[House Hearing, 109 Congress] [From the U.S. Government Publishing Office] HEARING ON POLITICAL SPEECH ON THE INTERNET: SHOULD IT BE REGULATED? ======================================================================= HEARING before the COMMITTEE ON HOUSE ADMINISTRATION HOUSE OF REPRESENTATIVES ONE HUNDRED NINTH CONGRESS FIRST SESSION __________ HEARING HELD IN WASHINGTON, DC, SEPTEMBER 22, 2005 __________ Printed for the use of the Committee on House Administration U.S. GOVERNMENT PRINTING OFFICE 24-061 WASHINGTON : 2005 _____________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800 Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001 COMMITTEE ON HOUSE ADMINISTRATION BOB NEY, Chairman VERNON J. EHLERS, Michigan JUANITA MILLENDER-McDONALD, JOHN L. MICA, Florida California CANDICE MILLER, Michigan Ranking Minority Member JOHN T. DOOLITTLE, California ROBERT A. BRADY, Pennsylvania THOMAS M. REYNOLDS, New York ZOE LOFGREN, California ------ Professional Staff Paul Vinovich, Staff Director George Shevlin, Minority Staff Director POLITICAL SPEECH ON THE INTERNET: SHOULD IT BE REGULATED? ---------- THURSDAY, SEPTEMBER 22, 2005 House of Representatives, Committee on House Administration, Washington, DC. The Committee met, pursuant to call, at 9 a.m., in room 1310, Longworth House Office Building, Hon. Robert W. Ney (chairman of the committee) presiding. Present: Representatives Ney, Ehlers, Miller, Millender- McDonald, and Lofgren. Staff Present: Paul Vinovich, Staff Director; Karen Christian, Counsel; Audrey Perry, Counsel; Samantha Drudge, Staff Assistant; George Shevlin, Minority Staff Director; Tom Hicks, Minority Professional Staff Member; and Jannelle Hu, Minority Professional Staff Member. The Chairman. The Committee will come to order. The Committee is meeting here today to hear testimony on the subject of regulation of political speech and activity on the Internet. We have a very interesting group of witnesses here today to testify. I really look forward to hearing from them. This is a very controversial subject--well, everything in this building is controversial, but this is horrifically controversial. Groups and people really take a stand on it. But before we get to our witnesses, I want to provide the general public with a little background on the subject so those listening know where we are in the process and what could be at stake. The Bipartisan Campaign Reform Act, McCain-Feingold, and Shays-Meehan, required the Federal Election Commission to develop regulations to implement this Act. The Commission determined Congress didn't intend for BCRA to cover Internet communications, and therefore adopted regulations that exempted them. Two of the Members of the House, pleading that the FEC's regulations didn't follow the intent of BCRA, sued the Commission. The Court agreed with the Members of Congress and ordered the FEC to rewrite the rule. As a result of this lawsuit and court decision, the FEC was forced to rewrite the rules that covered communications on the Internet. That new rulemaking began in March of 2005. While this new rulemaking was going on, some Members of Congress made clear that they didn't intend for BCRA to cover the Internet, and they did not want the FEC regulating these communications. In March, our good friend, Congressman Conyers, and 13 of his colleagues wrote to the FEC seeking exemption for the Web logs or blogs. I would like to include in the record a letter and press release from the gentleman from Michigan. Dated March 11, entitled, ``Representative Conyers Leads Call on FEC for Campaign Finance Exemption for Web Blogs.'' [The information follows:] [GRAPHIC] [TIFF OMITTED] T4061A.001 [GRAPHIC] [TIFF OMITTED] T4061A.002 The Chairman. Identical bills were also introduced in both bodies to preserve the exemption--in the Senate by minority leader Harry Reid, and in the House by Jeb Hensarling. Their bill language was actually adopted by this Committee when we inserted it in the Pence-Wynn bill reported by the Committee. These bipartisan congressional endorsements with Members from both sides of the aisle, in both the House and the Senate, are the exception, and shows there are still some issues on which both sides of the aisle obviously can agree. We will later hear from two witnesses who operate blogs, one conservative and one liberal--or if you want to classify yourselves a different way, that is fine--but who probably may not agree on anything philosophically except they don't want the FEC to be regulating their businesses or what is said on the Web sites. So the debate here today is really not between Republicans and Democrats or liberals and conservatives. It is between those who favor regulation on this issue and those who don't. A lot of the reform community favor regulation. They believe that Internet speech has to be regulated in the same manner as other speech or we would create a loophole that would allow people to evade the Campaign Finance Reform Act. This prospect doesn't frighten those who oppose regulation. What frightens them is the prospect of requiring bloggers to answer to a Federal agency if regulations are extended to cover what they can or cannot say on the Web sites. So, I think we have a real clash here of two fundamentally different views of the world, one being that regulation is necessary to preserve the health of our democracy, and the other that freedom from regulation is required for democracy to flourish. With the FEC in the midst of a rulemaking on the subject and the Congress considering pending legislation, we have a great opportunity today to just air the arguments and where people stand and what they think. I really look forward to the testimony. I want to thank our Ranking Member, the gentlelady from California; and I would note that we had a wonderful historic event together yesterday with Congressman Fattah, the unveiling of the Congressman Rainey portrait, who was the first seated African American elected and seated in the House. We had a great ceremony, and the Rainey family actually met each other and were present. Some of them had not ever met each other. It was a great day with our Ranking Member; and, as usual, we appreciate her interest in legislation. Ms. Millender-McDonald. Thank you so much, Mr. Chairman, for your continuing to bring people together as you did the Rainey family yesterday. I was amazed that many of them had not met each other, and so they came to meet each other yesterday at that great event put on by our colleague from Pennsylvania, Congressman Fattah. Regretfully, because this is the annual legislative conference of the Congressional Black Caucus Foundation, I am going to have to leave after I give my opening statement; and I regret that. But then I have a group of young 11-year-olds, 11- and 12-year-olds who will be doing demonstration flying with the military and--through Boeing, and so I have got to get out to this flying field wherever I am flying to. I have been flying all morning, but I do want to thank the chairman for scheduling this oversight hearing, and my leaving is not because of a disinterest, but it is because of the multiple schedule that I have today. Being from California, I have seen firsthand how the Internet has become an innovative and powerful medium. A little more than a decade ago, when public use of the Internet was still in its infancy, people around the world were just beginning to use this new technology to instantaneously communicate with one another. Today, the Internet has grown into a powerful tool for commerce, information, and the media. Looking back on this last Presidential election cycle, some of the positive consequences of enacting the Bipartisan Campaign Reform Act, or BCRA, were the democratization of grassroots involvement in this process and broadening of political free speech and the grassroots efforts to increase voter turnout, all of which were facilitated or made possible by the use of the Internet. Federal officeholders and their political parties were forced to appeal to a broader audience of small donors, and the Internet was tapped for that purpose. The Internet was also used by Federal candidates to get their message out and to become more involved in grassroots activities. Presidential candidates used the Internet to raise substantial amounts of money. Internet fundraising is much more efficient and much more--less costly than conventional outreach such as hiring phone banks, producing and airing TV ads and sending out mass mailers. All of the resources raised by the campaign is fully reported to the Federal Election Commission and publicly disclosed. Millions of small, first-time donors recently became involved with the political process by using the Internet. Americans were not only able to contribute to candidates using the Internet, but they were also able to learn about the candidate's position on issues when they arose and not wait for a news cycle. The Internet is leveling the playing field between everyday Americans and big donors and between the candidates and the news media which covers them. Hurricane Katrina destroyed the Gulf Coast, flooded 80 percent of the City of New Orleans, and caused the worst disaster in this nation's history. The Internet helped to raise millions of dollars in relief for the Red Cross and other relief organizations; and, as a result, the first beleaguered evacuees might be able to return to their city and their homes. But for every legitimate charity working miracles, there are hucksters and scam artists trading on America's generosity and community spirit; and this is an issue I want to raise with our witnesses today, or I will raise it later on. As I stated earlier, the Internet facilitated the participation of millions of new low-dollar political contributors. This was a remarkable and extraordinarily positive development. Regretfully and inevitably, as complaints to the FEC have disclosed, a few criminals took advantage of the enthusiasm of ordinary citizens to participate in our democracy and stole their contributions through phony political Web sites. These sites, by mirroring legitimate candidate sites, were able to deceive an unknown number of people. Unless addressed, this type of crime stands to undermine the confidence of people who would otherwise be willing to use the Internet to contribute to the candidates and parties of their choice. The Commission's normal enforcement procedures are not designed to respond in a timely manner to such crimes. Therefore, I would urge the Commission to develop procedures and to work with the private sector, the political committee, and other governmental agencies to address this problem and this type of fraud. I would be interested in hearing from you in addressing this very critical and serious issue. Mr. Chairman, thank you again for this hearing. Don't think that you are alone because there are--no other members will be on your side. But we do recognize the importance and the seriousness of this issue. Thank you. The Chairman. I thank the Ranking Member, the gentlelady from California, for also readjusting your schedule. You are not actually going to fly a plane, are you? Ms. Millender-McDonald. Heavens, no. The Chairman. I wanted to make sure. Thank you, and I think it is important to have the hearing for the record. Of course, the record will be open for follow-up questions, so I want to thank you so much for your support. We will start with the first panel today. We are fortunate today to have with us three distinguished commissioners from the Federal Election Commission who discussed their ideas and proposals regarding the regulation of political speech on the Internet. First, we will hear from Chairman Scott Thomas, followed by Vice-Chairman Michael Toner and, finally, Commissioner Ellen Weintraub. We look forward to your remarks. Welcome all three commissioners today. STATEMENTS OF SCOTT E. THOMAS, CHAIRMAN, FEDERAL ELECTION COMMISSION; MICHAEL E. TONER, VICE CHAIRMAN, FEDERAL ELECTION; AND ELLEN L. WEINTRAUB, COMMISSIONER, FEDERAL ELECTION COMMISSION The Chairman. We will hear from the Chairman first. STATEMENT OF SCOTT E. THOMAS Mr. Thomas. Chairman Ney, Ranking Member Millender-McDonald and members of the committee, thank you for inviting me and my colleagues to testify on the proper reach of any regulation of campaign activity on the Internet. I plan to read just a few snippets of my prepared statement, and I would ask that the full statement be entered for the record. I hope here to make a few basic points. I would add--since the ranking member does have to leave, I would just jump outside of my prepared remarks to indicate I think there are some interesting opportunities to work with the private sector to help develop seals of approval, if you will, that indicate a particular Web site is an official Web site. So I would be very happy to sort of explore along with your staff and your office ideas along those lines. There is actually a group that I know of that is working on that. It is called Election Mall Technologies, and they have started to develop and work with States to develop, in essence, an official seal of approval so people know that a particular Web site is the real deal. Ms. Millender-McDonald. That is encouraging. Thank you so much. Mr. Thomas. Now back to where I was initially leading. I hope to make a few basic points. First of all, the Commission's 2002 regulations, in my view, mistakenly adopted a total carveout for Internet communications that exempts from core statutory provisions even paid campaign advertising. Second, there are ways for the Commission to rectify the situation by regulating only Internet activity that raises the concerns underlying the core statutory provisions while leaving the vast majority of the Internet activity, including blogging, uninhibited. Third, Congress I think should await the Commission's effort and should not compound the current problem with enactment of the same total carveout approach. Now, as the Chairman referenced, the Commission is in the midst of a rulemaking concerning the proper reach of regulation regarding political activity on the Internet. We have put out a notice of proposed rulemaking with several options. This summer we had a couple days of hearings, and we hope to be able to adopt final rules on this topic by the end of the year. The regulations adopted by the Commission in 2002 created a very broad exemption from several statutory restrictions for Internet activity. It is similar to the exemption adopted by this committee when considering the Pence-Wynn bill, and the Commission has been in litigation over this broad exemption since October of 2002. The broad exemption the Commission adopted leaves serious gaps in the statutory system put in place by Congress to require hard money funding of State or local party communications supporting particular Federal candidates and to limit or prevent certain contributions on behalf of Federal candidates and committees and to require disclaimers on political advertising. Experience teaches that political professionals will exploit any perceived loopholes. For example, the national party soft money loophole started as a minor blip in the 1980s and exploded to a half billion dollar binge by the 2000 election cycle. Internet advertising and e-mail sent to millions are themselves showing signs of growing in terms of usage and costs. I would interject here we had a witness testify, Mr. Michael Bassick. He is with the Online Coalition, and he told us in 2004 alone over $14 million in Internet campaign advertising was purchased. He said this represented a 3,000 percent increase over the amount of paid Internet advertising from the 2000 cycle. So we have a growing development in terms of paid Internet advertising, and I would suggest that carefully crafted regulation on this topic is in order. I won't belabor with you the details of the legal problems with the Commission's approach except to note that really there is only one provision in the statute that defines the term public communication and uses it; and it is a provision that is designed to require State and local party committees to use hard money to pay for certain public communications that promote, support, attack or oppose a Federal candidate. That is where the Commission adopted this broad, across-the-board exemption for, in essence, any Internet activity. This arguably leaves State and local parties free to fund hard-hitting, candidate-specific attack ads placed for a fee on popular Internet Web sites, no matter the cost, as some sort of allocable expense that can be paid for, in large part, with soft money. Second, when later crafting new regulations specifying when coordinating a paid communication with a candidate or committee makes the communication an in-kind contribution, the Commission unnecessarily adopted a content requirement which, in turn, adopts that restricted public communication definition and thereby excludes all communications over the Internet. This leaves corporations or unions or foreign governments and wealthy individuals free to fund, without regard to the statutory limits and prohibitions, Internet communications of any sort in full coordination with Federal candidates and committees. Imagine a huge cooperation or union being able to fully fund the Internet ad campaign or million person e-mail operations of a cooperating Presidential or congressional or party committee. Now, the third mistake, in my view, of the Commission came when drafting the post-BCRA regulations dealing with disclaimers. Though the statute requires notice identifying the payor and indicating whether or not there is candidate authorization on any type of general public political advertising, the Commission again adopted its restricted public communication definition and thereby excluded communications over the Internet. The result is that candidates, party committees and other persons who pay for Internet campaign ads on popular Web sites do not have to follow statutory disclaimer rules. In sum, as a result of the decisions made by the Commission in the rulemaking process, party committees will be using soft money to pay for Internet ads bashing