Tuesday, March 29, 2011

The AT&T and T-Mobile Merger: Thinking Things Through

Remember the 2008 merger of the satellite radio companies, XM and Sirius? The National Association of Broadcasters, advocating on behalf of its terrestrial broadcaster members, adopted a facile battle cry slogan. The NAB said the proposed combination was a "merger to monopoly."

The NAB's claim was specious because "satellite radio" was part of a much broader marketplace comprised of audio information and entertainment service providers using multiple platforms, including free 'over the air' AM and FM radio, iPods, mobile-phone streaming, HD radio, Internet radio and next-generation wireless technologies. The ferocity with which the NAB tried to defeat the merger refuted the notion that its terrestrial broadcaster members did not compete in the same market.

[Tip: When considering competitive and market impacts for purposes of merger reviews, observe the extent to which various competitors, often many competitors, mount vigorous campaigns designed to convince the antitrust authorities and the regulators that if the merger is approved there will be an absence of competition. Note the incongruity.]

I recall the NAB's silly "merger to monopoly" mantra now because, in the face of AT&T's proposed acquisition of T-Mobile, some of the usual "I've never seen a merger I would approve" suspects have been quick to claim that a merger from "four to three" in the wireless marketplace, or at least this particular "four to three" merger, necessarily would be anticompetitive.

But, please, not so quick!

While the "four to three" formulation, like the NAB's "merger to monopoly" mantra, may make a nice sound bite, it is in no way a substitute for the rigorous market analysis and weighing of the public benefits that will determine whether the proposed combination should be approved.

At the time AT&T's acquisition of T-Mobile was announced, I had no hesitancy in stating: "Like all mergers of this size, the proposed AT&T - T-Mobile combination will get close scrutiny, and it should." So I do not propose here to offer a final judgment on the merger – before the merging parties have even filed their supporting papers with the FCC, or provided documentation to the antitrust authorities.

But I do suggest that formulaic sloganeering, coupled with the predictable, tiresome references concerning "giant" corporations, ought to be ignored throughout the review process. This sloganeering does nothing but detract from the type of informed analysis which ought to be performed.

With that in mind, I don't want here to go into any in-depth market analysis, except to note, assuming the AT&T/T-Mobile merger is consummated, that there will still be three major nationwide providers – AT&T, Verizon, and Sprint – along with many smaller providers, such as MetroPCS, Leap Wireless, and U.S. Cellular, which serve many geographic areas. There are reportedly five or more competitors in the top 20 markets. There are other providers as well, such as TracFone, which serve niche product markets by differentiating their offerings on the basis of price or terms of service.

While Sprint asserts that, post-merger AT&T and Verizon, would "control" 72% of the subscribers, the 28% of the market that remains is not marginal. It seems sufficiently large that the remaining competitors would continue to exert competitive discipline on Verizon and AT&T. Of course, and more fundamentally, it is wrong to view the market shares as static, as if the competitors simply accede to characterization of "control" of subscribers and cease competing. If this were true, the Sunday newspapers would be an awful lot smaller than they already are.

As the inquiry into the merger begins, here are some thoughts to keep in mind. The government's role is not to judge the merits of the AT&T/T-Mobile combination against some other hypothesized – or wished for – combination that was never proposed and never might have been. Its job is to assess the merits of the proposal before it.

And it will be most important to keep in mind as well the rapidity with which the parameters of communications and information services market change, driven by the interplay and feedback loops of incessant technological change and evolving consumer demands. In light of such rapid changes and feedbacks, it is difficult for even the most sagacious and experienced business and technology gurus to predict the future course of communications markets, or of shifting market power within those shifting markets.

I mean no disrespect to government workers in suggesting they are even less likely than the business people or technologists to have the knowledge or expertise to succeed at making accurate predictions concerning the future of these dynamic markets. Indeed, given their dismal past track record, for example, conditioning mergers such as the AOL/Time Warner based on misplaced predictions concerning future market dominance and technological evolution, there is every reason to believe the antitrust authorities and the FCC commissioners and staff should approach the AT&T/T-Mobile merger with a healthy dose of humility concerning their own perspicacity.

