Quick links:
- Introductions
- Top Tech Issues in Next 3-5 Years
- Net Neutrality, the Digital Age Communications Act, and FCC Reform
- AT&T and Internet Transformation
- Video Competition Reform
- FCC Process Reform
- FCC, the Revolving Door, and Priorities
- Conclusion
I. Introductions
Berin Szoka, President, TechFreedom : <inaudible>.. Our panel today includes Fred Campbell from the Competitive Enterprise Institute (CEI). We have the bios accessible, but Fred comes to us previously from the Wireless Bureau at the Federal Communications Commission (FCC) where he had quite the experience. Ray Gifford is a partner at Wilkinson and Barker, and before that, you may recall, he was at the Progress & Freedom Foundation (PFF), my former think tank. He has been with us for a long time and has been working on the project that PFF started as to how there can be a consensus on reform of the Communications Act. Last, but not least, Gigi Sohn , President of Public Knowledge, who is always a good sport and provides good perspective on the other side of these issues, and I hope that she finds a fair amount of common ground today–at least, that’s my goal. Danny Weitzner couldn’t make it today so I apologize for him dropping out.
Having said that, let’s get started. Thirty seconds or so just to introduce their overall perspectives on tech policy, how they look at these issues, and what their first principles are. So just really briefly, we should get started. Gigi, you should kick us off here.
Gigi Sohn, President, Public Knowledge : Okay. So good morning everybody and thanks for coming out on this miserable day. Actually, this is one of the few times the Capitol Visitor’s Center did not give me a hard time. So Public Knowledge basically thinks that there is a role for government in preserving competition and protecting consumers in the telecom and in the technology space. It’s not a huge role; we’ve actually brought lawsuits against the FCC when they’ve overstepped their boundaries.
The examples I’m thinking of include the 2005 Broadcast Flag Case , where the FCC was essentially telling all TV sets, TV manufacturers, and device manufacturers downstream to take … protection measures for a broadcast signal. Luckily, the DC Circuit agreed with us, vacating the order 3-0. We don’t think authority should be unbounded, but we do think that there needs to be some government role to ensure there is universally accessible, affordable, and reliable communications.
Fred Campbell, Director, Communications Liberty and Innovation Project at the Competitive Enterprise Institute : Hi, I’m Fred Campbell, Competitive Enterprise Institute. I think, from our perspective, the more lightly regulated the wireless and Internet industries are growing and doing very well and the more regulated industries are struggling. I think this issue is particularly interesting because convergence is finally coming true. We’re starting to see the end of the older technologies and moving to a very Internet-centric world with all-IP features. So we are focused on helping that transition move along and how we can remain competitive in the communications industry.
Ray Gifford, Partner, Wilkinson Barker Knauer LLP : I think there is a broad consensus, a bipartisan consensus, that waxes and wanes that the FCC historically has been an agency that does not follow rule of law principles, is particularly subject to capture and whimsy, and we can can do better based on neutral principles of law and neutral institutions that focus on competition policy and consumer protection. I don’t think, as a network industry, that you can have a purely private actor. Too many problems, too many <inaudible>…to have a regulatory structure amended. The key, the consensus is that a neutral rule of law regulator is to be preferred to a non-neutral and unpredictable regulator. That sounds very <nonsense words>, but it’s really not a bad place to start.
II. Top Tech Issues in Next 3-5 Years
Szoka : Well, indeed, that is the basis of where I want to go today. Where are we going to see changes in tech policy on the issues in a neutral and fair regulatory environment. While the FCC is not that regulator, as I’m sure we can agree, broadly speaking, what are the top 3-5 issues over the next few years? Where is there a consensus where we could see something happen, rather than just being intractable issues?
Sohn : I guess I’ll start. So I’m going to advertise the Public Knowledge blog. A blog post that my senior vice President Harold Feld put up today about the switch to all-IP network. Some of you may know that some time last week or the week before AT&T announced it was going to increase its investment in both its wireline and wireless networks by $14 billion over the last two years. At the same time, they have asked the FCC for some preliminary regulatory–or at least, the beginning of a discussion–about what the regulatory landscape should look like when we go to an all-IP network. That’s where everybody wants to go. People don’t to continue with their legacy telephone service, they want to go to an all-IP network. And that’s understandable and actually a good thing. But when the plain old telephone service (POTS) are retired, a lot of what goes with it will be old regulatory structure that has existed since 1934. So the question that arises, at least as far as telecom goes, is how do we ensure we have a universally accessible, reliable, and affordable network? Its the 100 year anniversary of the so-called Kingsbury commitment , where AT&T promised that kind of network. I think the time is ripe to talk about how in an all-IP world how we preserve that. That’s number one. Number two, and he doesn’t want me to mention copyright…
Szoka : I said I didn’t want to get stuck in the morass of copyright. <laughter>
Sohn : The future of video, how do we get to a world where people can watch the TV they want to watch on the device they want to use at the time they want to watch it? There are regulations that prevent that from happening and a lack of will from regulators have prevented that from happening. Also, a lack of will from some industries to make their content available for purchase. I think there’s a lot of work there and there is bipartisan support for that. The third thing from my perspective, and obviously the spectrum thing is big, and the proceedings on that. The fourth thing, is that the time is ripe for copyright reform. After SOPA and PIPA last year, there may not be 14 million people advocating for copyright reform but those of us who think that we need to bring balance back to the copyright equation, we have a lot more friends on the right than we did a year ago. I just heard that Congressman Issa had a bill which would allow you to rip DVDs that you own to a device that you own, that according to the copyright office could only be currently be done illegally.
Szoka : So we can unpack things, but just top issues before we get into details here.
Campbell : I actually largely agree with Gigi about the issues that are going to be big in the coming year. I think it’s all driven by Internet transformation, the term the FCC has used and I have used to talk about the ways which IP-interconnected networks are breaking down the traditional regulatory barriers. That covers all of the issues, I think, that Gigi spoke about. I really think the transitions to all-IP networks will be really big this year: we did it with digital transition to TV, we’ve transitioned wireless devices to digital, and by that IP broadband-based digital, and its time to look at the switch-telephone network and whether we can transition it as well. I do think there is a consensus around that, and I did a blog post on this as well. But we have a bipartisan consensus this time on how to make that happen. I think Harold’s blog post went into more detail on the issues, but the fact we have a consensus means its time to do that transition and its an important issue this year. I think video continues to be an important issues. Just like we have our Communications Act dealing with traditional communications centered around particular networks which are hopelessly outdated, our video regulations assume certain things about a broadcast model or cable model and the Internet is transforming these things as well.
