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>> the discussion on universal broadband service with commissions from the fcc. with chet, q&a nordlinger -- jay nordlinger. fcc commissioners discuss internet privacy, universal service, and other issues. this took place at the technology policy institute's annual form. it is about 45 minutes. jump right into it. we have been talking a lot about how communication and technology

has changed so quickly whether you are talking about video or high-speed fiber. we spend a lot of time talking how to protect and manage legacy systems. the question to start is, looking at the competitive landscape, if you could redesign the fcc from the ground up, what would your priorities the? how would you allocate resources? interest would you be hoping for? >> good morning, everyone. thank you for the opportunity. redesigning is what i do.

ms. clyburn: i think part of the benefits we are realizing right now is because of reg regulation, i would not be an advocate of redesigning. i am as a kid of forward thinking. -- i am an advocate of forward thinking. when you hear me take positions over-the-topces, and our request to seek redefinition, looking at the ever-changing,e i think it is important for us to keep in mind the pillars we speak about and how it is

applicable to these spaces. competition and choice. we want consumer protection. how do we achieve that in the different telecommunications platforms you have code that is the most important foundation for me. i am an advocate of having diverse voices. diversity in terms of choices. that is what you see me doing based on what we have learned. respecting legacy platforms and. but knowing that all of these things need to be complementary. you, the sec is an agency trying to promote choice -- the fcc is an agency ?rying to promote choice ye

ms. clyburn: i am not a proponent of starting over. thank you for having me. i am nottart by saying one of those people who thinks we should get rid of the fcc. , what would its look like going forward. i don't want to go through every component. i would spend a considerable amount of time removing ray regulation.acy a number of over-the-top providers can do today without the fcc. he think about the regulations on current providers, the cost is going to consumers.

i would remove a number of those barriers. interest inlittle capturing those companies that are trying to provide over-the-top. if i were still in congress, i would be very interested in working on title vi. just a touch of another agency in the news, the federal trade commission released guidelines about what it means by competition. -- are there certain authorities that would benefit from a similar clarification? we talked a lot about getting congress to up date what the fcc is but other things they could do to clarify? what are bigger authorities? ms. clyburn: we have a number of

things to do just that. i take slight issue to what you because yes, we see the and otheroutube evolutionary technologies and i think that is in part because of continually regulatory ability to reinvent ourselves. i think it is in part because of their willingness to be forward thinking. we do not live in a vacuum. will in the water has a ripple effect. all living things are complementary. all of those things are positive.

decisions you will hear about, we will continue to do so. i still don't think providers have benefited from the fcc. i don't know that we are a forward-looking agency. i don't believe we are. troubled on that side. we may disagree. there is a great deal of things that we can do to provide more clarity. the difficulty is that every provide -- that

neutrality, for example. areave great swaths of gainsaid, do what you want. that is not and the clarity to figure out how to operate. if a time that we try to provide clarity, we seem to open up unknowns. we talked yesterday about the enforcement guidelines. nobody knows what that process is going to be. it is whatever the agency feels at that moment. that is not the clarity companies need to offer. ms. clyburn: one of the things i see in a regulatory space is you have the quest for clarity and perfection. often, getting there is uncomfortable. not allowing, if you travel around the world, you will see

regulate -- regulating bodies that -- democracy, robust engagement, notices and further notices, all of those things can be relatively uncomfortable. messy.ely you can quote me on that. it is a framework which is inclusive. that to me is worth all of the imperfections we think about. incumbent lock every or entrance into a paradigm. worthk that it's a price paying for any type of discomfort and that we may be realizing.

think what you say in terms of our -- i think our request for and iual information flow believe the capacity to keep alerting and doing better, again, it is going to be in perfect. we will keep working until we get it close to write. i don't want to get it 100% right because that would latest tech nation. continual friction is positive. room areou in this here as a result of a little friction. think we haven't to worry about a getting close to perfect. plenty of room to provide as much friction, a lot of opportunity to make a lot of money. ms. clyburn: i am for making money. mr. fung: switching gears, something you both have worked collecting carriers to

funding from broadband, are we still on track for a mechanism for that? colleagues andy i are trying to provide a mechanism to a dress the issues about broadband. we would like to do that by the end of the year. it is more important to get it right. we are trying to do it in a collaborative way. we are not trying to force an answer. we are trying to figure out the best way to do that. this is an important task. is most of these providers are offering these services. should they get subsidies? and until we can answer these questions, we cannot deal with other issues. the concerns i have are areas in

america that have no service. i have traveled in seen and talked to people about how bad their services. we cannot address that until we can solve this issue. i think we are doing a good job. we are doing the hard work needed to find a solution. i want to move on to the danger more difficult questions going forward. ms. clyburn: i want to give credit where credit is to do it you often see us disagree on issues. on this one, we are working collaboratively. we are looking at the rate of return for carriers, making the universal service fund more efficient, getting rid of any fraud that exists. one of the things that was striking to me, when you look at

where subsidies are going or not going, subsidies are going to maintain support for disney world. disney world. subsidieseed for there, right? toread -- we really need look at our framework and recalibrate some money is flowing where needed. this fund was set up to bridge communications all caps. not to maintain platinum plated systems. this is what we are working -- this is where i might have a harder opinion tonight and i will be the first to say that

