Under new Trump chairman, FCC means business

With a market capitalization exceeding $11 trillion, the telecom, media and technology (TMT) sector is a major driver of the global economy. As consumer demand for information, communications, data, entertainment, video, voice and mobile services grows, so too does the TMT footprint.

Among the Fortune 500, for example, there are more than 25 U.S.-based companies from this industry alone, including AT&T, Apple, Verizon, Microsoft, Alphabet, Comcast, Disney, 21st Century Fox, CBS, CenturyLink, Viacom, Charter Communications, NewsCorp, Level 3, Cablevision, Discovery, Frontier, Time Warner, Motorola and Netflix, among others. There are other smaller and privately held companies that also could be included in this burgeoning sector.

An indispensable, but quite unpopular, element of this vast ecosystem is the Federal Communications Commission (FCC), arguably one of the most powerful regulatory agencies in the U.S. government — and perhaps in the world. It is a federal agency staffed by exceptionally capable and committed attorneys, economists, engineers and professional public servants who belie the term “bureaucrat.”

With statutory authority to regulate the nation’s communications systems, devices and apparatus, 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 multitrillion-dollar TMT sector.

Billions of dollars in investment capital, profit and revenue often hinge on a single decision or rule from the FCC.

Elections have consequences

Under President Obama and former Chairman Tom Wheeler, the FCC became a lightning rod for Congress, which tightened its legislative oversight of the agency. Controversial rulings on media ownership, net neutrality, spectrum auctions, licensing and regulatory procedure, and privacy, among others, prompted intense criticism from outside and inside the agency.

{mosads}The litany of hyper-regulatory actions unveiled a deeply anti-business bias which struck blow after blow against the TMT sector under the beneficent cloak of consumer protection and the public interest. Coupled with inflationary enforcement, jurisdictional overreach, and the claw back of well-settled rules, the Wheeler FCC found little favor with industry.

 

With the election of Donald Trump as president, all of that changed — virtually overnight. Conservative FCC Commissioner Ajit Pai was elevated to the chairman’s seat, and he immediately charted a course toward the right. For all those matters on which he vociferously dissented in the past four years, comeuppance has been quick.

The better business agency

As much as the Wheeler FCC was known for its pro-consumer bias, the Pai FCC will become known for its pro-business bent.

It is not that consumers will be forgotten; it is that Pai is an unabashed free-market trumpeter and proponent of limited federal government. As such, he is expected to encourage the private sector not only to pull its weight on competition, but also on consumer protection.

But he will not mandate — through regulation — such specific consumer outcomes. In his first two weeks as chairman, Pai already has reversed some of the most troubling and hotly contested rulings imposed under Wheeler.

This swift action has been soothing balm to the wounds of companies involved in the TMT sector.

In opinion after opinion, Pai maintains that the key challenge for businesses — both large and small —is complying with an overweight regulatory regime. This philosophy, articulated often and eloquently by Pai, sits foursquare with the Trump doctrine and will guide Pai’s actions, and most importantly, communications policy, for the foreseeable future.

End of the war on broadcasters

For most of his tenure, Wheeler was at war with the broadcast industry. It started with an out-of-the-blue sucker-punch disallowing joint sales agreements (JSAs) by broadcasters.

Even though JSAs have been integral to the growth and profitability of broadcasters for decades, Wheeler initiated a rule that penalized JSA arrangements for ownership attribution purposes. Pai immediately reversed the FCC’s ban on JSAs. In another move to reclaim lost ground, Pai is expected to reinstate the UHF discount, and to lift the broadcast ownership cap above 39 percent.

Not far behind will be the end of the TV-newspaper cross-ownership ban, which has long since outlived its utility and sustainability.

Each of these actions, while not fodder for daily news, is a big deal for the broadcast industry, and represents millions of dollars for the bottom line. As the failed broadcast incentive auction nears an end, Pai has thrown his weight behind ATSC 3.0, a cutting-edge technology that is expected to give life and value to broadcast spectrum.

Where Wheeler fought the rollout of the new standard, Pai is rolling out the red carpet. Along with his efforts to revitalize AM radio, the war on broadcasters is officially over.

Some have been overheard humming Dinah Washington’s 1959 Grammy Award-winning song, “What a Difference a Day Makes.”