Finally, the merger presents the FCC with yet another opportunity to demonstrate some much-needed regulatory modesty in the way the agency handles merger reviews. I first outlined the problems with the FCC's approach to merger review in a piece for Legal Times in March 2000 entitled "Any Volunteers?" As the title of the piece suggests, a significant recurring problem is the Commission's unseemly practice of extracting from the merger applicants, late in the review process, so-called "voluntary" commitments in exchange for the agency acting on the merger. Trouble is, these extracted conditions often have little or nothing to do with any specific competitive issues raised by the proposed merger. If the voluntary conditions are suitable at all for adoption as FCC-enforced mandates – and many are not – they should be considered in generic rulemaking proceedings.

For much more on this, see my recent blog, "FCC Merger Review Reform: The Case for Regulatory Modesty," and also FCC Commissioner Meredith Baker's excellent recent address on the subject. While the gist of my advocacy over the years, as well as the thrust of Commissioner Baker's speech, is that the Commission should adopt new generic policies and processes for handling merger reviews outside the context of any particular merger, there is no reason why the agency, in a display of self-restraint, cannot begin the long-overdue reform process right now.

Stranger things have happened.

Tuesday, March 22, 2011

Data Plans: Pricing Flexibility to Pay for What You Use

By Deborah Taylor Tate

Aside from its proposed acquisition of T-Mobile – a rather large aside -- AT&T recently has been in the news for plans to charge its heavy-using broadband subscribers a bit extra when they download large amounts of data that exceed certain monthly thresholds. Quick to pounce on those plans were critics that typically oppose any usage-based pricing plans that allow broadband subscribers to pay only for the amount of their own use.

But building and operating broadband networks involves real costs. Usage-based pricing arrangements allow broadband companies to recover those costs while allowing subscribers to economize by paying only for the service they actually use. Adopting government price controls on broadband to prohibit that kind of flexible pricing could actually stifle innovation by leading to network congestion by heavy users and by reducing the amount of revenues available for future investment in network upgrades.

According to news reports, AT&T will cap broadband data use at 150GB per month for its DSL subscribers and 250GB per month for its U-Verse subscribers. Apparently, the average AT&T DSL subscriber uses approximately 18GB per month. The company expects less than two percent of its subscribers will be affected by its data cap policy, which will involve $10 charges on subscribers for every 50GB that they consume past their allotted monthly limit. And TR Daily reported on March 14 that "AT&T also plans to notify customers when they hit usage thresholds equal to 65%, 90%, and 100% of their caps and to offer customers historical usage reports and multiple usage tools to enable subscribers to track and manage their usage."

In response, Free Press claimed that AT&T's data use and charging plans bear no relation to network costs and will stifle innovation. Criticisms of this kind, however, treat broadband as if it were a cheap or almost "free" kind of service.

Last year, in my FSF Perspectives paper "A Tangled Web: Moving from 'Open and Free' to 'Safe and Secure,'" I observed that proponents of proposed network neutrality regulation using the term "open and free" to define the debate were in fact obscuring the reality of how broadband infrastructure and services are financed and delivered in our economy:

"'Open and free' sounds really good. However, no American really believes anything in life is 'free' anymore — certainly not in the context of an incredibly sophisticated global Internet and high-end devices being unveiled almost daily. Consumers pay for computers, cell phones, wireless devices, Xboxes, BlackBerrys, laptops and now the new iPad. In addition, most pay a monthly subscription to connect these devices to a broadband or Internet provider. A family with the most basic plan might spend over $1,000 annually; families with fiber and the maximum number of movie channels spend thousands. In legal terms, 'free' is a red herring; it doesn’t exist for most consumers."

I went on to write:

"[M]assive movie downloads and video gamers (not to mention pornographers) may cause an online traffic jam, yet up until now, they have not had to pay for causing it. In fact, most light Internet subscribers would probably like the option of paying only for what they use while heavy users pay for traffic jams or damage to the Internet superhighway. We all want to ensure that a doctor in the midst of delicate tele-surgery would have confidence that the highest quality of dedicated bandwidth would allow the safest possible outcome for a patient.

On the other hand, a grandmother who e-mails periodically, shops online once a month and looks at baby pictures should probably not be paying the same as a 24/7 so-called bandwidth hog. Even The New York Times recognized that huge file- sharing platforms are used for 'pirated copies of movies' — i.e. illegal content downloads. But whether you are a grandmother, a small business or a multinational corporation, you should want the government working to ensure the safety and security of personal data and the protection of our children, and that we continue to have a robust, efficient and ever-expanding broadband architecture for the future."

