Friday, December 30, 2011

"A Call for a Radical New Communications Policy" and OIRA

The Administrative Law Review, published by the ABA's Section of Administrative Law and Regulatory Practice, has just published an issue commemorating the thirtieth anniversary of OIRA. The volume contains a number of excellent articles prepared by participants at a conference on OIRA sponsored by The George Washington University Regulatory Studies Center.

Many of the articles, written by OIRA Administrators and Deputy Administrators, provide useful insights concerning the way OIRA has operated over the years – showing patterns of both continuity and change. For an especially rich history of the formative years of OIRA, tracing its roots back much earlier than commonly assumed, I commend Jim Tozzi's article, entitled "OIRA's Formative Years: The Historical Record of Centralized Regulatory Review Preceding OIRA's Founding."

Of special interest to me are the articles, and there are a number of them, in which the former OIRA officials all make the same point: The so-called independent regulatory agencies should be subject to the same OIRA review process as the executive branch agencies. In other words, the independent agencies should be subject to more presidential control than they are presently.

In my new book, A Call for a Radical New Communications Policy: Proposals for Free Market Reform, the Federal Communications Commission's status as an independent agency plays a significant role. In one chapter I recommend that Congress consider transferring the policymaking functions of the FCC, usually carried out through rulemaking proceedings, to the executive branch, while retaining the current multimember commission format for deciding adjudicatory matters. Restructuring along these lines would give the President more control over policymaking functions, while continuing to insulate adjudicatory decisions from political control.

And in two other chapters I explain why, in the absence of a restructuring of the FCC along the lines I recommend, the agency should receive less Chevron deference upon judicial review than do executive agencies. I argue that the principal rationale of Chevron dictates this result. (By the way, so has Elena Kagan, when she was dean of Harvard Law School.)

I don't won't to spoil your fun by saying more here. But you can buy my new book, A Call for a Radical New Communications Policy: Proposals for Free Market Reform, from Amazon here, and from Barnes & Noble here. And then you can decide for yourself.

Thursday, December 29, 2011

New Book: A Call for a Radical New Communications Policy

I know my new book arrives too late for an on-time Christmas stocking-stuffer. But not too late to fulfill your New Year's resolution that this is the year you are going to think seriously about reforming communications law and policy.
My book, A Call for a Radical New Communications Policy: Proposals for Free Market Reform, consists of eight of my law review articles, with a Foreword placing all of them in the context of a free market-oriented communications policy reform framework that is consistent with fundamental constitutional principles.
You may order the book from Amazon here, and from Barnes & Noble here.

Here are a few excerpts from the Foreword which will give you a good sense of the book's scope and tenor:
"When Congress passed the Telecommunications Act of 1996, the most significant change to the Communications Act since its adoption in 1934, it was thought by many that enactment of the new statute meant there would be a meaningful deregulatory shift in communications policymaking in light of the developing marketplace competition. But, unfortunately, there has been no such paradigm shift - which means there is still much work to do to reform our nation's communications laws and policies."  
 "So, a full fifteen years after the 1996 Act's passage, what should be done now? The answer can be stated quite simply: Communications law and policy needs to be radically reformed in a free market direction that is consistent with fundamental constitutional principles. Communications policy at present cannot fairly be characterized as free market-oriented and conforming comfortably with the Constitution, especially separation of powers and First Amendment strictures. This book consists of a collection of eight articles and essays I have published in law journals over the past decade, beginning in 2001. In part they are descriptive. They explain what is wrong - from both a public policy and constitutional perspective - with the current regime. And in part they are normative in suggesting prescriptions for reform."
      "Of course, had major shifts occurred in communications law and policy over the last decade, there might be a legitimate concern that the articles are dated, or at least less useful than otherwise as a path to reform. But even as the communications marketplace and technology have continued evolving rapidly, leading to more competition and more consumer choice, the law and policy paradigm has remained largely unchanged from the twentieth century regulatory model. Therefore, the articles in this book remain as relevant as ever. Indeed, I would argue they are more relevant than ever, given the increasing mismatch, as time goes by, between competitive marketplace realities on the one hand and law and policy on the other."
"This brings me back full circle to this volume's principal purpose: To convince the reader that it is time - past time, really - for Congress to adopt a radical new communications law and policy paradigm grounded firmly in free market and constitutionalist principles. Replacing the current regime with one that is market-oriented and respectful of constitutional strictures would achieve Congress' presently unfulfilled intent, declared in the preamble to the Telecommunications Act of 1996, that our nation's communications laws be pro-competitive and deregulatory."
Each year one of my New Year's resolutions is to continue working hard to achieve much needed communications policy reform. If this is one of yours too, or if you are willing to join in the fight, or simply want to better understand what the fight is all about, I think you will find A Call for a Radical New Communications Policy: Proposals for Free Market Reform informative and useful.
Again, you may order the book from Amazon here, and from Barnes & Noble here.           

