize that you could reduce the royalty in the first couple of years of development. so those are just -- >> i wondered about that, but the $4 is not a very high rate. >> no, it's not. >> reducing that is not going to be an incentive to do anything positive. there are other ways of doing that. >> there is no alternative that is beyond consideration. we are trying to get the full menu of alternatives out there. >> that might wonder alternative is the production of the price because of its low price. and one of the things we are seeing of course is a very high success of the drillers and in the terms of the economic circumstances.

this is something we need to be paying attention to. these are materials that are owned by the people of this country that are owned by the general public and the general public is not really getting any advantage of the drilling process. diomede somebody else comes in and tells it and takes it up and then spends it for them. there's something that needs to be done that is quite be much more effective on behalf of the general public of this country. not just for the oil companies but the people here who are now spending so much of their income on the price of gasoline. >> i'm hoping we get a copy of what you sent to the president as well. >> we are asking you for the same thing. we're asking to provide for us the routine that you think and the circumstances that you understand in the context of the

examination you engaged in now and if you'd be kind enough to provide us with that information you come up with as a result of an investigation you are engaged in you would deeply appreciate it. >> what you think will get it? >> you'll get it after the president as my guess. >> it's not my report to be queried as a department report. >> to make it clear to the department why? devotee department here has asked for this and that we would like to get it as soon as they have the information not that they've been able to put together. >> just out of curiosity does every acre that is under lease

contained resources some of the naturally draw? spec some of them are dry. >> do have a question? >> i do, thank you, mr. chairman. >> i don't understand this discrepancy and i just want to ask if you can account for it. the doj filed in court in louisiana the claim that you have 270 shallow permits pending and 52 deepwater permits pending, and this information is difference? >> the information included in the department of justice filing

to our personnel from other modifications. so i know there was a press

talking to modify7&7'7'7$7%7% thousands of those, thousands.7' but some of them can be for7#7#% relatively minor things and so7' we thought it was inappropriate numbers because those are not you and your colleagues have interested in. and rightly so. been the appropriately to handle it. >> to explain not about the 52

deepwater that this press release mentioned. >> same thing. >> so they are just requests to alter existing permits? senator vitter -- >> i do. spinet it just says because there are actually 270 shallow water permit applications pending -- >> it's the same principle. things like applications to modify as opposed to applications for the wells or substantive reviews that our agency does and that takes so much time. >> so it is around ten when you look at the brand new permits to drill that are pending. >> that clears that up. >> mr. chairman, i have time for one more question? thank you.

i want to ask the question how that differs from the inspector general. >> the full time equivalent so in trying to understand what the iru will do that is different from what the inspector general does. >> it's a very good question. as you know and as the chairman knows, they're has been a history of allegations of corruption and misconduct within certain issues. in my experience, and experience in a lot of organizations, in order to have a healthy organization you need to have the ability to handle certain investigations yourself. the inspector general and interior of the inspector general of any department doesn't have adequate resources to do all of that.

the justice department present at that time immigration service fbi all had their own internal affairs units, and so the inspector general would get allegations and didn't have the resources or for some other didn't want to handle would be flat back to the internal affairs. that is exactly the principle we are talking about here is to create an internal affairs type of capability which will also have the ability to do aggressive and force reductions in the gas companies that are violating our rules and have been cited for violations of the rules. so working in close coordination we do not go out on our own without checking with the ig. we are creating this entity and i think it is serving its intended function already. petraeus back-line note to former mms investors that asked for the ig investigations when

the mms arrows and it took two >> that is the problem designed to address. >> now with the iru have an authority to hold production of the well based on the obligations if it was an investigation for a specific episode of misconduct. >> the iru assault would have no authority to stop production. >> great. >> one more question mr. chairman, you are so kind. [laughter] >> on to the estate partnerships for audit programs. that program relies on states to perform compliance activities on an estimated 3.3 billion royalty payments. i know the state of wyoming has been doing that for years with federal mineral royalties in the state and you have agreements with ten states and eight tribes

when i was in the state government in wyoming and i felt like the states were doing a really good job especially the state of wyoming on some of these compliance audits, and my question about this is since we have got such tight budgets and we are not going to be about fund everything that the federal level that's being requested do you think it would make sense to rely on states with which you have currently have agreements to collect revenue as well? obviously states like wyoming are collecting a tremendous amount of state royalty, severance tax royalties based on a lot of the same production from the same companies on the same formulas and it might be a cost savings measure. >> and actually, the partnership is excellent and something we are working on our strategic

review and are including the state and tribal auditors with all of the reviews on the program right now in the creation of the new office. as we have an excellent relationship with the auditors. something i think is at a win for both sides. and we have the federal system and we have all of these computer systems in place that can handle all of the revenue coming in, and it is a situation where the revenue comes and goes into the treasury and is dispersed. i don't see there's any immediate efficiencies gained by turning that part of it over to the state and the partnerships we've had a lot of efficiencies by using state auditors. did the interior finally get tribal royalties on the same mineral valuation formula as the mullen tribal loyalties. we are looking at all of our

value vision regulations and starting the process on evaluation for the gas. >> so they are not on the same formula. >> i can't believe that it's taken this long. spec one of the reasons they are not the same is the terms are different. we did revise the indian gas regulations in 2000 and we are still continuing to work on revising the indian oil valuations and we are convening an indian negotiating rulemaking to revise the petraeus began to the navajo and arizona are pretty deeply involved. they seem pretty sophisticated back when i was on that committee. thanks. >> we are working very closely on this issue. >> thank you. mr. chairman, thank you for your patience. >> thanks, mr. chairman. when you provide that information to the president and

a copy to us, would you kindly include the number of acres that are not likely for the you know do not have any value in them? as you said, there are some. >> i said there are some. we will do our best to collect the data, the relevant data. i don't know if we currently have access to it but that is focused on something -- >> absolutely. >> they don't have any oil in them. >> the would be interesting. i wanted to ask another question. it's about the drilling in the arctic, and as i understand the recently announced it wouldn't be drilling and they wouldn't be drilling there this summer in a way that they are going to be planning on drilling there sometimes perhaps next year.

the plans they have been put up two of pretty large expansion of activities. the operation as concerning because of the whole set of circumstances they are going to have to deal with and the experience we have seen from other activities up there. so, they're has been a member of tragedies'. we saw in the gulf last year and more recently, and an oil tanker that ran around a thing of love the coast some time just recently last month. so despite the bad things that have been going on in the context of the circumstances, shall realize on the spill response plans that were written before the bp will still and the

norway still from the arctic operations and that seems a little ridiculous looking at operations they plan to take, but based upon what the most recent things that took place which were much more tragic and much more damaging and dangerous, and i think that they should be at least in the of circumstances knowingly are. learned since those incidents, the spill response plans for the arctic are completely seemingly inadequate. based on the real set of circumstances they are going to have to deal with. the plans assume it will remove upwards 90% of an oil spill in any time. offshore mechanical containment

were 3% and somewhere between eight and 9% for the exxon valdez spill. the plan even fails to consider the potential uncontrolled blowout under the worst-case scenario despite what happened in the gulf and there are many more examples. so given this information and all we've learned whether or not we should even allow shell and drilling on the arctic on the basis of this set of circumstances. but at the very least, should the company be required to develop a new oil spill response and be prepared to deal with this in a much more reasonable, effective and rational way? >> thanks for asking the question. the arctic is obviously one of the most significant set of issues we have to deal with. it's a frontier area as people describe it contains various kinds of challenges because of the temperatures, because of the

ice, the relative absence of the infrastructure, because the coast guard isn't right there they are unique. we were working with shell to understand the plan they submitted for 2011 for just the beaufort and that time it was just to drill one exploratory well, and before we were too far down the road in doing that evaluation assessment and the had provided quite a bit of additional spill response related information to us because of problems with getting an epa permit the changed their plans and announced they wouldn't be looking to move forward in 2011. we heard the same things you have about their intentions to move forward in 2012. i think they are going to have to obviously satisfy us that all elements of the plan and their individual permit applications are adequate including with respect to containing the

blowout and dealing with other still response issues. as i said the application for 2011 that's now off the table was just for the beaufort. if in fact they go forward with plans for the sheet that is another set of issues for us to address to anticipate that and help us with that we are doing a supplemental environmental impact statement that goes beyond what the court has directed us to do to look up the spill response related issues in the wake of deepwater horizon. so we agree with you that there are lots of important and significant issues that need to be addressed and we will address if we get the exploration plans filed and said they will be and applications to drill along with those plans. we will give close scrutiny and will get every aspect of the proposals. >> thank you very much. i deeply appreciate what you

just said and the way you're looking into this and i think ackley what needs to be done. thank you. >> you're welcome. >> these are shallow water permits, right? >> i think they are all shallow water. i know the ones, i don't mix ackley with the are going to propose that as you know there's not a lot of deep water so i know that there is shallow water. >> so far shell has done everything asked of them except for the epa and the review panel. >> they've done everything we've asked of them and it's been very cooperative with us on supplying the information that we've requested. i have no complaints or criticisms. >> out of curiosity, sometimes to find out whether an acre has oil or not you have to drill. so it would be kind of hard to say how many are -- why would you least something if you knew there wasn't oil or something. the numbers i have is probably

one out of 4 acres that are least probably show no resources. >> i was told as recently as yesterday that if the company is one out of three they are doing well. >> i appreciate it and all you've done. we look forward to working with you to make sure -- that they come into existence and do the job i think all of us want them to do, and we look forward to working with you on this budget. >> thank you for your support, mr. chairman. appreciate it.

