[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
WIRELESS INNOVATION AND CONSUMER PROTECTION
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
JULY 11, 2007
__________
Serial No. 110-61
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
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COMMITTEE ON ENERGY AND COMMERCE
JOHN D. DINGELL, Michigan, Chairman
HENRY A. WAXMAN, California JOE BARTON, Texas
EDWARD J. MARKEY, Massachusetts Ranking Member
RICK BOUCHER, Virginia RALPH M. HALL, Texas
EDOLPHUS TOWNS, New York J. DENNIS HASTERT, Illinois
FRANK PALLONE, Jr., New Jersey FRED UPTON, Michigan
BART GORDON, Tennessee CLIFF STEARNS, Florida
BOBBY L. RUSH, Illinois NATHAN DEAL, Georgia
ANNA G. ESHOO, California ED WHITFIELD, Kentucky
BART STUPAK, Michigan BARBARA CUBIN, Wyoming
ELIOT L. ENGEL, New York JOHN SHIMKUS, Illinois
ALBERT R. WYNN, Maryland HEATHER WILSON, New Mexico
GENE GREEN, Texas JOHN B. SHADEGG, Arizona
DIANA DeGETTE, Colorado CHARLES W. ``CHIP'' PICKERING,
Vice Chairman Mississippi
LOIS CAPPS, California VITO FOSSELLA, New York
MIKE DOYLE, Pennsylvania STEVE BUYER, Indiana
JANE HARMAN, California GEORGE RADANOVICH, California
TOM ALLEN, Maine JOSEPH R. PITTS, Pennsylvania
JAN SCHAKOWSKY, Illinois MARY BONO, California
HILDA L. SOLIS, California GREG WALDEN, Oregon
CHARLES A. GONZALEZ, Texas LEE TERRY, Nebraska
JAY INSLEE, Washington MIKE FERGUSON, New Jersey
TAMMY BALDWIN, Wisconsin MIKE ROGERS, Michigan
MIKE ROSS, Arkansas SUE WILKINS MYRICK, North Carolina
DARLENE HOOLEY, Oregon JOHN SULLIVAN, Oklahoma
ANTHONY D. WEINER, New York TIM MURPHY, Pennsylvania
JIM MATHESON, Utah MICHAEL C. BURGESS, Texas
G.K. BUTTERFIELD, North Carolina MARSHA BLACKBURN, Tennessee
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
_____
Professional Staff
Dennis B. Fitzgibbons, Chief of Staff
Gregg A. Rothschild, Chief Counsel
Sharon E. Davis, Chief Clerk
Bud Albright, Minority Staff Director
(ii)
Subcommittee on Telecommunications and the Internet
EDWARD J. MARKEY, Massachusetts, Chairman
MIKE DOYLE, Pennsylvania FRED UPTON, Michigan
JANE HARMAN, California Ranking Member
CHARLES A. GONZALEZ, Texas J. DENNIS HASTERT, Illinois
JAY INSLEE, Washington CLIFF STEARNS, Florida
BARON P. HILL, Indiana NATHAN DEAL, Georgia
RICK BOUCHER, Virginia BARBARA CUBIN, Wyoming
EDOLPHUS TOWNS, New York JOHN SHIMKUS, Illinois
FRANK PALLONE, Jr, New Jersey HEATHER WILSON, New Mexico
BART GORDON, Tennessee CHARLES W. ``CHIP'' PICKERING,
BOBBY L. RUSH, Illinois Mississippi
ANNA G. ESHOO, California VITO FOSELLA, New York
BART STUPAK, Michigan GEORGE RADANOVICH, California
ELIOT L. ENGEL, New York MARY BONO, California
GENE GREEN, Texas GREG WALDEN, Oregon
LOIS CAPPS, California LEE TERRY, Nebraska
HILDA L. SOLIS, California MIKE FERGUSON, New Jersey
C O N T E N T S
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Page
Hon. Edward J. Markey, a Representative in Congress from the
Commonwealth of Massachusetts, opening statement............... 1
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, opening statement.................................... 3
Hon. Mike Doyle, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 4
Hon. Charles W. ``Chip'' Pickering, a Representative in Congress
from the State of Mississippi, opening statement............... 6
Hon. Hilda L. Solis, a Representative in Congress from the State
of California, opening statement............................... 7
Hon. J. Dennis Hastert, a Representative in Congress from the
State of Illinois, opening statement........................... 8
Hon. Jay Inslee, a Representative in Congress from the State of
Washington, opening statement.................................. 9
Hon. Cliff Stearns, a Representative in Congress from the State
of Florida, opening statement.................................. 9
Hon. John D. Dingell, a Representative in Congress from the State
of Michigan, opening statement................................. 10
Hon. Bart Stupak, a Representative in Congress from the State of
Michigan, opening statement.................................... 12
Hon. Gene Green, a Representative in Congress from the State of
Texas, opening statement....................................... 13
Hon. Jane Harman, a Representative in Congress from the State of
California, opening statement.................................. 14
Witnesses
Tony Clark, commissioner, North Dakota Public Service Commission,
Bismarck, ND................................................... 15
Prepared statement........................................... 17
Steven E. Zipperstein, general counsel, Verizon Wireless,
Washington, DC................................................. 28
Prepared statement........................................... 30
Answers to submitted questions............................... 156
Timothy Wu, professor of Law, Columbia Law School, Columbia
University, New York, NY....................................... 39
Prepared statement........................................... 41
Answers to submitted questions............................... 154
Philip L. Verveer, partner, Willkie Farr & Gallagher, Washington,
DC............................................................. 47
Prepared statement........................................... 49
Answers to submitted questions............................... 145
Jason Devitt, co-founder and former chief executive officer,
Skydeck; member Wireless Founders Coalition for Innovation..... 69
Prepared statement........................................... 72
Edward Evans, chief executive officer, Stelera Wireless, Oklahoma
City, OK....................................................... 81
Prepared statement........................................... 83
Answers to submitted questions............................... 152
Chris Murray, senior counsel, Consumers Union.................... 90
Prepared statement........................................... 92
Submitted Material
Letter of June 29, 2007, from Mr. Barton, et al., to Mr. Martin.. 127
Letter of July 9, 2007, from Mrs. Blackburn, et al. to Mr. Martin 131
Letter of June 27, 2006, from Dennis F. Strigl to Senator
Lautenberg..................................................... 134
Jessica E. Vascellaro, ``Air War, a Fight Over What You Can Do on
a Cellphone,'' Wall Street Journal, June 14, 2007.............. 136
``Reed Hundt's Spectrum Play,'' Wall Street Journal, July 11,
2007........................................................... 140
Robert W. Crandall and Hal J. Singer, ``Telecom Time Warp,''
Wall Street Journal, July 11, 2007............................. 142
WIRELESS INNOVATION AND CONSUMER PROTECTION
----------
WEDNESDAY, JULY 11, 2007
House of Representatives,
Subcommittee on Telecommunications
and the Internet,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:05 a.m., in
room 2123 of the Rayburn House Office Building, Hon. Edward
Markey (chairman) presiding.
Members present: Representatives Doyle, Harman, Gonzalez,
Inslee, Rush, Eshoo, Stupak, Green, Capps, Solis, Dingell,
Upton, Hastert, Stearns, Shimkus, Pickering, Radanovich,
Walden, and Ferguson.
Also present: Representative Blackburn.
OPENING STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF MASSACHUSETTS
Mr. Markey. Good morning. Today the subcommittee will
explore several wireless issues, including the role of States
in regulating the terms and conditions of wireless service,
consumer protection, and enforcement issues, as well as how to
promote greater innovation and consumer freedom in the
marketplace for wireless devices and applications.
The wireless industry has suggested that Congress should
preempt States from regulating the terms and conditions of
wireless services as it did over a decade ago with respect to
prices for wireless services. Many States have initiated
attempts to take action to provide consumer protection policies
for their residents, particularly with respect to regulations
aimed at wireless contract terms, early termination fees,
privacy issues and several other issues.
To the extent that wireless service is by nature an
interstate service, this hearing will provide an opportunity
for us to explore whether further preemption is advisable, how
consumer protection can be enhanced if regulatory treatment is
nationalized, and how best to ensure rigorous enforcement of
consumer protection policies in such a regime.
With respect to wireless innovation, just over a week ago,
people stood in line, slept overnight, so that they could get
one of these, an iPhone. The iPhone highlights both the promise
and the problems of the wireless industry today. On the one
hand, it demonstrates the sheer brilliance and wizardry of the
new technologies which are available in wireless engineering
today. This cutting-edge technology breaks new ground with
regard to the technology that consumers can have in their
pocket, and undoubtedly consumers will cherish this device as
though it is a part of their family. But at the same time, the
advent of the iPhone raises questions about the fact that a
consumer cannot use this phone with other wireless carriers and
that consumers in some areas of the country where AT&T doesn't
provide service, that they can't use it actually in some
neighborhoods at all. And that is because the iPhone is used
exclusively with AT&T's wireless plan. Moreover, even though
consumers must buy this iPhone for the full price of $500 or
$600, AT&T wireless reportedly still charges an early
termination fee of apparently $175 for ending the service
contract early, even though the phone cost wasn't subsidized
and a consumer can't even take it to use it with another
network provider.
This highlights the problems with the current marketplace
structure where devices are provided by carriers, portability
of devices to other carriers is limited or non-existent, and
many consumers feel trapped having bought an expensive device
or having been locked into a long-term contract with
significant penalties for switching.
I would note that a witness today, Verizon Wireless,
remains an anomaly in the industry by prorating its early
termination fees, and I applaud them for taking such a step.
It is becoming increasingly clear, however, that wireless
carriers are exerting far too much control over the features,
the functions, and applications that wireless gadget-makers and
content entrepreneurs can offer directly to consumers. I
believe that this is stultifying innovation and unquestionably
diminishes consumer choice. The freedom to innovate in the
wireless marketplace for gadgets and applications could unleash
hundreds of millions of dollars in investment and create new
jobs. Consumers would see more phones with WiFi or WiMAX chips
incorporated into wireless devices, and application providers
could avail consumers of the opportunity to obtain new content
and other technologies that enhance the consumer experience and
provide additional competition.
Policymakers should try to figure out how to explore and
promote greater innovation in the wireless marketplace and
empower entrepreneurs and consumers with greater freedom. This
was the idea behind the so-called Carterfone decision in the
late 1960s when the FCC broke the stranglehold that Ma Bell had
over the black rotary dial phone that consumers used and
allowed unaffiliated manufacturers to provide such devices in
the marketplace. The result was incredible innovation and an
unquestioned policy success.
The FCC has a rare chance to foster similar innovation in
the wireless marketplace in the upcoming auctions. As I have
suggested previously, the FCC should seize this opportunity to
create an open-access opportunity for wireless service in this
auction and should insist upon Carterfone-like principles
applying to a significant portion of the licenses to be
offered. Recent comments by FCC Chairman Martin that he is
poised to embrace these policies in a proposal for auction
rules is a step forward and is welcomed news.
I encourage the FCC chairman and his colleagues on the FCC
to maximize the benefits these policies can bring to consumers
and the high-tech economy in their upcoming decision.
I look forward to hearing from our witnesses today.
I now turn to recognize the ranking member of the
subcommittee, the gentleman from Michigan, Mr. Upton.
OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Upton. Well, thank you, Mr. Chairman. As we listen to
today's witnesses and as we debate the many issues confronting
wireless, I think it's important that we keep our focus on what
is indeed best for the consumer. We need to ensure that
sufficient spectrum is made available so that the wireless
industry can continue to innovate, like with the iPhone,
thereby enhancing consumer choice through the operation of
market forces.
Unfortunately, many of the policy proposals that face us
and the FCC could well have the opposite effect of stifling
innovation, and it is the consumer that will ultimately lose.
We need to take care so as to not adopt policies that would set
back the highly competitive wireless market. I don't think that
it would be productive to adopt a regulatory posture that in
any way emulates policies that apply to the past to a monopoly.
None of the nationwide wireless providers have the ability to
control the market for wireless devices which is occupied by a
wide variety of manufacturers. The wireless service market is
vigorously competitive with four national wireless providers as
well as several large regional providers. In fact, 98 percent
of consumers in 2005 lived in counties served by at least three
facilities-based providers and 94 percent lived in counties
served by at least four, according to the FCC. Even more
facilities-based competition is on the horizon from the winners
of the recent advanced wireless services auction such as cable
operators and possibly from winners of the 700 MHz auction as
well. So no matter how you slice it, forced network neutrality
smothers investment in a competitive market and in the end
would leave consumers worse off and probably with fewer
choices.
The iPhone is a wonderful and innovative new product and
may very well set a new industry standard for mobile devices,
and its early success is an indication that the wireless market
is indeed working. Competition in the wireless market spurs
carriers to innovate. They're forced to constantly build a
better mousetrap in order to attract customers to their
services or to keep customers moving to other competitors. The
iPhone is the newest mousetrap, and now other carriers will be
working to top it. Each month it seems like a new state-of-the-
art device hits the store shelves. New products foster greater
innovation and consumer choice. The winners are not just AT&T
and Apple or the companies that come out with the next hot
device to top the iPhone, the winners are American consumers.
And if the FCC or Congress wanders down the wrong path and
makes the wrong policy choices, the ability of the wireless to
live up to its potential as the third pipe will be greatly
hindered or eliminated altogether. There is an old saying that
no good deed goes unpunished. Imposing Carterfone rules or
other unnecessary burdensome regulations on the wireless
industry would certainly punish the good deed that emanates
from providing new, innovative services and devices to
consumers. So we must tread carefully. And in my view the most
important issue facing us is the need for the FCC to draft
proper rules for the 700 MHz auction.
Recently a group of my colleagues joined with Ranking
Member Barton and myself in sending a bipartisan letter to FCC
Chairman Martin. In our letter we noted that placing conditions
on the spectrum will reduce the revenues that the 700 MHz
auction would otherwise generate. More importantly, it would
prevent us from realizing the spectrum's true potential for
consumers. That is especially the case with regard to both
network neutrality and device unbundling mandates. Keep in mind
that anyone can bid on the spectrum, anyone; and if they pay a
fair market price, they are free to follow an open-access model
if they choose.
Mr. Chairman, I ask that a copy of the letter that we
signed be inserted into the record of today's hearing, and I
would also finally note that the ITC, International Trade
Commission, last month issued a decision that is likely to have
a profoundly negative impact on the wireless industry and this
country. This decision, part of a patent dispute between
Broadcom and QUALCOMM, will prevent the introduction of new
handsets that rely upon a chip that the ITC found infringed on
Broadcom's patent. Thus, new wireless technologies may well be
kept from the marketplace, effectively freezing wireless
innovation. The U.S. Trade Representative, Ms. Schwab, has been
given the authority to overturn the decision, and many of us
are actively encouraging her to do exactly that. We are not
taking a position on the merits of the patent case, but we are
arguing that the remedies imposed in the ITC ruling will have
an unnecessarily severe impact on consumers and innocent third
parties, and it would be truly ironic that despite the best
effort of those here in Congress and of the FCC that the ITC
ruling could undermine policies that are designed to spur
innovation and enhance consumer welfare.
Mr. Chairman, I see my time is expired so I yield back.
Mr. Markey. Before we close on the gentleman, without
objection, the gentleman's letter will be included in the
record at the appropriate point. The gentleman's time has
expired. The Chair recognizes the gentleman from Pennsylvania,
the vice chairman of the subcommittee, Mr. Doyle.
OPENING STATEMENT OF HON. MIKE DOYLE, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Mr. Doyle. Thank you, Mr. Chairman. Mr. Chairman, before I
start, I understand today is your birthday, am I right? Well, I
just want you to know that I saw you in line last night at the
midnight premiere of the new Harry Potter movie, and I hear you
are a really big fan. So I pulled some strings, and I have got
to tell you, Eddie, K Street is falling all over themselves to
make you happy. And I was able to get a copy of the new Harry
Potter book before it comes out. Now, when they handed it over
to me, I was kind of surprised by the title. It seems kind of
wonky, and the cover, I had no idea that Harry Potter looks
like Chairman Kevin Martin. The resemblance is really quite
striking. And this wizard guy, I can't place who he looks like.
But anyway, I want to present you with a brand new copy, hot
off the presses, of Harry Potter and the Order of the DTV
Spectrum Auction. Can you put that up on the television for us,
please. I think we have some video of this, Eddie, for people
to see.
Mr. Markey. I have not aged well. No choice about it.
Mr. Doyle. Now, Mr. Chairman, if you open up the book, and
I can't get around why all the pages are blank, but the rumor
is that Harry Potter just finished the first draft but it still
has to go through some editing by other students at the
Hogwarts eighth floor. So luckily, Harry has promised me you
will get the pages just as soon as he is finished talking about
it to the press. That being said, I am not sure you are going
to like the story he has to tell. Well, happy birthday, Mr.
Chairman.
All silliness aside, I think this is a great hearing, and I
look forward to the witnesses' testimony. In the latest
Newsweek, Steven Levy writes about the iPhone and says that if
1967 was all you need is love, then 2007 is all you need is
AT&T activation, and therein lies the issue that we come to
look at today.
Over the months and the years to come, what will drive the
most complaints about the iPhone, the lack of 3G speeds, no
voice dialing, the risk of fingertip frostbite trying to make a
call in winter, or will it be that the phone costs over $2,300
over the life of the contract and runs on what Consumer Reports
says is the worst or next-to-worst network in 19 of the top 20
markets?
The iPhone could still change the world and be available
for any consumer on any network, but we won't know until 2012,
the year that AT&T's American exclusivity reportedly runs out.
Now, since the iPhone is going to run on T-Mobile's network in
Germany, it could be tweaked to run on T-Mobile stateside, but
to do so would require hacking and other tricks out of reach to
the average user like me.
There is a lot to talk about in Washington about who is
really the decider. Well, I think it is time the consumer
becomes the decider of what they want their phones to do, not
the cell phone carriers. The draft 700 MHz auction order at the
Commission is a good start, but as I read it, it's not enough
to ensure that consumers have a new provider to enjoy strong
competition. As it stands, grandma Bell has over half the
wireless market using advantages like free spectrum in the
1980s, the ability to get exclusives like access to tunnels in
the Metro in DC and others. The Bells are back with vigor. As
it stands now, our cell phone carriers buy the phones from the
manufactures, and those carriers decide what features we get to
enjoy. Instead in Europe, that isn't always the case. But how
can we judge if that is the model Americans would prefer given
the opportunity or the regulatory pressure? Do we know if
consumers pay less per minute they actually use to talk verses
what they get in a bucket of minutes? Do they pay less for a
phone when they buy it up front or over time? All that being
said, Mr. Chairman, and on the other issue coming before us
today, I just want to say that I don't have any philosophical
objections with a national framework for wireless consumer
protection standards. In my State, the wireless industry
lobbied successfully to prevent our PUC from stepping in, and
our attorney general didn't sign a consent decree with the
wireless industry and 30 some-odd other States to create a
regulatory framework. So folks in my district could very well
be better off with robust consumer protections available to all
American consumers and businesses.
