In One Day FCC Voted To Both Streamline Competition And Disregard Competition

Image courtesy of Consumerist

It was a busy, if confusing, morning for the FCC. The Commission held its monthly open meeting, where it considered more than a half-dozen items, resulting in everything from harmoniously unanimous votes to contentious disputes among the three sitting members. Oh yeah, and Chairman Ajit Pai also got “rickrolled” in person.

Among the many issues the commissioners discussed today were proposals to streamline certain kinds of broadband deployment, plans to stop caring about other types of broadband, and reversing a rule that could have big ramifications when it comes to media consolidation.

Making Competition Easier

The Commission voted unanimously today to kick off the consideration period for a proposed rule [PDF] that suggests many changes to speed up and streamline fixed (wired) broadband deployment nationwide.

Among the many proposals in the Notice of Proposed Rulemaking (NPRM) are changes to pole attachment and one-touch make ready rules. These are the completely boring, utterly unglamorous, crucially important regulations that can make or break the chance for a broadband competitor to, well, exist. After all, you can’t connect someone’s house to your new service if you can’t run the wires to their town and their home.

The FCC has guidelines for pole attachment and permitting that about 30 states use instead of their own state-level rules, but those come with long notice, waiting, and compliance periods built in such that actually getting anything done can take months or years.

The NPRM asks if the FCC should try adopting one-touch make-ready guidelines like the ones some localities already use in order to make their cities more appealing to newcomers. For example, Nashville adopted such a rule to pave the way for Google Fiber to build infrastructure in town. Incumbents file lawsuits against cities that pass OTMR rules to block them and therefore slow down or halt newcomers’ attempts to compete, but if the rule were at the federal level suing one city at a time would become a much less viable strategy.

However, the NPRM includes a few other “streamlining” measures that concerned Commissioner Mignon Clyburn, although she still voted in favor of considering the proposal.

Her concerns have to do with legacy — copper wire — phone networks, and how carriers are transitioning them to modern, internet-based, fiber-using (VoIP) service instead.

Back in 2015, the FCC adopted a rule saying that a company ripping out legacy copper wire lines and replacing them with fiber doesn’t need to seek permission from the Commission to do so, but it does need to prove that the new service is equally sufficient to the old service, and it also needs to provide at least three months of advanced notice to the consumer… and those take time that the NPRM asks about reducing.

“The Commission seems to view paying customers who subscribe to legacy services as a barrier to infrastructure deployment, and this is problematic for me,” Clyburn said.

“A study from last year found that approximately 20% of Americans view landline telephone services as the most important communication service … this group may include the most vulnerable members of our society. … This item, as it was originally drafted, primarily ensures that large carriers, not consumers, got what they want.”

“It is no secret that it would indeed be more efficient for carriers to migrate all of their customers off legacy services as quickly as possible,” she concluded, “but as regulators, we are charged with protecting the public interest and the public interest standard goes beyond operating fees. Rather than properly wrestling with these difficult issues, the commission implies that efficient technology transitions override consumers’ desires and consumer protections.”

The NPRM now kicks off a comment and response period that will last for a few months before the Commission makes any final decisions.

Eliminating Competition

You may (or may not) recall that about a year ago, under the leadership of former chairman Tom Wheeler, the FCC started to consider an overhaul to the business data services (BDS, formerly known as “special access”) market.

More: This overpriced telecom market you never heard of costs you an extra $20 billion a year

The BDS market is for all those uses of phone lines that are critical to making the non-residential world run, but that you don’t necessarily think about. For example, the lines that let your credit card payment data travel from a store’s cash register, or the “middle mile” of wire that connects cell phone towers to the fiber networks that power them.

The market kind of ossified into a bunch of very entrenched carriers over the last 30 or 40 years, leaving some areas without much or any competition — which, in that way it always does, leads to higher prices.

“If we want to maximize the benefits of business data services for U.S. consumers and businesses, we need a fresh start,” Wheeler said about it at the time. “The marketplace is changing. Cable companies are entering the market, and Internet Protocol (IP)-based technologies can now deliver services traditionally satisfied by legacy, circuit-based products. Yet, competition remains uneven, with competitive carriers reaching less than 45 percent of locations where there is demand.”

The final rule on which the Commission voted today, however, had a very different view of competition than what Wheeler first discussed in 2016. Instead, the FCC now officially views BDS competition as “robust and vigorous” rather than lacking.

So how does it now define competition? The new Order determies that market is deemed competitive if 50% of the buildings in a given county are within a half mile of a location served by a competitive provider.

This means that if there’s competition across the county line from you, but not in your county, your location is still considered competitive if you live within a half-mile of that border — even if carriers refuse to serve your location.

Commissioner Michael O’Rielly called the order a “positive and welcomed step to eliminate unnecessary regulation.”

Chairman Pai, teasing out a winding metaphor about Alice in Wonderland, spoke at length about why reducing regulation would benefit everyone, saying, “We have collected the data, analyzed the data, and compiled plenty of public input and now is the time to act.”

Commissioner Clyburn, however, did not mince words over her extreme frustration and disappointment with the measure, delivering an uncommonly scathing dissent.