Spectrum. Gigi said there is a big proceeding underway, but the details of that will be of great focus to many. I would also just add that I think cybersecurity could be a big issue this year. It was worked on a lot last year and I think it is important to this administration. I don’t know how that will go but I do expect to see some discussion on that in 2013, as well.
Gifford : Let me kind of question your premise if I might, Berin. Not that I disagree with any of the topic or issues that are going to be hot, however, I do question how we tend to think about these issues in a framework of one-off, muddling through issues in a legacy regulatory model.
If we talk about the future of the public switched telephone network (PSTN), what we’re talking about is how do we deal with Title II common carrier notions that are still embedded back there in the mists of our voice traffic that has some social values that we want to carry forward–or not, as the case may be–and how do we muddle through that. But if we conceptualize all of these questions: the video question, the future of the PSTN question, as neutral legal questions about how do you conceptualize these things through the lens of competition policy, then first of all, they all become coherent and connected.
The video competition analytic issues are the same as the PSTN analytic issues in terms of how do the competitive pressures or lack of competitive pressures in these markets create or enhance consumer welfare or where is it impeded. It sounds a little bit esoteric, but if we’re trying to re-conceptualize these issues not as one-offs based on legacy systems where we are talking about video under the legacy video regulations and the future of PSTN on the legacy telecom regulations, then it at least becomes a clear and mutually coherent set of issues that we’re facing going forward into an all-IP Internet world where the video, the voice and the data are all running over the same pipe over the same protocols.
III. Net Neutrality, the Digital Age Communications Act, and FCC Reform
Szoka : So let’s start there, and this is exactly where I wanted to go with this conversation. As everyone here knows, the DC Circuit will rule next year, probably by June, on the FCC’s approach to net neutrality . Ray, do you think that decision could actually prompt the reconceptualization you are talking about?
Gifford : I think that’s the decision that will possibly, if not probably–I expect the DC Circuit will overturn the FCC–that will catalyze interest in this area. Because the progressive side of the world will be faced with the fact that the FCC either didn’t win or didn’t have the power to do it in the first place, and that could be the legislative impetus on that side. I think there remains a similar consensus to reconceptualize the way we approach to communications law and that its a worthwhile endeavor. Not as a series of one-off proposals but as broad and neutral reconceptualization.
Sohn : I think that’s great as a concept, but the reality is that I just don’t see this Congress–I think this Congress will be like the one we’ve seen before where there is about a month of kumbayah and then back to business. I just don’t see them doing anything that big. You do have some in Congress that would like to shirk the FCC, and net neutrality could be the factor that gets that moving, to shirk the FCC of all authority over broadband. Then there are those in Congress which would never allow that to happen. So I’m just not sure that Congress is going to be capable of something all that big.
I think even more than net neutrality–the net neutrality case if it goes the way suggested–and unfortunately my organization is defending the FCC but see it as a tough row for the DC Circuit to go the way we want it to go–I just don’t see Congress fixing it. I think it’s really going to take either a very strong FCC chair who is going to reassert the authority or its going to take the type of conversations that are going to come up around the AT&T filing on the all-IP network about what the next Kingsbury commitment is going to look like. As much as I’d like to see Congress to a big think around what communications law should look like in an all-IP world and whether the FCC has authority over broadband, I just don’t see it really happening. I think the best we might hope for is chipping away on some of the video issues.
Gifford : And I don’t disagree with you Gigi, I know it takes time, but we might as well start.
Szoka : So we’re talking about the politics here, but let’s talk about the law for just a minute here. So what do you think is the most likely outcome, specifically of the [net neutrality] decision? To put the question most poignantly, what options do you think will be left to the FCC?
Sohn : Well I think there will be a legislative attempt to try to give the FCC the limited authority it needs to reinstate the rules. I don’t think that it would succeed.
Szoka : So let’s assume the hypothesis here that nothing is going to get through Congress. The legislative change, the situation on the ground, after the DC Circuit rules, do you you think reform would be limited to the FCC here? Or do you think that it would revert to the status quo at the FTC–the position the FTC took in 2007 under Commissioner Majoras that they already have jurisdiction to enforce both the antitrust law and consumer protection laws under Section V and this could include broadband?
Sohn : I have to remind people that the FCC’s authority is being challenged in two other cases, and a lot of this depends on what happens there. The first case, which has already been heard–the oral arguments in the DC Circuit–challenging the FCC’s data roaming rules, which are the rules which would essentially require dominant wireless providers to enter into roaming agreements with smaller competitors so customers can roam across data networks. And that case in the DC Circuit, which also has the net neutrality case and is traditionally very hostile to the FCC. The third case involves the switch of universal service to broadband, the switch telephone service to broadband.
So the net neutrality case is not necessarily going to be the be-all, end-all on FCC authority. It’s possible that you could have some sort of swiss cheese with the authority to some to broadband but not the authority to do other things. I think it’s too early to say net neutrality will be the be-all, end-all, though it could affect a lot of the FCC’s ability to protect consumers. I think a lot of it will be up to the next FCC chair. This FCC chair has been inclined to bring back the authority the FCC had before 2002. On reclassification, yes. And if Congress does not act, then it depends a lot on what that chair wants to do.
Campbell : I’m going to echo a little bit of that. I’m not sure the current cases that are pending on the FCC’s broadband jurisdiction are going to be the be-all, end-all, either. Even if those cases would go against the FCC, I think there are larger areas and issues where the FCC has fully backed which can help us with IP transition regardless of the outcomes of those cases. So for example, there’s going to be a need to transition to all-IP networks from the infrastructure from the 1960s which is a deadweight loss on the economy, that exist because the regulations require it. You take the voiceover protocol, the FCC has 911 obligations that apply to those along with access by law enforcement that have not been challenged in court.
