infrastructure 2015. as we travel around the country, as we talk to public and a private, fund profit, corporate leaders all across the country this is the author looking for from us. they want to know who's doing what, tell me exactly the innovations that are out there. what can we learn from these people? they talk to get that done? give me the specifics. no one is waiting anymore. we see a lot of energy, a lot of vitality. we heard from your -- for your reason. this is the time to get things done. scene and from folks around the country. a few examples. we'll spend the next few months soliciting more. if you have ideas and then toss. we will start to build this clearing else. those lessons can be shared so that we can do this network approached, the partnership approach so we talked about so people can learn from one another. we do believe that america's infrastructure needs are

daunting, but i don't think that they are insurmountable, nor is washington this function an excuse -- excuse for inaction. from a believe our state and cities, to pollen areas and a pilot to the private public civic institutions that lead them to have the talent and as we have seen dramatic creativity to move this country for in this area and in others. we absolutely believe now is the time deduces of the weakest are building for the next 100 years. thank you for coming. appreciated. [applause] [inaudible conversations] [inaudible conversations] on c's

"q&a." is a dina elboghdady "the washington post" who covers the housing industry. what is going on on capitol hill when it comes to the housing industry -- not just capital but washington as well? guest: there has been a lot going on the past couple of weeks. basically there has been a big bill moving through the senate, it got through the senate banking committee overhaul fannie mae and freddie mac. yesterday the senate banking committee had a vote 13-9, they passed it, but it is probably

not going anywhere. while it got bipartisan majority, they did not get the central liberal core of the banking committee that they really needed in order to push this to the senate floor. thinksyone pretty much it is stalled for now, but i think this is an issue that will keep coming up over and over. all, if it passed the committee -- but you are saying it will not go anywhere. worst of all, what would it have done to fannie and freddie? guest: it would have dismantled them over a five-year period. the major point was to shift the risk of mortgage lending from the taxpayers to the private sector. because, of course, fannie and freddie were taken over by the government in 2008, the height of the financial crisis, and they have been under government control since then. and part of the problem was that even though they were profitable for many, many years during the housing bust, the losses overwhelmed them.

they just didn't have enough capital to keep running. the government has to step in, take them over, and they have been under government control ever since. host: also joining us is daren blomquist from the new york studio, vice president of a ltytrac.lled rea cuest: yes, it is realtytra and we collect public record real estate data. a lot of people know was for collecting foreclosure data, we get people to collect it from counties across the country. we also collect all other types of real estate data from tax and deed and mortgage type of data as well as what we call home tax ts data, home fac anything you want to know about the house. host: how would you describe the health of the u.s. housing market? guest: i would say we are kind of in a jekyll and hyde housing

market. there is a lot of good signs, when you look especially at home prices. but under the surface, there is still some lingering distrust left over from the housing should -- crisis that has not been fully dealt with yet. i think that is what everybody is concerned about, along with the somewhat anemic economic growth that people are concerned that this housing recovery is not for real or not as good as it appears to be. so we look at home prices, they had a very big jump in many areas in home prices in 2013, but we are starting to see the numbers him down, home price appreciation slowed down in many markets across the country. foreclosures are down to nearly pre-recession levels. actually we just came out with april numbers yesterday, and properties15,000 with foreclosure filings in the month of april. that is down from a peak of over

367,000 in march of 2010. and we are almost back -- before the recession we were seeing about 85,000 foreclosure filings a month. we are getting that closer to that level. that negative piece is largely gone from the market. housing prices are going up. but there is what i call a hole in the housing recovery that consists mostly of first-time home buyers and move up buyers not participating as much in the housing recovery as you see cash buyers and investors participating in the housing recovery, and that is a concern that this is not as sustainable as we would like to see. host: there was an article recently in "usa today," and it was talking about the fact that the middle-class cannot afford to be a homeowner today. yeah, we see that in our data. did an analysis of

median incomes which is largely stagnant versus home prices and average rental rates across the country. i am not sure if that article but weced our data, found that in one out of 3 -- if you look at it on a county basis, it doesn't look so bad. only about 20% of counties across the country would you say .re unaffordable specifically for rent, the average mortgage payment is 30% of income. but if you look at it on a population basis, for rent, about 34% of the population lives in one of those housing markets where rent is more than 30% of the medium income -- median income, so one out of aree americans living in market technically unaffordable to rent and then you look at buying, it is a little bit better.

actually better to buy and less expensive to buy than rent in most of the country, but still, there is 15% of the population living in one of those markets where the median income -- or excuse me, based on the median price of a home, you would have to spend more than 30% of your income to make the monthly mortgage payment. one of the things we notice this is a lot of these unaffordable markets, both to buy and to rent, are in areas where the , theer -- it skews younger younger generation lives, so the is a problem because younger potential renters or buyers are the ones who we would expect to be kind of the foundation of the housing market growth in becoming those first-time homebuyers. ilityes, unaffordabl

has snuck up. we looked at 47 markets across the country where it is both unaffordable to buy and rent. maybe not surprisingly, many of those are in coastal california, all five boroughs of new york are included. many of the markets where the younger generation lives are unaffordable both to buy into of those markets at a slightly more affordable to rent than it is to buy. elboghdady, is washington looking at the affordability issue? by the way, we will put the money -- numbers up on the screen. guest: there has been a lot of talk about affordable housing for lower and middle income people. that is part of the bill from yet today. one of the reasons why it stalled is a lot of the liberal democrats on the committee did not think there were enough

protections and therefore lower and middle income people. and fannie and freddie for a long time have had goals. they had to buy a certain number of mortgages from people in underserved areas. the bill that passed yesterday would eliminate those goals and just set aside a bunch of money for that purpose. and so that was one of the major stumbling blocks for the bill number is a lot of liberal democrats did not think the access issue was there. fa and whatis the fh is the goal? guest: it is the agency that took over fannie and freddie and it oversees them. there's a lot of focus on the agency because ittime north car. he is basically saying that until congress comes up with a reducee does not want to the footprint of the fannie mae and freddie mac. huge reversal from his

predecessor. he was reducing the footprint. that was a major policy shift. there have been a rash of articles about the fact that student loans may be the bad housing market. have you seen those? what is your take? guest: is interesting. it makes sense. we do not have the data specifically. it makes sense that if you have a bunch of debt coming out of -- the numbers are staggering when you look at some of these reports. you have a bunch of student loan debt coming out of college, at that point, you may be buying a house, you may not want to take on more debt. date on that, our

it seems to be more tied to just -- even if you do not have additional student loan debt, these markets, where a lot of the younger generation are living, they are unaffordable, even if you did not have the additional debt to deal with. these -- at mentioning we looked at the top 50 zip codes that are least affordable to rent in. those is zip codes, many in california, new york, new the 20 to 40 age range is higher than the national averages in those 50 zip codes. whether or not they have additional debt, just looking at the average income that would be afford properties in

those areas is tough. those markets, on average, of incomeo spend 48% to pay for average rent. it is even less affordable to buy. spend 53% of your income if you are in the median income in those zip code's. fundamentally, it has more to do with just the opportunity, whether or not you have the additional student loan debt, but that certainly makes it tougher when you have the additional debt. , based on the fannie and freddie guidelines, the toditional amount, debt income ratio is 43%. if your monthly debt that you're paying out to student loans or

other debt is more than 43% of , that will automatically disqualify you for getting a mortgage. there are many counts against irst-timeential f home buyers. they have this additional debt that is going to make it harder for them to qualify for a mortgage. i think that is part of why we are not seeing first-time homebuyers in the market is much. the homeownership rates are much lower than historical averages. guest: it is not just an ty issue.i buyers have a tough time getting the cash down payment together. that hits people right out of college particularly hard. it is also access to mortgages.

