whether applying the general internet conduct standard to new business practices, drafting advisory opinions in the enforcement bureau, or hiring a new onbuds person for the internet the commission will spend a lot of money and time applying regulations that are wasteful and unnecessary and that are already proving harmful to the american public. given that the fcc is struggling to fulfill core responsibilities under the communications act, it is irresponsible to spend millions of dollars regulating the internet. outside the budget, there is another issue with a fiscal impact that i'd like to discuss this morning. the fcc must sake immediate action to end abuse of the designated entity program.

what was once a well-intentioned program designed to help small businesses has become a play pen for corporate giants. the fcc's recent aws-3 spectrum auction is a shocking case in point. earlier this year the fcc disclosed that two companies, each of which claimed it was a, quote, very small business with less than $15 million in revenues together won over $13 billion in spectrum licenses. those very small businesses are now claiming over $3 billion in taxpayer funded discounts. how could this be? dish network, which has annual revenues of approximately $14 billion and a market capitalization of over $31 billion, has an 85% ownership stake in each of those supposedly small businesses. to be frank, i'm appalled that a corporate giant has attempted to use small business discounts to rip off american taxpayers to the tune of $3.3 billion.

this is money that otherwise would have been deposited into the u.s. treasury and it could have been used to fund over 581,000 pell graments, to pay for the school lunches of over 6.3 million school children, or to extend tax credits for the hiring of over 138,000 veterans for the next decade. as appropriators, as taxpayers, you know that this is real money. the dish entities' applications are pending before the fcc. if dish didn't comply with the fcc's rules we must reject any discounts, and going forward the fcc must fundamentally reform the de program to prevent big business from ripping off the american taxpayer ever again. the american people deserve no less. chairman bozeman, ranking member

coons, members of the subcommittee, thank you again for inviting me to testify. i look forward to answering your questions and to working with you and injure staffs in the days to come. >> thank you commissioner pai. let me ask you, and you touched on this, the fcc's 2016 budget request contains spending increases of more than $73 million. this represents a 22% increase above current levels. in your testimony you said that you did not support that. are there any areas where you believe the fcc should shift resources from current activities to pursue other authorities. >> thank you for the question, mr. chairman. i do think there are other area that is would benefit from more and more sustained fcc attention. for example, weeding out waste, fraud, and abuse in the lifeline program and reviewing the rules that apply to lifeline. making sure we have a standalone

support mechanism for supporting broadband in rural america. that has been on the shelf for a couple years. would be great to get that kick started. additionally freeing up more spectrum for licensed and unlicensed use particularly in the five gigahertz band. accelerating what i call thei p transition. finally providing lone-needed relief to the am radio brand. there are a lot of great am broadcasters around the country who have been dying for relief for 22 years. there are a number of different areas like that that i think could benefit if the fcc focused on it. >> how has the agency's focus on internet regulation affected its allocation of resources? >> mr. chairman, i think there's no question that it's diverted a substantial amount of staff hours and financial resources toward what what is essentially a di kretionary project. i have often said net neutrality was a solution in search of a problem. the internet wasn't broken before the fcc tried to fix, it

but nonetheless the agency has spent an inordinate amount of time producing over what has been over 300 pages of regulation that have to be implemented and enforced in coming years. it's detracted from the core purpose of the fcc under section 1 which is to realize the promise of communication services for every american. and so if we focus on rural broadband broadband, if we focused on providing more resources to schools in inner cities. unfortunately, net neutrality has been a diversion. >> chairman wheeler following up on that earlier in the year all five fcc commissioners promised the senate commerce committee that by year's end they would complete the rate of return usf reforms. this is an effort that, you know the commissioners support, this is something i think the committee supports. these are the areas that we're really looking for so we can

make a difference. could you update us regarding the status of that effort? >> yes. thank you, mr. chairman. it was -- first of all i don't change one comma in the commitment that we will have this done this year. three of the five commission offices, mine included actually sat down with the rate of return carriers to begin to work through the process of just how do you build this new model to make sure that we're delivering broadband by rate of return carriers. the challenge in this is there are going to be putting and-- puts and takes for individual companies and we're trying to say how do we keep our eye on

the ball which is to deliver broadband in rural areas and at the same time not create ex tin sen jis that unnecessarily burden those companies that are trying to provide that kind of service. i think we've made good progress. i expect that we will be moving towards a new model that we will release and propose shortly but we are dedicated to the proposition that we're going to get this done. >> and shortly is like the next month or two? >> by football season. >> i can relate to that. let me ask you, despite rapid changes in the marketplace the fcc has not substantially updated the regulatory fee structure. will you commit to jub dating the way your agency collects regulatory fees to make sure the fees are equitably spread throughout the industry that is

