COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES

CONSUMER AFFAIRS COMMITTEE INFORMATIONAL MEETING

STATE CAPITOL B-31 MAIN CAPITOL

WEDNESDAY, FEBRUARY 23, 2011 1:00 P.M.

MEETING ON TELECOMMUNICATIONS AND CABLE INDUSTRIES

BEFORE: HONORABLE ROBERT GODSHALL, MAJORITY CHAIRMAN HONORABLE JOSEPH PRESTON, MINORITY CHAIRMAN HONORABLE SHERYL DELOZIER HONORABLE GENE DiGIROLAMO HONORABLE BRIAN ELLIS HONORABLE JOHN R. EVANS HONORABLE JULIE HARHART HONORABLE WARREN KAMPF HONORABLE ROB KAUFFMAN HONORABLE BRANDON NEUMAN HONORABLE JOHN PAYNE HONORABLE DOUGLAS G. REICHLEY

ALSO PRESENT

MAJORITY STAFF:

COLIN FITZSIMMONS AMANDA RUMSEY

MINORITY STAFF:

JERRY LIVINGSTON BETH ROSENTEL TIM SCOTT

INDEX

TESTIFIERS

WITNESS PAGE

REP. ROBERT GODSHALL 5 CHAIRMAN

STEVEN J. SAMARA 7 PRESIDENT, PA TELEPHONE ASSOCIATION

GERALD PIPER 12 VICE PRESIDENT/GENERAL MANAGER, PENNSYLVANIA & NEW JERSEY CENTURYLINK

FRANK BUZYDLOWSKI 16 DIRECTOR OF PENNSYLVANIA GOVERNMENT RELATIONS, VERIZON COMMUNICATIONS

ELIZABETH MURRAY 21 DIRECTOR OF REGULATORY AFFAIRS, NORTHEAST DIVISION, COMCAST

BRIAN BARNO 34 VICE PRESIDENT OF GOVERNMENT AFFAIRS, BROADBAND CABLE ASSOCIATION OF PA (BCAP)

JIM D'INNOCENZO 36 VICE PRESIDENT OF LEGISLATIVE AFFAIRS, COMCAST

GALE Y. GIVEN 39 PRESIDENT, VERIZON PENNSYLVANIA

LISA VOLPE McCABE 44 DIRECTOR OF POLICY AND OUTREACH, SATELLITE BROADCASTING & COMMUNICATIONS ASSOCIATION

DAVE KERR 53 REGIONAL VICE PRESIDENT OF EXTERNAL AFFAIRS, AT&T PENNSYLVANIA INDEX CONTINUED:

WITNESS PAGE

MARISSA MITROVICH 57 DIRECTOR, NORTHEAST GOVERNMENT AFFAIRS, VERIZON WIRELESS

GARY HOREWITZ 62 COUNSEL, GOVERNMENT AFFAIRS SPRINT

CHRIS TERNET 64 SR. MANAGER STATE LEGISLATIVE AFFAIRS, T-MOBILE

CERTIFICATE 73

CHAIRMAN GODSHALL: Good morning. If everybody would please take a seat, the clock is not right up there, we are going to try to get moving, here.

I would like to call the meeting to order. This is an informal meeting on telecommunications and the cable industry and it is being recorded. Let's get started by having the members introduce themselves, and also staff. Starting over here to my left and coming around.

REPRESENTATIVE ELLIS: Brian Ellis. Representative, 11th District.

MR. FITZSIMMONS: Colin Fitzsimmons, Republican Executive Director, Consumer

Affairs Committee.

MS. RUMSEY: Amanda Rumsey, Counsel for the Consumer Affairs Committee

CHAIRMAN GODSHALL: Bob Godshall, Chairman. Along with my Co-Chair here, Joe

Preston. I introduced you, Joe, but you can go ahead again.

CHAIRMAN PRESTON: Joe Preston, Allegheny County, I work for Bob Godshall.

MS. ROSENTEL: Beth Rosentel, Executive Director, Chairman Preston's office.

REPRESENTATIVE DELOZIER: Sheryl Delozier, Cumberland County, 88th District.

REPRESENTATIVE DiGIROLAMO: Hello, everyone. Gene DiGirolamo, Bucks

County.

MR. SCOTT: Tim Scott with Representative Preston's Office.

MR. LIVINGSTON: Jerry Livingston, Representative Preston's Office.

REPRESENTATIVE EVANS: John Evans, Representative of Erie and Crawford

Counties.

REPRESENTATIVE KAUFFMAN: Rob Kauffman, 89th District, Franklin and

Cumberland Counties. REPRESENTATIVE NEUMAN: Brandon Neuman, 48th District, Washington County.

REPRESENTATIVE KAMPF: Warren Kampf, 157th District, Chester County.

CHAIRMAN GODSHALL: Thank you. And two of our members had to go to a meeting upstairs, they are coming back down as soon as they can check-in up there. As I said, this meeting is being recorded.

The purpose of this meeting is to provide an overview of these industries for the education and benefit of the Committee members, staff, and members of the public. The telecommunications industry in Pennsylvania has evolved from Bell providing landline telephone service into the multi-facet industry capable of providing traditional voice service as well as video and internet and wireless service. The constant development of new technologies makes this industry somewhat unique in that service providers operate in an arena where these types of services are available and the ways to deliver them to customers are constantly changing.

Today we have three panels of presenters and each panel contains speakers representing a different section of the industry. I am certain that the information presented today will be informational and will provide valuable insight into this industry.

There will be an opportunity for questions following each panel, and I ask that members please hold their questions until that time.

Chairman Preston, do you have any comments?

CHAIRMAN PRESTON: I just want to commend you on having informational hearings, especially since half of our Committee members are new so they can become familiar with the nomenclature. As we go forward into the future, when we look back only 40-50 years ago a lot of the subject matter that we will be covering today did not really exist. As we start going almost totally to a more communicative with satellites and wireless, this is communications business, contracts, international affairs, and finance are dependent upon what we are talking about today.

So, having a basic foundation before we get forward in this session, I look forward very much to working with you, Mr. Chairman.

Thank you.

CHAIRMAN GODSHALL: Thank you.

At this time we will have our first panel of the afternoon. It is made up of representatives from the telecommunications industry. Panel members are Steve Samara from the Pennsylvania

Telephone Association; Gerald Piper from CenturyLink; Frank Buzydlowski from Verizon; and

Elizabeth Murray from Comcast.

I would also like to acknowledge Julie Harhart has arrived from Lehigh County.

Gentlemen, whenever you are ready and whatever order you want to follow. Gentlemen and Ladies, I apologize.

PRESIDENT SAMARA: Thank you Chairman Godshall, Chairman Preston, members of the Committee, both incumbent and new members of the Committee. Good to have you all here and thanks for the opportunity to bring you up to speed on what has been happening in the telecommunications industry over the past year. I'll do a little unashamed pandering and let you guys know that, especially the new members, you have two good Chairman. Regardless of which party you serve, they seem to get along pretty well. As you can tell from the introductions, it is a

Committee that works on consensus and we have always agreed working with them. I think I can speak for the rest of my panel members that it's been a good Committee to work with. There is my pandering portion of the testimony.

My name is Steve Samara and I am the President of the Pennsylvania Telephone Association, an organization which represents the interests of all of the State's rural local exchange carriers, or RLEX. If you don't know by now, and Joe Preston and I have had this conversation as have Chairman Godshall and I, a lot of acronyms, a lot of abbreviations, a lot of new lingo. I didn't bring my telecom dictionary with me but it is about yay thick. It is about terms you would never, ever use in your wildest dreams nor care to, and it is out-of-date as soon as it is printed in this environment, but RLEX is the term that I will be using more often than not here today. There are 35 RLEX in the State, and if you haven't received this yet you will be shortly, it is our map which is also out-of-date. The colored areas are my member companies.

The white areas are Verizon areas. As I said there are 35 of us scattered across, geographically across the Commonwealth and we represent their interest here and before the Governor's Office and the Pennsylvania Public Utility Commission.

My member companies are, in many respects, as advanced as any sitting before you today and we are truly telecommunications companies, as opposed to just telephone companies.

We realize that for the sake of the hearing today we put panels together segmenting off the industries, but all of us testifying before you today are in pursuit of the same customer. We want to provide telephony, video, Internet, data, wireless services, and in that sense we are much more similar than dissimilar.

In the brief time that I have before you today I would like to provide a profile of PTA member companies that will hopefully be beneficial as this Committee addresses the myriad issues facing telecommunications providers in today's dynamic environment.

A little bit about who we are, PTA member companies range in size from several hundred thousand access line companies to less than a thousand access line companies, with a majority member companies under ten thousand lines. We are truly small. We are losing traditional access lines, which is no surprise to all of us here using cell phones and using other modalities and other means of communication. It ranges anywhere between 4 and 8% a year. We are all ardent subscribers to the adage that necessity is the mother of invention, so we spent lots of money to keep customers, to build and construct networks that offer the Internet, the data, the voice, and the wireless technologies and services that today's customers want. Despite that fact we still have issues with take rates. We put an infrastructure in there, we expect people to sign up, we want people to sign up, those range anywhere from 30% to some are doing better, some member companies. You guys will hear a lot about getting broadband out there as fast as possible at high speeds so everyone can jump on. Everyone doesn't jump on, unfortunately. That is not a politically popular thing to say. I know President Obama just rolled out under the National

Broadband Plan 100 Mbps for 100 million people. It all sounds great and everybody uses it, and probably everyone in this room uses it, but some people don't. We have to build a network to them whether they do it or not. Just keep that in mind. It's the, the burden is on us to get that take rate up and we are working hard to do that, but just so you guys know, there are folks that are not going to be hopping on here. We hope to change that scenario.

We are truly rural companies. Not only as defined by the Federal Telecommunications

Act, which includes as some of its criteria service to less than 50,000 access lines as a total or service only to municipalities with less than 10,000 inhabitants, but in terms that can be specifically quantified in Pennsylvania. The smallest PTA companies serve territories with an average of a little over 30 access lines per square mile. The larger companies are closer to about

50 access lines per square mile. Truly rural.

You won't see a lot of my folks, a lot of my member companies in the Fortune 500.

Gerald's company is one that snuck in, but you won't see a lot of them listed there. A little bit about our regulatory status, as RLEX. The PTA and the Pennsylvania Public

Utility Commission have worked diligently together over the last several years to implement the deregulatory provisions of Act 183, I will talk a little bit about that in a second, here. But, the incumbent local telephone industry still remains the last bastion of regulated industry in the

State. In addition, federal and State regulatory policies such as universal service have positioned my member companies as the carriers of last resort, a status imposing financial costs which some of our competitors do not bear.

Act 183 was passed in 2004, it remains the most aggressive broadband deployment statute in the nation to the best of my knowledge. As Congress and the FCC continue to discuss federal stimulus revenues for broadband deployment, mapping, reforming the Universal Service

Fund to ensure that rural areas of this nation have broadband access, you can solace in the fact that you guys, this Committee most notably, have put in place a statutory commitment that the

PTA member companies must universally deploy broadband by a date certain. For some of you newer members, you are certainly going to take it on the chin for some of the sins of your forefathers, so you might as well take credit for Act 183 while you are here. It's a good statute, it does good things for broadband, it does good things for deployment, and the vast majority of my members have finished their deployment schedules by 2008, which means they have a network in place under the Act that says within 10 business days of request their customers can receive

1.544 megabits broadband service. No small feat. There are a couple of companies that are 2013 companies, Gerald will talk a little bit about that, but they have done a real good job at getting broadband out everywhere well ahead of schedule for the 2013 companies, well ahead of schedule, as established in the statute.

Another thing you will hear us talking about, and we are not going to get into the weaves on issues here today, I know it's just an informational hearing, but some of the image of my member companies, the RLEX, is going to drive a lot of the commentary you hear from us about the issues of the day. Our charge as a PTA and as our members companies is to shed that

"dinosaur" image. We have been around for a long time. PTA will celebrate its 109th year of existence at our annual convention this summer, so we have been around for awhile. We have a lot of member companies that obviously are that old and some have reached 100 year anniversary of being in business. The 100 year celebrations are nice. You have a dinner, you invite legislators to speak, you hand out citations, you might get a plaque or two here or there.

Everyone feels good about it. The downside is the image of the traditional teleco. You guys are yesterday's news, you are copper wires, you're climate poles, you're not providing the advanced services that people want, and that is something we need to come back on a daily basis. The more you guys know about what our members do, and it's our job to tell you that, the better we have it.

We saw, quite frankly, when the federal stimulus money started coming out, that the general notion was that we need to funnel revenues into broadband deployment and mapping initiatives because no one has done anything for the country's rural residents, that somehow they are being left behind and that the RLEX in this country, well, all the LEX quite frankly, we are not doing enough to get broadband out to everybody.

