they're demanding the broadband delivery of video services. and so so long as consumers are able to make that choice in the future, so long as the networks remain open to that consumer choice, it will be a bright future for consumers. because they will decide what they want to receive through the internet. >> but in terms of capacity, just the infrastur handle all of this, i mean, does anybody see that as a problem? does that impose any kind of a constraint -- >> of course it's a problem -- >> to the future growth of the industry? >> we do not have a first-rate broadband infrastructure in this country. we are slower and less deployed than i think 15 or 18 countries. >> right. >> we also are beginning to

strain at capacity. and so i think that all the efforts to free up spectrum, the efforts that i think should be mandated for the widest broadband coverage, is mandatory. one way or the other, it will get solved. it would be nice if, in fact, enough spectrum is offered and enough bidders bid it up to whatever they think is a fair going rate, and then they bash each other in competition, for which there's relatively little right now. and the potential then is for rates -- transmission rates to be lowered, which would be a good thing. >> and you mention, mr. diller, in your testimony, to your prepared statement, you talked about broadband being ubiquitous. somebody represents a rural area, there are places in the country where that's not true. and i think of the reservations, for example, in south dakota and thinking about how -- what

efforts we need to make to make sure that we're including rural americans in these video business models of the future. because there clearly is a -- i know it seems like it's ubiquitous to many of us who live in places where you have access to it, but there are a lot of places that don't. i had a question on having to do with this issue of cord shaving. mr. westlake, you mentioned that in your prepared testimony where consumers elect to just have basic cable service and supplement their service with a subscription to netflix. it seems like there are a lot of content providers that are going to have the opportunity to sell their content directly to the consumer which would allow them to bypass cable subscriptions. and yet many, if not all, of the current online streaming models requires you to have a cable subscription. for example, you can't watch espn or hbo on your ipad unless you have a cable subscription. they provide licensing rights to stream it. what is stopping espn from selling their content directly to the consumer, or the nfl for

that matter to sell directly to the consumer? you mentioned it -- >> yes. in terms of each of these companies, of course, can make a decision whether they choose to sell directly to the consumer. if what you mean is do i know of any impediment, there are no impediments, it's more a business decision that they make. some of these services are, in fact, selling directly as well as on an authenticated basis. so it's really purely a business decision on their part. some have and some haven't. and i would expect over the course of time, there will be more services that are offered directly to the consumer. >> simply, senator, it would be insane for espn to sell itself directly to consumers. because right now, it's selling itself to me. i don't watch espn, i pay god knows what for cable transmission.

and i am therefore paying for espn because 100% of subscribers have to pay for it. so to sell it individually would be something they avoid. >> all right, thank you. mr. chairman, my time's expired. thank you all. >> thank you very much. senator warner. >> thank you, mr. chairman. thank you for holding this hearing. part of mr. diller's testimony, if i understand, he said incumbents always want to protect themselves and we need more disruption. i agree, coming from my background on the telecom side. but i'm trying to get my head around this whole new model where we've got on one hand, we have the content generators. in the traditional model, we had broadcasters and/or cable

others, which then had some level of public obligation because they either got that free license or they negotiated with the local community. so we've got this kind of how you do a distribution through either cable, over the air, or broadband network providers. and we've kind of got this new entity, not so much from nielsen, but everybody else, you all kind of being, in many ways, in between the content creator and the distribution system. and i guess the question i have for you all is, we have placed in the past either kind of program access rules or other responsibilities on the network providers some restrictions or rules around the content entities.

what should be kind of the policy ramifications for you all? what sort of rules? should we kind of -- should we get to the notion of what -- how do we define, senator demint was getting at, whether a distribution network or trying to put you in a traditional box, but what should your obligation be and what policy restrictions framework should we put around you all? i'm not sure that's a very clear question but let me have you all take a crack at it. >> well, senator, if i may, i think vigilance is due most in the areas where there's the least competition. and so at present, there are a plethora of content creators, content distributors, and certainly consumers. but there also are not many conduits by which the content can get from producer and provider to consumer. and so that's the area i believe

requires the most vigilance. and in this context, maintaining an open internet is crucial to the provision of these competitive services and the consumer choice that i believe we all agree is the right policy. >> senator, i think that -- not to be presumptuous, but i think you've got to rewrite the communications act of '96. it's overdue. given the internet. which -- which -- and it needs revision. because the rules started with broadcasting 80 years ago. but the rules that essentially protected broadcasters, and then the rules that enabled cable television, there is a new entrant. that new entrant -- and it's a healthy entrant -- is the internet. and so i think the rules now need to reflect that there is a

potential positive competitor to what has become, as you stated earlier, a very closed system of program content makers, people who organize networks, whether they be pay networks or whether they're advertising-supported networks and subscriber-supported networks rather than, quote, pay per view. but these players actually are in a system where there's no air. and there's no air because it's completely closed. dominated byelatively few companies, less than a handful. and i don't think those companies are going away. my goal in life is not to make them disappear.

