What Did We Learn at the Wheeler Nomination Hearing?

On June 18, the Senate Commerce Committee held a hearing on the nomination of Thomas Wheeler to be Chairman of the Federal Communications Commission. Wheeler’s nomination has drawn criticism from public interest advocates. They worry that Wheeler, who headed the main lobbying organizations for both cable operators and wireless carriers, may put consumers on the back burner with his sights set on completing an airwaves auction next year that will help wireless carriers bolster their networks and enrich television broadcasters. Wheeler used the hearing to elaborate on his background, outline his priorities, and to defend his business ties. During the hearing, Committee Chairman John D. Rockefeller IV (D-WV) indicated that Wheeler’s confirmation is likely. Most of the other questions posed to Wheeler were friendly and not very difficult. Several Republican senators expressed confidence that he would be confirmed by inviting him to visit their states once he took office.

In his opening statement, Chairman Rockefeller underscored the importance of the work that lies ahead of Wheeler and the FCC saying, “[Y]ou will lead an agency that has the most challenging and complicated issues pending since the Commission implemented the 1996 Telecommunications Act…. The decisions the Federal Communications Commission (FCC) makes under your leadership will shape the future of the Nation’s telephone network, public safety, the wireless industry, broadcasting, the Internet, and consumer protection for years to come.” Sen. Rockefeller stressed that the FCC is a regulatory agency: “These regulations serve important policy goals. You cannot have universal service without regulation. You cannot ensure competition without regulation. You cannot have consumer protection without regulation.”

“Even as communications networks evolve and technology advances,” Chairman Rockefeller added, “the FCC’s mission does not. The rules and regulations we have in place now may not be the rules we need for the future, but that certainly does not mean we should not have any, as so many in the industry seem to advocate.”

Chairman Rockefeller said the rules the FCC needs to adopt should:

• create the conditions so that every American no matter where they live has access to broadband.
• guarantee that every child in America can harness the power of the Internet. And, do it safely.
• empower consumers with the information they need to make informed choices.
• continue to create the conditions for job creation, innovation, and investment.

Chairman Rockefeller urged Wheeler to “harness the vast power of the FCC to spur universal deployment of advanced technologies, foster growth and innovation, and protect consumers.”

In contrast, the committee’s ranking member, Sen. Jim Thune (R-SD), highlighted Wheeler’s earlier statement that the Communications Act and its enforcer the FCC are “analog legacies in a digital world.” Sen. Thune had several questions for Wheeler:

• will you work with Congress and seek to amend the law where it may be inadequate or outdated?
• will you conduct agency business transparently?
• will you be visionary and share your ideas regarding statutory and agency modernization?

Addressing concerns about his background as a lobbyist, Wheeler also said that his experience would not prejudice him in regulating the industries he formerly championed. “I was an advocate for specific points of view, and I hope I was a pretty good advocate,” Wheeler said. “If I am fortunate enough to be confirmed, my client will be the American public, and I hope I can be as effective an advocate for them as humanly possible.”

In his testimony, Wheeler said his top priorities, if he is confirmed, would be consumer protection, increasing competition and providing sufficient predictability so companies know what rulings to expect. And he identified three challenges the FCC faces: 1) implementing the spectrum incentive auctions and creating a public safety network; 2) the IP transition--overseeing the transition from analog switched-circuit networks to Internet Protocol (IP) delivery; and 3) advancing civil society through communications, including the broadband buildout and promoting diversity.

He touted his business experience saying his decades of heading lobbying groups will bring important business sensibilities to the oversight of a communications industry undergoing a massive technological transition. He was chief executive of what is now the National Cable and Telecommunications Association in the 1980s. “I fought against the FCC’s rules limiting cable’s ability to compete with new video services,” Wheeler said. “I worked for the ability of competitors to bring services into the home.” Similarly, Wheeler said that his tenure in the 1990s as head of the cellular phone trade group now known as CTIA-The Wireless Association, was one in which start-up and rapidly growing cellphone competitors were at the forefront of wholesale changes in communications. “During my tenure, that competition was expanded by the auctions of 1994, wireless was increasingly used in place of wire line, and wireless data turned the phone into a pocket computer,” Wheeler said. “All of these developments brought with them new policy challenges,” he added, challenges that are no smaller now as wireless becomes the primary method of broadband and voice communication for millions of Americans.

His experience, he said, has taught him that competition is a basic value that must be encouraged. He said the FCC needs to promote competition over regulation. “Competition is a power unto itself that must be encouraged,” he said. “Competitive markets produce better outcomes than regulated or uncompetitive markets.” Telecom policy has helped create competition, he said, but he cautioned that the FCC’s rules could also put “a brake on innovation.” However, he also noted that competition is not always sufficient to protect other basic values, like universal service and the use of technology to enhance public safety and services.

Nomination hearings, in general, offer senators a chance to express what their priorities are through pointed questions while nominees do their best to answer the questions without offering any specifics. Here’s a look at some of the major issues raised by the committee’s members.

