The Republican FCC Reform Industry Doesn’t Want.

You haven’t seen a lot of industry lobbying to support the FCC Reform Legislation pushed by House Republicans on the Energy & Commerce Committee. One would think that a bill which requires the FCC to spend three years building up to adopting a rule, imposes all kinds of new burdens on the FCC before adopting a rule so that rulemaking will be even more burdensome and less likely to occur, and generally tries to limit the FCC from regulating or imposing conditions on media and telecom mergers would generate loud applause from industry players supposedly chaffing under the terrible yoke of the FCC. But we haven’t, and we won’t. Oh, Republicans may lean on industry trade associations for some perfunctory applause and ritual chanting about “the burdens of job killing regulation” blah blah Amen. But their heart won’t be in it.

This may surprise those who think that the proposed Republican FCC Reform Bill is an industry fantasy crafted by high-paid industry lobbyists and pushed by their wholly owned subsidiaries. The bill contains everything industry always claims to want, so where the heck is the industry cheerleading squad? Why haven’t they shown up to cheer its passage with any enthusiasm? Why aren’t industry lobbyists busy writing op eds about how this wonderful FCC reform bill will make your cell phone bills cheaper, bring us better broadband, and give you free cable? And why are Republicans so determined to push it if no one in industry really wants it?

I explain below . . . .

For those tuning in, here’s a short list of the highlights of the proposed roadblocks to rulemaking. The FCC would need to first issue a Notice of Inquiry, then go to proposed rulemaking (with rules actually proposed). The proposal requires lots of specific findings with regard to Republican hot buttons de jour, such as identifying a “specific market failure” or “actual consumer harm” and “weighing the cost of regulation.” This is the usual litany of complaints by industry players and their Congressional supporters whenever the FCC does something that makes them unhappy. Heck, I’ve complained about them myself when I’m upset with what the FCC does.

Where Are The Industry Cheerleaders?

But I’m supposed to be socialist regulation guy who hates roadblocks to FCC regulation. Why haven’t any of the industry trade associations or major companies, supposedly the biggest beneficiaries (after the American People, natch) of reigning in the out-of-control FCC? Where is the industry cheerleading squad with its pom-poms on yelling “Rah, Rah Walden he’s our guy! We need regulatory relief or we’ll just DIE!”

No doubt Republicans will say that industry reps are just so gash-darned terrified of retaliation from the Regulatory Activist Demon that is Chairman Julius Genachowski that they fear to come forward — which is funny for anyone who has seen the industry lobbying machine in action when they actually want something. Trust me, if NCTA, NAB, USTA, CTIA or any of the other big trade associations (or their members) wanted this legislation, they would not be shy about breaking out the pom-poms and cheering at the top of their lungs for passage.

Some of the failure of the industry cheerleading squad to emerge certainly comes from the fact that the legislation doesn’t have a chance of moving in the Senate. As former FCC insider turned media insider Bruce Gottlieb pointed out last month, beating up on the FCC when the other party runs it is as much an annual rite for Washington as the Running of the Bulls in Pamplona (feel free to insert your own joke linking “Congress” “FCC” and “running of the bull”).

Myth: Industry Hates The FCC And Wants It Abolished.

Reality: Industry Recognizes The FCC Is Damn Useful And A Totally Unregulated Industry Would Suck Rocks.

But there is a stronger reason industry won’t lobby heavily for the Republican’s FCC castration program. (“End of year, time to spay your pets and neuter your FCC!”) In point of fact, the proposed legislation, is so phenomenally bad for business that if it ever did come close to passing, we would see a flurry of lobbying to weaken it or kill it outright. Alternatively, it would get interpreted into virtual non-existence.

Why? Because most of the time, the industry actually wants the FCC to set rules and resolve dispute with other industry players. Sure, when it comes to pure consumer protection like “wireless bill shock” or the proposed broadband outage reporting requirements, industry will all come together to condemn “the heavy hand of government blah blah.” But most industry players recognize that they need the FCC to resolve disputes between each other to avoid potentially destructive consequences. So while cable operators piss and moan about the FCC when the subject is program carriage rules, they can’t run to the FCC fast enough when it comes to “protecting consumers from program black outs caused by broadcasters making outrageous fee demands for retransmission.” And while broadcasters will shout about how the FCC should not dare interfere with the free market when it comes to retrans reform, they are totally about the FCC “preserving the importance of local broadcasting” when it involves things like cable must carry and shutting satellite radio out of local programming.

In addition, while everyone who hadn’t heard of the FCC until Network Neutrality thinks the FCC is all about Net Neutrality and similar regulation, net neutrality is really the exception.  Most FCC work is vitally important but breathtakingly boring, ranging from international settlement rates for incoming calls to whether to widen the allowable channel size on high-power fixed microwave transmissions. What kind of “market failure” justifies a rulemaking on reclaiming or repurposing spectrum? You’re not suggesting that the wireless market is undergoing “market failure,” are you? Heaven forbid! Oh, it just makes things better. I think we used to call that “serving the public interest,” which conveniently is the current standard.

The Proposed Reform Bill Would Not Have Impacted Net Neutrality Order One Iota, But Would Have Killed USF Reform The Industry Desperately Wanted.

