How Is the FCC Protecting Consumers in the Digital Age?

Speeches by Federal Communications Commission chairmen and commissioners don’t often get big headlines, so you’ll be forgiven if you missed the news of two interesting speeches by key FCC staffers recently that address the commission’s role in protecting consumers. Both speeches highlight the need for the FCC’s expertise in overseeing telecommunications – and working with the other agencies with jurisdiction in this area.

I. Overlapping Jurisdiction in Telecommunications Ensures Consumer Protections

On September 24, Gigi Sohn, Counselor to FCC Chairman Tom Wheeler, was in Providence, Rhode island, to deliver a speech titled, Consumer Protection in the Broadband Era: The Role of the FCC. Sohn highlighted what Chairman Wheeler sees as the two core responsibilities of the FCC: 1) to facilitate dynamic technological change and world-class networks that drive innovation, economic growth and improvements in the lives of the American people; and 2) to ensure that our networks reflect core values: universal access, public safety, and consumer protection. Although Wheeler believes competition is the most effective way to advance the public interest, there are many places, especially when it comes to broadband, where there’s no competition.

Sohn’s speech has two main points. The first is that, in a country where access to the broadband Internet is inarguably critical to full participation in our society and our economy, oversight of the industry by more than one entity is not only prudent, but also necessary. “Each agency brings a different set of requirements, principles, and expertise to these matters and as such,” Sohn said, “the agencies can both complement each other and make sure that there are no gaps in oversight of the companies operating in this space.”

Overlapping jurisdiction with the Department of Justice and the Federal Trade Commission has long been at the core of an effort by some in the industry to strip the FCC of most of its consumer protection and all of its merger authority. The argument is that overlapping jurisdiction is redundant, confusing and leads to inconsistent results that lead to uncertainty and chill investment. But Sohn argues that the authority, core competencies and expertise of these three agencies are different and necessary – and lead the agencies to work together to protect the public.

• The Department of Justice’s expertise is not in the industry or the technology; it is in antitrust law and competition policy. In merger reviews, the DoJ can file suit to block any acquisition that may “substantially lessen competition, or tend to create a monopoly.” It can also order structural and behavioral remedies; remedies limited to those necessary to preserve competition.
• The FTC's mission is to prevent business practices that are anticompetitive or deceptive or unfair to consumers and to enhance informed consumer choice and public understanding of the competitive process. But the FTC is an enforcer, post hoc (or after the fact), of the Federal Trade Commission Act and antitrust laws.
• The FCC is the agency with the greatest expertise about the communications industries, knowledge of how the industries work, and how their services affect consumers. The FCC is best situated to determine whether consumers are being harmed and how to best mitigate that harm. In reviewing commercial transactions, the FCC must consider the public interest convenience and necessity. So, beyond just competition, the FCC considers price and quality of services, the possibility for new services in the future, free speech, diversity of ownership and the free flow of information. Moreover, the FCC, as an ex ante regulator, has the authority to adopt regulations to protect consumers before they are harmed. Ex ante regulation in telecommunications, Sohn argues, provides 1) regulatory certainty for the impacted industries and 2) clarity for consumers so they know what their rights are. As Sohn stresses:

Clear rules backed by strong enforcement moderate and deter bad behavior and as a result, protect consumers from all but the worst actors. In the communications sector, where free speech, privacy, economic wellbeing, civic participation and sometimes even life or death (in the public safety context) are at stake, the American people can’t wait for post hoc enforcement.

Sohn’s second point: The FCC is the preeminent expert on broadband and how consumers can best benefit from it. Through its regulatory and enforcement authorities, as well as its merger reviews, the FCC has become critical to consumer protection in the broadband era. As evidence, Sohn points to the FCC’s stepped-up enforcement of its privacy and data breach rules, open internet transparency rules, rules against Wi-Fi blocking and robocalls, and public safety rules to name just a few.

Sohn gave a clear warning to changing the FCC’s authority: “If the industry were to prevail in stripping the FCC of its consumer protection and merger oversight roles, the agency might be poorer for it, but so would its sister agencies. And of course the biggest losers would be the American people.”