candidates; corporations, unions, foreign nationals and wealthy individuals will be paying for Internet-related expenses of requesting candidates and parties; and the public won't have a clue who is paying for virtually all Internet advertising they will see. I would say this is not inconsequential or hypothetical. A search of the FEC database shows about $25 million on Schedule B disbursement schedules which describe with terms like Web or Internet or e-mail--$25 million. And that is just really what we can see because people have happened to label those kinds of activities that way. So there is a fair amount of activity out there. The invalidated regulations of the Commission would essentially gloss over this significant financial activity and the potential for soft money and other otherwise restricted sources being used to pay for it. So we are in the process of this rulemaking. I think we are working pretty well to try to correct the problem that I have identified. The focus of any Internet regulation should be those Internet campaign ads placed on Web sites that normally charge a commercial fee for such placement. That is the focus of the Commission's proposed regulation that we put out. For ads placed for a fee on another person's Web site, State and local parties would have to follow the funding restrictions intended for public communications in the statute; all persons who coordinate such ads with a candidate or party would have to treat them as contributions or coordinated expenditures; and, third, disclaimers saying who paid for them and whether they were authorized by a candidate would have to be included, unless it was otherwise impractical. Importantly, under the Commission's proposed rules, no other Internet communication would be regulated as a public communication. Thus, State and local parties would not have to apply the new BCRA soft money prohibition to material placed on their own Web sites or to e-mail activity. Likewise, persons coordinating with candidates or parties regarding material placed on such persons' own Web sites would not have to worry about triggering the coordinated communication rules. With regard to disclaimers for persons other than political committees, the Commission's proposed rules would not require a disclaimer under any circumstances if the communication did not include express advocacy or solicitation of Federal contributions. Beyond that, other than for paid ads placed on someone else's Web site, the proposal would only require a disclaimer on e-mail sent to more than 500 recipients if the sender paid for a mailing list to accomplish that mailing. Thus, for material placed on one's own Web site and for e-mail that is sent to 500 or fewer persons or to a list developed without having to purchase the names, there is no disclaimer requirement. Taken as a whole, the Commission's proposed regulations already described move toward a reasonable balance. They get at the heart of the problem noted by the court in Shays v. FEC and at the same time leave wide latitude for individuals, bloggers and others to undertake Internet political activity. I would say to further assure that vast array of individuals who use the Internet for political speech that the Commission intends to leave individuals free to operate outside the relatively few constraints noted above, the Notice of Proposed Rulemaking suggested several revisions to other regulations. For example, we clarified that we would expand the so-called volunteer activity allowance to independent activity, not just coordinated activity. This is important because, heretofore, the Commission has felt compelled to treat noncoordinated or independent activity on the Internet as something that is still subject to the current regulations on independent expenditures. So at some point a person would be subjected to the rule that only hard money can be used to pay for independent express advocacy communications and at a $250 threshold a person has to start reporting independent expenditures. So our intent with this rulemaking is to clarify that we will work with the volunteer allowance that is in the statute and make it extend to independent activity so that independent Internet activity likewise will have freedom from the independent expenditure restrictions. We also put in some provisions to clarify that our current rules on allowing an individual to use the employer's facilities will extend to use of computer facilities and Internet facilities at the workplace. We also put in some rules to clarify that we intend to apply the existing media exemption to Internet activity. So we hope those additional proposed revisions would assure the regulated community that our focus is only on these paid ads placed on someone other's Web site. We received over 800 comments. As I said, we held 2 days of hearings, and we are right now going over the voluminous record and trying to come toward a resolution on that particular rulemaking. In closing, I would just urge that the committee not adopt the approach that the committee approved in June, just because it will fall into the same set of problems that I described when we went through the regulation process. That broad exemption, at least in my mind, does not work well. I would just finish by saying the Internet, we all understand, is a wonderful tool for political activity. Its accessibility and generally low cost are invigorating the body politic. By the same token, its increased usage by candidates and parties and the increased resources being put into this technology for campaign advertising suggests a need to be cautious about attempts to exempt all Internet activity from Federal campaign finance laws. I hope Congress can await the outcome of the Commission's regulation proceeding. I thank the chairman and the ranking member and the members of this committee for the opportunity to testify, and I assure you the Commission stands ready to assist the committee further in any way it would find helpful. The Chairman. Thank you. [The statement of Mr. Thomas follows:] [GRAPHIC] [TIFF OMITTED] T4061A.003 [GRAPHIC] [TIFF OMITTED] T4061A.004 [GRAPHIC] [TIFF OMITTED] T4061A.005 [GRAPHIC] [TIFF OMITTED] T4061A.006 [GRAPHIC] [TIFF OMITTED] T4061A.007 [GRAPHIC] [TIFF OMITTED] T4061A.008 [GRAPHIC] [TIFF OMITTED] T4061A.009 [GRAPHIC] [TIFF OMITTED] T4061A.010 [GRAPHIC] [TIFF OMITTED] T4061A.011 [GRAPHIC] [TIFF OMITTED] T4061A.012 The Chairman. Vice Chairman Michael Toner. STATEMENT OF MICHAEL E. TONER Mr. Toner. Thank you, Mr. Chairman. I want to thank you and the ranking member and all members of the committee for inviting me to testify here today on Internet regulation. I want to emphasize three things today: First, there is no indication that Congress intended for the many prohibitions and restrictions within the McCain- Feingold law to apply to the Internet. As I detail in my written testimony, the Internet is not subject to McCain- Feingold under the plain meaning of the statute. Congress identified a large number of mass media that are subject to McCain-Feingold restrictions, including broadcast, cable and satellite communications, newspapers, magazines, mass mailings, telephone banks. Even outdoor advertising facilities are mentioned in this statute. Virtually every type of mass media in this country was identified by Congress in this key statutory provision except for one, the Internet. I do not believe that the statutory omission was an accident or an oversight. Rather, I believe it was a conscious, informed judgment by Congress that the World Wide Web should not be subject to the many restrictions and prohibitions that McCain-Feingold applies to other types of mass communications. There is also no evidence in the legislative history that Congress intended to restrict online politics when it enacted the McCain-Feingold law. To my knowledge, during the lengthy floor debates on this legislation not a single Member of Congress, including the legislation's sponsors, indicated that the Internet would be restricted or regulated in any way in the McCain-Feingold law. Given that such a result would potentially affect the activities of millions of online political activists, the fact that there was no floor discussion of the subject is powerful evidence, in my view, that Congress did not intend to restrict the Internet when it passed the McCain-Feingold legislation. So, given the plain meaning of the statute and its legislative history, in my view the FEC was correct to exempt the Internet from its regulations implementing the McCain-Feingold law. Second, there are very strong policy reasons that support in my mind exempting online political speech from government regulation and restriction. As many commentators have noted, the Internet is virtually a limitless resource where millions of Americans communicate every day at virtually no cost. Unlike television and other traditional media, which generally are scarce and have significant financial barriers to entry, an individual can communicate with millions of people online at little or no cost in an interactive and dynamic manner; and the speech of one person does not and cannot interfere with the speech of anyone else. Published reports indicate that, as of August, 2005, there were over 14 million Web blogs and over 1.13 billion links in cyberspace, that approximately 80,000 new blogs are created every day, which works out to about one every second, that the blogosphere continues to double about every five and a half months, that approximately 70 million American adults log on the Internet every day and that Americans send out approximately 43 million e-mail messages per day. In light of this, it is simply not possible, in my view, for any person or entity, no matter how wealthy they may be or how much money they can spend, to dominate political discourse on the Internet. By contrast, if a multi-millionaire decides to spend millions of dollars on television or radio advertising to try to elect or defeat a Federal candidate, that person could buy up much of the available advertising time and could make it difficult for anyone else to be heard on those traditional media. But such dominance, in my view, is not possible on the Internet, given its extraordinary size and accessibility. Third, there is no constitutional basis, in my view, for the Federal Government to restrict online politics. The primary constitutional basis for campaign finance regulation is preventing corruption or the appearance of corruption. Where campaign finance regulations meant to ensure that money and politics does not corrupt candidates or officeholders or create the appearance of corruption, such rationales cannot plausibly be applied to the Internet, given its size, affordability and accessibility. As bloggers Markos Moulitsas Zuniga and Duncan Black pointed out to the FEC earlier this year, the purpose of campaign finance law is to blunt the impact of accumulated wealth on the political process, but this is not something that occurs online. While wealth allows a campaign or large donor to dominate the available space on TV or in print, there is no mechanism on the Internet by which entities can use wealth or organizational strength to crowd out or silence other speakers. In sum, the Internet fulfills through technology what campaign finance reform attempts through law. On the broadest level, the question to be decided in the months ahead is whether the online political speech of every American will be free. I ask, must every aspect of American politics be regulated by the Federal Election Commission? Can there not be any part of our politics that is not subject to Government review, investigation and potential enforcement action? I don't view these as rhetorical questions. I view them as going to the heart of the debate of whether the Internet should be regulated by the Federal Election Commission. I remain hopeful that Congress and the Commission will take whatever steps are necessary to ensure that every American can engage in online politics free of Government regulation and restriction. I want to thank again the committee for inviting me to testify. I look forward to the committee's questions. [The statement of Mr. Toner follows:] [GRAPHIC] [TIFF OMITTED] T4061A.013 [GRAPHIC] [TIFF OMITTED] T4061A.014 [GRAPHIC] [TIFF OMITTED] T4061A.015 [GRAPHIC] [TIFF OMITTED] T4061A.016 [GRAPHIC] [TIFF OMITTED] T4061A.017 [GRAPHIC] [TIFF OMITTED] T4061A.018 [GRAPHIC] [TIFF OMITTED] T4061A.019 [GRAPHIC] [TIFF OMITTED] T4061A.020 The Chairman. Commissioner Weintraub. STATEMENT OF ELLEN L. WEINTRAUB Ms. Weintraub. Mr. Chairman, Representative Miller, it is a pleasure to be here. You have my written statement. I ask that it be entered into the record. I won't read it to you. Let me say at the outset that I got to the Commission after most of the rulemakings that were necessitated by BCRA had already been completed; and, as you have already heard and I think will continue to hear today, a lot of people who were involved in that process--at the Commission and on the outside as commentors feel very strongly about those regulations, whether they were right, whether they were wrong. I wasn't there, and I don't have a dog in that fight, and I am not here to relitigate that. I am also not here to lobby you over whether you should or should not pass a law governing the Internet and politics. But I am here to talk to you about where the Commission finds itself today. And where we are today is a place where, without congressional action, the Commission has no choice. We are under a judicial mandate to issue a regulation addressing at least some aspects of political speech on the Internet. Barring statutory change, that is exactly what we will do, although I believe the Commission should and will take a very restrained approach to any such regulation. But if you don't want us to issue that regulation, then we need a change in the law. I think that, I want to assure you that we are, as a group, and I know I am personally, committed to taking a very restrained approach to any regulation that we pass that governs people's use of the Internet. We are not interested in creating a new category of Internet outlaws. I am not interested in having anyone out there sitting at their computer, whether it is at their home or their office, about to send out a message and thinking, well, before I press that send button do I have to call my lawyer or, God forbid, read an FEC advisory opinion? I think that would be a very bad result, and we will do everything within our power--I will do everything within my power to make sure that is not the result of our regulations. In our proposed regulation, the only Internet activity that we propose to cover as a regulated public communication is an advertisement that is placed for a fee on another person's Web site; and we tailored that on purpose to be as narrow as we thought we could while still complying with the judge's concerns. Now I will point out that we received some testimony during our hearing that Internet ads can be placed very cheaply, as cheaply as $50 for 50,000 hits on some sites, according to the Center For Democracy and Technology; and it has been suggested to us that there perhaps ought to be some kind of a minimum threshold before we would look at even paid advertising. The threshold that has been suggested by several witnesses is $25,000. That might be a perfectly good idea, but I don't think we can do that, again, without a statutory change. So I will just suggest that to you that if you are interested in that approach, that is another area where we would need to see legislation. Our proposed regulation also addressed disclaimers on e- mail, only because we have a regulation on the books that I believe is vastly overbroad, and I think we need to pare that down. Right now, if an individual sends out 500 substantially similar unsolicited e-mails that advocate the election or defeat of a candidate, it requires a disclaimer. And when I think about how many addresses people routinely keep in their e-mail address books--I know I have over 500--people belong to listserv groups that have many, many names on them; and it is very, very easy, I think, for someone who is involved and excited about politics to, when it gets close to the election, decide to send out an e-mail to everybody in their address book, which could very well be over 500 names, saying please vote for my favorite candidate or vote against this other guy. For us to say that that would require a disclaimer or that the Federal Government has any interest in regulating that kind of e-mail I think is ridiculous. So I think we need to change the regulation on the books. The proposal we have made is to import a commercial transaction requirement onto that so, unless the individual had paid for their mailing list, which most individuals wouldn't do, they would not have to worry about that disclaimer requirement. But it has been suggested that that is not enough, and I am still contemplating, and I am looking at this issue. I think that it is quite possible that we might want to repeal that entire disclaimer regulation as it applies to e- mail except insofar as it would govern political committees, candidate committees, party committees, all political committees so that individuals would never have to be concerned about that, no matter the source of their address lists. The proposal also makes clear a couple of things that I think are already true, but perhaps, given all the attention to this, people using the Internet would feel more comforted by seeing it in writing--maybe not--and that is that the media exemption does apply online. Online publications are given the same protection that paper publications are and that the volunteer exception that is in our rules does cover individuals' use of computers in their own residences, on their own equipment, or on publicly available equipment such as in libraries or, in many instances, on corporate or labor union equipment that they otherwise have access to that they are free to use under the terms of their employment or the relationship with their union for nonbusiness purposes. A lot of people are concerned that the way our regulations are written, this