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107th Congress                                             Rept. 107-83
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 2

======================================================================



 
         INTERNET FREEDOM AND BROADBAND DEPLOYMENT ACT OF 2001

                                _______
                                

                 June 18, 2001.--Ordered to be printed

                                _______
                                

 Mr. Sensenbrenner, from the Committee on the Judiciary, submitted the 
                               following

                             ADVERSE REPORT

                             together with

                    ADDITIONAL AND DISSENTING VIEWS

                        [To accompany H.R. 1542]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 1542) to deregulate the Internet and high speed data 
services, and for other purposes, having considered the same, 
reports unfavorably thereon with amendments and recommends that 
the amendments be agreed to and that the bill do not pass.

                                CONTENTS

                                                                   Page
The Amendment....................................................     2
Purpose and Summary..............................................     3
Background and Need for the Legislation..........................     3
 A.  History of the Judiciary Committee Role in Telecommunications 
     Legislation......................................................3
 B.  The Telecommunications Act of 1996...............................7
 C.  Telecommunications Since the 1996 Act............................8
 D.  The Provisions of H.R. 1542......................................9
 E.  The Goldwasser Case.............................................11
 F.  The Referral....................................................12
 G.  Chairman Sensenbrenner's Amendment..............................12
 H.  Parliamentary Issues Relating to Chairman Sensenbrenner's 
     Amendment.......................................................13
Hearings.........................................................    14
Committee Consideration..........................................    15
Vote of the Committee............................................    15
Committee Oversight Findings.....................................    15
Performance Goals and Objectives.................................    15
New Budget Authority and Tax Expenditures........................    15
Congressional Budget Office Cost Estimate........................    15
Constitutional Authority Statement...............................    20
Section-by-Section Analysis......................................    20
Changes in Existing Law Made by the Bill, as Reported............    22
Markup Transcript................................................    24
Additional Views.................................................    69
Dissenting Views.................................................    77

    The amendments (stated in terms of the page and line 
numbers to the committee print document containing the text of 
the amendment as reported by the Commmittee on Energy and 
Commerce) are as follows:

    Page 15, line 6, insert ``, subject to subsection (l)'' 
after ``service''.

    Page 15, after 21, and insert the following:

    (c) Application Prerequisite to Providing High Speed Data 
Service or Internet Backbone Service.--Section 271 of the 
Communications Act of 1934 (47 U.S.C. 271), as amended by 
subsection (b), is amended by adding at the end the following:
    ``(l) Application Prerequisite to Providing High Speed Data 
Service or Internet Backbone Service.--
            ``(1) Requirement to file application with attorney 
        general of the united states.--Neither a Bell operating 
        company, nor any affiliate of a Bell operating company, 
        may begin providing high speed data service or Internet 
        backbone service in any in-region State under the 
        authority of subsection (g)(7)--
                    ``(A) unless it files with the Attorney 
                General of the United States an application to 
                provide such service; and
                    ``(B) until the Attorney General --
                            ``(i) approves such application 
                        before the expiration of the 90-day 
                        period beginning on the date such 
                        application is filed; or
                            ``(ii) fails to approve or to 
                        disapprove such application during such 
                        90-day period.
            ``(2) Authority of attorney general.--The Attorney 
        General of the United States--
                    ``(A) may issue rules to establish 
                requirements applicable to the form and 
                contents of applications filed under paragraph 
                (1);
                    ``(B) may make recommendations to an 
                applicant regarding--
                            ``(i) withdrawal of an application 
                        filed under paragraph (1); or
                            ``(ii) filing of an application 
                        under paragraph (1), with or without 
                        modifications, subsequent to the 
                        withdrawal of an application filed 
                        under such paragraph; and
                    ``(C) may not approve an application filed 
                in compliance with this subsection unless the 
                Attorney General determines that the applicant 
                has demonstrated that it meets the substantive 
                requirements of subsections (c) and (d) with 
                respect to high speed data service or Internet 
                backbone service in the State for which such 
                application is filed.
            ``(3) Withdrawal of application.--An application 
        filed under paragraph (1) may be withdrawn by the 
        applicant at any time before the Attorney General 
        approves or disapproves such application, but may not 
        be modified after being filed.''.

    Page 15, line 22, strike ``(c)'' and insert ``(d)''.

    Page 16, after line 4, insert the following:

    (e) Continued Full Application of the Antitrust Laws To 
Matters Involved in the Telecommunications Industry.--Section 
601(b) of the Telecommunications Act of 1996 (47 U.S.C. 152 
note) is amended by adding at the end the following:
            ``(4) Continuing operation of the antitrust laws.--
        The rights, obligations, powers, and remedies provided 
        under the antitrust laws are in addition to, and are--
                    ``(A) not preempted by;
                    ``(B) not inconsistent with; and
                    ``(C) not incompatible with;
        any of the rights, obligations, powers, and remedies 
        provided under the Communications Act of 1934 (47 
        U.S.C. 151 et seq.), under this Act, or under any law 
        amended by either such Act, regardless of the progress 
        of competition in any market.''.

                          Purpose and Summary

    H.R. 1542, as amended by the Committee on the Judiciary, 
maintains a vital Department of Justice role in reviewing Bell 
entry into the long distance provision of high speed data 
services and Internet backbone services. In addition, it 
corrects an erroneous part of the decision in Goldwasser v. 
Ameritech Corp., 222 F.3d 390 (7th Cir. 2000), and clarifies 
the policy expressed in the antitrust savings clause 
(Sec. 601(b)(1)) of the Telecommunications Act of 1996. 
However, because of the limited nature of the referral, the 
Committee was unable to address other antitrust problems raised 
by the version of the bill the Committee on Energy and Commerce 
reported.

                Background and Need for the Legislation

   A. History of the Judiciary Committee Role in Telecommunications 
                              Legislation

    Until 1984, America had one dominant telephone company--the 
American Telephone & Telegraph Company (``AT&T;''). AT&T; 
provided almost all local and long distance service throughout 
the United States, except that in some isolated areas 
independent phone companies provided local service. During the 
AT&T; era, local service rates were kept artificially low, and 
the substantial differences in costs of providing local service 
in urban and rural areas were not reflected in local service 
rates. AT&T; kept long distance rates, which were paid primarily 
by business, artificially high in order to subsidize low local 
rates. The policy, known as universal service, was that all 
Americans should have access to a telephone at an affordable 
rate regardless of the cost of providing the service. Because 
AT&T; was one company, it was relatively easy to administer this 
system of subsidies.
    As early as 1957, the Judiciary Committee held oversight 
hearings to examine the monopoly power that AT&T; wielded 
because of its control of the local exchange and the Department 
of Justice's efforts to limit that power through antitrust 
enforcement. See The Consent Decree Program of the Department 
of Justice: Hearings Before the Subcommittee on Antitrust of 
the House Committee on the Judiciary, 85th Cong. (1957 and 
1958); Report of the Antitrust Subcommittee on the Consent 
Decree Program of the Department of Justice, 86th Cong. (1959). 
These hearings specifically examined the process by which the 
Justice Department, in 1956, had entered into a consent decree 
with AT&T;, under which AT&T; agreed to cease anticompetitive 
activities in the context of its manufacture and sale of 
telephone equipment.
    The Judiciary Committee's ongoing examination of the 1956 
consent decree and other Department proceedings led, in 1974, 
to enactment of the Tunney Act, which strengthened and codified 
the process through which the Justice Department could enter 
into consent decrees in the antitrust context. Antitrust 
Procedures and Penalties Act, Pub. L. No. 93-528, 88 Stat. 1708 
(1974). Also in 1974, the Antitrust Division of the Department 
of Justice sued AT&T; for violating the antitrust laws in a 
number of ways--most importantly, not allowing potential long 
distance competitors to connect to its local networks. Even as 
the case was going on, the Judiciary Committee began to 
consider the antitrust issues involved. Proposed Antitrust 
Settlement of United States v. AT&T;: Hearings before the 
Subcommittee on Monopolies and Commercial Law of the House 
Committee on the Judiciary, 97th Cong. (1982); H.R. 6121, the 
``Telecommunications Act of 1980'': Hearings before the 
Subcommittee on Monopolies and Commercial Law of the House 
Committee on the Judiciary, 96th Cong. (1980). The 1980 
legislation was almost 150 pages long consisting of an 
extensive FCC regulatory scheme for the industry, and it was 
referred sequentially to the Committee on the Judiciary. The 
1982 hearings were held jointly with the Committee on Energy 
and Commerce.
    In 1982, the parties settled the lawsuit, and Judge Harold 
Greene of the United States District Court for the District of 
Columbia entered a consent decree known as the Modification of 
Final Judgment or MFJ. United States v. American Telephone & 
Telegraph Company, 552 F.Supp. 131 (D.D.C. 1982), aff'd, 460 
U.S. 1001 (1983). This 1982 consent decree modified the consent 
decree entered in 1956 which the Judiciary Committee had 
studied in its 1957-58 hearings. In doing so, the court 
followed the Tunney Act procedures that the Judiciary Committee 
had written.
    The MFJ created a new world. Beginning in 1984, it broke up 
AT&T; into a new smaller AT&T;, which was to provide long 
distance service in competition with other companies, and seven 
regional Bell operating companies (``RBOCs'')--Ameritech, Bell 
Atlantic, BellSouth, Nynex, Pacific Telesis, Southwestern Bell 
(now known as SBC Communications), and US West. There was also 
one preexisting independent phone company, GTE Corporation, 
which was of a comparable size. These seven regional RBOCs and 
GTE were to provide local service where AT&T; had previously 
been doing so. Subsequent mergers have reduced these companies 
to four: SBC Communications, BellSouth, Verizon, and Qwest.
    At the time, the general consensus was that long distance 
service could be provided competitively, but that local service 
remained a natural monopoly. Based on that assumption, the MFJ 
prohibited the RBOCs from entering long distance service and 
other lines of business without prior court approval. The 
court's procedures under the MFJ required companies seeking 
that approval to negotiate with the Department of Justice 
before filing for the approval. As a practical matter, DOJ 
approval was required to get court approval.
    In addition, policymakers wanted to maintain the universal 
service system. To do so, they required the long distance 
companies to pay ``access charges'' to the local companies for 
completing long distance calls. The local companies used these 
access charges to maintain low local rates in all geographical 
areas.
    The impetus for the Telecommunications Act of 1996 arose 
from the application and effect of the MFJ. In the years 
following the MFJ, the long distance industry became highly 
competitive with the entrance of numerous companies offering 
consumers greater choice and lower prices. In contrast, the 
local exchange market remained under monopoly control. Because 
that monopoly control remained, the Judiciary Committee began 
in 1987 to conduct hearings on the impact of the MFJ and 
monopoly control of the local exchange. Competition in the 
Telecommunications Industry: Hearings Before the Subcommittee 
on Monopolies and Commercial Law of the House Committee on the 
Judiciary, 100th Cong. (1987); The AT&T; Consent Decree: 
Hearings Before the Subcommittee on Economic and Commercial Law 
of the House Committee on the Judiciary, 101st Cong. (1989).
    In the 102nd Congress, the Judiciary Committee continued to 
exercise its jurisdiction over the antitrust issues raised by 
monopoly control of the local exchange through the 
consideration of two bills--the Telecommunications Equipment 
Research and Manufacturing Competition Act of 1991 (H.R. 1523) 
and the Telecommunications Equipment Research and Manufacturing 
Competition Act of 1991 (H.R. 1527). Both bills were jointly 
referred to the Committee on the Judiciary and the Committee on 
Energy and Commerce. Both consisted almost entirely of 
amendments to the Communications Act of 1934 directing the FCC 
to prescribe regulations to allow the RBOCs into manufacturing. 
Neither Committee took formal action on these measures.
    The Committee on the Judiciary then held a series of 
oversight hearings on these issues. Competition Policy in the 
Telecommunications Industry: A Comprehensive Approach: Hearings 
Before the Subcommittee on Economic and Commercial Law of the 
House Committee on the Judiciary, 102nd Cong. (1991 and 1992). 
These hearings led to the introduction of H.R. 5096, the 
``Antitrust Reform Act of 1992,'' which was referred solely to 
the Judiciary Committee and which would have established a 
unified procedure and standard for the RBOCs to use in applying 
for authorization to engage in long distance and manufacturing. 
The Judiciary Committee reported H.R. 5096 favorably on August 
12, 1992. H. Rep. No. 102-850 (1992). As reported by the 
Committee, H.R. 5096 contained an entry test requiring the 
Attorney General to determine whether an RBOC applying for long 
distance entry had proven that ``there is no substantial 
possibility that [it] could use monopoly power to impede 
competition . . .'' Sec. Sec. 2(b)(2)(B)(i) & 2(c)(2)(A)(i) of 
H.R. 5096 as reported. On October 1, 1992, the House Committee 
on Rules held a hearing on H.R. 5096, but it was never 
scheduled for floor consideration.
    The Committee continued its efforts during the 103rd 
Congress with the introduction and consideration of the 
``Antitrust and Communications Reform Act of 1994'' (H.R. 
3626), which was referred jointly to the House Committees on 
the Judiciary and Energy and Commerce. H.R. 3626 sought to 
modify the MFJ by permitting RBOCs to compete in new lines of 
business, including the provision of interchange 
telecommunications services. Importantly, H.R. 3626 contained 
language similar to the provision enacted in 1996 expressly 
establishing a role for the Department of Justice to consult 
with the FCC on matters affecting competition within the 
telecommunications industry. Sec. 101(b) of H.R. 3626 as 
introduced. Under H.R. 3626, a RBOC seeking to enter the long 
distance market would apply jointly to the Department of 
Justice and the FCC. Applications would be approved only when 
the Attorney General found that ``there is no substantial 
possibility that such company or its affiliates could use 
monopoly power to impede competition in the market such company 
seeks to enter,'' and the FCC found that granting the 
application is ``consistent with the public interest, 
convenience and necessity.'' Sec. 101(b)(3)(D)(i) & (ii) of 
H.R. 3626 as introduced. It also included extensive amendments 
to the Communications Act of 1934 to provide for FCC regulation 
of manufacturing, alarm monitoring, and electronic publishing.
    The Judiciary Committee held 3 days of hearings on H.R. 
3626. H.R. 3626, the ``Antitrust and Communications Reform Act 
of 1993'': Hearings Before the Subcommittee on Economic and 
Commercial Law of the House Committee on the Judiciary, 103rd 
Cong. (1994). On June 24, 1994, the Judiciary Committee 
favorably reported H.R. 3626. H. Rep. No. 103-559, Part II 
(1994). On the same day, the Energy and Commerce Committee also 
filed a report on the bill. H. Rep. No. 103-559, Part I (1994). 
A final agreed-upon substitute version passed the House on June 
28, 1994 by a vote of 423-5. 140 Cong. Rec. H 5189-5216, 5246-
47 (daily ed. June 28, 1994). The bill failed to become law, 
however, when a companion measure stalled in the Senate.
    In the 104th Congress, the Judiciary Committee continued 
its review of the monopoly problems in the telecommunications 
industry with its consideration of the Antitrust Consent Decree 
Reform Act of 1995 (H.R. 1528) and the Communications Act of 
1995 (H.R. 1555). The Speaker referred both measures jointly to 
the Judiciary and Commerce Committees. H.R. 1528 was primarily 
referred to the Judiciary Committee with a secondary referral 
to the Commerce Committee. H.R. 1555 was primarily referred to 
the Commerce Committee with a secondary referral to the 
Judiciary Committee. Again, this bill contained extensive 
amendments to the Communications Act of 1934 designed to 
address monopoly power in the local exchange. On May 9, 1995, 
the Judiciary Committee continued its long history of hearings 
on this topic. Telecommunications: the Role of the Department 
of Justice: Hearings before the Committee on the Judiciary, 
104th Cong. (1995). On July 24, 1995, the Judiciary Committee 
reported H.R. 1528. H. Rep. No. 104-203, Part I (1995). On the 
same day, the Commerce Committee reported H.R. 1555, H. Rep. 
No. 104-204, Part I (1995). After modification resulting from 
extensive negotiations between the two Committees, the House 
considered and passed H.R. 1555. 141 Cong. Rec. H 8281-95, 
8425-8501 (daily eds. August 3 and 4, 1995). In those 
negotiations, the Judiciary Committee successfully insisted 
that the Department of Justice have an integral role in the 
decision as to when RBOCs would be allowed to provide long 
distance service. This bill went to conference and ultimately 
emerged as the Telecommunications Act of 1996. Pub. L. No. 104-
104.
    More recently, in the 106th Congress, the Speaker referred 
legislation to modify existing antitrust law with respect to 
competition in the broadband market and to provide data relief 
to the RBOCs to both the Judiciary and Commerce Committees. The 
Internet Freedom Act (H.R. 1686), was referred primarily to the 
Judiciary Committee and secondarily to the Commerce Committee. 
The Internet Growth and Development Act of 1999 (H.R. 1685), 
was referred primarily to the Commerce Committee and 
secondarily to the Judiciary Committee. Both of these bills 
contained amendments to the Communications Act of 1934 that 
were similar in purpose to this year's H.R. 1542. Again, the 
Judiciary Committee held 2 days of hearings on these bills. 
H.R. 1686, the ``Internet Freedom Act,'' and H.R. 1685, the 
``Internet Growth and Development Act of 1999'': Hearings 
before the Committee on the Judiciary, 106th Cong. (1999 and 
2000).

                 B. The Telecommunications Act of 1996

    The Telecommunications Act of 1996 arose from an antitrust 
consent decree. That consent decree, the MFJ, prevented the 
RBOCs from entering the long distance business because of their 
monopoly control over the local exchange. Congress structured 
the 1996 Act to offer the RBOCs a basic trade: the RBOCs were 
to open their local exchanges to competitors for 
interconnection and, in return, they were to be allowed entry 
into the long distance market.
    In particular, it added a new Sec. 271 to the 
Communications Act to provide criteria and a process for 
scrutinizing RBOC efforts to open their local monopolies. 47 
U.S.C. Sec. 271. Given the Justice Department's unique 
expertise in competitive matters, Congress expressly provided 
within Sec. 271 that the Department would review RBOC 
compliance with the market-opening provisions of the act and 
that the Federal Communications Commission would give the 
Department's analysis substantial weight in making its decision 
with respect to an RBOC application to provide long distance 
service. 47 U.S.C. Sec. 271(d)(2)(A). These provisions were 
included at the insistence of the Committee on the Judiciary. 
In providing this role for the Department, Congress sought to 
expand the Department's traditional enforcement authority in an 
effort to prevent anticompetitive harms.
    During the 5 years since enactment of the 1996 Act, the 
Department has fulfilled its statutory obligations in reviewing 
RBOC applications for entry into long distance service. In 
fact, after reviewing each of the first five petitions filed by 
RBOCs under the 1996 Act, the Department concluded that none of 
the RBOCs met its obligation under the act. The FCC concurred 
and ultimately denied each of the first five RBOC petitions.
    In 2000, the Justice Department recommended denial of two 
applications based on antitrust concerns--one involving SBC, 
the other involving Verizon. In each instance, the applicant 
withdrew and resubmitted its application, in an effort to 
remedy the antitrust concerns raised by the Justice Department. 
In five cases, including the two resubmitted applications--New 
York, Texas, Kansas, Oklahoma, and Massachusetts--the 
Department did not recommend rejection, but did indicate 
problems that needed to be addressed before approval. In those 
five instances, the FCC approved the applications. Thus, the 
Justice Department's Sec. 271 opinion has essentially 
determined the outcome of each application that the RBOCs have 
filed to date.

