Once again, mega mergers in the media and communications sector have focused the attention of both Wall Street and Washington on the Federal Communications Commission’s (FCC) policies and practices. In a deal worth more than $55 billion, the proposed merger of Charter Communications with Time Warner Cable is one of the biggest transactions to come before the FCC in recent years. Financial analysts, private equity, hedge fund and institutional investors — along with consumer advocates, competitors and content producers — are spending lots of time handicapping whether the deal gets approved and, if so, under what conditions.
{mosads}In the wake of the failed Comcast-Time Warner Cable merger in early 2015, the Charter deal seeks similar synergies, including a bigger footprint in the burgeoning broadband and Internet video market, at a time when online video consumption is exploding. The “New Charter” would rival Comcast as the second largest cable company of its type. It would compete with the recently merged AT&T-DirecTV, which earned FCC approval in May, and was valued at $48.5 billion. Not far behind is a planned acquisition of Cablevision by French company Altice, valued at $18 billion. That, too, will require approval from the FCC, but could face political, labor and community opposition in New York state, which also must approve the deal.
With both consumers and investors wanting more, the FCC is under pressure from Capitol Hill and the capital markets to act on these deals expeditiously. Money does not wait, as the adage goes, and a speedy merger review is the exception, not the rule. Most media companies face the FCC’s version of the Bataan Death March before their deals are approved. AT&T’s merger took a staggering 408 calendar days. When companies emerge from this process, it is not always clear that the public interest has been advanced. A rebalancing of the consumer and business imperatives is long overdue.
A beleaguered but critical agency
By any objective measure, the FCC is a beleaguered agency. Browbeaten by Congress, criticized by consumers and pilloried in the press, the FCC has seen brighter days. Whether its recent woes are due to an intrepid chairman, errant enforcement or the mere zeitgeist of the moment, is hard to say. But due to a stumbling series of regulatory rulings, the FCC has become a shadow of its sterling past. On topical issues affecting consumer protection, data privacy and Internet behavior, the FCC has been eclipsed by the more disciplined and detached demeanor of the Federal Trade Commission (FTC). And in humbling fashion, the partisan divide has been laid bare for the world to see time and again.
Despite these dysfunctions, the FCC is as critical as ever in the communications ecosystem. It remains one of the most important and powerful regulatory agencies in the U.S. government, and perhaps in the world. It is home to a cadre of talented, dedicated and hardworking lawyers, economists, engineers and administrators, who have eschewed the lucrative private sector in favor of selfless public service. With statutory authority to regulate the nation’s communications systems, devices and technology, the FCC holds the power to approve or deny mergers; assess liability; levy fines and penalties; bring suit; award licenses and contracts; allocate spectrum; conduct hearings and inquiries; promulgate and interpret rules; establish standards and codes; and exercise a wide range of regulatory actions affecting television, radio, telephone, wireless, mobile, Internet, cable, satellite and international telecom services in the dynamic communications and technology sector.
The power of approval
Congress long ago determined how the FCC should review mergers, mandating that it determine whether “the public interest, convenience, and necessity” would be served by approving merger applications. That determination involves an assessment of the competitive impact of the transaction, but unlike the reviews by the Department of Justice or the FTC, the FCC looks at whether competition would be enhanced, not just harmed, by the combination. Further, the FCC standard involves an examination of the likely effects of the transaction on the private-sector deployment of advanced services, the diversity of license holders, and the diversity of information sources and services available to the public. In the communications pantheon, FCC rulings have the power to move markets, especially when it comes to broadband, cable and video, where the commission is the gateway to growth and expansion. Its approval can empower an aspiring Daedelus; and its denial can ground any Icarus daring to soar too close to the sun. Just ask Aereo.
Anti-business bias
As the commissioners deliberate on the fate of entire industries, their decisions have unveiled a disturbing anti-business bias. Under the beneficent cloak of consumer protection, the FCC has struck blow after blow against business and industry, including an assault on legacy broadcasters and a wholesale giveaway to plaintiffs’ lawyers on the Telephone Consumer Protection Act. When combined with inflationary enforcement, jurisdictional overreach and the claw back of well-settled rules, the FCC has become inimical to the needs, interests and well-being of the telecommunications, media and technology sector it oversees.
While the FCC is essential, its reputation as an independent and expert agency is open to question. Moreover, the enmity between the commission and the business sector is both unnecessary and unsustainable. If there ever was a time for change, it is now. The FCC should use its considerable suasion to strike a pragmatic balance between the interests of big business, new entrants and consumers in these mergers. Now that would be acting in the public interest.
Hoffman is chairman of Business in the Public Interest and adjunct professor at Georgetown University’s Communication, Culture and Technology Department. He served as a chief of staff and senior legal adviser at the Federal Communications Commission from 2013 to 2015.