to introduce me. and i can only hope his kindness will continue when he has a chance to question me later today. i last testified in front of this committee in march 12th of 2013. since then things have changed dramatically at the fcc. i wish that i could say on balance these changes have been for the better. but, unfortunately that is not the case. the foremost example, of course, is the commission's decision last month to apply title 2 to the internet. the internet is not broken. the fcc didn't need to fix it. but our party line vote overturned a 20-year bipartisan consensus for a free and open internet. with the title 2 decision the fcc today to give itself the power to micromanage virtually every aspect of how the internet works. it will hurt consumers by increasing their broadband bills and reducing competition. the title 2 order was not the result of a transparent rule-making process. the fcc has already lost in court twice.

and its latest order has glaring legal flaws that is sure to keep the fcc mired in litigation for a long time. turning to the designated entity program. the fcc must take immediate action to end its abuse. what once was a well-intentioned program designed to help small businesses has become a playpen for corporate giants. the recent aws3 auction is a shocking case in point. dish, which has annual revenues of $14 billion and a market cap of over $34 billion holds an 85% he can witd stake in two companies that are claiming $3.3 billion in taxpayer subsidies. that makes a mockery of the small business program. the $3.3 billion at stake is real money. it could be used to underwrite over 585,000 pell grants, fund school lunches for over 6

million children or incentivizing the service of 100,000. it denied them spectrum licenses they would have used to give rural consumers a competitive wireless alternative. in my view, the fcc should quickly adopt a further notice of proposed rule-making so we can close loopholes in our rule before the next spectrum auction. chairman thune ranking member nelson and members of the committee, thanks to you once again for giving me this opportunity to testify. i look forward to answering your questions and to working with you and your staffs in the time to come. >> thank you, commissioner. >> good afternoon, chairman thune, ranking members of the committee. they are change at a breathtaking pace. how quickly? well, consider this. it took the telephone 75 years

before it reached 50 million users. to reach the same number of users, television took 13 years and the internet took 4 years. more recently, angry birds took only 35 days. so, we know the future is coming at us faster than ever before. we also know that the future involves the internet. and our internet economy is the envy of the world. it was built on a foundation of openness and that is why i support network neutrality. with an eye to the future i want to talk about two other things today. wi-fi and the homework gap. first, wi-fi. a few of us go anywhere now without our mobile devices and our palms, pockets or purses. that's because every day in countless ways our lives are dependent on wireless connectivity. while the demand for our air waves grows, the bulk of our

policy conversations are about increasing the supply of licensed airwaves available for commercial auction. this is good but it is also time to give wi-fi its do. wi-fi is how we get online. wi-fi is also how our wireless carriers manage their networks through off-loading and wi-fi is a boone to the economy. there are studies that demonstrate it is responsible for more than $140 billion of economic activity every year. and that's big. so, we need to make unlicensed services like wi-fi a priority. the commission is doing just that with our work on the 3.5 gigahertz and next year on the 600 megahertz.

going forward, we all need to be on guard to find more places for wi-fi to flourish. second, i want to talk about the homework gap. today roughly seven in ten teachers assign homework that requires broadband access but fcc data suggests as many as one in three households do not have access to broadband at any speed. think about those numbers. where they overlaps what i call the homework gap. because if you are a student in a household without broadband today, getting your homework done, just getting your homework done is hard. it's why the homework gap is now the cruellest part of our digital divide. but it's within our power to bridge it. more wi-fi will help, as will our recent efforts to upgrade connectivity in our nation's

libraries through e-rate, but more work remains. and i think the fcc needs to take a hard look at modernizing its program to support connectivity in low income house holds, especially those with school-aged children. and i think the sooner we act, the sooner we bridge this gap and give more students a fair shot at digital age success. thank you. >> thank you commissioner rosenworcel. as much as we can, trying to adhere to the five-minute rule, it will be hard because we have a lot of interest in the subject. let me start by -- talking a little about an issue important to me and my state, and i'll start by saying laws and policies that are outdated often leads to rules that are are arbitrary which ultimately limits consumer choice and raises cost. and the current universal service fund rules require a rural consumer to buy voice service from a small rural

telephone company in order for that carrier to are eligible for consumer support. if they -- the carrier is no longer eligible to receive u.s. support for that subscriber's line. this contradiction undermines the mission of the new broadband centric usf. it makes broadband more expensive. last year senators gardner and i led letters to the commission to urged the fcc to propose rules to solve this issue nearly a year later that issue remains unsolved. and so i want to ask each of you a question. i'm going to take the approach of my predecessor, chairman rockefeller, and ask for a commitment from each commissioner. the question very simply is will you commit to solving this growing threat bit end of this year.

>> yes. >> absolutely. >> yes. >> yes. >> very good. thank you. >> okay we have unanimity now, sir. >> yeah, this was designed to get you guys all on the same side of an issue. you know i want to make just a an observation, in addition to other things we would like to talk about as well. i have a father who's 95 years old. he lives in my hometown in south dakota with a population of about 500 people. he's a user of the internet. it strikes me if i had to suggest to my dad that we're going to regulate the internet he uses with a law that was passed during the great depression when he was 14 years old, i think he would probably be flabbergasted. and essentially that's what we're doing. we're trying to take something

that was designed for a very different era and squeeze it and try to fit it into a modern technology. and one of the issues that that statute allows for is rate regulation. now, i know that, charnlgs you have contended that no rate regulation is going to result from the internet open order. let's say hypothetically that someone files a complaint alleging the rates they pay an internet service provider are not just and reasonable under section 2.01. commissioner pai, as a result of title 2 reclassification, isn't the commission legally obligated to investigate and rule on that type of a complaint? >> mr. chairman that is absolutely right. the order opens the door to complaints under section 2.08 both to the commission and courts around the country. at that point it will be up to the commission if it receives

such a complaint. the order limits itself we don't, things like tariffs but says nothing about ex-post regulation and i think that's why ex-post rate regulation is a very real prospect. >> so if that circumstance were to happen commissioner rosenworcel, if the commission judges the rates to be unreasonable, could the fcc require the isp to adjust its rates or to impose fines or forfeitures on the isp? >> we don't have such a case before us right now, but i think it's important as a matter of due process that any provider that's having difficulty to provide service has the opportunity to complain to the commission and seek resolution. >> so the answer is, yes, the fcc could? >> we'll see when we have a complaint before us. >> right. but i'm just saying -- >> sure. >> i'm not saying you should. i'm saying you could. commissioner clyburn how will

the fcc decide if a rate is unreasonable or unjust? >> so given the same context that you set up one of the examples that i gave in my opening statement was on inmate calling. and that affirmed -- should affirm to all of us that the bar is incredibly high when it comes to the scenario that you put forth. we waited over ten years to even think about addressing what was obviously a market failure. we won't know as my colleague says until something is before us. that bar is extremely high for that case to come to the resolution you put forth. >> you would have the discretion to determine if a rate is unjust or unreasonable? >> we have an obligation to look at any complaint anything filed before us and make a decision accordingly. >> and if that decision is made if that conclusion is reached, the fcc could, in that circumstance act in a way that

would adjust rates or impose fines, is that -- >> i jokingly say that, even though i'm from the south and we have the other south, south carolina -- >> thank you. >> and that we have been known to -- there have been very interesting people who have predicted the future. i, unfortunately, do not have that talent. >> i would have a hard time i think, explaining or how that adjudicate process would not be rate regulation. and, you know like i said granted the chairman has said that something on which they would forebear, but if you are -- if a case is brought forward, it strikes me at least the fcc has an obligation to respond. and i also think things decided by this commission certainly don't bind future commissions which is why we've argued all along that working constructively on legislative

solution that sets clear rules of the road is the best approach to doing this. but that being said my time's expired. senator nelson. >> chairman wheeler, rate regulation, unbundling, tariffing, these are things that some of the big corporations are quite concerned about. and no doubt you've had conversations with ceos of those corporations. and you've explained what your order is. how did you explain it and what was their reaction? >> thank you, senator. so rate regulation, tariffing, unbundling, those sections are all foreborn -- i never knew what the past tense was on

forebearance but we're not using them out of title 2. to the point senator thune was just making 1993 senator marky then congressman marky, created section 332 of the communications act in the house, which was sought by the wireless industry when they asked to be treated as title 2 common carriers and to have forebearance from parts of the act that are no longer appropriate in a nonmonopoly situation. that included specifically a decision by congress section 201. so, the kind of example that was just raised about section 201-b being some kind of back door into rate regulation has existed for 22 years in the wireless industry. and the commission has not been

confronted and has not acted in this kind of way that suggest it's some kind of back door regulation. in fact, what's happened, with the absence of consumer rate regulation that industry has been incredibly successful. the wireless voice industry has had $3 billion in investment since then. and it was that model that was actually more forbearance than was created for the wireless industry that we patterned the open internet order on so that it is not your grandfather's title 2. title 2 has 48 sections. 27 of those sections we said we will not use. which is 50% more than mr. marky results in 22 years ago.