                C. Telecommunications Since the 1996 Act

    President Clinton signed the 1996 Act on February 8, 1996. 
At that time, the Internet was in its infancy. Most observers 
thought that the RBOCs would remain separate companies, that 
they would begin competing in long distance quickly, and that 
they might enter the cable business. By the same token, most 
observers thought that the long distance companies would remain 
separate companies, that they would begin competing in local 
service quickly, and that they probably would not enter the 
cable business. As for the cable companies, most observers 
thought that they would remain separate companies, that they 
might enter the telephone business, and that they would face 
substantial competition in the cable business from satellite 
companies and telephone companies.
    In the 5 years since the 1996 Act was signed, the Internet 
has changed everything. At that time, it was a technological 
marvel that was just becoming available to ordinary people and 
was hardly used for commerce. Since then, it has become a means 
for conducting a substantial and ever growing amount of 
commerce.
    In 1996, data traffic was not a substantial portion of the 
long distance business. Estimates vary as to what the 
percentage was, but it was probably less than 10%. Today, it is 
probably more than 50%. The demand keeps exploding. As a 
result, being a carrier of voice (i.e. traditional telephone 
calls) has become relatively less important and being a carrier 
of data has become relatively more important. Moreover, it is 
now possible to transmit voice telephone calls over the 
Internet thus blurring the distinction between voice and data.
    As anyone who has used the Internet knows, it can be 
frustratingly slow depending on what technology one is using. 
Both cable companies and telephone companies are upgrading 
their networks in many areas. At the same time, both of these 
technologies are getting better and faster, and they are also 
becoming capable of carrying voice (i.e. telephone calls), 
video (i.e. cable programming), and data (i.e. Internet 
content) through the same pipe. This is what is referred to as 
``convergence'' of the technologies.
    Most telecommunications companies, irrespective of whether 
they started as RBOCs, long distance companies, cable 
companies, or something else, now think that their future lies 
in being capable of providing a package of all of the 
``convergent'' services on a global basis. Because getting into 
a new part of this business from scratch requires massive 
investment, many companies have decided to buy another company 
rather than build from scratch. That has led to a wave of 
mergers.
    First, the RBOCs began to merge with each other. Bell 
Atlantic bought Nynex and GTE. SBC bought Pacific Telesis and 
Ameritech. Then, new competitors began to buy existing 
companies. WorldCom, a relatively new local competitor, bought 
MCI, one of the major long distance companies. WorldCom also 
tried to buy Sprint, but the deal failed because of antitrust 
concerns. Qwest, a relatively new long distance competitor, 
bought USWest, an RBOC.
    Finally, AT&T;, the biggest of the old line long distance 
companies, bought Tele-Communications, Inc. (``TCI'') and 
MediaOne. TCI and MediaOne were two of the largest cable 
companies in the nation. These mergers gave AT&T; ownership of 
many cable lines going into American homes. Again, estimates of 
the percentage vary depending on who is counting. At the same 
time, Microsoft has purchased a stake in AT&T; as part of an 
effort to accelerate the deployment of broadband services 
across the country.
    When Congress was considering the 1996 Act, most observers 
thought that controlling the transmission of telephone voice 
calls was the future. Now, most observers believe that 
controlling broadband communications lines, be they phone or 
cable, is the future. H.R. 1542 seeks to allow the RBOCs to 
leverage their monopoly control of the local exchange to 
control the broadband future.

                     D. The Provisions of H.R. 1542

    Fundamentally, H.R. 1542, as reported by the Committee on 
Energy and Commerce, eliminates several of the most important 
restrictions on the monopoly power of the incumbent local 
exchange carriers. In addition, with respect to data, it 
completely undoes the basic trade that made the 1996 Act 
possible: the RBOCs would no longer have to open their networks 
in order to offer long distance data service.
    Section 4(a) of H.R. 1542 creates a new Sec. 232 of the 
Communications Act of 1934. Subsection (a) of that new Sec. 232 
provides for a sweeping prohibition of any Federal 
Communications Commission or State limits of any kind on any 
high speed data service, Internet backbone service, Internet 
access service, or network elements used to provide such 
services. Section 3(a) of H.R. 1542 defines the terms ``high 
speed data service,'' ``Internet backbone service,'' and 
``Internet access service'' in very broad terms. For example, 
``high speed data service'' is defined as any packet-switched 
or successor technology that transmits information at a speed 
generally not less than 384 kilobits per second. This 
definition could easily include voice transmission over the 
Internet. The desire to let the Internet grow unfettered is 
understandable. However, this sweeping language could eliminate 
even basic anti-fraud protections as well as many other 
consumer protection statutes. In addition, this sweeping 
language could be read to eliminate the rights of the 
Commission and the State attorneys general to bring antitrust 
suits under Sec. Sec. 4, 4C, and 11 of the Clayton Act. 15 
U.S.C. Sec. Sec. 15, 15c, & 21.
    Section 4(b) of H.R. 1542 creates a new subsection (j) of 
Sec. 251 of the Communications Act. 47 U.S.C. Sec. 251. Section 
251 sets forth the basic obligations of RBOCs and other 
incumbent local exchange carriers to open their local exchanges 
for competitors to interconnect. The new Sec. 251(j) contains 
exemptions that would generally eliminate their obligations to 
share the fiber optic parts of their network, to provide 
unbundled network elements for high speed data service, and to 
provide access to remote terminals as an unbundled network 
element. These obligations on incumbent local exchange carriers 
allow competitors the ability to provide competing high speed 
data service. In short, this provision allows the incumbents 
effectively to leverage their monopoly control over the local 
exchange and exclude competition in high speed data service. 
That is troublesome enough, but taken together with the broad 
definition of high speed data service, it could represent the 
potential remonopolization of the industry.
    Subsection 6(a) of H.R. 1542 inserts high speed data 
service and Internet access service into the definition of 
incidental interLATA services contained in Sec. 271(g) of the 
act. 47 U.S.C. Sec. 271(g). Under Sec. 271(b)(3), the RBOCs are 
allowed to provide incidental interLATA services without 
meeting the antimonopoly provisions of Sec. 271. 47 U.S.C. 
Sec. 271(b)(3). Thus, this provision moves high speed data 
service and Internet access service out of the Sec. 271 process 
altogether and allows the RBOCs to start providing them 
immediately without any further review by the Department of 
Justice, the Federal Communications Commission, or the States. 
Given the broad definitions of these terms, this provision 
undoes much of the basis of the 1996 Act. More specifically, 
this language would eliminate the role of the Department of 
Justice in reviewing much activity that would currently fall 
within the parameters of Sec. 271.
    Subsection 6(b) of H.R. 1542 creates a new Sec. 271(k) that 
would prohibit the RBOCs from offering in any in-region State 
any interLATA voice telecommunications service obtained by 
means of a high speed data access or Internet access service. 
This provision attempts to maintain the Sec. 271 restrictions 
for voice in the face of the broad definitions for the two key 
terms. However, it does not provide any definition of the term 
``interLATA voice telecommunications service.'' Apparently, 
this would be left to the FCC. Thus, in what claims to be a 
deregulatory bill, the purportedly fundamental distinction 
between voice and data is left undefined. However, regardless 
of how voice or data are defined or who defines them, this 
provision is intended to, and will, change the parameters of 
what the Justice Department will review in Sec. 271 
applications.
    Finally, subsection 6(c)(2) of H.R. 1542 eliminates the 
act's requirement that the RBOCs must conduct their interLATA 
information services through a separate affiliate. The act's 
definition of ``information services'' appears to include high 
speed data access or Internet access service. 47 U.S.C. 
Sec. 153(20). The separate affiliate requirement was a key 
provision designed to ensure that the RBOCs could not leverage 
their monopoly power over the local exchange to other lines of 
business. The elimination of this requirement simply adds to 
the elimination of any restriction on that monopoly power.
    In short, H.R. 1542, as reported by the Energy and Commerce 
Committee, reverses many of the basic antimonopoly provisions 
of the 1996 Act. In doing so, it eliminates potential antitrust 
actions by the FCC and the States and substantially limits the 
role of the Department of Justice in reviewing the monopoly 
power of the RBOCs.

                         E. The Goldwasser Case

    One recent development in the courts particularly interests 
this Committee. The Telecommunications Act of 1996 included an 
antitrust savings clause that read as follows: ``Except as 
provided in paragraphs (2) and (3) [which are not relevant 
here], nothing in this act or the amendments made by this act 
shall be construed to modify, impair, or supersede the 
applicability of any of the antitrust laws.'' Sec. 601(b)(1) of 
the Telecommunications Act of 1996. It also included a general 
savings clause that read as follows: ``This act and the 
amendments made by this act shall not be construed to modify, 
impair, or supersede Federal, State, or local law unless 
expressly so provided in such act or amendments.'' 
Sec. 601(c)(1) of the Telecommunications Act of 1996. Until 
recently, it was widely thought that this language made clear 
that nothing in the Telecommunications Act in any way effected 
any implied repeal of the antitrust laws.
    Recently, however, the Seventh Circuit effectively read 
these savings clauses out of the law in Goldwasser v. Ameritech 
Corp., 222 F.3d 390 (7th Cir. 2000). It held:

        [S]uch a conclusion [i.e., that the complaint at issue 
        alleged a freestanding antitrust claim] would then 
        force us to confront the question whether the 
        procedures established under the 1996 Act for achieving 
        competitive markets are compatible with the procedures 
        that would be used to accomplish the same result under 
        the antitrust laws. In our view, they are not. The 
        elaborate system of negotiated agreements and 
        enforcement established by the 1996 Act could be 
        brushed aside by any unsatisfied party with the simple 
        act of filing an antitrust action. Court orders in 
        those cases could easily conflict with the obligations 
        the State commissions or the FCC imposes under the sec. 
        252 agreements. The 1996 Act is, in short, more 
        specific legislation that must take precedence over the 
        general antitrust laws, where the two are covering 
        precisely the same field.
          This is not the kind of question that requires 
        further development of a factual record, either on 
        summary judgment or at a trial. We therefore agree with 
        the district court that it was proper for resolution 
        under rule 12(b)(6). There are many markets within the 
        telecommunications industry that are already open to 
        competition and that are not subject to the detailed 
        regulatory regime we have been discussing; as to those, 
        the antitrust savings clause makes it clear that 
        antitrust suits may be brought today. At some 
        appropriate point down the road, the FCC will 
        undoubtedly find that local markets have also become 
        sufficiently competitive that the transitional 
        regulatory regime can be dismantled and the background 
        antitrust laws can move to the fore. Our holding here 
        is simply that this is not what Congress has mandated 
        at this time for the ILEC duties that are the subject 
        of the Goldwasser complaint. The district court thus 
        correctly rejected the plaintiffs' antitrust theory.

Id. at 401-02. The Committee believes that this holding is 
wrong and plainly misstates the clear intent of Congress in 
both savings clauses. However, for the moment at least, it is 
the law in the Seventh Circuit. Another case raising the same 
issue, Intermedia Communications, Inc. v. BellSouth 
Telecommunications, Inc., is currently pending before the 
Eleventh Circuit. In that case, the Department of Justice and 
the Federal Communications Commission have filed a joint amicus 
brief arguing that the Seventh Circuit wrongly decided 
Goldwasser with respect to this issue.

                            F. The Referral

    On May 24, 2001, Speaker Hastert referred H.R. 1542 to the 
Judiciary Committee ``for consideration of such provisions of 
the bill and amendment recommended by the Committee on Energy 
and Commerce as propose to narrow the purview of the Attorney 
General under section 271 of the Communications Act of 1934.'' 
The referral lasted through June 18, 2001. This referral was 
narrower than the Judiciary Committee's traditional broad 
jurisdiction over monopoly problems in the telecommunications 
industry. Thus, the Committee was unable to address some of the 
antitrust problems raised by the bill--in particular, those 
raised by Sec. 4.

                 G. Chairman Sensenbrenner's Amendment

    Chairman Sensenbrenner offered an amendment to address two 
of the antitrust problems in the bill while attempting to stay 
within the referral. First, the Sensenbrenner amendment 
restores current law in Sec. 271 of the Communications Act with 
respect to Bell entry into long distance data service except 
that it makes the Justice Department the decisionmaker rather 
than the Federal Communications Commission. Second, it adds 
language clarifying the meaning of the antitrust savings clause 
in the Telecommunications Act of 1996 and reversing the 
misinterpretation of that clause in the Goldwasser case. The 
Committee adopted the Chairman's amendment by voice vote.
    A great deal of confusion has arisen over the meaning of 
the part of the Sensenbrenner amendment that addresses the 
Goldwasser decision. In light of that confusion, the Committee 
wishes to clarify the following matters. First, the 
clarification is directed only at that part of the Goldwasser 
decision that is quoted above in section E. This clarification 
is not intended to disturb other parts of the decision. Second, 
the clarification is not limited to the local exchange context, 
but would apply to any case in which a party claimed that the 
Communications Act in some way effected an implied repeal of 
the antitrust laws.
    Third, over the years, case law has added to antitrust law 
in ways that are not explicitly set out in the antitrust 
statutes, like the primary jurisdiction doctrine, the filed 
rate doctrine, the State action immunity doctrine, and other 
similar matters. The Committee believes these matters are part 
of the ``rights, obligations, powers, and remedies'' provided 
under the antitrust laws that the language in the provision 
intends to save. The provision is not intended to limit or 
eliminate these or other similar doctrines.
    Fourth, parties are free to sign contracts that waive their 
rights to bring antitrust actions or actions under the 
Communications Act. This language is not intended to override 
any otherwise valid contract provision that makes such a 
waiver.
    Finally, the Committee emphasizes again the general notion 
that the quoted portion of Goldwasser upset. With respect to 
conduct within the ambit of the Communications Act, the Act and 
the antitrust laws are parallel and complementary remedy 
systems. Conduct may violate the Act and not the antitrust 
laws; it may violate the antitrust laws and not the Act; it may 
violate both; or it may violate neither. When an action like 
Goldwasser is filed alleging conduct violating both the Act and 
the antitrust laws, a court should analyze the conduct to see 
if it violates the Act, and it should separately analyze the 
conduct to see if it violates the antitrust laws. The Committee 
understands the portion of Goldwasser quoted in section E, 
above, to hold that such conduct--at least if it relates to an 
incumbent local exchange carrier's obligations under Sec. 251 
of the Act before the local exchange market becomes 
competitive--can only be analyzed under the Act and not the 
antitrust laws.
    That is not what Congress intended in 1996. The courts may 
not simply read the antitrust savings clause out of the law. 
Accordingly, the Committee believes this clarification is in 
order to make it clear to the courts that the antitrust savings 
clause meant what its plain language said.
    Because of the narrowness of the referral, Chairman 
Sensenbrenner's amendment was not able to address the serious 
antitrust problems raised by Sec. 4 of the bill as reported by 
the Committee on Energy and Commerce. Nonetheless, he believes 
that, as to data, the provisions of Sec. 4 undo the basic trade 
made in the 1996 Act: the Bells would open their local 
exchanges to interconnection by competitors in return for being 
allowed into long distance. Section 4 allows the Bells to shed 
parts of that duty immediately including aspects of line 
sharing and the provision of remote terminals as unbundled 
network elements. To get this relief, they do not have to do 
anything in return. They do not even have to make any effort to 
meet the other requirements to get into long distance. These 
changes make it much harder for competitors to provide local 
telephone or Internet access service. Chairman Sensenbrenner 
sees no benefit to consumers in this provision and hopes that 
it will be addressed if the bill comes to the floor of the 
House.

 H. Parliamentary Issues Relating to Chairman Sensenbrenner's Amendment

    During the consideration of the Chairman's amendment, 
Representative Boucher raised a point of order arguing that it 
was outside the scope of the limited referral and that the 
House Parliamentarian held the same view. Chairman 
Sensenbrenner overruled the point of order.
    With respect to the restoration of current law concerning 
RBOC entry into long distance data transmission, he ruled that 
his amendment clearly addresses the provisions referred to the 
Committee. Subsection 6(a) of H.R. 1542 narrows the purview of 
the Attorney General under Sec. 271 of the Communications Act 
by taking high speed data service and Internet backbone service 
out of the class of service that is subject to that section. 
Thus, it narrows the Attorney General's consultative role under 
that section.
    In addressing that provision, the referral did not limit 
the Committee in introducing a new regulatory mechanism for 
approval of data, particularly because the Committee on Energy 
and Commerce removed the FCC from the process. If the Committee 
were to return to the status quo by restoring the FCC's role, 
it would surely be criticized for invading the Energy and 
Commerce Committee's jurisdiction. Given that Committee's 
decision to eliminate the FCC, this Committee cannot restore a 
consultative role for the Department of Justice because there 
would be no one with whom the Department could consult. Thus, 
if the Committee's policy choice is to maintain current law, 
the shape of the amendment necessarily follows from the Energy 
and Commerce Committee's action. Therefore, the part of the 
amendment dealing with the Attorney General's role in Sec. 271 
determinations is within the scope of the referral.
    With respect to the Goldwasser clarification, the Chairman 
also ruled that his amendment clearly addresses the provisions 
referred to the Committee. In exercising the consultative role 
under Sec. 271(d)(2)(a), the Attorney General may use ``any 
standard [he] considers appropriate.'' Section 6(b) of H.R. 
1542 specifically leaves this process in place for voice 
telecommunications service. The Goldwasser case casts doubt on 
whether antitrust law still applies to the telecommunications 
industry and thereby casts doubt on whether the Attorney 
General may continue to apply an antitrust standard in his 
evaluation of applications under Sec. 271. Reading Sec. 6(b) in 
light of Goldwasser, it reiterates a narrower Sec. 271 process 
because of Goldwasser's change of the law in the Seventh 
Circuit. Thus, it narrows the purview of the Attorney General 
under Sec. 271.
    Moreover, because Goldwasser is the law in only one 
circuit, it creates confusion as to whether the Attorney 
General must apply differing standards to applications from 
different circuits. If the Attorney General cannot apply an 
antitrust standard to a Sec. 271 application from the Seventh 
Circuit, then again his purview under Sec. 271--as reiterated 
in Sec. 6(b)--is narrowed. The Goldwasser fix directly relates 
to the subject of the underlying text because the consistent 
application of the law throughout every geographic region of 
the country is fundamental to the bill and the pending 
amendment. For these reasons, he ruled that the part of the 
amendment having to do with reversing a part of the Goldwasser 
case is within the scope of the referral.

