by Randolph J. May
Legal Times, June 4, 2001

At a May 17 confirmation hearing, John McCain, then-chairman of the Senate Commerce Committee, observed that what is largely a new slate of commissioners under the leadership of a new chairman of the Federal Communications Commission “will guide American telecommunications policy into the digital age.” So what should the newly constituted FCC do to bring its policies in line with the realities of the digital age?

Before answering, it’s worth reviewing who will be in charge of America’s communications agenda for the foreseeable future. Three new commissioners, nominated by President George W. Bush, were confirmed on May 25.

They are Kevin Martin, Kathleen Abernathy, and Michael Copps. Martin and Abernathy are Republicans, while Copps is a Democrat. Both Martin and Abernathy have spent time at the agency as legal advisers to commissioners, so they have had a good firsthand look at what the job entails. During the Clinton administration, Copps served as a Commerce Department official and, before that, spent 15 years as an aide to Ernest Hollings of South Carolina, the new Democratic chairman of the Senate Commerce Committee.

That leaves two remaining commissioners. One is Michael Powell, a Republican nominated by President Bill Clinton in 1997 and designated chairman by President Bush in January of this year. (Powell is also son of Secretary of State Colin Powell.) The second is Gloria Tristani, a Democrat who has announced she will resign later this year.

NEW KIDS ON THE BLOCK

So, how should these five commissioners, whose independence from executive branch control is buttressed by the requirement that no more than three may be from the same political party, approach their job?

Most fundamentally, they should junk the regulatory micromanagement mind-set of the Clinton-appointed commissioners. That means the FCC needs to bring its actions more in line with what Congress called the “pro-competitive, de-regulatory national policy framework” established by the Telecommunications Act of 1996.

One way to signal clearly a change in policy direction would be to revise the strategic plan, “A New FCC for the 21st Century,” issued in 1999 by then-Chairman William Kennard. Despite the fact that the plan predicted that within five years communications markets would be “characterized predominately by vigorous competition,” it nevertheless contemplated that, at the end of the day, the agency’s role would remain that of “market facilitator.”

But competitive markets don’t need “market facilitators.” In testimony before a House Appropriations subcommittee on May 22, Powell rightly characterized today’s communications environment as one of “dynamic and chaotic experimentation and unpredictable change.” This is not a world well-suited to governance by regulators who conceive of themselves as “market facilitators.” Surely they will spend too much time trying to figure out how to “level the playing field”—an impossible task in this environment. To set the tone for a new direction, the strategic plan should be revised to declare “the FCC will become primarily an industry deregulator.”

Having done so, here are four specific areas which cry out for FCC attention:

• Internet services. The commission should deregulate all high-speed Internet access services (a.k.a. broadband services, such as cable modems and digital subscriber lines). In the 1996 act, Congress directed the FCC to encourage broadband deployment by utilizing tools such as regulatory forbearance. Under the current rules, broadband services are subject to disparate regulatory requirements. For example, telephone company-provided DSL service is subject to public utility-style rate regulation and nondiscrimination requirements that are not applicable to cable modem service. While the FCC’s authority to deregulate all broadband services is not entirely clear, it should try to do so to encourage more robust broadband competition and investment in all such services. Even if it fails, at least Congress will know it needs to amend the act.

• Sharing requirements. The prior commission has required an excessive amount of sharing of facilities among competitors. The most notable example is the degree to which local telephone companies have been required to share their switches and lines with new carriers. In AT&T v. Iowa Utilities Board (1999), the Supreme Court rebuked the FCC for exceeding its authority by, in effect, giving the new carriers blanket access to the existing networks. Now, more than two years later, the commission has done almost nothing to limit the obligations to share.

And the commission’s sharing proclivities go further. Last year, it opened a proceeding to consider whether cable operators must share their systems with Internet service provider competitors. And early this year, it initiated still another inquiry regarding whether the cable companies should share video programming platforms for interactive television services, which have not even yet been defined. The commission needs to heed Justice Stephen Breyer’s admonition that “[r]ules that force firms to share every resource or element of a business would create not competition, but pervasive regulation.”

• The public interest doctrine. Much of the FCC’s authority comes from congressional requirements that the commission act in “the public interest.” In light of the Supreme Court’s decision earlier this year in Whitman v. American Trucking Associations, it is unlikely that the courts any time soon will hold unconstitutional a congressional delegation even as standardless as “the public interest.” Nevertheless, the commission should take it upon itself to cabin its discretion.

Two areas particularly come to mind. First, regarding its merger review process, the commission should declare that it will no longer use its public interest authority to undertake a competitive analysis that largely duplicates work performed by the antitrust authorities—or impose regulatory conditions unrelated to specific concerns raised by the merger. Second, it should declare that it will no longer regulate the program content of any electronic media. Such a self-abnegating proclamation would be a bold stroke for First Amendment freedom.

• Intercarrier compensation. The commission presently has a patchwork of different rules to determine how service providers are compensated when they exchange traffic on interconnected networks. This system embodies various subsidies designed to help one group or another of favored consumers or service providers. In today’s competitive environment, these mostly hidden subsidies, implemented through artificial regulatory distinctions, are no longer sustainable. The commission should develop a rational compensation regime that unmasks the subsidies and targets rate relief specifically to needy low income consumers.

What are the chances that the new FCC will implement such an agenda? Even if it is so inclined, it won’t be easy. There will be opposition from the various industry segments fighting to preserve their own special regulatory protections. And there will be opposition from “consumer” representatives who feel more comfortable, say, with the government dictating what programming should be broadcast “in the public interest” than with allowing the public to decide what programming it is interested in receiving.

And, finally, the change in Senate control means that a deregulatory-minded FCC may face more resistance from Capitol Hill. Hollings, the new Senate Commerce Committee chair, is not known for his deregulatory sympathies—although the truth is that many of the hot-button communications issues traditionally have drawn fire from both sides of the aisle.

Nevertheless, Chairman Powell has spoken forcefully of the need for deregulation in the face of a “great digital broadband migration.” He should have a good shot at persuading at least the two new Republican members to follow his lead.

Sen. Clarence Dill, the leading Senate proponent of the bill that created the FCC more than 65 years ago, said he wanted the commissioners to be “men of big ability and big vision.” He should have said men and women. But with that important revision, here’s hoping that the “new” FCC possesses the bigness of ability and vision to chart a new course consistent with the realities of the digital age.

Randolph J. May is a senior fellow and director of communications policy studies at the Progress & Freedom Foundation in Washington, D.C. The views expressed are his own and do not necessarily reflect the views of the foundation. He may be reached at rmay@pff.org. His column, “Fourth Branch,” appears regularly in Legal Times.

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