going to be a sore in this region not just for days and weeks and months, but years. and that is a problem for the west. >> can i do a follow up? >> yes, you can. >> just a follow-up answer is that, you know, the united states trained the iraqi army and generals to fight wars. they didn't train them to be ethical, you know? the corruption is, actually, very, very high. there is a report of about 40% of the let's call them the soldiers or the officers within the iraqi army are called phantom. in other words, they receive salaries, but they do not report to work. so iraq pays 1.1 million persons' salaries, but 40% of them do not exist. how can you fight a war with, you know, phantom soldiers? and. >> and the pay goes into the pockets of commanders. i do want to interject one thing. we actually did train ethics, and we trained obedience to civilian authority and so forth.

but, you know, without an american advisory effort and american units to partner with, there's no one there to oversee bad commanders, to say this guy needs to be relieved. when we were there, for instance, maliki removed every single bedivide commander in the -- brigade commander in the national police and two-thirds of the -- [inaudible] some of them twice. so we forced accountability on the state. but when we removed that check on maliki's baser tendencies, he was able to do whatever he wanted to do starting with the attempted arrest of the vice president of the state of iraq. >> and just to follow up on that , maliki has his own set of political considerations only some of which are to have an effective fighting force and some of which are to create

patronage networks and all those sorts of things. one of the things that was interesting to me about your account of the charge of the knights is it wasn't clear to me whether maliki thought the u.s. was actually vital in his inning. and maliki may have thought that the reason he won is because he understands iraq, and the americans all their happy talk about everybody getting along and everybody -- you know, that's the way americans fight. and one of the things that's been striking, i've seen maliki speak in washington. one of the funny things about people who speak in washington and watch in the next time you hear somebody. everybody speaks in washington they want to be loved, right? everybody wants to come to washington, they want to be loved, they want to be understood, they want to be appreciated, and there's always this sort of neediness that speakers convey. maliki came, i heard him speak at usip. i had never heard somebody who seemed to exhibit such patent

disinterest in being loved, in being understood. he said, here's my deal can, this is what i'm doing. and i think one of the things that's important to keep in mind as we talk about corruption in the iraqi military is it is conceivable to me that there are iraqis who have concluded that this is, actually, a better way to run things because then people are exempt -- dependent on you, then you have the support of people, you can rely on people, you have reliable people politically, and we will deal with the other stuff later. and the sort of american desire for cleanliness and sharp lines between things? i'm not sure it's always what leaders in the region think is either necessary or advantageous for them to do a much more complex set of tasks than just being able to win an engagement quickly and cleanly on the

battlefield. >> yeah. just wonder, jon, if you meant everybody coming to washington speak want to be loved, does that include american politicians? [laughter] >> especially american -- >> it especially includes american politicians. [laughter] although they're not doing so well. >> not for lack of trying. >> i'm alan rich, i'm from that distant suburb of baghdad called chicago. [laughter] let's assume that this morning prime minister maliki woke up and said i want to live in chicago, and i'm leaving. what you've presented today is a conundrum, and the conundrum is, is okay, you've talked about having the right sort of government for iraq, you've talked about the conundrum that the political elites are all self-interested and whatever. the facts on the ground are that when you organize a government, it's going to be based upon the parliament that was just elected and whatever. who are the people? who are, potentially, the leaders that could come together

and have sufficient political force domestically to lead a unified federal iraq? >> i'll try to answer this one. i worked for a company that was based in chicago, motorola. [laughter] >> our client. >> oh, a client. i'm pretty familiar, and i've been there several times. there's a myth, you know, that maliki won the election. maliki won 94 seats out of 328 seats. the other group which i prefer to call the movement for change, the movement for change includes all kurdish parties, all sunni parties and most shia parties. and this group has collected up to now about 201 seats. so in my limited mathematical ability, 201 is bigger than 95 seats. so maliki did not win, because had he won, he would have had more than 165 seats.

and any exam anywhere in the world, you cannot pass for less than 50%, right? he won 28% of the seats of parliament. same thing happened, you know, four years ago. maliki did not win with. they each had, i think, it was 23% and 24% of the vote. the movement for change is one that should have been listened to before the crisis in mosul. there has been a delay to announce the results of the election. the rex which i voted for and i had my purple finger in baghdad on the 30th of april. and the results were delayed about a month before they were announced, and the ratification of the cults was not done until -- results was not done until about a week ago. about a week ago the supreme court in iraq ratified the constitution. so as of today we have six more

days. by the end of june, according to the iraqi constitution and new government, you know, i like to emphasize the word "new," highlight, underline, a new government will be formed, you know? the ayatollah has called for a new government, the united states has called for a new government, the iraqis themselves, again, 201 seats out of 328. the vast majority have called for a new government, and that's what we will see very, very soon. >> i think the question is who's the leading candidate to be prime minister? >> well, one more piece of information. things are moving very, very fast. thanks for reminding me. [laughter] there are, actually, so on friday -- today's, what, monday? on friday sistani called for a new government. the day after that there were five candidates that were announced within the national alliance. the national alicense is, quote-unquote, the shia alliance. the the national alliance has five candidates. none of them is maliki.

so maliki has nominated one of his, his chief of staff, and there are four other candidates for prime minister,. >> american task force on palestine. so two questions. what should we expect from kerry's visit in baghdad today, and of after meeting with pm maliki, he said that was good. how should we read in between the lines of that? >> i mean, i can -- none of us was at the meeting. good means exactly what it mean, it was good. [laughter] i've talked to somebody who actually sought a meeting with maliki, and it wasn't with a redemocrat, it was with a republican, condoleezza rice. i've heard things that she said that i cannot repeat here, but in those meetings they get very, very close and personal so i'm not sure anybody's going to

share with us what they tobaccoly said. -- exactly said. >> actually, i've been in on those meetings with general petraeus, and the best outcome is a very full and frank discussion, occasionally general petraeus would show the full range of human emotions in order to get his point across. [laughter] but, no, that's not what comes out of the press briefing afterwards. i wouldn't with read much into good, and it's good that he's there, you know? the secretary of state should be deeply involved in knitting together some sort of diplomatic agreement even with the iranians, you know? a government in baghdad will fail if the iranians want it to fail. they can't make one succeed, but they can inject violence into the country in the form of their proxy militias. so we're going to have the talk to the iranians about the way ahead. but we, again, should mandate a government that, you know, all

iraqis can support. what we don't want is this sort of rump state in southern iraq beholden to iran. that would be very bad for national security. >> and just a piece of advice, i don't know exactly what the -- [inaudible] for the trip is. i think the biggest error is aiming low. it's going small to try to get us out of a crisis. i think this is an opportunity to think more largely about the region, to think more largely about the set of relationships, to think about the fact that so many people have so much of a stake in what happens in iraq. to me, the worst case scenario is a desire to come back in three days and say look how much we've accomplished and then move on to something else. it seems to me kerry, his many

attributes, one of his more admirable ones is he has incredible amounts of energy. and i hope that he puts some of that energy toward working in a sustained way towards solving what seems to me to be a whole web of regional challenges. >> over there on right. yes, sir. >> thank you. zack grossman, the eurasia center. my question is, basically, you started to brick it up, kohl -- bring it up, colonel man jsoor, but who else should be -- manso, or. you've mentioned that we should be talking to the iranians. who else within the region should be at these talks or meetings? the saudis, jordanians, who else? >> i'm not sure anybody else should be at the meetings, but people we should talk to, clearly, the turks we need to consult with the saudis, the jordanians because they're right next door. i'm not sure we're going to talk

to bashar al assad, the iranians. and, you know, it's important to get region alibi-in, as jon -- buy-in as jon has so admirably laid out for the way ahead. and we should be talking to the iraqi parties as well. you know, this idea that, well, they have democracy, so we shouldn't get involved. do you really think tehran thinks that way with their funding of iraqi political parties and their deep tentacles into iraqi politics? you know, we need to get involved, and it needs to be at the highest level. >> and if i could just add, there's a european role. you can argue about how big it is. i think we should be talking to chinese who have profound interests. they should understand both the things they can do that are helpful and things they can do that are harmful. i think we need -- this is a big deal. and i think when we think about the diplomacy, again, the mistake is if you go too small and you say we just want maliki to let the oh guys in the -- the

other guys in the tent, and we're going to work it all out. i think the opportunity and the obligation is to think big. >> and the reason you have to think big is the alternative future is one that dr. ziad worked out, and that is the 30 years' war in the middle east. the 30 years' war in europe killed a third of the population. i don't think we want to go down that road. >> i feel that nobody should get involved. it is an iraqi issue. as bad as it is, we do have democracy. we have the freedom of speech. what i'm saying here is what i have said in iraq when i was in iraq, and i'm proud to say iraq has freedom of speech. and i am an opponent to dictatorship, and i am a pro-democracy movement. and i said the whole thing, nobody should get involved. maliki won 95 seats, the movement for change won 201 seats, they should have the next government. >> okay. we are running out of time, so we'll just take, first, here. >> my question has to do with -- thank you. my question --