>> [inaudible conversations] [inaudible conversations]

the consumer federation of america held a summit today in washington. we will hear discussions about the economy, product safety and consumer protections but first a panel on the internet communications technology. executives from. this is three hours. >> we are going to get started on this morning's panel which is entitled the future of consumer -- the future of the consumer communications. ning because there better to be than to hear the panel talk about this issue. as most of you know in recent years we've seen an explosion in

growth in the devices that consumers use and ways that the devices with various facebook, twitter, video, more and more consumers are using devices in different ways to access information to send information within its e-mail on their laptop, watching a video on their ipod or tuitele on their mobile devices, consumers more and more are using devices in different ways not only to receive information but also to send information. and so what does all of this mean for the future of consumer communications? >> we have set for speakers to discuss this. their biographies are in your packet so i will read through all of them but i will give you the highlights and the bullet points who we have talking about this issue today. first we will have become the director of the internet and american life project. the pure research center is a non-profit, non-partisan fact

tank that studies the social impact of the internet, and he's been there since september, 1999 working on these issues. after him we will have link howeing at the verizon communications. following link we will have the elizabeth grossman, a member of the technology strategy policy group at microsoft corporation, and finally, cleaning up the panel will be dr. -- dr. mark cooper who you all know and love from the cfa. lee? >> thank you. i love the image of marrec. [inaudible] i like that relationship and it's an honor to be here and be part of this wonderful panel. i thought i would really quickly

run through the three revolutions that have taken place on our watch as the pew internet project we started doing survey work in march of 2000. since then we have seen three things happen in the technology space and we are about to see the fourth revolution occurring and to talk about the consumer environment of that. to talk about the broadband revolution the survey in march, 2000, showed 46% of americans from the internet at that point and 70% of adults. it grew from 73% of teenagers 2000 to 93% as teenagers now. broadband is part of that story coming and we watched the switch from the dalia lab environment to the broadband environment and so people became very different kind of internet users as they transitioned to that higher speed experience. they got more out of the internet, they did more on the internet, spend more time, they reported better outcomes, and

the biggest part of the story is the became content creators. there was something about the fast connection that in power people to tell their stories, share the things they knew and create culture on their own and become broadcasters and publishers without paying any of the necessary fees were doing the work that people in the legacy industries did. so the spirit of commenting, the spirit of reading and creating content was central to the broadband experience. right now, depending how you measure it and we use a variety of measures, two-thirds of adult internet users create content in one way shape or form, 75% create content so there's an expectation of people as they go through will share that with others. it started in to those to come 2003 as we were concerned 85% of

americans owned salles phones and 57% of americans, so more than half connected to the internet wirelessly either through their smart phone or their mobile card of the laptop so they have their communications active and ready in their pocket in their purse or the satchel. the change that brought into information and research, communications became an expectant part of life and the culture is now important. in the survey last april and we're going to repeat this april we saw 35% of americans had apps but only 34% use them. so a lot of people are buying the devices loaded on them, but not everyone is capable of or wants to use the act on their

mobile devices. still is going to be a big part of the information story that unfolds. you might remember the wonderful story in y your magazine in the fall of 2009 that said the web is dead long live the internet. the rise of the culture particularly in the mobile environment is part of that story where people are potentially moving through an environment where the trusting relationships and information in the media sources are coming back into the picture in the way they hadn't been part of the picture in the web based wild west of the world wide web. the third revolution, so it's internet, broadband, mobile, the third is the social networking revolution that tracks with of the mobile revolution. right now 48% of all americans use social networking sites. 62% of internet users use the networking sites. the fastest-growing is people over age 50.

so it's not just the domain for young people who are technical savvy and have their friends as part of the network, now their parents are trying to friend them which is freaking the kids out and is great for the social researcher to understand the tension. but it's a port and part of the story from the consumer environment because one of the core ways people are responding to this challenging the information environment with a velocity, the volume, the variety of information that's increasing in their lives, they are falling back on their social networks in three ways we see in our data. the first is the social networks now are becoming a really important century for tipsters in their life. people watch their face pages and twitter in the morning to find out what their friends are reading and what stories are taking place in the parts of the world they care about and essentially using it as a key to keeping function in every that traditionally the sources used

learn so the social networks now are about the leaders of information and when people were encountering information now they want to understand deeply or confuses them or just sort of disrupts the world as they think it operated, one of the things they do is paying the smaller people and the networks and ask two questions. first of all, do you believe it is it true? the second is if you believe it's true, what should i assign it as i try to understand the world. is it richter one type of factor or richter tend, is it something that's going to change the way i think or a little of the way. so the credibility assessment and just information assessment is taking place in the social network in ways it didn't used to. the final thing is the audience for their content creation. now a lot of people are preaching to their friends, broadly understood. they think the people in the

social networks people to evangelize or people to collective evangelizing but they are now in the content creation environment thinking they got the audience for the things they want to say and by god, they are going to say it. so those are the three fer of solutions that occurred on our watch and they are going to amplify even more. the new things we are looking at relate to the location based services and we are having a hard time asking the phone survey questions. one question we got 4% of internet users are using location based services now as of november and we changed the wording a little bit and got 17% a month later. so we are still trying to figure out what is going on for square and mapping services and things like that, but it's now part of the mobile experience people are having with their smart phone, checking income sharing the information and checking in where their friends are. the second biggest thing that is sort of on their radar now is

what we call consumer cartels. the group on the social experience of shopping and in powering consumers is changing the relationship between some businesses and consumers and the relationship they have without pricing and access to information so we are going to pay attention to that. and i'm not going to step on the other people's stories but to flag what other people on the panel are going to say, longer-term, the rise of the internet of things, smart systems it's going to be really important part of the story because our environment itself is going to be feeding data back to us sometimes to machines and we won't be in the middle of the communications and the algorithms making decisions on it, but a lot of times we will be in the middle and as more and more devices and more and more things get linked together, that's going to be a major part of the consumers story. so the hallmark of this new era

we are looking at our blended experience. it's not like a tree but is doing everything on their mobile phone or the internet or printed products or face-to-face. they are doing all kind of research in all kinds of ways that are allocating elements of research on the mobile device. they are turning to their friends and turning to the people to get other information so it's blended in that way. there are more and more people course who want augmented reality to check on pricing comparisons when they are literally get the point of purchase and they are also reading sort of private or stranger reviews of products now it is a much more common thing people are getting to the end stage of making the decision for the expensive purchase. they are reading the reviews and giving weight to them. the final thing i will beat you with as we study a lot but we don't yet understand what it might mean in the consumer space

is because it is changing. the critical on known about the future is what is going to happen to the privacy and identity. i know probably mark will be speaking more to these issues, but it's a very rapidly changing environment. there's now talk about the privacy bill of rights coming out of the administration. it will be interesting to see how much of that space is allocated to the private sector and how much is allocated the public sector. from our data what we see is people are on their own engagement of social and commercial the sort of new term of their engagement is reputation management. they are not so much -- they are taking it as a given that sharing brings benefits to their friends, communities and sometimes with their purchasing behavior so for many people, particularly young people, quite comfortable disclosing a bunch of stuff about themselves and sharing what they know what they are very conscious now

particularly younger people of how they present themselves or how they are represented so they are monitoring themselves with google and all sorts of stuff like that and they are asking mostly their friends to adjust the tags they've been on pictures and the way that they are representing people online because people know that first level for young people, college admissions offices are now looking at this stuff come future employers are looking, future significant others are looking at this, so that is a sort of new stability being brought to the marketplace. that sort of the panoramic view from the internet and i would be happy to answer questions leader. thanks. [applause] >> a famous quote i like a lot

because i think it keeps when you're talking about the future keeps you humble and that you have to be when you are looking at the future is the future is not what it used to be. and i like that because what it really means is although we can get a snapshot of what some of these might be we are not as always pressing as we think we are when they arrive, so i want to keep in mind as i go through these are some of my thoughts where i think we are headed in the industry and will be demanded by the consumers and what they're doing with it. but it would be totally different because we don't know how the consumers will use what happens in the industry is driven by what the consumers decide to do with the products. we sometimes don't know that until they start using it. so, quickly what i will be covering and i'm not going to go all of these the two important we kind of ignore when we look at trends is the demographics issue how the society is changing demographically that's an impact in the consumer demand and use and also advances interface portability and power.

those are sometimes ignored. they are critical in the industry. they've made a change already not just in the mobile aspect which talked about, but also in what you can actually do when you're going mobile. so demographics. the american people are becoming at least the trend suggests southern and western, more suburban, more hispanic and asian, more digital age than industrial age. and this is really getting some of the trends that suggests to me are that the youth minorities and young adults and we talked about this. over time more and more people are going to find this to be the world they know how to operate in. another aspect is that in my generation - 57 is the baby boomers are becoming older and i think you're going to see a lot of application in the home especially that use our technologies that help especially for example healthcare. that is an 97-year-old mother-in-law who lives for along time the last three years to take care of her full-time

and i really unfortunately she passed away a few years ago and i would have liked to have for example video connections would have helped but we didn't have it so that's going to change as the baby boomers get older. the diversity in the market lee talked about this but if you look how people use the technology and not just with the technologies are, sending and receiving text messages for the example, and also things like getting maps or directions, these kind of things are being done a lot more command more important not just by the minority population, it's also blacks and hispanics are heavily using this technology. it's in the mobile space in many cases but it's happening a lot. a lot more than we understand today so that is a big driver of these industries because it is going to change how people interact with each other as they become exposed to other populations through twitter and other technologies. mobil as we already talked but, lee talked about is a big part

of the store, and it's not just mobile but it's mobile devices are capable than ever. video is popular and it's going to be even more possible going forward because the networks are getting cable. deploying today that is going to have it already has applied to 100 million people today and we reach all of the population we serve which is pretty much the whole u.s. by the end of 2013, 2014. and they are actually faster and will deliver between 512 megahertz down and three megabits up that is a conservative estimate so they can do video quite well which wasn't possible a few years ago so that changes how people use the technology and if you look at the amount of traffic people think will be going over the networks it is mind-boggling. it's part of what because people are creating content, they are not any longer looking at it, they are sending it the other direction and many cases during two-way video communications. those are also content by the way. we shouldn't ignore when lee

talks about creating content is not just things on youtube it's also between two people, video conversations and so forth. communication is content. it's not just about watching movies. what are the other drivers is the device in the home that would be connected more and more. if you look back in 1966 in those days you didn't have many options if he wanted to use different kinds of media. newspapers, broadcast tv's, magazines, all of them were in a log. many pieces paper based. they couldn't khator send information back and forth. they were standalone types of applications. if you go up that chart you see at the top you not only have more devices in the home and applications many of the more digital if not most of them. ..

