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tv   Amazon Google Officials Testify on Smart Home Technology Market  CSPAN  July 22, 2021 10:20pm-12:28am EDT

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>> c-span is your unfiltered view of government. brought to you by these television companies and more, including buckeye broadband. ♪♪ >> buckeye broadband supports c-span as a public service along with these other television providers, giving you a front row seat to e democracy. >> officials with google and amazon were among the witnesses at a senate judiciary subcommittee hearing on the smart home technology market. they answered questions about data security, market competition and consumer privacy. this is just over two hours. [inaudible conversations]
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>> i call this hearing of the subcommittee on competition, policy, antitrust and consumer rights on protecting innovation and consumer choice in home technologies the order. to order. good afternoon. welcome to our witnesses. this hearing continues senator lee and my and our committee members' bipartisan review of america's monopoly problem. and i thank senator lee and his staff for working with our staff to plan this hearing. the competition policy subcommittee has been examining the problems that arise when a handful of companies become
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powerful enough to distort competition in the marketplace. so far we've seen that excessive market power benefits the few companies able to wield it at the expense of consumers, businesses and workers. our current antitrust laws have not been effective in stemming the rise of monopoly power or its abuse by dominant companies. as a result, we see competition problems in industry after industry across our economy. today we'll examine an emerging industry that could fall prey to the same dynamic. millions of americans already have connected devices in their homes including speakers, systems to control lighting or temperature within the home. i just -- senator lee -- used my own remote vacuum cleaner just the other today to scare my daughter as she was watching tv. it wasn't a big with deal -- [laughter] do it. and we are just at the beginning. these technologies continue to develop for things like connected refrigerators and washing machines. in the years to come, they will play an even larger role in our
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lives. many people are understandably excited about these technologies. i like them. but we must get ahead of this. so many of the things we talk about when we are in this room when it comes to antitrust or over in the house are looking back at things that should have been done differently. privacy rules, doing more when it comes to apps, doing more when it comes to what some of these acquisitions were. i just used the example of into gramm and what's app -- into gram and what's app. we have this moment to look around the corner and see ahead, and as we're looking at bills, senator lee just introduced a bill with well given this incredible movement
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and growth that we're seeing. in home technology we see some of the most powerful firms that dominate tech today poised to dominate the platforms of the future. we hear concerns about amazon's and google's growing market power with connected speakers, over 50% for amazon, 30% for google. we're also hearing concerns about use of consumers' personal information. that would be privacy. of course, privacy legislation on the federal level has somehow eluded us. mostly it would be handled in the commerce committee, but that's the other piece of this puzzle in addition to the work that needs to be done on antitrust. americans are counting on us to protect innovation and competition. to go over the stats, 94 million people in the u.s. own at least one connected speaker which they can use to play music, ask about the weather or tell their kids to come down for dinner. in the years to come, connected devices in our home will become even more sophisticated. these devices work with each
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other through technology interfaces, often digital voice assistants like alexa. i want to highlight a few key concerns that we explore at the hearing today. first, many consumers use their connected speakers to operate other connected devices like asking the digital assistant to lower the thermostat by 2 degrees. they should get the very best digital voice assistants available whether that is amazon's alexa, google's assistant or a new entrant. but will amazon and google use their power to blocking that new system from being installed on the connected speakers that are already in consumers' home, or will they let competition flourish even if it threatens their dominance. sec, in a few years -- second, in a few years, people might easily have 20 or more connected devices in their home. we want those devices to work with each other seamlessly. and in other words, they need to interoperate. you shouldn't have to choose the
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right devices for your home based on whether they play nicely with google or amazon's digital assistant or whether google or amazon has locked them into an exclusive contract. we have seen what happens when the largest and most powerful tech companies make their own decisions about interoperability. they embrace it as long as it helps their bottom line. but when interoperability threatens their own products and services, they change their tune and is start boxing out competitors. this has a real potential harm both to competition and innovation. third, concern about self-preferencing. the market leaders benefit from having their services pre-installed because many customers never change the default settings. maybe i know a little bit about that. imagine a household with a connected refrigerator that automatically replenishes the supply of certain groceries. do we want amazon to set whole foods as the grocery store as the only place to purchase these
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groceries? absolutely not. consumers should choose, to not vertically integrated tech giants. and finally, i have concerns, as i mentioned, about privacy. connected twices can make our -- devices can make our lives more efficient, but that should not come at the cost of basic privacy rights. giving already data-rich companies even more incentive to -- or lives in our home, what we listen to, what we say to each other, what foods we eat, how often we to our laundry and how well we sleep at night. that highly personal and sensitive information must not be aggregated and auctioned off to the highest bidder. that data is ours. given these problems facing the connected home industry, we need to act now to protect competition, innovation and the consumer. step one to give our antitrust enforcement the resources they need to do their jobs. we took a big step with the bill we passed out of this committee. senator grassley and my bill to change the merger fees, filing
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structure that that has now just passed the senate as part of a major bill in the last week. that bill is now going over to the house. we have everying reason to believe it will a pass, and then we have to work through the appropriations and budget process for more resources. secondly, updating our antitrust laws. as i mentioned, we all have some good ideas on that front, but that has to be part of the solution. and, third, federal privacy legislation. let me be clear, this isn't is about punishing success or going after companies just because they are growing. this is about learning from what we have seen in the recent past. instead of just complaining about it after the fact, we have a chance to include what we know about this market as we look at legislation and enforcement actions going forward. i want to thank you so much, and i turn it over to senator lee.
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>> one of the questions it raises is whether smart home devices will just provide for one more way for big tech firms to expand their already significant market power. google and apple have duopoly control over smartphone operating systems that smart home devices frequently need access to or compatibility with at a minimum in order for them to be successful. google dominates online advertising which relies on the kind of data that smart home devices may be uniquely in a position to collect. amazon is the leading online retailer and and a major cloud service so provider at the same
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time. competing smart home devices will inevitably encounter amazon just by trying to host their service and selling their products. second, setting aside specific antitrust concerns for just a moment, why on earth would we want to give big tech even more control and more influence over our daily lives? they already control how we find information on the internet, and they influence what products we buy and how we we buy them. they sell the data collect on us every day and hold the keys to monetization for an ever growing array of small businesses. and we already know that they don't always exercise this power in the best interests of society. and so as they branch into newer areas, obviously, that a raises some concerns.
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that makes the employee base uncomfortable, and they've censored all but progressives, protected their faith political -- favorite political candidates and hidden information that undercuts whatever happens to be their preferred narrative on any of a host of issues from day-to-day. big tech has even deplatformed a sitting president. and if you dare to actually try to build your own platform, like parler did, they'll pull the plug on that too. big tech already controls nearly everything we to on line -- we do online, and so are we now willing for the sake of some minor convenience to give them control over our homes as well? forget or the government in your bedroom. i don't want even want big tech in my kitchen.
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showerly we already know -- surely we already know enough to know this isn't going to end well. finally, as a consumer and as a father, i sometimes wonder whether in the aggregate the conveniences of big tech's smart home scheme outweigh the negative effects on us as a society. do we really need wi-fi on an oven? or on a light switch? if we can't even get off the couch to turn on the lights or check on dinner, how will we muster the energy to spend quality time with our families, meaningfully engage with our neighbors and participate in self-governance? i have no doubt that big tech will be happy to handle things like that for us as well. all these questions call for close scrutiny both during this hearing and by consumers as they consider purchasing these products. protecting competition will be
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more important than ever. it's one thing to deal with a monopolist in commerce. try dealing with one when you're cooking too. i look forward to this hearing and hearing from the our witnesses and how we can avoid past mistakes and insure competitive markets in smart home devices. hopefully to insure that they neither serve to augment big tech's market power nor undermine the fabric of society as a whole. thank you, madam chair. >> i'm now going to introduce our witnesses. ryan mccrate is the vice president and associate general counsel for alexa and echo at amazon where he leads the legal team supporting amazon's alexa voice service and echo family of devices. ryan joined amazon in 2007 and has supported a variety of to other amazon services. before that he practiced law at kirkland and ellis.