Wednesday, December 21, 2011

The Tennis Channel Ruling: No Mere Foot Fault

This was no mere foot fault. A Federal Communications Commission Administrative Law Judge (ALJ) issued a decision yesterday that was far enough out of bounds that perhaps it will be a game-changer that persuades policymakers that outdated legacy communications laws and policies no longer make sense.

The ALJ ruled in favor of the Tennis Channel in its "program carriage" complaint against Comcast. In essence, the ALJ ruled that Comcast discriminated against the Tennis Channel, which is not affiliated with Comcast, by not acceding to the Tennis Channel's request that it be moved, in the midst of its contract term, to the same program tier as two of Comcast's affiliated sports channels. The ALJ finds the Tennis Channel is sufficiently similar to the Golf Channel and Versus channels that they must all be located in the same program neighborhood for Comcast to avoid running afoul of the anti-discrimination prohibitions in the agency's carriage regulations.

In today's dynamic broadband world, including the broadband video world, the FCC inflicts much marketplace damage in the name of preventing or rectifying "discrimination." Just witness last year's promulgation of net neutrality mandates. Net neutrality mandates are based on public utility-style regulation that has, at its core, a prohibition on discrimination. This discrimination regulation may have been appropriate in the monopolistic Ma Bell-era but it is not proper in today's competitive multi-platform broadband environment.

In the Tennis Channel case, the ALJ purports to be enforcing the Commission's program carriage regulations promulgated under Section 616 of the Communications Act which gives the FCC authority to prevent multichannel video programming distributors (MVPDs) like Comcast from restraining the ability of unaffiliated video program vendors from competing "fairly by discriminating."
"Fairly by discriminating." Aha. There's a lot of room for the exercise of unbridled administrative discretion encompassed in those three words.

In my "Build Back That Broadband Wall" commentary, published just last week in the Washington Times, I highlighted four examples to show how the FCC is extending, or proposing to extend, legacy analog-era regulations developed in last century's monopolistic narrowband environment into today's competitive broadband world. One example, somewhat prescient in light of the ALJ's decision, was the FCC's program carriage regulations.

Here is what I said in my commentary:

"The commission proposes to expand existing program carriage rules intended to prevent cable operators and other video programming distributors from discriminating against unaffiliated programming vendors. The existing rules, adopted in the early 1990s when cable operators still possessed market power and when vertical integration was more pronounced, no longer serve any useful purpose. Today, only two of the 25 most-viewed cable networks are wholly owned by cable operators. With two nationwide satellite television operators and a broadband telecommunications provider competing vigorously in most locales - not to mention a growing number of popular Internet video sites - cable operators lack the incentive and ability to discriminate against unaffiliated programmers. So there is a good argument the existing program carriage requirements should be eliminated, especially in light of free speech concerns raised by the government mandating carriage of particular programs. At the very least, however, the regulations should not be expanded as the commission now proposes. Contrary to the First Amendment, the expanded regulations would have the government injecting itself even further into decisions about what programming video providers must carry and where in their channel lineups such programming must appear."

To understand what is wrong with the ALJ's decision, in a very fundamental sense, please carefully consider what I wrote above – before the issuance of the ruling in favor of the Tennis Channel.

And, now also consider this:

·      In this instance, the Tennis Channel's placement in Comcast's program lineup was in accordance with a contract between the parties in which the Tennis Channel had agreed to its lineup placement. The amount of compensation negotiated under the contract was, of course, related to the agreed-upon tier placement.
·      Several other MVPDs simply made a decision not to carry the Tennis Channel at all, thus obviating any need to bargain about placement of the channel.
·      If Comcast is required to move the Tennis Channel from its present location, it almost certainly will be required, due to channel capacity limitations, to displace another program channel that Comcast has determined, based on its business judgment, either is more popular with its customers, or one that at least deserves an opportunity to try to build audience support.
·      In rendering his decision on "discrimination," the ALJ was required to make determinations concerning the similarity of the programming among program channels. It is true, I suppose, that tennis and golf are both "sports." But to make the type of determination rendered in this instance, the government regulator is required to examine the intricacies of program genres, program ratings, target audiences, and the like. This type of examination into programming decisions raises obvious free speech concerns.
So, in sum, the ALJ's decision in the Tennis Channel case was a ball hit out of bounds. The Free State Foundation's mission, proclaimed on our website, is to promote understanding of "free market, limited government, and rule of law principles." By ignoring the competition that exists in today's video marketplace, by, in effect, abrogating the negotiated contract in mid-term, and by deciding to substitute his judgment concerning the carriage and placement of programs based on an examination of the contents of the programming, the ALJ has managed to offend free market, limited government, and rule of law principles in one fell swoop.

In the not too much longer-term, taking account of today's competitive video marketplace in which cable operators, satellite operators, and telephone companies – and, increasingly, popular Internet video sites -- all compete for viewers, Congress should repeal the provision in the Communications Act authorizing the FCC to promulgate and enforce program carriage regulations.