In testimony before the Senate Communications and Technology Committee last year, I noted that the PTA was not opposed to federal stimulus revenues, but that the best way to utilize that money was to first recognize that a robust broadband network already exists in Pennsylvania courtesy of Act 183 and what the local telephone industry had done. Consequently, partnerships with the folks that are operating those, building and operating those networks, was the best way to get your biggest bang for the buck.

The FCC is in the eye of the storm on issues such as intercarrier compensation, universal service funding, broadband deployment, and as those issues unfold you will certainly hear from a very vocal rural telephone carrier industry that a healthy, vibrant rural landline economy is the best way to bring broadband to rural America.

Looking forward, I just want to offer the services of PTA as we start to and do get down into the weaves of some of the issues, and through the leadership of Chairman Godshall and

Chairman Preston we will address many things going forward. I look forward to that opportunity.

If anyone has any questions about anything with what my members are doing today or going forward, I stand ready and able to help.

Thanks again. Chairman.

CHAIRMAN GODSHALL: Thank you, Steve. And at this time we'll go ahead with

Gerald Piper.

VICE PRESIDENT PIPER: Good afternoon Chairman Godshall, Chairman Preston, and members of the Consumer Affairs Committee. My name is Gerald Piper and I am the Vice

President and General Manager for CenturyLink in Pennsylvania and New Jersey. In this role, I oversee all of CenturyLink's operations in the two States, including sales and marketing, customer care, engineering, and our retail operations. It is my distinct pleasure to appear before you today to tell you a little bit about CenturyLink as a company and to share with you some perspectives on the ever-changing telecommunications industry.

CenturyLink is a leading provider of high-quality broadband, entertainment, and voice services to both consumers and businesses in all or parts of 25 predominantly rural counties in

Pennsylvania. We currently serve approximately 250,000 access lines and employ over 600 individuals in the State. While CenturyLink serves communities in Pennsylvania that are somewhat larger, such as Carlisle, Chambersburg, Butler, and Gettysburg, we also serve many smaller communities like Foxburg, Blain, Hopewell, Blue Ridge Summit, State Line, and Hewitt.

We are very much a rural company in Pennsylvania with an average of 54 customers per square mile in our local operating territory. As a reference, I have included as an attachment to my testimony a map illustrating CenturyLink's local operating territory in Pennsylvania, as well as our LightCore fiber network that we just recently completed to enhance the services we provide throughout the State.

Nationally, CenturyLink operates in 33 States and is headquartered in Monroe, Louisiana.

We are an S&P 500 company and are included among the Fortune 500 list of America's largest corporations. As many of you are aware, we are currently in the process of finalizing the acquisition of Qwest Communications of Denver, Colorado. Upon close of this transaction,

CenturyLink will become the third largest telecommunications company in the U.S., offering local, long distance, data, high speed internet, entertainment, and wireless services across 37

States. We are still in the process of gaining the necessary State and federal approvals to finalize the Qwest transaction, but we do anticipate day one of the combined company will take place in either late first quarter or early second quarter of this year.

CenturyLink is committed to delivering product and service offerings that meet the personal and business communications needs of our customers. For residential customers,

CenturyLink offers an innovative portfolio of services that includes reliable local and long distance home phone service, high-speed Internet, and satellite television from DirecTV – all in one monthly bill. With data, Internet, and telephone solutions from CenturyLink and our partners, business customers of all sizes can get the services they need to succeed. CenturyLink believes that business isn't just about making contacts. It's about making strong connections.

Connections that can help businesses get more done in less time so that they can focus on what's really important – their customers.

CenturyLink continues to meet or exceed all of its obligations under its amended

Alternative Regulation Plan. Pursuant to Act 183 of 2004, CenturyLink chose to accelerate its

100% broadband commitment to December 31, 2013. Today, we have broadband deployed to over 92% of our retail access lines in Pennsylvania and continue to work and invest diligently to make our year-end 2013 commitment. In addition, 127 carrier serving areas in CenturyLink's local operating territory have qualified for broadband deployment under our Bona Fide Retail

Request, or BFRR, program. As a result, nearly 10,000 Pennsylvania residents have had broadband deployed to them sooner than what may have occurred under our normal deployment schedule. Needless to say, this program has been very beneficial to our consumers and I applaud the legislature for establishing it as part of Act 183.

I believe it is important to emphasize that CenturyLink continues to invest heavily in infrastructure improvements in Pennsylvania. While a significant portion of our capital has been devoted to meeting our Act 183 commitments, we continue to invest in new and existing infrastructure in order to provide the very highest quality and most innovative services to our customers.

CenturyLink is also committed to providing the very best in customer care as we understand that service quality is an absolute must in today's environment if we want to continue to be competitive. While we work very hard to avoid service disruptions and outages, when such issues do occur, we are diligent at addressing them immediately to ensure customer satisfaction.

As a result, we not only meet PUC mandated service quality levels, but we consistently exceed those requirements. As you can imagine, it is not easy or inexpensive to serve customers in sparsely populated and often remote areas of Pennsylvania, but our customers are our lifeblood and we take very seriously our commitment to serving them.

Ladies and gentlemen, I'm sure you all realize that the days of the telecom monopoly are gone forever and that CenturyLink will never again be our customers' only option for telecommunications products and services. We face unprecedented levels of competition from a myriad of competitors, including Competitive Local Exchange Carriers, or CLECs, as well as intermodal competitors like wireless companies, Voice over Internet Protocol, or Voice Over IP, service providers, and cable-telephony providers. CenturyLink recently released 2010 financial results showing access line loss of 7.6% for the year, down slightly from 8.8% in the previous year, and our trends in Pennsylvania are generally consistent with the company's national results.

CenturyLink believes it is increasingly important that Pennsylvania recognize and address the challenges incumbent local exchanges carriers, like CenturyLink, face in today's marketplace. CenturyLink and the other ILECs remain the only communications providers in

Pennsylvania with the regulatory obligation to serve all consumers – regardless of where they live and regardless of whether or not we will ever see a return on our investments. This basic public policy tenant is known as Universal Service, and CenturyLink and Pennsylvania's other

ILECs are the instruments for carrying-out this important public policy objective.

While CenturyLink is saddled with the Universal Service obligation, the 100% broadband commitment resulting from Act 183 and other regulatory requirements, our competitors, with very few exceptions, are free to manage their businesses in a manner completely consistent with their economic interests and the marketplace. And while this Committee and the General

Assembly have made definite and considerable strides toward regulatory parity, more work needs to be done to address the disparate set of rules for carriers offering similar, if not identical services, and competing for the same customers. We submit that additional regulatory reform is necessary in order for all carriers to operate on a level playing field and so that all of your constituents, whether they reside in urban, suburban, or rural communities, can benefit from a truly competitive telecommunications marketplace.

In the absence of meaningful additional regulatory reform, the General Assembly needs to recognize the important role that CenturyLink plays in carrying-out public policy initiatives like Universal Service and ubiquitous broadband deployment. And, most importantly, you need to ensure that we have the necessary tools and resources to continue to meet these important obligations. To this end, CenturyLink pledges its commitment to work with this Committee and the General Assembly as a whole, to advance public policies that are mutually beneficial to

Pennsylvania's consumers and telecommunications service providers.

I very much appreciate the opportunity to present testimony before you today and I look forward to answering any questions you may have.

Thank you very much.

CHAIRMAN GODSHALL: Thank you. At this time in following the agenda we will go with Frank Buzydlowski from Verizon.

DIRECTOR BUZYDLOWSKI: Thank you Chairman Godshall.

Good afternoon. Good afternoon Chairman Preston, members, and staff of the House

Consumer Affairs Committee. My name is Buzydlowski, and I serve as Director of State

Government Relations for Verizon in Pennsylvania. On behalf of Verizon, which has over

32,000 employees and retirees who reside in our great Commonwealth, I welcome this opportunity to share with you our perspective on an industry that has been dramatically transformed in just a few short years. Today, customers are no longer looking for plain old landline telephone service, and Verizon certainly is not their only communications option.

Customers now demand an integrated array of voice, internet, and video services, and the competitors ready to deliver those services are abundant. Amid this intense competition, Verizon has transformed itself from a telephone company to a sophisticated communications provider capable of delivering these cutting-edge services. And we have invested billions of dollars in this

State's network infrastructure to provide Pennsylvanian's with a first-class network designed to handle the next generation products and services that are at the heart of Pennsylvania's competitiveness.

To understand the state of the industry today, it is important to appreciate the expanding competitive alternatives that consumers are turning to for their communication needs. As of the end of 2010, one in four households in the United States was wireless only, eliminating landline service entirely, while another 15% consider a cell phone to be their primary line. In other words, for 40% of the country, landline service is, at best, an afterthought. And those customers who continue to use landlines also have plenty of choices besides Verizon. The FCC reports that as of yearend 2009, CLECs, Competitive Local Exchange Carriers, or interconnected VoIP, Voice

Over Internet Providers, served 32% of the landlines in Pennsylvania – that is 32% of the landlines – a percentage that is surely higher today. And the FCC also reports that

Pennsylvanians had 1.2 million high speed DSL internet connections, nearly 2 million cable modem internet connections, and nearly 2 million mobile wireless internet connections.

This trend away from communicating only through landline service is reflected in

Verizon's business as well. In just 10 years Verizon has lost almost half of our Pennsylvania landlines as residence and business customers have switched to cable, wireless, Voice over Internet Provider, and CLEC competitors, dropped second lines, and in many cases stopped wire line service all together in favor of making their wireless phone their only phone.

Today, broadband, wireless, and global Internet Protocol technologies are a major engine of Pennsylvania's economy. Verizon is a leader in its Pennsylvania service territory, delivering these innovation communication services to residents, businesses, and government. Our skilled and dedicated employee work force build and operate the most reliable and advanced network, serving more than 3.5 million landlines in this Commonwealth. We also provide broadband services through our FiOS, our high speed DSL Internet service, and wireless products, we are a leading provider of Global Information Technology, security and communications solutions, and we deploy the nation's most advanced fiber-optic network.

In Pennsylvania, we have deployed nearly 2.9 million miles – 2.9 million miles – of fiber-optic cable. Our interoffice facilities, that is connecting our central offices that serve the locales through Pennsylvania, are 100% fiber-optic, and we are extending our fiber-optics farther and farther into the network by using it to connect our Central Offices to their Remote Terminals that are farther out into the community areas. This approach has brought High Speed Internet technology to rural communities in Pennsylvania, providing residents and businesses in those areas another, and in many cases the first, choice for their broadband service. Verizon has also made available to many Pennsylvania customers higher speeds of broadband service, with download speeds at 10-15 megabits per second. Fiber-optic cable is also being used to run fiber to the premises, FTTP, which allows the deployment of FiOS, which simply stands for Fiber optic Service. You hear the television commercials in Philadelphia, Pittsburgh, and Harrisburg.

You will hear more about our FiOS video service from our State President, Gale Given, who is on the cable and video TV panel, and more about the exciting developments in the wireless industry from my Verizon colleague Marissa Mitrovich, who, by the way, is celebrating her birthday today.

Our network capital investments for these and other upgrades have now exceeded $13.3 billion on the wire line network alone since 1993. That includes over $642 million in investment last year alone. This investment includes deploying fiber-optic links to wireless providers' cell sites throughout Pennsylvania, as those carriers expand their infrastructure to meet the ever growing demand for wireless broadband and advanced 4G services. Verizon's investment in

Pennsylvania positions us to meet the next wave of growth in communications, as we meet customers growing demand for broadband speeds, mobility, and high-quality networks and services.

Looking to the future, we see the further utilization of our broadband network to facilitate the development of Information Communications Technology, ICT, to provide new and enhanced cloud services, for example, remote sharing of medical records, which helps to control costs and reduce errors. In addition, ICT and broadband technologies provide the ability to reduce energy consumption via smart grid home monitoring and control applications.

Not only is Verizon a leader in the industry, but it is also a leader in its commitment to this Commonwealth's economic development and community service. The Verizon Foundation, our philanthropic arm, uses its technology, financial resources, and partnerships to address critical social issues, with a focus on education, domestic violence prevention, and Internet safety. In 2010, Verizon Foundation contributed more than $3.3 million to nonprofit groups in

Pennsylvania.

We are proud of our accomplishments in network enhancements, and high speed Internet expansion, and community support, especially since we have made this progress during a time of incredible transformation in our business. You have heard about that from my colleagues at

CenturyLink and the PTA, resulting from fierce competition, a weakening economy, and changing customer needs.

Your Committee and this General Assembly have been instrumental over the years in encouraging competition and technological advances in the communications industry and modernizing legislation from time to time to keep pace with those changes. In 1993 you passed the original Chapter 30, which first recognized the importance of lessening regulation for some competitive telephone services and encouraging deployment of a more advanced network. In

2004, you passed HB 30, sponsored Representative Bill Adolph, Representative Joe Preston involved very heavily in that, which became Act 183 that you further recognized the diminished need for regulation once competition has gained a foothold in the marketplace. And in 2008, you recognized the additional charges that had occurred in the industry and passed SB 1000 to assure that the Internet remains free from unnecessary regulation, and to incent VoIP service development. But with the recent explosion in competitive alternatives, available services and new technologies, it is time once again for the law in Pennsylvania to keep pace with the industry. Outdated regulatory requirements in a competitive environment hold back development and harm consumer interests.