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wilson white is a senior director on the government affairs and public policy team at google where he leads policy efforts for connected twices and android operating -- devices and android operating system. he was a patent litigation attorney at google where he not only defended google in patent infringement lawsuits, but also pushed for patent reform legislation. prior to joining google, he was an associate at a law firm in atlanta. eddie lazarus is the chief legal officer at sonos. he leads the company's legal corporate governance, sec reporting, government affairs, regulatory and compliance activities. previously, he was the general counsel and chief strategy officer for tribune media company and also serves as the chief of staff to the chairman of the fec -- or fcc from 2009-2012. matt crawford is a senior fellow at the university of virginia's
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institute for advanced studies and culture, a new york times best selling author. his books have been translated into 13 languages. how many languages was your book translatedded into, senator lee? okay. he holds a ph.d. in political philosophy from the university of chicago, which is where i went the law school. jonathan zittrain is a professor of law and of computer science at harvard. he is also a cofounder of the berkman kline center for internet and society is. with that, if the witnesses could please stand and raise your right hand. thank you. do you swear that the testimony you will give before the subcommittee shall be the truth, the whole truth and nothing but the truth so help you god? >> [inaudible] >> thank you. you may be seated. i'll now recognize the witnesses for five minutes testimony each. i would also note, senator lee, that lina khan was just named the chair of the ftc, an
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interesting development from an antitrust standpoint. with that, i will turn it over to many mccrate, if you'd like to proceed. mr. mccrate, i know you're remote. there you are. oops, we can't hear you. let's try this again. [no audio] >> you want to -- >> [inaudible] >> okay. do you want the start now? start over? okay, it's not working again. do you want to go to maybe us, it may be on our side.
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do youdo you want to go to mr. n first and then we'll go to mr. mccrate? >> can you hear me okay, senator? >> yes, i can hear you. mr. wilson, thank you. welcome back. enter thank you, chairwoman klobuchar, ranking member lee and distinguished senators of the subcommittee. thank you for the opportunity to appear before you again today. my name is wilson white, i'm a senior director on the government affairs and public policy team at google where i lead our policy efforts for connected devices and the android operating system. increasing access to the benefits of technology is what motivates me to come to work every day. at google our goal is to be helpful to people in moments that matter including when you're trying to scare your daughter with a remote vacuum. it's in those moments that technology can truly improve people's lives. i think of a google pixel user named chris. chris was a passenger in a car that was suddenly struck by a truck traveling at high speed
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through a poorly marked three-bay -- three-way intersection. stunnedded by the impact, chris panicked. disoriented and unsure what to do, he felt his pixel phone vibrating. the phone had detected that chris may have been in a car stent, and it was prompting him to deal 911 so that he and his family could quickly get the life-saving them a they needed the most. to us, this is what it means for connected devices and services to help in moments that matter. that phone can tell you that you might need emergency help shows just how far we've come, and it's just a taste of the innovations that lie ahead. a few decades ago most americans were fortunate if they had a single computer at home and even luckier if that computer could access the internet. today most americans have a super computer in their pocket. access to the internet on desktop devices paved the way for the explosion of to innovation and economic growth
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that we saw in mobile. and now we're witnessing the dawn of a new era of computing beyond the mobile phone where there will be more and more opportunities to integrate the benefits of technology into a diverse set of quite devices and services -- devices and services. but technology is helpful only where it can be easily accessed. making technology more accessible across a broad range of devices is what's driving innovation in the connected devices space. and at google, we believe the future of connected devices make people safer, will help them in their daily lives and will help businesses be more efficient and productive. and we're proud to play a role in spurring innovation in this fast-moving, hypercompetitive but nascent space. we've always believed that open platforms enable competition which is the best way to to put great services in the hands of users at the lowest cost. it's in that spirit that we've pushed for openness across the broad range of connected devices.
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back in 2019 we joined with others to start to stand up an independent working group focused on building an open connectivity standard that would allow devices to work with each other across a broad range of smart home ecosystems. open standards foster competition by leveling the playing field for smaller players and new entrants, simplifying product development and increasing choice for consumers. the working group has come a long way. last month it announced an interoperable, secure connectivity standard for the future of the smart home called matter. we're committed to implementing this new protocol in android and across a range of products making these devices more open, more customizable. now, connected devices show incredible potential to help consumers in the moments that a matter and in ways that were unimaginable a few decades ago when americans got the first taste of having computing in their home. we've come a long way since then, but we're still in the very earliest days of an
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exciting period of growth, competition and innovation. much of our discussion today will focus on the competitive efforts and innovative efforts of some of america's most successful technology companies including ours. but america's success in the years ahead isn't guaranteed. competition is fierce in this space. american companies face stiff competition from companies around the world. preserving america's global technological leadership in a field that has the potential to define the future of how people integrate technology in their lives will take a collective commitment to innovation, investment and technological advancements and getting the right pro-competitive, pro-consumer policies in place so that this burgeoning sector can thrive. and it's for that reason that we're grateful for the opportunity to participate in this discussion. we look forward to continued engagement with this subcommittee and others in congress on these important
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issues, and i look forward to answering your questions. thank you. >> thank you very much. thank you. are we, are we okay with mr. mccrate coming up now? thanks. mr. mccrate? [no audio] >> members of the -- >> yep, i a hear your voice. >> you can hear me now? great. >> i think we need to get a little louder. i do hear you though. >> okay. >> and i see you. nice background. perfect. okay. we're ott not going the make any, you know, assisted speaker jokes or anything. we're all good. [laughter] okay, go ahead. >> thank you, chairman klobuchar, ranking member lee and members of the subcommittee. i am ryan mccrate, vice president and associate general counsel for iowa hex saw at amazon -- alexa at amazon.
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amazon's invention of the echo smart speaker has meaningfully increased competition in the voice assistant and smart home space, increased customer choice, provided a new channel for customers to reach online services and created significant new growth opportunities for third-party manufacturers. when we set out to build echo and iowa lex shah ten years ago -- iowa alexa ten years agoe wanted a service to allow customers to access the power of the internet just by using their voice. it took us longer than we expected and required us to invent our way through many previously unsolved technical problems and to invent new ways to preserve and protect customer privacy. we are incredibly proud of alexa, and we work to constantly are improve them because we know customers have other options. alexa is not the most widely used voice assistant. google assistant and apple's siri are both used by many more customers. the truth is that most voice-assist usage occurs on
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mobile phones, and nearly all smartphones in the u.s. are google phones or apple phones which come with their voice assistants. with echo and alexa, we gave customers a new way to access voice, one that wasn't controlled by the operating system on our phone. and the options for customers only continue to grow. while building a new voice service was very hard when we started ten years ago, it is much easier to get started today. the state of voice science has advanced rapidly, and many of the zoning blocks for voice service can now be licensed off the shelf for access through cloud services offered by amazon, microsoft, ibm, google, nuance or others. as a result, there are many companies that have of or are developing their own assistants including samsung, facebook, comcast, lg, sound hound and spotify, and voice assistants are now available through a wide range of devices such as smart tvs, tablets, set-top boxes and even thermostats.