so, i think that the record is pretty clear that if we say we're not going to have consumer rate regulation, we're not going to have tariffing, we're not going to have unbundling and we explicitly remove those sections and say we're not looking at those sections and we pattern ourselves after something that has this kind of a two decade record of not having these imaginary horribles happen, that we're in pretty good course. >> and things like transparency and a host of other issues there's wide acceptance. >> so, the interesting thing is there are four regulatory actions in our order. no block, no throttling no pay prioritization and transparency which are the same thing that legislation up here, that the chairman and others have introduced, contain those four. and the isps run ads saying, oh we're all for these. we would never think about doing these kinds of things.

those are the four regulatory constructs. the thing where everybody gets adjeta is that we also say, and there should be a basic set of ground rules for things that nobody can anticipate that are not proceed skriptive regulatory saying, we are smart, therefore you will do this, but are saying, well let's take a look and is that just and reasonable? is that in the consumer interest? is that in the public interest? and on a case-by-case basis. the fascinating thing to me, sir, is that the isps for years have been saying, we don't want the fcc to have such broad rule-making authority. they ought to be looking at things like the ftc on a case-by-case basis. now what happens is we come out and say, we do something like the ftc on a case-by-case basis and everybody says, oh, that's

terrible uncertainty. we don't know what it is. if only they were making rules and tell us what it is. you can't have it both ways. but i think what we have not is common on four aspects. the only four regulatory aspects. and then says there needs to be be a set of rules and there needs to be a set of standards and there needs to be a referee on the field who can throw the flag if somebody violates those standards. >> and i would just conclude, mr. chairman by saying that certainly the five commissioners in front of us would never do this kind of dastardly stuff but would a future commission do it? and the flipside of that, and i'd like you to comment, chairman wheeler what about the future ceos that presently you have confidence in them but what about someone that suddenly

wants to go beyond the scope of your intent? >> so ceos come in to me senator, and they say, you know we trust you. we think you have -- we agree with everything, but, you know you're not wild and crazy. and we think they'll be decent, responsible decisions, so we trust you. but what about that crazy person that's going to follow you, you know, some years down the road? and my response is, i feel the same way about you, sir that you have said you would never do these kind of dastardly things to the internet but what about the wild and crazy ceo who follows you? so, let's have a basic set of rules. is it just, is it reasonable and is there a referee on the field who can measure against that yard stick and throw the flag if appropriate? >> thank you.

>> thank you, senator nelson. senator fisher. >> thank you chairman. there are a number members of congress who believe new technologies can help the united states remain innovative. and i'm working with senator booker, senator shotts, senator ayotte on a number of things. i think that's going to be a very good bipartisan resolution and moving forward hopefully legislation so we can see that innovate toreors are able to grow their business and they'll be able to solve problems with clear rules and also clear expectations. i think that's necessary, that innovators have to have that certainty out there. and when i look at the general conduct that is proposed that you have here i'm concerned it could jeopardize that regulatory certainty that i think we have to have if we're going to remain competitive.

the electronic frontier foundation has described this rule as an overreach and confusing. specifically the eff said the fcc believes it has broad authority to pursue any number of practices. hardly the narrow light touch approach we need to protect the open internet. "the wall street journal" reported that at a recent press conference, you said with respect to the general conduct rule that, quote, we don't really know. we don't know where things will go next. the order says the agency will watch, learn and act as required. a process that is sure to bring greater understanding to the commission. so, my question to you is, how can any business that's trying to innovate have any kind of certainty that they're not going to be regulated by the fcc under what i view as a very vague rule that you have here?

for example, when will it be applied? what specific harms does the general conduct rule seek to address that the rest of the president's open internet order doesn't capture? what are you after here? >> thank you, senator. first of all, i'd like to identify myself as an entrepreneur and as somebody who has started multiple companies and spent the ten years before i came into this job as a partner in a venture capital firm investing in those kbz. and i know from my experience that the key to innovation is access. and when gate keepers deny access, innovation is stifled. that's what we want to avoid. we do not want to be in a situation where we are having prescriptive rules. we want to be and what we have structured is something that says, okay, let's ask a couple of questions.

what's the impact on consumers of this action? what's the impact on content providers, those who want to be delivering, and what's the public interest? and i think we can probably all agree that nobody wants to sit by and see something evil happen to any three of those legs of the stool. and those are the tests. and we look and say okay, now, what happens on those three legs of the stool with this kind of an action that we have had a complaint on? and the important thing is as i was saying to senator nelson that this is not us saying we're so smart, we know what you should do. this is specifically doing what the isps have been saying to us don't make rules, but, rather, look at things on stay

case-by-case basis. that's what we tried to build in that kind of flexibility. >> with that flexibility, though, what do you do with these entrepreneurs, innovators that are coming up with things that i can't even imagine? >> all right. >> and there's a process they're going to have to go through with the fcc that they don't -- they don't know if they're going to be required to go through it or not. what do you say to them? do they wait and get their idea -- >> no, we don't move up the stack. we're talking about the delivery services. we're not talking about regulating two guys and a dog in a garage and they have to get -- >> do you think that's clear? >> yes ma'am. yes, ma'am. we're very clear on that. and that is an essential component of this. first of all, i think it's questionable what our reach would be. in terms of statutory authority. we're dealing with the delivery of what these creative people

want to do and making sure that they have open delivery. >> if i could just switch gears here. in your testimony i read you're trying to move forward with a voluntary incentive auction no later than early 2016. >> yes, ma'am. >> are you committed to that? >> yes, ma'am. >> thank you. >> thank you, senator fisher. senator mccaskill. >> we visited about this. the thing that's -- the rest of the story that was not explained is that not only was this a very big company using small businesses to get a $3 billion advantage. a $3 billion advantage. one of the entities used was an alaskan native corporation, they don't have any rules about being small. so, it is insult to injury

because alaska native corporations are multibillion dollar multinational corporations that get special deals under our law. they don't have to compete. they don't ever age out. program. they never get too old for the program. they never get too big for the program. and you confront legally. and this is really outrageous. i hope we can figure out how to get to the bottom of it. i visited with many of you about lifeline. i think this-t is a program that began under i believe president reagan, president bush. it was a subsidy. it morphed into a program without any kind of controls, without any kind of regulation. and it was a mess. now, i know we've had some -- we've had some enforcement. but i know we've had a pilot program on expanding it to broadband. let me ask you first, chairman wheeler, when will the report on the pilot program be available?

>> senator, i can't give you the specific date, but i -- it's in the next couple of months. >> well, we had some enforcement. there hasn't been much in a year. there's a list of reforms, i think, that include -- and if any of you disagree with any of these reforms, if you speak up for the record, i appreciate it. taking eligibility determination out of the hands of carriers. competitive bidding. making sure consumers have some skin in the game. placing a cost cap on the program. anybody disagree with those four reforms? okay. i would like to see those instituted. and i would like a discussion from you about whether or not it makes sense to continue the lifeline program. doesn't it make more sense to make it a broadband program? looking at the homework gap, looking at the capability of

making calls over the internet doesn't it make sense sfo-to-institute these structural reforms as we transition this from a program where no one has skin in the game and we've allowed the carriers to commit massive fraud in this country? doesn't it make sense to convert this whole program over to broadband? and i would love your take on that. >> i'm not sure who you're asking but -- >>fy of you speak up. i would love somebody to speak up who disagrees with doing it. >> well, i was showing my southern graces. i cannot sit before you and say, i necessarily agree with everything you laid out. one of the things that i am adamant about i put forward five principles last year. one of which i think is the most important that would get to the heart of some of the problems that we're having is getting the companies out of the eligibility

game. they should not be in that space. when it comes to grocery stores do not certify or have people eligible you know, for s.n.a.p. they're not in that game. doctors don't qualify people for medicaid. providers should not qualify people for that program. there should be an independent arm. and i think -- i truly believe a lot of the issues that have plagued this program f we take them out of that, would go to the heart of what we're seeing. please. >> i wanted to -- commissioner pachlt i and commission o'reilly, i've had the opportunity to talk to the chairman about this idea. would you be willing to work with the democratic commissioners on a program that had controls and had reforms in it that transitioned over to a broadband program? >> absolutely. and as you may know, i actually wrote recently about this issue

and put forward some of my principles in reform. and i thought they would be helpful to start in a review of the existing program and all the issues that it's faced before we go to the broadband -- expand the program to broadband. that hasn't seemed to be we're getting the signals internally. so i tried to put forward -- i think we should have that fundamental conversation on the reforms that should be in place before we go there. >> or maybe there in lieu of. >> i would be open to that as well. >> senator, first, i want to thank you for your leadership on issues of the fcc fiscal responsibility including the auction and lifeline. with respect to lifeline as applied to broad band it's critical to learn the express from the pilot. secondly, i've put fwrd in a speech at citizens against government waste a number of principles for reform, including those you talked about. it's critical for us to institute those first to ensure that the program is on a stable footing. remember, the lifeline program is only one of the four

universal programs that is not capped. if we don't have basic reforms for the process as this program stands f we expand it to include broadband, there's no telling what kind of problems we might encounter. >> sure. in 1985, when ronald reagan was in the white house that's when we started this is program. it was last updated during the bush administration. it is time to modernize this program along the lines you described. make sure it is free of any waste, fraud and abuse and then make it address broadband and things like we described the homework gap. >> great. >> and this is not a question of how do we take what's there now and just do a paste here or a change there. we have to look at this entire program, soup to nuts, and say, this started in a twisted pair environment, met morphized into a mobile environment. we now live in a broadband

environment. why in the world are we sticking with the decisions of the past? >> right. great. thank you all. >> thank you, senator mccaskill. senator heller. try to keep it to five, if you can. >> thank you, mr. chairman. thanks for calling this hearing. i have a statement for the record that i'd like to submit. >> without objection. >> i want to thank the commissioners also for being here. chairman, thank you also for attending. today what i'd like to focus on is how rules are adopted. and commissioner o'reilly, your opening statements/comments were near and dear to some of the comments that i want to make today. but before i do that, i would like to make an observation the observation i have is that it is my opinion the purpose for the affordable care act was to guarantee all americans have the same bad health care. and i believe that this title 2 decision made by this commission is to guarantee all americans the same bad internet service. i also believe two things.