sometimes i go a little further than he would verbally. i am very passionate about -- when i go home to south carolina, the comment repeated in rural areas is, we need broadband in order to thrive. the money is not flowing there, it is flowing to disney world. i have a problem with that. mr. fung: let's talk about lifeline. current rates are at $1.6 billion. you said before that you would like to see disciplining expenditures. savings are there before you have to start thinking about disciplining? what has not been set enough in this space is how

much money we have saved since the reforms. billion about $2.75 because of the reforms. i don't see any exposes about that. areas whereof those i think we have maybe the same overarching goals and different ways of getting there. he will see a little bit of debate. proponent of setting a cap at this point because the , this is a 30-year-old program. to establish a cap that looks at , thatapshot in time

exposes opportunities for 60% of eligibles. is askingned up for the question, what should it be? that has beenram stuck in a time warp. i am passionate about what tools we have in our arsenal to close the digital and communications divide. they rebooted -- a rebooted soon to bee program formally known as lifeline because i think we should sunset the current program. reestablish a new program. and information technology driven bridge to the future which would enable those who are temporarily down on their luck

to have the opportunity to have a monetary assistance to help there was a lady on the news last night who just picked up a refurbished computer and said, i could not have afforded it. i cannot convey to you how moving that exchange was. she could not afford to provide her 16-year-old with the current tools needed. there are millions in this country to -- you do not have the ability to connect. they rebooted program that would allow all of those eligible to sign on is one which i would endorse. mr. o'rielly: we have a lot of

commonality. all universal services start from the point. it is not something i would have designed exactly but we are where we are. i appreciate your comments in terms of rebooting. fix fraud and we abuse. that just shows you how out of wack we were. spending, itns in tells you how out of bounds you work. there is work to be done to bring it back to reality. we have more work to do. i am for a lifeline program. i'm willing to trade that for a cap.

ms. clyburn: we will talk. [laughter] cap isielly: i think a important. on every othert portion of universal service. butuld have done a cap hopefully we can find common ground. i am open to what that number is. we can think of how best to get home. there are some things that we have to do to improve the program going forward and hopefully we can do that. ms. clyburn: km for continual reform of these programs. i put a five step blueprint to do this. mindt happen to be of the that we can walk into them at the same time, that we can

improve and provision services. people cannot wait for connectivity. that 16 euro would have graduated without the tools she needed. i don't want another person similarly situated. again, our timeline may be a bit different. our goals are in sync. how i would: approach it -- i put 10 points forward. one of them is the cap. we want those people who needed to be able to benefit from it. i want the people who do not need them to not benefit. ms. clyburn: so we are in sync in terms of the entire universal service portfolio, where it is not needed the money should not

flow. ,here there is not eligibility we are in sync with had. press you, wanted to you are in favor of a light cap. from a budgetary framework -- mr. fung: can you be more specific? float atand you cannot number. right now, we are at less than 40% eligibility. frameworkf budget should have a realistic, should take into account as close to 100% as possible. if it is not used, it is not

spent. i was in favor of asking questions about a budget. this is one of those programs were if you don't sign up, the money does not flow. i would not endorse anything that would foreclose opportunities. if it is properly marketed and designed, is a dignified program -- ane of the main things point reinforced, and this is nonnegotiable for me, as a carriers can no longer be the ones who certify those who are eligible. heart ofe is at the the problem. that, any typef of incentives for that level of efficiency or in some cases

fraud -- i will put it out there -- that will be gone. and we can really work on having targeted that will be and deliver the opportunities needed. mr. o'rielly: to comment on that. i would say that i am not committed to a number. that 40%, we are spending 1.6 billion, that is more than doubling the program, that has to come from all of the consumers in america. the woman who could not afford a computer, we are taking more from her so we can pay for the other programs. that is a problem for me. inorry about the folks middle and lower income, the burden already placed on them.

we already impose a fee and if we talk about adding on top of , we already increased last that and doubled basically, so, there is more spending. i'm concerned at about how much we are taking from consumers. ms. clyburn: i know you want to move on. we look at what we now call the -- on talked about in equitable distribution in terms panel,ou have the next the authors of one of the study -- four people are not getting their proportion of what they are paying in. that money is not flowing to those who need it.

it is flowing to disney world. i know the money is flowing. i don't think people in aspen need subsidies. lifeline is but one of the programs. i am looking at the entire universal service by, in terms of how we ensure that money is flowing to where it is needed and we need to make some politically unpopular decisions to do that. if we do that, that equity, that that money is not being appropriately spent if you believe in the word fare which i don't use that often anymore. if you believe in fairness, she

is not being well treated. i have worked on a number of issues in the past where we have done means testing. means testing would be very applicable in that space. lifeline is an example where we need it. in high-cost, we fund consumers that are wealthy and that doesn't make as much sense. get to think we can perfect equilibrium on the number, the we can make sure that if you have an income above some number, that we don't subsidize you. i think everyone would agree require in america that consumers with greater income pay more for medicare. congress has agreed to do so.