A proper understanding of the First Amendment demands no less.
In the near-term, the FCC commissioners should reverse the ALJ's decision.

Thursday, December 15, 2011

Robert A. Anthony, RIP

Last December, the Free State Foundation lost an esteemed member of its Board of Academic Advisors, when Alfred E. Kahn passed way. Fred was a distinguished public servant and one of the nation's leading scholars on regulation, especially regulatory economics.

Now, FSF has lost another distinguished member of its Board of Academic Advisors. In November, Robert A. Anthony passed away after a lengthy, valiant battle against cancer. At the time of his passing, Bob was GMU Foundation Professor Emeritus at the George Mason University School of Law.

He received his undergraduate degree from Yale, a degree in jurisprudence from Oxford on a Rhodes Scholarship, and his law degree from Stanford. Then he set about on a remarkable career as a professor, law practitioner, and public servant.

Without doubt, Professor Anthony was one of the most preeminent – and oft-cited – administrative law scholars of his generation. Taking a leave from his teaching, he served during its formative years as one of the early Chairs of the Administrative Conference of the United States.

For a more complete appreciation of Professor Anthony's life and accomplishments, please see this memorial resolution adopted by the ABA Section of Administrative Law and Regulatory Practice shortly after his death.

Here I want to call special attention to just one part of the resolution, the part recognizing that Professor Anthony was "one of the foremost authorities on agency rulemaking and the use and misuse by agencies of policy statements and guidance documents." Bob was, indeed, the nation's leading authority on the use by administrative agencies of interpretive rules, policy statements, and guidance documents. His central concern was that agencies not abuse their authority by attempting to legally bind the public without adhering to proper process.

In one of his most oft-cited law review articles – cited in both Supreme Court and D.C. Circuit opinions – Professor Anthony explained:

"An agency may not make binding law except in accordance with the authorities and procedures established by Congress. To make binding law through actions in the nature of rulemaking, the agency must use legislative rules, which ordinarily must be made in accordance with the notice-and-comment procedures specified by section 553 of the APA." Interpretive Rules, Policy Statements, Guidances, Manuals, and the Like – Should Federal Agencies Use Them to Bind the Public, 41 Duke L. J. 1311 (1992).

So, a significant part of Professor Anthony's scholarship was devoted to explaining why, if America is to remain a nation subject to the rule of law and not to the whims of men, it is necessary – before purporting to bind our citizens – for unelected agency officials to be required to adhere to process required by law. With the seemingly intractable growth of the administrative state, this is a matter of no small importance.

On the Free State Foundation's homepage, we proclaim that our mission is "to promote, through research and educational activities, understanding of free market, limited government, and rule of law principles." My understanding of the rule of law principles that FSF aspires to promote owes much to Bob's teaching.

For me, Bob was a mentor, a scholarly colleague, and a helpful member of FSF's academic advisory board. And, above all, a good and caring friend.

So, Robert A. Anthony, RIP. 

Wednesday, December 07, 2011

Stopping Regulatory Encroachment on Broadband

It's nearing year-end. Near enough in fact that I find myself already beginning to think hard about 2012, and next year's communications policy agenda.

As I look forward, it is becoming more apparent than ever that the Federal Communications Commission's pro-regulatory proclivities threaten to burden digital broadband services with public utility-style regulation that may have been appropriate in the analog age but which is not so today. Fighting to prevent broadband services from becoming engulfed in the still-prevalent legacy regulatory morass, and rolling back broadband regulation where it already has occurred, looks to dominate the communications policy agenda during 2012.

When the FCC concluded, beginning in 2002 under then-FCC Chairman Michael Powell's leadership, that broadband services are "information services" not subject to common carrier regulation, and when the agency successfully defended this determination in the Supreme Court's Brand X decision in 2005, I was somewhat hopeful that a fence had been erected that would allow newly-competitive broadband services to continue to flourish on an unregulated basis.

Alas, for the most part, the demarcation between analog telecom services and broadband information services has proved to be more a porous Maginot-like line than an effective regulatory barrier. While I may have been hopeful after Brand X, it would be wrong to say I have been totally surprised at developments over the last few years. This is because the FCC, more so even than many other administrative agencies, possesses a strong institutional bias favoring activist regulatory solutions rather than free market solutions – a bureaucratic imperative, if you will. And the current FCC majority has proven itself receptive to seeking new regulations based on highly anecdotal evidence of potential consumer harm.

The regulation of broadband services about which I am concerned comes in many forms, some more onerous than others, and some couched in rhetoric that seeks to minimize, or even conceal, the extent of the regulatory intrusiveness and burdens. Here I want to identify just a few diverse regulations or proposed regulations that show the FCC's proclivity to extend analog-era regulatory regimes into today's broadband marketplace. In each instance, such extension is unnecessary and, indeed, generally harmful to overall consumer welfare.