i don't believe i'm wrong. one is the purpose of this open internet order is one two regulate and restrict content. number two, it's to open the door to taxation. what i would like is commissioner o'reilly and pai to tell me why i'm wrong. >> senator, i'll just tackle a part of the question. with respect to taxation, you're absolutely right. opens the door to billions of dollars in taxes and fees on broadband. with respect to reclassification that alone, as the order tees up, we're going to expect to get a recommendation from the joibt board on april 7th and it might be kicked off by a short period but reclassification will lead to the imposition of new broadband taxes. if you look at some of the new promises that some of the fcc is considering with respect to the programs administered under the universal spending fund, that extra money has to come from somewhere and it's going to come from the taxpayers' pockets. the fact reclassification opens the doors to a lot of taxes on

the state and local level. with respect to state property taxes, a lot of jurisdictions tax telecom providers at a higher rated than nonbroad band providers. in the district of columbia d.c. imposes an 11% tax on gross receipts. that's immediately an 11% tax off the bottom line that broadband providers have to pay. which costs are passed onto the consumer? the taxation aspect of this, completely irrespective of the internet freedom act, which does not apply to fees associated with broadband is so critical for us to keep mentioning because it affects consumers where it hurts the most. >> senator, it would be impolite to suggest any senator is wrong. i don't do health care so i have no comment regarding that part of your point. regarding your substantive comment on the -- i believe eventually this item the direction we're going, will get to edge providers. i made that point consistently.

if you look at where we're going on interconnection and how far we've gone on interconnection, there are blurry lines between what is the middle mile and what providers are offering today. so, in terms of their structure. i do believe eventually this is going to affect edge providers and the wonderful benefits they bring to the american economy. >> commissioner o'reilly i want to go to your opening comments, calling for amendments to a rule that at least 21 days prior to publication of a rule that it be displayed. and made available to the public. and i don't think that's a partisan issue. i think that's an issue we can all agree with. there are many other ways i think to make the fcc more transparent. i've suggested for example, that -- for example, that i have concerns with staff changes that take place after votes have already been taken. i think all commissioners should be asked -- should be able to ask for any vote.

commissioners should be able to collaborate more freely. and i think any rule that impacts the economy by more than $100 million should be subject to a cost benefit analysis. commissioner o'reilly, i believe that would make -- or increase the transparency and the collaboration of the commission that you have. but i guess the question is, one, do you agree with that? two, are there any other suggestions you believe would add more transparency? >> sure. so, you suggested really good changes that i whole-heartedly agree and advocate. i should make it clear, i don't think it's reflective of the item we just talked about. this issue applies across the board and go forward. it's not just about net neutrality but really it should apply going guard for everything. certainly on the 21 day availability. but i have a host of ideas that i think would help in my time being on the congressional

staffer and now being someone who's seen this for about 15 months. one, and you highlighted the delegation issue, but one interesting -- we have a uniform -- an ununiform situation now where it's called our 48-hour rule. in some instance we're allowed allowed -- we're notified we have 48 hours. we're basically given a heads up for 48 hours. only in some instances. sometimes it's 48 hours sometimes it's 24 hours sometimes its zero. i got an e-mail friday saying, as a courtesy we're letting you know. it's a courtesy they're letting me know what they're going to do. i think that's the wrong approach. i went throughout process to get on the commission to make as many decisions as possible. i'm happy to vote in a quick and timely way. but i don't think it's something that is a courtesy i'm allowed to know what's happening at the commission. we see that problem in the delegation area. where things get delegated in many instances of previous commissions, that i was part of and now the delegation authority

continues and i don't have the ability to track what's being considered by the bureau separate from what's happening on my level. >> commissioner, thank you. i look forward to working with you. mr. xharnlgs i look forward to working with you on the rethoers of the fcc. i hope some of these ideas, both myself and the commissioner mentioned, could be put forth and worked into. >> senator blumenthal. >> thanks, mr. chairman. thanks for working in such a bipartisan way on this hearing and on the bills that we'll be considering related to these issues. first of all, thanks to all of you for being here today. chairman wheeler i appreciated your remark about the wild and crazy krooez of the wild and crazy commissioners who might follow the present occupants of those offices. i want to assure you nobody ever asked us about the wild and crazy senator.

i'm not going to go any farther with that. i want to express my strong support for the fcc's open internet order. this decision was unequivocal, emphatic in its effect. it was a victory for consumers and innovators. that's all too rare in washington these days. and i know that it will be challenged in the courts. and i want to commit to you that i would be pleased to lead whatever amicus efforts may be necessary to support it. i believe there will be a lot of support by such involvement by my colleagues. and i believe it is strongly grounded in the authority that the united states supreme court has provided repeatedly under chevron most recently, under smiley v. citibank. you alluded to it in paragraph 329 of the order. i also want to express my

gratitude to all of you for joining in the bipartisan vote to repeal the sports blackout rule that i long called for with my colleague, senator mccain. we planned to pursue that issue in the fans act because the sports leagues, unfortunately, have themselves, continue to retain the power to black out games through private contract agreements. my special thanks go to commissioner clyburn for starting the proceeding. commissioner pai for going to buffalo and announcing your opposition to the blackout rule. and chairman wheeler for focusing the attention's agency on this issue. i want to express to all of you the action you've taken. strong and, again, emphatic action on cramming. and particularly to commissioner rosenworcel for coming to connecticut and helping educate

us about the effects of cramming and the attention they need to pay for it. again, this action on stopping cramming through the settlements you reached with at&t and t-mobile, i hope, will lead to rules that go beyond those settlements. as important as they were, i think there need to be rules established. and embodying the conditions that were expressed in those settlements that require express consent from subscribers before any third party wireless company, any wireless carrier allows third party's access to their customers' bills. third party charmgs are clearly and conspicuously identified on bills and provide free service to consumers to block those third-party charges should they choose to do so.

i would like to know from each of you you can say it simply yes or no whether you'd commit to updating the fcc rules to apply them to the whole wireless industry and ensure all characters protect their subscribers from all of these kinds of deceitful practices rather than provting from them. i'm assuming you would agree, and you can indicate yes or no, commissioner clyburn. >> yes. >> yes. cramming is pick pocketing. and we need to stop it. >> yes n two flavors. one you suggest and two we're going to keep enforcing. >> thank you. and i hope that it will be possible for those rules to be promulgated. i don't ask for a firm commitment, mr. chairman, but i'm hoping bit end of spring, that we can anticipate those rules will be on the books. >> i'd like to just turn briefly

to the comcast/time warner manager. as the fcc reviews this merger i'd like your assurance, mr. chairman that you will take into account anything the fcc can do to protect consumers. because i think a number of us are concerned about the potential increases and prices and reduction in choice that could come from continued exsections ive consolidation. >> well, senator as you know this is an adjudicator to and i should not opine as we're sitting in judgment. the responsibility that we have is to make a decision in the public interest convenience and new england. that will be the basis of the decision. >> thanks. there, mr. chairman.

>> senator marky, then senator gardner. >> thank you so much. and i want to congratulate you on your title 2 decision. i think it's very with the positions the fcc has taken over the years including, mr. chairman, what you mentioned, 1993, about the light touch approach to led to explosion of hundreds of billions of investment in that sector. that's in the best tradition of what the x have fcc does. i think under title 2 you'll be able to continue that as well, ensuring not only that there is a robust competitive marketplace but also that privacy is protected. the rights of the disabled are also protected. that we move to ensure those additional protections are built

into the law. and i have a chairman mr. chairman, from 140 advocatecy group and. and i would like to have this included. >> without objection. >> i thank you, mr. chairman. so, i would like if you could, just to talk a little bit more about title 2 and how, in fact, it was rate regulation that made it possible for there to be a universal. without it and the subsidies within that system that we could not have this universeal service but the opposite here is the goal of the fcc in terms of -- in terms of your intention to use the 1993 wireless -- can you expand upon that?