In December, the FCC proceeded to impose its controversial net neutrality regulation. I maintained the FCC's efforts were (and remain) a troublesome distraction from more important priorities — such as ensuring the Internet is safe and secure and protecting businesses, individuals, and even our government from cybercriminals and malicious attacks.

That being said, the net neutrality framework that the FCC ultimately adopted was premised on the agency's rejection of calls to "prohibit broadband providers from offering their subscribers different tiers of service or from charging their subscribers based on bandwidth consumed." Instead, the Commission concluded: "The framework we adopt today does not prevent broadband providers from asking subscribers who use the network less to pay less, and subscribers who use the network more to pay more." (See page 41, paragraph 72 of the FCC's Order.)

Whatever one thinks about the FCC's latest attempt to regulate how broadband companies can manage their own networks, even the agency's regulatory framework acknowledges the benefits of usage-based pricing to consumers. Pricing plans like AT&T's are entirely permissible, even under the FCC's pro-regulatory policy.

Congress and the FCC should preserve the kind of broadband pricing freedom that allows companies the flexibility to recover the costs of doing business while allowing consumers to pay for the amount of service they actually use.

Monday, March 14, 2011

Me, Michael Copps, and Sunshine That Hurts

I don't often agree with FCC Commissioner Michael Copps -- so when I do, I like to take the opportunity to take note.

For many years now, to his credit, Commissioner Copps has been the most steadfast proponent of congressional action to revise the Sunshine Act. As most readers of this space know, the Sunshine Act prohibits more than two of the five commissioners from meeting together privately outside of a formal FCC open meeting preceded by a public notice.

Perhaps in theory, this post-Watergate "reform" sounds nice, but in practice – in the real-world of agency decisionmaking in a multi-member commission -- the Sunshine Act works against the type of collaboration and collegial discussion that might well improve agency decisions.

Way back in 1995, I chaired a special committee of the Administrative Conference of the United States that recommended revisions to the Sunshine Act. Our committee report proposed revisions that would, at least on a trial basis, allow agency members to meet in private, without advance notice, provided a summary of the meeting was put in the agency's public record after the meeting. The report explained in detail the problems with the Sunshine Act and the reasons why revising the law would improve agency decisions.

Now Representatives Anna Eshoo, John Shimkus, and Mike Doyle have introduced the "Federal Communications Commission Collaborative Act." Their press release says that the bipartisan legislation "would modify current FCC rules to allow three or more Commissioners to hold nonpublic collaborative discussions, as long as no agency action is taken." A member of each political party would have to be included in any such discussions.

Commissioner Copps, in a news release commending the bill's introduction, stated that "[i]f there is only one action that the Commission could take this year to reform the FCC, this should be it."

I can think of several measures that ought to be taken to reform the FCC, but Commissioner Copps is right that revising the Sunshine Act is certainly an important one. Here is the way that Commissioner Copps explained why this is so:

“The inability of Commissioners to get together and talk as a group makes zero sense.  The statutory bar on more than two Commissioners talking together outside a public meeting has had pernicious and unintended consequences—stifling collaborative discussions among colleagues, delaying timely decision-making, discouraging collegiality and short-changing consumers and the public interest.  For almost a decade I have seen first-hand and up close the heavy costs of this prohibition."

Again, Commissioner Copps deserves credit for his leadership on this issue. Much of the press tends to take a pretty superficial, knee-jerk reaction against any proposed changes to the Sunshine Act, so it takes a certain amount of courage to argue for reforming the law.

Commissioner Copps and I are in agreement that, in the current state of affairs, too much Sunshine hurts.

PS – A final reminder. In a January blog, I put in a plug for Time Warner Cable's Research Program on Digital Communications, which awards stipends designed to foster research dedicated to increasing understanding of the benefits and challenges facing the future of digital technologies in the home, office, classroom and community. As I said in that piece, TWC executives, led by Fernando Laguarda, deserve much credit for developing and implementing the program. It presents a good opportunity for scholars to contribute to our understanding of digital communications.

The 2011 Program Announcement setting forth the program guidelines is here. The deadline for submitting applications is April 1. Take heed.

