FCC Slow-Moving Forbearance Process Isn't Getting Any Faster

My March 14 blog "FCC Opts for Delay over Deregulation in Forbearance Process," I cited a dozen sorry examples of agency delay in deciding forbearance petitions. At the time of posting, two significant petitions were pending—a USTelecom petition seeking relief from 17 categories of legacy voice service regulations and a CenturyLink relief from enforcement of legacy regulations with respect to its enterprise broadband services. And I observed the FCC granted itself 90-day extensions in reviewing both of those pending petitions. 

Ultimately, the FCC's stuck to its delay-prone pattern. The final bylines for both petitions could just as well be added to the dozen examples I cited earlier. To wit:

• USTelecom Forbearance Order (2013), granting, in part forbearance from legacy voice services regulations (petition filed, Feb. 16, 2012; order granting relief, in part, and granting extension, Feb. 19, 2013; final order adopted, May 10, 2013; final order released, May 17, 2013)

• CenturyLink Broadband Enterprise Petition (2012-3) seeking relief from legacy regulations with respect to enterprise broadband services (petition filed, Feb. 23, 2012; extension granted, Feb. 22, 2013; order requiring additional information and public notice requesting data, March 5; petition to withdraw granted, March 20)

This is a sorry addendum to make, particularly in the case of CenturyLink, which sought relief identical to that which was granted to other providers through the FCC's Enterprise Broadband Orders.

Keeping Up-To-Date on USF Reform and Surcharge Rates

It's welcome news to see the FCC's June 12 notice that the USF contribution factor will decline once more for the third quarter of 2013. The surcharge rate will be 15.1. In practical terms, that means consumers will face what is effectively a 15.1% tax on the interstate long distance portion of their phone bills during the next quarter. Of course, the new rate isn't so spectacular when placed in the context of the persistent USF surcharge rate hikes of the last decade:

Regarding USF reform, FSF President Randolph May filed public comments with the FCC in a Lifeline-related proceeding. The comment urged the Commission to grant TracFone's petition requesting prohibition of in-person distribution of handsets to prospective Lifeline cutomers -- a measure to combat waste, fraud and abuse.

Also worth reading are Law Professor and FSF Board of Academic Advisers member Daniel Lyons' remarks on USF reforms from FSF's January 23 Book Luncheon at the National Press Club. The luncheon spotlighted the release of Communications Law and Policy: The Next Five Years. The transcript of the event, including Professor Lyons' remarks, is available online.

Reminder -- ABA's Homeland Security Institute Conference

This is a final reminder that the ABA’s Homeland Security Institute’s conference is Thursday and Friday, June 20 and 21, at the Capital Hilton in Washington, DC. Topics include homeland security and policy issues, disaster relief, immigration law and policy, cybersecurity developments, and emergency response issues, and many more. This is a very worthwhile program -- if you are involved in these issues, you don’t want to miss this premier Homeland Security event with a stellar lineup of speakers.

The full program brochure with sign-up information is here.

The FCC's Incentive Auction: KISS It

There is widespread agreement that the proposed spectrum "incentive auction" the Federal Communications Commission plans to conduct – hopefully! – in 2014 is one of the most important action items, if not the most important action item, on the agency's agenda. 

And there is an equally widespread consensus that the auction necessarily will be the most complex spectrum auction ever conducted by the FCC in light of its two-sided offering and bidding nature. Broadcasters will have an opportunity to offer spectrum for bid in a so-called "reverse auction," and then wireless companies facing what the FCC itself has described as a "spectrum crunch" will have the opportunity to bid on the offered spectrum in the so-called "forward auction." And all of this presumably will be subject to auction design rules governing some "repacking" by the FCC of the offered spectrum into chunks sufficiently attractive to induce bidding by wireless companies. 

Oh, by the way. According to congressional direction, the incentive auction is supposed to be designed in a way that maximizes the auction proceeds, so that $7 billion of the proceeds go to establishment of a public safety "first responder" network, and another $15.2 billion goes to offset other budget costs and to deficit reduction. 

So, you can understand why there is such widespread agreement that the incentive auction will be inherently complicated. Given this, you can understand why the FCC should do everything it can to follow the KISS principle. KISS, of course, is the acronym for "Keep it simple, stupid." As Wikipedia puts it: "The KISS principle states that most systems work best if they are kept simple rather than made complex; therefore simplicity should be a key goal in design and unnecessary complexity should be avoided." 

Surely, with respect to the incentive auction, "unnecessary complexity should be avoided." 

