raiments where they have done exactly the same thing. that has a huge leap that benefited the american public because they pay less for p hones. nobody had an idea about touch screen technology and all the things the iphone did until it came out and was successful. what has happened in response? competition, competition, competition. .

my focus has been on the second part of the hearing. my impression has been this industry started out lower regulation. that was understandable. we have gotten to a place where there are more than two under 70 million wireless subscribers -- 270 million wireless subscribers. we had in the capabilities as never before. they are sending text messages

at a high rate. more than one trillion messages. in the past few years, we have seen the unprecedented consolidation in the wireless sector. we saw some dramatic increases in the prices of individual text messages. we have other concerns. the cell phone consumer empowerment act is something that i want to discuss. i am sure we will reintroduce something like that. i have appreciated some of the changes that have been made such as in the early termination fees. there have been some dramatic changes with that. we have been focusing on automatic contract extensions.

i have spent the weekend driving around my state. in rural parts of our country in minnesota, where the cell phone covered still goes bad. it is frustrating for people in my state. they think they are getting a cell phone coverage that covers a certain area but does not. if people do not have a full information, when they buy a cell phone as to where the dropped calls are, that is where we need to get a handle on it. the rural phone service and how we have issues despite all this growth in the market with competition to serve these areas is something i want to discuss. >> thank you for the question.

i think there is an example as to what kind of sense -- services are provided to consumers. we do a lot of things today that you are trying to address in your legislation. we talk about disclosure. we want predictability for our customers so they do not get surprise charges. they know what their monthly bill is going to be. we do not have an early termination fee. we have to earn our customers month after month. they can leave and go to a competitor. it is very important, because we are offering some of the most affordable rates and viable services today the congress and the fcc ensure that some of the industry issues are there to promote competition today and into the future. i have discussed some of those in my opening statements about

the constraints on sectors for midsize carriers as well as the rolling loopholes that need to be filled. if these issues are addressed, you will see more competition. >> can you fix some of these roman loopholes and offer better service -- service in the -- fix some of these roaming loopholes and offer better service in the rural areas? >> absolutely. >> we do not see this competition in summoning parts of hours they. -- competition in so many parts of our state. >> we have seen service itself

is increasing. prices are going up at the same time. rates are going up. there are few market providers than ever before. i think it is important to look at that and look at the barriers that stops some of the smaller competitors becoming bigger. on the data question, did it is the service that will drive wireless communications for the next 10 years, we see specific fees: online -- going on-line. consumers are stopped from choosing a smaller provider because they do not have the phones that consumers want.

if a smaller provider cannot get the handsets, they cannot attract the customers and invest in their data infrastructure. >> you know we sent a letter to the sec asking them to expedite the handset exclusivity relationship. what do you think about this innovation response? i think at&t or apple has been able to develop because of the air exclusivity relationship of the handset. >> thank you for the letter. we support that action. on innovation, it is really important to note that it does not the wireless provider that is the innovator, but the device manufacturer. we have seen devices where

services have been crippled as they have come over or been developed in the united states marketplace. there is evidence of a phone manufacturers saying we had called diamonds that we wanted to offer but we have been told that we should not roll those out. we have had gps that we wanted to offer free to consumers but grasp not to rule that out until the carrier's determined a way to get consumers to pay for it. i believe innovation -- the handset exclusivity is one way to finance research and development. and if consumers are trying to get certain types of phone, more options should be available at lower prices. >> verizon has announced that it