the fc c regulates? >> yes sir, mr. chairman. that's an ongoing effort. what we're trying to do is we're trying to peg the regulatory fees to the expenses that are associated with them because -- and this is one of the things that's at the heart of this universal service fund issue that we've been talking about. because broadcasters are paying for the administration of universal service, and other licensee that is don't participate in universal service. and so how do you make sure that there is a relationship between that which you get charged and the services that you receive? we have also moved to reduce the burden on small businesses. if your fee is less than 500 bucks, you shouldn't have to hire some lawyer or accountant for a couple thousand bucks to

make your filing for you. and so we've just eliminated that altogether. but, yes, to your specific question, changing how we do fees is a very important part of what we're doing. >> commissioner pai, would you like to comment? >> i share the chairman's vision of making sure our regulatory fee structure is calibrated to the realities of the marketplace as it stands and without revealing nonpublic information what i can say is the commission is on the brink of making additional progress toward that goal. >> senator coons. >> thank you, chairman bozeman and i appreciate the opportunity to continue some of this conversation. i mentioned i'm interested in the incentive auction and the auction funds. congress authorized the fcc couldto conduct three auctions. can you go into detail on how the aging i.t. infrastructure of

the fcc continues to operate in some ways as a barrier to a successful auction and whether you intend to meet the goals and how you will ensure that broadcasters might be made whole while maximizing the spectrum auctions? >> thank you, senator. >> just a few questions. >> the laundry list there kind of lays out exactly why this is a big undertaking. i keep calling it a rubik's cube because what we're doing is we're having to go into the marketplace and buy spectrum from broadcasters. then we turn around and repurpose it and sell it forward auction, to the wireless carriers, but that center ring in the rubeik's cube is where the real action takes place because as the amount coming in varies as somebody says, okay, i'm out

of the auction now, you have to have realtime rebanding that determines what you're auctioning out here. that goes to your software point and i will be very candid, sir and say that when i walked into this job about 18 months ago, i sat down with the team which is a terrific team that is doing this. this has never been tried before in the world okay? and the policy issues and how they're going through this is terrific but i said, hey, folks, i used to run software companies, and i'm worried about this software component, and i'm worried about our ability to have the infrastructure, the i.t. infrastructure, that can do the job. and so i requested a six-month delay so we could get that right. we're going to have this auction the first quarter of 2016. the software is going to work. i actually just had a briefing on it last week. we had a red team working on it.

we're actually trying to run this like a software company and i'm confident that we're going to have a successful auction on the first quarter of 2016. >> that's encouraging. and i'd appreciate you talking a little bit further if you would about how proactive investments in dealing with aging infrastructure on the i.t. side and proactive investments although significant in a reallocation may actually net positive to the taxpayer over time but why some of the government accounting rules requires you to do so in a lump sum up front. >> thank you, senator. let's separate the real estate from the i.t. aspect. on i.t. we have 100,000 unique data sets in the agency that have grown kind of like top si over the years. somebody says, hey, i need and something gets created. we have 207 different platforms that don't speak to each other.

the maintenance of those alone is an expensive proposition. if we can rationalize all of those, put them in the cloud, have a common platform, we're going to be able to reduce ftes that support them and even beyond that the consultants who you bring in to have to do the fix on this or the fix on that but you need somebody that's a specialist in this because you haven't built the program. so, for instance we did an update using the new technology -- using our new approach of our consumer site that we brought in for a fraction of what the consultant said he would charge us for, and we want to do that across the whole agency. on the real estate side you know, when i did real estate

deals, normally you would just take the build out cost and everything and amortize them over the course of the lease. obviously the owner of the building makes a little more in that process and the government says, no that's not the way we do things. we pay them up front because that's what's best for the taxpayer, and it's going to cost us up front $51 million this year to save $190 million over the course of the lease, and i think that's a good investment, sir. >> commissioner pai has raised a concern that if we approve or authorize appropriations that that will in some ways distend future considerations of what the base budget is. is that a legitimate concern? is that a reason not to do this? >> i don't think it is a reason not to do it, and i think commissioner pai's idea it should be segregated and flagged as this is what it is is a terrific idea. >> commissioner pai anything you would like to offer on how

