Broadcasting&Cable

The Federal Communications Commission's former general counsel Jon Sallet made the case for FCC Chairman Tom Wheeler's targeting of Internet service providers as the primary threat to Internet openness. That came in a speech Dec 16 at the Capitol Future of Broadband Competition Conference in Washington (DC). In what sounded like a farewell address, Sallet—who moved to the Justice Department's antitrust division as deputy assistant attorney general earlier in 2016—delivered a lengthy address on competition and broadband providers summed up in the first subhead in the transcript of his speech: "Telecommunications Network Providers Have Incentives and Abilities To Artificially Shape Competition And Have Long Been Associated With the Exercise of Gatekeeper Power." The speech was about an approach to mergers that presupposes ISPs are going to use that power unless reined in.

Sallet said he wanted to be clear that he wasn't saying that ISPs "are the only players in the Internet ecosystem that can ever be capable of developing or exploiting this power." But that was essentially the only mention of the edge beyond talking about how online video could be discriminated against by ISPs.

CenturyLink has secured an $11.4 million contract (three years at $3.8 million per year) to provide VoIP service to the state offices of US Senators. The contract covers hardware, software, training and help desks for more than 450 offices. Yes, there are still only 100 senators, but many have multiple state offices. The contract is with the Senate Sergeant at Arms, who handles the telecommunication and tech support for senators' state offices as well as their DC home base. The contract could actually total $26 million if the government picks up four one-year options.

Federal Communications Commission Chairman Tom Wheeler said commissioner Jessica Rosenworcel's fingerprints are on "so much of what this agency has done." Chairman Wheeler praised his fellow Democrat as she prepares to exit the commission following a fractious Senate's failure to vote her re-nomination by President Barack Obama. "You have been a long-term leader in communications policy on the FCC staff [a top advisor to former commissioner Mike Copps] on the Senate Staff [as a top advisor to former Senate Commerce chairman Jay Rockefeller] and here as a commissioner," said Chairman Wheeler. "I don't think that there is an end point on that leadership and expect to see a lot more out of you in the coming years continuing that great tradition."

Chairman Wheeler pointed to her early championing of Title II reclassification of Internet service providers. "I remember you saying to me, 'no, the way to go is Title II,'" he said. The "no" reference is because Wheeler's initial attempt to address a court remand of the original Open Internet order did not include reclassification. "You have always been attuned to the public safety community," he said, "and have been the champion of making sure that we live up to the first title of the Communications Act, which is public safety."

Ultimately, Federal Communications Commission Chairman Tom Wheeler had a clear sense of his mission, which was to make sure that broadband—the transformative technology of this century—was available to all—which he combined with a distrust of the marketplace. Chairman Wheeler is a famed student of history, which includes the struggles to get electricity to the farm wives still beating clothes on rocks well into the last century. Some can fault—and many in the industry do—how he chose to accomplish his task, but it is hard to argue against trying to get broadband to everyone.

Chairman Wheeler signaled from day one that he viewed the FCC as a consumer-focused agency and that they, not industry, were his constituency. But again, media companies argue that they serve consumers too and could serve them better freed from some of the regulations Wheeler imposed or refused to un-impose. He also made it clear that he viewed edge providers like Google and Facebook, as creative forces for good in need of protecting against Internet Service Providers and their monopoly conduit into the home.

The Federal Communications Commission did not extend the small operator waiver from the Open Internet order's enhanced transparency requirements by the Dec. 15 deadline. The FCC's Consumer and Governmental Affairs Bureau extended it in 2015 by a year. In a sense, not extending it does not have much practical effect because the enhanced transparency rules, from which operators are being exempted, have not even gone into effect yet. But industry compliance officers and lawyers like regulatory certainty, and this is not it.

FCC Chairman Tom Wheeler circulated an item extending the waiver, but commissioners could not agree on it. The sticking point remains the sub trigger at which the waiver takes effect. Republicans want it to apply to operators with 250,000 subs or fewer, while Democrats want to stick with the current, or until Dec. 15 current, 100,000 or fewer. Bills that passed the House and Senate Communications Subcommittee raised the trigger to 250,000 and some legislators this week were pushing the FCC to extend the waiver. The American Cable Association had been pushing for the waiver extension, so it was not pleased at the lack of regulatory certainty.