it has gotten tougher to get a mortgage since the financial crisis hit. people have to have incredibly high credit scores to get in. it is a two pronged issue. a third would throw prong in there. another fundamental issue is the low inventory of homes for sale. even if you overcome the first two hurdles, you are competing against other buyers. many are cash buyers. able to qualify for a mortgage and you can afford it, you may be competing against buyers who have cash and they will go to the front of the line and that is a challenge. investors were part of the reason prices shot up.

they were snapping up all of these foreclosures on the cheap area and they were offering all cash, all the time. a lot of people got shut out in the process. york homew 80% of new sales were cash. that was just recently. guest: i had not heard that number yet. that is something we looked at. i was discussing with someone in manhattan, an appraiser who is knowledgeable, we were looking at those numbers. when you dig into the meat of the market, the condos and townhomes, it is 60% that are cash sales. the end result is it is still very high. least, up to 80%,

depending on what housing stock you look at, are cash sales. is not the federal's governments job to save housing. how involved is the federal government in the housing market? extremely involved. i think they have something like 80% of the market. they play a huge role in supporting the market. host: loganville, georgia. your first up. buy bad insurance loans from people like bank of america who commit fraud. i don't understand why freddie and fannie have to take those loans back to the insurance process. you have the investors that come

in here and they buy up these foreclosures. the agents may be listing things, but they don't really listen to them. the only thing you have on these trashed outhouses is they are buying on $.30 on the dollar and they buy them and they drive up rents. they are back in the market now, building a different name. how they are able to do that and still get millions of dollars worth of loans is beyond me. i am looking at this data in the market and it is flat out crazy. the v.a. system, the way they do that and the appraisal process is a joke. the percent on the commissions

is nuts. why we are still paying that is crazy. i am a real estate appraiser in the state of georgia. i do this every day for a living. i do the supply and demand. you are right about the investment in the cash to the market. they have pocket listings and they sell these investments and one cash. the loan officers do not want to do the program because there's not a lot of cash. you have these trashed houses that freddie mae and fannie mac own. that only leaves a cash buyer. host: how is the housing market in atlanta? caller: it is great. you can show up at the courthouse in by a couple houses

for 30 or 40 grand that you can probably sell for 80 to $90,000. host: thank you for that. what response do you have for that color? -- caller? told --e have been talking to folks may atlanta market were nervous that the investor interest is so when these big private equity money that is coming in and buying up properties as rentals, the concern is, if and when they pull out of the market, the market will experience a downturn in atlanta. number onethe market, when we look at our

data, for these institutional investors. sales is goingl to one of these big institutional investors in atlanta. countrye most in any mesh any county. the 20 three came mortgages, one of those hidden gems is not available to investors. in and buy a to go property and get money for the rehab. it is suitable for properties that are highly distressed and need extensive rehab. in and get the purchase money to buy the property, but the rehab money. it tends to be underutilized because from lender's

perspective, it is more of a complex and difficult one to deal with. host: the head of the finance authority spoke this week. here is a little bit of what he had to say. [video clip] >> repurchase risk is a top concern for the mortgage industry. lenders believe that there is still too much uncertainty in this area for them to keys their credit overlays. ultimately, this undermines the goal of improving access for mortgage credit, for credit worthy borrowers. with fannie,ions freddie, and lenders over the past several months, we are making a number of refinements to address some of these concerns. as fannien rise and

mae and freddie mac announced yesterday, they're going to relax the payment history requirement for granting representation and warranty relief, by allowing two delinquent payments in the first 36 months after acquisition. get loan level confirmation when mortgages me performance benchmarks and when they pass a quality control review. enterprises will also eliminate automatic repurchases when a loan's primary mortgage insurance is rescinded. is what heignificant announced? it is pretty

significant. a lot of loans started going bad and they realized that the loans did not meet the standards. lenders had to buy back loans. it has cost a lot. as a result, they tightened their standards because they do not want to be in that position again. that is the access issue we were talking about. toy tightened and tightened the point where the pendulum had swung too far in the other direction. watt was saying he would loosen some restriction so they would not have to buy back the loans under certain conditions. host: next call. frank, new york. we are talking about the u.s. housing market. caller: thank you. there is so much information. taxes in albany, the

almost supersede the mortgage. it seems so hard. your mortgage is $500 and your tax the $2200. -- your mortgages $2500 and your taxes are $2200. rental, to have a offset the taxes, you could pay your mortgage, now it is the point you can. you have to come up with more and more and more. when does it stop? it doesn't seem like it ever does. i don't know if you guys have an answer. host: any response for that caller? guest: that is something we would like to analyze more.

the effect of property tax on the real estate market. that is one of the things a lot of homeowners, when they get , you mayownership forget about that cost of homeownership, which is significant in most areas. new york has the highest property taxes of any state. it is extremely high. that can really raise the cost of homeownership and push people to become renters. that is something the federal government is not controlling, but states can look at that and the property taxes are affecting the health of their housing market. where i live, we have the proposition 13, that controls property taxes as an effort to keep homeowners from seeing those huge increases in once they buy the property.

a consideration and a cost of homeownership that has to be figured into the equation. host: doug, baltimore. good morning. i am in the real estate business in baltimore. that couldtrend change some of the conclusions you are coming to. the millennial's do not own cars. many of them do not own cars. when you look at your definition of affordability, it is really beferent then what may an affordable standard. their choosing more expensive rental options in urban environments and then cheaper options in the suburbs. i think it is a fact that these markers -- these markets are high.

