value for american consumers while raising billions of dollars for deficit reduction. at the fcc we're focused on faithfully implementing the incentive auction provisions and maximizing the opportunities of the new law for the economy and all americans. it's a privilege for the fcc to be entrusted with this responsibility which of course will require a great deal of work and effort by the agency. incentive auctions are unprecedented. the u.s. will be the first country in the world to conduct them. it will be a multifaceted task affecting major parts of our economy involving many challenging questions of economics and engineering. fcc staff is analyzing the complex incentive auctions law. it's well over 100 pages. assessing the challenges ahead and developing a plan for implementation. incentive auctions are part of our overall agenda to unleash the opportunities of modern communications technology to benefit our economy and all americans. we focus the agency on broadband communications, wired and wireless.

together with my colleagues at the fcc we've made tremendous progress in the past three years taking many steps to unleash investment innovation and job creation. these include freeing spectrum for both licensed and unlicensed use. modernizing and reforming major programs like the universal service fund and removing barriers to broadband build out. indeed private investment, innovation and job creation are up across the broadband economy. these metrics which are outlined in my written statement are up both when looking at broadband applications and services and looking at broadband providers and network infrastructure. in 2011 the u.s. information and communications technology sector grew three times faster than the overall economy. broadband is helping create new jobs all across the country and not just for engineers, although it's vitally important that we lead the world in engineering talent. but also for sales people, construction workers and small business owners increasingly using the internet to boost

sales and lower costs. these -- sorry. we're also now ahead of the world in deploying 4g mobile broadband at scale with 64% of the world's 4g lte subscribers here in the u.s. in the next generation networks are projected to add $150 billion in gdp growth over the next four years created an estimated 770,000 new american jobs. in today's hyperconnected flat world, the success of american companies as well as global prosperity depends on a dynamic and open global internet. and so we're working to preserve the internet as free market globally and oppose international proposals that could stifle innovation. the health of our broadband economy would be enhanced by closing broadband gaps. so the fcc is focused on bringing universal service into the broadband area.

today millions of rural americans live in areas with no broadband infrastructure. our plan adopted in october to modernize the universal service fund will spur build out to hundreds of thousands of rural homes in the near term and puts us on the path to universal broadband by the end of the decade while keeping the fund on a budget. together with my colleagues we drafted a set of reforms that will drive efficiency and help bring broadband to rural america. in addition to the broadband deployment gap, we're making strides on the broadband adoption gap. nearly one-third of americans, 100 million people, haven't adopted broadband. the connect to compete initiative enlists government, nonprofit and private sector leaders to tackle the barriers to taupadoption, one of several public private initiatives to promote solutions to major challenges. public safety is a core mission for the fcc and the agency is working to harness the power of communications to make our communities safer. we're working with multiple stakeholders to advance next generation 911.

we accelerated the launch of wireless emergency alerts that allows local, state and federal authorities to send targeted alerts to mobile devices in an emergency. the fcc also provides value by protecting and empowering consumers. working with wireless providers. we found a common sense solution to bill shock. a problem that has cost millions of consumers tens, hundreds and sometimes thousands of dollars in unexpected charges. working with private sector, public and nonprofit partners we developed a small business cyber planner to help small businesses guard against cyber attacks which are estimated to cost small businesses who are targeted an average of $200,000 in damages for each attack. our work on cyber security continues, and i'm hopeful that working with private and public stake holders on our advisory committee we can make real progress on solutions to promote greater security in our communications networks. i'd like to highlight not only what the fcc has accomplished, but how we conduct our work. the fcc is committed to smart

responsible government we've taken significant steps to modernize our programs and ensure they're efficient and fiscally responsible saving billions of dollars. usf i mentioned in carrier compensation, lifeline, video relay service. in each case, these are examples of modernized programs whose reforms are collectively yielding hundreds of millions of dollars in annual savings already. in addition to our programmatic changes, we have reviewed rules and processes asking tough questions to make sure the agency is operating efficiently and effectively. in connection with this review we've eliminated more than 200 outdated rules and five unnecessary data collections. we've identified two dozen more data collections for elimination. internal reforms like consolidated i.t. maintenance and new financial system has saved the agency millions of dollars. we've done everything i've listed and more with the lowest number of full-time employees at the fcc in ten years. maximizing the ability of 21st