to best ensure taxpayers receive benefit and yet appropriators get a reasonable baseline going forward? >> thanks for the question senator. turning first to the voluntary incentive auction, i believe that we have to get this right. congress gave us only one chance to get it right. and so i think it's critical that we get it right instead of getting it done based on a particular deadline. now, in terms of getting it done right, i have three general buckets of concerns. one is that we tend to be making the incentive auction more complicated than it already is. as the chairman has aptly pointed out, sort of like a rubik's cube making it all fit together anyway. but there are different proposals on the table for example, dynamic reserve pricing, the variable band plan that are going to make it even tougher for broadcasters and wireless companies to make the decision to come to the table and to come to the table with sufficient resources. secondly, i think there are also some pretty important technical

questions that need to be ironed out. for example, as the children pointed out, how do we know the repacking software is going to work in crunch time? similarly, what types of uses should be allowed in the guard band? that's something that engineers have to inform us about. and then there are also other, third bucket is other factors outside of our control. we've heard from a number of carriers and from the capital markets that given the amount of money that was unexpectedly raised in the aws-3 auction, it might be hard for the carriers to participate as robustly as we would like them to in the incentive auction. as to how each of the three items plays out, i'm agnostic in terms of the timing but i think it's critical for us to sort them out regardless of the time line to make sure we manage to meet congress' expectation for this auction. >> terrific, thank you. >> thank you, senator. >> senator moran. >> mr. chairman, thank you and senator coons for having this position. when i was in the position of

senator coons, it had been nine years since the fcc testified. chairman powell came that year and we've had the fcc in front of us every year and i think this is one of the most important sub important agencies this subcommittee has jurisdiction over. chairman wheeler, over the last week i have asked several people who come into contact in their business lives with the fcc as to what questions they had like me to ask of you. the ultimate and best suggestion was whatever you do, ask for a yes or no answer and i'm going to try to do that as often as i can, although now i'm the one who is using up my time. senator coons asked the question about the incentive auction. whey heard you say is you are confident that the auction will occur early in 2016. that's a yes. >> that's a yes. >> my question that follows that then, you've been having meetings with broadcasters, and

do you believe they now have the information necessary to make an informed decision whether or not to participate in that auction? >> for the most part, yes, but we're not complete in the set of rules that we're developing and so -- which will get those done in the next couple months and then they will have the information. >> and do you have an ability at this point to predicted how interested the broadcasters are in allowing their spectrum to be auctioned? >> oh wow. predicting a market. i can say that there has been great interest. i have had major broadcast ceos in my office saying that they are seriously looking at whether or not they would put their spectrum up. i think that there is great interest in participating in the auction, but we won't know until we open the doors. >> likewise senator bozeman asked a question about rural broadband. i want to focus on the universal

service fund and the circumstance we find ourselves in. first of all i'm pleased to see we're moving towards the correction that was entered in an order. you committed to reforming the reforms, and i'd like to see that to continue expeditiously with a great deal of common sense and a sensitivity toward how rural the country is and how small many of those providers are. one of the things that i'd like to ask about this morning though is the universal service fund in so many instances the landline is no longer the desired option by the customer, and yet the universal service fund collects money on that service but we need that money to be used to deploy broadband in rural america. what is the plan to transition the universal service fund phone support to help support

broadband so that rural customers can access that broadband comparable and affordable rates as urban areas? >> thank you, senator. first of all, i want you to know we will continue to live up to that commitment. i came in and said that qra which you and i had a long discussion about is ridiculous and it's gone. >> thank you. >> and as i said earlier, we're in the process of looking at just how do we put together a rate of return package. i agree that it doesn't make much sense to have the linkage between narrow band and broadband, and i know commissioner pai and i are in violent agreement on that point. the difficulty is it's harder than just cutting the cord here because we need to make sure that we are not just supporting

existing broadband but we are also providing funds to the nonserved areas, and how we get that right is essentially what we're going through right now but we need to cover more of rural america, and we will do that, and we're doing it in this order, in the other order that commissioner pai and i just voted favorably for a couple months ago and we just actually took the action a couple weeks ago. we've released $10 billion to be spent over the next six years by six companies in the price cap carrier arrangement and then we've put in behind that a structure that says that those areas they're not going to serve, we're going to auction off. we're going to put auctions back to work to say okay, who wants to serve this area and what will it cost to serve it?

so one of the things we're going through is we're going through both changing the existing models that people are used to working with and the problem as i said before, that affects companies, but also changing the overall construct and saying it's not just your father's usf program anymore. we want to look at bringing new people in. we want to look at having marcus decide things by auction and that's what we're committed to doing. >> if the industry could come up with a plan to present to you as their way that that would be considered within the fcc? >> yes, sir. and that was essentially what we were saying when the three commissioners' offices got together with them and said, hey, can you come -- where you stand depends on where you sit, sir, and with he have to make sure that everybody understands they're sitting in the same place. >> how long do you see a transition taking? >> a transition to?