would limit individuals' use of those kinds of computers to 4 hours a month, which isn't a lot of time. No witness could come up with any reason why we would want to import that kind of restriction, and I don't see any reason to do so. So I am also looking at whether our rules are already clear enough on that, that this 4-hour limit wouldn't apply or whether we need to specifically broaden them. But the argument has also been made that perhaps we don't want to even go so far as to address the Internet in this context. Because even by virtue of exempting activity, we impliedly say that they are under our jurisdiction; and that is a debate that is ongoing at the Commission as well as outside. Let me say couple of words about bloggers, because the bloggers have generated and received a lot of attention in this debate. No one wants to regulate the bloggers. I think that is pretty clear now. But some commentors pointed out that blogging is only one form of communication technology that currently millions of people use, but there are many other ways that people use the Internet to communicate. And when we--if we are going to craft an exemption, we ought to make it broad enough that it is not limited to just a technology that happens to be popular today but also have it broad enough that it would cover the way people will continue to use the Internet next year and the year after that, or the way things change online, tomorrow and the day after that. So I think we want to be technology neutral in our approach, and an exemption for bloggers would probably not be broad enough. In addition, some of the bloggers have asked that they be allowed to incorporate for liability purposes the way political committees can without incurring all the corporate restrictions. I think that is an excellent idea. I would be happy to pursue that. I am not sure we can do that in the context of this rulemaking, given the requirements of the administrative procedure act for noticing what we do. The courts have been very strict with us on those requirements, and I think we might have to notice that in a new rulemaking, but I am very interested in pursuing that because I see no reason not to do it. One other issue that has come up with bloggers, in the last election a couple of bloggers received payments from candidates, and that became controversial, and some people have suggested that those payments should be disclosed by the bloggers themselves. However, we do not normally require disclosure by commentators of payments they receive by campaigns. It is usually the campaigns that disclose those payments. And I don't think that we--for myself, I personally would not support a rule that imposed a new requirement for people who comment on the Internet that does not otherwise exist for people who comment on television or newspapers or in any other forum. One other sort of technical point on the republication of campaign materials, which is generally covered under the law and is regulated. On the Internet, it takes on a whole different character because it requires virtually no cost or effort to cut and paste something or to add a link or to forward something that you have received from another source online. It is very different in character than Xeroxing a bunch of papers and then stuffing them in envelopes and folding them and addressing them and stamping them and buying the stamps. There is a lot of effort that goes into that, and it just doesn't track what happens on the Internet. So I think we ought to make clear that whatever our rules are in other contexts for republishing campaign materials that they would not apply in the same way to linking and forwarding and cutting and pasting online. I think we can all agree that the Internet is a potent and dynamic tool for fostering political debate and that any regulation we undertake should proceed on a ``less is more'' theory. We need to be very narrow and focused and restrained, and I am committed to doing it that way. The Internet brings people together who can't leave their house and or who live in faraway places and provides them with a forum where they can get together and talk about the future of our Nation, and who would want to interfere with that? I know I don't. I thank you for your attention. I am happy to answer any questions. The Chairman. Thank you. [The statement of Ms. Weintraub follows:] [GRAPHIC] [TIFF OMITTED] T4061A.021 [GRAPHIC] [TIFF OMITTED] T4061A.022 [GRAPHIC] [TIFF OMITTED] T4061A.023 The Chairman. I have a couple of questions now. I want to move on to both members who are here to ask questions and come back and still have some left. We will start with you, Commissioner Weintraub, and maybe someone else can answer. What is the difference between a blogger or a web site or what the courts said you ought to regulate? I know that the authors of BCRA when asked the question, both House and Senate, do you support regulating bloggers, said no. But they obviously sued the FEC to have regulation. Ms. Weintraub. General public political advertising. And I think what this debate concerns is what is advertising? What we have--the way we have proposed to do it in our rules is that we would only cover ads that are placed for a fee on somebody else's Web site, which would not be the case for bloggers sitting at their computers and sending out their own opinions. But, you know, it could be defined in a more capacious way. I don't think we have any intention of doing so. The Chairman. The question eventually somebody is going to have to try to answer, because--well, I will let the other two gentlemen comment. Mr. Toner. Thank you, Mr. Chairman; and I think Commissioner Weintraub is absolutely right. That was sort of the key statutory phrase that the court drew upon. But I have to note that the court decision is not in any way limited to paid advertising. In fact, nowhere in that decision is there any suggestion that if the FEC takes care of paid advertising it is in good shape. The Chairman. So what did the court tell you you have to do? Mr. Toner. It validated the blanket exemption for the Internet and said you have got to regulate at least some aspects of it in some way. The Chairman. So this is pretty wide open as to what you can get restricted or not. Mr. Toner. Right. It is always hard to know how these courts are going to react, but there is a real possibility of additional litigation, even if regulations along these lines are adopted. But the other point I wanted to make--and I think there is no question that the Commission's proposals are very restrained as compared to others that could have been made, and I think that was a very healthy development. But, you know, as my written testimony indicates, I do think there would be a number of complexities, even under a narrowly tailored regulation. But my bigger point here is that it is the exercise of jurisdiction in the first place that, in my view, would be problematic. Because if the history of campaign finance legislation is repeated in the future, the regulation of today will lead to broader regulation tomorrow. We have seen it over and over in different areas of the law. And if the Congress believes that the Internet is of a different nature than other mass media, doesn't have the same potential for corruption because of its accessibility, its affordability, its breadth, this is the opportunity to stand firm on that and make clear there will be no regulation of this medium. Mr. Thomas. Mr. Chairman, thank you. I would just note a couple things. As I read the court decision, when it got around to the Internet exception it was dealing with that part of the public communication definition that ends with the phrase ``any other form of general public political advertising.'' and in so many words the Court said, I leave it to the Federal Election Commission to properly interpret what Internet activity fits within the confines of that phrase, ``any other form of general public political advertising.'' so that is why we are focusing on this paid advertising prong. With regard to blogs, I have to also mention when we were doing the hearings we had lots of folks come through; and the fellow who has set up Daily Kos, which is a very popular Web site these days, was in a conversation with another witness who you will be hearing from today, Larry Noble; and they were going back and forth. But I gathered that Daily Kos, which is a blog, they post comments and responses to comments, and they go on and on quite a bit, and they cover lots of topics, but they also, apparently, accept advertising. So you are starting to see a bit of a blend, where some of the blogs are making a go of it commercially by offering up advertising. You should inquire, I guess, from Mr. Noble. My recollection is that he was talking about how he had discovered that Daily Kos was offering advertising over a certain length of time for $50,000. So we are starting to see some opportunities for advertising on the Internet and even on blogs that might turn out to be fairly expensive. So that is kind of--the focus of our proposal is really just on those paid ads, at least at this time. Ms. Weintraub. Could I add, Mr. Chairman, that, to the extent that we are looking at paid ads, it would--even if an ad is placed on a blog, the restriction in the proposed regulation would only govern the ad. It wouldn't govern the entire blog. The Chairman. I ask this question: I know that there are people out there that have formed groups, and you think they are 527, and you find out they are nonprofit or 501(c)(3) and then they go after candidates and have press conferences in the states. They bring up--they get one citizen, and they say, this is the committee against so-and-so. Then you see them on a blog all of a sudden, and they are out there blogging. So do they become an individual blogger that shouldn't be regulated? But this is someone--you can see the track, and people put money into advertisement on her blog. But she is a private citizen, so we don't touch her. Yet we know she has done press conferences. She has been here. She took money, 527 money. So, this is what kind of baffles you. How would you ever determine, you know--well, you go after them if you saw that they did a press conference for political activity and the money came in for an advertisement, but you don't go after them if they are just bloggers? I don't know the answer. That is why I asked you about them, a blog versus a web site. Mr. Thomas. Well, briefly, I would note you struck on one of the many complexities in this area. The Chairman. I gave you a real live case, too, that I have personal knowledge about. Mr. Thomas. Many members have lived through the experience of dealing with blogging operations that are fired up and active and usually going after the member in question, and it is a tough one. We have exemptions in the law, however, for individual volunteer activity. If you really are acting as an individual and you are basically doing activity on your noncompensated time, we think there are ways that should be used to exempt whatever those people do using their own computer and so on. So if you set up a blog, a Web site using your home computer, do it inexpensively, that is fine. What we are trying to focus on are situations where maybe someone does, in fact, pay for advertising on a Web site of some sort. It might be a blog, it might be some other very popular Web site like Yahoo, which has very, very expensive advertising space as Internet ad activity goes. So we are trying to focus on the most obvious situation where money is being spent to influence someone's election. Ms. Weintraub. I think that is a really important distinction--I am sorry, Mr. Chairman, if I could jump in--that we are talking about, is potentially regulating money that pays for the ad that would appear on the blog. The fact that we have a regulation that might regulate the money that is paying for the ad on the blog does not mean that the blogger cannot then continue to blog, cannot then hold press conferences or exercise his or her rights of free speech in any other area. It actually goes more to the person who is buying the ad than to the blogger him or herself. The Chairman. It still goes to disclosure in a sense. Because I am not by any stretch of the imagination saying, to be frank with you, when these individuals go into the districts and do a press conference: ``I am here to clean up the government, et cetera'', you usually find out they have, tripped over themselves anyway somewhere along the line. Then you look at their web sites and the stuff they stand for and the out-of-towners in here. So a lot of it, frankly, is not effective politically in anybody's district, either side of the aisle. But it goes to the question about the money. I am not suggesting you stop press conferences or free speech, but the reformers will say it still comes down to disclosure. Because if soft money is banned in the system, or trying to get soft money out of the system, the next thing you know somebody comes along and says, ``Hey, I will tell you what, you start this blog, but I am going to make sure that the money flows over towards that blog or wherever you go. In fact, why don't you go on a couple of the online radio shows, and we will go ahead and advertise $100,000 worth there.'' Now you start to say, is that some type of coordination? But that comes to the heart of my question: How do you determine that? And I would like to ask you, Chairman Toner, how do you determine that? How would the FEC say there was coordination and soft money afloat? Does it kick in because somebody files a complaint? Or do you have your staff surf web sites? I am just really curious to know how you determine that, if there has been a violation Mr. Thomas. Well, Mr. Chairman, most of the activity we get involved with in terms of enforcing the law as it relates to Internet activity comes to us through complaints. There is a very vigorous community out there on both sides of the political spectrum, and they are always looking at Web sites, they are always scratching behind it to try to find out if it looks like someone is actually subsidizing the Web site that is within, say, the control of a candidate or a party committee or something like that. So we have gotten several complaints along those lines. The coordination investigations are always difficult. It is very difficult to find someone who will ultimately admit that, yes, I had this conversation and, yes, within the technical confines of the Commission's coordination regulations we crossed the line. But, for the most part, it comes to us through the complaint process. We don't have a process--or we don't have staff onboard who are surveying Web sites and looking for potential problems on our own initiative. We don't do that right now. Mr. Toner. If I could, Mr. Chairman, I think this raises two points. First, there has been some discussion about that we are focusing on paid advertising, but we also have a proposal that would make clear that the press exemption extends to online politics; and also the chairman, I think, correctly noted that the individual volunteer exemption exists for people. But I think my point is that there would be no need for the agency to decide or for people on the outside to worry about whether the press exemption applies to the Internet if we didn't exercise jurisdiction over the Internet in the first place. Similarly, there would be no need for individuals to have to determine whether or not they were in the individual volunteer exemption if there was no jurisdiction over the Internet in the first place. These are examples of the complexity of the law that arise if we exercise jurisdiction and regulate in any manner. If we don't regulate in the first place, we don't have to get into thorny issues of whether somebody is an individual volunteering for a campaign and protected. They would be protected like everybody else, because we would be saying, in very straightforward English, if that is ever possible in these regulation books, that we are not exercising jurisdiction in the first place; and, therefore, you don't have to hire the lawyers---- The Chairman. That is the key, to regulate or not regulate. That is the question. And the court said you have to do something, so that is why this is a---- Mr. Toner. I should note that the Commission has sought en banc review by the full D.C. Circuit, and one of the challenges in that en banc review is whether or not the plaintiffs in the Shays case have legal standing. Now I don't know how that is going to play out, but if it is found they do not have legal standing to bring suit in the first place, then there could be the possibility that the entire lower court ruling would be vacated, including the obligation on this Internet rulemaking. So it is hazardous to predict what might happen in the future, but I did want to note that there is ongoing litigation in that area. The Chairman. I would have normally moved on to the Ranking Member, and she is not here, so I will move on for 5 minutes and then the gentlelady from Michigan. The gentlelady from California. Ms. Lofgren. Thank you, Mr. Chairman. I am happy to be here this morning. As you know, I represent Silicon Valley in the Congress, so I am not the first person you would think of who would say let us regulate the Internet. In fact, I think it is a blessing that we have managed to keep the heavy hand of regulation off the Internet. I recall when I was sitting on the Judiciary Committee looking at the Digital Millennium Copyright Act that the first draft of that actually prohibited Web surfing, which I thought was interesting. So when the government moves in to regulate the Internet, we will almost always get it wrong, it seems to me. And I am inclined--obviously I want to listen to all the witnesses, but I am inclined to believe that we ought to just keep hands off. I mean, the whole point of Federal campaign finance regulation is because, you know, TV is so expensive. I mean, you need to have a level playing field. But the ability to enter the Internet, I mean, there is no barrier to entering the Internet. And so the rationale for regulation and control, that does