century communications technology to deliver value to the american people and doing so in a smart and responsible way. that's the fcc's record for the past three years and that's our plan for ahead as reflected in our 2013 requested budget. to implement our responsibilities under the communications act, the budget requested a 2% increase over the previous year. from $339 million to $347 million. this proposal is essentially flat for inflation -- adjusted for inflation. as in previous years the amount will be derived entirely from fee collections. the budget includes a few small new initiatives, primarily technology investments designed to public safety investments aimed at saving lives. the budget provides a flat number of full-time employees which represents the lowest number of ftes in ten years. the number of -- excuse me -- let me just conclude the wired and wireless broadband sectors are critically important to our economy and our global competitiveness. look forward to working with the

committee on implementing the new law and unleashing the technology opportunities for our economy and the american people. thank you. >> thank you. chairman genachowski, i want to compliment you on finding the $6 million-plus in cost savings and efficiencies. that's something we could talk a little bit about. i wish all agencies were doing what y'all are on that front. commissioner mcdowell. >> thank you. thank you chairman emerson and ranking member serrano. it's terrific to be here today. this is my first appearance before your subcommittee owe thank you for having me. i'd like to focus on three matters currently before the commission. number one implementing the new spectrum incentive auction law the chairman outlined. number two, adopting universal service contribution reform. and number three, examining the complexities and burdens of proposed rules governing the maintenance of political advertising files by tv broadcaste broadcasters. lastly i'd like to address the

specter of possible regulation of internet governance by an arm of the united nations. first spectrum reform to make more parts of our airwaves available to american consumers. as a result of the law, the fcc will create and conduct the most complicated spectrum auctions in history. meanwhile, a debate continues over whether or how the fcc should shape the outcome of this process. history has proven that regulators' attempts to over-engineer spectrum auctions often backfire. i hope all of us can apply the lessons learned from the commission's past missteps as we implement this new law. our auction rules should be minimal and future proof allowing for flexible uses of spectrum as technology and markets change in the years to come. furthermore, i'm optimistic that we can create a structure that offers opportunities for small, medium and large companies to bid for and secure licenses without having to exclude any player from the auctions. i am confident that the fcc can get it right this time if it

avoids regulatory hubris. second is the need to fix the taxing side of our universal service fund subsidy. last fall the commission accomplished the task of modernizing the high cost portion of usf by repurposing it to support next generation communications technologies, all while keeping a lid on spending. the chairman and my colleagues who since retired and commission deserve a lot of credit for it. thus far, the commission has only addressed some of the spending side of the equation. perhaps more urgent is the need to fix the taxing side of the ledger. in other words, how do we pay for all of this? the contribution factor or the tax on american phone consumers has risen each year from approximately 5.5% in 1988 to almost 18% this year. this trend is unacceptable because it is unsustainable.

we need to abate the automatic tax increase as soon as possible. third is my concern regarding proposed new rules affecting tv broadcasters maintenance of the so-called political file. now, transparency is a laudable public policy goal, especially in the context of political spending. furthermore, providing broadcasters with more cost effective means to comply with fcc rules is also a noble endeavor. congress should be aware that the proposed rules create many factual, legal and pragmatic complexities that are not obvious at first glance. the political file contains information regarding candidates seeking to purchase political ads on tv and can shed light on the spending patterns of campaigns, political committees, third-party groups, super pacs and such. unlike other parts of politics inspection files the contents of the political file do not speak to whether a broadcaster is serving its local community of license. the political file is a tool instead for examining campaign spending rather than broadcaster