[inaudible] my name is -- [inaudible] my question actually about jordan and iran. how, i mean, you know, the isis or isil is sunni majority. by nature, they will dry to reach out to jordan -- try to reach out to jordan. what would the u.s. do to secure the jordanian-american interests and make sure that the stability of overor can will always be there? and my other questions, how will the facts on the ground and the iraqi crisis will affect the nuclear ambition for iran and the negotiation? thank you. >> the united states actually has a very close military relationship with jordan as well as a close diplomatic relationship. so we're there on the ground now with military forces in jordan. and we're also there in a humanitarian role because of the refugee camps and so forth. so i think the stability of jordan is something that the

united states government takes seriously, and it's doing what it can to make sure that that state doesn't implode the way syria and at least portions of iraq have. you want to talk about the nuclear ambitions? >> i don't have anything -- >> i'm looking at jon actually. i can, but -- >> um, i think the way to think about the iranian nuclear ambitions is to see it as part of a broader iranian effort to improve their position as a way to improve their security. iran's self-image is that are surrounded by hostile forces that they cannot win a symmetrical war against can

anybody. that's whey they stress -- why they stress asymmetrical tactics. and what they don't quite understand is that they diminish their security by making everybody feel insecure and arming against them, and it creates this sort of cycle. it's what's known in washington as a self-licking ice cream cone, right? the problem sort of deals with itself. i think they see iraq, they see things in motion as opportunities to advance their interests. and what worries me, bothers me is they particularly see the rise of diish in iraq as this takes pressure off bashar al assad, this makes maliki and the iraqi government -- the shia-led government if you want to see it that way and i think they do see it that way -- more reliant on us, and it gives us a card to deal with the americans.

so ill becomes three -- it becomes three elements of advantage. and it seems to me that the way to deal with that is to understand the way they understand their interests, to understand what they see their vulnerabilities to be, to understand where they are trying to protect and to try to work in that context. that's -- i think just the way the iranians don't want to be in a symmetrical confrontation with the united states, that is, they don't want to deal with conventional military forces, i think we don't want to be involved in a sort of head-to-held bar gaining relationship with the iranians -- head-to-head. that would increase tensions rather than diminish them, and to my mind, what we have to do with the iranians is try to find ways to enhance common interests and build confidence that way

rather than you give me this, i'll give you that. i think that are actually make it less likely to get a nuclear deal, make it less likely to meet iranian concerns and continue down spiral where the iranians make their neighbors feel less secure rather than more so. >> and i would just add that the worst thing the united states could do is enter into a military relationship with iran to fight isil or to bargain away pieces of iran's nuclear program in order to advance some sort of interests in iraq. both bad ideas, and we should not go down the that road. >> i just want to, i just wanted to add a follow-up answer to your question. actually, there's a new player now who is also, let's call it, wanting to meddle. vladimir putin. he is now involved, and he wants to support the continuation of the current government in iraq. >> okay. we have one question here and then right here. and then let me just add so that

we know there are three people who know they are going to be speaking, and i think that'll be for the rest of the evening. there's not going to be -- today, there's not going to be any more -- [inaudible] so we will take them all together. the following three questions. >> [inaudible] thank you for having us and organizing this event and planning for it with much foresight. i have two quick questions. what are the implications, and this question may be addressed to jon and peter, what are the implications of recent events in iraq for the status quo in syria? and turkey was mentioned as well during the discussion. what role has turkey played recently in iraq and in syria? and will it be sort of part of secretary kerry's engagement strategy going forward?

>> my name is -- [inaudible] >> let's take this answer here first. there's questions in the back -- [inaudible conversations] >> well, answer, any one of you. [inaudible conversations] >> okay. so this isil's incursion into iraq has expanded the syrian conflict across an international border. a border, by the way, which isil doesn't recognize and really has very little meaning given the fact that the violence is spanning the border. it will take some pressure off of bashar al assad because, obviously, the isil forces that are fighting in iraq are not fighting in syria. it could mean that the other jihadist groups in syria are going to make inroads into isil territory in syria which by some accounts they already have.

so it will have some dynamics in the syrian conflict, but it won't change the fundamental dynamic of the syrian conflict which is you have a government under bashar al assad who's trying to retain control of the portions of its state that it controls, and it's fighting an opposition that is largely very extreme. you know, i'd love to find that mythical moderate-secular opposition in syria, but i'm afraid one doesn't really exist, at least not in large numbers. in terms of turkey's role, i -- it's going to be very interesting to see what happens in the kurdish region. turkey and the pkk had come to some sort of agreement recently which is nice given the amount of violence that the pkk uprising in southeastern turkey has created.

it depends a great deal on what the kurdish read -- leaders do going forward, whether they're content with a larger stake in a larger iraq or if they make a move towards independence. ed to do that, they would need -- to do that, they would need buy-in from turkey. i don't see a kurdish state being viable without turkish support. that's what i look at going forward. >> it seems to me what is potentially at play is a shift in people's thinking that jihadis while they might not be very palatable but they're useful and people feeling that jihadis are actually a genuine regional threat. i think turkey has been willing to acquiesce in jihadis organizing, doing logistics through turkey. it is possible that what this does -- and it partly would be because of american diplomatic efforts and others -- that the

rise of daish in northern iraq persuades a whole range of external actors that, in fact, this is more of a problem than a problem solver, and it can help create greater solidarity to try to isolate the jihadi groups, diminish their funding and potentially affect the outcome both in iraq and syria. whether that will be done to bashar al assad's benefit, whether he would try to play it, there's a lot to play out there, but it does seem to me there's an opportunity in this to get everybody on this same page on the jihadis instead of thinking, well, they may be sons of bitches, but they're our sons of bitches, and they're useful. >> okay. now three questions in a row, and then we will have answers. >> my name is -- [inaudible] [inaudible conversations] >> yes, yes. >> my name is -- [inaudible] i was with the old iraqi army and the new iraqi army until

2009, i was a military physician, and i'm now working for the service university as a military -- [inaudible] we're assuming the reaction to the isis, isil, that their action against baghdad is only military. so what if it's not only military? now they control mosul, and now they are fighting in he divot that -- he keith that, and they might create a great crisis if they control the refinery. so do you think that could happen? and if yes, how can we react very quickly, and if no, why not? do they have something in mind? this is one, and, two, the reconciliation, if i may. how would you envision reconciliation? is it only a title, a referendum, or there's going to be a, quote, objective of the new government. thank you. >> thank you. and then back here. >> [inaudible] originally from iraq.

there is consensus, i think, that invasion of iraq was embedded with a lot of errors, and it garnered a lot of bad will towards united states. why not we -- why should we now want the foreign troops to go to iraq all over again and use drones and other means? wouldn't that simply will garner more hatred and produce more terrorists? especially if we use drones. drones are blind instrument despite all the technology. >> third question. >> all the way back. >> leann bernstein, this is a question on the regional issue. how can the united states attain partnerships with such questionable allies in the region including saudi arabia, the gulf monarchies who have been known to finance the very

groups that we're fighting against? and in the event that there's in this kind of safe haven, what can you -- can you state the direct threat to the united states homeland of having a terrorist safe haven throughout this region? i know you've said just in terms of the timing of diplomacy and those sort of things that there is time, so i'd just like to question that. >> so we have several questions here, so each one of you please take a crack on the answers knowing that we are -- >> very briefly. as far as the reconciliation is concerned, it is not a title. we are not going to bring a person in government because he's a sunni will say he hears our sunni token, and here is our kurdish token. this is a true partnership, a true partnership based on the efficiency of the government and not based on their ethnic and religious backgrounds. so we are bringing people together to form a unity

government that represents iraqis. and to answer your question, we don't have an army, sorry. there's an ineffective army that did not shoot one bullet to prevent the fall of mosul. that's why we need foreign help. >> jon. >> to answer the lady's question in the back, i was on a panel a week and a half ago, and somebody made the argument that there are more foreign fighters in syria now than in the entire history of the afghan conflict, up to the ,000. -- up to 12,000. this problem of people transiting is a fundamental security issue not just for the u.s., but for all of its allies. i'm not quite so sure that there is direct help from governments in the gulf. i think there is, there are differing levels of effort to cooperate to stop the financing, and i think those efforts need to be enhanced. >> 30 seconds. okay, jon, thanks. >> and then really, really quick because i know we're running out

of time, about u.s. military intervention creating backlash, i agree with you. i think it would if we did it today because we would simply be taking sides with maliki, the person who caused this problem in the first place, and thereby taking sides in what could be shaping up to be a very nasty civil war. so that's why i'm saying diplomacy, politics first. get a government that is worth supporting, and then i think u.s. military intervention could be conducted in a way that the iraqi people would actually support. >> okay. i want to thank you all and hope you would thank me, appreciate the panelists with their expert and professional, impressive contributions. thank you very much. [applause] >> we're in washington. thanks for your unconditional love. [laughter] [inaudible conversations]