·   Net Neutrality Mandates. Although couched as sweet-sounding "open Internet" regulations, in essence net neutrality mandates resemble traditional common carrier regulation that prevailed in the telecom marketplace throughout the 20th Century. With its prohibition against discrimination and unreasonable rates, the common carrier regime may have been suited to the monopolistic Ma Bell circuit-switched era, but it is ill-suited to an IP world in which operators of cable, telephone, wireless and satellite digital broadband platforms compete to provide variously-configured services or bundles of services and constantly evolving applications. In this digital multi-platform marketplace, discrimination prohibitions and rate regulation put operators in a straight-jacket that inevitably inhibits the development of innovative new service offerings and new network infrastructure investment. After all, "discrimination" is the means by which providers normally seek to differentiate their services from their competitors' services in response to what they perceive to be changes in consumer demand. Most troubling of all, the Commission adopted the net neutrality mandates without a showing of demonstrable market failure or consumer harm. 

·   Network Outage Reporting Regulations. For a different type of regulation -- indeed, perhaps a seemingly benign one – in which the FCC may extend analog-era mandates into the broadband world, take, for example, the agency's network outage reporting requirements. The FCC proposes largely to extend the old circuit-switched requirements to Voice Over Internet Protocol (VoIP) and broadband Internet services providers. As my colleague, Seth Cooper, explains in detail in his just-released FSF Perspectives: "At bottom, the FCC's proposed rulemaking is a monopoly-era legacy regulatory measure. It would carry over rules initially created to address problems pertinent to analog circuit-switched telephone calls to today's diverse and competitive digital communications services marketplace. Technological innovation, including the unique characteristics of digital broadband networks, limit the occurrence and scope of outages experienced by end users in a way that renders such a carry-over ill-advised." He explains that "when it comes to 911 and e911 services, however, the FCC has not made any showing that the VoIP and broadband Internet access and backbone markets are failing to deliver reliable 911 or e911 services, or that those markets are failing to incentivize reliable provision of these services."

·   Program Carriage Regulation. For yet another type of unwarranted extension of regulation, consider the Commission's pending proposal to further expand the program carriage rules developed in the analog-era to prevent cable operators and other multichannel video programming distributors ("MVPDs") from discriminating against unaffiliated programming vendors. The existing rules, which implement Section 616 of the Communications Act, no longer make sense today. Section 616 was added in 1992 when cable operators generally still possessed market power in the multichannel video program distributor marketplace and when vertical integration was more pronounced. For example, in 1992, only 68 national programming networks existed, and 57% of those were vertically integrated with cable operators. Today, there are over 500 national programming networks, and only about 15% are vertically integrated with a cable operator. According to a recent Comcast filing, of the 25 most viewed cable networks, only two are wholly owned by cable operators. With two nationwide satellite television providers and broadband "telco" providers competing vigorously in most MVPD markets, not to mention popular Internet video sites, cable operators (and the other MVPDs) lack the incentive and the ability to discriminate against unaffiliated program providers. In the current competitive environment, with consumers having a choice of multiple providers, and with more and more video programming available on the Internet, MVPDs cannot afford to favor their own programming over that provided by unaffiliated providers. So, in reality, there is a persuasive argument the existing program carriage requirements should be eliminated, especially in light of First Amendment concerns raised by the government mandating carriage of particular programming. But rather than curtailing them, the FCC is currently proposing to expand the scope of the program carriage mandates in ways that would make the rules even more intrusive and costly, and even more problematic under the First Amendment than they already are. The Commission would be called on to make determinations regarding program genres, target audiences, program ratings, and the like, which necessarily involve judgments concerning program content.

·   Set-Top Box Regulation. In 1996, when cable operators still retained market power, Congress included a provision in the Communications Act, requiring the FCC to adopt regulations governing the availability of set-top navigation devices from unaffiliated vendors. Anyone familiar with the history of set-top box regulation after 1996 knows it is a particularly sorry saga in which very little has been accomplished at great expense. In this instance, Congress, somewhat presciently, actually directed the agency to sunset the set-top regulations when the MVPD market and the market for set-top boxes became competitive. Both are, and they have been for some time now. Yet, rather than getting out of the business of regulating video navigation devices, the FCC is proposing to double-down on this form of regulation in the IP world. It is proposing to mandate for all broadband multichannel video providers certain standardized navigation functionalities (such as access, provision, decoding, and reception features). In other words, despite the fact that MVPDs must compete against each other to satisfy and retain customers, including in the provision of navigation features, the FCC is proposing to design a set-top box that embodies the search and display capabilities it thinks are necessary to promote independent provision of these features. As with the program carriage requirements, the proposal implicates free speech interests, which we have explained here. But the FCC apparently ignores the First Amendment concerns raised by a mandate that would dictate particular content by prescribing uniform search and display functionalities.

