program started. we are still working our way through that in a sense that they will return again and again until they meet our standards and can be approved. this year alone, as you see in the slides i left at your places, we have approved 1700 applications. or this year, we approved 700. in the program, we have approved 700 -- we have approved 2,207 approvals and tentative approvals since the gadufa program started. that's the number. so, i -- we also prioritize generic applications that may have public health implications. sometimes we have those that are first generics that are sole source. in other words there might be one product out there and it's a generic. we still prioritize the second

one. of course, shortage drugs, if there's a shortage, we prioritize generic applications. we move them to the front of the line, like the express line to try to get them through. i would like to say, i'm really proud of the work our staff has done in setting up the new generic program in the biosimilar programs. they were very tough. they require multiple changes, very heavy lift and i think we are showing that we are getting that work done. it's really been an enormous amount of effort that many people's part in that continues. i'm confident we'll continue to improve these programs and they will provide a pathway for competition in the market that will be very robust. i look forward to your questions. >> doctor, thank you very much. let me turn to the ranking member, senator merkley for any opening statement you would like to make. >> thank you very much,

chairman. i think there's a lot of interest in this hearing and the role of generic drugs and the role they can play in diminishing drug prices in america, which are a significant factor. the overall cost of our health care system and certainly a significant factor for families that have deductibles as so many working families do have. we have had a series of cases where a drug company controls a single product in a particular segment of the medical market. a single drug or a large share of the market putting them up for sale at vastly increased prices, very sudden, dramatic price increases. seems like every month there's a prominent story that catches the attention of america. the most recent of those is the e epipen and the milan company. the dramatic increase from

roughly $100 to $600 for a pack of two, despite the fact that the drug within them, i understand, caused very little in terms of what is inside those injectors. so, as we ponder all of these cases, we are very interested in the approval process. there are other dimensions of this as well, such as a challenge when companies buy up generics in order to keep them off the market or use a patent change to try to keep them off the market or pay generic companies to keep them off the market. market manipulations of this kind. they may not be things you are able to be part of in your role of looking at the effectiveness and reliability of drugs, but they are part of the broader picture that is of great concern to americans.

so, look forward to hearing my colleagues and hearing from you and exploring this because we have a -- there's a lot of room for improvement. thank you. >> senator merkley, thank you very much. i yield my time to the senator from -- >> you are kind. i hear from not only patients, friends, families, but i hear from doctors over what's going on with pharmaceuticals. my questions do ultimately end up applying to money, it deals really with your job. that is, in the ranking member talked about this briefly. can you tell me how a company can take a generic and change it to what doctors says very, very slightly and end up to be able to put it back on the market and jack the price up when it's

basically the same generic it was before they modified it? very, very modestly, if, you know -- talk to me about how that process works. >> certainly. the generics have to be copies of a reference listed drug, in other words, a brand drug originally. >> yes. >> they have to stay being copy. they can't modify the generic. they may make it look different or something like that, but in our experience, the price rises for generics or innovative products as you were referring to, have to do with where there's no competition in the market, where they may be the only game in town. overall, generic drug prices are going down, have been going down, but in these cases that you are referring to, where for some reason there's no competition, there may be other

approved generics, but senator merkley said, their market share may be so small or for other reasons they aren't effective competition. >> i will tell you, i appreciate that. i don't have a problem with the pharmaceutical company getting their research and development money back. i also think if we are funding part of that rnd, we ought to get a break on that money. that aside, i think it's important they are able to do their research. i have heard from many docs, not just one or two, many docs saying a patient is using a generic, the company pulls that back, somebody pulls it back, changes it not significantly at all and puts it back on the market for five or ten times the money or more. >> what you may be referring to is what they change is the ownership changes. so, one generic company may own a product, it's then sold, so it looks different, it has a

different manufacturer -- >> but it's the same stuff. >> it has to be under the generic laws. >> is there anything we can do about that? or is that the way it is? >> fda, as i said earlier doesn't regulate the prices. we have nothing to do about that. what our actions do is we try to, if there's a sole source, we try to get more copies into the market. >> i have a friend who got child diabetes at the age of 13. he's the same age i am. this is 1970 when he became a diabetic. it's been over a month ago, my memory doesn't last that long. he said insulin in 1970 was less than $10. now it's significantly much, much higher than that. has insulin changed over the last 40 years or is insulin insulin? >> there are many new forms of insulin that have been

introduced. modern diabetic care usually includes a long acting insulin and short acting insulins. there are insulin pens for people to autoinject so it's less painful. there have been different changes in technology. the basic insulins have not changed. >> so, why -- why, i mean, is it just pure greed they would increase the prices like that? >> well, i can't comment on the motives, but i can say that congress passed a number of years ago, legislation for biosimilars. insulin right now is regulated as a drug. this is complicated, but it will be regulated as a biologic under the biosimilars act and transfer over. they will be the biosimilars copy. >> i appreciate your testimony

today. i have to get the companies and visit with them to find out what's going on. i get it, you have to recoop your cost of research and development, but i'm hearing so many stories on the street where there's minor modifications or a drug that's been around 45 or 50 years and getting priced out of the marketplace and we are driving people into poverty in the process. that concerns me. thank you very much. thank you for your courtesy, mr. chairman. >> thank you senator tester. there is no doubt the price of the cost of drugs is an important policy issue. significant consequences to kansas families and taxpayers as we look at medicare costs. i think our focus, i hope our focus on this hearing will continue to be how do we make sure fda is doing its job well to create competition and opportunities for families to make other choices and to hold down the cost of those prices of

those drugs as a result. let me ask a couple questions. first of all, epipen, in particular is a combo. it's a combination between a device and a drug. are there unique circumstances that make the generic to be more difficult in that circumstance because of the combination? >> yes. the firm that markets epipen has patents on the device component that go through 2025. so, any firm wishing to make a generic would have to get around those patents somehow and not infringe on the patents or challenge them, successfully to market a copy. >> i think your column that you have written, i have read, it talks about generics for the drug. but they are not widely used? >> okay. this is confusing, too.

all right? there is another brand of epinephrine autoinjector that fda approved. we have approved a number of them. they are in the first category i talked about. they are stand alone drug applications. all right? they aren't generic copies, they are each one separate. each does the same thing, treats. one of those, there's something that people call an authorized generic. it's very confusing. it is not generic, all right. it is when a brand name company decides to market their product, usually along with marketing their brand product, they take the brand name off and look like a generic and market that, usually at a lower price. some people have the brand loyalty who stay with the brand, but they can compete in the generic market with this version. it's the same product. they make it in the same plant

usually and everything, just has a different label on it. okay? so, the other manufacturer of the current epipen, current epinephrine auto injector, it's not epipen, that one has an authorized generic and that's what's currently being marketed. >> thank you, i think, for that clarification. >> sorry. >> you indicated that -- first of all, let me ask this question. i indicated in my opening statement about backlog. you did a persuasive set of statements that indicate that there really isn't a backlog. so, if we were asking you what are you going to do to solve the backlog problem, you say the fda is on path the way it should be. is that fair? >> at the very back of the slide, the papers i passed out, there's this chart.

what it shows is right now there's 2300 andas, the generic drug applications in the process of fda reviewing them. the pregadufa ones are here at the top. they were the backlog. they have come back in. we are reviewing them again, not all of them. then each year, the goals become shorter for us to do the first review. as i said, next year, 2017 is going to be ten months. so, to be honest, and completely straight forward about this, these are more applications than we would like to have in process. it would be better if we had fewer applications in process. i have given authorization to our manufacturing reviewers to hire 50 more people, temporary people who are going to work on trying to get this down.

but, mainly, this is going to be up to the manufacturers to submit to us approvable applications and then we will be able, in a cycle, to approve them. if they still have deficiencied, they have to go back and it takes longer. >> the way, doctor, that i understand your testimony is what i described as a backlog really is application that is are pending that have been reviewed to some extent, but not approved, sent back to the drug manufacturer for further actions on their part. >> that's correct. there's about 1700 with the manufacturers. >> are those problems with the application, are they processed in the proverbial sense they didn't cross the "t" and dot the "i"? >> we have tried to make these all substantive. part of the changes we made for gadufa was that we are calling

the people all the time while reviewing their application. we call that information request so these minor issues do not delay a decision on application. so, we are back and forth. we send out thousands of these information requests and try to get the application fixed up as much as possible. but then when we send it out as a complete response, then the manufacturer has substantive work to do. >> i have a series of other questions. let me turn now to senator merkley. >> thank you very much mr. chair. you mentioned, dr. woodcock, there is a competitor, i believe the name is adrenal click. >> yes. >> that competitor also have an injectable device. >> yes. >> you also mention eed anyone o

wishes to compete has to get around the epipen or mylan has? does adrenal click have their own patent so it is now wrapped up by the two companies? >> we actually have approved over the years five different epinephrine auto injectors. three are not on the market right now. i don't know what adrenal click's patents might look like. we can get back to you on that. we don't know. but, that doesn't mean copies can't be made. it simply means because of the intellectual property rights they would have to be challenged or an auto injector has to be made that performs similarly and did not use the technology. >> sounds like there have been five approaches that have been approved in different points and times. >> none of them generic,

correct. >> adrenal click has an authorized generic you referred to, a version of itself, i gather and epipen is planning to do so. what is the cost of the epinephrine in one of the pens? >> it's probably insignificant. there is a cost, obviously, it's a chemical, but it's been around for 100 years. >> i have been told it's probably about $1. does that sound feasible? >> that would be probably a generous estimate. >> if i'm somebody at risk for this challenge of my throat closing down and i'm unable to breathe and i would suffocate, can i legally acquire an amount of the drug and put it into a seringe and inject myself? >> yes, a doctor can write a prescription to have that available for you.

i, myself, treated patients because i ran an allergy clinic for a while. i didn't have an autoinjector. if you are suffering an acute reaction and you are sick -- >> you have to move fast. >> tough move fast. if you don't do it all the time, it's not tutive. it's not as good as using an autoinjector. >> i'm challenged to understand why competition doesn't kick in more quickly. if someone in the audience said there are three companies with approved autoinjectors, i'll go to one, rent the technology, get a pen on the market that will cost instead of $600 for two pens, i'll sell it for $200. i'll make a ton of money. why doesn't that happen? is your agency so difficult to deal with that it's just a huge inhibiting factor to people who ordinarily see an opportunity? >> well, according to my staff

here, we have approved four autoinjectors, so we can't be too difficult. not five, but four. we can't be too difficult to deal with. it's harder to get a generic one approved because of the patents that have to be -- >> but you said the others are no longer on the market so somebody could conceivably make a purchase, license, rent the patent, payment for the patent. it's not happening. yet this vast amount of money being made. what is the barrier for entrepreneurs stepping into this? it seems like it's a dysfunctional market. let's say someone here wanted to do this. they have to go through an approval process for you from scratch even though the pen has been approve snd. >> no, companies frequently, as we were discussing earlier, sell their rights to something to someone else including the new

drug application can be sold and then picked up by someone else and reintroduce the product. they have to show us they are manufacturing and so forth. they don't have to go through showing safety and effectiveness. >> when you ask yourself the question, why hasn't somebody jump sbood this, is it because in getting their manufacturing approved that is so difficult? there are billions of dollars to be made they think it's unworkable? what is the huge barrier to market entry when available patents aren't being utilized? >> i do not know. we have approved 2,207 approvals or tentative approvals for generics. clearly, the barrier isn't unsuperable for many companies to get generics on the market. >> i hope somebody with an

entrepreneurial spirit will jump in tomorrow and create competition here. we would like to see a generic, certainly. as you pointed out, other autoinjectors have been approved. my time is up. i'm going to defer to my colleagues but there's something -- something is fundamentally difficult that is preventing ordinary investments and market entry from occurring. i think we have to understand that better. >> the senator from maine, senator collins. >> thank you, mr. chairman. good to see you, dr. woodcock. i know you are very familiar with the investigation that the aging committee under my leadership and senator mccaskill's leadership has conducted into the pricing of certain prescription drugs. i want to follow up on your comments about mylan's decision

to introduce what's called an authorized generic of the epipen. i have to say that that strikes me as gaming the system. essentially, what mylan is doing, as you confirmed is just changing the label on its product and then selling it for a lower price. but, doesn't that have the effect of reducing the incentive for a true first generic to come on to the market? i know that you have approved others and that some have been recalled due to problems, but in general, the idea of a brand name company simply swapping the label on its product and then issuing it as a generic strikes me as greatly reducing the

incentive for a true first generic to come on the market. could you comment? >> i'm no economist, but i would say that would depend on how much money a generic company felt they could make in the market based on what they could price their generic at. congress asked us to require companies to tell us if they are making authorized generic in their annual report and us to post that information. so far, we have noted 980 authorized generics we have been notified about of different drugs. it appears to be relatively calm practice in the industry. >> i think it's one, personally, that does need more examination as far as its impact on discouraging a true first generic or second generic to

come on to the market. let me switch to a different issue that came up in the course of our investigation. that is, we found that certain drug companies were putting their drugs, their brand name drugs into restricted distribution systems. that made it difficult according to our investigation for a generic company to get a sufficient amount of the drug in order to conduct the bioequivalent studies that fda requires. what can be done about that? >> we agree, we have received over 100 inquiries from generic companies of problems they have been having and getting enough of the reference listed drug. in some case,s it's a restricted program for safety.

however, we have tried to remedy that writing a letter to the reference company saying use of the product for this purpose is acceptable and doesn't violate the rems. nevertheless the companies have their own restricted distribution outside rems and this is impeding the ability to obtain enough drug to compare. with respect to what could be done about it by congress, we are -- we remain concerned that there's so much -- many of these drugs are so valuable that companies would do a great deal to delay generic competition. it's worthwhile. any type of legislation that would have a lot of extra steps. so, for each one of those would be an opportunity to sue us or send us a citizen petition or say we didn't do the process right or whatever and get into court and delay introduction of

the generic or delay availability of that product. i think in considering what you might do about this, consider there's a very -- it might be the cost of doing business because there's so much at stake in delaying generic competition. >> i think this is another real problem because the systems not supposed to work that way. the rem system is, as you said, safety oriented. it isn't intended to restrict distribution in a way that prevents the generic company from gaining access to a sufficient quantity of the drug so that they can do the bi bioequivalence study. i hope you work with us to come up with something that doesn't have the kind of unintended consequences that you said and

yet prevent companies we found all sorts of examples of this and other means that companies were using to try to block or delay the introduction of generics. thank you. >> senator collins, thank you very much. know that your committee with your leadership has significant interest in this topic. appreciate your appearance. senator udall? >> thank you, senator moran and merkley. dr. woodcock, it seems like every few months we hear about another pharmaceutical company raising the cost of a drug or device to a new ast nom cal price. the epipen is the most recent to draw attention. the epipen is so expensive families in my home state of new

mexico are struggling to afford it. their doctors say they must carry it in the event of an allergic reaction. mylan, the manufacture increased the price by over 480% since 2009. i have received messages from my constituents in new mexico who are directly impacted. i have heard from worried parents across the state. one of them, like a woman named paige from truth or consequences, new mexico, her daughter has a severe peanut and nut allergy. paige wrote to me about her families struggles to pay for the medication. she had to change jobs to get insurance that would help cover the cost. change jobs in order to get the medication for her child. i'm also worried about the impact the price increases will have on families who can no

longer afford the epipen. linda thompson from new mexico wrote to me because of rising costs in recent years, she is stopped buying and carrying an epipen. she's forced to go against the advice of her doctor who prescribed the epipen after a severe reaction to a bee sting. no one should have to go without a necessary product because of how much it costs. that's why i wrote to commissioner calif last week request thag the fda utilize all available resources to build a robust pipeline of epipen alternatives. you know, listening to those constituents, i would like you to answer for them because i think the real question they have of you and the fda is how did we get to this point? you know, what happened to create this situation?

how we got into a monopoly situation that we are talking about. and can you just describe that as simply as possible, how you think we got here? isn't it terribly troubling that this company now is further trying to encroach into the market because they are apparently going to put out a generic and so they are trying to keep the market to themselves. they have their own epipen that's brand name, then they are going to put a generic out on the market. could you try to answer that as simply as possible? how did we get here? >> well, for most drugs, once they lose their patent protection and so they can have generics, most drugs do get generics. some drugs don't. either they have large market, they have patents that say in this one the epipen has patents

that go through 2025. so, it's not easy to make a generic that doesn't infringe upon those patents and still works. all right? in other cases, it might be a small market. talking about for other patients in new mexico seen price rises or a single source drug owning one company, sells it. so, in all these cases, they don't have competition. in the united states, that's what keeps prices down, competition. for many of these situations, when we have looked, there's some reason competitors have not effectively entered the market and brought the prices down. >> what is causing that? you said you have approved four of these and yet as senator merkley asked, why isn't somebody stepping up and saying, you know, there's a lot of money to be made here.

who do you point to to say what's caused this monopoly situation that has these ast astronomical prices. >> there is one other on the market. >> the adrenal click. >> others were pulls off for performance problems. one thing for a drug like this, in a situation like this, you want it to work. so, you don't want to say, fda should rush something through even though it might not work all the time. if that were your life at stake, you would want it to work every time. so, we have to make sure that if there's competition here, it still works as an epinephrine autoinjector and deliver the life-saving medication when we have a life threatening event happening. >> mr. chairman, just to wrap up, you mentioned a patent over

and over again that seem to be part of this. i think, i know it's not in the jurisdiction of this committee, i think it's something we should be looking at, what the patents are doing to create monopoly situations. we appreciate your service. thank you very much for being here with us today. >> senator from new mexico, thank you. i recognize the senator from montana. >> thank you, mr. chairman. dr. woodcock thank you for being here. we are here because of huge spikes in prescription medications. i share senator udall's concerns what he's seeing in new mexico, we have seen a 400% increase of the epipen. it's the poster child of late here. it's a life-saving drug, a delivery system that people in mexico rely on, people in montana and across the nation. without the competition, of course, and the market, the spikes will go unchecked. i'm concerned about the impact

on montana and some have to choose between buying prescription drugs and buying food. we need to increase competition as you mentioned, creating market checks on the price of drugs and decreasing costs for those who need them. in your testimony, you highlight the savings generic drugs afford saving $1.68 trillion over the past ten years. in montana, that translated to $682 million saved in 2014. for example, according to the generic pharmaceutical, lipitor, a common cholesterol drug was $3 a pill in 2011. that now sells for 14 cents a pill and 96% savings. my question is, what are the fda and the office of generic drugs doing to incentivize the production of generics when

there's little or no competition maintaining drug quality and drug safety? >> well, what we do is, number one, we expedite applications where there's no competition. so, if it's a first generic, if there's just a brand, we expedite that competition. as i said, often, nowadays with the modern program we have, we approve multiple copies at once. that often would drive the price down more than a single copy. if there's just one generic and the reference drug has been withdrawn, we have a sole source situation, then we will expedite that as well, that application. or multiple applications because we don't know which one is actually going to get approved. >> so, kind of going along that line of thinking, reducing the generics entering the markets would create other examples like lipitor by reducing the tush

lance we see in the market. the fda has a law for labeling. there are significant concerns this would prevent some generics getting to the market. since you delayed a final rule until next year, what revisions are you considering to bring generics to the market? >> well, this rule isn't about helping bring generics to the market. we had a lot of comments. we had a public meeting after the proposed rule was published and received a large number of comments from the stake holders and we are evaluating the comments. >> looking at the turbulence in the concrete example, there are certain applications assigned target goal dates instead of target action dates. as you know, a goal date is not binding, giving little clarity to the applicant.