Nothing better demonstrates how out of touch Republican “reformers” are with what actually goes on at the FCC, and how industry stakeholders actually feel about the FCC, than the fact that the FCC actually complied with all the steps required in the FCC reform bill for the network neutrality rules, but not for the far more popular USF Reform Order the FCC adopted with broad industry support in October. Lets trace the actual history, as opposed to what Republican Members of Congress and their base keep repeating back and forth to each other. The FCC opened the bidding on Network Neutrality in 2007 with a Notice of Inquiry specifically for the purpose of whether any network neutrality rules were necessary. After two years of gathering data — including a lengthy investigation involving allegations that Comcast, the largest residential broadband provider,  blocked/degraded use of peer-to-peer applications – the FCC issued a Notice of Proposed Rulemaking in 2009. The Notice meticulously recounted the history, the need for a rule, an analysis of potential cost, and proposed actual rule language. For over a year, the FCC ran the process, seeking additional public notice as the FCC refined its approach. Finally, in December 2010, it issued a set of final rules in which it did a detailed cost/benefit analysis of the need for regulation, whether the market could adequately police itself, potential cost to ISPs v. potential cost to others, and everything else those who dislike the Order and either haven’t read it or don’t agree with it claim the FCC didn’t do.

By contrast, the USF reform proposal, generally supported by industry and Republican legislators, did not comply with the FCC Reform bill requirements. In particular, the part of the order most heavily lobbied for by cable and other voice-over-IP providers at the end, requiring telcos to pay access charges for VOIP traffic, would not be possible for another two years under the FCC Reform bill. The FCC did not issue a Notice of Inquiry to look at the question of VOIP access charges. In the actual rulemaking, it solicited general comment, but made no specific proposals one way or another. This entire multibillion compensation matter got resolved by the FCC in the last few weeks before they voted the USF Order in exactly the way the proposed FCC Reform Bill is designed to prevent. Cable guys rushed in and said “don’t give a USF/intercarrier comp gift to the telcos without making sure that we get paid by them for our VOIP traffic. We insist on this because (a) we totally deserve it; and, (b) not only is the best opportunity for us to force you to do this, it is the only opportunity. Once you resolve USF, you are not going to touch something this controversial until 2013.” So the industry stakeholders all went in to the FCC Sausage Factory and did what industry does and this bill purports to prevent – cut some deals in old-fashioned horse-trading based on political leverage rather than any extensive policy process or “cost benefit analysis” or “specific market failure.” The Commission’s Order does not identify any market failure other than to say “things are uncertain, so we will clarify them, because people need clarity.”

Indeed, the record around this issue demonstrates that absolutely no one in the industry wanted a “free market” approach. All of them wanted resolution by the evil, socialist FCC, nasty, unrestrained, totally able to cut deal and make them stick FCC. Under the bill proposed by the Republicans, the industry would still be waiting for the FCC to check all the boxes and run through all the various and sundry analysis and findings before it resolved uncertainty and everyone could get on with their lives.

And that is the real reason why you won’t see the industry cheerleading squad trying to push Democrats to cross party lines on this bill, or out writing op eds in the Wall St. Journal or the Financial Times about how passing the Republican FCC Reform Bill will create jobs, encourage broadband deployment, and spur innovation. While the industry may occasionally wish that they had a stronger choke collar for the FCC to bring it to heel when it wonders in directions this or that industry segment dislikes, none of them want to see the FCC permanently hogtied the way the Republican FCC Reform Bill envisions. Much as lobbyists might piss and moan about any given decision, none of them wants to give up the security blanket of the FCC as a potential tool to advance their ends and referee for when things go wrong.

As an aside, that’s really the difference between the industry, the real Libertarians, and progressives such as myself. Real Libertarians will agree with me about how industry manipulates the process, cuts all these deals, leverages the agency to its own advantage, and that this is precisely why we ought to get rid of regulatory agencies altogether – or at least seriously limit their authority. And they have a point. But from my perspective, agencies with the power to protect consumers and promote competition can do a lot of good, and occasionally actually do so.

To go back to the example of VOIP traffic, much as I may think cable operators deserve to live in an unregulated free market wonderland where AT&T can tell them that they won’t pay access charges, I would rather not have Comcast and AT&T refuse to exchange voice traffic during a dispute about rates. But both of us can agree that industry tends to be a bunch of self-interested hypocrites on the subject. But that’s fine. I love industry being self-interested profit-maximizers. It makes them understandable and predictable for anyone who takes the trouble to notice.

Republican FCC Reform, v. the Real World

Which brings us back to the House Republicans who, for all their talk about loving business and “job creators,” do not seem to have the least clue about what actually goes on at the FCC or what industry really wants out of the FCC. If the House FCC Reform Bill ever actually passed, one of two things would happen. Either it would be a disaster for the industry by making the FCC utterly unable to respond to industry needs, or the FCC and the courts would effective read the requirements out of existence as happened with the Paperwork Reduction Act, the Regulatory Flexibility Act, and every other legislative vehicle Republicans with a majority in Congress have used to try to neuter federal agencies that industry stakeholder generally don’t want neutered.

Real Reform Effort Or Fundraising Gimmick?

You can expect to see a lot of speeches to the anti-big government base at mark up. No doubt this will make a delightful anecdote to the local chapter of the Club For Growth or Americans for Prosperity fundraiser, showing how the brave Republicans are holding back the evil Socialist regulatory tied and sticking it to the insane regulation machine and out-of-control-institution, the Federal Communications Commission, which ranks only behind tax increases and manticores as threats to our economic recovery.

What you shouldn’t expect to see is any actual industry support. Oh, I expect there will be some lukewarm statements from the usual suspects at the behest of their Republican friends so that the Rs don’t look too ridiculous claiming the mantle of Friend of Industry and Slayer of the Dreaded Regulatory Beast. But industry folks understand that the FCC’s occasional inconvenient foray into consumer protection or the occasional blocked merger is a small price to pay for the ability of the FCC to lend your industry sector a hand when needed, and making sure industry food fights don’t spiral too far out of control.

Stay tuned . . . .

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