i think that is something that is needed. , don't know what the number is but we can agree to subsidize not every american. mr. fung: i'm going to jump in here. we are going to take audience questions but i wanted to ask about privacy. yesterday, we heard a lot about sec -- fcc, telling -- what they can and can't do with personal information. what other personal information might fall into this category? what is your interpretation of

how the definition could change he ? mr. o'rielly: the chairman has announced that he will start this fall. i am troubled by that. the difficulty in terms of what it means for different agencies with the same information. 222 is narrowly written. it deals with telephone records. there are people who would like to expand that. whatwould like to expand the definition is put at is not something congress has given to the agency. implement it.y difficulty with where we are trying to go, what it means for different providers. we are also trying to

and 706?et 201, attempt to impose burdens on today is about broadband to the providers of side. there have already been positions -- petitions to do that. tendung: as a consumer, i to think that if we are plot -- are applying the framework to the providers, all of the traffic and metadata that is associated with my broadband level of that the granular we are talking about? ms. clyburn: for me, i did not have a problem with that. let me affirm why. we spoke about this a lot. we have had quite a few

interactions and briefings. 222 a comment it affirmed our duty to protect proprietary information. what is more proprietary than your social security number? individuals who outusted a company, filled applications, have their social security numbers on their come and with a click of the mouse i would have had access to that. there is a problem with that. duty and the fcc had a duty to act.that i also believe that where there is a shared work on certain areas of authority with our sister agencies, we have and will continue to work collaboratively to ensure that

nothing false between the cracks. -- that nothing false -- falls between the cracks. we have a duty to respond an act -- affirm that the companies that they will not have a casual arrangement or lack of arrangement with someone's personal identifiable information. swiftly in sec timeframe.- fcc we put out a signal to those that this would not be tolerated. if you look at the we are -- statute, reinterpreting and creating definitions that do not exist in the lot to serve a particular

purpose. i support your point that no one falls between the cracks but that means double agencies and double regulations for providers. i trying to navigate this universe with the same data even though i have so many regulators in front of me. i have extreme problems with that side. i think we are heading on a collision course later this fall. time of thisat the decision, i did not hear of any other agencies that was poised to act on behalf of these consumers. a lot of them who are not well-heeled and did not know where to go to get protected. i hear what you are saying. casually --ms will they are in place for us to not step on each other's toes. but having to be able to go on a website and access somewhat so-so -- social security number

is not acceptable. mr. fung: let us take a few questions. there is a roving microphone. >> peter pitch with intel. 70% -- 17% -- should that include broadband? ms. clyburn: i have a deep concerns about expanding the collection side of the equation. until we resolve the other sides. expand they: programs as far as we possibly can and then do the collections died of the form which means we will add broadband. the numbers will go down. the goal is to spend as much as we can and collect it on that side -- i am not for that and it seems to be the where -- the way we are headed. ms. clyburn: i think the conversation needs to continue

and tone down the rhetoric when we talk about reforms. i highlighted this earlier in -- what has been happening over the years is our funding has been growing -- going to support broadband. i think it is time for us to have an adult conversation about what the contributions -- what those proportions look like. place that is as equitable as possible. where the money is actually flowing. i don't believe this framework is as efficient or as effective as it should be. mr. fung: i am always ready for

an adult conversation. they are often not ready. the answer is that they are not ready. we have had an act -- an acknowledgment by the congress that imposing this fee or state and local taxes would increase the cost and therefore decrease of adoption. we were doing the same thing to congress -- these people that give us the authority are saying don't do that. ms. clyburn: they are supporting the construction of broadband networks and we need to have a conversation about that and what that means as it relates to contribution. mr. fung: let us take another question. allen from austin. i have enjoyed this healthy debate on whether there is statutory authority to enforce

against privacy for personal information that is not proprietary and whether there was fair notice before the decision was handed down. my question is about the penalties. and the vast discretion that the fcc has in terms of coming up with the numbers in terms of accountability. the commission started out saying that this could be a $10 billion penalty but in the exercise of grace, it was $10 million and may have ended up lower. isn't there a fairness issue with regard to the range of discretion that the agency has to establish notice of appearance liability? on that point -- i am not going to count -- counter what you said. every case is different. when you talk about your social

security number where you cannot get another one, as far as i know, legally. to me, that is serious. if that troubles you. you can talk about other of thees in terms lifeline potential decisions. those are very troubling if you talk to the providers aced on what the alleged infraction is. beelieve that there needs to conversations and checks and balances as it relates to that. every situation is different. it is difficult for me to say hard and fast -- i will not disagree with you. that will be something that we will continue to look at.

some discretion i believe is needed because again, every case is different and the severity of that may differ depending on who you are representing. mr. o'rielly: i will take the opposite view. i agree with your point. the problem is that one, we are grasping for numbers out of thin air. they are not based on anything at all. i have tried to find justification for numbers and they are not there. the second part is that if it enforce this -- the one we are focused on today is to get the biggest headline we possibly can. we want the headline to say that this is the largest fee or penalty for this purpose. the is not in my opinion purpose of enforcement. it is not to make someone happy that they have a good headline

in whatever trade publication or newspaper to make themselves feel better. this is a -- this is about enforcement. we seem to be ignoring that. i gave a speech recently that -- some of theme folks in the agency said that the numbers we are starting with billion.illion -- $1 where do you think that money is coming from? it will come from the bottom line of the company and that means fewer jobs, less deployment. they do not have a justification for the number in the first place so it becomes a charade. ms. clyburn: when of the things to keep in mind is that if you get an action -- one of the things to keep in mind is that if you get to that point, all is

not right. if you get the attention of the enforcement bureau, all is not well. let us work with that baseline. you can talk about the amount of trouble damages. i am willing to have that conversation. when aten than not, decision is handed down, it is not because everyone was compliant. let us have that baseline conversation. mr. fung: let us take one more audience question. and i will close with the question of my own. i wanted to follow up on your meansnt agreement on testing for high cost subsidies. i was wondering if either of you had any concrete vision of how that would work in reality. other than turning it into a

