FCC Auction Staff -- Thanks for the hard work!

Often enough -- more than I would like -- I'm in the position of criticizing the FCC's leadership for what I consider to be a seemingly endless string of unduly regulatory decisions that fail to account for the increasingly competitive communications marketplace.

Not today.

I just want to stop what I'm doing, as the Commission's incentive spectrum begins, to praise the FCC's auction staff, and especially Gary Epstein, the chair of the agency's Incentive Auction Task Force, for the very hard work that has brought us to this point.

I don't know the extent to which the incentive auction will meet expectations (whatever they are) in order to be considered a slam-bang success. But it is a very important - yet very complicated endeavor. And for the sake of meeting the continued and growing need for more spectrum to meet rapidly expanding wireless broadband demands, I sure hope the auction is successful.

There are aspects of the auction design that I would have done differently. This is certainly true of some of the commissioners as well. Nevertheless, come what may, the FCC commissioners and staff deserve thanks for their hard work on the project over many long months.

And, most of all, Gary Epstein, Howard Symons, and all the FCC staff deserve our gratitude for their dedication to doing all that was required to get us to the starting gate!

Content Availability in U.S. at an All Time High

On March 17, 2016, SNL Kagan released a new study entitled “U.S. Availability of Film and TV Titles in the Digital Age,” which quantifies the availability and growth of legitimate digital offerings of film and TV series in the U.S. based on a review of 33 major online video on-demand distributors and 14 TV everywhere on-demand services.

Key findings from the study include:

• 98% of premium films and 94% of premium TV series were digitally available on at least one of the reviewed online services.

• 97% of premium films were digitally available on at least one of the reviewed online video on-demand services – up from 94% in 2013. The report also found that 93% of premium TV series were digitally available on at least one of the reviewed online video on-demand services – up from 85% in 2013.

• On TV Everywhere on-demand services, which provide online access via an authenticated paid subscription, 96% of premium films and 82% of premium TV series were digitally available on at least one of the services reviewed.

• 95% of premium films and 84% of premium TV series were digitally available on at least five of reviewed online services. 

Additionally, a new study from FX Networks found that the number of scripted series has increased 94 percent from 2009 to 2014. Consumers have many choices regarding video devices and online video services. It is pretty clear that there is more video content available for consumers today than ever before, despite FCC Chairman Tom Wheeler’s recent statement that “consumers essentially have no choices.” (See FSF’s new infographic on the FCC’s set-top box proposal.)

The findings from the SNL Kagan study are important when considering the misguided regulations proposed by the FCC to add mandates to set-top boxes and lock in old technology. It is clear from this study that the video market is moving online rapidly, but the FCC’s proposal could stifle this innovative transition, harming the creative process and the growth in consumer choice.

The United States is a leader in providing strong IP rights protections for the creative community. This has helped create the dynamic, growing market for video services, but the FCC’s proposal could reverse this progress by jeopardizing the protection of copyrighted content.

Press Statement Regarding Netflix's Throttling of Its Videos

Here is my statement of the press regarding the discovery that Netflix has been throttling its videos accessed by subscribers of AT&T's and Verizon's wireless services: 

“There are many different reasons to be concerned about the discovery that Netflix has been engaged over a period of years in throttling the speed of its videos accessed by Verizon and AT&T wireless subscribers. First is just Netflix’s complete lack of transparency about the practice, especially in light of its strident advocacy against treating Internet communications differentially. Netflix’s hypocrisy in this regard is pretty stunning, if perhaps not surprising.

Second is the light Netflix’s actions shed on the FCC’s faulty approach to ‘Open Internet’ regulation. The FCC only concerns itself with practices of the ISPs, not the so-called edge providers, and this leads to a double standard. I’m not in favor of most of the FCC’s newly-adopted Internet regulation (except reasonable disclosure requirements), and I don’t really want to see Netflix’s practices regulated by the FCC either. But by acting in the way it does, the FCC lends itself to becoming part and parcel of Netflix’s hypocrisy.

Third, you can bet you will see this double-standard — and the hypocrisy — recur, sooner or later, in the realm of privacy regulation, where the FCC wants to adopt a regime that will facilitate differential privacy regulation for Internet market participants.”