In other words, some of the social obligations already apply insofar as the FCC is concerned and they have not been challenged in court and presumably would be unchanged or unfettered by anything the FCC does in these other cases. Which leaves the issue of legacy economic regulations which are holding back our transition to an all-IP Internet future. I don’t want to see these things are not important, but I would echo the view that they are not necessarily the end of the FCC’s role here and there are things that need to be tackled going forward in 2013.
Szoka : Since we’re talking about cases, let’s talk about one other one: City of Arlington .
Gifford : There is a case, City of Arlington , whose petition for cert was accepted by the Supreme Court. This issue is whether Chevron deference applies to agency jurisdiction. It’s not a communications law-specific issue; Chevron deference applies to most agencies.
Szoka : Isn’t the issue whether the courts will defer to an agency’s own interpretation of its jurisdiction? Not dealing with substantive outcomes, but whether the FCC can determine its own jurisdiction?
Campbell : If Chevron deference applies, yeah, then courts would defer to agency decisions on the extent of its jurisdiction. If it doesn’t, this would be determined as a matter of law.
Szoka : So Gigi is shaking her head here. Do you feel conflicted about this?
Sohn : No I’m not conflicted about this. This is the key to a victory we had seven years ago in a pretty considerable case where the FCC was trying to regulate devices after a communication had taken place. They alleged that they had Chevron deference over the determination over their jurisdiction and the DC Circuit said “No way, now how.” That is a baseline question… Reversing that decision would make me very very nervous if an agency could determine its own jurisdiction. The baseline authority should not be subject to Chevron deference because courts give a lot of deference under Chevron .
Campbell : I tend to agree with you on that. Go on, Berin.
Szoka : Is it fair to say then, Gigi, just to bring into the circle the differences and the common ground, is it fair to say that in some circumstances that agencies are given broad jurisdiction but it shouldn’t be up to agencies to determine the extent of its own authority?
Sohn : Correct. That’s what Congress gives to it. It should not have the ability to essentially overrule what Congress gave to it.
Szoka : So that is a plea to have Congress decide issues like this rather than leaving them to the agency?
Sohn : Look, I agree, and I really wish the FCC’s authority over broadband was clearer. I am dismayed and disappointed that since 1998 but Democratic and Republican chairs have seen fit to essentially give up authority over broadband. This thing that shocks the living daylights out of me. Look, Republicans and more pro-market types may not use their authority, but they don’t just give it away. The FCC is unique in that both Democratic and Republican chairs have just given away its authority to protect consumers when it comes to broadband.
Gifford : If I could push back a little. What PK and other groups did on the broadcast flag and I think rightfully very wary of is the mission creep that tempts the FCC, largely through industry pressure. Surprise, surprise. It is going to have an expanding jurisdiction over things it does not have jurisdiction over and to become a regulatory handmaiden for specific interests. The abrogation by the FCC of the authority over broadband is that same mission creep. The telecom wars of 1996 to 2004 were largely a wrestling match over a vision of synthetic competition between different segments of industry over rents. The consumer welfare benefits which emerged out of the 1996 Act were illusory at best. At it seems to be that prudentially for the FCC to deny itself in whatever dramatic–to say we’re just not going there, we’re going to let this thing go–has almost been completely salutary and would only be damaged by them doing something, absent some showing of consumer welfare harm.
Sohn : Well I might not agree with you on whether the 1996 Act worked or not. It worked for a short time in a way that was extremely salutary to consumers. In the dial-up world, each American had a choice of 13 dial-up ISPs. Now, we live in a world where we have essentially a wireline monopoly, or if you’re lucky, a duopoly, and then two very strong wireless companies and two pretty weak ones. The 1996 Act ended up not working because the FCC basically allowed for all of this consolidation and got rid of the policies they’ve now adopted in Europe and elsewhere where they have many many many different choices for consumers.
So I’m not necessarily sure I agree with you on that from a historical perspective. But again, it’s one thing not to exercise your power, it’s another thing to throw it away into the dustbin of history. So if you actually wanted to use it, like for public safety reasons or universal service reasons, or to protect the disabled, then you would be challenged in court because you gave it away. This is what Scalia, and I don’t want to get too legalistic, but this is what he wrote in his wonderful dissent–and you can write it down: Gigi praises Justice Scalia–he wrote a wonderful dissent in the Brand X case. He predicted this. He predicted an agency would lose its ability to protect consumers in a broadband world. It was a brilliant–and quite frankly, prescient–dissent.
Campbell : I actually slightly disagree with the historical characterization of the 1996 Act. I think technology passed it by. I don’t think the act expected to see different types of networks providing the same types of services that the IP world enabled. The thought that we were going to have this telephone network and that’s where all the competition was going to occur. What really happened irrespective of what the regulator did is now wireless networks can provide essentially the same service as you have over the wireline networks. You have the ability to access wi-fi over various providers at airports. All kinds of market developments were just not foreseen. I like to call it Internet transformation, but whatever you call it, I think it’s passed the Act by. The questions we now have to struggle with is if that’s true, what do we do going forward?
Gifford : Well I think you’re right, but let’s also remember that the regulatory construct of the 1996 Act caused hundreds of billions of dollars of malinvestment for about a two year period because the market signals and the rights and incentives to invest were completely destroyed by regulatory default rules.
Szoka : Ok, so let’s not spend too much time on history.
Sohn : Blaming government for the foolish acts of the marketplace. That’s uh…
Szoka : That’s not the first time that’s happened.
Sohn : Exactly, yeah.
Szoka : So let’s talk about this: so Gigi, it sounds like your fundamental concern is that there has to be some vehicle for protecting consumers and attenuating market power. Ray, at PFF, you ran a project that was intended to deal with exactly those two problems and come up with a consensus solution for how to re-conceptualize the FCC along those lines. Would you tell us about the Digital Age Communications Act project and what it has become today?