>> to that form of broadband support? >> i hope that we can have the plans in place this year. >> okay. let me ask -- let me ask just about call completion. >> yes, sir. >> what progress is or isn't being made? >> so there are three components to call completion. one is enforcement. we finded wind stream $2.5 million, level three almost $1 million. the second is they had this fraudulent activity going on where you would hear a ring even though the call wasn't being completed and we've passed a rule and commissioner pai and i again worked together on this to make that illegal and to be able to take enforcement actions against that. and then the third question becomes, okay beyond that, how do we quantify what's going on, and so we have a data inquiry out to the affected carriers right now saying we want to know what happens about this what happens about this and that

will help us define what any further steps need to be. >> when will you be able to share that report? >> i hope that again, that's something that will be done towards the end of this year. >> busy year, mr. chairman. >> yes, sir. >> commissioner pai, i had intended to ask you to respond to anything you wanted to respond to. my time is -- with the chairman's indulgence, commissioner pai, anything you'd like to respond to the questions i asked the chairman? >> sure. if i could build on briefly to the chairman's answer with respect to the mechanism for supporting standalone brad band. this is something we had a longclelong cle colloquy about. we've seen it in kansas. both my commitment to getting it done and finishing patriot jekt by the end of the year. this is part of the reason why i proposed standalone -- support for standalone broadband a couple years ago. these carriers either go it alone or they risk losing the customers. so i think we do -- and i'm glad on a bipartisan basis we teed up

a lot of these issues including how the mechanism should be structured and we teed up a number of different proposals in that same nprm as it's called. we need to be clear, we don't need a second path for carriers. we don't need an elegant mathematical model. we don't need a follow-up to the qra which i'm grateful to the chairman for scrapping. what i'm inhe is kroogly optimistic about is we can adopt targeted reforms. in particular part 36 and part 54 accounting rules. that regulatory tweak which we have all the legal authority in the world to do i believe could help some rate of return carriers offer standalone brad band without effectively being penalized for it. again, i stand ready to work with the chairman, our other colleagues and, of course with you to make sure the mechanism is something that works for rural america. >> thank you both very much. >> senator langford. >> thank you. thanks for both being here.

i want to follow up on these conversations about the designated entity program and what is the potential right now about $3 billion in lost revenue. where does that stand for the future? what is the process at this point for re-evaluating the program and how it's managed and as you alluded to before closing the loophole on this. what's the conversation right now? >> let's parse it into two parts. thank you, senator. let's parse it into two parts. the first part commissioner pai spoke eloquently about the reality that happened in the dw-3 auction. i can't find a lot to argue with in that. i think we are strongly of the belief that this was designed for designated entities. how the rules were in fact, administered or, i'm sorry not administered, used by followed

by the bidders using an item that now is finally before us because yesterday was the day opportunities to challenge those licenses closed, and we have like dozen challenges to them. you may have noticed that the wireless bureau was slow in getting those out because we wanted to make sure that we understood everything there was in those so that we would be able to respond in this kind of a situation. we're now to the point where there are challenges to those licenses, and we will respond accordingly. so that's kind of what happened. on the broader designated entity question, again, commissioner pai and i are in agreement. this program needs to be updated. i was around when it was created in 1993. it has the right kind of philosophy and it's a mandate from the congress that we need to make sure that there are opportunities created for small

businesses businesses, and the problem is that the world has changed a lot since then and our rules haven't. so what we did a few weeks ago, probably a month ago now, was to put in a public notice because we want to make sure we have the record to support everything we do, we put out a public notice saying here are the kind of issues that got raised. give us input on that, and it's our intention that we're going to have a rulemaking that will be in plenty of time before the incentive auction so the people will know what the rules are there and change the structure of the designated entity rules so make sure that they meet the mandate of congress and to make sure that they don't run afoul of the kind of things that we've seen happening. >> okay. thank you. anything else you needed to add to that? >> senator no. i can't improve upon that. we're working in common purpose

and i hope that some of the common sense changes that were teed up in the public notice will be adopted as fundamental reforms to this program. >> it's great. let's transition to lifeline program. you all have put some reforms in place over the last couple years. that program rapidly accelerated and then it's starting to be able to draw back some. it still has a distance to go. what are the major reforms that are still pending whether they be pending rulemaking or proposals or whether that be changes that are in operation that you would see? my state of oklahoma is one of the prime examples of that and i have already mentioned to you as well i'm willing to be able to work together to make sure that those individuals that are eligible for this receive it and those individuals that are not do not as you walk through the process. so what is pending at this point? >> so we will bring out a reform of the lifeline program notice for proposed rule make egg in the the next couple months.

it will address the kind of issues you have mentioned here and many others. there was just a report by the government accountability office in which they came out and said you know, there's been great progress in helping to clean up this program and move it forward, but there aren't enough specific management goals. you're not shooting to these specific targets and saying are you hitting them we're going to be developing those so that we can have a management-like approach to lifeline, and as i say we expect this to -- nprm to start in the next couple months. >> is it your assumption at the end of the day that individuals would receive a phone for free under the lifeline program or there is a subsidized edd cost? >> that is specifically one of the questions we will ask and we'll make the decision based on the record. >> okay. what is your assumption of the direction that's going? what's the conversation happening on that or do you need to save that for the record?