I hope everyone can work together in good faith. A state-
by-state patchwork might most severely affect smaller wireless
carriers which frankly have some of the most pro-consumer
offerings including unlimited calling, no early termination
fees, and affordable rates.
Thanks, Mr. Chairman, and I yield back the balance of my
time.
Mr. Markey. I thank the gentleman, and I thank the
gentleman. I will keep this forever. This is great, a lot of
imagination. Thank you.
The Chair recognizes the gentleman from Illinois, Mr.
Shimkus.
Mr. Shimkus. I will waive, Mr. Chairman.
Mr. Markey. The Chair recognizes the gentleman from
Mississippi.
OPENING STATEMENT OF HON. CHARLES W. ``CHIP'' PICKERING, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF MISSISSIPPI
Mr. Pickering. Mr. Chairman, thank you, and happy birthday.
Let me first start by thanking you for this hearing. It is an
important hearing addressing critical issues at a very pivotal
time with the FCC coming out probably today with a draft order
concerning many of these issues in the 700 MHz.
As we look at the context of where we are today, I do
think, Mr. Chairman, that it is appropriate that we move as we
have in the rest of the telecom policy to a Federal framework
on the consumer protections, and that is something that would
eliminate the patchwork of regulations and gives consumers a
safety net at a Federal level of what they should expect as far
as consumer protections. And then as we look at the current
context of the 700 MHz and the Carterfone questions, it is
important to remember where we have come over the last 10 years
as we went from a duopoly in cellular communications to a very
robust, vibrant, and intensely competitive marketplace as we
changed the policy through auctions. Instead of having two
providers, having five to seven providers in a market, having
both national and regional and niche providers creating a very
vibrant competitive sector. And it has led to an explosion of
innovation, of investment, of build out, of opportunities for
consumers to choose. But we also find ourselves at a time as we
have had that explosion of competition, we are now seeing the
realignment in telecommunications and the convergence but also
the consolidation. As we look at where we want to be in the
future, I think that we have a great opportunity in the 700 MHz
to create an open platform that will make sure that we have
competition and choice and innovation in the future, not only
in the past but for the future. And let me be very clear on
what openness is and what openness is not. Openness is not net
neutrality. Openness is creating the wholesale market, it is
creating interoperability for devices so that you can use a
device, whether it is an iPhone or another device, with
whatever function you choose. If you want to go to a WiFi or
WiMAX spot and use it or if you want to have the access to
other networks, you can do so. That is openness in wholesale.
We have done the same thing in energy, whether it is natural
gas or electricity in creating wholesale markets and the
ability for independent power producers to connect to the grid,
to the system, to the network. And so that is all that we are
doing here, actually, the best way to ensure a non-regulatory
solution and a new space and a new opportunity with the 700 MHz
to have the robust competition, innovation, and investment that
we have had in the past.
So I really commend Chairman Martin for taking this
opportunity to address and to get a space in our spectrum that
would be open, innovative, competitive. I also commend Chairman
Martin for addressing the significant need for a public safety
network that would drive interoperability and public safety and
will for the first time since 9/11 and Katrina give us our best
hope of having a national public safety network.
As we look at the Carterfone issue, it is the equivalent of
portability. I think that what we did in 1996 that a consumer
could choose if I am going to go with a cable company, a
telephone company, or any competitor and I can take my number
with me. Now the question is in the wireless sector, can you
take your phone with you as you choose which network, which
carrier, which device that you want to. And as we look at the
challenges and the threats of maintaining competitiveness, I
believe having an open space and new space where you don't have
to impose regulatory burdens on any incumbent carrier but you
give a new network a chance with new opportunities, I think
this is the best way to go, and this is the best time and
opportunity.
Mr. Chairman, I yield back.
Mr. Markey. The gentleman's time has expired. The Chair
recognizes the gentleman from Texas, Mr. Gonzalez.
Mr. Gonzalez. I will waive my opening statement.
Mr. Markey. The Chair recognizes the gentlelady from
California, Ms. Solis.
OPENING STATEMENT OF HON. HILDA L. SOLIS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Solis. Thank you, Mr. Chairman, and happy birthday. And
I also want to thank the ranking member, Mr. Upton, for holding
this very important meeting today. I look forward to learning
more about the advances in the wireless industry, which has
over 200 million subscribers. Many of my constituents consider
a cell phone a necessity now for their convenience and safety.
According to a recent Pew Hispanic Center survey, 59 percent of
all Hispanic adults in the U.S. consider the cell phone a
necessity rather than a luxury compared with fewer than half of
non-Hispanic whites at 46 percent and non-Hispanic blacks at 46
percent. Even more consumers are now foregoing landline phone
services in favor of cell phones. We have seen an incredible
rise in broadband wireless Internet usage and a release of new,
innovative products in recent years such as the new BlackBerry
models and the iPhone. Consumers are relying even more on
wireless devices and the networks that support them to meet
their communications and entertainment needs. The increasing
wireless usage by all Americans will be directly impacted by
the innovation of the wireless industry and consumer protection
regulations. I look forward to hearing from our witnesses about
the positive and negative effects of State and Federal
regulations on consumer services and innovation in the
industry. I am also interested in the concept of wireless net
neutrality, and I hope our witnesses can tell us more about
whether they think the industry is moving toward an increased
portability of devices on different networks. And I yield back
the balance of my time.
Mr. Markey. The gentlelady's time has expired. The Chair
recognizes the gentleman from Illinois, Mr. Hastert.
Mr. Hastert. I thank the chairman, and I too want to
congratulate the chairman on his long, long life and great
seniority on this committee. And I understand you are now third
in line geriatrically on this committee, so I congratulate you.
Mr. Markey. Thirty-one years on this committee and I am
still considered a young man still waiting for my----
Mr. Hastert. That is a long, long time.
Mr. Markey. That is a long, long time.
OPENING STATEMENT OF HON. J. DENNIS HASTERT, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF ILLINOIS
Mr. Hastert. Mr. Chairman, I want to thank you for holding
this hearing today, and I would like to certainly welcome the
panel and look forward to hearing about the new innovations in
the wireless industry.
When I got my ears wet, I guess, on this issue was back in
the early 1980s when I wrote the Public Utility Act in Illinois
and the Telephone Act. Back then there was twisted wire and
copper wire and a little black thing that you dialed, and
people picked it up and really didn't know how to use the punch
buttons yet, but things have changed so much. You couldn't even
begin in the 1980s to try to think about smart buildings, PCs,
and handheld telephones and the things that we have today. This
has happened partly because there is competition. Competition
in the wireless marketplace has dramatically changed since 1993
when Congress created the classification of commercial mobile
services. In the early 1990s there were only 25 million cell
phone users, and now the number has grown to over 225 million
according to the FCC. The number of mobile telephone
subscribers have increased penetration rates of approximately
71 percent. The amount of time mobile subscribers spend talking
and texting on their mobile phones has also increased. The
volume of text message traffic has grown to 48.7 billion
messages in the second half of 2005, nearly double the 24.7
billion messages in the same period of 2004. Revenue per minute
fell 22 percent during 2005 from 9 cents in 2004 to 7 cents in
2005. These numbers speak volumes of an industry that is
clearly shown to be extremely competitive and able to provide
for its consumers. Wireless companies such as AT&T, Sprint,
Verizon, and T-Mobile offer a menu of other services along with
the traditional mobile and voice services, including text
messages, data transferring, Internet and television access on
their mobile devices. These various capabilities have given
consumers plenty of choices.
With as many options and plans as we have to choose from
today, it is certainly questionable to impose Government
regulation and net neutrality mandates on an industry that is
already aggressive. Government should not dictate how a current
successful industry should run, and the Carterfone principles
should not be extended to today's competitive wireless
industry. Congress must continue to promote policies that
foster innovation in wireless technologies and not allow States
to set policies that will stifle competition. It is critical
that we do not enact regulatory burdens that hinder an industry
responsible for providing consumers choice in telephony.
I thank you, Mr. Chairman, and look forward to hearing from
our witnesses today, and I yield back my time.
Mr. Markey. The gentleman's time has expired. The Chair
recognizes the gentleman from Washington State, Mr. Inslee.
OPENING STATEMENT OF HON. JAY INSLEE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WASHINGTON
Mr. Inslee. Thank you. I look forward to this hearing. I
just wanted to comment on two things that have fundamental
ramifications for the development of this service, one is the
development of white spaces, and we won't be talking about that
much today, but I think it is an important issue that all of us
keep in mind that we try to develop these technologies. The
other, I want to reiterate Mr. Upton's comments about the
injunction that really does threaten the industry of Broadcom
and QUALCOMM issue, and I will be active in talking to the
Ambassador in attempting to find a remedy that doesn't
potentially significantly affect services for millions of
Americans, and I look forward to working with others in this
room on that. Thank you.
Mr. Markey. The gentleman's time has expired. The Chair
recognizes the gentleman from California, Mr. Radanovich.
Mr. Radanovich. Thank you, Mr. Chairman. Happy birthday,
and I pass.
Mr. Markey. Thank you. I appreciate it. The gentleman will
receive extra time for that. The Chair recognizes the gentleman
from Florida, Mr. Stearns.
Mr. Stearns. Mr. Chairman, happy birthday several times.
Mr. Markey. Unlimited.
OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF FLORIDA
Mr. Stearns. Obviously thank you for holding this important
hearing. We welcome the witnesses. It is interesting to go
through the witnesses and where they are from and so forth, so
it is quite diverse, and I compliment the majority for getting,
I think, a very balanced list of witnesses here.
I think of course as many on this side will say, we are
interested in focusing on the consumers' welfare. It is a true
American success story, this wireless industry story. It was
once thought to be perhaps a niche market appealing to maybe
900,000 people maybe by the year 2000. Despite these
predictions, the wireless industry has become one of the
fastest-growing and most competitive sectors of the U.S.
economy because Congress has more or less allowed the consumers
to rule the market. Many of us obviously feel the consumers are
the best judges here, and we work for them, and so we look
forward to more competition.
Since Congress laid the groundwork in 1993 to create a
competitive wireless industry, the number of wireless
subscribers has leaped from about 16 million to 230 million
people today. In addition, the wireless penetration is now more
than 76 percent of total U.S. population. Competition in the
wireless industry continues to grow beyond what many of us
could even imagine. The FCC recently reported that 97 percent
of the United States' population lives in counties with at
least three service providers, up from 88 percent in 2000. That
is a huge success story we all should be proud of. Consumers
are also getting a great deal. In 1993 the average wireless
bill was about $61.50, and consumers used their devices an
average of 140 minutes per month. In 2005, the average wireless
bill of $50 was nearly 20 percent less, and the average minutes
of use was 708 minutes, a more than 400 percent increase.
The purpose of this hearing is to examine the relationship
between wireless consumers and wireless service providers. As
we have seen, the wireless industry exists in a highly
competitive environment. The best protection consumers can have
is a competitive marketplace. Wireless has four national
competitors today. Congress needs to ensure a national
framework for wireless so that one or two renegade States don't
disrupt the status quo and harm wireless competition. In the
event of market failure, the FCC should have the exclusive
responsibility of adopting consumer protection regulations. The
FCC is the most appropriate agency to do this because the
wireless industry is a national service, and the Commission
already licenses and regulates this industry.
So in closing, Mr. Chairman, the best consumer protection
is competition, and Congress must fight the urge to impose
burdensome regulation on this industry. And I thank you, Mr.
Chairman. I yield back the balance of my time.
Mr. Markey. The gentleman's time has expired. The Chair
recognizes the gentleman from Michigan, Mr. Dingell.
OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Dingell. The chairman thanks the chairman for holding
this important and timely hearing on your birthday. And by the
way, happy birthday.
Today, Mr. Chairman, we turn our attention to how consumers
are treated by the wireless industry and what consumers may
expect in the future. We also consider the wireless industry's
call for greater Federal control of consumer protection
measures. Important questions.
I am pleased that so many American consumers have elected
to purchase wireless devices. Like many, I have come to rely on
my BlackBerry, and I am now enjoying a brand new iPhone. I am
pleased that the wireless industry has adopted a consumer code
whereby carriers have pledged to make certain information
available to consumers and to follow certain pro-consumer
practices. I remain, however, concerned about some lingering
consumer protection issues and how these issues will relate to
the licensing of new spectrum shortly to be up for auction.
The first issue is the imposition of early termination fees
on consumers who choose to terminate a wireless contract. I
fully appreciate the need of carriers to recover the costs of
providing consumers with new devices at low prices.
Unfortunately, there are reports that this practice has been
abused. In some cases, consumers have been forced to pay the
fee even if their service never worked and they were not
properly served. It is puzzling to me that the amount of the
fee is not tied to the cost of the phone. Carriers typically
charge the same fee for subscribers with the cheapest handsets
as they charge for those with the most expensive handsets.
I am also concerned about the bills that consumers receive
from their carriers. These are almost always difficult to
understand and in some instances impossible to understand.
Proper billing practices have long been a problem for all
telecommunications customers, and this is a matter into which
this committee must inquire I think now. The Federal
Communications Commission received more than 12,000 consumer
inquiries and complaints related to wireless services in 2006.
Many of these concerned billing issues. This consumer
protection issue clearly must be addressed and vigorously so.
Finally, I am concerned about the complaints of some small
carriers that they have difficulty in obtaining roaming
agreements with large, national carriers. Clearly consumers are
in need of protection in this matter so that they may receive
the optimum amount of choice in the service that they are
afforded by the different suppliers. Technological limitations
and increased consolidation sometimes leave small carriers with
only one large carrier with whom they may enter into a roaming
agreement. This dynamic may produce abnormally high roaming
rates for customers of small carriers. It may also limit the
area in which consumers may expect to be served properly.
The major wireless carriers are asking Congress to preempt
the States on wireless consumer protection matters. In
exchange, the carriers ask to reestablish a national set of
consumer protection rules. This committee has carefully
established the current regulatory framework for the wireless
industry, and precluding a State from protecting its citizens
is not a matter that should be undertaken lightly. Many
wireless carriers, however, operate national businesses, and it
is possible that consumers might gain more under a federalized
regime. I look forward to the testimony on this topic, and I
think it is again a matter for inquiry by this committee.
Finally, I expect to hear more about the controversy
surrounding the so-called Carterfone rules and wireless
networks. This issue has taken on a new urgency since USA Today
reported that the FCC may apply some form of Carterfone to new
licenses in the 700 MHz band. When considering these
developments, we should always seek to ensure that the
Commission's actions benefit consumers, because it is they to
whom we have the greatest responsibility. In the past, even the
FCC's most well-intentioned initiatives have not always
resulted in solid consumer benefits, some even operating to the
detriment of the consumer.
I look forward to learning more about the witnesses' views
on this matter and also to finding out what the FCC intends to
do and how it will impact upon the consumer. I welcome the
distinguished panel of witnesses who appear before the
committee today, and members of the panel, I express my thanks
to you for your assistance and for the testimony that you will
present in the hearing. I thank you, Mr. Chairman.
Mr. Markey. The gentleman's time has expired. The Chair
recognizes the gentleman from Oregon, Mr. Walden.
Mr. Walden. Thank you, Mr. Chairman, and happy birthday,
and I am going to waive my opening statement in honor of your
birthday.
Mr. Markey. Thank you. I appreciate that. The Chair
recognizes the gentleman from Michigan, Mr. Stupak.
OPENING STATEMENT OF HON. BART STUPAK, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Stupak. Thank you, Wizard Markey, and happy birthday. I
look forward to hearing the testimony of our distinguished
panel today. The home page of CTIA, the wireless association,
poses the question, who doesn't have a cell phone these days.
It is a rhetorical question as there are 260 million wireless
customers today. Innovation and competition have been the
hallmarks of the wireless industry. Consumers have benefited
tremendously, and the industry has grown rapidly. However, a
different question in my neck of the woods is often asked, who
has cell phone coverage? Unfortunately, too often in rural
America consumers lack dependable, affordable cell phone
service that works for them at home, at work, and everywhere in
between. I know when I travel my huge district, I have long
periods of time when I cannot be reached. That is not to say
that the wireless industry has not made great strides in rural
America; it has. It is just that rural America continues to
face fewer choices and less coverage.
Today's hearing is about taking stock of the marketplace
and examining whether consumers would benefit from changes to
our nation's wireless policy. I look forward to a good debate
on the issues on the role of State regulators in requiring open
access rules on wireless. Consumers, especially those who live
and work in rural America, deserve accurate coverage maps when
they are choosing a plan. Rural consumers should be able to
know if their coverage is going to work when they travel out of
the carrier's service area. Smaller, rural, and regional
wireless carriers have raised concerns about their ability to
negotiate fair and reasonable roaming agreements with national
carriers. The FCC first opened a proceeding on this issue in
1999 and reopened it in 2005. I look forward to hearing the
panelists' thoughts on these concerns.
I would be remiss if I did not mention the upcoming auction
of the 700 MHz spectrum and the Federal-State Universal Service
Fund joint board's proposal for an interim cap on wireless.
This committee held a hearing earlier this year on the upcoming
700 MHz auction. It was pronounced over and over, including by
myself, that the spectrum is ideally suited to provide
broadband to rural America. As such, I was pleased that
Chairman Martin proposed strong build-out requirements for the
spectrum to be auctioned. I am hopeful that the chairman and
the Commission remain committed to this proposal as the rules
are finalized.
Finally, I believe this committee needs to begin some real
oversight and work on universal service reform. A good place to
start is with wireless. The joint board recently proposed an
interim cap on USF support for wireless. While I agree that the
growth in wireless deserves the Commission's immediate
attention, I have serious concerns with the cap proposal.
Interim policies at the FCC tend to become permanent.
Furthermore, the cap may freeze in place the problems with the
current system and effectively stall deployment of wireless in
areas of the country that are still lacking coverage.
Mr. Chairman, I am hopeful the committee will turn to these
issues as you continue your series of hearings on wireless
technology. Thank you, and I yield back.
