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Broadband: Competition and Consumer Choice in High–Speed Internet Services and Technologies

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Broadband: Competition and Consumer Choice in High–Speed Internet Services and Technologies S. HRG. 106±678 BROADBAND: COMPETITION AND CONSUMER CHOICE IN HIGH±SPEED INTERNET SERVICES AND TECHNOLOGIES HEARING BEFORE THE COMMITTEE ON THE JUDICIARY UNITED STATES SENATE ONE HUNDRED SIXTH CONGRESS FIRST SESSION ON EXAMINING COMPETITION AND CONSUMER CHOICE IN BROADBAND, HIGH±SPEED INTERNET SERVICES AND TECHNOLOGIES, FOCUSING ON THE IMPACT OF RECENT CONSOLIDATION IN THE COMMUNICA- TIONS INDUSTRY JULY 14, 1999 Serial No. J±106±36 Printed for the use of the Committee on the Judiciary ( U.S. GOVERNMENT PRINTING OFFICE 66±614 CC WASHINGTON : 2000 VerDate 11-MAY-2000 08:46 Oct 04, 2000 Jkt 000000 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 66614.TXT SJUD2 PsN: SJUD2 COMMITTEE ON THE JUDICIARY ORRIN G. HATCH, Utah, Chairman STROM THURMOND, South Carolina PATRICK J. LEAHY, Vermont CHARLES E. GRASSLEY, Iowa EDWARD M. KENNEDY, Massachusetts ARLEN SPECTER, Pennsylvania JOSEPH R. BIDEN, JR., Delaware JON KYL, Arizona HERBERT KOHL, Wisconsin MIKE DEWINE, Ohio DIANNE FEINSTEIN, California JOHN ASHCROFT, Missouri RUSSELL D. FEINGOLD, Wisconsin SPENCER ABRAHAM, Michigan ROBERT G. TORRICELLI, New Jersey JEFF SESSIONS, Alabama CHARLES E. SCHUMER, New York BOB SMITH, New Hampshire MANUS COONEY, Chief Counsel and Staff Director BRUCE A. COHEN, Minority Chief Counsel (II) VerDate 11-MAY-2000 08:46 Oct 04, 2000 Jkt 000000 PO 00000 Frm 00002 Fmt 0486 Sfmt 0486 66614.TXT SJUD2 PsN: SJUD2 C O N T E N T S STATEMENTS OF COMMITTEE MEMBERS Page Hatch, Hon. Orrin G., U.S. Senator from the State of Utah ................................ 1 Leahy, Hon. Patrick J., U.S. Senator from the State of Vermont ....................... 2 DeWine, Hon. Mike, U.S. Senator from the State of Ohio ................................... 4 Kohl, Hon. Herbert, U.S. Senator from the State of Wisconsin ........................... 6 CHRONOLOGICAL LIST OF WITNESSES Panel consisting of C. Michael Armstrong, chairman and chief executive offi- cer, AT&T Corp., Washington, DC; Ivan G. Seidenberg, chief executive officer, Bell Atlantic Corp., New York, NY; Alex J. Mandl, chairman and chief executive officer, Teligent, Inc., Vienna, VA; and William L. Schrader, chairman and chief executive officer, PSINet, Inc., Herndon, VA ................... 8 Panel consisting of Anna-Maria Kovacs, first vice president, Janney Mont- gomery Scott, Boston, MA; Gene Kimmelman, co-director, Washington Of- fice, Consumers Union, Washington, DC; and Kevin M. Moore, director, Deutsche Banc Alex. Brown, Baltimore, MD ..................................................... 56 ALPHABETICAL LIST AND MATERIALS SUBMITTED Armstrong, C. Michael: Testimony .......................................................................................................... 8 Prepared statement .......................................................................................... 10 Kimmelman, Gene: Testimony .......................................................................................................... 60 Prepared statement .......................................................................................... 62 Kovacs, Anna-Maria: Testimony .......................................................................................................... 56 Prepared statement .......................................................................................... 57 Mandl, Alex J.: Testimony .......................................................................................................... 21 Prepared statement .......................................................................................... 23 Moore, Kevin M.: Testimony .......................................................................................................... 75 Prepared statement .......................................................................................... 76 Schrader, William L.: Testimony .......................................................................................................... 27 Prepared statement .......................................................................................... 29 Seidenberg, Ivan G.: Testimony .......................................................................................................... 15 Prepared statement .......................................................................................... 