what do you do in the housing market and how would you describe the housing situation in baltimore? : we built a lot of retail in downtown baltimore city, where there was not any. it is all customers coming in to new rentals, primarily. the baltimore city real estate market has been healthy downtown. the outskirts of downtown are not healthy and have a lot of issues. the downtown area, we are having a boom and it is being driven by empty-nesters and young people. what some oft these young kids are paying for rent, it seems excessive, but their economic decision formula is different than mine. guest: one thing we have not talked about, i am sorry to bring this up right now, prices

have been moderating. that is probably paint -- playing a role right now. they will probably moderate for the next year or so. interest rates have been climbing and are starting to come down a little bit. what exactly is wrong with the housing market? is it too expensive, is it too cheap, is it bad quality, bad quality, that laces, poor service, what? problem isbiggest that a lot of people were underwater on their homes. they owed more on their mortgages than their homes were worth. that problem, with the price in the paste seen two years is getting better. there is the access issue. a tightening in people not being able to buy. ofst-time homebuyers is one the bigger problems. the fact that people are not entering the markets means the whole pipeline gets jammed.

their firstnnot buy home, then the people who are in those homes that are for sale cannot move up and buy the next home. the entire system gets gunked up that way. host: are their pockets that are really healthy and pockets that have the problems that began in 2008? guest: absolutely. we are seeing pockets. it boils down to fundamentals in a lot of areas. havebecause foreclosures gone away in a place like detroit does not mean -- and when i mean gone away -- they have not completely gone away, but the new foreclosure activity sign oft visible distress is back to prerecession levels. that market has other problems. market, as healthy healthy as other areas. on the flipside, a contrast to phoenix, where

foreclosure activity is back to prerecession levels. the negative is gone, but there are more positives in terms of job growth and population growth. local, as every good real estate will tell you. that is the case when we look at markets across the country. i want to address what the question -- what is wrong with .he housing market i would take -- the most significant issue is the underwater issue. has come down significantly, 17%, 9.1ata shows million homeowners with a mortgage are seriously underwater. .hat is down significantly

what that represents is one in every five homeowners with a mortgage to it kind of stuck. -- with a mortgage who is kind of stuck. buyers are move-up largely absent, because they have negative equity or very little equity, and another issue we have been hearing about is a who ownhese homeowners homes, and maybe have equity, low refinanced at such a interest rate, they do not want to sell their home, because if they sell their home, they will have to get into a higher interest rate when they buy a new home. they love the low interest rate. they are not as interested in selling because they highly value that interest rate. are not aswners

.ebel and -- not as prevalent host: joseph, ithaca, new york. caller: thank you for c-span. i used to work on a committee that was working on redlining, something that was a banking, notto investing in low income areas, not investing in housing areas like, detroit, and fannieithaca, mae and freddie mac were part of the system that maintained and helped eliminate that process. it was specific banks across the country that were doing this to different areas across the nation. i am listening to one person in particular who was saying she fsjld like to have the

disassembled. what does she perceive that would be a technique to ensure that redlining nationwide is not done? guest: one of the major problems is the underserved areas. a lot of the liberal democrats were saying fannie and freddie pay a very important role in that arena. that theseensure goals stay in place. on the other hand, the republicans, the ones who opposed the bill say this affordable housing issue and the goals that were thrust upon freddie and fannie are the reason that the housing crisis occurred. there has been a lot of academic study that says that is not the case. it has been a hot political issue. host: what is the sha and its

its role?a and and basically have always they have basically always been there for first-time homebuyers. they play a big role in the market. they have had problems with the language used and they kept adding premiums. think they raised their premiums about five times. that is a fee that is imposed on the loans. it is imposed on the borrowers. that has cut down their share of the market. i think they have 20% of the market right now. when you look at the

national economy, what percentage do you think the u.s. housing market contributes? i do not know the answer to that off the top of my head. it is a significant driver of the economy. i think it helped drive the economy on the upside and was argue that, many the reason we got into the great recession tied back to the housing market, which became overinflated and over speculative. it is a significant driver. the interesting thing is we are seeing this recovery, it feels like the two have been more separate.

we have seen great signs of housing recovery, but that does not seem to affect and impact the economy as much as we would expect. host: ellen, california. caller: i think one thing that thed change the profile of market is the elimination of the taxed induction for a second home. deduction for a second home. i live in an area that a large percentage of the homes are second homes, vacation homes for people. it has driven the market to a level that is unaffordable for the average person living in this area. guest: the second home market has gotten hit really hard. we have seen it in the washington area and the beach communities.

it is a problem. i get a lot of calls about that. host: is there public policy on that? can you take full did the actions like you -- can you take full deductions like you cannot your first home? guest: i am not sure. host: what is the risk of a be 20% down payment standard when buying a home? guest: what is driving policy right now as they want the homeowner to have more skin in the game. they want the homeowners to be i don't and not say, have much money in this house, no big deal. that is what is driving some of these higher down payment requirements. that is why fha has been popular. it's minimum down payment is reply five percent at this

moment. people think of there are no other alternatives, but there are. greg, ventura, california. how would you describe the housing market in your area? it is the same as it is across most of the country. one of the greatest concerns is the rental markets. when they went to the housing bust, it insulated cost appreciation on most of the mortgages, but that also domino into the rental market. the rental markets went up as well. after all of the foreclosures, the people that left the foreclosures ended up in the rental markets. no one is addressing that. they seem to be addressing all of the adjustments to mortgages. first-time homebuyers are coming out of the rental market.

it not only dominoes from the housing and mortgages, but it went into the rental market, it went into autos, it went into inflating about every part of our economy. i think many people are stuck with the rental high prices right now. upt of the people that ended selling their homes found out they could get to do thousand more than what their neighbors got and it domino. it was false appreciation. those people purchase tire properties. they invested into income properties. they got higher mortgages. they never adjusted those rental rates. it seems to be draining the market. a person renting would be able to go and as open to the investors. i actually bought my first house in ventura county, california. so i am familiar with that

market. i think what you're saying is part of the fundamental issue of inventory. lack, orthe apparent low inventory in this market, and that is affecting both homebuyers as well as renters. there is limited inventory of homes, particularly to live in, and whether those are rentals or buthases it is driving up because there is still demand. ers have not ramped back up to the pre-recession levels. there is low supply that is a affecting -- that is rental levels and supply of homes. i think the statistics would what you were saying that you have the additional supply into the rental market because of all the homeowners who have lost their

homes over the last 7-8 years. we are showing about 7.7 million homeowners nationwide have either lost their home to foreclosure or doone a short sale because they were forced to. rentersthem have become , and one of the things we have not talked about is the idea of boomerang buyers. that is a little bit more of a fuzzy thing. -- millionrevious previous homeowners, how many are them are going to come back into the market, rather than stay as a renter, and become a buyer again? whether what they did last year to try to encourage the boomerang buyer effect, to lower takes to requalify for a loan once you have gone through floor closure -- through

foreclosure. it is now down to one year. will have ant that effect on the boomerang buyers, that remains to be seen. that is one element of this market that is going to help us know whether our housing market is going to continue as a home ownership market or is going to continue shifting more toward a rental market. those -- notwith only with the millennial's, but with the boomerang buyers who lost their home during the foreclosure crisis? whether they stands renters or become homebuyers. >> the issue of supply is very real. that is why our eyes are on the home, to see if they are going to build or. new home sales are a small part of the inventory.