what are you doing to address those concerns? >> under the agreement we made under the generic drug user fee act, okay? we agreed to have goals for 2 4 2014, '15 and '16. there will be a goal of ten months. if someone sends in october 1 of this year, if they send in a approvable application, it can be reviewed and responded to and on the market in ten months. >> a goal date is not binding. >> well, sometimes there are other factors that come in. we have goals. our goal is we would do 90% of them within the ten months. that's how the program works, too. prescription drug user -- >> you would think it would

speed up the process and create more certainty. >> the earlier dates that target action dates were for the backlog that didn't have any goals associated with it. our agreement under that is we take an action on 90% of those by the end of the five years and we already did that. we exceeded that by 15 months. we have acted on almost all of those. so -- >> my time is up, doctor. i'm sorry. just to conclude, i understand there's more than 14,000 approved generics. i believe incentivizing new, safe, e vektive generics and promoting competition is important. thank you for your thoughtful comments. i encourage you to facilitate by providing stability for manufacturers to plan effectively and continue to bring safe and quality generic drugs to market.

we have seen a lot of great successes here. thanks dr. woodcock. >> thank you, senator. you indicated you have the ability to prioritize within the backlog and you listed a few criteria you might prioritize. i'm interested in knowing, you also indicated in your comments to my colleague from, the ranking member, you used the word only game in town. what you mean is little or no competition. >> mm-hmm. >> is that a criteria you can prioritize from the backlog? >> yes. >> and you do that? >> yes. it's not just the backlog. there really aren't so many in there. even an application today or tomorrow or october 1, we try to prioritize that if it were a single source, like one drug on the market. >> okay. and you indicated that in your

testimony and part response to my questions that often substance within the application process, substance within that application is insufficient for an approval, therefore that application is still pending and would be considered, in my words, part of the backlog. it's really waiting on, then, the applicant to do something more to make that application more viable and approvablpprova summery of what we are talking about? >> yes. >> you indicated to me, which i was pleased to hear, this is not about crossing the t's and dotting the i's, whether the drug application should be approved. does the -- then again, you indicated you let the drug companies know throughout the process where there might be problems. they have the opportunity then to correct those issues as the process is going -- as the

application is going through the process. is that true? >> that's correct. >> so, it's not like starting over at the end. you don't deny an application and say to the drug company, i'm sorry, you don't qualify, you don't get our approval, go fix something and come back and apply again? >> no. what we do is send a complete response. we don't send out denials. we send out a complete response. these are the things you must do before your application can be, you know, considered approvable. that has to include the facilities. often, an application may have 14 facilities around the world that they are relying upon for testing. this part of the manufacturing, this part of the packaging. we have to make sure all those facilities are in good standing. and so, perhaps they may have to work on improving a facility.

it might be in another country or switching to a different facility. these are the kind of problems they face, sometimes. >> does that approval process involve inspection of a facility or a paper process? >> there are a large number of facilities around the world that make drugs, generic drugs for the united states or test the drugs or do the testing. we try to have a schedule for inspecting those and inspecting them every several years on a regular basis. sometimes they will be new inspecti inspection, new facilities that come in with the application or doing something they never did before like making a sterile product which is different than a tablet. we inspect them as well. sometimes their inspections, if they have had a recent inspection or good standing, we won't inspect them again. >> is there a common denominator for drug companies who are

required to submit additional information during the approval process in a backlog, is that a smaller company as compared to a larger company? someone who is new to the market? a new entrant to the drug pharmaceutical business? >> we wish. i mean we have tried to discern this and what is causing the problem. before the generic drug user fee program, almost no generic drugs were approved on the first cycle. they were all defish enlt. often, they went through four cycles, i think that was the median. there was a tremendous amount of work and repicking it up and looking. it was a long period of time. of course, many of them could submit before the patents expired. they had time to work on their application. so, we are trying to do a lot of analysis to answer your question. we want to know that, too. how can we remedy this situation?

in padufa, the new drug side, we are way up in the 85-90% first cycle approvals. over the 20 years of that program, we have taught the industry what they need to do to send in an approvable application. we meet with them before and so forth so that we can get through the application efficiently. >> i'll follow up on that as soon as i turn to senator merkley and he is concluded his questioning. >> so, the -- the competitor that was taken off the market of ovicue came off their own decision. they weren't forced off, roughly a year ago. do we know if mylan is paying them to keep that product off the market? >> i don't know anything about those business arrangements.

>> would that be legally allowed under the law? >> what we do is refer these type of things to the federal trade commission. you know, we get different inquiries. >> i know you are not a decider, but i'm sure you are familiar with the general law. is that allowed to pay a company to keep it off -- >> i don't know, actually. i'm not a lawyer, i'm a doctor. >> it's an issue that's been widely discussed in the public sector. paying to keep products off the market. >> okay. >> also buying up other companies to keep their products off the market. in your interest in seeing, you mentioned, i don't want to put words in your mouth, essentially, you referred to generics having a positive effect on lowering the cost of drugs. so, in the interest, should congress be looking at making

sure that there are not strategies in which name brand drug companies keep generics off the market? >> yes. we believe that. we are subject to some of these as they were talking with the problems getting the reference listed drug, the brand drug to do bioequivalent studies. the safety as a reason not to give the product out. >> i was appalled to hear that somehow a name brand company can present their competitor from getting enough of the drug to do the very studies that you are requiring and shouldn't that be grounds for them being penalized in some way for essentially -- it's another strategy to prevent a competitor legally entering the marketplace. >> yes.

we have certainly been talking to members about these problems and along, we have a long history of citizen petitions which congress had taken actions on before. filing of citizen petitions to prevent the availability of generics based on various scientific issue that is are raised. >> is ovicue trying to get approval to address the dosing issues it hads? >> i'm not allowed to discuss anything like that. >> if they were attempting to do so, would you be prioritizing their application? >> if we were doing that, if another nda came in, new drug application came in, that's under a new -- it's not a generic, right? those have a very rapid time frame already for review and approval. >> we are talking about a combination product. the drug is already approved.

it's just the device. you are saying it would be fast tracked if they were to reapply with a modified device to address the dosage issue they had previously? >> i'm saying it would be under the new drug app time lines which is very speedy. >> you have authority in cases where there is market dysfunction to prioritize applications, is that correct? >> well, we have -- market dysfunction i don't think enters into our statutory language. what we have done under our procedures for generics the prioritize -- >> let me put it differently. when there is a single product in a marketplace and the costs are so high people can't afford it, do you have the ability to

address that prioritizing an application whether it is a competitor. put it at the top of the list if it is a big problem when lives are at risk? do you have the ability to prioritize that? >> we do prioritize that for generics whether it's a single source. >> how about for a competitor? >> we do not have a procedure to do that. >> we have heard horror stories about devices getting approved. if a company comes back and says, hey, we had a slight manufacturing defect that caused us to have a dosage problem, we fixed it, here is our new version, are you going to send them out for clinical trials that cost $10 billion, i'm exaggerating, in ten years or are they going to be able to get that modification approved and back on the market? >> they should, if you are talking epinephrine autoinjector, they really don't need clinical trials.

this is not -- you need to show that you are injecting the epinephrine where it's supposed to go. and that you can do that reliably every time under emergency time under emergency circumstances. >> i'm just trying to get some sense how much money, how much time for a slight modification of an injector because their injector had a problem. is that a big obstacle for them re-entering the market? >> i don't know about big obstacle. they may have to -- >> how much time? how much money, in general terms? the public would like to understand how big the obstacle is posed by the fda to enable the market function. i understand it's very important things work. it's also very important that there be a functioning system to allow products to get back on the market. how much time? how much money would it take? >> i would say the time might take them if they were able to solve this theoretical company, a manufacturing problem, it

might take them -- and they had to change things, then they might have to, depending on how they change their auto injector, right, they might have to do human factor study again to make sure that people could use it properly. or they might not depending if the change was just inside, they might not have to do that. but if a change was how you went about injecting yourself, they might have to test that again on people to make sure that it would work for them. >> i'm just hoping there's some common sense. we're talking essentially about a preloaded syringe that costs $600. and people can't afford it. this shouldn't be impossible to enter the market. i encourage you. i'm just wrapping up. i'll turn this back to you. i encourage you to ponder from that direction of whether there are unreasonably difficult, expensive procedures that make it very hard for competitors to enter the market. because, clearly, if it was easier there would be people

entering the market and we wouldn't have this problem. then we have all these tricks of the system in which the name brand is seeking to prevent those competitors. if you have procedures complicit in that, that's a problem, and we really need to examine that very, very carefully because it's not this one drug. this is a whole systemic problem in our drug approval process. and the price of drugs are making health care the most expensive in the world here in the united states, out of reach to millions of americans. they pips their drugs because they can't afford to buy them under their deductible. it's a very big deal. thank you. >> doctor, i think we're about to wrap up our hearing. assuming i don't talk so long that other members and other senators arrive. just a couple of follow-ups. i indicated in my opening statement that at least the understanding is the fda is close to to finalizing goerke i

negotiations on new round of fees and regulatory requirements. you indicated in your response to my question that, again, it goes back to the definition of a backlog. this is a process by which it takes a number of steps. are you able to tell me is that part of the negotiations with the industry, from their perspective? i don't know whether they'd say the same thing that you indicated. were there issues that could be negotiated with the companies in this process that reduce the number of times it's necessary to have the application reconsidered? >> well, i think that's definitely on their mind and on our minds, too, mr. merkley's questions. senator merkley's questions. you know, one of the things that we need to do is get a process for generics where we give advice to complicated generics

before they come in and send in an application. that's what we negotiate under the prescription drug user fee act for the new drugs. and that's something that there's great interest in. and having a program so that for these complicated things, it isn't just a pill, we can interact with companies and give them advice and tell them what to do. so both this workload -- let's not call it a backload, but our large workload we have now, part of which is inherited from the things that are cycling multiple times, is on everyone's mind. and it's definitely part of our discussions is how to deal with that. >> can you report anything about the status of those negotiations, or is that beyond your -- >> i can say, with the industry, they've concluded, and, obviously, there are many other steps. we'd have to have a public meeting as described in a statute and, of course, we'll hope to provide the consequences to congress.

>> is there a time frame in which you'd expect that consequences to congress to occur? >> i think that was written in the statute. if you excuse me, i'll ask my colleague here. thank you. sorry for the -- i wanted to give you accurate information. we hope to post those notices soon and then transmit to congress by january. >> and that's your expectation? >> i would certainly hope so, yes. >> i also mentioned that you were able -- i know this is not a generic drug, but we were talking about duchesne and the muscular dystrophy drug. it's not a generic, but at least the reports are that you found a way to accelerate the process? is that an accurate analysis or statement of description of what occurred? >> the description of what occurred is that the product was approved under something called

accelerated approval. that may be a little bit of a misnomer. but that's what it's called. what it means is you don't have clinical trials. it showed the product gave benefit to patients. you approve on a surrogate end point that is -- we feel is reasonably likely to predict clinical benefit. that's how we approve a lot of hiv drugs over the years and cancer drugs and many other drugs have been approved under accelerated approval. then the company has to prove with later studies that the product really does have the predicted benefit. >> is there anything to learn from that process that would apply to generics? >> i don't think so because that has to do with showing effectiveness, and generics get their effectiveness by showing they are the same as the reference drug. >> but different standard? >> yes. >> and the generic ought to be more easily met?

>> yes. the generic doesn't have to do clinical studies. in fact, they're not allowed to do clinical studies of efficacy or else they can't be a generic. >> doctor, do you have anything you'd like to tell us that we've not gotten from you from our questioning? >> well, i do think that we are very focused on making sure that any drugs that can be approved and are safe and effective can get on the market. that the pathways are clear that there aren't unnecessary barriers to getting on the market. however, i would say that our standards have to do with making sure those drugs work for patients and that they are reasonably safe, and that they are adequate quality so that the drug supply in the united states is a very reliable, high quality drug supply. and we do try to expedite where

we can to improve availability. we're sensitive to that. >> dr. woodcock, thank you very much for your testimony today. in my view, this hearing was what a congressional hearing, in most instances, should be. an opportunity to be educated and to learn. and you have certainly helped me in that process. for members of the subcommittee, any questions that you would like to submit for the hearing record should be turned in to the subcommittee staff within one week, which is wednesday, september the 28th, and we would appreciate it, doctor, if fda could respond within four weeks thereafter. and again, i thank everyone for their attendance today, and i will conclude this hearing. the meeting is adjourned.

president barack obama will be among the world leaders who will speak at the funeral for former israeli president shimon peres. president obama left this afternoon on air force one. the u.s. delegation traveling to israel includes members of congress, the u.s. national security officials and former president bill clinton. the funeral is friday morning in jerusalem.

the f dcc pushed back a meeting on set-top boxes. that meeting is next. then an update on north korea's nuclear program. later, remarks from house homeland security chair michael mccaul and we'll hear from cia director john brennan. c-span's "washington journal," live every day with news and policy issues that impact you. coming up friday morning, committee for responsible federal budget president maya

mcginnis on her group's efforts to educate lawmakers and voters on the fiscal impact of the growing debt. and an author talks bhs latest book "supremely partisan" which argues the supreme court is becoming increasingly partisan and politicized cases threaten to undermine confidence in the court. c-span's "washington journal" beginning live at 7:00 a.m. eastern on friday. join the discussion. next, today's federal communications commission meeting. topics include wireless emergency alerts, foreign ownership rules for mass media outlets and video content distribution. after the meet, fcc chair wheeler spoke to reporters about tv set-top box devices. >> good morning, and welcome to the september meeting of the

federal communications commission. madam secretary, please walk us through what to expect today. >> thank you, mr. chairman. good morning to you, and good morning commissioners. >> good morning. >> first, you will consider a report and order and further notice of proposed rule making that would leverage advancements in technology to improve wireless emergency alert content, delivery and testing while seeking comment on further measures to ensure effective alerts. second, you will consider a report order that extends to broadcast licensees the same streamline rules and procedures that common carrier wire licensees use to seek approval for foreign ownership with appropriate broadcast specific modifications. the item also establishes a framework for publicly traded common carrier or broadcast licensee or controlling u.s.

parent to ascertain its foreign ownership levels. third, you will consider a notice of proposed rule making that proposes steps that the commission can take to promote the distribution of independent and diverse programming to consumers. please note item four has been deleted from today's agenda. regarding the items listed under consent agenda in the commission's september 2016 sunshine notice, items one through four have been removed from the consent agenda and remain under consideration by the commission. item six and seven have been deleted from the consent agenda and were adopted by the commission. the commission has before it today consent agenda item number five. last, you will consider six personnel actions consisting of the items listed under personnel

actions. this is your agenda for today. the first item will be presented by the public safety and homeland security bureau. it is entitled "improving wireless emergency alerts, amendments to part 11 of the commission's rules regarding the emergency alert system" and we're admiral david simpson, chairman of the bureau, will give the introduction. >> admiral simpson? >> good morning chairman wheeler and commissioners. since its launch in 2012, more than 21,000 wireless emergency alerts have been sent to warn americans from weather events, missing children, active shooters and bombing suspects to many other emergency situations. the service is a proven, valuable tool for keeping communities safe. it makes a difference. now we have the opportunity to leverage technological advancements and lessons learned

to make the service an even more effective public safety tool. in recent events in new york city, the value of high quality alert was illustrated. on september 19th, in the wake of a bombing in the chelsea neighborhood, emergency managers used wea to alert the community. new york city leaders very since indicated the inclusion of a photo with such an alert would be an even more effective tool. wea also played a critical role during natural disasters as was the case very recently in baton rouge where emergency managers used the service to warn of predicted, severe flooding. the event also illustrates the shortfalls in the existing service as some residents not in the traditional flood plain assumed the broad area of flooding alert was meant for those along the river n did not plan for their subsequent evacuation. eletters more geographically targeted are more likely to grab the public's attention n motivate them to take appropriate protective action.

the changes proposed in the almost before you would approve wea for community and state emergency managers and enable them to more confidently use the tool. it would enable links to additional information like a map with hurricane evacuation routes, aid distribution points or phone number shortcuts. it would expand message content. the geo targeting improvements in the item will lead to best practice alert use ensuring that warnings are sent wherever possible, whenever possible to the intended audience with time sensitive information relative to their current situation. lastly, it would support amber alerts intended to motivate the public to help law enforcement in the search for a missing child to include links to pictures of the child or the suspected abductor. taken together, the changes would make wea a more powerful life-saving tool and will improve engagement by emergency managers with the communities they serve.

with me today for the public safety and homeland security burie are nicole mcginnis, associate bureau chief for cybersecurity, gregory cook, and james wiley from our policy and licensing division. i would like to thank lisa folks in the office who contributed to this item. we also appreciate the continued engagement by public safety and industry stakeholders, including the national center for missing and exploited children, as well as our sister agencies fema and noaa. james will present the item. >> thank you, admiral simpson. good morning chairman wheeler and commissioners. this item if adopted would leverage technological advances to enhance wea as a tool for state and local officials to keep communities safe. the order adopts requirements to improve wea message content, delivery, training and outreach. with respect to message content, we would increase the maximum message length from 90 to 360 characters for 4g, lte and

future networks. we'd significantly improve the quality of information that alert originators are able to transmit by requiring participating wireless carriers to support embedded urls and phone numbers in all wea messages, including amber alerts within one year of the rule's publication in the federal register. this would enable the public to view a photo or place a call to authorities by simply clicking on a link in a wea alert. we would create a new alert classification for public safety messages, defined as essential public safety advisories that prescribe one or more actions likely to save lives or safeguard property. we would also require carriers to support transmission 5 alerts in spanish. the order would also adopt rules to meet originators needs for the delivery of alerts, specifically, we'd require participating wireless carriers to create and maintain alert logs they must make available upon request. we'd require carriers to improve alert delivery by geographically

targeting alerts to an area that best ax proximates the target area and allow carriers to begin implementing device-based geotargeting as soon as practicable to create a clear path forward for meeting an even more accurate geotargeting standard. the order would adopt rules that they create a frahmwork for emergency managers to test and raise public awareness about wea to support community proficiency in the use of wireless alerts. in the further notice, we propose and seek additional measures to improve the effectiveness of wea. we propose to require that wea capable devices preserve alerts for easy user review. we propose requiring carriers to deliver earthquake related alerts in fewer than three seconds and also sikh comment on additional steps we can take to optimize wea as a means of communicate with the public during disaster reefforts, including becausing it for crowd

sourced community feedback. we'd also seek to incorporate future technical advancements to improve wea. require support for certain multimedia content and safety measures and geotarget alerts to areas that match rather than approximate target areas. we would also sikh comment on ways to deepen wea's support for alerts in multiple languages and on whether and how 5g networks could enhance media even further. finally, we'd take steps to promote the development of consumer education tools for wea and propose to facilitate and inform state and local emergency management agencies use of wea by requiring carriers to annually report crittal performance metrics. they request adoption and editorial measures. >> thanks james and to all of you for all the work that's gone into this. commissioner clyburn? >> thank you, mr. chairman. it's in our darkest hours that we, unfortunately, are most

reminded of the importance of robust, reliable connectivity. in the wake of the recent bombing in manhattan, the wireless emergency alert system listed millions of new yorkers to be the eyes and ears of law enforcement. thanks in large part to this valuable tool, the suspect was swiftly captured. this first of its kind message is appointed example of the innovative ways wea can be utilized to help save lives. today's item enhanced wea's effectiveness and utility by adopting rules to improve message content, delivery and testing. notably, we increase the maximum alert message length from 90 to 360 characters for 4g, lte and future networks to enable them to more clearly communicate with their communities. we also require participating mobile providers to support

embedded references in all alerts as contemplated in the underlying nprm. as a recent incidents in new york and new jersey underscore, providing emergency managers with the ability to direct their communities to a comprehensive and authoritative resource in an emergency situation is a must. equally important is ensuring that alerts are delivered to the intended audience. to support this goal, we require participating wireless providers to narrow their geotargeting of alert messages to locations that best approximate the areas specified by an alert originator and we confirm our commitment to ensuring wea alert messages are only received by those for whom they are relevant. the further notice of a series of questions and technical considerations that must be resofld before we get there.

