i look at the sesame learning program that we'll be releasing in september as a catalyst for companies, producers, to see what can be done. this is technology that connect it's kinect as opposed to the word connect. is an accessory that attaches to the x box and has the capability of detecting voice, motion sensing and has a video camera. and what this program, what we've done is commission 50% more programming to be shot integrating it with the production of the "sesame street" program that's produced each year, produce about 40 hours of linear program. and taking the digital content combining with the linear, children are able to interact as i describe can throw a ball toward the television and the ball appears on the television set as though this nonexistent

ball suddenly fell into their television set, something that was previously impossible to do. and what we're doing is we look at this as a seed for showing others this is what we can do. this is what we've done in other areas which is when we know the technology, what better way than demonstrate it. so i think it's the beginning stage, the beginning of the stage of being able to have producers produce the content, that is available for children to be used in this fashion, as you said the same with health care, any number of ideas that it could be used for this technology to bring health care content, et cetera. >> mr. diller, education? >> i would say that if online technology does not transform education it would be a crime. it is already beginning to do so. you have to remember we only had broadband for just a few years.

so, the ability to have rich video transmitted is a recent phenomena. we have things like con academy, a wonderful service for education. we have online like cap lin's online university which has i think 100,000 members so to speak. everything is eventually going to be online and there's -- there are healthy potential business models that are going to support that. and they will have a profound effect, i think, profoundly positive effect, because you will finally get some competition, really lively creative competition in education, how it's delivered, what its products are, et cetera. so i'm very -- i would say i can't imagine that it won't be transformed. >> thank you. thank you, mr. chairman.

>> thank you. >> i want to thank the panel. this is all the technology is remarkable, the innovation is amazing and you know, we here in congress are just trying to keep up with what's going on out there. as you can tell from listening to us this morning. i'm curious to know, this is for anybody on the panel because there are some studies out there that suggest streaming accounts for about 54% of internet traffic in north america during peak times, netflix and youtube for 37.6% of north america's daily internet consumption. which leads to a question, do we as a nation have sufficient infrastructure and band width to support the increased demand for high quality online streaming services and what are the foreseeable issues that arise fog our internet infrastructure in terms of this exploding demand and availability of online video and what should congress be watching for in this

area? if anybody would like to take a stab at that. >> senator, thank you very much. i think the core characteristic of the internet is that consumers are allowed to pull to them the information that they seek. so it's all about consumer choice. the information doesn't get into the wire as it were, unless the consumer asks for it. so, consumers are driving that growth of online. consumers are demanding devices like kindle fire, the broadband delivery of video services. 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. >> in terms of capacity, just the infrastructure to handle this. does anybody see that as a

problem? is that pose -- >> of course. the future growth of the industry. >> it is going to be a problem. 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. 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 is relatively little right now, and the potential

then is for rates, transmission rates to be lowered which would be a good thing. >> you mentioned mr. diller, in your testimony, your prepared statement, you talked about broadband being ubiquitous, as somebody who represent as 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 -- i know it seem likes it's ubiquitous but there are a lot of places that don't. i had a question on having to do with the issue of core shaving. mr. westlake you mentioned that in your prepared testimony where consumers elect to just have basic cable and supplement their service with a subscription to

netflix. seems there are a number that can sell directly to consume tear allow them to bypass cable subscriptions. yet many if not all of the current on line streaming models require you to have a cable subscription. you can't watch espn or hbo on your, you require the licensing rights to stream it. what is stopping espn from simply selling their content directly to the consumer or the nfl for that matter to sell directly to the consumer? >> you mean -- >> you mentioned -- >> in terms of each of these companies can make a decision whether they choose to sell directly to the consumer, which 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 s

as -- it's really purely a business decision on their part. some have and some haven't. 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. right now it's selling itself to me, i don't watch espn, i pay god know what is 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 would avoid. >> thank you. my time's expired. thank you. >> senator warner. >> thank you, mr. chairman. thank you for holding this hearing. missed part of mr. diller's testimony but i understand that he said that incumbents always

want to protect themselves and we need more disruption. i agree coming from my background on the tele-com side. i'm trying to get my head around this new mod wrl we have on one hand we have the content generators. and 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 a local community. so we've got this kind of how you do a distribution through either through cable over the air or broadband, network providers. and we've got this new entity, you all being in many ways in

between the content creator and the distribution system. and i guess the question i have for you all, we have placed in the past either kind of program access rules or other responsibilities on the network provider providers some restrictions or rules around the content entities, what should be kind of the policy ramifications for you all. what set of rules and should we kind of -- should we get to the notion of -- how do we define what senator demint was getting to, a distribution network or trying to put you in a traditional box burt what should your obligation be and what policy, restrictions, framework should we put around you all. not sure that's a clear

question. let me have you take a crack at it. >> senator, if i may, i think vigilance is due most in the areas where there is the least competition. 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. so that's the area that 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. and it needs revision because the rules started with broadcasting 80 years ago. 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 then, 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 are advertising supported networks, and subscriber supported networks rather than, quote, you know, pay-per-view.