The future success of our industry depends on continued legislative and regulatory policies that will foster an even more innovative and competitive marketplace, to the benefit of our consumers. Now, more than ever before, consumers are in the driver's seat to select the products, services, and technologies that meet their needs and their budget. The result is robust competition that has been financially beneficial to consumers and allows customers to vote with their feet. Thus, in looking forward, we encourage the members of this Committee to continue the work the legislature has started to provide regulatory parity among competitors in the marketplace by adopting policies that continue to remove unneeded regulation. This will in turn increase business investment and economic development in Pennsylvania. Continuing the work that you started with Chapter 30, Act 183 and the VoIP Freedom Act, SB 1000, will allow

Pennsylvania to remain a national leader in encouraging growth and innovation in our industry.

Thank you for this opportunity to appear before you. I look forward to working together with you to address these important issues and I will be happy to answer any questions you may have when this panel concludes its testimony.

CHAIRMAN GODSHALL: Thank you, Buz.

At this time we will conclude with this panel with Elizabeth Murray, Director of

Regulatory Affairs from Comcast.

DIRECTOR MURRAY: Thank you. Good afternoon Chairman Godshall, Chairman

Preston, and members of the Committee. My name, as you heard, is Liz Murray, I am the Senior

Director for Regulatory Affairs for Comcast. I appreciate the opportunity to be here today to brief you on the latest telecommunications activities at Comcast.

You have heard a lot about competitors, we are the competitor. We are the third largest residential voice provider in the U.S. and we are the largest competitor in the residential voice market in the U.S.

Our Business Class service offering is the fastest growing part of our voice business, offering small and mid-sized businesses a competitive alternative that meets their particular needs.

Comcast and our cable brethren are the reason there is a viable voice market in the

Commonwealth. In fact, economists from Micra, an economic consulting and research firm, estimate that our voice services will mean $4.8 billion in savings for Pennsylvania consumers over a 10-year period.

One of the reasons for our great success here in the Commonwealth is that early in the roll out of our Internet Protocol-based service, the General Assembly determined that a light regulatory touch would most effectively spur investment and job creation.

As you know, in 2008 the legislature exempted IP-based services from regulation with the passage of Act 52, commonly referred to as the Voice Over Internet Protocol Freedom Act.

Since then, Comcast has added hundreds of customer-facing jobs that allow my fellow

Comcaster's to support their families.

In fact, Comcast employs about 11,000 Pennsylvanians in 456 facilities across the

Commonwealth, including our headquarters in Philadelphia.

Comcast's Xfinity Voice service provides customers a full-featured primary line service that includes dozens of the most popular vertical services, like call-waiting, caller-ID, and voice mail. We provide E-911, access to relay services for deaf and hard of hearing people, and directory assistance. We've also taken advantage of our broadband network to offer more advanced voice services like web access to voice mail and caller ID on PCs and televisions.

A bit of background on the type of fixed Internet interconnected VoIP Comcast offers may be helpful. There are several varieties. Computer to computer voice services use the Internet exclusively for completing telephone calls. Nomadic interconnected VoIP uses a combination of the Internet and the public switch to telephone network and may be used from virtually any location with a broadband connection. Fixed interconnected VoIP, like Xfinity Voice, never touches the public Internet. Comcast's voice service is fixed in that customers may use it only at their billing address and may only be assigned telephone numbers from their home rate center. This limitation is what allows Comcast to offer customers traditional E-911 service in which the operator is able to identify the caller's location.

Although our VoIP service is not regulated at the State level, we are subject to some regulation by the FCC as an interconnected VoIP provider.

We also have traditional telephone affiliates that are certificated by the Public Utility

Commission. The lion's share of these Competitive Local Exchange Carriers' business is acting as a wholesale provider for our VoIP affiliate. Through these CLECs we interconnect with other phone companies, secure telephone numbers, and pay fees like TRS – TRS being the

Telecommunications Relay Service – and access charges, among other things.

As I have mentioned, the Commonwealth was in the vanguard of creating a regulatory environment in which Voice over Internet Protocol providers could grow and thrive.

In the same vein, we ask you to consider that the telephone market of the past no longer exists in most of the Commonwealth. Both cable and telephone service companies, whether rural or urban, not only provide traditional telephone services, but many advanced services like VoIP, broadband service, and video service. For these reasons, we ask you to view traditional telephony related items such as intercarrier compensation against this changing backdrop.

Intercarrier compensation, in particular the access charge policies of rural carriers, is outdated, in desperate need of reform, and is harmful to competition. It costs no more to terminate a long-distance call from California to Camp Hill than it does to terminate a call from

Philadelphia to Erie. But the rates charged by many rural carriers for intrastate calls far exceed their interstate rates, never mind their actual cost. And it's because they've come to rely on these subsidies to support acquisitions, investment in non-telephone services, and to satisfy shareholders that rural carriers continue to resist making changes that would allow their competitions to compete fairly within their footprint.

Pennsylvania law, even the relatively recent changes in Chapter 30, continues to treat rural carriers as if their service offerings were limited to traditional telephone service over copper wires. The law doesn't consider the totality of the revenue generated by the unregulated and advanced services, like DSL, that are offered on their networks. And it doesn't acknowledge that the new market reality is that most consumers choose service bundles, not stand alone telephone service. As a result, the subsidies enjoyed by many rural ILECs – supposedly to support traditional telephone service – are distorting the market.

This wealth transfer is a hidden tax on our customers, adding cost to our products, and discouraging receiving companies from being efficient about containing costs.

It is similarly incongruous that the PUC distributes about $32 million in universal service funds each year, but at the same time is denied by Chapter 30 the legal authority to investigate whether those funds are, in fact, needed. Further, the PUC may not assess whether companies' costs justify continued subsidization and whether USF funds being used for the purpose of reducing the cost of telephone service for customers.

There is no question that there are rural telephone companies whose density results in high costs and where there are no competitors, may require a subsidy. In addition, there are rural customers who need support based on income. But these are limited circumstances.

Whether Comcast's customers are paying excessive access charges to support an enhanced revenue stream or absorbing the direct subsidies for universal service, they are forced to do so without regard for their ability to pay or the actual need of the recipients. It's absurd that working class residents of Harrisburg or Scranton are forced to subsidize phone and broadband service at the vacation homes of New Jersey executives. And there should never be subsidies for companies operating in areas where there are multiple competitors offering services over a variety of platforms.

Competition and investment will provide consumers with more choices, lower prices, and the necessary incentives to companies to offer innovative and cutting edge services and products.

In order for unsubsidized competitors to continue to seek and invest risk capital, the law must catch up with reality of the market.

Thank you for the opportunity to be here today, and I look forward to answering your questions.

CHAIRMAN GODSHALL: Thank you.

Are there any questions from any of the members?

Chairman Preston.

CHAIRMAN PRESTON: Thank you, Mr. Chairman. I think first let me commend all of you for sitting with each other. I noticed nobody tried to move away from each other. Mr.

Chairman, it just goes to show you in a sense from Chapter 30 we have increased the level of competition.

A couple of things, because the mixture of this Committee is very diverse in territory. It is obvious that we have gone through a lot of problems about the telephone numbers, exchanges.

And I think for the members, you might want to express, how many numbers are there that are being held by private individuals that we cannot use? Two, so far we have only seen two mannerisms about the overlay or new exchange as far as an area code. I have never heard anybody mention about any other alternative. Are there other alternatives away from this that we could possibly bring forward to the Public Utility Commission?

PRESIDENT SAMARA: I'll let Buz take that one, because I am a nice guy. DIRECTOR BUZYDLOWSKI: That was pretty sneaky, Steve.

PRESIDENT SAMARA: There is competition. We have kind of stayed out of that debate for the most part, but there may be other ways. I know there has been suggestions about segmenting new customers away from certain things and doing it by technology or by industry, but the overlay and the split are the only traditional ways that I know of. Buz, your company has been more proactive on that one than my members have, so.

DIRECTOR BUZYDLOWSKI: Our area code guru is in the audience, too. We could call him up here, but that would be another hour of testimony so I won't ask Dan to come up.

The only two ways I know are overlay or split, and Verizon supports an overlay. Right now 814 is approaching number exhaust, and Mr. Chairman, I will have to get back to you as far as how many numbers are out there and are reserved by CLEX or others, I don't know the answer.

CHAIRMAN PRESTON: Could you explain that at least so the new members can understand about just the concept that there are numbers that people hold that privately own them one way or another?

DIRECTOR BUZYDLOWSKI: Well, no one really "owns" the numbers and no member of the industry owns numbers. There is a national administrator that handles this. What you might be referring to, there are certainly businesses that have a block of numbers that they then utilize individual extensions, large hospitals, campuses, and so on and so forth. But that doesn't really hit enough to make a difference. What is happening is there is such a proliferation of competition, whether it is wireless, wire line, using up these phone numbers that you have to create new ones. The only way to do that with a ten digit dialing plan is to create a new area code. The only way to do that is to split or to overlay. I mean, 717 and 570, 570 was created, was split-off from 717 just like 610 off of 215 and 724 out of 412. Now 814, the PUC will make a final determination what to do, but whether it is an overlay or a split is their final decision, we favor the overlay.

On the subject, once you split an area code you basically, look at Representative Evans there, depending on which end of the split or which side of the fault line you are on, you may have to get a whole new area code, where if you go with an overlay no one has to change their number, you just have to, new numbers get the new area code. But you then go to ten digit dialing.

That is an issue onto itself, and maybe Chairman Godshall can have a hearing in 814 sometime and talk about it.

CHAIRMAN PRESTON: Thank you, Mr. Chairman.

CHAIRMAN GODSHALL: Buz, I'd like to ask you a question. If I hold a block of numbers like that, a business, do they have to pay to hold those numbers? Are they paying for those numbers that they are holding?

DIRECTOR BUZYDLOWSKI: Well, again, you are talking about small, relatively speaking, a small number of numbers. But, if someone has a Centrex or a PBX and they have a whole bunch of numbers that they may assign or reassign, they could be paying for the lines.

Nobody pays for a number. You don't pay to have a number. They could be paying for those lines if they are inactive, but there are blocks of numbers that would not be utilized, if they are not active, they are not paying to hold the number. I just want to emphasize— Look at a hospital. Like Holy Redeemer Hospital in Meadowbrook, they may have non-functioning four digit extensions that no one else can use, but they will use them at some point in the future, but it is really a relatively minor number of numbers. CHAIRMAN GODSHALL: Okay, thank you.

Representative Evans.

REPRESENTATIVE EVANS: Thank you, Mr. Chairman.

I have a couple brief questions. First of all to Mr. Buzydlowski. On your testimony, page

5, you referenced that over the past year the capital investment has been approximately $642 million. I'm just wondering if you could spread that out a bit to cover maybe the last 5-year period of time as to what the investment has been for your company.

DIRECTOR BUZYDLOWSKI: Well, it has been amazingly consistent. It's been a very high level ever since Chapter 30 because of the amount of money we are putting into the ground at the fiber-optics and high speed Internet service. Over the last 5-years it is $3.6 billion. That, now if you add in our wireless investments, you can look at just last year, it is close to a billion dollars just in a year. WE are at $904 million last year, 2010, when you look at wire line plus wireless. These industries, add VoIP into that too, but they have converged. They are interchangeable in the way of competition, so the investment is really benefiting all consumers.

I'm sure my colleagues can talk about it also because they have a tremendous amount of money that they are putting in to their networks.

REPRESENTATIVE EVANS: The other question I had was in light of the point raised by Ms. Murray about the subsidies and the payments that are made to some of the smaller carriers. There is a phenomena that I have been made aware of called "telephone pushing" where numbers are pushed into some smaller exchanges, whether it be 800, 900 numbers and in some other States there have been cases where local municipalities have worked illegally with some small companies to receive monies for some of the calls that are pushed through those small areas and the subsidy money is being split between some municipalities and the companies. Is that something that is happening in Pennsylvania or is it something we need to be made aware of?

DIRECTOR MURRAY: Maybe my fellow panelists may know if it is happening here, I am not aware of it happening here specifically. The phenomenon that you are talking about is owing to high-access charges. The amount that we pay to drop off calls on rural networks. I don't know about municipalities, but there are businesses who make their business, they are usually the free conference calling services. They will have not an 800 number but a regular exchange telephone number and they split the value of the access costs with the rural provider and so it is in our view a form of arbitrage that would be eliminated if there were, if the access charges were made more rational. That kind of business opportunity wouldn't exist. It's not fair to those of us who are providing a service to our consumers in the sense that we are paying the extra, the high access charges for our customers to receive the benefit of toll-free calling that benefits only those two companies, the provider of the free conference calling and the rural access provider.