but we're unwavering in our goals to reduce overalerting and improve wea's effectiveness in this regard. in addition, the further notice seeks comment on a number of important issues such as expanding the language capabilities of wea beyond english and spanish, providing the public more choice in the types of alerts received, as well as the manner and timing of the alerts. and ensuring that enhanced wea capabilities are considered and factored into the 5g development process. the importance of this life-saving tool cannot be overstated. and i encourage all stakeholders to continue to participate in the ongoing dialogue as technological improvements are made to mobile networks. we have a lot to be proud of today, but more work remains, and time is of the essence. how appropriate it is, mr. chairman, that we are releasing this item during national

preparedness month. it gives us another opportunity to thank the nation's emergency professionals for all they do to keep us safe, including those who came to the rescue during yesterday's tragic shooting incident at townville elementary in my home state of south carolina. i would also like to thank admiral david simpson for his leadership and the staff of the public safety and homeland security bureau for their dedication and tireless efforts on behalf of the american people. >> thank you, commissioner. commissioner? >> thank you. as you heard my colleague say, september is national preparedness month. it was also in september more years ago than i care to count that i moved into an apartment in new york. it was small and unlovely. it was also within easy walking distance of the neighborhood

where a bomb exploded earlier this month. what i learned from my time in new york is that its residents may shuffle down the sidewalks in an anonymous blur but when crisis ensues, they rally. they love their city. so on september 19th, when mobile phones blared with a piercing sound of a wireless emergency alert, urging them to look for a bombing suspect, they took note. he was located a few hours later, and last week, he was charged by federal and state prosecutors. the question now is how we can make alerts like this better. that's not just a question for new york. it's a question for all of us. our wireless devices are in our palms, pockets, our purses. they are with us always. so let's recognize them for what they are. a formidable tool for public safety. congress saw this very clearly

when it created the wireless alert and response network act ten years ago. but the engineering and approach behind this emergency alert system is dated. and though its power has been demonstrated in new york and elsewhere, so have its limitations. we tackle some of those limitations today. we update and modernize key elements of the wireless emergency alert system. in particular, we increase the length of alerts from 90 to 360 characters. this will allow them to include embedded references, including telephone numbers. in addition, we better target the geographic delivery of messages. we also expand testing opportunities for state and local public safety authorities. but by no means should we stop here. because the episode near my old neighborhood did more than burn and budget buildings.

it dej straighted going forward we can do more with these messages. vague directives in text about where to find more information about a suspect just as we saw in new york are not good enough. as we move into the 5g future, we need to ensure that multimedia is available in all of our alert messages. because as a new yorker, senator schumer has said, when it comes to a terrorist or other very dangerous criminal on the run, a picture is not only worth a thousand words. it could save a thousand lives if the right person sees it. amen. let's make this happen. >> thank you very much, commissioner. commissioner pine. >> thank you, mr. chairman. before i discuss this item, i haven't had a chance to make a statement about some news today that the public and folks in this room most likely just learned about. and so i wanted to take this opportunity to say happy national coffee day.

as you can see, i'm observing the occasion by the leader. and i hope you will, too. okay. the wireless emergency alert or wea system has a similar -- simple purpose. to send public safety information to americans on their mobile devices during emergencies. wea's implement auation has bee more difficult. i noted they were targeting wireless alerts to more specific geographic locations. that's because of a phenomenon sometimes referred to as overalerting. and this happens and has happened to me when you get an alert that has no real connection to your location. instead the alert is about a storm or some other event at a nearby neighborhood or even a distant community. receiving an irrelevant message isn't just an annoyance. it undermines the effectiveness of the entire wea system by causing people to tune out all alerts. this has serious public safety

consequences as we've seen over the past weeks and months. for example, as louisiana was drenched by catastrophic floods this august, officials used wea to send out at least six flash flood alerts. but as our communications security, reliability and inoperablity ground, the alerts went unheeded by tens of thousands of people. residents ignored the messages because they previously received flood alerts that only applied to homes within a traditional flood zone. this time around, people assumed that the alert was not for them since their home had never flooded before. in the end, over 30,000 people had to be rescued. the need for enhanced geotargeting was brought home again less than two weeks ago during the bombings in new york and new jersey mentioned by my colleagues previously. public safety officials activated the wea system three times in response to the bombing

in manhattan september 17th. when they found a suspicious package in the chelsea neighborhood, they attempted to send targeted alerts directing them to stay away from their windows. those messages were broadcast far beyond that neighborhood. to ensure that kind of overshoot doesn't happen in the future, new york city's public safety officials have urged the fcc to adopt a device assisted geofencing approach. this approach would help ensure that eas messages are delivered only to areas where they are relevant. the problem with overalerting isn't limited to cases where too many people are receiving messages. the opposite is also true. citizens and public safety officials alike are opting out of the system altogether. for instance, the city of seattle says it, quote, doesn't use wea because of overalerting. houston says it has shied away from using wea because of the high likelihood of overalerting. harris county, texas. it chose not to use it during

four recent disasters due to significant concerns over the granularity of alerts. millions of people who live in these communities could miss out on potentially life-saving information because wea's current brush stroke is too broad. that's why the public safety community says enabling more precise alerting is the single most important action the fcc can take to make wea relevant for first responders. after studying the record and speaking with public safety officials, including those in new york city, i agreed that we need to do more than simply codify the status quo. so i proposed to my colleagues we be more forward lining, commit in this order to moving ahead with the device-based approach to geotargeting. by enabling devices to screen emergency messages and only allow the relevant ones through, this approach would allow public safety officials to target information to specific geographic areas. and it would advance wea as a platform by reduce alert

fatigue. i'm happy to report this order incorporates this approach in adopting -- in addition to adopting other enhancements to our geotargeting rules. moreover, further notice now seeks additional comments on ways to implement our commitment to device assisted geotargeting. taking a step back, these are major steps toward promoting public safety solution as advanced as wireless services themselves. and so, today's order moves us in the right direction, it has my support. thanks to the staff of the public safety bureau and others in the commission for their hard work on this item. thank you, mr. chairman. >> thank you, commissioner. commissioner o'reilly? >> thank you, mr. chairman. wireless alerts are one of the many tools that provide americans with information during emergencies from tornados to amber alerts to terrorist attacks, these alerts can provide beneficial warnings that there is danger ahead or to be on the lookout for a missing child. i can generally support such ideas as 360 character alerts.

a new category of public safety messages and narrower geographic targeting as a means to improve the wireless emergency alert system. and i appreciate that the certain number of my edits, including the elimination of the legacy timeline on 360 character alerts by date certain and reduction in the message log retention were incorporated in the text. at the same time as we make changes to the functionality, it's necessary to encourage participation by weighing the burdens placeod industry and recipients by ensuring the system is reliable so that consumers receive necessary information but not annoyed by overalerting. i believe portions of this item fail to strike such a balance and this is where my ideas and views differ from my colleagues. i cannot support requiring participating wireless providers to add functions that are not based on what can reasonably be achieved with existing technology and realistic timelines. today's order requires certain

components to be completed within 30 months and others a year. people undoubtedly say these timelines are sufficient, these solutions will need to go through standards process, divisive network development, testing and be deployed in the marketplace. that's not likely to happen within these tight timelines. we've seen this approach on multiple occasions in the public safety context such as location accuracy where the political pressures and headlines take precedent over technological feasibility. big announcements lead to big expectations which eventually result in multiple wavers because that technology lags behind the hype. overpromising and underdelivering does not improve public safety. we also need to consider the standards bodies have their hands full preparing for next generation technologies. i certainly wouldn't want to see 5g deployments stuck on the sidelines in order to incorporate not ready wea solutions into development of 5g networks and devices. that's exactly what is being contemplated by provisions in

this further notice. this trend also permeates the further notice where we propose earthquake alert prioritization and delivery within three minutes which the system is not currently designed to do and which may not be feasible. we see common and multilingual alerting beyond english and spanish which also requires standards and new character sets. to top it off, the item acknowledges that's many emergency management agencies do not have the capability to send such messages. second, we seem completely oblivious to the potential unattended consequences of unproven technologies. the requirement to include embedded references such as urls and phone numbers is a beware for what you wish for. while the availability of these links may seem useful, affected individuals may not be able to use them because encouraging internet use and phone calls at those exact moments could lead to additional network congestion at a time of already beyond capacity during an emergency. this is directly contrary to the

comments from network operators and technical experts such as alliance for telecommunications industries standards in the record. the pilot program that is initiated in this item is more than troubled. take for example the period for such a trial will conclude and the rurment goes into effect wfr the standards are likely finali finalized. how does that allow us to determine if network congestion is an issue. instead of getting answers we're ignoring the warnings of network operators and experts in network congestion. this item doubles down on this idea by incorporating multimedia such as photos, images and maps into wea alerts. this issue we considered in the further notice but through consideration will be needed with real testing beyond the prototyping envisioned in the tord the network effects such messages before we force providers to accommodate additional data intensive messaging. third, we must ensure that wea's

only used when appropriate. otherwise there's increased risk that consumers will opt out of these alerts. my colleagues have claimed the bombing in new york is illustrative of how wea's system works and can be improofed. but after the alert was issued tock on the lookout for the suspect, there were articles in social media posts about how frightened and annoyed some recipients were. if some found the screeching tone of countless cell phone alerts going off in subways offputting, imagine if it was a public service announcement informing you of the benefits of wea. i strongly oppose the use of emergency alert signals for the purposes of psas. lastly, the further notice adds a host question ofable ideas such as requiring a uniform format for alert log, standardized opt out menus for consumers and extensive data collection and annual reporting requirements which will add unnecessary costs for wireless providers with little benefit to

consumers. the unnecessary point of sale disclosures are burdensome and could mislead consumers because your wea experience can change depending on your geographic yairx what network you are on and whether there is congestion. while i approve a good portion of this, i must dissent for those reasons. >> we began this proceeding last november for a simple reason. and that is that when technology gives us the opportunity to save lives, to increase public safety, shame on us if we don't seize on that opportunity. as my colleagues have said, we know of the importance of

wireless emergency reports, from the headlines. whether they be in the bayous of louisiana or the canyons of new york. and in those experiences we've learned how the alerts can be made better, from including links to further information, including photos to more precise geographic targeting, to expanding the length of the message and the languages in which it is offered. a couple of weeks ago, i guess less than a couple of weeks ago, it was probably last week, nypd chief james o'neil wrote us a letter in which he talked about the importance of these alerts and said, quote, lives are truly

on the line. we all know how mobile technology has changed our lives generally. with this action today, we are now doing even more to allow mobile technology to save lives. so i will call for the vote. all those in favor, say aye. >> aye. >> opposed? the ayes have it. the item is adopted. the request for editorial privileges is granted with the objection noted. madam secretary? >> mr. chairman and commissioners, the next item on your agenda today will be presented by the international bureau and the media bureau and is entitled "review of foreign ownership policies for

broadcast, common carrier and area nautical radio licensees under section 310-b4." >> good morning, everybody. whenever you're ready. >> good morning, chairman. good morning commissioners. the report and order before you today would extend to broadcast licensees the same streamlined foreign ownership approval process the commission applies now to common carrier wireless licensees with appropriate broadcast specific modifications. this standardized approval process under section 310-b4 of the communications act will

provide the broadcast sector with a clearer path for investment. in addition, this report and order would reform the methodology that a publicly traded broadcast or common carrier licensee uses to ascertain its foreign ownership levels. this new methodology would eliminate the need for surveys or random samples of shareholders which are impractical for public companies in today's marketplace. the media bureau and international bureau collaborated with invaluable assistance from the office of general counsel and the wireless telecommunications bureau. the international bureau has worked closely with the media bureau on foreign ownership issues for nearly two decades. to my right is bill lake, chief of the media euro with ben arden and christine. to my left are susan o'connell, kim cook and gabrielle kim from the international bureau. in addition, i would like to recognize from the media bureau david roberts, lisa scanlon and

jamila bess-johnson. behind me, our team from -- deputy chief of the bureau troy tanner, kate collins, denise coca and francis gutierrez. also bill richardson from the office of general council, linda ray and kathy harris of wtv. and diane cornell who championed this when she was in the chairman's office and now holly saur started reviewing this in the media bureau and has it as her first international bureau from the chairman's office. gabrielle will present this item. she's one of our star honors attorneys, and this is her first commission presentation. >> good morning, mr. chairman, commissioners. as noted, the report and order before you extends streamlined foreign ownership rules and procedures to broadcast licensees but also reforms the methodology that publicly traded broadcasts and common carrier licensees and controlling u.s.

parent companies use to ascertain compliance with the foreign ownership limits of the communications act. the item discusses the procedures for the finding and review of broadcast petitions for declaratory ruling under section 310b. it allows the broadcast licensee to request approval for up to and including 100% aggregate foreign ownership of its controlling u.s. parent. a broadcast licensee may also request approval for a proposed controlling foreign investor to increase its equity and/or voting interest in the u.s. parent up to and including 100% at some future time. and for a foreign investor to increase its ownership interest in the u.s. parent up to and including a noncontrolling 49.99% interest at some future time without requiring a new ruling. broadcast licensees, including any covered affiliates or subsidiaries that have foreign ownership rulings may apply those rulings to after acquired

broadcast licenses regardless of the broadcast service or geographic area served by the stations. broadcast licensees would need specific approval only for foreign individuals or entities with a greater than 5% ownership interest or in some cases, an interest greater than 10% in the licensee's u.s. parent. the item recognizes that in some instances it is appropriate to apply existing broadcast requirements to minimize disruption to broadcasters. for example, broadcasters would use a broadcast atribution criteria to determine those u.s. and foreign interests that must be disclosed. and would use a broadcast insulation criteria to determine whether a particular foreign investor requires specific approve ag. next, the item reforms the methodology a publicly traded broadcast or common carrier licensee or controlling u.s. parent uses to ascertain its compliance with the 20% foreign ownership limit under section

310 310-b3 under section 310-b4. it relies on information that's known or reasonably should be known to the company in the ordinary course of business. the methodology requires public companies to exercise due diligence in identifying and determining the citizenship of their known or reasonably should be known interest holders. it specifies the information public companies can rely on for purposes of complying with section 310-b. it eliminates the need to conduct surveys or random samplings of public company shares or apply presumptions about the citizenship of unknown shareholders. it provides license ease with greater certainty and reduces burdens in determining aggregate levels of foreign ownership. and it allows such companies to focus their efforts and resources on identifying and determining the citizenship of those shareholders that may present a realistic potential to influence or control the company rather than on smaller unknown

shareholders that lack such potential. the international bureau and media bureau recommend adoption of this item and request editorial privileges. thank you. >> thank you very much, gabrielle. and nice job. commissioner clyburn? >> thank you. as an owner of a small weekly outlet -- former owner. don't want rumors to get out. a lot of rumors floating around here today. i know all too well the importance of adequate capital to enable operations, support new and innovative service offerings and provide value to customers. today's order recognizes these benefits by extending in large part to the broadcast industry, the streamlined rules and modified procedures the commission adopted three years ago for foreign ownership reviews of common carrier licenses. we address head-on the complexities and difficulties faced by publicly traded broadcast companies when

attempting to ascertain the extent of foreign ownership. and we provide more efficient approaches, offer greater transparency and predictability and enhance access to capital opportunities for broadcasters while reducing regulatory burdens and costs. the leadership and staff of the international bureau and media bureau are to be commended because this order is a praise-worthy example of how the commission unleashes opportunities by harmonizing and streamlining rules to facilitate capital investment as we protect important policy goals. thank you, mr. chairman. great job, gabrielle. and i look forward to the vote. >> and thank you. commissioner? >> broadcasting has a storied history. for decades, it has been where we turn for local news and entertainment in communities all across the country. the change is in the air. spectrum used by broadcast stations is now in demand by

other services. a new broadcast standard is in the workses. and new media platforms are multiplying. to ensure the future of broadcasting is bright, investment is key. but the laws that govern broadcast investment can get in the way. that's because they have a distinctly vintage quality. in fact, by and large, they were put in place to prevent foreign powers from disrupting ship to shore communications during warfare. but just as horses and bayonets are not the tools of modern warfare, the cyberthreats we face today are not especially well guarded by these prohibitions. moreover, these policies can create artificial constraints that make it tough for broadcasters to access funding on a global scale. this is not right, and it's not fair. so today we update our policies

by extending to broadcast licensees the same streamlined rules and procedures applicable to common carrier licensees under the law. we clarify our rules on foreign investment across the board. and we also improve our method for counting foreign ownership in both common carriers and broadcasters. these actions remove barriers for investment and provide clarity for broadcasters seeking support for new technologies and new ways to reach the communities they serve. this effort has my full support. >> thank you, commissioner. commissioner pie? >> four years ago i called for the fcc to relax restrictions. at the time, i said this could give broadcasters greater access to capital and the commission's rules with respect to foreign investment didn't make sense in today's marketplace. for example, our approach allowed a foreign company to own a majority interest in one of our nation's nationwide wireless

carriers. but it did not allow that same company to own a single a.m. radio station in kansas. in 2013, the commission took action. we ended our de facto ban on any foreign investment in u.s. broadcast holding companies exceeding 25%. that was a step in the right direction, and i was pleased to support it. but i also noted we still had to develop additional procedures for applicants seeking to take advantage of the commission's policy change. in this order, the commission does just that. we decide to streamline the procedures that apply to a foreign investment in broadcasters. and these same streamlined procedures have worked well in the common carrier context. so i'm confident they'll work as well in the broadcast context. we'll make it easier for broadcasters to access capital while at the same time ensuring that any foreign ownership above the 25% benchmarket is forth in section 310 does not comprise our national security or any other public interest.