>> i have heard arguments on both sides and so what we're going to do is tee up in the nprm this specific discussion and try and tease out from everybody and have people debating the various topics so we can have the best record to make that decision on. >> there's also a conversation in my state in oklahoma and multiple other states with a large native population that the subsidies were set up for individuals that were native american but it seems to be the assumption was on tribal lands to try to expand that out into tribal members and it seems to be expanding well beyond what it was intended for. in my state there are more individuals on lifeline than there are total tribal members in the state that get the tribal subsidy so there is a problem with that and i assume it's in multiple other states as well. is that part of the rulemaking. >> one of the things i learned when i came to the commission was all of oklahoma was tribal lands.

i didn't realize that. you pointed out to me that tribal members carry an identification card that say i am a tribal member. i mean the reality is that when -- multiple years ago during the bush administration when lifeline was expanded to nonfacility based carriers, that a whole series of things were triggered that we now have to address, and that clearly is one of the obvious things and i can assure you, sir, that will be in the nprm. >> one last question on this and i will try to be brief. we fled to talk about some of the open internet conversations and i understand the issues that are floating through this and the opinions that are out there. my question really circles around why not a legislative fix for this? why do a rule making? there are so many different exceptions that were built in and the areas to say, well, these 30 different parts, you don't apply to this and these 700 different rules you don't apply to this. there seems to be so many

exceptions it looks like a round peg in a square hole in some places when there was a congressional conversation about some of the same issues. why do it through a rulemaking and try to adapt rather than wait on congress to be able to respond to it and is there any guess at this point in your budget as you're thinking about this long term the cost of litigation as you're beginning to prepare for that? >> thank you, senator. legislation has been proposed in both houses as you know. i read in the trades this morning that in this body senator thune and thorsenator nelson are discussing how to come together on legislation, that is the prerogative of the congress and we would certainly bow to whatever decision the congress makes. in so far as the budgetary impact, we don't sit down and say, well this is specifically what it's going to take to do

this program or that program. with the possible exception of lifeline where we do sit down and say we have 155 people that are dedicated to lifeline. >> do you have any guess on the litigation cost? you have to know there will be tremendous litigation on the backside? we've got to look at that as well, what's about to happen costs on litigation. >> i don't have an estimate for that, sir. >> okay. more than $10 million do you think? >> i don't have an estimate sir. but it's a fixed cost. the reality is we're not going to go out and hire ted olsen or somebody like that if that's what you're asking. it's a fixed cost that we have an appellate group inside the office of general counsel, and, you know, they're worrying about usf appeals and they're worrying about this the next day. >> okay. thank you. >> chairman wheeler, the fcc

announced in march that 16 of the 24 enforcement bureau offices around the country would be closed. what impact will these closings have on the fcc's ability to address interference concerns? >> thank you mr. chairman. it will improve our abilities. one of the realities that we have is that the offices were placed there 20 years ago in an entirely different era when radio frequency interference was not an issue. on average less than 40% of their time is spent on rf interference issues. we ought to be spending more time on the challenges to the future economy, which is a wireless economy rather than trying to figure out if the local broadcaster has painted

his tower. and so what we are proposing is a structure that will put electrical engineers in eight strategically located offices so that they can then get out of those offices and deal with the issue which is never in the office it's out there. and in addition we then want to put -- we get a lot of complaints from the industry that, hey, i tell you about some kind of an rf problem, and it like falls into a black hole. back to senator coons' i.t. question, if we have the right kind of i.t. structure, i want to have a dashboard so you can say let me look up who is responsible for this, where it is in the status, and what the

outcome is. but we're not structured to that right now. we're structured to an era when you used to go and inspect broadcasters' records which are -- used to be in files in their offices and now are online. where you used to worry about whether towers were lit and we got to ask the question is that the broadcasters' responsibility for should we have 24 field offices out there doing that? and so we're trying to reallocate our resources to do a better job. >> the resources that you save then is going to go towards interference as opposed to across other enforcement or just within the agency itself? >> we believe that we will be improving our interference. we believe we'll save about $9 million a year because -- >> that's going back into interference? >> and that goes into the general fund. but it will be -- it will be