>> thank you. i think there are two historical approaches here. the first is the internet wouldn't have existed if the fcc hadn't required that telephone companies controlled who was able to attach equipment to the phone network. and it was those old screeching hayes mow democratdems we hooked and bought to our home security. so the route of the internet is in open access. and then the question becomes okay, how do you balance out the fact that there need to be consumer protections at same point in time you want to be incentivizeing better production of ever faster speed capabilities. and it was clear that -- and as everybody knows, i had an evolutionary process in my own

thinking on this. and that the realization in 1993 what you had structured in the -- in section 332 produced the kind of success where there are was not rate regulation there was not tariffing, the things that used to come with this old structure. and the most important thing there, senator i think is that -- is the realization that on the day after this order takes effect the consumer revenues for the isps should be exactly the same if not better than the day before it took effect because we're not touching those. and that -- and one of the things that's key here also is when the president made his announcement and joined the 64 members of congress including you and many on this committee who said that we ought to be

doing title 2, the following day stocks went up. so if the concern was that there is a negative impact of this kind of light touch regulation that allows rates to be set by the market, not by government officials, there was a concern that was going to have an impact on capital formation. it certainly has been disproved and disproved again after we made our decision and the stocks are beating the s&p. >> if i may say this what we've done is we have created -- you have created a more predictable investment environment where we know 62% of all venture capital in the u.s. two years ago went to internet and software companies, knowing they could get in, reach their customers, there would not be discrimination, there would not be throttling blocking, they

could reach their customers. you've done a great job in identifying those tens of thousands of companies that are out there. and similarly, i just want to say here that the internet tax freedom act originally passes, you know in 1998. it prohibits states and local governments from taxing internet access, electronic commerce it's reauthorized every few years. and there's an internet tax freedom act forever that senator thune introduced that i'm an original co-sponsor of. so, i think we have to be careful in this area. and i would just say to you, commissioner rosenworcel that you've done a fantastic job. the whole commission has, on focusing on e-rate. as we pass new trade bills as we speed up the pace of change in our economy we have to make sure that we speed up the pace at which young kids get the skill set they need for the new jobs in our country. so, if you're talking about ttip

or ttp and you want to speed up the pace of change, you have to speed up the pace of change for kids. and raising the e-rate from 2.9 billion to 3.9 kids in the poorest cities and towns poorest homes, get access to the skill sets they'll need to compete with the smartest kids in the world and i congratulate you for that because it is a vision of what america has to be in this global economy. i thank you. >> thank you, senator markey. senator gardner. >> thank you, mr. chairman. thank you to the commissioners for joining us today. chairman wheeler, i want to again reiterate what chairman thune said. last year i led almost 90 members of the house congress signing a letter asking the fcc to adopt a mechanism for rural rate of return carriers that would encourage broadband adoption. i know there was a similar letter here. i want a tailored update that

would allow these carriers to move forward with broadband deployment in areas that truly need it. >> can i make a commercial here for just 30 seconds? >> is it going to have the same unity unity? >> yes, sir. we need -- the great thing about the rate of return carriers is that there are these small vibrant heart of the community kind of organizations in very small communities. getting accord amongst them as to the best way to help them to their job is worthy of henry kissinger. and i hope that we can have the help of you and senator thune and the committee to help send a message that says, hey, folks, it is time to quit bickering over details. let's have a common approach

because we're going to move and we'll make that decision if we have to make that decision. but it sure would be good if we understood that the various segments of the industry could pull together and say, hey this is the kind of north star you got to be guiding to. >> thank you. i appreciate that. we're so close i feel like we ought to be having a cup of coffee. commissioner clyburn, if there is one thing the fcc atitleghtfcc's title 2 proceeding displayed was the need for trancesparencytransparency. it makes little sense the general public did not have access to the text until two weeks after. should the fcc publicly release items put on circulation prior to a commission vote especially those that significantly impact the economy? >> one of the things that i like to talk about in terms of this

process, it is amongst the most open in the world. we had a notice and 4 million comments that allow people to weigh in. one of the things i'm also cautious about when we talk -- i'm open to any type of ways that we can improve the transparency. there is a deliberative process that takes place among us that i would love for that to continue. i am able to speak in unbridled fashion. one of the things i'm worried about in terms of releasing things premature -- what i would say is prematurely is is that would be compromised if i have a question or concern or want to get some feedback, i would not like for that to necessarily get out before i come to terms with the exchanges. there are apa issues. real quasi judicial body -- and abide by apa requirements so all of those things i think need to

be fleshed out before we make any type of move in the direction -- >> thank you. commissioner er commissioner, pai would you like to add? i agree these documents should be revealed at least three weeks before the commission votes. the fact it wasn't revealed created a haze of confusion both among net neutrality supporters and opponents. what you saw in the days leading up to the order was a substantial portion of the order was revised with respect to the so shn so-called access provider service. there was a great deal of press interest. you will find a lot of people wondering, if you google it, how are we going to respond it how does it affect the order. but because of the sunshine provision none of those people had any input. if we had our product on the table day one it went circulated, the american people could have seen it and ultimately it would have helped

our product be more legally sustainable. >> i'm running out of time. talking about petitions, a number of petitions before the fcc, petitions for reconsideration or forbearance petitions, other petitions that have been before the fcc and wondering how we can make sure that these petitions are addressed in a timely manner. perhaps you can get back to me on how we can -- what internal processes we should change at the fcc to have a more timely processing. one last question. chairman wheeler, $25 million was transferred out of the fy 2016 budget from the universal service fund to the fcc's general budget. i'm concerned that could affect something i'm very concerned about and that's rural funding usf issues. chairman wheeler, what additional, not ongoing, agency activities will this funding shift pay for? >> it's a proposed gift.

and the attitude -- the idea is this. the money has to be spent. that kind of money has been spent traditionally on the activities of the wire line bureau, wireless bureau and others on usf. we fund our auction activity through the revenues from auctions. the question is why should universal service activities be funded by people who are not involved in universal service. why should a broadcaster have to pay fees for programs they're not involved in? why should some marine licensees, why should -- you know, et cetera, et cetera. so all this was was an attempt to say, okay, how do we make sure that these are balancing each other out. because it has to be paid. and if the decision is that the

congress wants to say, hey yes you ought to make sure that broadcasters pay for this, so be it. what we were trying to do was to say what makes logical management sense. >> let me just clarify. the $25 million isn't dedicated to anything. it is just being put back into the general budget -- >> the money gets spent. the question is does that money get raised by the general assessment that goes against everybody who is involved with the commission or does it get raised through the program that it relates to. and there will be a significant decrease for broadcasters for instance, if they no longer contribute to something that they do not participate in. >> thank you. senator booker. >> first of all, i want to just say thank you to all five who are serving our country. often debates in congress gets

personal. but every single one of you have done a great service in trying to achieve noble aspirations and noble goals. thank you for your service. some of the issues people are bringing up are important to me and won't get headlines. honorable clyburn criminal justice reform has been critically important to me. what you are doing with your sadadvocacy is essential to end the nightmare of broken families and those linkages that are so important for us to bring justice back to our legal system system. i want to jump in and really commissioner wheeler give you just a chance to address some of the things that i hear said consistently that i see no evidence for whatsoever. i would just like to give you a chance to talk for the brief time that i have a little bit about this idea that somehow what you did was anti-business, that somehow it undermines the

ability for companies to thrive in this marketplace. some of the other talked -- i'm a passionate believer in the importance of us to have a free and open internet, net neutrality. it is critical for the growth of american economy and more importantly, as i work with kids especially urban kids and see that those skillsets sets that they can learn -- the democratizing force, job opportunities, business opportunities, access to capital, all that excites me. as a guy who's kind of pro-business, i wonder if you can address the issue, because when i read that t-mobile, google cablevision wind stream have acknowledged using title 2 with forbearance doesn't change their investments plans. executives at verizon, folks in my state, comcast, time warner cable, charter have said the same thing to their investors. it is not going to undermine their investors.

wall street and capital markets barely noticed the title 2 news. that's because investors understand that the order -- the order and the fcc's title 2 framework does not regulate rates or impose other so-called utility regulations. so wall street didn't budge. heads of companies that i know and talk with on a regular basis say it is not going to affect their behavior. these rules keep broadband buyers from discriminating. would you address the mountain of evidence rebutting the speculation will investment harms? i think that users deserve the right to an open internet. not just rhetoric. and how title 2, in a sense, does not undermine but still actually my opinion could provide an environment where there's more investment in the space. >> thank you, senator. i think it would be hard to find a bigger capitalist sitting at this table than me. i am a capital "c" capitalist

and have been involved in starting companies and helping build companies for most of my professional life. the key -- there are multiple keys to the success of risk capital enterprises. one is that you have to have access to the consumer. the reason that steve -- the reason that steve case was able to build aol as he was is because he had this open network that would sail like this. he could get six people over here in someplace in new jersey and seven people in boston and it a couple of people over in albuquerque, and excuse me -- i keep -- and -- and out of that build a whole. if he had to go to serially to the various folks who provide services there and say can i get on? can i get on? which we've had to do so many

times in history. it wouldn't have been that kind of success story. so open access is key to innovation and growth. secondly, you need to make sure that those who are providing that access are getting the rate of return that they deserve because that's the only reason they're going to invest the capital to build the pipes to begin with. and that has been a threshold issue with me from day one of this topic. and again, i come back to the model that the wireless industry has used most successfully for their voice services. and not having rate regulation, not saying this is what consumer prices are going to be not having tariffing, not saying you've got to build something, then unbundle it is a structure that encourages the investment.