Sunday, March 13, 2011

Taxes Worthy of a Tea Party – Part II

In a February 10 piece, "A Tax Worthy of a Tea Party," I said: "When consumers are forced to pay a 15.5% tax on a service the government continually describes as vital in order to support a subsidy regime the government admits is 'wasteful and inefficient,' you would think there would be calls for a Tea Party – whether of the 1773 Boston variety or the 2010 nationwide variety."

There I was speaking of the 15.5% surcharge imposed on all long distance calls to support the various Universal Service Fund ("USF") subsidies.

A recent special report by Scott Mackey published in State Tax Notes documents that, including the federally-imposed USF tax, wireless users now pay a combined federal, state, and local tax rate of 16.3%, up from 15.2% in 2007. (Throughout, as shorthand, I use "tax" to include charges that have the same economic effect as taxes, whether the governments denominate them "fees" or "surcharges" or the like.) The average U.S. wireless subscriber pays approximately $7.84 in taxes on his or her monthly bill.

Considered in isolation, the nationwide average 16.3% tax rate imposed on wireless services is startling – and disturbing – enough.

But considered in relation to the nationwide average tax rate of 7.4% imposed on other general goods and services, the 16.3% tax rate imposed on wireless services –- more than double that on other general goods and services -- is even more startling and disturbing.

In light of the interest in supporting more widespread use of wireless smartphones as part of a national strategy to make broadband services more accessible, especially to lower-income persons, the discriminatory tax treatment of wireless services makes no sense from a public policy perspective. The discriminatory treatment certainly discourages use of wireless services vis-à-vis other goods and services.

You might think that, along with the Tea Party I suggested to protest the federal USF tax, the excessive tax treatment of wireless services by state and local governments would be worthy of a Tea Party too.

But at least some relief from further state and local government tax escalation may be in sight. Representatives Zoe Lofgren and Trent Franks, and Senators Ron Wyden and Olympia Snowe, have introduced the "Wireless Tax Fairness Act of 2011." The bill would impose a five-year moratorium on any new discriminatory tax on wireless services. A discriminatory tax is defined as one that is not generally imposed on other goods or services, or one generally imposed at a lower rate.

While there should a sizeable reduction in the current federal USF charge, and a reduction in existing state and local government wireless taxes, the moratorium proposed by the "Wireless Tax Fairness Act" is certainly a worthy and important start to achieving such needed tax relief. The fact that the bill is a bipartisan effort with 140 co-sponsors is a positive sign.

With the economy still fragile, and with a governmental interest in encouraging more widespread broadband use –- or at least not affirmatively discouraging such use by discriminatory tax treatment -– speedy passage of the Wireless Tax Fairness Act makes sense as both sound tax policy and sound communications policy.

Monday, March 07, 2011

FCC Should Conclude, Not Over-Condition Qwest-CenturyLink Merger

The FCC's approval process for the Qwest-CenturyLink merger drags on. It is now 283 days since the Commission's merger decision shot-clock started. That puts the Commission's merger review process more than 100 days past its self-devised 180-day decision deadline that commenced last May. All the while outside interest groups continue to call on the Commission to pile extra regulatory conditions onto the merger's approval. Qwest-CenturyLink has become yet another example of the need for a faster and more focused approval process.

CenturyLink proposes to acquire Qwest in a deal worth approximately $22.4 billion. The merger between Qwest-CenturyLink will create a voice, video, and broadband Internet service business benefitting from enhanced economies of scale. Once merged, the new business could potentially become a stronger competitor to other national carriers, video service providers, and broadband service providers. Qwest and CenturyLink operate in almost entirely separate geographic areas. So the merger will result in very little overlap of existing operations. An indication that the deal poses no market power or consumer harm complications is the Federal Trade Commission's fast-track approval of the Qwest-CenturyLink merger back in July.

Despite the Qwest-CenturyLink merger's potential for creating a more competitive market for consumers and despite the lack of any clear consumer harm posed by the deal, the FCC continues to sit on the deal. Public comment and reply periods have long since concluded. And now, 100 days past the Commission's deadline, interest groups press the FCC with continued calls for extra and unnecessary regulatory conditions on the Qwest-CenturyLink merger.

