As a former FCC Chairman, I know something about the challenges that Tom Wheeler, who recently has assumed leadership at the Commission, will face over the next few years. With apologies to David Letterman, here are what I see as the “Top Ten” issues facing the agency and its new head:
1. Spectrum Auctions. This could be a top ten all of its own, as the Commission struggles with the complex task of implementing the Spectrum Act. The agency must design an auction which simultaneously will attract enough broadcasters to participate, enough wireless carriers to bid, and enough money raised to fund a new public safety network and reduce the deficit – all a very daunting task. As to the latter, the Chairman will have to decide whether to limit industry (read AT&T and Verizon) participation in the auction which, some believe, could dampen revenues; and also, to determine how to “repack” non-participating broadcasters so as to preserve their existing coverage areas to the extent feasible.
2. Network Neutrality. What the Commission will need to do on this issue will depend on the outcome of Verizon vs. FCC – now pending in the D.C. Circuit. At issue is an appeal of the FCC’s 2010 Preserving the Open Internet Order, which claimed statutory authority to adopt enforceable requirements on broadband Internet access service. A decision by the Court of Appeals may come in the next several months and could set off follow-on activity at the Commission.
3. Media Ownership. In the 1996 Telecommunications Act, Congress mandated the FCC to examine its media ownership rules every four years to determine if they are still necessary in the public interest. The Commission may not issue a decision in the 2010 Quadrennial Review this year and, if so, it will have to wrap the current proceeding into the 2014 Review – a very disappointing result given the Commission’s responsibilities and the state of current regulations which, in my opinion, are largely outmoded and counterproductive, and especially so the 1975 newspaper/broadcast cross-ownership restrictions. The efficiencies inherent in cross-ownership would benefit both of these struggling industries. The marketplace also is crying out for relief from the television duopoly rule, especially in smaller and mid-sized markets where duopolies are largely impossible due to current FCC restrictions. Whatever the Wheeler Commission decides on this entire issue will be subject to the Third Circuit’s continuing jurisdiction which has been maintained for nearly a decade of enormous marketplace change. During this period, a Circuit panel has twice reversed deregulatory actions by the agency but, in my view, it is time for the court to affirm the next Commission order and move on to other matters.
4. Minority Ownership. Speaking of the Third Circuit, minority ownership has played a large part in its prior reversals. However, the fact is that FCC policy in this area is circumscribed by the Supreme Court’s Adarand decision which subjected racial preferences to strict scrutiny review. As I see it, the real problem in effecting greater minority ownership is access to capital. With that in mind, the Commission recently and wisely relaxed its foreign investment standards. The agency also might want to consider other initiatives such as minority incubators and a recommendation to Congress to enact a new tax certificate program.
5. Retransmission Consent. In my view, retransmission consent is working primarily as Congress intended when the program was enacted in 1992. Why? Because both sides have something to gain: MVPDS want broadcast programming and broadcasters want additional coverage. So deals have gotten done (literally, thousands of them) with few, and generally brief, service interruptions. While rising program costs are a concern for the MVPD industry and the public at large, retrans fees are a relatively smaller part of this equation, especially compared to sports programming. The FCC’s authority to alter the retransmission consent environment appears to be limited, but there is an important related issue: the definition of MVPD and, in particular, whether that term should include Internet (or over-the-top) video providers which, of course, would involve them in the retransmission consent context. The FCC issued a Public Notice on this matter in March 2012, following a 2010 program access complaint by Sky Angel against Discovery Communications. The whole issue may play out in the courts or Congress but the FCC may want to consider the definition of an MVPD in a broader proceeding.
6. Indecency. Like the newspaper/broadcast cross-ownership rule, the FCC’s indecency standards are premised on an entirely different world than we have today – a world in which broadcast television was the primary, if not the only, video content outlet into American homes. The Supreme Court’s recent (and very narrow) ruling in Fox did not address whether indecency regulation is consistent with the First Amendment, and left the agency free to revise its regulatory response. Former Chairman Genachowski, toward the end of his tenure, dismissed 70% of backlogged indecency complaints and stated that the Commission henceforth would focus only on “egregious” cases. If followed by the Wheeler FCC, this policy could signal a back-to-basics approach consistent with the Supreme Court’s 1978 Pacifica decision and an avoidance of regulatory forays into such issues as fleeting expletives and momentary nudity, etc.
7. New DTV Transmission Standard. The NTSC analog television transmission standard, adopted in 1941, served the nation well for over 60 years. But, ultimately, it was replaced by the ATSC DTV standard, adopted in 1996 and implemented in 2009. However, digital technology is moving rapidly, and a new standard designed to facilitate Ultra HDTV and service to multiple platforms (including handheld devices) is being worked on and may be technically feasible in the next few years. However, a transition to another national transmission norm may take some time since it likely will not be fully backward-compatible.
8. Transition to All-IP Network. Likewise, the Public Switched Telephone Network (PSTN), designed for voice calls, has operated effectively for more than a century. But consumers today increasingly are demanding IP-enabled services. And the only way to meet this need is through IP networks which can carry all kinds of digital information (including, incidentally, so-called HD Voice). Thus, the demise of the PSTN is inevitable with the only question being when and how. Chairman Wheeler has announced plans to seek adoption of an order early next year to advance the IP transition, to include possible market trials (as urged by AT&T) and other experiments. The Chairman indicated that an existing FCC Technology Transitions Task Force (established by his predecessor) would present a status update with recommendations on how to proceed. Hopefully, all of this will create momentum for advancing IP technology while, at the same time, retaining Commission requirements and network attributes necessary to serve the public interest.
9. Long-Term Special Access Plans. In a somewhat related issue, AT&T recently filed tariffs which seek to phase out discounted long-term special access plans which have been offered to other carriers and business users. The Company asserted that this effort is part of its attempt to transition from TDM services to all-IP offerings. AT&T’s initiative may be opposed by its competitors and business users who object to what they anticipate will be more expensive shorter-term contracts. The key question is whether the Commission decides to suspend the proposed tariffs and proceeds with an overall investigation.
10. FCC Efficiency. Consistent with our increasingly fast-paced digital economy, the new FCC must make decisions, set deadlines, remove unnecessary regulations, sunset new rules and, overall, operate more rapidly and efficiently. And, under Tom Wheeler’s direction, I hope and believe that this Commission – with its able membership and staff – will do just that. If so, we may see decisions emerging from the agency on a record “top ten” (and more) issues, such as AWS-3 and H Block auctions, cellphones on planes, wireless phone unlocking, the UHF Discount, program carriage and program access, sports blackouts, rural call completion, USF contribution, 911 reliability, video time and place shifting, and you name it.
In all I predict a very active and productive era at The Portals.