                                Hearings

    The Committee on the Judiciary held a hearing on H.R. 1542 
on June 5, 2001. The Committee received testimony from four 
witnesses: Honorable Tom Tauke, Senior Vice President for 
Public Policy and External Affairs, Verizon, Washington, D.C.; 
Mr. Clark McLeod, Chairman and Co-Chief Executive Officer, 
McLeodUSA, Cedar Rapids, Iowa; Ms. Margaret Greene, Executive 
Vice President for Regulatory and External Affairs, BellSouth 
Corporation, Atlanta, Georgia; and Mr. Jim Glassman, Resident 
Fellow, American Enterprise Institute, Washington, D.C. The 
Committee also held a hearing on two related bills, H.R. 1698 
and H.R. 1697, on May 22, 2001. The Committee received 
testimony from four witnesses: Honorable Terry Harvill, 
Commissioner, Illinois Commerce Commission, Chicago, Illinois; 
Honorable Bill Barr, Executive Vice President and General 
Counsel, Verizon, Washington, D.C.; Mr. Jeff Blumenfeld, 
Partner, Blumenfeld & Cohen, Washington, D.C.; and Mr. John 
Malone, President and Chief Executive Officer, The Eastern 
Management Group, Bedminster, New Jersey.

                        Committee Consideration

    On June 13, 2001, the full Committee met in open session 
and, by voice vote, ordered that the Committee report the bill, 
H.R. 1542, to the House with an amendment and with the 
recommendation that the amendment be agreed to and that the 
bill as amended not pass, a quorum being present.

                         Vote of the Committee

    During its consideration of H.R. 1542, the Committee took 
no rollcall votes. The Sensenbrenner amendment was adopted by a 
voice vote. The Cannon motion to report the bill, H.R. 1542, to 
the House with an amendment and with the recommendation that 
the amendment be agreed to and that the bill as amended not 
pass was adopted by voice vote.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee reports that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

                    Performance Goals and Objectives

    H.R. 1542 does not authorize funding. Therefore, clause 
3(c)(4) of rule XIII of the Rules of the House is inapplicable.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of House rule XIII is inapplicable because 
this legislation does not provide new budgetary authority or 
increased tax expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, H.R. 1542, the following estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 18, 2001.
Hon. F. James Sensenbrenner, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1542, the Internet 
Freedom and Broadband Deployment Act of 2001.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Ken Johnson 
and Lanette J. Walker (for federal spending), who can be 
reached at 226-2860, Erin Whitaker (for revenues), who can be 
reached at 226-2720, Shelley Finlayson (for the state and local 
impact), who can be reached at 225-3220, and Philip Webre (for 
the private-sector impact), who can be reached at 226-2940.
            Sincerely,
                                  Dan L. Crippen, Director.

Enclosure

cc:
        Honorable John Conyers Jr.
        Ranking Member
H.R. 1542--Internet Freedom and Broadband Deployment Act of 2001.
    H.R. 1542 would prohibit the Federal Communications 
Commission (FCC) and state governments from regulating the 
provision of Internet access or high-speed data services, with 
certain exceptions. H.R. 1542 also would allow the FCC to 
impose penalties for violations of certain provisions of the 
bill, including requirements that certain telecommunications 
carriers give consumers the freedom to choose their Internet 
service providers. Under the bill, the FCC also could assess 
penalties against Bell telephone companies that offer voice 
telecommunication services using telephone lines for data 
transmission without the agency's permission.
    CBO estimates that implementing H.R. 1542 would have a 
negligible net impact on spending by the FCC. The increase in 
gross spending would be about $1 million in 2002, subject to 
the availability of appropriated funds. Any such increase would 
be offset by fees collected by the FCC.
    Pay-as-you-go procedures would apply to this bill, for two 
reasons. First, the bill would create new penalties, which are 
recorded in the budget as governmental receipts (revenues). CBO 
estimates that the bill's provisions would increase collection 
of FCC penalties by less than $500,000 a year. Also, enacting 
H.R. 1542 could affect the cash flows of the Universal Service 
Fund (USF). The USF seeks to provide universal access to 
telecommunications services by levying charges on some 
telephone companies (which are recorded in the budget as 
revenues) and making payments to others (which may be spent 
without further appropriation). CBO cannot estimate the bill's 
gross impact on the revenues and spending associated with the 
USF; however, the net impact would be negligible in each year.
    H.R. 1542 contains an intergovernmental mandate as defined 
in the Unfunded Mandates Reform Act (UMRA) because it would 
preempt the ability of states to regulate high-speed data 
services. CBO estimates that the costs of complying with this 
mandate would not be significant and would not exceed the 
threshold established by UMRA ($56 million in 2001, adjusted 
annually for inflation).
    The bill would impose private-sector mandates as defined by 
UMRA on the Bell operating companies and other incumbent local 
exchange companies providing broadband service. CBO estimates 
that a strict interpretation of the mandates would result in a 
total mandate cost that would exceed the annual threshold 
established in UMRA ($113 million in 2001, adjusted annually 
for inflation) in at least one of the first five years that the 
mandates are in effect.

                ESTIMATED COST TO THE FEDERAL GOVERNMENT

    Based on information from the FCC, CBO estimates that 
implementing H.R. 1542 would cost $1 million in 2002, assuming 
the appropriation of the necessary amounts. These funds would 
pay for additional staff to develop new regulations necessary 
to implement the bill's provisions. Under current law, the FCC 
is authorized to collect fees from the telecommunications 
industry sufficient to offset the cost of its regulatory 
programs. CBO assumes that the additional costs of implementing 
H.R. 1542 would be offset by an increase in collections 
credited to the FCC's annual appropriations. Therefore, H.R. 
1542 would not have a significant net impact on the cost of the 
FCC's operations.
    H.R. 1542 would authorize the FCC to impose penalties for 
violations of certain provisions in H.R. 1542. These provisions 
include requirements that incumbent telephone carriers give 
consumers the freedom to choose Internet service providers, and 
provisions that would prevent the Bell telephone companies from 
offering voice telecommunication services using telephone data 
lines unless authorized to do so by the FCC. Violations would 
be subject to a maximum penalty of $1 million per incident, or 
$10 million for a continuing violation. H.R. 1542 also would 
allow the FCC to impose penalties on the Bell telephone 
companies for failure to provide customer access to high-speed 
data services on a schedule specified in the bill. Based on 
information from the FCC and telecommunications firms, CBO 
estimates that enacting the bill would increase collections of 
such penalties by less than $500,000 a year.
    Finally, H.R. 1542 could affect the size of the USF, which 
was established by the Telecommunications Act of 1996 to 
provide universal access to telecommunications service 
throughout the nation. The FCC assesses charges on 
telecommunications services and distributes the amounts 
collected to telephone companies to subsidize telephone and 
Internet service for high-cost areas, low-income consumers, 
schools, libraries, and others. Because H.R. 1542 could affect 
the telecommunications market in non-rural, high-cost areas of 
the country, enacting the bill may cause the FCC to change the 
amount of money that would be provided from the USF to 
companies that serve those areas. USF outlays are mandatory and 
occur without appropriation action. Any change in the amount of 
payments from the USF would cause a commensurate change in the 
amount of money collected by the USF, which is considered a 
revenue in the budget. CBO cannot estimate the magnitude or the 
direction of these changes in revenues and direct spending; 
however, their net effect would be negligible.

                      PAY-AS-YOU-GO CONSIDERATIONS

    The Balanced Budget and Emergency Deficit Control Act sets 
up pay-as-you-go procedures for legislation affecting direct 
spending or receipts. CBO estimates that enacting H.R. 1542 
would affect penalties (receipts) by an insignificant amount 
each year. The bill could also affect receipts and spending 
associated with the Universal Service Fund. CBO cannot estimate 
the magnitude or direction of any change to USF receipts and 
spending, but in any event, such changes would have a 
negligible net impact in each year.

        ESTIMATED IMPACT ON STATE, LOCAL, AND TRIBAL GOVERNMENTS

    H.R. 1542 contains an intergovernmental mandate as defined 
in UMRA because it would preempt the ability of states to 
regulate high-speed data services. While data are very limited, 
CBO estimates that the costs of complying with this mandate 
would not be significant and would not exceed the threshold 
established by the act ($56 million in 2001, adjusted annually 
for inflation).

                 ESTIMATED IMPACT ON THE PRIVATE SECTOR

    H.R. 1542 would impose private-sector mandates on local 
telephone companies, primarily those companies that were part 
of the pre-1982 telephone service monopoly--the so-called Bell 
operating companies--but also on other telephone companies that 
enjoyed a monopoly position in local telephone service--
referred to as non-Bell incumbent local exchange carriers. CBO 
estimates that the total costs of mandates in the bill would 
exceed the annual threshold established in UMRA ($113 million 
in 2001, adjusted annually for inflation), assuming a strict 
interpretation of those mandates. Should the language of the 
mandates be interpreted less strictly, the total direct costs 
would not exceed the threshold.
    Section 5 of H.R. 1542 would require all incumbent local 
exchange providers to provide their customers the ability to 
subscribe to the Internet service provider of their choice. 
This would be a new requirement for the non-Bell incumbent 
local exchange carriers, although it is currently a requirement 
for the Bell operating companies. However, providing such 
access is currently general industry practice. Consequently, 
CBO estimates that the incremental cost to the industry to 
comply with this mandate would be small.
    Section 7 would require the Bell operating companies to 
deploy high-speed data services--or broadband services as they 
are often called--in each state in which the company or one of 
its affiliates is an incumbent local exchange carrier. The bill 
defines high-speed data service as the capability to transmit 
information (using certain technology) at a rate greater than 
or equal to 384 kilobits per second in at least one direction. 
The bill also specifies targets for accomplishing this goal 
over five years. The bill would require the Bell operating 
companies to upgrade 20 percent of their central offices to 
have high-speed data capabilities within one year of enactment, 
40 percent within two years, 70 percent within three years, and 
100 percent within five years.
    Under the bill, a Bell operating company could meet the 
deployment requirements in either of two ways. First, the Bell 
operating company could upgrade both the equipment in a central 
office and the access lines of customers who request such 
upgrades, provided their access line is less than 15,000 feet 
long. Based on engineering and industry reports, CBO estimates 
that the cost of upgrading is between $175,000 and $230,000 per 
office, and that the bill's mandate would require the Bell 
operating companies to upgrade between 3,300 and 5,000 central 
offices that would not be upgraded absent that mandate. 
Alternatively, the bill provides that a Bell operating company 
could meet the deployment requirements by providing access to 
high-speed data services by alternative means, for example, 
through a cable television line, a satellite link, or a 
terrestrial wireless connection.
    The total cost of the mandate to deploy high-speed data 
services would certainly exceed the UMRA threshold if the Bell 
operating companies conformed to the mandate by upgrading their 
central offices. Alternative means could prove less expensive, 
and by CBO's estimate would fall below the UMRA threshold. But, 
none of the alternatives is currently capable of providing 
broadband service to ``each customer'' as required by section 7 
of the bill.

                         PREVIOUS CBO ESTIMATE

    On May 24, 2001, CBO transmitted a cost estimate for H.R. 
1542, the Internet Freedom and Broadband Deployment Act of 
2001, as ordered reported by the House Committee on Energy and 
Commerce on May 9, 2001. The two versions of the bill and the 
CBO cost estimates are similar. The version ordered reported by 
the House Committee on the Judiciary includes a requirement 
that Bell telephone companies obtain approval from the Attorney 
General before providing high-speed data service. We estimate 
that enacting this provision would have a negligible effect on 
the federal budget and would not impose an additional 
intergovermental mandate.
    The private-sector mandates in both bills are identical. 
The House Committee on the Judiciary approved an amendment that 
would affect potential savings to the Bell operating companies 
under the bill. The amendment would restore certain current-law 
restrictions on the Bell operating companies related to long 
distance data services that the previous version of the bill 
would have lifted. Nonetheless, CBO estimates that the mandate 
costs in both versions of the bill would exceed the annual 
threshold established by UMRA assuming a strict interpretation 
of the mandates.

                         ESTIMATE PREPARED BY:

Federal Costs: Ken Johnson and Lanette J. Walker (226-2860)
Revenue Impacts: Erin Whitaker (226-2720)
Impact on State, Local, and Tribal Governments: Shelley 
    Finlayson (225-3220)
Impact on the Private Sector: Philip Webre (226-2940)

                         ESTIMATE APPROVED BY:

Peter H. Fontaine
Deputy Assistant Director for Budget Analysis

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in article I, Sec. 8 of the Constitution.

               Section-by-Section Analysis and Discussion

    The following section by section analysis describes H.R. 
1542 as reported by the Committee on Energy and Commerce.
    Section 1. Short Title. Section 1 provides that this Act 
may be cited as the ``Internet Freedom and Broadband Deployment 
Act of 2001.''
    Section 2. Findings and Purpose. Section 2 sets forth 
congressional findings and purposes with respect to the bill.
    Section 3. Definitions. Section 3 defines the terms ``high 
speed data service,'' ``Internet,'' ``Internet access 
service,'' ``Internet backbone,'' and ``Internet backbone 
service' as they are used in the bill.
    Section 4. Limitation of Authority to Regulate High Speed 
Data Services. Subsection 4(a) creates a new Sec. 232 of the 
Communications Act which prohibits the Federal Communications 
Commission or the States from regulating high speed data 
service, Internet backbone service, Internet access service, or 
unbundled network elements used to provide these services 
except as expressly provided in the act. It also prohibits the 
Commission from imposing or collecting any fees or taxes on 
such services. It contains a savings provision preserving the 
States' authority to regulate traditional telephone services 
and local governments' authority to regulate cable franchises. 
It also preserves current law on enhanced services and 
universal service.
    Subsection 4(b) creates a new Sec. 251(j) of the 
Communications Act. The net effect of this new Sec. 251(j) is 
that incumbent local exchange carriers are still required to 
allow competitors access to the old, copper line parts of their 
networks as under current law. However, they are not required 
to allow them access to the new, fiber optic line parts of 
those networks that are used to provide high speed data 
service. In addition, they are not required to provide access 
to remote terminals as an unbundled network element, and they 
are generally not required to provide any unbundled network 
element for the purpose of providing high speed data service.
    Subsection 4(c) provides that nothing in the act shall be 
construed to affect existing interconnection agreements between 
RBOCs and competitors.
    Section 5. Internet Consumers Freedom of Choice. Section 5 
creates a new Sec. 233 of the Communications Act. This new 
Sec. 233 requires incumbent local exchange carriers (i.e. the 
RBOCs and other independent incumbents) to: allow Internet 
users to subscribe to any Internet service provider that 
connects to the incumbents' high speed data service; allow any 
Internet service provider to acquire the facilities and 
services necessary to connect to the incumbents' high speed 
data service; allow any Internet service provider to collocate 
equipment for purposes of interconnection; and allow any 
provider access to the incumbent's facilities so that it can 
provide Internet access service within the same time period 
that the incumbent provides access for itself.
    Section 6. Incidental InterLATA Provision of High Speed 
Data and Internet Access Services. Subsection 6(a) inserts high 
speed data service into the list of incidental long distance 
services contained in Sec. 271(g) of the Communications Act. 
Incidental long distance services were various services which 
the RBOCs could provide without meeting the network opening 
requirements of Sec. 271. Thus, the effect of this provision is 
to allow the RBOCs to provide high speed data services and 
Internet backbone services over long distance without meeting 
the market opening requirements of Sec. 271 and without going 
through the DOJ and FCC approval process.
    Subsection 6(b) adds a new subsection (k) to Sec. 271 to 
clarify that the RBOCs must still go through the Sec. 271 
process with respect to long distance voice services. The new 
subsection (k) also makes clear that RBOCs may not use high 
speed data services or Internet backbone services to provide 
in-region interLATA voice telecommunications services until 
they meet the requirements of Sec. 271.
    Subsection 6(c) eliminates the Act's requirement that the 
RBOCs must conduct their interLATA information services through 
a separate affiliate. The Act's definition of ``information 
services'' appears to include high speed data access or 
Internet access service. 47 U.S.C. Sec. 153(20). Thus, the 
effect appears to be to eliminate a separate subsidiary 
requirement for high speed data services.
    Section 7. Deployment of Broadband Services. Section 7 
creates a new Sec. 277 of the Communications Act. Subsection 
(a) of the new Sec. 277 requires the RBOCs to deploy high speed 
data services in each of their in-region States in accordance 
with this section. New Sec. 277(b) requires the RBOCs to meet a 
percentage target for deployment within each State over a 
period of years culminating with 100% deployment within 5 
years. New Sec. 277(c) provides that the FCC may impose 
forfeiture penalties on the RBOCs for failure to comply with 
these requirements. New Sec. 277(d) requires the FCC to report 
annually on deployment of high speed data services in 
underserved areas.
    Section 8. Commission Authorized to Prescribe Just and 
Reasonable Charges. Section 8 provides for the FCC to impose 
civil fines of $1 million per violation for violations of 
sections 5, 6, or 7 of this act. For continuing violations, 
each day shall be considered a separate violation, and an 
amount of up to $10 million may be assessed.
    The Sensenbrenner amendment makes two changes to H.R. 1542 
as reported by the Energy and Commerce Committee.
    First, it creates a new subsection (l) of Sec. 271 of the 
Communications Act. This new subsection (l) essentially 
reinstates current law with respect to Bell entry into the 
provision of interLATA high speed data services and Internet 
backbone services. The only change is that the Department of 
Justice would decide whether the RBOC had met the Sec. 271 
standard for entry rather than the Federal Communications 
Commission. This new process maintains the same substantive 
standards provided in current law.
    Second, it creates a new subsection (4) of Sec. 601(b) of 
the Telecommunications Act of 1996. This language clarifies the 
meaning of the antitrust savings clause contained in 
Sec. 601(b)(1) and the general savings clause contained in 
Sec. 601(c)(1) of that act. This language reiterates to the 
courts that the rights, obligations, powers, and remedies 
provided in the antitrust laws are not preempted by, not 
inconsistent with, and not incompatible with those provided 
under the Communications Act, the Telecommunications Act, or 
any law amended by either such act regardless of the progress 
of competition in any market. See also discussion in section E 
of the Background and Need for Legislation Section, above.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, except as shown below, are shown in 
Report 107-83 part I, filed May 24, 2001. The differences 
between the bill as reported by the Committee on Energy and 
Commerce and as reported by the Committee on the Judiciary are 
shown as follows:
    Existing law in which no change is proposed by either 
committee are shown in roman.
    New matter proposed to be inserted by the Committee on 
Energy and Commerce is printed in boldface roman. New matter 
proposed to be inserted by the Committee on the Judiciary is 
printed in italics.