>> secretary of state john kerry is in baghdad today meeting with prime minister nouri al-maliki. the associated press reports secretary kerry will urge the shiite-led government to give more power to political opponents as the sunni insurgency continues its spread throughout the country. the meeting also coming on the heels of president obama's announcement last week that he would be sending 300 special forces to the country to advise and train iraqi forces. both chambers of congress return today, the house in at noon eastern. this afternoon they'll resume legislative work on a bill to reauthorize the commodity futures trading commission through 2018. the senate returns at two eastern with votes at 5:30 on four federal district court

nominations. later this week senators take up a bipartisan measure to help train and assist people looking for work. watch live coverage of the house on c-span and the senate live here on c-span2. over at the white house, president obama participates in an all-day summit looking at ways to assist working families. the president's scheduled to deliver his remarks at 1:40 eastern, and we have it live for you over on c-span3. ..

live coverage beginning at 7 p.m. eastern right here on c-span2. >> religion is a powerful identity forming mechanism. part of human society is figuring out who was us into his of them, who is my group who is the outgrowth. religion answer the question pretty easily. if you pray like me, if you eat like me, if you go to the same church as i do, then you're us. if you don't then your them. you can see very easily how that kind of us-them mindset can very easily lead to extremism, the marginalization. as i remind people religion may be the most powerful form of identity formation, but just as powerful is violence or talladega who is us a news event? if you're fighting alongside me,

you are us. if you're fighting against me, you are them. so far from religion violence being the two things that are at odds and should nothing to do with each other, they have as everyone knows throughout history been much more online than we would like them to be. be. >> religious scholar and best selling author reza aslan his book is to let him get the guest. he will take your calls and comments for three hours live starting at noon eastern sunday july 6. in the months ahead august 3, former texas guardsman and republican presidential candidate ron paul and september 7, the former chair of the u.s. commission on civil rights and children's rights advocates mary frances berry. this month honor on my book club we're discussing amity shlaes the forgotten man. start reading and join others to discuss the book in our chat room at booktv.org. booktv, television for serious readers. >> former fcc commissioner

robert mcdowell testified before a house panel about the agency proposed net neutrality rules. the plan would create a tiered internet with fastlink for content providers willing to pay more. the hearing examined whether antitrust laws are better equipped than fcc regulations to protect consumers. this is an hour and 40 minutes. >> the subcommittee on reg reform commercial antitrust law will come to order. without objection, the chair is authorized to declare a recess at any time. at this time we will have our opening statements. does the chairman of the full committee -- would you like to go first? >> if you like, mr. chairman, i'd be happy to. mr. chairman, thank you for holding this hearing. regulation and antitrust law have long had an uneasy relationship. antitrust law serves to protect

a competitive process by prosecuting anticompetitive conduct if and when it occurs. regulation typically dilutes or casts aside reliance on antitrust enforcement and attempts to constrain or direct market forces by imposing new rules of conduct. these approaches generally are at odds with each other and a natural tension has arisen between the two. there are few more important issues that will impact the future of the internet than the question of whether to apply antitrust law or regulation to protect the internet from anticompetitive and discriminatory conduct. i want to thank chairman bachus for holding today's hearing on this critical question. proponents of imposing additional regulation on the internet marketplace argue that it is needed to encourage competition and promote innovation. i am deeply skeptical of these claims. in my experience, regulation generally stifles rather than facilitates competition and innovation.

in fact, it is my belief that the internet has flourished precisely because it is a deregulated market. that is not to say that we should stand by and allow companies to engage in discriminatory or anticompetitive activities. i believe that vigorous application of the antitrust laws can prevent dominant internet service providers from discriminating against competitors' content or engaging in anticompetitive pricing practices. furthermore, antitrust laws can be applied uniformly to all internet market participants, not just to internet service providers, to ensure that improper behavior is prevented and prosecuted. in 2007, the department of justice expressed its preference for antitrust enforcement over regulation when it warned that the fcc should be highly skeptical of calls to substitute special economic regulation of the internet for free and open competition enforced by the antitrust laws. doj further stated that

regulation could in fact prevent, rather than promote, optimal investment and innovation in the internet, with significant negative effects for the economy and consumers. i understand that the nature of the internet and the speed at which the market evolves could present challenges to enforcing the existing antitrust laws in the internet context. we may need to consider amending the current antitrust laws to ensure that they can be applied promptly and effectively to protect the competitive nature of the internet marketplace. the judiciary committee has long played a role in ensuring that antitrust laws are properly equipped and can be applied effectively in the telecommunications industry. this committee will continue to play a strong role advocating for key antitrust enforcement and certainly will examine these issues closely to the extent telecommunications laws are rewritten over the coming years. i look forward to hearing from today's witnesses on this important debate, and i yield

back the balance of my time. >> thank the chairman of the full committee. now i recognize the ranking member, mr. hank johnson of georgia for his opening statement. >> thank you, mr. chairman. the modern internet is a powerful engine for social enrichment, and i would argue for basic freedom in america. and perhaps in other locations throughout the world where the culture has attained this degree of intellect and innovation. whether its educational opportunities like the khan academy channel on youtube, starbucks recent announcement to offer its employees a free college education online through arizona state university, or online hackers that equipped

young minorities -- consumers everywhere benefit from content services that educate, enrich and connect us together. it's no mystery why the united nations lists internet penetration as a key metric in reducing poverty. we all succeed when more members of society have access to such important tools online for productivity, education and, indeed, personal well being. that's why today's hearing is such an important opportunity to discuss the best path forward to advance an open internet. i strongly and unequivocally believe in an open internet. openness goes beyond economic concerns like growth and competition. openness embraces our very core values as americans. equality of opportunity.

if our ideas are good enough, they should have a chance. openness also separates us from closed autocratic societies that limit the educational and social opportunities of their people. look no further than the great firewall of china which has established barriers to free expression, education, and cultural enrichment, and stunted the opportunity and growth of china's people. undoubtedly, antitrust agencies have certain advantages like a prosecutorial mindset and our removal from political influence that make them attractive as regulatory watchdogs. but as tim wu will testify later in today's hearing, the current framework for antitrust law is designed for every kind of business in the world, but is a poor fit for non-economic values like openness, freedom of expression and, indeed,

equality. it is also freedom. it is also abundantly clear that the remarkable success stories of the first large internet startups, google, amazon and yahoo! were not written in a regulatory vacuum. rather, these companies all benefited from a regulatory ecosystem that encouraged the widespread deployment and adoption of broadband internet. as an expert agency with 80 years of expertise over telecommunication services, and more recently, information services like the internet, the federal communications commission has been at the forefront of crafting regulatioregulatio ns that not only encourage growth and competition but also advanced non-economic values like equality of opportunity and fairness. indeed, as the d.c. circuit

recognized earlier this year in verizon versus fcc, regulations that ensure internet openness have fostered a quote virtuous cycle -- excuse me, virtuous circle of both social and economic fruit although the court vacated the open internet order in verizon, the d.c. circuit strong upheld the commission's basis for promulgating net neutrality rules under section 706 of the telecommunications act of 1996, precisely because congress mandated the commission to encourage broadband deployment to advance this virtuous cycle of social and economic growth. there is little doubt in my mind that the d.c. circuit's blueprint in verizon amply demonstrates the commission's authority to promulgate rules to protect the open internet through its section 706 mandate.

but the commission shouldn't have to rely on this authority alone to uphold a common goal and countless americans share. excuse me, but the commission shouldn't have to rely on this authority alone to uphold a common goal that countless americans share. there is wide bipartisan agreement that updating the telecommunications act of 1996 is long overdue. yes, we all enjoyed the thrill of logging onto aol, or we enjoyed the thrill of logging on to aol or other internet service providers over our pilot noticed in the 1990s, but the internet has changed since then. so should our laws. in closing, i thank the chair for holding today's hearing. as the sole committee with jurisdiction over antitrust law, i look forward to working together with my republican

colleagues to ensure that the next great communications act upholds the common principles of competition and opportunity and equality of freedom. these being things that we all share. i look forward to today's testimony, and i yield back. >> thank the gentleman from georgia. i want to welcome you to the hearing today. the hearing today is entitled "net neutrality: is antitrust law more effective than regulation in protecting consumers and innovation?." so we are not deal with the whole subject of net neutrality, or sometime, maybe more descriptive network neutrality. a lot of people don't know what the net is come but i figure refers to the network. let me say from the onset that our focus on the hearing is not on any specific agency proposals. or any regulatory proposals.

although there -- they will undoubtedly be referred to during the hearing. rather, the interest of the judiciary committee is whether the application of antitrust laws would be more effective approach to protecting consumers and promoting innovation in this arena than the long, frequently contentious and sometimes arbitrary federal regulatory process. it is becoming increasingly hard to recall when the internet was not an integral part of our lives. it spurred new technology, created jobs come established dynamic marketplace for goods and ideas. it's a wonderful education tool. fast spreading technologies have always attracted significant interest because of public policies, issues they raise. as a railroad attorney, i

studied the history of the railroads, and that was always a struggle between development of the rails and regulation. and many of you who know that industry, overregulation almost killed the industry before the staggers act. and it revived itself only because of a scaling down of regulation. but even today there are tremendous issues in that industry as well as this industry on public interest, public safety, et cetera. and these issues with the network deal with issues including access, competitive balance, and the tension between the private interest, public interest, between regulation and innovation. so it's always a balancing act. on may 15, the federal communications commission proposed a rule marking its