Qwest-CenturyLink is the latest in a string of recent FCC merger reviews that have gone way beyond the buzzer. The chart below lists major merger transactions at the FCC over the past five years, comparing how long the Commission's review process has taken.

(click image to enlarge)

As Free State Foundation scholars have pointed out in prior Perspectives papers and blog posts, lengthy delays in the merger review process leaves merging companies in regulatory limbo. While approval is pending companies are unable to take advantage of economic opportunities. In addition to opportunity costs, lobbying and other costs related to appeasing regulators continue to increase. And those delays also allow outside interest groups and marketplace competitors to inundate the Commission with demands that regulatory conditions be imposed on the merger. With the FCC's shot clock long since expired and time still passing, merging companies grow increasingly desperate to have the deal approved and pursuant to behind-the-scenes negotiations ultimately cave under pressure to regulatory conditions that impose costs of their own.

A case in point regarding the Qwest-CenturyLink merger is a recent
ex parte filing by Free Press urging the FCC to impose extra net neutrality and USF-related regulatory conditions on the deal. In particular, Free Press asserts that because the merged entity will be bigger and will be rolling out video content offerings that it will have increased content discrimination incentives. Free Press insists that the FCC should impose net neutrality regulatory conditions on the Qwest-CenturyLink merger because similar conditions were imposed in prior mergers, such as Comcast-NBCU and AT&T-BellSouth. And Free Press also insists that the FCC ought to impose net neutrality regulatory conditions on Qwest-CenturyLink because both parties "expressed skepticism and opposition" to the Commission's proposal to adopt net neutrality regulation.

These are not good reasons for imposing regulatory conditions. The FCC should reject calls to make net neutrality regulatory requirements a condition for approving the Qwest-CenturyLink merger. For starters, there is no reason to think that "big is bad" serves as a sound basis for imposing regulation, let alone for imposing conditions on mergers. Economies of scale that arise from larger enterprises often bring benefits to consumers through lower prices, wider product and service selection, as well as increased competition and choice in the market. This is certainly the case in capital- and infrastructure-intensive markets such as advanced telecommunications.

Since Qwest and CenturyLink have so little overlap in their existing operations, consumers are not going to find their choices for advanced telecommunications services reduced by the merger. If anything, expanded video service offerings by a merged Qwest-CenturyLink will most likely benefit consumers by giving them another alternative to cable and DBS video services.

It reaches the point of absurdity to insist, as Free Press does, that any broadband service provider should be subject to net neutrality regulation or regulatory conditions just because the ISP opposes it. But the bigger point is that major regulatory policies—such as net neutrality regulation—should not be haphazardly applied to particular companies as conditions for approval in merger review proceedings. It is improper for the FCC to impose untried, complicated, and wide-ranging regulatory policies as merger conditions. Those kinds of policies should be considered, rather, in industry-wide inquiries and rulemakings.

As known to all, the FCC adopted net neutrality regulation through rulemaking last December. The broadband Internet services regulatory framework ultimately adopted by the Commission is lengthy, complicated, subject to numerous exceptions and carve-outs, involves determinations based on the balancing of competing interests, and requires interpretation of general terms and "values" through future adjudications. What's more, the FCC's net neutrality rules are neither based on nor targeted to anticompetitive conduct or consumer harms. The FCC's wide-ranging framework for regulating broadband network management is not a limited set of specific requirements that can be targeted at particular anticompetitive concerns or consumer harm concerns posed by a particular merger. The expansive nature of the FCC's net neutrality regulation makes it a poor candidate for a merger review condition.

And, of course, Qwest-CenturyLink will already be subject to the Commission's net neutrality regulation—unless there is a successful legal challenge to such regulation. Given the FCC's adoption of industry-wide net neutrality regulation, the Commission should not force-fit such regulation into the Qwest-CenturyLink merger or into any other merger proceedings.

It is important to point out that these FCC process concerns regarding industry-wide rulemakings versus merger-specific conditions exist independently of the merits of the particular regulatory policies at issue. For these same reasons, calls for Qwest-CenturyLink to relinquish USF support as a condition for merger approval also appear dubious.