Each of these examples, as diverse as they are, has this in common. They are instances where the FCC has either extended, or is proposing to extend, a form of legacy regulation from the analog into the broadband world. And in each instance the agency is not compelled to do so by statute, but rather it is choosing to do so as a matter of administrative discretion. And, wholly aside from the costs and burdens imposed by the new regulations, it is doing so in the face of serious legal questions concerning its statutory authority (net neutrality) and even its constitutional authority (program carriage and AllVid).

While there is no gain in giving up hope, or in failing to advocate vigorously for the adoption of market-oriented policies by the agency, it is unlikely that the FCC will meaningfully reform itself. Unfortunately, it is instead more likely that the Commission will continue on the road of attempting to impose on broadband Internet services regulations developed for narrowband analog-era services.

I have some ideas that I'll be discussing in the weeks and months to come concerning ways to stop this regulatory encroachment on broadband. In the meantime, if you have ideas too, I'd welcome hearing about them.     

Tuesday, November 22, 2011

Thanksgiving Day - 2011

If calendars weren't so infallible, and I didn't smell the turkey roasting in the oven, I wouldn't believe it is already Thanksgiving.

But it is. And long-time readers know that I always – well, almost always – try to offer some special thoughts on Memorial Day, Independence Day, Thanksgiving, and New Year's.

Most every day of the year, including often weekend days, here at the Free State Foundation we're focused on espousing free market, property rights, and rule of the law principles. And in order for our work to be impactful, oftentimes we're focused on the nitty-gritty of thinking hard about how to translate those broad principles into sound policy recommendations that enhance the nation's welfare.

There aren't too many days that go by that I don't think, at least for a moment, about how fortunate I am to live in a country where I have the freedom to do what we do at FSF – advocate fundamental principles in which we believe. Too many people around the globe still lack this basic freedom.

So, I am thankful for this First Amendment freedom I have, and I am thankful for our Constitution that guarantees it.

And I am thankful for the opportunity to play a part in the ongoing American experiment in democratic republicanism (note the lower case) that has provided the American people with so much bounty and continuing promise.

Nevertheless, it would be foolish on this Thanksgiving, while rightly giving thanks for America's bounty and its promise, to ignore the serious challenges confronting our country in the months ahead. I especially have in mind today the severe fiscal straits in which we find ourselves, with an ever-rising $15 trillion national debt, the result of years of profligate overspending.

It is not the time today to ascribe blame or to push policy proposals. Instead, I want to share one of my favorite poems. There is something in the simplicity of it, and its simple meaning, that comports with the Thanksgiving spirit. And which does so in a way that makes us think anew about how one person extending a hand to another can make our communities and our nation stronger.

The Bridge Builder


Will Allen Dromgoole

An old man, going a lone highway,
Came, at the evening, cold and gray,
To a chasm, vast, and deep, and wide.
Through which was flowing a sullen tide.
The old man crossed in the twilight dim;
The sullen stream had no fear for him;
But he turned, when safe on the other side,
And built a bridge to span the tide.

“Old man,” said a fellow pilgrim, near,
“You are wasting your strength with building here;
Your journey will end with the ending day;
You never again must pass this way;
You’ve crossed the chasm, deep and wide --
Why build this bridge at the eventide?”

The builder lifted his old gray head:
“Good friend, in the path I have come,” he said,
“There followeth after me today
A youth, whose feet must pass this way.
This chasm, that has been as naught to me
To that fair-haired youth may a pitfall be.
He, too, must cross in the twilight dim;
Good friend, I am building this bridge for him!”

So, best wishes from those of us at the Free State Foundation for a Happy Thanksgiving and safe travels. And may the bridges you build be many and strong.

Report Examines the Present and Future of the Internet "Exacloud"

For the latest on Internet traffic trends look no further than "Into the Exacloud," a report just released by Entropy Economics' Bret Swanson. The report summarizes from and succinctly analyzes a number of recent studies and estimates on Internet traffic growth. It also looks at the latest advancements in network capabilities as well as applications and content demands. Not surprising, "online video is the driver of network traffic." In addition, the report includes forecasts for Internet traffic growth and related innovation along with some basic policy prescriptions to best accommodate what he calls the growing Internet-era "exaflood." Below is a liberal quotation of the report's executive summary:
  • Very large investments in info-tech infrastructure – including wireless – will need to continue for years to come.
  • Wireless capacity, coverage, and flexibility is the chief bottleneck that must be addressed – and is today’s chief public policy concern.
  • Driven largely by Web video, network traffic continues to grow rapidly and may have accelerated in the last year or so.
  • Networks are increasing in capacity, reach, and complexity, and content companies have become Internet infrastructure companies.
  • Broadband connectivity enabled the rise of the cloud, and now the cloud requires ever more broadband – both wired and wireless.
  • Enormous troves of data, both structured and unstructured, are piling up all over the world.
  • The digital ecosystem, comprised of networks, devices, software, services, and the cloud is changing fast. Innovations are improving and disrupting most sectors of life and the economy, including entertainment, education, health, finance, retail, and government, not to mention our social fabric.
  • The next generation of exacloud services will deliver unprecedented real-time content and software experiences and impose severe new demands on network capacity and speed.
On the public policy front, the report points to the importance of spectrum and deems wireless capacity to be a "crucial scarcity":
Part of this scarcity can be relieved through investment in new 4G networks and femtocells. A substantial portion of the scarcity, however, is due to a lack of available clean radio spectrum – the type of spectrum that can support 4G networks and the volumes and diversity of future traffic… Unleashing this spectrum through auctions and allowing greater flexibility to use, buy, and sell existing private spectrum is a paramount concern – if vive and thrive in the exaflood era.
This emphasis on spectrum for wireless services provides a timely reminder of the significance of NTIA's much-anticipated and hopefully soon-to-be-released report on the 1755-1850MHz. That spectrum band is a potentially rich resource for serving consumers' growing demands for next-generation wireless services.