30th to address the issue of net neutrality. its two previous attempts were struck down by the courts. as rail tour proceedings continue to stretch on, a question i have is whether there may be a more efficient and more effective way to safeguard against potential discriminatory behavior then federal rulemaking. that is where antitrust law comes in. antitrust law has a number of benefits to consider. antitrust law and the standards applied by the courts have developed, evolved and been refined over decades. this stands in contrast to newly proposed regulations that include untested definitions and approaches which would be interpreted and enforced by constantly rotating commission, and the courts on many occasions would be dealing with cases of first impression as opposed to established case law.

antitrust light uniformly applies to all participants in the internet marketplace. a recent fcc regulation, by comparison, would only apply to a small group of internet service providers. antitrust laws prosecute conduct, once it occurs, and determined on a case-by-case basis whether a violation has occurred. regulation is a one size fits all approach and imposes a burden on all regulated parties regardless of whether the parties actually engaged in proper country. they could stifle legitimate and necessary innovation before it happens. and then you have a different approaches, different countries take. although the network or the internet is a worldwide system. antitrust law violations may be brought by both private actors and enforcement agencies

equipped with lawyers, economists, that nations who have decades of experience policing anticompetitive conduct. regulatory violations typically may be pursued only by select group of defined parties and the regulatory agency. notably, the fcc only has one single administrative law judge. that's something that i was not even aware of before this hearing. these are only some of the factors that we will consider, that should be considered when determining whether an antitrust already literate approach should be taken to protect internet users from anticompetitive conduct. today's witnesses are very distinguished, have perspectives from each of the relevant agencies, the fcc, the federal trade commission and department of justice. and i notice commissioner wright

is here, so i tried one of our seating commissioners. i'm glad you are joining. i look forward to hearing their testimony on the benefits and limitations of using antitrust law to protect consumers and innovation. at this time i'd like to recognize our panelists. at this time i recognize the gentleman from michigan, mr. conyers, the ranking member of the full committee, former chairman, for his opening statement. >> thank you so much, chairman spencer bachus for holding what i considered an important hearing on net neutrality, and the role of antitrust in ensuring a free and open internet. this should be a very interesting hearing, to say the least. this committee has a central

role in studying the issue of net neutrality, and more generally, competition on the internet. and i appreciate the chairman's decision to assert our jurisdiction. turning to the specific question of whether antitrust is more effective than regulation in addressing net neutrality, we should keep in mind that we need a regulatory solution to address potential threats to net neutrality, and must allow the federal communications commission to do its job. congress created the fcc to develop expertise so that it could properly regulate the complex telecommunications industry. any fcc rules to address the net neutrality would have the benefit of addressing some potential threats to net

neutrality before they fully materialize. and it could do so in a manner that would be more comprehensive than the piecemeal approach of antitrust enforcement. additionally, having a set of best practices enshrined in rules would provide certainty for the industry. the fcc's efforts, therefore, must be given the opportunity to develop, and in developing its rules to ensure a free and open internet. the fcc should incorporate the following principles. broadband network providers should be prohibited from failing to provide access to its broadband network for any provider of content, applications, or services on reasonable and nondiscriminatory

terms. broadband network providers should be provided -- prohibited from blocking, and burying or just committing against or otherwise interfering with the ability of anyone to use a broadband service, to use or access lawful content applications or services on the internet. and there should be strong transparency requirements regarding clear disclosure to users of information concerning any terms, conditions or limitations on the broadband network service. the fcc began its latest rulemaking process only a month ago, and so we must give time to allow this process to proceed. to the extent that we do look to

antitrust law as a way of ensuring net neutrality enforcement of existing antitrust law would be insufficient. under current antitrust law there is relatively little that antitrust enforcers can do outside the merger review context to address the conduct of a regulated industry like broadband internet service, with respect to enforcing net neutrality principles. through a series of decisions, the supreme court has limited the potential to successfully pursue claims under the sherman antitrust act arising in net neutrality context. moreover, exclusive reliance on antitrust enforcement while having the benefit of a more

nuanced and fact specific approach to the problem would also be a cumbersome, more limited, more resource intensive, and after the fact way to develop a regulatory regime for net neutrality. another potential approach would be for the federal trade commission to use its authority under section five of the federal trade commission act to stop unfair methods of competition. while i hold an expansive view of section five, to the extent that this approach goes beyond the scope of the sherman act or other antitrust laws, it would be very controversial as some of my friends on the other side of the aisle would be the first to note. moreover, antitrust law is not

sufficiently broad in scope as it does not address the non-economic goals of net neutrality. including the protection of free speech and political debate. our former chairman of judiciary, james sensenbrenner, and i introduced bipartisan legislation in 2006 to strengthen antitrust law to address net neutrality in part because of the fcc was doing too little at that time, in my view. and i certainly am open to suggestions on how antitrust law can be better tailored to address net neutrality concerns. but if we go down that path, current law must be modified to codify net neutrality principl

principles. and so whether one supports a more antitrust approach or a more regulatory approach, inaction by congress and regulators is not an option, as potential threats to net neutrality remain present. and in my opening statements in 2008 and 2011 on this very same issue, i noted that many parts of our country -- in many parts of our country, consumers have the choice of only one or two broadband internet service providers that effectively function as monopolies or duopolies. i noted then that the market power that these broad providers enjoyed could lead to differential treatment of content carried by the provider, depending on how much a customer

pays for the financial incentives for discriminating for or against given content. the concerns i noted may have only grown since then, particularly in light of increasing consolidation in the telecommunications industry that may result in even less choice, less innovation, higher costs, and more power in the hands of the fewer broadband providers. and having given you that impartial view of my position on this matter, i yield back the balance of my time, and thank the chairman of the subcommitt subcommittee. >> thank you very much. and i've taken the chair for mr. bachus was called away for votes and another committee that he serves on. without objection, other members opening statement will be made part of the record. we've really got a great panel today, and i'd like to begin by

introducing our witnesses. commissioner joshua wright is a city commission at the federal trade commission. he was sworn in january 1, 2013, to a term that expires in september of 2019. prior to joining the commission, commissioner wright was a professor at george mason university school of law and held accursed appointment in the department of economics. he is a leading scholar in antitrust law, economics, and consumer protection, and has published more than 60 articles and book chapters, co-authored a leading casebook and edited several books and volumes focusing on these issues. commissioner wright also served as coeditor of the supreme court economic review, and was a senior editor of the antitrust law journal. commissioner wright previously served with the ftc in the bureau of competition at its inaugural scholar in residence from 2007-2008. he is focused on enforcement matters and policy. his return to the ftc marks his

fourth hit at the agency after having served both in the bureau of economics computer of competition from 1997 and 1998 respectively. prior to his tenure at george mason, commissioner wright worked for justice james selma of the u.s. district court for the central district of california. commissioner wright graduate with honors from the university of california-san diego and received his jd and ph.d from ucla. mr. robert mcdowell -- commissioner mcdowell is former commissioner of documentation commission. he was appointed by president george w. bush in 2006 and barack obama in 2000. and unanimous confirmed by the u.s. senate each time. his second nomination in the first republican appointed by president obama to an independent agency. during his tenure at the fcc, commissioner mcdowell worked continuously to forge bipartisan

consensus in adopting policies, to promote economic expansion, investment, innovation, competition and consumer choice. the "washington post" called him an independent force at the fcc. while broadcasting and cable magazine, described his tenure as statesmanlike. commissioner mcdowell has also been an official member of the u.s. diplomatic delegations working on treaty negotiations at international conferences covering global spectrum and telecom policy. prior to doing the fcc, commissioner mcdowell worked in a senior position in the telecommunications industry to for 16 is that you graduated cum laude from duke university and received his law degree from the college of william and mary school of law. professor bruce owen is maurice m. doyle's until professor and public policy at stanford university and a senior fellow in the stanford institute for economic policy research. he directs the state for public policy from which offers

undergraduate and graduate degrees in public policy analysis. professor owen was the chief economist in the telecommunications policy at the white house under president nixon as well as the chief economist and antitrust division of the department of justice under president carter following his public post be taught economics at both duke and stanford. professor owen has published books and articles on mass media economics, telecommunications and regulatory policy among other topics. professor owen received his ba from williams college and earned his ph.d at stanford. welcome. professor tim wu is a professor of law at columbia law school in new york city where he teaches courses in, among other things, communications law and intellectual property professor was also taught at the law schools of harvard, stanford, university of chicago and the university of virginia. professor wu recently served as a senior advisor in the competition of consumer protection division at the federal trade commission.

