Sharpening Blades in the FCC's Regulation Weed Wacker

Submitted on June 8, 2018

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Federal Communications Commission Chairman Ajit Pai (in)famously said, “We need to fire up the weed whacker and remove those rules that are holding back investment, innovation, and job creation.” On June 1, 2018, we learned a bit about how far follow-Republican FCC Commissioner Michael O’Rielly is willing to go to cut back consumer protections. In FCC Regulatory Free Arena, Commissioner O’Rielly highlights the pervasiveness of the “app economy” to argue that traditional companies regulated by the FCC should seek to be released from their regulatory obligations.

O'Rielly's Argument

Commissioner O’Rielly argues that the competition from the “numerous modern technologies central to many Americans' communications habits” (social media, YouTube, Netflix, Spotify, etc.) is sufficient enough to justify regulatory relief for all companies regulated by the FCC.

O’Rielly sees large-scale investment in the app economy, but not in traditionally-regulated companies. “Talk with any market analyst or investor group, as I try to do regularly, on whether they see new large-scale investment coming to any services regulated by the Commission and, except for certain opportunities in the wireless sector, they will look at you like you have two heads and speak Venusian.”

“This rapid development and momentous shift of consumer preferences toward application-centric offerings, requires the Commission to evolve its overall approach. Entire subject areas — once proud mainstays of the agency's workload — need to be scrapped immediately,” says O’Rielly. “[T]he Commission must rethink outdated terminology and market definitions. Continuing to label and regulate certain providers as ‘incumbents’ based on legacy notions of competition instead of marketplace realities makes no sense.”

O’Rielly concludes that the FCC then has two options:

Support greater deregulation of FCC regulatees that must compete with these digital services; or
Advocate for new Congressional powers to regulate these services, which, O’rielly says, “would seem futile and unnecessary.”

Not surprisingly, the deregulatory O’Rielly opts for the former.

His post contains this kicker: “If an existing FCC regulatee is in the voice, video, or data business, they should be knocking down our doors to demand fundamental and colossal relief.” To clarify: A sitting commissioner has just invited every company regulated by the FCC to seek release from consumer protections.

Rule Reviews and Forbearance

How does Commissioner O’Rielly want companies to seek deregulation? First, mandatory, periodic reviews of the FCC’s rules.

By law, the FCC must do periodic reviews of its regulations “that apply to the operations or activities of any provider of telecommunications service...,” and if it finds that they are “no longer necessary in the public interest as the result of meaningful economic competition between providers of such service...,” to “repeal or modify” those rules. [The term “provider of telecommunications service” is very broad, so the FCC could use this mechanism for rapid and substantial deregulation.] Section 202(h) of the Telecommunications Act of 1996 confers a similar mandate directing the FCC to review all of its broadcast ownership rules.

Second, Commissioner O’Rielly points to forbearance. O’Rielly salutes FCC Chairman Pai’s use of mandatory, periodic reviews to deregulate, but notes that “there is capacity to do more if entities would do the work to make the proper showings.”

Section 10 of the Communications Act of 1934, adopted as part of the Telecommunications Act of 1996, requires the FCC to forbear from applying to a telecommunications carrier any Communications Act provision or FCC regulation if certain statutory criteria are met. Under section 10(c), any telecommunications carrier or class of telecommunications carriers may file a petition with the Commission asking that it exercise this forbearance authority. If the Commission fails to act on a forbearance petition within one year (extended by three months, if necessary), the petition is "deemed granted" by operation of law. The law reads:

the Commission shall forbear from applying any regulation or any provision of this chapter to a telecommunications carrier or telecommunications service, or class of telecommunications carriers or telecommunications services, in any or some of its or their geographic markets, if the Commission determines that—
(1) enforcement of such regulation or provision is not necessary to ensure that the charges, practices, classifications, or regulations by, for, or in connection with that telecommunications carrier or telecommunications service are just and reasonable and are not unjustly or unreasonably discriminatory;
(2) enforcement of such regulation or provision is not necessary for the protection of consumers; and
(3) forbearance from applying such provision or regulation is consistent with the public interest.

In January 2017, Andrew Schwartzman highlighted both of these tools in the then-new FCC majority’s deregulatory toolbox.

Conclusion

Just days after the Indy 500, Commissioner O’Rielly is waving the green flag, starting a new race to full regulatory relief. Given the prospect of a completely-deregulated communications envirnoment, consumers should do more than raise a caution -- this fast-moving, hazardous car should be returned to the pits.

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Sharpening Blades in the FCC's Regulation Weed Wacker

O'Rielly's Argument

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