Law360, New York (December 16, 2016, 12:09 PM EST) -- With the transition in presidential administrations well underway, we have a good idea on what the Federal Communications Commission will focus on over the course of 2017, and the agenda looks both more limited and very different than it has looked over the last eight years. To date, Trump officials have identified Jeff Eisenach, Mark Jameson and Roslyn Layton as FCC transition advisors. All three have associations with the American Enterprise Institute, a free market advocacy group. All are on record as favoring a deregulatory approach to the communications industry. The frontrunner for the chairman’s job, current Republican FCC Commissioner Ajit Pai, is of like mind, having opposed much of current Chairman Wheeler’s agenda over the last four years. Given that a Republican administration means that the president’s party will hold three of the five commissioner seats at the FCC, their agenda will hold sway for at least the next four years.
It’s the Spectrum, St**id
Spectrum issues will likely dominate the FCC’s affirmative agenda over the next year. Both Republicans and Democrats agree on the FCC’s spectrum management role, at least at the broad brush level. The agency is slated to complete the buy-back and auctioning-off of broadcasting spectrum in 2017. The process is already well underway, and represents a bipartisan effort to repurpose spectrum that has become much more valuable since broadcasters first availed themselves of their 6 MHz slices in the analog age. The repurposed spectrum will be put to use for mobile broadband offerings across the country.
The FCC is also in the process of identifying even more spectrum for mobile broadband and other uses in its “Spectrum Frontiers” proceeding, the FCC’s efforts to allocate spectrum for the next generation of wireless networks, “5G.” This past summer Commissioner Pai and his fellow Republican Commissioner Michael O’Rielly joined their Democratic colleagues in identifying bands for 5G services and proposing additional frequencies for consideration. FCC transition team advisor Roslyn Layton has been a vocal advocate for spectrum sharing approaches to wireless planning. Commissioner Pai, too, has campaigned for portions of 5G spectrum to be made available to the public for “unlicensed” uses like Wi-Fi, Bluetooth and more.
The FCC will also be busy parsing no less than a baker’s dozen of applications for nongeosynchronous (NGSO) satellite systems. These are satellites that fly much lower than those traditionally used for communications, and their systems consist of dozens, or even hundreds, of small, lightweight satellites. Their owners plan to use them to offer near-ubiquitous broadband coverage across the globe. This will be a significant undertaking for the FCC’s International Bureau, which hasn’t seen this type of interest in NGSO communications since the 1990s. Like the 1990s, industry experts expect that the initial bevy of applicants will winnow itself down as more speculative systems drop out before having to post the $5 million dollar bond that NGSO satellite systems have to pledge to the FCC upon issuance of their license. At issues among the remaining applicants will be how to share the available spectrum for their operations, an approach that FCC rules mandate.
The FCC has played a role in dissuading several significant mergers in recent years, including AT&T/T-Mobile, Comcast/Time Warner Cable and Sprint/T-Mobile. At the same time, over the last eight years the FCC approved a slate of other major mergers, including Comcast’s merger with NBC Universal and AT&T’s takeover of DirecTV. The market-based approach is likely to hold sway in a deregulatory-minded FCC, increasing the chances for even mega-mergers to get past the FCC’s review process. While President-elect Trump voiced his opposition to the announced merger between industry giant AT&T and media powerhouse Time Warner Inc. while on the campaign trail, it’s unclear whether this opposition will continue throughout the regulatory approvals process for the deal. It seems unlikely that an FCC chaired by Commissioner Pai would prove less friendly to industry consolidation (especially in the context of a vertical merger) than the 2010 FCC led by Chairman Julius Genachowski, a Democrat, and which approved the largely vertical merger between Comcast and NBC Universal.
The newly constituted FCC will also likely take up the agency’s media ownership rules — rules that limit companies’ abilities to hold multiple media assets in the same market. Earlier this year the agency voted to keep most existing restrictions in place, with both Republican Commissioners Pai and O’Rielly dissenting in strong terms. Were the FCC to relax these rules, we can expect a slate of mergers between newspapers, radio and TV stations across multiple markets as industry players seek economies of scale.