The FCC should KISS it. 

If nothing else, in the context of the proposed auction this means the Commission should resist the urgings of those, including Sprint and T-Mobile, who want the auction to be designed in such a way so as to exclude AT&T and Verizon from bidding on certain spectrum. The Commission should resist suggestions that it manipulate the auction in this way, even when such suggestions are offered, as they invariably are, in the name of "promoting competition." 

In reality, these pleas for gaming the auction are very unlikely to promote competition or consumer welfare. Rather, they are requests that the agency, by designing rules to exclude AT&T and Verizon, "manage competition" ex ante so as to reach a preordained market result. Previous FCC attempts to game auction results by adoption of special bidding rules and extraneous eligibility conditions have not worked out well from the perspective of taxpayers or consumers. Likewise, any such attempt at FCC-directed managed competition for this auction almost certainly will not end well for consumers or taxpayers either. 

Not only would FCC attempts to design "exclusion rules" to foreordain particular market results be complicated to draft – thus violating the KISS principle – such attempts are unnecessary from a competitive standpoint. There is no reason to believe the wireless marketplace, presently dynamic and competitive, will not remain so without adoption of special rules intended to exclude AT&T and Verizon, or any other bidders for that matter. 

The Department of Justice has submitted comments to the FCC supporting some (unspecified) form of exclusionary rules designed explicitly to ensure that Sprint and T-Mobile "win" a certain amount of spectrum at the incentive auction. But such preemptive gaming appears unnecessary to preserve a competitive wireless marketplace. Indeed, in the very comments professing concern that AT&T and Verizon may attempt to use the auction to "foreclose" their smaller rivals from gaining as much spectrum as they otherwise might wish to possess at their preferred (depressed) prices, DOJ says "the four largest wireless carriers (AT&T, Verizon, Sprint, and T-Mobile) compete across many dimensions, including coverage, network speed, network technologies, and price." 

Of course, if a wireless company is going to be in a position to compete in the marketplace, acquisition of a certain amount of spectrum, whether at auction or through secondary transactions, is required. But I was struck by these two sentences in a June 10 Wall Street Journal news report on SoftBank's latest increase in its offer to acquire Sprint: 

"With more than 55 million subscribers and $35 billion in revenue, Sprint offers a path for either investor to profit from the boom in wireless Internet traffic. Sprint's potential is magnified by its roughly 50% stake in Clearwire Corp., which controls a huge cache of spectrum needed to carry the growing volume of data traffic." 

Indeed, Clearwire alone controls 160 MHz of spectrum in the top 100 metropolitan markets, and Sprint and Clearwire together control 210 MHz. Verizon controls 115 MHz and AT&T 113 MHz in these same top 100 metro markets. Certainly, with its "huge cache" of spectrum, as the WSJ puts it, it is difficult to understand why anyone, including the Justice Department, would argue that the FCC's auction rules should be drawn in a way that favors Sprint. 

I may have missed it, but, as far as I know, in the bidding war going on for Sprint between SoftBank and Dish, neither suitor has said that the acquisition is contingent on the FCC adopting rules preferring Sprint (and T-Mobile) in the forthcoming auction. In other words, these suitors sprinting to the finish line appear to be confident of Sprint's competitive marketplace position and not particularly concerned about its prospects in the auction. 

T-Mobile is not presently as spectrum rich as Sprint. No company is. Nevertheless, in recent months, T-Mobile has increased its own spectrum holdings through its merger with MetroPCS and its secondary market spectrum acquisitions from AT&T and Verizon. 

Significantly, both Sprint and T-Mobile are backed by highly capitalized, world-class firms. It looks like Sprint shortly will be acquired by SoftBank, a leading Japanese wireless, broadband, and Internet company, or, if not, by Dish, one of the two U.S. satellite operators. Dish has substantial spectrum holdings of its own. And T-Mobile is owned by Deutsche Telekom, one of the world's largest communications companies. In other words, both Sprint and T-Mobile have the financial resources available to bid for whatever spectrum they deem they need without the benefit of any preferential bidding rules. 

Thus, it is difficult to understand why the FCC would want to tailor its bidding rules in a way to prefer either Sprint or T-Mobile. This is especially true when it is all but certain that adopting rules designed to exclude AT&T and Verizon from bidding will reduce the overall auction proceeds to the detriment of taxpayers and the prospective public safety network. 