Monday, November 21, 2011

FCC Should Pursue Solutions to Make Lifeline an Effcient Job Line

Posted for Deborah Taylor Tate 

Over the years, I've written a lot about the Lifeline-Linkup program which -- thankfully and finally -- is part of the overall USF Reform being undertaken by the FCC.  As a former FCC Commissioner and Federal Joint Board Chair, I had really hoped to start the "reform" back in December 2009; however, better late than never. And sometimes I wish I were still at the FCC so I could put out a statement whenever companies step forward with creative, positive solutions to real problems.

This past weekend, two of the leading Lifeline providers -- Nexus and TracFone -- announced a plan to help resolve a "bumper sticker" issue of "waste, fraud and abuse," specifically as it relates to any duplication of Lifeline. By law, Lifeline is restricted to one subsidy per household. Nexus and TracFone "plan to engage a third party vendor to develop and implement a database which will enable all ETCs [eligible telecommunications carriers] to determine whether applicants for enrollment in their Lifeline programs are enrolled in other ETCs' Lifeline programs." The two providers intend to "reach out to other Lifeline providers to participate in this cooperative effort" to prevent and reduce incidences of duplicative enrollment in Lifeline.

The FCC has an opportunity to adopt an industry-led, voluntary, resolution that will be cost-saving -- i.e., paid for by the companies themselves. It can certainly be implemented much more quickly than a burdensome bureaucratic government scheme.  And, most importantly, it will resolve the problem.

With 44 million Americans in poverty -- not to mention that a recent report recognized those communities are "predominantly of people of color" -- I have never understood why Lifeline was not being championed as a "job line."  Even though the FCC and this Administration say they are intent upon getting broadband deployed to every American, how incredible that huge segments of our population still do not have access to a simple phone. (And how odd that we often applaud developing countries for connecting their poor to cell phones while we still can do more to help our own citizens to gain access to communications in the 21st Century!).

We all agree that any fraud should be investigated, waste reduced, and abuse stopped. And, in the abstract, more regulatory oversight, stiffer eligibility rules and additional hoops to get Lifeline make for a terrific sound bite. However, with unemployment continuing at an all time high and Americans facing ongoing tough times, we should utilize a program that could actually help solve larger societal problems: helping link up someone who is jobless to a job, or accessing necessary health care, or just finding out your child is sick.

Lifeline was created during the Reagan Administration. As President Reagan so eloquently put it: "Welfare's purpose should be to eliminate, as far as possible, the need for its own existence." Lifeline-Linkup is one of the few government programs that does precisely that.

And by the way: Just try leaving your cell phone at home for a day and see what its like to be without your lifeline.

Friday, November 18, 2011

Congressional Subcommittee Passes Cost-Benefit and Other FCC Process Reforms

As covered in recent news accounts, the House Communications Subcommittee passed a pair of FCC process reform bills on November 16. In a November 3 blog post titled "Reforming the FCC's Regulatory Process," FSF President Randolph May discussed both bills: H.R. 3309 and H.R. 3310.
The FCC is an independent agency and not subject to existing Presidential Executive Orders regarding regulatory processes. So among its many provisions, H.R. 3309 incorporates some key language contained in Executive Order 12866 (1993) and Executive Order 13563 (2011) regarding identification harm and cost-benefit analysis.
H.R. 3309 contains requirement that must be met by the FCC in conducting rulemakings that will have an "economically significant impact"—i.e., will cost $100 million or more annually or have "a material adverse effect on the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local or tribal governments or communities." In particular, the FCC must identify and offer an analysis of "the specific market failure, actual consumer harm, burden of existing regulation, or failure of public institutions that warrants the adoption or amendment." The FCC must also provide:

Cost-benefit analysis is receiving increasing attention as a method for bringing more discipline to administrative agencies and for halting or perhaps even turn the tide against escalating numbers of new federal regulations. Taking reasoned steps to curb unnecessary costs and restrictions imposed by federal regulations is particularly important in light of our existing economic travails.
Also on November 16, Dr. Jerry Ellig and Sherzod Abdukadirov of the Mercatus Center published a short primer on "Regulatory Analysis and Regulatory Reform." Ellig and Abdukadirov sketch out a useful framework for assessing the quality of regulatory impact analysis and offer some prescriptions for improving such analysis. It should come as no surprise that they recommend that "[r]egulatory analysis must be legislatively required for all agencies, including independent agencies."
a reasoned determination that the benefits of the adopted rule or the amendment of an existing rule justify its costs (recognizing that some benefits and costs are difficult to quantify), taking into account alternative forms of regulation and the need to tailor regulation to impose the least burden on society, consistent with obtaining regulatory objectives.