if the builders do not start building they are going to have problems. in areas like california there are a lot of land constraints. either they are not allowed to build, or in there is not room to build. host: a tweet -- guest: those have come up over and over as a problem. dfa j hugecaused fha huge -- the problems. . they are trying to put something in place to deal with that. the issue with fannie and freddie has been going on for 18 months. there've been trying to cobble together legislation. there is a lot of consensus that these institutions need to be wound down in some way, and that

the housing market needs to be less dependent on the federal government and more dependent on the private sector. the problem is nobody can really -- while everybody agrees on the goal, nobody can agree on the means. thatwill be an issue dominates the debate in congress for a couple of years. --st: final question that is the million-dollar dollar question, or trillion dollar question. i think we're seeing many -- inces of the market the market that that is taking place. markets like phoenix, a year ago we received 30% price appreciation, and now it is down to 13% annual price appreciation which is still very healthy and

decent, but it is not realistic to believe that 30% appreciation is going to continue year after year. i think it is a good thing that we see this softening in the home prices. ideally, it is going to be more of a slow pullback on the bounce back we saw in 2013 rather than another drop-off on the cl iff. i would rather be talking about the problem which we are talking but now, that credit is too tight, and inventory is too low, i think those are better problems to have then we were saying during the last housing bubble. credit is very easy to get. i think those of the problems that led to the housing bubble. we are seeing a different set of problems now, and that is a

reason that it is hopeful we're not going to see another housing bubble created. host: the vice president of the financialnd

this portion runs one hour. yesterday the sec issued two plants on dealing with net neutrality. there is a plan to roll out more spectrum so we have other broadband on our mobile devices. .hey are massively significant

they are important to the growth and vibrancy of internet. we wanted to increase consumers and members of congress' awareness. hashtaguse the #netneutrality. our next briefing will be next friday. it will be on the efficacy of the surveillance land. that will be next friday. i will send out a notice. what we are going to do is we will bifurcate those into talking about the open internet half-hour andirst then we will have it -- could it to a couple of speakers. we will try to do some queue and a at the end of the session. feel free to ask any questions you like. if you need more chairs, there

is a stack of them will stop quickly, let me introduce our speakers. it will be the open internet order. we have matthew breaux. he is formerly from the fcc. we have sarah morris. she is with the new america she is the head of head ofional -- the congressional relations is also named sarah morris. she is a different person. we also have a partner at steptoe and johnson. we also have an assistant professor at the university of nebraska. we have a diverse set of speakers. we will get going quickly. if anybody has not heard about net neutrality, i do not think

we need to go into too much detail on what it means. it is the idea that on the shouldt, consumers access content and everyone should have their applications and services treated equally. how that happens and legal authority for that has been a tortured conversation since 2005. me quickly say that the sec had a vote on this. i will ask matt to tell us how we got here. we were here in january and it was after the d c circuit court struck down the previous plan for open internet. this is another crack at it. they are taking cues from the circuit court decision will stop the fcc chairman had a vote.

two were in favor and one was concurring. out whatsk gus to lay happens now. we will go into some discussion stop if you could tell us how we got here, but very quickly. >> just so everyone knows, i've been involved in these issues for a long time. i have been with the sec for a long time. i worked on early proceedings that give rise to these discussions. i have been working in private practice and representing network owners to have a strong interest in this issue. i will try to get through the background quickly. it is helpful to understand where we got to today. 2002 the sec confronted how to classify broadband

services provided over cable networks. cable modem services. the big debate at the time was whether the services under the communications act, whether they should be considered telecommunications services or instead information services. they are generally regulated and referred to as title i services. the distinction between those labels is important. they are mutually exclusive. telecommunication services consists of transmission. dance services can be telecom services when they are moving information. that is without any change in the content. in contrast, information services consist of transmissions. when you are retrieving stored information and acting on that

information, that is considered an information service. the sec said that broadband internet access when provided over the cable networks was an information service and only on information service. transmission was involved in providing this, transmission of information between remote servers and isps. the fcc determines that the service when you viewed as a whole should be regulated as an information service. it should not be subject to title ii. traditional common carrier obligations to provide just and reasonable service and regulation of quality, none of that apply to broadband internet access. ruling, andof that it went to the supreme court and they upheld the decision, the fcc started to think about what sort of protections might accompany information service. the initial debate was not about

rules for protecting consumers. they were known as open access debate. providers like earthlink wanted to make sure they had access to serve customers. the right one of debate over whether the fcc should compel providers to open up those networks so that third parties would be able to step in and serve the customer. those mandates were never adopted. they were debated for years. was thelly emerged foundations of net neutrality. we had principles of first that consumer should have access to content. they should not be blocked by their isps. they should have access to services. the s cc codified some principles that were not binding, but were a statement of the expectations of the agency will stop it was an

understanding that they would monitor developments in the industry stop there were allegations several years later that comcast had throttled traffic using bit torrent protocol. they brought action against comcast. that resulted in the first court case in the district circuit court of appeals. struck down that order saying that the fcc did not have binding rules in place. they had not justified there in force in action to stop that case is pending and the fcc had proposed rules that resulted in the 2010 open internet order to stop that case went up to the d c circuit again i'll stop it was reversed in part in the verizon decision. in itsupheld transparency requirement for broadband providers to disclose important information. is regulation that prevented

blocking of internet traffic. it was remanded to the agency. that has brought us to yesterday's proposal. i will hand it off. gus, thisi get to allows me to say some face. i forgot to talk about our process. the congressional caucus in conjunction with the copies -- we have various congresspeople here. they cochaired the copies. the organization does not take any position. issue toeally great illustrate that will stop all we do is host balance discussions on these issues. pros and cons. the internet is important and needs to be preserved. thank the caucus

and its cochairs. they have been supporting this program. that is our particular process. as far as it goes for the fcc -- >> in a similar vein, a little bit of an introduction. i am the assistant professor of law at the university of nebraska. i teach telecommunications and regulation. there is a great program with a lot of graduates is. it is a quick plug. there is one of our graduates. i will talk about the process moving forward. i want to quickly start typing a pin in the comcast case. it is an interesting question of how the comcast case might have come out if the fcc had previously interpreted this

section is applying to the internet stop they previously said it did not apply. we may want to come back to that question. the process moving forward. what happened on thursday? adopt assion voted to notice of rulemaking. the real beginning of the process. it is a bit peculiar with the discussion we have been having. it was leaked prior to the commission meeting. all of the public import that has been happening and public discussion has been premature until today. commissions when the dumps this? i hope most of you in this room are familiar with the administrative procedure. this is governed by ordinary