Net Neutrality, the Unwanted Stepchild
Net neutrality is also sure to be on the FCC’s agenda, although more as an unwanted stepchild of the new majority. The deregulatory focus of the incoming administration and new FCC chairman are likely to focus strongly on undoing these rules. Commissioner Pai opposed the rules when they were passed, and all three of Trump’s FCC advisors have criticized the FCC’s approach. The internet is abuzz with plans to kill the rules in their entirety, but sometimes such plans are easier said than done. The rules have been in effect since mid-2015, so change would take affirmative action on the part of the FCC or Congress. There seems to be an appetite among Republicans in Congress for a full rewrite of the Communications Act, the FCC’s governing statute. Provisions that curtail or even eliminate the open internet rules are being considered for the rewrite, although the leading thinking is that some elements of the rules might be preserved in the statutory approach. Advocates for a full repeal would have to get at least some Senate Democrats on board in order to ensure cloture, and therefore a vote, on any bill in the upper chamber.
The statutory approach to dealing with the FCC’s foray into net neutrality may seem more straight-forward, being unburdened by open rulemaking requirements and their accompanying lengthy process. But the realities of today’s congressional politics, the depth of the Republican congressional agenda, and the relative priority of communications law reform make the prospect of definitive congressional action in the near term appear unlikely.
The newly configured FCC itself, of course, could move against its own rules by opening a proceeding to reconsider both the rules and the FCC’s classification of broadband internet access as a common carrier service. This approach would take a year or more while the FCC collects and considers public comment as the Administrative Procedures Act requires, during which time the open internet rules would remain in effect, as least as a technical matter. At the same time, we would expect to see little appetite for enforcing the rules at the FCC once their critics are in the majority. The general “reasonable conduct” open internet rule for broadband providers, in particular, seems likely to wither on the vine. The bright line rules against blocking, throttling and paid prioritization would be harder to avoid addressing, especially if a user makes a formal filing with the FCC seeking enforcement.
What does seem clear is that the FCC’s recent interest in the zero rating plans of major wireless carriers such as AT&T and Verizon is likely to drop precipitously next month. Zero rating happens when a carrier exempts certain data — either because of its type or (more usually) source or origin — against otherwise relevant data caps on an internet user’s plan. In its open internet order, the FCC declined to rule definitively against such plans, noting that the agency would address the plans under the “no unreasonable conduct” standard in the rules. Just this month, the FCC called out, in strong terms, both AT&T and Verizon on their zero rating of affiliated content (AT&T with its affiliate, DirecTV’s content, and Verizon Wireless with its affiliate, Go90’s content). In both cases FCC staff has opined that the zero-rating plans unfairly disadvantage third parties vis-à-vis the affiliate. Both Commissioners Pai and O’Rielly strongly criticized both inquiries in words making it clear that the commissioners would allow such plans.
Efforts Left Behind
Other areas of activity for the FCC over the past year have already been left behind. These include the current chairman’s efforts to force competition in the set top box market and major reform to the business data services market (moderate speed data connections to businesses). The chairman has been unable to get a vote of the commissioners on the former item, and he took the latter item off the agenda for the commission’s November 2016 meeting after Republicans in Congress asked him to shelve any nonconsensus matters. And it is highly unlikely that we will see new regulatory forays into these areas with a deregulatory-minded FCC.
With all the talk about deregulation, a federal hiring freeze and an agenda likely to focus on limiting intervention in the marketplace, it seems likely that the FCC will come out of the next administration on the leaner side. Whether or not you think that this is a good thing depends on many factors unaddressed here. What is clear is that, today, the FCC’s 2017 agenda is both more circumscribed and very different from what many thought it would look like as little as two months ago. I look forward to seeing how it all plays out.