they'll also promote regulatory parody and ensure different sectors of the communication industry can compete for investment on a level playing field. we also modernize in this order the commission's methodology for assessing compliance to the foreign ownership limits set forth in section 310. our prior approach, which broadly focusod all shareholders, may have made sense given the way the stock market operated decades ago. but today, about 85% of the shares held by an institution are held by an institution or individual on behalf of someone else. so this makes it very difficult for companies to figure out the identity, let alone the citizenship of many of their shareholders. and that was a particular problem given the commission's presumption that any unknown shareholders are not u.s. citizens. thankfully, the commission ends at presumption today and our new methodology focuses on ownership information that is known or reasonably should be known to a

public company. this reform makes sense because these are the ownership interests that could influence a company's operations. furthermore this reform will eliminate the need for companies to conduct costly and unreliable surveys of individual shareholders. i'm therefore optimistic this will reduce the regulatory burdens on public companies and make it easier for them to comply with our rules. at the end of the day, the commission's rules in this area need to strike a balance. on one hand, promote investment of the united states and make it easier for communication companies to access capital. but on the other, we must ensure that any specific foreign investment in this sector of our economy is in the public interest. because this order generally strikes the right balance, i'm pleased to support it. i'd like to thank the staff of the international bureau n the media bureau for their hard work in this proceeding, particularly gabrielle kim and my old classmate kim cook for her hard work. and commissioner o'reilly for

his advocacy of a regulatory framework in this area. >> thank you, commissioner. >> thank you, mr. chairman. i've often spoken of the need to promote foreign investment opportunities for broadcasters and further streamline ownership reviews under section 310b of the communications act. quite simply, today's order is a helpful step as the changes are likely to produce significant benefits without jeopardizing national security. by allowing broadcasters to follow the streamlined process available to common carrier licensees, we facilitate new avenues of capital that will help stations compete in today's highly competitive video marketplace. we also modify the methodology that broadcasters and common carriers use to assess compliance with the statute. the old method of determining foreign ownership levels was practically um possible and not cost effective to implement for publicly traded companies in today's fast-paced, global markets. further, by focusing primarily

on those shareholders with more than 5% interest which are reported in certain s.e.c. filings. the burden on licensees will be greatly reduce while retaining the ability to review companies with significant foreign ownership held by entities more likely to be able to exert influence over a company. there are some things, however, that i would like to have done differently. i had hoped the item would raise the overall reporting threshold. raising this level which triggers the time-consuming review process would reduce costs on industry participants. a align the u.s. with nations that permit he are levels of foreign owned investment and reduce the efforts of other countries to restrict u.s. investment based on our own ownership restrictions. we do not do this today, i am very pleased the item states we may pursue such measures in the future. in that regard, the commission must finish its mission to truly streamline its foreign ownership

review. we can take all the steps we want but if team telecom can hold of regulations for years all of the improvements we do today are of ril value. failing to identify the concerns hidden behind opaque structures and delaying or refusing to conclude review has been problematic. that dock set near the university filled with filings indicating drastic improvements to team telecom are needed, and it needs to be resolved in the very near term. so i want to thank the chairman for incorporating my edits, and i can't thank enough the teams for all of their work on this important item. thank you very much. >> thank you very much, commissioner. i liked that. i can't thank enough. i think that's a true and well put statement to the media bureau and international bureau. and all of you worked so hard for this. i have a statement for the record. i won't read it into the record here but i want to say thank you

to all of you and commissioner o'reilly for his leadership on this issue. so we'll go to the vote. all those in favor say aye. >> aye. >> opposed? the ayes have it. the request for editorial privileges are granted with the objection noted. thank you to all of you. >> mr. chairman, commissioners, the third item on your agenda will be presented by the media bureau and is entitled "promoting the availability of diverse and independent sources of video programming." and bill lake, chief of the media bureau, will give the introduction. >> didn't even have to move. you know? just sit there, and the whole world comes to you. >> i do have different reinforcements this time. >> this is okay. all right.

the floor is yours. >> good morning again, mr. chairman, and good morning commissioners. the media bureau presents a notice of proposed rule making that seeks to foster consumer choice and access to diverse

>> mr. chairman and commission ers

and variety of their video programming and greater flexibility and the means and manner of accessing program content. the media recommends that you adopt the proposal and address privileges. thank you. >> it's appropriate that you are the fist commenter here since you have been leading the charge on this. commissioner. >> thank you, mr. chairman. you have been dropped. these are three of the most paralyzing words a smaller independent programmer could ever hear. they render a content provider powerless and frustrated. as for the consumer, with little or no warning, they suddenly discover that a favorite network or show has been removed from their channel line-up leaving them with little or no alternative means for assessing

niche content. what some may call niche programming is that customer's preferred viewing. strong ratings? rave reviews? neither of these seem to matter. their favorite station is now missing from the programming line-up because the cruel reality is that inpent programmers live by a different set of rules. some understandable. others quite perplexing. just last month as part of my office's connecting communities tour, i visited one such programmer in a small town called indianland, south carolina, which is an unincorporated community just south of charlotte. there i toured the facilities and met with the leadership of insp, a family-focused content provider that reaches more than 80 million u.s. households. inspiration network, like countless other independent programmers i have heard from,

faces a number of significant challenges and make it difficult to compete on a level playing field, though they will be the first to admit that comparatively speaking, they are quite fortunate. but it's because insp and dozens of others who are not as fortunate that i urge seven months ago for the adoption of a notice of inquiry that enabled the commission to embark on a fact finding mission on the current state of programming diversity, consumer choice, and the evolving video marketplace. what did we learn from this exercise? more than 36,000 filings and reviewing the transcripts, several themes emerge. most notably, independent programmers from all ends of the idealogical spectrum told us that they regularly must accept clauses in their program carriage agreement, including most favored nation and

alternative distribution methods provisions that inhibit their ability to grow and innovate. now, i must admit that when we launched the noy in february i was unsure what path, if anything, we would tread. i knew that there were significant problems facing independent programmers, but i was always aware that tackling these issues head on would require a robust docket and clear legal authority. building on the extensive record and the authority granted under section 116 of the communications act, the npr and we consider today appropriately targets two troubling practices. unconditional mfn's and unreasonable adm's. for those outside of the communications law space, imagine that as an independent programm emer eager to grow subscribership, you strike a carriage deal in which you agree to accept a lower rate per

subscriber in exchange for, say, better channel placement. now, in negotiating with another distributor, you are told that because of your previous deal with the other entity that they will not take your discount -- that they will not only take your discounted rate, but put your channel in a tier with just a quarter of the subscribers you thought you were negotiating for. now, just how fair does that sound? similarly, what if you were told that to strike a carriage deal with the traditional pay tv provider, you must agree to a clause that will forever prevent you from striking similar agreements in the future with on-line video distributors, or what we call ovd's. these very real situations are what independent programmers face each and every day. but do not take my word here

when it comes to the fanature o these practices. look at what the department of justice said in its review of the charter time warner cable deal earlier this year. doj stated that adm's and other contractual provisions have the effect of making ovd's less competitive. as a result of this determination, the department of justice imposed conditions on new charter that prohibit the company from entering into or enforcing adm's with programmers as well as mfn's if they are inconsistent with this underlying prohibition. i am also pleased that this nprm asked about potential recourse when customers find that their favorite programming network has been dropped from the channel line-up. some are locked into a multi-year line-up, and the prospect of finding another pay tv provider that carries their favorite channel, if one even

exists, means paying stiff cancellation penalties. the npr at my urging also asked a series of questions about other practices such as bundling that may prevent independent programmers from gaining carriage. for new entrants, some who are even willing do initially offer free carriage, this can be challenging. it's also challenging to get your telephone call returned. in sum, i respectfully ask this body are we satisfied with a few large conglomerates dominating the pay tv channel line-up? do we believe that independent and diverse voices have a place in a vibrant media landscape? do these voices play a role in a strong democracy? the adoption of the day's nprm insures that these questions and

more are addressed and for that i sincerely thank the chairman for his support of this fact-finding kper sides, the media bureau staff, including michelle carrie, march that hth and -- for diving into the complex issues in looking at carriage issues. i must thank my advisor david grossman for his keen attention to detail. thank you. >> thank you, commissioner. >> i think we will probably shortly find the answers to those questions you posed. mr. -- mrs. rosen. >> so much content. so many ways to watch. so few hours in the day. this is what viewing now feels like for me. and probably a lot of other people too. we have a dizzying array of channels. we have programming available any time anywhere and on any screen. new platforms are multiplying at a rapid clip keeping up with a

show, a season, a meme, a hash tag. it's exhausting. while all kinds of content is available to exhaust and excite us. for those who create it, breaking through and being seen is hard. cutting through the crowd often requires securing space on the line-up of cable and satellite systems. although there are new ways to watch, these platforms still dominate viewing. as a result, they were made an important part of building an audience and building an audience, in turn, is essential for new investment, which provides the opportunity to create more new and diverse content. today's notice of proposed rulemaking takes a hard look at the situation. it asks about carriage agreements programmers signed to get on cable and satellite systems. in particular, it seeks comment on the operation of certain clauses in those agreements

known as unconditional most favored nation provisions and alternative distribution method provisions. in practice these clauses can make it tough for new and independent programming to get on the channel line-up of satellite and cable systems and tough for them to show their programming on-line. we asked for ways to seek new and diverse programming and to give them a fair shot at being seen. i look forward to the record that develops, and thank my colleague commissioner kleiburn for encouraging us to get this dialogue going. >> commissioner -- >> i believe that our media should ideally reflect the diversity of the country in which we live. when it comes to the video marketplace, we have played a lot of progress over the last decade. there are now more outlets through which createors of video content can distribute their programming than ever before.

over the top video has been a game changer. it's given diverse voices a new way to be heard and it's given americans access to novel content they might not previously have seen. in my notice of inquiry, for example, i discussed the second episode of "master of none," a netflix series who is the show's co-creator and co-writer. that episode focused on the relationship between asians who came to this country in the 1960s and 1970s and their american-born children. as an american-born son of indian immigrants myself, that episode really hit home with me. it told a story that i had really never seen before on american television. evidently that episode impacted a lot of other people as well. earlier this month it won the emyil for outstanding writing for a comedy series. i'm sure that most of the emmy voters weren't the children of asian immigrants, which i think just goes to show that a

compelling story has universal appeal. given my support for greater diversity in the video marketplace, i had hoped that i would be able to support this notice of proposed rule making. indeed, it used to be the case that almost all fcc votes were unanimous. notices were meant to represent the beginning of the rule making process. not its end. their purpose was to identify all period of time nant issues and ask the right questions so that the commission would be able to make a decision about whether to move forward with new rules and if so what the new rules should be on the basis of a complete factual record. for this reason commissioners were generally able to add questions to draft notices. even if commissioners were ultimately likely to disagree on how substantive issues should be resolved, the norm within this building, when i heard during my years as a staffer in the office of general counsel, used to be that there's nothing wrong with asking a question. unfortunately, those days are

long gone. too often, notices are now one-sided documents that leave little doubt that the commission has already made up its mind on the issues about which it is purporting to seek the public's input. they suggest that the comment part of notice and comment rule making is merely an administrative hoop through which the commission must jump rather than a critical component to shaping the fcc's decision making. accordingly, questions that could generate answers suggesting flaws with the commission's predetermined conclusions are excluded entirely from the document. efforts to bring balance by just describing each side's arguments in a fair way are rejected out of hand. i was disappointed when the draft for this notice that i received three weeks ago reflected that approach. so, as a result, i suggested a number of edits to make it less slanted. those that would not have blocked the intended direction. i proposed a number of questions to insure that all aspects of the issues raised in the document were explored, and it's

especially critical to make one other point. had my ideas been accepted, there still would have been adequate notice for adopting the final rules that this notice's most vocal prop oonents favor. the vast majority of my edits and suggestions were ignored. this is effectively an order masquerading as a notice. this is a note littered with statements indicating to the commission that they've already decided. many of the most important issues about which we are seeking comment. this is a notice that doesn't include many questions that could yield answers the commission might dpiend inconvenient, and this is a notice that i cannot support. in particular, i would like to briefly discuss two of my most serious concerns. first, i'm not convinced that the fcc has the legal authority to adopt the proposals set forth in this notice prohibiting unconditional most favored nation or mfn provisions, and unreasonable alternative distribution method or adm provisions and program carriage

agreements between mvpd's and independent video programming vendors. now, the notice contends the section 616 a of the communications act gives the agency general rule making authority over programming content -- contracts. in particular, the commission points to that part of the provision that reads, "the commission shall establish regulations governing the program carriage agreements and related practices between cable operators or other mpvd's." it goes on to specify things that those regulations should include, contain, or provide. six specific things. now, commission claims that these regulations promulgated may not be limited to those since things and may include others, such as prohibiting mfn and certain adm provisions, but i have my doubts. to begin with, the almost quarter century since section 1 616 was enacted, the commission

has never issued regulations you should this provision that go beyond the six requirements specified in the provision. we've only implemented the specific terms set forth in section 616 a 1 through 6. moreover, if section 616a does give the commission general rulemaking authority over programming agreements, well, then what are the limits on that authority? no one within the agency or without has yet answered this question. the notice's interpretation simply gives the commission carte blanche to regulate programming contracts. i see no evidence that congress intended to give the fcc such limitless authority. i'm also concerned that such an interpretation of 616 a1 could give rise to serious constitutional difficulties. under the nondelegation doctrine, congress must provide agencies with an intelligle principle to base its regulations, but under the portion of 616a that the commission believes it provides general rule making authorities,

what is the principle? there is none. additionally, the notice fails to ask about the significance, if any, of the contrast between the structure of 616a and that of section 628c. in the latter section it directed the sec to establish regulations to prohibit cable operators and others from engaging in unfair methods of competition, or deceptive acts or unfair practices. the purpose of which is to hinder significantly or to prevent any from providing satellite programming or satellite broadcast programming to consumers. then in section 628 c 2 congress specified four different types of regulations that the commission must adopt. this provision, however, is entitled minimum contents of regulations, thus signaling that congress didn't intend for the fcc's rule making power under 628 c 1 to be cabined by the particular regulations discussed

in 628 c 2. congress entitled 6 of the communications act clearly knew how to indicate the particularly regulatory mandates established aa floor for the commission's authority, rather than a ceiling. such an indication is found in section 628c, but not within section 6716a. moreover, it contains a clear principle that can be used to guide a general grant of rule making authority. 616a by contrast doesn't appear to include any such principle. shouldn't all these differents impact the commission's interpretation of 616a? the second major concern is that i'm worried if the proposal set forth in this notice could have unintended consequences? in my meetings with programmers, and there have been many, i've heard their concerns about how unconditional mfn provisions as well as adm provisions are impacting their businesses? i have sympathy for their

perspective. particularly with respect to unconditional mfn's. we need to consider fully the potential results of commission action here. remember, mvpd are under no obligation to carry any i understand percnt programmers i the first place. we have to consider whether banning mfn's and adm's would make it less likely that independent programmers would be able to secure carriage by mvpd's at all. would banning such contract terms make it more likely that those independent programmers already being carried by mbpd's would be dropped, or would prohibiting such provisions make it more likely that a large mvpd would insist on exclusive deals with independent programmers? thus, limiting these programmer's reach. in short, would the commission's proposals make it easier or harder for independent programmers to gain distribution? unfortunately, it's evident from the notice that the commission has already fixed upon an answer before the record has even been

compiled. one last point. i voted against the charter time warner cable brighthouse marerg because i was concerned that it would over time be transformed into industry-wide rules. when i took that stand, i heard from many who insisted that this wouldn't be the case. less than five months after that vote, here we are. the fcc is already proposing in this notice to impose on an industry-wide basis restrictions on programming agreements agreed to by the justice department and a single company during a single merger proceeding. even before the use of the time warner cable name has been completely phased out, we see the commission's first effort to demand of the entire industry the regulatory tribute exacted from charter. mark my words, it won't be the last. i respectfully descend. >> mr. o'reilly. >> thank you, mr. chairman. today's item takes up the cause

of independent programmers who want all the benefits of cable distribution, including advertising revenues, while also seeking to prohibit certain distributor limits and acquire the ability to completely bypass their cable agreements to self-distribute. i understand why independent programmers would want this. it just doesn't seem to be the role of the government to further it. in the end i suspect the effort will not be as fruitful as anticipated, as independent 3r578ers will face more difficulty getting underlying carriage. thereby, reducing their viability and longevity. that means there will be fewer diverse programming sources, not more. i do have some empathy for independent programmers. they seek to fill niche consumer programming interests often without diverse financial backing. in today's media marketplace, it's certainly difficult to generate such programming. survive a whirlwind of changing consumer taste and technologies and make overall finances work.

at the same time distributors often take a chance to carry such independent programming, when it would be easier and perhaps more lucrative to carry other channels. in exchange, distributors seek certain conditions to justify their risks of carriage. with this item, the commission seeks to improperly jump in the middle of programmer-distributor relationships and eliminate certain practices that the independent programmers have in the past and continue to voluntarily accept during private commercial negotiations. to argue that these are not free negotiations because it is an unbalanced negotiating table completely ignores the fact that such circumstances exist in so many other parts of our economy. for instance, if you want your product to be carried by wal-mart, marriott, or home depot, you have to deal with the potential for unbalanced negotiating table. it's not illegal, inappropriate, or necessarily worthy of government involvement. complicating this item is the simple fact that is an extension

of the conditions imposed on a merged charter communications in its acquisition of time warner and brighthouse. having been totally shut out of any involvement in the crafting of those conditions, i'm now being told we must burden the entire industry with the same. at least charter got something in return for acquiesing to such market interference. this commission, you should this leadership, has proven the sentiment totally laughable. just think about this very subject matter. we were told that the noi was to be very vague and sit out there for quite a while before any action was even contemplated, and, yet, here we are with a determined outcome and a march to completion. thank you, mr. chairman. >> well, you know, the issues here are really quite simple. we had a notice of inquiry. we had a series of workshops in

this room, and those activities found discriminatation against independent programs. you've heard the term one-sided mfn most favored nation, kicked around up here. let's talk about what it means. it means give us the good stuff that you got in other deals, but we won't give you the terms that made such a transaction a fair deal. we've heard the term adm, alternative distribution methods. restrictions. thrown around up here. what's it mean? it means i'm a big cable system.

if you want to get on, i must be able to dictate your use in other media. now, the statute is pretty clear. the statute requires us, says shall -- the statutes requires us to prevent cable operators from engaging in conduct with the affect of unreasonably restraining unaffiliated video programmers. is there anything reasonable in those two examples i just gave? so this notice proposes to ban both of these discriminate ory practices. it is an mprm. it is an nprm which like all nprm's we say here is the nugget

of what we're talking about that we are proposing. focus your attention on this. we also specifically ask the question about our legal authori authority. i look forward to a physical input into making a decision based on that record. again, we want to thank the commissioner for keeping us focused on these issues. with that i'll call for the vote. all in favor say aye. aye. opposed. >> no. >> the ayes have it. the item is adopted. the request for editorial privileges is granted with the objection noted. madam secretary. >> mr. chairman and

commissioners, as mentioned at the beginning of the meeting today, you will consider item five listed under the consent agenda portion of the commission sunshine notice. for your convenience, we have provided you a copy of the noti notice. >> i will shortly call dpor votes on these personnel actions. i guess we're having something -- >> mr. chairman, we're doing the consent agenda. we have one consent agenda item. item number five that we're going to consider right now. >> got it. we previously sought consent of all the commissioners for the inclusion of the items on the consent agenda. we've removed from the proposed consent agenda any item for which we received an objection from any commissioner or which

was voted. for the remaining consent agenda item listed on the sunshine notice we've received no objection from my commissioner. accordingly, i'll shortly call for the vote on this consent agenda. if you are voting to adopt a consent agenda item, please indicate by voting in favor. if you oppose, please vote to oppose. all those in favor of adopting the item listed on the consent agenda, please indicate by saying aye. aye. aye. >> opposed? so ordered. now, would you like to go talk about the other item? i was just, you know, so anxious to roll along here. >> okay. now we will consider the personnel actions listed on the commission's sunshine notice. we will consider each one of them separately. >> i will shortly call for votes, as i said before, on

these personnel actions. because they're personnel actions, there will be no discussion of the items. if you're voting to accept these personnel action items, please indicate so by voting in favor. if you oppose the adoption of these personnel actions, please vote to oppose. madam secretary. will you please announce each of the items? >> for personnel action number one. >> all in favor say aye? aye. opposed? >> no. >> the ayes have it. so ordered. personnel action number two. that's you. that's not me. >> yes. >> personnel action number two. >> all those in favor say aye. aye. opposed? >> no. >> the ayes have it. so ordered.

