by Randolph J.
May and Seth L. Cooper
Next-generation
communications technologies and services will supply potent new sources of value
for consumers in the Digital Age. To this end, in early 2017, we proposed that
the FCC should clear away legacy regulatory obstacles to market investment
innovation by relying more on its Section 7
authority. In a welcome development, the FCC will
consider a proposal to invigorate and streamline its Section 7 authority for
promoting new technologies and services at its public meeting on February 22.
Certainly, the FCC should adopt the draft Section
7 rulemaking proposal. After that, the Commission should take further steps to
maximize the proposal’s effectiveness in encouraging timely innovation. In
particular, the Commission should consider using innovation-friendly procedures
such as a deregulatory presumption and a deemed granted provision in connection
with agency decisionmaking about whether new technology and service offerings are
in the public interest.
Section 7 of the Communications Act provides:
(a)
It shall be the policy of the United States to encourage
the provision of new technologies and services to the public. Any person or
party (other than the Commission) who opposes a new technology or service
proposed to be permitted under this chapter shall have the burden to
demonstrate that such proposal is inconsistent with the public interest.
(b)
The Commission shall determine whether any new technology
or service proposed in a petition or application is in the public interest
within one year after such petition or application is filed. If the Commission
initiates its own proceeding for a new technology or service, such proceeding
shall be completed within 12 months after it is initiated.
Although adopted in 1983, only a handful of
Section 7 petitions have been filed with the FCC. And the Commission previously
has not adopted rules for the section’s implementation. In a July 2012 speech,
then-Commissioner Ajit Pai called Section 7 “the neglected stepchild of
communications law,” and stated that “[t]he Commission should make the
deployment of new technologies and services a priority.” We commend Chairman
Pai for following up on his call to prioritize innovation by initiating the Section
7 rulemaking.
The draft proposed rulemaking observes that
“outdated technical rules and regulations can require proponents of new
technologies or services to either seek a waiver of those rules or petition the
Commission to conduct a rulemaking.” Legal and administrative proceedings can
be lengthy and delay-prone. And the draft states: “Often, competitors petition
to deny or oppose the introduction of new technologies or services that may
have a negative economic effect on their own service but would otherwise
provide significant public interest benefits if the Commission moved quickly to
allow the new technologies or services to be offered.”
Concluding that Section 7 “evinces a bias in
favor of technological innovation and dispatch,” the FCC’s proposed rulemaking
consists of guidelines and procedures intended “to effectively breathe life”
into the provision. The proposed rules include some basic filing requirements –
such as express requests for consideration under Section 7, as well as showing
that the new technology or service is “both technically feasible and commercially
viable” and “new.” Public notices are to be issued regarding applications that
satisfy the filing requirements. And consistent with Section 7(a), opponents of
the application would bear the burden of showing that the proposed technology
or service would not be in the public interest.
Also, applications are subject to a 90-day
review led by the FCC’s Office of Engineering and Technology (OET) to determine
whether the proposed service or technology is, in fact, “new” and within the
scope of Section 7. If that determination is positive, the Commission “will
evaluate the record once complete, and decide within a year of the filing date
the appropriate course of action with respect to the petition or application.”
However, if the proposed technology or service is determined to be outside the
scope of Section 7, then the application “would be handled under the existing
Commission processes that apply generally.” Negative determinations could be
challenged and Section 7 treatment ultimately granted in the course of the
Commission’s standard processes.
The FCC’s proposed requirements and processes
for implementing Section 7 appear reasonable as far as they go. If adopted, the
proposed rules could provide fast track, or at least less cumbersome means for approving
for new technology and service offerings in the communications market.
However, to best ensure that its
reinvigoration of Section 7 succeeds in encouraging market investment and
innovation, the Commission likely will need to take additional steps to overcome
the institutional bias of regulatory agencies toward preserving and extending
regulation. Indeed, in describing difficulties that cause delays in approving
new technologies in services, the proposed rulemaking observes: “Sometimes the
problem is simply regulatory inertia.” In order to counteract that
pro-regulatory bias, the Commission should consider incorporating more pro-free
market procedures into the final rules it adopts.
For starters, although Section 7 does not
establish a presumption in favor of granting applications, the Commission does
have the discretionary authority to adopt such a presumption regarding its own
exercise of authority. (For more on that point, see our July 2017 Perspectives from FSF Scholars paper, “D.C. Circuit Ruling Supports the
FCC’s Use of Deregulatory Presumptions.”)
We
previously published a series of proposals for specific policy and process reforms based on existing FCC authority.
Although differing in details, most of those reform proposals called on the
Commission to establish a presumption that enforcement of the regulation at
issue was not in the public interest, absent clear and convincing evidence to
the contrary. Consistent with those reform proposals, the Commission could
adopt a deregulatory rebuttable evidentiary presumption that an application for
a proposed new technology or service offering that falls within the scope of
Section 7 is consistent with the public interest and should be approved, absent
the Commission finding clear and convincing evidence to the contrary. Alternatively,
the Commission could establish a lower evidentiary standard for overcoming the
rebuttable presumption, such as a finding that substantial evidence exists that
the proposed technology or service offering would not be in the public
interest.
In
either instance, the proposed language for such a procedural rule would track
with the public interest criteria contained in the Section 7 proposed
rulemaking. And thus the rule would not dictate the outcome of any particular Section
7 application. Establishing a rebuttable evidentiary presumption that takes
account of the consumer welfare benefits of market investment and innovation is
consistent with Section 7’s “bias in favor of technological
innovation and dispatch.”
The
Commission should also consider adopting a deemed granted provision to better
ensure that the agency takes action on applications within the one-year time frame
set forth in Section 7(b). The Commission could establish a procedural rule
that an application for a proposed new technology or service offering would be
granted automatically if the agency fails to act on that application within one
year of its filing. As we point out in our Perspectives
from FSF Scholars paper, “A Proposal for Spurring New
Technologies and Communications Services,” timeliness is a key concern of Section 7. Similarly,
the draft rulemaking states: “[W]e propose to commit
the agency to swift action, consistent with section 7, to evaluate that
technology or service.” A deemed granted provision would help make Section 7’s
one-year time frame meaningful and partially act as a counterweight to the
problem of “regulatory inertia” identified in the proposed rulemaking.
In all, the proposed rulemaking to breathe new life into Section 7
surely merits approval. At the same time, the proposal’s goal and potential positive
effect in spurring new technology and service offerings may be improved by
incorporating additional pro-innovation measures.
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