burden free speech, and maybe for good reason when you are talking about buying million- dollar TV ad buys isn't present in the Internet. It is a great leveler of people being able to communicate and have their opinions out there, and really it is what is interesting gets heard. It is a wonderful endeavor where the most interesting person, the most exciting blog actually floats to the top. So I am interested in--I don't know whether you have had a chance to look at the bill that has been introduced by Senator Reid and Congressman Hensarling relative to this. Do you have a comment on whether that really accomplishes what I have just said I want to accomplish, Commissioner Weintraub, or any of you? Ms. Weintraub. I think that it would. It certainly would lead to a hands off the Internet approach. I have seen those proposals in various iterations, sometimes freestanding and sometimes folded into larger packages. So obviously the Members will decide whether they want to have other things in addition to an Internet exemption. But my comments only extend to the Internet exemption itself. Mr. Toner. And if I could note, I think the Reid bill is excellent. It would solve the public communication part of the problem that was introduced by the Federal court decision here. There may also be--might make some sense to focus on whether a similar type of total exemption from the Internet from the definition of contribution or expenditure which would make ironclad that all activity on line is exempt from regulation, not just public communications, but in all forms, and regardless of whether coordinated or done independently. Mr. Thomas. Congresswoman, I take a slightly different approach. While you are here, I will try to bend your ear. I think the problem that I have tried to articulate in my statement is that this blanket exemption for all Internet activity, it is in essence too broad because we are starting to see the use of paid Internet advertising increasing. In my opening remarks I referred to statistics from one of the on- line coalition representatives who testified at our hearings, and he pointed out that in 2004 he had identified more than $14 million worth of paid Internet advertising just in 2004 alone for campaign purposes. And it is like a lot of things, it is an opportunity; it starts out small, but it grows and grows and grows. We saw that with the soft money phenomenon. There are some other statistics. You are starting to see some large outlays by national party committees. One of the national party committees, it is in my statement, made payments of $260,000 for e-mail acquisition, payments of 200,000 and payments of 179,000 for e-mail services, and payments of 170,000, and 147, 000 for Web advertising. So the numbers are starting to grow. And on a committee-by-committee basis, a campaign-race-by-campaign-race basis, you see the potential for someone who is otherwise prohibited from subsidizing that activity all of a sudden maybe being able to subsidize a significant amount in a particular candidate's race. So that is what we are trying to focus on. As we have tried to point out, none of us has any interest in regulating what John Q. Citizen does on their home computer. We want people to be able to use the facilities at their workplace as long as it does not interfere with the normal amount of their work. They can work at the office at night on the office computer. We have regulations and ways of getting at really opening up the ability of individual of bloggers to undertake what they do, but we do think this broad exemption that is in the amendment that this committee adopted and that is in Senator Reid's bill, at least I do, I think it is a little bit too broad. It can be better tailored. We are trying to do that through our regulations at the Commission. Ms. Lofgren. If I may, Mr. Chairman, I know my time has expired, but I have a statement I would like to submit for the record, and I certainly will listen, but I am not persuaded that the Federal Government should regulate the Internet. I just am not. At the end of the day, there are many contentious issues before the committee, but it may be that we are going to agree on this one. And if we took the Reid-Hensarling bill and put it on the suspension calendar, we could probably get it done this afternoon, and that might be an approach we want to take. So I yield back. The Chairman. The additional materials are entered into the record. [The information follows:] [GRAPHIC] [TIFF OMITTED] T4061A.024 [GRAPHIC] [TIFF OMITTED] T4061A.025 [GRAPHIC] [TIFF OMITTED] T4061A.026 The Chairman. Gentlelady from Michigan. Mrs. Miller. Thank you, Mr. Chairman. I was a few minutes late as well. I do have an opening statement. Without your objection, I would like to offer it for the record also. [The information follows:] [GRAPHIC] [TIFF OMITTED] T4061A.027 [GRAPHIC] [TIFF OMITTED] T4061A.028 [GRAPHIC] [TIFF OMITTED] T4061A.029 [GRAPHIC] [TIFF OMITTED] T4061A.030 [GRAPHIC] [TIFF OMITTED] T4061A.031 Mrs. Miller. You know, first of all, I think we need to stop calling some of these different groups reformers. They are really not reformers, they are regulators, I believe. They just want to regulate, regulate, regulate. In fact, in another committee I sit on, I am the chairperson of the Regulatory Affairs Subcommittee on Government Reform, and we are spending a lot time looking at onerous governmental burdens through the regulatory process and what it is doing to industry, how uncompetitive it is making America in the global marketplace, and trying to dissect and eliminate some of these onerous government relations. What we are talking about here is not going to stifle competition, but has every opportunity to stifle free speech. As we are all marching down the information highway, and my staff sometimes refers to me as a technotwit, I try really hard to keep up to date. But if you were not really familiar with technology, some of this would just seem like gibberish, I think, to the average American who is trying to understand how what we are talking about actually is going to help them understand who is trying to influence their vote and influence the election process. And perhaps what you are dealing with as a result of the court action goes to why a lot of people raise consternation about activist courts legislating from the bench rather than the legislative body doing what they were elected to do. I agreed with your statements, Mr. Toner. I was not in Congress when BCRA passed, but it did seem to me, reviewing the law, that Congress did make a conscious decision to exempt the Internet from the McCain-Feingold Act, and that was the clear intent. I agree with your observation on that. And I notice that there was actually an article in The Hill last month where it was reported that Senator McCain had suggested that President Bush reappoint the Chairman to the FEC, and so I wonder why would he want to reappoint someone who was interested in internet regulation. Have you had an opportunity to talk to Senator McCain, and does he agree with your position on this subject, Mr. Thomas? Mr. Thomas. I have not talked with Senator McCain except, I guess, twice in my life, and it has been years since that occurred. I assume that Senator McCain is reflecting what we are seeing in a comment that was just handed to me today from several of those groups who are basically taking the position that, I think, they don't want to regulate the vast majority of what we are seeing on the Internet. I think they, as I suggested this morning, are thinking we do need to preserve the core provisions of the statute that would prevent someone from just paying for a candidate's Internet services, and that would at least get at this phenomenon we are starting to see of paid advertising. That is real money that someone can pay to support a particular candidate's race, and so where you have got that clear pattern of money actually being expended, maybe the base contribution limits and prohibitions limits should apply to someone who is paying for advertising on the Internet. But I think that is probably the position that Senator McCain would take, along with the groups that have filed that recent comment. Mrs. Miller. Well, like all types of regulatory things, particularly when it comes to campaign finance, there is never any really black and white. I think there is a lot of gray in this rainbow. I was trying to make some notes when you were speaking about 80,000 new blogs--was it a day--are coming, on-line? I can't even imagine that you have any estimate of what your budget and your staffing level requirements would be if you actually had to start to regulate some of these kind of things. And, of course, we have very strict regulations under the Campaign Finance Act about corporate involvement, et cetera. Some of these blogs, I understand, actually incorporate to protect exposure. How would you be able to regulate that to be certain that these bloggers are not already negatively impacting the laws on the books? Mr. Toner. Congresswoman, as you know, I don't think we should go there across the board. That would be the solution, because otherwise we might have to hire some additional staff to keep up with this. But 80,000 new blogs are created every day in cyberspace. Billions of links exist on the World Wide Web; millions of Websites, millions of e-mail sent out ever day. For me, that is what makes it fundamentally different than other types of communications. I think the Chairman is correct in noting in the past cycle spending that is related to the Internet, there is no question that political committees and others are focusing on that. They are developing e-mails, Websites, the ability to do links, candidate often set up their own blogs, a wide variety of Internet activities. But where is the potential for any of that to dominate this medium? Where is the potential for anyone, no matter how much money they might want to devote, to be able to crowd anyone else out in this medium? That is different from television or radio or other types of communications where you really can buy a lot of points and prevent other people from getting on the air. And so if the Internet is different from that, there is no danger of that, given it is doubling every 5\1/2\ years. Where is the basis for regulation where the touchstone of any permissible campaign finance regulation is corruption or the appearance of corruption? How can that happen in this kind of environment? Mrs. Miller. I know my time is up. One more question. Just to follow up on that, because it is so true. I had been a secretary of state before I did this job and did campaign finance in my State of Michigan, and obviously I was always looking at Buckley and what it meant. And the impetus of Buckley was to negate the impact of big money on the influence of the electoral process. I am just wondering, could anybody give me an example right now where you would see a specific example of something that is happening on the Internet with paid political advertisements that you feel is corrupting the process? Mr. Thomas. Well, we get that question fairly frequently, show me some evidence of corruption. Mrs. Miller. Show me the money. Mr. Thomas. Exactly. It is always--I am not going to go there. I am not going to assert any particular thing I have seen is corruption. What I would say, and this goes back to the type of example I alluded to, even a blog site like Daily Kos has one advertising option whereby you can spend as much as $50,000 to get on that very popular Website. I suppose there is even more expensive advertising on bigger Websites that a lot of Americans go to like Yahoo or something like that, Google, if that is your opening Website on your computer. So if someone wants to pay for advertising to support a candidate on a site like that that is very popular and would be seen by a lot of folks, it can start costing a lot of money. So that is really the focus I am trying to bring to you. There are some situations where I guess this advertising is starting to get a little bit more expensive. We did get folks at the hearing telling us for the most part most Internet advertising space is very inexpensive. And so most of it probably--if someone is running a site that for some reason provides paid advertising, and they are an individual, if it supports a particular candidate and basically someone is subsidizing that, that person has a contribution limit as an individual of up to $2,100 per election, so a little $50 ad on someone's Web site is not going to be a problem. But I grant you there are situations where you can start to affect more and more folks because there is probably more and more opportunity for paid Internet advertising. As the vice-chairman pointed out, lots more Websites are popping up. So it does have the potential, even if we focus on this advertising aspect, to be fairly broadly--broad in impact. I think that Commissioner Weintraub's idea of maybe trying to allow some flexibility for bloggers to incorporate without triggering the standard corporate prohibition rules, I think we can try to find a way to work there. That would be very helpful. Ms. Weintraub. Congresswoman, if I might, you had mentioned how many staff we would need to try and deal with this issue. About half the people in the room right now are staff of the agency who are here trying to read the tea leaves on what kind of regulation they might be writing or maybe not. Mrs. Miller. So this is a full employment bill for them, right? Ms. Weintraub. We have plenty of work to do, Congresswoman, and I would like to differ with something the Chairman said earlier. I think that you can see the outlines of the regulatory approach that we are contemplating now. Again, I didn't come here to lobby one way or the other, but if you are going to pass a law and obviate this rulemaking, on behalf of the staff that would still have to put in a lot of hours to work out the fine points, I would appreciate it if you would do that sooner rather than later, not after we write the regulation, but before we put that work in, because believe me, we can find other jobs for them to do. Thank you. The Chairman. I have just one more question. If you want to ask another question before we go to panel two, whatever either Member would like to do. Let me ask you just a quick answer for this: How effective do you think the Internet actually is in its believability when it comes to bloggers and political activity? The internet might not be particularly credible because you can put anything you want on there. Something becomes very salacious, and then the other supporters come out and attack another candidate in the case or beat each other with baseball bats, and the rest is history. In a way, the internet is not as effective a tool as the good old-fashioned way of people talking to each other in communities and neighborhoods on where they stand on the candidate. I also think there are times where the internet tries to get something going politically on groups, or advocacy groups, or candidates, and hope to get it into the mainstream media, where it would--I can't believe I am saying this--have some validity in the mainstream media. But it would have more validity if it is printed in a major newspaper, radio or TV rather than if you read it on the blog, because anybody can sit there and get mad and blog back. Having said that, how effective are the blogs politically? If people are advertising and spending all this money, should you really regulate it? It is out there, it is free speech, but not really an effective political tool as much as going door to door and things like that? Any comments in that direction? This is probably outside the box, what I am asking. Ms. Weintraub. Well, Mr. Chairman, I think that the second panel would probably have a lot to say on that subject. The Chairman. I am not saying they are not effective, but if you are looking for the political activity in the blog, and it is going around BCRA and soft money, maybe it is not in the sense--maybe the advertisement angle is too much to look at to regulate. That is what I was trying to get at. Ms. Weintraub. I think that the information that is out there on the Internet is about as reliable as what you get walking around in your neighborhood and talking to your neighbors. Some of your neighbors are more reliable than others; some are biased, and others are not. You can make that assessment. I think what a lot of people find to be one of the great virtue of the Internet, if somebody says something not reliable, inevitably there is somebody else who is going to be banging away at their keyboard a minute later pointing out the fallacies. The Chairman. So you think they are politically effective, the bloggers? Ms. Weintraub. I think the last election showed an awful lot of effective political activity took place. The Chairman. So why don't you want to regulate them? Ms. Weintraub. It is not a question of whether I want to regulate it or not. The Chairman. If you say they are politically effective, and it is an arm of politics, and there is money over there. Ms. Weintraub. We will regulate it. We are under a court order to regulate it. The Chairman. I am not trying to ask a trick question. If they are politically effective entities, and soft money is going to them so the reformers would say, ``Yes, it is effective'', or ``We write them off, they are really not effective'', people are still talking to each other in neighborhoods, so why should we regulate them at all? I have supported along the lines of not regulating, but I am just saying this argument becomes so confusing, and they either are politically effective and are utilizing soft money to bypass the system, or they aren't, and if they were, how would you even regulate them? Mr. Thomas. I would note, Mr. Chairman, you are about to hear from a gentleman, Mr. Mike Krempasky, who runs RedState.org. If you don't think that is an effective Website, you are not really sort of following the political process. It is a very effective political Website, and I would note from the outset he spoke with advisors, and they basically decided they were going to set themselves up as