>> this predicts it's going to happen and you can send that information to your repair people or get it on your cell phone and it says something is happening with your electric system. that stuff is valuable. we had a demonstration too at the consumer electronic show in vegas that the latest enstar was

out. it's a camera mounted in the back of the car and one in the front. if somebody backs into a parking lot, you're not there, it takes a picture of the license plate and sends it to your cell phone. [laughter] i think that's neat. there'sf'ú an old story of somee in a parking lot, hit somebody else, everybody is watching and they write a note, put it on the windshield and when you look at the note it says everybody watching and i'm supposed to write a note, so here's your note. [laughter] they are designed for humans and for the last few years they have not been as human centric as they should be. the kinds of ways we can use devices is changing dramatically. a few years ago all we could go is keyboard and mouse.

today there's touch screen, technology that allows you to translate realtime and voice technology is much more possible. think about the capabilities of these disabled people in particular. these technologies are transforming. it's really advanced a lot, and one of the biggest advances is battery power, not only that, but it's improved so you have devices running all day, the tablets, the smart phones that are good in of themselves, but there's remote charging technologies that are beginning to advance. you may be able to just swipe your device over a wireless device that recharges your phone or tablet at least for a short amount of time. we're talking about being connected anywhere and never running out of power or at least not rapidly. lee said how we communicate is changing. it's more social and being connected. p if you look at left side of

this, that's the global users of social network that passed the number of e-mail users for the first time in history. on the right is the amount of usage. now, they are sending e-mails and text messages to each other within the context of a social environment that is identifiable and they know who the other people are and they communicate more ready. it's a different way to communicate. the technology is being driven by a number of underlying technology aspects that come into the industry more and more. storage power is a big, big part of this. storage power is increasing dramatically. the power, the communication networks is doubling every 20 months or so. we've gone from 678 kilbits to

250 megabits. we will continue to improve as time goes on. we'll see more power on the mobile side as people continue to use it. the way we communicate with each other and communicate through computing devices also changed a lot. look down at the lower part there, 1960s, there's mainframe technologies, mainly centralized. you couldn't do a lot on your desk top all the way to a service which is mainly in the cloud, in the web. it's something where we're sharing more readily with access to information. every time we go through a cycle you see a dramatically increase in people using the technology. it makes it more consumer friendly in a sense that everybody can access the technologies and use them. one of the things that's really changed bow the industry -- about the industry because all

the trends, the consumer demand trends, the way they use the technology, the capacity of the networks is we have competition and choice that is more available than ever before. we tended to think of competition in the broadband sector as being between land line carriers or between wireless carriers. it's more complex today. our ceo said at the ces show a few weeks ago that it can't be done by one company any longer. today, you have to collaborate with other providers. we don't make the operating systems or the devices. those are made by other companies and what's driving the consumer to buy our services is an iphone, not our network. many cases they like the network better than somebody elses, # but that's not the driver. there's a lot of factors that go into the consumer demand today that make competition much more complex and vibrant than depicted in some of the analysis of our industry.

this, to me, symbolizes it dramatically. it's a combination of things. those networks were essentially analog, single purpose networks not able to do much beyond what they were designed to do. even the tornado telephone network was strained and low capacity. all of that is dramatically changed now. when a consumer looks at the choice they have not only in the applications and communication services, but also the networks, there's a lot more choices today. in many cases, we have to work with other companies in a collaborative basis to offer products they want, so they want to buy our service, but they buy it because of other things like the apps or the device. consumers are more in charge and have a lot more -- they are actually driving the markets more than possible in the past. again, i said at the beginning i don't want to predict the future, but i want to look at trends and where we've gone.

look at the left hand side and the kinds of networks and sources people used, some of these things don't resinate with anybody. what are portals? portals are now not discussed much. the way we access the services changed a lot. to me, if you look at the trends too that are interesting is you think of them having implications for other industries, but they do. search engines, for example. basically they are easy to use different access to services you want, and you don't have to search for it. it's on your phone already. it competes with search. it competes with our services. skype is a voice service competing with our voice service on mobile. we have text messages services and they are popular, but we have apps that offer text messages. they don't have to buy our text

messages if they don't want to. the way the industry changed if you look at the last chart there is dramatic. consumers can personalize things more, they are mobiling accessing these things more, and most importantly, they will be increasingly driving what the content is. twitter, and i access that every morning and night, and it's really another form of search too, so instead of putting something on google, you send it out to your friends and say i'm looking for a good place to eat in washington, d.c. tonight, what do you recommend? you get five to six recommendations and they are usually good. it's a different form of access, and it's about the social network trends that lee talked about. so, thank you, and i look forward to the discussion. [applause]

>> good morning, everyone. i'm going to tilt this down a little bit to see if you can see me. can people see he? i'm really short. let's get that out front. [laughter] i'm from microsoft, and i'll build on what the two previous speakers have said before because i'm actually -- i'm here in dc, but i'm from microsoft research. the disclaimer that was made about not predicting the future, that's my every day hazard. i'm going to talk about things that are a little bit further out that may or may not be true, but they will be interesting and hopefully a little bit thought

provoking. again, everybody has their favorites. mine is tomorrow looks like today, but the day after tomorrow looks nothing like the past, and so that gives me an excuse to talk for about 30 seconds about the past to talk about the future, and i'll talk about the past in a very narrow sense in terms of the past of computing. if you look at computing that started in the 1940s compared to physics, it's a relatively new science. one of the things that cakessed the first -- characterized the fires first decade of computing was scarcity. we heard about this. it used to be computing power was expensive and computing storage was expensive and computing between computers was hard. you spent -- computer scientists spent a lot of time thinking about how to do things more efficiently.

can we think hard about what information needs to be stored and how are we going to access it? the scientists spend their time tackling this problem and computer scientists are smart and hard working and all the work led to what was described by the previous two speakers where all the sudden the price of storage has gone down, not only the efficiency, but the science of computers has gotten smaller and smaller and smaller. we've gone from an era of scrairsty to an -- scarcity to an age of plenty. we have more power and storage than we know what to do with and more information than we know what to do with, so in one sense, yay, age of plenty, but another sense, oh, my god, what are we going to do next? that's the past, and now the future. i think this is a slide that builds on what was said before

that the internet -- what that means is not only can all of us in this room have a computer, not only can all of us in the room have multiple computers, but your car have have computers, your fridge, your stove, your television, but also your dog can have a -- okay, your dog collar can have a computer or your contact lenses can have a computer, so has been sorting changing the way we have to deal with the information on the computer screen. not only do they all have computers, all the computers are talking to each other, so what this means is that there's another revolution, not only are we going from scarsty to plenty, but we're also going to have to have a transition on how we interact with computers. again, referring to the past, and that past takes us up to today. the way that we interact with

computers is that we poke them, poke. so, you know, we've gotten pretty advanced in -- it used to be when my mother was programming computers, she had punch cards. we've gotten to the point where we do all this elegant flick of the wrist as our finger runs over a screen. let's not fool ourselves. that is still poking the computer. the question is what comes next? the idea of next is moving from a computer that works on your command to a computer that works on your behalf, okay? i'm going to talk a little bit. we've already touchedded on that to a certain extent with the idea of the sensors in your house looking for the electric shorts, ect., or getting your dinner information from your friend, but let's take that -- let's take that dinner example

to another level; right? you're already to the point where your phone has a gps and if you type in restaurants, poking it, it tells you, wait, wait, talking to the satellite, discovers washington, d.c., and gives you the restaurants there. there's a a little bit of working on your behalf. let's take it a step further and think about, well, what if the phone was tracking and sensing your behavior over time and the pattern recognition. for example, my phone might know that my home base is washington, d.c.. this is where i live, # where i eat dinner. if one day, you know, checks in with the satellite and discovered we were in seattle washington or redman, washington where i go regularly, it could, in fact, look around and say, oh, it's 5:30 local time, and it's not where she usually is, she might want dinner recommendations, # and then it looks at the calendar and it says the last time she was here,

she ate indian food, and, in fact, she eats asian food a lot. i'll send her recommendations for asian restaurants here. maybe i'll do neat that meze and chinese and look at which ones have good recommendations in the social network and where they have good recommendations from trusted reviewers, maybe somebody from the "washington post," i really trust tom, and then maybe i'll see what has reservation, and then it might send me a note saying here's ideas. that's one sort of a vision, but it can apply to a lot of other things like the health care situation. imagine you have elderly people living alone in their home. everybody has seen the ads for the buttons to wear around their neck. if they fall, they push the

button. that's a great example of on or off. either you don't press it, or you do and you get 9-1-1. let's get nuanced. that's what the technology allows you to do. you have an array of possible sensors that determine what room people are in, sensors going back to computer in contact lenses that provide information like blood sugar level. i'm looking into the future. this is not happening tomorrow. already although, there are people putting computers into contact lenses. i'm not as cooky as you think i am. there's sensors in the lids of pill bottles, and there's an array of information and you build on past patterns of behavior to figure out if something is wrong, and then you can determine how wrong it is. does it make you eneasy and you want to phone to ring to see if they are okay or is it a crisis

or is there a range in the middle? these sorts of abilities to use this america of communications in a nuanced way, and i talked about home and the individual, but there are similar things, for example, for the power grid. these are the things that working on our behalf mean, and as i say, this sort of thing which is totally focused on getting the right information to the right person at the right time. that is the core of this idea of computers working on your behalf. obviously, there's implications for a lot of things important to us as a society, education, national security, health, ect.. this is my last slide because i was told to bring it around to some of the policy questions, and so what i really want to talk about on this slide for a minute is that this idea of computers working on your behalf and these ideas of what technologies can do when they connect together, that's an

important one, but the technology is actually, well, a virtualist or a cycle, whether your an optimist or a pessimist is my guess, but technology can strain what we can and cannot do. you know, when networks overload, we can't make certain phone calls, ect., so technology sometimes doesn't always do what we want it to do. on the other hand, it also enables lots of things we want to do whether it's catching the guy who dinged our bumper in a parking lot or controlling the programmable thermostat in our house, so technology is an enabler and a constraint, but people, and then by extension, our policies, legislatures, governments, ect. are the enabler and constraints of technologists. the reason i spent this time talking about where technology is going is that in order to decide what we want these computers as they get smaller

and smaller and smaller to do, we have to have a conversation about what's important. we, consumers, companies, governments, have to have the conversation about what's important to us and what kind of niewngsed choices -- nuanced choices we want to make. it turns out we talk about computers handling huge amounts of data, our programmable thermostat taking it not nth degree recognizing your patterns of behavior and heats your house in a nuanced way and it knows if you went to the gym to work out early in the morning, and it will kick in earlier for you when you get home. that conversation is the one that consumers and companies need to be having early, early, early on, and that goes back to the privacy and the identity things and we'll talk more about those in the q&a. thank you. [applause]