REPRESENTATIVE EVANS: So that is something that is happening in Pennsylvania?

DIRECTOR MURRAY: I don't know, I don't know if maybe my colleagues know. I'm not aware of that.

PRESIDENT SAMARA: I will address that, Representative Evans. It is called "traffic pumping" that is the term that you are referring to. Iowa is kind of the poster child for better or worse on the traffic pumping issues. There have been some instances there where there was the best we can tell, some collusion between carriers and other entities to funnel traffic through to get the access rates. To the best of my knowledge, that type of situation is not happening in

Pennsylvania. It has gotten some national attention. Ms. Murray and I are never going to agree on access charges, any aspect of it, but that is safe to say, but that situation is happening in other areas. The argument is that you are signing up with a conference caller or chat line, some type of entity, as an RLEC or local phone company, to funnel traffic through, get their meter running on the higher level of access, whatever you are charging for access rates. That is the phenomenon. I would be happy to provide the information on what's happened in Iowa and how they have gone about combating that there.

REPRESENTATIVE EVANS: Thank you, Mr. Chairman. Maybe something we might want to look at in the future for legislation in Pennsylvania because of the risk that does exist.

CHAIRMAN GODSHALL: Representative Reichley and I want to welcome

Representative Reichley from Lehigh County. I apologize for my voice, but I have had a couple of bad days. You will have to bear with me.

REPRESENTATIVE REICHLEY: Thank you, Mr. Chairman, and I apologize for being late. I had a hard time finding where the room was originally, and Representative Harhart is asking what the temperature is here, too, if we could turn the thermostat up at some point.

Two questions. I apologize for missing the first half of the testimony. Referring specifically to Mr. Buzydlowski and Ms. Murray, Ms. Murray, in the final page of your remarks in the second paragraph, in the end of that paragraph, it says, "Further, the PUC may not assess whether companies' costs justify continued subsidization and whether USF funds being used for the purpose of reducing the cost of telephone service for customers." It seems like the sentence is incomplete, or I'm not sure if there was any wording missing. I guess in conjunction with that question for Mr. Buzydlowski, on page 8 of your testimony, the lower paragraph, it says that you, "believe the legislature should start to work towards regulatory parity by removing policies that have unneeded regulation." Obviously we want to make sure that Pennsylvania customers have the best cost environment possible and I am wondering at this early stage, is there something for both of you on the regulatory aspect short of the kinds of issues on the access fees that you and Mr. Samara were just making reference to? Ms. Murray, are there areas in regulatory reform that we could be taking a look at?

DIRECTOR MURRAY: In general, the access fees are our primary issue at the moment.

We do not generally, because of the deregulation law for Voice over IP, we have tended to benefit from that greatly. For the moment our primary issue remains access charges.

DIRECTOR BUZYDLOWSKI: Representative Reichley, the whole purpose of course of regulation in any industry is when there is a monopoly. People didn't have a choice, they couldn't vote with their feet. And I said in my testimony today that people can vote with their feet. We have a regulatory regiment that is basically started with the Federal Telecommunications Act in

1934. It was based on the premise that whether it is CenturyLink or Verizon or our predecessor companies, we are given a franchise in an area and then the deal was that we would provide universal service to everybody so everybody would have telephone service, but to keep costs low and to keep service high. The regulators were created, and in our case the Public Utility

Commission in this State. Our position is what has happened in the industry, and even just over the last 5-years it has happened in the industry, is such that in every part of the State people now have competitive choices. I know in the Lehigh Valley, it is just like Philly and Pittsburgh. You have not just CLEX or Competitive Local Exchange carriers, but you have cable companies such as Comcast and Service Electric and then Verizon FiOS, but talking about our competitors, there are two of them. And then you have many cell phone providers. You can walk into a Walmart now and for $19.99 get a TracFone or the equivalent of a prepaid phone and plop down 10 or 20 bucks a month or whatever and get a whole bunch of minutes and you don't need a landline.

Well, with all of these things happening, for the regulated industry to continue to have this same regulatory burdens, the same reporting, price caps aren't even an issue any more because you can't raise your prices when you have so much competition. To have service standards that you really don't need, is it anachronistic because if a person doesn't get good service, they can just cut the cord and they can go to Comcast, they can go to Service Electric, they can go to AT&T Wireless, they can go to TracFone.

What we would hope this Committee would do is to continue what you have already done three times before, and that is always the case with all due respect, technology and the industry moves faster than government. It is time again to take a look at what the regulatory burdens are on the regulated industry and let us all compete on a level playing field.

REPRESENTATIVE REICHLEY: I appreciate that, and I think as we all know from our younger constituents, they increasingly have dropped landline service and are just using cell phones and maybe DishNetwork TV, things like that so hopefully we could accommodate the need to adjust the economy while maintaining the level of guaranteed service for the rural customers that still tend to populate the majority of the State. Thank you, Mr. Chairman.

CHAIRMAN GODSHALL: We have the next question from Representative DiGirolamo from Bucks County.

REPRESENTATIVE DiGIROLAMO: Thank you, Mr. Chairman. A question for Frank, in general, how would you describe overall the telecommunication climate in Pennsylvania and a second question, how are we doing competitively with other States, especially the States that are bordering us?

DIRECTOR BUZYDLOWSKI: Thank you for the question. The competition is everywhere. I could restate my answer to Representative Reichley's question. It is just every place we turn around. I have been in the business and the industry for over 30-years now and it is incredible to see what has happened and where competitors come from. We, when you have

Skype and Vonage and so on and so forth, at least competitors out there that basically, really there is no place in this State where you don't have an alternative two or three or four or five or a dozen alternative.

But comparing to other States is really a new facet in your question. New jersey, for instance, they are assembling in their Senate are moving legislation as we speak, for the last couple of months they have been working through Committee and looking for floor votes that there is going to be a dramatic lessening of regulation on the ILEX and the RLEX CenturyLink and Verizon are the main ones in New Jersey. So it might be, just look across the river for what is happening there and the impact that that will have. It is very similar.

I think you are going to see similar, we are seeing similar things happening. Indiana has already gone through that. Georgia, and a couple of other States. Alabama, Florida, so forth are looking at it. It is something that I think you are going to see in your ALEC and NCSL newsletters and so forth as States are enacting yet the next wave of regulatory reform legislation.

CHAIRMAN GODSHALL: Thank you very much. I appreciate, and Buz, your last response that there is no area in the State that these services are available, I will give you an address of a property I own up in Pike County.

DIRECTOR BUZYDLOWSKI: Except for that one part of Pike County, and I think that

Steve Samara has a member company— No, I am sorry, Steve.

Thank you, Mr. Chairman.

CHAIRMAN GODSHALL: Thank you. Thank you very much.

Our next panel will discuss the cable and video industry and we have Brian Barno from

Broadband. Then we have Jim D'Innocenzo from Comcast; Gale Given from Verizon; and Lisa Volpe McCabe from Satellite Broadcasting & Communications Association.

Thank you, and you may begin.

VICE PRESIDENT BARNO: We will go in order unless there are issues there.

Chairman Godshall, Chairman Preston, Members of the House Consumer Affairs

Committee, good afternoon. I am Brian Barno, with the Broadband Cable association of

Pennsylvania, BCAP. BCAP is the trade association representing the Commonwealth's broadband cable industry. We represent 20 member companies that provide voice, video, and data products in the State. We have 13,000 employees in the Commonwealth and also represent equipment suppliers and programmers both inside and out of Pennsylvania. I appreciate the opportunity to share some thoughts with you about the industry. I won't read my prepared my remarks and just hit some highlights in the testimony.

The cable industry was born out of consumer demand. People in the mountain valleys of northeastern Pennsylvania traveled outside of their area and discovered television by visiting friends and relatives outside of Philadelphia and New York, and they liked it. They liked Milton

Berle and Jack Denny and the Friday Night Fights and the Lone Ranger. They came back to their home towns and they couldn't get TV service. Local appliance dealers couldn't sell television sets because there was no programming, no signal to show people when they looked in the stores.

Industry pioneers like John Walson of Mahanoy City put antennas up the mountains, strung down army surplus cable down into the towns, so folks in places like Mahanoy City and

Lansford and later a place like Palmerton and Shenandoah could have television service. From this humble beginning Pennsylvania remains really a hub of the broadband cable industry with five of the nation's 20 largest providers headquartered here, including Service Electric, Blue

Ridge, Armstrong, Comcast, and MetroCast/Harron Communications, with a payroll of more than $935 million in the State and paying more than $220,000,000 per year in taxes and fees.

The economic impact of major cable and cable-related companies located in the State, including Armstrong, Atlantic Broadband, Motorola, Music Choice, QVC, is one of

Pennsylvania's most outstanding business success stories. It is funny Bell Atlantic Chairman Ray

Smith said 1995 that the cable industry would be on its deathbed at the turn of the century. The major reason he was wrong was the industries response to the Telecommunications Act of 1996, which lightened regulation and freed capital for investment. Broadband cable companies in the

Commonwealth have invested over $8 billion in private capital in plant, and equipment, and electronics, nearly $2600 per customer to bring high speed data, voice, and video services throughout the State.

Here in Harrisburg, as was mentioned earlier in the testimony, the General Assembly endorsed a deregulatory approach to IP voice services which sent a positive message to our members to continue rolling out their broadband visual voice product.

Nearly 10-years ago there were essentially no competitive residential voice services.

Today, over 1 million Pennsylvanian's enjoy residential voice services from the broadband cable industry. We have lived up to our promise and have built broadband networks throughout suburban, urban, and rural Pennsylvania with no guaranteed rate of return in back of that. We told Congress in '95 and '96 that if they passed deregulation on the federal level, we would build a network. We have lived up to that commitment.

Another critical feature of the '96 Telecommunications Act was Congress' decision to look at competition, not regulation, to govern the evolution of Internet services. No provision of the '96 Act was more important, or wiser, than the decision to set a policy to preserve the free market that exists for Internet without the burden of federal or State Regulation. BCAP applauds the national broadband mapping project and believes it's a good first step to identify the availability of broadband service in the country. As with any work of this nature, the first version does not represent a complete picture. BCAP is working with the DCED and its contractor, Michael Baker, Jr., Inc., to ensure the map shows the full picture of broadband deployment in the State.

Broadband in Pennsylvania has been substantially deployed by cable to citizens throughout the State. It's difficult to imagine a technology that has had more of an impact on our home life and our business life than Broadband. However, even in areas where broadband is available, there is a gap between availability and take rates. Many folks in this room have a struggle with going half-an-hour without going to their personal assistant, personal device, we've got a lot of our members out there who currently don’t have broadband. I'm not real concerned about my mom, she has no interest in getting broadband. She's in her early 80s, but we should be concerned about the family with school-age kids that doesn't have broadband. It may be because they don't know much about broadband, it may be because they don't have a home computer, but it makes a definite impact in looking at the lost opportunities for that family and those students without the availability of broadband. BCAP is concerned about the digital divide not only from a business standpoint, but also because it impacts the quality of life in our communities.

We look forward to working with the Committee on this issue to ensure the benefits of broadband technology are more fully embraced.

Thank you for your time, I look forward to answering your questions at the end of the panel's testimony.

CHAIRMAN GODSHALL: Thank you, Brian. At this time Jim D'Innocenzo from

Comcast. VICE PRESIDENT D'INNOCENZO: Thank you, Mr. Chairman.

Good morning Chairman Godshall, Chairman Preston, and members of the House

Consumer Affairs Committee. As the Chairman said, my name is Jim D'Innocenzo and I am the

Vice President for Comcast Legislative Affairs. I would like to thank you for the opportunity you gave us today to talk with the Committee, especially the new members of the Committee.

I would like to say that our biggest news is that last month we received all of the regulatory approvals for the Comcast NBC transaction and that Comcast and GE closed on the transaction to create the joint venture NBCUniversal about four weeks ago.

This transaction brings together the rich traditions of some of the world's most well known and respected entertainment, news, and sports brands at NBCUniversal with the technology and consumer reach of Comcast, creating the ideal entertainment and distribution company headquartered right here in Pennsylvania.

As mentioned earlier by Brian, Pennsylvania is the proud birthplace of the cable industry.

Today and for over 40-years, it is Comcast's home and as a result remains the birthplace of the latest cutting edge video, voice, and broadband technology.

While many companies have left the Commonwealth, we continue to demonstrate our unwavering commitment to call Pennsylvania our home.

Comcast, the largest corporation headquartered in Pennsylvania based on market capitalization, is primarily involved in the development, management, and operation of broadband cable networks and the delivery of programming content. We continually develop and deploy a range of new technologies and programming as part of our ongoing effort to improve the services we offer to our customers in 39 States and the District of Columbia.