but these players actually are in a system where there's no air. and there is no air because it's completely closed. dominated by relatively 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 ask you this because my time is going to run out. >> sorry. >> i feel like -- i agree we got to push more access, more conduits. but then what obligation should you have as a way to take -- as the intermediary between the content creator and the distribution, what obligation 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, through all of these, have a total level playing field. my time's up. >> 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. absolutely. i mean, 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 are being added to every hour. so i don't think you have any worries about that. >> senator, the greatest -- i would add the greatest innovation we've seen in the last couple years has been from

those that are utilizing broadband on line 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, essential. that is essential. but that is the creation of content is growing exponentially, both the volume of it as well as the innovation behind it. >> 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. the fcc broadband plan talks

about getting photos, video, to everyone, yet often the speeds aren't as fast in the rural areas. 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 platform company. we don't actually deliver broadband to the end point. we're dependent upon that as the consumer is. we are certainly as i said in my opening remarks encouraging wider access to that at the fcc for meg down minimum threshold because at that point we feel in terms of both what we can deliver in terms of high speed or excuse me, high quality video, high def quality video, that suits the needs we have as far as giving those consumer what they need.

as far as actually being able to facilitate that pipe out to the home, that's not a business we're in. >> senator, we're providing -- thank you. we believe we're helping to provide the value proposition for the build-out of that broadband t very fact that 120,000 movies and tv episodes are available from a service like amazon instant video, makes it more valuable for consumers and so the consumer demand will drive the build-out of broadband. certainly that's an area of important policy oversight from this committee and the commission. i'm a big believer in that. but rural areas especially will benefit from internet video. >> there is an article today in the washington post pointing out the 1934 telecom act ensuring programming for rich and poor alike. how about the disparity in terms of equal access to low income households. as more people are getting 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 that what the fcc is doing is -- i mean, in terms of using the old telecom funds to finance, build-outs in rural areas is great. but i think we 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. >>what do you see the role for local news?

we have our local news is provided through getting people through tornados, to the flooding in fargo morehead, daily reports of where people should go, 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 and were probably in all of these new development areas are going to be antiquity. i always felts otherwise. 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 television program of the moment. >> senator, i find that based o moment. >> senator, i find that in the greater seattle area where two of us live, i guess i work for one, i live in seattle. the local stations are utilizing online now for a depth of local news that isn't practical 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 most 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'll see the local

stations adopt to video apps that ores are doing and it will only proliferate. i have one last question. >> you have the tv viewers at 51 to 49 women watch more tv, is this right? i didn't know this. and online women beat out men for videos. 54 will have 46 for social networks. 50/50 for smart phones and the tablet owners are the only category where is 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's that? >> because actually we see very broad distribution of video in the usage on every device. if you mean, do i think the tablet -- >> i was just curious why that's the one. >> i think that's just been,

he's got an example of. >> the tablet is a knewer device. >> i was going to start my testimony with my ipad and blackberry and my iphone and pc, but i didn't do that. i do think that -- i do think that's just a timing issue of the distribution of the devices. it's interesting. >> thank you very much. >> thank you. senator heller. >> thank you, mr. chairman. thanks for holding this hearing today. i want to thank the panel. it's enlightning to hear your comments. i know we ask a lot of questions. it's usually the same question asked a little bit different. i i ashy your the question runs down that line. i would hope that we have more hearings like this, mr. chairman. in fact, i would hope that we talk about the communications act a little bit more, the cable

act and some of these issues. i would respectfully act in the near future to hold an oversight hearing on the sec. i would like to submit a statement for the record if that's okay. >> it's included. >> thank you. >> i call of you i marvel at the technological advancements and innovations that have taken place over the next 15 years. an unregulated internet market has been a dynamic force it's created many substantial and well paying jobs abroad and of course many the state of nevada. these advancements beg the question, 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 districtors that are on the books and determine what makes sense and what does not for a

world with a participant who's unregulated. they should do this while remembering the content should be protected and compensated accordingly. but focussing on the laws on the books is also a discussion for another day. today i'm hopeful that our panelists can provide us with the outlook of where we headed with content distribution and perhaps what consumers may expect with what's around the corner. such is the consumer electronics show. in 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 is helpful to me because the last thing that i want to do as a lawmaker is to stifle that innovation. with that in mind, i'd like to

ask the panel 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? i'll start with you. >> i said it earlier -- >> i said we're going to ask questions. >> oh, no, i respect that, senator. i think where we're going is obvious. we have a new radical revolution in communications called the internet. more is going to transfer. not completely. mu before 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 long er.

>> we see a trend of people using multiple devices simultaneously. more and more people watch television while they're using their tablet or their pc or their phone. chb only leads to the need for broad band because many applications are like that. we see more multitasking. we see many people wanting access to their favorite programs, their favorite content, their news and information wherever they are. and again on the best device possible whether that is. but as phones in particular, smart phones 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 that increases as well. they compliment 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 years. all the innovation everyone else is talking about, i leave to the experts about that. >> sounds like you're an expert. >> she is. sounds like the distinctions among the different communication 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. i'd with happy to work with the committee to address that blurring and 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. >> you do not have to apologize ever for 29 seconds in this room. senator carey then senator pryor. >> thank you, mr. chairman. indeed the line upward, in fact it's pretty unclear right now where a lot of jurisdictions began and where they end. we're way behind the prayer. ironically, i've said this before with the chairman, the 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, fair prices as well as the role that competition is going to play in those choices. i don't think we've tapped the answer to that yet to be honest with you. there -- you mentioned it a moment ago, the floor apparatus experience that you live and some people may have more, it's pretty normal for people to be doing that. there's nobody here who dunce understand the ways in which is technology 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 and movies over the internet for the rest of us to produce and distribute our