Mr. Markey. The gentleman's time has expired. The Chair
recognizes the gentlelady from California, Mrs. Capps.
Mrs. Capps. Thank you, Mr. Chairman. I waive my opening
remarks except to welcome the witnesses and try to figure out
why we are having this hearing on your birthday or vice versa.
Mr. Markey. I thank the gentlelady very much. The gentleman
from Texas, Mr. Green.
OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Green. Thank you, Mr. Chairman, and happy birthday.
When you get to be our age, we are just happy to have them, but
we don't want to count them. I would like to put my opening
statement into the record, but I will give you an example about
how wireless has expanded so much in our country.
In 1999 I brought a very old car up here from Texas. I
drove it, and there were so many places between Texas and
Washington, DC that I lost cell phone service. That was prior
to BlackBerries. But I brought another one up this last week,
and I was amazed that driving in very rural areas all through
the south, Mississippi, Alabama, Tennessee, and even in
southern Virginia how the service was never a problem at all
with the BlackBerry or cell with two different large carriers.
So obviously from the consumer side we know that, and it is
great to experience it, because coming from the very urban area
in Houston and working in Washington, DC, some of us don't
realize in the rural areas, like my colleague from Michigan
said, that there are still gaps in it. And that is what I would
hope that we would look forward to. I know the coverage
nationwide is good. 98 percent of the U.S. population lives in
counties with three or more wireless operators, and 51 percent
of the population lives in counties with five or more wireless
operators. So Mr. Chairman, I would like to again place the
whole statement in the record, but thank you for holding the
hearing, even if it is on your birthday, but it is also
Wednesday.
Mr. Markey. Thank you, Mr. Green, very much. And the
gentlelady from California, Ms. Harman.
OPENING STATEMENT OF HON. JANE HARMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Harman. Thank you, Mr. Chairman. On behalf of
California grandmothers, I join with Mrs. Capps in wishing you
a happy birthday.
To our witnesses and to the committee, I realize that the
scope of this hearing goes beyond just spectrum, but the
biggest spectrum in U.S. history is on the horizon. After the
DTV transition, the importance of the consumer issues under
consideration today will grow exponentially. I am confident
that the wireless industry, including the companies represented
by our witnesses today, is doing its best to offer cutting-edge
services at competitive rates, but the upcoming 700 MHz
auction, the iPhone, and the QUALCOMM/Broadcom patent dispute
all show how quickly the wireless industry is changing. On the
open access question, greater freedom for wireless devices and
applications can bring down the cost of handsets and spur
innovation in the industry. We should look hard at this idea as
the FCC is because wireless technology in the U.S. is years
behind other parts of the world.
But my priority, Mr. Chairman, and I think everyone on the
committee is getting a little tired of this rant, is to assure
that we don't blow it with respect to the 700 MHz auction for
the public safety spectrum. Mr. Pickering and I wrote again
yesterday, and I am sure he mentioned this, to the FCC urging
that the auction include open access, wholesaling, and a
national not regional approach. I believe he did speak to this
earlier. I hope the FCC is listening.
On television yesterday, and actually in the press today,
is information from the Department of Homeland Security
Secretary Michael Chertoff and others that chatter is up and an
attack on U.S. soil by some terror group or terror groups or
terror cells is likely this summer. This is mid-July, so we
have 6 anxious weeks to go. I worry that when it comes, I
didn't say if it comes, we still may lack the interoperable
communications so necessary for first responders to respond
adequately, especially if there are near-simultaneous attacks
in different parts of the country, which is absolutely
possible. This problem has to be fixed. This problem won't be
fixed if we do business as usual. The clock is ticking. I am
glad that the FCC is acting promptly, but it is now necessary
for the FCC to make the right decisions; and I would urge this
committee, I would urge you, Mr. Chairman, and I would
certainly urge others listening in to get this right with
respect to open access, wholesaling, and a national approach to
this emergency spectrum. I yield back the balance of my time.
Mr. Markey. The gentlelady's time has expired. The
gentlelady from Tennessee, Mrs. Blackburn, is not a member of
the subcommittee, but by unanimous consent, we would invite her
to make an opening statement if she would like.
Mrs. Blackburn. Thank you, Mr. Chairman. I will waive. I
look forward to the witnesses and opportunity for questions.
Mr. Markey. OK
Mrs. Blackburn. I yield back.
Mr. Markey. The gentlelady's opportunity will be preserved,
and I do not see any other members of the subcommittee wishing
to be recognized for the purpose of making any opening
statements. We will turn to our very distinguished panel and
will begin by recognizing Commissioner Tony Clark. Mr. Clark is
commissioner of the North Dakota Public Service Commission. He
also serves as the president of the Telecommunications
Committee of the National Association of Regulatory Utility
Commissioners. Welcome, Mr. Clark. You have 5 minutes to
deliver your testimony.
STATEMENT OF TONY CLARK, COMMISSIONER, NORTH DAKOTA PUBLIC
SERVICE COMMISSION, BISMARCK, ND
Mr. Clark. Thank you, Mr. Chairman, and Ranking Member
Upton and members of the subcommittee. I appreciate the
opportunity to testify today. I am Tony Clark, commissioner
with the North Dakota Public Service Commission and a member of
the National Association of Regulatory Utility Commissioners
and chairman of its Telecommunications Committee. We commend
you for holding this hearing on protecting consumers, and it is
a goal that is shared by both the States and Congress.
Under current law, State commissions handle thousands of
consumer complaints every year and generally provide individual
relief to each complaint, often resolving complaints in a
matter of weeks or even days through informal processes. In
addition, we are able to address new and novel concerns as they
arise.
We are concerned because the wireless industry in
particular has lobbied to create a technology-specific
preemption standard for their telecommunications service. As a
response to concerns that we have raised with regard to this
approach, industry representatives have said that they still
support State attorneys general having authority to enforce
general laws of applicability over the industry. We
respectfully argue that this sounds a whole lot more impressive
than it actually is; and in fact, 41 State attorneys general as
well as NGA agree with us, signing a letter to Congress last
year urging a defeat of the kind of preemption that we are
discussing.
The point is that while fraud enforcement actions have
their place in jurisprudence, it is a pitifully poor way to
police a market like telecommunications. Take, for example, the
issue of bill slamming and cramming. Now, it is clearly a wrong
practice, and laws prohibiting it on the State level are
clearly telecom specific. And yet Federal legislation that
would only permit State laws of general applicability in the
wireless arena would wipe these laws from the books of 50
States as they pertain to the wireless providers. Is this
really good public policy? Do we want to have to bring a full
fraud case for every wireless bill dispute that arises, while
handling wireline landline complaints through an administrative
process? It makes no sense and illustrates the problem with
broad Federal preemption based on a specific technology.
In addition, we believe that a law change at this juncture
would add significant legal confusion over a Federal act that
is only now beginning to see some legal stability after years
of litigation.
In November 2004, NARUC convened a Task Force to examine
our own role and our view of the telecommunications marketplace
and federalism. The outcome of that and other NARUC efforts we
believe sets NARUC on a very pragmatic, moderate path in
dealing with the wireless jurisdictional relationship; and
while we do not believe that limiting States to laws of general
applicability is a feasible path forward, neither do we argue
for a return to rallying around old jurisdictional flags and
crying States rights. Instead, we believe we offer a
constructive way of viewing the Federal-State wireless
relationship. In the end, we came to two important conclusions.
First of all, with the pace of innovation, all Government
policies must strive to be as technologically neutral as
possible. And the second conclusion was the development of our
functional federalism concept, which is the idea that if
Congress is going to write portions of the Telecom Act, it
doesn't have to be bound by traditional distinctions of
interstate versus intrastate or try to figure out ways to
isolate the intrastate component of each service. Instead, a
Federal framework should look to the core competencies of each
level of government and decide what it wants to regulate and
then just decide who does what best. Now, some have argued for
the FCC to set national standards for consumer protection.
NARUC is very willing to explore Federal standards for consumer
protection, and we believe that it may be one way to address
carrier concerns over potentially conflicting State
regulations. However, we also wish to be clear that Federal
standards must be accompanied by a State enforcement mechanism.
Experience has taught us that relying solely on the Federal
Government for enforcement of a mass market like this would be
folly. Take for example, the Do Not Call list experience. While
both States and the Federal Government have enacted these laws,
in practice, enforcement has fallen overwhelmingly to the
States, in fact, almost exclusively.
Finally, we believe that States must retain the ability to
enact new consumer protections to then address potential
abuses. To limit the ability of States to address emerging
concerns will in effect handcuff cops on the beat protecting
consumers.
The bottom line is that State regulators are seeking a
middle ground that relies on each level of government doing
what it does best: the Federal Government setting standards
that apply to all and the States enforcing those rules and
tailoring them to emerging specific issues. It is a
partnership, not preemption. If the industry finds State rules
burdensome and contradictory, we believe appropriate remedies
should rest with the FCC conducting individual case-by-case
reviews of the disputed rules.
Finally, Mr. Chairman, I would note that NARUC has
committed itself to ongoing dialog with the industry and other
policy makers to ensure that the benefits of wireless
innovation are preserved while ensuring that consumers are
served in the best possible way.
Again, I thank you for the opportunity to testify. I look
forward to any questions you may have.
[The prepared statement of Mr. Clark follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Markey. Thank you, Mr. Clark, very much. Our next
witness is Mr. Steven Zipperstein. He is the vice president and
general counsel of Verizon Wireless. Welcome, sir.
STATEMENT OF STEVEN E. ZIPPERSTEIN, GENERAL COUNSEL, VERIZON
WIRELESS, WASHINGTON, DC
Mr. Zipperstein. Good morning, Mr. Chairman. Thank you very
much, and happy birthday. Mr. Chairman, Ranking Member Upton,
and other members of the subcommittee, it is a pleasure and a
privilege to be here with you today to talk about the issues
that have been raised in the opening statements and other
issues that I am sure will come up in the hearing, and I will
do my best to answer all of your questions as forthrightly and
as candidly as I possibly can.
A number of the members have referred to the recent
developments particularly yesterday and this morning in the
press regarding the upcoming spectrum auction, and I thought I
would begin by offering a few comments from the perspective of
Verizon Wireless on these developments.
First, so far all we have, I think it is important to
emphasize is a proposal. Mr. Chairman, you refer to the fact
that the chairman of the FCC is poised to take action but that
no final action has occurred; and I just want to make the point
that we have a proposal. We haven't even seen the language yet.
It hasn't been released publicly. All we can do is speculate at
this point about what the specifics are, and of course, the
process at the FCC will continue over the next few weeks as
people discuss the proposal with the FCC that will lead
eventually to final rules.
I think it is also important to note that based on what we
have seen emerge in the press last night and this morning, it
appears that the proposal may be somewhat narrower in scope
than originally appeared to be the case yesterday morning. For
example, it now appears based on what we are reading and
hearing that the proposal affects about one-third of the
spectrum to be auctioned, about 22 MHz or so out of the 60 MHz
to be auctioned, and it appears that the so-called open access
component that would apply to that one-third or so of the
spectrum appears to be focused on a couple of issues. The first
issue involves what some of the members have referred to here
this morning as device portability, namely allowing consumers
to bring devices of their choosing onto a carrier's network,
and second, it appears that there may be some focus on enabling
so-called WiFi access, and I wanted to talk about both of those
two for a moment if I may.
With regard to device portability, the first thing I wanted
to mention, Mr. Chairman, is Verizon Wireless has over 60
million customers. Every day we receive thousands of phone
calls into our centers from those customers who have questions
about various items. We receive e-mails at our headquarters, we
receive letters from customers with complaints, with
suggestions, with ideas. We have, quite frankly Mr. Chairman,
not heard from our customers very much about a desire to bring
other devices onto our network or a desire to enable WiFi. We
just have not been hearing that from our customers. We
understand it is a concern. I don't want to in any way downplay
the concern, I just wanted to report to the subcommittee that
it is not something that we are seeing a lot of from our
customers. It is also important to remember that the FCC
initially, under Chairman Hundt, and then continuing through
the present, set the wireless industry in this country on the
path to developing dual technologies that would compete against
each other, CDMA technology which my company uses, which Sprint
uses, which Alltel uses is one path. The other path is the GSM
technology which T-Mobile uses and AT&T uses. And those two
technologies are not easily compatible with each other in a
device sense. What we have been hearing from customers of ours,
for example, is that when they go to Europe or to countries
that have GSM, they would like a device that works over in
Europe, and if I could just show the committee, we do have a
BlackBerry that we began selling recently, the 8830, which
works in Europe on the GSM mode and works here in this country
on our network on the CDMA mode.
So as the market informs us of their desire for those sorts
of devices, of course, we've responded to the market as have
other carriers.
I would also then, turning to WiFi, mention that the market
is responding there as well. T-Mobile as recently as last week
announced a phone that will work on their network as well as
WiFi. We are also looking at such a device, but I would caution
that there are a lot of very, very important technical issues
here. Our engineers tell me that, for example, a device working
on WiFi has to search, it has to use power to get on the WiFi
network, and battery life could be a real issue, and consumers
could see some degradation in battery performance. And as a
result, I would just echo what Chairman Dingell said and what
the FTC, Federal Trade Commission, staff said recently. It is
important before we plunge headlong into this that we do take a
very, very careful look to make sure that we don't
inadvertently do things that can be counterproductive for
consumers.
I think it is also worth mentioning that the market has
been able to respond to conditions such as new innovations in
the iPhone in a way that has been very, very favorable to
consumers. The example I would use, Mr. Chairman, is the RAZR.
Cingular introduced the RAZR phone, which was the hot device at
the time, November 1, 2004. It was exclusive to Cingular, GSM
only, and it was $500. But ultimately the market demanded a
RAZR that could work on CDMA networks, too. They are now
ubiquitously available as cheap as $49.99. Some carriers even
give them away for free. We didn't need Government to tell us
to do that, we didn't need open access to tell us to do that,
the market took care of it as other members have indicated.
Finally, Mr. Chairman, I had mentioned that there was an
auction last year of 4G spectrum, the so-called AWS auction. We
didn't hear calls at that time for open access in that auction.
It was an extremely successful auction. $14.5 billion came into
the Treasury, new entrants, cable company joint venture bought
spectrum, and I am sure that if there is a business plan for
open access as the ranking member said, a new entrant or an
entrepreneur would certainly embrace such a plan. Thank you,
Mr. Chairman.
[The prepared statement of Mr. Zipperstein follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Markey. The gentleman's time has expired. Now, we
recognize Professor Timothy Wu. Professor Wu is a professor of
law at Columbia University Law School, and he served as a clerk
for Justice Breyer on the United States Supreme Court. We
welcome you, Professor Wu. Whenever you are comfortable, please
begin.
STATEMENT OF TIMOTHY WU, PROFESSOR OF LAW, COLUMBIA LAW SCHOOL,
COLUMBIA UNIVERSITY, NEW YORK, NY
Mr. Wu. Thank you, Mr. Chairman, Ranking Member Upton. I am
here today as a person who is an academic. I am not paid by any
member of this industry. I am not in this industry, and I
present my views simply as someone who has studied this
industry in great depth and has come to the conclusion that
there are reasons to be concerned about the direction this
industry is headed and reasons to think that policy changes
might be very important to continue the strength of America in
technological leadership.
The United States, if we look comparatively at the rest of
the world, leads the world in a lot of high-tech areas. We are
the entrepreneurs, the innovators; this is our comparative
advantage. Yet, it is often felt by American people, consumers,
by people in the industry, by the world at large that one area
that America really is not the technological leader is in the
wireless space. We lead in the Internet applications, we lead
in consumer electronics, we lead in computers and computer
software, and I suggest the only different variable between
these different industries is policy, that we have allowed, and
although there have been a lot of positive developments in
wireless, we have allowed one way or another for there to be a
spectrum-based oligopoly in wireless that is controlling
innovation, and it is controlling the development of devices
and new devices in the wireless sector. And I suggest to you
that that is the state of affairs that is not going to change
overnight but that which this Government, this Congress, and
the FCC has a duty to set us back to a direction towards an
open market, toward a leave-in market, towards the kind of
competitive innovative market that we have seen in computers,
we have seen in consumer electronics, we have seen in the
Internet that has made this one of the richest countries on
Earth that we are lacking in the wireless sector.
Now, what I want to do and spend my time on today is trying
to explain and make clear the difference between two what I
think are very different issues. The wireless Carterfone issues
which I have seen as the primary focus of our discussion here
and the, I think, very different issues of what should be done
with the spectrum that is coming available with the termination
of broadcast television UHF, the 700 MHz auction. I want to
make clear what the difference is between these two things
because I think they are getting a little bit confused, and we
have different policy options here that will deliver different
results, and we need to understand what is going on between
them.
So let me explain first of all what exactly wireless
Carterfone means and why it is important not just in the 700
MHz context but important period for setting this country on
the right path to becoming a world leader, the world leader, in
wireless innovation.
Right now today, as some of the members have already noted,
we have a very unusual situation when it comes to buying
wireless devices. Over 90 percent of retail is controlled by
the four carriers. You can't go to any old store and buy a cell
phone. Most of it goes through the bottleneck of the carriers
and devices the carriers think are the right phones for
Americans. This is a very unusual situation, and moreover, when
you buy these phones, there are two things that tend to happen.
First of all, they tend to be locked to the particular network
you buy them from, one way or another; and second of all, it
can be very difficult and very complicated to bring your phone
with you when you leave one service and move to another
service. I mean, these phones are property. They are supposed
to belong to Americans. You pay for them. You pay for them in
higher monthly charges. I mean, this idea that you get these
free, subsidized telephones, don't be fooled. You pay $50 up
front, but the money is collected on a buy now, pay later
basis. This money is paid by American consumers. These
telephones are their property, yet they are not allowed to do
with these telephones what they want. Imagine a situation where
you bought a television set, you had cable service. You decide,
I am done with cable, I am moving to satellite. The next thing
you know, your television stopped working. That would be
completely unacceptable. When people buy a television, they
think, this is my television, I own it. If I want to move to
broadcast, fine. If I want to move to cable, fine, satellite,
fine. This is my property, I can do with it what I want.
Telephones are nothing like that. They are locked to carriers,
they are disabled from switching, and it is a situation which
is unacceptable and will become increasingly unacceptable when
we see companies like Apple trying to enter this market but
being forced to be hamstrung and disable their devices from the
full kind of compatibility that they should have.
And so the point of wireless Carterfone is addressing these
issues, and the most important rule in addressing these issues
is rules against locking and rules against blocking. Device
portability must be allowed, and these phone companies should
not be allowed to block applications that people want to use.