>> this is a test, now. wait, i'm going to do it this way. all right, so, at the end of that wonderful discussion of technology, my job is to stir things up a little bit. i was told not too much. it's early in the morning, and i actually am going to be pretty positive about most of this stuff, so i was going to start by asking everybody who has a cell phone to raise their right hand. keep them up, keep them up. we need exercise in the morning, you know? if you access the internet through a laptop, raise your left hand. i don't want to embarrass the people in the room without both

hands up, but those people with both hands up say hallelujah and put them down. you participated in the greatest communications revolution in the history of the species, bar none. more important than the alphabet, the printing press, the telegraph, the telephone, the tv, or the radio. now, in a certain sense, this revolution built on those, but it is infin nitly more important than any of those revolutions for a simple reason and lee used the word, it's democratic. the previous revolutions have typically allowed a small sliver of literal wealthy elite to communicate better where before it was one way, radio and tv. this is a two-way revolution available to everybody, and the united states -- living in the united states, we don't

appreciate that aspect of the revolution enough, so i want to talk about this global revolution because everybody in the u.s. has this stuff. well, not everybody, but most everybody. it's the rest of the world where this is a dramatic revolution, and so here are global numbers, and these numbers are really important because i'm also going to talk about the problems. i was told to be positive, but there are some dark clouds on the horizon. if you look at this, it took about 125 years on the planet to get to 20 telephones per 100 people. that meant approximately 80% of the people on the planet did not have a telephone. it took only 15 years to get to 75% of the people having a cell phone. that's the revolution. everybody else can talk to everybody else.

the second part of the revolution you heard about was broadband; right? it's not only voice, but it's video and data, and that's really important, and you will observe that there are more people on the planet with a broadband connection than a telephone. that is a remarkable revolution, but remember, we're still down here at 20% or 20 per 100. the question is we cannot wait a century for the rest of the people on this planet to get the access to the full slate of communications we want, and united states, we call that universal service. it turns out that 79% use the interpret, but only two third have it at home. one-third of americaning still are not -- americans still are not participating in the key aspect of this revolution. that is a social problem, an

important policy problem, the first of them. we have to make sure that we get this number to there in a lot less than a century, so it's a wonderful revolution, no doubt about it, but we have to keep it spreading. now, so i want to quickly talk about why we've had this revolution, and then the three policy challenges. i've mentioned the first one which is universal service. the second one is going to be cost, who pays? and the third one is going to be control, people have mentioned it, and i have picture slides. i've discovered pictures are worth 1,000 words. i don't use words on my slides other than titles, and i frequently chastise the fellow panelists that there were too many words and not enough pictures on the slides. if it's a word, you can speak it. you don't have to see it. one of the big issues about it is cost. it turns out that mobile

communications are independencive in low -- inexpensive in low density areas which is why it spread in the rest of the world because it cost a fortune to pull wires, and they never did. you know what? they never will. if you live in a place without a wire today, they're never going to pull a wire. they are going to build a tower and do it with wireless. that's not a bad thing. that's a good thing because a lot more people will get service a lot quicker. second reason i think is functionality, and this is controversial. it turns out that the broadband networks we love in america, the 100 megabit pipes we want at our homes provide us with an access way beyond the functionality we need. it turns out people are really good at cramming a lot of stuff into a little capacity. that's what they spend all their time trying to do, and so it

turns out in my opinion, and this is that i don't need 100 megabits. if i don't have a wire, i'm never going to need 100 megabits. i'll be just fine with a 10 or 12-megabit system, especially if it's freed up. i think the declining value of band width is really important. the third thing that's really important is the value of mobility. it turns out that mobility is the thing that we value most. mobility is the essence of the modern world, and i frequently get this speech where i talk about if you think about feud lism, the most important for the feudal society was to do was to

keep people in their place, nobody moved physically or through the social hierarchy, and the last 500 years has been to break down those barriers of mobility and let people move. people value mobility immensely, and it's -- someone used the term realtime connectivity. it turns out that realtime connectivity is about what i can do what i'm moving around, so for those reasons, we have this tremendous revolution, but now let me talk about the problems, and now i'm going to go from the global sense back to the u.s. for a minute. when we designed the universal service program in the 20th century to make sure everybody had a telephone, we said we would tax long distance calls to pay for basic service, and that was a good idea. we consumer advocates if we were

being honest -- consumers were going to pay anyway. a consumer always pays. we felt the toll calls were discretionary, and the basic plain old telephone service was a necessity. we were willing to allow the price of toll to bear some more of the burden. the problem, of course, is that toll doesn't matter anymore. it has e evaporated in terms of revenue. why? because the other users replaced the long distance call. people send e-mails, use their cell phones, and so the toll revenues have disappeared, and, of course, we're still subsidizing telephone service when we need to subsidize broadband. the commissions has a series of notices out, and i encourage you

all to get involved, but i will also encourage you to remember this model because this always gets me in trouble. if we have to find some way to pay for it to make sure that the one-third who don't have it get it, then we ought to think about discretionary goods as the place to raise the funds. we can't tax toll calls anymore, but maybe we ought to raise the price a little bit for people who want to down load 150 movies a month. now, that is a very controversial statement; right? that essential principle of raising funds from discretionary goods to support basic goods. the second problem is cost, and on community cation networks, costs are driven by flows. they are driven by the peak hour of perception.

it is not cost by the quality of volume you use. at&t said they were putting a volume cap and explained it and justified it by saying they have a congestion problem. volume caps have nothing to do with congestion. if congestion is a problem, it's the wrong way to solve the problem. i put this little example up here which shows two customers, and i misspelled customer the second time. typos are my thing. [laughter] i just don't see them. two customers, customer a uses five units, we might say megabits or whatever we want, every day at, you know, a constant rate. customer b uses 15 megabits in a moment in time creating this massive peak. now, customer a has two-thirds of the usage, but causes only

one quarter of the costs because they're not there at the peak. if you institute a volume cap of say, 15, customer a who causes only one quarter of the cost pays 100% of the price because they are the ones who exceed the cap when this is the fellow whose caused the cost. we have to be really careful about cost of covering. at&t doesn't really care about its congestion problem, or if it does, it's going to do something else. this is a scheme to tax the people who aren't causing the cost. we have to be really careful about that. we fought about that on the tornado watch network, we'll -- telephone network, we'll fight about this in this network. it's a question of control.

the simple fact of the matter is that on these networks, we do not have good control over the flow of information. in the past when we made a phone call, we clearly had control of that, and we had the belief that no one was listening. we learn the that they cheat sometimes, although, actually, when we shifted to cell phones, it turns out the law said they could listen to our cell phones. the expectation of privacy was not there, and we're working hard to restore that. on the internet, there's a problem. the average person gets on the internet and does not know or control what people are doing with that information. now, on the one hand, they don't practice very good digital hygiene, and that's a term that my colleague used a few years ago and not with standing who he

is, it's a really bright term. we vice president taught -- haven't taught people about digital high jeep. whenever you duototo the doctor, your mother said change your underwear. [laughter] when we're on the internet, we have not taught people how to practice digital hygiene. at the same time, the opportunity to practice hygiene is not well-developed. the people who run these networks have not made it easy for us to practice digital hygiene; right? they snoop. they hide. they give us privacy statements that incomprehensiveble to 99% of the people. they have not given us the tools, and we're about to have a big debate about who should control that information. at the same time, there are some things that we ought not allow to happen, and i like to use the

issue in the video space for messages. way back when tv became -- was becoming a dominant medium, advertisers discovered they could put in blips of information that spoke to the subconscious of the viewer. the viewer never saw it consciously, but it influenced their decision by putting in a few frames. we as a society decided that was an unfair practice because it defeated the consumer defense mechanisms. it was intended to defeat, and there was nothing the average consumer could do about it. as technology gets more and more complex, we need to admit that there are some things that should not be allowed, just flat out banned because the structure can want allow the consumer to exercise choice.

the final great danger is the following. the internet and the exchange of information is based on trust. you've heard about people going into the social networks because they now feel more comfortable, they trust the people on the network, although they need to exercise a lot more digital hygiene in those rooms. if we destroy trust, if we erode trust, people will stop going there, so as some of you know, i work on nuclear power. if you destroy trust, you could, in fact, dramatically reduce the willingness of people to use this. we insist this can't happen, but unless we have a set of institutions, anyone can, thank you. [applause] >> thank you, thank you, all,

for some great presentations. it looks like we have a lot to look forward to with consumer innovations, but there's questions to answer and choices we have to make. we would love to get the rest of the panel's input and thought on what are some of the questions or challenges that you think we still face when it comes to making access more affordable and more accessible so whether you're southern or western, suburban, how can we ensure all consumers where they are, who they are, will have access to the great technologies that you've stated that we'll see in the future, the one to ensure they are not just available, but affordable. >> one aspect of that is mark was talking about a third of the population don't have broadband today, and the truth is, only

5%-6% of those people can't get it. it's just not available to them. the other people just have not adopted it. part of it is why are they not adopting it, and the other is can we get it to everybody else? on the everybody else part of it, the next generation of broadband mobile services has begun to deploy it. there's 100 million people who can get it today and by the beginning of 2014, it's available to the entire population. there's areas we know we can't deploy to economically. there's a program called the lte rule program where we're going to negotiate with rule carriers and in many cases to rural carriers, and letting them use a spectrum we have with the roll out of 4g and providing access to our backbone facilities, the network taking it from the wireless tower out to the rest

and back to other consumers to get access to that as well because they need that. building it out is expensive, and in exchange for that, they get access to a tower or build a tower, but they use our spectrum which is pretty valuable, and we roam own their network, and they can roam on ours. i don't know how many grievances we have now, but we're negotiates with many companies in rural areas to make it happen. that's one way we can make it work. it's more efficient for that than to put wires everywhere. it's more complex, i think, there was a focus group a few years ago and in the discussion -- these were all dial customers, and we asked a lot of questions about why they didn't adopt the technology. some said cost, but what they meant is they buy cable, telephone, and so forth, and this on top of it makes it expensivement bundling is part it.

can we make bundles that are cheaper to get access to all of it. things like when my child gets into grade school, i'll get it. right now, they don't have the need, but nay will get it because of other factors. the third part is they don't use the technology in their lives either because their jobs don't require it or there's not access to it where they work, and all they have a dial-up because all they need is e-mail. we have to make sure the people know how to use it, but also actually find that there is value beyond just using e-mail which is broadband would be valuable. >> there was wonderful work done at the ftc in developing the broadband plan that divided the non-broadband user population into four cohorts. it was nonuser segmentation. there's a cohort of about 10% of the population who are not

users, they are primed to go. something happened in their life where their computer is broken. they can't afford it at the moment, and they have history on the internet. they enjoy broadband in the past. other members of their family are accomplished technology users so they are ready to go when their life circumstances change. at the other end of the spectrum, an equal number, are sort of deeply weary. they don't see the relevance of these technologies to their life. they love the stuff that they already have and think that they are plain old telephone, their printed material in their home and the news sources they use through traditional media gives them the sources they want. often, when you talk to them though, they are more aware of the problems associated with the internet. predators, stalkers, people who are going to steal your identity, and they are worried about the technology itself.

