each month. but along with that increase in video consumption on line it's worth noting that 33.5 million mobile phones users now watch video on their phones, which has increased almost 36% since last year. and consumers with this access spent 4 hours and 20 minutes doing this. consumers are increasingly becoming media multitaskers meaning that they will use more than one form of media at the same time. for example, recent nielsen data shows that 57% of smart phone and tablet users in the u.s., check their e-mail, and 44% visited a social network site while watching tv. consumers are finding and accessing their favorite content on more and more devices, or screens. consumers are saying

unequivocally that on line video will play an increasingly larger role in their media choices. thank you again for the opportunity to join you today. >> thank you, miss whiting. mr. paul misener, the vice president amazon.com, and i believe that you will speak about amazon's entry into the online streaming video business, following on the heels of effortses to digitize books and make them more available through its kindle service. i'm going on a limb but i think you're going to stress the need for an open internet which is kibds of called network neutrality but which i support and which my colleague to my left does not. in order for amazon to compete against incumbent video service providers. we welcome you. >> thank you very much, chairman rockefeller. >> is that about right? >> yes, sir. absolutely right. my mom will be proud. thank you, mr. chairman, members of the committee.

exactly a quarter century ago the fcc set out to establish rules for so called advanced television, which was the very first significant update to consumer video quality since the introduction of color tv in the early 1950s. the commission established a private sector advisory committee evaluate the technology and i had the honor of assisting that chairman richard wiley, his committee can be thanked for beautiful theater quality video we now take for granted when we watch a movie or football game on hdtv. more emerged. already in the mid 80s digital video capture and compression had come of age but in the early 90s, the committee also oversaw the emergence of digital transmission of digital video data bits. the future of video was to be digital all the way from the camera to the display. two other crucial developments occurred. first, the world wide web was invented. forever transforming the

internet into a graphic rich, easily accessible medium. second, congress over hauled u.s. communication law and although the 1996 act maintains some legacy distinctions among broadcasting, cable, satellite, telephone and mobile services it codified the concept of an information service. it was into this era that amazon.com was born. amazon opened on the worldwi wi web in july 1995 as an on line book store and grew to offer other products including music cds, vhs tapes and dvd's all of which require physical delivery. today, the amazon instant video service offers customers whether in populous or rural areas the ability to buy, rent or subscribe to a huge catalog of videos delivered instantly 24 hours a day. amazon is available on pc and macs and other internet capable devices.

amazon instant video offers more than 120,000 movies and commercial-free television episodes for purchase or rental, and with 25,000 of those are available on high definition. in february 2011 amazon introduced prime instant video as a subscription service through which amazon prime members can watch instantly and for no additional cost more than 17,000 video titles selected from thes in stanlts video library. this gives our customer to explore new video content. though we recognize our customers want to watch video content from the comfort of their homes we recognize that they are on the move and they want access to digital video. to support that demand last september amazon introduced the kindle fire, this is a fully functioning tablet that allows customers to access the internet, read books, play games and importantly watch high quality video.

and, if our customers have questions about our on line video services and the kindle fire, our customer service team including specialists in our huntington, west virginia facility are standing by to help so. to answer the question posed in today's title hearing on line video has emerged, and undowdedly a key medium of future delivery. with continued growth we believe the consumer demand and choice will cause continued growth of on line video services for a brighter future. this assumes of course that the internet will remain a non-discriminatory open platform. the open internet allows consumer to decide if a product or service succeeds or fails and this openness is particularly crucial in rural areas of the country where other choices are mo more limited. the fcc pledged to monitor the potential for competitive or other wise harmful effects from

specialized services but i ask your committee remain vigilant on this and other issues ever intsz net openness. consumer data caps instituted by some network operators merits such vigilance. consumer choice without impairment must be preserved. amazon would be happy to assist the committee in any way we can including if the committee were to undertake a review of the 96 act. as the testimony delivered in this morning's hearing indicates the lines between the communication service separately addressed in that legislation continue to blur and how consumers especially young people now think of television does not match long standing legal and regulatory conventions. the hearing today already has drawn important attention to that fact, and so in conclusion, amazon.com believes that the future of on line video is very bright for consumers and look forward to working with the committee preserve consumer choice. thank you again for the opportunity to testify and i look forward to your questions.