Now, I am running out of time. I want to say why these are
different than 700 MHz.
Mr. Markey. I apologize to you, but you are over right now;
but I think you are going to get plenty of questions, and I
think the discussion might begin with our next witness.
[The prepared statement of Mr. Wu follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Markey. The next witness is Mr. Phil Verveer, who has
been a frequent visitor to this committee over the years. He is
a partner at the law firm of Willkie Farr & Gallagher and is
chair of its telecommunications practice. He was also the lead
attorney for the Department of Justice in the lawsuit to break
up the old AT&T. The way things are going, we may need his
talents again. We welcome you, Mr. Verveer. Whenever you are
comfortable, please begin.
STATEMENT OF PHILIP L. VERVEER, PARTNER, WILLKIE FARR &
GALLAGHER, WASHINGTON, DC
Mr. Verveer. Thank you very much, Mr. Chairman. I
appreciate the opportunity to testify before the subcommittee
today. I think the proper question to be asked in terms of any
of the issues that you are addressing is not whether or not we
can do better. Of course we can do better, we always can do
better. The real question is one of ways and means. What are
the best ways and means to move forward?
Mr. Markey. That is a phrase we actually don't use in this
committee. If you could find another way of describing.
Mr. Verveer. So let me describe in terms of the best
methods then in terms of moving forward. The received wisdom
which is embodied in the Communications Act is that we should
rely upon competition wherever we can, and the mobile wireless
industry is indisputably workably competitive. You can see that
in terms of the four national carriers and the regional
carriers that are available. You can see it in terms of the
statistics that have been mentioned by many members of the
subcommittee this morning. That is both the reflection of and a
consequence of section 332 of the Communications Act again as
mentioned by many members of the subcommittee this morning.
Now, I suppose to paraphrase Senator Bentsen, I know
Carterfone, I have made extensive use of Carterfone as an anti-
trust prosecutor and as an FCC official in the 1970s, and this
is not Carterfone. Carterfone is not a precedent for Government
intervention into product and service design in today's mobile
wireless industry, and I will try to explain a couple of
reasons why I believe that to be true. But first I think it may
be worthwhile to briefly describe why it is that product and
service design is something that both Congress and the FCC have
normally sought to avoid, three pretty obvious reasons.
One, the Government has as much knowledge about issues of
product and service design as industry does, and there is an
inevitability both for Government and industry when we are
talking about product and service design. The decisions have to
be made in the face of uncertainty. In general, we are much
better off if we let those decisions be made by the people in
industry who have risen to the top of their respective
companies.
Two, the Government requirements with respect to product
and service design tend to inhibit product evolution and the
ability to respond to new opportunities and changing demand as
they arise. And three, Government due process requirements
inevitably slow the entire process. The Part 68 terminal
equipment connection arrangements that have been cited today
and cited in the context of the Carterfone debate took as I
well remember almost 10 years to perfect from the time of the
Carterfone decision, and that example, I think, is an
instructive example.
Now, why is it that Carterfone isn't really an appropriate
precedent with respect to today's wireless industry? First, the
old Bell system as you mentioned, Mr. Chairman, was a
thoroughgoing monopoly. It was vertically integrated, it
occupied about 85 percent of the telecommunications industry
broadly defined. As it happens today, the four national
wireless carriers occupy about 85 percent of their industry.
The difference between one having an 85 percent market share
and four having an 85 percent market share is a very large
difference; and with deference to Professor Wu, whose work I
admire greatly, I think the term oligopoly really may be a
misnomer with respect to the wireless industry today, again, an
industry with four national carriers and many regional
carriers.
The second reason is arcane but is one I know the
subcommittee is well familiar with and that is incentive
structures arising from regulation today are entirely different
from the ones that apply to the 1968 Bell system. Rate of
return produced perverse incentives with respect to the
activities of the old Bell system. The ability to discriminate,
or in fact, the incentive to discriminate, even if it meant
diminished use of the network, was something that was a
function of that kind of regulation. Today's wireless companies
are not subject to rate of return regulations. They are not
subject to that set of incentives.
This entire dispute at a kind of abstract level is
reminiscent of a lot of the disputes of the past. It can be
characterized I think as one between static efficiency on the
one hand and dynamic efficiency on the other. The difference
between trying to achieve a lower point on a static cost curve
versus the creation of new and lower cost curves. The Bell
system was broken up in part, I am convinced, when it was and
the way it was because of the work of this subcommittee. And
some of the deregulatory activities in which I was involved,
including the deregulation of terminal equipment and the
determination there should be more than one cell phone company,
were both commonly a judgment that dynamic efficiency and
competition was the better way to go, and I believe it still
is.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Verveer follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Markey. Thank you, Mr. Verveer. Our next witness is Mr.
Jason Devitt. He is the founder and CEO of Skydeck and the
founder and former CEO of Vindigo. Both Skydeck and Vindigo
develop software applications for use on mobile devices.
Welcome, Mr. Devitt.
STATEMENT OF JASON DEVITT, CO-FOUNDER AND FORMER CEO, VINDIGO,
CO-FOUNDER AND CEO, SKYDECK, MEMBER, WIRELESS FOUNDERS
COALITION FOR INNOVATION
Mr. Devitt. Thank you and happy birthday, Mr. Markey,
ranking member Mr. Upton, and members of the subcommittee.
Thank you for the opportunity to come and testify before you
today.
I am a small business owner. I don't like regulators, no
offense. I am here today because I don't have a choice with
respect to wireless.
Mr. Markey. Yes, you wouldn't exist without us.
Mr. Verveer. Precisely. That is precisely the point. In the
context of wireless spectrum, I do not have a choice. We do not
have a choice between no regulations and regulations. We have a
choice between badly written regulations and regulations that
work; but I put on a suit today for the first time in 18 months
and flew here from Silicon Valley to tell you that we have a
regulatory system that doesn't work, and the only way that you
are going to be able to fix it is to implement some form of
open access.
Thomas Carter was not a judge who broke apart a monopoly by
fiat. Thomas Carter was an entrepreneur who wanted to bring an
interesting product to market and was furious, mad as hell, to
discover that he required permission to innovate. I am an
entrepreneur, and I am mad as hell that I require permission to
innovate in the wireless market. I don't have to go to the
great companies that build our public highways and ask them for
their views on what kind of cars that I can put on those roads.
I don't have to ask ConEd for permission when I want to put a
refrigerator on the electricity network. I don't have to ask
Verizon, thanks be to Thomas Carter, for permission to attach a
computer to their network or to launch a Web site. But for some
reason I have never been able to understand, I have to ask
permission of Verizon wireless to attach a computer or the
computers that they now call phones to their wireless network,
and I have to ask their permission to run applications and
services on those phones. Worse, I have to ask the permission
of my competitors, because they are competing with me to
provide services to consumers.
There are three ways that you can fix this problem. The
first is you can go on selling spectrum indefinitely, but
unfortunately, it is a scarce national resource, and we are
going to run out of it. I would be happy to purchase spectrum
and launch a national network and so would my 14 colleagues in
Wireless Founders Coalition for Innovation who wrote to the FCC
on this issue a couple of weeks ago. But you don't have enough
spectrum to sell us, and you aren't going to allow us to do
that for the same reason that you are not going to allow us to
dig up the roads and streets of America to lay 15 sets of
cables to everybody's homes no matter what the consumer
benefits might be.
So the second solution that you could take is regulation,
and that means some form of open access, and by open access, it
essentially is what Mr. Pickering said it is, the opportunity
to attach any device to the network. It's the opportunity to
run any service on the network, provided of course that no harm
is caused to the network and that it is for a lawful purpose.
And that is the solution that I recommend.
And the only other solution is competition, pure action of
market forces. And I have to tell you, however, that despite
the fact that as the CTIA and the FCC keep telling us, wireless
sector is the most competitive telecommunications sector in
this country, and that is unquestionably true, nevertheless,
there are hundreds of interesting applications and services
that are not getting in front of consumers because of the
current structure of the market; and that is a problem that we
can only address through regulation. And in my written
testimony, I set out extensive examples of the services and
applications that are not possible. They fall into four broad
categories. First of all, there are applications and services
that require the permission of all of the carriers in order for
me to launch them. I gave the example of, say, an xPhone.
Imagine a phone that worked across every network in the United
States so that no matter where you were in the U.S. you could
get coverage because the phone would automatically activate on
whatever network offered the strongest signal. Now, it is
actually technically easy to build such a phone, and Mr.
Zipperstein just showed you one because Verizon is already
selling it. But they have crippled that phone so that it won't
work on any GSM networks in the United States. They sell it
only to their customers who want to be able to use it in GSM
networks abroad. And frankly, I don't blame him because even if
he tried to do that, he would probably fall afoul of antitrust
provisions if he tried to negotiate relationship with all of
the U.S. networks in order to sell such a device, but I could
sell such a device, and any consumer in the country--and
remember 27 percent of consumers change carriers solely in
order to get better coverage--27 percent of consumers would
surely be interested in buying a device that worked across any
network, and I could intermediate a relationship with all of
the networks in order to ensure that they had a single billing
relationship. That is a straightforward thing to do.
The second category--and remember, that is just one
category of devices--the second category of applications and
services are those that compete with the carriers' own
initiatives, and there are hundreds of examples of those. I
will give you a trivial one. Ringtones. Why are your kids'
ringtones so expensive? It is not because there aren't people
who don't want to sell them to you for less money, it is
because the people who want to sell them to you for less money
are not allowed to get onto the carriers' handsets because the
carriers are supporting the price of those services.
Here is the third example. Legal risk. If I want to launch
a service that has any legal risk associated with it
whatsoever, it is highly unlikely to happen because the
carriers have thrown out the baby with the common carrier
bathwater. By no longer being regulated under the terms of
title II, they no longer have any immunity for any of the
services that they carry over networks, so they will take a
very conservative approach.
I have plenty more to say, but I am sure I will have
further opportunities to speak.
[The prepared statement of Mr. Devitt follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Markey. Thank you, Mr. Devitt, very much. Mr. Ed Evans.
He is the chief executive officer of Stelera Wireless, a start-
up wireless broadband company. He is also here representing the
Board of Directors of the CTIA. Welcome, sir. Whenever you are
ready, please begin.
STATEMENT OF EDWARD EVANS, CHIEF EXECUTIVE OFFICER, STELERA
WIRELESS, OKLAHOMA CITY, OK
Mr. Evans. Thank you, Mr. Chairman, Ranking Member Upton,
distinguished members of the House subcommittee. Thank you for
inviting me to discuss wireless innovation and consumer
protection today. My name is Ed Evans, and I am the founder and
CEO of Stelera Wireless.
The emergence of Stelera Wireless provides fresh evidence
that the current light-touch regulatory environment is the best
means of fostering innovation and competition in the wireless
industry. The choices made possible by this innovation and
competition protect consumers far more effectively than any
regulations could. I am here today to urge you to do two
things, to avoid calls to impose particular business models on
the wireless industry as well as to extend the well-established
benefits of the national wireless framework to encompass all
the terms and conditions of wireless service and not just rates
and entry.
Let me address both of these issues, but first, since you
may not be familiar with Stelera Wireless, allow me to provide
you with a little background. Stelera is a start-up company. We
were formed in 2006 to participate in the FCC's AWS auction.
That auction concluded last September with winning bidders
paying almost $14 billion for the rights to the AWS spectrum.
We were a successful bidder. The towns in our 42 markets range
in size from just a few hundred, places like Umatilla, OR, to
almost 200,000 people in Lubbock, TX. Three-fourths of the
towns in our footprint have a population of less than 10,000
people. In some of those towns, Stelera will be the first
company to provide any type of broadband service. Our plan is
to provide competitively priced broadband wireless services
both on a month-to-month basis and under longer term contracts.
We will be using third generation wireless technology with
transmission speeds of up to 6 megabits per second. While we
plan to provide a voice over IP solutions competitive offering
in late 2008, we will allow the consumer to choose another
voice over IP provider if they so choose. We will not restrict
customers from accessing any Web site or running any
applications, although we will monitor total usage and reserve
the right to charge a premium or take action against abusive
subscribers. This is critical in a wireless network, since one
subscriber abusing the network can adversely affect many other
subscribers on the same network.
Stelera's experience in deploying a new broadband service
gives us a valuable perspective on how the Government can best
promote wireless innovation.
Our conclusion is simple and straightforward. Congress and
the FCC should continue to rely on market forces instead of
prescriptive regulation to determine how new wireless services
are deployed. The ability to invest with confidence allows us
to give consumers a wider choice of wireless services and
providers. This competition and choice protects consumers far
better than prescriptive regulations that are subject to
interpretation, misrepresentation, and manipulation. Whether
you call it Carterfone or open access, command and control
regulatory mandates will harm rather than promote the interest
of consumers. The decision to allow market forces to drive
wireless innovation has its roots in this committee's
determination, enacted by Congress in 1993, to establish a
national deregulatory framework for wireless services. This
market-proven approach abandoned the notion that wireless
providers must be regulated as if they were monopoly utilities,
a wise policy choice that has only been confirmed with the
passage of time.
Wireless consumers today have a choice among numerous
national, regional, and local carriers offering a broad range
of rates and plans to suit every need and every budget. Free
from State rate and entry regulation, wireless providers can
structure their products and plans without regard to State
boundaries. The result has been aggressive competition for
price, features, and customer service. Notwithstanding the
obvious benefits of Congress's 1993 decision, national
treatment does not extend to all terms and conditions of
wireless offerings. Seeking to exploit this gap, some States
have proposed wireless-specific rules and regulations that
could put at risk the national framework that has fostered a
vibrant, competitive wireless marketplace. Given that today's
wireless industry affords consumers the ultimate consumer
protection of competition and choice, there is simply no need
for a new layer of rules, especially not mandates that vary
from State to State. Congress should act now to ensure that the
benefits of the uniform deregulatory wireless framework
originated by this committee 14 years ago are not compromised
by aggressive and unneeded State regulation. While the FCC has
already declared wireless broadband services to be interstate
information services, clarity on this point will establish a
common framework for all wireless services and help avoid
disputes going forward.
Thank you again for inviting me today.
[The prepared statement of Mr. Evans follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Markey. The gentleman's time has expired. And now to
our final witness, Mr. Chris Murray. Mr. Murray is the senior
counsel at the Consumers Union, and he testifies today on
behalf of Consumers Union, the Consumer Federation of America,
and Free Press, thank you, Mr. Murray.
STATEMENT OF CHRIS MURRAY, SENIOR COUNSEL, CONSUMERS UNION
Mr. Murray. Happy birthday, Mr. Chairman. Good morning
Ranking Member Upton, Vice Chairman Doyle, and other esteemed
members of the committee. I do appreciate the opportunity to
testify again for you today.
I am here because I am concerned that the wireless industry
is gouging consumers with hefty early termination fees and
impeding innovation by stopping applications and devices from
reaching consumers. I would like to associate my remarks with
the panelists that share these concerns, and I really want to
underscore some things that are going on in this marketplace.
First of all, let us remind ourselves briefly of what this
market really looks like. We do have two dominant providers
that have more than half the market for wireless services, and
those two providers are also the dominant landline phone
providers in their service territory. They are going to have
more than 90 percent of the customers in their service
territories. They are also the broadband providers in that
area. They have the leading brand recognition in the service
territories, and there is nobody else in their territory that
can offer that bundle. So while this is a more competitive
market than say landline, which is virtually a monopoly, and
broadband, where we have got two choices, it still doesn't
preclude tight oligopoly behavior from occurring in this
marketplace, and Economics 101 tells us a little bit about what
can happen in those situations.
First let me talk briefly about early termination fees.
These are ubiquitous, with carriers charging $175, $200, as
much as $240 if a customer wants to leave before their often 2-
year contract is up. While Verizon has adopted a prorating
policy, which I think is a good step, the other carriers have
not even taken this minimal pro-consumer step. ETFs are a
pocketbook issue, but they also affect the preemption
discussion that we have taking place, and the reason for that
is because if you have got any kind of a suit against the
wireless carriers, whether it is because their maps weren't
accurate, whether it was because they didn't disclose fully the
terms of service, the damages in every instance are going to
involve the early termination fee. So if we preempt those early
termination fees, it is not--from having some sort of State
purview, we are not just talking about just the early
termination fee. We are talking about stopping policing of a
lot of anti-consumer behavior.
Some examples of problematic ETFs is if let us say I locked
into the family share plan where I can add an additional member
of my family for $10. If I have got a family of five with five
lines, if I want to leave, it is going to cost me nearly $1,000
in some instances. Would we expect competition to work very
well in that market? I don't think we should. The carriers are
also extending early termination fees for any change in service
plan, whether it benefits the carrier or not. In other words,
if I increase my bucket of minutes, they are actually going to
lock me into another 2-year contract. That is astounding to me.
The justifications that we hear for early termination fees
first of all is subsidy, subsidy, subsidy. I think the release
of the iPhone shows this to be transparently false. Consumers
are not getting one dime of subsidy for that device, yet they
still get locked into a 2-year contract with a $175 termination
fee.
Having lost that fig leaf of subsidies, I then hear them
talking about other costs associated such as the cost of
maintaining a network and the cost of acquiring consumers.
Well, welcome to capitalism. These are the same costs borne by
every other company in America, yet somehow they manage to
recover them from the rate base. The other reason I am
skeptical this is just purely about consumer welfare is because
I see applications that they are stopping from reaching
consumers. BlackBerry created a mapping program that they
wanted to give people for free. AT&T turned around and said no
because we have got a program that we want to charge them $10
for. I see the BlackBerry 8800 that Mr. Zipperstein noted. That
is a phone that does both CDMA and GSM; but if I take that to
Europe, it is not going to work. If I take that to another GSM
carrier, it is not going to work. The manufacturer designed
this phone with a chip set that works on all these different
networks. They have actually taken affirmative steps to disable
those electronics. This is outrageous to me. I am paying $600
for a phone, and they have gone out of their way to make it not
work because they want to reach into my pocket again to charge
me for an expensive international plan.
Why is it that we see better choices in Europe and in Asia
for consumers? I submit that it is precisely because they have
not allowed manufacturers to lock down these devices.
I have three challenges for the industry today. Number 1,
stop charging consumers undue early termination fees. I can get
out of a lease for an apartment or a home with one month's
rent, yet I get about the cost of a half-a-year's service to
end my wireless contract. Number 2, stop crippling these mobile
phones. If I spend $600, it is reasonable to expect that that
device works exactly as it should. And third, stop preventing
new applications from reaching consumers.