but i think it's -- the internet allows for competition. >> let me just ask you this because my time's going to run out. >> sorry. >> no, i just feel though -- i agree with senator thune, we've got to push more access. we've got to push more conduits. but then what obligation should you have as a way to take -- as the intermediary between the content creator and the distribution system, what obligations should you have in terms of providing equal access, paying for the amount of content you push through these pipes, and should we be distinguishing between traditional sources -- cable, broadcast, wired, wireless? should we have a total level playing field? my time's gone. >> i would just simply say a level playing field is mandatory. and that means that the rights and obligations that people have are across all of these arenas. [ inaudible question ]

>> absolutely. broadband -- by the way, right now, the profit margins on data transmission are in the 90s. so it's not exactly as if these systems are not going to be built out. they are being. and they're being added to every hour. so i don't think you have any worries about that. >> senator, the greatest -- i would just add, the greatest innovation we've seen in the last couple of years has been from those that are utilizing broadband online video delivery, bar none. access to the broadband and the reach of broadband is the essential part. i don't find that we have an issue of getting access to the content. in fact, the most profoundly different content is coming from those who are utilizing that means. wide access to it is essential. that is essential. but that is the -- the creation of the content is growing

exponentially, both the volume of it as well as the innovation behind it. >> senator klobuchar to be followed by senator heller and senator kerry. >> thank you very much. thank you, mr. chairman, for holding this hearing. i wanted to follow up quickly first with senator thune referred to rural america. i think you all know the fcc national broadband plan talks about getting broadband, including web pages, photos, video, to everyone, yet often the speeds aren't as fast in the rural areas. and could you talk, maybe one of the three of you that provide these services, about how you're working to make your delivery systems more available to rural america? >> senator, well, we are a platform company. we don't actually deliver broadband to the end point. we're dependent upon that

essentially as the consumer is. >> i understand. >> we are certainly, as i said in my opening remarks, encouraging wider access to that at the fcc, 4 meg down, minimum threshold. because at that point, we feel in terms of both what we can deliver, in terms of high speed -- excuse me, high-quality video, hi-def quality video, that suits the needs we have as far as giving those consumers what they need. but as far as actually being able to facilitate that pipe out to the home, that's not a business we're in. >> senator, thank you very much, senator. we believe we're helping to provide the value proposition for the buildout of that broadband. the very fact that 120,000 movies and tv episodes already are available from a service like amazon instant video makes it more valuable for consumers. and so the consumer demand will drive the buildout of broadband. certainly that's an area of

important policy oversight from this committee and from the commission. i'm a big believer in that. but rural areas especially will benefit from internet video. >> and there's an article today in the "washington post" pointing out the 1934 telecom act was ensuring programming for rich and poor alike. how about the disparity issue in terms of equal access to low-income households? how do you think that fits into this? as more and more people are going to be getting their news in other ways? >> well, i would say that access is going to be increasingly available as the broadband infrastructure not only becomes completely ubiquitous, but also has enough price competition to allow it to be available. i think what the fcc is doing is -- i mean, in terms of using

the old telecom funds to finance buildouts in rural areas, et cetera, for broadband is great. but i think we do need a national policy for broadband. because everyone is going to be affected by it and we're going to need to have as good a system as there is in the world. and right now we don't. >> and where do you see the role for local news? our state, the local news is provided through getting people through tornados, to the flooding in fargo moorhead, literally daily reports of where people should go, what's happening. what's the role of local news as you see the video marketplace maturing? >> i've always thought, as people said, that local broadcasting, local television stations, were going to be outmoded. were probably in all these new development areas were going to be antiquity.