The FCC has finally begun its new efforts to modernize and streamline the USF and intercarrier compensation systems and to ultimately reduce the size and scope of the Fund. As a matter of public policy, FSF scholars have
consistently urged comprehensive reform of the universal service fund—including introduction of market-based approaches and significant reductions in the size of the Fund. USF is outdated, wasteful, and a growing tax burden on consumers. But rather than single out companies through its merger review process to make piecemeal USF reforms, the FCC should make use of its industry-wide USF reform proceeding to address USF issues.

Unfortunately, the FCC has insisted on net neutrality regulatory conditions in prior merger proceedings. The FCC has also made relinquishment of USF support a condition for prior mergers involving Verizon and Sprint, respectively. But that is hardly reason enough for the Commission to continue making the same mistake over and over again.

On other occasions the FCC has rightfully rejected calls for imposing certain regulatory conditions in merger reviews when such policies are a better fit for consideration in industry-wide inquiries and rulemakings. Such concerns were the basis for the FCC
rejecting handset exclusivity conditions in approving the AT&T-Centennial merger, for instance. Rather than engage in selective memory, the FCC should consistently remember those process concerns when considering interest group calls that it impose extraneous regulatory conditions on mergers.

* * * * * * *

This blog post was written before I had an opportunity to read Commissioner Meredith Attwell Baker's March 2 speech to the IPI Summit on reforming the FCC's merger review policies. The Commissioner's speech contains a number of excellent proposals, as FSF President Randolph May pointed out in his recent post, "FCC Merger Review Reform: The Case for Regulatory Modesty."

Thursday, March 03, 2011

FCC Merger Review Reform: The Case for Regulatory Modesty

You probably have seen the trade press reports on FCC Commissioner Meredith Baker's Wednesday speech concerning reform of the FCC's merger review process. Even if you have, it is well worth taking the time to read the entire speech here.

Entitled "Toward a More Targeted and Predictable Merger Review Process," Commissioner Baker sets forth a number of specific ideas for addressing what she aptly calls the "long-term structural issues" bedeviling the agency's merger review process.

The speech is concise, and I am not going to repeat what Commissioner Baker says. The merger review process, as carried out by the FCC, has been subject to criticism for well more than a decade. Suffice it to say that her reform suggestions fall into the following three categories: (1) eliminate or at least reduce the duplication of effort – and the attendant expenditure of resources – that result from dual review of the proposed transaction by the antitrust authorities and the FCC; (2) reduce substantially the time the FCC takes to complete its review; and (3) constrain the FCC's practice of imposing wide-ranging merger conditions that do not pose clearly merger-specific harms.

As noted in Commission Baker's speech, I first wrote about the problems attendant to the FCC's merger review process in Legal Times in March 2000 in a piece entitled "Any Volunteers?" ("Volunteers" was used purely in the ironic sense.) Another article entitled "Reform the Process" appeared in the National Law Journal in May 2005. I have written on the subject many times since.

Rather than rearguing here what should be done – and Commissioner Baker has certainly done a good job of laying out her own proposals – I want to emphasize a different point: The timing may be – ought to be -- right now for the FCC to adopt many of the reforms that Commissioner Baker and others have suggested.

Of course, as a practical matter, the Commission will only act to adopt merger reforms if FCC Chairman Julius Genachowski gets behind the effort – and provides the crucial third vote.

He should want to do so.

Commissioner Baker generously credits Chairman Genachowski with devoting agency resources to institutional agency reform. I am not aware of all he may have done in this regard. But I am sure that nothing Chairman Genachowski has done thus far would be as significant or meaningful with respect to institutional reform as changing the FCC's merger review policies along the lines suggested by Commissioner Baker.

There is widespread agreement that the way the Commission conducts the process now -- with the inevitable year-long reviews, the incontrovertible duplication of effort of the Department of Justice and the FTC on the one hand and the FCC on the other, and the unseemly extraction of so-called "voluntary" conditions – has contributed mightily to the FCC's reputation as an agency that does not function very well much of the time.

With the nation's economy and job creation prospects still fragile, and with intense focus on our massive budget deficit, the timing ought to be right for Chairman Genachowski to lead a serious effort to achieve merger review reform. After all, President Obama has made a point in the past few weeks of saying government agencies should ensure their rules and processes are not unnecessarily delaying or making more costly new investments and job creation by businesses. See, for example, the President's widely-publicized Wall Street Journal op-ed, "Toward a 21st Century Regulatory System." And earlier this week the Government Accountability Office released its widely-commended report, "Opportunities to Reduce Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue," highlighting areas where the government can achieve cost savings by eliminating duplicative functions and increasing the efficiency of operations.