agency procedure will stop it applies to all agencies for the most part. adopted proposed rules and there is a public comment keyword that is open to stop the rulemaking process is referred to. the agency has given the public notice. they are waiting for comment. over the next 60 days, between now and then, the agency will be accepting public,. following that, we will have another 60 days of the 120 day keyword -- period to respond to comment. the public can response to whatever has been submitted. it is too early to suffer from fcc fatigue. >> is never appropriate to suffer from that will stop >> there will be members who will

be signing letters during the process and submitting comments. they will hold hearings. onre will be a hearing tuesday. >> one of the interesting things that the fcc has done given the public interest in the subject, they have been adopting some nonstandard mechanisms for the public to submit comments. there is an e-mail address that will continue to be used throughout the public comment keyword -- period. they can e-mail comments. that is an interesting whatdural innovation stop happens after all of these comments are received? september 10, the comments will close. the commission will do one of three things. it will throw its hands up in the air and say, forget about it stop that is unlikely. the next alternative is the

commission well take a look at all the comments that have been received and it will go back and delivery and start drafting a final rule. that will be issued sometime by the end of the year. the chairman wants to have this done by the end of the year. issuedal rule that is fromneed to be foreseeable the proposed rules that were announced yesterday. ,hey either have to be the same notice, or a logical outgrowth of what is in the report. they cannot make up new rules will stop -- new rules. authorityalk about that was granted in 1996 and title to, which is a telephone service, there are openings for

both of those. precise, itit more is currently -- they are proposing to use the weapons of comment on title 2 or other possible sources of authority. it is for wireless and hybrid approaches such as those that were submitted to the agency. the fcc refers to them. their insert efforts from columbia university. most people know which professors those are. resulted in,, it would clearly be a logical outgrowth. >> they have both options? >> right. >> the third option they could do after the september 10 deadline is they could say, we need to think about this more

will stop we will issue a further notice of rulemaking. that is another npr and. it will go through another comment cycle. machen happened many times. it probably will not happen in this days will stop the nprm that was issued was very good. there are interesting things being done there. summarize, it looks like the nprm is a consumer choice of services. is like a bill of rights for consumers. what they can get an access. there is a no blocking rule, which is consistent with the last attempt. there are limits on privatization. that is a big question.

there will be no internet fast lanes. speaking, iou stop sigh headline in the washington post that said internet fast lanes. we want to discuss that. then there is transparency. i think we laid out with the element was before. there will be some kind of business,- a start up a consumer ombudsman. we can dispute these things and ask for permission to do certain things. >> usefully liked it much better than me. let me ask, how you feel this enhances or preserves nutty trolley? -- net neutrality? >> i'm sarah morris. i am the senior policy counsel

for the open technology institute. we have been long-time advocates for open internet protection will stop i think those words will get misinterpreted and tossed around stop we, this with a strong concern that the internet is not just a platform for innovative business models. is a platform for innovation itself. and for unfettered communication access among users. at the commissioners pointed out, this is not just about companies. this is about consumers and users and their ability to participate. to answer your question about what this means for the future of the open internet and our general reaction, this

rulemaking is quite comprehensive. forredicates the framework the new net neutrality rules on a legally shaky ground. the framework itself is difficult to apply in real life. it will not afford the same types of protections that we saw before. thinking pretty critically about what this means. there is a long way to go. >> thank you. as a communications lawyer, this nprm is a phenomenal document. it has everything you would ever

want to tackle all stop it has raised intriguing questions. everyone believes in open internet. that was clear in the meeting. this is complicated and worth unpacking. what is in controversy and what is not? i thought i would start with what is generally not in controversy. based on prior court cases we have seen, and with has been submitted. what is not controversy is two things. there is a certain -- a theory. contributes to broadband adoption. innovation by internet companies . the fcc goes through some

examples of what has happened since 2010 that further shore up that theory. they were very clear on that point that the fcc had adequately lanes the reasoning. the second issue that is not controversy is that broadband havenet access providers the ability to limit openness. supported andy explained their reasoning. then we get into what is really a controversy. is two in controversy things. whether and how to prevent privatization. the fcc wants to know whether there should be prioritization on the internet. how do they adopt that?

>> is that the fast lane we've been hearing about? >> i hesitate to characterize it as a fast lane full i'm not sure how you would describe that. what they are proposing is a base level of service. it encourages individual organizations. the second piece that is that controversy is what parts of the internet ecosystem that such broadband access should be subject to the rules? there is internet access that you pay for through cable or dsl. there is mobile internet access through your cell phone. folks that are interested in addressing where the cable companies and phone companies service attaches to the internet. those three categories will be the commission

has said they will not change the scope in that regard. the rules will apply to wireless access with regard to mobile access. mobilee will prevent a provider from blocking website and applications that compete with mobile services. we will not get into discrimination issues, which are not in play. -- the firstsue issue is the scope. the legal issue is framework for adoption of both worlds. that is whether the commission bases its authority on a provision in the statute that direct them to take necessary steps for broadband adoption. i would characterize it differently and say that the commission has strong legal ground to or.

the question is, how far can they go? is, whether they anchor their roles in telephony that kids that impose, carrier obligations. the commission raises some questions about that post do they anchor some of this in roles? lastly, there could be other theories of jurisdiction and whether it is based on cable statutes or some other statute that they could use to justify some part of the roles. there's a law in in the rules. onis important to refocus the controversy of the scope of the roles. that is why they propose rules -- there is a lot of controversy

will stop that has beenwar said. i will not cite you how to respond to stop privatization, walking. feel free to comment. >> i agree with a lot of what markham has said. in terms of the things that are not in controversy, i would not fully agree that everyone would say broadband providers have an incentive to cause harm. they are operating in a competitive environment. they want the best possible service for their customers. if they did something harmful, there will be a price to waive. -- pay. old examples that were trotted out as babies is for net neutrality would never happen. the old example is that with a

provider denied access to amazon.com and shifted traffic to barnes & noble? they shifted your attempt to reach certain websites. there will would be a massive consumer backlash. -- such conduct would be condemned. it would not occur in the marketplace. all agree thatd there is enough competition that providers would never engage in that behavior. there are fair debates about whether some of the priority arrangements that can be called or innovative business arrangements, whether those are good or bad and whether there are incentives to engage. a wad of the action in these proceedings will be about prioritization. the is that it is important to understand that there can be good prioritization

or bad. it is easy to think of examples of both all stop charming wheeler says that he has priority access to the telephone network stop we should all retain that on the internet. serviceagine a remote where there is a heart surgeon and a city is consulting with a patient in a remote area of stop let's imagine that application. it would seem logical to prioritize that traffic over other forms of traffic that are less sensitive. at the other end of the spectrum, we all agree that if a broadband provider had exclusive arrangements to prioritize traffic, that would be anti-competitive. the point and the takeaway is that prioritization itself is not inherently good or bad. it depends on the context.

