This hearing is about the regulatory status of broadband services, and in particular whether those services should be classified as "information services," "common carrier" services, or "something in between." As the members of the subcommittee are aware, this question has been the focus of several ongoing proceedings at the Federal Communications Commission (FCC). EarthLink is presently appealing in court the FCC's declaratory order in the proceeding dealing with the provision of broadband service over cable facilities, and is anxiously awaiting the FCC's action in the proceeding dealing with the provision of broadband services over telephone facilities.

To be frank, EarthLink is dismayed with the answers regarding the regulatory classification of broadband services that the FCC seems determined to reach. The law is clear about that regulatory status, and we are dismayed that the FCC seems determined to ignore the law in an effort to tilt the playing field in favor of incumbent providers who have built their networks over public rights of way using federal authorization while protected from competition by federal, state or local government-granted monopolies.

What is particularly troubling to EarthLink, and I hope would be troubling to the members of this subcommittee and the Congress as a whole, is the tremendous and far reaching effect of classifying all broadband services as "information services" under the Communications Act. The effect is tremendous because of technology convergence. Digital, packet-switched transmission networks are replacing analog, circuit switched networks at an ever increasing rate. It will not be long before most, if not all, of the major network operators are able to provide all of their services-voice, data, and video-over packet-switched networks also used to provide Internet services.

The effect would be far reaching because the common carrier transmission services that are the foundation of the information economy would no longer be required to be made available to information service providers upon reasonable request on non-discriminatory terms and conditions. Network owners would be free to arbitrarily decide who can use their networks, at what price, and on what terms. This would not only work against consumer interests, but vital communications links that can be reached today under court order by law enforcement agencies would suddenly be beyond reach because laws like the Communications Assistance to Law Enforcement Act (CALEA) would no longer apply. Congress would have re-write an entire body of laws that have been carefully enacted over the years to promote competition, protect consumers, and provide for public safety. All because the FCC is ignoring not only its own precedents, but also the plain language that Congress wrote in the Telecommunications Act of 1996.

The central question of this hearing (and of several current FCC proceedings) is the regulatory classification of broadband services. Let me be clear in answering this question. All internet access services - whether provided by an independent ISP like EarthLink, a telco affiliate like Verizon Online, or a cable company like Comcast - are information services. Let me be equally clear that all information services are, by definition, delivered via telecommunications, and the offering of such telecommunications, whether by a telco or a cable company, for a fee to the public makes them telecommunications services. This is true whether the Internet access is provided by an independent ISP or by the network operators themselves. Internet access, broadband or otherwise, is therefore an information service riding on top of a transmission component which is a telecommunications service.

In the world of dial-up Internet access these two components are easy to see. Consumers purchase their phone line from their telephone company and their Internet service from an ISP such as EarthLink. The telephone company provides a telecommunications service which can be used to transmit voice or data. The ISP provides an information service. The consumer dials an EarthLink access number, which establishes an underlying transmission link through the customer's phone line; the consumer can then use EarthLink's services to access the Internet. The underlying transmission link is a regulated common carrier telecommunications service. The Internet access service is an unregulated information service.

Now suppose that the ISP in the dial-up scenario I just outlined was not EarthLink but Verizon Online. It would make no difference. The underlying transmission link (provided by Verizon in this case) would be regulated as a common carrier telecommunications service, but Verizon Online's Internet access service would still be an unregulated information service. This is the regime that the FCC crafted in its seminal 1980 Computer II proceeding, which has been affirmed by the FCC and federal courts many times in the intervening years, and which Congress adopted in the Telecommunications Act of 1996. The FCC created a level playing field by requiring that the underlying transmission link be made available by facility owners on a non-discriminatory basis to all ISPs and then treating all ISPs the same with respect to the unregulated nature of the information service component, regardless of whether or not the ISP was owned by the owner of the underlying transmission facility. As a result, competition in the provision of information services flourished because the facility owners-the telephone companies in the dial-up world-could not use their ownership of the underlying transmission facilities to leverage their position in the information services market.

Broadband Internet access works much the same as dial-up Internet access, with two exceptions. First, it is faster, because the transmission link has better electronics or greater capacity. Second, in most cases the end user isn't given the option of buying separately the transmission link from their home or office to the switch. Rather, they have to buy that portion of the link as part of a bundled package of services which combines the information service component provided by an ISP with the transmission component provided by the telco or cable company. Furthermore, most broadband ISPs are affiliated with or directly owned by the transmission facility owner.

In the case of broadband Internet access, the FCC seems determined to take the exact opposite approach from the one that proved so successful for promoting competition in the dial-up world. For broadband, the FCC suggests that, so long as the facility owner refuses to offer consumers the option of buying the transmission link separately from the information services component, the bundled package of transmission and information service is an "information service" under the Communications Act. Therefore neither the information service component nor the underlying common carrier transmission link would be subject to regulation. As a result, facility operators are able to shield their transmission networks from requirements for non-discriminatory access by other ISPs. This all but eliminates competition among broadband Internet service providers and not only violates the letter and intent of the Telecommunications Act, but also does great harm to independent businesses and to consumers.