used obviously for paying for what will be increased costs of travel and this sort of stuff. we want to have a coordinator at headquarters that oversees the whole thing. we want to build the dashboard. all of those, of course, will cost money. >> right. so you're not committing to putting it in interference for sure. it's going in the general -- >> but the focus of the field offices is going to be interference. >> okay. commissioner pai, under the title 2 reclassification, if someone files a complaint with the fcc that an internet service provider is charging unreasonable rates, isn't the fcc legally obligated to investigate the complaint and make a determination under section 201? >> yes mr. chairman, would be the fcc's obligation, which is why ex post rate ex lation is explicitly on the table as a result of the net neutrality

regulations. >> can i just say one thing, senator? that i hope somebody files with that. and i have said this with commissioner pai and i have had this discussion before. i hope somebody files with this because if they do i hope we will be able as a commission to take an action that makes it clear that ex post -- ex ante rate egg lation is not what we're after here and that we will produce a decision that makes it clear that that's not what we're trying to do here, and we're in strong agreement on the effect if not how to get there. >> commissioner pai? >> well mr. chairman, and with due respect to my chairman i think the order says they won't get engaged in ex ante regulation -- >> so we're talking about consumer as well as interconnection rates? >> exactly. as i read the open internet order, it explicitly applied --

permits post ex rate regulation in interconnection under section 201. >> chairman wheeler, you're not interested in interconnection rates either? >> i'm saying our goal is not to have rate regulation and the 201b interpretations that some people have said, that this gives us some kind of ex post authority, i would like to be able to make it clear that it is not a rate regulation tool. >> either consumer or interconnection. >> that we need it specifically for consumer rate regulation okay? as we look at interconnection, i think we need to make sure that we make decisions based on what the facts of the situation are. i'm not trying to donl your question, but i'm trying to say that absent understanding what the facts are i think we need to wait for that. >> so i gets the question then

is would you have objection to congress prohibiting the fcc from spending money on regulating rate charges charged for the broad bad internet access service including those for interconnection? >> so i think that one of the things that's most interesting is that as i believe senator langford pointed out, we forebore from a lot of sections in title 2. there's been a concern raised, well, okay, you know, this commission will stay out of that but what about the next commission? if congress wants to come along and say that's off the table for the next commission, too i have no difficulty with that. >> thank you mr. chairman. senator coons. >> thank you, chairman, and thank you for a broad and vigorous conversation about a lot of different issues. i want to take us back to the access to broadband and making

sure we've got an e rate program and a usf that works. you announced sweeping reforms last year to the e rate program to bring broadband and wi-fi to schools and libraries while modernizing the program and eliminating funding for lower priority programs. how will these changes to the e rate program build on funds provided through the connect america fund to ensure every child has the ability to access the internet for complete their homework either at school or at home? how is that going to lay out in reality? >> thank you senator for the question. literally we just closed the funding period and there is about $3.9 billion in requests that came in that we will be able to fund and the exciting thing about what's happened this funding year is that because of some of the good work that john

wilkins, our managing director, did here he was able to identify a couple of billion dollars inu usf funds that was literally just sitting there and without any impact on rate pairs to be able to reprioritize those so that they could deliver wi-fi to the desk of the student because it's one thing to connect the school, but getting it to the principal's office or the computer lab isn't enough anymore. it's got to be to the desk and we had always provided for that in the rules but there was never any money because it got sucked up by the first part category 1. now there is the ability to do that and as a result of that 20 million students are going to be connected at their desks that weren't before. and that's a significant thing. the other thing that's really important as well is that

connecting the school, the worst situation for high speed connectivity was in rural america. now, that's no great surprise, but there were unique challenges that exist in rural america that we addressed in the new rules so that we could close the rural fiber gap to get the connections to the schools so then it could go wi-fi to the desk and as i say, the first iteration under the new rules has just happened. >> i suspect something you will find bipartisan agreement about is the need to continue with investment for rural access. many don't think of delaware as a rural state but we have rural communities, and i hear regularly in sussex county in southern delaware, about their concerns about broadband access libraries, schools homes. in my former role as county executive i was responsible for a 911 call center and spent a lot of time on upgrading its