>> thank you very much, mr. misener. finally blair westlake who is corporate vice president of microsoft and your response for the x box not personally but perhaps you are, at microsoft, that started as a video game but has gone on to become an amazing instrument. we welcome your testimony. >> chairman rockefeller, members of the committee, thank you for the opportunity to testify in the emergence of online video today. i oversee the media and entertainment group out of microsoft that's my core scope and responsibility. microsoft engages with video in several ways. including through our various releases of the windows operating system, and windows phone products but i'm also here to discuss how the market is delivering consumer's greater choice and control over their viewing with on line video through our x box video service.

i have three ideas for you to consider today. first, we are in the early stages of the transition to the future of video. a few years from now current online video offerings will look like a mere bucket in the proverbial ocean of content. second, while the current online video distribution marketplace is dynamic and vibrant t committee is right to keep a watchful eye as content and internet service providers adapt to these changes. third, the video marketplace is on the edge of even greater change. that will feature new forms of content, greater interactivity, access and payment choices for the consumers. let's first consider the present online video market. even five years ago it was not possible for consumers to access high definition high quality video content delivered over the internet. the witnesses at today's hearing

represent just a few of the businesses creating a an abundance of viewing options for consumers. as you may know, xbox did start just as a video gaming console. when netflix chose to make its online video service available beyond the pc so that it could be viewed on a tv set, netflix did so through our platform. that was a pivotal moment in tv history that has helped revolutionize consumers' viewing habits. today, microsoft's xbox live service has more than 40 million subscribers worldwide watching 300 million hours of video per month. internet delivered video enables consumers to access a broad array of video content at various price points. whenever and whatever broadband enabled device they want. these choices from xbox and others compliment traditional

cable, satellite and telco services. we are not a substitute for traditional video offerings. for example, we have also seen consumers choose smaller discounted programming packages offered by many of the mvpd's and who may opt to supplement their basic tier cable with offerings such as nex flix. a practice referred to as core shaving. all of this demonstrate as current on line video market that is vibrant and dynamic. the future will bring even more change. in my view, the tv landscape will likely experience more change in the next 18 months than the past five years. tv will be a two way experience. "sesame street" programming t microsoft will release will be

completely interactive for children and leverage the power of gesture and voice control. children will be able to interact directly with elmo and cookie monster on their tv screen to learn counting and the alphabet and to actually see themselves on the tv in the program, thereby stretching their imaginations like never before. tv also will be increasingly a multidevice experience, soon consumers will be able to watch all of the content they want and pay for on any and all of their devices. we are already seeing production companies create content with mobile screens specifically in mind. innovation also will be introduced into other aspects of the television viewing experience. for example, the integration of bing search functionality and voice recognition technology enables some customers to find -- consumers to mind an

episode of mad men by using just their voice. these are just some of the exciting changes on the horizon and they highlight a key lesson. the vital importance of broadband access. microsoft is committed to digital inclusion and affordable access to wired and wireless broadband. as we move forward, policies that promote access to universal high speed broadband are critical to the health and vibrancy of a market that enables innovation, and benefits consumers. finally t future of video also depends on companies adapting to sustainable, innovative business models and broadband management policies that do not discourage or impede consumer consumption of a vast and innovative online video offerings that are possible in the future. and consumers have come to expect. today, companies are experimenting with transactional video on demand,

subscription-based distribution, and electronic sell through models. all these options enhance choice and are good for consumers in so many ways. as content owners and distributors to monetize their products and services i fully expect innovative alternative business models will come in view. out with the old and in with the new. in conclusion microsoft is pleased to be part of this vibrant and competitive market place that is rapidly evolving to a future that will give consumers more choice, more control, and better offerings. thank you, and i welcome your questions. >> thank you m westlake. we'll do five-minute rounds and i got about 100. but we'll just keep going until you exhaust. this is to all of you. if you want. miss whiting notes in her

testimony the popularity of online video is growing. we agree. but traditional television also remains very popular. i want to understand better how online video will compete with pay television packages from cable and satellite companies. and therefore my question, do you believe online video will grow to become a full substitute for pay television? will it compete directly with pay television packages that are so popular still today? and secondly, even if it does not become a full substitute, will it result in some downward pricing pressure on pay television service? which cost more for consumers each and every year. please. >> so we have a little bit of history to look at in the digital transition that just