is also widely credited with coining the term net neutrality through the publication of his paper, network neutrality, broadband this commission. professor wu clerked for judge posner at the seventh court of appeals and supreme court justice stephen breyer. professor wu received a bachelor of science degree in biochemistry from mcgill university and his law degree from harvard magna cum laude. each of the witnesses statements will be entered into the record in its entirety. and ask each witness please summarize your testimony in five minutes or less. you have some indicators in front of you, much like the traffic signal. green means go. yellow means hurry up, and read means stop. so we will get going and we'll start with commissioner wright, you are recognized for five minutes. >> chairman goodlatte, jim bachus, ranking member conjures and country and number of the subcommittee, thank you the

opportunity to appear before you today. minus joshua wright and on the commission of the federal trade commission. i'm pleased to join you to discuss competition and regulation and the broadband sector and more specifically the issues highlighted by the ongoing debate surrounding net neutrality. i should make clear at the outset that the views i express today are my own and do not necessarily the views of the federal trade commission or any other commissioner. today i'll focus my comments up on competition policy and regulars and and broadband markets from the consumer welfare perspective. consumer welfare is the -- and it guides decision-making at the ftc. the consumer welfare approach harnesses the power of rigorous economic analyses to inform competition policy and antitrust. this emphasis on consumer welfare makes antitrust particularly well-suited for tackling complex issues and questions relating to broadband competition and for addressing the important issues raised in the net neutrality debate. more specifically, the rule of

reason analytical framework that lies at the core of modern antitrust analysis can be deployed effectively to analyze business practices in the broadband sector and to separate conduct that increases consumer welfare from those business practices that make consumers worse off. i'd like to begin by discussing net neutrality from an economic perspective. at its heart the magic of the debate concerns the competitive effects of what economist would describe as vertical contractual arrangements between broadband providers and content providers. put another way, net neutrality is about the fear that broadband providers will enter into business arrangements that disadvantage certain content providers, harm competition and thereby leave consumers and internet users worse off. for example, a broadband provider might end into an exclusive contract with an online video site to foreclose a rival video sites access to the broadband providers subscriber. this type of potential competitive concern is grounded in antitrust economics and more specifically in the racing rivals cost literature familiar

to all students of antitrust. proponents of net neutrality traditionally have responded to these types of concerns by favoring a rigid categorical ban or other significant restrictions upon broadband providers ability to enter into vertical contractual relationships. fearing that any network discrimination by broadband providers grace undue risk of competiticompetiti ve harm, they have argued for a one size fits all approach prohibiting such arrangements. this approach fails to recognize the fundamental economic point that most vertical contractual relationships benefit consumers. the economic literature is replete with examples of empirical evidence that vertical contracts great consumer benefits by reducing double marginalization, prevent free riding, facilitate new business models and entry and aligning manufacturing distributing incentives. consumers benefit from these deficiencies because they're passed on to them in the form of lower prices, increased output,

more content, higher quality and greater innovation. moreover, considerable empirical evidence further supports the view that vertical contracts are more often than not pro-competitive. these empirical studies cut sharp against the idea that broadband providers necessarily will use such arrangements in a way that harms competition. the marketplace experience and learning also demonstrates that so-called non-neutral business models deployed by providers have proven highly beneficial to consumers. for instance, in 2000 to a fledgling google was able to strategically achieve economies of scale but beating out its competition in a bid to become the default search engine on aol, then the country leading internet service provider. to be clear the economic literature and. of evidence that's the kind of purple contracts never could competitive -- the correct question is not whether vertical contracts can harm consumers but rather what recor ragged restrue and legal rules will best promote consumer welfare in this

context. in economical and. in economical in here and check which must in my view begin with the fundamental observation and market experience that the business practices at the heart of the net neutrality debate have generally been pro-competitive. in light of the economic theory and evidence in my view, editors offers a superior analytical framework, one that focuses on consumer welfare to address any potential anticompetitive concerns in the broadband sector over the past century and to trust just prince has evolved ties this could rule of reason about an approach for investigating whether vertical arrangements are anticompetitive in practice. the rule of reason framework is a flexible one that allows consumers to benefit from the vast number of vertical agreements that help consumers by also creating a means grounded in sound economics and evidence for identifying those contracts that harm consumers. and closing it's my belief that editors offers a superior approach to addressing anticompetitive concerns and broadband markets and in the

achieve the best result for consumers. i'm happy to answer any questions. thank you spent thank you, commissioner wright. will not go to commissioner mcdowell. could you turn the microphone on? >> thank you, mr. chairman, ranking member, members of the committee. it's an honor to be back before he committed today. at the outset i should make clear it is my hope the internet remains open and freedom enhancing as it has been since it was privatized in the mid 1990s. as the internet migrated further away from government control, it proliferated beautifully grown from just under 90,000 years in the late 1980s to approximately 3 billion users globally today. its success is the fastest-growing technology in human history was the direct result of the clinton administration's bipartisan policy to keep the government's hands off of the internet sector. in short, the internet is the greatest deregulatory success

story of all time, in my view. when it comes to the net neutrality debate it is important to remember that nothing is broken that needs fixing. the fcc is pursuing new rules without the benefit of a comprehensive peer-reviewed economic study, something i've called for time and again over many, many years. if there is systemic market failure, let's discover that they're a data-driven process. in 2007 at the ftc examined of the market and in a unanimous and bipartisan fashion found that there was no market failure, while eloquently warning against new rules that may produce harmful unintended consequences. i report whose staff was another fcc commissioner, maureen ohlhausen. instead of making new and untested, new and untested body of law that would produce uncertainty a potentially collateral regulation of the entire internet sector, our

public policy should rely on what has worked so well for virtually every other aspect of the highly complex american economy. are antitrust and consumer protection laws. those laws are effective, enjoy a century of course tested legal precedent and could be administered by the federal trade commission at the same speed, or lack thereof as the federal communications commission. additionally, another state and federal statutes andcommon law offer powerful consumer protections such as those covering breach of contract, interference with contract, deceptive trade practices, fraud, and much more. if isps were to breach the terms of service with their customers, the plaintiffs bar would have a field day launching an unaccountable number of class action lawsuits. these are powerful deterrence against anticompetitive practices. additionally, having part of an official u.s. diplomatic delegations to negotiate treaties in making medication

space as well as recently being a member of an international blue-ribbon panel on internet governance, i can personally attest to the influence of the american net neutrality debate on international efforts to regulate all corners of the internet. the ongoing prospect of new net neutrality rules has generated thinking throughout the world that more regulation in the internet ecosystem should be the norm. recent initiatives in europe covering all types of internet related companies underscore this point, and some internet regulation appears to be a one-way ratchet. lastly, today i offer a warning. some technology companies that are pushing for classification of internet access as a telecommunications service under title ii of the communications act of 1934 should be careful what they wish for. this section of the communications act is not only antiquated, effect be as easy to celebrate its 80th birthday yesterday, but it is particularly powerful,

prescriptive, far-reaching, and by some accounts has over 1000 requirements. as market forces cause the technical -- to converge, help is that today are calling for the regulation of the rival and naïvely think they will not get swept up in title ii regulations themselves could wake up one day having to live under its mandates. as technical, as a technical and business matter, transmission services and information services are quickly becoming indistinguishable. so across the globe, content application companies are falling under the purview of more and more regulations and court orders. in conclusion, whether creating new rules or hoisting adequate laws on new technologies, the end result would be counterproductive and create uncertainty and unintended consequence. a better path would be to rely on time-tested antitrust and

consumer protection laws that helped make the american economy strongest and the most innovative in the world. thank you for the opportunity to testify today and i look forward to your questions. >> thank you, commissioner mcdowell. we will not recognize professor owen for his five minutes. [inaudible] >> your microphone. you probably need to bring it close. the acoustics in here are awed. >> thank you, mr. chairman, ranking them, members of the committee for this opportunity to testify today. net neutrality is a seductive slogan. it seemed to have many people in favor of it, many of them i suspect don't know exactly what it means. its meaning seems quite odious. it just like a mutating virus to fit the consensus of the body against it.

i think the most common current definition or usage of net neutrality involves what is more commonly called common carrier regulation. that is, a public utility to which anyone has a right of access on non-discriminatory terms. now, we have a lot of experience with common carrier regulation in the united states. starting with the first federal regulatory legislation in 1887. the act to regulate commerce which created the interstate commerce commission and began the regulation of the railroads. later trucking and other modes of transportation were included, all under a common carrier rubric. the fact is that none of that regulation stopped discrimination. in fact, discrimination 20 or 30

years into regulation of transportation under the act was much worse, or at least much more extensive, then when it began. moreover, like many other industries, the transportation industries became embedded in the political economy of the regulatory structure. the loudest voices affecting transportation policy in washington where the railroads, the trucking industry itself. and before very long before the depression, in fact we had a series of regional monopolies, or cartels, overseen and refereed by the regulator. and the results for consumers were not good. consumers were clearly worse off. they pay higher prices, output was reduced, entrants were kept out, and innovation was resisted because you had to get a license from the icc to compete in the

transportation business. and one of the things the icc took into consideration was whether the current incumbents would be harmed. the issue was not whether customers would be benefited -- whether incumbents would be harmed. the same thing happened in telecommunications. and telephone regulation in particular. it came to be true that the interests of at&t, the old bell monopoly that was broken up in 1982, where primary at the fcc and the interest of consumers were definitely secondary. entrance were excluded. technology was excluded or slowed, and consumers lost in order to benefit the incumbent monopoly. we don't have a good history with regulation. even where there's a lot of concentration in the industry.