President-elect Donald Trump's Federal Communications Commission transition team has met twice with FCC Chairman Tom Wheeler, the chairman said at his post-meeting press conference. Chairman Wheeler said he had met once individually with team leader Jeff Eisenach and with all three members on a second occasion. He called them good meetings and said he made it clear that if there were any issues that came up, "I was the guy to call first to solve those." Chairman Wheeler has experience in transitions, having helped the Barack Obama Administration move in back in 2008 as an FCC transition team leader.

Republican Commissioner Michael O'Rielly of the Federal Communications Commission says he shares many of the policy positions of President-elect Donald Trump and advised that while the FCC still has important functions—like spectrum management—how those are handled going forward is an open question. What is not is whether a Republican FCC, if Commissioner O'Rielly has anything do about it, will take a whack at the regulatory underbrush and the Title II-related actions—on broadband privacy and zero rating, for example—of the current administration.

Commissioner O'Rielly says the commission in a Trump Administration should focus on four main things: 1) remove regulatory underbrush, which he said were regulations that have been on the books "for a long time" but make no sense in the current marketplace; 2) undertake structural reforms of the commission itself, saying that structure has "broken down"; 3) undertake a pro-growth, pro-innovation agenda, for example antenna citing for wireless nets; and 4) undo bad and partisan policies, where he said he and his fellow Republican Commissioner Ajit Pai's input was not "even given the time of day."

A bipartisan, bicameral group of legislators has asked Federal Communications Commission Chairman Tom Wheeler to extend the waiver the FCC granted to smaller cable operators in 2015 from the enhanced transparency requirements in the FCC's Open Internet Order. Those smaller operators have argued that the reporting—on network performance particularly—are an undue burden.

The FCC's Consumer and Governmental Affairs Bureau granted the waiver in 2015 for systems under 100,000 subscribers and there were bills in the House and Senate to do the same, while upping the sub trigger to 250,000. But the bills did not make it into law, and the waiver expires Dec. 15 unless the FCC takes action. The legislators—including incoming House Commerce Committee Chairman Greg Walden (R-OR) and Sen Joe Manchin (D-WV)—urged the chairman to extend the waiver. "Without commission action, small businesses soon face regulatory uncertainty and will potentially be subject to burdensome requirements," they wrote. "Before the current extension expires, the Commission should extend the enhanced transparency exemption and begin the process of considering whether the definition of small business entities to which the exemption applies should be modified [i.e. expanded to match Congress' 250,000 or perhaps another figure]."

Broadband capital expenditures (capex) was down almost $1 billion—to $76 billion—in 2015 over the year before, according to USTelecom’s annual broadband investment report. Of that, wireless accounted for 43%, wireline 35% and cable at 22%. By contrast, from 1996 to 2015, cable's slice of the pie was 17%, wireless 33% and wireline 51%, so the landscape is changing as wireline's share of capex has declined and wireless and cable's have grown.

Internet service providers, including USTelecom, have argued that the imposition of Title II regulations would result in decreased investment, though Federal Communications Commission Chairman Tom Wheeler has suggested that would not and has not been the case. USTelecom pointed to a Progressive Policy Institute report earlier in 2016 that showed sluggish growth and attributed it in part to regulatory uncertainty. The uncertainty now is just how long it will take either a Republican FCC or Congress to reverse the Title II decision. The report shows modest increases in capex between 2012 and 2014 before 2015's decline. Over the 20 years the report covers, broadband industry capex has totaled $1.5 trillion.

CenturyLink and Level 3 Communications have filed their merger (license transfer) applications with the Federal Communications Commission and their pre-merger notification to the Federal Trade Commission and Justice Department.

The merger is valued at $34 billion including debt. Along with the AT&T-Time Warner merger, it will be one of the first big media mergers to be vetted primarily under the Donald Trump Administration. Trump has talked about reducing regulations but also about blocking consolidation among media outlets. The FTC or DOJ—they divide those reviews but DOJ almost always handles media mergers—will vet the deal for antitrust issues and either give it a green light, a green light with conditions agreed to by the parties, or file suit to block it. The FCC will vet the deal for public interest issues that go beyond a straight antitrust review but will look at competition issues as well and consult with DOJ—they coordinate their reviews and stay in touch. As the companies pointed out, that is the first regulatory step toward the merger. Among the pro-consumer benefits the companies are touting are better service, more competition, more broadband deployment and investment.