and i've always felt otherwise. because the strongest local television stations are the ones that provide the most news and information and community programming. and so i think that is -- continues to be very vibrant. and clearly, if you look at the success of any television station in any market, they are more dependent upon their ability to deliver news than they are having to hit a television program of the moment. >> senator, i find that based on just viewing in the greater seattle area where two of us live, or actually i guess -- you work for one, i live in seattle. the local stations are utilizing online now for a depth of local news that is impractical on-air. so there is barely ten minutes

that goes by in a broadcast of a local independent or affiliate station that does not refer to their website for more in-depth video footage, et cetera. so actually, i think the local -- i agree, local content remains for more consumers first and foremost where they go, as opposed to just a broader national feed. and the local stations on the whole, i think we're seeing just the beginning of it, i think you will see those local stations actually adapt to video apps that others are doing, and it will only proliferate. >> ms. whiting, i just had one last question. i was looking at your gender break youp. always a good topic to end, huh? on the digital consumer. you have the tv viewers, 51-49, women watch more tv, is this right? i didn't know this. and online women beat out men 53-47 for videos. 54-46 for social networks. 50-50 for smartphones.

and the tablet owners are the only category the men are ahead, 53-47. do you see that changing as well or where do you see that going? >> no, i don't see that changing. >> why is that? >> because actually, we see very broad distribution of video in -- usage on every device. if you mean do i think the tablet disparity? >> no, i was just curious why that's the one where the men are -- >> he has an example -- >> i know there's a man up there with a tablet. >> i think that is manly because it's a newer device. >> and the women, they wait more to make sure they work and are prudent? >> i was going to start my testimony with my ipad and blackberry and iphone and pc but i didn't do that. but i do think that -- i do think that's just a timing issue of the distribution of the devices. >> it's interesting. all right, thank you very much. >> thank you. senator heller. >> thank you, mr. chairman.

thanks for holding this hearing today. i want to thank the panel for being here. it's enlightening to hear your comments. i know we ask a lot of questions. we just do it in a different way. it's usually the same question, just asked a little bit different. i assure you that my question probably runs right down that line. but i would hope that we have more hearings like this, mr. chairman, and that, in fact, i would hope that we talk about the communications act a little bit more, the cable act, and some of these issues. in fact, i would respectfully ask in the near future we hold an oversight hearing on the fcc and discuss some reforms that i've introduced. so that would be my request. i would also like to submit a statement for the record, if that's okay, mr. chairman. >> it's included. >> thank you. like all of you, i marvel at the technological advancements and innovations that have taken place over the last 15 years. an unregulated internet market

has been a dynamic force that's created many substantial and well-paying jobs, abroad and of course in the state of nevada. these advancements beg the question of whether the laws passed in the 20th century are outdated in relation to today's changing landscape. that's why congress should look at the laws regulating content distributors that are on the books and determine what makes sense and what does not for a world with a participant who is unregulated. they should do this while remembering that content should be protected and compensated accordingly. by focusing on the laws on the books is also a discussion for another day. today i'm hopeful that our panelists can provide an outlook with where we may be headed with content distribution and perhaps what consumers may expect around the corner. i'll tell you one of the great benefits of being a senator from

nevada is to tout the conventions that come to my state. such as the consumer electronics show. a recent convention held by the national association of broadcasters. these gatherings are always informative because they showcase what's coming down the pipe from innovators for consumers. knowing where we're going, it's helpful to me because the last thing that i want to do as a lawmaker is to stifle that innovation. so with that in mind i'd like to ask the panel kind of an open question to all of you in regards to viewing content. where do you think we're going? and do the laws in existence help or hurt us from getting there? mr. diller, i'll start with you. >> well, i said it earlier. >> i said we're going to ask questions -- >> no, i respect that, senator. but i think that where we're going is obvious. we have a new, radical revolution in communications called the internet.

and so more is going to transfer -- not completely, but more is going to utilize the capacity of the internet to provide more information, more services, more programming, and the laws we have -- that '96 communication act -- no longer -- do not address the reality of this new force that has only been really going on since 1995. >> senator, i would just probably add a couple things. we see a trend of people using multiple media and multiple devices simultaneously. so more and more people watch television while they're using their tablet or their pc or their phone.