and i think that, thirdly, that that is a reality that has been proved out by the market. as you said sprint says this works for them. t-mobile says they'll invest. google fiber who has never been regulated under title 2, says of course we're going to continue to build even though we're now under title 2. cablevision comes out and says it's not going to change our business practices. the small rural rate of return carriers that we've been talking about here in this hearing, they filed in support of title 2 with us. because i think everybody understands that appropriately done title 2 provides certainty, and serious opportunity for return. >> i will stop you there. i have seen the chairman bench press. i don't want to tick him off. >> thank you, senator booker.

we have senator danes up next. >> i'm not cory gardner. good to it be up here. my background was 12 years in technology, cloud computing we were part of the free-wielding wild west of the internet and seeing what that does for innovation and value creation in america here. i believe speed of light commerce and i'm just hoping that the only constraints that we'll see in this incredible story that's called the internet is technology constraints. but not regulatory constraints. so i -- it just gives me pause. i heard -- i have great respect for my friends across the aisle here about -- and some of the proof points they've demonstrated in terms of the capital markets didn't move with these announcements, ceos are saying things are going to be okay in some of these companies. i'm more concerned where this all goes long term. there have been a lot of hearings in washington.

history with the records what began as perhaps well intended and good idea turned into overreach. i've not seen many federal agencies and regulations only diminish. they only grow. i'm looking for kids and grandkids where this all heads because i think we have something very special here in america which is this free and open internet. with that as background i want to shift gears and talk about transparency and accountability of the fcc. i'm concerned about the commission's routine practice of granting broadband editorial privileges to beyond just technical edits. could you describe specific examples of what needs to be addressed to aslur asure a transparent and open process? >> i've had difficulty in the last meeting. the chairman asked for -- bureau asked for right to editorial privileges and i objected. part of the reason is i had an opportunity to look at our

manual. there are no fast rules on what we have. they're just practices we've written down in this commissioner's guide to what the agenda meeting should be. one, we ought to codify our practices here. but two, i've had a problem with the practice itself. what's been encompassed within editorial privilege has not been just technical informing. it's also been changes to the text itself and substantial changes. early on in my time, the changes were quite -- i want to be careful in my wore -- but they were quite negative to one of my colleagues in terms of what was being -- what the changes were being suggested. it's unnecessary to criticize another one of my colleagues when it is something that i had voted for. it's unnecessary to do that -- >> along that line were there staff editorial ed ditz made to the open internet order after the commission voted on february 26th? >> yes. >> were you allowed to discuss those changes made in the order?

>> i think i can suggest there have been changes since the item we voted on and to the item that was released. one of them was that they -- it effectively had to backtrack on the chairman's speech regarding the -- regarding the peering issue. he had argued that it was going to be done separately and not part of this item and the interconnection issue was going to be separate. here they actually put a footnote in saying no it is actually contained in here. they had to back out his own statement and correct it. >> just to be clear this what you're quoting was a speech that i made over a year ago in which i said you know, i'm not so sure -- i have been saying throughout this process, as we led up to it that interconnection needed to be on the table. this was not an editorial decision that was made in secret. this was a policy decision that was put forth to everybody.

>> let me bring it back here. >> but can i also say, i would like to identify myself with commissioner o'reilly and the points that he made in his blog. i think he made some really valid points. and i think that we have to deal with those. he and i both walked in essentially the same time and -- >> same day. >> -- and were landed -- >> let me ask commissioner wheeler -- chairman wheeler excuse me. then why did you choose not to have the entire commission revote on the advisory order on march 12th especially if the fcc staff played substantive editorial clang? >> so the changes that get made were changes that were in response to dissents wrihich we are required by law. >> can you make that february 26th order available to you? >> sure. it is on the website. >> okay. >> it's on the website.

yes. >> the final one. he's saying the one we voted on the day of. >> yeah. the final order is on the website. the issue here is that we're -- >> i don't believe it is. we'll follow up on that but maybe we could get to the bottom of that. i think the issue right now is transparency and accountability. even within the commissioners here -- >> the final order is not on the website? >> the document as we voted on on february 26th is not on the website. >> the final document as required by process and the law -- >> the question, to prove transparency around the process. >> so then i'd like to associate myself with commissioner clyburn who was actually right when she said this is an editorial process and that going back and forth -- if we open that process up, there are multiple things that are going to happen. markets aren't going to understand, well, you no he? commissioner clyburn wants to

change glad to happy. what's that a mean? this is a quasi judicial role that we exercise. we need to be going through and having an ability to in camera have our own discussions. but 30 seconds more, sir. i think there is a misunderstanding that the name -- the end of the game is the final rule because what happens is you put it out -- the public it in the federal register, and the next thing that happens is that people are going to file for reconsideration. and what is reconsideration? reconsideration is the entire decision is out there for everybody to see and then the public comes in and comments and says, no we think you ought to reconsider this and we're going to have to vote again. >> well i'm out of time but let me summarize by saying, the stakes are awfully high as we look at something, stepping into title 2 and the internet. i would hope we could work together here to improve the accountability transparency of

that process. so that we ensure we have trust as well as better outcomes. >> senator shotz. >> thank you for enduring yesterday's and today's hearing. and to all the commissioners, thank you for your great work. we appreciate it. thank to themr. chairman for bipartisan process he's undertaking. i'm not clear that we're going to be able to get there because i think that we don't have a meeting of the minds even on kind of basics of a negotiation, which is to say it is hard to imagine that president obama or house and senate democrats would agree to legislation that would undermine the basic principles of net neutrality. i think there is some openness among some of us to enshrining those net neutrality principles in statute, but if we're unable to kind of reach the common ground in terms of the beginning

of a negotiation, then i'm not necessarily hopeful. but i think it is worth exploring. i think it is worth discussing. impea a little concerned about the litigation risk. not just on the title 2 side but on the forbearances side. so i think it is worth exploring but i also think we ought to be direct with each other about what's realistic in terms of a legislative strategy or a litigation strategy. i'm not sure that at some point we're not going to have to decide which it is and what's the most practical course of actions. can you tell plea, mr. wheeler, how you arrived at the forbearances? did you sort of start with the net neutrality principles and then forbear everything else? >> great question. thanks, senator. we started with -- back to section 332 and senator markey. and those 19 that clearly have

experience has shown are not necessary is a. then we went through and said what are other ones that in this situation are not applicable. and that got us a list of 27 up from are the 19 of earlier. >> so what remains that isn't the sort of four principles of net neutrality but not that hasn't been forborn. >> the highlights -- big-ticket items. section 201 and 202 which is basically where this just and reasonable test resides. section 208 which is the consumer protection aspect. section 222, which is -- which is the privacy activities. section 254 which is universal service. and that's probably the firsthand of priority issues. >> is it fair to say this is

unprecedented in terms of the number of things that have been forborn? has that been done before at that sort of scale? >> well it was done for section 332 and has stuck. >> and has stuck. >> and has stuck. and been successful. >> and has the commission in its history undone a forbearance? i think people are calling it unfor bear unforbearing. well is this concern you may have forborn all of these permissions in the statutes. is there any question that a future fcc would do that in the future based on the past actions? >> that's the right question. here's the issue -- so section 10 of the act instructs us how we forbear and that we must forbear if certain things are met. if you were to go and reverse that, there would have to be an

on-the-record notice and comment proceeding that follows section 10 and says here is the record that builds to deforbear. so technically you could. realistically there's a lot you have to go through. >> you're actually on my next question now which is how procedurally and legally would you kind of do the evaluation, then on an operational level how would you forbear. but i guess my question is, in the fcc's history, has it undertaken to undo a forbearance? does it do that? >> no the that i'm aware of sir. and again, what you would have to do -- for instance, let's just hypothetically say five years for now, somebody wants to come in and deforbear on rate regulation. there is going to be a serious test that has to be done to sigh, what is it that has changed. and that of course will be an appealable decision itself. and it will be an open proceeding.

and it will have everybody in the country involved in it. so i think the ability to deforbear is going to be a high bar to hurdle. >> thank you, mr. chairman. >> thank you senator. senator cantwell. >> thank you, mr. chairman. i am reminiscing of the time that we had a major discussion about the use of just and reasonable and ronin manipulation of energy markets. even though just and reasonable was in place, a lot of commissioners still struggled for a long time about whether manipulated rates could be ever be just and reasonable. so i would suggest that that interpretation of just and reasonable is probably going to be left up to the determination of whoever is in the majority of the commission. so hopefully hopefully people will get some common ground on that and a framework. but thank you for your work.