I will end there since my time is up. I appreciate the time
today.
[The prepared statement of Mr. Murray follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Markey. The gentleman's time has expired, and all time
for opening statements from the witnesses has expired, and we
will now turn to questions from the subcommittee members, and
the Chair will recognize himself.
Mr. Wu, you spend $500 for an iPhone, but the problem with
the iPhone is that the iPhone with AT&T is kind of a Hotel
California service. You can check out any time you like but you
can never leave. You are stuck with your iPhone forever, and
you can't take it anywhere. And that it seems to me is the
heart of this problem, and you pointed to the fact when people
buy a television set for $500, if they want to switch from
service to service, they can do so. It is their television set.
Can you just take that point and elaborate on it a little bit
more so the members can understand how tied these consumers
are? Even if they are not complaining, sometimes they don't
understand that there are other options. People were very happy
with their black rotary dial phone. I am sure there weren't a
lot of people calling in because they just thought that they
were stuck with it for the rest of their lives. Once they had
other options, they went to them en masse.
Mr. Wu. I think that is exactly right, Mr. Chairman. It is
just unusual. This industry, there is something strange about
this industry in the sense that even the basic rules of
personal property of Americans owning what they buy seem to be
suspended in this industry. That is why I don't know if it is
iPhone or iPhoney. As you said, televisions, Americans spend a
lot of money on televisions and don't expect when they switch
services the television stops working. If you spend a lot of
money on a toaster or refrigerator and suddenly you decide you
want to switch to ConEd or Potomac Power or something, it would
be outrageous if suddenly your refrigerator stopped working or
died or wasn't allowed to work on more than one network. You
have cars that could only drive on some roads. It would be very
unusual. There is something strange about this industry.
Now, this is a Government-created industry in a lot of
ways. It is reliant on public spectrum, and it was born of
public spectrum, and I think that is one of the major reasons
why we have such a strange state of affairs where personal
property is not transferable or usable with more than one
service provider.
Mr. Markey. All right. Let me turn to Mr. Devitt. Let us go
to this question of innovation. Let us turn to this area, where
the United States should be No. 1 looking over their shoulders
at Nos. 2 and 3 in the world in this area, these wireless
applications. Talk to us about what you think could happen if
entrepreneurs knew that they could get their services carried
and that consumers could have access to them.
Mr. Devitt. The challenge we face in answering that
question is what former Secretary of Defense Rumsfeld described
as unknown unknowns. We don't know what we don't know about the
applications that might be unleashed if entrepreneurs had the
freedom to innovate. We could only argue by analogy, and I
would say imagine what it would have been like in 1995 if Jeff
Bezos had to persuade a mid-level manager at Sprint that he
could do a better job of selling books online than Barnes &
Noble could. Or what it would have been like if the founder of
eBay had to persuade Verizon that selling stamps and coins and
dolls online could actually make both of them a lot of money.
Or what it would have been like if the founders of Google in
1999 had to persuade the telcos that it was time to launch yet
another search engine. This is the daily reality of life for
those of us who are trying to innovate in the wireless space,
and it is created by this inability to innovate without asking
permission.
With regard to the device market, if I wanted to bring an
interesting device to the U.S. market or even bring a Japanese
device to the U.S. market, theoretically, I could build a GSM
handset and sell it directly to consumers, but the reality is
that because AT&T and T-Mobile, the GSM providers who do allow
consumers to put foreign devices on their network, claim that
this is simply a policy that they could change at any time, no
device manufacturer is going to take the risk of coming out
with a device that actually challenges their business model
because AT&T Mobile could simply block that device overnight.
So that is why we don't see innovative ideas. That is why you
don't see a flurry of entrepreneurs coming to you saying we
can't get on the market, because a Thomas Carter is very rare.
A Thomas Carter has to be a person who is smart enough to come
up with a really compelling idea and dumb enough to try and
execute it in this market given the power of the carriers and
then crazy enough to try and sue somebody over it. And those
people don't come up very often because we have got plenty of
smart people in the Valley, but most of the ones who are dumb
enough to try and do something in the wireless market get
blocked in the VC stage because the VCs are smart enough not to
invest in them; and so far we haven't seen anybody else come
through who is crazy enough to sue.
Mr. Markey. Well, at least we have somebody crazy enough to
testify before our committee, and we thank you for doing that.
Mr. Devitt. Thank you.
Mr. Markey. And through us, I think you are talking to the
Federal Communications Commission as they are deliberating,
because ultimately it was the Federal Communications
Commission, not Mr. Carter, and that takes courage itself in an
atmosphere that is created where competition and the potential
of new devices are then recognized as a valuable goal for
public policymakers. Thank you for being here, Mr. Devitt.
Let me turn now and recognize the ranking member, Mr.
Upton.
Mr. Upton. Thank you, Mr. Chairman. And for those in the
audience, we have a series of votes on the House floor. I do
have a couple questions before I need to skip over and vote.
Mr. Verveer, it is my understanding that nearly a million of
these iPhones have been sold already literally in the first 2
weeks of their offering, and it is my understanding that nearly
400,000 of those million or so actually switched carriers from
one of the competition to what is available now to get the new
exciting--did you wait in line to get that phone, by the way?
Your iPhone, did you wait in line? I was in Chicago when they
came out, and the line was blocks long to get in.
Mr. Markey. Actually, Mrs. Capps asked what is the point of
having this hearing today, and it is actually just to hint to
my wife as to what I do want for my birthday.
Mr. Upton. So it is not really yours? That iPhone is not
really yours yet, is that what you are saying?
Mr. Markey. It is a hint.
Mr. Upton. All right. Well, anyway, that many folks are
actually switching. Doesn't this mean that in fact other
carriers who lost their market share, aren't they going to come
back with some competition that is going to bring people there?
Mr. Verveer. I think that is exactly right. That is exactly
what we would anticipate, that the normal thrust and parry that
one sees in and among competitive firms is going to continue to
produce the kinds of things that consumers want, and the iPhone
obviously has attracted an enormous amount of attention and
consumer interest and as you suggest has caused some people to
change from their prior carriers to AT&T. No doubt those
carriers and the others in the business are going to be very
anxious to come forward with innovative products of their own
that people are going to want. And that process is one that has
brought us to what I think is a very good set of circumstances
today, and it is one I think we should continue to rely on.
Mr. Upton. And Mr. Zipperstein, I know that you can't
comment on proprietary information, but wouldn't you agree? I
mean, you have got to have something that is coming soon,
right?
Mr. Zipperstein. Absolutely. And I again raise the example
of the Motorola RAZR. After the RAZR came out----
Mr. Upton. I waited until they were $49.95. I couldn't
believe it. I said, son, we are going there.
Mr. Zipperstein. Other manufacturers, LG, Samsung, Nokia,
put their designers to work to build a better RAZR; and they
all came out with competing products before long that operated
on different networks, CDMA, GSM. The market really addressed
that problem in a very, very quick and efficient way.
Mr. Upton. I am running out of time because I am watching
the clock here on the little TV screen. The comment has been
made about different networks and being able to have devices
that work on all of them. How much would that add to the cost
to the consumer? I was in Europe not too long ago, and I made
sure that in fact my BlackBerry did work in Europe; but I know
that my previous one did not work there. In other words, there
was an added cost. What would the added cost be to some of
these devices if they had to work on every network that is out
there for the consumer?
Mr. Zipperstein. You would definitely see higher priced
devices. You would see as I mentioned with respect to WiFi
devices that may see degraded battery life. You would also see
the FCC being concerned about whether devices would be GPS
compliant, whether they could work to receive E911 Phase II
connectivity at the PSAPs, whether they would meet the FCC's
hearing aid compatibility requirements, whether they would meet
the FCC's RF, radio frequency, emissions requirements also.
Mr. Upton. Thank you.
Mr. Markey. The gentleman's time has expired. Again, as the
gentleman just noted, there are four roll calls on the House
floor. It should take about a half-an-hour. There is intense
interest in this subject material, so I think you are going to
have a lot of members coming back to ask you questions. At this
point the subcommittee stands in recess.
[Recess]
Mrs. Capps [presiding]. All right. You can tell I am doing
this in part because I am sitting way down at the bottom end.
By getting here, running over very fast after the last vote, I
will be able to ask my questions first and move onto something
else I need to do now, and I have already cleared with my
colleague from Texas. He knows what I am doing, and it is OK
with him. He has got seniority over me on this committee.
But I have found this to be such an informative hearing and
am thanking my chairman for gathering us all together.
I am going to start with Mr. Verveer with a question for
you. I want to ask a lot of questions. I have 8 minutes or now
less than that, but I want to cover as much territory as I can.
Your testimony today argues that the wireless market is very
competitive in imposing open-access requirements, and you
consider it to be similar to the Carterfone decision, that a
decision imposing open-access requirements would be a mistake
if we did something similar to the Carterfone. Would you
briefly describe what parallels and differences you see, Mr.
Verveer, you were there then, between today's wireless market
and the telephone market of 1968?
Mr. Verveer. Yes, I would be pleased to do that. In 1968,
the telephone industry was dominated by a single company that
was a thoroughgoing monopoly. The old Bell system was
integrated between and among local telephone service, long
distance service, and telecommunications equipment
manufacturers. It was also regulated in a particular way
involving rate of return regulation which it turns out creates
a well-known set of incentives that involve again as it turns
out--it provides them with rational incentives to discriminate
even if the discrimination involves less use of the network
over which they preside. In other words, they had rational
economic reasons to refuse the deal.
Mrs. Capps. Could you get to the contrast really quickly
because I want to move to some other issues, too.
Mr. Verveer. That is obviously very different from the
world today of wireless.
Mrs. Capps. Right.
Mr. Verveer. There are numerous wireless carriers, and they
are not subject to rate of return regulation.
Mrs. Capps. So you think there is no monopoly today. And
Professor Wu, I think you might have a little different
opinion. I want you to----
Mr. Wu. I think that things don't really change that much
in telecommunications markets. They have a well-known tendency
to go towards monopoly, and that is exactly what we have seen
over the last 10 years. This is a new market, and we started
with a lot of companies. We are down to four, two dominant, and
it is not surprising. It is economics.
Mrs. Capps. Right.
Mr. Wu. It is more efficient to have a single company.
Mrs. Capps. So even though we are not there yet, you
envision us getting more toward a monopoly?
Mr. Wu. Well, that is the direction we are going.
Mrs. Capps. A little bit different tack on that, Mr.
Zipperstein. As you know, Vodafone, the world's largest
wireless phone company, owns almost half of Verizon Wireless.
And in Europe, where Vodafone is particularly strong, many
phones have functionality that has come to the United States
very slowly, like Bluetooth capability and call timers.
Vodafone in Britain and Verizon Wireless in the U.S. offer many
of the same models of handsets. Do you think Verizon Wireless
offers fewer features on any of these handsets than Vodafone
does?
Mr. Zipperstein. No.
Mrs. Capps. They don't?
Mr. Zipperstein. We offer different features than Vodafone
does in Europe.
Mrs. Capps. Would you say that it is identical, the service
here, than Europe?
Mr. Zipperstein. No, it is not identical. The features are
different, the networks operate differently there. The service
providers there offer a different range of options to
customers, some of which we have here and some of which we
don't. Some of the offerings that we have here are not as
available in Europe.
Mrs. Capps. So there are differences, and we have heard
other people make the statement that it is a little difficult
to go--so many people travel so frequently, and it is still
somewhat of a hang-up. What do you think is making the
difference?
Mr. Zipperstein. Well, certainly the BlackBerry device I
showed earlier is a device that we deploy to respond to demand
from our customers to be able to use a BlackBerry if they go to
London or Paris on vacation. Also we offer two regular cell
phones that work here and in Europe as well.
Mrs. Capps. OK. Thank you. Well, are there particular
features that we don't have here that they do have in Europe?
Mr. Zipperstein. I am not fully familiar with all of the
offerings that the European carriers have.
Mrs. Capps. Maybe you would get back to me in writing with
some of those things because I want to now ask Mr. Devitt, and
then if there is time, Mr. Wu, I will get back to you to
comment on the effect of open access on innovation and maybe
even finish up this one description about Vodafone.
Mr. Devitt. Thanks for the question. Let me put it this
way. There are I think 30 devices that I can purchase today to
use on Verizon Wireless's network. There are approximately 800
devices that I can purchase to use on Vodafone's network. I
would call that a significant difference in terms of consumer
choice.
Mrs. Capps. And you want to repeat what you think are the
barriers here?
Mr. Devitt. The barrier is that if I want to produce a GSM
device that will work on Vodafone's network, I don't have to
ask Vodafone's permission. If I want to produce a CDMA device
that works on Verizon's network, I have to ask Verizon's
permission. That is the only difference.
Mrs. Capps. I guess I am also concerned because you made
your opening statement about that you don't like regulations,
and I know Mr. Stupak when he comes with his very rural
district in Michigan and parts of my district are very rural,
too, and I am always concerned about the private sector's
willingness to get into places that aren't so lucrative for it.
What do you propose in that area?
Mr. Devitt. The solution there--well, there is actually a
number of things that you could do under those circumstances
because I could envisage producing devices that were solely
designed to increase network coverage in rural areas.
Mrs. Capps. What would the incentive be?
Mr. Devitt. My incentive would be that I would be selling
those devices to your constituents.
Mrs. Capps. But not as many as you would in some other
glamorous areas.
Mr. Devitt. Certainly not. That is why I personally
wouldn't choose to go into business in the rural markets, but I
know that there are plenty of other entrepreneurs who would.
Mrs. Capps. How about Mr. Wu? You want to finish that off?
Mr. Wu. I am sorry, which topic exactly?
Mrs. Capps. The way that we could open up access on
innovation.
Mr. Wu. Right. Well, I think it is, to get back to that
rural issue you were just talking about, I think that is why
the subcommittee and Congress and the FCC have to think
carefully about the 700 MHz auctions as a solution to a
different set of problems. I mean, we have a series of problems
that have to do with device interoperability and that we have
been talking mostly about. But I think we can't solve these
problems. You are concerned about rural broadband, rural access
solely with device operability rules. They are just different
problems. The solution to that lies in the 700 MHz option, and
I think we have to understand that that is a different tool for
solving that problem.
Mrs. Capps. Is that a way to solve that problem?
Mr. Wu. I think that is the best way to solve that problem.
There is spectrum coming available in an auction that can be
used to solve the rural broadband, the rural access problem.
Right now we are not necessarily headed in that direction, and
I think it is very important that we make sure that this
historic opportunity to have the last options be used to solve
the most serious problem, which is rural coverage.
Mrs. Capps. And if my colleague----
Mr. Wu. I think it is important to talk about Carterfone
and all these issues, but understand that this conversation is
not going to solve those coverage issues at all. That is a
completely different conversation.
Mrs. Capps. And some interoperability national security
issues could also need that kind of direct involvement from the
Federal Government, you would think?
Mr. Wu. Right. I mean, we are talking about two issues in
this hearing. One is the issue of device interoperability and
freedom to innovate. These are Mr. Devitt's positions, and they
are all very important. The other issue is we shouldn't think
that those rules will solve the problem of rural broadband,
public safety. Those are the 700 MHz options, and those have to
be done correctly or we are going to miss this historical
opportunity to really change these things. I mean, I like
Carterfone, but don't be fooled to think that Carterfone solves
any of these rural issues or any of these public safety issues.
Mrs. Capps. Thank you. This is my first time here. I
certainly don't want to run over time and make the chairman
unhappy. In lieu of the next person, Mr. Shimkus, your turn now
for 5 minutes.
Mr. Shimkus. Yes, ma'am. I think I have 8 minutes because--
--
Mrs. Capps. Eight minutes.
Mr. Shimkus. No, that's all right. I would invite you to
southern Illinois. It is very glamorous, Lois, in southern
Illinois, maybe not very populated, but it is very glamorous.
Mrs. Capps. I hear you.
Mr. Shimkus. And I wish Chairman Markey was here because I
know Rush Limbaugh gave away 10 iPhones, and I thought maybe
you got that as a loyal listener to Rush Limbaugh. I guess he
is not commenting.
A couple things. The good thing about to listen to your
testimony is that you are all very smart, you are involved in
looking at the industry and consumer protections, is that you
hear things that it makes you want to ask a few questions. I
know a colleague of mine, this is Mr. Murray, who is trying to
get out of a 12-year lease on an apartment, or Mr. Devitt may
have mentioned it. Guess what. He is not going to get out base
paying 1 month's rent. I have an issue with people who don't
read contracts, understand contractual obligations. And for us
just to say, well, let us just have no contractual obligations,
let us don't have people read and understand the
responsibilities. I bought three phones for my kids, didn't buy
the service contract. My choice. My son dropped it in water,
zapped one of them. Guess who was responsible? Me. What did I
do? Well, I called the provider, and they helped me find a
used, turned-in phone, so I got the cheapest one I could, and I
went on with my contractual obligations because there is always
an issue of raising the capital, assumption of risk and trying
to get a return on that investment. And when we micromanage,
when we regulate, we discourage capital flow.
And when we talk about the rural debate, the rural debate
is we want service. We don't have service in all parts of my
district, and who is going to provide the service? It is going
to be guys like Mr. Evans who are going to be new entrants into
this market, who are going to say there is a market out there
that I can invest capital, I can assume risk, and I am going to
get a return. One of the questions will be if we move to a net
neutrality debate in the new MHz, will that incentivize
competitors to bid or will that discourage? And I want to ask
Mr. Evans and Mr. Zipperstein real quick on that question.
Mr. Evans. Well, from my perspective, it is going to
discourage my participation in it because I am effectively
buying a piece of spectrum now that is more encumbered than any
other spectrum that I own. Therefore, that spectrum should be
sold to me at a discount. Where I envision this going in the
long term frankly is if we put that type of regulation in place
today, we will lose a lot of money in the Treasury. Sell that
spectrum at a discount and once those individuals who have
never run wireless networks before go out and understand that
you can't just attach anything to a wireless network and make
it work, they are going to come back up here wanting those
encumbers released. So then you are going to have to take those
laws down, and you are going to have lost the money that you
would have raised by having a fair and open market competition.
People believe that they can go and make an open access model
work. I think they have every right to go out and bid in the
700 MHz auction like any other auction and go make it work.
Mr. Shimkus. And there are people in the tech community
that have multi-billion dollars of capital to be able to bid on
these things. I know one in particular. So they should be able.