>> for personnel action number three. >> all those in favor say aye. aye. all those opposed say nay. >> no. >> the ayes have it. so ordered. >> personnel action number four. >> all those in favor say aye. aye. all those opposed say nay. >> nay. >> the eayes have it. so ordered. >> personnel action number five. >> all those in favor say aye. aye. all those opposed say nay. >> nay. >> nay. >> the ayes have it. so ordered. >> personnel action number six. >> all those in favor say aye. >> aye. >> all those opposed say nay. >> nay. >> the ayes have it. so ordered. >> completed. >> thank you very much, madam secretary. would any of my colleagues like to make any announcements at

this point in time? commissioner kleiburn. >> aye. >> aye? >> sorry about that. i was -- yes. i would like to, if you will allow me to introduce our three fall law clerks. if you would stand as i call you. megan sun is a 2l catholic university columbus school of law and university of miami school of law. she has interned with us, as you might recognize her, in the wildlife conservation bureau and was named the earl k. moore fellow last spring. megan enjoys thrift shopping, and she started a digital media ink ba incubat incubator. i don't know if some of you had time to watch a little television this morning when they talked to sean combs. he made more money than his

fashion line than a future. it's a bruight future if you ge a cut from all the people subscribing in your service. i'm not promoting. i'm just stating a fact. next, there's adriana, who is a 2a at columbus school of law. she graduated from the university of pittsburgh and is originally from youngstown, ohio, mr. chair. she is a pittsburgh penguins fan and loves to bake in her free time. we will put her to work before the season is over. >> wait, wait. the penguins. does she have any other sports teams that she follows? >> you will take that up later after she bakes us something. last but not least is kelsey rutherford, who is from cincinnati, ohio. an invasion here. she's a 2l. columbus school of law. we know they rule the world here, right? she graduated from the university of tennessee in 2015, and she enjoys hiking, photography, and, of course,

being a tennessee volunteer fan. here is my class, so to speak, of 2016 fall law clerks, and i would like to welcome. they are doing a fine job. >> that's great. you are very fortunate to have two buckeyes on your team. commissioner rosen. commissioner pie. >> i have awe few law clerks as well. julia balermo. she's from george mason. she's a proud jersey girl, and she is not despite rumors to the contrary, best friends with snooki. julia graduated from marris college. at marist she started a program to teach karate to underprivileged kids. when she isn't talking tra, in our fantasy football league, she's sparring with us to keep her black belts up-to-date. she's the first intern in pie office history to be on a first name basis with brandon carr.

secondly, alex mcleod is a third year law school at american. she grew up in a small town just outside of the bay area and graduated from sonoma state university where she received a degree in economics with a minor in political science. while at sonoma she worked as an ra, volunteered at a local charter school for underprivileged youth and i think this is the most important part, became a wine and cheese officianado. alex says she's always watched the golden state warriors even before she went 73-9. yeah, right. the a's and the raiders, much to my chagrin. she also claims she'll be taking my first place in the spot of the fantasy football league next week, but i have my doubts. last but not least is kirk garner. a second year law school at george mason. he grew up in northeastern pennsylvania and is still surprisingly a devoted philadelphia eagles and phillies fan. at least for now.

prior to mason, kirk graduated from the university of pennsylvania, majoring in philosophy, politics, and economics. while at penn he was a member of the glee club, no relation, i don't know i don't think, to the tv show. he prefers washington to philadelphia, but he still longz f -- longs for the day when wawa will have the sense to move southward. all thanks to our folks, and we're excited for the semester to come. >> mr. o'reilly. >> thank you, mr. chairman. i want to mention a somber moment for me. a friend of mine on capitol hill, jim lyons, an employee on the senate finance committee, had a charity basketball event last week and suffered a massive heart attack. this afternoon they will be turning off his life support, so i wanted to extend my opportunity to thank jim for getting to know him, and i wanted to mention that while we may fight on this and disagree on policy matters, we certainly know what's important, what's really important, our friends

and our family, and thank you for your time. >> here here. >> we, too, would like to welcome some new folks into the chairman's office. steven cline. steven, are you back there? where are you? whoops. okay. steven must be in class. he is a returnee. he was in the enforcement bureau this past summer. he is a third year student at georgetown university of law school where he is the production editor for the federal communications law journal and a member of the student intellectual property law association. steven received a bachelor the science in education from the university of miami. and timothy campbell, tim, are you here? this is great. everybody from the chairman's office decides not to show up. >> they went to class. >> hey -- >> priorities.

>> timothy is also a third year student. attends american university, washington college of law. got a masters in american history and both have been with us now for several weeks, have already jumped in, and we are glad that they're both in class as well as working in the chairman's office. are there any other things that should come before us at this point in time? madam secretary, tell us about our next date, please. >> the next agenda meeting of the federal communications commission is thursday, october 27th, 2016. >> thank you very much. until then we are adjourned.

>> here we are. kill ae killer's row. >> we're going to start with the press conference now. >> thank you, kim. obviously, there was a great deal of interest in what the commission did not have on the agenda today. so i want to address that at the top here. it was simply a matter of running out of time. the set top box item remains on circulation, remains in deliberation among the

consumers. i trust that you have seen the joint statement that commissioners rosen, warsal and kleiburn put out and the commitment in that statement to unlock the box. let's dauk about what we did today. since it was established in 2012, the wireless emergency alert system has been a tremendous success that has literally saved lives, whether by giving advanced notice for people to seek shelter before an oncoming tornado or transmitting amber alerts that led to the safe return of dozens of missing children. while the system has worked, we know it can work better as evidenced by the recent experience in new york city.

we're an alert identifying the alleged perpetrator had to say go to the media to see his picture. this on a device where you're always looking at pictures. the updated rules would enable the public to receive additional vital information in wireless alerts. public officials will now be able to send embedded links in all wireless emergency alert messages, including amber alerts. the public can click to see a photo or to call authorities. it will enable local officials to send spanish language alerts while seeking comment on whether we ought to be thinking about that in other languages as well. participating wireless carriers will now be required to deliver alerts to more specific geographic areas.

as i said in my statement, nypd commissioner james o'neil couldn't have said it better. lives are truly on the line. i agree, and that's why i'm gratified that the commission has taken such swift action on this item. with that i'll be happy to answer any questions. let's start at this end. >> sorry. monty taylor. can you be more specific about why you ran out of time on the set top item? were there things that needed to be edited, or did you not have the votes to get it approved, or what? >> we're going back and forth on edits and content. >> personnel question. no, set top boxes. i'm just wondering -- it seems like from the record that's developing the realisticing point is this licensing thing.

why not just drop that if the content industry and at least three other commissioners doechblt want. the point of the matter is as i said, we ran out of time. we keep it on circulation. brian. >> are you still planning to do something on zero rating before the end of the year? >> so, you know, as i have said all along, we are carefully

examining what has been developing in zero rating. it's interesting to see that new things continually come on. it's interesting to see that old things continually -- continue to evolve, and we're trying to make sure that we understand the dynamics of all of those. >> you have been looking at this for a long time though now, right? months. what are your thoughts after having -- >> i love it. let's see. sometimes i get beat up for the fact we've been taking too long. other times i get beat up because we're moving too fast. we're -- things move at the pace that is appropriate for that and i think we're doing a good job with our examination of the ever-evolving issue of zero rating. >> i am wondering -- i'll give you a braeeak from the set top box. on wireless emergency alerts you mentioned the incident in new york. that came up a lot. you were lobbied by the city of new york on it.

at the same time after that incident there were concerns that the way new york used this alert to put on the the name of a suspect they were could lead to racial prodpielg. i'm wondering how you balance those concerns as you are working on this and what you plan to do? >> we're the technology agency. we're not the agency that makes a decision which alert gets set. >> one of the proposals they want considered is whether the fcc chairman should be added as a permanent member. i'm wondering if you have an opinion on that?

would you support it? would you oppose it? >> we'll do whatever they tell us to do. >> do you have an opinion? do you think this agency should be -- >> this is a -- this is something that congress is the one that decides kwl things are in or who was participating in this and will abide by whatever congress wants do decide. >> on the inquiry study -- >> that's the right word. >> did you going into it and do you now have as an end goal some kind of action like npr or was your intention -- is your intention now more of informational kind of study of -- >> so it's premature to speculate on something that might result from something that hasn't resulted.

okay? and, you know, again, zero rating is something that there has been continual evolution in the old programs. there have been some new things. we're trying to make sure that we understand everything that's going on. >> hi. alicia green, roll-call. >> hi. >> lawmakers have suggested that you should issue a new notice of proposed rule making for the set top box item and open up comments again. is that something that you would consider? >> oh, golly, you know, this is something that has had public comment that has been going on for a couple of years. i mean, let's go back to the destack report and all of the comments filed in that, all the comments filed in this. i don't think this is an issue where the public has not had an opportunity to express themselves or has not been heard. >> morning consult. i wanted to ask about the isp privacy rules that you recently said in the senate hearing you were looking to finalize by the end of the year.

i'm wondering are you guys in talks right now at the ftc about potentially kind of streamlining those rules to go along with what they already have? >> well, i think i said at the hearing and although i didn't see the ftc subsequent hearing, i think they also address the issue that, yes, they have been -- they have made a formal filing with us. a filing that was bipartisan and unanimous. we have been working with them, and i think i even in my -- in my comment at the senate referenced how i had been in touch with them the last 24 hours. you're not howard simons. i know that for a fact. despite that name in front of you. >> i'm -- i'm -- i was going to ask about the nprm, but she took that from me. i wanted to ask you about

reports that there was a revised item that was put out by your office on tuesday and that part of the issue was that at least one commissioner's office was concerned that there wasn't enough time to review and comment on that revised item. >> we're talking about set top boxes. >> yeah. >> as i said, this is a timing issue. this is a -- do we have enough time for everybody to be able to do all the diligence they need to do and to be able to have the dialogues that are necessary? again, i reiterate what i said in -- at the outset that it's clear from the statement of three of us that we intend to get something done. >> clarm -- communications daily. >> hey, matt. >> the commission didn't do anything -- in the circumstances for test evil waualuation back r this year? what makes sense for it now to be the npr on this way as opposed to an opportunity taken months ago?

>> i think the question becomes let's see what develops in the record. we have proposed something, and that proposal was specifically targeted in order to -- let's see what the record develops and we'll make the decision based on that. >> there have been a lot of calls planned and the fact sheet. was there time for it to be a longer fact sheet and what -- >> look, all that's happened here is that the deliberative process that has been going on continues to go on. that's the only change. >> the timing because on the one hand you say that -- you argued

for 20 years that -- what makes you believe it can be passed -- how far in the distance -- we have a statement all three of us want to do something. we're just making sure -- >> you got a lot on your agenda to get done. you have i don't feel a set top box, business data services and the privacy rules. >> right. >> is this the setback of getting your entire agenda done on set top boxes, or is this not a big setback? >> this is -- this is ticktock. this is clock. this is oops. you know, we ran out of time. >> business data services and the privacy rule done before the

election? >> well, we're managing -- what i've said all along is we're managing to get it done by the end of the year. i had hoped to have it done as soon as possible. john. >> do you think that there was any pressure from the hill that made any difference in this outcome today on set top box? >> john, the hill has made itself known on both sides of this issue since it started, and i agree with cecilia. it was 20 years ago. since the destack and everything started a couple of years ago. >> she already asked a question from -- are you going to put up with that when he says you're one in the same? mark that. alekts, w alex, yes, sir.

>> two major logistical question. you pulled the set top box item because you didn't have three votes for it. if so, when did you know that you did not have the votes for it? >> what did you not hear about what i said? >> i don't think it's been explicitly stated that the reason that it was pushed was because you didn't have votes for it. >> you're -- we are in the process of a deliberative -- trying to get to the deliberate -- the end of deliberations on how to do it. we ran out of time. it is a large document. it goes back and forth. there were it rags that didn't come out until late last night. people need time. you know, you're -- period. >> janet rfd tv. do you see that something might actually -- a rule might be set

before the end of the year? >> well, we're going to -- it's a notice and comment proceeding. there will be, you know, a notice -- there will be a comment period. then there will be a reply comments period. then there will be, you know, how do we make sense out of all of that. i don't want to set an arbitrary date to it. todd, sneaking up from the back row. >> yes, sir. with a small question. >> on set top boxes saying people need time, when would you expect the item to be resolved? >> i hope soon. >> i got a follow-up. >> nice try, monty.

>> questions for public safety. raise your hand. public safety. come on up. >> some of you may have noticed that we had a test of the emergency alert system 22,000 stations have responded to us, and we're continuing to compile those results with our partners at fema and industry. as well as the state commission. really excited about the results of that national test. >> i have a question about the test if you are taking. >> i think we can if the others don't mind.

>> some stations that would put on the a spanish alert didn't because -- do you know if any spanish alerts did go out yesterday? >> they did. that's exactly the kind of thing that we wanted to test because the way the alert system is set up, it's set up to be fail safe, right? if it doesn't get it through, the connection that rides over the ip network, it will get it through the broadcast relay. the spanish part through the broadcast relay and so we believe this would give us the data necessary to refine the transmission at the second language. that's where we're at with that.

>> do you think that this was a more successful test than the 2011 -- >> it would be hard for me to compare because the work that was required to get the first one going i know is very significant. my good friend jamie barnett, my position at the time, and i hesitate to say that one was bet than the other. i can tell you that foundations set the first test built upon, and we think we were in a better place to capture results. not just from the broadcasters themselves, but from the disability rights organizations as well as communities in general. if we were better, it's only because that team prepared the table for us and we built upon that. greg, is that fair? >> i think that's accurate. >> regarding the waea item

today, could you clarify regarding the requirement for support for pictures and multi-media? was that in the order, or is that in the further notice, and is it both the pictures and the multi-media that it's -- >> i may ask james to clarify because we wanted to bring in as much capability as we could when the technology and the platforms that the providers operate kwoo support it. we make allowable as soon as possible the inclusion of some. i'll have james walk through the timeline. then we walked through a timeline that that transition from it's allowable to you have to support it. james, can you --

>> we identify in the order of public safety value that it would have to include that kind of content in alerts themselves. we seek comment on technical perimeters that should be paramd be associated with the multi media and alerts as well as on appropriate type compliance program. >> the pictures. >> right. >> so, specifically, with respect to multi media, the kind of content that we will contemplate including thumbnail sized images and hazard symbols, informational symbols. >> that's multi media sent over the data channel as an included part of the alert. we, after 30 days, now will allow the inclusion of a link to images, which we think will be very important. while it won't be that the alert pops up the picture on your screen as soon as you look at the alert, you'll with one click

be able to get to the picture. and that we will make allowable 30 days after -- 30 days after it. >> so with respect to embedded references, it will be permitted to include in alert, 30 days federal register and required to provide support for the notification for register. >> did that answer the question? >> i think so, i'm actually asking it for paul and he sent my -- >> paul is proxy. >> thank you. >> did you have something on that issue? >> yeah, go ahead. >> just to be clear, he said images and video. >> james answered the question first about multi media. that's part of that multi media piece where it's allowable, but we defer to the future notes suppose we'll make it on details associated with videos.

>> got it. >> that said, there would be nothing that would preclude with the embedded links to have alert originator host at that link -- that video clip of something. >> are there any restrictions on where you can link to. >> we leave those details to work that we will do in its limitation with public safety community, clear there's a number of considerations to make sure we do that in a safe manner that -- that has the right to very confidence between alert or ring nater -- originators. >> they do not allow video to be included in the alerts themselv themselves. >> does the order require -- during the presentation it was

referring to allowing carriers to deploy the device based geo targeting as soon as practical. does that mean just -- if it's okay you do it if you don't have to. does the further notice, is it looking towards moving towards that in the future. >> yeah, this is part of our thought process, let's make it available as soon as practical and so within 30 days we believe that the rapid advancements have been made and the ability for messaging, in general, to consult the location based services within the phone, that it's becoming a very useful competitive feature between phones. we want to make clear that we appreciate and applaud that kind of effort.

>> we see reasonable compliance time frame it would be for that they match the target area and the dates we see coming down 42 months the federal register or 24 months from the data that standards are completed, whichever is sooner. >> that's an important key point we won't require it, but the requirement that we expected to find in the future notice to exactly match, we think would -- while being neutral, it will drive the need for solutions like device based alerting or it could be by then we're so good at 9 t 11 location that it could mean it that way as well.

>> you just said it will be technology much wall. does the item contemplate any type of specific technology for the improved go targeting. >> this item does not. and we are -- have been working for some time now on improved geo location associated with 911 and in that proceeding and the engagements since there are no for that proceeding with the industry, we see the e ver jens of some wonderful new technologies that will make geo location devices at scale across providers much more achievable and we think that that will have a complimentary effect, useful effect for this item.

>> questions, anybody. >> okay. then we'll do the media bureau for video programming diversity, any questions? great. >> questions about the programming item. >> sure, does the item define what an independent programmer is, is that anybody not connected to an mepd or any large programming entity or how do you describe that? >> it's a notice so it proposes a definition for independent programming. >> can you share what the definition is. >> essentially, it's someone who is not linked with a major studio, don't know exactly what the wording is. it's not only independent for

but also independent from the major studios. >> got it. >> is there also consideration of some kind of rule that will require paid tv companies to have a certain percentage of the content they carried independent programmers or was that left out. >> no, that's not proposed. >> can you give a little bit better sense of what kind of questions you're asked? >> we ask very questions in the noi and what we've identified are two sets of issues with respect to contract provisions on which we've made specific proposals. one is unconditionals and the other is unreasonable adms and what we've said is that we don't propose to forbid any clauses that relate to putting programming on an alternative distribution methods, but we want help in defining those that are unreasonable because we did find in the record that independent programmers say that these adms are a great obstacle for them in getting their

initial carriage and also being able to get additional carriage over the top. >> i guess i was under the impression that how long would those at the mpr muzzle ask sort of questions -- >> yeah, we don't have a specific question on bundling but we've got a lot of record input and the possible effects from programmers and we've asked additional questions on that? >> what sort of additional questions are being asked? >> essentially what effect there may be of bundling practices in eliminating the opportunity for independent programmers to get carriage. some of the suggestions we've had there may be capacity limitations so if they're required to carry large bundles, they may not have room for independent programmers. there have been some suggestions that it may be a financial matter that if they're carrying channels that they might not

otherwise carry because of bundling restrictions that might not leave the money to be able to carry additional programmers, that's the kind of questions that have been raised in the record and that we pose further in the notice. >> thanks. >> hey, everyone, just a brief statement from me and then i don't know mr. morelli. with respect to the set top box proposal, to me the proposal doesn't need more time behind closed doors, it needs the public's input for both legal and policy reasons and that input can only happen if the commission considers its proposal in the context of a further notice. and that's why i believe the majority should release the red

line that was circulated at 9:00 p.m. last night. we need to let the public know what the fcc's proposal is and provide informed views on it. so let's unlock the plan, with that i'm ready for any questions you may have. >> can you tell us anything about what was in that version. >> yes. >> please do. >> no. [ laughter ] >> okay. did it contain a licensing body of any kind? still not going to do it? >> unfortunately i can't. but i think this illustrates the importance of open and transparent process. this process we heard about a couple of weeks ago can only be such if the american people have a chance to have a seat at the table. >> can you tell me when you found out it was going to be pulled and how you were going to vote on it before it got pulled? >> i found out about it at

10:00 a.m. this morning. >> around 10:00 a.m. >> i couldn't help but notice that the joint statement didn't include you guys from chairman wheeler and the two democratic commissioner. should we read anything into that are you not prepared to support the item if you can get it to the place. >> that means you're having any kind of conversations on the item, notwithstanding the pledges of bipartisan deliberative discussions that would occur, we've had none. so if there was conversation the chairman alluded to late last night, i had zero. we actually were told by the chairman's team that when we made suggested that it's to the last document, not to this document, the previous document we made and talked about previously things we want to see happen. we made specific requests and we were told that unless they were included in commissioner -- the other two democratic commissioner lists, they would not be included in any form,

there was no conversation about that. they were immediately ignored. i don't know how that's deliberative and i don't know how that's inclusive of any of our thoughts. unless they propose them and we just happen to agree with their thoughts on our list they have been overlapped. then none of our thoughts mattered. i'm having a tough time. at the same time some people are, you know, have argued that i'm the problem with bipartisan ship at the commission. so it's a very interesting dynamic we have. >> hi, 360, do you think there's any chance this doesn't get done this year? are you pleased to see a delay? >> i'm pleased because i don't think the document itself is ready and i've suggested a number of changes to it. i'm never pleased that the -- we want the document to be in the best form it should be in and whenever it's ready. i have no clue in terms of the timing and have not been part of any discussions this morning.