program for individuals, i cannot picture anything. what are your thoughts? mr. o'rielly: i would start and say that right now, i am focused on solving the issue on greater return on broadband. s -- set a capught to have annual certification. i think there is a way to make sure -- it will never get to the point that you can get down to the exact number of who should get a subsidy in a high cost program but we can't exclude a number of people that do not need it. ms. clyburn: one of the things that is troubling to me -- i have not worked out and i do not have a template to present you this morning. includingindful of

what is reliable and what is not. ofdid not have that menu what is acceptable spending or not. where my age comes in. -- had certain companies ceos with excessive salaries. you had people buying extravagant artwork and travel. there were those types of things going on. that needs to cease. you talk about -- i do not know what fraud is but i think i recognize waste and abuse when i see it. that is it. these are the types of things that i think are steps towards that. outside of that, we have a lot of work to do. it is very difficult.

$4 billion right now. the framework. a lot of companies. this is going to be a continual collaboration with our state counterparts because a lot of the abuses that i am aware of came from state regulatory --horities who went inside they do that better than we do. i am sorry to be so verbose. i wanted to close by asking one more question about privacy. should consumers be expected to expectations of what kind of privacy protections they are going to get when it comes to providers and their internet providers? i have spent a lot

of time on privacy. there is an expectation of different treatment based on the information itself and not on who is the provider. sensitivity tore health records and health information. they have more sensitivity to financial information. we have a number of laws that cover that to date. the difficulty in privacy is a number of agencies and the number of governing structures that make it difficult going forward. we will add another one come this fall. ,s. clyburn: in a broader sense each time we click or access something, we give up a little bit of ourselves. get level of privacy chipped away each time we fill out a form and we share our personal information. i think we need to have a

healthy, realistic series of --ert nations when it comes realistic expectations. still, when you entrust your personal information to a company, there are certain expectations you should have. i think that the regulatory commission is one of the best means to help send out and affirm that signal. mr. o'rielly: information sharing is what is making the current internet operating today. mr. fung: thank you so much for joining me on this panel. [applause]

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>> also at the technology policy astitute for them, there was panel discussion about universal broadband service. sec commissioners and other executives were on the panel and this is just over an hour.

>> we are moving into the universal service panel. the conversation that we just heard was a good introduction to it. as we know, the universal service fund was originally intended to subsidize voice for though income consumers and it has steadily transitioned to focus on broadband. in 2011, we had the fund that began to subsidize world broadband. this year, the white house announced the program that increased funding for the school programs. consideringurrently how to reform the lifeline program to subsidize broadband and that a voice for low income people. about a billion dollars a year.

-- $8 billion a year. the distribution and collection mechanisms have been criticized as inefficient. that is part of the discussions that have forged. we hope today to discuss the question about whether there is a way to meet these societal goals of providing some level of broadband service to everyone in ways that are both equitable and efficient. our panel will discuss these issues. on the panel, i will introduce them in alphabetical order. the executive vice president of the national cable and telecommunications association. fcc commissioner who has a long history with regulation. and prior to her swearing-in, she served as the representative of south carolina's district. a nonresident senior fellow at

the brookings institution. he also serves as executive director of another organization. executive director and senior fellow at the stanford institute for policy research. the professor of economics at the university of las vegas where he focuses on the regulation and deregulation effects on telecommunications. before we start, i what you do know we will take questions at the end. i will also be following twitter. moderated, someone pointed out a mistake that i made which was very helpful. i will be watching there. i will start with commissioner clyburn to sort of expand on what she was talking about in her discussion with commissioner o'rielly. the servicebout

program and thinking about it more holistic way. holistically. ms. clyburn: when of the things that i talk about is when people discuss my focus on lifeline. they say lifeline and universal service. i say lifeline is a part of universal service. you brought that question up. it is important for us to look at the universal service program. a leg in am is four-legged stool. you mentioned the high cost of connecting america program. part of the push for reform is that weree moneys flowing to those companies were explicitly toy support broadband infrastructure. because this is the

wave of now and the future that we would be more explicit about that we would affirm that in order to get money going forward, you will be required to construct a framework that is in sync with the way the world is trending. the lifeline program that we the program in helped connect health care facilities. all of those are important and should be looked at in concert. -- iere is one thing believe the entire school is at risk. are in need are receiving assistance from those health care facilities and they would not have the ability for additional care. as great as we should be -- and theout

president's home initiative. schools libraries there should continuum -- for people to continue their educational and business experience. which is why lifeline is so important. --ook at it holistic late holistically. connectivityiding for rural health care clinics. not just ensuring that schools and libraries have the state-of-the-art connectivity that we need to be effective and forward thinking learning centers. if there is not the ability for those most in need to be able to afford service then we are going to have inefficiencies that will

continue to manifest themselves economically in a negative way on this society. again, that is why i look at it as seamlessly as possible because it is important for us to think about the adoption, affordability, accessibility side of the equation and not separate them. order, you have systemed interest in a that is more focused on -- viduals rather than is that something you would prefer to see ralph the system --you would prefer to see throughout the system? to really discuss

how we bring -- we keep talking about contributions and the levels that are hovering around a certain number this quarter and what we can do to address that. the only way i know to do that is to be more efficient and to really go back to where we began in terms of rereading what the purpose of universal service was. and that was to bridge the communication divide. it was to be a means or a conduit to provide service where the marketplace is not flowing. it is important for us to reread and revisit that and to continue to calibrate these programs to reflect that. the only way to arrest or