If they want to provide all of this great service, if they want
to have net neutrality over the airwaves, let them come through
the market.
Mr. Zipperstein, you want to answer that question?
Mr. Zipperstein. Yes, sir. I would agree with everything
that Mr. Evans said, and I would simply add as I mentioned
earlier that Mr. Evans had a business plan that he put
together. He participated in open, fair, transparent auction
for a 4G spectrum last year, the AWS auction. There were no
encumbrances such as those that are being suggested should be
applied to the next 4G auction, the 700 MHz auction; and yet,
here we have an example, Mr. Evans, of a businessman who felt
that there was a reasonable case to be made for investing
capital and for building out a network to serve his rural
customers.
Mr. Shimkus. Thanks. So many questions, so little time. I
am glad to see my friend Anna Eshoo is here; and we penned a
letter on this ITC ruling, and obviously our concern is first-
line responders and stuff. Maybe I will go back to Mr.
Zipperstein first. If the President does not disapprove the
ITC's decision, what will be the impact on the wireless
industry's ability to deliver cutting-edge products to enhance
public safety and enable the United States to achieve its goal
of ubiquitous, affordable broadband deployment by the end of
2007? Kind of the same type of question, but it really
addresses the ITC also.
Mr. Zipperstein. Congressman, the impact will be
devastating. Essentially, as you know, this is a patent dispute
between QUALCOMM and Broadcom. QUALCOMM was found to have
infringed a single Broadcom patent that Broadcom bought second-
hand. They didn't invest in or didn't invent this particular
technology. Broadcom is enforcing its patent that it bought
second-hand against QUALCOMM. It is really up to QUALCOMM to
resolve this issue. But the impact as you mentioned,
Congressman, on public safety, on innovation in the wireless
sector, would be devastating; and I think that every single
person appearing on this panel and every Member of Congress
should be very concerned about that.
Mr. Shimkus. And I think some of us are, and I appreciate
those comments. Mr. Evans, and if we have time, Mr. Clark, we
may want you to respond, because we are referring to NARUC.
They opposed the 1993 preemption of States on matters related
to entry and rates, yet between 1993 and 2005 the number of
subscribers grew. This is the argument. You all are saying that
this is a highly competitive market. This is probably the most
competitive market in our country, and it is the most diverse,
energetic and exciting. And one of the reasons I always say
before this committee is because we do not try to regulate. In
fact, it moves quicker, and we can actually regulate. And these
are the stats. The numbers of subscribers grew nearly 13-fold
to 207.9 million. The average local monthly bill dropped nearly
20 percent to $49.98. Minutes of use per subscriber jumped more
than five-fold to 740 per month, and the cost per minute
dropped more than six-fold to 7 cents from 44 cents. That is a
success story. And in 2005, there were only 25 FCC complaints
per million wireless subscribers. Is there any reason to think
that NARUC would not be similarly wrong in opposing a national
framework for wireless terms and conditions? Go ahead, Mr.
Evans.
Mr. Evans. Well, I am certainly in favor of that. My
concern as an entrepreneur that is going out to start a
business in call it seven or eight different States around the
country is that we are going to be somewhat resource limited,
and we have to try to comply with several different sets of
State regulations in order to get up and running. It is going
to severely delay our ability to get out into a competitive
marketplace and to bring a product out that is severely
underserved today. So we certainly support the idea of a
national framework extending beyond rates and entry today and
encompassing all elements of wireless as we see fit. We think
that makes the most sense. This is a national product that is
out there. It is not a regional product, it is not a local
product, it is national; and therefore, it should be regulated
from that perspective nationally.
Mr. Shimkus. Thank you, Mr. Chairman. I know my time is
short, but because I referred to NARUC, if Mr. Clark could
respond to that question? It is your call, Mr. Chairman.
Mr. Markey. No, that is fine. A brief answer, Mr. Clark.
Mr. Clark. Certainly, Mr. Chairman and Congressman. I am
not aware of NARUC's position in 1993.
Mr. Shimkus. Well, check it out. That is the point.
Mr. Clark. Clearly the market has had beneficial impacts
for consumers, and frankly, no one is a bigger supporter of the
market than myself. But there are certain issues that come up,
even in the fully functioning market, things like slamming,
cramming, specific issues like this that still need somewhere
in Government for individuals to turn to. We are arguing that
even if you have Federal standards, it is inappropriate to
force consumers across America to call Washington, DC, to
enforce those standards, that you need some point of local
contact. We suggest that PUCs and attorneys general are the
ones who can most effectively enforce those rules.
Mr. Shimkus. Thank you, Mr. Chairman. I appreciate it.
Mr. Markey. The gentleman's time has expired. The Chair
recognizes the gentleman from Pennsylvania, Mr. Doyle.
Mr. Doyle. Thank you, Mr. Chairman. Mr. Zipperstein, just
briefly, I am curious. Press reports say that Verizon had first
dibs on Apple's iPhone, but your company turned them down. I am
just curious, was it because they wanted features on the phone
that you weren't comfortable with, or I am just curious why you
turned down the chance to be the provider for the Apple iPhone.
Mr. Zipperstein. I have to be careful about disclosing
confidential discussions, but I think it is fair to say that we
didn't view it as the right opportunity for us at that time.
Mr. Doyle. Fair enough. I thought it was maybe because you
couldn't get the Verizon logo on the phone.
Mr. Zipperstein. Probably. I should say that despite the
hype about the iPhone in the media over the last couple of
weeks and the press attention, the product has only been out in
the market for 10 days or so; and I think it is fair to say the
jury is probably still out. We will just have to wait and see
how the market reacts, just like we did with the RAZR.
Mr. Doyle. Fair enough. Professor Wu, Google told the FCC
that incumbents have big advantages going into the DTV auction.
Could you explain the wholesaling that they and Frontline
sought, and how that might benefit consumers?
Mr. Wu. Sure, I would be pleased to. In the 700 MHz, one of
the big proposals that is out there is the wholesaling
proposal; and the idea is to create a creature, to create an
entity whose interest is giving the most amount of bandwidth to
Americans as possible and a corporate entity whose only mission
in life is not retail but simply making available bandwidth and
selling it to as many people who want it as possible. That is
why people often discuss the wholesale model as one of the best
solutions of the problem of coverage in this country in the
sense that when you have a wholesale model, you have an entity
which does not retail but relies on everyone else, anyone who
wants to retail or try to sell to Americans bandwidth that
opportunity. And so you create a creature that by its nature
wants to do nothing but put wireless bandwidth out there for
Americans to use. And so I think that is why it is important to
seize this opportunity and adopt a different model for 700 MHz
than we have adopted for the rest of the spectrum and see what
the results may be.
Mr. Doyle. Mr. Devitt, how do you feel about that?
Mr. Devitt. Well, there are at least two separate issues
here, and one is how do we create more competition in broadband
wireless and broadband services for consumers? And the only way
to do that it would appear is to mandate that there be new
entrants into the market. One way to ensure that is to create a
wholesale market in the 700 MHz auction. I think that is an
exciting opportunity. I don't have a view one way or the other
on the merits of the specific Frontline proposal or the
specific Google proposal, but as I said at the outset of my
comments, what frustrates me is this idea that I require
permission to innovate and for someone else who wants to bring
you services to market and wants to provide services say to
rural America. The fact that they are in the death grip of a
number of incumbent providers makes it very difficult for them
to do so, and a wholesale submodel would be one that would
solve that.
The issue that I am more focused on because I am a
developer of content and applications and services for the end
consumer is again the death grip that the carriers have on the
device market, and on the applications and services that I can
deliver to consumers through those devices. And what I
recommend the solution to that is is some implementation of
Carterfone which I do not see laying more regulation upon the
industry. I see that as deregulating it.
Mr. Doyle. Right.
Mr. Devitt. I think creating open access, creating more
choices for consumers, creating more opportunities for
innovators is a reversal of regulations, a rollback of control,
and that is why I am passionate about that issue. As a
consumer, I support calls for additional services in the 700
MHz.
Mr. Doyle. Well, what about that, Mr. Zipperstein? Let's
talk about the Motorola RAZR. I mean, that is a very popular
phone, and Verizon sells one, and Cricket also sells one, and
Alltel sells one. Now, your phone, the Verizon model, you can't
download MP3 files which are the most popular--I think Windows
Media is yours and then you also have an online music store
that sells songs in the Windows Media format. Why would you
disable a popular feature that would allow people to play MP3s
from your phone?
Mr. Zipperstein. When we entered the music business January
2006, Congressman, we made the determination at the time that
we would use a model that in some respects was similar to the
iTunes model that Apple used and in some respects similar to
some of the other models out there. So we needed to acquire
from the music publishers, from the recording industry, the
right to legally sell their music over the air or through a Web
site. We needed to be very, very cautious and careful to
protect the digital rights associated with the music that we
sell. Our music business has been very, very successful. I
believe that the Verizon wireless music Web site, based upon
recent information I heard, is just No. 2 to Apple's iTunes.
Mr. Doyle. Well, what about the MP3s that a consumer
already owns and gets off their CD? I mean, why wouldn't you
allow them to have both? Why does it have to be either or?
Mr. Zipperstein. Actually, with our music product it is
possible for a consumer to acquire music to their phone in two
ways. First, they can download it over the air, or they can
move music that is in their personal collection. For example,
if they take a CD and burn the CD music or upload the CD music,
transfer it from their CD that they buy in the store to the
computer, they can side load that music onto their phone.
Mr. Doyle. But Mac users can't, just PC users?
Mr. Zipperstein. Any computer user, Mac or PC, is able to
take--if they go to the record store, buy a CD then upload that
music to their computer, they can transfer it to their phone.
Mr. Doyle. I am sorry, Mr. Chairman. Thanks.
Mr. Markey. The gentleman's time has expired. The Chair
recognizes the gentleman from Mississippi, Mr. Pickering.
Mr. Pickering. Mr. Chairman, thank you again. What I would
like to do is ask questions that will put things in the context
of the decision before the FCC today, because I think it
addresses all the issues that we have discussed, and that is
the decisions on 700 that the FCC is about to do.
But I would also like to put their decisions in context as
we talk about whether we have adequately competitive markets,
and I think as you look at a monopoly, what we had before 1996,
and we have seen a growing competition on the wireline side,
voice, video, data. Then you look at wireless, and it is more
robust competition. So as you move along the competitive
spectrum, you would have wireline, wireless, and then you have
the Internet model; and if we had the two ends of the spectrum,
Internet being the most open, most competitive, most
innovative, the question we have before us on the 700, can you
take a portion, just a portion, you don't have to do anything
to regulate Mr. Evans or Mr. Zipperstein or any of the
incumbents, create an open space to see if you can create the
fully competitive, fully vibrant, innovative space within
wireless by having interoperability of devices and a wholesale
market. Now, we are not talking about regulating content or net
neutrality. Net neutrality is a different debate. Now,
sometimes people will bring in net neutrality to try to taint
what we are talking about in this case, and we want to keep
that separate. It is wholesale and it is device portability is
what we are talking about. And in that context, can a portion
of the spectrum leaven the entire wireless sector so that it is
more competitive on price, on service, and on devices? And so
my question, Mr. Zipperstein, you do not have to do Carterfone
and 700, you don't have to bid on that spectrum if it is
conditioned in that way, you do not have to change your
business model, neither does Mr. Evans. But if there are those
who want to invest in a new business model that will create a
more dynamic, vibrant, healthy, competitive wireless sector,
what is wrong with that?
Mr. Zipperstein. There is nothing wrong with someone
voluntarily participating in an open and fair, transparent
auction, and if they decide that the business model that they
want to use is along the lines that you have discussed,
Congressman, they are free to do that. I think that was the
point that the ranking member made, and we agree with that
analysis. But we don't think that a business model should be
hardwired into the auction by regulatory fiat in advance. I
would also mention that there are a number of concerns in the
real world that can result from a mandate in this area. We
could have, for example, devices that come onto the network
that are not GPS enabled. Therefore we would have problems
ensuring the adequacy of the E911 Phase II system. That is
extremely important to the country, extremely important to
public safety. So I think that we need to just tread very, very
carefully; but if somebody can figure it out and make it work
as a business model, then by all means they ought to have the
right to bid, and if they win, they ought to have the right to
try out that business model.
Mr. Pickering. Now, Mr. Evans, you would probably bid for
the CMA and the 700, is that correct?
Mr. Evans. I purchase mostly CMA, so a couple of EAs as
well.
Mr. Pickering. EAs? Now, none of the proposals on
Carterfone or openness relate to EA or CMA under the current
proposals. Are you concerned that if you do require openness in
the upper bands that it will intensify the competition in the
lower bands and the lower markets and drive your price of the
auction up?
Mr. Evans. Well, I think that is certainly one factor, but
I think a bigger factor is the fact that I believe you would
actually shut down capital investment into rural markets by
doing that. If venture capitalists or anybody who is putting
their own capital into a project suddenly realizes that there
is a band of spectrum that a group received for free and they
are going to go out and do something with it----
Mr. Pickering. Nobody is talking about doing anything for
free.
Mr. Evans. OK.
Mr. Pickering. There would be reserve prices, and you would
have full-market value at any auction.
Mr. Evans. I understand. Then I will have acquired spectrum
based on a certain set of rules, and now under a different set
of rules there is a new piece of spectrum that is out there
whereby we don't know what they are going to do with it. We
don't know what they are going to deploy. We don't know what
type of technology, but we know that it is open. Therefore you
substantially lower the barrier to entry for any competitor to
come in, literally anybody in the world who wanted to walk in
and try to turn on a wireless network----
Mr. Pickering. I think you have captured the issue. Do you
want more competition or less competition?
Mr. Evans. The issue is the following. I think you do want
more competition, but the issue is there isn't a wireless
network out there, there is not a wireless technology out there
today that will accomplish that. So you are going to give up a
scarce resource or sell a scarce resource out there today that
you are not going to be able to recoup the value on at a later
date; and you are going to inhibit other people from deploying
proven technologies in that same scenario.
Mr. Pickering. Mr. Evans, it is just a wholesale network. I
think the technology is clearly available to do wholesale. You
are just talking about taking somebody who will build a network
and sell at a wholesale rate, which is a very healthy component
with any fully functioning economic market. We are not talking
about content, and device portability is technically feasible.
So this is not rocket science. This is wholesale and device
portability. What is wrong with that?
Mr. Evans. I would simply ask how many wholesale models in
the U.S. wireless industry, which has been open, and you have
been able to become a wholesaler in the wireless industry for
20 years. How many of those models have been successful?
Mr. Pickering. Well, the question would be do you have a
national network and opportunity in this spectrum to do so? Mr.
Chairman, I yield back.
Mr. Markey. The gentleman's time has expired. The Chair
recognizes the gentleman from Texas, Mr. Gonzalez.
Mr. Gonzalez. Thank you very much, Mr. Chairman. Happy
birthday. I guess I am just going to build on somewhat, go in a
different direction than my colleague, Mr. Pickering, but I
will remind individuals that he prefaced his statements in his
opening statement as to what open access really does mean and
what others may feel that it means and whether this is an issue
of net neutrality coming into the wireless, into the airwaves.
Of course it is. We may call it open access, but I think let us
just be frank in our discussion. We can continue this debate.
Unfortunately, I never have liked the term ``net neutrality''
because I don't think it is accurate, and I don't like open
access because I don't think it is descriptive, either.
However, I think the professor understands that if you define
the debate at the beginning, you win the debate. We may already
be there, I don't think so.
But let us just start off with open access. In building on
what Chip was talking about, it is just going to be a sliver.
We are going to have a pilot project or something. If this is
such a wonderful model to follow, why a sliver? Why not just
have open access conditions supplied to the entire spectrum?
And I will ask Professor Wu. Would you be in favor to apply the
open access model to the entire auction?
Mr. Wu. To the entire auction or the entire----
Mr. Gonzalez. Everything that is going to be out there in
700. Everything. I mean, why are we only going to----
Mr. Wu. I will just say I would be in favor of that. I
think it is----
Mr. Gonzalez. OK. I just want to know if you guys really
believe in this, then you would say why are we going to
experiment? Why are we going to have just a small portion of
what is out there available? This is it. This is the answer.
And Mr. Devitt, would you agree with the professor to extend
that to what we are going to be auctioning at that MHz?
Mr. Devitt. Oh, let me be clear. I would go back and apply
it retrospectively to all of the spectrum in the country.
Mr. Gonzalez. OK. And that is what I thought. Let me go on
because I am going to follow up, Professor, specifically with
you. You seem, and others, to totally dismiss the investment
that it takes in the way of buildout, and you are assuming for
whatever reason that under this new model we will still have
individuals and entities making that kind of an investment
without any restrictions and such. And to me this is just a
business model. There is always exclusivity agreements and
such. Each and every one of you in your business dealings have
entered those type of contracts. Now, if we take the iPhone for
instance, there was an interview, and this is what Steve Jobs
said. Is the iPhone a wireless iPod or is it a phone that has
an iPod in it? And this is what he said. It is three things. It
is the best iPod we have ever made, if it was a cell phone
alone, it is an incredible cell phone, but what it is is the
Internet in your pocket. And so Mr. Zipperstein, this is not
the RAZR. This is the Internet, and this is what we have been
discussing from day one in this committee.
Mr. Zipperstein. Right.
Mr. Gonzalez. And this is what he said. Why AT&T? Why? He
said, well, he believed that they have spent a fortune to build
these 3G networks, so they have a lot of bandwidth. Phones are
not capable of taking advantage of it because their Internet
experience is so poor. They have lousy browsers, and then he
went on to say we are going to take advantage of some of the
investments they have made in their bandwidth in an entirely
new way. So it did spur this innovation in what I think will be
the future because of the carriers' and the networks' previous
investment in building out the system that accommodates the
device. So we have the carriers, we have the device
manufacturers, and we have the content aggregators. No one does
anything for free, and Mr. Murray, you said Google was doing
something for free. No one does anything for free. There has to
be a return. And I forget exactly what you were alluding to.
Mr. Murray. That was actually the BlackBerry. They wanted
to offer a free mapping feature to their customers, and
absolutely, people were purchasing their phones, but they felt
that that was----
Mr. Gonzalez. And I am sure it was just out of the goodness
of their heart. There wasn't any business connection, and I am
sure there was no other motive. But what I am getting at, let
us just say you get your way and we have this auction. You
anticipate that we are going to have a new entrant, and I
think, Professor, you may be the person to tell us who that new
entrant may be because there are stories out there already as
to who probably has the capital and the assets to make that
investment. So I would like for you to answer, who do you
anticipate this new entrant would be, who would build out the
network because they probably would have to go to the third
party to have it built out, right?