Here in Pennsylvania, our advanced fiber optic plant encompasses over 42,000 miles and we offer those advanced broadband services to over 98% of the 4 million homes we pass in

Pennsylvania.

We are at the center of the digital home for our 2.4 million customers in Pennsylvania offering a growing variety of interactive, converged services to consumers, including video, high speed Internet, and Comcast digital voice.

Right now you are probably saying to yourself, what does converged services mean?

Well, the term has been used liberally for some time and everyone who is a peer here today would probably give you a slightly different definition of what it is. What I mean by the term is that, simply put, that our customers can get the content they want where and when they want it.

On TV, OnDemand, online, and on mobile devices such as the iPad or the iPhone.

Our vision is to provide our customers with the entertainment they love anytime, anywhere. Comcast is continuing to extend our services by inside and outside the home to provide mobility and create new features that integrate with our services and are compelling to customers. We continue to explore opportunities and options in this space and some of our recent offerings include the high speed to go. It is a fourth generation, which you are going to hear a little bit about later, fourth generation 4G wireless high speed data service that provides the fastest available wireless internet.

In the summer of 2009 Comcast introduced a free, downloadable application available for the iPhone or the iPod Touch, and it was the Comcast Mobile App. That app combined some of the best features from our digital phone, video, and high speed Internet services and put them on

Apple's popular touch screen platform.

In February of last year, we added remote DVR programming services to that app.

Recently, a couple of months ago, we launched the XFINITY TV iPad app, which reinvents the way our customers interact with their television and further extends their ability to search, discover, watch, and share their favorite TV shows and movies wherever and whenever they want. And of course, it is free to our customers.

All of these products are very exciting, but in order to keep people employed and our company growing, we recognize that we need to retain our customers. We aim to do everything we can to keep our products working, acknowledge if something goes wrong, and to fix it quickly. The vast majority of our 24 million customers receive service without issue year after year. However, we recognize that some things don't go as planned, and what that happens it is important for our customers to know what they can expect from us. We are listening to our customers, and they tell us that, quite frankly, we could do a little bit better, which is why we are fundamentally changing the way we do business in order to improve our customer satisfaction.

Although we are committed to improving our customer experience with us, the change may take some time. We believe this a journey that will continue into the future and against which we will measure our own success.

Our company-wide effort to improve services and satisfaction is ongoing and is focused on several key initiatives, including our new customer guarantee which lets our customers know what they can and should expect from us. We have 375 million customer interactions a year.

Three hundred seventy five million customer interactions a year. And we aim to get every one of them correct.

I thank you for the opportunity to be here, I look forward to working with the Committee over the next session, and at the conclusion of testimony I will be happy to answer your questions.

CHAIRMAN GODSHALL: Thank you, Jim. Now we have Gale Given from Verizon. PRESIDENT GIVEN: Thank you. Good afternoon Chairman Godshall, Chairman

Preston, and members and staff of the House Consumer Affairs Committee. My name is Gale

Given and I am the President of Verizon Pennsylvania. I appreciate having the opportunity, along with my colleagues Frank Buzydlowski and Marissa Mitrovich on the other panels, to share with you our perspective on the state of the competitive communications, information, and video services industry in Pennsylvania, and to describe our efforts to deploy the most advanced products and services that enhance consumers' lives and empower individuals for success in today's challenging economy.

Verizon is investing $23 billion to build out our FiOS fiber-to-the-home network, including parts of Pennsylvania. This is a massive investment in a totally new, state-of-the-art fiber network employing thousands of Verizon workers across the Commonwealth.

The roll-out of the FiOS network in Pennsylvania and other States has been driven by intense competition in the industry by many different players – wireless, competitive local telephone carriers, Internet voice providers like Vonage, and, especially, cable TV providers.

The cable companies are now our main competitors in the voice and Internet markets. These companies have for some time offered Internet access in addition to their cable TV service. They now also provide voice service on their networks as well. In fact, Comcast alone provides its digital voice service to more than 8.6 million customers nationwide as of year-end 2010, and is now the third largest wire line residential telephone service provider in the country. Although, I heard on the last panel they are going to be fighting CenturyLink for that soon. This fierce competition across a range of services is bringing more innovation, better prices, and more robust offerings to consumers.

Meanwhile, voice service is fast becoming just another application riding on a multi- purpose communications network. To compete in this world, it was necessary for us to provide video service, and we are now doing that primarily by deploying an end-to-end all-fiber network, the only company to do so on a large scale. The tagline that I am sure many of you have seen in our recent advertising – FIOS. A NETWORK AHEAD." – is not just a catchy slogan to our employees. It reflects the pride and excitement we feel in offering customers superior communications, broadband, and video products offered over the finest network in the world.

As Mr. Buzydlowski explained, the use of fiber all the way to the home in our FiOS network provides a very large pipe with virtually unlimited bandwidth that can readily support

Internet access speeds up to 150 Mbps downstream, and 50Mbps upstream, and beyond. This new infrastructure provided on such a large scale can be a major factor in the development and growth of small business and entrepreneurial investments in Pennsylvania.

On the video side, we are currently offering FiOS TV to over 300 communities in eastern, central, and western Pennsylvania with which we have negotiated local franchise agreements, and we have been very successful in getting customers to sign up for the service.

That's because our fiber-to-the-home network enables us to provide a superior video experience.

Our high-definition quality is especially vivid because the capacity of an all-fiber connection allows us to deliver high-definition signals to the consumer just as we receive them. In addition, one FiOS installation can support up to seven high-def televisions simultaneously, which should meet the needs of those video devotees who want a TV in virtually every room of their house.

We provide more than 130 high-definition TV channels, and we expect that number to grow as new programming becomes available. We offer over 50 all-digital music and radio channels and more than 19,000 on-demand TV titles, including approximately 2,500 HD titles.

The FiOS Home Media DVR performs all the usual DVR functions, like recording favorite programs, pausing live TV and watching instant replays, but also has other groundbreaking features. Multi-room functionality permits customers to watch recorded shows on up to three TVs at the same time. Customers can pause a recorded show in one room and continue watching it in another. An interactive Media Manager permits customers to view from their television photographs or music that is stored on their home computer. Customers can program the DVR remotely using their computers or Verizon smart phones, and can even change channels with these smart phones, should they misplace their remote controls.

We also have a functionality we call widgets that permits you to view such things as traffic or weather reports on the screen without interrupting your program and to access social media like Facebook and Twitter on the screen to comment on the screen – so you can comment on those Housewives while you're watching them. We even have a widget that allows you to track your NFL fantasy football team at the top of the screen without turning away from the

Steelers or Eagles.

Finally, our latest FiOS TV innovation, called Flex View, permits customers to watch approximately 2,000 of our Video on Demand programs on their TVs or their computers or their smart phone screens, or any combination thereof. So, you can start watching a program at home on your TV, then continue watching it on your laptop on the train, and then finish watching it on your smart phone. Flex View allows, therefore, for you to watch what you want, where you want, and enjoy the freedom and convenience of our new go-everywhere, watch-anywhere, mobile entertainment technology.

In communities where they are provided under the terms of the franchise agreement, we carry local public, education, and government channels. The programming on these channels can be an important part of the fabric of the community, providing access to the public, schools, and government and the exchange of local information.

You don't have to take my word for the fantastic quality of FiOS TV. It scored highest, for the third consecutive year, in J.D. Power's 2010 Residential Television Service Satisfaction

Study for the East Region. A leading consumer magazine gave FiOS TV a top rating among major providers in its most recent survey of television service, with top marks in all five categories in which it measured Verizon: channel selection, picture quality, sound quality, reliability, and value.

Beyond all the exciting capabilities and features of FiOS TV, the biggest advantage it offers Pennsylvanians is something many of them have never known, a choice of local cable providers. Competition between Verizon and the cable companies greatly benefits Pennsylvania consumers, as does the voice and data competition that my colleagues on this panel have brought to the marketplace.

The focus of competition between Verizon and the cable companies now is "the bundle," a package of communications, internet, satellite, TV services offered together for a discount price. The so-called "triple play," or, if you add wireless, the "quadruple play." Customers like paying one price to one provider on one bill for such a bundle, and in fact, nearly half of our customers subscribe to one. These bundles compete head-to-head with those offered by cable companies.

This competition works best when all providers are operating on a level playing field. It does not work well when there are restrictions or requirements placed on one provider that do not apply to the others. While there has been great progress on leveling this playing field through work done by this legislature, there are still inequities that need to be addressed. And my colleagues on the panel I think will agree that this is best done by removing the restrictions from us and not by adding others onto them. As you will hear in the wireless panel testimony, one need only look at the amazing developments and innovation in the wireless industry to see the benefits of competition on a level playing field with only a light touch from government.

In closing, Verizon is very excited and energized about bringing voice, Internet, and TV services on its cutting-edge FiOS network to millions of customers across Pennsylvania. We understand that every aspect of our business is being contested in the current competitive arena.

In using our new all-fiber network to meet substantial pent-up demand for FiOS services, we will continue to be a fierce competitor to the cable companies and expect them to defend their long- held turf with equal vigor. Consumers can only win.

Thank you for this opportunity to appear before you, and I will be happy to answer any questions you may have.

CHAIRMAN GODSHALL: Thank you, and the final panelist here is Lisa Volpe McCabe from Policy and Outreach, Satellite Broadcasting.

DIRECTOR McCABE: Thank you, Chairman and members of the Committee. I am happy to be here today. I am just going to take a second here to get my PowerPoint up and running.

My name is Lisa McCabe and I am the Director of Public Policy and Outreach for the

Satellite Broadcasting & Communications Association. We are the consumer satellite association, which our biggest members are DISH Network and DIRECTV. Since this is the first time that the satellite industry has been before the Committee, I thought I would start with a little explanation of how satellite television works and then talk about our place in the marketplace and the video services marketplace in Pennsylvania and then a little more about what our

Association focuses on. Basically, satellite service, the distribution model, has three components. Those three components include the uplink, the satellites, and the consumer equipment. The uplink is where programming is sent to the facility, DISH Network and DIRECTV have these facilities in

Wyoming, Utah, and California. The programming is sent to the uplink and the uplink is coded and digitized and sent up the satellites. Then, the satellites, there are 12 satellites that DISH

Network has and 11 that DIRECTV have. These are satellites that are geosynchronous, meaning they work with the rotation with the Earth so they are always in the same space, the same orbital slot is what it is called so that when a customer's satellite is installed at the home, the dish is installed, they will be able to find the satellites because they are in a constant position.

These satellites, this is a large infrastructure cost that DISH Network and DIRECTV have because they have to pay launching fees to have the satellites as well as rocket fuels so they are launched from various places around the world. They also have lease fees, and in some cases they lease space on other people's satellites as well as certain slots on others, or they will lease an entire satellite.

The next portion, the third part of the structure is the customer equipment. The customer equipment consists of the satellite dish that is on your property as well as your DVR, your

Digital Video Recorder, which is your box that contains all of the information that you have.

That is the one that you have in your home. This is a little schematic that kind of just shows an overview of how the system works.

DISH Network and DIRECTV are companies that have been around for over 20-years, but they have really only had a significant position in the marketplace for about the last 10-years, where they have gained customers and gained a presence in the U.S. as well as in Pennsylvania.

Currently there are about 110 million television households in the U.S., and 95 million of them have some sort of pay TV. We reckon that about 65 million of those are cable customers, and just over 30 million of those are satellite TV. Satellite TV has about 30% of the pay TV market across the country, but only about 25% in Pennsylvania. They are about 1.07 million satellite households in Pennsylvania.

To go from 0 – 30% in 10-years we think has been a pretty fast growth, and we are very happy about that growth. Some of the reasons for that growth, we think are, 10,15 years ago there was no Verizon FiOS, cable was really the only offer as well as broadcast television. So, being a new competitor that comes into the marketplace has helped us grab a little bit of market share. Also, the fact that satellite TV has 100% coverage in rural areas, I think is another offering in areas where cable doesn't have service and where rural customers would like some other types of programming choices other than what is available over the air. We have made some significant progress there in providing services to rural areas.

Another thing that DISH Network and DIRECTV have done a good job of is finding different niches of programming that may not be offered by the others. They have significant sports programming, DIRECTV, as you may know, has a deal with the NFL for their very popular NFL Sunday Ticket, as well as some Major League Baseball packages. Both companies do a good job with providing very diverse foreign language programming. A lot of urban areas as well as rural areas that have high foreign populations, they offer very robust foreign language programming in almost any language you can think of. So they think that these have been good ways in which they have differentiated them in the market where they have been able to get customers.