Service providers get reprieve on privacy

Wheeler easily galvanized the cable and telco industry when he precipitously launched an FCC rule-making to “open up the set-top box” to competition. The ill-conceived plan forced industry giants to draw a Maginot line between telecom and tech on consumer navigation devices.

With Pai in the chair, we will not see anything resembling the set-top box debacle. Instead, we should expect a more transparent government-industry process leading to a more sustainable solution for both business and consumers.

When it comes to privacy enforcement, the FCC is by all measures out-of-bounds and over its head. Yet the Wheeler FCC moved to extend its jurisdiction and reach to enforce the privacy practice of broadband providers, contrary to the well-established expertise and jurisdiction of the Federal Trade Commission.

With Congress and most privacy experts squarely at his side, Pai is sure to aright the FCC’s off-course foray into privacy enforcement.

No more net neutrality

The FCC’s dubious authority on privacy enforcement derived from its Open Internet (or net neutrality) rules which were upheld in the Court of Appeals.

Pai, along with House Energy and Commerce Subcommittee Chairman Marsha Blackburn (R-Tenn.), abhorred the net neutrality ruling and have vowed to overturn it this year.

Whether the undoing comes by way of legislation — Blackburn’s Internet Freedom Act or Pai’s Further Notice of Proposed Rulemaking — it is safe to say the days of net neutrality, as we now know it, are numbered.

Turnaround on TCPA class actions

When the FCC chose to interpret provisions of the Telephone Consumer Protection Act (TCPA) in a business-unfriendly way, it gave new life to the growing class action lawsuits against companies in the banking, financial services, retail, energy, healthcare, utility, education and collections industries.

TCPA class actions account for the second-highest number of plaintiffs’ lawsuits and settlements as high as $75 million. While I have flippantly called TCPA the “Total Cash for Plaintiffs’ Attorneys Act,” it is no laughing matter for industry, which has struggled to comply with a strict violation statute and little understanding from the regulatory agency charged with its enforcement: the FCC.

FCC Commissioner Mike O’Rielly warned the agency of the dire consequences of its interpretation of telephone equipment technology. Almost two years and hundreds of millions of dollars later, companies from every sector may get the reprieve from frivolous TCPA litigation they have been begging for.

Both the new FCC and Congress are interested in a commonsense approach to an important consumer protection law that will not penalize businesses for communicating with their customers.

More mergers and acquisitions

As the TMT market grows, the lines separating these related subsectors are blurring at a rapid pace.

Legacy telecom companies not only provide wireless and wireline telephone services, but also deliver broadband to millions of Americans. Growing consumer demand and increased competition are prompting many companies to acquire or build content. Many of the so-called high technology firms have broadened their footprint to encompass new services, because in our world, today, every company is a media company. Leading investment banks and financial institutions are adjusting their organizations, too, as content and distribution providers in North America and Europe are consolidating to create industry giants.

In contrast to his predecessor, Pai is expected to preside over a streamlined merger review process that will impose fewer conditions on companies for approval. This should mean a shorter timeline and more predictability for the outcome of merger applications.

With close ties to the Justice Department and Congress, Pai’s focus is sure to be the bottom line. Beyond antitrust, companies should be prepared to demonstrate how a merger will deliver jobs, new services and innovation to the economy.

In a different lexicon, these might have been referred to as the “public interest.”

The business of America

In January 1925, President Calvin Coolidge addressed the American Society of Newspaper Editors in Washington with a speech entitled “The Press Under a Free Government“:

“There does not seem to be cause for alarm in the dual relationship of the press to the public, whereby it is on one side a purveyor of information and opinion and on the other side a purely business enterprise. Rather, it is probable that a press which maintains an intimate touch with the business currents of the nation, is likely to be more reliable than it would be if it were a stranger to these influences. After all, the chief business of the American people is business. They are profoundly concerned with producing, buying, selling, investing and prospering in the world. I am strongly of the opinion that the great majority of people will always find these the moving impulses of our life.”

Under Chairman Pai, certainty, clarity and competition will become the pillars and foundation for a light-touch regulatory environment. While “competition, competition, competition” was the previous motto, certainty, clarity and commerce will become the pillars of a light touch de-regulatory agency.

Without a doubt, the new FCC means business.

Adonis Hoffman is chairman of Business in the Public Interest and an adjunct professor at Georgetown University. He served from 2013 to 2015 as chief of staff and senior legal advisor to a FCC commissioner.

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The views of contributors are their own and not the views of The Hill.