address the issues as they relate to contributions is to remind ourselves that we need to make sure the money is flowing where it is needed because it is not doing that effectively. proponent of looking at that and making the adjustments when necessary. what is your take on the overall effectiveness of the program so far especially thinking about your 2011 paper where you look at lifeline and link up? what do you think the lessons are from that research to how we could report the system? >> i agree with the commissioner

that the most important thing is to be efficient. to be more efficient, what we have to look at is what we are getting or our money. what have we delivered and what are the month -- what are the outcomes. the research that we have done, a couple of things have come forward. this can help us design a program. the first thing is that a lot of the money in the lifeline program goes to household that have subscribed to telephone service. the question is what do we want to accomplish? do we want to transfer income from one group to another or do we want to increase penetration rate? for your buck is to concentrate on the number of people who have access to the network. leads me to the second point that low income households have a difficult time with upfront payments which will be important when you're talking about refurbished computers.

commission got rid of the linkup program which is upfront funding. there were a number of different issues with that. in thise been addressed next round of rulemaking to take care of the problem of abuse. reducing the monthly charge and moving it to the upfront will address the issue of upfront payments and it is better targeted because it would be targeted at people who do not have that service. we think this could improve the efficiencies of the system, reduce the cost. i said hello and that was the nicest thing i could say.

i will not argue with what you said about the efficiencies. when it comes to the linkup program and respectfully, that is where a lot of the savings from our reforms came from. i take issue with what you said about those who would be signed up anyway. .eople want to communicate people are making incredible sacrifices to communicate. should they be making a trade-off that we know that they are making?

44% and those who are though income because of economic hardships, discontinue their service. only who rely on broadband connectivity,band 48% of those are forced to shut off service because of economic hardship. almost 50% of them are disconnected. we need to look at, talking about data, look at it from that perspective. if they sign-up, do they stay signed up? we needthe conversation to have.

>> the difficulty funding those things. about is that it becomes in income transfer program. the way we collect the money is not the most efficient way to do it because raising a dollar by 70%, costs more than a dollar. you get the inefficiency, the fact that you're taxing will change the way people behave. for one group to help another group on that base, there are that are better suited for income transfer. observation.

talking about universal service, , always find something missing we should be talking about dollars. it is absolutely certain that at some point in the program, we are using money inefficiently. private sector people do the same thing. it is difficult to get everything efficient. when you run a government program, you have to follow rules. that meeto have rules the median. i want to commend scott for his great work. there were a number of inefficiencies in the program that came out of his work. that is not the only thing -- the big thing that everybody

misses is how much more efficient the government would be if it knew that everybody was online? satan's to the government in terms of its own enterprise is in billions of dollars. there was a study that talked government switched platforms, they were billions of dollars of savings. is, at the federal, , we needd local level better conductivity in homes. we would also save lots of money. ofs is different in terms universal service.

making sure everybody had access 10 911 and things like that. about improving how we operate. while it is important to be efficient, let's not forget getting everybody on and getting institutions connected. >> i think there is a lot of money available if we concentrate on that. goal in thehat the measuring stick. let me follow up on that. he-rate was you baby -- he-rate

was your baby. e-rate was your baby. >> is it right that they are especiallyther yet: with the importance of getting everybody connected to the government. libraries are an important place of connection for people. it is a little bit different from schools. should they be part of the same program? should we be looking at them the same way? service solves three problems that need to be solved similarly. areas, institutions, and health care. it is part of the same bucket.

the third is low income individuals. hearingservices hard of individuals. it might be that you could more efficiently do it if you broke up the programs that i don't think so. we have not seen compelling evidence of that. again, there are certain moments in time where you want to debate -- scott -- i don't see that issue is being timely. let me point out that on the previous panel, the commissioners argued about a cap the budget. it is not really important to debate that in 2015. the important debate is how do platform a program --

-- for lifeline, that allows people in [indiscernible] 2017 to [indiscernible] -- at the end of this year or january, decide how to reform it and i am completely in agreement in terms of taking the certification away, things that she outlined. reallyu do that, it is -- the budget does not code in effect. that one happy be done until after the election. i would hope that we can put aside the discussion of budgets. focus on how we have an efficient program. and serves the need of the program. lead-in for good

great. -- for greg. thinking about an economic framework. afraid i would say the same things and that is a good fear. in terms of better economic principles for a universal servers program, if we have a subsidy, there should be a goal. nobody will say it was should be in income transfer program but that has been effective. to low incomeone people. when i was at the commission, it [indiscernible] curate it is not the kind of thing we should be thinking

about. to hear theaged commissioners talk about having more of a target and try to eliminate the idea of it being in income transfer program. is, minimize the cost of spending. idea of a $10 million income limit seems high to me. even though i am in silicon valley, that seems high. be -- at least -- i think -- that was kind of high -- at least you can think there are income limits on programs want to -- and then you minimize the cost of reason the money. i talked about distortions from taxes.

he want to have a broad base. the way to minimize this is a broad base tax. .eneral government revenue he want to do it as broad-based as possible. the other thing that economics teaches you is to tax something demanded. when congress says it, we shouldn't tax broadband, now i think it is more in demand. same with wireless. we need to get better estimates as to what they are. me inhis overall says to terms of dollars. the lifeline program that is getting so much heat is one

third the cost of the rotenberg -- broadband program. in the lifeline program transfers income to people who need it, costing three times as much. people who are often poor. i have compliments to the commissioners about the ideas of trying to improve it have a program that is more targeted. seems that the conclusion is --try to institute a boucher voucher program based on income. lower income people would get subsidies. clyburn talked about competition and choice. vouchers give people that incentive. they will have the money to provide it if they are not low income.