they have a sense if they hit the wrong key, they'll blow up a thousand dollar machine. they don't have the sense that high quality news, great medical information, interaction with government are facilitated with these services. in many cases, educational programs, hand holding, mentoring, tech support and those things are special parts of convincing that cohort that there's a value proposition for that. >> i want to build on sort of two of those points. one has to do with the access issue and then again i'll answer further out into the future. one of the things that we think about in computing is how to do things more first timely, and so one of the things we do in the area is how do we start to think about technologies that use the white spaces between tv bands,

but also looking further forward, how can we have technologies with the phrase we use with smart radios. the unused areas of the spectrum in ways that make -- they are invisible, and if technology is invisible that is invisible to the user but incredibly efficient uses of the spectrum. thinking about those things and taking it back to the policy question making sure that as we do things with the ftc and make policy decisions now, we don't lock things down and constrain the technologies because as we develop new capabilities, we won't be able to deploy them and use them to take advantage of future efficiencies that we can't necessarily do now. that's one thing with access, and the other thing is a comes back to is usability. there's been a couple references to the nemple people with apps

which is around 36% and the number of people who use them is 24%. [laughter] you know, these are apps which everybody sort of holds up as the pinnacle of use, and even then we haven't gotten it. it's back to the class of people who are cautious, and i think we want to be thinking at the same time as developing the technology capabilities what it means to use the technology, and that goes back to the working on your behalf. we're thinking about the tasks we want to do, not how we want to tell the computer to do the tasks, but just making a decision about what we want and having the technology make it as easy as possible to speak our language or understand our gestures so to speak. >> well, the interesting thing is that it is clear that 10% of the people are deeply weary and are probably ungetble. unfortunately, they get 90% of the attention.

for people who don't want to move forward, they emphasize the fact there's a certain set of people out there who just don't want it. why the heck are we trying to make them get it? that, of course, distracts greatly from the fact that 90% of the people are gettable, and even that 10% -- i like -- when we do surveys these days, we ask the internet is important and 75% of the people say the internet is important to them personally, and my conclusion is that i'm going to analyze those because the other 25% just don't understand, and, you know, i can probably convert a bunch of those if i had time. the first point is it's the 90% of the people who are gettable that we ought to care about. the second point is yet it is true that it is not only cost, but, in fact, the sing the most important determinant of whether you have it or don't is cost.

it's the largest percent, and if you add in the cost of the equipment, it becomes a major impediment. if we worry about the 90% who are gettable and ask the question what's the most important thing to do, it's find a way to make it affordable. now, you can talk about all the other social issues and education issues and use issues, but the simple fact of the matter is that's the most important thing, and the recent comcast-nbc merger, one the conditions agreed to was to make broadband available to everyone who every member in the territory in the school lunch program add $10 a month. that's a very attractive price, and it turns out that school lunch programs as a public assistance program is a pretty forgiving program. it's relatively easy to get into. it obviously has the members of the household we worry about,

the kids, and we know that families with kids want broadband more, want the interpret more, so here it was, and it's part of a merger condition. it's an extraction, and they committed not only for three years to sign everyone up, but even beyond the three yeerd period, as long as the family is in the school lunch program, they will stick with it. that's a very progressive kind of program which i would like to see the whole industry adopt. [laughter] >> i think we have about 5-10 minutes left, and i think there's a question for the panel from the audience. >> i'm going to jump in here because i haven't asked a question in two days. [laughter] >> i'm scott from south dakota, fly over places you don't think much about. you talked about it today, but don't think about it.

i'm excited to go home because my verizon phone works out there, but not here. [laughter] >> there's a spot in my room here that it works. [laughter] the question i haven't heard talked about is we are deploying some smart meters, smart technology. i work for utility. one of the concerns that our customers, our members and owners have is privacy and how, you know, you're going to know when i'm showering and when i take medicine and when i'm in the bedroom or in the kitchen. what about privacy in all of this that we're talking about? i haven't heard much of that this morning. >> i'm glad you asked. i had a finite amount of time, and i was hoping to come back to this issue. so, i think the very interesting thing about privacy, and, again, i'm going to go past and then forward. it's a pattern i have. it's like a nervous tick, only

verbal. the past are sense of privacy was very physical and location based. it had to do with the door of our house or how close was mark sitting next to me, ect.. in the information era, the privacy has become very distribute the, so, for example, you have transivity. if i let mark sit close to me, he can't pass the ability to sit next to me next to friend because i know it's not mark. whereas if i give a piece of information like my birth date to a person, that person can tell a lot of other people with no loss of fidelity or accuracy, so that is just sort of one example of the changes in how we think about privacy and deal with privacy, and so then that makes us at microsoft think about a lot more nuanced ways to

control privacy so it makes us think about are there technological ways that using both, you know, rules and definitely things like incringes we can -- save information, but disappeared after a certain period of time. there's smart meters in the house with information about everything used in the house and at what time. the upside of that is that you could, let's say if the energy company was charging different prices at different times, you can choose when you wanted to do things, but the energy company doesn't need to know what you're doing at different times, and so working on and people in microsoft research work on these types of things is ways to take that information from the smart meter, verify it's accurate, and then send a integrated amount of

information to the power company that says this was the total amount of power used at the various times so this is the total amount that the bill should be along with a certification that it's accurate and not tampered with. you have the information and the accurate information within your house, so, again, back to this geographical feeling of privacy in your house, and people in your house know you're showering. they can hear the water, but the power company doesn't necessarily do that. i mean, this is again, this idea of nuanced levels of choices and letting information out in nuanced ways and yet maintaining the trust, and it's a really hard question, but we are going to be able to make choices both as individuals about how much information we want to share as we do already. sometimes we have the location feature on our phone turned on and other times the option is turned off. we want technology to allow us

to make any choices we want. >> a lot depends on the business model too. you could have a model, which i think is what you refer to, is where the electricity company gets the information and turns down the power at certain times. the other model is the consumer has the information in a home network, and many people now have wireless home networks and do the controlling themselves. the information doesn't necessarily go to the power company. it's used within the home to control the levels of the devices within the home. research shows there's ways to make people more aware of the power they are using that are a lot easier than you might think. for example, putting smiley faces when your power goes down on the bill. that makes a difference to people or letting people know on their bill your next door neighbor had a 15% lower usage than you did. you use your drier too much, think about doing that. there's ways to get the consumer information in a way that's useful and ways that they

control most of the changes they want would to make on their homes that deals with the privacy issue because they are in control of that. it's no longer going to a company outside of the home. another way to do that is with the devices themselves. we work with companies doing this now. convey the information to you in realtime in a way that's meaningful. it says this is costing you 15 cents per minute, you want the light on? you make the changes much more ready. part of it is consumer information as well. >> the point is privacy -- we're taking this to the next step and knowing people are taking medicine. what is the privacy barrier developed? it's not saying there's the model that the consumer controls their house, they are in control. >> let me make a point about the choice in control part because it's wonderful to say that consumers should have choice and

be in control. it's also unrealistic to think consumers are going to be able to make these decisions on a transaction by transaction basis. it will consume -- in this amount of consumer resources, and so whey they do is throw their hands up. if i have to figure out on each and every gps chip or each and every device, i worry that i don't care if they know what i'm cooking, but what i'm doing in the shower. they're not going to make those choices. there's a wonderful example talking about the gps chip in the sock. they are great when we can't find the socks in the house. we look up and see where the sock is, but if the sock is under the bed of our mistress and the wife is looking for it, it's not so great. [laughter] for consumers, i think the point is we have to simplify this stuff. if we think consumers are going to make choices on a device by device, transaction by

transaction basis, it's not going to happen. consumers will be exposed to risks they don't want, but don't have the resources or the time to control. the answer is we need some simple choices; right? don't collect any information. that's a good one. if i want to opt in, let me opt in on an issue by issue basis. if any electricity bill is important to me, i'll tell the company, fine, but the second rule is that you only use the information for the purpose i have agreed to. that we don't have now. if i tell the utility you can use this information to send my the smiley face, great. don't tell anybody else about that. don't send it to some vender who wants to sell me devices that respond to the smiley faces. let me make that choice. those are two simple principles,

neither of which we have today, a good simple choice, and then complete control over what happens to the information that we agree to allow to be collected. those are two things that would advance us, and actually it turns out south dakota looks a lot more like the rest of the world than washington, d.c., so the rest of the world is joining south dakota and stuff you develop in south dakota actually may have a bigger market globally than the stuff the companies are developing for the urban center which is the really exciting part about this revolution is we really all of the sudden now have a true global market for lots of stuff, and we need to think about that, not just think about a u.s. market. >> we are quickly running out of time, but there's been people waiting patiently. if we can get in two quick questions with two quick answers, we can be done for the

day. >> i want to go back to the universal service aspect of it. that's a major concern, and i hear us still talking about we'll let the providers provide where they want to provide, and we'll trust that in the course of that everyone will get coverage, and when we did that with electricity, there were large areas not covered, and we will electric cooperatives. with this technology, i see we're leaving small areas that nobody covers, and they will not be economically appropriate for that, and it just so happens that i live in one of those in the mountains of virginia, and there's about a five mile circle that i live in, and, you know, comcast came down the back roads from town and out another road to provide and stopped. it's still too far. there's mountains, a railroad, a river, an interstate i live two miles off of, and four miles

veer rye zone brought dsl. they are putting some lines for broadband and so forth in, but still, my five mile circle is not getting addressed and it happens we are able to try things, so we tried dial up and satellite and the air cards, but i still cannot get to my house the kind of things that everybody else has. the president of verizon tells me i need to move from the house i lived in tar 25 years and renovated over that period of time and was a stagecoach. obviously, i didn't know this technology was going to be there when i moved there. for the subdivision next to me and some other people, my neighbors and i can't get anything. why aren't we doing something like say, if you cover the area that everybody wants to cover,

you've got to provide service to a small portion of the territory nobody wants to provide to. how are we ever going to get true universal service when we base it all on where the companies want to provide? [applause] >> talking to the service reform, and he was talking about changing the way we support communication networks from an old model that basically supported voice service to a model where the money gathered a used for capital spending, in other words, building networks where it's not economic to build them today. we support that reform at the fcc and think it's a good idea. if they do that, you'll see areas like that being addressed. >> there's not a local service, and in that five mile raid yaws, there's not going to be a small local company. there suspect any kind of infrastructure, and there's no motivation in a five mile range for anybody to do that.