Thursday, November 17, 2011

Supreme Court Terminates Review of Early Termination Fees Case

Do early termination fees (ETFs) included in wireless service contracts fall under the category of wireless "rates" or under "other terms and conditions"? That's the question that was presented to the U.S. Supreme Court in Sprint v. Ayyad, a class-action lawsuit involving California customers charged ETFs for terminating their wireless service contracts. But the Supreme Court took a pass on answering that question, issuing an order denying certiorari on November 7.
The case was an appeal of a decision by the California Court of Appeals that held that, at least under the facts of the case, non-prorated ETFs charged by Sprint were not intended to be an element of the rates charged by the carrier for service but were instead intended as a liquidated damages clause to reduce churn. The California Appeals Court applied a presumption against preemption and found that, as a liquidated damages clause, the ETFs constituted "other terms and conditions" subject to California common-law remedies. As one may recall, in 1993 Congress amended the Communications Act by providing in Section 332(c)(3)(A) that states are preempted from regulating the entry of or rates charged by wireless carriers while states can continue to regulate other terms and conditions of wireless services.
The class action plaintiffs' attorneys were confident enough in their position in Sprint v. Ayyad that they waived their right to respond to Sprint's petition to the Supreme Court. However, there are weighty arguments to me made on both sides. Without addressing them in detail, it's worth recognizing that the handful of trial courts across the country that have considered the question of whether Section 332(c)(3)(A) have reached contrary conclusions. Even the California Court of Appeals acknowledged that:
It is certainly possible that elimination of ETF's may indirectly affect Sprint's rates to the extent that Sprint incurs costs in pursuing alternative remedies for contractual breach or that it would reserve for losses attributable to a potentially higher level of customer defaults. Sprint would presumably factor actual or projected lost revenue into its rate structure.
By declining to hear Sprint v. Ayyad, lower courts will likely continue to make contrary rulings as to whether or under what circumstances federal law preempts ETFs. And for its part, even the California Court of Appeals' decision left standing may offer lower courts little guidance due to the facts of that case. As a general matter, wireless carriers now universally include grace periods and prorated ETFs in their wireless services contracts.
The Supreme Court's order denying review might have been influenced by pending petitions seeking an FCC declaratory ruling that ETFs are "rates charged" under federal law. However, as the California Appeals Court noted in its ruling, "[i]t appears safe to say that any action by the FCC on this issue is not imminent."

Wednesday, November 16, 2011

Willful Denial and First Amendment Jurisprudence

With the submission of briefs to the Supreme Court in FCC v. Fox Television Stations (a.k.a. "the FCC indecency case"), I have been thinking, as I often do, about the Federal Communications Commission and the First Amendment.

The issue in the Fox Television case is whether the FCC's determination that three different broadcasts violated the agency's indecency policy is consistent with the First Amendment. Two of the broadcasts concern the use of "fleeting" expletives, and the other, "fleeting" nudity. If you want more graphic details, you can go to the briefs, or to the original broadcasts.

For my purposes here it is unnecessary to dwell on the specifics of the broadcasts, or my sense as to whether or not the broadcasts comport with my own standards of decency. What I want to do instead is to use the occasion to once again call attention to the need for a new First Amendment jurisprudence that treats all media the same. By that, I mean a First Amendment jurisprudence that accords all media, including broadcasters and cable television and satellite operators, the same robust First Amendment protection accorded to the print media.

In the case now before the Supreme Court, the Court of Appeals for the Second Circuit held unconstitutional the FCC's new context-based indecency policy on the basis that it is impermissibly vague. "Void for vagueness," as the constitutional doctrine goes. It is quite possible, perhaps more likely than not, that the Supreme Court will decide the case on this vagueness point.

But Fox and other broadcasters explicitly are asking the Court more broadly "to overrule Pacifica and recognize that broadcasters have the same First Amendment protections as other media." To the same effect, a distinguished group of former FCC commissioners and staff officials filed a brief declaring:

In today’s media environment, the distinctions drawn by Pacifica between broadcast and other electronic media are unsustainable. Viewers can access the same content across broadcast, cable, satellite, and the internet or can subvert the Commission’s enforcement efforts by simply switching channels or turning on a computer. This reality makes plain that the Commission’s efforts to impose a separate standard on broadcasters is woefully under-inclusive. The First Amendment cannot tolerate discrimination against one of several like speakers. It is time for this Court to declare that the same First Amendment principles apply to all media.