i think, therefore, we have to be very careful before imposing regulation. the first stop, the presumption in our economy is competition and the promotion of competition by the government is the ideal way to go. and if that fails, which you can do, then we turned to regulation, reluctantly, as a last resort to solve a serious and otherwise irremediable market failures. we don't start with regulation. we start with competition. so there's no particular evidence that competition isn't working in the parts of the transport industry devoted to internet supplies. and there's every evidence that competition is, in fact, increasing largely because of technology, and particular the growing use of portable devices supported by broadband wireless

service. the capacity of wireless broadband service to serve the needs of consumers and competition with wireline internet access providers is limited only by the fcc, which is in control of the amount of spectrum that can be devoted to that use. if we would like to see even more competition than we already have in local broadband access to the internet, the first thing to do is to increase the spectrum available to wireless providers. technology will also help with that as we move to the fifth generation of wireless service. we will be able to provide greater amount of service within roughly the same bandwidth.

antitrust policy promotes and protects competition, regulation, whatever its intent and however well meant has the practical effect of suppressing competition. antitrust promotes and protects innovation that makes it easier to answer and industry when that would benefit consumers. regulation, whatever the intent of it may have been, tends to suppress innovation in the interest of the incumbent regulated firms. it seems clear that antitrust is an effective way to preserve competition. one of the great victories of antitrust in the last century was breaking up the bell system monopoly. the result of which was a huge

increase in competition, both at the local level and in long distance service. and more importantly, unleashing the forces of innovation. the bell telephone monopoly was a great inventor. bell labs was a wonderful source of invention -- >> professor, if you could wrap it up, try to stay in our time. >> i'm sorry. was a reluctant innovator, at&t didn't become an innovator in till after it was largely deregulated after the break. thank you, mr. chairman. >> thank you, professor. we will not go to professor wu. >> chairman, ranking member, members of the subcommittee, thanks so much for mentioning but i welcome the opportunity to i can summarize my comments in a few sentences. i have the highest admiration for the antitrust laws, and the agencies enforcing antitrust laws.

but i so they don't think they're equipped to handle the broad range, the values and policies that are implicated by net neutrality and my the open internet. just to take a sample, what i'm suggesting is that when we consider internet policy, what we are really considering it is not merely economic policy, not merely competition policy, but also media policy, social policy, oversight of the political process, issues of free speech. there are a wide range of non-economic values that i fear that the antitrust laws, despite its expertise, despite the decades, indeed over a century of law making in that area simply does not capture. and for that reason i think that despite its imperfections we should stick with the process of fcc oversight of the internet and enforcement of net neutrality rules.

so let me break some of these ideas out will be. first of all, as i said i have enormous appreciation for the antitrust laws and agencies that enforce them. i served for some time at the federal trade commission, and i think there's some advantages that the fcc could learn from in this area. there's a commendable insulation from influence. the adventure process is very well have a. i think the fcc does a good job at what it does. the problem is with the fcc end of the antitrust agencies is that they are optimized for one kind, or two guys in the case of fcc, two kinds of problems. and that is the protection of consumer welfare through the competitive process. and this i is a worthy goal but i'm not going to sit and say we shouldn't protect the competitive process. that's terrific and it's particularly accomplished by focusing on a complex and very

sophisticated economic analysis which again i commend when we are considering only the issue of competition. the problem is that in its day-to-day operation, the internet advocates a whole host of non-economic values which are simply not well captured by antitrust processes. let me just give an example. let's imagine we had an internet service provider that for its own reasons decided it did not like all the speakers on one or another side of the spectrum. let's say we had a different isp that, for whatever reason, believes that local news sources were less valuable than national news sources and decided to favor them. or let's say we had an isp that had a bias in favor of big speakers as opposed to small speakers, for whatever reason. or maybe just something totallyy irrational like it favored one sports team coverage is thought that the new york rangers were a better hockey team despite losing the stanley cup than the l.a. kings, and so tried to adjust the coverage around the

sports, whatever it was. these are the kinds of issues, whether political, social, sports, whatever, you name it, that silly do not register in antitrust analysis. because if you have political bias, it doesn't necessarily give a competitive advantage to the isp. so what i'm trying to suggest is that what's at stake in indigo debate is protection of the american political process. and protection of the united states as an open society. we can't a college that simply -- we can't leave him out of that important to the economist. that's what i'm going to suggest. i have great respect for economist at have great respect for economic analysis but i want is just we cannot leave the multiple values at stake in american society and in our political process to new economic analysis. and a close by, chart there. thank you very much. >> thank you very much. we will not recognize the chairman of the full committee, the gentleman from virginia, for

the first round of questioning. >> thank you very much, mr. chairman, for your for parents. professor wu, why is a group with much of what you just said, particularly the thought that accident attended in the past, regulating the content offered by broadcasters on television and radio, which was a very popular thing to do in the past, and now that that has been pushed aside to allow for more free speech, i was suggest to you that we have far greater diversity of opinion expressed in that traditional market. and the thought that we would need to have fcc commissioners regulating content on the internet to make sure that somebodies avenue to access to the internet was fair and balanced would be, to me, and extraordinarily harmful thing to do. but i want to commend you on one

thing, and that is you picked a name for the subject, net neutrality. that's stuck. i've been at this issue for a dozen years. congressman rick boucher and i introduced legislation before. con -- before congressman sensenbrenner did just before. we called it open access t the edit think we're probably a great on the principle that the internet should have open access to all the competitors and all of the consumers and have access to it. so let me direct a question first to commissioner wright. it's been reported that during peak hours, netflix traffic accounts for approximately a third of all internet traffic. when i saw that recently i was amazed. i think that's a great credit to the popularity of netflix, of whom i am one of their customers. this amount of traffic could be indicative of a significant market position. one of the reasons that

antitrust law hold more appeal than regulation is its ability to proceed improper conduct by all market participants, not just a select few. i'm not in any way suggesting that netflix has and in proper market position, but to the extent the netflix were to use its market position to engage in anticompetitive behavior, would antitrust law or existing or proposed regulation be more effective at policing improper conduct? >> thank you, chairman. i appreciate the question, and house of cards is quite a show. so whether it grants of netflix market power i think is a question that is one, the place where antitrust analysis began with such a question is what the antitrust laws do with respect to market power is say that if a firm achieves its market position by innovation, by building a better mousetrap, by making a content that benefits consumers, this is the death of

conduct that the antitrust laws celebrate rather than condemn. the antitrust laws step in when a firm with market power abuses it in such a way to make consumers worse off. those sorts of concerns that a netflix, for a hypothetical example, or any firm in the broadband space with market power would discriminate in such a way to harm consumers would set off a set of standard analyses. the ftc and other antitrust agencies and courts for that matter have analyzed these problems for decades upon decades in a variety of industries and the formula -- excuse me. the algorithm for analyzing these problems are now well known. i was a with respect to the methodology rather than boring you with its details, that it is focused upon asking the central question of whether the conduct at issue makes consumers better

off, in this case, internet users, better off are worse off. >> i'm going to interrupt because i want to direct one mormore question. i've more question. i've wondered a lot and want to direct it to commissioner mcdowell. antitrust law has the benefit of being available for prosecution of improper conduct if and when it occurs. in your view has been a demonstration of widespread abuses by internet service providers or other market participants that justifies deploying a before the fact regulatory approach to potential improper conduct on the internet? and a follow-up question is, can you explain why the fcc is unwilling to conduct a cost-benefit analysis before regular in such an important component of our national economy? is a fearful of potential results? >> so no, i'm not aware of widespread market failure, and that's why for years i've called for a bona fide peer-reviewed market study to be put out for public comment time and time again. ..