The FCC's interpretation is at odds with both the letter and the spirit of the Telecommunications Act of 1996. The Communications Act of 1934, as amended by the Telecommunications Act, defines "information service" as "the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications." 47 U.S.C. 153(20). The term "telecommunications" is defined as "the transmission, between or among points specified by the user, of information of the user's choosing, without change in the form or content of the information as sent and received." 47 U.S.C. 153(43). As the statutory language makes clear, information services are made available to consumers using a transmission network. Up to this point I believe there is no disagreement among any of us sitting at the table. It is the next step which the Commission refuses to take, and over which there is disagreement among the witnesses today.

In 1996, when Congress added the terms "information service" and "telecommunications" to the Communications Act, they also added the terms "telecommunications service" and "telecommunications carrier." A "telecommunications service" is "the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used." 47 U.S.C. 153(46). Any provider of telecommunications service is a "telecommunications carrier," and telecommunications carriers are to be treated as "common carriers" subject to regulation under Title II of the Communications Act. 47 U.S.C. 153(44).

The structure Congress enacted in 1996 mirrors the structure the FCC adopted in its 1980 Computer II decision. The definition of "information services" cross references the defined term "telecommunications," which in turn is incorporated in the definitions of both "telecommunications service" and "telecommunications carrier." The transmission component that is integral to the delivery and definition of "information service" is treated separately under the Act for regulatory purposes, just as transmission had been treated separately by the FCC for 15 years prior to the passage of the 1996 Act. The language of the definition of both "telecommunications carrier" and "telecommunications service" make plain that they are intended to apply broadly; they apply to "any provider" "regardless of the facilities used."

"Telecommunications carriers" and "telecommunications services" are the key terms that Congress used to define the pro-competitive provisions of the 1996 Act. Almost all of the rights and responsibilities in the 1996 Act attach or apply to telecommunications carriers, which the statute says are to be treated as common carriers to the extent they provide telecommunications services. Yet under the FCC's interpretation those terms would apply only to those facility owners who chose to make a "separate" or "stand-alone" offering of telecommunications to the public - those facility owners that chose instead to offer their telecommunications to the public only if the public also buys the facility owner's chosen information service get to escape regulation as a common carrier.

Two examples illustrate severe problems with the FCC's approach. First, consider the case of a competitor who seeks to offer information services in competition with the information services offered by a facility owner - say an RBOC or a cable company. If EarthLink wants to continue to compete in the information services market, but is now denied access to the broadband transmission networks needed to offer its services to consumers, then presumably EarthLink would have to build its own broadband facilities to reach consumers. Yet to build those facilities, EarthLink would have to become a common carrier in order to take advantage of any of the market opening provisions Congress enacted in 1996. Those provisions only apply to telecommunications carriers and telecommunications services. At the same time, EarthLink's competitors, the RBOCs and cable companies, who already have existing transmission networks that reach almost every customer, would be unregulated with respect to the same transmission services for which EarthLink would be regulated.

Going back to the days of old Ma Bell AT&T, the telephone companies enjoyed a government-granted monopoly market for almost a century in which to build out their transmission networks. The cable companies had monopoly franchises, the federal cable-telco cross ownership ban, and below cost access to ducts and poles for over 15 years in which to build out their networks. Today the telephone companies and the cable companies still each have 85% or more of the customers in their core business - phone or cable - from which to draw a steady revenue stream as they push into the information services market. And they have some 95% market share of all broadband DSL or cable modem customers, respectively. Yet EarthLink and other potential competitors to these incumbent facility owners would, under the FCC's interpretation, have to undertake the impossible task of building their own last-mile network - without any protection or subsidy-in order to continue to compete in the information services business. This result stands the 1996 Act on its head.

Second, the FCC's own documents demonstrate that their interpretation can only work if words are added to the statutory language that Congress adopted in 1996. The statutory definition of "telecommunications service" states that such service is "the offering telecommunications for a fee directly to the public" without qualification. But the FCC, in both their declaratory order in the cable modem proceeding and in their briefs defending that order to the Court of Appeals for the Ninth Circuit, insists that a telecommunications service only exists if there is a "stand-alone" offering for a "separate" fee. Only by adding words that don't exist in the statute can the FCC make their version work.

In summary, it is crucial to distinguish between broadband information services and the underlying telecommunications services which deliver them. Internet access services, whether narrowband or broadband, and whether offered by an independent ISP, an RBOC, or a cable company, remain unregulated information services. But the facility based transmission services that underlie all information services remain common carrier telecommunications services, regardless of whose broadband Internet service the customer subscribes to and whether or not the facilities operator offers those transmission services separately to consumers or as part of a combined package of services that includes information services. Consumers and the economy have benefited over the past twenty plus years from robust competition in an unregulated information services industry. That unregulated competition in information services was made possible because the underlying transmission networks remained subject to regulations that require that they be offered to all ISPs on non-discriminatory terms and conditions.

In most areas of the country today there are at best two broadband networks; for many residential consumers there is effectively only one. Both the telephone networks and the cable networks were built with government-granted monopolies over public rights of ways using Federal authority using rate-payer money. To allow these facility owners to now repudiate their obligation to share those transmission networks on a non-discriminatory basis with others who seek to offer telecommunications or information services to the public is an abuse of the law and is anti-competitive. Such an approach would take a robustly competitive and level playing field and tilt it heavily in favor of a few players by allowing them to leverage their transmission facility monopoly into domination of new areas and services. Clearly that was not what Congress wrote or intended when it passed the 1996 Act.

Thank you again for the opportunity to testify today. I would be happy to answer any questions.