Mr. Wu. Well, I will answer that.
Mr. Gonzalez. What would be the return for that person that
is buying that spectrum? How would they make their money? How
would they pay the third party for the buildout?
Mr. Wu. Wholesale markets are common in many different
markets. Mr. Pickering has last mentioned energy markets. There
are parties with billions and billions of dollars who are
interested in investing, and we have seen them, whether they
are associated with Frontline or other parties, interested in
entering this market on a different model. I think there is no
question that if this auction comes and as you suggested, if
you take this amount of spectrum and you make it a wholesale
structurally separated model, there are people who are
interested in investing billions, investing in buildouts on a
model where your return of investment comes from selling
bandwidth to anyone who is interested.
Let me give you an example of a company that lives on a
full wholesale model. Ford Motors. Ford Motors does no retail.
Ford Motors is only a supplier of cars, and they have their
retailing given to everybody else. If Ford Motors can make
money on a wholesale model, then surely someone in the Internet
and wireless broadband model can make money on a wholesale
model. There is no question this is an established model. It is
part of a----
Mr. Gonzalez. Do you believe that the new entrants aren't
some of the current players out there, not under the carrier or
network category, but definitely as content? I mean, that is
where this is all going, isn't it? I mean, Google is not in
this business to simply provide free services. It is to compile
a consumer profile, to build an advertising hierarchy. We know
what is going on out there. I am concerned about who is going
to assume the responsibility of making the capital investment
to make sure that we continue to build out broadband capability
so that all your devices, and that includes Mr. Devitt, and I
know that you eventually sold to--I think Zingy now has it. I
mean, their advertising package starts at $25,000. So who takes
the place of AT&T and Verizon and others? That is my question.
Mr. Wu. I think it is a great question. I agree with you
100 percent that no one does anything for free, but as I have
said, if Ford Motors can make money and General Motors can make
money on wholesale models, new entrants have every----
Mr. Gonzalez. Mr. Wu, I would not use our domestic
automakers at this point in time as a model.
Mr. Wu. Let us talk about the domestic automakers early in
the 20th century which is where they would be. The companies
that come into this market will have more incentives to build
than our friends at Verizon or AT&T. AT&T and Verizon already
have networks. Their interest in getting more spectrum is in
protecting their market share, not in building new networks.
They already have spectrum. If you already have spectrum, you
have less reason to want to build. If you don't have spectrum,
then you are waiting to try and create a new wholesale model.
Those are the parties who are going to invest in building the
world's best wireless network, and that is what America should
have.
Mr. Gonzalez. Thank you. My time is up.
Mr. Markey. The gentleman's time has expired. The Chair
recognizes the gentlelady from California, Ms. Eshoo.
Ms. Eshoo. Thank you, Mr. Chairman, for having another
really important and substantive hearing in your series that
you began in the beginning of the year. I apologize for not
being here for a good deal of it. I have duties at the House
Intelligence Committee as well, so I am trying to keep you
safe, and now let us see if we can be competitive, how is that?
This is a very interesting discussion. I think all too
often the work that is put into the memorandums that the
committee staff does kind of goes unnoticed, but I would like
to make note of what is on page 2, and that is essentially that
the top four national carriers represent 85 percent of the
market for wireless. So this is about protecting in my view the
most sought-after real estate there is. It is really beachfront
property, and we don't want anybody else coming to the beach.
They have spectrum that they are not even using. So that is
what this discussion is about, how we enlarge this, how we
allow for real competition. I have learned around here in
Congress that everybody is for competition until it comes to
them, and then they don't want somebody else really competing
with them. I guess that is just part of the way we operate, and
I understand that, but it is an observation. But no one should
think that we don't respect people making investment, capital
investment. We want more capital investment. So those that have
made capital investment want to keep others out, from making
their own capital investment? Look, this is the way the
consumer wins in our country, so I appreciate what has been
said, but to my wonderful colleague from Texas, there is more
to it than that. You have to fill out the story. You have to
fill out the story and say, hey, are we going to go for 95
percent and not let anybody else in? So, to Mr. Devitt, thank
you for traveling to Washington and being with us. I admire
what you have done, and you are just one city out of my
Congressional District; but for today, well, I am going to
adopt you. How is that? You can be part of the 14th district.
You certainly are part of the innovation that is going on in
our country. Let me just ask a couple of quick questions.
First, obviously, the rollout of Apple's iPhone has caused
a great deal of excitement in the country, as well it should.
And I thought your answer about why you are not a partner in it
was curious. It kind of reminds me of when you hear great
actors being interviewed and they say, well, what role did you
turn down, and they name it, and they regret it. But I
appreciate the way you described it.
At any rate, it has generated a great deal of excitement,
among the public and in the media, and it obviously
demonstrates a great deal about innovation and also the
appetite that customers have for new and exciting technologies.
Another exciting product of Apple's is AirPort. It is a
wireless base station as you all know that connects to any
broadband network. Can any of you, maybe Mr. Murray, Professor
Wu--I understand you spent some time at Stanford. I like that.
Don't you wish the weather were like that here? And Mr. Devitt,
why is it OK for consumers to use new technologies like AirPort
that can be used on any network but the iPhone and the
partnership with AT&T doesn't allow that?
Mr. Wu. I will start, speaking from Stanford. Not exactly.
There is something strange about----
Ms. Eshoo. I will bet you miss it, don't you?
Mr. Wu. Yes, I do.
Ms. Eshoo. I am putting words in your mouth.
Mr. Wu. There is something weird about this market, and I
just come back to that. It is a strange market. We keep talking
about the markets working, but it is an unusual market. It is
not like consumer electronics, it is not like computer
software, it is not like the Internet. AirPort is something--
people buy computers, people hook it up to any Internet
connection. They buy devices. The one big exception to
America's way in technology policy is its mobile networks. They
are strange, and the reason is I think historical. This is the
last vestiges of the old AT&T monopoly, and it is that business
model, the model that failed us, that still dominates wireless;
and it is not the Internet business model which has been the
driver of this Nation's economy.
Mr. Devitt. And I would add to that that I don't think it
is any surprise that it has taken 26 years for Apple to decide
to produce a phone. I mean, in that previous 26 years they came
up with a whole host of extraordinary computing devices, all of
which they were able to attach to Verizon's DSL network or its
AT&T network or its Comcast or its Time Warner without asking
permission of those companies; and for some strange reason, Mr.
Gonzalez, those companies in turn were prepared to go on making
a significant capital investment in delivering the bandwidth
necessary for those computers to work, despite the fact that
they weren't allowed to switch them off remotely.
So it is as Professor Wu says, the iPhone is an
extraordinary technical achievement, but it is a miracle that
it is even possible under the current market condition; and we
should have seen many, many more devices come to market in the
years gone by.
Ms. Eshoo. Thank you very much to all of you, and Mr.
Chairman, happy birthday.
Mr. Markey. Thank you.
Ms. Eshoo. Thank God you were born.
Mr. Markey. Oh, boy. You are in a minority there, but thank
you. I appreciate it.
Ms. Eshoo. Well, it is what I think. It is my time. Thank
you.
Mr. Markey. I thank the gentlelady. The Chair recognizes
the gentleman from New Jersey, Mr. Ferguson. Oh, by unanimous
consent, we will move to the gentlelady who is not on the
subcommittee and recognize her before the remaining
subcommittee members. The gentlelady Mrs. Blackburn is
recognized.
Mrs. Blackburn. Thank you, Mr. Chairman, and I will wish
you happy birthday also. And I think that as we have very
robust debates that we are all glad that you were born. We all
have a position that we fill here for our constituents, and I
want to say thank you to our panelists for taking the time to
come here and participate in the debate today. We do appreciate
your time and your interest in this.
You have reset the clock on me, but that is OK. There are
three things that I want to get to in my questions, and
hopefully I will be able to yield back time so that you all can
get on with your time. I want to talk about deficit reduction,
public safety, and innovation. And we have to realize that we
are here because of the Deficit Reduction Act and the set-aside
for the auction of that spectrum. And I think sometimes as we
debate, some of the devices that would be at the end use we
forget about that. And I do think that that is an important
component of this discussion that we are having, and I
appreciated that Mr. Pickering focused on bringing us back to
that discussion.
Mr. Wu, I would love to spend some time talking with you on
your spectrum-based oligopoly as you stated it, but I am not
going to do that. I am going to submit those questions. I think
our debate on that would be rather robust. I think that what
you would like to do is you don't like the oligopoly that you
see out there but you are saying give me a shot at structuring
one for my friends. And so I do think that we could have a
rather robust debate on that.
Mr. Verveer, I think that I would like to start on
questioning with you if I may, please. We have heard all the
sides on open access and on the neutral and net neutral auction
arguments, and they suggest sometimes that the only way to go
about spurring innovation is to have open access rules, to have
the neutrality rules, because if we don't do that, then we are
going to have a beleaguered, stagnant, anti-competitive
industry. And looking at the panel and listening, reading your
testimonies and listening to me, I think you may come at this
with the most personal historical participation in the
development of the industry. And I say that in deference to you
from what you have submitted to us as we look at the industry
having grown. And of course, I come at this also as a parent of
a son that majored in MIS and technology-related items in
college and the amount that I learned as he went through
school. So I want to hear from you. Do you share some of these
sentiments about being beleaguered and stagnant and anti-
competitive, or do you believe that consumers have access to
advanced technologies at increasingly lower prices? Just your
perspective on that, and then if you would come back and just
address how you think open access rules would either drive or
depress innovation in the wireless marketplace.
Mr. Verveer. I believe that this market is probably as
progressive as we could possibly hope. We could always do
better, there is no doubt about that. But it is a wonderfully
progressive market. In fact, I believe Professor Wu in the
working paper that started off the Carterfone debate describes
the industry as a modern wonder, and I think that is a correct
assessment.
The question about whether or not we can do better by
introducing open access or other kinds of arrangements is one
that at least I am personally skeptical about. I think that if
for some reason we believe we don't have enough competition and
we don't want the major players in the next auction, the
straightforward thing to do is to say you can't participate in
the next auction, just as we have in the past with spectrum
caps. I don't think that is necessary, but if we believe that
that was the case, that is probably the right way to do it. If
we move to a so-called wholesale model, we have accomplished a
variety of things. There is clearly no free lunch here, so the
first thing that is going to happen as Mr. Evans said is the
spectrum will be auctioned at a lower price because it is
encumbered.
The second thing that is going to happen is that it will
turn out it is not quite as simple in terms of saying simply
open access and have it magically happen as we were told. It is
going to turn out that there are going to be decisions about
what kind of air interface. I think it also will turn out there
is nothing magical about this in terms of rural coverage.
Somebody is going to have to pay a lot of money to put a radio
signal over rural areas, and there is nothing inherent about a
wholesale model that would cause that to happen. There are an
awful lot of things that one might wish were different or
better, but in general, I think that our commitment over the
last several decades to competition has been the right one. It
has been the successful one.
Mrs. Blackburn. So then stability and predictability are
two things, one you have mentioned and one you have alluded to.
You see the value of that in the marketplace for spurring the
innovation?
Mr. Verveer. Well, these things are clearly very important
in terms of securing investment capital.
Mrs. Blackburn. OK. Mr. Chairman also I have got two
articles from the Wall Street Journal today, one a commentary
and the other, I guess it is Review and Outlook. I would like
to submit those for the record as we move forward in our
discussion. They are from today's Wall Street Journal, if I
may.
Mr. Markey. Without objection.
Mrs. Blackburn. Thank you.
Mr. Markey. And I will also, if I may, without objection,
the letter on behalf of Mr. Pickering from Cellular South
Company regarding the inability of small or mid-size wireless
carriers to get access to the iPhone will be inserted at the
same time.
The gentlelady is recognized.
Mrs. Blackburn. Thank you, Mr. Chairman. Mr. Evans, you
mentioned a couple of times services that you were wanting to
roll out. Can you describe some of the services that you are
rolling out or planning to roll out?
Mr. Evans. Certainly. First and foremost, it is broadband
Internet access, just the ability for these people to access
the Internet. It is something better than 250 kilobits per
second. On top of that, it is our plan in 2008 to begin
introducing a voice over IP solution to go in and have a
competitive environment for the telephone market out in these
areas as well. There is typically a local ILEC or one of the
larger RBOCs that are out there operating in these areas, and
we believe we can be very competitive against those individuals
as well. Moving on from there, there is also we believe a
market for a regional portal, if you will, where you can access
information on the Internet about your local community that is
out there and therefore evolve into an advertising model where
we can sell local advertising, if you will, in the rural
markets and provide that across our network. So we see it as a
three-pronged approach to go out there, the broadband Internet
access is first and foremost by far but then adding on various
applications and services to sell to these individuals that
don't have access to that today.
Mrs. Blackburn. Well, and we hear from so many of those
ILECs and our rural communities about the broadband access and
the effect that it has not only on the quality of life and on
public safety, but also on economic development.
Mr. Chairman, I will yield back the balance of my time.
Thank you for the courtesy.
Mr. Markey. The gentlelady's time has expired. The Chair
recognizes the gentleman from New Jersey, Mr. Ferguson.
Mr. Ferguson. Thank you, Mr. Chairman. I apologize, too. I
wasn't at this entire hearing but certainly have a great deal
of interest in the topics that have been discussed. I want to
thank all of you for being here and for offering your various
perspectives on some of the important issues that we are
dealing with. Obviously, being from New Jersey, we are not only
packed with people who benefit from these technologies but we
are also home to some of the leaders in innovation who helped
to create these products and these technologies, and we are
very proud of that.
I want to begin with Mr. Zipperstein if I might. I
certainly want to thank you for being here today. I know you
have been fielding all sorts of different questions on
different topics, and we appreciate both the work that Verizon
Wireless does--we are very proud to be your home in New
Jersey--but for being a leader in developing so many new
technologies and services for people that really are enhancing
and improving the quality of people's lives. I want to talk a
little bit about some of the preemption issues that have been
very important. We have a state-to-state sort of patchwork
issue that we deal with in some ways, not necessarily on rates
but in other ways for wireless carriers. What would be the net
effect on the consumer if wireless carriers were actually
subject to 51 different sets of rules on how you write
subscriber contracts and formatting of bills and whatnot?
Ultimately, how does that affect a customer like me?
Mr. Zipperstein. I think the effect would be very
detrimental, Congressman. A customer like you based in New
Jersey also using your cell phone in Washington and other parts
in between, perhaps New York, perhaps Delaware, Pennsylvania,
and elsewhere in the country, you might find yourself subjected
to different kinds of service mandated by different States,
depending upon where you are. If you have a bill coming to your
place of work, even though you live in New Jersey, the billing
format may be mandated to be a different way in the place where
you work than the place where you live. In some States,
regulators have, for whatever reason, decided that it would be
appropriate to target wireless for very, very intrusive
micromanagerial sorts of monopoly, utility-style regulation,
even though it seems very clear, and particularly from the
comments that pretty much all the members have made in this
hearing today, that the wireless industry is a nationwide
inherently interstate industry, to use the chairman's term, and
therefore, this sort of individual state-by-state patchwork
could harm consumers, could create confusion, could lead to
higher costs as we would have to spend more money to achieve
compliance with multiple conflicting, inconsistent regulations.
That is why we favor a more appropriate approach which would
have a Federal set of rules.
Mr. Ferguson. This national framework that has been talked
about, we have heard about the need, I certainly have heard
about and I know many of us have heard about this need, for
this national framework for wireless service. How does a
national framework for wireless service make our constituents
better off than they are today given the current set of
standards?
Mr. Zipperstein. We think it achieves first of all
consistency across the country so that consumers, whether they
are in New Jersey or California, Massachusetts, would have the
same expectations as to the nature of the service that they are
receiving from their wireless carrier. It would also enhance
the ability of carriers to efficiently and cost-effectively
serve their customers on a nationwide basis.
Mr. Ferguson. Mr. Clark, thank you for being here today. I
appreciate your traveling here from North Dakota.
Mr. Clark. That is correct.
Mr. Ferguson. Wireless consumers are mobile. They take
their phones everywhere. They pretty much work everywhere. They
travel between States. Shouldn't consumers have some consistent
set of guidelines and expectations regarding what kind of
consumer protections they can count on? Wouldn't this be easier
to deliver and to be more uniform if this were sort of
delivered from the Federal level? I realize I am asking a State
regulator. But just maybe you could give me your sort of honest
assessment of that.
Mr. Clark. Congressman, NARUC is certainly not opposed at
all to some sort of Federal framework for a consistent approach
to how wireless issues are, the standards that the industry has
to deal with. The concern that we have is that the actual
proposal forwarded by the wireless industry goes far beyond
that. They try to attempt to federalize both the standards and
the enforcement, and that is the concern that we have because
we don't think it is a viable option to tell folks in New
Jersey or North Dakota when they have something crammed on
their wireless bill, a service they didn't order, to tell them
to call Washington, DC, because experience is the FCC just
doesn't have the resources to handle that. We believe that you
have to have a local point of contact for enforcement.
Mr. Ferguson. I realize my time is up. Could I have an
additional 1 minute?
Mr. Markey. Without objection.
Mr. Ferguson. Thank you. We have 33 attorneys general,
including the attorneys general in my State and your State, who
have entered into these agreements with national carriers to
help address some of these challenges. Is that not a good way
to go? Is that not helpful in this process?
Mr. Clark. Congressman, I would just respectfully submit
that 41 attorneys general last year signed a letter urging that
the particular type of preemption of the wireless industry
afforded was not appropriate for this particular marketplace.
Mr. Ferguson. I would be interested in Mr. Zipperstein. We
have 15 seconds. Can you just briefly give me your thoughts on
that?
Mr. Zipperstein. We advocate a single set of rules to be
established at the Federal level, but we also are not talking
about preempting State enforcement of their consumer protection
rules. There are consumer protection laws that apply to all
competitive industries across the board.
Mr. Ferguson. Thank you, Mr. Chairman. I appreciate the
indulgence.
Mr. Markey. The gentleman's time has expired. The Chair
recognizes the gentleman from Michigan, Mr. Dingell.
Mr. Dingell. Mr. Chairman, I thank you.
A question to Mr. Zipperstein. Mr. Zipperstein, I am lucky
enough to have an Apple iPhone. Now if it is possible I am not
happy with the AT&T service and I want to change carriers,
assuming for the moment that the iPhone is a dual band, is
there any reason why I shouldn't be able to take my phone with
me to another carrier?