Gifford : Yeah. First of all, it would be grandiose of me to say I ran it. It was a collective group effort. Carl Dickson, who is here, helped run it, as well as a lot of great folks. What we did was bring a group of scholars together: from think tanks, from academia. And out of the folks that participated in the original group, a majority were from the Democratic side of the isle. How can we re-conceptualize the Communications Act for the 21st Century was the conceit. And not wanting to completely remake the world, we looked at different sorts of models which have some merit. Things like the Staggers Act , which is how we dealt with the railroads in the early 1980s and how we handled the most apparent problems of railroads, which is a model I think was similar. The one we settled on was the Federal Trade Commission Act model. It did the two things its purported that–at a general level, what Gigi mentioned–which is that it is there to protect against unfair competition and allow for consumer protection to be proven.
The keystone of it–the two institutional modifications to how the FCC does business now are as follows. First of all, it took away most of the prospective rulemaking, which is really how the FCC acts now, and replaced it with post-hoc adjudicatory efforts. Like at the Federal Trade Commission, if the Commission is going to act, it needs to go in front of an administrative law judge (ALJ) and, in some cases, in front of court, and prove that market power has been abused and consumers have been harmed. So instead of what is traditionally an untransparent and pure prospective rulemaking model would end up being a public, adjudicative model that still focuses on what our Progressive Era statute values in language of unfair competition and consumer protection.
Szoka : So that was the Digital Age Communications Act that Senator Demint introduced in 2006. Where does that stand today?
Gifford : Not to monopolize it here, but a few of the band have gotten back together and have been talking about what we can do differently and what we know now. I still think the fundamental model of the Federal Trade Commission Act holds with little prospective rulemaking. One addition, and I hope Gigi can speak to this, is the move toward multistakeholder models. The UK in 2003 passed a Communications Act that explicitly authorized co- and self-regulatory bodies to kind of intermediate between the sovereign actions of the state and the frictions that break out from network industries, to treat it generically like that. Multistakeholder bodies, the best example of which we have around Washington is BITAG , which Gigi is the chair of… well, I’ll let you explain.
Sohn : So BITAG is the Broadband Internet Technical Advisory Group. What it is set up to do is essentially examine network management practices to determine whether they are reasonable enough or not. So this comes right out of the FCC’s network neutrality rules which says that, particularly if you are a wireline, that you cannot block or discriminate against applications, services, or content with the exception to that rule being reasonable network management to ensure the reasonable and efficient running of one’s network. So BITAG consists of a working group, of which I am a co-chair of, and is made up of folks from all different industries and public interests, and there is a technology advisory group which is open to anyone, though I don’t think any particular industry but maybe some. They look at network management practices and determine what are best practices and what are not. It’s been around for two years now, and just got a new executive director, Doug Sicker , and it has worked very very well so far.
Szoka : So, having been thinking about this while sitting with Fred, Gigi and Ray here and we’ve had an opportunity to hear from left to right if you will, let’s think about that compromise proposal that Ray is describing that is respected by people Gigi has a lot in common with. Fred and Gigi, what do you think of this sort of approach? Gigi, if you would like to start.
Sohn : I do think the multistakeholder model is good for a lot of things, but the problem I have with it in DACA is that it is the primary way of making policy and that there is no backstop. It specifically says there is no government backstop for multistakeholder decision making and that makes me nervous. The other thing that makes me nervous… the imperfections with the multistakeholder governance is there is no provision to ensure groups like mine have a representative at the table and the means to be represented at the table. Two of my attorneys are going to Dubai as part of a US delegation and as part of a multistakeholder model there. But, groups like mine cannot do this on a regular basis; we just don’t have the resources. We can’t fly all over the world, and frankly, in the international context, developing countries don’t [resources]. There needs to be a protection to make sure that the public is actually represented. A multistakeholder model that works for me still has a backstop if an agreement cannot be met.
Szoka : Ray, quick response?
Gifford : Well, yeah, I think Gigi’s right. If you look at different sorts of models, one of them is the UK’s Communications Act language, is co-regulatory because there is a government backstop behind it. Self-regulatory is the other language that does not.
Szoka : To be clear, in terms of that backstop, we aren’t talking about enforcement of a self-regulatory code. We’re talking about a code not producing a good enough system, of having the government step in a regulate it.
Sohn : Yes
Gifford : Right. And I think Gigi’s points are well-taken. The challenges that come to multistakeholder organizations are one they are not broadly represented enough, and also we have the problem, we talked about it a lot at BITAG, as Gigi knows, is how do you account for the innovator who is not there? The person, who by definition, is not in the room because you don’t know who they are or what they look like. The idea, or the conceit, of–and you know, multistakeholder processes are unmanageable, they don’t take care of everything, and just go home and forget about it–a lot of it depends on the culture that evolves within the entity itself. But, you can adapt them to a different kind of competition policy or consumer needs in a way that I think can accommodate some of the concerns that Gigi expressed.
Campbell : I would like to say a couple of things, actually. I think there are advantages to whatever that Latin word is for looking at it after-the-fact. What is that? Ex post, that’s it, thank you; Latin, it kills me. There are advantages to that because there are a lot of risks to prophylactic regulation in not allowing new ideas to evolve and develop as people try to conform themselves to regulation. A second problem is once persons have conformed themselves to regulation, business then have a business model premised on that particular scenario. That’s what makes these transition issues so difficult. During the digital TV transition and the wireless transition, there were companies who had premised their models on regulation. So when the government says its time to change that regulation, you get that argument, “Wait a second.” And this can lead to stagnation–so there are advantages to that [post-hoc adjudication].
On the other hand, some of these things can be issue-specific. There are certain things, for instance 911, where I think there is a bipartisan consensus around that, where there may be a government role there because it is run by a governmental entities, so it takes some coordination between government and industry and the like. You can do it through a multistakeholder model, but I guess what I’m suggesting is there’s a sort of post-hoc enforcement mechanism that can work very well for competitive issues where you want to maximize business model innovation and the like and maybe a different model, multistakeholders, for issues like 911 and how we can interconnect with public safety answering points. I guess I wanted to almost be a mediator in the sense that there are various reasons to use different models depending on the circumstances.
