Chairman Pai’s FCC Challenge


In this podcast, Shane Tews and Richard discuss key issues likely to grab the FCC’s attention this year, the impact of Chairman Ajit Pai, and whether the FCC needs to be reorganized. Beyond the issues themselves, Chairman Pai is likely to invest a lot of effort in changing the tone at the agency. Rather than forcing questionable issues through the agenda, expect him to work for consensus solutions that will outlast his tenure.

Closing the Digital Divide

The chairman and his current colleagues have a history of working together to address digital inclusion. Their last effort, expanding lifeline but also capping the fund, was cut short by Congressional meddling orchestrated by the old majority, but those factors are gone now. In his first address to agency staff, the one policy issue the chairman discussed was Digital Divide. This means high-quality broadband in rural America as well as access by low-income families in the cities.

The rural theme plays well with the priorities of Senate Commerce Committee Chairman Thune, who gave a speech stressing precision agriculture, IoT, interconnection, and the digital economy this Monday at State of the Net. Thune also said he expects the Internet’s growing pains to be worked out in the marketplace rather than at the FCC, which is probably music to Chairman Pai’s ears.

The structure and focus of rural subsidy programs needs revision, but some parts of that process are fraught with politics.

Open Internet Order

It’s no secret that Chairman Pai was not pleased with the previous chairman’s use of Title II (telephone network regulation) as a basis for legal authority in the 2015 Open Internet Order. Light touch regulation of blocking, throttling, and differentiation behaviors by ISPs doesn’t require such a heavy tool. And the Chairman was right that Title II would lead to the agency gaining jurisdiction over issues such as advertising, privacy and cybersecurity in which it has little expertise.

While the chairman could open a new proceeding on the basis that the Open Internet Order was poorly carried out – which it was – nobody wants to get into a mode where Internet regulations change every time the White House falls in the hands of a different political party. So the Order can be finessed because its definition of an ISP is too vague, or Congress can take an action that clarifies the correct regulatory classification for Internet service.

It’s unfortunate the press still doesn’t understand the difference between the Open Internet Order’s concept of net neutrality and Title II. While Pai is no fan of Title II, he’s probably just as friendly to the idea that the Internet should be friendly to new applications, new users, and new business models. Letting a thousand flowers bloom is the goal, and Title II is not the right means because it’s all about one flower at a time. See Larry Downes on the confusion between Title II and net neutrality.

FCC Structural Reform

The FCC’s capacities for both economic and technical analysis haven’t kept pace with the issues before it today. Unlike the FTC and DoJ, the FCC lacks an economics bureau, and its engineering expertise is spread awfully thin. Tom Lenard recommends the FCC create an economics bureau, which is probably possible without Congressional approval once the hiring freeze is lifted.

The transition team proposed an extremely broad rationalization of duties between the FTC and FCC. We can expect to see some rebalancing between the two agencies going forward. IoT regulation is a friction point that both agencies would like a hand in.

The main hook for the FCC is cybersecurity, but a white paper from the FCC’s Public Safety Bureau demonstrates very poor understanding of the issue. See Shane’s blog post on the importance of cooperation in Internet operation. Regulation tends to get in the way when the ecosystem has already developed means for addressing common problems.

Security is all about the coding, all about how people in different industry segments cooperate with each other to solve problems. Given recent focus on Russia’s hacks, this a hot topic and will remain that way.

Other Issues

The rise of 5G heightens the urgency for addressing Internet security and also forecasts the need to reassign spectrum from legacy uses to future applications. We’re no longer in the era in which each application had its own network, and, if it was a wireless application, its own frequency assignment as well. Spectrum assignments remain highly fragmented but common pool allocation makes more sense.

The set-top box proceeding is most likely dead. The last FCC couldn’t advance it because it lacked a coherent standard for streaming devices, and it can’t really create one. The industry is addressing this issue on its own today, and it’s likely we’ll have a standard, either official or de facto, in the next two to three years. At that point, the set-top box problem solves itself.

Television continues to move rapidly, with new programming developed just for streaming and new forms of advertising – such as product placement – in Netflix original programming. Product placement makes obvious sense for Amazon in particular.

We talk about the uses and spread of Alexa after the 30 minute mark. If y0u own one of these devices, chances are listening the podcast will trigger it. Alexa plays the role of Switzerland in the competition between Google and Apple in the car and home automation markets.

So enjoy the podcast and leave a comment if it provokes a reaction. Here’s the podcast we did with Pai in October when he was still a commissioner.