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we think it's critically important that customers have the freedom to choose. a coalition of over 80 companies to have access to multiple, simultaneous voice services on a single device. each with it own -- enabling customers to talk to the service of their choice simply by saying its name. amazon's willingness to invest in the developments of echo and alexa have been good for consumers and good for competition. throughout amazon's history, we are focused on empowering third parties to create and grow their own business. we took the same approach with alexa. in contrast to the approach of the incumbent phone-based voice assistants at the time, we made our technology available to third-party developers and manufacturers allowing them to bring the power of voice the their own products and services. for instance, services like spotify, pandora are available
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through alexa, and developers can create brand new services like games or education skills. we also make alexa technology to third-party manufacturers without any exclusivity requirement. making those devices more appealing and valuable to customers. we were the first company to do this. and it has significantly expanded customer choice on how to access voice assistants. finally, through our alexa smart home program, we've been able to manufacture smart home devices such as lights, locks and ceiling fans to allow customers to control those devices by voice making those devices more useful and valuable. in conclusion, we are still in the very early days of the developmental voice assistants for smart home devices. it is a competitive and innovative space made even more so by amazon's efforts to
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provide customer choice. we appreciate the important work the committee is doing in this space. we believe our goals are fundamentally aligned with those of the committee to foster innovation, insure competition and create a digital future that works for all consumers. thank you for this opportunity to share our vision. i look forward to your questions. >> well, thank you very much. thank you for your testimony. next up is many lazarus are. mr. lazarus. >> thank you, chair klobuchar, ranking member lee and distinguished members of the subcommittee for the opportunity to appear before you. it is an ohioan to testify -- honor to testify as the chief legal officer of sonos, a company that embodies american tech innovation at its best. sew nose was founded in 2002 -- so not was founded by entrepreneurs who set out to reinvent audio for the new age. the old home audio systems
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featuring passive speakers would be replaced by a seamless experience where users could play music on wireless speakers that communicate with each other to produce what is known today as multi-room home audio. fast forward, sonos employs roughly a 1500 people, and our products have been welcomed into more than 11 million homes. our success is based in significant part on elevating the idea of consumer choice rather than a walled garden experience, including a choice among more than a hundred music streaming services as well as between the two dominant voice assistants, alexa and google assistant. from our perspective, we see two possible futures in the smart home. in the first scenario, resulting from the current trajectory we're on, every smart home will be controlled by one of a few dominant companies. these behemoths exert overwhelming control over the direction of innovation and what new ideas make it to market. in an alternative scenario,
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revamped antitrust law and enforcement will level and broaden the playing field. the second future is one in which company like sonos and countless others bring novel experience poos to customers with the -- experiences to customers. assistance provided by the dominant company, but also to mix and match easily among theirs and other offerings. for google and amazon specifically, the smart, this new -- smart home, this new and growing interface between online enterprisers and consumers presents both a threat and an opportunity. the threat is that if other companies were to be successful in the smart home space, they might stand between the dominant companies and customers. meanwhile, the opportunity for google and amazon is to dominate yet another important consumer market and even more critically, to use their smart home assistants to collect vast amounts of consumer data which can be monetized on their
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already dominant and enormously profitable platforms. in suppressing competition, a common central of google and amazon is to take on a competitor by flooding the market with similar products sold at highly subsidized prices or even given away. amazon and google can afford to lose money on the speaker profits because they aren't counting on profits from the profit sales themselves. instead, from the rich trove of personal data that these microphone-enabled products -- from consumers. it's compounded by restrictions on interoperability. the strategy of each of the dominant players is to aggregate demand on etc. own individual platforms -- it own individual platforms. they lure you in and then they want to lock you in. sonos and other innovators watch want to offer a model that interoperates with each of the dominant players but also enables consumers to discover and choose from various other products and innovations. the dominant playerses often make that difficult, if not
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impossible, either by prohibiting the implementation of new ideas or conditioning access to their platforms with anti-excess competitive -- anti-competitive demands. google and amazon run sprawling, irreplaceable empires. in many respects, those partnerships are mutually beneficial. but there's a downside too. to gain access the their platforms, integrate with their services, these companies issue various take it or leave it demands including early access to proprietary business information. this undercuts competition especially when these companies decide to use what they've learned about your business to produce and sell is remarkably similar products. we've been heartened that state and federal antitrust agencies have begun to investigate and in some cases bring enforcement action against the more egregious practices, but these are not enough to protect consumers and promote the competitive process. for that reason, we very much appreciate, senator klobuchar, that senator klobuchar has
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introduced legislation. we know that ranking member lee has now drafted his own bill that we will be studying closely. @viceally -- it's vitally important to recognize that a significant range of conduct that income a passes -- that suppresses competition in the smart home falls outside existing law. ap antitrust reregime for the digital age must address restrictions on interop rant and cross-subsidization and misuse of data. we urge congress to act soon. due to strong network events, markets can tip kickly, expld -- quickly, and it would be a shame to look back and wonder what might have been if only. thank you for your consideration. >> thank you very much. thanks for your testimony. next up, many crawford. mr. crawford. >> chair klobuchar, ranking member lee and distinguished members of the committee, thank you for the opportunity to address you today. i have no expertise in antitrust. i come to you as a student of
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the history of political thought. the convenience of a smart home may be worth the price, that's for even of to us -- each of to decide can. but one has to understand what the price is. after all, you don't pay a monthly fee for alexa oring google assistant. the sleep number bed is typical of smart home devices. it comes with an app, of course, which you'll need to install to get the full benefits. benefits for whom? well, to know that, have to spend some time with the 12-page privacy policy that come cos with the bed. this you'll read about third party sharing google analytics, targeted advertising and much else. the contract specifies that the company can use your personal information even after you cancel your sleep number account and that the firm doesn't honor do not track notifications. and, by the way, the bed also transmits the audio signals in
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your bedroom, and i'm not making this up. whatever its appeal to the consumer, the business ration rationale for the smart home is to bring inti nate pattern, of life into the fold of the surveillance economy which has a one-way mere are quality. -- mirror quality. increasingly, every aspect of our lives, our voices, our facial expressions, our political affiliations and intellectual habits, are laid bare as data to be collected by companies who, for their own part, forward with military grade secrecy the algorithms by can they use this information to determine the world that is presented to us. for example, when we enter a search term or in our news feeds. they're also in a position to determine our standing -- to determine our standing in the reputational economy. the credit rating agencies and insurance companies would like to know us more intimately. i suppose alexa can help with
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that. allow me to offer a point of reference that comes from outside the tech debates entirely but can be brought to bear on them. key legal psychological arounds -- conservative legal scholars have criticized a shift of powers to the administrative state which seeks to bypass legislation and rule by executive fiat through administrative rulings. the appeal of this move, of course, is that it saves one the effort of persuading others; that is, the inconvenience of democratic politics. i'd like to suggest that all the arguments that conservatives make about the administrative state can be applied as well to this new thing. call it algorithmic governance that operates through artificial intelligence developed in the private sector. it, too, is a form of power that is not required to give an account of itself and is, therefore, insulated from democratic pressures.
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for reasons intrinsic to machine learning, the logic by which an a.i. reaches its conclusions is impossible to reconstruct even for those who built the underlying algorithms due to the complexity of how they interact in massively it rated layers of inference. we need to consider the significance of this opacity in the light of our political traditions. when a court issues a session, the judge -- a decision, the judge writes an opinion in which he explains his reasoning. he grounds the decision in law, precedent, common sense and principles that he feels obliged to articulate and defend. this is what transforms the decision from mere by yacht into something -- fiat into something that is legitimate, capable of securing the asset9 of a few -- assent of a free people. authority is supposed to be grounded in this way in our shared rationality.
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rather than appealing to, say, a special talent for -- divination. it appears to be in a fragile state. with the scrutable -- of data science, a new priesthood peers into a hidden layer of reality that is revealed only by a self-taught a.i. program. the logic of which is beyond human knowing. the feeling that one is ruled by a class of experts who cannot be addressed, who cannot be held to account has contributed to populace anger. the usual distinction between government and the private sector starts to sound like a joke given how concentrations of economic power order our lives in far-reaching ways. google, facebook, twitter and amazon have established portals that people feel they have to pass through to conduct the
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business of life and to participate in the common life of the nation. such bottlenecks are a natural consequence. it was early innovations that allowed these firms to take up their positions, but it is not innovation, it's the established positions and the ongoing control of the data it allows them to gather, that accounts for the unprecedented rents they're able to collect as in the classic infrastructure monopoly. if those profits measure anything at all, it is the reach of the grid of surveillance that continues to spread and deepen. it is this grid's basic lack of intelligibility that renders it politically unaccountable. yet accountability is the very essence of relative government. representative government. mr. zuckerberg has said frankly that, quote, in a lot of ways facebook is more like a government than a traditional company. if we take the man at his word,
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it would seem to a raise the question, can the united states government tolerate the existence of a rival government within its territory? in 1776 we answered that question with a resounding no and then fought a revolutionary war to make it so. the slogan of that war was don't tread on me. this spirited insistence on self-rule expresses the emotional core of republicanism. as senator klobuchar points out if her book "antitrust," the slow taliban was directed in particular at -- slogan was directed at monopoly charters to corpses that control trade with the colonies. today the platform firms appear to many as a foreign imperial power. the fundamental question, who rules, is pressed upon this body once again. thank you.