>> there are two things that can happen if there's a capital fund. there are backbone facilities that take the traffic from the local networks out, and so they can get access to that, and there's also building out of that that's being done. the part you talk about, the local, part of it could be a wireless model and the companies within the area get funds from the federal government where it's not economic today to build out to do that. this is designed to take it the final mile where there's no economic capability to do that and get those places filled in, so we do need to have that universal service reform mark talked about not just because we support old networks and old approaches, but because we need broadband built in areas where it's not economic to do it today. that reform is important if we can get it done. ..

i'm going to say here is your service territory. i've now taken the spectrum back. i've got it. who will come in here to build that at the lowest cost? and you win. you get the business. under those circumstances i think i can solve your problem. i would love to simply tell him he's got to serve it which is what we did for 60, 70, 100

years. but we have abandoned that obligation to serve and we can do one of two things. we can carry our hair out and ask to get the model back which i don't fit is going to happen. my grand kids, maybe, your grandkids or great grand kids. we can tear our hair out about or figure out meet ways to get service as fast as you can. these days i hope for the latter because that's what matters to you and to most people. >> one final question. >> part of the question and comment. i didn't have the same image you had, i just recall i recently switched from a flip phone to a smart phone and i'm recalling this change in the size of the bill. [laughter] and this is the way i was feeling. [laughter] i went from $60 a month to $160

a month and i'm still trying to unravel the benefits. it's a smart phone sold to a not so smart consumer who's going to spend -- hopefully learn how to use this thing before i can't use it anymore. elizabeth i would like to make a comment to you because this has been a jury did panel and i have learned a lot. i am struck by your phrase in the consumer's behalf, on the consumer's behalf, which really resonated because that's what people need. but you went on to describe it as there are computers all around you talking to each other, and by the thinking what are they saying? what are they doing? and i get phone calls all the time -- by the way, my name is david. i want to say to you privately i'm an engineer, electrical engineer. i've probably taught some of the guys making this neat stuff. [laughter]

>> [inaudible] >> well, the trouble is it's got to be taken in context. on the ground i get phone calls all the time. how do i change the temperature in my refrigerator, held liggett the oven to work? because there was so much quote stuff with a cool guys in the laboratory can dream up and so many other school people know how to sell this stuff and make you think you're going to go to nirvana and when they are left alone with it, they can't make it work. i can't figure out all this stuff. i probably will end of taking my smart phone apart. [laughter] it is the technology gets just out of reach of the consumer. it's like trying to get a soap bubble. you reach for it and the wind gets it just beyond you. it's like the capacity in computers. it's great we double the

capacity in the programmers said i'm going to eat this up and it's still a constant push. and so, it's just a request. you can comment on it, probably you don't have time. but you've got to get to this on behalf of the consumer is on behalf of the consumer and concert with the consumer, talk to the consumer instead of a big full-page ad telling us by yet and figuring it out later. [laughter] >> i think we need to clear the room for the next panel. we are we over time. maybe you can have this conversation off the cuff. >> we are going to take a five minute break and be back at 10:30 because the keynote speaker is here and ready to start. okay? [inaudible conversations]

>> good morning. i'm the executive stricter of the federation for america. once again, i have the privilege of introducing michael barr, professor of law at the university of michigan. the last time michael spoke at a an event was in december, 20009 while serving as assistant secretary of the treasury department. in this capacity he played a key role in developing financial services reform legislation and was the head of fenestration which leader in advocating reform and notably the consumer

financial protection board. for that contribution alone, consumers and the consumer movement will remain forever in his step. we greatly appreciated the speech even if it and all of their speeches of the treasury have been written by someone else as he noted it is going away reception. so we now greatly look forward to hearing him express his own personal view and his own words on the subject of the financial challenges facing american households. michael barr. [applause] thank you. this just shows what a wonderfully optimistic and 90's person steve is. [laughter] he clearly doesn't know anything about academics and has never heard of the word research assistant. so i'm going to do my best to

give the speech i can to give but i can't promise every word in a is a originally written down by me. but i believe all the words i'm about to say. i am thrilled to be here with you again to talk about consumers and the challenges in today's economy. when i was here in december, 2009, we were in the middle of a very large fight to get the dodd-frank act passed and the consumer federation of america and all of you in this room were steadfast ally is of the president in getting this piece of the legislation passed and there wouldn't be the law without you. so i think you should all give yourselves a round of applause. [applause]

i want to talk to you a little bit today about where we've been in the economy and the challenges ahead. when you think back to two years ago when the president came into office, our financial markets were completely frozen, our economy was shrinking, we were facing the worst economic crisis our country has endured since franklin roosevelt came into office. our nation was losing nearly 800,000 jobs. losing 800,000 jobs every month. small businesses were closing their doors. home prices were in a freefall. in my view the president moved quickly and decisively to stabilize financial markets, reduce the wide spread harm caused by the failed policy of the past and restart the economic growth. had he not taken such decisive action the recession as brutal

as it has been for so many families would have been far worse. although the economy is showing signs of improvement and many employers have begun to hire again considerable challenges remain for many american families. now, when i was back in government we were focused not only on repairing the economy, but also on the obligation to fix the failures and our financial system that helped trigger the recession, the recession that has cost american families and small businesses so dearly. the passage of the dodd-frank act in my view provides a strong foundation on which we can carefully build a more stable system. a system that protects consumers and investors the reward innovation and is able to adapt in the law with changes in the financial markets. now to be sure the failure that led to the 2008 crisis had many causes. some here in washington, others

on wall street and some on main street. regulators didn't protect consumers to the extent of their authority which led to unchecked lending that trapped so many families. firms and investors to, risk the didn't fully understand. legal loopholes and regulatory gaps allowed large parts of the industry to operate without oversight or transparency or restraint. and many americans to on more debt than they could afford. many financial entities encouraged them to do just that. for the one in seven americans who live in poverty, the millions of americans who live in fear of falling out of the middle class, these times have been particularly devastating. these families were the least prepared to handle the shock of the recession. they had little or no savings to fall back on and one medical emergency or one major unexpected karkh malfunction away try personal economic crisis. when the crisis hit in 2008 families found themselves over leverage and under resources.

we know is going forward american families need to save a larger share of income and borrow more responsibly. today many americans are rediscovering the importance of living within their means. building assets by saying delete proceeding four and paying down debt and they are careful how they borrow and invest. the changes are necessary and healthy and ultimately they will build economic security for american families and make our economy stronger and more resilient. one of the ways we can help promote their economic security is by making consumer financial markets work better for american families. we need to continue to learn more about the dynamics of these markets including the but individuals ecology behavior and the role of the firms as they react to individuals and markets. now the evidence on the consumer from the ability and on how the firms believe in light of the

fallibility can suggest a framework for understanding and thinking about what types of consumer financial protection policies might work best in different markets. it's helpful to decide where the terms are neutral or having spent overcoming the consumer from the ability and those have it incentive to exacerbate this consumer feelings. for example providers of banking's have incentives to help individuals overcome the behavioral barriers to savings. lenders on the other hand of incentive to exploit that leave consumers to over mauro. and providers of all kind of the incentive to choose fees' less for the consumers the to get into of the consumers error and predicting their own future product usage such as late fees', over the lead and overdraft fees. the implication for policy-making in the two cases are quite different as well. in that regard it's helpful to

think about the potential market intervention has fallen into two different categories, changing the rule of the game and changing the scoring. changing the rules means looked on market participants must do were allowed us to do with changing the scolding means the incentives, cost or benefit of the participants to choose one practice over another. intervention is the change of the rules and the scoring can be used to both types of market context. the scenarios where the firms have incentives to overcome or exploit the consumer from liability. however they require different approaches. in this scenario with their natural or have incentive to overcome consumer by a cs the rule changing the be effected on its own. for the simple, the success many of you know in promoting retirement savings through the use of smart diesels automatic savings is a well-known example. in this case employers were indifferent and inclined to

increase employee participation in the slaying of the contribution plans. in the cases where they have insensate to exacerbate changing the rules may not be enough. firms will have incentives to work around the walls and render them less effective. firms made to comply with the letter of disclosure law we deduct to undermine them by discouraging them from focusing on an understanding the true context and those of you familiar in the mortgage context know that it's often the case a broker will say don't worry about the ap are, that's something the government makes us well before dhaka that the monthly cost. such cases it may be necessary to change the way the game is scored, the basic incentives to make a difference for consumers who use of the spearman framework has presented locations as the consumer agency and others think about how to promote financial alexis and

stifel on the contribution plan would serve as a nixon will tell you really informed innovation can have a significant impact on the lives of everyday americans there is the need for a lot more innovation informed by the interplay of the consumer psychology is and incentives in much more market specific context. i tend to think of the challenges in this area as being a variation on this three legged stool. there are three primary ways we need to make progress in consumer financial of comes from american families and helping families have greater financial stability the first is enhancing the basic to the place, financial literacy. the second is promoting access that means consumers needs and there is establishing strong protection for consumers. basic financial literacy is a necessary foundation for informed consumer decision making. but to be effective financial

literacy must be combined with improved access to the suitable financial products and strong protections. so let me say a few words about financial access. that's one area where financial innovation is needed. it's absolutely financial tv cut essential to this financial sector and its critical important to meeting the needs of the low and moderate income households. a growing body of research revealed financial assets get in the country advisable. the fdic estimated 9 million american households are on the banks and of doherty the cofounder bank meeting the have a checking or savings account but are not well served and rely on costly alternative financial service providers. one challenge we face in expanding access, financial access for the low and moderate income americans promoting savings in the use of low-cost

electronic payment systems such as debt cards. changing the rules money help in the context because the providers are savings and transaction accounts incentives to deviate for example with respect to procrastination to gather deposits. however the defaults and may be less effective on their own on the market as in the retirement context the reason for that is the cost to serve the low-income individuals is a small balance can discourage firms from serving low and moderate income populations and in this context the combination approach is needed and it may be necessary to change the scoring as well as the rules such as by design and creative solutions that help them serve these populations with sustainable products. the treasury, for cybill, took an innovative approach to direct the federal benefit payments that relate to these insights. the treasury is responsible for making ongoing payments to 70 million social security recipients and other federal benefit recipients.