" reduce the exclusive time of two of its phone -- has announced that it will reduce the exclusive time of two of its phones. >> they will reduce the time frame to six months. >> why those models and those phones? >> they are the most popular ones. >> what do you think is the average life span of one of these bones in today's market? >> i am not sure. many of these funds go through many variations and have been on the market for quite some time. the notion that getting rid of him and said exclusives as a mandatory aspect as government intervention -- i do not think it will have any affect on the

issues that mr. cousy is speaking about. -- mr. kelsey is speaking about. the carrier has to work with the device manufacturer to make sure it works on their network. there is mutual the element that goes on and a great deal of regional development. it is not know what he is talking about when he says it is only the device manufacturer that innovate. if someone wanted the verizon experience with a certain phone, if they went to a different carrier, they would not get it. >> how do you respond with what is happening in europe? >> i think europe has a paucity of handsets compared to the united states. they have about 150 handsets. we have over 630 different kansas available in the united states. that is related to the

innovation that is going on. any view that there may be a different way to fund in addition is historical. we have years of innovation in handsets that have come about from a system where there are contacts between providers and device manufacturers that involved some area of exclusivity. it rewards innovation by providing these exclusive dealings. >> you are reducing the exclusivity timeframe to a shorter time frame. gradually the marketplace of balls. klopstock's as technology changes and there is more innovation -- gradually the

marketplace changes. as technology changes, there is more innovation. people try to buy the best phone for the service. they are in. they find out what they have read this not really cover their service area. i would like to see more competition in some of these areas where they can actually get service. maybe they have some service, but to go one block out of town, and then they do not have service. >> i appreciate your efforts to address this issue. at&t is committed to rural markets. we have demonstrated that commitment in a number of ways. it has been demonstrated with our dollars and since.

we have had a number of transactions we have tried to acquire and different wireless companies. we are trying to buy a number of assets from verizon. one of the most common attributes of east -- each of those three transactions is the geographic areas they serve which would generally be described as rural. we have taken that step in going out and committing to spend billions of dollars to get into those markets where we can bring advanced features and capabilities that you're talking about. we have a significant commitment to that. we are spending our capital budget as a whole between $18

billion in 2009. that is an enormous number. there are few companies who are making that kind of investment in this environment. when we make that investment, the work is done on our networks. it is done by the largest unionized full-time work force in america. we are investing in america and rural america, which are creating and maintaining good, solid high-paying positions, a unionized workforce. we are the only wireless company that has any unionized work force at all. you put all that together, and the very concerns you have expressed, i believe we are addressing head-on. >> i will bring you to staples and a few other companies. i appreciate that. a look forward to working with you as you look forward to be

introducing this legislation. thank you. >> a single text message is limited to 160 characters. it does not cost very much at all for your cellphone networks to carry this information. i'd doubling the price -- by doubling the prices, they have been justified by increases in your cost. >> we are a multi product firm. we have to recover all of our costs of our various products. there is no reason to believe that prices are going to come to cost. we do not base our text message prices on our cost. we are mindful of our cost. with respect to the profs

analysis that it does not cost very much for our network to carry a text message, i think there are some important points. looking at the incremental cost ignores the fact that you have to let the network in the first place. we've had to make huge investments in computers to carry even the first text message. those text messages have to carry all of those common costs along with every other service we have. the second issue is, the question of cost is not relevant to this issue. we're not in a regulated industry, nor should we be, one for the question is what is your cost for that product?

i believe that the issue is not relevant to what our prices are. >> implicit in your question was an acceptance of some of the testimonies you live for today that the increases in the quantity or volume of text messages has not resulted in an increase of cost for the carrier. with all due respect to the professor, the network that he describes that can increase simultaneously the capacity to handle trillions of voice traffic and handle billions if not trillions of text messages and to suggest that network can do that without additional cost would be describing a network that would be magical in its proportions, but it does not exist. that network is a myth. there are enormous costs

incurred in building these networks. from the spectrum to the carriers to the networks. what you have heard that all the text messages can be carried in [unintelligible] 208 cell sites -- 280 cell sites. that is not the case. that capacity had to be created. incurred costs as a result to create that capacity. >> i appreciate that. one of the purposes of this hearing today is to come up with more vigorous competition in the industry. you can understand how we want to do that, because we're here to protect consumers. we're not here to be destructive to view.