be placed in the record. >> without objection, so ordered. >> i would also for clarification, just note note that commissioner wright, you're testifying before us today only in your individual capacity and that your oral and written

testimony do not necessarily reflect the views of the federal trade commission, is that correct? all right. thank you. and if you would -- >> that is correct. >> all right. thank you, sir. now, professor owen, you stated that most consumers don't, or confused about the definition of the term, net neutrality. would you give us your definition? >> i don't have my own definition. >> okay. well, i'll tell you what -- >> i would -- infer it. >> let me ask for professor wu to give us his definition of the term. >> net neutrality is a principle that suggests that internet carriers should give consumers what they want, when they want it, and not stand in the way, not to block some sites and not to favor some sites over others. it is just a basic principle of non-discrimination which we have

in many public accommodations in hotels, you know, airlines and so forth, as applied to the basic, basic transportation facilities of the internet. >> all right. thank you. commissioner wright, the u.s. supreme court's recent decision in american express versus italian colors upheld the right of companies to force arbitration of antitrust terms through adhesive clauses hidden in contracts in company's terms of service online. are you familiar with that decision. >> i'm vaguely familiar with that decision. >> well, in her dissent, justice kagan clarified the issue. she said that as a result of that decision, amex's contract will succeed in depriving italian colors of any effective

opportunity to challenge monopoliesistic conduct -- in violation of the sherman antitrust act. don't be fooled she said, only the supreme court so requires. the federal arbitration act was never meant to produce this outcome. in the hands of today's majority arbitration threatens to become more nearly the opposite, a mechanism easily made to block the vindication of meritorious federal claims and insulate wrongdoers from liability. the court thus undermines the, the federal ashtation act -- arbitration act, no less than it does the sherman act and other federal statutes providing rights of action. so commissioner wright, in your written testimony you argue that the court should set the rules of the road for internet

openness through antitrust law but how could a complaint of anticompetitive behavior even reach the courts if it is lawful to force every consumer, small business, and employee, to arbitrate their claims in a foreign venue that is secret, that's for profit, it's, you're familiar with the arbitration process. no jury trial. no right to appeal. and, how does, how does your opinion about how the internet should be regulated fare in comparison to or in light of that supreme court ruling? >> i appreciate the question. let me give you two quick answers. one is there's nothing in that decision that would preclude the ftc or the d off j from bringing a case. we're not in arbitration agreements with any of the companies at issue. when we bring investigations in areas where there are

arbitration clauses all the time. >> well the public though would be banned essentially from a jury trial. >> second reason, so that speaks for the public agencies. so, like ftc, doj -- >> we would leave the public subject to the government going to court. >> the second part of the answer is that the, with respect to private rights of action, i can tell you, perhaps not on industry by industry basis but private rights of action, both before and after the supreme court decision in italian colors are alive and well. there is no down-tick of right rights of antitrust action. in fact over the last 30 years, private rights of action are at an all-time high. >> they will be at an all-time low as we proceed forward under this u.s. supreme court ruling which actually snuffs out the

constitutional right, 7th amendment right to a jury trial where the case in controversy exceeds $20 or more. so i will, at this time, yield back the balance of my time. >> thank you very much. the gentleman from southern california hasn't kateed that he is under a time constraint and out of the good sense of yielding to my full committee chair on the oversight and government reform committee i will now recognize mr. issa. >> thank you, mr. chairman. as a result i will go to a different subcommittee on the other side of this wall in just a few minutes and i thank you. professor wu, i really appreciate your being here. i think you have given us the appropriate characterization of the true reason for net neutrality. you said it was social media policy, speech policy, political policy. you used words including control. all of that you did voluntarily here, right? so, what you're saying in effect is, that if the fcc gets ahold

of this, we could go back to the leave it to beaver times, times in which too married adults had to be in twin beds in order to get past the social norms of the day. times in which, even today, bill maher, who i often disagree with, can't be on broadcast because the fcc won't let him on because he uses the f-bomb too often. times in which complaints are being considered today and in the last year against "two and a half men" because they're too sexually explicit. this is the fcc's role. there are regulatory policy entity that actually does limit free speech, carefully question moral norms and the like. do you have any way to tell me that is not true after your opening statement? >> what i'm trying to suggest -- >> please answer the question and you can pivot to your suggestion. >> i am suggesting that if the antitrust agencies overtake --

>> no, you were telling me the good reasons for the fcc to have this kind of control. and i have countered with you're absolutely right. everything you said about social policy speech, political, these are things the fcc has controlled over the airwaves for my entire life. commissioner mcdowell, you probably have the best perspective because you're a former commissioner. nothing like somebody who has been on both sides of it. do you have any question in fact but that is it still today, a part of how the fcc views its mandate when it takes complaints on whether "two and a half men" is crossing the line in broadcast? >> absolutely. the fcc has control over speech for, over broadcast licensees under a doctrine called spectrum scarcity which days may be numbered at the supreme court, we don't know yet. but it does have control over speech and to build on professor wu's comments and a lot of other net neutrality proponents this is about bringing such controls to the internet as well.

social policies, speech policies, political regulation policy. i think that actually does summarize quite well just as he said. >> i have been in washington for nearly 14 years -- knife can answer the question. >> i think you've -- answered it wonderfully how you phrased it. professor, professor, professor, i will ask the chair to remind you, this is my time. i got an answer to your question. i will come back to you in a moment. >> all right. >> in my 14 years the one thing i've noticed, we like to harmonize things. so commissioner wright, and commissioner mcdowell, do you have any question but that there would be if the fcc takes full net neutrality authority if you will, that the fcc by definition will tend to want to harmonize other spectrum such as broadcast and its limited cable role, with the internet? in other words, the rules of the road for broadcast that have given us not having things on

broadcast inevitably would be applied at least in some parts of the internet, maybe similarly to how we regulate cable can only grow so far? i'm going to give you a simple question. you can't put what some people consider pornography on broadcast television, can you? >> no. >> and it is extremely limited as to what can be on cable? it can not be a free-for-all. >> can't be obscene. that is different constitutional standard, yes. >> but on the internet today, it is limited only to criminal acts, is that correct? but anything on the internet, no matter how much somebody doesn't like it as long as it is not a crime, correct? >> correct. >> if it's a crime law enforcement regulates it? >> correct. >> professor wu, i will give you the last word, do you see any inconsistency with exactly that? you're talking about in your statements about speech policy, social policy, control. isn't that part of the concern that american people should

have, much of what they see on the internet could be regulated out of existence? >> no, i disagree. net neutrality prevents the exact opposite. net neutrality protects the -- >> net neutrality is a con september, isn't. >> a platform for diversity of speech. we've had net neutrality rules, defacto for last 20 years. we had incredible outpouring of speech all across the political spectrum. i'm suggesting if we maintain -- >> professor, your own words indict you. one quick question, an antitrust question. isn't our real ability to insure competition, in our control, if we as a congress, and this committee, define the relevant market so that in fact, it is intended to and promote competitiveness by defining the relevant market to a low enough level to always insure free flow of competition? >> mr. chairman, i would ask for regular order if we're not growing to allow professor wu to answer the question.

>> it is mr. issa's time. i indulged you with a couple -- >> to be honest any of them can answer any questions. the last one i think i got time for professor wu. >> time expired, mr. chairman. >> when the gentleman goes off the actual question it is not his time. chairman conyers is over there, i knows well. i asked professor wu to answer the question and be succinct. now the fact is the pertinent question right now and i don't care how much time the chairman gives professor wu to go on and disagreeing with us but the pertinent question is is the antitrust relevant market question. i would appreciate all four witnesses answering it. >> we'll give them a short time to answer. as your time is up. we will allow each witness a couple of seconds to go in and we'll recognize the gentleman from michigan, if anybody wants to -- >> i hate to do it tiff point, can you repeat the question? >> no. >> it is short.

the central florida haven't market, in other words, how we define competition, is competition entire state or competition what is available to you in your home, those kind of relevant markets we can set, which of course would make antitrust harder and harder to circumvent which would push for more antitrust control over entities that have 60, 70, or 100% market share in your particular rural home. >> that is, yes, that is correct. there is a standard mode of market definition analysis with antitrust i think has very sound economic principles that i think would serve just fine here. >> the definition of markets is very key with what the fcc does in defining the public interest under its public interest standard. when it comes to broadband there is owe axe seal cable, fiber, copper, there is dsl. there is the wireless broadband, the fastest growing segment of

the broadband market and there is unlicensed wireless broadband which i have been a big proponent of a long time. also what is important here how these companies are converging. these are no longer dumb pipes. everything migrates to internet protocol there is intelligence embedded in networks. if you're a content delivery network you've got networks. if you're a traditional telco or cable company you have networks and you have intelligence and content embedded in those. from a engineer's perspective they're starting to look a lot alike. the danger for the government trying to parse this with a scalpel, somehow outguess the marketplace, that is the big danger that will undermine innovation an investment and our competitive edge. >> professor owens. professor be real quick. we're way over on time here, if you want to take a stab at it. you're welcome to pass. >> i'm invited to pass. i pass. >> i'll answer the question. market definition is essential to the antitrust policy and it would determine everything we do in this area and it is one of the problems in this area because the fcc is equipped to

deal with issues like regionalism, like localism, like diversity which are important american values and aren't captured by analysis that only focuses on market definition. >> thank you very much, professor. we'll now recognize the ranking member of the full committee. the gentleman from michigan, mr. conyers. >> thank you, subcommittee acting chairman farenthold. i -- >> he looks good in that chair though. >> i am impressed with the fact that we have three very distinguished witnesses taking one position and professor wu, i just like to go through a few things in the minutes i have. would the fcc be regulated

content as suggested by our full committee chairman goodlatte? and isn't antitrust regulation weak and slow and can't operate in a preventative way? >> the answer to the question is the fcc would not be regulating content. net neutrality is not a call for content regulation. it is a call for non-discrimination norms on the internet which everyone on this panel seems to agree with in one form or another. and my suggestion is that by having a neutral platform, it has served as an incredible platform for free and diverse speech and that threats to that have intimately, threats to the neutrality in network ultimately threaten the speech environment and political process the united states. we don't, how many political outsiders come from nowhere from an internet campaign? i would suggest with respect to the chairman of full committee seems to have left that he has things precisely wrong,

