FCC Process Reform

House Energy and Commerce’s Communications Subcommittee is holding a hearing tomorrow (Thursday) on a FCC process reform. While this sounds like a dry subject, it’s significant. The subcommittee is considering two bills that would significantly change the way the agency does business.

The  Federal  Communications  Commission  Process  Reform  Act would distribute power more broadly among the commissioners. The FCC currently has a “Strong Chairman” model where power is consolidated in the chairman’s office and the other four commissioners have very limited power to affect agency decisions. Three of them can disagree with the chairman and block his orders, but this almost never happens: Even when Kevin Martin was pursuing a campaign for net neutrality rules that the other Republicans did not support, he was able to get his way with the support of the two Democratic commissioners (the court didn’t agree with his order, but he was nevertheless able to pass it out of the FCC.)

The Strong Chairman model is reinforced by the inability of a commission majority to meet behind closed doors. Hatching a plot to derail the Chairman’s program is much easier if the three dissidents can sit down with each other and speak freely before votes are taken at a public meeting.

Power is distributed by New  Sections  13(b)-13(d):

New  Section  13(b)—Ensuring  Deliberation  by  Commissioners.  Requires  the  FCC  to outline  for  commissioners  the  options  available  to  resolve  a  proceeding,  to  provide commissioners adequate time to deliberate pending orders, and to provide the public time to read proposed orders prior to open meetings.

New Section 13(c)—Nonpublic Collaborative Discussions. Allows a bipartisan majority of Commissioners  to  meet  for collaborative discussions  if they disclose such meetings within two  business  days  and  comply  with  Office  of  General  Counsel  oversight.  Also  applies  to meetings of Federal-State Joint Boards.

New Section 13 (d)—Initiation  of  Orders  by  Bipartisan  Majority. Requires  the  FCC  to allow a bipartisan majority of commissioners to direct staff to draft an order, to put such an order on the FCC’s agenda, and to require that the FCC to vote on any order.

New section 13(e)—Review of Delegated Items. Requires the FCC to provide drafts of items to be issued on delegated authority to the commissioners at least four business days before adoption. Allows two or more commissioners to require such action to be taken, if at all, by the full commission.

[Bold face in original] These are big changes. The bill would also require the FCC to determine whether new technologies and/or market forces are likely to resolve problems before issuing corrective orders. I’m not sure that this will do much, because nobody really knows the future and the FCC can pretend it’s going to turn out in whichever way it wants.

The Process Reform Act would also force the FCC to abide by its internal “shot clocks” for merger reviews and the like. The shot clocks are guidelines today, and they’re rarely satisfied for significant events such as the AT&T/T-Mobile merger.

Merger Reviews and Spectrum Transaction Reviews are especially galling for FCC critics, since the agency has vast power to enact policy in the context of the merger reviews and many feel that the agency abuses this power. The language is simple:

New Section 13(k)—Transaction Review Standards. Preserves the FCC’s ability to review transactions but requires conditions to be: (a) narrowly tailored to remedy harms that arise as a direct result of the transaction, (b) within the FCC’s general authority, and (c), related to harms unique  to  the  transaction  that  are not  present  more  broadly  in  industry.  Applies  same requirements to “voluntary” commitments.

Part (b) is key here. In the past, the FCC has imposed conditions in connection with merger reviews and spectrum transactions that it would not be allowed to impose as a general matter: When AT&T merged with Bell South, the agency imposed net neutrality conditions, and when it auctioned the 700 MHz D Block, it imposes device conditions that it could not generally impose, reducing the market value of the transaction significantly, of course.

This provision would take the FCC almost completely out of the policy business, which is a long-held objective of Republicans but not a pleasing one to Democrats. With Congress essentially in gridlock and a Democratic majority at the FCC, Democrats quite like the FCC acting as an organ of the White House, even though that’s not its actual mandate. Republicans, of course, feel that the FCC is too insensitive to the dynamics of the market and the potential of new technology. Both sides are partly right and partly wrong, which underscores the need for legislation that defines the FCC’s role with greater (some would say “some”) clarity.

The FCC’s Open Internet Order, for example, draws its authority from Section 706 of the Communications Act, which simply directs the FCC to report to Congress on the state of broadband markets. The House Republicans see this as an overreach, and seek to correct it another bill, “The Federal Communications Commission Consolidated Reporting Act,” to wit:

New Section 14(a)—Communications Marketplace Report. Requires the FCC to publish and  submit  to  Congress  a  communications  marketplace  report  synched  to  the  two-year Congressional cycle.

New Section 14(b)—Contents. Requires the FCC to assess the state of competition in the communications  marketplace,  the  state  of  deployment  including  the  deployment  of  advanced telecommunications  capability,  and  regulatory  barriers  to  market  entry  and  competitive expansion. Requires the FCC to identify the issues it plans to address over the next two years as a result of this assessment and to report on its progress on those issues previously identified. Majority Memorandum for July 11, 2013, Subcommittee on Communications and Technology Hearing Page 5

New  Section  14(c)—Special  Considerations.  Requires  the  FCC  to  consider  intermodal, facilities-based, and Internet-based competition and to compile a list of geographic areas that are not served by any provider of advanced telecommunications capability. Empowers the FCC to consider  international  and  demographic  data  in  making  its  assessments.  Requires  the  FCC  to consider market entry barriers for small businesses.

Section 3. Consolidates into a Communications Marketplace Report the ORBIT Act Report, the Satellite  Competition  Report,  the  International  Broadband  Data  Report,  the  Status  of Competition in the Market for the Delivery of Video Programming Report, the Report on Cable Industry  Prices,  Triennial  Report  Identifying  and  Eliminating  Market  Entry  Barriers  for Entrepreneurs and Other Small Businesses, the Section 706 Report, and the Report on the State of Competitive Market Conditions With Respect to Commercial Mobile Radio Services.

Strikes from  the  Communications  Act  outdated  or  already  repealed  reports,  including the  Report  on Competition  between  Wire  Telephone  and  Wire  Telegraph  Providers,  the  1997  Report  on Spectrum Auctions, and several reports repealed by the Federal Reports Elimination and Sunset Act of 1995.

Section 4. Specifies that this Act does not alter the authority of the Commission in any way.

Section 4 is as important by itself as the rest of the Act because it addresses the 706 issue.

This is a sensible bill insofar as it reduces the stove-piping in the FCC’s present reporting by technology. It’s less important to know how many satellite broadband providers there are htan it is to know how many Americans have access to broadband defined by particular performance and price parameters, and how the American broadband marketplace compares to markets in other nations.

This would be a hard report for the FCC to write, however, because its internal structure reflects the Communications Act insofar as it is divided between technologies. As the capabilities of mobile- and satellite-based broadband improve, it makes sense to produce a consolidated report. This Act would also make it harder for the FCC to pretend that mobile broadband is not competitive in the US, another hot-button.

The common thread in these two acts is shifting the FCC towards a greater emphasis on markets and a smaller emphasis on stove-piping by technologies. The transition of the FCC away from the “Strong Chairman” model toward a more democratic structure would be other theme.

All in all, these are very significant reforms. The House shouldn’t have any problem passing these bills. The Senate is likely to push back on them, but it can’t very well refuse to admit that some of the proposed reforms are well overdue, such as private meetings and reporting reforms. I’m quite sure that few Congressional staffers even read all of the reports the FCC is supposed to deliver today, so simply reducing the busy work has to be a win for everyone.