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>> thank you very much. mr. zittrain. >> thanks very much. internet of things might join artificial intelligence as being a little like asbestos. it's very useful, it can awe accumulate in your house without you thinking about it, it may cause unforeseen problems. it's easy to look back at the way the internet developed and feel like it was all inevitable. it was not. a few decades ago we were on a course toward a very different future. i know because i was there, and i was very excited about it. ..
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that it could affect the air but that isn't an unusual situation right now and it has a lot of momentum. compuserve had about 2 million servers and today over 1 million iphones and 2 billion users with active [inaudible] 100 million devices out there. my written testimony has more on my suggestions but here are a few ideas for actions congress could take towards a better
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future that might not happen on its own. first, reform antitrust law over the vertical integration strategies that would attempt the major vendors will and the artificial connection between which phone we purchase and assistant we use and which assistant and devices can instruct him for the device themselves between what hardware we purchase and who can read the software that runs upon it. to detour, the devices lose their connection to keep working at least as well as their non-smart counterparts. no one who buys a coffee maker expects its to stop working one morning because the company decided to charge a fee. second, congress should subsidize people in organizations developing the license to standards and software for smart devices and protect those who want to tinker with those devices and test them for security and privacy. basic support for internet protocol development is perhaps some of the best bang for the
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buck that the american taxpayer has ever seen in the history of this country. those investments pay off and we should make more of them. third, lawmakers must have new rules around privacy for the always on passive devices all over our homes that can be used or conscripted to claim constant telemetry including audio and video. for many there's simply no way to discover what they are recording and where they are sending it weather for their own purposes are under the legal process. we need consistent, transparent and appropriately restrictive rules on the road now before the habits of surveillance for home technologies are established and then deemed indispensable. at least as important, security won't provide for itself. we need to cultivate a new generation of well governed app store styled marketplaces to that the applications for safety without becoming anticompetitive tools. technology regulators so often have to take a deep breath and throw darts somewhere between
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willing to tell and too late to do anything about it. now is the time to arise at a vision for the public interest demands of this new promising and perhaps an enduring set of technologies and to set up clear boundaries for the market players to appreciate and respect. that can help prevent the problems that will be much harder to patch later. thank you very much. >> very good. thank you to all the witnesses. i will get started and then i will turn over to senator lee. senator blumenthal is going to be joining us very soon. we have heard concerns given to mr. mccrate and mr. white the prominent role of that google play connected home technologies could allow your comforters to limit or limit seamlessly into the connected home. in theory, you could do this by
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excluding or eliminating the functionality of competing devices. for now, your companies do talk about promoting interoperability. but as the companies expand the connected home device offerings and it gives a bigger and bigger market much more than it is now, i have concerns about your incentives to preference your own connected devices over the competing products. given the sum of the other self referencing we have seen and other aspects of the businesses, why shouldn't we be concerned even if you are promoting interoperability now when the markets are developing what is to stop you from changing the policies once you have a more entrenched market position and what commitment will you make today under oath about specifically how you will support the interoperability for how long and who will oversee the commitments to ensure compliance for the connected home devices. those are a lot of questions so i will sum it up even if you are
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promoting interoperability now what is to stop you from changing your policies, that's first, and number two, what commitments you will make here today about how you will support the interoperability and for how long? and who will oversee those commitments? do you want to get started? >> we could go to mr. white first if we want. >> thank you for the question, senator klobuchar. as we have seen other panelists said, this is a new and evolving space. very dynamic. i cannot predict what the future of this will look like. the signs are promising and you are grappling with the right
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questions of how to ensure that we maximize the benefits of where this basis is and mitigating some of the potential issues. there is a robust conversation happening across the industry to try to address some of these issues. as i mentioned in my testimony, we joined with almost 200 other companies to work on this secure connectivity standard and open protocols so that the various smart home devices and ecosystems can interact with each other. that is a promising industry and we are contributing to that. i think one of the mid-gators to the risk that you are identifying is the fact that it's not just the big companies that are a part of this working group. it's companies big and small. we hope that more companies get involved in this working group so that it really is sustaining
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the technology well into the future. >> other than the working group, which i appreciate, can you specifically say that you will support the interoperability and answer who is going to oversee the commitments? >> yes, senator, generally speaking, the interoperability we support and will support. there are some technical specifics we have a very diverse set of devices for it isn't yet clear today that each of those of various factors will have the same evolutionary path. i think we need to continue to follow that and continue to invest in this space. with the northstar towards the interoperability. at a general level i can say that. and then who oversees this i think right now the industry is doing a good job of tackling
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some of these questions. our position would be let's see what the industry can get and if there are areas that we need additional help or oversight, i think that is a great area for this group across policymakers, academia, civil society and the private sector to work on. a. >> mr. mccrate, you want to answer? >> i think we can hear you there. >> i apologize for the challenges. >> don't worry. go ahead. >> so, thanks for the question. it is a super important topic. amazon strives to be a centered company so all of the decisions working backward what we think is in the best interest of customers. it's true today and in the future. we think having any customers the options to use multiple different assistance from a single device is important and
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interoperability is important. we want customers to have a simple experience where they can find a device in the store without wondering if it is going to work with their assistant at home and things just seamlessly work. we continue to be focused on making the device simpler for customers and making sure alexei works with devices from all manufacturers. >> okay. what are you going to assure us that you will always support interoperability and who is going to oversee that? >> senator, i can assure you we will always work backwards in the best most interest of the customers and that includes interoperability. >> okay. as a seller of connected devices at sonos, that operate with amazon and google, does the testimony that you just heard give you any comfort? >> [inaudible] >> could you explain why?
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>> [inaudible] is your microphone on? >> i apologize. >> we are having a lot of interesting speakers. continue on. >> could you hear the beginning of what i said? >> you can start over. a. >> i said it didn't give me a lot of comfort. i wanted to give an example. i heard the emphasis the representative from amazon put on the voice and i should have, which is actually an idea that sonos promoted to amazon. but the reason i'm interested in this, the interplay between amazon and google catches us in the middle. we actually invented a technology called common currency which allows you just to look at your speaker and channel into a variety of ways just using weak words. if you look at the speaker and say alexa it will go to amazon or google and it will go to google assistant or another assistant if there were one. google contractually prohibits
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us from using that technology. the voice interoperability initiative which is an excellent idea and we appreciate amazon is partnering with companies, it is just an on-ramp into the amazon ecosystem now, because you can't mix and match between the big companies. and that is, as the professor mentioned, that mixing and matching ability is crucial when you talk about interoperability. and we would hope this committee would look very carefully as the house subcommittee did at requiring that ability to go between the ecosystems seamlessly and not just into one ecosystem with your device. >> okay. thank you. professor zittrain, in the european commission's preliminary report about connective home devices, many connected device manufacturers cited interoperability as a significant barrier to market entry expansion. are the company led interoperability efforts the best way to have a competitive and interoperable ecosystem and
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what do you think would work better? >> thanks very much for your question. and i think the answer to that lies a little bit in the previous exchange. it's totally understandable that our industry colleagues would say yeah, we like competition. we are here to promoted and we will let you know if we need help, but it's the kind of thing that may be betters and settingg certain ground rules for competition than simply waiting to see if any of them has a motive to sort of move if they find themselves in the lead. i think for example, that mr. mccrate's discussion of the current positioning of alexa rings true as pretty accurate to me. of course i might ask him is it possible for somebody to sell books on a kindle that they are not going to run through amazon, and that might be a little trickier because that is a
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different market on which amazon has a different configuration. so, with respect to your question on the industry initiatives, basically very well-organized if you bring the right, quote on quote, right players to the table they can come to accord and then quickly if they are serious about it, implement it through their respective ecosystems. but the drawbacks are also significant because it may turn out that they come to an agreement that in turn, to use antitrust lingo, restrains trade that works for them, but not for everyone else. and figuring out how to have industry associations and standard-setting processes that might be in a more open and the multi-stakeholder as they call it realm, in my own testimony i likened that to the internet engineering task force that has corporate participation, but not corporate governance. it's those processes you can't copy and paste them over, but it might be worth exploring to see how best to represent all of the many spinning gears of this
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ecosystem. >> okay. very good. i'm going to ask one more fast question because we have three senators here. mr. white and mr. mccrate, just one sentence or two sentence answers. the connected speakers, you store what the connected speakers hear from consumers in their homes when they ask something like lay, you know, prince or bob dylan, not to mention only minnesota artists. but how do you monetize the data that you collect from your digital voice assistants and how much revenue does that generate from each of the companies last year? you monetize that? mr. white, you can go first again if you'd like or mr. mccrate. >> i'm happy to go first, senator. on the financial side of things, i don't think we break down our profitability by product area in that way, so the numbers that are made are the numbers that
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are in our public filings on that particular part of the question. but in terms of how we monetize the data, when you are interacting with the google assistant, your voice recordings are not stored unless you decide to have those recordings stored. and then we give users transparency and control over the data that is actually being collected from the google assistant. they can go to their google account, see the data being collected and make decisions about how the data is used and whether they want to delete it. recently we changed the data retention policies so that for the new users, data is going to the auto delete schedule. >> mr. mccrate. >> senator, part of the foundation to how we approach alexa and the echo devices, we do not sell the customers data or voice recordings. we make money through alexa when customers use paid amazon services like our amazon music subscription. >> okay.