that is an important thing. choice is also important. how many of you are staying in this hotel are signed up for keep yourour room? hands up. how many of you picked the premium service? three. most of you did not. you had a choice. this is not a representative sample. >> these are people whose expenses will be reimbursed. >> almost none of you take the premium service. defines broadband at 25

megabytes per second. would you rather have mobile or fixed? it seems like competition and choice should allow consumers to push the services they want. i agree with a lot of what greg said. defending rural phone companies in this regard. i have spent a lot more time debating them. with vouchers.em part of the problem of universal findce is we are trying to a capital project but we keep

and op-x.cap-next you take half the money and accomplish more. he basically allow the fcc to float bonds. he raised $100 billion over 20 years or something like that for whatever and then you have a reverse option and you get fiber everywhere and the hardest places to get in and you and the program. there are certain problems with that. the problem with having vouchers is you can't rely on that over a to put the of time fiber facilities in there.

as we focus on that, there are problems with that. economically, rural phone companies could not finance the construction of companies. fcc is consistent enough that they could get various financing. part of the challenge for universal service is, we are funding what is mostly a capital cost. there are certain inefficiencies in that. i also agree with you on contributions.

[no audio] you,ah, no, and thank scott. i was trying to write on the notes of the outline because it was so good. -- blankem, obviously sheet of paper, that is what would work off, the problem is,

we are not on a blank sheet of paper and how do we get from the world were service was compact with a monopoly to fund the goals that we all share today with a recognition of the competitive marketplace we live theoday and the fact of matter is that the cable industry in particular, we have built out to 93% of all households in america largely without any government financing [nopeeds are, you know, audio] -- government subsidies and it seems to me that while i think there are signs that we are recognizing the competitive andd that we are living in,

the glacial pace of progress is something that is frustrating for an industry that continues to put private capital into improving its own network so i too want to commend commissioner clyburn and commissioner o'reilly for the work they recently did and noting that we probably don't need to subsidize rural carriers who are covered by a competitor who reaches 100% of the homes in that area without a subsidy but that is the tip of the iceberg when it comes to recognizing the distortions that can play into the current regime. the more that we can do to recognize and unleash the power of private investment and to steer funding into the areas where you don't have a competitive alternative, we need

to do. i fear that we are moving too slow on a lot of these areas and we have areas with carriers that have rights of first refusal to , it issl over six years not even broadband today. we need to take a more sobering assessment on how we promote efficiency in the system and to redouble our efforts. ask a question that is unfair. you can imagine a scenario where vouchers allowed people to apply to any carrier, potentially cable broadband but that we also tax broadband.

is that a complete nonstarter? i will not say -- i will certainly say it is not a preferred outcome. at the time we are want to promote adoption, we wouldn't impose additional cost but you know i think all of us kind of recognize that these programs change over time and certainly a conversation that we want to be a part of. actualings on the subsidies i'd, one of the things our industry has done a lot of work on, comcast [no audio]

-- probably not even the most important factor when you are talking about issues like is it relevant to my daily life ca? for these programs to be there need to focus on a holistic approach to getting people to connect showing that there is value in the broadband connection and to really moving the needle in that regard. i think it also to the extent and i think the order is long overdue.

we have to get more participation in we have barnacles of requirements you have to be eligible telik omissions carrier that really ine no sense to me at least this modern age and i am glad to see the commission recognizes that potential obstacles that can create and is looking at ways to kind of stream and that process and the last point in addition to purchase asian is that we have to be fiscally prudent. when he wase talking about the idea of a budget whether we should or shouldn't fight about it. we should fight about it later. yet. -- yeah. i always wanted dessert first. and i thought about the spinach later. i always am a little worried and one of the things -- it is always a discipline a

factor to operate on a budget that forces us to be more efficient and the choices we make and soever rather have that debate sooner than later. important we is create a platform that allows the consumers of lifeline to also know what other subsidies might be available like essentials or training programs. that is the job of the fcc. debate.a legitimate we are going to spend a huge issue of capital on in label be debated in 2017. how do you allocate political capital yu? targeturther enlarge the

currentck, under the construct, we are subsidizing broadband enabled networks. thinkou talk about what i is the debate, we need to talk about what that means and that should be brought in sync with where the money is going anyway. disproportionately those who are least benefit in our paying the most. it, i don't think is enough of a part of the conversation. i don't think we are having that conversation beyond academic exchanges and i think that is

unfortunate. to structure a system where ess can have cable and wirel be competitive, in terms of a broadband tax, one thing i didn't mention is there are different tiers of service. connection may be inelastic, that might change based on the elasticity between services. thing i want to talk about his prices from an asian. discrimination. in thesencome programs

voluntary conditions of mergers have been to combine service. this, to me, is a price discrimination tool that the providers are able to charge a price to people who might not otherwise sign up. actually a good thing. you can increase quantity and that is the definition of how economists look at price. this is an efficient way of providing service. it makes the politically could for a company to price discriminate. i cannot think of what it is, but if it were to take samples of voluntary agreements --