And, as importantly as the likely diminishment in auction proceeds, wireless consumers will be the losers as well. If no companies are deliberately disadvantaged by the auction rules, then those companies that presumably value the spectrum the most will bid the most for it and put the spectrum to the highest value use serving their customers' needs. Under the present competitive market circumstances, the Justice Department's theory of bidding by AT&T and Verizon to "foreclose" their rivals appears highly conjectural. 

At bottom, the FCC should not make the forthcoming incentive auction anymore complicated than it necessarily already will be by attempting to fashion complex exclusionary rules to favor bidding by some entities over others. Instead, it ought to KISS this auction – or "Keep it simple, stupid." 

Otherwise, the FCC might be kissing the auction prospects goodbye.

Catch the Video of FSF's "If I Were the Chairman" Seminar

In case you missed it, the YouTube video of the Free State Foundation's "If I Were the FCC Chairman" lunch seminar is now online. It was held at the National Press Club, June 4, 2013. The video is linked below:



On the panel of speakers were Gail MacKinnon, Executive Vice President and Chief Government Relations Officer, Time Warner Cable; Craig Silliman, Senior Vice President for Public Policy & Government Affairs, Verizon Communications; and Gigi B. Sohn, President & CEO, Public Knowledge. The panel was moderated by FSF President Randolph J. May. 

Maryland's StateStat Program Should Be Improved

Maryland's Governor martin O'Malley is fond of touting his StateStat program, and, indeed, the effort is   a worthwhile -- if properly carried out. StateStat is a so-called performance measurement tool that, according to the state's website, is intended to make state government "more accountable and more efficient."

MarylandReporter.com, an invaluable site for keeping up with Maryland governmental affairs, has a new report out on StateStat. According to the report, StateStat "can be substantially improved so that it comes close to living up to the high expectations inherent in the governor’s StateStat messaging."

The article has a number of thoughtful recommendations for improving StateStat, some of which have been noted for several years. If he is serious about making StateStat into the effective tool that he is fond of touting, the Governor would do well to take the recommendations to heart.

Advice to the New FCC Chairman

Posted for Deborah Taylor Tate

Free State Foundation

National Press Club

June 4, 2013 

"If I were FCC Chairman" Luncheon Event

Remarks as Prepared for Delivery by Deborah Taylor Tate, Distinguished Adjunct Senior Fellow, The Free State Foundation, and Former FCC Commissioner

At different times, in different moments, the FCC needs a different type of Chairman.

My friend Michael Copps tried to repair a demoralized and unappreciated staff in his very first few days as Interim Chair.

Some have exerted a "command and control presence"; in fact, I differ with my friend, Gigi Sohn, in that I don't think we need a Chairman exercising more power or their own "agenda" but rather implementing and championing what is our best national agenda. Some Chairs have actually delegated more authority – and clearly there is legal authority to do so – to the Bureaus and Chiefs. However, whatever your CEO style, just show leadership that inspires your 2,000 employees and American citizens; be trustworthy – your word is indeed your bond – and always take the higher road.

While everyone wants to pigeon-hole you – "she is only interested in cable"; "he is only interested in mobile"; "the media is too consolidated"; "satellite issues are well – too technical, I would suggest be more like a chameleon. It mystifies people, including the press (and Randy May). So, don't be pigeon-holed. Surprise people with a knock-out speech. Bring items up from the Bureau. Get involved in where the industry thinks technology is going. Talk to consumers about empowering them in this digital age.

FSF’s Deborah Taylor Tate Named to Aspen Institute Task Force

Deborah Taylor Tate, a Distinguished Adjunct Senior Fellow at the Free State Foundation and a former Federal Communications Commissioner, is the first ITU Special Envoy for Child Online Protection. She is participating in the Aspen Institute Task Force on Learning and the Internet program. Honored to be a part of Task Force, Ms. Tate said:

“Today, technology makes it possible for students to learn anytime and anywhere. I am excited to work with my colleagues to explore the best ways to increase digital learning and innovation without compromising safety, civility, or privacy. The Task Force will analyze what’s working, what needs improvement, and how to ensure that the participatory educational opportunities of the web are optimized for safety and learning."

The Task Force, made up of 20 individuals with diverse perspectives in learning, innovation, and safety, includes honorary co-chair Former Governor Jeb Bush. They will participate in online public conversations to ensure diverse ideas and comments are included as part of their discussions and will release a report of their work and findings in early 2014.

"Everything's Up To Date In Kansas City"

"Everything's up to date in Kansas City." 

