March 24, 2015 The Honorable Hal Rogers Chairman U.S. House Committee on Appropriations H-305, The Capitol Washington, DC 20515 Dear Congressman Rogers; During the March 4, 2015, hearing Reauthorization of the Federal Communications Commission, Jon Wilkins, managing director of the Federal Communications Commission (FCC), appeared before the U.S. House Subcommittee on Communications and Technology to defend the agencys Fiscal Year 2016 federal budget request. As you hold your hearing with FCC Chairman Tom Wheeler and FCC Commissioner Ajit Pai today, Im writing to urge the members of the House Committee on Energy and Commerce to seek clarification of FCC policy before considering the agencys potentially record-setting budget proposal. While the FCC is requesting taxpayer funding at an unprecedented level, the agencys leadership has demonstrated an apparent disregard for consumer impact and an unawareness of the practical application of some of the mandates it forces on manufacturers and thus consumers. To approve the agencys proposal before requiring definitive answers to how the organization will address several misguided programs would do a disservice to the American economy and people. In his March 4 testimony, Mr. Wilkins said the FCCs FY16 budget outlay demonstrates a dedication to creating efficiencies and executing tailored but significant long-term, cost-savings measures. Yet, the agencys track record suggests it has largely failed in that regard. This year, the FCC voted to unilaterally reclassify Internet services as a Title II utility, subjecting one of the most innovative sectors of the U.S. economy to outdated rules and regulations developed to govern telephone companies of the early 20th Century. Circumventing the legislative process, the move adds layers of bureaucracy and politicization that will slow the growth and deployment of broadband services well into the future. Congressman Greg Walden called the decision a failure of imagination that repudiated years of light touch regulation of the Internet under both Republican and Democratic administrations. This action suggests an agency seemingly ill-suited to address the needs of the modern communications ecosystem and aggressively expanding its regulatory ambit to compensate for its growing obsolescence. Experts from nearly every sector of the economy agree. Still, the FCCs detachment from American consumers is even more clearly demonstrated by its inability

to articulate the purpose and administration of the ATSC standard, a grouping of television receiver related patents which are collectively licensed. The ATSC standard, which standardizes digital cable feeds, is mandated for inclusion in all television sets sold in the United States, regardless of whether buyers want or need it. And, as more and more users cut the cord on traditional cable services and opt instead for streaming services, fewer costumers do in fact need it. In effect, the ATSC standard amounts to a hidden tax on some of the most popular consumer electronics purchases. Unlike any other product requirement, rights to the ATSC standard are privately held by a Denver-based company, MPEG LA, which reaps the benefits of the federal requirement which amount to about $200 million each year. Whats more, nearly a quarter (22.4%) of the patents bundled into the ATSC standard are expired, so consumers are effectively forced to pay for a product with an expired shelf life. The practice of bundling worthless expired patents within larger portfolios is common practice for MPEG LA. The ATSC licensing fee amounts to $5 on every digital television sold here in the United States. While that may seem inconsequential, consider that in other countries like Japan and those in Europe similar technology costs only about a dollar. A study by one coalition found American consumers pay between $20-30 more per television set than their counterparts in other countries due to these kinds of licensing fees. Last fall, Congressman Mike Pompeo sent a letter asking FCC chairman Tom Wheeler to explain how the ATSC standard is administered and what the agency is doing to ensure that American consumers arent continually abused to the tune of $200 million a year in fees. Mr. Wheelers response was fraught with errors, which should come as a concern to the Committee as it considers the FCCs budget proposal. Mr. Wheeler stated that the ATSC patent pool fees include the patent royalty for the MPEG-2 decoding standard. That in fact is not true. A separate license fee of $2 is charged for the MPEG-2 Video and Systems patents. MPEG LAs own website state, the ATSC Patent Portfolio License does not include a portfolio license to patents that are essential to MPEG-2 Video and Systems. That extra $2 dollars added to each television is tacked to the $5 dollars paid to MPEG LA for ATSC. Not shockingly MPEG LA is also the exclusive licensor of MPEG-2. In the same letter, Mr. Wheeler claimed other venues including the Patent and Trademark Office and the International Trade Commission are viable options for entities seeking resolution of patent fee issues. Again, that is not accurate. If an entity claims it is being charged an excessive royalty, there is nothing that the USPTO can do. The entity cant take the complaint to the ITC except by going delinquent in royalty payments, then get sued by the patent owner at the ITC, and then raise a FRAND defense before the ITC. To date, such an approach has never been successful, and in actuality it doesnt even address fee disputes, rather in some cases it grants an exclusion order. The Institute for Liberty is committed to helping ensure an environment that fosters business growth and entrepreneurship through sensible technology policy. We believe government policy should empower competition, not stifle it and force consumers to pick up the bill. I urge the House Appropriations Committee to require the Federal Communications Commission to clarify its position on the ATSC standard, among other issues, prior to approving the FCCs FY16 budget request. Thank you for your consideration and your continued hard work on behalf of the American people.

Respectfully, Andrew Langer President Institute for Liberty CC: Members of the House Appropriations Committee Members of the House Energy and Commerce Subcommittee on Communications and Technology