i've learned the same time they called this just before the meeting to say they're going to get pulled so let's hope so. >> to me the lesson of this particular episode is bad process yield bad out comes. if the commission adopted a open trance parns and bipartisan from the get go. i have to think what you saw tran transpire today and last night would not have occurred or would have been mitigated. we've been excluded from the process, we put our proposals on our internal e-mail chain and said, look, here is a way forward, we think, we would like to get your input. this is all too typical, our suggestions were just dismissed out of hand. >> can you be a it little bit more specific about when you offered up your proposals for the item? >> speaking for ourselves, it

was, i want to say, it was over the weekend. it was not this week. i think it was sunday. maybe saturday. >> i've got two quick questions, the first is can you speak at all to what your way forward was, it wasn't adopted by the leadership and then the second one is for commissioner riley, you alluded to this, you were essentially accused of being partisan strife by signing democrats. and i'm wondering if you regret the comments that were brought up at that hearing as evidence you were contributing to african atmosphere and second if you've had any conversation about the senator about those concerns? >> the first question was what your -- what was your way forward on this item? >> here -- yeah, i can't get into the details. what i can say it would have been consistent, i think with our legal authority and would

have reflected largely where i think the marketplace is evolving and, if you'll get some of the previous statements i've made, what i suggested would not be a surprise to you. >> i think fundamentally it is to get the commission out of -- the placement between programmers and distributors and multiple layers and multiple parts of the item. still, you know, this licensing entity commission still has its tent cals in that and i don't believe it should. so i would like to, you know, those are two areas that i've identified as part of my testimony and set of commerce committee. more specifics, there are a bunch of different other things that have come forward that are lesser known but still need to be addressed, in my opinion, we a v to see if there's any willingness. during the second question i'm happy to address. i didn't find my comments intended to insight partisanship. i said to general nelson that

wasn't -- that i wasn't tried to an tieg niez or inflame, i was speaking what i think were inaccurate. this interesting process we've had here that were not included and yet that's -- that i shouldn't be upset about that in some form. you know, i have not talked to the senator since the hearing, but i think my proof is that i work on all items and was happy to work on this item, if included. so i'm one of the sources of, you know, we had a good dialogue on foreign ownership, i've been pushing hard op that and try to get us forward. team tell con did a ton of things that i would try to find a bipartisan agreement on. >> do you feel the language that you used at the time, forgetting some of the substance of your concerns, the language you used suggesting that democrats could

be trusted whether that's on the hill or here, do you think that was the right language to use? >> i was repeating a phrase. it's not a long -- it's been used for decades. and i just restate in it. that wasn't my phrase. i was repeating it and it went to the heart of the fact that in multiple items, you know, since my time has been here my colleagues have backed away either the morning of or right up to delayed meetings, you know, it's problematic part of this i said to the senator, part of my commitment to committee and to him was that i'll keep my word and that you can trust what i've said. i think i've honored that, i don't know that everyone else has done that. >> o'reilly, you've emphasized today that the team tell con review needs to be completed. i recognize that you're in the minority.

do you have the sense of the status of that review and do you think a final vote can take place this year. >> i think the record is complete on that item and we can move forward. i don't have idea of a timing for that or any of the other items, potentially. >> is there any census to whether the parties are stalled or grid locked over the proposed changes. >> i don't get that impression. i think there's quite a good deal of agreement on the item. there was, you know, certain some administration i thought were not reflective of the current situation and may be a little unnecessary in protective. i think there's a way to get to home, in my opinion. in the coming months. i just don't control the agenda. >> thanks. regarding the global star order, can you give us an update on your status on when you think you'll make a final decision.

>> sure. i don't have any new data or information to provide on this situation. you can see from my exparties i continue to have conversation with anyone who is interested in coming in. i don't have any idea of the timing. i don't know that it's any different than last month. >> the two of you voted no on all of the personnel items, can you give -- which we don't know what they were and they'll be the ones to tell us. can you give us any insight at all as to what there would be about personnel item that will cause you to do that. >> we can't get into the merits of any particular item. what i will say is that the term unilaterally and without consultation changed the process and, that, at least, i think informed our decisions, or at least my decision, i want to speak for commission on that. >> i can agree. i said racist is part of my senate commerce hearing testimony that's available. that you could see that -- submitted, you know, here is

unilateral decision, we're changing the process and here is how it's going to be resolved, ever. i asked can we do some of the same things from any of the process, he agrees with a number of the changes i proposed, so there's a great deal of agreement in that universe. if you can do one, why can't you do some of the others and that's falling on deaf ears. >> it can be a traditionalist across the board. >> can you explain what a 99:00 p.m. red line means, at the chairman's office, suggestions from another commissioner or what is that document that you have out there. >> so, typically, what will happen is that the bureau staff in charge of drafting particular item will send around to the five commissioners offices a red line. so you have the black letter document that was originally

circulated and here are all the changes we made that are quite literally in red and microsoft wor word. >> after the red line was circulated, was any other changes suggested by any commissioner or offices? >> trying to remember. this was circulated around 9:00 p.m. i don't think so. >> i'm following up. >> yeah, me too. >> just for clarity, for it to be a red line that means that somebody has proposed it and the chairman offices allowed it to be in the red line. what happened you all propose it and they never show up in red, is that right. >> in the theoretical case, what will happen is the particular commissioner's office will say

we suggest changes a, b and c if they have both. traditionally what happens they'll incorporate changes a and b into the item, then the item once circulated, either within the document itself it will say -- you'll show the red line changes and there will be a common bubbles included at the suggestion of the commissioner or within the text of the e-mail in which the red line is sent, they'll say do these changes reflect changes made by the commissioner act. >> they haven't gotten a certain number of votes yet. >> yes and no, typically, it will be the case that it was incorporated only if it's three

votes. >> not necessarily, no. >> in addition there was one particular change one that was not made at the suggestion of any commissioner, or at least no commissioner suggested it on our internal e-mail chain. we're curious about how it ended up there. >> sometimes they'll have an idea or concept and the red line is intended to reflect those wording to get to see how one would actually function and read it in context of the other paragrap paragraphs. >> was the t p.m. red line the first new version of the item you've seen since they announced that they were circulating to everyone when they put out the fact sheet. >> there was a circulated version and there was another one, i'm trying to think. i can't remember when it was, that was circulated.

>> i went to bed -- i was in bed by 9:00 last night. this baby thing is just killing me. >> yesterday, you know what i mean. >> it was a few days ago. >> you said a few questions ago the sec still had its tent cals on the licensing board to clarif clarify. >> i didn't get a chance to read the 9:00 p.m. document, i was already in bed.

so i believe that there they're still have a role in that equation. it is different than previous versions, but it's still involved, in my opinion. >> and that includes the one that was just referenced a few days, week ago that that was still in there as of a week ago. >> that's my understanding, like i said, i haven't read that document. i was doing statements this morning, but my thing it hasn't changed and so the last version i saw i still had a role for the commission, you know, it's arguably that -- some would say it's a backstop. >> both of you sort of raised the mission yeeks on that spreading into general regulation. are there particular conditions or terms of the charter conditions that you see as more likely that the fcc would try to implement? what are the ones that seem most dangerous from your standpoint? >> i think if you look at my

incentives, all of them. -- it was pretty clear that the agency was forcing that upon the parties through the transaction because it was specific, but because it was forecasts a policy direction that they would like to impose upon the entire industry. and i think that is good example of -- i think a particular majority would like to impose sooner or later. >> i agree, i think the difficult thing about the conditions we had no involvement in them until they were sent around. so we weren't part of the formation of them, at least -- yeah we weren't part of the formation of them in any form of fashion and now they're being implemented into some other items. the record reflects as it relates to the particular merger and what people commented about it. not the industry as a hole or all the players that may be involved in it.

>> this is a merger proceeding where the american public doesn't get to have a say. so, essentially, you have the department of justice saying, we want you to agree to these conditions. the sec then says we'll approve the deal to. the agency will say and sometimes have heard from up on this, we agreed to it in the charter transaction, let's apply to everybody, it's only fair. we did it to these particular companies, we should do it for everybody. that's how the administrative process should not work. if it's a good idea, tee up in a farewell in noticed proposed rule making we propose to do the following thing. that sort of shoe horn into, you know, the regulatory framework every other company which never had a say in the original proceeding. >> i would add to that and i referenced in my statement, you

know, charter agreed to those circumstances, they were party to that. the rest of the industry wasn't party to that item, so, you know, they got something for it. you can say it was good or bad or whatever they made an agreement with those conditions and accepted them, nobody else has. >> this was sort of being forced. it's an mpr process, there's public input right there, though, isn't it? >> well, in the sense that the entire -- the entire foundation was this the charter merger. you heard from the dice today, the charger merger we were forward thinking when we proposed this condition. that's part of the original charter order itself. >> i think i've said this before and i'll say it again, you know, we can call mprn, it's a prel e prelude. these are formalities it's a matter of months before we see the final out come, tentative

conclusion means that's what the item is going to say. i think there are definitely exceptions to the general rule, but the general rule applies, what you see is what we're going to get in a matter of when they'll pull the trigger on that. >> if you have this 9:00 p.m. red line with no new suggestions from commissioners, why wouldn't there be three votes today? >> that's a very good question for members of the majority. >> i was not party to any conversations last night or this morning regarding any of that, so i don't any insight for you. >> you referred earlier to an

item or provision in the 9 t p.m. red line that had never showed up before and for which you had no kind of chain of custody or whatever. what did it provide for? >> unfortunately given my understanding about the rule -- the information that i can't get into what it was, were you surprised at its effect? >> what would its effect have been? >> want to know if you have any updates on the lifeline

investigation that's been kind of on going? >> we've sent out a number of letters, as you know, to state commissions and others, we've been in the process of receiving responses, they recently submitted responses, we were taking a look at that information and trying to synthesize it and trying to figure out what the next steps are and so we're in an going conversation with all of them, including folks within the building, we've reached out to the enforcement building to see if there are any less sons they draw from the data we've compiled so far. if so, how can we implement some sort of fcc bed practices or other actions to make sure that there's wide stewardship of the funds. >> this singular reception of a particular company that you're referring to, do you think that had a effect of delay that occurred today or no. >> honestly, i don't know.

i red the red line that came out last night and we went to bed, woke up this morning, we were working on a statement and found out at 10:00 a.m. these were from consideration. we had no -- i had no insight whatsoever into what was going on behind closed doors. >> so this singular exception, can you at least tell us, does it involve -- like, what side of the ecosystem are we talking about, the third parties. >> that's -- i can't get into it any more. if the commission agrees to release the document, as i think they should, then you'll get all the insight into that. >> do you think they will? >> no. >> i would say that the pressure is building, both in congress and within the community to make the documents available so we can all have a conversation on

what the specific texts is, maybe it's not immediate, but i think it's increasing. i think we saw a letter this week from a number of democrats on the hill who sought the document be made available. so i think you're seeing an increase in a number of people whether it's collectively we should make the documents available. i don't know if it's immediate, but i think it's growing. >> anyone else. thanks a lot.

the next president making appointments to the supreme court of the united states will be president donald trump. >> with hillary clinton and the white house, the rest of the world will never forget what they've always looked up to the united states of america. >> c span's campaign 2016 continues on the road to the white house with the vice

presidential debate between republican governor mike pence and democratic senator tim kaine tuesday night in virginia beginning at 7:30 p.m. eastern. at 8:30 p.m. brief debate briefing. the 2016 vice presidential debate watch live on cs, pan, watch live on any time on demand at cspan.org and listen live to the free cspan radio map. >> leading up to tuesday's debates between senator kaine, we look at past vice presidential debates this saturday night on cspan starting with the 1984 debate between new york congresswoman. >> you can walk around saying things are great. if that's what we're going to be hearing that, i wef been hearing

that on those commercials, i'll be coming one woman to squad start, let's start tonight. >> they delivered 21.5% interest rates. they delivered interest rates that were right off the charts. they delivered take-home pays checks that were shrinking, and we've delivered optimism. >> the 1988 debate. >> i have more experience than many others that sought the office of vice president of this country. i had as much experience in the congress as jack kennedy did when he sought the presidency. >> senator, i served with jack kennedy. i knew jack kennedy. jack kennedy was a friend of mine, senator, you're no jack kennedy. >> and the 2008 vice presidential debate between delaware senator joe biden and

alaska governor sarah palin. >> let's commit ourselves just every day, joe six pack and hockey moms i think we need to ban together and say, never again. >> reporter: the middle class needs relief, tax relief, they need it now. focus on change with barack obama. >> watch saturday night on cspan.org and radio app. >> we well dock you all to the senate foreign relations on east asia, the specific and international cyber security policy and 114th congress. i want to thank the senator for

his cooperation and support for holding this hearing and it is much appreciated. this committee has done a great amount of work on north korea. thank you to senator menendez and my colleagues, all of us for the work that we've done on north korea. north korea just conducted its fifth nuclear test, which is the regime's fourth since 2009. it's the largest weapon they have ever tested yet. it's explosive yield of 10 kilotons. it represents a grave threat to global peace and stability. and direct threat in the immediate future. while failure to stop has been a buy partisan venture, this administration's policy strategic patients crafted under secretary of state hillary clinton has resulted in the most rapid add advancement of mass destruction. as it was editorialized.

the policies since 2009 strategic patience has failed. they're mostly consistent -- we're now witnessing the consequences of that failure. nuclear experts have reported that north korea may have as many 20 nuclear war heads and potential to possess as many 100 war heads in the next 25 years. james clapper stated that north korea has expanded the size and sophistication of ballistic missile forces from close range to intercontinental and committed to developing a long range that is posing a direct threat to the united states. this regime is one of the far most abusers and maintains and men, women, and children are confined to atrocious living conditions and tortured, famed and killed. on february 7, 2014, united

nations found they constituted a crime against humanity. we also know that he's quickly developing cyber capability by sony pictures hack and repeated attacks on the south korean and communication systems. according to the recent report, minority korea is emerging significant actor in cyber space with military gaining the additions to conduct. given the record of aggression from north korea and effectiveness of this administration's policy. this congress came together on february 6, 2016 to pass the policy and enhancement act. this legislation which president obama signed into law on february 18th, to 16 was moe men tus achievement.

i hope to hear from the administration today regarding its records compliance with the law. i hope to hear detailed examination of the people's republic of china's record with council resolutions regarding north korea whether beijing has utilitized any loopholes and what the united states has done. ash carter stated on september 19, 2016 the department of defense are standing 24-7 to defend against the threat with all aspects of extended deter rent capabilities. we must repeat these often to our allies and back them up with

actions. we must continue to show demonstrate it will bear a heavy price for any aggression. we must expedite the placement or thadd and the republic of korea and i want to thank our partners and soul and commitment to this capability enlight of the pressure from beijing in moscow. we must build unilateral. including closer high level and joint missile defense exercises. we must explore possibilities to put additional as state sponsored terror, stripping of the united nations seat or

global trade embargo. both to guide the actions of this administration as well as set parameters, with that i yield to my good friend and colleague. thank you for calling this hearing. it's been a pleasure to work with you on this subcommittee. clearly korea presents one of the greatest challenges. to the two witnesses thank you. i know we had to adjust schedules and thank you very much for being willing to be here today to share this your vision as to how we can be more effective regarding the policies concerning north korea. this committee has taken action as the chairman has indicated and congress has passed legislation giving additional tools to the administration to deal with the activities of

north korea, including its most recent test, united nations is taking action, they've passed security council resolution 2270. it was our hope that china working with republic of korea, united states, japan and others we'll be able to put pressure on korea to change its behavior. that has not happened. so despite all of our efforts, the current policy is not deterring north korea's activities in acquiring greater nuclear weapon capacity. the question today is what more can we do? how can the administration working with congress provide the leadership internationally to change north korea's activities. we know we need to have more effective action by china. what will it take to get china

to really exercise the leverage it has to change that behavior. it presents not just a security challenge to the korea, not just the security challenge to that region of the world, but directly to the united states, what plans do we have in order to protect the security of our allies as well as our own security as a result of north korea's activities. these are question that is we want to explore today. we have two talented people that have given public service over a period of time. we thank both of you for that and we look forward to sharing your observations as to what we can do to prevent north korea from destabilizing that region and presenting security threat to the united states. >> thank you, senator.

and thank you to the witnesses for being here. i would ask our distinguished witnesses to keep remark it is to no more than five minutes. our first wrns who serves as the assistant secretary of state for east asian and pacific affairs. mr. russell? >> thank you. >> chairman gardner, ranking members and members of the subcommittee, thank you for holding this very timely hearing on north korea and thank you for your consistent bipartisan support of u.s. asia policy. the threat posed a serious challenge to the last four administrations. today we're using all of the tools at our disposal, including tools the congress has made available to us to counter that threat and to roll it back. our strategy is based on

diplomacy and on pressure. we deter north korea in our alliances with south korea and japan. and we strengthened our alliances and our defense cooperation with both those countries to an unprecedented degree, we have expanded our deployments, our exercises and our weapons systems in order to meet the growing thread. diplomatically, we've united the world so that north korea has denied regular access to the international system, so that minority korea has isolated and widely condemned, but at the same time we continue to make clear to the north that we're ready at any time to engage incredible negotiations on denuclearization and offer path to security, prosperity, respect

the path that others like burma have chosen to take. the third component of our strategy has been pressure. and the tremendous pressure that we've applied through both multi lateral and national sanctions has generated serious head winds for the dpr regime and significantly impeded its ability to generate desperately needed hard currency to proliferate arms or nuclear material, to attract international investment or economic assistance or to extract concessions and aid from the outside world. together with our partners in response to the latest nuclear and ballistic missile test, we will develop a new un security council resolution that squeezes north korea even harder.

together, we will expand and coordinate our unilateral sanctions and impose escalating costs on north korea. until it agrees and to comply with its international obligations and commitments. together we will shine a light on the e gree jogregious human violations. together we'll defend ourselves and allies against north koreas threatening behavior and make clear that there's a high price to pay for provocations. mr. chairman, our strategy has insured that kim jong hun has nothing to show. yes, he's made holes in the ocean with missiles, yes, he's detonated nuclear devices and

holes in the ground, which are bad things, but it has netted him nothing in terms of what north korea has indicated its need. he has failed to extract material or political benefits from its threats as president obama made clear. we will not reward bad behavior and we'll use all the instruments of national power to defend our homeland and our allies and threats against north korea. it may well be negotiating an end to nuclear program is the last thing on earth that he wants to do. if so, we're determined to show him it's the only viable option, that only negotiations offer him a pathway out of danger and isolation. i thank the committee for your attention to this political challenge and with your

permission would turn to my colleague, thank you. >> thank you secretary russell, our witnesses who serves as coordinator for sanctions policy at the state department position he's held of 2013, served in various distinguished positions including assistant secretary of state for european and european affairs and special assistant with the president and senior director at the national security council and also as united states ambassador to pola poland. thank you for your service and look forward to your testimony this morn. >> thank you, chairman gardner, ranking member. i'll continue where my colleague left off, sanctions are key component of our strategy and the sanctions applied to north korea to date have created significant problems for the regime. because sanctions work over time impact accumulates, the

administration and close coordination is examining our sanctions, tool kits and identifying ways to improve their efficacy. we're working through the um through our allies and nationally. and this has been a year of intensifying pressure in all three areas. security council resolutions play an important role because they have the power to impose universally binding sanctions. the five previous security council resolutions on north korea between '06 and 2013 targeted north korea's missile and nuclear programs. they did what they did, but their targets were narrowly focused. in march 2016 after the january 2016 nuclear test, security council resolution 2270 imposed for the first time measures targeting economic activities

generally that supported the regime broadly, not just revenue streams directly connected to ballistic missile programs. this is the first time, um, with the support of all the security council, permanent members including china took this step, that crossed the line in a good way. in addition, congress and the administration after -- especially after the january 2016 nuclear test worked together to adopt broad domestic authorities that operate on the principal that we must go after the revenue stream that support north korean regime. in sanctions as the -- as the saying is as use to be said in washington, follow the money. was signed by president obama, we have vigorously used its principles and requirements. the administration is

implemented the act including by designated kim, himself. most recently on september september 26th. the treasury department designated four try cheechinese nationals consistent with the mandatory sanctions in the act, that was a significant and hopeful effective step working with partners and allies around the world and increasingly the european union, we are encouraging and pushing when necessary third countries to curtail their own economic ties with north korea. we've had some good results. we have essentially shutdown the operations of north korean ocean maritime management company, its

shipping line. we've restricted the landing privileges. several governments around the world have imposed visa restrictions on north korean passport. south korea closed the case. taiwan halted imports of north korean coal. there's more -- there's more to say about this, but there's also more to do, china is, by far, north korea's major economic partner and north korea's coal exports, mostly to china, generate over a. we are working to curtail north korea's ability to expert coal and ironer and limit its foreign currency earnings.

