Rosenworcel and Pai Head Back to the FCC

On May 7, 2012, the Senate approved the nominations of Ajit Pai and Jessica Rosenworcel to serve as commissioners at the Federal Communications Commission. President Barack Obama announced his intent to nominate Pai and Rosenworcel back on October 31, 2011 and the nominations were soon sent to the Senate. [Note our earlier post on their nomination Rosenworcel and Pai Are Not Dead – Remaking the FCC Again]

Pai is a Partner in the Litigation Department of Jenner & Block LLP. Immediately prior to joining Jenner & Block, he worked in the Office of the General Counsel at the Federal Communications Commission, where he served as Deputy General Counsel, Associate General Counsel, and Special Advisor to the General Counsel. Previously, he served as Chief Counsel to the U.S. Senate Judiciary Committee’s Subcommittee on the Constitution, Civil Rights, and Property Rights and as Senior Counsel at the Office of Legal Policy at the Department of Justice. Pai also served as Deputy Chief Counsel to the Senate Judiciary Committee’s Subcommittee on Administrative Oversight and the Courts, and as Associate General Counsel at Verizon Communications. Pai began his career as a law clerk to Judge Martin L.C. Feldman of the U.S. District Court for the Eastern District of Louisiana, and then as an Honors Program trial attorney in the Telecommunications Task Force at the U.S. Department of Justice’s Antitrust Division. Pai holds a B.A. from Harvard University and a J.D. from the University of Chicago.

Rosenworcel is the Senior Communications Counsel for the Senate Commerce Committee, working for Senator Jay Rockefeller IV (D-WV) since 2009, and previously for Senator Daniel K. Inouye (D-Hawaii) from 2007 to 2008. Before joining the Committee, she worked at the Federal Communications Commission from 1999 to 2007, serving as Legal Advisor and then Senior Legal Advisor to Commissioner Michael J. Copps (2003-2007), Legal Counsel to the Bureau Chief of the Wireline Competition Bureau (2002-2003), and as an Attorney-Advisor in the Policy Division of the Common Carrier Bureau (1999-2002). From 1997 to 1999, Rosenworcel was a communications associate at Drinker Biddle and Reath. Rosenworcel received a B.A. from Wesleyan University and a J.D. from New York University School of Law.

When the new commissioners are sworn in – which should happen any day now, really -- the FCC will have five commissioners for the first time in over a year. On May 8, the Benton Foundation was proud to publish an op-ed by former FCC Commissioner Michael Copps who gave his take on what we can expect of an incoming FCC commissioner. He identified four expectations:

1. A real feel for the public interest: Federal communications law mentions the public interest 112 times, so it must be of paramount performance for FCC commissioner. In telecommunications (phones and broadband) that means encouraging the delivery of the most advanced telecommunications systems feasible to every consumer in the land, no matter who they are, where they live, or the particular circumstances of their individual lives. Reasonably comparable services at reasonably comparable prices for all is the clear mandate of the law. Congress also made plain the need for consumer protection, competition among providers, and protecting the safety of the people. In media, the public interest means diversity, localism and competition.
2. A realization that the issues the FCC deals with are as important as any that the country confronts: In this first quarter of the Twenty-first century, America’s success, both at home and abroad, is hugely dependent upon building communications infrastructure that works for all of us.
3. An ability to work together as a team: Forging consensus is important now more than ever because so much rides on making good decisions.
4. An understanding of who the Commission works for: The FCC was instituted to serve the people. It is first and foremost a consumer protection agency, charged with making sure that the nation’s communications resources serve the public interest. So reaching out to the FCC’s “non-traditional” stakeholders (the general public) should be every new commissioner’s first calling. Every citizen has the right to be heard. And the FCC has an obligation to listen.

Part of the pride Benton took in publishing Commissioner Copps’ expectations of FCC commissioners is that they so well align with our long-stated mission to identify and promote policy solutions that support access, diversity and equity, and ensure that media and telecommunications serve the public interest and enhance our democracy. So we believe Commissioner Copps’ op-ed provides an excellent lens through which to view some of the policy decisions that face the new FCC. Here’s a quick look at just a few of the issues that popped up in Headlines this week that the FCC will be addressing in the months ahead.