Gifford : Part of the difficulty here, which you raised, Fred, is issues of regulatory backward compatibility. It’s a technological problem that tech companies face: how am I going to be backward compatible with legacy structures. My kids, my youngest is just crestfallen, his new Wii won’t run his old Wii games, and it’s a very tough decision in the mind of a seven-year-old: do I abandon my existing platform…
Szoka : He didn’t get the Wii transition check? <laughter>
Gifford : That would be the point, right? What regulation often does is put us in a position to have to wrestle with backward compatibility with the old regulation. 911 is a great flashpoint for that, where it’s not easy when you got something which everyone identifies as a public good, that is premised on a 1960s network architecture and set of signal systems. You can either invest large sums of money to make the Internet part backward compatible to the old system, or you can scrap it and start anew. I think the same principles apply to regulation here, which is why emerging categorically from old legacy regulations to a new framework is necessary. You’ve got to tear off the band-aid.
Sohn : I just want to make it abundantly clear that I’m uncomfortable with a lot of things in DACA. The Federal Trade Communications Act is very narrow in its scope. I also wonder why you are essentially giving the FCC the same powers as the FTC? Why not just have the FTC regulate and enforce in this area? Be it as it may, what an unfair or deceptive trade practice is is being construed very narrowly. Your bill says essentially that the FCC is supposed to construe those terms pretty much the same way as the FTC does. So I don’t think it gets at a lot of the consumer issues that we work with everyday.
I’m uncomfortable with the standard for denying license transfers. I think we need to look at the fact that pretty much every license transfer is being granted. I think that we’ve raised the bar so much to show that a license transfer is not in the public interest that every single one would be granted. I like multistakeholderism; I think it has a role, but there are other things in this bill, to make it clear, that I’m not as comfortable with. This is not to say that I think the Commission is perfect. I and my own organization have been advocating for structural changes that we would like to see made, like changes in the sunshine law. I can get into it if people want to hear more about it, but I just think this bill would really really limit the kind of things the FCC could do. I know you’re concerned about mission creep; I’m concerned about mission creep, but this would leave it with very limited ability to deal with things like public safety of the hearing impaired, universal access, and things like that.
Szoka : So I want to get back to things that are going to happen in this next Congress, what actually could happen, but just, very briefly, do you have any response to Gigi’s concerns?
Gifford : Getting back to neutral rule of law principles is where we need to start and I think we agree on that. The FCC reform project that Public Knowledge did with some of their friends–there’s a lot of overlap and agreement with us. There’s kind of a historic inherent lawlessness to the way the FCC does business. Things like unfair competition and consumer protection, through the FTC and the Department of Justice and antitrust doctrine, have evolved to the point where there’s a Harvard school of antitrust and there is a Chicago school view of antitrust. There is a legal argument between people on a neutral playing field where we agree about principles. We may not agree about outcomes, we may not agree about whether a given practice in the market is going to be harmful or not, but we’re speaking the same neutral language of law. If it comes out one way or another, we at least understand why that is and what the principles are that a person is applying. I think that in itself is a monumental leap forward from the system we have now, which is a series of one-offs from a very murky common carrier past. It’s from a law written for a monopoly.
Szoka : From that point, let me just add here, and we’ll talk about this in a future round too, I share to some extent Gigi’s concern. The situation just described is true in antitrust where we have developed a great deal of analytical rigor and there are schools on both sides delivering their opinions.
On the consumer protection side, and this has become more of my focus over the last few years, especially on privacy, and I’m sorry to say, is where that has not been the case. It could be the case, but I think it hasn’t happened primarily because on the antitrust side of things, the FTC and DOJ are frequently challenged in court and there has been a great doctrinal evolution because the courts have checked the agencies. The agencies have to justify themselves in court and the academy has got involved to explain how the very terse language of the Clayton and Sherman Acts should be developed. However, on the side of pure consumer protection cases under Section V, two things to start with unfair and deceptive trade practices. The FTC, in 1980 and 1983, issued policy statements which gave meaning. The unfairness policy statement was subsequently codified and is now part of the FTC Act.
The problem is–and this is where I think to a large extent I do agree with you, but I’m perhaps more optimistic–the problem is, in those cases, in particular those about privacy, the FTC’s never challenged. Companies always settle. The Wyndham case that is currently pending, is to my knowledge perhaps the second or the first depending on one’s count, is a data security case where the FTC has actually gone to court and because of that, the FTC really hasn’t built doctrine. Instead has essentially just said in each of its cases: here’s what happened, and we think that’s unfair and their isn’t a lot of analysis to that.
So I’m saying to Gigi that to the extent we’re looking towards that sort of model for consumer protection, it’s more likely to work the more it looks like a common law model in which the agency has to extend its analysis. In sum, to get to Ray’s point, there is some independent neutral arbiter that actually decides whether those standards have been met. In time, there may be a clear sense what is a substantial injury to consumers, what is a countervailing benefit, and how can consumers actually avoid it. That would be true on privacy, that would be true on the sorts of billing issues the FCC currently deals with, and any of the consumer protection issues that Gigi would find concerning. So that’s just a way of saying that I would love to see Ray’s vision to come true and have a rule of law playing field where we actually hash out these issues. We may disagree with what the standards might be, but we could agree that that would be a better world to live in than where we deal with problem prophylactically and create rules that don’t necessarily make sense over time and where the agency can be prone to capture by special interests that can steer the regulations.
IV. AT&T and Internet Transformation
Szoka : So, I want turn to from this conversation and talk about some actual case studies and things that might actually happen this Congress. One, to take the specific issue we have been talking about, there has been concern for several years now about having the FCC deal with consumer and proprietary information by simply having some privacy rules: does it make sense for them or the FTC? Second, process reform, the House having passed legislation this last Congress. Three, AT&T just announced they want to end their copper public-switch telephone network system and move to all-fiber. And four, to wrap this conversation up, video competition reform. So those four areas seem to be areas where something is going to happen.
Fred, with you being left out here, would you like to get started on talking about AT&T?
Campbell : Sure. Well I’ve think we’ve already sort of come to a consensus that that’s going to happen. The switch-telephone network cannot go on rationally.
Szoka : But what does that mean for the FCC’s authority?