behavior. congress should be aware that this requirement could be experiencing mission creep at the fcc. in october of last year the commission proposed to reverse its 2007 position regarding political file mandates with little to no evidence that kts, their representatives or members of local communities served by broadcasters have been unable to access the required information, let alone that the benefits outweigh the costs. in fact the evidence before the commission indicates that the proposed new rules could cost the tv industry $15 million to up front expenses to upload existing paper files to a new government website while also forcing each station to incur upwards of $140,000 per year in recurring costs to maintain the information in realtime, as the fcc has proposed. before going further policymakers should be thoughtful and deliberative when examining the implications that

could arise as a result of the proposed rules. i still see many unanswered questions. for instance, number one, if the public policy goal of new rules is to produce more transparency in campaign spending, is the fcc the best agency to achieve such ends rather than a federal election commission? number two, would fcc requirements that are duplicative to fec rules violate the paperwork reduction act? and number three, among many others and there are more in my written testimony, where are the equitiys in singing out tv broadcasters for such disclosure requirements when political campaigns spend money on a plethora of money on outlets to contact voters such as radio, newspapers, the internet, direct mail, outdoor advertising, cable television, satellite radio and tv, paid activists to knock on doors and many, many more avenues for voter outreach. i'm hopeful that we as policymakers can strike the right balance between protecting core political speech and

encouraging transparency without disproportionately burdening one of many outlets. finally, all of us should be concerned with a well-organized international effort to give an arm of the united nations known as the international telecommunication union, new powers over internet governance through a renegotiation of a treaty. the internet has flourished under deregulation not only within our country, but throughout the globe as well. but some countries such as china, russia, india, iran, and saudi arabia among many, many others are working hard to change that, and we must stop them. thank you again for the opportunity to appear before you today. i look forward to your questions. >> many thanks, commissioner mcdowell. it's nice to have you here, too. so i want to get into this whole issue if we could of political files. there was -- i'm sure you all read "the washington post" article this morning.

and i'm -- i'm curious, chairman genachowski, where in your governing statute does it say that the fcc is -- or has responsibility or the authority over campaign finance issues? i'm kind of confused by this. >> sure. congress in 2002 directed required broadcasters to disclose information about campaign ads, et cetera, that was a cod fiction of fcc rules that had been in effect for a long time and the statute provides orders to the fcc to carry out those provisions. but if i could, the issue that is raised in this proceeding is part of a broad effort to move from paper to digital.

in fact, the suggestion in the proposal that was made in october which was based on a widely praised report from about a year ago identified the broadcaster public file as one of the last pieces of disclosure that was purely on paper. in fact, the files literally are in filing cabinets at tv stations. so the proposal in the notice was to enable the movement of all of that information from physical public files to digital. it's a proceeding that's open now. we're looking carefully at the record, and all of the issues that have been raised will be taken care of. >> so tell us what information is available in the political files? in other words, i mean, i know that i personally do not have to go to a tv station that i can get this information

instantaneously as my campaign, all of our campaigns do today. so consequently, i'm curious as to why we're doing this, but what is it in the political file that you all tell us all of the pieces of that? >> again, the proposal in the notice would apply to all of the different elements of the public file. the items that broadcasters have to maintain in the public file are actually prescribed by statute. the date and time of ads, the purchaser. the rates. it's listed in statute. >> right. >> they're in the public file, and the intended audience of the public disclosures is the public at large. any member of the public who wants to see that information can get it. >> right. >> but they have to go to the station, knock on the door and ask to see the public file. >> i don't agree with you on that. because, for example, our media buyers gave us all of that

information in the last campaign instantaneously. we knew within 10 or 15 minutes. i assure you, my media buyer was not able to go to a paducah, kentucky, tv station when they were in st. louis in 15 minutes. i think a lot of that information is available now. i guess i'm confused as to why you all are doing this when i can still get the information from the federal election commission. in other words, let's just say it says, emerson for congress made this buy. then i can certainly go on to the fec online and find out who all of my contributors are. i'm just -- i'm confused by whether -- is there a problem that exists out there that we're trying to correct? >> the information that's in broadcaster public files and broadcasters have been required by statute and commission rules for many years as part of the obligations as public trustees to maintain certain information available for everyone in the