The FCC and the Rule of Law

Not surprisingly, much of the debate concerning the Federal Communications Commission's actions takes place in the realm of policy - that is, we debate whether or not this or that action constitutes, to our minds, sound policy.

This policy debate is not only important; it is essential.

But whether or not an FCC action constitutes sound policy, we must also ask another question: Is it lawful? Each of us probably can name an agency action that we think constitutes sound policy, but which turns out, upon court review, not to be lawful.

Each year at the Free State Foundation's major annual telecom policy conference, we discuss the most important communications law and policy topics. I'm certain this year's conference, this Wednesday, March 23, will be no exception - what with the pending Open Internet Order and Municipal Broadband Preemption appeals; near-term agency consideration of draft orders to expand the FCC's privacy regulation over Internet service providers and to expand the Lifeline program; a recently-initiated proposal to mandate a new set-top box "open standard" for devices accessing video services; new spectrum policy initiatives; the "special access" investigation imbroglio; unprecedented high-profile enforcement fines; and much more.

At this year's conference, you can bet that we will discuss these "hot-topic" issues as a matter of policy. But the theme of this year's conference is "The FCC and the Rule of Law." In that vein, I anticipate that, throughout the conference, a meaningful part of the discussion - perhaps more than usual - will focus not only on policy, but on law.

And not on "law" only in the narrow sense of whether the FCC's actions ultimately will withstand judicial review. But also in the somewhat broader sense of whether the actions conform to the "rule of law" and promote respect for the "rule of law." To be straightforward about it, preservation of the rule of law is the underpinning for maintaining ordered liberty and freedom. Every government agency - and every government official - has the responsibility to uphold rule of law norms.

I'm looking forward to my lunchtime conversation with Jonathan Sallet, and I'm sure we'll be talking some "law-talk." After all, as FCC General Counsel, Jon is the agency's top lawyer! And at the immediately following session moderated by my FSF colleague Seth Cooper, we are privileged to have Ambassador Philip Verveer, FCC Senior Counselor, join AT&T's Robert Quinn and Boston College Law School professor and FSF academic advisor Daniel Lyons in a panel titled, "The FCC Rule and Law."

Whether you prefer policy over law, or vice versa, or prefer them in precisely equal parts, we have an absolutely stellar lineup for Wednesday's conference to discuss all the current hot topics. The complete conference agenda is here, and the registration form is here. Registration, along with breakfast and lunch, is complimentary. But please register if you plan to attend because space is limited.

PS - Please don't consider this an assignment! But if you want to think a bit about what the "rule of law" means in advance of the conference, here's one common definition: (1) a system of binding rules; (2) of sufficient clarity, predictability, and equal applicability; (3) adopted by a valid governing authority; and (4) applied by an independent authority. In similar vein, Friedrich Hayek, in The Road to Serfdom, declared that the rule of law "means the government in all its actions is bound by rules fixed and announced beforehand - rules which make it possible to see with fair certainty how the authority will use its coercive powers in given circumstances and to plan one's individual affairs on the basis of this knowledge."

Pirates May Have Killed "Hannibal"

On March 14, 2016, Martha De Laurentiis, the Executive Producer of the former NBC show “Hannibal,” published an article in The Hill asking the question, “Did pirates kill ‘Hannibal’?” “Hannibal” was the fifth-most illegally downloaded show in 2013 and nearly one-third of the show’s audience came from pirated websites — despite the fact that a legitimate download for each episode was available the following day. NBC cancelled the show in 2015 after three seasons.

Ms. De Laurentiis debunks the unfortunate but common perception that producers are not harmed by for-profit theft of films and television programs. More importantly, she says that the thousands of crew members that work on television and film sets are often the forgotten victims of piracy. According to Ms. De Laurentiis, pirates of “Hannibal” might not be concerned with the wallets of top-billed actors and producers, but they should be able to relate to the hard-working crew members who were harmed when NBC decided not to renew “Hannibal” for a fourth season.

Ms. De Laurentiis concedes that it is hard to know if pirates killed “Hannibal.” But she is sure that the more than 2 million viewers who watched the show illegally at least partly contributed to the show’s cancellation.

Isn’t it ironic that “Hannibal,” a show about a cannibalistic serial killing psychiatrist, may have been killed by its own fans who downloaded the show illegally?

