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The new Federal Communication Commission- What should we expect?

The new leadership of the Federal Communication Commission will be tested on its ability to deal with the so-called “digital revolution,” in which information has been digitized and is distributed in all sorts of unimaginable ways. To supporters of the independent agency, the Commission has been responsible for major changes in the communication sector in the United States, and its role is still crucial to progressing across services and platforms, as well as between communications and computing technologies, while promoting competition.  This view is not shared by everyone though; some say that regulatory proposals have exceeded the legal authority of the Commission and its regulatory capacity to keep pace with innovation in ICTs has been lost. The recent FCC vs. Verizon case, in which the FCC’s net neutrality rules were once again challenged, is a clear example of this statement. In addition, the spectrum auction as well as the Internet Protocol networks (IP transition) are issues the incoming FCC Chairman Tom Wheeler and the new Commissioner, along with the existing members, will have to manage by creating an uncomplicated but concrete strategic plan to catch up with a 21st century regulatory approach. 

 

To have a better idea of what to expect from the new FCC, the Technology Policy Institute (TPI) in Washington D.C. hosted the event: “Competition, Net Neutrality and Other Issues Facing the New FCC.” The panelists focused on discussing the role of competition policy in FCC regulation and how the Commission’s new leadership should proceed with IP transition, and spectrum auctions. Prior to this panel, TPI published the essay “Articulating a Modern Approach to FCC Competition Policy” that presents a brief history of the three different competition policy approaches that the FCC has implemented over the past 70 years:

 

  • The classic role of regulation terms and conditions of sale;
  • The modern role of using various tools to create largely deregulated, multi-firm, competitive markets; and
  • The laissez-faire approach of believing that unregulated markets, even if monopolized, will produce the best outcome

 

Reed Hunt, former FCC Chairman and co-author of this essay, joined this panel. Hunt believes that the adoption of a competition policy framework is fundamental for the Commission. He thinks that the FCC should know when to get out of the way to enable innovation and new technology to emerge, like it has done in the past with the Internet. Opponents of the FCC questioned the ability of this agency to deal with competition issues.  Hunt defends the idea that the FCC can move more quickly than litigation, by having expertise on competition in this market that the DOJ and FTC do not possess.

 

Representing the industry point of view, Jim Cicconi, Senior Executive Vice President for External and Legislative Affairs of AT&T, focused his vision of the FCC on how this agency will facilitate the IP-transition. He talked about the importance of having strong leadership in the Commission in order to make things happen.  During the panel it was clear that Cicconi and Hunt have a good relationship, where Cicconi recognized Hunt’s leadership and vision that contributed to the rise of the Internet. However, he also expressed concerns regarding the new FCC approach for the IP transition. According to him Americans are voting for this IP transition, pointing out that in a few states only 15 percent of Households are using Plain Old Telephone Services (POTS). “We are not seeing just wireless substitution, but a merge… IP transition is not just a tech migration, it is a capability migration, were IP brings (offers) the accumulated knowledge of mankind to users.” Cicconi calls for a modernization of the agency’s regulatory approach in order to ensure a successful transition. He invites the FCC to work together with AT&T on the creation of a modernization plan. He also reminded that when it comes to wireless and cable, companies can make network changes without government intervention; however, they need the FCC’s approval to modify wireline telecommunication networks. Apropos, it is worth mentioning that the Communications Act specifically prohibits the FCC from imposing common carrier on non-telecommunications services, restricting it to telecommunications services.

 

On IP transition, one of the general objectives is to make sure that this transition guarantees public safety and accessibility. Cicconi agrees that public safety concerns need to be satisfied, but this necessitates conducting IP trials so safety issues can be resolved prior to mass implementation. Cicconi and Hundt agreed that the principle of universal service, which states that nobody is left behind, should be a key part of the IP transition. John Mayo, Professor of Economics, Business and Public Policy in Georgetown University’s McDonough School of Business, agrees with this, however, he raises the question of how to make universal services smart. According to Mayo, targeting customers rather than creating funds is more effective; he used the lifeline  program as an example of targeting costumers.

 

The spectrum auction is another critical issue that the FCC needs to manage. On this, Cicconi believes that one of the most difficult tasks for the FCC will be to bring broadcasters on board for the incentive auctions. “Restricting the two biggest bidders in the auctions could be very harmful”, he added. On the other hand, Hunt reminded attendees that there are a lot more issues than the spectrum incentive auctions, such as the PCS “H-block,” the 1695-1710 MHz band and the 2155-2181 MHZ to be paired with the 1755-1780MHz band. Hunt said that the spectrum auction illustrates the FCC’s proper role. According to him, the House of Representative got it wrong by thinking that the main goal of the auctions is to maximize revenue for the federal agencies. This is an opportunity for the new FCC to correct this idea.    

 

Finally, Thomas W. Hazlett, Professor of Law and Economics at George Mason University, said that given the FCC’s history of stifling new technology with visionary statements, he is afraid of its vision. Hezlett criticized the lack of expertise of the FCC’s staff when it comes to economic analysis. “The difference between the Commission and the DOJ and FTC is the latter agencies value economic analysis enough to have a separate division for it.” He believes that agencies with economy-wide authority tend to be better monitors than a more insular type of agency like the FCC. Mayo added that he would force the FCC to articulate its goals for competition policy, which have had the tendency to vary wildly.

 

In sum, The Federal Communications Commission is in the eye of the storm, because its actions will affect, for better or for worse, the future of the telecommunications sector in the United States. Furthermore, The FCC will need to find an innovative way to keep up with the rapid changes in the industry in order to guarantee its existence as regulatory agency. The only question left is if the FCC’s authority to regulate will still be recognized by the Telecom industry. All bets are off.

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Chema Alonso

Chief Data Officer, Telefonica.