Mr. Zipperstein. The only reason at this point is the
exclusive contract that AT&T has with Apple.
Mr. Dingell. That is the only reason?
Mr. Zipperstein. That I am aware of, yes, Mr. Chairman.
Mr. Dingell. There is no technical reason?
Mr. Zipperstein. Well, I think you said assuming that it is
a dual band GSM and CDMA, so our network is a CDMA network. If
the phone is technically capable of working on a CDMA network
and it meets the performance standards of the network, if it
meets the requirements of the FCC and other respects, then
there would not be a technical reason why it could not work.
Mr. Dingell. So the FCC through their rulemaking and the
chip makers through their magic are able to address all the
questions that might exist here, is that right?
Mr. Zipperstein. Yes, Mr. Chairman.
Mr. Dingell. Thank you. Now, this is for my old friend, Mr.
Verveer, and welcome to the committee. I have heard your
argument that the wireless network of today is very different
from the AT&T telephone network of 1968, and I agree with you.
In fact, you and I are probably the only ones around who would
remember that. But today, four wireless carriers cover 90
percent of the market, and it is pretty hard for me to ignore
the reports and the testimony of Mr. Devitt that people who
make wireless devices and software are not able to get new
services to consumers as quickly as they would like at all.
Quite frankly, this brings back my memories of Carter and
Carterfone. Now, is there a reason why wireless carriers should
be constricted in determining what devices consumers can use on
the network and what applications they can use on their phones;
and in like fashion, is there any reason why, if the original
grant of the spectrum and the technical questions can be
addressed, that the consumers ought not have the ability to
determine what devices they are going to use on the network?
Mr. Verveer. Mr. Chairman, assuming that the technical
issues can be overcome, and some of them have to do with
intricacies involving shared networks, that is the airwaves are
shared between all the consumers that use them, things of that
nature, but assuming they can be overcome, there is no
particular reason why one shouldn't, if this seems to be the
preferred course, introduce obligations for the use of any
device one wants, any application one wants. The question that
I have about this is whether or not we are better off relying
on the competitive process to try to produce what consumers
want. The carriers it seems----
Mr. Dingell. Well, let us address the competitive process.
The purpose here is to provide service to the consumers. The
purpose here is to provide the maximum choice to the consumers.
The purpose here is to provide competition so that the
consumers are best served. The purpose here is to see to it
that this provides the greatest choice and the greatest
availability of service of all kinds to the consumer. Once we
agree on all of those points, why is it that we should not
leave this particular choice to the consumer, and why is it
that the consumer's right to choose should be constrained?
Mr. Verveer. I think, Mr. Chairman, there are two things
that enter into this that are important at least to consider
carefully. One is whether or not the existing carriers have any
set of incentives not to try to provide what people want. If
one assumes as I do that in order to maintain their businesses,
they are very anxious to serve consumers, to provide what they
want, we can I think rely on their wholesome incentives. The
second aspect of this, however, is this. If we change these
particular requirements, these particular rules, there will be
consequences. I suspect the consequences will be that there
will be changes in at least a couple of obvious dimensions.
One, the pricing for transmission will change, the various
approaches to pricing will----
Mr. Dingell. Let me interrupt you, old friend. First of
all, the Carterfone decision said that they could attach a
device to the wire network if it did not cause problems. In the
drafting of the original license or grant of the spectrum that
can be in large part addressed. The balance of the problems can
be in large part addressed by the software makers and the
people who make the network. Now, why then is there a problem
with this that ought not be decided in favor of the consumer as
opposed to being decided in favor of somebody else?
Mr. Verveer. See, I think the question on some level is are
we sure, are we confident, that this----
Mr. Dingell. Here is the deal. First, you insist that the
grant of the spectrum address that question in that fashion.
That gets rid of a lot of the problems, does it not?
Mr. Verveer. Well----
Mr. Dingell. Yes or no. It gets rid of a lot of problems or
doesn't it?
Mr. Verveer. I think----
Mr. Dingell. And then the software maker comes along and
the hardware maker comes along, the software and the chip
address the balance of the question. And if it can't be
addressed, then don't let them do it; but if it can be
addressed, why should we deny them? Now obviously, the network
owner, the licensee, is going to say, oh, this is scandalous
that we should be doing this for the consumer. But as a
consumer, and I think you and I share that concern, we think
that maybe the consumer ought to be looked after and that the
network owner and licensee is going to do just fine because he
is going to charge whatever it costs to provide the service or
he isn't going to be in business.
Mr. Verveer. Mr. Chairman, you are absolutely right. The
network operator will adjust to whatever the rules are, but
there are at least a couple of things to think about. One is
whether or not the preference of the majority of consumers may
continue to reside in this subsidized handset model. The reason
it arose I presume is because the carriers thought that this
would get more people on the network. The second is the pricing
rubrics. The way that we presently price wireless service will
surely change if any application is available at the behest----
Mr. Dingell. That is of course true, and they are going to
price it at the level which enables them to continue in
business and continue making money. But we have already
addressed the problem. Technically, they can address it, and
quite honestly, there is no reason to say, all right, we are
just going to blank it and say you can't do it. In the
Carterfone case, what they do is they see to it that the
telephone fits on the system. I apologize. I know I am over my
time, Mr. Chairman. When I look at the bottom of my telephone,
it says this is by rule and regulation of the FCC determined to
be suitable for the use on the particular network. Now, is
there any reason why we wouldn't have the same thing with
regard to the wireless phone? I see none, do you?
Mr. Verveer. You clearly can. I think there is no doubt
about that. I think the question that is uncertain, and I
really don't believe that there is any way for us to know the
answer.
Mr. Dingell. The answer is that you set it up beforehand.
The grant of the license permits them to function on the basis
of having all this be compatible. The software, the hardware
makers, they do what they have got to do, and all of a sudden
you have solved the problem, and there is no reason to have a
ban on this kind of arrangement. There is no reason why we
ought not look after the consumer who is the guy for whom we
are setting this damned thing up in the first place and who is
going to be paying the cost.
Mr. Verveer. I agree that I don't know, at least I am not
aware of any technical inhibitions.
Mr. Dingell. All right.
Mr. Verveer. The thing that is uncertain----
Mr. Dingell. Well, I am 3 minutes and 46 seconds past my
time. It is good to see you again. It is good to see you, Mr.
Chairman.
Mr. Markey. The gentleman's time has expired. The Chair
recognizes the gentleman from Michigan, Mr. Stupak.
Mr. Stupak. Thank you, Mr. Chairman. Mr. Clark, if I may, a
couple questions for you. It was reported earlier this year
that the FCC was finally attempting to clear the backlog of
thousands of Do Not Call registry complaints from its backlog.
There are tens of thousands of them. I asked Chairman Martin
about this when he appeared before our committee in March, our
oversight hearing. He confirmed that these complaints were from
as far back as 4 years ago. He confirmed that the FCC was
sending letters to many consumers asking for more information
because the FCC was unable to process the complaint and then
was closing out those complaints. Can you please contrast this
experience with how the States dealt with the Do Not Call
registry complaints?
Mr. Clark. Congressman, I think it is a constructive
example why we say there has to be a local point of contact,
and it has to go beyond just laws of general applicability.
There were those who were trying to strike down State Do Not
Call lists in favor of the completely Federalized system. The
experience was is that the only place consumers got individual
relief was at States. I will give an example from my own State,
sparsely populated, 640,000 people. In the first few years of
the operation of North Dakota's Do Not Call list, there were
more individual enforcement actions brought just in North
Dakota than in the entire Federal Government. It is compared to
millions of complaints that were received at the FCC. And I
don't think it is because folks at the FCC don't care or they
are bad people, it is just that when you are looking at a mass
market of 300 million people, you can't vest all the authority
with one Federal Government agency and expect that individual
complaints can be heard.
Mr. Stupak. So even if you increased the resources at the
FCC, do you think they would be able to handle this on a
nationwide average of complaints?
Mr. Clark. Congressman, I don't think there is enough
office space in Washington, DC, to create a Federal bureaucracy
that would be able to handle the hundreds of thousands of
individual consumer complaints that State commissions and
attorneys general across the country handle.
Mr. Stupak. Let me ask this. I realize the State consumer
protection statutes help out consumers. We have used them in
Michigan for price gouging on gas prices, things like that, and
I know you are not an attorney general, but I assume you work
with the AG's office in your capacity. So how would relying on
the statutes of general applicability by the AGs provide
consumers with a timely resolution of complaints compared with
State Commissions that investigate and resolve individual
complaints?
Mr. Clark. Congressman, the concern that NARUC has about
laws of general applicability is that there are specific, very
telecom-specific concerns that States address, things like bill
cramming, just a myriad of other types of issues that are
interconnection disputes, eligible telecommunications carrier
processing, those types of matters. And to simply say that the
only relief that States have is to bring fraud investigation
enforcement type actions we don't believe is reasonable. And
the attorneys general agree with us. Fraud is very specifically
defined. You have to prove intent, you have to prove all sorts
of things, and you are not going to bring a full fraud
complaint simply to address someone who had a bunch of
ringtones put on their wireless bill but didn't ask for them.
Mr. Stupak. Thanks. Mr. Evans, if I may, a couple of
questions. In my opening statement, I raised concerns about the
Joint Board's proposal for an interim cap on the USF support.
My fear as I said was the so-called temporary caps usually
become a permanent fix at the FCC, and I also believe it would
also become a long-term freeze on deployment of rural wireless
in many parts of the country that still need service. Agree?
Disagree?
Mr. Evans. Yes, I completely agree with you, Congressman. I
think you are stifling the very thing the fund was created to
do and that is expand coverage out into rural America today.
Instead of continuing to feed a technology that is shrinking
and going away in the ILEC business, we are instead stifling
what is coming to replace that in a much more economical way
and clearly in a way that consumers prefer, that is in the
wireless world. So I strongly disagree with those actions and
believe that should be left alone and continue to prosper the
way it has.
Mr. Stupak. Let me ask this. Wireless carriers have been
telling me they are having trouble securing roaming agreements
with large carriers, and it has a huge impact on the data that
is received or the voice service, especially when they travel
in different parts of the country. What can be done or what do
you think should be done to provide whatever incentives or
whatever you want to call it for large carriers to negotiate
and in good faith protect the availability of these services in
rural areas?
Mr. Evans. I am not familiar with the carriers that have
been having a lot of those issues, frankly. I mean, I can only
speak to my own experience which has been negotiating two of
the top four who share the same type of technology that we are
using. We are obviously in very rural areas. We are deploying a
third-generation network, and candidly, they have been very
open to discussing those with us, and we are having ongoing
negotiations. So I have not encountered what the other carriers
have. I think it is a function of the fact that I am deploying
a network in some cases that is two generations ahead of the
bigger carriers. So their data services and everything are
going to work perfectly on our network, and some of the
smaller, rural carriers have not upgraded technology; and
therefore, the larger carriers have been hesitant to negotiate
agreements, knowing that their customers are not going to have
the same experience when they go down there. So I don't know
that I am qualified to really answer your question.
Mr. Stupak. Thanks. Thanks, Mr. Chairman.
Mr. Markey. The gentleman's time has expired. The Chair
recognizes the gentleman from California, Mr. Radanovich.
Mr. Radanovich. Thanks, Mr. Chairman. I have two questions
and appreciate the patience of the panel. I am sorry I was not
here to be able to hear all of the testimony, and some of these
issues may have been covered, but I would like to ask two more
questions of Mr. Evans and then one question for the entire
panel.
Knowing that you have a relatively small company, Mr.
Evans, would you be more or less willing to operate in a State
that has its own disparate set of rules?
Mr. Evans. When we went into the AWS auction last year we
specifically avoided certain States that had onerous
regulations around them for that very reason and elected not to
purchase spectrum in those markets. That was a conscious
decision on our part at that point in time, so my answer is
yes, we certainly did review that and in States where we felt
like it was going to be onerous, from my previous cellular
experience--I built cellular networks for 20 years yes, I
intentionally avoided certain States because of the regulatory
environment.
Mr. Radanovich. Then also for you, Mr. Evans, but then I
want to open up the same question to the rest of the panel. If
there was an effort federally to make things more uniform on
the issue of consumer protection is always there and then an
issue with the States, how would you react or respond to a
consumer protection regime where the standards were set at say
the Federal level but that the States were empowered to enforce
those standards? Is that something that you--but I would like
to hear from the rest of the panel as well.
Mr. Evans. Yes, from my perspective I think that is
perfectly acceptable. I think the concern is a different
playing field everywhere you go. I candidly support States
being able to enforce those regulations. I think that makes a
lot of sense. What I don't want to get involved in is States
setting arbitrary and sometimes unnecessary additional
challenges for us over and above what is at the Federal level.
So insofar as there was State enforcement of a Federal
regulatory environment, no, I would have no issue with that.
Mr. Radanovich. And even if that consumer protection regime
included privacy protection, do you think that something like
that could be crafted that would be suitable and acceptable at
the State level as well?
Mr. Evans. With the limited innovation, yes.
Mr. Radanovich. Even including----
Mr. Evans. Knowing what I know here, yes, sir, I do believe
that.
Mr. Radanovich. Does the rest of the panel feel the same
way?
Mr. Clark. Congressman, I believe that that is actually
pretty close to what NARUC's position is, which is we think a
Federal framework may be acceptable as long as there is State
enforcement. One caveat that I would put to that is we do
believe there should be some mechanism for some State
flexibility to address an emerging issue that we can't even
contemplate right now because States do tend to be the ones who
are able to address those questions more quickly and not have
to run immediately to the Federal Government. But I think that
that can all be worked out. You can create some sort of
mechanism where hopefully you wouldn't have 50 different
outcomes.
Mr. Zipperstein. I think that the regulatory community at
the State level and the industry actually have been moving
closer together, and I am very pleased to hear some of the
comments that I have heard today as well as from the members. I
think everyone has the sense here, the strong sense,
Congressman, there is really a consensus in the room, that as
an interstate business, wireless shouldn't be regulated on a
state-by-state basis. It just doesn't make sense. It is not
good for consumers, it is not good for innovation, it is not
cost effective, it will drive prices up. So our view as an
industry has been that there ought to be one set of rules at
the Federal level. We already have 34 States and three carriers
who have agreed upon a set of rules that the attorneys general
of those States negotiated with the carriers. We could expand
that to the other one-third of the country, and then those
rules can be complied with. And the attorneys general, if they
believe that a consumer protection law that applies to other
competitive businesses has been violated, they are still free
to enforce that; and of course I would agree that the State
public utility commissions can continue to be a clearinghouse
for collecting customer complaints and asking carriers to
address those. What we don't want, though, is for the
individual States through their public utility commissions to
set different rules, because that is really going to set us
backward, not move us forward.
Mr. Radanovich. Very good. Thank you. I am seeing heads
from the rest of the panel, so I am assuming you are in
concurrence.
Mr. Murray. If I might just add, what I didn't hear in the
answer Mr. Evans gave was he didn't want to go into States
where there were different standards necessarily. It sounded
like he would go into some States where there were different
standards. It was onerous standards that concerned him, and
that is a little bit what concerns me about Federal standards.
We are not averse to Federal standards, but if the goal in
setting Federal standards is to lower the standards that
consumers have, then yes, we are concerned. So it is a question
of what is the Federal standard going to be.
Mr. Radanovich. All right. I thank the panel. Thank you,
Mr. Chairman.
Mr. Markey. The gentleman's time has expired, and the time
for this hearing has expired as well. Thank you so much. This
was an excellent panel. I think all the members were impressed.
You had nearly every member of the subcommittee come to hear
you in the course of the day. And I think it is important for
us at this point to actually note that it is a historic point.
Back in 1993 this subcommittee moved over 200 MHz of spectrum
because the subcommittee was in fact unhappy with the fact that
there were two incumbent cell phone companies. They were each
analog, and they were each charging 50 cents a minute. We
didn't do anything except kind of work with the FCC to create a
third, a fourth, a fifth, and sixth license but not allow the
first two to bid in any of those markets where they already
were. And all of the three or four new companies each went
digital, and pretty soon it was down to 10 cents a minute; and
unbelievably, the first two companies within a very brief
period of time each went digital, and each were charging 10
cents a minute. And that was a way in which we were able to
change the marketplace and make it possible for people like Mr.
Evans and others to exist. And so we kind of reached this point
now where we are at the end of the spectrum trail. We have this
700 MHz that we want to deal with now, this frequency, the 700
frequency, and we want a good result as well. And obviously,
the goal of this subcommittee has always been that innovation,
competition, consumer choice is the goal. And for my purpose, I
think that having wholesale service with Carterfone-like
principles attached to it for at least some part of this
spectrum will play a big role in driving the already existing
incumbent marketplace that serves 230 million Americans. So we
didn't tell the first two incumbents in 1993 what they had to
do, we just created a marketplace over here that they had to
respond to. And that is pretty much what we are talking about
here as well. We won't tell any of the incumbents what they
have to do, but watch out what happens over here when there is
a new part of the spectrum that has Carterfone-like principles,
it has wholesale, and see what the rest of the marketplace does
to respond to it. And I think that is the way that we should
view this, not dictating to incumbents but creating a
marketplace that kind of moves or creates an environment where
new technologies, innovation, services can be created and then
watch the market work once again.
We can't thank you enough for your great testimony. This
hearing is adjourned.
[Whereupon, at 1:50 p.m., the subcommittee was adjourned.]
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Question for Professor Wu from Mr. Upton:
Professor Wu, the iPhone is already being credited for
opening up wireless networks. Since this is happening through
free market forces, why would we want the FCC micromanaging
this process at this stage? Haven't we learned from recent
history that forcing carriers to open up their networks doesn't
work well?
Thank you very much for the question. I am, as you are,
optimistic that, over time, the iPhone and other electronics
companies will serve as one of the forces that opens up the
wireless market to greater competition and innovation. But I am
not confident that they are enough on their own; I believe that
some level of Government oversight remains necessary.
Telecommunications markets have a historic tendency toward
monopoly and the use of that monopoly. That said, I do believe
that the market can disrupt the use of market power, and open
innovation in wireless markets. But I don't think markets are
perfect. That is why I believe that the right level of
Government involvement--even in an oversight--is essential.
An analogy may help explain my answer. Just as Congress
plays an important role watching for abuses of executive power,
so I believe Congress and the FCC can play an important role
checking and watching for the potential abuses of some of the
most powerful private companies in the United States. That is
the role I believe that your committee is playing, and I
appreciate its role in that regard.
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