And I have long argued the same point. In a 2009 law review article published in the Charleston Law Review, I ended this way:

Hopefully sooner rather than later, the Court will revisit Red Lion, Pacifica, and Turner in order to establish a new First Amendment paradigm for the electronic media, one that is much more in keeping with the founders’ First Amendment vision. It may even move in this direction this Term upon its Fox Television decision. Perhaps it was predictable, maybe even likely, that the First Amendment’s protections would be limited substantially during the twentieth century’s Analog Age that tended towards a monopolistic or oligopolistic communications marketplace. But now, in the face of proliferating competitive alternatives attributable to profound marketplace and technological changes, it ought to be considered predictable and yes, even likely, for the Court to establish a new First Amendment jurisprudence befitting the media abundance of the twenty-first century’s Digital Age.

Of course, on the first trip up to the Supreme Court for the FCC's indecency decisions now on review, the Court did not confront the constitutional issues now before it. Instead, in Fox Television Stations, Inc. v. FCC (2009), it remanded the case to the appeals court, sustaining the FCC's actions on administrative law grounds, thereby avoiding a decision on the broadcasters' First Amendment claims. Notably, Justice Thomas, in a concurring opinion citing my Charleston Law Review article, invited reconsideration of Red Lion and Pacifica, the two principal cases that provide the foundational sanction for according broadcasters less First Amendment protection than other media. Justice Thomas stated: "The extant facts that drove this Court to subject broadcasters to unique disfavor under the First Amendment simply do not exist today."

Many, if not most, of the readers of this space are familiar with the posture of the Fox Television Stations II case now before the Court and with the First Amendment jurisprudence to which I have alluded. But many may not be familiar with one of the more eloquent calls ever for a new First Amendment jurisprudence, certainly one of the most eloquent delivered by an FCC commissioner. An FCC commissioner who suggested the FCC ought to relinquish, as a matter of constitutional duty, authority to regulate broadcast content. I have in mind then-commissioner Michael Powell's June 1998 address entitled, "Willful Denial and First Amendment Jurisprudence."

At the time I first read it, I found Mr. Powell's address a stirring, prescient declaration of free speech principles, with which I was in full sympathy. I pull out the speech from a ragged old folder to re-read from time to time. As the Supreme Court prepares to hear argument on, and decide, Fox Television Stations II this term, I suggest you too may find the address by Mr. Powell, now President and CEO of NCTA, worth reading, or re-reading.

Here are a few excerpts to whet your appetite:

This leads me to the heart of my remarks today. Though I consider the constitutionality of proposed broadcast regulation last when I work through such issues under the public interest standard, at least I do work through it. I have observed that while changes in technology, the law, markets and consumer preferences often ignite discussion about the impact of changed circumstances on broadcaster's public interest obligations, such changes rarely initiate an equally serious examination of their constitutional protections. I believe that any attempt to consider how changes in technology and the regulatory environment affect public interest obligations, necessarily must include a review of the underpinnings of current First Amendment jurisprudence. There is a symbiotic relationship between the scope and content of public interest duties and the Constitution. The greater the protection afforded by the latter the less intrusive the government can be with respect to the former.
I submit that the time has come to reexamine First Amendment jurisprudence as it has been applied to broadcast media and bring it into line with the realities of today's communications marketplace. As far back as 1984, the Supreme Court indicated in the League of Women Voter's case, that it would await "some signal from Congress or the FCC that technological developments have advanced so far that some revision of the system of broadcast regulation may be required." I believe we should be getting those signal fires ready.
With scarcity and the uniqueness of broadcasting such demonstrably faulty premises for broadcast regulation, one is left with the undeniable conclusion that the government has been engaged for too long in willful denial in order to subvert the Constitution so that it can impose its speech preferences on the public -- exactly the sort of infringement of individual freedom the Constitution was masterfully designed to prevent.
In sum, I submit that it is time to reexamine the defensibility of maintaining a separate First Amendment jurisprudence. We must take the truth about scarcity for broadcast media out of the closet. Rather than continuing to engage in willful denial of reality, the time has come to move toward a single standard of First Amendment analysis that recognizes the reality of the media marketplace and respects the intelligence of American consumers.
Recall that these excerpts are from a speech delivered in 1998, more than twelve years ago. Surely, it is time for the "willful denial" of First Amendment rights, of which the then-FCC commissioner Michael Powell so eloquently spoke, to end. It is time, as I said in my 2009 Charleston Law Review article, for the Supreme Court "to establish a new First Amendment jurisprudence befitting the media abundance of the twenty-first century’s Digital Age." This means a jurisprudence that willfully provides full First Amendment protection to broadcasters, cable and satellite operators, Internet service providers, print purveyors, and other media alike.