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all right. i'm going to turn over to senator lee and following that, senator blumenthal and then the senator hawley. >> thank you. mr. mccrate, i'd like to start with you before we get into smart home devices. i want to follow up with you regarding a response that i received from a person named shannon kellogg at amazon. representative can book and i received a letter. we sent a letter to jeff baize those with some fact-finding questions related to some very serious concerns about amazon's involvement in the procurement process at the u.s. department of defense and instead of a helpful reply or any kind of a meaningful engagement from mr. beziz or anyone at amazon, we instead received a letter from mr. kellogg. rather cavalierly dismissing the
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concerns entirely. and refusing to answer questions. first, i hope your level of engagement with us today will rise above that abysmally disappointing level. more importantly, will you promise to raise this issue with mr. bezos to ensure that we get some actual answers to the questions? to be honest, the initial refusal to answer the questions only makes it look like there's something to hide. is there? >> senator, no i don't believe so. it is deeply concerning to me and i'm sure you can appreciate i expect when i raise a serious question that it will be raised with a serious answer. we didn't receive that, not in the slightest. for years i've been concerned
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about the federal government violating the civil liberties of the american people and you've raised in your opening testimony some very valid points about how any american concerned about how the civil liberties might be eroded by government should likewise be concerned about how that might have been with big business and big tech in particular. now we are all voluntarily connecting the microphones in our kitchens, our living rooms and even as you pointed out in our bedrooms. do you see the risk that big tech and big government might work together in the future to the detriment of the people, and in particular work in a way that they could find a way to circumvent some of the protections that lie against government simply by virtue of the fact they are going through
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a third-party intermediary that's been invited into the home? >> the progressives of a century, teddy roosevelt's time, took on the monopolies of not out of class warfare but because they understood that once it progresses beyond a certain point, the concentration of the economic power becomes incompatible with representative government. so, what are the prospects for that kind of corrective action today? many of today's progressives appeared to be preoccupied with cultural issues rather than securing the conditions for the widely shared prosperity and this gets to your question will the firms enjoy a light regulatory touch in exchange for
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becoming with the kind of governments that we associate with the hr departments. so i think any dissident minded person today here's a kind of consolidation of power along the axis that runs from dc to palo alto. and i think that these need to remain separate and opposed if the self-government is to remain viable. >> would you agree if i added to the statement, that is very well expressed, it wouldn't necessarily even need to be contingent upon the quid pro quo arrangement or regulatory touch in exchange for participation in this sort of omnipresent police state. this could have been more subtly by virtue of the fact that the first amendment itself applies
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to government and not corporations and once a corporation has been invited into someone's kitchen, living room or bedroom, they are collecting business information and it can then choose to sell that information to others including a government. >> i think that's right. quite apart from any it often appears from a flyover country or just a lot of places that there's a kind of clarity that shares a lot of the presuppositions about the need to transform society and that there is a like mindedness. so it doesn't require coordination. i am trying to give voice to this feeling we are going to enter a more oligarchic phase in
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american history. and it prevails in big tech and is very much aligned with the most progressive element of the democratic party. a feature if you call it that, is that something that you think people ought to be concerned about from the civil liberties
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standpoint. i had no expert knowledge of anything in particular but as a citizen i certainly wouldn't want the comings and goings of my friends knowing that way. we don't know what that information has. there's a pattern of life analysis with the intelligence purposes that has become a prominent part of the business platform. this has become one of the planks in the surveillance economy. >> mr. mccrate, tell me what you're doing and how are you protecting the customers
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internet security and privacy using this sidewalk feature. to ensure that the customers data is safe and secure. >> thank you for pursuing these very, very enlightening and instructive hearings fortunately. to read the book before the hearing i'm already a major part through it.
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>> in april, first let me say i know earlier in the hearing i don't think that it's officially announced yet. but i want to welcome her and i think that it will begin a new chapter for the enforcing of antitrust in april this thesubcommittee hearing held a really compelling on competition and the app store marketplace. we heard really stunning reports
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about how google and apple used their control over the app stores and the mobile operating systems to extract rent exorbitant and exclude the rival products. and the internet of things product designed to help consumers find their lost items. this is to illustrate the point right before the store hearing apple launched that appears to be a carbon copy of tile products. at the hearing, they shared the concern that apple was using in its control over iphones and the operating systems to limit competition the benefit over the tile products, though they had access to the sensitive business information with no guarantees that apple wouldn't repurpose
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that data to advantage its own products. tile also claimed that they blocked or limited its access to new iphone features. now, the app store and the mobile markets have almost taken over the digital economy as all of you know more and more consumers are using mobile phones as opposed to laptops. as you recall the hearing you testified that it was your,," understanding that google has,
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quote, data access controls in place to govern from the third-party services. i want to set the record straight they provide platforms for the businesses to distribute the apps to the google play store and it's internet of things ecosystem. does google have a firewall does google ensure the data it collects from third-party software developers often sensitive business information is not used to compete with those developers? >> thank you for the question, senator and good to see you again. as i said in the previous app store hearing, we do have data access and controls in place and
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also internal policies in place that govern how we use the data that we get from our partners and for the competitive purposes. >> i can't say that. the term firewall may implement the technical understanding i'm happy to have my team get more specifics on that. i do know that we have data access controls in place and internal policies that govern how we use the data from our vantage point -- >> so, from what i take and my understanding of your response, there is no firewall. there are policies and controls but no firewall. i would be happy for your team to provide more detail. but my understanding there is
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there are no firewall. let me ask mr. mccrate the same question. you provide one of the largest marketplaces for electronics, and you provide the alexa voice assistance to third parties. you collect a lot, and, i mean, tons of confidential business information about your competitors. does amazon have firewalls, to use the word firewalls to ensure that it does not use competitors status against them or to rig the system for amazon's own product? >> prohibiting the trust of the third-party partners is critical to assist alexa. the data we use is appropriate to continue to work and use the services available. we focus on using the information we receive to customers to improve alexa overall including for our third-party partners. >> i'm going to take this as a
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no you do not. my time is limited. so i'm happy to have you respond further. >> professor zittrain, as gatekeepers, google, amazon and apple have access to troves of sensitive business information as we all know about the competitors. don't we need firewalls between app stores, internet of things, platforms and others to restore competition to the marketplace? >> i would be supportive of that. i think that it's understandable that companies and is creative and big and with as much spare cash as some of the ones you've mentioned they are going to want to get into all sorts of different businesses and there may be in the classic word synergies among them and that's
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how you can be the platform and one of the vendors on your own platform in the way that google might offer ads on its own a service for its own the stuff and sensitivities around when that form of involvement in so many different aspects of what otherwise is a marketplace with different players amounts to and unfair thumb on the scale instead of the most innovative or chiefest you end up with the one that is sort of on the home team and the measures would be a way to say look if you want to play in multiple spheres we understand that might be worthwhile but the need to be ways to ensure you do not end up in a winner take all environment because of doing that. >> thank you. i will say in conclusion and i apologize i'm a little over my
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time, in the days of the progressive mentioned by mr. crawford, the power was in railroad tracks and oil wells. what we have here is power in data, control over the data whether it is the privacy of an individual consumer which should belong to them or the data that is collected by these behemoths. amazon and google where they can use it in effect against their so-called customers and compete against them unfairly and deprive consumers of innovation and competition. that is the reason that we are here today. >> because the internet of things threatens to become a vehicle for anti-competitive steps when they weaponize it.