I'm a huge fan of Broadway musicals, and Rodgers and Hammerstein's "Oklahoma," an American classic, is one of my favorites – for the way it captures the can-do American spirit, along with its memorable show tunes. 

Reading the communications trade press in the past week or so called to mind – yes, it's true! – a line from the "Oklahoma" tune, "Everything's up to date in Kansas City." Recall the time was 1906 as Oklahoma is on the verge of gaining statehood. Will Parker travels for the weekend to Kansas City, where he discovers he didn't have an idea "what the mod'rn world was comin' to." 

Among his discoveries, the telephone: 

"An' then I put my ear to a Bell telephone.

An' a strange woman started in to talk.

What next! What Next!" 

"Everything's up to date in Kansas City!" 

What called this tune to mind was an item in the June 3 edition of Communications Daily [subscription required] in which Google's Milo Medin, VP for access services, reportedly said this at a telecom event in…you guessed it, Kansas City: "We do not offer a voice product. Voice can be a pain to implement and carries a substantial regulatory burden with it." 

Well, Will Parker might turn over in his grave if he knew that a "100 short years later" Google is not offering a "voice product" in its new, highly-touted Kansas City fiber system. But because I am aware of the regulatory burden of which Mr. Medin speaks, I can feel Mr. Medin's pain. 

But I can also feel the pain of Verizon, for example, and other Ma Bell-offspring that remain stuck with legacy regulatory burdens in our now competitive telecom environment. Some of these regulatory burdens were put in place not too long after Will Parker visited Kansas City. 

The current back-and-forth between Verizon and Public Knowledge concerning the restoration of telephone service to New York's Fire Island, while somewhat unique, nevertheless is illustrative of Mr. Medin's – and my – point about legacy regulatory burdens. As consumers increasingly, and rapidly, turn away from service provided over old analog copper wires to broadband Internet Protocol ("IP") communications networks, regulators are met head-on with questions concerning the best way to promote continued investment in new digital broadband networks while, at the same time, protecting legitimate consumer interests. 

A good part of Verizon's legacy Fire Island copper network was destroyed last autumn by Superstorm Sandy. That's an indisputable fact. Because a substantial number of Fire Island residents and visitors already use wireless phones, and in order to get ready for the approaching 2013 summer tourist season, Verizon proposes to install a certain fixed wireless technology called Verizon Voice Link to restore Fire Island service, rather than re-installing wireline facilities. This has provoked protest from Public Knowledge representatives and perhaps others that Verizon should not be allowed to install and use the Voice Link technology, at least without further regulatory review to ensure compliance with the public utility-style "discontinuance of service" regulatory filings and so forth. 

In light of what Sandy did to a considerable portion of Verizon's East Coast network, especially including Fire Island, without much investigation on my part I am sympathetic to Verizon's effort to get the Voice Link technology up and running without having to run the gauntlet of a lot of regulatory rigmarole. But my real point here is not to take sides in the spat over Fire Island. You can read the recent blog, "The Fire Island Voice Link Situation," by Verizon Senior Vice President Tom Maguire for Verizon's perspective, and the blog also contains a link to the Public Knowledge critique. Decide for yourself. 

No, my point is more fundamental, transcending the Fire Island dispute. It has to do with the implication of the Mr. Medin's statement that, "We [Google] do not offer a voice product. Voice can be a pain to implement and carries a substantial regulatory burden with it." 

It is because of the continued existence of legacy regulatory burdens to which Mr. Medin refers that the FCC and state regulatory commissions must get on with the task of facilitating the ongoing transition to an all-IP world. And the regulators need to do so with a greater sense of urgency than they have displayed thus far. 

I have said before that Google's entry, even if somewhat timidly, into the communications business by way of constructing high-speed fiber networks in metropolitan areas like Kansas City, Austin, and Provo, Utah is a welcome development. But, as I also said in this late April blog, Google should not receive regulatory benefits and privileges that are not available to other communications providers on the same terms and conditions, whether the others are telephone companies or cable companies. 

The reality is that Google's "no voice product" position, while perhaps understandable from its business case perspective, just serves to illustrate the present asymmetric distortions resulting from the continuation of outdated regulatory regimes. There is an obvious gap, one with real consequences, between the legacy regulatory burdens Google so openly proclaims it will avoid and those burdens that continue to saddle the providers we sometimes still mistakenly refer to as the "incumbent" carriers. 

With the filing of its IP-Transition petition in November 2012, AT&T helped focus the attention of regulators on the need to move forward with the development and implementation of a plan for transitioning completely to all-IP networks. AT&T deserves much credit for doing so. But, unfortunately, the FCC so far appears to be treating the IP-Transition proceeding in a somewhat desultory fashion, rather than with the sense of urgency it deserves. 