they still receive benefits individuals with an account can direct deposits but individuals who prefer not to use direct posits now receive payments on the direct express card. a direct express' is a card account platform offered by the bank according to the requirements established by treasury and there are no more than 1.4 million federal prison begins to receive the cards which was launched initially in 2008. this is a principal of the we that the government can help make serving the low and moderate income households more sustainable for providers. in this case by bundling customer accounts together alone for more favorable scale of operations for the provider. a treasury simultaneously is undertaking other efforts to improve the electronic delivery of the federal benefit payments. i should add the suggestion were

say the insistence of members of the consumer federation of america. for example, the treasury established rules that better protect federal benefit payments from the bank account cornishman and the rule just published. the treasury is enhancing requirements from the types of accounts eligible to receive benefit payments including prohibiting benefits being deposit into the accounts set up for pay lending arrangements. and this tax season the treasury is piloting an initiative to improve tax administration by offering selected low and moderate income households the opportunity to receive the tax refund on the kurds. this will provide important evidence about how to take this program to scale and what works and what doesn't. so that the cynics will access. we need the education, access but to improve the consumer protection. in an environment of the ineffective regulation, the

tendency of the sound consumer financial market to end up in the races to the bottom as we saw badly in the housing market it isn't likely to be overcome solely by informed consumers or better assets. and let me give you some examples of what can be done in this area. as you know, the court act which president obama championed and signed into law in may, 2009, is an example of regulations written for the market and which providers have strong incentives to usher the consumers into this of optional choices to rack up the late fees' and make up only the minimum payment each month. most of you know that nearly 80% of american families have a credit card and carry a balance. before the act americans were paying 15 billion annually in penalty fees. the karnack in my view was crafted legislation that

combined the requirement of common sense disclosure with protections from practices designed to make the use of consumer fraud ability for the benefit of the credit card issuer and to the detriment of the consumer. for its simple, the unfair rate increases in quitting rate increases on existing balances to the universal default clauses and restricted retroactive rate increases due to late payments. it's been unfair including the weekend due dates or due dates that change each month or payment deadlines in the middle of the day. it ended the confusing on fair practice of the so-called double cycle dillinger. this is an excellent careful kind of regulation using a variety of techniques that can be affected. there are important changes in the dodd-frank act to the housing market in addition to the creation of the consumer agency i will talk about in just a moment. most people don't know because the act was extremely long that

it fundamentally shaped the rules of the road in the mortgage market. it yielded premiums and changed the practice is for hiding the taxes. it eliminated the practice of steering. it provides brokers need to decide whether or not an individual has the ability to repay their loans before they make them alone. reforms the disclosures and requires the remains can in the game as a way of the lining incentives. so all of these changes i think are going to make a fundamental difference in the mortgage market. the car deck and the mortgage rules in the dodd-frank act are two examples of ways in which regulation can be used to better and improved consumer financial markets. but they have the disadvantage.

they tend to lock in on the practices or harmful in the past and provide room for consumers to be abused in new ways in the future and that's why it was critical in the dodd-frank act that we create a new financial consumer protection bureau, and i feed the new bureau has provided us with a historic opportunity to build a successful regulatory structure for consumer protection. one is designed to promote financial inclusion for consumer choice and provide more efficient innovative markets for the consumer financial products. markets that operate on a competitive basis of price and quality rather than hidden fees. before dodd-frank, let's remember our system was largely incapable of supporting a successful free gift restructure for the consumer protection. fragmentation of the riding, supervision and enforcement made it impossible to create comprehensive and well

calibrated consumer financial regulatory system. jurisdiction and authority for the consumer protection was spread over federal regulators who had higher prairies than protecting consumers. banks could choose the least restrictive supervisor among different banking the agencies. a large number of nonbank providers the ski the any meaningful supervision at all. and the bureau will for the first time now be able to provide the necessary mission focus on market live coverage and consolidated authorities. it would be an agency that focuses not simply on more regulation but on the slaughter, coherent and the effective regulation. regulation that is designed and implemented with an understanding for and respected classical models but it isn't blind to the compelling insights of consumer division beehive from the last. regulations that balances the consumer's ability to find those suitable financial products from among the seemingly in distinguishable choices on the

one hand and product providers and incentives to hide that choice on the other. i have to admit what i find it curious that the voices of opposition to the consumer bureau, and agency i remind you whose primary principles by statute or accountability, transparency, fairness and access is that the logic rest on the press and in powering the consumers to send out and difficult to the free-market spirit of the appear to be stuck in the debate that presumes the regulation and efficient innovative markets are at odds. in fact the opposite is true. markets rely on good faith and trust and fair dealing. markets require transparency the reflects economic reality rather than distortions caused by misleading sales practices and the hidden traps. and the discipline of the market requires clear rules. i want to thank you again for the opportunity to speak with you today.

you are all truly amazing and the hard work means securities for our family and hope for the future. firms compete based on price and quality, not trucks and traps. and we are old-fashioned virtues and values of thrift are rewarded. thank you. [applause] -- thank you very much, michael. we have time for a couple questions. >> from bloomberg i've heard a lot about you and came into the just after dodd-frank was passed. it seems this is a ground ball would like to know whether you'd be interested in running or if you have the opportunity. i certainly think the people here would approve and i would love to hear whether you are available for the job and an

hour is not that far away. >> [inaudible] >> first of all let me say i'm thrilled we have such a thing as a full-time reporter on the consumer protection bureau. [applause] no, that's terrific, i love my family and i'm happy to be where i am. >> i want to endorse the idea you should consider coming back to d.c., but a question on treat the rule by the federal new treasury rule of federal benefits going into the approved account or certain specifications how will that be enforced? i'm sure the consumers heard of the account, how would the treasury ensure these meet the standards and the rule?

>> so, there are two separate things. one is the account the treasury set up for deposits to go into and those are in force because the treasury sets of all the rules and they are the account treasury wants. there's the other account people have their deposit put into and those instances in which the department of deposit account is other than what is permitted by the rule we have to rely on the first instance on consumer complaints and information from the market. there's not a part of treasury that is conducting this activity, doesn't have direct arm of the law in the world to do that. now once the consumer financial protection bureau is up and running, the consumer financial protection bureau can enforce wide range of consumer protection laws and will be i think an incredible additional

partner at a table in shaping this market in a positive way. so short term relying on the consumer complaints and going into the deferment saying you are not in compliance with the rules and longer-term the consumer agency is another avenue. >> the consumer federation of america and other consumer groups and those on the frontline keep track of consumer complaints and historically auto sales and dealer practices, like a number one. and as you know, they have an exemption from the protection bureau. could you comment on that? [laughter] >> it's wrong. [laughter] you know obviously when i was in treasury we were fighting very hard to get although lending included in the jurisdiction of

the protection bureau for precisely that reason. it didn't make any sense to me the you could have a banking engaged in practices there are governed by the consumer rules and an auto lender during the same thing that's not governed by the rules or you could have as is often the case of both lenders packaging essentially giving them to take out loans on behalf of the bank's da silva loans to and not be covered by p sick consumer protection rules, so i thought there was a mistake, not treat all although lenders the way that you would treat any other lender, that is to make them subject to the jurisdiction of the bureau and make them come into conformity with basic fairness and practices in the consumer lobby and the practice as you know and you were the expert on this, the prices in the area are atrocious and have been.

lots of lenders to a great job and lots of them are completely on the hawk in dove and don't have any problems but where there are problems there are serious problems. racial discrimination, overcharging, appropriately the fee involved, and it's a situation in which consumers are often quite vulnerable because they think they've made the choice the matter to them which is what car they want and then they thought they did the other thing important which is negotiate a good price for the car. but it turned out that the stop working when all the action kicks in which is how much you pay for your credit. and so i think it's a problem. >> we have time for just two more questions. >> i am margo saunders of the congressional law center. >> than you need no introduction

[laughter] >> thank you on behalf of my colleagues and our clients for the tremendous work you did while you were in washington. [applause] >> thank you. >> you didn't name one of the real victories in the dodd-frank bill. the treasury was largely responsible which was the remittance bill that significantly provides protection for remittances than by people living in the united states to find countries in area where this has no protection at ever and has dramatically new and great protection. i do have a quick question. the treasury has indeed done great things in regards to protecting social security and other federal benefits. use it a minute ago the treasury established protections for accounts into which federal benefits could be deposited, and i followed this pretty closely and must have missed something because what i see is the

protection on garnishment, protections for prepaid cards, the new protections or ongoing indirect express, but is there a regulation -- >> i did mean the card based accounts. there is no general treasury rule without and as you know they're going to be completely covered by the consumer financial protection bureau. so the rules and regulations the will come in that area and eventually the card area more generally i think we will have a much more natural home than an agency set up to protect consumers so i don't think that there will be gaps in that regard we were obviously thrilled to get the remittances and to the dodd-frank legislation and i think it is an example of where researchers can

a difference in policymaking and i've been research disclosure remittances before coming to the government. both on my own and the owls the foundation and i think that research topped us convince people that there was worth putting the energy into regulating in this area where they sit before it doesn't seem like there is a real problem. i think people could see there was a real problem and very happy that it's in the final bill. >> my name is pamela from the new america's foundation and i wanted to say thank you so much for visiting were being part of creating parul. what is necessary to ensure the commission that was envisioned to care for >> one of the things we try to build in the consumer agency directly in the statute was a strong role for the public

accountability, so flexible the bureau needs to review its rules and get input on how it's doing the rules that are out there, the agency is going to have an ad for is recounts the for the input. there's a whole bunch of transparency issue is built into the statute so one thing you can do is make sure you are affording yourself the opportunity to get put into the content. >> i think as zach is saying, more broadly before coming up here there is almost a collective amnesia descending on capitol hill and washington and elsewhere in the country about the financial crisis we went through two years ago. people kind of forgot we had it and why we had and why we had to fix it. and all ready to go back to

whatever we were doing before, and i think that's dangerous for the country, so i think groups like yours be unable to go and say publicly and provide evidence of past and current and ongoing harm consumers are facing is an important way of reminding people like this we had to fix the system before because the was deeply, deeply broken. >> this brings us to the end of the discussion to the next speakers here and waiting to speak to ensure michael who will stick around another five minutes if there is anyhow other question outside of this room please join me in thanking michael. [applause] and the next session will begin

momentarily. [inaudible conversations] >> [inaudible conversations] we're going to begin in about ten seconds. >> my name is jack, a director of public affairs a cook the consumer federation of america. this morning there really is a pleasure to introduce david strickland as the administrator of the national highway traffic safety administration.