Describing how time and time again the Commission and D.C. at large talk about protecting and promoting small businesses as “the backbone of the American economy,” Clyburn accused the FCC of turning its back on them.

“Instead of looking out for those millions of little guys, the Commission has once again chosen to side with the interests of a handful of multibillion-dollar providers,” she said.

“This order puts a hefty nail in the coffin of wireline competition. … I am not alone in expressing concern about this order. Members of Congress, industry, the Small Business Administration Office of Advocacy, and even the European Union have substantial concerns about the direction of this item, but when the goal is deregulation at all costs, we should not be surprised that those concerned calls fall upon deaf ears,” she continued.

“Make no mistake, these are highly complex issues,” she finished, “and yet the conclusion that I am forced to reach today is that this order is one of the worst I have seen in my nearly eight years at this Commission.”

She added that she found the order “abhorrent,” “dizzying,” and “arbitrary and capricious” — the last being the language that gets used in lawsuits to overturn regulation.

Media Consolidation

In another contentious move, the Commission granted an Order for Reconsideration having to do with the UHF discount.

If you haven’t been able to remember the difference between UHF and VHF since TVs still shipped with two dials (or if you were born after that, and have no memory of it at all), you’re not alone. UHF was the bottom knob back then, channels 14 and up.

The UHF discount has to do with determining how big is too big for a TV station — what percentage of the airwaves in the country it can own.

There’s a cap for nationwide broadcast reach: 39%. If you broadcast in the UHF spectrum, you need to stay at or under that limit to be in compliance with the law.

In 2016, the FCC changed how it calculates a station’s reach towards that limit. UHF stations had previously been given a “discount” that made their potential audience “count” as only 50% of the households they could reach.

So, for example, if you could reach 1 million people in a given metro area, for calculation purposes that would count as 500,000 people. On the national scale, that could very quickly add up to reaching more than 39% of households while still, on paper, reaching not even half that.

Today’s FCC action reversed that, and re-established the discount, making those stations once again permitted to calculate they reach half of the households they can for regulatory purposes.

While this is all fairly arcane regulatory stuff from the consumer perspective, it can have huge effects down the line, permitting media groups like Hearst, Sinclair, and others to continue growing their empires.

O’Rielly was in favor of reverting the rule, as he disapproved of altering it in the first place last year.

Pai, too, spoke in favor — not just of reverting the rule, but in fact of finding a chance to revisit the concept of a national cap altogether. “Today,” he concluded, “the FCC is wiping the slate clean and later this year we will begin a new proceeding to review comprehensively the fguture of the national cap, including the UHF discount.”

Clyburn, however, once again stood staunchly against the Commission’s action, saying that “I am not a betting woman, but mark my word: this Order will have an immediate impact on the purchase and sale of television stations.”

“This order will enable the largest broadcast station owners to grow even larger and those aspiring owners that we meet and try to give up to at conferences .. your dream of owning and competing as a new entrant or a smaller broadcast owner will become a nightmare, because no justification exists for this order.”

“Consumers benefit from competition,” she concluded, “and as regulators we are supposed to be the public interest’s torchbearers for this nation. Today, I’m sad to report, we failed miserably.”

Privacy and Net Neutrality

While the Commission did not formally discuss or vote on any measures related to consumer privacy or net neutrality today, at the traditional post-meeting press conference, reporters hammered Pai with questions about both.

One reporter asked Pai about what he and the FTC have planned to do, now that matters of privacy related to ISPs can no longer be handled by the FCC.

The answer? Nothing. Not yet, at least.

“We haven’t yet sat down with the chairman and her team,” Pai admitted. “But the sentiment remains the same … and so in due course, we’re going to make sure that we work cooperatively with the FTC to figure out a way to do that.”

Nor have he and his counterpart at the FTC sat down to hammer out a privacy framework, he added in response to follow-up questions.

As for net neutrality, another reporter asked about Pai’s meeting earlier this month with telecom trade associations — the groups that represent the Comcasts and Verizons of the world — in which, sources say, he outlined a way to kill off the Open Internet Rule.

He confirmed that he’s been meeting with many companies, “and the goal here is pretty simple,” he added.

“I’ve been consistent in my view that I favor a free, open internet, and that I oppose Title II. I’ve simply been soliciting thoughts on how to secure the online consumer protections that people have talked about, and that’s how we proceeded.”

In response to follow-up questioning, he said he was looking for a “diversity of views among a diversity of stakeholders,” and added, “I think everybody, certainly in this Commission, favors a free and open internet. It’s what we had prior to 2015 when these regulations were adopted on a party-line vote, and I think everybody needs to recognize that there’s common ground here.”

But, he continued, “In my view, Title II has had harmful effects on the marketplace. It has depressed investment in this country in terms of capital expenditures by broadband providers, big and small.”

(The numbers for the big guys do not appear to back that up.)

“I think going forward,” he concluded, “we want to make sure we have the light touch regulatory framework that induces investment and competition. Those are things that consumers benefit from at the end of the day … I’m focused on trying to find the common ground here, so that we can move forward in a way that benefits everybody.”