i'd like to follow up on senator fisher's question as it related to the auction spectrum. people are saying we want to get it right but we also want to get it done. when we're talking about a delay for a third time i just want to make sure that we have all the tools and all the information we need now, resources, to get us there given that i think this is for our rural communities something that we really need to pair with resources so that we can get robust broadband networks out there. so i just want to go back over what we think the -- do we have any problems that are undiscovered here that we think is going to cause us problem and actually getting this done in the fall of 2015, starting the auction in 2016. >> it's never been tried. >> it's never been what? >> it's never been tried.

that's a huge problem, senator. we are -- we are inventing from whole cloth. so for instance when i walked in the door, i said, wait a minute, we got to have a time-out here because i come from a software background, like you. and there is -- i've never seen code work the first time. okay? and we didn't have an appropriate testing structure in place and all of this sort of stuff so we delayed six months while we could put a red team in place, while we could do the kinds of things that normally get done with software. but, having said that, i believe that we will be able to begin the auction in the first quarter of 2015 and we -- i'm sorry 2016. and we are managing to that goal. we will be bringing forth to the commission later this year in ample time for the people who might be bidders the final

package of rules that bidders will be using. we are on road trips which i guess i'm not supposed to call road trips. information sessions around the country meeting with broadcasters and sitting down and helping them understand what the financial considerations that they want to keep in mind are and we are managing this for a first quarter of 2016 auction. >> besides the uncertainty of trying it, are there any other obstacles that you see at this point? >> we have a lawsuit that we have to get through here that the nab and a broadcaster have filed. but i'm confident we'll get on the other side of that and be able to move on. we have a situation where everybody, when you start talking about spectrum everybody wants a piece or to keep their piece, or to not change. we need to deal with that.

we need to -- commissioner rosenworcel's incredibly valid point about unlicensed spectrum. we need to make sure there's unlicensed spectrum in here. same point in time, congress instructed us to deal with the spectrum -- to use the spectrum that wireless microphones and others have been using. we got to find homes for them. i mean i believe this is all doable. i do not underestimate the challenge. but we have now been at it for three years and i can see light at the end of the tunnel and, better than that we are managing to that date. >> i saw inclinations to speak but i have half a second -- i mean half a minute left. >> senator if i could jump in, i think the biggest challenge we confront right now is the complexity of the auction as it is currently structured. just to give you two examples

first the dynamic reserve pricing proposal which is on the table is exceedingly difficult for members of the commission myself, to understand exactly how it would work in real time. when you are dealing with a broadcaster community that's unused to dealing with these kinds of auctions at all, it is going to be exceptionally difficult. if we want to incentivize them to participate, this proposal essentially undercuts the amount of money that the market would determine they are eligible to get from the wireless carriers in the auction. the second example of complexity potential variability in the band plans. some spectrum plight be occupied by a wireless carrier. in an adjacent market it might be occupied by a broadcaster. how that interference will work is a very complicated issue and we have to get it right. we only have one shot. otherwise youent up with entd up with a very difficult situation for carriers and broadcasters alike. >> those are the kinds of issues i was referencing. >> that's why i asked the question. i wanted to just expand on it a

little bit so we can get through those. >> thank you, senator cantwell. >> clarmhairman wheeler, the fcc is an independent agency commission created and accountable to congress. correct? >> i kind of want to walk you through a timeline here. i really only need yes or no answers to confirm i have this right. january 14 2014, the d.c. circuit struck down portions of the fcc's 2010 open internet order. correct? >> yes, sir. >> in that decision d.c. circuit provided the fcc with a road map to follow an order to craft net neutrality rules that it would uphold. correct? >> they said -- >> just -- >> no but section 706 was a solution if you are not going to do title 2. the reason we were throwing out this decision, the court said is because they did not use title 2. >> then on february 2014 you

announced your intent to file the road map the d.c. court laid out. >> correct. >> in april 2014 you circulated notice of proposed rule making that tentatively concluded the neutrality rules should be based on authority under rule 706. >> correct. >> that rule making was voted on in may 2014. >> yes. >> according to reports you were planning on holding a vote on net neutrality order in december 2014 based on section 706 or hybrid approach. correct? >> 706 or a hybrid approach? no. >> right. you did not -- >> no. >> -- announce your intention to hold a vote on -- >> yes. i did say we were trying to do things in december and what we were trying to manage to at that point in time was a title 2 section 706 approach. not an "or." >> on november 10 2014 president obama announced his support for regulating the internet under title 2. >> correct. >> were you aware of that

announcement before he made it? >> they came to see me november 6, i believe. >> so you were made aware of that a few days before that. >> yes, sir. >> ultimately you decided not to hold a vote on the net neutrality order in december. correct? >> that's correct. we couldn't get it done. >> yesterday you told the house oversight and government affairs committee you delayed the vote because you did not have the time to "whip the horses" to complete an order in time for the december 2014 open meeting. >> i think i used some metaphor like that. >> lnlfinally, the fcc voted to reclassify broadband services under title 2 on february 26 2015. correct? >> correct. >> the next day on february 27th, the dnc sent an e-mail boasting that "the fcc has approved president obama's plan." were you aware of that? >> i saw it after it went out.

>> now based on the actions of that timeline do you think an objective observer taking a look at those actions would really view your actions as chairman of those -- of an independent chairman of an independent agency? >> yes, sir. >> you don't think somebody would come to the conclusion you were really just carrying water for this administration? >> nois. i was looking at a title 2 and section 706 approach before the president filed his position and we came out with a title 2 section 706 approach. the president in his filing did not suggest we should cover interconnection. we covered interconnection. the president did not suggest the breadth of the kind of forbearance that we have talked about. and the president talked only in terms of doing something with title 2. so i think that actually what we came out with is stronger, as well as more deregulatory than

what the president filed with us in his -- >> commissioner, were you a little surprised about the about-face of chairman wheeler in respect to his order on internet? >> not sure if i was surprised but i was disappointed that the independence of the agency in my view had been compromised by the imposition of political considerations by the executive branch. >> can you describe or are you concerned about potential lawsuits under those rules and regulations that currentry ryly are going to be forborn? whatever that is. under this current rule make zmg. >> absolutely. i think there are significant legal flaws in the order throughout and i detailed them in my dissent. with respect to forbearance alone, the fact the fcc crafted a novel and completely unprecedented competition analysis which is essentially we don't have to do one in order to forbear was unprecedented. the order repeatedly uses phrases "we forbear" was

unprecedented. i think it the jettisoning of a lot of forbearance precedents which at its core was unprecedented. i think a review in court will have a great deal of scrutiny to apply to some of the decisions with respect to forbearance. >> there's going to be a great deal of uncertainty in terms of investment and how people view is the internet over the next few years because of this ruling. >> absolutely. if i could elaborate a little bit, companies that are responsible for the largest capital expenditures in this industry have told us title 2 will impede investment. if i might quote from a letter we got on february 10th, title 2 regulation will underpalestine the business model that supports our network, raise our costs and hinder our ability to further deploy broadband. you might ask what corpsorate titan wrote that? it was 43 municipal broadband provided who told us that title 2 is a road map to a regulated

monopoly. that's not something that creates inven tifs to invest and in innovate. i would suggest that's completely not the case. first of all the reason we refrain from rate regulation and the other title 2 regulations on mobile was because the fcc explicitly found that there was competition in the wireless marketplace so these regulations weren't necessary market forces would protect the consumer. here in the net neutrality order the agency says specifically there is not a specific competition which is part of the reason why title 2 is necessary. similarly the argument is made well, people are going to invest anyway. bottom line is broadband networks don't have to exist. what is remarkable is the fact that right now google fiber does not offer voice service. why? it would cost zero. they've already built the fiber. the reason they've said on the record is because there are title 2 regulations that apply to voice. it strains credulity to think on one hand you can apply title 2

regulations that are even stronger than what the president suggested, but on the other hand revenues won't be affected. you have to pay the piper when it comes to title 2. the proof is going to be in the pudding in the months to come. >> i will say if it is not broke, don't fix it. i would say there is a lot of people having buyer's remorse on this rule making. >> thank you senator johnson. >> thank you very much. commissioners and mr. chairman, thank you for your presence today. i look forward to this conversation. i have appreciated what i've heard so far. look forward to seeing at least some of you in if the appropriations proceeding. we'll see you again. i've met on one-on-one meetings with each of you other than commissioner o'reilly. i would welcome that at some point in time when it fits your schedule, commissioner. i actually have enjoyed the

conversations we've had and i appreciate the respectful manner in which those have occurred. let me ask about as you would expect, my focus will be upon rural providers and consequences to rural america. first on net neutrality and then i will shift to the e rate issue. on net neutrality one of the providers shared with me the regulatory burden they currently exist. that they have a calendar of things they do to comply with the regulations three pages in front of me. the amount of time, they indicated that it would take -- first of all, i should tell you this is a less than 20-employee business, covers less than 1,000 square miles of service territory, has less than 2,000 customers and their calendar indicates that it would include 62 different federal filing mandates that would require