Nothing more is needed for the FCC to succeed in a merger review reform effort than a healthy dose of self-restraint and regulatory modesty. I understand that, consistent with the relevant Communications Act provisions, the agency must find that license or authorization transfers are in the "public interest." There is no doubt that within the context of that vague standard, the Commission has the discretion, for example, to adopt each of the process reform proposals Commissioner Baker proposes.

In 2008, I published an article in the Administrative Law Review entitled, "A Modest Plea for FCC Modesty Regarding the Public Interest Standard," in which I suggested that in carrying out its public interest responsibilities, "the FCC itself should act more modestly." With respect to the merger review process and other agency policies, I said that, short of congressional action, "regulatory constraint under the public interest standard must come from the agency itself."

While unusual, it is not unprecedented for an administrative agency, on its own, to implement institutional reforms. Over the past few decades, despite the remarkable marketplace and technological changes that have occurred, the FCC, unfortunately, has been especially resistant to institutional change.

Chairman Genachowski should seize the opportunity presented by Commissioner Baker's thoughtful merger review proposals to demonstrate that the FCC is still capable, in an exercise of regulatory modesty, of reforming itself – at least in this important respect.

Tuesday, March 01, 2011

Speaker Boehner Hits High Notes in Music City

For Deborah Taylor Tate

John Boehner made his first speech as Speaker outside Washington, DC, Sunday night here in Nashville. He addressed the annual meeting of National Religious Broadcasters.

Speaker Boehner was straightforward, straight-talking and straight-faced in his analysis of our present “debt empire,” as he put it. The first half of his speech focused clearly on the Republicans' review of unnecessary government regulations. The FCC bore the brunt of his consternation.

He began his attack with this description of the FCC’s actions: “Right now, freedom and free expression are under attack by a power structure in Washington populated with regulators who have never set foot inside a radio station or a television studio.” Evidenced by numerous outbreaks of applause, the room full of broadcasters heartily agreed. With Representative Marsha Blackburn -- another passionate and ardent opponent of “government takeover of the Internet” -- in the audience, this was the perfect venue to call out the FCC for continuing to push in the wrong direction regarding Internet regulation.

The Speaker mentioned numerous colleagues determined to stop the FCC's new net neutrality regulations and ended this portion of the speech with this statement (again, met with resounding applause): “Congressman Greg Walden of Oregon, a former broadcaster himself, has introduced a congressional resolution of disapproval to reverse the FCC’s actions. I’m pleased to report the House will act on this measure as early as next month."

Whether net neutrality, or the return of the “fairness doctrine,” or the audacity of an agency utilizing tax dollars for inappropriate purposes -- most every example of regulatory over-reach ended with a ballroom full of “Amens.” (I bet he doesn’t hear that very often during speeches in Washington). Which is precisely what the problem is. Not that Washington insiders aren’t religious; many are deeply so. But that Washington’s penchant for taxing, regulating and spending -- under the present Administration’s leadership -- is not merely unsustainable. “It is also immoral.”

The fact is that ordinary Americans are facing extraordinary and immediate problems of joblessness, bankruptcy, and even higher gas prices…while Washington is on a “spending binge.” One of Mr. Boehner’s examples is that each baby born starts life with a debt of $45,000 -- their portion of our present national debt. That is more than most college educations, many annual incomes, and about half the price of an average home in many parts of the country. That is appalling. In Mr. Boehner’s words: “Every dollar the government takes is another dollar families cannot devote to strengthening their communities or saving for their children’s future.” And, quoting Proverbs: “No society is worthy that treats its children so shabbily.”

Mr. Boehner is not a showman or an actor. He is not a great orator, and he even has a little trouble getting used to the teleprompter. But he is “everyman” (and everywoman), and he is keenly in touch with both the very fiber of our founding fathers as well as “we, the people.”

Probably the most telling phrase of the night was: “In Washington, the abnormal becomes normal.” Let's hope this faithful band of fiscal conservatives can actually do what the Speaker proposed and “chart a new path to prosperity and make the tough choices necessary to restore a moral fiscal policy” at the FCC as well as in Congress.

Godspeed, Mr. Speaker.