Incentive Auctions
In his opening statement, Chairman Rockefeller raised two pending issues before the FCC that he believes should be top priorities. The first is what is called the incentive auction proceeding, aimed at creating the revenues to fund a nationwide interoperable public safety network. Chairman Rockefeller asked Wheeler whether he felt the incentive auctions should be held ASAP because Rockefeller is concerned about the auctions raising enough money to pay for FirstNet, a first responder public safety network he has been championing since 9/11.

"I think it is absolutely crucial that the incentive auction move on an expedited schedule," Wheeler said emphatically. He also said that he understood the need for incentive auction rules that provide enough funding for FirstNet.

Wheeler compared the complexity of the incentive auction to that of a Rubik's cube. "On the one side of the cube, you have got to provide an incentive for broadcasters to want to auction their spectrum," he said, holding an imaginary cube before him and twisting its right side. "On the other side of the cube, you have got to provide a product that is structured in such a way that it incentivizes...the wireless carriers ...to want to bid for the spectrum," he said, twisting with his left hand. "And then in the middle of this, on an almost real-time basis, you have a band plan that is constantly changing to reflect the variables that are going on [on the sides]. That's why this has never been tried before. This is a monumental undertaking."

Modernizing the E-Rate
Another top priority for Chairman Rockefeller is an update of the FCC’s E-Rate program which Rockefeller helped to create with provisions in the Telecommunications Act of 1996. The E-Rate provides subsidies for Internet connections at schools and libraries, but Rockefeller, President Obama and others want to modernize the program to provide both high-speed, broadband connections to schools and libraries as well as wireless connections to the Internet.

Wheeler said he supports expanding the E-Rate: "It is not good enough for us to have 1996 textbooks in the classroom. I don't think it's good enough to have 1996 connectivity in the classroom." He added "When 80 percent of the E-Rate schools say they're not getting the proper bandwidth for their instructional needs, something needs to be done.”

Merger Reviews
Both Sens. Thune and Roy Blunt (R-MO) questioned Wheeler about FCC reviews of proposed mergers. Perhaps the biggest reservation Republicans seem to have is that a Wheeler-led FCC might capitalize on telecom mergers as a way to force industry changes it can’t cause by other means. Many have pointed to Wheeler’s own writings about the importance of merger conditions and his suggestion that the FCC could have put conditions on the AT&T/T-Mobile merger that could then be more generally applied. But Wheeler pledged to conduct merger reviews according to the specific facts and legal precedents of those mergers. Asked by Sen. Blunt whether the FCC would "continue" to apply merger conditions "that don't directly deal with competitive issues," Wheeler echoed an earlier response to Sen. Thune. "I believe that the merger review process deals with a specific case, the facts in that situation and is guided by the law and precedent. And that ought to be the defining four corners of any consideration."

Wheeler backed away, however, from his comments in 2011 on his blog. In the post, he said the FCC might have expanded its authority over wireless companies if it had approved the merger of AT&T and T-Mobile by imposing conditions that could later be applied to all wireless companies.

Wheeler said that any merger review must consider the facts before the commission and not deal with theoretical questions of the sort he raised in the blog post. “In a hypothetical musing, it is possible to do that,” Wheeler said. But in a merger review, he added, “I am guided by precedent, the statute and the facts before me.”

Media Ownership
On June 17, New America Foundation’s Mark Lloyd published a piece urging Senate Commerce Committee members to ask Wheeler to address a recent wave of media ownership consolidation. Lloyd pointed to Gannett’s purchase of 20 Belo television stations, a purchase that will make Gannett, the publisher of USA Today, the owner of 43 stations in total with 21 stations in the nation’s top 25 markets and make the company the No. 3 local station owner in the United States, by revenue. In addition, Media General announced earlier this month that it was merging with Young Broadcasting, creating a broadcast conglomerate of 30 stations. Nexstar signed a letter of intent to purchase 12 stations from the Communications Corporation of America, bringing its total TV station count to about 84. And in June, the Sinclair Broadcast Group announced a deal to buy six television stations owned by the Titan Television Broadcast Group. If approved by the FCC, Sinclair will own roughly 140 TV stations in more than 70 markets. Nexstar President and CEO Perry Sook predicts a wave of mergers, “I would think within two to five years, you'll see the emergence of what I call three or four super-groups, and I think you'll see a couple emerge sooner rather than later."

Sen. Maria Cantwell (D-WA) criticized the Gannett deal and, in particular, Gannett’s plan to "use shared services agreements as a way to get around [FCC local ownership] rules" while questioning Wheeler. Wheeler said he understood the seriousness of the issue, and has been a longtime advocate of diversity of voices. But he said the FCC has asked the Government Accountability Office to study the issue and he "looked forward to their opinion." He said the key is for the FCC to look at competition, localism and diversity as the touchstones, not business plans. He declined to comment on whether some broadcasters could abuse shared service agreements to get around the rules. "I am not informed enough to be explicit on that," he said, "but I am going to be."