ii orr we are under title section 706, the commission has appropriately proposed to judge these things on a case-by-case basis. the choice of legal authority will not affect that all stop their proposing to make context specific case-by-case judgments about the appropriateness of certain behaviors. that makes sense. the scope is missing. if we're worried about consumers having access to the content they are choosing, the threat to that openness does not come only from broadband. hearingerested in groups arguing for open internet. protection seldom talked about what is going on outside of this. we have real-world examples all the time. last year and this year, and retransmission disputes.

content owners have withheld content from customers to essentially punish a cable provider. often consumers are damaged in that. they cannot get access in a retransmission dispute within cbs and time warner cable. withheld it from internet access address is longing to time warner cable will stop some of those customers were not time warner customers. they might have been directv subscribers. the weird thing from my perspective is that those who support a role for government in promoting openness do not seem to be talking about those sorts of comments, which are not hypothetical. they are occurring. going to haveare this debate about the role of government and it will make judgments about what sorts of discrimination are good or bad, it is hard to have that debate without looking at other players

will stop without looking at whether a content owner or other service providers are acting in a way that violates these principles. >> that is interesting. i was not expecting to hear retransmission issues. do you want to address the elephant in the room? >> i will address several elements for -- elephants. i want to say that mr. brill is a wise and learned man. i also would have brought a retransmission fees as an example. saysetaphor is, google that they will not allow their --ver -- searchers to use time warner cannot use it. cox can. say, cut usx could a better deal or we will cut off

netflix to you. your customers will be harmed. >> there is an interesting history here. the baseline to take away from this history is that the content has as much or more market power than the distribution side. we as a society, we like the content side of stop it is valuable to us. we tend to side with the content side. there is fiber in the ground. why is that so much money? if you look at the 19th century and telegrams, there was major litigation. there were investigations. actinged like they were anti-competitively. they were harming the public. after substantial investigation, the government realized that this is the news agencies that are bad actors. the entire investigation shifted

to focus on them. in many ways, this is the same dynamic. the content side and the distribution side, these are big corporate entities will stop frequently the consumer gets stuck in the middle. we turn our initial attention and blame because we like the content guides. we realize that it is the content guys who are exerting market power. to get back to the original is then, it started as open internet a good thing right acting? i think it is a bad thing for a particular reason. no matter what the commission does, unless it goes for the option that i outlined before that it won't do saying no, we won't do anything, what will result is another 2-4 years of litigation. that will be followed by 2-4 years of bickering over the

details of implementation. that will just be on jurisdiction issues. that will not have a sensitive -- substantive issue. the commission has authority to take action against a wide range of net neutrality violations. anything they could ultimately take action against. section 706. my preference would be for the commission to say, we are not going to make rules here. we will wait for real problems to occur. ?> can you give me examples given theou name comcast decision and given what they did? what authority do they have?

>> the comcast example is a great example. if the current understanding of section 706 as applied to the internet were to have been the extent interpretation, that case could have come out like differently. they dismissed it on certain grounds. the fcc could not enforce the policy. there was discussion about the nature of a policy statement. >> i am confused. you are saying that the circuit court read in 2706? >> the fcc breathed new life into it. in 2010 with the open internet we arethe fcc said, revising our prior understanding of 706. with our new understanding, it does apply to the internet. under basic principles of administrative law, the agent

can change their entire interpretation. there are two important cases here. they are both fcc cases. the first is fcc versus fox. a 2007 case where justice scalia said that agencies can change our prior interpretations . a previous interpretation does not bar them from doing so. where the agency -- this was the continuation of the prior case. entities subject to a case-by-case adjudication have noticed that they might take action against them. they can take action against them. they can change the rules. there were a mind supreme court cases. >> will we get to the elephant in the room?

glad this is the lightning round. of section 706. this is a knob adjusting. the burden of proof on the agency with the level of formality they need to go through to enforce the statute. is the unjuston and unreasonable discrimination. --y say it does not prohibit it only prohibits unreasonable discrimination. under case law, that is express language that would need to begin in meaning. >> i have a ton of questions. >> can i respond? >> get your questions ready. we will come around with a boom mic. just speak into it. >> i want to talk about what is different in these rules, versus what was in the 2010 order.

particularly in light of this dialogue that has started to unfold about the beauty pageant of whether we like content providers more. why the distinctions matter from an economic standpoint. i want to point out something that is interesting from a structure stand point of the proposed rulemaking. the commission is trying to that held theets rules in the 2010 order. that was the no blocking rule and the nondiscrimination rule. , they talk about the transparency role. the no blocking rule as it is modified, and we can talk about specifics, but instead of going to the nondiscrimination rule, they go to codifying an enforceable rule. this is important because this

represents a really critical distinction that the circuit pointed out. you can do the rules that you wanted to do in the 2010 order, that you cannot apply them to non-common carriers. this is why the fcc is bending over backwards to figure out how to protect against discrimination and how to do so in a way that allows individualized bargaining. it is trying to do nondiscrimination through rules that protect against the opposite. that is important here. getting back to a point that was made at the beginning about how things are not controversial from a legal standpoint in terms said andye 2010 order d.c. circuit agreed with -- that is, there is a risk of

discrimination by internet service providers that would interfere with the advancement of telecommunication services. i want to talk about why that is true. a broadbande subscription in your home, you only have one for residential home broadband. not ascribe to comcast and another service provider. that is a terminating access monopoly for to reach each subscriber of a network, a content company has to negotiate or connect entrance met -- and transmit their content. terminating access monopoly is important. some of the other panelists may say that this is fiction gets people have cell phones and other tablets.

i think we can all think about this as reasonable people. if i have a home broadband subscription, i will not use my four g service to watch netflix. my primary source of connectivity is my wired isp. i will use my phone to watch videos at night. i do so, but not over my data plan. i do so over my wi-fi network at home. that is why we're concerned. we're are not concerned because we do not like i used. i have nothing against them. i do have concerns about the way that the internet is structured and the way we have seen historically that service providers take advantage of their status in the market. i want to clarify concerns and

why they are specific to isps. >> we are in the lightning round. glad i will do this lightning version. i watch a lot of netflix over my verizon. i am a beneficiary of a grandfather data plan. not everyone can do that. israelk of competition and important -- israel and him are. i think as we get competition and net neutrality concerns fall basicthe question is a title to debate. it is largely driven by two worldviews. competition is not possible. the other is that competition is possible, and we do not need title to. i want to response to an economic argument that has been

made here. this goes back to the idea of the virtuous circle. it is absolutely correct. it can also go the other way. the virtuous circle describes a two-sided market will stop the economic literature very consistently holds the same result. it can harm consumers. it can also benefit substantially. prioritization, we are foreclosing the possibility of certain business and that could benefit consumers. >> can ask you to clarify? there seems to be a lot in the press and i a lot of conversations about title ii. it has been around for 80 years. common carriage in telecommunications has had a lot of things attached to it.