. secretary kerry affirmed last week, that every koun friday has a responsibility to vigorously enforce u.n. sanctions so that north korea pays a price for its dangerous activities. we intend to pursue a global pressure campaign on north korea more generally and urge necessary push other countries to join that effort and i look forward to discussing this further with you. >> thank you, we'll begin the questions. i commend the administration for finally designated a chinese entity and for chinese individuals this week as you mentioned in your opening statement this week for violations, i do wonder if these designations would have taken place without the studies, the ground breaking work and released by the center advanced defense study and asian institute that publicly identified these networks and received widespread media

coverage had it not have happened without those studies. it's my hope this will send a strong action and all of the enablers. it's also important to see the change in the administrations work and policy as a result of the heavy involvement from congress beginning with the enhancement act passage and continued oversight. this round of december isignati though, should scratch the office. stopping north korea incorporated harvard and m.i.t. found that the trading companies managers have shifted their strategy by one hiring more middlemen who can more effectively handle logistics and doing business with foreign firms operating in china, number two, taking up residents and embedding themselves on the mainland which increases their effective, increasing the use of

embassies as a procurement. on september 16th, 19 members of the senate sent a letter to the president and i asked -- i'll insert this into the record, but i'm going to start with some questions from this letter sense to the president. how many investigations are ak tiff and currently on going pursuant to the north korea sanctions and policy. >> we're current and we've sent out all of them that were required the to do so. and frankly we appreciate the opportunity. the administration and the congress are moving in the same direction and the degree to -- to the degree we send a signal

of a united american position, the stronger we all are. so, i thank you for that. treasure department, state department are active. >> we are working -- treasury colleagues are working diligently and may i say aggressively in tracking down violators of sanctions both u.n. sanctions and american sanctions, parts of the state department, particularly, my colleagues who were nonproliferation have their own stream of activities and investigations. they they follow ships, they do this in great detail and i can assure you that they are aggressive. i can't give you a number of specific investigations but there are a lot of them, we

follow both public material, you mention one there are others. we also use intelligence information. we are in a forward leaning mode. >> how many of these -- these investigations place, are of chinese entities or individuals? >> i don't want to get into specific numbers in this session, but let me say this. because it's a -- it's an important question. and comes to the heart of the matter. it would be best if china itself came to the conclusion that it needed to put increased pressure on the north. china has -- my colleague knows this better than i do, but china has expressed concern about, and opposition to north korea's testing especially. so the best option is if china does this itself.

it would also be useful if chinese banks and companies understood that increasingly dealing with north korean companies, especially those that are sanctioned, is going to be risky. frank frankly, not worth it. the best sanctions are those that do not have to be applied. because the threat -- the credible threat of sanctions acts as a deterrent. treasury's action -- well, the u.s. government's action earlier this week demonstrates that we are in earnest. and i can assure you that we are. there is more we could say in a classified setting. but i think you understand the direction that we're headed. >> let me just ask this before i turn to senator cardin. maybe a simpler way to ask it

is, are additional chinese firms under investigation? >> we are investigating -- treasury and state are investigating a number of countries around the world. i'll put it this way. there are no limits, and there is no administration red line of exempt countries or companies. we go where the evidence takes us. >> and so i think the answer is, yes, additional chinese firms are under investigation, is that -- >> i wouldn't argue with you. >> thank you. senator cardin? >> once again, thank you for your testimony, for your service to our country, both of you. secretary russel, i agree with you that we've done a lot in leadership on imposing global sanctions against the regime in north korea. and it has had a major economic impact on north korea. there's no question about that. but it hasn't worked. it hasn't worked.

north korea continues to accumulate and enrich materials. it continues to develop delivery systems that could threaten not only the region, but the united states. ambassador fried, you mentioned countries that have been very helpful to us. and we appreciate what australia's doing, and the republic of korea is doing, japan is doing, canada is doing you, and now you even mention the eu. but you did not mention china in those countries. in fact, china appears -- china appears to look for ways to weaken the impact of the security council resolution. we know about the livelihood exemption. you mentioned coal exports. how dependent north korea is on the export of coal. but this is perplexing, because china does not want to

destabilize the korean peninsula and does not want north korea to have its nuclear arsenal that it has, and it's growing. and it could do so much more. it could. so what can the united states do? i ask both of you, what can the united states do to get china to take the steps it could take that will put the type of pressure on north korea that they will change their behavior in regards to their nuclear program? >> well, thank you, senator cardin. i first started working on north korea 25 years ago, under the george h.w. bush 41 administration, and have a healthy appreciation of the challenge that's faced of successive administrations in dealing with north korea. and motivating china to

cooperate with us. the difference between 25 years ago and today is the difference between eight years ago and today, it's dramatic in the terms to which china has -- >>

>> coal exports are up, right? >> china's changing its behavior towards north korea. that behavior is manifested in the cooperation of the united states in trying to stem proliferation, in trying to enforce resolution 2270. and in creating barriers to north korea. >> but when you have the livelihood exemption interpreted the way china is interpreting t

it. >> and in pushing back against risk of either provocations, or proliferation. >> well, that's a pretty general statement. and i would like to drill down on it. and i'll ask you that you get the committee the information on how china's been so helpful. it seems to me that because of its economic relationship with north korea, its economic relationship with north korea, that all the work we're doing on sanctions globally is being compromised dramatically, because of china's economic relationship with north korea.

that doesn't seem to make any sense. >> we share the concern, senator, that china's purchases of whole and other economic activities create a lifeline that reduces the impact of global sanctions, and we are working directly with chinese senior leadership to encourage and purr suede them to tighten up and to toughen up for the purpose of bringing about a change in the dbrk's behave yo. >> thank you, mr. chairman. >> thank you, senator cardin. it's hard to believe china is serious about effecting change in north korea's behavior when they continue to share $1 billion worth of coal exports, and continue to share 90% of their economy. and i think senator cardin, what he was getting at was chinese cooperation, and are they going to be willing in this new

security resolution you're talking about, to narrow or limit the livelihood exemption in the new security council resolution you mentioned several times now? >> that is what is under negotiation now. we certainly hope so. and we're working to that end. at the same time, we are pursuing law enforcement cooperation, other forms of sanction enforcement and implementation in an effort to continue to tighten the net on the dbrk for the purpose of changing their behavior, and bringing them to real negotiations. >> perhaps we can get further into this. senator barrasso? >> thank you, chairman, for holding this hearing. and to senator cardin, i think you're absolutely right on all the issues you raised. i look at september 9th, 2016, defense secretary carter discussed the most recent nuclear test by north korea. he said, quote, china has and shares important responsibility for this development, and has an

important responsibility to reverse it. it's important that it use its location, its history, its influence to further the denuclearization of the korean peninsula and not the direction things have been going. secretary russel, is china willing to impose any consequences, any additional sanctions against north korea for this most recent nuclear test? and what specific actions -- because senator cardin said it's gem answers -- what specific actions for china to take in response to the nuclear tests and the missile launches? >> thank you, senator. i agree 100% with what secretary carter said. the president has met repeatedly with president xi jinping over the course of 2016, as recently as early this month in hongjo china. and very forcefully presented

our specific asks and recommendations in practical ways that china can enhance the effectiveness of sanctions through border controls, through limiting access to chinese banks, through limits on air coreo and other modes of transportation, shutting down north korea's cyber bad actors, including on chinese servers and soil. the list goes on. president obama met again in new york last week with premier li, and again pushed very forcefully. we have both strategic and economic dialogue in which secretary kerry, with his kou t counterpart, the state counselor of china have delved into this. and every level below that, we have worked directly with china to enhance and improve their cooperation and their

implementation. we are not fully satisfied. there is much more that we believe china can and should do. we look for ways to demonstrate that it is very much in china's interests to do more. and we have demonstrated, including through the decision to deploy thad system, that the united states and our allies will take the steps necessary to protect us against the threat posed by the dprk, even when those steps are unwelcome by the chinese. we've pointed out that the solution to their concerns about the behavior of u.s. military and northeast asia is for them to act more assertively, and changing the dprk's behavior and

ending the missile and nuclear program. >> mr. chairman, what we heard is, the president is, and i think he said pushed forcefully. but it has not been very effective. i want to talk specifically about trade between china and north korea. and you may want to weigh in on this. china is north korea's largest trading partner. china has worked hard to put loopholes and exemptions to many of the north korean sanctions that the united nations. it seems the way china is working. there is an exemption under the unsc resolution 2270, allows north korea to sell coal and iron ore. china continues to import north korea's coal. i ask, mr. ambassador, what would be the impact of a complete ban on china's import of the coal and iron ore, and is the administration working to this end to get rid of these loopholes and exemptions? >> yes, we are indeed working to address the problem of north

korean coal exports generally, and specifically to china. if in sanctions you follow the money, the money takes you to coal. it also takes you to some other sectors. but your question was to coal, so i'll stick to that. the most effective way would be, of course, to address this through a new security council resolution. nscr is generally accepted and legally binding. if that is not possible, there are other options. we can seek to convince chinese individual companies that it would be in their own best interest to avoid dealing with the most suspect north korean coal exporters.

and our actions -- the administration's actions on monday designating chinese companies demonstrates that nothing is off-limits, including this. i don't want to get more specific at this point, but the questions from you -- from chairman gardner are -- and ranking member cardin are exactly the right ones. and it is -- i take it as a good sign that those are the questions the administration is grappling with right now actively. >> let me ask a final question. i know my time is expiring. this year alone north korea has conducted almost 30 missile tests. double the number of last year. what are we hearing from our friends in japan and south korea about what's happening over there? >> there is immense and appropriate concern in japan and in south korea about the accelerating tempo of north

korea's ballistic missile activity. and a commensurate willingness to work closely with the united states to promote military information sharing, joint exercises, and a variety of other defense related programs that are increasing our ability to deter and defend against this significant threat. >> thank you, mr. chairman. >> senator menendez, and i want to thank senator menendez on much of the things this hearing is focused on. >> thank you, mr. chairman, for holding this hearing. and i want to commend you on your active leadership in this regard. and we've worked together on the north korean sanctions and policy enhancement act. and that is the vehicle we're using to try to push back against north korea's, not only promotion of its nuclear weaponry, but also my concern of proliferation as well.

and i think all of my colleagues, and what i gather, as i was having meetings in my office but had the tv on, asking the same questions, what do we need to do to get china. i must say that one of the things i'm convinced that we're unwilling to do, and it's from my experience as one of the office of the iran sanctions act, is to sanction the universe of financial transactions. because those would lead to chinese banks. and when we do that, that has some of the toughest and most consequential actions on iran. now, we have not pursued the financial transactions center as an element of getting those who want to facilitate north korea's actions, and creating pressure on them as the world created pressure on iran from

disengaging with it financially. so ambassador fried, have we, meaning the administration, contemplated the type of financial sanctions that we levied against iran, as it relates to those who would be doing business with north korea? and who would be permitting them access to their banking centers? >> we are looking at all possible points of leverage and pressure against north korea. and the north korean economy. we have abundant tools. you're quite right that the financial sanctions against iran, combined with the oil and gas sanctions, were powerful. so that there's no question about that. >> i didn't ask you about all tools, i'm asking specifically about these tools. it seems to me that we are

reticent to pursue the type of financial transactions, because they would largely lead to chinese banks. and so in the absence of doing that, one of the most powerful tools that you might have left to get north korea to observe international norms, and the will of the international community as expressed by the united nations is missing. why is it that the administration has not come forward and sought specifically that type of either tool or immement, if they think they have the power to do so themselves? >> we actually have sanctions. we have designated a number of north korean banks. we are now, and the action which the administration took on monday demonstrates that we are willing to take the next step of designating third country entities, which are cooperating with designated north korean

banks. so we have crossed that line, and we are actively looking and constantly looking at additional targets. >> the north korean banks -- which chinese banks have you sanctioned? >> well, this monday there were chinese financial institutions sanctioned by the treasury department. and i think you've got -- there's four chinese nationals, and one entity complicit in sanctions evasion. >> nationals is good. i'm talking about institutions. >> and an institution. this is a -- >> i'd like to know whether you have all the authorities you need to go after chinese banks that are engaged in dealing with the financial transactions that north korea would ultimately need? it seems to me if we're going after those banks, that that is an incredibly powerful tool. so if you can just explicitly tell me, do you have all the authorities that you need, and if so, is it the intention of

the administration to use those authorities against whatever bank, whether they be chinese or others, as it relates to transactions with north korea? >> yes, we believe we have the authorities we need. and yes, we are looking at all possible pressure points, including financial. >> if that's the case, the onus is on the administration for the additional authorities you obviously don't need. let me ask one other question. one of my main concerns is north korea's level, and mr. secretary, maybe you could speak to this, about sharing and transferring nuclear technology. north korea has successfully subverted sanctions and exported/imported controls through largely falsely flagging cargo ships. i want to get a sense from you what steps are we taking, what steps are our international partners taking since march to more rigorously monitoring the

strict control of the u.n. security council passed in march? >> senator, i would go one step further than the u.n. security council resolution, that because proliferation is a paramount concern of the obama administration, we are working through a variety of intelligence and law enforcement channels to significantly enhance the monitoring of dprk activities to establish telltales, and trip wires for the purpose of making it harder and harder for the dprk to successfully sell or transfer either technology or physical material, and try to ensure that we're able to detect efforts they may undertake to do that. that involves close cooperation, not only with north korea's

neighbors, but also ensuring that it is constrained in terms of its ability to move ships, cargo, planes, and people. so increased scrutiny, international airports, greater verification of passport information, the requirement of visas, as well as close government-to-government information sharing are among the steps that we're taking. if i could add, senator, to your important point about china. we are working our way through the suite of options in terms of steps that we can take, vis-a-vis china's behavior towards north korea. we've begun obviously with the goal of persuading china to take more and more action. in part, because china can do far more effectively and usefully from our point of view willingly than we can achieve indirectly through direct

sanctions against china. but we have, as my colleague dan fried mentioned, not balked at taking direct action against chinese entities, or people when the evidence is there. we make a point of bringing information to the chinese, and encouraging the chinese to act on that information, and develop it further in their own law enforcement, and security channels. they have abundant tools of their own to put restrictions on the dprk. i'm not in the business of defending china. we think that there is much more that they need to do. as i mentioned, president obama stood up in china and made that point directly and explicitly in public, as he has in private. but the fact is that the trend line of chinese action against dprk proliferation, missile and nuclear activities, and the

trend line of china's cooperation with the international community generally through the u.n. and with the united states on a bilateral basis is improving. >> senator rubio? >> thank you. mr. fried, i'm going to talk about this report. the recent study by the center for advanced defense studies, called in china's shadow. it's clear from this report that china is conducting $332 million in trade volume. the report identifies six companies. you discussed here the sanctions against one. why did treasury only designate one of those six companies? >> we are actively looking at all possible targets. i won't speak for treasury and its individual decisions. but in my experience, treasury is both effective and aggressive in identifying targets and

pursuing them. we have to have u.s. evidence to meet treasury's legal threshold. but i will tell you that we are in the mode of gathering information, and will go where the information takes us. i don't want to get -- >> that sounds like -- i get it. you're saying -- >> i don't want to talk about a specific company and a specific designation. at least in this session. >> why? they're out there in this report. i mean, they're named -- the world, and everyone knows who these companies are. there's not a mystery here. >> well, as a general rule, it's best not to talk about current investigations and -- >> that's true in a court of law. but -- >> not in an open session. >> that's absurd. this is a report that's out there for the world to see.

everyone knows this. this is not a secret. >> i'll tell you what, i can get -- i will consult with my treasury colleagues and try to get you whatever we can -- >> that's why these hearings are -- it's so hard to sit through sometimes because you get -- i don't mean to be disrespectful. i know you're toeing the state department's line on this stuff, but everyone can see what this stuff is. we're afraid to press the case against too many chinese companies because of the broader -- have the white house or state department asked to delay designations in law enforcement actions to avoid embarrassing china? >> not to my knowledge, no, sir. >> okay. because we have a department of justice indictment, criminal indictment lists transactions and millions of u.s. dollars going all the way back to 2009 where these front companies that served as financial intermediaries for u.s. dollar

transactions between north korean based entities financed by kkbc, designated north korean bank and suppliers in other countries, it was done in order to evade restrictions on u.s. dollar transactions. why did we wait from 2009 to 2016, why did we wait to act against these persons? the only conclusion one could draw is beyond the issue of sanctions, we have here the issue of pressure because of the broader situation with china and our foreign policy. and i've got to be frank, this looks to me like an administration that's saying, let's not go too hard on some of these chinese companies, because it's going to destabilize our broader relationship with china on a series of other topics. here's another point i don't understand. there are three times as many other persons designated by the united states than north korean related persons. i have no problem with there being a lot of iran related designations, but why are there more than north korean related

designations when in fact north korea has already not only developed weapons, but are demonstrating it, and using them in all sorts of tests? why the discrepancy? >> first point to make is that the administration's action on monday to designate the chinese banks was an important step. and as i said earlier in the hearings, we are actively looking at a number of tar gets. slg with respect to the numbers in comparing iran and north korea, iranian economy is both much larger and much more connected to the rest of the world than the north korean economy. and the north korean economy was, despite huge areas that are hidden behind the various walls of secrecy in iran, is generally more open.

that may have something to do with the numbers. but to answer what i think, senator, is your larger point. the administration shares congress' view that the north korean threat, and north korean actions including especially the recent nuclear tests compels us to intensify our pressure campaign working both through the u.n., with third countries, such as the japanese, south koreans, europeans, australians, canadians, and using our national authorities in a coordinated fashion to increase the pressure. we welcomed the legislation earlier this year. we put it to good use. and we intend to pursue north korean targets aggressively. >> all i can say is that what this looks like from watching it is that what we're basically involved in here is a provocation response cycle with

north korea. and you talk about the sanctions -- i know my time is up. you talk about the bill that congress passed earlier this year. but it was only until then, it was that we finally designated north korea as a primary money laundering concern. and again, this whole thing looks like to me a combination of things. this provocation cycle we've gotten ourselves into with north korea, you know, we're holding back on sanctions, they provoke news a different setting, and these cycles continue. north koreans played this brilliantly over the last few years. buying time for themselves to reach the point they've reached. and the other is, what this looks like is the united states is trying to -- it's holding its diplomatic fire, and it's sanctions fire on some of these issues for fear of impacting our relationship with china, and our fear of offending the chinese government or going after some of their entities. who are also involved in all sorts of other endeavors that are questionable. so again, mr. chairman, i don't

know why it's taken so long and why so little has been done. it's no surprise we're at the point we're at today. >> just one point, senator. you mentioned, your words not mine, the provocation response cycle. that is not where we're -- that's whot what we're doing. this year especially, working through the u.n. and other channels, we are in a position of intensifying pressure independent of a provocation/response cycle. we are in earnest. we intend to increase pressure on north korea. to do so, we also have to work around the world with third countries, and with the chinese, as my colleague pointed out. that is our intention. so i agree that a

provocation/response cycle, and staying within such a cycle would not be the right approach. and that is not our approach. >> mr. chairman, with your permission, i would just add, senator rubio, that if it were the administration's policy to tiptoe around china in dealing with the north korean threat, we would never have decided with the republic of korea to deploy the thad system. we would never have designated chinese entity and chinese national. we would never have taken the decision to send a b-1 bomber, or aircraft carrier to the korean peninsula. it is very much the case that we seek active chinese cooperation. we recognize that a change in china's behavior is a prerequisite to getting a change in north korea's behavior. the president, the secretary of

state and others have made it crystal clear, directly and in private to chinese leaders, and in public, that we think there is much more that china needs to do, and can do, and should do to tighten the screws on the dprk given their significant leverage and their special relationship. >> all those moves are important. but we're talking about sanctions here. and yes, we sanctioned one company. there are multiple companies affiliated with -- from china, china related companies who we have just as much evidence against. everyone knows who they are. when you look at how long it's taken to get to this point, and you look at the limitations that have been placed, where only one company has been designated so far, when there are other companies of equal status, and some are involved in even more of these sorts of deals, it starts to look like we're not trying to do too much too soon. this notion of a standard of proof, i understand about that. if you're going to prosecute someone in federal court. but from this perspective, it's a different situation. this is not even a secret.

the world knows who these companies are. quite frankly, they don't necessarily take great steps to try to hide it on many occasions because the interests of the chinese government beyond anything else is stability in north korea. they don't want to see a regime collapse. and millions of people pouring over the border. and the profit mode as well for some of these companies. we know who the companies are. there's no reason not to have moved faster. there's plenty of targets of opportunity and plenty of information out there about them. >> thank you, senator rubio. i remind secretary russel that under the sanctions act that we passed, these are mandatory investigations required, mandatory sanctions required, unless the administration provides a waiver to congress. at this point, do you intend to provide us with waivers of companies that you're investigating? >> no. >> and so why have we only designated one company then? >> as i said earlier, the

treasury department, the state department, and our intelligence community are all involved, engaged in investigations. as assistant secretary russel said, of course the preferred option is for china itself to do more as we think it should. a second option is to have chinese companies independently come to the conclusion that it would be a lot better for them if they avoided interaction with north korean companies. but clearly our actions on monday indicate that we are willing to sanction chinese companies who are evading u.n. or u.s. sanctions. so we're pursuing all of these avenues. >> senator markey?