180 degrees wrong and doesn't seem to understand the ininternet very well. because under, under net neutrality over the last 20 years we have an incredible flourishing of speech, including his speech which would probably not have been heard in the earlier era and it is, he owes and all speakers owe the internet an incredible debt of gratitude for getting their voices out there. all of the speakers in our society. and so what i've, what i'm suggesting net neutrality has supported and upheld this network as a platform for speech and a platform for innovation and a platform for non-economic values. none of this is it well-captured by antitrust scrutiny. the fcc has taken, you know, it hasn't always been been pretty but over the last 20 years it has taken a light-handed approach that has incredible benefits for the entire society and i agree with your suggestion that the antitrust laws, had

they been in place over the last 20 years would probably have not been adequate to oversee and create the kind of incredible speech and innovation environment we have seen over the last 20 years and so i thoroughly agree with your suggestion and i think that the fcc, despite its imperfections remains the right agency to oversee this network. >> i would like now to turn to our other three witnesses and ask if there was anything objectionable just uttered by professor wu? yes, former commissioner. >> great to see you again, congressman by the way. so, i'm not going to say an objection but i think there is fine point of distinction for the house judiciary committee which has jurisdiction over the first amendment which is when we're talking about speech, what i think the professor is offering is speech balancing. in the broadcast context,

historic the fcc we call that the fairness doctrine that would be probably be ruled unconstitutional by the supreme court today. when you have private parties speaking on private platforms the constitutional precedent says the government can't balance the speech. that is actually censorship. when private parties shout down one another that is not censorship. censorship inextricably is intertwined with state power and state involvement. now we want the internet to be open and free and a great platform. that will come but abundance and competition and that is what regulation actually subverts. >> could i ask professor wu, my last question. >> sure. >> what, what is the can't most people see what i've heard? why is antitrust which is slower

and weaker and can't get in front of a problem why would it be advocated over the if cc? -- fcc? is there something i don't understand going on underneath this discussion? >> i certainly don't advocate it antitrust is slower, sometimes weaker. they did, the at&t breakup was pretty strong. but i think what it does, is it it would turn as opposed to being a public debate over the open internet, it would turn into an economist debate where you have one set of economists and one set of data and another. as i suggested many of the important values which i think are values in our communications networks, values of the media would be neglected. >> there is more than that. >> there is important value of localism, regionalism, diversity, technical expertise,

all of which are lost when we turn to purely economic analysis that only considers economic, financial aspects of the internet. >> thank you very much, mr. chairman. >> thank you, mr. conyers. i will now recognize myself for five minutes of question. i'm going to start with professor wu. i would not engage but you've drawn me in. so, what's broken now? give me some examples of where you're seeing internet service providers regulating political speech or shutting down potential speakers? i don't see a big public outcry that this is happening. >> right. i would point you to the country's, outside the united states where they don't have net neutrality to suggest where you see the problem. now in the united states -- >> but it is countries themselves that are doing that through their internet policy and not so much private sector isps, isn't it? >> mixture of the two. whether it is the private isp or the government involved. i also don't think the

government should discriminate, should censor the internet either. let me say the reason we haven't had a problem over the last 20 years we have had de jure internet neutrality in place. >> i have limited time. i have to get to other people. this sounds like a if it ain't broke don't fix it argument. i've been on internet for a very long time. back when i was in college in the '80s, i actually accessing use net and things like that. whenever there was some sort of content regulation or something that wasn't deemed fair there was a huge outcry and i don't think there is more vocal advocacy group than internet users. we look no further when we were looking at sopa and fipa how adequate internet users are. we're seeing consolidation in

number of providers in vast -- outside of rural areas, you typically will have two or three providers. you will have a cable provider, wireline provider and wireless provider of broadband. so commissioner wright, commissioner mcdowell, do you see it broken and do you see a problem here? >> i don't and ftc has studies in this regard but i want to focus on one part of your question which is the values, heard a lot about the values of internet users in a variety of ways reflecting on the debate. i think that's important to note that what consumers value in their activities on the internet is in fact what lies at the center of antitrust analysis. i heard now, i think something that needs correction with respect to how cramped a view of antitrust is out there. antitrust is a consumer welfare-based system. this means what economists do is not merely focus on the things we can count but also on what consumers value.

and to the extent in antitrust analysis this things like the amount of content, the quality of content, innovation, things other than price and quality, these are captured within antitrust analysis. >> commissioner mcdowell, do you have anything you want to add? >> first of all i would like to say the federal trade commission can act as the same speed as federal communications commission or lack thereof. the idea that antitrust law is slower moving is not the case. i think it is important to point out that those countries where the internet is regulated more, there is less freedom overall but especially less freedom of speech. there is direct correlation between more regulation, more state involvement with the net and less freedom because these countries are balancing. really censorship. >> so potentially could some of these net neutrality regulations get in the way of innovative offerings? i pay $100 a month for my

internet. i have four people typically streaming all at the same time. my mother before she passed away was emailing and facebook. would net neutrality making these streaming services equally available as opposed to somebody who just wants to use internet and email, doesn't it give, force internet service prices higher and take away my options to buy a himmed account? -- limited account. >> the case for antitrust over regulation is simple as this the economic view these type of contracts across many industries help consumers. what the antitrust approach is allow you to do have benefit of contracts when they help consumers and reserve enforcement for instances we can find and we do, abuses of market power. it allows consumers to have both. >> professor wu and some net neutrality advocates suggest antitrust law is ill-equipped to deal with this i disagree but are there any tweaks we should

look at in antitrust law that perhaps should address these problems and be there should the problem arise? >> antitrust over of the last 50 years has evolved significantly and fine tuned approach based on modern economic that focuses on consumer welfare that approach is one that incorporates things like non-price dimensions, quality, innovation, exactly the thing we would want in antitrust policy to do. my view the consumer welfare approach served antitrust incredibly well. it is effective enough to reach these types of concerns. in my view it doesn't need any tweaking t does what it does well. what it does well is broader than some of what we've heard. i don't think it should do more than what it already does well. >> thank you, i sigh my time has expired. we'll recognize the gentlelady from washington, miss deben knee. -- delbene.

>> we appreciate how essential it is to innovation and economic growth. i appreciate there are very different views how we get there i believe it is critical for the fcc to implement strong, enforceable rules that will protect consumers and make clear there are protections and blocking and discriminatings on content. commissioner wright, your testimony suggests that you believe that the fears that network discrimination by broadband providers could lead to competitive harm are unwarranted and i'm not sure i agree with but can you please talk more about what you see as the potential, you know, benefits or efficiencies that these type of contracts will create for consumers? and how consumers are actually boeing to see that -- going to see that? >> sure. the idea of discriminatory what we call vertical contracts for example, between broadband providers and contract providers here's types of contracts have been focus of antitrust inquiries and economics for a

century. sometimes what they do when we have close relationships between folks in different parts of the supply chain is align their incentives more closely to provide new types of services by combining, not by merger, but by contract. >> but specifically, a consumer today, what do you think that they're going to see by today, in terms of benefits? when i hear from consumers i hear concerns about net neutrality and kind of violating the principles of net neutrality. i hear concerns about pricing. what, when you say there are benefits -- >> so, for example, business models that charge, i mean the heart of discrimination, business models that charge different prices to consumers can allow lower prices to disadvantaged consumer groups, for different types of services that might be charged for higher prices. that discrimination gives some people cause for concern and i understand that concern. but it also provide, and i think, don't think there is any debate in the economic

literature about this, it provides real benefits to consumers by facilitating the growth and entry of new products, new business models, sometimes differentially priced or differentially designed but those provide real benefits. >> so let me, you know, i guess i have a question for professor wu then. do the regulation of the internet today prevent venture capitalists or others from investing in startups like google and yahoo!? with very seen a lack of innovation? >> no, we've had net neutrality policy for last 20 years, maybe 30 depending how you count and we've had during this period the most astonishing of economic growth andvillement centered on the internet that, that we've ever seen in telecommunications. it has been a it has, been a tide that has risen all boats. the telecommunications sector itself around cable and telephone companies are very profitable. we've had one great innovation after another.

i suggested that under the net neutrality policy we approached what economists aspire to which is a market with very few barriers to entry and -- jenna: >> we have defacto today, have kind of a net neutrality policy that has been in place that been operating, maybe not formally but in some ways formally but also informally. >> i will agree with the sentiment if it is not broken don't fix it. we have had net neutrality policies for the last 20 years and it has been terrific. this is no time to jettison, jettison and turn turn to the f 2. c and jettison antitrust. >> that would be change. >> the change would be moving to antitrust. the fcc oversight has been terrific in terms of economic development and innovation. >> i also want to say that maybe why we have a letter from over 100 internet