16 (III) VerDate 11-MAY-2000 08:46 Oct 04, 2000 Jkt 000000 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 66614.TXT SJUD2 PsN: SJUD2 VerDate 11-MAY-2000 08:46 Oct 04, 2000 Jkt 000000 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 66614.TXT SJUD2 PsN: SJUD2 BROADBAND: COMPETITION AND CONSUMER CHOICE IN HIGH±SPEED INTERNET SERV- ICES AND TECHNOLOGIES WEDNESDAY, JULY 14, 1999 U.S. SENATE, COMMITTEE ON THE JUDICIARY, Washington, DC. The committee met, pursuant to notice, at 10:14 a.m., in room SD±628, Dirksen Senate Office Building, Hon. Orrin G. Hatch (chairman of the committee) presiding. Also present: Senators Thurmond, Specter, DeWine, Ashcroft, Abraham, Leahy, Kohl, Torricelli, and Schumer. OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM THE STATE OF UTAH The CHAIRMAN. I apologize for being just a little bit late, but I had problems I had to handle before I got here, and so I apologize. Good morning, and welcome to today's hearing on competition and consumer choice broadband Internet services and technologies. I first would like to thank all of our witnesses today for their time and cooperation, and I hope that with this hearing we will better understand the so-called broadband issue which all of us have heard so much about recently. The focus of the hearing will be on how recent consolidation in the communications industry, especially within the cable industry, might affect competition and consumer choice for high-speed Inter- net service and content. Competition, in my opinion, is crucial to the future of the Inter- net. It is competition that has created the robust Internet economy that we are experiencing today. Companies and venture capitalists have made unprecedented investments in new Internet products, services and technologies. Continued growth in this area is vital to our economy and our global leadership in the information tech- nology sector. Indeed, many of the new technologies that we enjoy today are the fruits of deregulatory objectives of the 1996 Tele- communications Act. As we continue to deregulate the telecommunications industry, as envisioned by the 1996 Act, it is our hope that fair and rigorous competition in the communications sector ultimately will replace burdensome and unnecessary government regulations. If further deregulation of the telecommunications markets is warrantedÐand I am not saying that it is at this pointÐthis committee and its (1) VerDate 11-MAY-2000 08:46 Oct 04, 2000 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 66614.TXT SJUD2 PsN: SJUD2 2 Chairman intend to continue to work with Senator McCain and the Commerce Committee to do what is fair. In any event, as we move ahead with the deregulations of the 1996 Act, timely enforcement of antitrust laws, as established through sound legal and economic principles, will become even more important in ensuring a competitive marketplace. As I have said before, proper enforcement of antitrust laws today will and should avoid heavy-handed regulation of the Internet tomorrow. That is what we are here to examine todayÐthe status of competi- tion in the high-speed service and technology markets. Today's hearing is about the future of the Internet. And when we talk about the future of the Internet, we mean broadband. It is only with broadband that the full potential and benefits of the Internet and electronic commerce can be realized. For example, to- day's hearing is being streamed over the Internet. Those who are watching it online will appreciate how much better the images and sounds would be with broadband access that can carry 100 times as much data. As we move forward, it is important to have an environment that provides proper incentives for companies to continue to invest in broadband technologies. At the same time, making sure there is competition in the broadband service market will be critical. If we can achieve these goals, consumers and Internet companies will both benefit. No single company should control who can access or develop ap- plications or content for the Internet, whether that company owns the architecture, the hardware, the content of the operating sys- tems needed to navigate broadband pipes. As such, we should try to address any market distortions that prevent software, telephone, or cable companies from entering the race to bring cheaper, better technologies to the consumer. We need to determine what ulti- mately is best for consumers. There are many important issues that deserve to be examined here and we are going to start on those today. Now, I particularly appreciate all of you who are appearing here today, and naturally look forward to your testimony. You are key leaders in this area and we just simply need to have your input. Let me now turn to our Ranking Member, Senator Leahy, and then I will recognize the Chairman and the Ranking Member of our Antitrust Subcommittee, Senators DeWine and Kohl, respec- tively, for their opening statements, and we will move on from there. Senator Leahy. STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM THE STATE OF VERMONT Senator LEAHY. Thank you, Mr. Chairman. When I was first elected to the Senate back in 1974, in the post±Watergate era, we knew it was a time of political change in America. But I didn't real- ize it
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