occurred about three years ago, the full digital. many homes actually kept their pay cable television, or satellite, so it was in some cases a matter of switching the provider but they were paying. what we see is, as i said before, a record number of televisions in the home which may seem counter intuitive but people love large screen tvs, high definition experiences, and i think it's the ease of use that will matter so while i won't predict -- what we know is good content absolutely wins. whether it's user generated or created in other ways. if people provide the right content and as a business model mainly it's supported by advertising or by a subscription that works, they will continue to produce the content. consumers follow the content. the devices will multiply. and i think it's the ease of use and the ability to watch

whatever you want wherever you want it whenever you want it that we see has supported traditional television programming. it actually has grown. it's the access that matters. and i think other members of this panel may have more insight into the pricing and other things, but if we look at consumer demand, people want the content. and as long as the content is there it's a matter of just making access easy, simple, and different. >> i don't think it's to answer directly i don't think it's going to absubstitute. i think it's a supplement. i think that what on line can offer is more ala cart programming. you spoke earlier about having 500 channels and only watching ten. but you essentially pay for the channels that you do not watch and therefore subsidize them, and that's our current system.

it's a totally closed system. the internet gives the ability to offer individual programs or discreet packages or the narrowest of narrow casting, so as time goes on and we get more television sets naturally in big screen format, connected to the internet, you have the -- this incredible optionality that can only come from the internet. there is no closed pipe. so i think its long term effect is it's not going to replace pay television but it will certainly be up there in terms of consumption if not exceeding the consumption of pay television over time. >> for now it's attitude. >> sorry, attitude?

yes. >> let me do one quick one. thus apologizing to you too. obviously television is incredibly powerful. it informs us or doesn't inform us, in some ways shapes who we are to be. so we're talking about the advent of online video and how new technology could change the nature of television. and once again we go back to i believe that disruptive technologies come along when there is something to disrupt. and when we have -- what we have is not working for us. so this leads me to ask, so what went wrong with television? or is it just about technology. >> technology. sorry. >> anybody. >> well, mr. chairman if i may, i think the medium of television was always about pushing information out to consumers with the hope that they would appreciate it and want it. the internet in contrast by its

very nature is a pull medium where consumers pull to themselves what they choose and what they want. our whole business model is predicated on vast selection, convenience and value providing low prices to customers and nowhere is this more clear than with the provision of our video services. we want to give our customers the choice to watch what they want to watch, rather than have to watch what was pushed to them by someone in the traditional media. >> one more crack. >> i think stepping back it's about what you define television to be. so, what we see happening is there's live tv, watching when it's immediately broadcast, there is so much now done with time shifting, with dvrs, obviously they are distributed online video on your pc, tablet, your phone. i'm not sure that anything has gone wrong with tv so much as

you have this technology change in how to access it. that's what we see happening. it's complicated. it's complicated for everybody in the business to adapt to but it's really about the distribution. >> in 19 -- one little. in 1960 or so, if the world had the internet, the whole distribution system would have changed. we would not have wired the country. we would not have put up satellites. we would have simply done it over this wonderful internet ubiquity. >> i agree, and one thing that occurs to me and i'm coming right to you, senator demint, is the marvel of how we push broadband and how with the exception of some rural areas, which i care fiercely about, it has worked wonderfully and also wireless.

so it's in a sense like public policy, and your innovation created a perfect playing field. senator demint. >> thank you, mr. chairman. mr. dill e i'm curious, if you were still in the broadcasting business, what would you think about areo? >> well, you know, i probably -- if i was in the broadcast business i would do what every broadcaster has done which is to protect their arena and do anything to prevent any one else from getting into it. but i would also recognize that the part of being a broadcaster was receiving a free license. and in return, you programmed in the public interest and convenience. and core to that was that if you had a finger in the air or antenna or whatever, you could receive a signal without anybody