This past week, CTIA - The Wireless Association held its annual conference in New Orleans. The group’s president, Steve Largent, couldn’t stop talking about his industry’s need for more spectrum, the radio waves that carry voice calls and wireless data. Wireless carriers want some of the spectrum others – mainly television broadcasters -- have and are seeking approval from the Federal Communications Commission to buy it at government auction. Back in the early 2000s mobile network operators were clamouring to sign up new subscribers to “unlimited” data plans to offset what they correctly perceived to be a steady decline in mobile voice revenues. But, in a startling validation of the adage “be careful what you wish for”, mobile operators in the US in particular are now scrambling to keep pace with a smartphone and tablet PC-driven mobile data tsunami that threatens to overwhelm their networks.

The FCC has set a target of freeing up an additional 500Mhz of spectrum for mobile operators over the next decade, but the process of freeing up new spectrum and auctioning it off is too slow, say some of the operators. At the CTIA conference, FCC Chairman Julius Genachowski stressed the use of a technology called small cells, also known as femtocells, to expand wireless capacity. Femtocells, which consumers can buy to install in their homes, improve cellphone reception by routing calls and data over broadband connections. Mobile operators are looking at a number of new tactics and technologies to manage mobile data growth and make better use of the spectrum they already own. These include accelerating the rollout of new, more efficient 4G technologies such as LTE and building denser wireless cells using new “small cell” technology and antenna, to offload data on to Wi-Fi networks. But the most controversial strategy is to throttle data download speeds for the heaviest mobile data users, including those on “unlimited” plans, in an apparent attempt to persuade these users to curtail their download habits, or switch to potentially more costly monthly metered data plans.

Of course, the quest for spectrum is what is driving some carriers to acquire capacity held by others. Currently before the FCC is Verizon’s $3.6 billion purchase of spectrum currently held, but unused by major cable television operators. The FCC and the Department of Justice are examining whether the acquisition would make it harder for Verizon’s rivals to expand wireless networks. This week Bloomberg first reported that the review of the deal has raised concerns for the agencies about the impact of the deal on Verizon rivals T-Mobile USA, MetroPCS Communications and other carriers. Deutsche Telekom CEO René Obermann personally pressed FCC Chairman Julius Genachowski to block the deal recently, saying that it would give Verizon too much control over prime spectrum and leave competitors, like Deutsche Telekom subsidiary T-Mobile, out in the cold. Allowing the deal could mean the end of a competitive telecommunications landscape, the Communications Workers of America told the FCC, saddling consumers with higher prices and diminished choice. Rep. Mike Doyle (D-PA) is concerned the deal could hurt Internet quality for his constituents. He sent a letter to Verizon filled with a number of pointed questions about the company's intentions toward its traditional telephone service and its FiOS TV and Internet service — which competes with the cable companies like Comcast from which Verizon wants to buy spectrum.

The regulators are examining whether competition will be hurt by Verizon acquiring airwaves that it doesn’t plan to immediately use. Chairman Genachowski said the agency has discouraged the holding of unused spectrum.

Verizon Wireless CEO Dan Mead defended the company's bid, saying his firm has proven to be good steward of the public airwaves. "We're confident the regulators will understand this purchase is good for Verizon Wireless customers and good for the entire broadband economy." Mead pushed back against claims that it is "warehousing" spectrum. On April 19, Verizon surprised many people by announcing that it would sell its 700MHz A-and B-block holdings if the FCC approves the spectrum purchase. Verizon has said the A and B licenses it is offering to sell cover dozens of major cities and rural areas including Chicago, Los Angeles, New York and Washington (DC).

The April 19 announcement led some to wonder whether Verizon is really as short on spectrum as it claims. However, what’s more intriguing, wrote Tim Farrar, is whether Verizon can actually pull off this sale and meet Verizon CFO Fran Shammo’s claims that Verizon will be able to get a “return” on its original investment. Farrar wrote that the outcome of Verizon’s proposed spectrum sale may be significantly affected by how the FCC decides to approach it. The FCC could allow Verizon to make a voluntary sale (which may then be predicated on Verizon turning a profit on the spectrum – potentially causing licenses to go unsold), or it could impose a condition that this spectrum must be sold within a defined period after completion of the deal with cable companies. If it’s the former, Verizon may well get it’s cake and eat it, too. If it’s the latter, the dynamic would change significantly, giving bidders like AT&T and MetroPCS much more leverage to negotiate on price. As a result, if Verizon was forced to sell all of the 700 MHz spectrum within a certain time frame, it could wind up taking a significant loss, raising questions about whether buying this spectrum was really such a good investment after all.

Under Justice Department antitrust review are joint marketing agreements between Verizon and cable companies that were announced the same day as the airwaves sale. The marketing agreements say the cable companies and Verizon will sell each other’s products. Over time, the cable providers will have the option to sell Verizon service on a wholesale basis.