a political committee, operating as a political committee. There is a broad array of Websites, and some are obviously more effective than others. I think the committee would be very well served to do some really good research to see if you can get some sense as to which of these Websites were utilized effectively during the campaign and how, get some flavor for whether this phenomenon of Internet advertising really is something where it was effective in a particular race. You have got a lot of colleagues, and maybe you could inquire from your colleagues, ``Tell me about your race; can you remember any advertising that was on Internet Websites that people seemed to have picked up on and followed and that may have gotten tons of chatter?'' I think that is a very valuable part of this committee's function. The Chairman. I am not saying by any stretch of the imagination that they are not effective. I just threw that out there, not being facetious, but throwing it out there. Some people say, well, you dismiss it, but you might want to have some regulation because they are effective, and soft money is going there. And I am saying it is a very confusing issue, but it still comes down to free speech and the internet, which is a unique, different creature than a newspaper or a radio or a television. Even here in the House we have looked at the transmission of an e-mail, as long as it is not for political purposes, as a different thing that we look at to regulate versus if the Member puts out the newsletter. So the Internet is a different, type of creature. Mr. Toner. If I could, Mr. Chairman. I think a strong argument could be made that Web blogs and the Internet in general is self-regulating. If there are over 14 million blogs in this country, the raw number of them prevents any one of them, no matter how widely read, to dominate discourse. And also, Internet communications often require proactive steps by the viewer to go get that information, unlike television or radio, which can be very passive. The raw breadth of the Internet, the accessibility of it, I think an argument can be made, really prevents the ability for anyone to have a corrupting influence no matter how much money they may be spending on it. The Chairman. Do either of the Members have additional questions? Thank you for enlightening us today and confusing us today, but actually being here to have a good discussion on the issue. I want to thank all three of the Commissioners. The Chairman. We will now move on to the second panel. After the hearing I am sure the second panel will blog us to death to show how prominent and powerful they actually are. Our second panel, we are fortunate to have with us today two operators of two very popular political web logs or blogs. These witnesses will explain to the committee their perspective on Internet regulation, which will shed light on how the blogs operate. First we have Michael Krempasky, who runs a conservative blog, RedState.org. Then we will hear from Duncan Black, who runs the liberal blog Eschaton. We look forward to their remarks. We also, I would note, invited Eli Parser of moveon.org. and Marcos Zuniga of dailykos.com. They weren't able to come due to some scheduling conflicts. We are glad to have both of you here to hear your point of view, and we will begin again, I think, with Mr. Black. Thank you. STATEMENTS OF DUNCAN BLACK, FOUNDER, ESCHATON WEBSITE; AND MICHAEL KREMPASKY, DIRECTOR, REDSTATE.ORG, FALLS CHURCH, VIRGINIA STATEMENT OF DUNCAN BLACK Mr. Black. Chairman Ney, members of the committee, thanks very much, and thanks for the introduction. I will stick roughly to my prepared remarks, although I will deviate somewhat in response to some of the comments of the previous panel. I just stated my name is Duncan Black. I write for the Website Eschaton, a blog. Everything on the Internet these days tends to be called ``a blog,'' but whether or not that is valid or not I don't know, but I do actually have a blog, and I started it in April of 2002. On the Website, I cover politics, current events, economics, and cultural issues. During the 2004 campaign the site averaged between 1- to 3 million viewings per month, and in addition to writing about politics, I also engage in fundraising drives for a number of Federal candidates and the DNC and other organizations, candidates including Joe Hoeffel, John Kerry, Ginny Schrader, and Richard Morrison and others. I run advertising and accepted paid advertising on behalf of Federal campaigns. My goal is really here more to provide helpful information as I can regarding the narrow question of whether greater scrutiny and regulation of Internet political speech is really necessary in order to meet the intent or spirit, what I consider to be the intent and spirit, of campaign finance law. I am no expert in this area, but my understanding of the basic motivation and statutory language of the legislation and the general purpose behind all such campaign finance language and laws is to reduce the impact of concentrations of financial power on Federal elections. It is my opinion, either through the regulatory process of the FEC, if possible, given the current court decision, or through slight modification of actual legislation, the government should take steps to not implement and force regulations which impact the ability of small actors to engage in political speech on the Internet, an activity which neither requires nor necessarily benefits from being backed by significant financial resources. The Internet generally and blog specifically is a medium which allows anyone the full powers of the press and to potentially command a large audience at a minimum cost. Unlike broadcast, cable or newspaper distribution where there are significant barriers to entry, both financial and otherwise, there are almost no barriers to entry on the Internet. Anyone can reach a large audience for a minimal cost. I find it hard to believe that the intent behind campaign finance legislation was to sort of leave large media corporations essentially untouched through the media exemption by campaign finance law while failing to grant similar latitude or exemption to small Web-based publishers. If the current statutory language doesn't make it clear, and the court decree requires Internet communications be regulated by legislation which I believe is poorly suited for doing so on the Internet, which is inconsistent with the broader intent of campaign finance legislation, then the legislation should really be changed. Whether by clearly extending the current media exemption or through other means, those who use the Internet for the purpose of disseminating news, commentary and editorial should be as free to do so as are Clear Channel, Disney, News Corp., Time Warner and others. So I began my site, as I said, in the spring of 2002. Both then and now I use almost entirely free web services. My direct operating costs of my website, really being generous here, are about $150 a month, if that, and that includes paying for a standard Internet connection and maintaining a working computer. I have never spent any money to advertise my sites or on any other sort of public relations activity or any promotion of my site whatsoever. While the meaning of Internet statistics is always somewhat unclear, I get about 125,000 visits per day on an average day, and that probably means I reach maybe 40,000 unique sets of eyeballs for a day. I began my site simply as a hobby. I had no intention of making money, but eventually, through large enough traffic, I could make money through advertising. I haven't yet incorporated, but other bloggers have done so primarily for the purpose of limiting liability. As with many other blogs, my site provides links and excerpts of current news article, commentary and other events and other editorial comments. I have endorsed candidates for Federal elections, as most newspapers do. I encourage readers to donate money to candidates I recommend, something which you see all throughout the media. Just the other day Sean Hannity was telling all of his listeners to donate to a candidate for Federal election and pointing to them on his website. No different than what I have done. The primary differences between me and Sean Hannity or major newspapers, or partisan magazines, talk radio, cable new networks, broadcast news, et cetera, is what I do doesn't require any money. That is the real thing. The actual financial expenditures I have to make, as I said, $150 a month, a generous estimate. Now, it is true you can spend money on a site, and other bloggers do. You can add some bells and whistles and retain more control over some aspects of your site by spending money, but it really isn't necessary to spend money to have successful and influential sites. It is unclear what the advantage often is of spending money. So I think those who want more Internet speech to sort of fall under the regulatory framework believe that, at some point, large sums of money spent on the Internet could have a corrupting process. Now, I share the concerns about the future possibility. I certainly wouldn't say that this is not a concern at all, but I don't see that such abuses have yet to take place. I don't yet see a mechanism by which money, just simply throwing vast sums of money at the Internet, is really going to have sort of a disproportionate effect on the electoral process. You were talking about the effectiveness of Internet sites and whether they are effective. I think the real key here is there isn't a very strong connection now between the effectiveness of a site and how much money is spent on it. On site, you can spend a lot money on the site and not be effective at all; you can spend very little money as I do, and I am occasionally effective. Hopefully I am. But the point is there is a disconnect between the effectiveness and money. I would also submit that to the extent that we are concerned that as technology evolves and individuals or groups, organizations, spend large amounts of money on, say, Internet video advertising and these kinds of things, I think the real power of those ads won't be when they are on the Internet; it is when cable news, or the nightly news decides they are interesting ads and rebroadcasts the ads for free over free media to the world as just part of their political conversation. It is sort of the amplification effect of other media that is going to make the difference, not so much the money spent on the Internet itself. How you deal with that, I don't really know. I do share the expressed concerns by Senator Feingold and the Chairman of the Commission that the overly broad language in the Reid bill potentially opens up loopholes on coordinated activity. I think the example of being concerned that if you essentially allow somebody not linked to the campaign to essentially pay for the entire Internet operations of a political campaign, that that is something to be perhaps concerned about. Whether money spent on the Internet is something we are concerned about is corrupting the process, certainly any campaign now has to spend nontrivial amounts of money to have an Internet operation. That is just part of having a modern campaign. If you let somebody just pay a million dollars to cover those expenses, we could potentially have either corruption or the appearance of corruption. So I understand those kinds of concerns, and I certainly think those concerns can be addressed largely if a broad media exemption is passed by the FEC. I think what is critical, both for the poor staffers for the FEC as well as the rest of us, is that we get some clarity on these issues sooner rather than later, because we are heading into the 2006 election season just about now, and it is sort of vital people like me or any ordinary citizens participating in political discourse on the Internet don't suddenly find themselves experiencing investigations as a result of complaints filed through the FEC or some other mechanism. I thank you for your time, and I look forward to answering your questions. [The statement of Mr. Black follows:] [GRAPHIC] [TIFF OMITTED] T4061A.032 [GRAPHIC] [TIFF OMITTED] T4061A.033 [GRAPHIC] [TIFF OMITTED] T4061A.034 The Chairman. Mr. Krempasky. STATEMENT OF MICHAEL KREMPASKY Mr. Krempasky. Mr. Chairman, members of the committee, I want to thank you for your invitation to be here this morning. Not long ago if someone would have asked me to come to Congress, I would have expected it would be to apologize for some intemperate remark I wrote on a Website. Now that Commissioner Weintraub informs me that there is a roomful of FEC lawyers behind me, I am just hoping to get out alive at this point. I want to talk to you as someone who is quite potentially looking at the business end of the regulations that you are considering, the regulations that the Commission is formulating, and I want to start with a statement that I hope that we can agree on, regardless of our opinions or views on campaign finance generally, and that is that technology, the Internet, the ability to communicate across the Internet has done more to democratize our politics than any law could hope to do. It has put more opportunity in the hands of more individuals than we have seen any contribution limits or bans on communication. It has given anybody around the country, the law professor in Tennessee, the homemaker in Ohio, the college student in Arizona, the ability to participate at an influential level in our politics whether they are local campaigns or national campaigns. One thing that is crucially important to remember about this medium is that despite what figures you are going to hear about how much money is spent on line or how many people participate on line, it is a medium in which passion and creativity really do trump brute force and muscle and funding. And to your question, Mr. Chairman, earlier about whether or not they are effective, I think they are, but that doesn't mean they ought to be a target of regulation. Effective free speech is no more dangerous to our politics than ineffective free speech. Now, in our rush to close loopholes, or perceived loopholes, I think it is important to remember that we are talking about fixing something that hasn't really been demonstrated to be broken yet. We did not see massive amounts of soft money circumventing the system in 2004; we didn't see rampant spending across the Internet distorting or corrupting our politics. We are really talking about fixing a problem that is either not there or certainly that we don't understand yet. And unlike parties and candidates and campaigns, whether at the national or local level, bloggers are not sophisticated legal actors. They do not have general counsel, don't have budgets to pay to deal with audits and reporting. They really are the small speakers that we ought to protect at almost all cost. I want to make sure that we understand that when we hear about potential loopholes or we hear the specter of these things, that in the rush to close them, it is the small speaker that is going to be trampled. They are not going to navigate Federal election law, they are not going to read FEC advisory opinions, they are just going to be quiet. If that is the end result of either a piece of legislation that is passed or not passed, or a rule from the FEC that is either passed or not passed, that would be a real terrible thing to happen. Chairman Thomas, in fact, urged you to wait and let the FEC sort through these issues. I think in his written testimony he refers to sort of bringing their expertise to bear on this question. And there is no doubt that the Federal Election Commission has experts in law and politics and regulations. But I think that when it comes to the issue of expertise and technology, I think that may be overstating it a bit. I have brought up several times that one of the Commissioners opened the first hearing on this issue by telling the entire room present that no one in the room knew less about the Internet than he did. To his credit, he has tried to learn a little bit since then, but I still think that the issues of speech and freedom that we are talking about are really important, and we have to understand that it is not just about a blog or about an e-mail list or something that we are talking about today, it is what is the next form of communication, what is the next opportunity the people have to participate, and how can we make sure that we don't just chill speech, but that we don't actually inhibit the development of new technology. Now, as Duncan mentioned, I think that one of the easiest ways to solve this question is to simply acknowledge in law what we already know, and that is that new and alternative media, the most commonly talked about one now of which is bloggers, are, in fact, media. Rush Limbaugh wakes up every day trying to change the country, influence elections, and the law grants him an exemption for everything he does through his outlet. So what possible good is it to protect Rush Limbaugh and Paul Begala on CNN while they are spending corporate money to affect our politics while potentially regulating people like Duncan and I? That to me doesn't seem to make any sense at all. Finally, I think I would just like to point out that the legislation before this committee which mirrors the Reid and Hensarling bills doesn't solve all the problems. It does leave gaps in the campaign laws before BCRA that still have to deal with bloggers and people that communicate on the Internet, but what it would do is put Congress on the record saying that this ought not to be regulated, and we are going to figure out how to make sure that is the case, that there still remains some place, some opportunity for people to participate as freely as they want, and that we are going to support and protect that. So I thank the committee for its time, and I look forward to answering any questions you might have. [The statement of Mr. Krempasky follows:] [GRAPHIC] [TIFF OMITTED] T4061A.035 [GRAPHIC] [TIFF OMITTED] T4061A.036 [GRAPHIC] [TIFF OMITTED] T4061A.037 [GRAPHIC] [TIFF OMITTED] T4061A.038 [GRAPHIC] [TIFF OMITTED] T4061A.039 [GRAPHIC] [TIFF OMITTED] T4061A.040 The Chairman. I think the