which only leads to the need for more, as we're talking about, broadband, because many of those applications are like that. so we see more multitasking. we see people wanting access to their favorite programs, their favorite content, their news and information, wherever they are. and again, on the best device possible, wherever that is. but as phones in particular, smartphones also have wider and wider penetration. that device really is a video device for any of the different kinds of content we're talking about. so i think that increases as well. so they complement each other. people are using multiple media at the same time and that will grow. so those are the big trends we see in the next couple of years. all the innovation everyone else is talking about i leave to the experts about that. >> sounds like you're an expert. >> she is. senator, the distinctions drawn among different communications

services in the '96 act and the '34 act before, the '92 cable act, those distinctions have blurred significantly over the past decade or so. and i'd be happy to work closely with the committee to address that blurring and to see if perhaps there are ways we ought to update the law to reflect the business models and technology that exist today. >> thank you. my time has run out, mr. chairman. i apologize, mr. westlake. >> you do not have to apologize ever for 29 seconds in this committee. senator kerry, then senator pryor. >> thank you, mr. chairman. indeed, the lines are blurred. in fact, it's pretty unclear right now where a lot of jurisdictions began and where they end. and i think we're way behind the curve. ironically, and i've said this before with the chairman here, as chairman of the subcommittee,

i've said that we were really behind the curve within six months of the 1996 bill being signed. because we didn't really think very hard about data transmission. so a hearing like this is pretty important as we think about what's the role of government in the market going forward? and hopefully it will help us understand how free americans are to really engage in the creation and consumption of video in fair terms, at fair prices. as well as the role that competition is going to play in those choices. and i don't think we've tapped the answer to that yet, to be honest with you. you've mentioned it a moment ago, ms. whiting. the four apparatus experience that you live and some people may even have more.

but it's pretty normal, actually, for people to be doing that nowadays and there's nobody here who doesn't understand the ways in which the digital technologies have shaped the video landscape from youtube, amazon instant video, facebook, netflix, many others, have now made it possible for hollywood to distribute television movies over the internet for the rest of us to produce and distribute our own video. from the sort of innocuous and silly and personal, family-oriented, kid-oriented kinds of things, to the joseph kony video, which had profound impact and stunning, over 80 million or so hits over a short period of time. now the smartphone and tablet folks make it possible for people to capture video not just on your television or computer but any time, anywhere. so it's a brave new world. it's a whole new deal.

and most of these services are riding on either the wired or the wireless investments of a group of companies -- the satellite, cable, telephone folks. and now they're using their broadband capabilities to put content out in new ways such as the comcast, x-box, microsoft x-box setup. so a lot of us are sitting here trying to figure out, what are the principles that ought to guide us going forward? mr. chairman, i think it's critical that whatever we do, we help to grow and empower and enable this innovation. that means on the wireless side that we have to do a better job of managing and releasing the spectrum, because video takes up a heck of a lot more bandwidth. on the wired side, we need to be pushing out broadband networks

to underserved regions. still a problem here. mr. chairman, you and i have talked about this. the committee has had hearings before. we've had policies put in place. president bush way back in 2003 or so said we're going to have policy that had everybody in america wired. as we all know, we're light years behind that. in fact, dropping behind other countries, which we really ought to take note of. if you want to talk about american competition and preeminence in the marketplace, it's going to be dictated largely by some of this, and we're not doing what we need to do by any sense of the imagination. finally, i'd just say -- this is part of the opening comments i wanted to make earlier, mr. chairman -- we have to protect net neutrality, i believe. that's critical as we approach this. we fought back against one effort in the senate to undo that. so i remain very committed, as chair of the subcommittee working with my full chair, to make sure that we enhance this

marketplace as we go forward. and frankly, make a little sense out of it. because i think consumers are bouncing off the walls right now in some ways. in other ways they're benefiting just enormously through the increased access and different appliances. and we have to be careful not to nip that because of its power in the marketplace. so let me ask you a couple of questions, if i can. one, i might ask mr. diller, given your success in the marketplace in a number of different venues, the knowledge you have of this, what would prevent you from going out and creating now your own sort of fox network or some network, any other name you could attribute to it -- >> i think i would pick a new name. >> well, pick a new name. but your own network, your own

individual network, outside of the broadcast or the cable world, and just distribute it purely on the internet? >> absolutely nothing. >> doable? >> yes. the wonderful thing about this miracle of the internet is you literally get to make up whatever you want, press a send button, and publish to the world without anybody between your effort and the consumer. so it gives you an absolutely open possibility to create anything. now, we're at a very early stage. we've only had video for a few years. the ability to transmit rich pictures over the internet. and there's no question in my mind that as time goes on and systems for consumers get used to, to the same degree that they're used to the one click on amazon, so that if you have