public. for any citizen, for anyone to have access to it. >> right. >> the question in this proceeding is, whether in the 21st century a disclosure obligation that's fulfilled by a filing cabinet alone makes sense or whether common sense says, if broadcasters are required to disclose anything, as they are by statute, shouldn't that be online? most obligations of broadcasters have to disclose -- in fact, in general at the fcc increasingly interactions are digital not paper whether it's applications, consumer complaints, license information. the suggestion in the report that came out last year as part of a general effort to move from paper to digital as part of a general effort for transparency, if we're going to have any obligations at all on broadcasters as public trustees

to make information public, shouldn't that be online? if it should, why should we exempt any particular category? now, again, there have been questions raised in the record, and we'll look at all of those as part of the proceeding. >> but commissioner mcdowell said that you're just requiring this of broadcasters. what about cable companies or radio stations? where i live you buy more radio than you do tv. so is this to apply across the board to every single electronic media outlet? platform? >> we haven't proposed expanding the obligations on others. broadcasters have had unique obligations as public trustees. in this case the 2002 law singles out broadcasters to make these disclosures. there's a lot of history as broadcasters having these obligations. we're not looking at new requirements. we're looking at the existing landscape of broadcaster disclosures. should they or shouldn't they move online? >> so what percentage of

broadcasters are not putting this online? >> i'm not aware that any broad casters are putting -- >> or have this in a database. let's put it that way. not necessarily online, they keep electronic files as opposed to paper in filing cabinets? >> well, the only way that i'm aware that broadcasters make this information available to the public now is in filing -- is in paper at filing cabinets. the citizen wants access to this information, which the law requires broadcasters to disclose, i'm not aware of another option they have to get it from broadcasters. many people do go to the stations, knock on the door, look at the public files, have access to the information. but in the 21st century, the question is whether common sense says let's have that be online. >> so, broadcaster keeps -- if i buy a tv -- a series of tv spots and the broadcaster has all of this electronically because i paid for it.

it is not on paper. i paid for it. they're going to -- and on the form in the computer it says paid for by team emerson. so anybody's media buyer, anybody -- you're just asking the tv station to then put this to create a website, if you will so they can access it as opposed -- >> in fact -- >> or let me get into their database? >> the disclosure goals of the statute and fcc rules are about the public in general. the ordinary public doesn't have access to the information right now. your point suggests that for broadcasters to make the information available online would not be a difficult step. we would -- one of the options that we -- that is possible here

is moving the obligation of broadcasters so that the paper file could be eliminated completely. eliminating a step, since broadcasters have this information in online formats anyway, they can make it available online. eliminate the physical public file and have information that's already required to publicly available in easy accessible ways for anyone who's interested. >> why do you care about this? you have plenty of other things that are far more important to deal with since we have a federal election commission who has jurisdiction over campaign finance. i'm just saying in the whole scheme of things working on the spectrum auction, on usf, i mean why in the world is this a big priority? >> again, across the board the fcc has been looking to move from paper to digital. just in the last year alone, we've taken steps to move

tariffs from paper to digital. radio renewal applications from paper to digital. consumer complaints are now 95% digital. licenses are digital. and so it should be really an easy thing to say anything that's paper, let's move it to digital. let's allow companies that have obligations to not file anything in paper and move to digital. it should not be a time consuming difficult process. >> commissioner mcdowell, let me have your thoughts on this. obviously i can tell you're not in favor of it based on this "washington post" article. but i'm still kind of perplexed as to why we -- i mean -- why this is such a priority. >> well, good question. first of all, i think two key points to emphasize. as proposed by the fcc the word immediately implies a realtime online posting and also proprietary information, something i didn't get a chance to talk about in my opening remarks.