As I stated in an August 2015 blog, Ms. De Laurentiis has urged that profit should be removed from piracy. As a CreativeFuture Leadership Committee member, she often speaks out about how piracy undermines the vitality of the entire creative industry. CreativeFuture, a coalition of more than 400 companies and organizations in the creative industries, notifies and warns major companies about avoiding ad placement on websites which facilitate illegal content. Ms. De Laurentiis stressed back in August 2015 that “[w]ithout their ad dollars, we can take the profit out of piracy.”

Diminishing ad-supported piracy is important to help ensure that content providers, artists, innovators, and marketers can earn a return on their creative works – thereby incentivizing more innovation, investment, and economic growth. 

The FCC Should NOT Impose New Video Device Mandates!

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Any Volunteers? – Part XX

Almost 16 years ago to the day, on March 6, 2000, Legal Times published my commentary, “Any Volunteers?” The essay bemoaned the Federal Communications Commission’s then-increasingly common practice of accepting supposedly “volunteered” conditions by merger applicants, almost always late in the day, in order to get the Commission – finally – to approve a long-pending proposed merger.

I referred to this phenomenon of supposedly “volunteered” action as “regulation by condition.” And I explained how the indeterminate “public interest” standard makes it easier for the Commission to spur such volunteerism in the context of reviewing transactions that need agency approval. I offered reforms of the merger review process, so merger applicants would not need “to continue playing the FCC’s version of ‘Let’s make a deal.’”

Well, in the 16 years since, I have written several dozen other pieces, and testified before Congress at least twice, urging reform of the merger review process, either by Congress or the FCC itself. Rather than go back and count them all, I’ll just call this one, “Any Volunteers? – Part XX.”

Without rehashing the more complete discussions contained in many of those pieces, I just want to make one particular point about the current review process involving the proposed Charter – Time Warner Cable – Bright House Networks merger. As my colleague FSF Senior Fellow Seth Cooper explained in a blog last week, several parties, which, not surprisingly include competitors, are urging the FCC to impose various conditions on the proposed merger if the agency approves it at all. These conditions relate to claims that a merged Charter/TWC/BHN would adversely affect the availability of online video distributor (OVD) services and that the merged company would stop making its video services accessible to independently manufactured and supplied set-top box navigation devices.

In his blog, Seth explains why, in light of marketplace developments, the proposed Charter/TWC/BHN merger poses only a remote potential for the claimed harms to occur. And we explained why this is so at much greater length in the comments we filed with the Commission in connection with its review.

The point I wish to make here is the same one I made 16 years ago: When the Commission indulges in “regulation by condition,” inevitably, its action is “characterized by a whiff of regulatory extortion” that necessarily implicates accepted rule of law norms.

It need not be this way if the FCC would exercise a modicum of regulatory self-restraint. And if it would simply adhere to its own injunctions. For example, the Commission often says, as it did in the order approving the AT&T/DIRECTV merger, words to this effect: “To the extent that there potentially is an industry-wide public interest harm…., it would be beyond the scope of this proceeding in any event as it is not transaction specific.” Or: The Commission “does not impose conditions to remedy pre-existing disputes between parties that are unrelated to the transaction at issue….” Or: The Commission “will not impose conditions to remedy pre-existing harms or harms unrelated to the transactions.”

For better or worse – quite arguably worse, from the perspective of whether any new regulatory action is needed – the Commission already has initiated generic industry-wide proceedings concerning the online video distributor and video device issues raised in connection with the proposed merger. Despite any suggestions to the contrary by the condition-seekers, there is no good reason, given the existence of the generic proceedings, to single out Charter-TWC-BHN for special or unique treatment.

There is a time and place for volunteerism outside the realm of official government proceedings. Over the last 16 years, at various times the Commission has been more or less inclined to extract so-called “voluntary” conditions in merger proceedings. On those occasions when it has exercised a proper degree of regulatory restraint, I’ve gladly commended the agency.

The Commission should use the Charter merger to move away from “regulation by condition.”       

Agenda Released for FSF's Annual Telecom Policy Conference

Today, the agenda for the Free State Foundation’s Eighth Annual Telecom Policy Conference, “The FCC and the Rule of Law,” was released. The conference will take place at the National Press Club in Washington, DC on March 23, 2016 from 8:45 am to 2:45 pm.

Registration is complimentary, including continental breakfast and lunch, but you must register to attend. Register now here!