layers and layers of regulation. it is going back 80 years. what do they mean by that? why is that not a problem? >> the basic question of title ii is that we do not know. provisions lot of that would by virtue of reclassification automatically applies to the internet ecosystem. there is a process of weaving most of them. there is a forbearance process. it is not clear. as companies develop new business plans, this is the important transition. it agencies want to develop new plans, they would have to go to the fcc and get frugal through forbearance. that could take 15 months. >> you innovate. innovation by permission.

is that right? >> excuse me. one thing that is correct is that there is literature that says a two-sided market can be beneficial. that is right disagree with sarah. embracingheeler is paid prioritization. he is arguing that they are proposing that it should not necessarily be the norm. there is a base level of service. debate, whether the scope of the rules has to be a predicate before we get into whether we want to be in a certain category. it is hard to say which theory i would jump to until you decide what vision for the internet you would like to have. >> the commission has proposed questions on whether they think paid prioritization is good or not good.

nprm did not advocate paid prioritization. the first part of that will necessarily inform the answer to the second part. >> a couple points on title ii. there are a lot of misconceptions. choice policy driven that the fcc has discretion to make. some advocates talk about if we , it will drive a certain result. they are classifying other lines. they will look closely at how these services are provided to the consumers. it will make a technical

termination of how that fits. the supreme court affirmed it on that basis. factual particulars of the service are driving classification. the fcc cannot disregard facts and say they approve or a different outcome. they had a record showing. the functions are not what they were. that might justify a different result. that is not the case. the technologies i've spoken to say that there is nothing fundamentally different about the way isps are structured. that is one important thing to keep in mind. there is an enormous amount of baggage with title ii. it has historically required terror thing of services and price regulation. it is an intensely regulatory framework. many people feel that it is ill suited to the ecosystem. the fcc has tried to address those concerns. they may be able to waive some

of its provisions. experience, that would generate a ton of and certainty. they? would a court upholds it? a lot of that uncertainty is a concern. there is a huge spillover risk. if they look at transmission in internet access and say that transmission would be viewed as a separate regulated service, guess what? everyone else is providing transmission too. networks andery other providers who have always been providing services on an egg regulated -- unregulated basis. they are all providing transmission together content from servers to isps. there would be on in honesty stabilizing risk.

it will be regulated for the first time as a telecom service. many other forms of internet transmission might be regulated. from my standpoint, having watched the debate. debate, ifatched the they want to achieve certain concessions that there are review procedures. they are meant to ensure appropriate arrangements. we can forge a consensus around that. title ii is something that will never lead to consensus. it will lead to uncertainty and fighting. >> matt has hit on an interesting point. it is one of the things that will be the undercurrent of the debate. where do you want to see uncertainty lie? at&t says that they think there is too much uncertainty with the

reasonable standards. i think it would lead to litigation over deals. uncertainty over what kind of arrangements they can do. if isropose a rule that not affiliated, and it doesn't engage in an affiliated way, there should be some sort of as long asill be ok there is a baseline of internet service. fast we havewe are had 10 years of litigation. it is a debate about where the uncertainty lies. it makes consumers nervous about access to content. providers are nervous that they will have to pay more. they may be forced into relationships when they have isps. they may be foreclosing

potential revenue surfaces that services. whered argue that that is it is going to be impossible to get to a consensus about all that. it is the job of the regulator to figure how to bridge those gaps. forbearance, we were supposed to start this five minutes ago. if i get to donovan and allison. two grams a few questions. does anyone have a question? they will bring a boom mic over to you. it is live. raise your hand. the netflix deal, i heard dealthe netflix to comcast does not touch the internet. it is a private line.

it is from netflix network to the comcast network. in terms of paid prioritization, will people be able to do these side deals where they do direct lines bypassing the public internet? that is probably 89 or 90. when chairman wheeler was walking out, someone from the press asked about that question. he said it does not apply to the netflix deal. >> i agree with that. let me explain. these open internet rules are aimed at governing the connection between internet service providers and consumers. when we talk in that context about paid prioritization, what we're saying is that at&t should not be allowed to cut a deal with netflix. it will speed up the delivery of netflix traffic.

that is compared to other services. we will have a debate over whether such an arrangement might be reasonable. the interconnection between networks and netflix directly comcast and between comcast with an intermediary is something that the sec has set it outside of these rules. it is a debate raised on relationships that are scrutinized independent of open internet. there is a lot of activity around that. the chairman has said that it is not part of a net neutrality proceeding. >> i represent netflix. chairman has proposed that they do not extend the roles, it does ask whether it should do so. -- let'sent for that

say you have rules that prevented arrangement where at&t is not able to extract a new charge. and there was a lot they could accomplish. and whether the fcc will agree with that view or not and whether they think it should be a different proceeding. there'll be advocates that say it has to be addressed. >> i would add that the fact that the net lights comcast arrangement is coming up as a controversy in light of net neutrality is evidence that the rules work. network fromd the unreasonable discrimination. in fact, that discriminatory behavior and pressure points

moved to a different point in a network. the worry here is that again, given the highest fee -- the interest, theyg have the ability to not just extract fees from content companies. they can extract fees that are not grounded in market-driven rates. they could charge a toll. >> i want to respond quickly. i think that is fundamentally wrong to stop there is not one fight that netflix has available. what makes the deal possible is the marketplace where netflix and comcast have separate. there are backbone providers. their content delivery networks. historically, netflix is used all of those routes to transmit

traffic. its own economic benefit as cutting out the middleman. it comes out with an economic arrangement. no one made netflix do that. they came up with the idea and they are saving money. i resist the idea that somehow net neutrality had anything to do with that. think about it in common sense. this is an ideal position with merger proceedings ending. they wanted to use the regulatory process to avoid a they voluntarily went into a commercial arrangement. >> putting on my engineering hat full this is a nice demonstration of the technical architecture of the internet. technologists and engineers will tie you that the internet is not neutral. it is a concept that has a technological meaning. one of the reasons is the design of the network.

there is a great deal of influence over how effectively different sources will be handled by the internet. i want to highlight that it is nothing new for netflix or anyone to use a private connection to bypass parts of the public network. that is what level three cost is this model has been. they have a private network that the use to bypass congestion of the public internet. connect withctly the destination high-speed. but that is not from an engineering perspective. the think matt raises factual question, which will have to be addressed. if those roads are congested in a program is so popular that you have used up all the capacity and the isp says that you will have to pay us to open up

another poor to gain the capacity, that is the first question. the second one is, is that rate subject to market or says? are they able to choose a number based on business models. that will be the question on the docket. >> in a nice twist on that, from an antitrust perspective, we focus on the power to set prices. netflix is in a different position. they are in a position -- they represent such a significant portion of the traffic.