1,490 man hours, person hours. and i'm worried that net neutrality, the order that the commission has entered will only increase that burden. and in the same way that i think mandating health insurance is only valuable if you can find a doctor. mandating network management rules does nothing to protect the person who has no access to broadband. and many of our conversations, commissioners, one-on-one has been about access to folks who live in rural places in the country. so let me ask, i'm going to ask commissioner pai this question. bl mr. commissioner i am reluctant to ask you because i would lose all my time in your answer. commissioner pai how does the net neutrality rules impact

network providers? was the commission provided evidence input before making. the decision related to net neutrality as to the cost of compliance and ultimately who pays the price of those regulations? >> thank you for your concern. i think that title 2 is when you have a devastating impact on the rural broadband customers. simple reason is that it is a challenging enough business case as it stands to build broadband networks in rural america given the sparse population, great distances distances. when you layer on top title 2 regulations, it would make it exceptionally more difficult for broadband companies to take the risks, deploy the capital to make that infrastructure work. wave wireless, which supplies broadband internet service to my own parents. as it is it is tough for them to get a reasonable alternative when it comes to broadband. wave has said it is going to be challenging for them. they have to have people comply with these regulations it won't be easy to deploy more infrastructure in the field. the fcc neglected,

unfortunately, the statements of the many, many companies that wrote to us and said broadband is -- or title 2 is a bad solution for these small rural broadband providers. we got a letter from 24 of the countries, smallest isps, all serve less than 1,000 customers. one ever them served four customers in canon falls, minnesota. because they have no budget line items for outside counsel. repeatedly we've heard from smaller providers title 2 will reduce their ability to compete. one of the great ironies to me in title 2 in this entire debate has been the key thing that people say i think -- or that they mean when they say net neutrality is that we want more competition, we want more broadband providers offering better choices better prices at faster speeds. title 2 takes us exactly in the opposite direction. heavy handed regulations affect

negatively -- >> i want to make sure you don't take all my time either. >> i want to set a record for a 30-second response. the record and the information that we gathered in the record does not ignore the question you asked, as has been suggested. the ntca, the association that represents all of these small 20-employee kinds of companies filed, again obviously representing a consensus in their industry saying they supported title 2 in this open internet. >> this is absolutely critical. they did not support -- what they supported with respect to title 2 is a last mile connectivity they already offer as a transmission service. they did not assert title 2 jurisdiction over interconnection -- >> no, i don't think --

>> next time i'm going to ask commissioner o'reilly. then perhaps either commissioner rosenworcel and commissioner clyburn can respond. thank you for that answer. my time is up. we always say that before we ask the next question. we have a great appeal that's been on file for four years. we'd ask you to respond. it has not been responded to. and i would ask your commitment that you would get the details from us. >> i'm sorry what is it -- there is an appeal? >> can ed. yes. on appeal. four years. for rates that were established -- they filed -- i'm sorry, they filed in 2011. it is a case dealing back to the funding of 2005. >> yes. >> so we'll follow up. mr. chairman, thank you very much. i'll submit the rest of my questions for the record. >> thank you senator moran. senator cruz. >> thank you mr. chairman. commissioners, thank you for

being here. the internet has proven to be an incredible haven for innovation and for opportunity. and i believe the commission's order imposes a profound threat to continued innovation on the internet and in time will hurt small content providers and favor large corporations with influence in washington. i also believe the order is contrary to law. i'd like to ask you mr. chairman initially, just a simple question. in the order, am i correct that what the commission has done is now to treat broadband providers as common carriers? >> yes, sir. >> how then, mr. chairman, does the commission justify that given that last year when the d.c. circuit struck down the commission's previous failed attempt at regulating the internet, the d.c. circuit said on page 45 of the opinion, and i quote, we think it obvious that the commission would violate the

communications act. were it to regulate broadband providers and common carriers. >> sir, i'd be happy to get a specific legal response for you on that. i think that what the court was say ing saying was that the commission was imposing common carrier-like regulation without stepping up and saying you are a common carrier. that's what essentially that statement says, i believe. they were saying you're violating the communications act if you're doing these common carriage-like requirements without making a finding that in fact they are common carriers. >> let me ask -- >> -- was the gut of that. >> the specific order was it subject to ordinary notice and comment, and specifically was the public able to look at details and comment on it before

it was adopted? >> there was a full notice and comment proceeding and longer than average. >> let me ask that question again. was public able to read the specific details and comment on specific details of this order before it was adopted? >> the order was put out in keeping with the total process -- a propose dense -- >> mr. chairman you're avoiding saying the word no -- >> because with due respect sir -- and the o'reilly rule never disagree with me -- >> my question simply was the public able to read the order and comment on it before it was entered. the answer is no, correct? >> that's not the way the process works. >> i did not ask the way the process worked. i asked was the public able to read and comment on it before it was entered? that's either a yes or no, you could go and read it before it came into affect, or no you could not. >> the public never reads orders, sir. >> the answer is no. i would note that just a few

weeks ago president obama's executive amnesty was enjoined by a federal court for violation of notice and comment. and i think the commission's action represents an abuse of its authority. let's shift though to the effect of this order. treating broadband providers as common carriers, putting them under title 2, treating them as public utilities subjects them to section 201. section 201 gives the commission the authority, according to section 201, all charges and practices shall be just and reasonable. is that correct? >> correct. >> that means -- i with a'nt toant to understand the effect of the commission's order. it is the commission's position that it has full legal authority from this day forward to regulate every charge and every practice of every broadband provider to determine whether they are just and whether they are reasonable. >> we have said sir that we believe this should operate the

same way that section 332 has and that that has not been the result. >> but mr. chairman, you seem to be misunderstanding my question. i understand that you're currently telling us you're going to forbear from using this authority. my question is to understand what legal authority the commission is claiming. >> 201 is the legal authority. we are using 201 and 202 in this order. >> so i am correct that it is the commission's position that it has the legal authority to regulate every single charge and every single practice of every broadband provider and to determine in the commission's own judgment whether those charges and those practices are just and reasonable. >> there has been removed from the item the procedures that the commission would use to do that as in tariffing, as in retail rate regulation those tools -- >> you're not arguing that you lack the legal authority. you're saying right now you're refraining from doing that. correct? >> no, sir. i'm arguing that the tools to

make that happen -- tariffing ability, rate regulation ability -- have specifically been removed and that we expect that 201 will function as it has for the last 22 years in wireless. >> well, mr. chairman, would you support legislation from this committee to codify the forbearance you're suggesting explicitly prohibiting the increase of rates of broadband providers. would you support legislation making that explicit? >> i need to be real careful on that. i would be very happy to provide input to the committee. i want to be careful about saying i'm endorsing legislation or arguing against legislation or whatever. i think the point you raise, however, is that in any open internet rule or legislation, there should not be consumer rate regulation. >> let me ask one final question. my time is expiring. but commission pai, would you

share with this committee what the impact is likely to be of this order on consumers, the taxes and the impact on innovation and opportunity online. >> it is a terrific question senator cruz. the impact is going to be substantial. first and foremost consumers broadband bills will go up. the door is opened to billions of dollars in new taxes through the universal service fund contribution. independent study have suggested it is going to be $11 billion each and every year. that assumes that the fcc doesn't increase the amount it promised to spend on some of these universal service fund programs. additionally funds for these fees will go up as a result of the increase in state and local taxes that broadband providers will have to pay as a result of re reclassification. the fees are going to go up additionally because pole attachment rates are going to go up. right now a lot of broadband providers pay a lower rate. that will go up. that cost has to be born by someone.

it's going to be born by the consumers. that's just the bills. in terms of the actual service in rural america it is going to be substantial. you've heard our exchange about how some of smaller fees in particular will have to suck up the costs or go out of business all together. some of the larger providers will have to include a line item. will the commission employ section 201 authority to second-guess the infrastructure for interconnection? the three routes that traffic has to go over could be second-guessed by the commission. all of these things now go through the fcc as gatekeeper. third, consumers are going to suffer as a result of the second-guessing the fcc will do through the internet conduct standard. we don't really know where this is going to go. the fcc is going to sit there as a referee to throw the flag. the problem is nobody even knows what the games is or what the rules are. i think when the fcc specifically tees up pro-consumer things like t-mobile's music freedom which

allows the free streaming of music content to your smartphone and says that may be an internet violation. ironically enough, some of the competitive upstarts will want to challenge the big boys will have to say, whoa, before we offer this let's make sure we get an advisory opinion from the fcc as to the enforcement bureau. not the full commission but the enforcement bureau to make sure this is kosher. as a result of all of this, instead of the internet working to the benefit of consumers, it is going to be lawyers bureaucrats and politicians who decide what kind of digital opportunity we will have in the future. other than that, it is okay. >> powerfully said. >> thank you, senator cruz. senator peters is back. >> thank you to each of the commissioners. this has been a very long afternoon for you. there is a few more questions for you but i appreciate your service, your public service, your commitment to these issues.