Campbell : For the FCC right now, there are a number of requirements in Title II that apply uniquely to companies that operate switch telephone networks and actually require them to operate them–which is the problem. I think everybody now realizes we need to go to an Internet future. But we are requiring companies, actually a subset of companies in the market, to maintain an outdated technology, a duplicative network, additional cost, additional engineers. I think we’ve come to a consensus that that needs to go away.
What that means for FCC authority, I think I would say they have the authority–and their are a couple of different procedural avenues–to forbear from some of those regulations and the like. I use voice over Internet protocol (VOIP) as an example of where they’ve done some of this where it’s a service we haven’t classified as a traditional communications service subject to these switch telephone network rules. And yet, they’ve applied a number of obligations to it under a bipartisan consensus like 911. I think that kind of approach could continue to work.
Szoka : So Fred, why should those rules go away? Gigi has mentioned concern about a wireless monopoly or duopoly, and this is has been a focus of people like Tim Wu and Susan Crawford . Do you think those two issues intersect–that these old regulations in some sense making a monopoly more likely?
Campbell : Yeah I believe they actually limit competition too. There is a theory out there that cable is establishing a monopoly. To the extent that we require one of the wireline competitors to waste money on a deadweight loss, on an unnecessary network, potentially, we’re derailing a potential competitor to that. I think that there’s an intersection and also not an intersection. The non-intersection is we’ve got a whole set of rules that only apply to one set or type of company and are based on the idea that those companies were dominant in a particular network type. That network type is serving 30 percent and dropping rapidly. So I think it varies a little bit by region. Not many folks are using the traditional wireline network, yet we’re maintaining the switches to provide service to those wireline telephones based on a regulatory fiat from a different era.
The point is, if we’re going to go to an all-IP world, we need to figure out how to subject IP networks to the same competitive environment.
Sohn : I think we said this at the very beginning: I think it’s time to rethink the Kingsbury commitment. If we’re going to an all-IP network, we have a consensus that that’s a good thing. But, obviously, it does undermine what remaining authority the FCC has left after the courts are done with it. We need to figure out how we ensure–and I know I’m sounding repetitive–universal service, affordable, and reliable network. Look, I just found out last night that my childhood home was wiped out by Hurricane Sandy. And people were searching for payphones to try to make phone calls because, understandably, the wireless networks were down and houses were wiped out and phones weren’t working. So how do we make sure people have reliable phone service in an all-IP world? I’m not saying we should have to continue providing POTS, but it’s one of those backstop things that I think is the essence of what we want government to do. I know AT&T is saying that if we don’t do the investment 99% of the country will be covered, and that’s fantastic, but 1% is still millions of people.
Szoka : You heard it here–Gigi Sohn cares about the 1%. <laughter>
Gifford : To pick up on a point that Fred was making–and I think he’s exactly right–pretty soon, the next wave we’re going to hear is that it’s the end of the world as we know it because there are business models that are premised on rights gained under Title II: interconnection rights, special access. Ironically, the FCC on special access is going the exact opposite direction of letting the IP world go. They may go back and regulate it. So the problem of this transition is going to be real because there are very real reliance interests that are premised on a legal stature and status that comes from being on the old circuit-switch network. How do you transition that to an all-IP network where I don’t think interconnection, going forward, is going to be a big deal. But you can see where denying interconnection in a specific instance could be a big problem.
Szoka : We should mention that the bill you are working on actually does have section D interconnection.
Gifford : We can think about how we want to deal with interconnection there, but I’m probably somewhat confident that a thing like that would work out in the marketplace going forward while realizing transitions can be hard because there are folks who want backwards compatibility, Title II interconnection rights, and leasing rights.
Campbell : I actually want to seize on something I think Gigi said, and correct me if I’m wrong. If universal service is an issue, the answer is not requiring a continuation of an outdated network but coming up with a subsidy to solve the problem.
Sohn : Exactly.
Campbell : And I would agree with that, but I will tell you that there are folks of the free market persuasion that would say folks shouldn’t be living there.
Sohn : They should move…
Szoka : So you’re saying that Robert Redford’s ranch should get subsidies for universal service?
Campbell : To be honest, I think there’s a bipartisan consensus around universal service, and one of the reasons is context. For almost 100 years, we’ve encouraged people to live in rural areas. We gave away land under the homestead act, we did rural electrification, and the like. So the reality is… let’s figure out how to solve those issues without, you know, throwing the baby out with the bathwater by keeping around ancient technologies.
V. Video Competition Reform
Szoka : Saving time for questions from the audience, and I wanted to cover those other issues. But it sounds like there is a consensus that where there is market failure, that’s where we should be focused on. So, another topic is video competition reform. There is a bill now, Senator Demint’s Video Competition Reform bill . Gigi, and I want to you to comment on this, but could you very briefly explain the gist of the bill?
Sohn : Well I don’t know every single detail, but basically it gets rid of a lot of legacy regulations that protect broadcasters or protect cablecasters from satellite. It also gets rid of some media ownership regulations. I think the idea is to make a more level playing field when it comes to video competition. So it would get rid of retransmission consent, must-carry, distant signal protections, compulsory license, which cablecasters and satellite providers take advantage of, as well as media ownership regulations.
Szoka : So what do you think?
Sohn : I like it other than the media ownership part.
Szoka : Let’s assume they take that part out… What do you think of the rest of the bill?
Sohn : I think it’s a real good start. I’m all for the consumer being able to watch what they want to watch, on the device they want to watch it on, the time they want to watch it. What is missing from that bill, in my opinion, is the ability for a consumer to attach any device to a cable network. That’s the only thing that’s missing from that bill. There’s no real policy or other reason to continue to protect broadcasters, either through retransmission consent, must-carry, or distant signal protections. In this day and age, I don’t understand why we need those anymore. And compulsory license is kind of the flip side of that.
Szoka : Just to be clear, when you say “in this day and age”, what do you mean? How has the marketplace changed?
Sohn : Do people know that they’re watching a broadcast station over a cable channel? People don’t know, it’s all the same to them. Cable has its own local channels as well. The basis of the protections that broadcasters got was that they were supposed to be so-called fiduciaries for the public by, you know, carrying local programming. Other than weather and sports, they don’t do that. They get free spectrum, and they really don’t keep up their end of the bargain. I’m not sure I’d even want that bargain in this day and age. Even assuming that bargain is solid, they certainly haven’t kept up their part of the bargain and there’s no reason they should get mandated protection and mandated carriage of cable stations and be protected from competition.