david began in january, 2010, and quite frankly has taken on one of the most important, complex and challenging job is in america. fuel economy versus safety, the tour u.s. challenge, reducing the rule over death, a trunk and destructive driving, regulating the largest in the country who produces a product responsible for more death and injury than virtually any other product we by. on top of that, he's nursing back to health and agency some would say has been asleep at the wheel for about eight years. [laughter] an agency that has the potential to save more lives than virtually any other government entities. [laughter] that's david. prior to his appointment he served eight years on the senate commerce science and transportation committee and likely worked with more than half the people in this room.

as the senior counsel for the consumer protection subcommittee he was the lead staff person on the oversight, federal trade commission and consumer product safety commission. he also served as the lead staff person in the formulation of the cafe to reform in 2007 and in the reauthorization and safety will act of 2005. as you can see, he wasn't just a 101st senator, he was the 101st through 110th center. [laughter] his work in advising members led to the inclusion of several important vehicle mandates and putting the electronics stability control for every passenger vehicle. the fed initiated safety reforms and funding increases for the seat belt and drug driving programs and was named the congressional staffers of the year by mothers against drunk drivers. and while neither one was good enough to make the tournament,

david eskridge of northwestern and harvard law school. with that, i'm happy to welcome david strickland to the consumer federation of the american assembly. [applause] >> thank you, jack and i still bitter about passing over northwestern. we deserve to fit this time. [laughter] we deserve one. no, thank you. this is an honor and a privilege. i have had the privilege of speaking to thousands of people across america. my past year and in the service to the national highway traffic safety commission. but this particular group when i received the invitation from the cfa, this was an absolute must do for me. i had the honor and the privilege of presenting to the assembly about two years ago when i was still the senate staffer during the legislative update when i think the senate

and the committee was in the throes of the consumer cia and there's a number of people i'd probably kept up late at night with calls of desperation to get things worked out in that piece of legislation to reauthorize which is another one of our public health and safety agencies and i am incredibly proud of. before i came down i met with jack and rachel and i was telling them it feels weird to be via administrator of the traffic safety administration. not that i don't think i'm comfortable with the rule or my love of the agency i worked with three agencies every day for about a decade and they were like your children there's no favorite whether it is the safety commission or whether it

was nitze and all the agencies did such fantastic work to serve the american public first and foremost trying to keep people alive which is the first priority period. the federal trade commission it is making sure people aren't cheated and screwed. so everyday was a fantastic opportunity and challenge for me as a staffer and i think the working with you, all of you and the agencies and the others, the ngos and companies that have been a part of this assembly for so long helped build my east coast in terms of looking at safety and how we take care of people coming and i think that has been even more deepen and blessed with my work of my staff that the national highway traffic safety administration. i'm happy that my deputy administrator is here who is

other alumni of the safety commission and another proud warrior in the fight of keeping people safe and life and his entire career in government service and he really is for both of us as agency leaders to come to work every day with our agenda. as jackie lu did to this job is -- i tell people and they think i'm being hokie about this but for think i have the best job of the federal government. i guess for me but i can only speak of my inexperience. the best job in the federal government. i have the opportunity to work with fantastic technology, companies around the planet looking at ways to improve the individual mobility. things that sort of enriched every american's life. one thing i know because i have a relationship with my car people have personal relationships with their vehicles. there is nothing more personal than a car, and the visceral choice you make of the

dealership try to figure of what you want on the car and then becomes a tool and it's part of your life for me ten, 15, 20 years and that part is fine, but then there is the people part of it, recognizing that while you have that connected relationship to every person and when you talk about 255 million of them, the unfortunate circumstances of how many people lose their lives because of high rate traffic we are talking about 34,000 people in 2009. so the excitement about the product and what it does and the freedom it's created for americans also creates this huge risk and frankly the torment of the loss of supply and how we have to balance that at the agency every single day how we can get the numbers down and

better use our authority and rulemaking ability and research, how we can better work on our behavioral programs whether it's impaired driving or fatigue or wearing your built for speed control it is a portfolio of issues and there is nothing parallel to a specially for a person that so desperately believes the need for the government to help support model me how people manage their driving pat and safety but how we support the revolution of transportation of the individual mobility. it's something that i see at my desk every day and i would love to say every moment has been julia's and stress free. but you know something? i would rather have been frankly that he might have on board during the challenges of this agency because the staff is

fantastic. the of done so much and they are true believers and with the do. it is a fantastic opportunity for me and ron to be at the head of this agency. now, i wanted to talk about i guess the question and the notion of the challenge as a regulator and all of you the work so hard on the safety i've worked hard specifically about the safety culture and the transportation realm and, you know, i thought i had a very active safety culture. when i worked with an baala adelbert before he became the commissioner the cpsc and his perspective when he was there the ground floor of the creation of the agency as a staffer and then came and worked with david of this gspc and john hockley dewitt before it was ever there,

all the folks i worked with from the staff and from the political leaders, you know, what it means about culture and how we can in part a better safety culture for everyone and then i came to nitze and the interesting challenge we face every single day and as we move with all of you and work with the manufacturers is where we have to edolphus the c2 culture and how we talk about the start of next step of what we do not only as an agency that as a country. i can give you a little example of this. back in 1977 my father gave my mom a brand spanking new 1997 lincoln continental fox. i mean a big car. i mean free member of the day my father should do the in the neighborhood about the sound

system and i remember lincoln had a little demo tape or actually it was an eight track of the elton john that was tracked him to show the sonic ingalls of the car and it was all this great stuff. and, you know, my mom and awfully in the car population. was i in the safety belt when i was in the car with my mom? no. and road trips was i actually sitting in the backseat of that car? i was in the back deck between the rear window, you know that back deck that was huge enough's -- i was back there in the car with my mom and she had a lead foot, has a lead foot. i tried to teach her the ways of speed control now that i am the administrator. [laughter] it would be incredibly embarrassing for the mother of

the administrator to be getting speeding tickets. [laughter] so hopefully in georgia she is keeping my word and doing the right thing. i believe she is. [laughter] but, nobody thought there was wrong. you saw kids riding in the ??? area of cars all across america. nobody blinked and on a. today, would you do if you saw an unrestrained child riding that way? a lot of you lose your mind and start honking and some would call the state police and say we have a problem over here. but that's what i'm talking about. in terms of the evolution of the expectations and safety culture. and a lot of it has had to do with the hard work of the national highway traffic administration, our partners like all of you here in the room, the state law enforcement, mothers against drunk driving,

the consumer federation of america. the laundry list is huge, but originally -- highway advocates, i'm sorry, jackie, i would never live and forget you. i have a list of people you all know me personally i would be like you didn't need me. jackie, iou special. we have to have lunch. i can never forget advocate. but the point being is a ticket tremendous amount of work to get the behavioral changes to people who accepted the use of the technology groups. so when you are a trillion to get the better in some instances - one have actual noval systems which they've got away from since then. when you are improving the protection and working on child restraint systems and trying to put in, how we get people to do

it, how we move that needle in the choices they make, that power collectively that we all have. nhtsa has a huge role in this and we don't shy away from it every day in terms of research and rulemaking authority and rulemaking pretty plants. the work we've done that move to the needle on saving children specifically, talking about from 1995 to 2008 with an estimated almost 9,000 kids saved by a child restraint seats are up by a safety seat or using an adult seat belt. that's huge. it's huge. and it's a great success we have got to do better. but then, as we are thinking about all of those things and the hard work it took it will be the law enforcement of the mobilization. in terms of your hard work and outreach and public education and lobbyists and getting the

resources to our agency and others. this turns into a positive men momentum but then along with the notion of the safety culture we have the movement of it technology and how we balance the two. i will give you an example of that. now, we are working very hard at nhtsa, the next generation specifically of crash avoidance. we have been working for decades on the crash of waiting along with other people and we've done this in a lot of ways and improving by highlighting issues in the five star safety rating that we updated for 2011. it's the hard working cfa and to the reports the hard work of the advocates, highlighting those particular traces of technology and behavior in the state law it's hard work for the whole

bunch of people. but then the question is where the safety culture goes along with the technological lead chance because then you get the counter argument from a lot of the folks that have a different perspective on government regulation and the turmoil like to capture how to describe things meaning the government, right? hauer who do we convince where the responsibility of the driver who begins, where the response of the automobile manufacturer begins and where the of responsibilities of the regulatory regime begins and ends. because we can issue rules and want her early anything -- in some instances if i say the safety rating for example having people will get that and make

recess whether they are going to buy a five star safety rating car or whether or not that is going to be a factor in their decision, whether they are going to choose to buy a vehicle that has lain departure warning systems, to technologies the agency has highlighted in the last go around in our upbringing because those are technologies that have a huge ability in the future to keep the crash from happening in the first place. but then there's the question of well, how reliant to we want our drivers to be on the systems? how do we as a nation value those particular systems? arcane bricker receipts? is the cost we will be adding to the vehicle burst army mandating it on every vehicle? will we saving of lives? but there's a bigger question

before you get there because just what the electronics to the control, there's a mandate that's going to take place starting in 2012. but before that, there was cars. people were hearing about this as a part of the package. they were choosing to buy it because it could possibly help them keep control of the vehicle. and that had so much power we were able to make them but again, does that mean -- do we encourage people to drive aggressively to have a sister system embedded, the answer is no, we want to support the driver in the time of emergency. and as we lawyer or things into the car as the car has more systems and that which will

intervene when there is a point of no return for the driver there's some system some automakers have where they can sense that the car is a point of impact and there is no way a human being is going to be able to intervene and get that pedal down hard enough to get it to stop so it will stop itself. some people are making decisions and that is one thing we are hearing the world talking about all thomas driving systems and where this leads. the question happens for all of us and our expectation. what about our safety culture? there's nothing we as an agency can do to substitute for an alert driver.

but there's a substitute for that. we can't. it's as the agency to create the safety recognizing there's some risk created on the road every single day to help eliminate them or medicate them to such a point they can get your people involved in accidents and suffering that fatalities and injuries. then the next question comes to all of you when you come to our agency or the commission or the federal trade commission and say this is a pretty come something happening now that you have to do, and then again against every other risk all of our agencies have to work through versus the other crosscurrents of what may be happening politically or what consumers are willing to buy and

accept. i think the classic symbol of the great conundrum for us as an agency is the alcohol detection system for safety is work we are doing to leverage deftly with the manufacturers it's a five-year project where you can have a technology hopefully by the end of the work in some years in the future that a car can figure not whether you are over the limit before you start the car. you touch the wheel. it senses the breath of the driver and if you are over the limit, if you are over .088 can walk the vehicle so you never get on the road in the first place. as a society we don't want truckdrivers on the road. we have vigorous state laws that will in prison you if you drive over the limit. we spend millions of dollars every year in the cm