                       COMMUNICATIONS ACT OF 1934



           *       *       *       *       *       *       *
                       TITLE II--COMMON CARRIERS

           *       *       *       *       *       *       *


   PART III--SPECIAL PROVISIONS CONCERNING BELL OPERATING COMPANIES

           *       *       *       *       *       *       *


SEC. 271. BELL OPERATING COMPANY ENTRY INTO INTERLATA SERVICES.

    (a)  * * *

           *       *       *       *       *       *       *

    (g) Definition of Incidental InterLATA Services.--For 
purposes of this section, the term ``incidental interLATA 
services'' means the interLATA provision by a Bell operating 
company or its affiliate--
            (1)  * * *

           *       *       *       *       *       *       *

            (7) of high speed data service or Internet backbone 
        service, subject to subsection (l).

           *       *       *       *       *       *       *

    (l) Application Prerequisite to Providing High Speed Data 
Service or Internet Backbone Service.--
            (1) Requirement to file application with attorney 
        general of the united states.--Neither a Bell operating 
        company, nor any affiliate of a Bell operating company, 
        may begin providing high speed data service or Internet 
        backbone service in any in-region State under the 
        authority of subsection (g)(7)--
                    (A) unless it files with the Attorney 
                General of the United States an application to 
                provide such service; and
                    (B) until the Attorney General --
                            (i) approves such application 
                        before the expiration of the 90-day 
                        period beginning on the date such 
                        application is filed; or
                            (ii) fails to approve or to 
                        disapprove such application during such 
                        90-day period.
            (2) Authority of attorney general.--The Attorney 
        General of the United States--
                    (A) may issue rules to establish 
                requirements applicable to the form and 
                contents of applications filed under paragraph 
                (1);
                    (B) may make recommendations to an 
                applicant regarding--
                            (i) withdrawal of an application 
                        filed under paragraph (1); or
                            (ii) filing of an application under 
                        paragraph (1), with or without 
                        modifications, subsequent to the 
                        withdrawal of an application filed 
                        under such paragraph; and
                    (C) may not approve an application filed in 
                compliance with this subsection unless the 
                Attorney General determines that the applicant 
                has demonstrated that it meets the substantive 
                requirements of subsections (c) and (d) with 
                respect to high speed data service or Internet 
                backbone service in the State for which such 
                application is filed.
            (3) Withdrawal of application.--An application 
        filed under paragraph (1) may be withdrawn by the 
        applicant at any time before the Attorney General 
        approves or disapproves such application, but may not 
        be modified after being filed.''.

           *       *       *       *       *       *       *

                              ----------                              


           SECTION 601 OF THE TELECOMMUNICATIONS ACT OF 1996

SEC. 601. APPLICABILITY OF CONSENT DECREES AND OTHER LAW.

    (a) * * *
    (b) Antitrust Laws.--
            (1) * * *

           *       *       *       *       *       *       *

            (4) Continuing operation of the antitrust laws.--
        The rights, obligations, powers, and remedies provided 
        under the antitrust laws are in addition to, and are--
                    (A) not preempted by;
                    (B) not inconsistent with; and
                    (C) not incompatible with;
        any of the rights, obligations, powers, and remedies 
        provided under the Communications Act of 1934 (47 
        U.S.C. 151 et seq.), under this Act, or under any law 
        amended by either such Act, regardless of the progress 
        of competition in any market.

           *       *       *       *       *       *       *


                           Markup Transcript



                            BUSINESS MEETING

                        WEDNESDAY, JUNE 13, 2001

                  House of Representatives,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:07 a.m., in Room 
2141, Rayburn House Office Building, Hon. F. James 
Sensenbrenner, Chairman of the Committee, presiding.
    Chairman Sensenbrenner. The Committee will come to order. A 
working quorum being present, pursuant to notice, I now call up 
the Bill H.R. 1542, the ``Internet Freedom and Broadband 
Deployment Act of 2001,'' also known as the Tauzin-Dingell 
Bill, as reported by the Committee on Energy and Commerce for 
purposes of markup.
    Without objection, the bill will be considered as read and 
open for amendment at any point. Without objection, the Chair 
is authorized to declare recesses of the Committee today at any 
point.
    [H.R. 1542 follows:]
    
    
    Chairman Sensenbrenner. I will yield myself 5 minutes for 
an opening statement, and won't use it. I will make a more 
detailed statement later when I offer an amendment to this 
bill. I would like to thank all the Members of the Committee 
who have worked hard on these difficult issues over the last 
several weeks.
    The referral we received from the Speaker directed us to 
move with lightening speed, and in true Judiciary Committee 
form, we have. However, I disagree with the scope and length of 
this referral. Nonetheless, we have abided by these strictures. 
We've had 2 days of informative hearings in which the vast 
majority of Members on both sides of the aisle participated. 
Again, thank you all for your diligent work and attention to 
this matter, which has allowed the Judiciary Committee to 
exercise its jurisdiction.
    I yield back the balance of my time, ask unanimous consent 
that all Members may include opening statements at this point 
in the record, and recognize the gentleman from Michigan for 5 
minutes.
    Mr. Conyers. Thank you, and good morning, Members of the 
Committee.
    Mr. Chairman, I think you should be congratulated for 
holding this markup, and for your outstanding leadership in 
protecting the Committee's historic jurisdiction over 
competition in the telecommunications industry.
    Under both Democratic and Republican leadership, the 
Judiciary Committee has always voted on an overwhelming 
bipartisan basis to preserve the Department of Justice's role 
in insuring the telecommunications marketplace is open to 
competitors. We cannot forget that it was the Department of 
Justice that brought the antitrust suit that ultimately broke 
up the old telephone system.
    In 1996, when we considered the Telecommunications Act, the 
Committee again voted overwhelmingly to give the Department of 
Justice a co-equal role with the FCC to review the Bell 
monopoly's entry into both voice and data long distance 
service. Today, the Committee considers the Tauzin-Dingell 
Bill, H.R. 1542, which would eviscerate the Department of 
Justice's role with respect to Bell entry into the long-
distance data market. This is not a nice thing to do. And we 
all know that data is the market of the future, not only 
because data represents over half of long-distance traffic and 
is still growing, but also because it's impossible to 
distinguish between voice and data when everything is 
transmitted in ones and zeroes.
    If the future--if the problems with the Tauzin bill were 
limited to the Department of Justice, no doubt we could find a 
way to correct them, but unfortunately, this bill--and I hate 
to say this--is so deeply flawed, that we cannot, within our 
narrow referral jurisdiction, fix this bill. So let's be frank 
about it. The Tauzin bill guts the market opening for pro-
competitive requirements of the 1996 Telecommunications Act. 
It's pretty straightforward in doing that. By essentially 
eliminating sections 251 and 271 of the '96 Act, which require 
that local phone monopoly facilities be open to competitors, 
the Tauzin Bill gives the local Bell monopolies a license to 
exclude. This is not a good thing.
    The bill would effectively transfer, effectively duplicate 
the monopoly over local telephone services into broadband DSL 
services. This is not--this is another not good thing. Not to 
mention the fact that the bill undermines important consumer 
protections such as rules against slamming, which prohibit 
companies from changing a customer's service without their 
consent, privacy regulations, law enforcement requirements, and 
protections against obscene and harassing communications. 
Competition should be our religion in telecommunications. It 
should be our credo. It is the touchstone for lower prices, 
better services, and for unleashing the innovative creativity 
that has built our new economy from the ground up. And 
historically, it's been the role of this Committee, Judiciary 
Committee, to preserve the basic rules of competition, and I 
think we intend to do that this morning.
    I urge the Committee then to reject this deeply-flawed bill 
that eliminates the Department of Justice's ability to prevent 
the remonopolization of the phone network.
    And I thank you for the time, Mr. Chairman.
    [The opening statement of Mr. Conyers follows:]
Prepared Statement of the Honorable John Conyers, Jr., a Representative 
                 in Congress From the State of Michigan
    I want to thank the Chairman for holding this important markup and 
for his outstanding leadership in protecting the Committee's historic 
jurisdiction over competition in the telecommunications industry.
    Under both Democratic and Republican leadership, this Committee has 
always voted on an overwhelming bipartisan basis to preserve the 
Department of Justice's role in ensuring that the telecommunications 
marketplace is open to competitors.
    We cannot forget that it was the Department of Justice that brought 
the antitrust suit that ultimately broke up the old ``Ma Bell'' system.
    In 1996, when we considered the Telecommunications Act, the 
Committee voted overwhelmingly to give DOJ a co-equal role with the FCC 
to review the Bell monopolies' entry into both voice and data long 
distance service.
    Today, the Committee considers the Tauzin-Dingell bill, H.R. 1542, 
which would eviscerate DOJ's role with respect to Bell entry into the 
long distance data market.
    And we all know that data is the market of the future. Not only 
because data represents over 50% of long distance traffic--and growing. 
But also because it's impossible to distinguish between ``voice'' and 
``data'' when everything is transmitted in ``ones'' and ``zeros.''
    If the problems with the Tauzin bill were limited to DOJ, we could 
find a way to correct them.
    Unfortunately, the Tauzin bill is so deeply flawed that we cannot--
within our narrow referral--fix this bill.
    Let's be honest: the Tauzin bill guts the market-opening, pro-
competitive requirements of the 1996 Telecommunications Act.
    By essentially eliminating Sections 251 and 271 of the '96 Act--
which require that local phone monopoly facilities be opened to 
competitors--the Tauzin bill gives the local Bell monopolies a license 
to exclude.
    The bill would effectively transfer--effectively duplicate--the 
monopoly over local telephone service, into broadband DSL services.
    Not to mention the fact that the bill undermines important consumer 
protections--such as rules against ``slamming'' (which prohibit 
companies from changing a customer's service without their consent), 
privacy regulations, law enforcement requirements, and protections 
against obscene, indecent, and harassing communications.
    Competition should be our religion in telecommunications. It should 
be our credo. It is the touchstone for lower prices, better services, 
and for unleashing the innovative creativity that has built our new 
economy from the ground up. And historically, its been the role of this 
Committee to preserve those basic rules of competition.
    I urge the Committee to reject this deeply flawed bill that 
eliminates the Department of Justice's ability to prevent the re-
monopolization of the phone network.

    [The opening statement of Mr. Issa follows:]
 Prepared Statement of the Honorable Darrell Issa, a Representative in 
                 Congress From the State of California
    Mr. Chairman, I want to thank you for bringing forward H.R. 1542, 
H.R. 1698 and H.R. 2120 to the full Judiciary Committee. Like many of 
my colleagues on the Judiciary Committee, I am frustrated that our 
committee received an extremely narrow referral of H.R. 1542. My 
frustration in particular is focused on section 4 of the H.R. 1542 bill 
that may inhibit efforts to prohibit spamming.
    As we on the Judiciary Committee all recognize, unsolicited 
commercial electronic mail, or ``spam,'' can impose significant 
economic burdens on Internet access services, small and large 
businesses, and of course, individuals. That is because the information 
superhighway can only handle a finite volume of email. Spam can also 
negatively affect the quality of service that web users receive and 
ultimately contributes to a loss of privacy online.
    Both the Federal Communications Commission and the states have a 
substantial governmental interest in regulating spam. Indeed, this 
Committee recently addressed the spam issue--taking a measured approach 
to ensure that spammers do not cause further damage to our high-tech 
economy. To date, however, the primary burden for dealing with spam has 
fallen on the FCC and the states.
    Section 4 of the Tauzin-Dingell bill is intended to completely 
deregulate the provision of high-speed data services offered by 
incumbent local exchange carriers. New section 232, which would be 
created if H.R. 1542 is enacted, would eliminate the authority for the 
FCC and the states to address spam. As the bipartisan, dissenting views 
from the Commerce Committee concerning the Tauzin-Dingell bill point 
out: ``The sweeping evisceration of FCC and state authority raises 
several questions about what rules and regulations no longer apply. . . 
. That means that many important rules, including consumer protection 
rules, may inadvertently be swept away.'' Spam is one of those areas 
where FCC and state regulations would be nullified.
    Given that H.R. 1542 threatens the ability of the FCC and state 
governments to deal with spam transmitted using the high-speed data 
services of Bell companies, I was prepared to offer an amendment this 
morning. My amendment--to be added to the end of Section 4(b) of 
Tauzin-Dingell--would simply have said: ``Nothing in this section shall 
be construed to prevent the Commission or any state from adopting 
regulations to prohibit unsolicited commercial e-mail messages, or 
`spam.' ''
    The impact that Tauzin-Dingell would have on consumer protection 
measures such as spam regulations causes me great concern. I hope that 
if H.R. 1542 does, in fact, reach the floor of the House, all of us who 
are concerned about this issue will have an opportunity rectify the 
situation with a floor amendment.
    Again, I thank the Chairman for holding this hearing and for his 
leadership on these broadband bills.

    [The opening statement of Mr. Cannon follows:]
 Prepared Statement of the Honorable Chris Cannon, a Representative in 
                    Congress From the State of Utah
    Mr. Chairman, I want to thank you for offering your amendment to 
preserve the interLATA data rules and to reverse the Goldwasser case. 
It is critical that we protect the jurisdiction of this Committee on 
issues pertaining to competition in the telecommunications marketplace. 
More importantly, however, there are real, substantive problems with 
H.R. 1542 that I would have liked to address. But given the narrow 
terms of the referral we received from the Parliamentarian, this 
Committee is not permitted to do so.
    Should we have had a broader referral, I would have proposed two 
amendments. The first amendment would have addressed the issue of 
privacy and the second amendment would have preserved FCC authority to 
address slamming and cramming.
                                privacy
    During consideration of the 1996 Telecommunications Act, Congress 
recognized that new competitive market forces and technologies had the 
potential to threaten consumer privacy interests. Congress enacted 
Section 222 of the '96 Act to ensure that telecommunications carriers 
protected the privacy of customer proprietary network information 
(``CPNI'') and other customer information they obtain when they provide 
telecommunications services.
    The Federal Communications Commission has adopted rules to 
implement and enforce Section 222. Because Section 4 of HR 1542 can be 
construed to completely deregulate the high-speed data services offered 
by incumbent local exchange carriers (``ILECs''), it could jeopardize 
the Commission's ability to protect the privacy of sensitive customer 
information obtained by ILECs when they provide high-speed data 
services.
    As such, I would have offered the following amendment:

        ``At the end of the existing text of subsection 4(b), insert 
        the following:

                `Nothing in this section shall be construed to limit or 
                affect the authority of the Commission under Section 
                222 of the Communications Act, 47 U.S.C. 222 et seq.' 
                ''

    This amendment would have protected consumers in the event of the 
passage of H.R. 1542. Specifically, it would have preserved the 
Commission's authority to regulate ILECs' usage of customer 
information, even if they obtain that information from their provision 
of high-speed data services.
    Unfortunately, such an amendment is beyond the scope of our 
referral this morning, and thus, would have been ruled out of order. 
The fact that H.R. 1542 would potentially undermine privacy protections 
provided by the Federal Communications Commission can only increase my 
concerns about the Tauzin-Dingell legislation.
                         slamming and cramming
    In addition to privacy issues, I am also concerned about the 
Tauzin-Dingell legislation because it fails to preserve FCC and state 
authority to prevent slamming and cramming.
    The FCC currently has statutory authority to regulate the practice 
of ``slamming,'' where a company changes a subscriber's chosen provider 
of telecommunications services without the subscriber's knowledge or 
authorization, and ``cramming,'' where a company places unauthorized, 
misleading, or deceptive charges on consumers' telephone bills. Certain 
states also prohibit or regulate slamming and cramming under state 
consumer protection statutes or regulations.
    Slamming and cramming are fraudulent practices that distort the 
market for telecommunications services. I know of no one who supports 
the right of Bell companies to slam or cram consumers.
    Unfortunately, Section 4 of H.R. 1542 could be construed to 
completely deregulate the high-speed data services offered by Bell 
companies; as such, it threatens the authority of the FCC and the 
states to prevent slamming and cramming by telecommunications 
companies.
    I had hoped to offer an amendment to address this oversight in the 
Tauzin-Dingell legislation. Specifically, my amendment would have said:

        ``At the end of the existing text of subsection 4(b), insert 
        the following:

                `Nothing in this section shall be construed to limit or 
                affect the authority of the Commission under 47 U.S.C. 
                258 to prohibit and otherwise regulate illegal changes 
                in subscriber carrier selections (``slamming'') or the 
                authority of the Commission under 47 U.S.C. 201(b) to 
                prohibit and otherwise regulate the imposition of 
                charges on telephone bills for unauthorized services 
                (``cramming''). Nothing in this section shall be 
                construed to limit or affect the authority of any State 
                to regulate slamming or cramming under state consumer 
                protection statutes or regulations.' ''

    This amendment would have ensured that consumers remain protected 
by preserving FCC and state authority to prevent slamming and cramming.
    Unfortunately, the Judiciary Committee's narrow referral of H.R. 
1542 precludes my offering such an amendment. Since our Committee is 
unable to address the slamming and cramming issues within the scope of 
its referral, I hope the House will consider and accept such an 
amendment if H.R. 1542 reaches the floor.
    Thank you, Mr. Chairman, for your indulgence on these issues. I 
yield back the balance of my time.