broadcasters came to us in 2007 when the fcc first moved to have most of the public inspection file posted online. the chairman is right in most cases that is much more cost effective and easier for everybody and is it easier accessible so public interest groups or academics or general members of the public can look to see what kind of programming of local interest broadcasters are providing to their local communities of license. that's the important core mission of the fcc. and as you pointed out, this is an election law issue regarding transparency in campaign spending. so broadcasters have come to us in a couple of waves in 2007 and 2011, and 2012 to say this isn't cheaper for them to do. the political file component of it, because of the implication that this would be realtime updating. some estimates are maybe $140,000 per year per tv broadcaster. and keep in mind, broadcasters are not big businesses.

most are small businesses. this might be an unfunded federal mandate of sorts. the second component it would require them to disclose to the public immediately proprietary pricing information. candidates campaigns are sort of entitled to the cheapest rate. and that becomes a competitive issue. so one of the potential unintended consequences actually could end up being price signaling among broadcasters in a particular market regarding what the lowest rate should be. as you pointed out buyers sort of know what the lowest rates are anyway. but having it out there in realtime could cause some unintended consequences as well. so i think, you know, we need to sort through a lot of these. the chairman is right in that there is as part of the bipartisan campaign reform act also known as mccain-feingold of 2002, the fcc is charted with requiring broadcasters to keep political files with this information. including by the way if a campaign committee calls the station inquiring about ads, not

just if there was a buy event. that's important, but broadcasters are coming to us not campaigns. saying the proposed rules might be unduly burdensome to them. it's important for us to ask what is the cost benefit analysis here and to weigh that very carefully and deliberately. and, also, maybe generally speaking as policymakers, we should be asking if we want transparency in campaign spending shouldn't we turn the microscope around off of tv broadcasters and look at the campaigns or the political committees that are spending the money, and where is that money going? that way you have a more comprehensive view. i'm not advocating that one way or the other, but i'm saying the goal, the fcc is not necessarily the best agency to do that, especially when we're just focusing on the narrow issue of tv broadcasters and no other media. >> so i guess then this begs the question if in fact, let's say hypothetically that this rule

goes forward and broadcasters of are forced to do this, then i assume that you would then move to require them to move them to do this for all advertising? so in other words let's say you've got kellogg's and general mills. and the kellogg's folks have tv -- a tv buy and then general mills wants to make sure that on its tv buy it gets the same information. would that be the next step here? would you -- i don't know why you have to do it just for political ads and not all advertising? if you want people to be digital then they've got to be digital for everything not just for political ads. >> that wouldn't be the next step. in fact, the political file isn't the goal here. there are existing obligations on broadcasters that are part of their long-standing requirements as public trustees. and the question is as with everything else that's happening in paper just common sense say it's time to move from paper to digital. so the commission isn't looking

at new requirements -- new disclosure requirements. expanding disclosure requirements, but, rather, moving from paper to digital. in fact, giving broadcasters the option to eliminate paper disclosures and move to digital. if i could comment on the proprietary point quickly. it flows from that as well. we are not proposing to require any disclosures of information that already isn't disclosed publicly. the issue is simply should we move from paper to digital? if we do, should we exempt any category like political ads from the general trend toward using digital for greater transparency? >> so basically you're going to require broadcasters to not only digitize political ads but all advertisement -- any buy that's made? >> no, no, no, no. the statute applies to political ads -- >> i understand that. but if you're in fact so big and

intent on digit -- digitalizing i can't say that word -- digitalizing the political ads, then why -- wouldn't you digitize all media buys? >> it's not in the statute it's not in our rules. it's not something that's been raised. it's not something that we're looking at. the question is that the commission is considering. again we have a record before us. there have been a number of legitimate issues raised and the staff is looking at all of those. but the general question is once there are disclosure obligations, should they move from paper to digital as across the board we're moving from paper to digital? >> i understand what you're saying, it still doesn't -- doesn't compute to me. do you have -- have you all done a cost benefit analysis on this -- on determining how much this would cost? >> the record and response to our notice contains a good deal