If I may just say one more thing, I remember we supported the merger of XM and Sirius. One of the things that Sirius wanted to do, or XM, I don’t remember which one, was carry local radio stations. They wanted to carry their own local content. The broadcasters went absolutely bats about it and one of the things that was prevented in the merger is they were not allowed to carry any local content. Why should that be? Why shouldn’t broadcasters actually have to compete in the local marketplace? That’s the essence of being anti-competitive.
Szoka : Fred?
Campbell : Well, I think there’s a lot of good things from that bill as well. A move towards a more market-based approach for video programming makes a ton of sense. The FCC recently allowed some of the per se prohibitions on some of the program access rules to expire and that was a good thing. Again, based on history, there was an assumption when that was enacted that there was one sort of network at time, cable, that was prior to the launch of the first DirecTV satellite, and that’s not the world that we have anymore. But what happens when you have a regulation that gives you a government right to certain programming disincentivizes others? I pointed out in a blog post that Verizon and AT&T may be producing more content for their own video distribution networks, except they have a regulated right to everyone else’s. I’m a little more thinking of the multichannel video programming distributor (MVPD) type of video programming than the broadcast type. But getting to Gigi’s point, almost 10% get their video programming over the internet now and a lot of those regulatory structures in place probably don’t make a lot of sense.
VI. FCC Process Reform
Szoka : The FCC has been sued, as you know, over its intervention into the Internet marketplace as policeman over the preferential tier. Just to wrap things up here and before we turn to questions from the audience. Any final comment on the issues I laid out, either on experience or where we might actually see something happen here? On the potential of–if Gigi’s right, something big may not move this Congress–we talked about video competition reform. What do you think of targeted legislation that could either deal with the issue of consumer proprietary network information (CPNI), giving the FTC limited data protection authority, to have authority over that, instead of the FCC? What about finding the proper move for the dancing gnome, which is FCC process reform? The House passed a bill last Congress which would have done that; Public Knowledge has come out in the past endorsing a different package with some overlap of process reforms. Could this be one of those areas where we actually see some legislative movement? Ray?
Gifford : I suppose so. FCC process reform, while I think there is a lot of value to it, whether there is a little bit of disagreement on the margin, I think you can come to a consensus. It’s a little bit like rearranging the deck chairs on the Titanic, though. The fundamental cultural outlook, the gestalt of the agency is not going to be changed by a few rules it seems to me. On CPNI, sure, not a terrible idea by any means. But, none of them will make my heart skip a beat.
Campbell : I was actually surprised at some of the reaction against FCC reform in that House bill. I think FCC reform could do a lot of good, and would probably have to happen on a statutory basis. But, there was a transaction decided at a bureau level, and the result is years have gone by and it’s never been addressed by the full commission because of the procedural posture and rules that prevent that kind of thing. It could be a good thing–I don’t think it’s a very good idea to be able to try to accomplish fundamental market changes on authority delegated to bureau within an agency and without the nominated commissioners getting a chance to pass on it. The way the law currently exists, that can happen and there’s no time limit on when it needs to come up to the full commission for review and the courts, the DC Circuit, has held that it generally doesn’t review agency decisions until they’re decided by the full commission. So, in essence, it gives the Chairperson, whoever that may be, a lot of authority. I think that’s somewhat in tension with the point of having multiple commissioners. That’s one example. But I was surprised with how much resistance there was towards trying to do something to reform the FCC. I think there’s a lot of good that could happen there.
Szoka : Gigi, what’s wrong with the FCC that can be fixed?
Sohn : If there’s a process reform bill, I think there’s a chance. The problem with the bill from the last Congress was that it wasn’t just process. It also changed the public interest standard, and was very similar to DACA, and I think that’s what made a lot of folks uncomfortable.
There’s a lot of things that could happen. I agree with Fred wholeheartedly that there is way too much power invested in the chair. I believe if two other commissioners want to put something on the agenda, they should be able to do that. One thing I liked about that bill was some Sunshine Act reform, that is, there was a prohibition against two commissioners meeting at one time. I think there’s a way to do that in a transparent way that makes sense. So what happens when you prohibit two commissioners from meeting at one time is the power goes to the staff. The staff makes all the decisions. So that needs to be changed.
I think there needs to be more ALJs. And that would get you more to the sort of enforcement model that you’re talking about, more actual fact-finding.
Szoka : Administrative law judges.
Sohn : Yeah, I’m sorry, administrative law judges. The FCC has one, and he’s what, 85 years old? I think that would get you much more back to enforcement. Another thing that I’ve kind of gotten religion on is merger reform on merger review. I think it should be shortened down. I think the kinds of conditions, they don’t work because the FCC doesn’t enforce them. Even if the agency enforced them, I don’t think it would make… I like what they did with AT&T, the FCC actually never really decided AT&T, but I hate what they did with Comcast. It should have either been “It’s good for the public” or “It’s bad for the public”, but layering with 50 pages of obligations, 99 percent of them not being enforced is just a waste of everybody’s time.
Szoka : So I want to turn to questions from the audience, but Gigi, there’s a macro question. One of things in the bill, one of things you might refer to under process reform, was the provision that said in a merger review, the FCC would not have the authority to impose a condition anything they would not have the authority to impose as a regulation. Is that something you would support?
Sohn : I think it’s much better, rather than crafting specific behavioral rules for one transaction, they ought to do it industry-wide. To the extent that that’s part of the bill we probably support that. The bill had more than that which made me uncomfortable.
VII. FCC, the Revolving Door, and Priorities
Szoka : We might get some process reform through next Congress. I would like to take questions. If anyone has any please get the mic. Be sure to identify yourself. If there are no questions, I have other questions, so.
Sohn : There’s actually one thing I did forget which is the revolving door is a major problem. Industry capture is a major problem. I would like to see some structural reform that would deal with that. It’s difficult, right? You could say if you worked at the FCC, then for five years you can’t–this is what Clinton originally said–for five years after you can’t lobby Congress or the agency. I understand the argument that that keeps good people out, but I’m open to ideas of how else you can deal with the revolving door.