    Chairman Sensenbrenner. The bill is now open for amendment, 
and I have an amendment at the desk.
    Mr. Boucher. Mr. Chairman, I reserve a point of order on 
the amendment.
    Chairman Sensenbrenner. Point of order is reserved.
    Clerk will report the amendment.
    The Clerk. Amendment offered by Mr. Sensenbrenner to the 
Committee Print, showing the text of H.R. 1542 as reported by 
the Committee on Energy and Commerce, dated June 8, 2001.
    Chairman Sensenbrenner. Without objection, the amendment is 
considered as read, and I will recognize myself for 5 minutes.
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. Let me say first that I was 
disappointed at the narrow referral that we have received, 
because I was hopeful that we would be able to address all of 
the antitrust issues raised by H.R. 1542. Unfortunately, 
however, I believe that given the limited scope of the 
referral, we are only able to address two of the antitrust 
issues raised by the bill. My amendment deals with both of 
them.
    First, it would restore current law with respect to Bell 
entry into interLATA data, except that the Department of 
Justice would become the decisionmaker rather than the FCC. 
With respect to this issue, I am not ready to give up the 
Justice Department's role in reviewing the antitrust 
implications of Bell entry into long distance, even for data. I 
understand that the Energy and Commerce Committee has worked 
its will, and that it is ready to give up the role of the FCC, 
at least for data. That's fine. However, on this Committee, we 
have a longstanding bipartisan position that the Justice 
Department should have a role here, and this amendment 
vindicates that long-held position.
    Second, my amendment would fix what I believe to be a part 
of the Goldwasser decision that was wrongly decided by the 
Seventh Circuit. In the 1996 Act, Congress expressly stated 
that nothing in that act in any way changed the antitrust laws. 
In one part of the Goldwasser decision, the Seventh Circuit 
appears to hold that Congress impliedly repealed the antitrust 
laws by passing the 1996 Act. I do not see how a court can 
imply a repeal of the antitrust laws when we expressly state 
that we are not repealing them. So I believe that this fix is 
necessary to make it clear to the courts what Congress 
intended.
    I believe that both parts of this amendment are important 
to the Committee's future jurisdictional interest, and I urge 
all of the Members to support this effort to maintain our 
jurisdiction.
    And yield back the balance of my time.
    [The prepared statement of Chairman Sensenbrenner follows:]
  Prepared Statement of the Honorable F. James Sensenbrenner, Jr., a 
         Representative in Congress From the State of Wisconsin
    Let me say first that I was disappointed at the narrow referral 
that we received because I was hopeful that we would be able to address 
all of the antitrust issues raised by H.R. 1542. Unfortunately, 
however, I believe that given the limited scope of the referral, we are 
only able to address two of the antitrust issues raised by the bill.
    My amendment deals with both of them. First, it would restore 
current law with respect to Bell entry into interLATA data except that 
the Department of Justice would become the decisionmaker rather than 
the FCC. With respect to this issue, I am not ready to give up the 
Justice Department role in reviewing the antitrust implications of Bell 
entry into long distance even for data. I understand that the Energy 
and Commerce Committee has worked its will and that it is ready to give 
up the role of the FCC at least for data. That is fine. However, on 
this Committee, we have a longstanding bipartisan position that the 
Justice Department should have a role here, and this amendment 
vindicates that long held position.
    Second, my amendment would fix what I believe to be a part of the 
Goldwasser decision that was wrongly decided. In the 1996 Act, Congress 
expressly stated that nothing in the Act in any way changed the 
antitrust laws. In one part of the Goldwasser decision, the Seventh 
Circuit appears to hold that Congress impliedly repealed the antitrust 
laws by passing the 1996 Act. I do not see how a court can imply a 
repeal of the antitrust laws when we expressly state that we are not 
repealing them. So, I believe that this fix is necessary to make it 
clear to the courts what Congress intended.
    I believe that both parts of this amendment are important to the 
Committee's future jurisdictional interests, and I urge all of the 
Members to support this effort to maintain our jurisdiction.

    Mr. Boucher. Mr. Chairman, I insist upon my point of order.
    Chairman Sensenbrenner. The gentleman will state his point 
of order.
    Mr. Boucher. Mr. Chairman, I must insist upon this point of 
order because the amendment exceeds the scope of the 
Committee's referral of the underlying bill under rules 10 and 
12 of the Rules of the House. The Speaker granted this 
Committee a sequential referral of H.R. 1542 under the 
provisions of rules 10 and 12 until the 18th of June 2001. That 
referral specifically and expressly limited the scope of the 
referral to the consideration of, quote, ``such provisions of 
the bill and amendment recommended by the Committee on Energy 
and Commerce as proposed to narrow the purview of the Attorney 
General under section 271 of the Communications Act of 1934,'' 
end of quote.
    The amendment addresses matters outside the scope of this 
very limited referral for two reasons. First, the amendment 
fundamentally changes the consultative role of the Attorney 
General in section 271 proceedings, and that consultative role 
is the basis for this Committee's referral. Current law 
requires the Attorney General--I'm sorry. Current law provides 
to the Attorney General only a consultative role in the section 
271 process. The Attorney General may submit comments in 
writing to the Federal Communications Commission, but the 
statute makes clear that the evaluation by the Attorney 
General, and I quote again, ``shall not have any preclusive 
effect'' on the Federal Communications Commission's 
determination. And that is found in section 271(d)(2)(A) of the 
Communications Act.
    Instead of a consultative role, the Chairman's amendment 
gives the Attorney General a dispositive role over Bell Company 
provision of high-speed Internet services across LATA 
boundaries. That is not a role that the Attorney General 
exercises today. Therefore, it is not related to the proposed 
narrowing of the Attorney General's role as proposed by the 
Committee on Energy and Commerce, and it is only the proposed 
narrowing of the Attorney General's role that this Committee 
may consider under the referral to this Committee from the 
House.
    Secondly, the balance of the amendment deals with antitrust 
matters that have nothing to do with the consultative role of 
the Attorney General under section 271. Because the operation 
of the antitrust laws doe not address the consultative role of 
the Attorney General under that section, and any narrowing of 
that role by the bill reported by the Energy and Commerce 
Committee, the second half of the amendment is clearly outside 
of the scope of this Committee's referral as well.
    Mr. Chairman, it is my understanding that the House 
Parliamentarian has had the opportunity to review the amendment 
that is now pending, and it is also the opinion of the House 
Parliamentarian that this amendment exceeds the referral 
granted to this Committee, and I'm confident the Chairman and 
his staff are well aware of that fact. I must insist upon my 
point of order because his amendment exceeds the scope of the 
referral to this Committee.
    Chairman Sensenbrenner. Anybody else on the point of order? 
If not, the Chair is prepared to rule. The Chair overrules the 
point of order. The Speaker referred the bill to the Committee, 
quote, ``for consideration of such provisions of the bill and 
the amendment recommended by the Committee on Energy and 
Commerce as proposed to narrow to purview of the Attorney 
General under section 271 of the Communications Act of 1934,'' 
unquote. H.R. 1542 narrows that purview by taking high-speed 
data service and Internet backbone service out of the class of 
service that is subject to section 271. Thus, it narrows the 
Attorney General's consultative role under that section.
    In exercising his consultative role under section 
271(d)(2)(A), the Attorney General may use, quote, ``any 
standard he considers appropriate,'' unquote. section 6 of H.R. 
1542 specifically leaves this process in place for voice 
communication service. The Goldwasser case cast doubt on 
whether antitrust law still applies to the telecommunications 
industry, then thereby cast out on whether the Attorney General 
may continue to apply an antitrust standard in his evaluation 
of applications under section 271.
    Reading section 6 in light of Goldwasser, it reiterates a 
narrower section 271 process because of Goldwasser's change of 
the law in the Seventh Circuit. Thus, it narrows the purview of 
the Attorney General under section 271. Moreover, because 
Goldwasser is the law in only one circuit, it creates confusion 
as to whether the Attorney General must apply differing 
standards to applications from different circuits. If he cannot 
apply an antitrust standard to a section 271 application from 
the Seventh Circuit, then again his purview under section 271, 
as reiterated in section 6, is narrowed. The Goldwasser fix is 
directly related to the subject of the underlying text because 
the consistent application of the law throughout every 
geographic region of the country is fundamental to the bill and 
the pending amendment.
    For these reasons, I rule that the part of the amendment 
having to do with reversing a part of the Goldwasser case is 
within the scope of the referral and is germane to the bill. 
Moreover, the amendment is germane for an additional reason. 
The pending amendment reestablishes the Attorney General's role 
in section 271 decisions, whereas the underlying amendment 
removes the Attorney General from the process. The pending 
amendment would have to RBOCs apply to the Attorney General for 
authorization to provide interLATA high-speed data services and 
Internet backbone services. The bill says they should be able 
to provide that service now without any further process. If my 
amendment passes, there again would be confusion as to whether 
the Attorney General could apply an antitrust standard in 
evaluating applications under my amendment. Thus, I rule that 
the amendment is germane for that reason as well.
    Also under my amendment, we reinstate the current process 
with respect to data, except that instead of having the FCC 
make the final decision, the Department of Justice will make 
the final determination.
    The referral we received from the Speaker permits the 
Committee to consider such provisions of H.R. 1542, quote, ``as 
proposed to narrow the purview of the Attorney General under 
section 271 of the Communications Act of 1934,'' unquote. This 
amendment clearly addresses those provisions. We are not 
limited in introducing a new regulatory mechanism for approval 
of data, particularly because the other committee removed the 
FCC from the process.
    This amendment is closely related to the underlying bill. 
It is clearly within the jurisdiction of the Committee, and as 
a regulatory process, similar to current law in all but one 
respect, and therefore, the part of the amendment dealing with 
the Attorney General's role in section 271 determinations is 
germane.
    Let me say that if we were to return to the status quo by 
restoring the FCC's role, which was taken out of the bill by 
the Commerce Committee, we would surely be criticized for 
invading the Commerce Committee's jurisdiction, and I would 
never want to do that. [Laughter.]
    Chairman Sensenbrenner. We cannot restore a DOJ 
consultative role if there's no one to consult with, and the 
Tauzin-Dingell Bill took that FCC out of the business, so the 
DOJ can't consult with anybody under the Tauzin-Dingell Bill. 
Thus, if our policy choice is to maintain current law, I cannot 
conceive an amendment more germane and more precisely within 
the scope of the referral, and the point of order is overruled.
    Is there further debate on the amendment?
    Mr. Conyers. Mr. Chairman, I seek recognition.
    Chairman Sensenbrenner. The gentleman from Michigan moves 
to strike the last word, and is recognized for 5 minutes.
    Mr. Conyers. Thank you very much. This is back on to the 
amendment that you have brought forward, and what it seems to 
me is that this amendment attempts to lay claim to the 
Committee on Judiciary's rightful jurisdiction over antitrust 
laws in the telecommunications industry, and it reaches to the 
full extent of our referral in trying to improve a troubled 
product that we have received from the Commerce Committee.
    The amendment's Goldwasser fix reaffirms what we thought we 
made clear in the 1996 Act, namely, the telecommunications 
industry must comply with both the '96 Act and the antitrust 
laws. Let's not have any fooling around in trying to limit 
antitrust application to the telecommunications industry. 
Congress and all but this one court--the unnamed number of the 
appellate court I will not reveal at this time--but this one--
outside of this one misguided court, everybody's understood and 
recognized the application of the antitrust laws to the 
telecommunications industry. I never thought we'd have to go 
and make this clear to the courts. But this amendment, once 
again, makes our position clear, and it's totally within the 
scope of our referral.
    Now, the amendment narrows the Tauzin measure to some 
extent. In its current form, the bill destroys the bargain made 
in the '96 Act. It permits, Tauzin does, the Bells to provide 
long-distance data services before meeting the competitive 
checklist in section 271 of the '96 Act. Can't do that, 
fellows. Cannot do that. You cannot modify the '96 Act on this 
very, very important provision.
    And in addition, Tauzin eliminates the Attorney General's 
historic role in identifying anticompetitive behavior by the 
Bell companies, and that's what this amendment tries to do, 
merely to restore the Attorney General's role by requiring the 
Bells to demonstrate that they have opened their local 
telephone monopoly to competition before they can offer long-
distance data services. What's wrong with that? It's the 
current law as it presently exists, and as many of you on the 
Committee know, that this amendment only goes a small part of 
the way in trying to repair the product we've got from the 
Commerce Committee.
    Due to the narrow referral, we are unable to amend the most 
broken parts of the bill. The amendment--this amendment does 
not and can't fix section 4 of that bill, Tauzin, which rolls 
back the line sharing and unbundling requirements contained in 
section 251 of the 1996 Act, and as a result, even if this 
amendment is adopted, the Bells can still act in a monopolistic 
way and abuse their power by denying competitors access to the 
local loop. This is not a good situation.
    Secondly, the amendment doesn't and cannot correct the fact 
that the Tauzin bill would severely limit Federal and State 
authority over the Internet to prevent spam, invasions of 
privacy, obscenity and pornographic materials that ought to be 
restricted, and other protections critical to consumers.
    And, finally, the bill--this amendment doesn't and can't 
fix the inadequate broadband buildout requirement that does not 
require the Bells to deploy any new broadband facility anywhere 
for two solid years, which allows the Bells to escape these 
requirements all together, merely by selling off their rural 
exchanges. Bad deal.
    And so I urge the Members to support the Sensenbrenner 
amendment and return any time.
    Chairman Sensenbrenner. Time of the gentleman has expired.
    For what purpose does the gentleman from Virginia seek 
recognition?
    Mr. Goodlatte. Mr. Chairman, move to strike the last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
quick minutes because there's a vote on.
    Mr. Goodlatte. Mr. Chairman, I will be very quick. I am a 
strong supporter of the Tauzin-Dingell legislation as it is 
written because I think it promotes competition and creates 
fairness. All of their competitors in the high-speed Internet 
market are not regulated. Cable and wireless and satellite, 
these folks are heavily regulated and they are losing this 
battle as a result of that.
    I must reluctantly oppose the Chairman's amendment, not 
because of the Chairman's effort to protect the jurisdiction of 
the Committee and the role of the Justice Department. I think 
that is a very important function, but I think this amendment 
goes too far in that it creates an affirmative step that must 
be taken by the Attorney General before companies can get into 
competition in a business area, and that is highly unusual 
except in the area of mergers. This is something that 
effectively rolls back the situation. It eviscerates the 
Tauzin-Dingell Bill because it has the effect of saying that 
we're simply transferring all of the responsibility from the 
FCC that we're trying to get relief from, we're trying to 
deregulate from, and turns that over to the Justice Department 
with a big question mark as to exactly how the Attorney General 
and the Justice Department would apply that standard.
    To me, this is a step backward, and as a result, I must 
reluctantly oppose the amendment.
    Chairman Sensenbrenner. The question is on the amendment.
    Mr. Boucher. Mr. Chairman, I want to speak in opposition to 
the amendment. Would the gentleman consider perhaps a brief 
recess while we vote on the floor so that we can continue our 
discussion of this amendment?
    Chairman Sensenbrenner. The Committee stands in recess. 
Please come back right after you vote.
    [Recess.]
    Chairman Sensenbrenner. When the Committee recessed for the 
Journal vote, pending was an amendment by the Chair to H.R. 
1542. For what purpose does the gentleman from Virginia, Mr. 
Boucher, seek recognition?
    Mr. Boucher. Mr. Chairman, I rise in opposition to the 
amendment.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Boucher. Mr. Chairman, this amendment goes well beyond 
whatever the Committee might deem to be necessary to address 
whatever concerns Members of the Committee might have with the 
recent Goldwasser decision.
    The amendment does a number of things that I think are 
inappropriate. First of all, it establishes new 
telecommunications regulatory policy in an antitrust agency. It 
does that without the Department of Justice having had the 
opportunity to comment to this Committee on whether it wants 
this authority. It does that without the Department of Justice 
having indicated to this Committee that it has either the 
resources or the expertise to carry out these regulatory 
duties. And most importantly, I think that the amendment would 
eliminate the immediate relief for interLATA data services, 
which the Tauzin-Dingell measure provides. And that relief is 
essential and is much needed for three major reasons.
    First of all, the provision of immediate interLATA data 
relief would promote competition in the offering of Internet 
backbone services. That competition would provide better 
pricing, and would affect in a favorable way the prices that 
all of us pay to our Internet service providers for monthly 
Internet access service.
    Secondly, the provision of immediate interLATA data relief 
would provide for more rapid deployment of DSL services by the 
Bell operating companies. They would be able to maximize their 
investment from the deployment of DSL service as they would be 
able to carry the DSL traffic, the data traffic, from the 
originating user through the entire Internet backbone, and that 
would significantly increase the interest and the willingness 
of the Bell operating companies in deploying DSL services more 
rapidly.
    Third, and from the standpoint of those of us who represent 
rural America, perhaps most importantly, the immediate 
interLATA data relief that the Tauzin-Dingell Bill provides 
would create a much greater willingness on the part of the Bell 
operating companies to deploy Internet hubs, Internet points of 
presence in much greater numbers in rural America. Study after 
study has shown a marked active investment in sufficient 
numbers of Internet points of presence to assure the 
availability of truly affordable, high-speed Internet access 
services, primarily for businesses in rural America. The fact 
is, if you're a business in a place that is served by a Bell 
operating company today, and it happens to be a rural area, you 
are probably going to pay far more for high-speed Internet 
access than you would if you are a business in a city or if 
you're a business in some rural area that is served by a local 
exchange carrier that is not a Bell operating company.
    Now, why do we find this phenomenon? The basic reason is 
that the Bell operating company is required to hand off the 
data traffic that comes to its Internet hub when that traffic 
reaches the first LATA boundary. And there simply isn't a great 
deal of financial incentive for the Bell Company to deploy hubs 
if they have to hand the traffic off from that hub very quickly 
to some other carrier, some other provider. But that is the 
circumstance we face today, and that is the circumstance that 
would be remedied in a very effective way in the Tauzin-Dingell 
measure, offering immediate relief from interLATA data 
services.
    This amendment would reverse that, and would deny that 
immediate relief. It would prevent these three advances that I 
have mentioned, which I think are very important, from being 
realized by the American public.
    The bill would also lead to the reimposition of a range of 
burdensome regulations that have hampered the deployment of DSL 
services. The cable industry today has 70 percent of the 
broadband market locally, and that's because it's essentially 
unregulated. The Bell operating companies are burdened by 
legacy regulations from the previous telecommunications era, as 
they seek to roll out their advanced services. The Tauzin-
Dingell Bill would remove those regulations, create regulatory 
parity, and dramatically increase the willingness of Bell 
companies to deploy DSL.
    If you're interested in the deployment of DSL service, if 
you're interested in extending broadband to your constituents, 
a no vote on this amendment is required.
    Thank you, Mr. Chairman. I yield back.
    Chairman Sensenbrenner. For what purpose does the gentleman 
from Utah seek recognition?
    Mr. Cannon. To strike the last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Cannon. Thank you, Mr. Chairman. I would like to voice 
my support for this amendment to H.R. 1542. This amendment 
focuses on one of the many fatal flaws of this bill, that is 
the anticompetitive behavior--correction--let me call that the 
predatory behavior of the regional Bell operating companies. If 
the underlying bill were to pass as is, any and all checks to 
insure a fair and level field of competition on communications 
facilities would be tossed out. By overturning the errant 
decision of an activist judge in the Goldwasser case, we will 
be reaffirming this Committee's belief and the belief of 
Congress that the established antitrust laws do in fact apply 
to the telecommunications industry. We do this despite the best 
efforts of attorneys representing the RBOCs in a number of 
antitrust actions pending around the country. We do this to 
preserve the explicit antitrust savings clause of the '96 
Telecommunications Act, which this Committee and the entire 
Congress supported.
    Proponents of this bill invoke deregulation and claim this 
piece of legislation is the best way to expedite the rollout of 
advanced services. Some form of deregulation it may be, but I 
fear the cost of this form of deregulation is remonopolization.
    The Energy and Commerce Committee should know, especially 
now, given what is happening in California, that flawed 
deregulation will only create problems and headaches down the 
road. In this context, it will create blackouts in competition 
on the nation's information super highway.
    As Northpoint, Telegint, Rhythms, Harvard Net and others 
can attest, the Bells cannot be trusted to preserve competition 
on their own accord. The '96 Telecommunications Act was quite 
effective at pointing the way to deregulation by conditioning 
interLATA data on opening of the local loop. The Tauzin-Dingell 
Bill moves backwards by removing all regulatory authority over 
all advanced services. Some Members of the Energy and Commerce 
Committee feel--may feel all right about unleashing the Bells 
in toto. I, however, believe that we should acknowledge our 
jurisdiction and affirm the role of the Attorney General and 
the Justice Department to review the actions of these companies 
and protect consumers from bad actors who abuse monopoly power.
    While I applaud and offer my support of the amendment 
proposed by the Chairman, I must, however, acknowledge its 
limitations. Given the narrow and overly restrictive nature of 
the referral granted to this Committee, the Chairman has done 
all he can to salvage what is a very bad bill. If H.R. 1542--it 
does make H.R. 1542 better, but it is still--it still is a very 
bad bill.
    Given the nature of this referral, I cannot offer any of 
the amendments I would, amendments to preserve the FCC's and 
states' authority to address such topics as CALEA, spamming, 
slamming, cramming, pornography, privacy, unbundling and 
interconnection should be added. All are and should rightly be 
important issues to the Members of this Committee, but our 
hands are tied.
    I thank the Chairman and his staff for the substantial work 
they have done in crafting an amendment that addresses the only 
concern possible under this unusually narrow referral. I urge a 
yea vote on the Sensenbrenner amendment.
    Thank you, Mr. Chairman. I yield back the balance of my 
time.
    Chairman Sensenbrenner. For what purpose does the 
gentlewoman from Texas, Ms. Jackson Lee, seek recognition?
    Ms. Jackson Lee. Rise to strike the last word.
    Chairman Sensenbrenner. The gentlewoman's recognized for 5 
minutes.
    Ms. Jackson Lee. Thank you very much, Mr. Chairman.
    Four years ago on this Committee I supported the work that 
we did on the Telecommunications Bill with respect to the 
importance of the antitrust provision, 217. Still continue to 
believe that the issue of competition is extremely important. 
My disappointment and dissatisfaction today is that we, with 
the limited jurisdiction of our Committee, could not frame, if 
you will, and could not receive support for a reasonable 
approach, which is to compromise and to recognize that there 
are monopolies on both sides.
    There are monopolies on the side of the larger, long 
distance company with respect to their ability to garner the 
market on cable companies which are not regulated. And there 
are likewise monopolies, as it relates to local service and 
local jurisdictions.
    I believe that we need to solve this, not by a sledge 
hammer, but by a compromise, and I'm going to be looking at 
some of the legislative compromises that have been offered.
    I do want to applaud the Ranking Member and Chairman for 
the commitment to the competitive necessities of this 
particular market, but I am concerned as to whether or not the 
amendment before us is too harsh and too stringent, and cannot 
be handled more with the frame of amendment that I had, which 
is to monitor and potentially intercede the Attorney General of 
the Department of Justice Antitrust Division when the 
monopolies are determined. I am concerned that the amendment 
before us does exceed its present--or the necessities of 
reform, and am concerned as well that we are going too much in 
the direction of an existing entity that has as much a monopoly 
as anyone else, of anyone who's trying to get cable service and 
get any improvement in the cable service, they will be waiting 
in line for ages and ages and ages, and most likely it's poor 
service, and I have experienced that as much as my constituents 
have.
    So I believe that what we should be trying to do between 
the committees of jurisdiction is to find a reasonable approach 
to resolving these concerns as opposed to taking lock-step 
positions on one side or the other, because there are no clean 
hands in this room.
    I yield back the balance of my time.
    Chairman Sensenbrenner. For what purpose does the gentleman 
from California rise?
    Mr. Schiff. Move to strike the last word, Mr. Chairman.
    Chairman Sensenbrenner. The gentleman's recognized for 5 
minutes.
    Mr. Schiff. Mr. Chairman, Members, the 1996 Act provided 
that nothing in that act shall be construed to modify, impair 
or supersede the applicability of the antitrust laws. If that 
wasn't enough, it goes on to provide that nothing in the act 
shall be construed to modify, impair or supersede Federal, 
State or local law unless expressly so provided. Nothing 
expressly so provided with respect to the antitrust laws. In 
fact, exactly the opposite. And therefore, I think that 
Goldwasser was wrongly decided.
    Part of the amendment would overturn Goldwasser, and I 
think that would be good law. That would provide that the 
antitrust laws continue to apply and are not superseded, if 
there was any question about that fact.
    But the amendment goes well beyond overturning Goldwasser, 
and in doing so, provides that the Attorney General will play 
an unprecedented role in this area. I would like to see an 
amendment that was confined to overturning Goldwasser, but does 
not establish a new regulatory mechanism which may prove more 
flawed than the one that we've been through.
    For that reason, I must reluctantly oppose the amendment.
    Ms. Lofgren. Mr. Chairman?
    Chairman Sensenbrenner. The gentlewoman from California.
    Ms. Lofgren. Strike the last word.
    Chairman Sensenbrenner. Recognized for 5 minutes.
    Ms. Lofgren. Mr. Chairman, I understand the reluctance 
being expressed by some of my colleagues relative to the 
amendment, and my colleague from California is correct, this 
is--the amendment would not actually establish the status quo 
that we, I think, many of us seek. Goldwasser was wrongly 
decided. We do need to overturn that.
    But I guess I come down on the other side of the issue, 
because we do have very limited jurisdiction here. And since 
the Commerce Committee has essentially removed the FCC from its 
important role, the only thing that we can do to more or less 
essentially protect the status quo, is what the Chairman has 
suggested in his amendment. So in an ideal world, without the 
narrow jurisdiction that this Committee has been saddled with, 
we might do something slightly different. But given the 
referral, I really am at a loss to see how we could do anything 
other than what the Chairman has suggested in his amendment, 
and therefore, I think we really are constrained to support 
this amendment, even though we might, had we had a freer hand, 
come up with something slightly different.
    And I thank the Chairman for his amendment, and I yield 
back the balance of my time.
    Chairman Sensenbrenner. For what purpose does the gentleman 
from New York seek recognition?
    Mr. Nadler. To strike the last word, Mr. Chairman.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Nadler. Thank you, Mr. Chairman. I was one of the 16 
Members of the House, who, 5 years ago, voted against the 
Telecommunications Act of 1996. And one of the reasons I voted 
against the act was that I feared that it would lead to further 
concentration of ownership in the media and that it might lead 
to further concentration of ownership in telecommunications.
    I certainly think that the basic bargain that was struck in 
the bill, that the baby Bells, the RBOCs, cannot go in to 
compete with long distance until they open up their local 
monopolistic markets to competition from others, from the long-
distance carriers and from others, is the basic minimum we 
ought to expect. And the Tauzin-Dingell Bill goes in exactly 
the wrong direction, and would lead to what has become, in a 
number of different fields, a pretty standard course for 
deregulation. You start with a regulated monopoly. You break it 
up. You have then competition. The consumers benefit. Then the 
mergers and acquisitions start, and eventually you come to an 
unregulated cartel. And especially if Tauzin-Dingell passes, I 
think that that will just accelerate that process, and that the 
present long-distance carriers will probably be eaten up by the 
RBOCs and we'll probably end up with one or two RBOCs running 
all the telecommunications in the country. And then we'll wait 
and hope that the cable companies can compete with them.
    I don't think that's what we want, and therefore, I would 
oppose Tauzin-Dingell, and I think that the Chairman's 
amendment goes in the right direction. I wish we had a broader 
referral, but given the limited nature of the referral, the 
Chairman's amendment goes in the right direction, and I would 
support it, and urge my colleagues to vote for it, not only to 
protect the jurisdiction of the Committee and to protect the 
existence of antitrust law in this area, but to protect the 
existence of competition if we hope to see any competition 
remain in this field at all.
    Just one further observation. We're told by the supporters 
of Tauzin-Dingell that, well, in 1996, it wasn't anticipated 
that--you know that there be all this data transmission. Well, 
we're going into a digital era. Everything is going to be data, 
including voice. And if Tauzin-Dingell passes without this 
amendment, what you're going to end up with is the RBOCs, the 
baby Bells, having carte blanche to compete in everything 
without opening up--on everything nationally without opening up 
anything locally, and that's a situation for going very swiftly 
to a very limited cartel running everything in the country on 
telecommunications.
    So I support the Chairman's amendment, and I thank him for 
it. I yield back.
    Chairman Sensenbrenner. For what purpose does the gentleman 
from Arkansas seek recognition?
    Mr. Hutchinson. Move to strike the last word.
    Chairman Sensenbrenner. The gentleman's recognized for 5 
minutes.
    Mr. Hutchinson. Thank you, Mr. Chairman. And I do support 
the Chairman's amendment. I think it preserves a tradition of 
the Justice Department in antitrust review. I probably could 
have drafted it a little bit differently if I was doing it 
myself, but I think it makes an important statement as to the 
importance of antitrust review by the Justice Department.
    I also want to take this opportunity to raise a concern 
that hopefully will be addressed down the road, in reference to 
the underlying Tauzin-Dingell Bill, and that is in reference to 
the implications that it will have for CALEA, which is the 
Communications Assistance for Law Enforcement Act of 1994. And 
that was enacted in order to insure that law enforcement 
officials with proper authorization are able to conduct 
electronic surveillance effectively and efficiently in the face 
of rapid advances in telecommunications technology. CALEA 
requires all telecommunications carriers to build into their 
networks the technical capabilities that are necessary to 
assist law enforcement with authorized interception of 
communications and call identifying information. The 
technologies used to provide the high-speed data services are 
deregulated under section 4 of H.R. 1542, and they are the ones 
that Congress, this Committee, were concerned were posing 
problems for law enforcement officials. Because section 4 could 
be construed to completely deregulate these facilities, the 
bill threatens the FCC's authority to implement and enforce 
CALEA, and therefore, also threatens the ability of law 
enforcement officials to conduct electronic surveillance of 
communications transmitted using high-speed data services.
    This amendment insures the commissions--well, the bill, I 
hope will be considered in terms of correcting this possible 
problem, and I raise this for the Committee's consideration on 
the underlying bill, and I hope that that can be remedied, 
because I do believe that the Tauzin-Dingell Bill does enhance 
competition, which is very important, but I hope that we can 
address the concerns of the law enforcement community on how it 
would apply to enforcing CALEA.
    And with that, Mr. Chairman, I yield back.
    Chairman Sensenbrenner. The gentleman's time has expired. 
The question is on the amendment offered by the Chairman to 
H.R. 1542. Those in favor will say aye.
    Opposed, no.
    The ayes appear to have it. The ayes have it, and the 
amendment is agreed to. Are there further amendments to H.R. 
1542?
    Ms. Waters. Mr. Chairman, I do have an amendment to the----
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    The Clerk. Mr. Chairman, I don't have the amendment.
    Ms. Waters. The amendment should be at the desk.
    Mr. Boucher. Mr. Chairman, I reserve a point of order.
    Chairman Sensenbrenner. A point of order is reserved by the 
gentleman from Virginia. The clerk will report the amendment, 
which is Waters 002.
    The Clerk. Amendment offered by Ms. Waters to the Committee 
Print, showing the text of H.R. 1542 as reported by the 
Committee on Energy and Commerce, dated June 8, 2001, 2:51 p.m.
    Beginning on page 7, strike line 4 and all that follows 
through the end of page 12, and insert the following:
    Section 4. Clarification Regarding Requirements----
    Chairman Sensenbrenner. Without objection, the amendment is 
considered as read, and the gentlewoman from California is 
recognized for 5 minutes. A point of order has been reserved.
    [The amendment follows:]
    