being -- anybody taking a toll or doing anything to prevent you from receiving that signal directly. that's what areo does. it's technology that allows a consumer to get what was the quid pro quo for a broadcaster receiving a free license. >> so do you see yourself as selling network subscriptions in effect or do you -- >> no. >> as a reselling content? >> we're not reselling -- we're not reselling anything. what we're doing, what we have is a technological platform. >> but it's a network in effect. >> no, it's not. >> people can subscribe. >> it's one to one. we essentially, you have an antenna that has your name on it. not literally but figuratively because it's very tiny. your name wouldn't fit on it. certainly senator rockefeller's

wouldn't. but you have this antenna, and it's one to one. it is not a network. it is a platform simply for you to receive over the internet broadcast signals that are free, and, to record them, and use them on any device you like. >> the broadcasters have licensed with the producers of the content to broad cast that. but you are going to in effect capture that and resell it without a license. >> no, we're not. sorry. we're not reselling anything. >> but you charge -- >> we charge a consumer for the infrastructure that we put together, the little antenna, and for our dvr cloud service. that's what the consumer is paying for. the consumer doesn't have to pay, we don't charge for

programming that is broadcast on this free direct to consumer system. pardon me. >> you are a distributor. >> no. sorry. i mean -- i would like to agree with you on something. we're not a distributor at all. we're not distributing except if you say that what we are doing by -- if you would call an antenna that radio shack sells, charges a consumer for, a distributor, then it would be analogous. >> you would contend if the amazon or microsoft businesses could -- could intercept broadcast signals and sell them through what they have set up now -- >> the laws, the system for broadcasting is, i mean, microsoft could do it presuming

in redmund where there is a tv signal, that they offered the same kind of platform, that we would offer because the system of broadcasting transmission is local. so it's utterly one-to-one. local broadcaster sends a signal out, and we provide an antenna to receive it, and put it over the internet and allow people to record it. >> okay. mr. misener, you plan to intercept broadcast signals and sell them over your network? i guess do you sell them as part of your content? you see that as a legitimate thing to do at this point? >> senator action thank you for the question. we currently don't offer live programming in our video service and we don't know what the future holds for our other businesses. we're all about providing our

customers vast selection and choice. the 120,000 available movies and tv episodes -- >> you license those or. >> yes, sir. >> deal with the copyrights. with everyone who owns them. >> correct. >> so you don't necessarily see yourself as a competitor to traditional pay tv services like cable or satellite? >> no, we're close partners with the studio who is produce the content. >> okay. all right. >> an aside question. do you think a walgreen's or cvs has the right to charge more for an in dial display than a position on the shelf? >> i'm sorry, senator. i didn't follow the question. >> have you ever seen an end aisle display of products in a grocery store. >> sure. >> do you think that retailers should have a right to charge

more for the end aisle display than for a position on the shelf? >> goodness. senator, i guess i feel that the products and services that a company like an amazon offers -- >> this is just a question about a grocery store. do 3 have a right to charge differently for displays versus shelf place? >> well, they do. >> that's really all i want to know. thank you, mr. chairman. >> thank you, senator. senator cantwell. >> thank you for this hearing. i thank the witnesses. i think combined at least the three of you employ about 100,000 people related to washington state so thank you very much for that. thank you for continuing to innovate in the business models and while we could have a lot of discussions here about a wide number of issues from net neutrality and on line distribution rights and piracy

and what the fcv capable of doing and not capable of doing, simplicity, one of the things that i wanted to discuss was or get your input on is just as we're talking about business models related to entertainment and the changes and what congress needs to do, to me there is one incredible opportunity with the advent of online content and distribution of that content, that's in the area of education. particularly when you talk about connect and two-way devices, i'm curious about what you see, mr. westlake, as opportunities in the area of education. i could say health care is another application but education where just about every are i university could put every bit of content on line and change the dynamic and access to education. whether you're going to give them a degree or not. to me it's almost irrelevant.

the fact that you can make educational material so available. and mr. diller, you made a habit of staying ahead of -- innovating and stating ahead of business, making sure you don't fall subject to business models as they change your competition. what do you see as the opportunities for this content to be made more readily available to the american public when we know one of our biggest challenges as a country is making sure we have a competitive workforce and driving down the cost of education. mr. -- anybody on the panel. i wanted to know because my understanding is two-way communications too, so one of the things that people are now saying about it on line or interactive education is the limitations but with connect you're obviously changing the dynamic to get more interactive going with individuals. >> thank you, senator. yes, that's