point you both made was the point I was making at the end: Blogs are effective. Some people say they aren't, but they are effective. Of course, the blog is only as effective as its credibility, how it conducts itself, how it outreaches; but I think you both make a good point that effectiveness does not necessarily equate to money. You can spend a million bucks a year on the best bells and whistles on a blog, or spend 150 bucks a month, and it can be just as effective. So that is kind of a leveling of the issue, and should be able to support candidates and raise money and all that. Well, we will have some reformers today, but I assume if candidates are directly involved and out there soliciting soft money out of companies and unions and trying to get that in the system, that might be a whole different world. But the bloggers on their own are just generally independent and will have candidates, like the two of you, that you will support. That is the point I was trying to make. I am not sure just because the blog is successful, which they are, a lot of them, equates that you have to take it and regulate it. I just have one question to both of you. Do you think the blogging community--not both of you, but just the blogging community in general in the United States are worried that if regulation comes out that they could run afoul? Would they go towards hiring the lawyers they need, or would it stifle communication? Are bloggers around the United States concerned about regulation, or do they know it is going on? Mr. Krempasky. The fact that Duncan and I have been working together on this issue sort of speaks to sort of dogs and cats living together. I know that when the first--when this first hit the news back in March, a group of us, conservatives, liberals, libertarians, put together an on-line coalition of people that didn't agree on anything except this. We presented an open letter to the Chairman of the Commission, and within about 36 hours we had about 38,000 bloggers sign on to the principles of that letter, asking for more protection as media, opposing more intrusive regulations, and warning about really two things; one, that they would chill speech, because bloggers don't have access to counsel, they don't have folks like the talented people here that come and testify on behalf of either groups or candidates. But just as dangerous for those that support campaign finance reform or regulation, with the 17 or 14 million blogs that Commissioner Toner pointed out, that is a lot of potential complaints that can be flung at each other. If you like the idea of getting big money out of politics, the last thing you want to do is have the people behind me spend all their time with the 3,000 complaints they could get in a morning about this blogger or that blogger filed by other bloggers. So absolutely they are concerned. Mr. Black. They are definitely concerned. I agree with just about everything he said. I just want to add to stress while I imagine certain bloggers might hire counsel and have access to lawyers, and the community would probably get to work lobbying Congress to the extent they could, and we would see how effective we are, but it certainly would have an incredibly chilling effect and in part because of what Michael said, in part because it is a very partisan atmosphere, and one way to attack would be to attack your opponents through the FEC through the complaint process. The instant any of us, or most of us, who--for most people it is just a hobby, just something to do on the side. They get that registered letter or however the complaint arrives, that would have a serious chilling effect, and a lot of people who were participating the process would decide it was no longer worthwhile to do so. The Chairman. Why don't we move on to the other Members. I think blogs are effective. I think the greatest thing about the blogs, you do not have to have a lot of resources behind yourself to start it. I think that gives the average citizen from any walk of life the ability to get into the political process. The gentlelady from California. Ms. Lofgren. Just a couple of questions. I think I have already made my inclinations known to the prior panel. I never am very interested in regulating the Internet because of where I am from, I guess, but I do want you to comment on the suggestion made by the Chairman of the committee. I am summarizing, but my sense is that he was thinking that a distinction could be made between what you do and say, for example, Yahoo. I mean, Yahoo is publicly traded. Their CEO came from Walt Disney Corporation, they are different than you guys, and that that somehow should be a subject of regulation. I am not sure how you make the distinction, but I am wondering if you have thoughts on that proposition. Mr. Black. First of all, it is not clear--I mean, Yahoo is a publicly traded company, but it is also a media company. It runs newspaper articles from newspapers all over the world, including editorials from all over the world, people operating other media; publishes columns by opinionated people who are trying to affect elections in this country in one way or another. So Yahoo is a media company, and they are free to do all this without having any regulatory oversight by the FEC. There are restrictions on other types of corporate activity that they engage in outside the context of their media operation, but nonetheless the basic activity of running news and commentary on their portal site, they are perfectly free to do that. In that sense I am not sure what the important distinction would be between what I do either as an unincorporated blogger, which I am, or if I were to incorporate as a media company, and Yahoo the media company. Mr. Krempasky. I think Duncan's point about Yahoo is a good one. I think what we are really talking about is the specter that was raised at the hearings this summer about what if Halliburton had a blog; wouldn't that be awful? Professionally I work with a lot of corporations to try to teach them how to communicate either through or with blogs, and I can tell you that all of the things that make blogs successful, speed, responsiveness, personality, tone, credibility, even a bit of irreverence, none of those exist very well in a corporate environment. So the prospects of a successfully funded blog in the presence of things like general counsel--and I have to say that I can tell you that I had a conversation with a corporate legal counsel this week that had not only convinced his client but the rest of the company that if they were to run a blog, they would not be allowed to link to a news article without violating some copyright laws. And so the risk of the corporate environment when it comes to succeeding in this medium, they are really not as compatible as people think they are. Ms. Lofgren. Let me ask another question, because I really think opening the door to regulating the Internet is a mistake; however, there are regulations that are going to apply whether or not you are on the Internet. I am wondering, I don't know whether either one of you has filed as a 527. Have you? The 527 regulation in terms of tax-exempt status is going to continue to rule your activities, whether it is on the Internet or off the Internet, in terms of just whether you are eligible for the exemption. You wouldn't suggest that the IRS rules be changed in any way, would you? Mr. Krempasky. Let me say that RedState filed all of these legal forms and with all these specific agencies because we expected this issue to come up this year. And we saw everything that was going on in the campaign last year and had to go out to raise the money to pay a lawyer to file the paperwork and file reports every quarter disclosing every penny that comes in and goes out. And we did that hopefully so others would not have to go through that burden. I don't have any comment specifically on the IRS or the rules that govern political committees except to point out it is not an easy thing for small speakers, individuals, or even small groups to navigate that process at all. Ms. Lofgren. I know my time is almost up, but it seems to me that while we don't want to regulate speech, people who are getting a tax exemption are going to have to still follow the tax exemption rules of the IRS, and that we should make that clear. I thank the Chairman and yield back. The Chairman. Mr. Ehlers. Mr. Ehlers. Thank you, Mr. Chairman. Thank you for having this hearing. I think it is a very important topic. I have read a few blogs here and there, but I wish I had more time to read them. They are very interesting, very entertaining, and it is a pleasure to have you here to present your point of view. You look remarkably normal for bloggers. Mr. Krempasky. Sir, you look remarkably normal for a Congressman. Mr. Ehlers. I am a fellow nerd, and I managed to cover it pretty well, but my plastic pocket protector always gives me away. As you know, most of the laws we write are designed to regulate the bad guys, not the good guys, and from all appearances you folks are good guys, and I applaud what you are doing. I think it is very good. The concern that I think the FEC and that some Congressmen have is what about the bad guys who will misuse the Internet, misuse blogging, and in ways that certainly at least violate the spirit of the campaign finance reform law. Can you imagine ways in which some of your less ethical colleagues could basically subvert the law or violate the intent of the law by misusing their freedom on the Internet? I would just be interested in any responses you might have to that. Mr. Krempasky. I think regardless of how they might do that, the unfortunate companion to that is that it is absolutely unenforceable. If they chose---- Mr. Ehlers. We will get to that later. I want you to think creatively about---- Mr. Krempasky. Certainly people could use servers and Websites in other countries. Chairman Thomas mentioned foreign nationals and governments spending money. I am not sure how you get at that, if it is actually a Canadian or English company and Websites pouring content into America that Americans are reading, whether or not that violates the law or not. It certainly doesn't seem to be a question we can start to answer. I suppose there are ways that people can spend a lot of money on the Internet that maybe they would not otherwise be able to spend if it were in television or radio or things like that. But I think one thing that Duncan made pretty clear is that there is really not a corollary between spending and effectiveness. Commissioner Toner pointed out earlier that you cannot really crowd anybody else out. So even though you might be able to spend amounts of money, it is not like you can have the same impact in this medium, which I think is a completely different animal. Mr. Black. I think people can behave unethically on the Internet as they can in all walks of life, and a lot of what we think of as ethical issues, such as not disclosing conflicts of interest, not disclosing financial connections to individuals or groups, or anything else that you may be endorsing or supporting one way or the other, all those are potential unethical behavior that can be engaged in on the Internet and are engaged in every single day throughout the rest of our media where people are going on TV and certainly not always disclosing what groups they work for or what groups they represent. Maybe they are not even being unethical, it is just in the interest of time, they are not going to post their CV on the television screen every time they have something to say. I think those issues of ethics exist throughout the media and potentially would be no different in Internet activity. I am not sure that means, therefore, we have to regulate Internet activity exactly. Mr. Ehlers. Let me give an example that just occurs to me. In the last election we saw some individuals who spent millions and millions of dollars of their personal money on the campaign, all of which was duly reported some ways through the IRS, which is not as effective as FEC or as timely, but nevertheless they did that, and it was reported, and everyone knew what they spent and that they were trying to influence it. I suppose someone with huge amounts of money would hire 1,000 bloggers and say, okay, you go to it. I want you to talk about this, and I want you to have this political point of view, and in order to boost your readership, I want you to offer prizes to your readers if they read your message all the way through and spot certain key points, can answer a question at the end; they send it in, and if they are right, they get $200 or whatever. This would be a very effective way of spreading false information and clearly violating the intent of the campaign laws, because someone would be spending a lot of money to spread a message in a very effective way. Would you regard that as inappropriate? Clearly they are not in your category where you are trying to scrape along and write entertaining, interesting, concise letters, but basically being bribed to read propaganda. Mr. Black. I think to some extent you described an extension of the modern public relations industry. Yes, you can find ways. Mr. Ehlers. But they have to report. Mr. Black. Certainly, but as long as this stops short of endorsing Federal candidates, then they are probably not going to run afoul of campaign finance laws. The public relations industry is very good at influencing public opinion on a variety of issues up to and including essentially writing op- eds and signing other people's name to them with their permission, for payment. These kinds of things go on all the time. It is only once you get to influencing Federal elections directly that you run into issues with the campaign finance laws. Mr. Ehlers. I will yield back in a minute, Mr. Chairman. I just want to apologize for being late; I had a couple of other meetings and shortly have to go to the floor to speak on a bill that is up. This is a topic I am very interested in, and thank you very much for being here. The short time I have been here, I have learned a great deal. Thank you. The Chairman. Thank you. Gentlelady from Michigan. Mrs. Miller. Thank you, Mr. Chairman. I think it has been interesting listening to you both using similar examples about how, as we sort of move towards the possibility of regulating the Internet, which I think is regulating free speech, and thus very dangerous, yet the media has a complete and free blanket of protection under free speech. The media is protected, and yet oftentimes--I think you, Mr. Black, used an example of the media using as part of their newscast, something they saw on a blog or on the Internet. So the very impetus of that particular newscast, which is freedom of the media, yet we are moving to actually regulate that part of it. And it is a very common element in campaigns. You showcase an advertisement that you are about to play, and you have a press conference, you have all the media come in, you show them the ad, and you are hopeful the media will then broadcast your ad for free. Probably the best example of that in the last Presidential was the swift boats, which was a very small buy and ended up with everybody just broadcasting and talking forever about this particular ad, yet they didn't have to really disclose how much was spent all over the media on that. I think most people would agree that many media outlets do have a bias toward an ideology, whether that is conservative or liberal or what have you. So I just make that observation as we are looking at this question, because it is almost counterintuitive, in my mind, to be thinking about regulating the internet--perhaps because it is unconstitutional in my mind as well. There certainly is a very slippery slope about regulating the internet and free speech. I would just ask for your observation. I am not sure if either of you have any thoughts on this. Why is the thinking that you have to regulate it because of dollars spent? You were commenting about how inexpensive it is to create these blogs. How could you even place a value on an endorsement that is on a blog or a candidate's picture that is on a blog or those kinds of things, an endorsement, et cetera? Could you comment on that? How could the FEC even determine a dollar value and decide whether or not they were going to regulate it? Mr. Krempasky. I think I would almost leave it to someone associated with the FEC to talk about how they come to conclusions and have formulas and such. I think, though, it does raise really one interesting question, and that is if the Federal Election Commission were to come up with a threshold or some line over which if you spent above that, you are now considered an active participant in the target of resolution. On the Internet there is a dynamic that does not exist off line, and that is you can actually create content at home as a volunteer that you find interesting. Maybe you edit some videos yourself and set them to music or do something interesting or funny, and if a site like Duncan's actually notices it and drives people to watch it, you can actually get a bill for the resources that your site has spent to serve that video to people that simply come along and want to see it that not only may cross that threshold considerably, the bill may come in after the election, and you have no control over it whatsoever. You simply put up a little video, 30,000 people come and watch it, and you get a bandwidth bill from your hosting company for $3,000, which is higher than all these contribution limits. So there are costs out there that even if the Commission says once you spend past this, there are costs you simply cannot control at all. Mr. Black. I mean, just to add, I think if we start placing value on a link or an endorsement on a hot traffic site, once we start thinking about anything on the Internet in terms of in-kind contributions, you basically shut down political speech on the Internet in its entirety. It would be over. I do not see how in practice it could be done. Even if it could be done, it would just have an extreme chilling effect. No one would bother because it would be impossible to know when you cross