response and some of the transition from a predominantly landline world to a predominantly cell phone world, and i know that you've been working hard on some investments to try to strengthen it. commissioner pai, could you explain a little bit more about the recent fcc rules on the topic and any other 911 improvements you think are necessary and chairman wheeler the fcc budget if i remember correctly provides something like $850,000 for a do not call registry for public safety answering points. if you could explain what that will be used for i would appreciate a few minutes on 911 centers. >> thank you for the question. i think our responsibilities are rarely cast in as sharp relief as when we're talking about public safety. the fcc has taken a number of steps to improve functionality. we improved standards for location accuracy. the most fundamental aspect of a 911 call is for emergency response to be able to figure out where is the person in need and that was increasingly difficult in this world where

people are calling from cell phones and it was difficult to figure out a location. thanks in part po our bipartisan efforts on that issue i think we're moving forward with standards that hopefully will hasten the day when anyone calling from any kind of device will be able to be found very quickly. we're kicking off an initiative to study architecture of our public safety answering points nationwide. unlike a lot of countries we have over 6,000 of those piece apps right now sprinkled across the country, some big, some large. i have visited the new york city paste app. it is massive. rows and rows of dedicated professionals. i have visited some with just one or two people and they have to be there at all hours of the day. is there some way to rationalize that structure to make sure that we deliver public safety value while also being careful stewards of taxpayer funds? that's something the fcc is shepherding a conversation about. also the fcc isn't just issuing mandates from up high. we're also leading by example. and in this regard i want to

thank the chairman for our recent announcement that the fcc beginning on june 1st i think it is will now be allowing fcc employees in the headquarters here in washington, d.c., to themselves directly access 911 where previously they would have to dial an access code such as nine. you might think an access code isn't such a big deal but in the press of an emergency it's not one of the things people know about. they just know the number 911. i think we're going to be leading by examples so hopefully other federal agencies, other private sector entities will do the same. >> can i pile on and give credit where credit is due on that last item. that was entirely because commissioner pai brought this issue to us and championed this issue and he's also done an outstanding job working with hotels around the country to get them to voluntarily do the same thing. >> very grateful to the chairman for the kind words and in return if he decides to move the fcc to wichita, i will support him in that endeavor to save money.

>> we could only agree on a few things. >> i thought i'd push the envelope. >> wichita. wonderful. >> plains, trains, and automobiles go there senator. >> not cost-effective but wonderful. if you would to the do not call registry. >> i'm sorry yes. so we need to create -- piece apps get robo called. that's what the issue is okay? and it wastes the time of these people that commissioner pi wasai was talking about. we need to have a vegeregistry for that. congress said create this registry and it's a terrific idea, but we're asking you for the money to fund it. >> right. >> one last question if i might, mr. chairman. about positive train control. this is a complex and difficult public safety investment, improvement. could you just give us an update

on the progress to the deadline and what the fcc should be doing to expedite to it's possible to meet the deadline. >> thank you senator. there are two parts to positive train control. one is the spectrum and the other is the placement of the antennas that will control that spectrum. we have been opening up spectrum transferring -- let me see. for instance for commuter lines we recently eased their power restrictions so they can push out more power over the same spectrum means fewer pulls. for amtrak we have got knew spectrum in the northeast corridor now. and we did some spectrum license transfers last week. so that's kind of the spectrum side. then there is the process that is required for us to carry out under the environmental protection and historical protection act that we create a structure for native american

communities to be able to review the placement of the poles that hold the antennas. when i walked in there was a huge problem that it was not structured in a way that could handle the terrific input that was coming from the railroads. i'm happy to say that thanks to the cooperation and working hard with tribal leaders we now have in place a process that will handle 2800 requests every two weeks. and it is, frankly, a process that the railroads have not been able to fill. there were about 27% capacity right now. which is good news. i'd rather have excess capacity than struggling. and so i think we're making some real serious progress on ptc. >> okay. thank you, mr. chairman. >> senator moran? >> chairman, thank you very much. i want to thank the commission. i mentioned in a hearing the

last time we were together which i think was in the commerce committee on a case that was pending since 2011. within a week of that hearing, the case was settled and the kansas board of regents presents your attention. >> amazing how things happen. >> let me turn to a letter that i and 28 of my colleagues recently worked on including senator coons. there is significant public well-being at stake here along that border and it's -- the effort here is to implement a 2012 agreement that mexican government entered into. my question is does the budget reflect the necessary resources? do you have the necessary expertise to critical to get this issue resolved and to assist the mexican government in addressing this issue? >> thank you sir. i think the answer is yes. i think i got good news on that

for you. we're in on going negotiations with mexican government. and i believe that we are now to a point where we have reached a structure where there can be rolling approvals, if you will. so we bring forward and say here are a group of licenses we have to worry about. and they deal with those. and we can deal with them on that kind of a basis rather than just dropping a whole load of hypotheticals on the table and say deal with that. so our international dur owe is doing a great job on this. and i think that we have crested the hill, sir. >> so the new standard is that if i raise a topic it's resolved within a week? >> well sir -- >> let me turn to the diversion of money. i think commissioner pie mentioned this in your testimony. the bunt request a diversion of $25 million from universal service fund for the purpose of