>> i think it is great -- just one thing, back to yesterday's conversation, one thing about the act of competition, what the competition date is, before the telecom act, the prices that we had to not make sense. what competition did is that it forced them to get rationalized. [no audio] -- where people could come up with techniques to serve these people. rules were put in place is not allowing innovation and prices to work to provide

service. >> i wanted to ask about some of the innovations. before i do that, i wanted to ask larry. he mentioned nongovernment programs. that is what you have been involved in in trying to bring broadband networks. maybe that communities are two different thano university communities. are there lessons that you learned from trying to bring in new networks that may be useful ? >> what we are trying to do is

still a puzzle and there are different pieces of that puzzle. we looked at it in 1984 when we deregulated cable. these things keep changing. how do we solve the puzzle of getting everybody positioning them to be a viable citizen in the information economy. in trying to explore experimentation in high-bandwidth networks, affordable bandwidth. what is interesting about that is the way you see experimentation going on. we are running interesting experiments.

it is too early to know how effective it is. adjusted data. city where kansas google is doing a different experiment. they are saying, we will have a general offering which is basically free on a month by month. day, we need the to run a bunch of experiments. this is the government's obligation. while being hit from 93%-90 5%.

get from 93%-90 5% and then finding out how to to -- is something very important. axido we look at existing ccess to change the math of upgrades? >> experimentation is a bit risky for regulation. when the results are not necessarily in sync with expectations, there is a headline or two or three or four. those are risks that we need to be willing to take. is one of the reasons why,

you do the forensics, to sector tothe private have different experiments. internetwant essentials to look like what at&t's thing. we learn from all of those. ecosystem, one-size-fits-all -- he's are important. necessary toare ,eep whatever this week spot is at least 95%. up they, you brought google model. like can't the military say, we will surface this area?

there are other ways of financing this. voucher, maybe that would work. it, wouldy of doing we as a country be better off if allsaid, we will forgive loans. the subsidies are essentially coming out over the same country. there are a variety of ways of address. of the the heart problem, the confusion between them. doing a large amount of experimenting. they showed that it is possible with a mobility fund.

whole series of pilots rate is anybody have any comments whether we can draw any conclusions? >> the reverse options, trying to reduce the cost of serving was cost areas, it important, the fcc, the original cost model, when they figured at the cost of the area, when they ran the reverse option, it turned out to be half the cost of the cost model. giving people the incentive to push down subsidies. using the power in his incentives attracted to that, that was a great innovation. there was a group of 71

economists that is part of this to me of this package, they made huge infrastructure grants and they we our submission what we need to do is to select these on .ow cost affection they are how many people signed up and they looked at us and go, that is nice. >> i would say that it looked really nice. would ask to the on one of the selection committees and i say i have no skilled at the best project by only giving me to projects like can't evaluate it in i declined but they ended up -- there has been a bunch of controversy over the program and a have not connected that many people. the fcc is doing a based on

dollars per connection. itt is a better way of doing . how dup more cost-effective? if you want to connect more people, i don't care if they are in texas or alabama. it is about connecting a person. you cannot use your budget as effectively unless you do it in an efficient way and i think the fcc is making progress. >> that comes with a level of pr risk. that is part of what outside forces could help equip it because we will never get close to nirvana by doing things the same way.

look continues to push even if again that target of. >> there is a difference between two thingss to temporarily and they had to the falling into the things that they know. part of the changes at the fcc reflecting able to step up with the plan and help folks like scott and you build a political understanding of options. this is not up in our plan, this is about a planning process. buildt to step back and capital toward a system.

you are not thinking about draining the swamp. how do you actually think long-term? the only thing i would add is that despite the pressure, it is an agency with continuing problems over time and that is not to denigrate people who do but it underscores the problem essentially in a competitive space deciding that you are going to provide a loan to one party and not another so we continuously half issues where we are not loading two one carrier over another vet that essentially is going to prevent us from sending more capital into that area because we are going to protect -- and then

there is a vicious cycle that goes on. is one thing that we ought to redouble our efforts on trying to impose -- try to get out of the business of trying to subsidize competition. i want to talk about the random trials. you talk about the policy and the way the press looks at it, randomized trials is the state of the art. a look a randomized trials to see what works and doesn't work. is where werials are. having the trials was a great idea. i have not seen anybody analyze the data. i have seen summaries of them.

you have to make sure you are doing things correctly. about,cussion earlier reducing cost over time, what are the trade-offs? hack we find that out? let's get some estimates. when we talk about -- we want to maximize the number of people on the network. maximize dial-up or minimize cost to achieve a call. randomized trials shows the fcc what the data and the cost has in their buying and they understand there is distortions that are caused by taxing or -- and they want to do it the right way. it is important to get it right. let's find the best way to do it. there is a point that the

commissioner made about the planets making a bigger target. we want these pilots. if every pilot showed success, that would mean they are not taking enough risk. >> please continue to say that. >> i would like to come back to cap x vs. op x. there is lots of creativity on both sides. i want to get some other answers on how would you do this? operating expenses? what would be two things he would have to do -- what would be the things you would have to

deal? what to leave economists think do economistst think of this? capital expenditure and operating expenditures are important. this is something that companies do every day. ,hether it is making iphones they make these decisions. they expect future revenue to cover capital expenditures. that is what we should push towards. have them take the risk knowing that they have a risky revenue stream.

it doesn't have to be the case that rural people pay the same. higher cost is part of -- they talked about the fact that he is happy to subsidize rural people. .here are trade-offs some things are cheaper. some things are more expensive. companies to these every day. there is a question here. this was a good discussion. i am glad to see they are still hard at work on this issue despite resistance from politics

of the situation. switching to subsidies will not solve commissioner clyburn's problem. would justs ranch get faster broadband. capital expenditures should be targeted to unserved areas. there is little evidence that the high cost subsidies have had any effect on penetration over eight -- or rates. agree -- i don't know of any evidence after the that while thed margin of a transfer the cost of fromnications in schools

the property taxpayer in local areas to the communication theyyer, any evidence that have had any effect on education? has there been any studies done to justify spending and expanding this program to schools? i found a paper that looked at texas. lot inot find a whole terms of studies that looked at these things. a lot of studies talk about different systems of learning that could be used to design a program that could be effective. >> we did achieve our congress asked us to do in 1996.