some threshold of traffic or directed traffic or receive traffic. It would just be absolutely impossible. Mrs. Miller. Thank you, Mr. Chairman. The Chairman. I surely appreciate both of you coming here today. I appreciate what you do and the effectiveness of the blogs in this issue. We talk about this issue and Mr. Elhers and I were just talking, and all of a sudden you go in circles because it starts with regulation somewhere in the campaign law. And all of a sudden, it goes back and you know to the Internet. It is just like an endless discussion. I think also technologically it would be so difficult--and you made a good example. It would be so difficult to find out who--you know, how many people you are talking to. Does that count as in kind? It is mind-boggling to think we could go in that direction to try to regulate that. And with that I have no more questions. Mr. Ehlers, do you have any? Mr. Ehlers. I would like to know how to get on your list. The Chairman. And thanks again and please blog us nicely tonight if you can. Mr. Black. Certainly. Mr. Krempasky. Yes. The Chairman. On our last panel, we are fortunate to have with us three highly qualified election law experts who explain what they believe would be the implications of regulating or not regulating the Internet through campaign finance laws. First we will hear from Professor Bradley Smith, former Chairman of the FEC, who now teaches election law at Capital University in Ohio. Then we will hear from Karl Sandstrom, of counsel for Perkins Coie, and also former member of the FEC. And our final witness of the day will be Lawrence Noble, who serves as Executive Director of the Center for Responsive Politics. Mr. Noble previously served as General Counsel at the FEC. I want to thank all three of you for being here, and we will start with Mr. Bradley Smith. STATEMENTS OF BRADLEY A. SMITH, PROFESSOR OF LAW, CAPITAL UNIVERSITY LAW SCHOOL, COLUMBUS, OHIO, FORMER CHAIRMAN, FEC; KARL J. SANDSTROM, COUNSEL, PERKINS COIE, FORMER MEMBER OF FEC; AND LAWRENCE NOBLE, EXECUTIVE DIRECTOR AND GENERAL COUNSEL, CENTER FOR RESPONSIVE POLITICS, FORMER GENERAL COUNSEL OF FEC STATEMENT OF BRADLEY A. SMITH Mr. Smith. Thank you, Mr. Chairman. I would like to thank the members who have joined us today for part or all of the hearing. It is a pleasure to be here and be back here in the capacity in which I previously testified as a private citizen exactly 1 month today. I want to begin by talking about the scope of the issue, I think which is not fully understood, the potential threat, and then a little bit about the press exemption. First let's talk a little bit about the scope of the issue. What needs to be understood is that if you enact Pence- Wynn, if Congress were to pass Pence-Wynn, essentially you would be passing the exemption that has been on the books now and remains on the books even in light of the court's decision in this Shays-Meehan case because that regulation remains in place until the Commission writes another. And as we think about that we begin to realize that in fact even now the Internet is not unregulated. Indeed I would suggest that Congress might want to consider taking steps to further deregulate the Internet. Earlier you heard the Chairman, Commissioner Thomas. My friend made some comments about the amounts that were spent on Internet ads in the last campaign. He estimated it from one source of 14 million. That was about three-tenths of 1 percent of what was spent overall. But what is interesting is then he cited a number of figures that political parties and other groups had spent on Web and Internet and e-mail and so on. Well, how did he know that data? Because that is regulated activity already and it had to be reported to the FEC. In other words, even under Pence-Wynn, corporations cannot generally advocate the election or defeat of political candidates. Political parties and political candidates are still regulated in the money that they can take in and then use to spend, whether it is for Web activity or anything else. So it is a mistake to think that the Internet under the exemption either was or is unregulated or that it would be unregulated if you enact Pence-Wynn. Secondly, it is worth pointing out that there are people who definitely want to regulate it more. I very much appreciate the comments of my former colleague, Commissioner Weintraub and the light-handed touch that she has brought to this issue. I think she has been very sensitive to the concerns. But I disagree with her when she makes a statement that no one wants to regulate the Internet or unpaid blogcasting and bloggers. There are clearly people who want to regulate the Internet and want to regulate unpaid ads as well. As Vice Chairman Toner pointed out, the court decision is not limited to paid advertising, and indeed arguably paid advertising is already regulated. The exemption could be read in the same way as the current press exemption. If you read the press exemption literally, any broadcast commentary is exempt. And that would mean a commercial. But no one has ever interpreted this as applying to paid ads. But if we go beyond that and look a little bit at the notion of whether or not we want to limit it to paid ads, I just want to cite to you the comment submitted to the FEC by the primary House and Senate sponsors of the Bipartisan Campaign Reform Act, or BCRA. They wrote, ``the proposed rules''--this was the FEC's proposed rules--of ``retaining a broad exemption for Internet communications with the single exception of paid political advertising is an invitation to circumvention.'' So clearly, there is more than just paid advertising on the table, and people should not be lulled into thinking that that is the only goal of those who are pushing for more regulation here. I think the scope is also not understood because of the fact that Web entities, people acting on the Web are still regulated if their activities amount to expenditures or contributions. And there are a number of issues that go there. We have talked a little bit today about small, incorporated bloggers and that type of thing. There is also the issue of how one values that. And that has come up from time to time. I think it is worth noting here only that at least in some circumstances the FEC has valued expenditures not by the amount actually spent, but rather by the perceived value to the campaign. And if that is the case, then a link which might cost just a few cents to be done could have a value to the campaign of many thousands of dollars. And now, the Commission is not always consistent in that type of application. And so perhaps it could be handled through some type of rule. But again to the extent that we don't want to rely on forbearance of the Commission there may be some value in Congress acting. And it is worth noting when we talk about the Commission being light handed, light in touch, that there are four seats that are up for reappointment on the Commission. And the regulatory lobby, the same people who say we don't want to limit this to paid advertising, are lobbying very hard to have commissioners on board who will be more regulatory than the current set of commissioners. So we can't kid ourselves about that. I want to conclude with just a couple quick thoughts about the press exemption because again there has been some confusion there. The people talk about the ``Halliblogger.'' ``It would be a horrible thing, a big corporation could have the press exemption.'' I want to point out that Halliburton, to use an example, already has the press exemption. And so do all kinds of big corporations. You see, the press exemption isn't based on who you are. It is based on what you do. And so if you are the Philadelphia Inquirer, you have the press exemption. And you have it even though the owners of the Inquirer are giving hundreds of thousands of dollars to the Democratic candidate for Senate in Pennsylvania, it appears, even though they announced last year that one of their primary goals was to elect John Kerry and they used their newspaper relentlessly for that purpose. Sinclair Broadcasting is a corporation and it is not a small one, and it already has the press exemption. And last year it ordered all of its stations to run a documentary that many people viewed as simply a long anti-John Kerry commercial. It ultimately backed off that. But it shows that corporations can already do these things, and they do. And they are powerful and they are influential. And Halliburton can start a newspaper or buy a radio station any time it wants. What is different about the Web is that you don't have to have that kind of money. You need a lot of money to get the press exemption by starting a newspaper or a radio network or a TV station. But you don't need a lot of money to start a successful Web page. And so I think it is important that we keep that in mind and not be distracted by the red herring that somebody else might, you know, gain the press exemption. The press exemption is available to any American who engages in press activities, and I don't think it is clear that the Internet is covered by that press exemption at this time. And I think it would be very valuable if Congress were simply to add to the two parts of the act that include the press exemption. It now says ``by periodical or broadcast,'' ``distribute through periodicals or broadcast,'' to simply ad ``or through the Internet.'' That would make clear that Internet sites do have the press exemption. And there would still be limits on it just as now, for example, we don't interpret the press exemption as getting to paid ads. We don't have to interpret that for the Web, but we could in that way give people a great deal of insurance that their basic editorial content they want to put out, whether they are in a blog or whether they are in a Web forum or however they want to do it, would be protected. Thank you very much and I look forward to questions. Thank you. [The statement of Mr. Smith follows:] [GRAPHIC] [TIFF OMITTED] T4061A.041 [GRAPHIC] [TIFF OMITTED] T4061A.042 [GRAPHIC] [TIFF OMITTED] T4061A.043 [GRAPHIC] [TIFF OMITTED] T4061A.044 [GRAPHIC] [TIFF OMITTED] T4061A.045 [GRAPHIC] [TIFF OMITTED] T4061A.046 [GRAPHIC] [TIFF OMITTED] T4061A.047 [GRAPHIC] [TIFF OMITTED] T4061A.048 [GRAPHIC] [TIFF OMITTED] T4061A.049 [GRAPHIC] [TIFF OMITTED] T4061A.050 [GRAPHIC] [TIFF OMITTED] T4061A.051 [GRAPHIC] [TIFF OMITTED] T4061A.052 [GRAPHIC] [TIFF OMITTED] T4061A.053 [GRAPHIC] [TIFF OMITTED] T4061A.054 [GRAPHIC] [TIFF OMITTED] T4061A.055 [GRAPHIC] [TIFF OMITTED] T4061A.056 [GRAPHIC] [TIFF OMITTED] T4061A.057 The Chairman. Thank you. Mr. Noble. STATEMENT OF LAWRENCE NOBLE Mr. Noble. Thank you very much, Chairman Ney, and members of the committee. I appreciate the opportunity to appear before you today. It is beyond doubt that the Internet is changing the way that we do politics in this country. It is really a transformative tool. When television came in over 50 years ago, it also changed the way we did politics. But television has a very high threshold for entry, and that threshold is so high that most of us have been left as observers and not participants in the debate. The Internet is different because it does really allow a vast segment of society, though not necessarily everybody, a vast segment of society, to have access to what is a very large loudspeaker. But I think it is a mistake to assume that just because political activity on the Internet can be undertaken for very little money that it will not be used as an avenue for spending large amounts of undisclosed soft money, money from corporations, from labor unions that is spent in coordination with Federal candidates, also soft money being spent by State party committees where normally a mixture of hard and soft money would have to be spent. And when that type of money is spent by corporations and labor unions on the Internet, it poses the same potential for corruption and apparent corruption that you see in television ads, that you see on the radio or in the newspapers. Now there has been some talk here about drowning out voices, and that since everybody can get on the Internet, most people can get on the Internet, there is so much room that individuals will not be drowned out. But the reality is the Federal Election Campaign Act is not about equalizing voices. The Supreme Court has said that, that the laws are not about making sure everybody has the same access. What the laws are about is stopping apparent corruption from the large aggregations of wealth. The law is also not about the effectiveness of the ads. I would suggest that if the law was about the effectiveness of the ads, some party committee ads and even candidate ads, they could probably go unregulated. I think one of the fundamental ironies that runs through this debate is that we are hearing a lot today from people who are saying that because the access to the Internet is so easy, because you can get on the Internet and spending such little money that there is no need to regulate the Internet. But the fundamental irony here that is what we are really talking about is access by those with large aggregations of wealth. What we are talking about is access by corporations and labor unions who can spend a lot of money on the Internet. And for those who are saying that, you know, people are not spending money on the Internet, Chairman Thomas was correct, the Daily Kos has a place where you can sign up $50,000 worth of ads, though I will give them credit they said they have not been unable to sell that yet. But ads are being sold on the Internet. If you go on a lot of commercial Web sites or newspaper Web sites you are first now hit with very sophisticated ads that are in effect videos. Now these are commercial ads that I suspect cost a fair amount of money. Andas more and more commercial interests find it effective to run expensive ads on the Internet, I think you are going to see more and more candidates, more and more political parties, and more and more interest groups deciding it is effective to run political ads on the Internet, and run them when they are very sophisticated and where they are very expensive. But it doesn't mean that we should regulate everything on the Internet, and nobody is trying to regulate everything on the Internet. As it stand now the Federal Election Campaign Act has exemptions and the FEC's regulations have exemptions, and the FEC is working on further refining them, that allow individuals to set up blogs and say whatever they want. Nobody is talking about going after this. It hasn't happened. It is not going to happen. First of all, there is a definitional exemption if you are not spending any money. So for those who say, well, you can do so much without money, without spending money, then the answer is then you don't come under the campaign finance laws. There is also volunteer, the individual volunteer exemption that allows individuals to get on their computers at home, in the dorm room, in some ways at their work and blog to their heart's content and talk about which candidates should be voted for, and in fact they can coordinate that activity with the candidates. So in that sense it is no different from handing out leaflets, and people right now do that without having to hire lawyers. Some of these exemptions can be further expanded to allow people on their Web sites to spend some money on doing sophisticated ads or sophisticated graphics, but that is different again than having some labor union come in and working with the candidate and paying for that. Now there has also been the question of the press exemption. The Supreme Court in 1990 said media corporations differ significantly from other corporations in that their resources are devoted to the collection of information and its dissemination to the public. All I want to say here is that the concept of the media and journalism is changing. There is no doubt about that. I think this is a debate in some ways that has to be had with journalists participating. But if you say that every blogger is a journalist or everybody now with a computer is a journalist, effectively what you have said is that there is no special profession of journalism. Maybe that is the end result of this. I wonder how that is going to affect shield laws in the State. I wonder when a blogger is subpoenaed by the government for something totally unregulated whether they are going to try to take a shield law and whether or not a court will accept it. And one final point. It is not--and I think Congressman Lofgren said this. You cannot say the Internet is not regulated. Copyright laws are enforced on the Internet. Tax laws are enforced on the Internet. All we are talking about here is enforcing the campaign finance laws which deal with the spending of money on the Internet. Thank you. [The statement of Mr. Noble follows:] [GRAPHIC] [TIFF OMITTED] T4061A.058 [GRAPHIC] [TIFF OMITTED] T4061A.059 [GRAPHIC] [TIFF OMITTED] T4061A.060 [GRAPHIC] [TIFF OMITTED] T4061A.061 [GRAPHIC] [TIFF OMITTED] T4061A.062 The Chairman. Thank you. Mr. Sandstrom. STATEMENT OF KARL SANDSTROM Mr. Sandstrom. Thank you, Mr. Chairman, members of the committee. When you are the last witness on the last panel you are reminded of what Congressman Udall once said, everything has been said but not everybody has said it. So I will try to say something a little different and I may start with something that the aging regulator and the New York Times might find fairly shocking. I believe that the Internet is entitled to greater protection than the traditional media, and I think that previous panel is a good example why. The previous panel of bloggers didn't get their job from Rupert Murdoch or the Sulzberger family. They are not employees of NBC or Disney. The traditional media is concentrated power. The Internet is dispersed power. The traditional media has high entry costs. The Internet has low entry costs. These differences make a difference, and the Internet should be treated differently because of the wonderful role it has played in democratizing our politics. You know, I have heard some nonsense here today. But nonsense sometimes dressed up in legal analysis is no more than a clown in a bow