    
    Ms. Waters. Thank you very much, Mr. Chairman.
    I am introducing this amendment to address a serious 
problem the competitive local exchange carriers have 
encountered when they try to enter the local telephone markets 
under the Telecommunications Act of 1996. As we all know, the 
Telecommunications Act was enacted as a way to insure 
competition in local telephone service areas. After its--well, 
basically in local telephone service.
    After its enactment, hundreds of CLECs entered the market. 
I think we were all optimistic that the 1996 Act was going to 
have the necessary effect we had intended. Unfortunately, more 
and more of these CLECs have now filed for bankruptcy. The 
remaining ones are by and large in severe financial straits. 
There are several reasons for this, but the most pervasive is 
the fact that the Bell companies have successfully impeded the 
entry of CLECs into the local telephone market.
    For example, some CLECs have gone out of business while 
they instigate lawsuits, lawsuit after lawsuit, in an attempt 
to get the Bell companies to comply with the 1996 Act. Other 
CLECs have financially--been financially handicapped by long 
delays on the part of the Bell companies.
    I want to talk about one problem that I kind of monitor, 
that I know something about, and I've heard about, where the 
Bell companies follow the letter of the law, but not the spirit 
of it, as they did, for example, when one CLEC attempted to 
share a tower. The Bell company in that case did give the CLEC 
access to the tower, but refused to share the entrance and the 
stairway into the tower. The CLEC was forced to create its own 
entrance and stairway at considerable time and expense. What we 
have here is a group of monopolistic companies who have 
essentially thumbed their noses at the legislation we passed 5 
years ago.
    I see no reason why those same companies should be rewarded 
for their anticompetitive actions at this time. Instead, we 
need to address these problems. And I think my amendment would 
do just that, by prohibiting the Bell companies from using any 
unreasonable impediments with regard to line sharing and 
unbundling. This does not impose an unattainable standard. It 
merely says that they must behave in a reasonable fashion when 
responding to requests to line share or to unbundle or to 
resell.
    Mr. Chairman and Members, we talk a lot about small 
business in this Congress, and some of us talk a lot about 
minority business in this Congress. Those of us who are sent 
here by our constituents to just open up opportunities, to see 
that they get a little break, just a fair share, ask us to do 
what we can when we're making public policy, to give them an 
opportunity to do what America says they can do.
    Well, I am disgusted with the kinds of actions that have 
taken place since 1996, where on the one hand, we have people 
that we have supported time and time again, who are always 
willing to come to our dinners and buy a table, but will do 
nothing to open up opportunity to small and minority business. 
I'm sick and tired of it, and I may be ruled out of order. I 
may be ruled out of order, and it may be clear, or it may be 
some question about whether or not we have jurisdiction. I 
don't think this interferes at all with the jurisdictional 
questions. But I want all of those Bell companies to know that 
I know what has been happening. I'm not pleased about it. You 
have done nothing to open up and share opportunities. You have 
done nothing substantial for minority business, and you have 
closed out small businesses from being able to share in this 
opportunity that we all sat here and voted for in 1996. And I 
don't like it. And if I don't get you today, I'll get you 
eventually. [Laughter.]
    Mr. Boucher. Mr. Chairman?
    Chairman Sensenbrenner. The gentleman insist upon his point 
of order?
    Mr. Boucher. Mr. Chairman, I do insist upon the point of 
order. Very briefly, I would say that this amendment deals with 
regulation only. It has nothing to do with the Attorney 
General's consultative role under section 271, and it is the 
consultative role that provides the basis of the referral to 
this Committee.
    Chairman Sensenbrenner. Anybody else on the point of order, 
because the Chair's already made up his mind? [Laughter.]
    Mr. Delahunt. Mr. Chairman?
    Chairman Sensenbrenner. The gentleman from Massachusetts.
    Mr. Delahunt. Just for a moment. I want to add something to 
the statement by the gentlelady from California.
    Chairman Sensenbrenner. The question is on the point of 
order raised by the gentleman from Virginia.
    Mr. Delahunt. On the point of order---- [Laughter.]
    Mr. Delahunt. I mean there has been testimony before this 
Committee which has not been refuted, that the mere 
introduction of Tauzin-Dingell had a devastating impact on new 
entrants by drying up access to capital. And there's a recent 
out by AEI and MIT that reports an 84 percent decline in 
capitalization over the last 14 months, among the largest 
CLECs, from 242 billion to 38 billion. And I think that 
emphasizes the point made by Ms. Waters.
    Chairman Sensenbrenner. The Chair is prepared to rule. The 
gentleman from Virginia, Mr. Boucher, raises a point of order 
that the amendment is not germane to the bill. The referral 
that has been given to us by the Speaker relates to the 
Attorney General's consultative power under section 271. The 
amendment proposed by the gentlewoman from California proposes 
to amend section 251 of the Telecommunications Act. It is 
outside the scope of the sequential referral that the Speaker 
has given this Committee. Therefore, it is not germane, and the 
Chair sustains the point of order by the gentleman from 
Virginia.
    Are there further amendments to the bill?
    If not, the Chair recognizes the gentleman from Utah, Mr. 
Cannon, for a motion.
    Mr. Cannon. Thank you, Mr. Chairman. I move that the 
Committee report the bill, H.R. 1542, to the House with 
amendments and with the recommendation that the amendments be 
agreed to, and that the bill, as amended, not pass.
    Chairman Sensenbrenner. The question is on the motion. 
Those in favor will signify by saying aye.
    Opposed, no.
    The ayes appear to have it. The ayes have it, and the 
motion to report the bill as amended, unfavorably, is agreed 
to.
    Without objection, the Chairman is authorized to move to go 
to conference pursuant to House rules, and without objection, 
the staff is directed to make any technical and conforming 
changes. All Members will be given 2 days, as provided by House 
rules, in which to submit additional dissenting supplemental or 
minority views.
    I'll let the Chair state at this point in time that the 
sequential expires on June 18th. So if you wish to insert your 
prose in the Committee Report, that is a deadline that is 
established by the Speaker, and please meet it.
                            Additional Views