[indiscernible] there are studies that suggested actually helped an upgrade to broadband. that.eciate you look at the evidence that reform, the support for of programs to have more wi-fi and we needed to extend the programs. there is a lot of evidence.

when you talk to educators. schoolteacher. pointing out that they are facing problems. it is obvious that you assigned homework based on materials available on the web. when 60% connected, you do it. the school systems that have choice in terms of having a lot that tells you something. we don't know how to measure it, yet.

>> should private companies have to introduceon different tiers of service to price discriminate and expand? proposed to do in a few years back and it was quite an uproar. nation, theprices, goal in mind is to figure out what is the strategy we can do to get people connected to the network. those types of experimentation are exactly what needs to happen. is, itever the number

thought i remember reading one that did. she is correct. they had different levels and looked at different options. companies to have different tiers already. that is an easy answer. >> thank you very much to the panel. [applause] >> we will take a 10 minute break. [captions copyright national cable satellite corp. 2015] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] next, a hearing on

ways to improve the military. after that, q&a. life is 7:00, your comments on washington journal. his first full week in office, the house considering a number of bills including some on intelligence sharing that. tuesday, work on transportation and highway funding. defense programs also on the agenda. the senate is back on tuesday for work on a water quality protection bill. c-span, ande is on the senate on c-span two. a signature feature

of book tv as our coverage of book fairs and festivals with top authors. here is our schedule. we will be in massachusetts for the boston book festival. at the end of november, we are alive from florida for the miami book fair international. and the national book of warts from new york city. -- national book awards from new york city. announcer: c-span presents landmark cases, the book, a guide to our series. madison, brown versus the board of education, miranda versus arizona.

featurescases introductions, background, highlights, and the impact of each case. c-span inby cooperation with cq press. get your copy today at landmarkcases. announcer: on thursday, the senate armed services committee held a hearing on them proving the military. this is about two hours.

>> before i go further, i would like to mention to members of the committee now that hopefully assumingplete our work will be agreement passed by both the senate and house and signed by the , intended to embark with the purchase of patient of every member of the committee on extensive examination of our structure, our challenges in the reform inr need for every area of national defense urge both the subcommittee chairmen and

ranking members as well as all in a series ofge examinations of national defense in all of its aspects so that we can come up with a continued reform package to follow our modest beginnings in this year's nda. i know that senator reid is committed to the same prospect and i know that we can embark on this odyssey in a completely bipartisan fashion. the men and women who are serving deserve it. america deserves a thorough bestnation of how we can equip our military and the ability to defend this nation weing turbulent times so

will be having a meeting of the committee next week so that we can discuss this in greater detail. we are pleased to have our panel here today. and decoder would, senior research fellow at the heritage foundation. i welcome all of you today. last week former secretary of defense robert gates echoed with senior security leaders have testified to this committee all year.

the current global threat environment is challenging and uncertain. many of our adversaries has spent the past decade and more investing billions to build up and reshape their militaries and developing technologies to america's military advantages. as we will here today many of the technologies that made america the unparalleled global power just 15 years ago, such as precision guided munitions and stealth are contributing to others at a dangerous speed and scale. our adversaries are fielding new technologies from cyber to counterspace. at the same time we face growing networks of extremist that would engages in a low technology conflict of ideas for years and decades to come. as the bipartisan defense panel warned future public are likely

to unfold more rapidly, atul feels horribly more lethal, operational sanctions will be scarce and often fleeting. conflict will be the norm in this rapidly changing environment. u.s. military superiority is not a given. and yet since the end of the cold war a century ago the united states has maintained a similar but ever shrinking version of the military results during the 1980's. the constant dollars we're spending is on us the same amount as we were 30 years ago. but for this money today we are getting 35% fewer combat brigades, 63% fewer combat air squadrons and a lot more bureaucracy and overhead. they are not capable of being in multiple places at once.

capacity still matters, especially given the numerous potential contingencies we face around the world. once more our adversaries are more capable to. many significantly so you are military technological advantages are eroding fast. add that to the years of defense spending cuts, and sequestration and we are now facing the dual problem of a quantitative and qualitative erosion of our military edge. we are now living through an all-too-familiar pattern of international exertion plus the desire to cut defense spending and we handle courting disaster that is where we are today. relearning that under reaching can be as dangerous as

overreaching if not more so. now more than ever we need a clear strategy or strategies plural to guide our actions and defense investments. all too often senior leaders in our government do not even seem able to define the concept. when pressed for a strategy they offer objectives and general interests and inputs and dreams and means but not a strategy. not a description they will marshal limited means to achieve their ends. that's how we heard -- and we get what we heard on tuesday the three r's. what's worse than the national security strategy that become a speech writing exercise to please all constituencies and tell us less than the quadrennial defense review which our witness told us last thursday has become more of a sustained explanation of the