tie. For example, I have heard that somehow there was a complete exemption for the Internet put into the Commission's regulations. In many ways I am for a broader exemption, but that was never the case. For example, a labor union could not pay for a candidate's Internet ads. That is not permissible under the current law. It is not permissible because 441(b) prohibits it. All there was was an exemption from the definition of public communication. Yard signs are exempt from public communication. But not a single member on this committee would ever go to a corporation in their district and say purchase yards signs for me because they are not a public communication, and you can use your corporate money for that purpose. That just is not the case. That is not the law. And no amount of obfuscation can make it the law. 441(b) is a ban on using corporate and union funds in connection with an election, the purchase of ad space that is expressly advocates election or defeat if a candidate clearly falls within that prohibition. Now, this committee and the Commission will fund most of its efforts--if it chooses to go down this wrong path--to regulate the Internet will be a failure because it can't quite get a hold on what they are regulating. Are they regulating a library? Are they regulating what books you can go to and check out at Google? Is Google a media entity? If Google is a media entity, why would a blogger not be a media entity? But a blogger is just someone using a particular type of software. Why isn't my 14-year-old son a media entity since he is capable of putting up a Web page? Don't think of it as a media entity because it is not. It is not the Fourth Estate. It is the Fifth Estate. It is a new power center, and you have to grapple with that power center. Yes, people will lie on that power center. They will slander and they will defame and sometimes it will be difficult to find them, and that is going to make your lives more difficult. But let's just--for instance when people are afraid of all this undisclosed soft money that may be used over the Internet to promote, support or attack or oppose a candidate, that is an interesting perspective. Given that two of the three groups, I visited their Web sites this morning. Two of the three groups who took that regulation to court to challenge it have on their Web sites very interesting materials about Members of Congress. Remember we are using undisclosed money. I find that two of these groups--I have to put in the record--make some very critical comments of members of this committee by name, distribute this to the press, make it as widely available to anyone who has access to a computer, which is more and more every one of us. The other thing I would like to point out is how difficult your task is going to be. Right here I click that on, this is where you want to place disclaimers? That is CNN. If I put a, you know, banner ad on that, tell me how big that banner ad is going to appear on that screen. And don't forget that almost everything I get on the Internet is something that I as an individual citizen went out to retrieve. I sought the information. And maybe not information you want me to hear because it is critical of you, but I am the one as an individual citizen. And if I want to give it to my neighbor and my neighbor is across the country, in that virtual community that has been created I should have that ability. And so I think most of what you see here today and those who say that the Commission went too far, the problem with the Commission, is it didn't go far enough. [The statement of Mr. Sandstrom follows:] [GRAPHIC] [TIFF OMITTED] T4061A.063 [GRAPHIC] [TIFF OMITTED] T4061A.064 [GRAPHIC] [TIFF OMITTED] T4061A.065 [GRAPHIC] [TIFF OMITTED] T4061A.066 [GRAPHIC] [TIFF OMITTED] T4061A.067 [GRAPHIC] [TIFF OMITTED] T4061A.068 [GRAPHIC] [TIFF OMITTED] T4061A.069 The Chairman. Thank you, all three, for your testimony. There has been a lot of discussion about the media exemption, and it goes back to something all three of you said maybe in different directions or maybe you all feel differently about it, but it is well established and I think generally accepted by pretty much everyone that the friends of the media can say whatever they want about politics and campaigns and spend as much as they want to in doing so. And they don't have to worry about getting a knock at their door from the FEC, no matter who owns it--Disney or whoever. They will never be asked to explain why they chose to write something--whether they have relatives that lobby. Relatives get mad at Members of Congress, next thing you know a reporter does an article. You know we can all make up or talk about a lot of real life things that go on. So they will never be asked to say why they, in fact, wrote something because it was a relative that prompted them into doing it. So there are a lot of issues in play. Now, when you look at that, and again we don't have the FEC looking at them, so what would make the internet any different that we should start saying, ``Well, the person that started that blog is related to somebody, and they, you know, received money from a union or corporation.'' I think you understand my point. What makes a second tier that we start to regulate the Internet? Mr. Noble. Mr. Chairman, if I may start, first of all, I think it is more accurate to say that the media or the press is not regulated when they are acting in their press function. And the courts have said this. And the classic example used was that the New York Times can editorialize and say vote for John Kerry. It cannot take out an ad on TV that says vote for John Kerry, and it cannot take out a billboard that says vote for John Kerry. It has to be acting in its media function. Also, they can't be owned or controlled by a political party. So there are limits on the media. And likewise when they talk about--we have heard a lot about NBC is owned by General Electric and all the companies that own media. General Electric doesn't get the media exemption for its other activities. NBC gets the media exemption. So I just want to say we are talking about them being functionally working as the media. When you are talking about the Internet, there is no doubt that there are a lot of Internet entities that fall into the media exemption. Some of them have offline newspapers, obviously New York Times is on the Internet now. Some exist only on the Internet such as Slate. The question that keeps coming up is bloggers, and I think bloggers really present a different issue. There are some bloggers who probably fall within the media exemption. But there also are a number of bloggers I think who do not fall into the media exemption. But more importantly you don't need to reach that because they are not related to this individual activity. They are not regulated because there is no money being spent on it. Mr. Sandstrom. But that is just not the case. We have heard there is money being spent on blogs. And if the Daily Kos wants to give me a regular piece on its site for nothing, a regular ad, I will probably accept it. Others have to pay for it. So it isn't the case. There are many different business models for blogs. And I will show you how even what a traditional category--we talked a lot about advertising. But what is advertising on the Internet? Is a sponsorship of a Web site advertising? If I like what one of the former bloggers is saying, if I send him a gift, is that advertising? Sponsorship? Is that something that is now subject to regulation and may transform the degree that they are going to be regulated? And when is a blogger acting in his blogger capacity? The Chairman. We are not regulating the blogs. Mr. Sandstrom. But what is a blog? It is a particular type of software. So I am opposed to essentially regulating almost anything that occurs on the Internet. One, it is a futile effort. And two, it undermines the most democratizing technology that has come along, more democratizing than television or radio, and maybe even more so than the telephone. Mr. Smith. Perhaps I can add, as Commissioner Sandstrom says, there is a very low monetary threshold in the law. In fact, small amounts are spent. Many blogs now, many Web sites again, I kind of use blog generically for whatever is developing on the Web in the context of this debate. But many blogs now ask people for some kind of contributions: Please contribute to help me do this, find the time to pay for some space on the Web, and so on. Andrewsullivan.com has such a link. Steve Bainbridge, who runs a pretty popular blog called Professor Bainbridge, does that. Now if these guys collect over a thousand dollars from these people through the PayPal accounts, do they become political committees? They are spending over a thousand dollars. They engage in expressly advocating the election or defeat of candidates. And it would seem that they are political committees. So I just don't buy this notion that there is--you know, don't worry about it, don't worry about it. I will feel more comfortable when people are specific about what not to worry about. Again it seems like we hear two sides of things. Whenever we are in a public forum where the press might be there we hear a lot of soothing words about how no one wants to regulate the Internet, and then we get comments to the FEC saying, ``well, that's a mistake when you only go after paid advertising, that is a mistake.'' We get soothing words in the press release and then we get the brief that just goes into court and isn't going to be seen by most people that describes the Internet, deregulated Internet as, ``a poison pill,'' ``a loophole,'' ``a step backwards,'' ``anti-reform,'' ``the favored conduit for special interests that undermines BCRA's aims,'' an avenue that opens--``a medium that opens an avenue for rampant circumvention for all of BCRA's central provisions.'' We sort of are hearing two things. When we had the hearing at the Commission, three of the groups that lobby for more regulation, including Mr. Noble's, made a suggestion to us that we consider exempting the first $25,000 that you spend. I did not ask this question to Mr. Noble. I did ask it of the counsels for the other two groups that appeared before us. ``Do you think we actually had the authority to do that?'' And both of them said, ``well, no, we don't.'' So they are telling us you can do this. It makes them appear very moderate and laid back. And then I asked one of those two, ``Well, if we did do this, would you promise not to sue us?'' And he pointedly refused to promise not to sue us if we did pass the regulation that he was recommending we consider passing. So there are some real issues here, and I think that I agree entirely with Commissioner Sandstrom's point. I think he has put it out very well. But it is a mistake to say the Internet is already unregulated. That is not true. It is a mistake to say that if Pence-Wynn is passed it will be unregulated. And when we hear all the soothing words, just for me, you will have to make your judgment, but I find myself feeling rather suspicious. Mr. Noble. If I may respond to that, I think Mr. Smith is painting with a rather broad brush and ignoring a lot of very well stated distinctions that were drawn over time. First of all, we do think you need to be specific and we think the FEC needs to be specific, and we have talked about specifics. With regard to the paid advertising issue, I believe that was in the context of saying that if you go only on paid advertising, State party committees who don't pay for their own advertising on their own Web site are going to be able to use soft money for advertising on their Web site. The $25,000 issue is an important one. There is a question of whether there should be a threshold to allow use of Adobe software on your own Web site, to spend a lot of money on your own Web site to put up your own material. And we said, yes, and a $25,000 threshold may be appropriate. And we also said that the FEC may not have the authority to do that. And maybe they should go to Congress to do that. And we are not saying that the whole Internet should be regulated. What we are saying is that the spending of coordinated money on the Internet in certain circumstances should be regulated. We acknowledge that a lot should not be regulated and a lot naturally will not be regulated. So I don't think this is painting with a broad brush. There are two sides. One group says regulate everybody on the Internet, break into everybody's home and see if they are on the computer, and the other side wants total freedom from regulation. I don't think that is really accurate. I think there are more nuanced approaches than that. The Chairman. The bells are ringing, so we have five minutes for each of the members. Ms. Lofgren. I will be very quick. I think as someone who has always resisted the heavy hand of government on the Internet this has been a very useful hearing and of course it is correct the ordinary laws still do apply. The libel laws still work if it is online, and copyright laws are enforced and antitrust laws still exist. But the issue is you don't single out the Internet for special types of treatment. And as I have listened to all the witnesses it has become clear to me that we would just be opening up--this is a mess to try and do that. The one question that remains in my mind--and I am not suggesting that we should do this--but I would like people to think about it and maybe even jot some notes to me after the hearing--is whether a distinction should be made between publicly traded--for example, a Google that is in my district, it is publicly traded. They have a different relationship to the online world than the Daily Kos. I am not suggesting that that should be a subject of regulation. But I am just wondering what your thoughts are on it. Mr. Sandstrom. My thoughts are that Google and Yahoo are a greater threat right now to freedom on the Internet than the government is, and I think Yahoo's activities in China demonstrate that. I think they are driven by profit, and that is fine. That is how they succeed. That is how they employ many people in your district. But they are--with respect to--because they are the creators of the architecture that allows, you know, the suppression of speech in some of these countries I think worldwide, they pose a greater threat than anything the FEC-- Ms. Lofgren. For example, if Google wanted to, and they never would do this, they could make sure that all traffic that Google flows through a particular site, and if you type in Republicans it goes to the DNC instead. Should that be or should it not be the subject of inquiry? Mr. Sandstrom. If they started doing it then certainly it should be because, like I say, they are the greater threat. Mr. Noble. I would agree that if something like that happened there may be a need for inquiry. But a lot has been raised about bloggers who incorporate for liability purposes and whether they would fall under the general corporate prohibitions. Ms. Lofgren. They are not publicly traded. Mr. Noble. They are not publicly traded and they are really corporations for very limited purposes. Most of them say they are not profit making, though maybe they would like to be. But I think the Congress could very well come up with a equivalent of what is called the NCFL exemption in the law right now, that the Supreme Court added, which is to say there is a certain class of corporations that are--or a certain class of blogs that are incorporated for liability purposes only that don't fall under the corporate rules. Ms. Lofgren. Maybe just those are subject to SEC jurisdiction. I am just thinking out loud. Mr. Smith. I would just say, Congresswoman, I think you raised a good issue. As Commissioner Sandstrom says, if that was to happen it might be regulatable and there are a number of different statutes I would suppose. The point I would make is that if we don't extend the press exemption broadly, we are oddly enough in a situation where the scenario where you say who could be protected under the press exemption, because who is going to get it? The Washington Post and the New York Times Web sites clearly get it. Probably Slate and Salon. Well, Yahoo's Web site looks an awful look like an newspaper, too. So they would be much more likely to spend the resources and have it look clearly like a newspaper and get the press exemption than would Duncan Black. That is the question. Do we want to extend the press exemption to Duncan Black? And that is the question that the reform community doesn't want to answer. And I think they don't want to answer that because I think their answer is no. Ms. Lofgren. Which I disagree with, and I am wondering is there a limit or is there not? Given that, that is the second bell, I will yield back and let Mr. Ehlers---- The Chairman. I want to thank the gentlelady. The gentleman from Michigan. Mr. Ehlers. Thank you, Mr. Chairman. I will be very brief. I have no questions. I just want to say it has been very enlightening hearing the discussion and I am very pleased with the panels you have put together. I found some issues have been clarified my for me, others have confused me, which is probably appropriate. It is a very complex issue. You have certainly given us things to think about, and I went to thank you for being here. With that, I will yield back my time. The Chairman. I want to thank the Members, staff of the ranking member and our majority staff, and the witnesses of all three panels. I think it is a baffling issue in the sense everybody gets a little confused, but I think it is a very important issue. And with that again, I want to thank all witnesses. I ask unanimous consent that Members and witnesses have 7 legislative days to submit material for the record, that those statements and materials be entered in the appropriate place in the record. Without objection, material will be added. I also ask unanimous consent the staff be authorized to make technical and conforming changes in all matters considered by the Committee of today's hearing. Without objection, so ordered. And we have completed our business for the hearing. Thank you. 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