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so, i think we need to take bold action like lines of business restriction and data firewalls to protect from weaponize inc. andthose troves of sensitive daa to further their own business interest and squash the competition. and again i think we have here conflicts of interest where the gatekeepers and operators of online platforms and marketers of their own products have dual and conflicting roles and it's an environment as a result of the conflict that is ripe with exploitation and appropriations every bit as serious as in the days of the titans or the railroads even though it is a lot less visible. thank you madam chair. >> thank you senator blumenthal. next up, senator hawley.
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>> thank you for organizing these hearings. i want to say in response to the last comments and the last witness i will put my cards on the table, i don't think there's any reason one company ought to be simultaneously, let's take amazon for example, a book retailer, the store, delivery, clothing business, tv networks, technology hosting company, easy eereading manufacturer, digital music vendor, game house and i could go on. those lines of businesses are related and what we see there's a pattern. organized across different industries, there is a distinct pattern here. we always have the same two or three people here every single time, amazon and google and apple almost every hearing. why? because they have their dominant market players that are leveraging their dominance in the core markets and using it to
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capture dominance in other markets. so it's always the same story no matter the industry. these two or three and then some competitor they are trying to edge out and walks out by using their market power. we see it over and over and the same tactics over and over. predatory pricing, self referencing, exclusionary conduct and we are seeing it here in the market we talk about today. here we've got these companies using their power with voice assistance and smart technology to fortify their existing surge with shopping and other lines of businesses. and again, they do it by cross subsidizing. they do it by using third-party data that they have access to. and they use it by insulating their own offerings to squeeze out the competition. for instance, by making their own services set as default, which is what amazon has done with the sidewalk device set up that senator lee was asking about.
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all of that is to say we are seeing a pretty consistent pattern here, and i think the time has come to say that we have got to present these massive dominant firms from buying up market share and using their own dominant positions in one market to leverage a dominant position in another market. i propose legislation to do this and i know the chairwoman has legislation of her own that would also be of interest. i hope that we can find some agreement to go forward because i think it is becoming more and more apparent that we need to big changes in order to come from the big problems that we have across the different markets. mr. mccrate if i could come back i want to follow up on senator lee's line of questioning when it comes to the amazon sidewalk device set up. why did you decide to make it opt out only rather than opt in? why did you set the default that way? >> senator, we make all of our products by working backwards. we think the sidewalk network has many benefits that will help customers better manage the
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devices. the items simplify the set up. we informed customers and make it easy for them to choose whether they want to participate. a. >> you didn't really answer my question. are you worried the customers wouldn't want to opt in? is that why you set the default the way you did ask why did you make it difficult? i bet most of the customers don't even know about it. why would you default it to opt in, and they have to then go figure out how to opt out of it? why would the default set where it was? >> senator, we set the default the way that it was because we think that is the best experience for the customers. provides benefits in helping customers to keep the devices online and simplify the set up. we did e-mail all customers and notify them that sidewalk was going to be available and we make it easy for the customers to configure that setting. >> to see from the customer's perspective, but what steps have you taken to ensure that the user's bandwidth gets tapped under this program and that it
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will not be held liable for any misuse of their internet connection our violations of amazon's terms of service by devices from another household? >> senator, the sidewalk network uses only a very small amount of information. a lot of it is misperception about what sidewalk is. it's not about sharing your internet network or allowing someone to stream a movie or check websites. it's focused on setting small amounts of information over distances that can't be covered by wi-fi -- >> so the kindle tablets don't have access to the sidewalk network? >> the tablets might use the network to set up other devices. we don't access the internet or browse over the network. the example that might be helpful to go back to tile, sidewalk networks like amazon was designed to help enable the third-party developers. tile, which makes smaller devices you can attach to your keychain or lost items is one of the partners we are working with
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him sidewalk. today if you lose a tile device, you can find the device with another customer with the app on their phone if they happen to walk by the device with a small amount of information that gets sent to that customer's phone to the internet and to the customer that lost the device. it is an extension of that so now you can find your device if it is within range. it's a small amount of information. it gives the approximate locations of the customer can find it. >> let me ask you this. in the sidewalk paper, the white paper use a amazon sidewalk won't support third-party devices immediately at launch, but we will make careful choices about the information they receive from sidewalk. we will have more details in the future. so, what third-party devices do you plan to give access to in the sidewalk network? >> senator, i do not directly support the sidewalk theme. i don't have all of the e-mails but i do know that tile is one of the partners.
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>> so can you give me an answer to that question in writing then with the third-party devices you plan to get access to because it seems like you are at the bit of a bind if you don't open this network up to third-party devices, then that looks like anti-competitive conduct and on the other hand if you do open it up, you have created a situation in which amazon device owners by default, because you've opted to set it as opt in, not oft out, they might be inviting all types of so potential security threats to their home because of the internet connection, so it seems like a relative question. can i get an answer about what plans you are going to give access to. >> happy to do that. >> in my brief time remaining, let me ask you what is the cost to make and sell and alexa unit approximately? >> i don't have the figure and there is a wide variety of devices that come at a different price points. >> have these products ever been
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sold to consumers below cost? >> senator, i am sure that it has. we focus on producing the devices at a low cost as possible because it provides comforting pricing to customers. we frequently have to put our devices on to compete with other devices and in those instances i'm sure. >> i'm sure there is and i'm sure you've admitted it. they can probably speak to this as well when you are facing somebody like amazon that has the ability with cross subsidizing to sell their units and sometimes dramatically for the idea of pricing out a competitor it's hard to compete when you have somebody that is deliberately during the policy. maybe if it's all right with
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you. as opposed to making money on the data. >> okay, senator. >> thank you mr. chair man and to the panel. i'd like to begin with you regarding amazon products that function with connections to wi-fi networks what data regarding others on the same networks produced by other manufacturers like amazon devices particularly those that act as a were bridge not between the various network devices. >> i believe you may be referring to those that would operate in the state network and
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so some of the devices include home technology to allow customers other things like that. we do receive the status of the devices so we can control them on the customer's behalf. >> so collecting information that for example in that case about when, where and in what rooms customers may be turning on or off the lights, when and where within their homes they might be using the connected cleaning devices and what other kind of information might you collect from third-party devices on the same network and what is the utility of the data from the commercial standpoint? >> certainly, senator. they want to be able to control
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that device and so for instance if it is on or off it is easier for us to access if they say turn off the light you would need to know which lights are on and which lights are off. that kind of data to generate the market insight pattern of life information that makes you better able to market to the customers and secondarily do you ever sell any of the data to the third parties? >> we do not sell the customer data. we are focused on using the
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data. for their pattern of life when and where they are moving and when and where they are activating turning lights off and on perhaps using devices related. is the data useful? >> we use the data to provide. my time is limited and you've made that statement. whether or not you are able to glean the market insight or information that improves the marketing capabilities we do not
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use certain advertisers i think we will be able to drill down a little bit more on the specific types it is to be utility of all of this data that amazon is gathering from the devices connected on the same networks and amazon devices. this is a question that will start with mr. white about both for you and mr. mccrate. the devices are capable of other bluetooth enabled devices. to the products track the locations of phones variables or other devices in the home or within the range of a wi-fi network to which one of the company's devices may be
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connected? around of the triangulation, and i'm happy to follow-up with you in the specifics i want the team to get that question. what i can say generally is what we need to do is ensure the thatusers have transparency and control over the data so they can go into the account and see what location data may be stored. they have the controls to do that as well. >> thank you. just to restate the question. do any of the products track the locations or the other devices within the home or within the
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range and i believe amazon owns the product that is a next work products of the question is whether you are tracking the location of the user devices in the homes and products present. >> senator, it's a very important question. i want to make sure we get accurate information it can provide appropriately. >> thank you. mr. white, your privacy statements indicate the data collected from these interactions to develop new products and services, but it does not indicate the amounts on what kind of products the data may be used to develop. do you use the video and image data to collect, develop or train facial or object recognition software or systems?