Szoka : Any ideas? Fred? Ray?
Campbell : I don’t know how to deal with the revolving door either.
Sohn : I do think that one thing, at a minimum, if somebody is looking at leaving the agency, they need to at least post publicly that they’re doing so. Then you wouldn’t have the Meredith Baker problem. Those instances of high level officials, I had meetings with them on topic affecting the industry they then left for a month or two months later. So all they have to do is tell the general counsel that they’re recused somehow then they won’t have to tell the public. That would actually be small but significant.
Szoka : Fair. Any questions from the audience? If there aren’t any questions, let’s just wrap up here. I would just like to hear from each of you what you would have the Chairman prioritize inside the agency. Ray?
Gifford : Again, I think regular order, I think routinizing, imposing some self-discipline by shot clocks, by things like a degree of transparency on how things are being done and why they’re being done. It sounds like small <something>, but it would do a lot to enhance the credibility of the agency.
Szoka : Fred?
Campbell : I think a focus on those few issues that we started with. Some of them, in the case of incentive auctions, they’re going to have to do anyway. And yes, I think more transparency is good, although it feels like we say that at the start of every chairmanship, and somehow, you know, we have these discussions later.
Szoka : What’s the breakdown? Is it the people grow in office? What happens? Why doesn’t that commitment occur?
Sohn : It’s easier to be non-transparent, I just think. You used to be at the agency, but even I find that it’s easier to pick up the phone and talk to somebody you want to do them a favor. It’s just as bad–it’s as bad now as it was the last term.
Campbell : And I’m suggesting, when I said there may need to be some legislative requirements around process, that if you don’t have a timeline, it’s easier to take your time. I was pointing out one particular, specific type of procedural issue, but if you can do something at the bureau level and you do not have to submit it to your fellow commissioners and you’re not sure you’ll get them, then oh great, let’s do it at that level. Then, it never gets reviewed. Those are the types of things that just aren’t raised. Ideally, they would be voluntarily resolved by whoever the chair is.
Szoka : I just came across a quote from Alfred Kahn yesterday. Alfred Kahn, of course, deregulated transportation. He always said that his great regret in life is that he didn’t abolish the FCC instead of the Surface Transportation Board and so on. He, the liberal Democrat, said “The dispensation of favors to a select few is a political act and not a judicial one.” And that was really at the core of his approach to get back to Ray’s concerns about the rule of law. Gigi? Thoughts?
Sohn : As I said before, I think the switch to an all-IP network encompasses all the authority questions we have been talking about; I think that’s really going to be the number one thing. One thing I would like the next chair to do is actually have an agenda saying this is what I’m going to do and how I’m going to do it. As opposed to having industry dictate the agenda. Congress did for a little while with the National Broadband plan, but what happened with that plan? Not a whole heck of a lot has been implemented. I’d actually like to hear a chair say: this is what I believe in, this is what I plan to do, and this is how I’m going to do it. It gives us something to judge that person by in the next 2-4 years.
VIII. Conclusion
Szoka : One final provocative question. So Alfred Kahn did what people thought was impossible, which was actually taking down an entire regulatory regime. The Progress & Freedom Foundation was first started and very early, one of its first papers was on the abolition of the FCC. This probably seemed a little crankish in 1993, but in the last few years you’ve seen various people, from Larry Lessig to others actually say “You know what, we’d actually be better off without the FCC. We’d be better off starting over.” What do you think? Are we better off with the FCC? Are we better off with some.. would other problems exist, in terms of market power and consumer protection, and is the FCC the proper vehicle to address those?
Sohn : It could be under the right reforms and under the right conditions. Right now it’s not, but I’m not ready to say blow the whole thing up. There are days where I do feel that way, but I think, overall, it needs a strong leader. I’ve been doing this, for what, 25 years, and we’ve had some great chairs and we’ve had some lousy chairs and it really has depended. So I’d say leadership and some serious process reforms are the things that are needed. I’m not ready to give up yet, even though, like I said, there are days that I am.
Gifford : I think it’s also instructive looking back again at Alfred Kahn, Berin. If you recall his recounting of what he intended to do at the Civil Aeronautics Board and what he ended up doing, they were two different things. He went to the CAB not to shut it down, but to reform it. He was going to bring the kind of economic rigor that he had as an academic to airline regulation. He had an A-list of minds with him and around him. He said very soon after getting there that he realized it was unreformable. Not just the agency itself, but kind of the barnacles that had grown around it, called legacy airlines and the way they did business. It was only after being there that he decided, no, we’ll have to put this out of business rather than just reform it and make smarter regulation happen. I don’t know if this is a universal lesson, but I want to raise it.
Szoka : And yet, Ray has spent so much time working on it, he actually is trying to reform the FCC, instead of as Gigi asked, just transferring that authority to the FTC. So does that mean you don’t think it’s time to give up on the FCC yet?
Gifford : I’m with Gigi. It depends on the day.
Szoka : Fair enough.
Campbell : You know, there are certain elements of it that are also intertwined with international law. We don’t usually think of spectrum this way, but there are elements of ITU radio regulations that are binding treaties. I just realized the camera probably hasn’t picked up anything I’ve said because I’m not leaning forward. But there are elements that are bound up in international law, like I’ve thought we should go to a property rights like regime for spectrum for awhile. Congress hasn’t shown a lot of interest in doing that. If you don’t do that, then you probably need the FCC for that. This is a long-winded way of saying that these are complicated questions and I think there are certain elements you can probably eliminate altogether and other things you should probably think long and hard before doing that. In the interim, some procedural reform could be helpful.
Szoka : From my point of view, to close this out, I would simply refer you that quote line from the Great Gatsby about it might be the case that the FCC goes bankrupt slowly, and then go at once. It might be the case that a trickle of smaller changes may end up inching towards real fundamental reform. But as with bankruptcy, we’ll see with time. Please give a hand to my peers for coming today. I look forward to seeing you all at future round tables in this series. Again, on video competition, privacy, and public safety. So thank you for coming.