II. Lessons from Recent Merger Reviews

On September 25, FCC General Counsel Jon Sallet visited the Telecommunications Policy Research Conference to deliver a keynote, The Federal Communications Commission and Lessons of Recent Mergers & Acquisitions Reviews. Sallet’s aim was to give insight into the FCC’s thinking as it considered the suggested Sprint-T-Mobile merger, AT&T’s acquisition of DIRECTV, and Comcast’s abandoned bid to buy Time Warner Cable.

Sallet said five basic principles best explain the FCC’s approach to merger reviews: 1) Start with the facts and economic analysis. 2) Consider carefully both traditional competition-law principles and the FCC’s special charge to examine merger-specific outcomes in light of the potential for enhanced competition and service to the public interest. 3) Require conditions that are needed to address potential harms and offer verifiable benefits to consumers. 4) Make sure that conditions are enforceable. 5) Work closely with the antitrust agencies to provide complementary expertise to the advantage of both. The FCC, Sallet said, looks to the future to decide whether the outcomes of a transaction will – or will not – advance the public interest.

Sallet went on to unpack the five principles a bit:

1. Facts and the core methodologies of antitrust are the starting place of the FCC’s analysis. Sallet highlighted two illustrations: Asked for an early reaction to the potential Sprint-T-Mobile merger, FCC Chairman Wheeler made plain that a national horizontal merger in a concentrated market would not get a green light in the absence of a serious factual review building on the learnings of AT&T’s abandoned acquisition of T-Mobile. In the AT&T/DIRECTV transaction review, the FCC used state-of-the-art merger simulation models.
2. The broader legal standard entrusted to the FCC – namely the requirement that applicants demonstrate that their proposed transactions will further the public interest – is an appropriate means to look beyond the traditional strictures of the antitrust laws. The FCC has traditionally noted that it can take merger-specific steps to enhance, and not just protect, competition. Sallet said that one can view the conditions imposed in the AT&T/DIRECTV order as both protecting competition and enhancing it. That transaction was, as Sallet said the FCC recognized, “a bet on competition.”
3. The FCC closely examines public interest commitments that applicants offer. There has been little discussion of the proposed conditions that the FCC declined to accept in AT&T/DIRECTV, but Sallet believes that important lessons can be drawn from the Commission’s analysis, including that public interest commitments are most important when they directly address potential harms from a proposed transaction.
4. The FCC is putting in place strong mechanisms to ensure compliance with conditions. The FCC created an independent compliance monitor with enhanced selection criteria to oversee the combined AT&T/DIRECTV’s merger agreements.
5. The FCC brings particular expertise, especially in the economics and engineering of networks, that complements the expertise of antitrust agencies. In all three of these matters, and perhaps most closely and extensively in the proposed Comcast/Time Warner Cable transaction, the FCC worked in harmony with the Antitrust Division of the Department of Justice in a way, Sallet believes, that improved the work of both agencies.

III. The Evolving Public Interest Standard

The "public interest" is not a rhetorical flourish, but a concept enshrined by Congress well over 100 times in communications law. And it is a concept, Ms. Sohn reminded her audience, the Supreme Court has described as a "supple instrument for the exercise of discretion by the expert body which Congress has charged to carry out its legislative policy.” Over 80 years of FCC precedent has given that term meaning. The FCC considers many factors that are part of protecting the public’s interest including diversity, multiple avenues for expression, price and quality of services, and whether a firm will bring better products, new innovations, and wider deployment to consumers. With each new revolution in communications – from analog to digital to mobile to what’s next – the public interest standard must evolve to protect the public’s stake. With these two recent speeches, FCC staff have highlighted how the agency is keeping pace.

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In the Digital Beat blog, the Benton Foundation aims to caputure the debate over what "in the public interest" means in the Digital Age. A significant part of what we do at the Benton Foundation is to try to make it easier for you to track regulatory review of major telecommunications mergers and acquisitions and legislation. In addition, we've written for years on how consumer protections are translated from traditional, analog networks to today's digital ones, be they television or telephony. And, of course, we chronicle it all each day in our free Headlines service.