it is complicated an as we see can be contentious from time to time. thank you for your service. this goes primarily to commissioner rosenworcel because of your work in this area. i'll ask the chairman as well to comment on this. there is without question tremendous demand for wi-fi and devices using unlicensed spectrum right now. as a result, the upper 5 gigahertz band is being targeted for potential sharing, particularly the 75 megahertz and 5.9 gigahertz band for use in intelligence transportation systems, including vtov and vtoi. this points to the many years spectrum has been reserved without actually being used. i think this ignores millions of dollars that have been vefredinvested and thousands of dollars spent.

the reality is that these connective vehicles are being deployed today in pilot programs, on the streets of ann arbor, michigan, and the national highway traffic safety administration has taken action that will likely lead to a rule making this year to require nationwide deployment of vehicles using the v2v during the next few years. the agency has said the v2v and v2i -- i think this is incredible -- potential to mitigate or eliminate 80% of all accidents that occur right now with the non-impaired drivers. if we continue to focus on advanced intelligent transportation systems of vehicles and in a smarter infrastructure we can spur innovation, we'll be able to create jobs, we'll be able to discover new business models and opportunities that haven't been previously possible and we can save thousands of lives in the process. i would contend that we should not do anything here in congress or at the fcc, for that matter that would derail this

incredible comment. i'd like your thoughts on this and hopefully today you might be willing to commit not to move forward on opening the 5.9 gigahertz band to wi-fi until it has been proven that it can be done without any harmful interference to these life-saving technologies with our vehicles. >> thank you senator peters, for the question. as you undoubtedly know, the demand for our airwaves has grown exponentially over the last decade. and certainly that's true since 1999 when the spectrum was set aside for the kind of intelligent transportation systems you're describing. and i know that the development has been slow, but i also know a lot of resources have been poured into that effort. since 1999 when that spectrum was set aside, something else has happened. we've grown much, withmuch better at managing interference in all sorts of spectrum. it is my hope we can explore how

this can be a shared spectrum for both unlicensed and itf services but i take your point we absolutely cannot sacrifice safety in the process. >> i appreciate that and your concern to make sure that that's going to be at the top of your list. chairman wheeler, if you'd care to comment as well. >> i think commissioner rosenworcel is spot-on. the future is all about how can you share. the encouraging thing here is that intelligent transportation systems and wi-fi are not that dissimilar. and so i think that there is a way that technology can -- if you're essentially sending bits the same kind of way, there ought to be a way tlau canhat you can figure it out. that's what we're encouraging. >> i appreciate that. mr. chairman, i yield back. >> senator rubio. >> thank you. commissioner o'reilly i want to begin with you. use of wireless broadband and

internet connected devices has provided all sorts of economic growth and innovation that was previously, quite frankly, unimaginable. wireless traffic as we all know is projected to grow exponentially in the years ahead. because of this i introduced legislation to free up additional spectrum for commission use, both licensed and unlicensed. i strongly believe that we should be enacting policies that ensure that the united states continues to lead the world in wireless innovation and technology. unfortunately, it's my personal opinion -- i think those of others -- that the fcc net neutrality order is quite frankly the opposite of what we should be doing. i would be interested to hear you talk a little bit about the impact the order is going to have on wireless and wireless consumers who are interested in this topic and may not understand its true impacts on them. >> absolutely. thank you for your leadership on wireless issues. i have to say i think the commission is backwards and has flipped in how it approaches wireless issues for purposes of whether wireless should be -- as actually offering broadband

services, we say flo.no. for purposes of applying title 2, we say yes. i think one is a violation of the statute. i think that's why we're most exposed to in a court proceeding. i think the statute is fairly clear on that. i've introduced the wi-fi innovation act with senator booker. i did so because of the potential for growth in wi-fi and the need for more unlicensed spectrum for wi-fi. i'm also hopeful we can make progress in the upper band.

i'm concerned these have become mired in all sorts of technical arguments. can the fcc use its leadership to push the process ahead? >> thank you for your leadership on your legs. >> i think it's something we can do in short order mile still prowhile still protecting the dsrc.

public utility regulation would involve those foreign governments around the world that want to impose greater international regulation upon the internet. like you i'm not only concerned about the negative impact on investment innovation here at home by subjecting broadband to these title 2 regulations i'm also very concerned about the message this sends to other governments around the globe who do seek quite frankly blatant greater control of internet governance. will be viewed by foreign countries as an excuse to regulate content and infrastructure in a way that

might not be consistent i think it backs important for us to maintain on the international stage. we want a free and open internet with the same repressive foreign regimes can say look, you yourself said the internet is broken, the competition is insufficient and the fcc is going to stand as the gatekeeper. >> sending a mixed message. our own government has said there is a problem we need to solve and therefore has injected itself. >> i agree. >> with due respect, i disagree. and i have met with foreign regulators on this topic. my message to them is, this is no more regulating the internet than the first amendment regulates free speech.

this is saying that the internet is open. i met two weeks ago with european regulators and they understand this. i met last week with the head of the international telecommunications, which is kind of the international body that comes up with this. you need to understand this is the no the regulation of the internet. this is making sure that the internet is open. the regulation of the internet is the regulation of numbers, names, routers, this kind of activity. and tariffing and rates. when putin tries to shut down pussy riot on facebook when turkey tries to shut down access to twitter chinatwitter. those are absolute violations of what we're talking about here.

because no party whether government or private sector should act as a gate keeper. to who gets on the internet. that is what this rule does. >> as you said at the outset of your statement you are applying, you are saying this is more regulation that be the first amendment. the problem is putin doesn't have a first amendment. and neither does china. and i understand your meelg and talking with that europeans but the ones we're concerned about the china and russia and others. and who do not understand this notion of the free speech. so when you make the argument to them that for example as you have made now that we're not regulating content this is -- for them it is literally a if foreign concept. they don't have a first amendment or a societal or governmental commitment to the notion of free speech. what they say is a governmented agency in the united states involved in setting terms for how the internet can be provided. even if it is content neutral

and i think it gives them an excuse to say if your government the do it ours can do. >> with respect i don't think it sets the rules. and the other thing is when i met with secretary general sao, whose chinese and said you need to understand that is what this is. and in your home country, when you are blocking, that would be a violation of our open internet rules. because that is what this is about. not the operation of the network but making -- >> and i'm confident he probably informed you that in his country you set rules and he'll remind you of their sovereign the i and the demotion of their view of -- >> the position of our country hasn't changed. >> if i could add one critical point. nevin a matter less than free spempl speech, what we have done it sends the message. you should our internet conduct standard the sec explicitly tees up practices as sponsored data

as net neutrality violations. if we were to find the practice which essentially gives consumers something for free would violate net neutrality, now we see foreign countries adopting the same process. the same -- now we see foreign countries doing the same thing. banning sponsored data and other pro consumer type innovations that allows smaller competitors to distinguish themselves. so we can't act it is if what the fcc does is in a vacuum when it is bad. but the message it sends when it is good is somehow going to be transmitted through the globe. you can't have it both ways. >> senator ayotte. >> thank you chairman and ranking member. appreciate it. >> commissioner pai. shortly after the latest spectrum option you and i pend an onp op ed in the journal about the flaws in the program and showed a egregious example where

in the most recent auction that companies with billions of dollars in revenue were able to get taxpayer credits to purchase discounted spectrum. and since our op ed, it's been interesting to see that a wide variety of groups have come out to say this issue needs to be addressed by the fcc, including groups ranging from the naacp to americans for tax reform. can you update us on this program? and i hope that the commission has a whole will take a very thorough review of what happened here. because it can't have been what we intended with this so called designated entity program. because this isn't benefitting truly small or disadvantaged businesses. >> thank you senator for the question and for your leadership. since we had a chance to collaborate we have seen a broad raising of concern across the

country and across the political spectrum about this issue. senator mccaskill expressed concerns, representative palone on the house side as well. and aside from interest naacp and americans for tax reform, other groups have pointed out that this was not the way it was supposed to work. unfortunately i wish i had a better story to tell with respect to the facts. but since you and i worked together it's come to my attention that not only were there people who didn't participate in the auction at all, there are specific companies from nebraska to vermont who put in bids but were outbid by one or both of the entities run by dish who ultimately were denied or had to bid much more than than wanted. and part of the problem is these are facilitates based carriers. actual companies providing actual service to actual

customers in places and instead had to give away to the ash trang we arbitrage in the auction. so that's why currently the fcc is undergoing the review of the auction. and petitions filed by competitors concerned. and i welcome the chairman when he said we want to make sure the integrity of the program remains in tact. it is important to have that further notice of proposed rule making where we make sure once and for all these loopholes are closed and corporate wmp ends. >> could i pick up on this. because we called make news. >> i would like to. >> commissioner pai and i are going to agree. there are people back here who are falling off their chairs at this moment. >> i'm glad we can agree on this. >> you know, i am against slick lawyers coming in and taking advantage of a program that was designed for a specific audience and a specific purpose. i'm as oppo