There are lots of different services and the same choices that are available on cable TV with some of your favorite channels, HBO, Showtime, TNT, whatever, those are also available on satellite TV. In your packet you see there are number of different competitive offerings that we list about new things that DISH Network and DIRECTV have come up with, and I can tell you that similar to some of the things that Verizon had talked about offering through FiOS,

DISH Network and DIRECTV have some very interesting service. DIRECTV just launched last year their Whole-Home DVR Service where you can watch a show in one room, pause it, continue it in the next room and finish it up in a final room. One thing that both companies have come out with are apps for iPad and iPhone where you can program your DVR from wherever you are. Another technology that has been very popular is called "sling box" technology. DISH

Network and DIRECTV both offer the use to be able to sling your TV to wherever you are. So if you have your favorite shows that you record or you like to watch the Harrisburg news and you are traveling to New York or wherever, you can "sling" your TV to your iPad, to your computer, to your iPhone, and be able to watch the local Harrisburg news even if you're in wherever. We think that that has been popular as the world becomes more mobile you have the ability to take your favorite television shows with you.

As far as the presence of satellite TV in Pennsylvania, I did mention we have almost 1.1 million subscribers in the State, and this State ranks number seven as far as subscribers in the country for satellite television, so Pennsylvania is a very important market to us because of the large number of subscribers. And as I said, we have about 25% of the pay TV market in the

State.

As part of the work that the Association does, we provide education and training for the work force that provides satellite television. Our model is you can call the 1-800 number for both companies to get service, but also there are over 700 small business owners in this State that sell

DISH Network and DIRECTV out of a local store front or have a local presence. We provide, the association provides, education and training for them. We have a national certification program in which we educate the individual installer who comes to someone's home to learn about how they can do the best job of installing and listen to the customer and learn how to do it more efficiently so that they cannot keep the customer sitting at home because they are not sure of what they're doing, so we have a national certification program in which we've certified over

1,000 technicians in the State.

There are also equipment providers and manufacturers in the State that sell DIRECTV equipment to the retailers and to some installation providers. DISH Network and DIRECTV have

864 employees in the State that are direct employees of those two companies, and even with the larger work force, if you look at the small business as well as the distributors and retailers and installers in the State.

On the public policy front, the association I work in some of DISH Network and

DIRECTV to follow State legislative issues, State taxing is important to us as well as licensing of electrical workers because we have low voltage electricians that do this work, as well as educating consumers, installation providers, towns and cities, on the consumers' right to satellite service. Part of the 1996 Telecommunications Act required that the FCC promulgate rules which they call the Over the Air Reception Device Rules, We call them the OTARD rules, and these rules, over certain conditions, allow consumers the right to have satellite television. They often override homeowners association rules, landlord rules, and local zoning ordinances. They're specifically designed so that the consumer, under certain conditions such as if they have an area of exclusive use, such as a patio or a balcony, that they could place a satellite dish on. But they can do that even if their landlord doesn't allow it as long as that dish is totally within their area of exclusive use. The intent of the rules is so that service for consumers, the ability to have installation, maintenance, or use of a satellite dish is not unreasonably delayed that you don't unreasonably increase the cost of installation, maintenance, or use, or you don't preclude someone from getting an acceptable quality signal. I worked with a number of municipalities in

Pennsylvania to make sure that they have local ordinances that don't run afoul of the FCC's rule while still taking into consideration the wishes of the residents and council members in their cities.

I am happy to answer any questions.

CHAIRMAN GODSHALL: Any questions from any of the members? Representative

Evans.

REPRESENTATIVE EVANS: Thank you, Mr. Chairman. Question for Ms. Given, you mentioned about the competitive nature of the marketplace with cable television in Pennsylvania and I think it is evident by the panel we have here today that there are many, many choices that people have. I am just wondering if you could tell us a little more in your own words about the competitive nature of Pennsylvania right now.

PRESIDENT GIVEN: I guess there has been a lot said already, so I will just try to add a couple of things that are a little different. One, I guess we talked about on the line side as opposed to the cable and the voice side, that we have lost somewhere around 50% of our access lines. I think most of us would assume that that is in the cities. I think typically the cities are probably in that area. But we actually have rural exchanges that have lost 70% of their lines, so it is dangerous to kind of make assumptions about where competition is especially affected and what consumers are doing, because some of it will surprise you.

The other thing, I guess I would mention, is that the environment is just changing so dramatically across the whole spectrum of this industry. If you look at the devices that are coming onto the market, we have Kindles, we have iPad's, we have smart phones, we have netbooks, we have the device to be named later, and our customers want television on their phone, they want the phone on the television, they want the Internet on their iPad, or vice versa.

So we have to keep up with all that. If any of you who have watched your children or your grandchildren take to these devices like a duck to water, you could imagine the kinds of things that are going to come in the future. I think this environment is extraordinarily competitive, extraordinarily exciting, and is going to continue to become more so in the next few years.

CHAIRMAN GODSHALL: Thank you. Representative Kauffman.

REPRESENTATIVE KAUFFMAN: Ms. Given, you mentioned of course Verizon has the ability to have cellular phones, which I think you are the only one up there, which kind of made me think back to the last panel, but since you are there I will ask you a question.

As far as technology goes, looking at the consumers and moving from land lines to cellular phones or cable digital voice, what are those trends? Maybe you can quantify them a little bit, I don't know what you can offer for that.

PRESIDENT GIVEN: The latest statistic we have seen is that more than 25% of customers have now cut the cord altogether and have gone strictly to wireless. About 40% are using wireless as their predominant phone. I think it was not much more than 2-years ago I would've told you that percent was 10. So, that is a really steep curve. Now, I don't know how much it is going to continue, if it's getting to the point where maybe it's going to flatten out a little bit or not, but it is definitely a dramatic curve. Personally, having started out in this industry as a wire line network planner and engineer, I kind of like the old wire line phone and hope everybody goes out today and gets another one. But, really that is not the trend we are seeing.

And of my three children, only one of them has one, so I guess I didn't teach the other two quite well enough.

But if you indulge me one minute, could I go back and add a little bit to your question,

Representative Preston, on the 814 area code kind of thing? I just want to add one little thing to that. As far as I know, once an area code is exhausted, I only know of the two ways to have a new one put in, but there are a number of number conservation methods that can be used along the way, one of which is thousands block pulling. That is something that is now being put in place across Pennsylvania and when you take that into consideration we think the 814 area code will last a lot longer, so we may be able to push that out.

CHAIRMAN GODSHALL: Gale, I also have a question. When you say that you have an enfranchise agreement with a municipality, does that mean that you have to actually give services to every home owner in that municipality no matter where they live? If somebody way over here out of it, you are compelled to take care of everybody?

PRESIDENT GIVEN: Well, we negotiated all of those agreements individually. There are about 335 of them if my memory serves me correctly, and I believe most of them do have that kind of a built-out requirement. I would have to check to make sure that they are all written that way. I will tell you, I absolutely know for sure that Pittsburgh and Philadelphia, we are required to pass every single household in the city. I think that is generally true across the board.

CHAIRMAN GODSHALL: I also have a question for Lisa. Lisa, one of the complaints, I guess, that I have heard on DIRECTV is that, how do you determine, say your CBS, NBC, FOX, is from Philadelphia that I get on my DIRECTV? Rather than Scranton, New York, someplace? I have had a complaint from one of my colleagues that up in the northeast all of a sudden when they went to DIRECTV they got New York major channels. How do you determine which channels you are going to be giving to that subscriber and making them aware of the fact of what major channels they are going to be getting, from what city?

DIRECTOR McCABE: The basic way that those channels are determined are by DMAs, the Direct Marketing Areas. It's a term they came up with in the 50s, that the broadcasters came up with, that determined for selling for advertising that these are what would be considered the

DMA. So you often times have someone who lives in Pennsylvania but they live very close to

Ohio, might get Ohio channels. You see that in a lot of major cities. There are sometimes limited by the actual DMA in which that county or that area is set in, which was established by the FCC years ago. There is a little bit of leeway when there are adjacent counties or adjacent DMAs where the provider, DISH Network or DIRECTV may have an option of offering one or the other, and so I am happy to look into the specific situation you have here to see how that was determined. A lot of it is set at the federal level and there is a little bit of leeway that the carriers can decide which way they will go in providing which locals to which, and I would hope that at the time of buying a service they would let the customer know of that.

CHAIRMAN GODSHALL: I wish you would. That is something that has come up a number of times for me.

Are there any other questions from any of the members? Chairman Preston.

CHAIRMAN PRESTON: Very quickly, I just wanted to really commend both panels, the first and the second, along with this Committee, because I think we need to look at what the

Committee has done along with business who are all competing with each other. If you look at the first panel, Comcast wouldn't have been sitting at that panel 10-years ago. If you look at the second panel, whoever thought that Verizon, and a lot of people thought that the satellite industry would be gone 10-years ago. So, when we're looking at the work that this Committee has done and we are getting ready to go to in the future, and that is why I was asking the questions. Because every once in awhile as new technology is changed, things have evolved.

And I look forward to working with you guys in the next couple of years.

CHAIRMAN GODSHALL: Thank you, and thank you for your comments.

At this point our final panel of the day contains representatives from the wireless communications industry, Dave Kerr from AT&T, Marissa Mitrovich from Verizon, Chris

Ternet from T-Mobile, and Gary Horewitz from Sprint.

We have covered the universe, I think, pretty well.

When you're ready, go ahead.

VICE PRESIDENT KERR: My name is Dave Kerr, I am the Regional Vice President for

External Affairs with AT&T. I would like to thank you for the opportunity to present today. On behalf of our 3300 active employees here in Pennsylvania with AT&T, I am happy to join you today.

First of all I want to take a step back. I was reviewing history a little bit. AT&T has a long history here. In 1885 a new subsidiary was formed in New York City called Bell Telephone.

Bell, at that point, created a new subsidiary called American Telephone & Telegraph 126-years ago and opened the first long-distance network, a 300 mile copper network between New York

City and Philadelphia. So, we do have a long history. It has changed a lot, as you have heard from the previous panels, but it is also interesting, I as well could probably serve on any of these three panels as well.

We are the largest telecommunications company in the country. We do have the most land lines in the country, although we don't have any in Pennsylvania, and we are subjected to the same challenges that CenturyLink, Verizon, and Steve Samara and his members have as well as the loss of land lines. We do have the most wired and wireless broadband customers or users in the country with greater than 17 million when you count the laptop cards, as we do in these figures. We also have an award winning television and video service of our own. Again, not in

Pennsylvania, but we have 3 million customers in a service we call UVerse which we offer in our

States where we have land line territory and we are proud that in the first three quarters of last year, in 2010, we added more customers than all of our competitors combined in the video space, so that is a growing market for us. Not exactly in Pennsylvania, but in other areas of the country.

I am here today with our colleagues in the wireless industry, I am going to serve as the maestro of the slide show as well. It is interesting here, you are sitting with four of the larger carriers in the wireless industry, and this presentation really could be a day long, could be a couple days long, and you could have multiple panels just with our industry. When you look at the facilities based providers, which is basically what the four of us sit here and represent, and there are others in Pennsylvania, we are the carriers. We are national in scope but there are regional players and local wireless service providers here in Pennsylvania.

When you move to the top right quadrant there are what is called non-facilities based providers or mobile virtual network operators, MVNOs. The easiest way to think of those, or examples of those, are resellers. Prepaid customers, the prepaid market, we are going to hear a little bit more about that in a little bit, does represent about 18-20% of the total market right now.

This also represents companies like Clear, I think you heard a reference to that under the former panels, it is a joint venture with some other providers as well. You also have third-party actors, platform providers, there are a number of new platforms, we'll hear more about that, there are also a number of manufacturers and suppliers, many of which are home and based here in

Pennsylvania. These are the handset operators, the chip and network equipment operators, the tower companies. We'll talk a little bit more about tower companies here today, as well. And lastly, on the bottom right quadrant, if you will, a large and growing part of the industry, the app and software developers. I do see, I don't know if app is now part of the Webster's Dictionary, but I think it was the word of the year for Time or one of those magazines. It is certainly in the vernacular these days. That includes television, entertainment, mobile gaming, a lot of the other innovative offerings that we as providers have, and we'll hear a little bit more about that.

So while the face of the industry is the facilities based providers that are sitting here before you, there are clearly a lot of other segments of the industry that are represented here in

Pennsylvania.

I want to talk just a little bit about the evolution of the wireless eco-system. The total number of subscribers has grown astronomically as you'll see there and see more. The total SMS, which is basically another word for texting, and minutes of use, those figures there are, yes, in trillions of units. That is pretty amazing, and that is no surprise to anybody in the room with children and even younger children nowadays. Churn is a term that we use in the industry. It is an important measure for us in terms of movement of customers between providers. We all attempt to keep our churn down. What you see with churn increasing, I think, is representative of a continued competitive nature of the industry.

Smart phones is a new vernacular in the industry, relatively new. You will see there in the figures, fourth quarter of 2006 6% of the total handset market were smart phones. A smart phone is basically just a device you carry around, a phone if you will, that has the ability to have voice and data capabilities. It is your common devices, iPhones, Droids, those types of things. Others can chime in on their devices as well, I didn't mean to single anybody out.