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>> senator, if a user has this stored on their account, we may use it in a very randomized way. we might use some of the audio recording to help improve the speech recognition technologies. i am aware of that. but the user also has the ability to not have their audio recordings, for example, or the images that save to their account. >> your products which capture video, whether they are digital assistants, communication tools or security services. do you use the video and image data collected for the tools to develop or train facial or object recognition systems?
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none of the devices provided a face recognition features. i'm not aware of the data being used in that way.
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if there are any other senators please let us know are you concerned about amazon and google copying ideas and impairing the competitors in the same way that we've heard allegations regarding between apple and tile for instance. thank you for the question. one, in the certification process they go through both of those companies they asked for
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the sales forecast and that sort of thing and that causes great concern that what they are looking at is what would be a nice product that they might make themselves and we get into the cycle of the cross subsidization that we were discussing. in addition to that it was on the public record that we believe that both amazon and google in french roughly have taken some of the core technologies to build smart audio speakers so we do have a lot of concern in that area and we are very pleased this committee is looking at it. >> do they give the companies an advantage in the home smart stays and how does amazon compete with that? >> senator, i do think that
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there are benefits to controlling the smart phone devices the customers use. they are again the primary way the customers access voice assistants today and of the primary way the controller smart devices. most have applications that customers access through google or apple store and then can use to set up and control their ceiling fans et cetera. the fact that the phones are the gateway the customers use to receive those apps and the primary ways they access voice is helpful. >> what do you do if apple or google cut off the ability to interoperate with android or the ios devices? >> potentially catastrophic we make a variety of apps available to both apple and google, the
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amazon app or music app and those are critical ways the customers access the data. >> thank you. >> i've heard google wants to be as open as possible as it comes to internet of things devices. it makes sense while the market is still growing and while the adoption is still on the increase. but what about what happens when the market begins to plateau and would it be in their interest to start pushing out the rivals by giving treatment to its own devices and to its own services? >> senator, before i answer that question, let me note in the previous comment around what happened with the android operating system it really is a free and open source system and amazon has benefited greatly in building our own system so that
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level of innovation that's come from having an open platform is something we have already seen in the market and something we think also goes to the question around what happens as this space continues to evolve and for us we are motivated by ensuring we stay on the cutting edge of giving the consumers in the ecosystem there are other stores and we allow other app stores including amazon, so it is in our interest and the demonstrated interest to ensure many people are playing in this space because it is pro- competition and proconsumer and we've seen the benefits of that in the model. >> i want to ask you and i'm going to ask more questions in a moment. i frequently see that your
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companies, the respective companies literally giveaway your smart speakers for free. how do you make money off of that? >> there are ways of generating revenue including things like licensing fees, subscription, selling devices directly and it's a very competitive space. you have several that are competing in the smart home space. microsoft court, samsung bixby, google assistant and new players are getting into the spaces as well as getting it to the voice assistants so as recently purchasing a voice company so it's a very active competitive space. >> i get it is an active and vibrant space but you still have to make money off of it.
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i assume you make money off of it by encouraging the use of it sort of analogous to what happens with videogame consoles. is that fair to say? >> encouraging the use of it and competing for promotional opportunities, licensing fees, a multitude of ways that we are exploring in terms of generating revenue for the business. >> do you think it undermines competition? >> no, senator, i do not. i think we can beat vigorously for the opportunity that is a common thing and we think that we are very much in line with the competitors that we see in this space. >> what about amazon, how do you make money off of giving away speakers? >> i am not aware of any instances we have given away speakers. we are proud of the places we are able to offer and it does take a lot of work.
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we focused on building quality devices so that we can price them competitively. we are often not the cheapest device in the marketplace and we frequently price match others. >> there are many different business models. spot if i recently announced what they made available for the services to allow the customers to access the streaming content. my understanding is they are giving it away and causing a subscription fee for the customers to use it. we think it is proconsumer and that lower in price. >> mr. zittrain what is your view of the undermining competition? >> the point here is that they will cross subsidize. it's one thing to have a
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business model in the same market where the device isn't the way in which you are getting your profits. it's another to take the profit from the dominant platform and subsidize the device so that you create a circle that then feeds back into the dominant platform and that's what we believe is going on in this market. >> thank you madam chair. >> very good. thank you, senator hawley? >> if i could follow up on that same point, could we talk about the next unit. have you sold that to consumers at below cost, below the cost it takes to manufacture? >> i do not know the answer to that because we do not break down the profitability byproduct area but i am happy to have the team follow-up i just don't have the numbers. >> but you do know that they exist. you know whether or not you have at any point sold the product at
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below the cost to make it? >> i do not know but i am happy to follow-up with you. >> i would like to see that number. indeed alexa had been sold at below cost and i would be shocked if they haven't and i would like to come back to the point that mr. lazarus made which is let me just ask the question senator lee asked you if you indeed had sold the unit at a price below cost to customers and have done that in order to undercut a competitor, that is anticompetitive conduct would you agree? >> as i said i don't know whether we sold the devices. what i can say is this is a competitive space along with of the other devices that are in this space. >> let me ask about a report released last year and titled
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think with google. it was entitled connecting the dots and in the report, the author said the consumers want seamless integration and went on to say it is to find ways to provide consumers with unified access to different content and service providers. consider building partnerships with other companies to let people access all their devices and apps in one ecosystem senator, right now what we are doing is learning in this new and evolving space and working with partners across the board for example over 2,000 device makers bringing their devices online as part of the evolution. we are partnering with industry players both big and small on
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questions around a secure, activity standard. so, we are very active in the industry here and evolving the industry as the industry evolves. >> does that mean that you know or you don't know? it doesn't sound like a yes, so do you currently do not provide access to the competitor devices on the system or do you not personally know the answer to that? >> there are examples. i'm trying to paint a picture that it is diverse and for example in the google assistant if a user wants to play music on the google assistant, they can actually choose a default music provider and we have partnerships with providers like spot of high and pandora and if they choose one of those partners when they give the command to the assistant to play music, we will honor that choice by the user. that's one example. it's an evolving space and we will continue to work as we
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integrate more. >> i will give you this question for the record. i'm asking because some journalist reports from a few years back as recently as 2017 wrote you can connect your music subscription to your home speakers but you couldn't tell the speakers to turn the volume down or to change tracks. they could be used to order and play netflix but if you want to order a toothbrush on amazon you are out of luck. they were not a very common patentable with competitors and that was as of 2017. what i'm driving at is are you giving the services equal levels of functionality to your own the services that are offered in the same market? >> senator, i think that you are getting at the question of the interoperability that we are talking with senator klobuchar and others. that's an evolving area and a robust conversation the industry
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is having at a technical level and we are participating in that and hope that over time we will see more and more of that interoperability between the broad range of the smart home ecosystems. >> i would like to drill down on that a very aspirational statement. and i'm sure the market is evolving but it would be helpful to have an understanding of what you are doing right now so we can see what the current practices are and measure that against what your competitors are claiming so we will put this in writing and see if we can't get a little more precise answer. >> very good. i want to put on a letter on the record we've received from the consumer reports in connection with this hearing and seek unanimous consent to enter it into the record without objection. one of the concerns that has
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been raised is companies like google have the power to exclude competing voice assistants. google limits the ability of others to exist, currently on the connected home system that could prevent competing general-purpose systems and inte special purpose from cute competing at all. why not let other assistants operate alongside google assistant? >> senator, in some areas, we do. and as i have said throughout the conversation today, it's an evolving area. on the sum of phones we have the assistant alongside the google assistant but this question -- >> is that in these specific phones or do you do it routinely where you allow another noise assistant to operate concurrently? >> i don't think that is the case on every device but there are different ways of achieving this idea of concurrency.