what you would come up with. fair market based and everything else, or they have put there from two are on the scale and

favor one company over another when it came to these options? is government kind of skewing it a little better? and so that this is a different thing. an important word is jittery. you see in the open internet there's another supposed will making which is on and on and on . the orders of a bit closer to fruition. i have alison intended to los what happened. the amount of discipline. then the to the fcc diaz to the and that? >> thanks. on behalf of competitor carriers association we represent over 100 wines carriers windy or sprint and t-mobile to some very small ruler as providers. i think the size of the market shows to from carriers can be shown that an at&t over rise alone controls more customers and all of my members combined

with a hundred pounds a. so we, i think, in all solutions of bigamy and was that both of these topics were discussed because both of these have been topics of several hearings on their own sense of when committees. we would ask how did we get your . so looking back, going back to 1981 the fcc mid the presario is is available. that was divided up in each market between to providers, the of the going to a competitor. in 94 congress broke out in its first duopoly by providing the fcc with optional porgy. this is big. this past winless it, then him. we probably could have a whole session on how spectrum is more than the pay for, but for

getting spectrum legislation through an important aspect is that spectrum is a huge pay for. it generates a lot revenue. so we threw the 94 on the bus up the one under 20 mhz a pc a spectrum which brought in new competitors. for example, sprint today as it exists because of the pc as option as well as several of my members. this option the party was expanded in the balanced budget act of 97. none of these releases of the spectrum act. and then the last major huge specter option was 700 mhz, which was created did tgv switch to a switching from analog and digital tv you're able to free up some prime laments spectrum. moving forward from that point for several years we had discussion of s911 in the senate that jumped opportunities, looking at ways to set up the

incentive option, of remarked it cannot. the fcc broadband plan and how you could incentivize broadcasters to relinquish some spectrum more to shares of spectrum to free up more spectrum to fuel the mobile broadband networks the consumers are increasingly using. we talk about that neutrality. congress adopted the spectrum act portion of another big pay for package generally total 12. that was adopted september of 2012. through the lobbying and notice and comment proceeding it was adopted yesterday. there's still some work to do on some of the fine points, but the general framework was updated yesterday, which finds us here without the awful, you know, several trees order to read your at this point wrote with a general sense from the commission meeting yesterday about the direction they're looking to go.

>> they did not actually publish the order. they gave a preview. the notice of proposed rulemaking, the publisher will making even though it was 110 pages. >> i would be surprised if we come in at 110 pages. >> a big deal. a lot of stuff in there. but just generally, you know, how does this benefit consumers, you know, at companies, mobil providers? >> absolutely. i think that the order coming out was great news for pretty much anyone who has ever sat staring at their phone at that loading symbol of doom hoping to connect. this is did news. this is, you know, as tim laid out, the process we have been working on for years now trying to get through the commission. we have all seen tremendous growth in the asset economy and through all kinds mobile services that we are

increasingly relying on and depending on. i think that, you know, from our perspective we represent a broad swath of the wireless ecosystem carriers, equipment suppliers, of at developers of folks who are doing innovative work in mobile. for all of our members is was a good moment and a good opportunity to know that there will be spectrum in the pipeline, you know, several years down the road. from our view it was interesting to see canadian know, the chairman, all of the commissioners command the commission staff really spend a lot of time on this trying to a move this side of ford, and i think that -- i think that having more spectrum in the pipeline even though it will take several years to reclaim from the broadcast of very complicated process, so it is no wonder that we might not seal order for a few days. there are a lot of moving parts,

and at the end of the day this is good news for all consumers and wireless is an particularly froebel innovation. >> this takes a long time. well, i'm going to give up my spectrum, give it back to the government. the government will have an option. people will buy it. broadcasters would get compensated, and the people that get the spectrum then build the network on those frequencies. so with this huge process, and i guess the concern was there are very few companies or institutions with the financial and technical wherewithal and employees to actually do that. capitalize, have the infrastructure. i guess the concern is, should we not have innovation, younger, smaller companies able to get into this game? i guess there was talk about adjusting the rules so that you could have other companies with less capital and where would all get into that game.

>> the fact that we are both here praising the order is a strong testament to the work that was done to get this right. a couple of points that will really help innovative companies able to participate in this auction, big one was the geographic size of licenses offered. if you only offer a spectrum piece that covers the entire nation there are very few networks and carriers that can bid for that. week, of course, for small cellular market areas, 700 in the nation, more granular. the original fcc proposal would ask for economic areas. there are all tied to economic areas. through a compromise proposal we are able to reach a partial economic areas which allow rural carriers to provide service in all markets while still allowing larger carriers to piece together the puzzle pieces to serve a larger footprint where

necessary. that was a big step to allow some of the smaller, innovative companies to be able to participate. general threshold issue the getting into the auction room. the other big one was true reserve spectrum, much lobbied and fairly controversial aspect of what the fcc adopted. what happened there is, after a threshold prices reached where first that has all of their funding, sufficient funding to move the broadcasters that have volunteered to participate in this process, then about vendee on an up to a 30 megahertz of spectrum will be reserved for those that are not dominant carriers to make sure that they are able to gain access to this important spectrum and table the bill not networks. >> senator and several members of the senate, our coach eric with the congressional internet caucus and a letter expressing concern about the government, you know, favoring some

companies over others when it comes to the spectrum auction. do you think -- did you know that today you would have -- you would like this order so much? did you know that yesterday or two days before? >> i think it is interesting that we are here together in the same place. we had opposed any type of mechanism that would put the fund on a scale for anyone or prevent anyone from participating in the open auction. three have had a long track record of auctions in this country, and open auctions have been successful. i think the biggest take away from the end of his survey is that neither two nor my carrier members and everything that they wanted out of it. the end of the day the mayor know, we saw among all of our members some very strong interest in participating in these auctions, and that is critical. we need a very vibrant participation on the wireless site and very strong participation on the broadcast side. i know that we have been

watching -- the broadcast as a been watching this process where early to see what the activity will be, what will be at stake here. we were encouraged to see the commission will be spending a lot time over the summer going into the father helped answer the broadcast questions. think that at the end of the day we will have a pretty vibrant auction and broad participation of both nine. >> you mentioned how we got here that the budget act and -- there is a financial -- the american budget and balanced budget and revenues is a big question about how the options play into our federal coffers. that is a big aspect of this that is financial that you need to raise enough money in the auction to cover money that we have already budgeted. so can you explain that a little bit? >> it is an interesting dynamic play.