Device manufacturers, operating systems, increase in the number of applications over

400,000 apps now in the marketplace and growing exponentially. Then, as we're going to talk a little bit more about pricing and competition, the average bill, and we're very proud of this fact, remains low.

Wireless in Pennsylvania, just some statistics here courtesy of CTIA, our wireless association, subscribership matches very much the national figures growing 37%, now about

10.8 million subscribers, wireless subscribers in the Commonwealth. I believe it was 2005-2006 when on the X-chart the number of wireless subscribers passed the number of wire line subscribers. I think was as long ago as 4-years ago, so significant. The wireless industry has a significant number of customers in Pennsylvania. Our adoption rate is about 86%, so approaching saturation which is a challenge that all of us have in the marketplace moving forward.

Fourteen facilities base providers in there, we'll talk a little more about that.

In 2008 the revenues constituted more than 9.9 billion, or almost 19 billion to the economy. So significant import for the Commonwealth. And then you'll see the figures there for the number of employees, number of business locations, in the Commonwealth. That includes retail stores as well as headquarters operations and such, and then the wage I think is very important as well. The industry in terms of per capita income is quite significant in terms of good paying, quality paying jobs for Pennsylvanians. I think that is very important.

We are also proud of our partnerships with the General Assembly and policymakers with

Agencies like the Office of Administration, who has worked with the industry on the Public

Safety Radio Network in making their facilities available, so we want to applaud them for their efforts. We continue to work with PEMA, the Emergency management Agency, and the PSAPS, which are the Public Safety Answering Points, all of the carriers before you today are phase 2 compliant, which means we work closely with them to upgrade the facilities and your emergency responders in your communities to make sure that we are compliant and have the most updated technology.

I do want to compliment, on behalf of the panel, the General Assembly and the Governor for signing Act 118 last year, which was an industry effort around clarifying the collection methods for pre-paid wireless for 911 purposes and generating additional funding for first line emergency responders. It was a good bill, and you should be applauded for that action.

The last thing I want to mention is we had some significant discussion about an important public policy issue before you, the issue of intercarrier compensation and access charges. From

AT&Ts perspective, this is a critical public policy issue. It was asked by a few panelists here, the issue of traffic pumping and some other things, I just wanted to let you know the PUC has been debating this issue for close to a decade now. Our company put forth a complaint on this issue 2- years ago, and it is right for a decision. This is truly a dinosaur policy that is inhibiting competition and really needs to be addressed. We hope that that is addressed very quickly.

The way we are going to handle this presentation, I'm going to turn it over and let my colleagues introduce themselves, but we want to leave you with three thoughts after your education today on the wireless industry today, and that is competition, innovation, and affordability. Our panelists are going to talk a little bit about their companies but are also going to hit on their tenants of the wireless industry.

With that, I will turn it over to Marissa.

DIRECTOR MITROVICH: Good afternoon Chairman Godshall, Chairman Preston, members of the Consumer Affairs Committee. My name is Marissa Mitrovich. I am here representing Verizon Wireless today. I serve as their Director of Northeast Government Affairs. I would like to thank you for inviting me to participate today. I also would be remiss if I didn't recognize my colleagues, Gale Given and Frank Buzydlowski, who are not only effective leaders in the Verizon family, but also great people to be on a team with.

I will first start off by giving you a background on Verizon Wireless presence. We are also very proud to have over 3,000 people employed in Pennsylvania. We have two of our regional headquarters here in the State, in Trevose and Warrendale. We have one customer care center which is in Cranberry Township. We have, as a company, invested on the wireless side

$1.2 billion since the company was founded in 2000 in the State of Pennsylvania, and you can buy our devices at 96 direct retail locations. We also partner with some of the big box retailers,

Best Buy, Walmart, and we're very proud of our presence here in the State.

What I want to talk to you about today, my piece I'm going to focus on is competition. I know you all have a handout, but I'm kind of going to go off the handout. I'm going to add my own commentary and dialogue, but you can use that as a guide.

I think what's really important for you all to know is that wireless is a very exciting industry. It is highly competitive, and really consumers are benefiting from the competition.

Competition has driven investment and innovation in networks, devices, service plans, and applications. So, as industry, we have continued to evolve. We have invested more in our infrastructures. We all are making our devices smarter, faster, better, we all want to have the best, fastest network and so we are continuing to make this a top priority for our companies so we can serve the needs of our customers.

Competition has driven down the cost of service to consumers. My next slide, I'm not ready to go to yet, I'm going to show you how many subscribers we have. We have more carriers who have entered the marketplace, we have more devices being introduced, and we're really proud to be able to meet the ongoing changing demand. Our devices are changing, our capabilities are changing, and we're able to all compete effectively and produce different but equally great devices for customers to choose from. Additionally, other parts, and I think we touched on this, Dave did just recently, prepaid market is growing. That is another way we are meeting our customers' demands and being able to compete. People want to manage their costs and their plans, and so we are able to meet that aim.

Competition, the next point, the last point, competition continues to drive the deployment of faster, next-generation broadband wireless service. As many of you are aware, our handsets are not just, we don't make calls on them. Our handsets serve kind of as, we're not leaving home without our handset. We are messaging people, we are playing our music on our handsets, we are also watching videos and playing video games. I think it is really exciting. Additionally, we have brought tablets in to the market, which is another thing we really have become innovative. I brought my iPad up here just to show you, I thought it would fun to have a prop. I'll bring it back up later. And we have the iPad, the Samsung Galaxy, and other competitive devices.

I'm ready for the next slide, which just shows you how amazing the subscriptions we have had are. We're at 292 million customers, 292 million wireless subscriber connections. So, if you look over 20-years, that is 48 times the amount of subscribers we have had. This is a great testament to the affordability, the way we are using our handsets, people of all ages have handsets. I know many of your children have them, I know we really rely on them. So we continue to increase our subscriber rate.

The next slide is the ARPO, which is Average Revenue per User, we want to really make the point that it has remained stable. What is very, what you really need to see in this is what subscribers are using, their voice usage has gone up, you also start to see in more recent years their data usage has gone up, their texting, their MMS capabilities, so they are using more, but the price has remained stable, steady. That is something that we are very proud of. It also just shows how we have been able to work as an industry to make these prices competitive for customers.

The next slide effectively, this is basically wireless customers are paying far less for minutes since the 90's. So you see this red line, which shows the costs going down of what they are paying per minute, you see the blue line which shows how many minutes they're buying, it's quite a phenomenal chart. Especially you consider back in the '90s people were buying bundles of minutes, a couple hundred. Now people are buying minutes in the thousands. This just illustrates, I think, a really great point that we have been able to make our costs go down while people are getting more value for their minutes.

The next slide kind of just speaks to how all of these things have changed. I spoke to the habits of the consumer is changing. We have some interesting figures. In just 2-years we have seven application stores. That is where you download all of your apps. Anything from iTunes from Apple, Android from Google, they all have the opportunity, you can go and seven stores offer all sorts of devices. It is over 500,000 applications you can buy. That number grows every day. I have a colleague who designed an app just the other day, and he said, will you download this for me? It's a bird app. He takes pictures of birds. I said, sure, I'll download that. So this is just constantly a growing number.

Additionally to date, more than 10 billion applications have been downloaded by consumers. These can be everything from, on my iPad, which I brought and you won't be able to see very well, but I figured I'd pull it up, we have everything from Scrabble, I have the Weather

Channel, I can online and say, oh, it's going to be 38 and sunny in Harrisburg today, great. I have

FiOS. If I don't get home in time tonight I can make sure I DVR modern Family in there. We have all these great opportunities. Things are evolving. So wireless carriers in the U.S. already are transmitting the equivalent of more than 1.5 times the entire Library of Congress book collection every hour of every day. Basically, this is all uploads, downloads, documents, streaming video, a host of other non-voice applications, and this is just a ton of data and content.

I think additionally, we expect this number to grow substantially. Right now we think from 2010

– 2015 we are going to go from downloading, streaming about 49,000 terabytes a month to more than 986,000 terabytes a month. That is a lot, a lot of data. That is the best way to say it. I can give you the mathematical breakdown later, if you would like.

The next thing is we have more choices. This is, again, just speaks to our ever-evolving ecosystem of the wireless industry. We have not only choices for apps and handsets and, we are really meeting consumers needs and we have nearly three-quarters of consumers have a choice of five or more wireless service providers. In addition, they have choices, they have choices for their, we all sit up here together today and I think we come together on a lot of issues. However, as you all know, when you turn on the radio or turn on the TV it's a very competitive industry.

You can tell by the commercials. All of us are out there competing with one another.

Verizon, I can say one thing we did is we launched our LTE network in Pennsylvania in

Pittsburg, in Philadelphia, just this year. I know other carriers are doing the same and people are wanting faster speed, they are wanting choices for what networks they can use and this is kind of the future of the industry. I know one of my colleagues is going to talk about innovation and what this means for us, but what I want to leave you with is there's just a lot of options. We are highly competitive. We are very proud of this competition and we're also collectively very proud to have a great presence in the State of Pennsylvania.

That concludes my part of the wireless presentation. Thank you again for the opportunity to be here. On behalf of Verizon Wireless we look forward to continuing to work with this body of government moving forward.

MR. HOREWITZ: Good afternoon. My name is Gary Horewitz and I am counsel with

Sprint Nextel. I won't tell you the long history or story of Sprint or Nextel, one a more than 100- year old company and one a very short company merged in 2005, but what I do want to talk about briefly is the newest product and service that we are very proud that we have rolled out in the Commonwealth which is Assurance Wireless with our prepaid service of Virgin Mobile and

Boost Mobile. Assurance Wireless is a free, yes free, wireless service with a certain number of minutes and if you haven't heard about it yet we will make sure that you do so soon for

Pennsylvania residents who qualify for aid and assistance to make sure that, sometimes it is between a job and not a job to make sure someone has a lifeline phone, and that lifeline phone is now going to be provided on a wireless basis from Assurance and we are very proud to make sure that we're serving people to help people get jobs, make sure that they can have emergency communication when they need it and have the ability to stay in touch with family. That is actually just rolling out this week.

Again, we'll provide more information about it and of course also, as you heard, Sprint

4G has a ever-growing footprint in the Commonwealth in both big cities and in small and expanding. I think that kind of leads to, when we talk about the competition as we have said we all are fiercely competitive up here. Of course Sprint is the best, that is a given, but I think, while we all agree on several policy matters, we do fiercely compete every day in all seriousness. I think that message to that is that if you look at the number on my part, it is talking about cell site investment. Competition has led to tremendous innovation. Also, consumer expectation, where we started once not only just 26-years ago where there were only a couple people with mobile phones and if you got a signal you were excited about it, to tell people you were talking on a phone. Representative Preston, I'm sure you had one of the first phones. People now expect to download the Library of Congress "X" amount of times per hour. So how did we get there? This just doesn't talk about only a 15-year period from '85 – now, and look at the dramatic increase in cell site investment. That's the way that we have been able to deliver these amazing applications, the service, the voice, the messaging. Whether it be on a tower or on a flag pole that looks like a tower or through work of the Commonwealth, maybe on a public site, public safety site in cooperation with. Most often we are what is called colocated, as we are doing information colocated would mean that we share space, whether we share space with multiple carriers, having their facilities on a particular tower or share space with, again, with a public safety or a public emergency site using the towers. We are trying to get the most efficient investment and coverage to be able to deliver these applications and these services that consumers have, quite frankly, come to expect. So, it is competition that has led us. You look at not only just the number of raw locations of everything that qualifies a cell site. Not just a tower but in buildings or on the side of a building, but look at the numbers of money that is spent in just that same period of that 15-years.

On the next slide you can see that it is almost $300 billion from the industry nationwide.

Now, that investment includes the costs of installation. The cost of purchasing of equipment. The cost of manufacturing equipment, technicians. So the contribution of not just enabling the economy and enabling industry and services and public safety that our industry does, and consumers from entertainment from enabling participation in government to watching the transmission of hearings to participation on applications like blackboards so you can track your kids homework. That $295 billion nationwide also has meant tremendous investment in jobs in building out these networks.

The last slide then I want to cover is, again, the choices are being made in looking forward toward the future, the response to this investment and the competition that has led to it has been tremendous. When you look at these numbers, and this is just a much shorter graph.

This is not '85-now, this is 2008-2009. We are talking about, these are high speed lines. When we are talking about high speed lines, I will not get into somewhat the controversy of what defines a high speed line, I will just tell you that Sprint 4G is high. Thank you.

High speed lines have abilities to get these applications and when you are talking about the ability of downloading as you can on – did I mention Sprint 4G? – as you download a video without buffering time or being able to watch Modern Family, in case you missed it earlier, we can download it for you in real time. That is why in mobile wireless is being the choice for all, for new, 85% for the new choices of high speed lines. It is mobile. People expect to do the things that they want to do not just connected to their house or their business, but expect to do that everywhere and expect those speeds everywhere. They have responded to that. Again, that is because of investment of the industry, the jobs that have come out of that investment, and the competition that this body has enabled and made sure that we are able to engage in that competition leading to that investment. Of course, investment equals jobs, investment equals innovation. I'm going to turn it over to my colleague Chris Ternet from T-Mobile to talk more about that.