Everything was up to date in Kansas City when Will Parker visited shortly after the turn of the nineteenth to the twentieth century. Now, in its own way, Google is bringing its own notion of up-to-datedness to KC shortly after the turn of the twentieth to the twenty-first century. 

But for "everything to be up to date" across America, it is crucial for the FCC and the state regulatory commissions to recognize, especially in light of the last two decades' remarkable technological advances and marketplace changes, that the regulatory environment needs to change as well.  In order to promote continued investment and innovation in the digital age, legacy regulatory burdens that are no longer necessary to protect consumers must be promptly reduced or eliminated. And certainly new ones should not be imposed.

Concerning CableCARD's Place After the EchoStar Case

At FSF's June 4 lunch seminar, "If I Were FCC Chairman..." panel discussion included the future of FCC video device regulation. The panel was divided on the FCC's much-criticized "AllVid" proposal for more expansively regulating video devices. But the panel was essentially united on their displeasure with the current CableCARD regulatory regime for cable set-top boxes. 

The EchoStar v. FCC decision by the D.C. Circuit this past January was also brought up in the seminar panel's discussion. My FSF Perspectives paper, "A Recent Appeals Court Ruling on Ancillary Power Limits Could Curb Regulatory Overreach," addressed that case and its potential impact on AllVid. But the case has immediate impact on CableCARD, as discussed during the seminar.

FSF's Fifth Annual Conference also featured a wide-ranging debate and discussion on FCC regulation of video devices. The insights offered by FCC Media Bureau Chief were especially helpful regarding the status of video device regulation at the FCC. What follows is an excerpt from the transcript for the Annual Conference panel "The Right Regulatory Approaches for Video Service Providers."

The AllVid proposal is still out there. We've continued to watch the developments in the marketplace. And there have been a lot of developments since we've made that proposal. I'd like to hope and think that maybe the proposal would help to spur some of those developments. 

One thing that's happened is it's clear that whole home solutions are something that consumers increasingly want. They just don't want one box in each room separately. They want a system in which they can record in this room and watch in that room, and so forth. One thing we did last year was to impose the requirement that boxes have an IP output. Whatever the status of that first box in the home, we wanted to make sure that there was a retail marketplace for all the other boxes that would be connected to it. And that would be enabled by having an IP output on the first box. 

Whether that rule survives the EchoStar decision is an open question. We know that our CableCARD regime took a real hit in that decision. One of the things we're thinking about is what we do in terms of reinstating some or any of those rules. And, we're thinking very much about what will be the replacement for the CableCARD regime in an IP world. It's not designed for an IP world. 

The AllVid solution was proposed at a time when we were farther from an IP world than we are today. So we're open for suggestions as to exactly how we ought to treat the whole set-top box issue when cable has gone IP. 

An April 18 Order by Bureau Chief Lake granting Charter Communications a waiver from the FCC's set-top box integration ban shed further light on the impact of EchoStar on CableCARD. The FCC's Media Bureau's waiver would allow Charter to initiate an open-standard, downloadable security solution that supports third party retail devices. In paragraph 9 of its Order, the Media Bureau explained:

We find good cause to grant Charter a limited two-year waiver of Section 76.1204(a)(1) subject to conditions. We recognize that, in vacating the Second Report and Order, the EchoStar decision eliminated the requirement that cable operators continue to support CableCARD as a means of complying with the integration ban. Charter does not need a waiver in order to implement a downloadable security system as long as such system complies with the integration ban. Prior to the EchoStar decision, the Commission's CableCARD rules furthered Section 629 by ensuring that consumers could purchase CableCARD retail devices with the knowledge that such devices would work on their cable operators’ digital cable system. After the EchoStar decision, we recognize that there is the potential for a fractured cable set-top box market should different cable operators adopt differing non-CableCARD separated-security standards. In the past, the Commission has encouraged the development of an industry-wide downloadable separate security standard to further the purposes of Section 629. We believe granting Charter's waiver under the circumstances presented in this proceeding will increase the chance of an industry-wide standard developing... Therefore, Charter’s expansion of the market for devices operating this particular downloadable system should help "assure the commercial availability" of navigation devices, as Section 629 directs.

EchoStar may not have brought about the elimination of the integration ban. That's something that FSF President Randolph May and I have urged on several occasions. Expect to hear more on this in the future.