    We concur with the Committee's views and strongly endorse 
the Committee's unfavorable recommendation of H.R. 1542. To our 
knowledge, the Committee's last adverse report on a 
telecommunications-related bill was over twenty years ago on 
H.R. 6121,\1\ the ``Telecommunications Act of 1980,'' which 
would have severely undermined the Government's antitrust 
litigation that was then pending against AT&T;, and which would 
have lifted critical portions of the 1956 judicial consent 
decree against AT&T.; Now, as in 1980, this Committee must 
vigorously protect against legislation designed to benefit 
monopolists, impede competition, and hurt consumers. In 1980, 
the Committee's adverse report stopped H.R. 6121 dead in its 
tracks, and we envision history repeating itself here. No 
stronger message could have been sent to the House--H.R. 1542 
is bad policy and bad for the people of the United States.
---------------------------------------------------------------------------
    \1\ H.R. 6121, the ``Telecommunications Act of 1980,'' H.Rept. 96-
1252, pt. 2, 96th Cong. 2d Sess. (Oct. 8, 1980) (adversely reporting 
H.R. 6121 out of the Committee on the Judiciary).
---------------------------------------------------------------------------
    In its current form, H.R. 1542 destroys the bargain made in 
the Telecommunications Act of 1996 (the ``1996 Act'') by 
permitting the Bells to provide long distance data services 
before meeting the competitive checklist in section 271 of the 
1996 Act. In doing so, the bill also eliminates the Attorney 
General's historic role in identifying anti-competitive 
behavior by the Bell companies. We support the Sensenbrenner 
Amendment because it restores the Attorney General's role by 
requiring the Bells to demonstrate that they have opened their 
local telephone monopoly to competition before they can offer 
long distance data services.\2\ In effect, the market opening 
requirements of section 271 of the 1996 Act which were taken 
out of H.R. 1542, were re-imposed by the Sensenbrenner 
Amendment.
---------------------------------------------------------------------------
    \2\ Under both Democratic and Republican leadership, this Committee 
has always voted on an overwhelmingly bipartisan basis to preserve the 
Department of Justice's role in ensuring that the telecommunications 
marketplace is open to competitors. We must not forget that it was the 
Department of Justice that brought the antitrust suit that ultimately 
broke up the old ``Ma Bell'' system. The Department of Justice, through 
Republican and Democratic Administrations alike, has applied its 
antitrust and telecommunications industry expertise to these markets, 
to foster competition and deter and redress anti-competitive activity. 
In 1996, when we considered the Telecommunications Act, the Committee 
voted overwhelmingly to give the Department of Justice a co-equal role 
with the FCC to review the Bell monopolies' entry into both voice and 
data long distance service.
---------------------------------------------------------------------------
    However, the Judiciary Committee's referral on H.R. 1542 
was extremely limited, relating only to provisions that 
``propose[d] to narrow the purview of the Attorney General 
under section 271 of the Communications Act of 1934.'' \3\ As a 
result, the Committee was unable to amend section 4 of the 
bill--arguably the most offensive portion of the bill.
---------------------------------------------------------------------------
    \3\ Cong. Rec. H2709, (daily ed. May 24, 2001).
---------------------------------------------------------------------------
    We take this opportunity to put into context the historic 
role that the Judiciary Committee has played in ensuring that 
antitrust considerations are taken into account when setting 
telecommunications policy. We also expand on the two most 
egregious portions of H.R. 1542 that were deemed to be outside 
the Committee's referral. First, section 4 of H.R. 1542 rolls 
back key portions of the 1996 Act regarding unbundling and line 
sharing, which likely will have a negative impact on 
competition in the telecommunications industry. Second, section 
4 completely deregulates high speed data services offered by 
the Bell operating companies, which would deregulate two areas 
over which the Committee has repeatedly exercised jurisdiction: 
``spamming'' and law enforcement in telecommunications. We 
therefore strongly oppose H.R. 1542 and urge the House, based 
upon our adverse recommendation, not to consider this bill.

                        I. Historical background

    From the late 19th century until the historic 1982 
antitrust consent decree was entered, the American Telephone & 
Telegraph Company (``AT&T;'') dominated the American 
telecommunications market. The government made several efforts 
to control AT&T;'s monopoly power--a Department of Justice 
antitrust suit brought in 1913, the passage of the 
Communications Act of 1934, and a second Department of Justice 
antitrust suit brought in 1949. None of these efforts succeeded 
in opening the telecommunications market to effective 
competition.
    Because AT&T; continued to take advantage of its monopoly 
power to the detriment of consumers, DOJ brought a third 
antitrust action against AT&T; in 1974. In the 1974 case brought 
by Republican Attorney General William Saxbe, the government 
sought, in part, to prevent AT&T; from using its local telephone 
monopoly to discriminate against its competitors in long 
distance and equipment manufacturing and to use revenues from 
its regulated monopoly in local telephone service to subsidize 
its other non-regulated business ventures, a practice known as 
cross-subsidization. That action led to a settlement and 
consent decree entered in 1982 during the Reagan 
Administration.\4\ This consent decree is commonly known as the 
Modification of Final Judgment or the ``MFJ.''
---------------------------------------------------------------------------
    \4\ United States v. American Telephone and Telegraph Co., 552 F. 
Supp. 131 (D.D.C. 1982) aff'd, 460 U.S. 1001 (1983)
---------------------------------------------------------------------------
    Under the terms of the MFJ, AT&T; retained its long distance 
and manufacturing businesses, but divested itself of its local 
telephone exchange monopoly. Effective January 1, 1984, the 
local telephone exchange monopolies were taken over by seven 
regional Bell operating companies (``RBOCs'')--NYNEX, Bell 
Atlantic, BellSouth, Ameritech, SBC Communications, Inc. 
(formerly known as Southwestern Bell), U.S. West, and Pacific 
Telesis.
    The MFJ required an RBOC to demonstrate that there was ``no 
substantial possibility that it could use its monopoly power to 
impede competition in the market it seeks to enter'' \5\ before 
it could enter four lines of business: (1) providing long 
distance service; (2) manufacturing or providing communications 
equipment and manufacturing customer premises equipment; (3) 
providing information services; and (4) entering into any other 
non-telecommunications business. The courts subsequently 
removed the restrictions on information services and non-
telecommunications businesses.\6\
---------------------------------------------------------------------------
    \5\ AT&T;, 522 F. Supp. at 231.
    \6\ United States v. Western Electric Co., 767 F. Supp. 308, 327 32 
(D.D.C. 1991) (removing information services bar), aff'd, 993 F. 2d 
1572 (D.C. Cir.), cert. denied, 114 S. Ct. 487 (1993); United States v. 
Western Electric Co., 673 F. Supp. 525, 602-03 (D.D.C. 1987) (removing 
non-telecommunications business bar), aff'd in relevant part, 900 F. 2d 
283 (D.C. Cir.), cert. denied, 498 911 (1990).
---------------------------------------------------------------------------
    In the years following the MFJ, the long distance industry 
became highly competitive with the entrance of numerous 
companies offering consumers greater choices and lower prices. 
In contrast, the RBOCs resisted opening their networks to 
competitive providers of local telecommunications services, 
despite some Federal and State regulatory initiatives to 
require them to do so. As a result, the local telephone 
exchange market remained under monopoly control by the RBOCs.
    The impetus for 1996 Act arose from the application and 
effect of the MFJ. The MFJ prevented the RBOCs from entering 
the long distance business because of their monopoly control 
over the local exchange. Congress structured the 1996 Act to 
offer the RBOCs a basic trade: the RBOCs were to open their 
exchanges to local competitors and, in return, they were to be 
allowed entry into the long distance market. The 1996 Act 
sought to accomplish this largely by two interrelated 
provisions. The first is section 251, which empowers the FCC to 
impose access and interconnection obligations on Incumbent 
Local Exchange Carriers (``ILECs,'' the largest of which were 
the RBOCs and GTE, before GTE merged with Bell Atlantic to form 
Verizon) to ensure competition in local exchange and exchange 
access carriers.\7\
---------------------------------------------------------------------------
    \7\ Upon passage of the 1996 Act, section 251 was immediately tied 
up in litigation. Not until January 1999--nearly three years after 
enactment of the 1996 Act--did the U.S. Supreme Court rule that the FCC 
had the authority to prescribe crucial rules to implement section 251. 
Iowa Utilities Board v. FCC, 119 S. Ct. 721 (1999). Still pending 
before the Supreme Court is a separate challenge to the FCC's 
principles for pricing interconnection and network elements. Verizon 
Communications, Inc., et al. v. FCC, et al., 219 F.3d 744 (8th Cir. 
2000), cert. granted, Jan. 22, 2001. The uncertainty resulting from 
these lawsuits has delayed implementation of the market-opening 
requirements of the 1996 Act. Adding further to this delay and 
uncertainty, the RBOCs also challenged the constitutionality of section 
271 as an unlawful bill of attainder, despite their support for the 
legislation at the time of enactment. These challenges were 
unsuccessful. SBC Communications, Inc. v. FCC, 154 F.3d 226 (5th Cir. 
1998); BellSouth Corp. v. FCC, 162 F.3d 678 (D.C. Cir. 1998).
---------------------------------------------------------------------------
    The second ``pro-competitive'' provision of the 1996 Act is 
section 271, which presents the formal test by which the RBOCs 
can obtain authority to provide in-region long distance 
service. Elements of the test include: (1) compliance with a 
competitive checklist based in significant part on section 
251's interconnection and unbundling requirements, which is 
designed to assure that the RBOC local exchange market is open 
to competition; \8\ (2) existence of a ``facilities based'' 
competitor, or in the absence of such a competitor, a State-
approved statement of generally available terms to 
interconnection and access; \9\ (3) compliance with a separate 
affiliate requirement and non-discrimination safeguards 
described in section 272 of the Act; \10\ and (4) a finding by 
the FCC that authorization is consistent with the ``public 
interest, convenience and necessity.'' The 1996 Act requires 
the FCC to give ``substantial weight'' to the Department of 
Justice's opinion in the ultimate determination regarding Bell 
entry.\11\
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    \8\ See sections 271(c)(2)(B), 271(d)(3)(a)(ii).
    \9\ See sections 271(c)(1)(A) and (B).
    \10\ See section 271(d)(3)(b).
    \11\ Id.
---------------------------------------------------------------------------
    When the 1996 Act was enacted, many observers predicted 
that the RBOCs would quickly comply with the competitive 
checklist so that they could begin competing in long distance. 
The RBOCs also indicated that they planned to enter the cable 
television business. Observers also believed that the long 
distance companies would be able to obtain the interconnection 
and access to the incumbents' network elements necessary for 
the provision of local service. As for the cable companies, 
most observers hoped that some or all of them would enter the 
telephone business, and that they would face substantial 
competition in the cable business from satellite companies and 
telephone companies. Unfortunately, these developments largely 
have not come to pass.
    Believing in the promise of the 1996 Act, companies who 
compete with the Bells to provide broadband service, called 
competitive local exchange carriers (``CLECs''), invested tens 
of billions of dollars, created 100,000 jobs, and began the 
enormously difficult work of providing choice to consumers and 
businesses. But today, most of those companies have been 
devastated by the anti-competitive behavior and procrastination 
of the Bell monopolies. Tens of thousands of newly created jobs 
disappeared, billions of dollars of value are gone, many CLECs 
are bankrupt, and the capital markets are nearly closed to many 
of the competitors.
    The limited development of competition in the past five 
years is not an indication that the 1996 Act has failed. We 
continue to believe that the principles and procedures embodied 
in that statute, properly implemented and enforced, offer a 
foundation for a competitive telecommunications marketplace. 
Rather, what the past five years have shown is that legislating 
the removal of the legal barriers to entry does not by itself 
bring competition into being. Instead of seeing the RBOCs eager 
to enter each others' businesses, there has been a general 
reluctance to compete. While the RBOCs could have entered the 
long distance business by opening their local markets, they 
have largely chosen not to do so.
    Consumer groups and CLECs have seen the Bells slow to open 
up their networks to competition, as is evidenced by the fact 
that more than 90% of long distance calls still go through some 
component of the Bells' network. While innovation has 
flourished and prices have been slashed in the area of long 
distance, the reverse has occurred in the local network. In 
addition, in the past five years, we have seen unprecedented 
industry consolidation. Instead of seven RBOCs and GTE, we now 
have only four: Verizon, BellSouth, SBC, and Qwest. This 
consolidation has also reduced the prospects for competition.
    Now, some want to bring the same competition problems we 
have seen in the local loop to the broadband market. Broadband 
is the critical condition to bringing the promise of the 
Internet home to millions of American consumers and businesses 
through streaming audio and video and other high end uses. The 
last thing we need to do is bring the same high prices, shoddy 
service and stifling of innovation we have seen in the local 
telephone market to the high speed Internet market.

 II. Section 4 of H.R. 1542 Severely Harms Competition by Rolling Back 
  the Unbundling and Line-Sharing Requirements of section 251 and by 
                  Preempting FCC and State Regulations