>> thank you, mr. chairman, very much. we know that kim jong-un's goal is to die as a very old man in his bed. so that doesn't really work for him if there's an all-out nuclear war in that region, because he would probably not become a very old man. and so my concern here is the plans which are in place to use preemptive force against north korea's nuclear arsenal, or its leadership, which would actually increase the risk of accidental nuclear war in a crisis. recently south korea's defense minister informed the parliament that south korea has forces on standby that are ready to assassinate kim jong-un, if south korea feels threatened by nuclear weapons. he said this. south korea has a plan to use precision missile capabilities

to target the enemies, facilities, in major areas as well as eliminating the enemy's leadership. if north korea fears that south korea intends to use preemptive force to kill its leaders, then that could create huge pressures for kim to delegate control over his nuclear weapons to front line military commanders. and if north korea believes that south korea plans to preemptively take out its nuclear weapons, that could create pressure to use them in a crisis. both of these pressures could drastically increase the risk of inadvertent nuclear war on the peninsula. secretary russel, in your view is there a focus on a preemptive attack on the arsenal, and could increase the risk of nuclear escalation, as part of your strategy for the plans to

deescalate a military crisis so it does not spiral out of control and result in a nuclear war? do you foresee potential arrangements for crisis communications with the north korean regime to diffuse and de-escalate such a situation that could lead to an accidental nuclear war? >> the short answer, senator markey, is yes. we are concerned lest there be an es ka la tory cycle on the south korean peninsula. yes, we have in place very serious kourcht counterescalati in the alliance. the commander of the combined forces, general vince brooks, one of america's best soldiers, is, as his predecessors have

been, working with the rok military, and national leadership on a day in and day out basis. they're very tightly stitched together. and yes, the alliance has very specific plans to deal with a variety of contingent sis with a view in the first instance de-escalating and defusing. this has been a big part of our joint defense strategy. now, there's a lot of hyperbole and rhetoric in the way that certainly north korea speaks always, and the way that some south korean officials occasionally speak when they're either testifying or speaking before the press. i don't think that the comments of the defense minister taken by

themselves represent an intent on the part of the republic of korea to take provocative action. >> my concern obviously is how the north koreans react to it, whether or not south korea intends to do -- on the paranoia, in an individual or group of people that could then lead to an escalation. that's what we were always concerned about in the cold war between the u.s. and ussr. it was rhetoric that could be used against those who think nuclear weapons are usable. that's always a concern. and what we're seeing, actually, in following the 2013 north korean nuclear test, a poll found that 66% of the south korean public favored acquiring an independent nuclear deterrent after north korea's test in january of this year, a senior

south korean figure in president park's party suggested that south korea should acquire its own nuclear weapons, referring to our nuclear umbrella that we provide. juan said, quote, we can't borrow umbrellas from next door every time it rains. we should get a rain coat of our own. we should get our own nuclear weapons. how would you assess pressures in south korean society to acquire nuclear weapons? would you assess pressure inside of the japanese society for them to acquire nuclear weapons? and what actions are we taking to reduce the likelihood that they move in that direction? >> senator, i think that the pressure in the mainstream political society in either the republic of korea or in japan to contemplate the acquisition of nuclear weapons is directly

xhuns sur at with their faith in america's commitment as an ally to their defense and the deterrence or nuclear umbrella provided by their alliance with the united states. >> so you're saying they would have to believe that if there was, for example, a nuclear attack on south korea, that we would then launch a nuclear attack on north korea, they would have to believe that? >> put it the other way, senator. if the japanese and the korean public's and their leaders lost faith in america's resolve, in our absolute determination to use all of the tools of national security to deter and to defend against an attack from north korea, then yes, i think -- >> so how do you interpret this

poll that says that 66% of the south korean public favors acquiring an independent nuclear deterrent? does that not indicate to you that there's a lack of confidence in the american nuclear umbrella? that we would actually use nuclear weapons against north korea from there was such an attack, or even a biological attack on south korea? >> well, i can't speak to a particular poll. i think there's an ebb and flow among korean -- among the korean public. but certainly the concerns driven by north korea's pattern of, and tempo of testing is driving anxiety. however, steps by the united states such as the strong message of reaffirmation of our alliance commitments that president obama made in his immediate phone calls to

president park and president abe, the deployment of our strategic bombers to the korean peninsula, the plans for bilateral and trilateral exercises, and the other manifestations of america's unshakable determination to defend and protect ourselves and our allies, i believe keeps that kind of thinking still -- >> you're saying we're sending strong signals that we would use nuclear bombs on north korea, and that we're assuring the south koreans that they don't have to have their own nuclear deterrent because we would use them in the event that there was a nuclear attack on south korea, is that what you're saying? >> no, senator, what i'm saying is that we're giving enough confidence to our allies -- >> confidence that what? that we would do what? >> that our deterrence -- >> our nuclear weapons? our nuclear bombs? >> our willingness to utilize --

>> to use them. >> -- the full range of -- >> right. that's what i'm saying. we are giving them confidence that we would use nuclear bombs against north korea, is that what you're saying? >> i'm not going to say -- i leave it to the president to decide if and when the united states is going to use a nuclear weapon. what i'm saying is -- >> that's what i'm hearing you say. that's exactly the words you're using. you're not saying nuclear bomb, but you're using every other word but that to describe the use of a nuclear bomb? >> the way that, senator, that i think it should be understood is that the certainty on the part of the dprk, that the united states would either prevent their use of nuclear weapons or

retaliate in a devastating manner is an effective deterrent. and the credibility of the u.s. deterrent is such that neither government intends to pursue nuclear weapons. >> i guess what i would like to say is we should intensify our efforts to make sure there's no accidental situation that develops, that could increase tensions, that we're working very closely, that we're creating close communications with the north korean government in terms of the deployment of their weapons, so that we don't have that accident, and we don't have to ever have to use a nuclear weapon ourselves against the north koreans. because we don't know where that would end. thank you, mr. chairman, very much. >> senator udall? >> thank you, mr. chairman. and thank you both for being here. retired admiral mullen and former senator sam nunn recently made recommendations with regard to how to deal with the threat

from north korea. these included many recommendations for how to get north korea back to the negotiating table. how has the state department reviewed these recommendations, and do you believe that it is possible to restart negotiations? >> thank you, senator. i recently sat down with both admiral mullen, with whom i had previously worked when he was chairman, and who i deeply admire, and senator nunn to work through in some detail their recommendations in their report. i have been in touch with them during the process of writing the report as well as with other important members of the committee. i think that we see things in generally a consistent manner. the goal of the u.s. policy has been to try to engineer negotiations with north korea

over their nuclear program. on the simple grounds that that is the only peaceful way forward to achieve denuclearization. but the terms of those negotiations are very important. there's not only no value in talk-for-talk sakes, but the experience of the first bush presidency, the clinton presidency, the bush 44 presidency and our own experience has demonstrated that unless the negotiations are about north korea's nuclear program, and unless they include the discussion of iaea access and monitoring, north korea simply can't be trusted to honor its promises. what the north koreans have done

is to, number one, abandon the six-party talks, renounce the commitments they've made under those talks, reject and defy international law in the form of the u.n. security council resolutions. and continue their violations, while fitfully, occasionally offering to hold discussions with the united states about the withdrawal of u.s. forces from south korea. that's an utterly unacceptable basis for talks. but we have worked consistently to show the north koreans that we want to negotiate, that we are willing to talk, that the door is open to a process that can net them the benefits that were on the table in 2005, in the six-party talks process, which includes discussions about a successor agreement to an

armistice. that includes the process of diplomatic normalization, economic assistance, and so on. secretary kerry has gone out of his way, both publicly, but also in international meetings where the north korean foreign minister was present to emphasize our interest and willingness to negotiate. >> do you have any additional comments on that? >> no. >> how can we strengthen our monitoring capabilities to prevent north korea from obtaining nuclear materials and equipment that it could use to create additional nuclear weapons? does congress need to invest more in technology and equipment to better monitor such transfers? >> senator, monitoring the materials that go into north korea and that come out of north korea, monitoring the movement

of dprk scientists and officials who might be involved in proliferation is a top priority for our national security agencies. as it is for those of japan, korea, and i believe china. we're working to share information. we're working to tighten the safeguards and the monitoring. as for what additional funding authorities, or congressional action would assist that effort, i would have to consult with my colleagues in other agencies and propose they respond in a classified setting. >> okay. thank you very much. thank you, mr. chairman. >> thank you, senator udall. we'll go to a second round of questioning. i'll begin with senator menendez. >> thank you, mr. chairman.

ambassador fried, i pride myself on my preparation for these hearings. so i went back to my office after your answer. and i looked at ofax statement from monday. you said in response to my question, we just sanctioned the bank on monday. i read from ofax statement that they impose sanctions and ab industrial company and four individuals. is that company a bank? >> sir, it is a financial -- it is not a bank, it is a financial company that worked with a sanctioned north korean bank. >> it's different than saying you sanctioned a bank? >> yes, sir. >> you did not sanction a bank on monday? >> we sanctioned a chinese financial corporation. >> it's different than a bank. let me ask you this.

how many banks -- banks -- has the administration sanctioned as it relates to north korea? >> do you mean banks in general, or chinese banks? >> let's talk about chinese banks. >> a number -- no chinese banks. >> no chinese banks? >> not in china. we have -- >> that's my point. that's the point i was trying to drive at earlier. you have sanctioned no chinese banks at the end of the day. and they are probably the major financial institutions for north korea. what this company, as i understand, did was make purchases of sugar and fertilizer on behalf of a designated korean bank. it's a trading company, not a financial company. so when i take testimony as a member of this committee, i need to make sure that testimony is

accurate, because i make decisions based upon it. and i must say that the information you gave me is not accurate. this was not a bank. this is a trading company. and finally, i got the answer that i wanted to hear, which is what i knew, is that you sanctioned no chinese banks as it relates to north korea. and it is our hesitancy to do so that takes away one of the major instruments possible to change chinese thinking. i'm all for persuasion if you can achieve it. but when you can't, and north korea continues to advance its nuclear program in a way that becomes more menacing, and its missile technology, i don't know at what point we are going to continue to think that we can stop them when in fact they're pretty well on their way. and we allow them to continue to do so. and we don't use some of the

most significant tools that we have. so i'm disappointed that you didn't give me the right information. one final question to you, mr. secretary. we had a -- i think the chairman had a separate private panel that suggested that the chinese have basically created a preference over stability in the korean peninsula versus the challenge of north korea pursuing this nuclear power, nuclear weapons and missile technology. now, i'm never for a nuclear proliferation, but is that -- do you agree that that is the view that china has? >> senator, what i've heard xi jinping say repeatedly is that china's three nos are no war, no chaos and no nuclear weapons on the korean peninsula. so i think they have multiple

objectives that are in conflict with each other. and we see in part depending on north korean behavior and in part depending on the pressure, or the persuasion from the united states, some ebbs and flows, some shifts in the chinese from a bias towards maintaining stability and preventing -- >> in my mind, they're equally the same. when you have war, you have some degree of chaos. no nuclear weapons. there are some who suggest that if that's their dynamic, then allowing south korea to pursue the possibility of nuclear power for nuclear weapons changes china's dynamics as to how far it's willing to coach north korea. >> i think the chinese are very mindful of the risk that either south korea or japan might

distance itself from the u.s. nuclear umbrella and pursue their own capabilities, and that i believe ought to motivate china to redouble its efforts to push back on the north koreans. that's only one of many examples of why we believe it is so in the best interests of china to tighten up on the north to expand their cooperation with us. and to really abandon an old pattern of tolerating a significant amount of provocative and dangerous behavior by the dprk. the greatest driver of instability in northeast asia is north korea's nuclear and missile program. and the actions that the united states is taking and will take hand in hand with our allies, that china opposes, which china

perceives as somehow containing it are all driven by the growing threat from the dprk. secretary kerry has said again and again, if that threat diminishes, if that threat is eliminated, the rationale for the united states to take a more robust military posture in northeast asia goes with it. >> thank you, mr. chairman. >> thank you, senator menendez. i want to follow up on senator menendez's question on the issue of banks. i'm trying to look into the testimony. perhaps you can refresh my memory. the statement was made that north korea is exporting about $1 billion worth of coal to china, that is benefiting the north korean nuclear activity, is that correct? >> yes, that's our belief. >> okay. and so let's assume that $1 billion is coming in from -- give or take -- is coming in to north korea from china for the purchase of coal that's

benefiting the nuclear program. i assume they're using chinese banks, is that correct? for this coal? and the importation and payment of that coal? >> the north korean export of coal is certainly a large, and the largest single generator of foreign currency from the north korean economy generally. it's a slightly different question as to whether that money directly funds its nuclear weapons and missile programs. however, for the purposes of our sanctions, that difference, and because money is fundable, that money is not dispositive. >> are they using chinese banks? >> we are looking into exactly the mechanisms by which the coal

goes from north korea to china. i don't want to say specifically the role of banks versus the role of trading companies or other institutions. but we are looking hard and actively at the coal trade generally. >> so earlier in this conversation, i asked if we were actively investigating chinese entities. >> yes. >> okay. so we are actively investigating chinese entities. >> yes. >> so we should expect sanctions to be issued against a number of chinese entities, is that correct? and if that's not correct, then when will the administration be sending waivers to congress? and you said earlier that we do not anticipate waivers to be issued. >> that's true. >> so when can we anticipate these additional sanctions to be made? >> as my colleague and i said,

the best option, the most effective way to put sustained and sustainable pressure on north korea, which is our objective here, is to have china itself decide for its own purposes that this is where it wants to go. a second way to proceed is to convince chinese companies, including banks, that it would be in their best interest not to deal with sanctioned or sanctionable activities. the option of directly sanctioning chinese entities is available. >> and mandatory if they violate the terms -- >> well, that's right. what we're looking at is the most effective means to achieve this end. what we want -- our purpose is to put pressure on north korea.

the purpose of sanctions is to support a policy. my colleague has spoken of the policy. i'm just the sanctions guy. the purpose of sanctions is pressure. on north korea. we want to find the best tactics to do that. we are looking at all of the tools. that includes sanctions, that includes high-level discussions with the chinese. i look forward to being in touch with you, sir, with your committee about our thinking as this -- as this progresses. but i can tell you that this is not a go through the motions exercise. we're serious about this in general and specifically with respect to coal. >> then let me ask you this next question. has the administration designated any actors, entities

in north korea for their cyber actions? cyber attacks against the united states? >> not specifically for cyber. however, some of our designations are so broad, i suspect that they capture. >> do we plan to issue any cyber sanctions under the terms of the section 209 of the legislation? the north korea sanctions? >> mr. chairman, the administration did levy sanctions against a number of north korean individuals and entities in the wake of the sony hack under our own presidential executive order that preceded the adoption and the signing of the north korea sanctions act. we haven't yet developed a case

under the law for -- against north korean cyber actors. but we are working towards that end. there is no question that north korea's cyber activities, both those that emanate directly from north korea and from servers in third countries represent a serious threat to us and to others. we're on it. >> because, i mean, as reported this summer, north korean hackers steal blueprints for u.s. fighter jets. have they been sanctioned under the legislation, these actors? >> the intelligence and the law enforcement community and the u.s. government is looking at, and seeking to develop cases in order to sanction north korean actors for any transgression.

>> you talked a little bit about air koreo. is there designation of air koreo, believed it's engaged in activities that would make it eligible for designation? >> in this setting, mr. chairman, i don't want to discuss specific investigations. it is true that we and our allies have curtailed air koreo's activities and restricted its ability -- third governments have restricted its ability to land. i don't want to discuss in this session in an open session particular investigations. but we are well aware of air koreo's role in the north korean system. >> secretary russel, we talked earlier in the hearing about

united nations security council resolutions 2270. can you tell me a little bit more about china's implementation of 2270, particularly as it relates to coal? >> i'll make a -- >> maybe -- >> i'll comment and then turn it over to ambassador fried. the general comment is that i would characterize china's implementation of 2270 as incomplete, as a mixed bag. we have seen some clear indications that china has strengthened sanctions enforcement. that includes improved customs enforcement. the chin naes have publicly and privately asserted unequivocally that they consider themselves fully bound by the terms of 2270. but as i've said repeatedly, and

quoted president obama and secretary kerry as saying, we think that there is much more that they can do. i've had quite a number of conversations with a variety of chinese counterparts on this very subject, both in china and elsewhere. they point out the not inconsiderable challenges they face given the extent of the chinese-north korean border and the degree of commerce. and their concern about the livelihood and the welfare of north korean people. so they say. but right now, mr. chairman, i think our principal focus is the next generation of sanctions that we're seeking to obtain through a new u.n. security council resolution in new york, and that includes making some

adjustments to provisions under 2270, to address some of the problems that you have flagged. >> ambassador fried, i think in our briefing material, given every member of this committee, it talked about the -- china's announcement number 11. captions copyright national cable satellite corp. 2008