Public Knowledge asked the FCC this week to publicly reveal details about Verizon's plan to launch a joint research operation with a group of cable companies. The research project is part of the spectrum deal. Verizon and cable companies Comcast, Time Warner, Bright House and Cox haveagreed to pool their resources to research new technologies. Public Knowledge argues that the planned joint research project could be the first step toward a cartel of the major video, Internet and wireless providers. The public interest group already has access to confidential information that Verizon and the cable companies submitted to the FCC for its investigation. But in the new filing, Public Knowledge argued that the companies should publicly reveal some of those documents. The group said the public should have access to the "basic governance structure" of the joint research project. "The governance structure of the [Joint Operating Entity] is neither highly confidential nor confidential, but is critical to assessing the public interest impacts of the proposed transactions; understanding the connections between the Applicants’ spectrum, marketing, resale, and JOE agreements; and determining whether the JOE will establish the basis for a future cartel between its members," Public Knowledge wrote.

On the media side of the equation, we wondered here last week about the problems the News Corporation faces in the UK and if those problems could impact the company’s 27 broadcast licenses in the US. This week offered a glimpse of News Corp’s future.

On May 8, advocacy groups sent letters to key Members of Congress asking for hearings into potential violations of privacy laws by News Corp. Free Press also delivered a petition signed by 30,000 people calling for hearings on News Corp.’s businesses practices. Via Twitter, News Corp. founder Rupert Murdoch responded saying, “One or two tweets on FCC okay, but hundreds identical Just phoney and abuses twitter. By the way, what law?” CREDO Action political director Becky Bond fired back at Murdoch in a statement, saying "The deplorable actions [Murdoch] has condoned in News Corp. call his character into question and go to the very heart of whether or not we can trust his company to act in the public interest. The FCC should enforce the law and revoke the broadcast licenses held by Rupert Murdoch's media empire." One watchdog group, Citizens for Ethics and Responsibility in Government, has specifically called on the FCC to determine whether Murdoch no longer meets the character standards required of broadcasters by the 1934 Communications Act.

Testifying before a Senate Appropriations subcommittee on May 9, Chairman Genachowski said the FCC takes calls to cancel Fox's broadcast licenses "very seriously." Sen Frank Lautenberg (D-NJ) pressed Chairman Genachowski on whether he plans to do anything about the allegations. Genachowski said it wouldn't be appropriate to comment on a specific case, but that the commission is "certainly aware of the serious issues that have been raised in the UK." He noted that the law requires that the FCC only grant broadcast licenses to people of "good character." "If any issues arise, the commission has an obligation, we would take it very seriously, to look at the record, look at the facts and apply the law," Genachowski said.

Reuters published a piece May 7 finding News Corp faces “limited risk” of losing broadcast licenses in the US. Although the FCC has the power to deny a license renewal if it finds the license is not being used by people of good "character" who will serve "the public interest," agency has been loath to use it.

"The only other way a license can be lifted is by revocation, which is a years-long process in which the FCC has an extremely high burden of proof," said Andrew Schwartzman, long-time policy director of the recently closed public interest law firm Media Access Project. "The idea that a Democratic administration, a Democratic Justice Department, a Democratic FCC would go down the road of license revocation proceedings against Fox, especially during an election year, would cause a firestorm," said Medley Global Advisors analyst Jeffrey Silva. "The backlash would be that Democrats would be portrayed as trying to censor conservative political expression," he added. Barring massive, overwhelming proof of wrongdoing and illegal activity within the United States that can be directly tied to high-level personnel at Fox stations, Silva said Fox's broadcast licenses were not in any near term jeopardy.

This analysis may prove true, but Eric Alterman, a Senior Fellow at the Center for American Progress and a CUNY distinguished professor of English and journalism at Brooklyn College, wonders if we’ve perhaps reached a tipping point. News Corp’s Rupert Murdoch has made no secret of the way he does business in the United States -- where he can credibly claim to be the single most powerful person in the media and one of a handful of the most powerful people in the entire country -- and has long made naked corruption a key part of the way he does business elsewhere. But through it all, Murdoch has remained “an honored figure in both the media and the New York social whirl. So I guess the question is what now? Murdoch may be “unfit” to run a media empire, but he continues to run one. And so long as we continue to treat it as a news source like any other, the corruption that lurks at the bottom of his business practices will continue to infect our media and our politics and ultimately, our lives.”

So welcome back to the FCC, Ajit Pai and Jessica Rosenworcel. You seem to have a few big decisions ahead of you.