we are trying to protect consumers. when you have a sufficient level of competition that result in better results for consumers. i am sure you understand our premise. the consumer is charged to send and have a fever sending text messages. they are charged even if they do not want to accept a message. should not be allowed to decline a message and save the cost? >> my answer is going to be short. i do not know.

i hate to say that. i do not know the answer to that question. >> i wish i did know. we have the ability to provide our customers with the ability to receive no text messages. they can't lock their hand set out of receiving text messages entirely. on a message by message basis, i do not know. >> i believe the existing text messaging standard does not have a message that can be sent by the consumer that says declined. you could always have some kind a system. it would complicate matters enormously. i do not think that is a way we want to go.

that is my answer. >> these increases in text messaging, consumers are moving to your plans would start at $5 a month. raising the present text messaging would encourage consumers into the bucket plan because the individual text message was going up and up. i want to understand how your marketing plan works. the more it costs on an individual basis, the more likely to customer will go to a budget plan. is that right? >> we believe so. >> i believe that is the case. that is where consumers get their most value.

>> one way that phone companies restrict competition is by locking in customers to two-year of service contracts. if they want to switch, they must pay a hefty early termination fee which is as high as two under $50. what -- $250. what is your policy due to reflect the amount of time left on the contract? these early termination fees are inadequate said that if they cancel their planned one month before the tape -- two-year contract is up, is to pay much more than a prorated account. >> it is not accurate. it would have been true a year ago, but not true today.

we have changed our early termination fee process. if you just subscribe today, you play 1/24th of the contract price which is the commission penalty. that was the case at one time, but not anymore. >>, they want to terminate the month before -- if they want to terminate one month before, what isn't? >> we have changed it with its declines on a certain basis. i will get back to you either way. >> anybody else have a comment you want to make for some ideas you want to express tha? >> is a huge barrier switching

carriers because the fee starts off and a high level. it is not linked -- after they have been with a carrier for 20 months and have to pay back the subsidy on the phone, there is no reason that a consumer who wants to switch providers should not be able to. >> i want to state that they talk about how much investments their company is making. we made billions of dollars in investment in the advanced wireless services. we are putting people to jobs to work today building networks. we are able to offer affordable prices on our plan despite the kind of investments we are putting into the network. it is important that we have

performed for spectrum policy said that competitors like as can continue to be successful today and in the future. >> thank you. >> i would like to respond to remarks about my prior testimony. my analysis of looking at the cost and establishing minish between voice minutes and text messages, the was ms. have to pay for the upfront costs. i believe my information is accurate. addition of the english ship between price and cost. -- there should not be a relationship between price and cost.

about rural areas, they always have a problem because the amount of revenue that can be derived per square inch is a lot less than what it can be derived for in manhattan versus the world area. -- rural area. there is a cross subsidy for from more expensive markets to others. it is not something the competition is going to fix in my opinion. thank you. >> too for the opportunity to appear here today. in conclusion, i reiterate my belief that the wireless market in america is a great success

story. we need to look at it and take a lesson from. under the current set of rules which are very light hand, there it has been great amount of investment, hundreds of billions of dollars in investment. many jobs have been created and are still going to be created out of the wireless industry in this country. innovation has been startling. prices overall have gone down. i believe we have a situation where with all due respect, we have to be careful if we're going to you change it. >> thank you. we will leave the record open for one week. i believe that today's hearing demonstrates the importance of encouraging vigorous competition in the industry as willis' focusing on text messaging pricing. we will continue to closely follow these issues on this

committee. i believe the justice department's should beat -- just as the permit should take action and racial barriers in the cell phone industry are removed including by the . reform -- including by they fcc. we thank you all for being here today. this hearing is completed. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009]

>> today on "america and the courts" commencement addresses given the sheer by the supreme court justice anthony kennedy. that is 7:00 p.m. eastern here on c-span. >> tomorrow on "washington journal", and look on iran. former congressman tom davis talks about health care and republican politics. later, a look at the cover story @