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for example, on one of the sonos speakers what we are requiring in that area is for the user to manually decide which assistant they are interacting with because we are trying to balance the interoperability with other things which is the user experience, mitigating the confusion, privacy, security and that's the area we are still working in and innovating in and there are some technical challenges around having those that are listening at the same time. what happens if a user asks one assistant to turn the lights on and another to turn the lights off, how are they working together. there are some challenges i think the industry will have to work out. we are not there yet but we are actively engaged in the conversations. >> i'm interested in your thoughts. sonos invested in a voice assisted technologies. what do these prevented the concurrent more than one voice
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assistants due to the incentives to further develop the technology, and i think what has been your experience? >> google contractually in the currency between the speakers we got technology that solves the problems described and we offered to demo it for google. we demoed it for any number of regulators around the world in this country and we've been pleased to demo it for the committee so you would see what a great consumer experience it would be and to allow us to bring the consumer innovation to market you need companies like switzerland that sit at the intersection and that is the
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kind of interoperability that we need and in reforming the law that we will set some rules of the road. >> thank you. i don't know if you've done research, and as noted by senator lee but i am half swiss. how would you respond to what mr. lazarus just said that he would love to demo it and show it and adjust concerns that eliminating the incentives of a number of companies for the voice recognition technologies because it sounds like the modus operandi is not to allow the conference even though you did illustrate one example?
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it is an evolving space and we are working through those issues there has to be a conversation around privacy, security, consumer confusion and the experience itself. it's this idea of having a user have the ability to switch between the vice assistant that exists today. this will evolve and as we are balancing those various factors we will get to a place where we are bringing more innovation to benefit the consumers to talk about the resources here i am not as focused on that right now in this question and there've been a number of bills introduced in the house, so as i
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mentioned we are working on those in the senate, senator lee and senator grassley and senator hawley. do you think antitrust reform proposals would be helpful to address some of the issues that we discussed today to contribute to the development of a more open and competitive home a technology market and what exactly would be helpful? >> there is no question about that. to get at the issue i think senator hawley was focused on as a recruitment rule and also
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doesn't have the right formula for calculating price for the software environment where the cost of software is basically zero so we welcome reform as well as the nondiscrimination proposals you've been looking at. the golden rule in this area would be great. that is a nice way to end but i have one more question. according to your testimony, you support reforming the law. what do you think would be helpful in the market? >> i think looking at the exchanges that have happened, to whatever extent the law can help take what is currently a business development exercise subject to the drafts and deals
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about that whether one is going to assist with pandora or are they paying pandora because they want to become a popular assistant this is the kind of switzerland line. i think that would be great and some of the provisions in your own bill that are more generally about antitrust could be helpful in that area. mr. lazarus talked about the way in which the courts understandably in other areas have focused on absolute certainty about risk about having to demarcate damages where in these realms that might be a lot harder to do. and to be able to have the standards for the regulators in support of a free market rather than against it, that seems to me extremely helpful and i want
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to note the way in which the valid concerns about privacy that have been raised today in my own testimony i considered we could have a privacy apocalypse here. some are about asking the big players not to be sharing and under the same breath we are asking them to make sure that any data that they make use of the competitors have use of it and also figure out how to square the circle. as a big part of getting the policy right in this area well-known voice assistants and of course apple is a different approach than amazon and google rather than the data in advertising it seems apple's aps connected devices are less
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interoperable perhaps by design. in your opinion, does apple's approach to the connected competition concern as well? >> it boils down to the same issue. are we going to have a smart home market that is dominated by a couple markets. apple has its strategy if you want to be a licensing theory you have to accept a competing product. so, yes lots of competitive concerns but in the macro i would say it is part and parcel the same thing the sideload ecosystems of a few dominant players is not the best way to organize the smart home market. >> really briefly, is the approach to the connected home preferable to amazon and google's more open approach or do they just raise different types of concerns? >> it raises different types of concerns and we can do better than that. i am sympathetic to what he would hear from apple if they
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were here today that there's just seamless kinds of consumer experience made possible because of the care they exercise and integrate where they want to. in preparation for this hearing i was trying to figure out if i could make the default on my iphone and it turns out that with enough clicks and about six hours of time i could probably have it so that i could go what is the weather and literally would ask google to ask the weather what the weather is and pass it back to me. so, no, we can do better than that and i think the law needs to provide it to have elbows that are less sharp. they are competitors. let's set up the rule so that they know how to play but not go
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beyond. one last question. in september we covered this in various ways with google in the past and in a previous hearing in another context. in "the wall street journal" it examined the ability for the anti-competing devices for video streaming devices to actually advertise on amazon.com specifically those that won't let competitors sponsor the product ads tied to search for amazon devices such as the echo speaker and ring doorbell. it does amazon restrict competitors from advertising the devices on amazon.com including sponsored products and tied to searches for specific devices? >> i want to make sure we are getting accurate information
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thank you and we look forward to that answer. one question because i didn't ask one and then if senator lee has your question i think we know that the fight against the power is more than just lower prices it's about freedom of individuals and/or democracy. you mentioned some of this before. what can we do to prevent the digital monopoly from undermining the democratic process. >> knowingly you would have to review almost a thousand
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separate contracts and of course hardly anyone leaves even one such contract and perhaps they are counting on that and that raises the issue of the asymmetry of information which economists tell us is fatal to the free market. another thing that is not supposed to happen is hostagetaking. so, the terms of service stipulate if you don't agree to all the data gathering, you could suffer from the frozen pipes, failed smoke alarms. so the basic functions that you are looking for and that if youe paying for our held hostage to the submission of data and these functions are enmeshed in this service and software. and the basic idea is that you are free to vote with your feet and go elsewhere.
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it isn't likely to happen. thank you. >> thank you. senator lee. mr. crawford in response to your point that a company like facebook can end up starting to resemble a rival of government how would you respond to those who would say that facebook can't unlike the government it can't force you to do something at the point of a gun? >> there is no coercion. there are no thumbscrews applied at any point. but it becomes a matter of every aspect of life being ordered by a handful of firms and as you know they are now in the trillions and at some point it has to be extended beyond these holes to entities that have
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far-reaching control and a sort sort ofpenetration into our liv. >> you might say that is a sort of response that you would expect in a stockholm syndrome situation is that your point to the fact that they are not behaving as a government and requiring you to do it doesn't mean that there are not things happening. >> with technology we often say that it's all optional but there's a sort of tipping of the society into dependence on certain things certainly platforms that certainly doesn't feel optional. can you not have a smart phone? may be that life would be hard. it doesn't have been through legislation. it happens through these kind of
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consolidations of economic power. okay very good. thank you. this has been enlightening and i think we are going to have a number of follow-ups as a number of senators have mentioned with follow-up questions. i think as i said at the beginning of the hearing, we are a bit ahead of ourselves than we were where we are now looking backwards at some of the other issues and raising what has been raised in the tech industry. but i think the work that we are doing with regards to those issues is going to for certain include some of what we have learned today as we look at this major marketplace as a part of the area where we are going to have to draft bills and pass bills and have our enforcers in force in this area and think ahead of themselves when it comes to the tech legislation and even what i would like to see of course and i know senator lee is interested in this as
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well, but other pieces of legislation that even go beyond that could make it easier to bring the cases and look at what's happened in certain industries so that's what we are about right now and i've been pleased about the bipartisan work that went on in this committee and the judiciary committee a couple of weeks ago with senator grassley. i'm proud of the work going on in the house. i talked to the representative that is a friend of yours, senator lee, last weekend managed to finally get moving and we are ready to go. so, thank you very much. to the witnesses both here and remote we look forward to following up with all of you. thank you. the hearing is adjourned.
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[inaudible conversations]
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the white house covid-19 response team held a briefing to give an update on government efforts to combat the virus. topics covered included the delta variant cases in the u.s. and ongoing clinical vaccine trials for children younger than 12 years of age. good morning and thanks for joining us. today we will provide an update on the state of the pandemic.r doctor fauci on the effectiveness on the cases among the vaccinated and i will discuss the work to get more people vaccinated and help states curb the spread of the virus. doctor murphy will talk about the on the ground work we are supporting in communities to get more people vaccinated. then we will open up for questions. over to doctor wilensky. >> i want to begin with an overview of the data. cdc

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