    The Sensenbrenner Amendment greatly improved H.R. 1542 by 
restoring the Attorney General's role in the section 271 
application process, thereby ensuring that the RBOCs open their 
networks to competition before being permitted to offer long 
distance data services. Unfortunately, due to the Committee's 
narrow referral on H.R. 1542, we were unable to address section 
4 of the bill, which contains some of the most anti-competitive 
provisions.
    First and foremost, the Sensenbrenner Amendment could not 
fix the portions of the bill that roll back the line-sharing 
and unbundling requirements contained in section 251 of the 
1996 Act. Even as amended, H.R. 1542 would allow the Bells to 
continue to act as monopolists and abuse their power by denying 
competitors access to the local loop.
    Second, the amendment could not correct the fact that H.R. 
1542 would severely limit Federal and State authority to 
prevent ``spamming'' over high speed Internet services and to 
ensure that law enforcement officials with proper authorization 
are able to conduct electronic surveillance effectively and 
efficiently in the face of rapid advances in telecommunications 
technology. The remainder of this section discusses these 
problematic portions of H.R. 1542 that were unamendable due to 
the referral, yet clearly fall within the Committee's 
jurisdiction.
H.R. 1542 Eviscerates the Market-Opening Requirements of Section 251 of 
        the 1996 Act
    The Committee was unable to amend some of the most 
offensive portions of H.R. 1542 that dismantle the market-
opening requirements of section 251 of the 1996 Act. section 
251's ``unbundling'' and ``line-sharing'' requirements are the 
principal bases upon which many competitors (predominantly 
CLECs) are currently able to provide voice and data services 
that compete with the local phone companies (ILECs). H.R. 1542 
undermines the unbundling and line-sharing requirements so 
severely that it could effectively kill off competition.
    ``Unbundling'' is the requirement that the ILECs make the 
components of their networks available to competitors at cost-
based prices. ``Unbundled network elements'' (or ``UNEs'') are 
the piece-part elements of the local phone network. They 
include the ``local loop'' that runs from people's homes to the 
ILEC's central office and the ``trunk'' that leads from the 
central office to the long distance phone network. Under the 
unbundling requirements of section 251, companies can lease the 
UNEs from the ILECs and use them in conjunction with facilities 
they own and deploy in order to provide competitive voice and 
data services. A CLEC also has the right under section 251 to 
``co-locate'' its own equipment in the ILEC's central office.
    Section 4(b) of H.R. 1542 rolls back the FCC's unbundling 
rules, depriving new entrants of access to the facilities (the 
UNEs) they need to compete. Specifically, CLECs would no longer 
be able to lease various network elements available under 
current FCC rules to provide high speed data service. Under 
H.R. 1542, the only way that a company could provide such 
service would be to build an extensive network from scratch. No 
new entrant--not even a company that plans eventually to 
operate its own network--can be expected to build out that 
network before signing up a single customer. MCI and Sprint 
began as resellers of AT&T;, building up a customer base and 
market credibility that enabled them to make the investments in 
their own networks. Local competition in high speed data 
services can develop the same way, but CLECs must have the same 
opportunities provided to the original long distance 
competitors.
    Furthermore, section 4(b) could have an extremely harmful 
effect on competition for voice services as well as data 
services. This is because section 4(b) exempts the ILECs from 
providing the network elements used to provide high-speed data 
services. Network elements are often facilities (i.e. the loop 
and trunk) that are used for both voice and data services. It 
is impossible to distinguish between voice and data traffic, 
since they are both increasingly transmitted in digital form 
that consists of ``ones'' and ``zeros.'' Almost every CLEC 
provides both voice and data services to their customers over 
the same facilities. If the CLEC cannot obtain a network 
element because that network element is used for data service, 
the inability to obtain that network element is almost certain 
to limit the CLEC's ability to provide voice services as well.
    H.R. 1542 also places severe limitations on the ``line-
sharing'' rules adapted by the FCC pursuant to section 251 of 
the 1996 Act. ``Line-sharing'' is the unbundling of the high 
frequency portion of the local loop used to provide high speed 
data service. CLECs lease this portion of the loop to provide 
digital subscriber line (``DSL'') service to customers in 
competition with the ILECs. Line-sharing makes it much more 
convenient and much more economical for residential customers 
to get DSL. The FCC ordered the ILECs to allow competitors to 
line-share in November 1999. Since that time, residential DSL 
competition has exploded, with both the ILECs and competitors 
providing line-shared DSL.
    To the extent that the lines between people's homes and the 
ILECs' central offices are all copper, competitors can access 
the high frequency portion of the loop at the central office. 
Recently, ILECs have begun to replace some of the copper lines 
with fiber-optic lines.\12\ The lines that are closest to 
people's homes are still made of copper. The place where the 
fiber ends and the copper begins is referred to as a ``remote 
terminal.'' \13\
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    \12\ This yields benefits for consumers (faster, more available DSL 
service) and for the phone company (lower maintenance costs).
    \13\ The remote terminal is a piece of equipment that multiplexes 
the signals from several copper loops onto the fiber optic line. 
Currently, 35% of American homes are served by remote terminals with a 
mixed fiber/copper architecture, and this number is expected to grow 
rapidly, as the ILECs expand their plans to upgrade their facilities.
---------------------------------------------------------------------------
    When fiber is ``pushed out'' to remote terminals in 
neighborhoods, competitors must be able to locate their own DSL 
equipment in the remote terminals in order to provide DSL 
service, or they must be able to get access to their 
subscribers' data traffic in the central office. The FCC and 
several States have ruled that competitors must have access to 
remote terminals in order to continue to provide their DSL 
service.
    H.R. 1542 would overturn these FCC and State decisions and 
make it more difficult for consumers to obtain high-speed 
service from competitors. H.R. 1542 would preclude line-sharing 
for customers that are served by hybrid copper/fiber loop 
facilities and remote terminals.\14\ This would deny 
competitors the ability to serve those customers, who will 
remain captive to the ILECs, a monopolist provider, for voice 
and data service.
---------------------------------------------------------------------------
    \14\ Although the ILECs claim that it is technically infeasible to 
line-share over a mixed copper/fiber architecture, this is simply 
untrue. Competitors can access fiber networks by interconnecting their 
equipment with the ILECs' facilities in the central office where the 
fiber loops terminate. Competitors can also interconnect with fiber 
facilities at the remote terminals, where the copper lines meet up with 
the fiber. There are no technical impediments to these interconnections 
and, in fact, this is the same way that the Bells offer their own 
broadband services. Even Qwest Communications has recognized that 
competitors need access to loops in order to provide broadband service. 
See Comments of Qwest Communications at 3, Deployment of Wireline 
Services Offering Advanced Telecommunications Capability, CC Docket No. 
98-147, Second Further Notice of Proposed Rulemaking; Implementation of 
the Local Competition Provisions of the Telecommunications Act of 1996, 
CC Docket No. 96-98, Fifth Notice of Proposed Rulemaking (filed Feb. 
27, 2001). And Verizon has stated that an architecture of fiber and 
copper could be offered to competitive carriers. See Letter from Gordon 
R. Evans, Vice President, Federal Regulatory Affairs, Verizon, to 
Dorothy Attwood, Chief, Common Carrier Bureau, FCC, Apr. 26, 2001, at 
2, filed May 1, 2001 in connection with Bell Atlantic/GTE Merger Order, 
CC Docket No. 98-184.
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H.R. 1542 Preempts FCC and State Regulations that Govern the Internet
    Section 4(a) of H.R. 1542 may be construed to completely 
deregulate high speed data services offered by the RBOCs.\15\ 
As a result, a wide range of current consumer protection and 
other requirements may not apply to broadband services.\16\ The 
Committee's narrow referral on H.R. 1542 prevented us from 
addressing our concerns in two areas that fall squarely within 
the Committee's jurisdiction: ``spamming'' and the 
Communications Assistance for Law Enforcement Act (``CALEA'').
---------------------------------------------------------------------------
    \15\ Section 4(a) provides that ``[e]xcept to the extent that high 
speed data service, Internet backbone service, and Internet access 
service are expressly referred to in [the Communications] Act, neither 
the Commission, nor any State, shall have authority to regulate the 
rates, charges, terms, or conditions for, or entry into the provision 
of, any high speed data service, Internet backbone service, or Internet 
access service, or to regulate any network element to the extent it is 
used in the provision of any such service.''
    \16\ These include subscriber privacy, foreign government ownership 
of telecommunications facilities, ``slamming,'' obscene or harassing 
telephone calls, and services for hearing-impaired and speech-impaired 
individuals.
---------------------------------------------------------------------------
    Unsolicited commercial electronic mail, or ``spam,'' can 
impose significant economic burdens on Internet access 
services, businesses, and other recipients because of the 
finite volume of email that recipients can handle. This issue 
has recently been addressed by the Judiciary Committee. On May 
23, 2001, the Committee marked up H.R. 718, the ``Unsolicited 
Commercial Electronic Mail Act of 2001'' to regulate the 
distribution of unsolicited commercial electronic mail 
messages. Yet despite the government's interest in protecting 
recipients from spam, section 4(a) of H.R. 1542 may severely 
restrict Federal efforts to regulate spam transmitted using the 
RBOCs'' high speed data services.
    Similarly, Congress enacted CALEA in 1994 to ensure that 
law enforcement officials with proper authorization are able to 
conduct electronic surveillance effectively and efficiently in 
the face of rapid advances in telecommunications technology. 
Section 4 of H.R. 1542 deregulates technologies that are used 
to provide high speed data services. These are the very 
technologies that Congress and this Committee intended CALEA to 
cover. Section 4 threatens the government's authority to 
implement and enforce CALEA, and therefore, also threatens the 
ability of law enforcement officials to conduct electronic 
surveillance of communications transmitted using high speed 
data services.

                               Conclusion

    Competition should be our credo in telecommunications. It 
is the touchstone for lower prices, better services, and for 
unleashing the innovative creativity that has built our new 
economy from the ground up. And historically, it has been the 
role of this Committee to preserve those basic rules of 
competition. Unfortunately, the limited referral given to the 
Committee prevented us from amending or improving section 4 of 
H.R. 1542, which raises serious antitrust concerns that in any 
other context would be within the Committee's jurisdiction and 
will be in the future.

                                   John Conyers, Jr.
                                   Chris Cannon
                                   Jerrold Nadler
                                   Darrell E. Issa
                            Dissenting Views

    I disagree with the motion approved by the Committee that 
the bill H.R. 1542 be reported unfavorably, but that the 
amendment to the bill adopted by the Committee be reported 
favorably. I would have preferred that the Committee report the 
bill favorably and without amendment. The bill that was 
referred to the Committee for consideration was a good piece of 
legislation, as it would promote competition and reduce 
regulation in order to encourage the rapid and widespread 
deployment of high-speed telecommunications networks.

I. Section 271 Amendment Adopted In The Judiciary Committee--A Harmful 
                               Amendment

    In the Committee, an amendment was adopted that I believe 
did significant harm to H.R. 1542. This amendment provides that 
a Bell operating company may not provide, on an interLATA 
basis, any high speed data service or Internet backbone service 
as authorized by H.R. 1542, until the Bell operating company 
(BOC) has filed an application with the Attorney General upon 
which the Attorney General has 90 days to act. The Attorney 
General may not approve an application, unless he/she 
determines that the applicant has demonstrated that it meets 
the substantive requirements of Section 271(c) and (d). 
``Substantive Requirements'' mean the competitive checklist and 
the public interest test.
    In my view, it is entirely inappropriate for Congress to 
turn the Department of Justice into a regulatory agency with a 
dispository role in such a process. When the 1996 Act was 
considered, such a decision-making role for the Justice 
Department was considered and rejected by both the House and 
the Senate in recorded votes. On June 13, 1995, while 
considering S.652, which was the Senate bill which went to 
Conference with House Bill H.R. 1555, the Senate defeated by a 
vote of 57-43, an amendment offered by Senator Thurmond, then 
Chairman of the Senate Judiciary Committee, to give the 
Department just such a dispository role. In the House, two 
months later, a similar result was reached on August 4, 1995 
when a decision-making role for the Department in the interLATA 
long distance approval process was overwhelmingly defeated, by 
a vote of 271-151 [Roll Call No. 630].
    A dispository and regulatory role for the Department of 
Justice was not a good idea then nor a good idea today. In 
fact, H.R. 1542 eliminates the Federal Communications 
Commission (FCC) from any regulatory role in this process with 
respect to the provision interLATA Internet backbone services. 
H.R. 1542 does this, because there is no need for any FCC 
review of Bell provision of these services, and because the 
elimination of these regulations will lead to increased 
consumer choice and competition in the interLATA backbone 
service market. Reimposing regulatory conditions precedent as 
the Committee adopted amendment does will have the opposite 
effect.
    The Committee adopted amendment will institute a totally 
new regulatory scheme, with the Attorney General as regulator 
in Chief. This is an unnecessary role for the Justice 
Department, as well as one that is needlessly regulatory, which 
is not warranted by the competitive circumstances in the first 
instance.
    A major inhibiting and limiting factor to broadband 
deployment throughout the United States, which H.R. 1542 would 
eliminate, is the Local Access and Transport Area (LATA). The 
LATAs were created by the Modification of Final Judgment (MFJ), 
which settled the antitrust case brought against AT&T; in 1974 
and which resulted in the divestiture of the BOCs from AT&T.; 
The Congress eliminated the applicability of the MFJ with the 
passage of the 1996 Act. One remnant does remain, however, as 
LATAs were transported largely intact to the FCC by the 1996 
Act. The Bell System's territory was divided in 1983 into 163 
LATAs which thus remain intact today.
    The LATAs of 1983 have no relevance today to Internet 
traffic and the World Wide Web, and H.R. 1542 addresses and 
corrects that issue squarely. There was no commercial Internet 
in 1983 when LATAs were adopted by Judge Greene (560 F. Supp. 
990, 994). Yet, they are being applied today to the Internet, 
and this is frustrating the deployment of broadband facilities, 
due to the fact that BOCs cannot cross these LATA lines with 
their data services. H.R. 1542 eliminates the LATA as such an 
obstacle.

                    II. Main Components of H.R. 1542

    H.R. 1542, the bill which I supported prior to its 
amendment by the Committee, has three main components. First, 
the bill broadly preempts, with certain narrow exceptions, 
State and federal regulation of high speed data service, 
Internet backbone service, and Internet access service. Second, 
the bill clarifies that Internet backbone and high-speed data 
services are not subject to the interLATA restriction in 
section 271 of the 1996 Act. Third, the bill ensures freedom of 
choice to Internet users by requiring each incumbent local 
exchange carrier to allow Internet service providers to 
interconnect with the incumbent local exchange carrier's high 
speed data service for the provision of Internet access 
service.

                      III. Why H.R. 1542 Is Needed

    Until five years ago, local telephone service in the United 
States was largely a regulated monopoly. In each local service 
area, a single telephone company, known as an incumbent ``local 
exchange carrier'' or ``LEC,'' was the dominant, if not the 
sole, provider of service. State regulators treated that 
company as a public utility--requiring it, for example, to 
provide basic local service to residential customers at 
relatively low rates. This system resulted in incumbent LECs 
providing the overwhelming share of local telephone service in 
each local service area. And because of concerns relating to 
the potential for discrimination by these providers of local 
service, the largest of them--the Bell operating companies 
(``BOCs'') that had been divested from AT&T; in 1984 pursuant to 
the Modification of Final Judgment--were precluded from, among 
other things, providing most interLATA services.
    As part of the Telecommunications Act of 1996, Congress 
replaced this system with a pro-competitive, deregulatory 
framework for the provision of local and long distance 
telephone service. The overriding premise of the 1996 Act was 
and is that competition, not regulation, is best suited to 
ensure low prices and improved services.
    At the same time as it enacted these measures to facilitate 
local voice competition, the 1996 Act also took steps to 
increase competition in long distance. In particular, Congress 
recognized that, except for a few services that were uniquely 
related to the local voice telephone market--in particular, 
long distance voice service--there was no reason to prohibit 
the BOCs from providing interLATA services. Moreover, even as 
to those services that were related to BOC control over the 
local voice market, the Act allowed BOCs to provide such 
services, provided that the BOC could show, on a state-by-state 
basis, compliance with a precisely delineated 14-point 
checklist designed to ensure that the local market in question 
was open to competition.
    Although the primary purpose of these provisions is clear--
to facilitate local and long-distance competition--in the five 
years since the enactment of the 1996 Act, the FCC has taken a 
number of steps that contradict that purpose. First, the FCC 
has substantially diminished, if not eliminated, any incentive 
a new entrant may have to deploy its own local service 
facilities. At the same time that it adopted policies that have 
deterred sustainable, facilities-based local competition, the 
FCC also put off the long-distance competition that the Act 
envisions. As noted above, the 1996 Act allows a BOC to provide 
interLATA services in an in-region State if it can demonstrate 
to the FCC that it has satisfied the 14-point checklist. The 
FCC has, however, expanded that 14-point checklist beyond 
recognition, thereby delaying BOC entry into long-distance far 
beyond anything Congress envisioned in 1996. H.R. 1542 is 
needed to address these problems of implementation of the 1996 
Act.

                     IV. Internet Backbone Services

    The FCC has construed the 1996 Act to preclude BOCs from 
providing in-region interLATA Internet backbone services and 
high-speed data services, absent FCC approval pursuant to 
section 271. As with the FCC's treatment of incumbent LEC 
provision of high-speed Internet access, this interpretation is 
contrary to the de-regulatory intent of the 1996 Act. The 1996 
Act lifted the prohibition on BOC provision of interLATA 
services, except where Congress determined that an interLATA 
market was uniquely related to local voice service. The 
Internet backbone market is not such a market. Because the 
BOCs' historic control over the local exchange provides no 
inherent advantage in the Internet backbone market, there is no 
basis on which to continue to restrict their provision of 
interLATA high-speed or Internet backbone services.
    The immediate entry of BOCs into the Internet backbone 
market will increase consumer choice and enhance public 
welfare. This is why I opposed the Committee-approved amendment 
requiring prior Justice Department review. The Internet 
backbone is highly concentrated, with the bulk of backbone 
revenues as well as ISP connections resting in the hands of a 
few major providers. With their broad geographic reach, BOCs 
are well suited to compete in this market, especially in those 
areas of the country that have limited backbone capacity. BOC 
entry into the Internet backbone market will increase 
competition in the market, leading to lower prices and improved 
service. In addition, this prohibition places the BOCs at a 
further disadvantage to competing providers of high-speed data 
services and Internet access services. All of these providers, 
including the cable providers that dominate high-speed services 
are allowed to provide Internet backbone as part of their 
service offerings. H.R. 1542 thus exempts high-speed data 
services and Internet backbone services from section 271 of the 
1996 Act.

                V. Choice of Internet Service Providers

    Consumers will benefit not just from the widespread 
deployment of high-speed data networks, but also from a choice 
of Internet service providers that can provide service over 
those networks. Historically, such a choice has not been 
available to customers that receive high-speed Internet access 
from cable operators. H.R. 1542 accordingly guarantees Internet 
service providers the opportunity to interconnect with 
incumbent LECs' high-speed data services for the provision of 
Internet access services, and it requires incumbent LECs to 
allow Internet users to subscribe to any Internet service 
provider that interconnects with the incumbent LECs' high-speed 
data service.

                        VI. Goldwasser Decision

    I am also concerned with the section of the Committee 
adopted amendment that seeks to ``fix'' the Goldwasser case 
problem. I believe this section attempts to fix a problem that 
does not exist. The amendment attempts to address a small 
portion of a single decision by a single panel of a single 
Court of Appeals in a case the losing parties chose not to take 
to the Seventh Circuit en banc or to the United States Supreme 
Court for review on the record. The decision in question is 
Goldwasser v. Ameritech Corp., 222 F.3d 390 (7th Cir. 2000).
    There have been repeated suggestions that the decision is 
very broad--that is, that it exempts the entire 
telecommunications industry or portions of that industry from 
antitrust scrutiny. Stated differently, the assertion has been 
made that the Goldwasser opinion creates some sort of ``implied 
immunity'' for conduct that would otherwise be subject to 
antitrust remedies because that conduct violates the antitrust 
laws. In my view, this is not the case.
    The Court in the Goldwasser case declared and held that :

        Our principal holding is thus not that the 1996 Act 
        confers implied immunity on behavior that would 
        otherwise violate the antitrust law. Such a conclusion 
        would be troublesome at best given the antitrust 
        savings clause in the statute. It is that the 1996 Act 
        imposes duties on the ILECs that are not found in the 
        antitrust laws. Those duties do not conflict with the 
        antitrust laws either; they are simply more specific 
        and far-reaching obligations that Congress believed 
        would accelerate the development of competitive 
        markets, consistently with universal service (which, we 
        note, competitive markets would not necessarily 
        assure).

    There is no way to read this explicit rejection by the 
Goldwasser court of ``implied immunity'' as an activist attempt 
to undo the 1996 Act or its savings clause. This language 
explicitly rejects implied immunity and explicitly recognizes 
and applies the savings clause. The savings clause, after all, 
does not suggest that duties created under the 1996 Act shall 
be considered to be and enforced as antitrust laws. The savings 
clause essentially states the new law does not displace 
existing duties under the antitrust laws or prevent them from 
being enforced as they were before the 1996 Act took effect.
    Having rejected implied immunity, the Goldwasser court 
considered whether the plaintiffs had stated an antitrust 
claim--that is, a claim under the antitrust laws that was based 
on the violation of duties that existed under those laws. The 
plaintiffs claimed that they had alleged such a claim under a 
doctrine known as the ``essential facilities'' doctrine. The 
problem with the plaintiffs' essential facilities claim, 
however, was that the competitors actually did have access to 
the specific facilities alleged to be essential through the 
specific processes established under the 1996 Act. Those 
processes not only provided for access in general but specified 
the precise manner in which both price and nonprice terms of 
access would be established and enforced. In short, the claims 
that plaintiffs portrayed as ``freestanding'' antitrust claims 
were nothing of the sort. The so-called freestanding claims 
were instead ``inextricably linked to the claims under the 1996 
Act.'' Id.
    Nothing in this decision suggests that telecommunications 
carriers are immune from liability for conduct that violates 
the antitrust laws. The need for the Committee's action to 
overrule that case, therefore, does not exist.
    The Internet is a significant engine of growth in the 
nation's economy. That growth depends, however, on 
competition--in particular, on telecommunications carriers 
competing with one another to deploy the high-speed data 
networks that can carry the ever-increasing amount of data 
traffic sought to be transmitted over the Internet. The purpose 
of the bill that was referred to us was to facilitate that 
competition, by implementing a de-regulatory framework for the 
provision of Internet backbone services and high-speed data and 
Internet access services, and by ensuring that all providers of 
such services are allowed to compete on an equal footing, 
regardless of the technology or platform they use to provide 
service. The amendment adopted by the Committee would render 
this framework ineffective. Consequently, we need prompt 
passage of this important legislation without the inclusion of 
the Committee's amendment in order to keep this economic engine 
running at maximum speed.

                                   Bob Goodlatte