Sen. Cantwell then asked if consolidation is needed to save newspapers. Wheeler suggested that it is not. "It has been my experience that the way to grow businesses when they are challenged by new technologies is to embrace those new technologies. That's the best way for working your way out of this situation."

Wheeler avoided giving a specific opinion on new media ownership rules: “I am specifically trying not to be specific,” he said.

Retransmission Consent
Sen. Blunt asked Wheeler whether he agreed with former-FCC Chairman Julius Genachowski that the FCC's power to rewrite retransmission consent rules was "very limited" and changes in the policy would have to come from Congress. "I look forward to looking into that issue and trying to get my arms around it,” answered Wheeler, “particularly in light of some recent court action and a pending Second Circuit action that has been brought on a related kind of issue," he said without identifying the Second Circuit case. "I am not trying to dodge the questions, but I think this ... is a situation that is in flux at the moment."

When Sen. Amy Klobuchar (D-MN) later asked what he thought about retransmission consent, Wheeler endorsed it, saying it was a way for broadcasters "to get revenue from subscribers through the intermediary of the cable operator. I believe in that kind of evolutionary market." But Wheeler also expressed concern about the breakdown of retransmission negotiations between broadcasters and cable and satellite operators that sometimes results in the loss of broadcast signals to subscribers. "What does bother me...is when consumers are held hostage over corporate disputes. And if I am fortunate enough to be confirmed, that is something I will be looking at."

Indecency Enforcement
This week, the Parents Television Council (PTC) and Morality in Media (MIM) urged senators to press Wheeler on how he would enforce broadcast indecency regulations.

"I'm old enough that when I see some things to kind of grit my teeth and say, "Is this what I want my grandkids to be seeing?' Whether it be violence or obscenity or indecency or whatever," Wheeler said. But Wheeler said the bully pulpit might have more influence than any regulations the agency could write. “I do believe it is possible to call upon our better angels with some leadership,” Wheeler said. He recalled that the “vast wasteland” speech of Newton N. Minow, the former FCC chairman, “caught people’s attention.” He added: “Maybe it’s time to do the same type of thing today.

Political Advertising
Sen. Ted Cruz (R-Texas) asked Wheeler to submit in writing whether he believes the FCC has the authority to require political TV and radio advertisers to disclose the source of their funding — and then warned Wheeler that he would jeopardize his confirmation if he says that he does. "This is the one issue that has in my opinion the potential to derail your nomination," said Sen. Cruz. Having failed to pass a law requiring disclosure, some congressional Democrats have begun pressing the FCC to do it through rulemaking, insisting that the agency has the authority. Republicans have pushed back, believing, in Cruz's words, disclosure requirements in law or FCC rules are "unconstitutional and bad policy."

Wheeler avoided taking a stand on the issue. "This is an issue that I look forward to learning more about," Wheeler told Sen. Cruz. "But I do not miss the expressions on both sides of this as to the strong feelings. I know this is an issue of tension."

After the hearing, Chairman Rockefeller told POLITICO there's no reason to worry. “I just let it float right by me,” Rockefeller said, noting he's not concerned, before adding this about the process: “These things have a way of working out.”

Conclusion
The main question, especially for public interest advocates, on the Wheeler nomination is how to resolve his background as a lobbyist for the wireless and cable industries. Timothy Lee in the Washington Post writes, “The ideal candidate for FCC chairman would have decades of practical experience with the tricky technical and legal questions the agency grapples with. He or she would also have few ties to the industries he’d be charged with regulating. But those criteria are in tension with each other because one of the best ways to gain experience with telecom issues is to work for a telecom company.” Lee believes that a move from regulator to lobbyist is more troubling than from lobbyist to regulator. Wheeler has had a prosperous career and is nearing retirement age, giving him the luxury of not worrying how his decisions might affect his future employment prospects.

Writing for Fortune, Dan Mitchell said, “Despite in some respects looking like an industry apparatchik, Wheeler actually appears to be more of a wonky nerd than anything else. Given the complexity of many of the issues he'll be facing, he might turn out to have been the perfect choice for the job.”

The Commerce Committee did not vote on Wheeler’s nomination, and panel leaders did not specify when the final OK might come. Chairman Rockefeller, for his part, said he’s “certain” Wheeler would ultimately win the Senate’s final approval. Most likely, the committee won’t formally tee up Wheeler for full Senate approval until the President selects a Republican for the FCC’s other open seat — and Thune told POLITICO both nominees should advance together. He declined to say whether Senate Republicans, who by custom can suggest a name for that open slot, have recommended a potential nominee to the White House.
For now, Chairman Rockefeller emphasized: “There's nothing in the Commerce Committee rules that says we need to have a pairing.”

In any case, the decision on the Wheeler nomination is crucial. “I think the agency is more important than ever,” said Chairman Rockefeller during the hearing. We couldn’t agree more.