MR. TERNET: Thanks, Gary. Chairman Godshall, Chairman Preston, members of the

Committee, thank you for the opportunity here today. I am Chris Ternet with T-Mobile and as you can see we are all sitting up here together. We work well together, but we are very, very competitive. I would be remiss if I didn't give you some statistics and a little bit of information about T-Mobile.

T-Mobile has a growing network in Pennsylvania. Our build-out continues. We rolled out

4G, what we describe as 4G, what some others may not describe as 4G. That is part of the ongoing debate and ongoing competition among the carriers. We have a robust 4G network and our customers have paid $84 million in transaction taxes. We have 1800 employees in the State,

900 of whom are based at our Allentown call center, and that accounts for a $62 million payroll.

You can see we are quite invested in Pennsylvania and as my colleagues have mentioned, we have talked about competition, we have talked about investment, both of those, competition leads to investment, competition leads to innovation both broad based industry wide innovation as well as carrier specific innovation. Competitive differentiators in the industry. We are in a very, very competitive marketplace. I don't know if we've mentioned that enough times today. It is very competitive.

Our networks have evolved dramatically over the last several years. From the first generation of the network and the afore mentioned brick phone that allowed you to make, it was new, it was exciting, it was very innovative at the time. It allowed you to make and receive voice calls. We have evolved quite a bit since then. Moving on to 2G pre 3G devices, which not only allow you to make and receive voice calls but also saw the introduction of text messaging, the ability to browse the Web, and listen to audio, listen to music files. Then we moved on to 3G devices, which allowed you to watch video. To do streaming audio i.e. radio and advanced gaming. Now we are at 4G. 4G is really all about, it's really about the speed and allowing you to replicate those experiences one would have with the television or a PC and to do that on a device. We are moving certainly beyond just devices now to tablets and netbooks.

As our networks have evolved and grown over the years, so have our devices. From the basic needs phones which are fine for many people today to smart phones. As I think Dave Kerr mentioned, smart phones now account for about 30+% of the market and that number will only increase as the interest in smart phones continues to pick up and as prices for smart phones go down.

Another significant development is the opening of networks. The Android and Apple operating systems have changed the market significantly over the last few years. T-Mobile was the first wireless carrier to roll-out an Android device, the T-Mobile G1 with Google. Another area that some of colleagues have talked about is prepaid wireless services. Certainly that has been around for quite awhile. It is now evolved and there are numerous variations of prepaid products and services that consumers can avail themselves of with more and more pricing options and almost every device that every one of us offers is now available to prepaid customers. It is nearly 20% of a 292 million subscriber marketplace. It is growing at a rate of 5-

10% annually. So it is suffice to say prepaid offers consumers choices that they didn't previously have. No contract options, and many consumers are availing themselves of that option.

Our consumers demand innovation. It is really the whole mark of the wireless industry.

As carriers we approach the market in different and unique ways. Each of us have developed competitive differentiators to set ourselves apart in a very competitive marketplace. Just to give you one example, T-Mobile was the first carrier to offer detailed coverage maps. Street level detail so you could determine if our coverage was right for you. That has now become the standard in the marketplace.

Finally, we as an industry believe that State-specific requirements both stifle innovation and homogenize wireless service offerings. Certainly in Pennsylvania we appreciate a light legislative and regulatory touch and believe that has led to significant growth in the industry and certainly a heightened competition as well as significant investment in innovation.

Thank you all for your time today, we appreciate it.

CHAIRMAN GODSHALL: Thank you. I have one question. What about towers? Why do we have to have 4-5 towers sitting side-by-side? There is growing opposition to this in the municipalities and a few years ago, now all of a sudden towers are the cause of cancer and the cause of everything else, what is the story and what are we doing about towers?

MR. TERNET: I will take a crack at it, and then I'll let my colleagues chime in as well.

I think in the early days of the wireless industry each company developed its own locations and did not seek out colocations. That has certainly changed. As we have developed sites around the State and indeed around the country, we have taken the low hanging fruit. Sitting is very difficult in particular jurisdictions and colocation offers us the ability to site one facility and have numerous carriers located on that facility. We are taking advantage of that opportunity on an increasing basis.

CHAIRMAN GODSHALL: What about health hazards? It has all of a sudden become a big thing. Down in the southeast, needless to say they don't want the towers, but they want the service. But they don't want the towers, so they are looking at reasons of why the towers shouldn't be there. Are there any scientific studies that have shown there are health hazards that have come along as a result of the towers?

MR. TERNET: Mr. Chairman, the overwhelming body of evidence suggests that there are no health risks associated with wireless. There are a few studies that have determined that there are, that there is a health risk, but those studies have not been able to be replicated. In other words, they have not been able to show that when looking at that issue again. But the overwhelming body of evidence says that there is no health risk associated with wireless; either wireless devices or wireless towers.

MR. HOREWITZ: Specifically, Mr. Chairman, on a couple of things, on wireless cell sites. The reason you see a lot more than you see, for instance, take KDKA as a radio station that

I think is out of 50,000 watts or something like that. I have heard KDKA as far away as Chicago.

It is because it is a very high power, high wattage radio system that carries out over a long distance. Cell sites, those are very low power. That is why the FCC does regulate the amount of power of cell sites, but they are extremely low power. They are low power for a couple of reasons. One, of course for safety, and extremely below the FCC's allowable amount of energy, but also, more importantly, so you don't have one cell site which can only handle so many callers, interfering with another. So, the design of a network and the design of where a particular cell site is based on making sure that a very complicated network where there is not interference with each other, without interference to public safety, and the number of people, the capacity of a particular cell site. That is why there are so many sites needed. But, to the extent that we can as an industry, there's not just a trend, it's really the standard practice. Whenever possible, we do engage in colocation including on Pennsylvania public sites and Pennsylvania public safety sites that become available so that we do have as few structures as possible. It's our preference, it's obviously less controversial, and of course it's the most efficient from a sitting perspective and efficient from economical for us too. We're absolutely for only having the minimum amount that we need to make sure that we serve our customers, make sure people can reach 911, but because those sites only put out a very, very small amount of radio waves compared to like a KDKA, that's why you have a very small cell site and a need for more towers.

CHAIRMAN GODSHALL: Approximately how many suppliers can you service from one tower? Or can utilize a tower? Is there any given number or is there— MR. HOREWITZ: I am not an expert, but it also depends on, again, there is so much in the design of a particular site, of the height of the site, where the trees are around, where there are buildings around, everything from several miles you can cover potentially several miles if you're on top of a mountaintop to a big city it might be only a couple of city blocks in terms of capacity for a particular site. Of course, what the infrastructure is capable of. It's not unusual to see two or three different radio systems, whether they be wireless carriers or perhaps

Pennsylvania State Police in a wireless carrier, too, it's not unusual to see several on a particular site.

VICE PRESIDENT KERR: Mr. Chairman, it's hard to judge on a capacity level on the number of subscribers. It depends on what you're putting over the network. If it's a regular voice call versus streaming a movie video to a smart phone, it depends. Those are obviously a different capacity over the network, whereas you can have an individual phone call, many hundreds or thousands of people. It's a smaller number with an intense download of data.

CHAIRMAN GODSHALL: Is there any, how many suppliers, like AT&T, Sprint, T-

Mobile, can utilize the same tower? Is there a problem with 3,4, 5 companies using the same?

:In fact, I think there are a number of towers that do that. I think we all know that the top of the towers is the prime space to be, but there are many towers with multiple, 3,4,5 providers on them.

CHAIRMAN GODSHALL: Thank you. Representative Payne.

REPRESENTATIVE PAYNE: Thank you, Mr. Chairman. Marissa, if I could ask really, first, a comment. The correct answer, is that an iPad that you brought? It was not Modern

Family, but you have PCN on there so you can stay up to speed on everything we are doing, right? DIRECTOR MITROVICH: Correct.

REPRESENTATIVE PAYNE: I don't know what Modern Family is, but—

DIRECTOR MITROVICH: Thank you for correcting me.

REPRESENTATIVE PAYNE: —I just wanted to get the record straight.

3G, 4G, where are we going? Truthfully, do we know? Is there a limit or is there no limit? We could be at 50G in 3-years, 5-years.

DIRECTOR MITROVICH: Well, I'll take a stab at that question and I'll let my colleagues also answer. I think right now we say 4G and as Gary said a couple of times, we are trying to determine what that 4G is. I mentioned at Verizon Wireless we call it long term evolution, it is a speed, it is a light speed, for example, if you want to download a movie, things that would take hours take less than a minute now. I think the evolution of the wireless system, I think we could continue to go and move and innovate, and it could get even faster and I don't think we know where it's going to stop is the answer. I do know that all carriers are continuing to, and I should say not just carriers, but so many people in this ecosystem are continuing to research and come up with ideas and study this and figure out how we can best use our spectrum and how fast things can go on it and I think we will continue to see innovation. Right now where we are focused is 4G and long term evolution.

MR. HOREWITZ: I think it is important, since this is an informational hearing and maybe to try to eliminate acronyms, and maybe one of the parts of controversy. "G" is not a government standard or even necessarily a standards body. "G" simply stands for "generation."

So, what is one company's third generation might be another companies fourth generation, etc. I think that helps understand, we all claim, what is fourth generation, truly fourth generation?

There is a disagreement. There is some, including a definition of what is "broadband" I am not an expert on it so I couldn't begin to provide that, but there is some of that debate. But the "G" is a marketing term.

REPRESENTATIVE PAYNE: I personally appreciate that clarification because I think some of us thought, okay, if 3G is fast 4G is faster so can I get 10G. The answer is, no, it's just the generation. Each one of you could have a different generation but it's still faster than you were before.

DIRECTOR MITROVICH: Exactly.

MR. HOREWITZ: Even within there, you saw the 3G and the 3Gplus, and there is even variations within it. Again, That is some of the marketing controversy. What we can say clearly is that every step typically means faster and better. Where the limits are we don't know.

Although overall Spectrum is limited because—

REPRESENTATIVE PAYNE: Hold that, because I want to follow-up with the

Chairman's question where we were talking about capacity and while he was going on capacity on a tower for how many of the vendors could be on the tower, and I know everybody wants to be up at the top, do we in the next 5-10 years have a concern going back to Bob's comments about, well, we have a tower now, with all the data, I know I've gone from a simple flip-phone to a Droid, and I don't know if it's good or bad, I know I get more e-mails and more photos and everything else on there from my grandkids, but, that has to eat up more capacity going through that tower. If you're downloading your TV show or your movie or whatever, that has to eat up capacity. Do we see in the near future a problem with capacity regardless of which tower we're on because we have so many more wireless users and so many more Tweet, and Facebook, and everything else. Is there an issue there?

MR. HOREWITZ: Simplest answer, every day. That is what our engineers work, and that is why we work about, the Federal Broadband Plan is to try to get more capacity. I like to liken radio spectrum to real estate that you can't see. So your question is, how much can you build on and use on the property that you have so that we are always, and again, competing and working on policy issues to try to use that space as efficiently as possible and press and do whatever we can to deliver the same services.

MR. TERNET: Yes, it's Spectrum, and there's significant debate at the national level about that access to Spectrum and just a thought, Spectrum is very valuable. Our companies in the industry spend billions of dollars when the FCC had a Spectrum auction about a year ago, and they are contemplating more auctions for additional Spectrum. It is significantly valuable.

When you think about it, you're basically buying air, but the amount of money that was spent on that Spectrum is astronomical, but it is necessary, as you point out, Representative, for continued access for our customers.

REPRESENTATIVE PAYNE: And that is my concern. I'll just close and say, please let the Chairman know if there is something that we should be doing to assist in that, because while everything that we do today is neat, that we all have these phones and appliances, the reality is I wouldn't want to find out that, well, next year we just can't do this stuff or this stuff slows down.

I think the expectations are, we are going to get faster. We're going to get better. Not slower.

And at some point I just see us running out of capacity on a tower to process all of this data.

Thanks.

CHAIRMAN GODSHALL: Thank you. I want to thank all of the panelists for their excellent presentations. It was quite worthwhile, I think, for not only myself but for a lot of the newer members. It's just trying to keep up with what's happening out there in the real world is really tough, and sometimes it's, as John just said, getting faster, it's a little too fast for me right now, I'll tell you it may be too fast for some other people that are in this room. If they want to admit it.

Thank you very much for being here, for being with us today, and I apologize again for my voice.

With that, the meeting is adjourned.

The above is a full and accurate transcript of proceedings produced by the Official Reporter’s

Office of the Pennsylvania House of Representatives.

______

Jessica L. Rabuck, Reporter's Office