identifying improper payments waste, fraud and abuse. i consider those dollars within the universal service fund pretty scarce. and important. based upon what i know about the inspector general's report and 2008 this is just an example, the ig projected to congress that you would find -- they would find $608 million in potential improper payments. as i understand it the number after this onerous audit was a mere $79,000. my question is what evidence does the -- >> what my questions are, what does the fcc have to indicate that there was $29 million of waste, fraud and abuse. one would think you would get greater return from the money spent from the fund and secondly, wouldn't it be better to take the dollars from the general operation budget than to take them out of the universal service fund? >> thank you, sir. you just gave me an idea.

i didn't think about comparing ins and outs. i know within the last six weeks we find at&t over $10 million on a life line. the point i was trying to make earlier, senator, is that we have 155 people who are working on universal service. it's about 10% of our employees. and we're in situations where we're cutting employees. how do we hold universal service management enforcement and appeals harmless from budget cuts? i think the model was established when you said us to the point just made about inspector general. we want inspector general's

activities and waste, fraud and abuse to be paid for not about it fcc but by the universal service fund. the data base that we had to build to go after that waste fraud and abuse was paid for out of the universal service fund, as it should be. it's the same kind of concept where the cost of managing the option is paid for out of the auction proceeds. and i think it's good business to associate expense with revenue. i also think it is good equity for the rate -- you were talking previously about how we were setting the rates. we ought to establish that there is -- this is the benefits that you get and this is what you pay. but not load in the costs for somebody else into what a broadcaster has to pay, for

instance. and so what's really important, i think, to mention here is that those 1 a5 people that $25 million, we got to pay that one way or another. okay? it's not going to go away. and so what i'm suggesting is that there should be a dollar for dollar reduction in the general fees charged by the agency. so that we can assure that universal service is protected from any fte reductions or any of the other things and is paid for out of the funds generated by it and, yes, sir i can virtually guarantee that i'm brings you years of history that it's always been paid for by enforcement. >> let me make one final point. i have asked you in a -- i think

i submitted in writing itt infrastructure questions that we talked about in march. i'll resubmit those today and look forward to them. >> great sir. >> commissioner pie? >> anything in particular that you -- in particular about my question about the $25 million? >> thanks for the question. i think my concern is twofold. first, every dollar -- we should think what the universal service fund is. this is a tax on consumers. anyone with a phone bill pays into it f you extract $25 million from that fund, the consumer is going to have to make up that gap eventually. so to accommodate this $25 million transfer or any further transfers in the future years if this one were to be approved the tax on consumers has to go up to cover that gap. secondly in, terms of how the money is going to be spent, i gr he that enforcement of the rules regarding the universal service fund are absolutely essential. i've been -- since i started at

the fcc, i've been talking about the need of more effective reinforce reinforcement. but we need to reprioritizeyizereprioritize, in my view to streamline the operations and free up funds to go after that kind of enforcement rather than divert diverting it. my concern is this is essentially the camel's nose under the tent and i would prefer we keep the two activities separate for the sake of the consumers. >> commissioner thank you very much. mr. chairman, thank you for the opportunity to have a conversation. >> thanks. >> senator kinds? >> i simply want to thank our witnesses for your service and for your testimony today. and for the very businesslike way that you approach both the solutions to the challenges in front of you and to working together. thank you. >> thank you, sir. >> thank you, senator kinds. and thank you all for being here. we had a good hearing. and i think we really do have -- we've got some profound disagreements and yet we really do have some areas that we all

agree on. one thing as i go out and about throughout the state and i know it's true of my colleagues in the old days when you talked about infrastructure you talked about roads and bridges and water. now, electricity, now infra infrastructure, what you're doing is w. broadband connectivity is so important. this needs to get done. and certainly we're looking for ways to help you get it done. so, again, that's so important. not only for rural america which we're concerned about but also we're also very, very concerned about urban america, the whole thing. so we appreciate you being here. if there are no further questions -- the other thing bring go on is i want to thank you but i also want to thank your staffs. i know you worked really hard in getting you all prepared as have our staffs. >> we want to thank your staffs. >> as our staffs have also. and we do appreciate them f there are no further questions,

the hearing record will remain open until next tuesday may 19 nl at noon for subcommittee members to submit any statements or questions to the witnesses for the record. the subcommittee hearing is herebyadjourned. is hereby adjourned.