Washington — The House Energy & Commerce Subcommittee on Communications and Technology conducted an oversight hearing of the FCC last week.  So far this year, the subcommittee has held several hearings regarding issues within the FCC’s purview. However, this is the first time in almost two years that all five FCC Commissioners were present for questioning by the subcommittee.  Commissioner Rosenworcel said it best when she addressed the huge impact of Congress’ and the FCC’s actions because this is “lofty stuff,” noting that the communications and technology sectors account for one-sixth of our economy.  The three hour hearing covered issues ranging from reforming the agency’s processes, special access, the set-top box marketplace, the Open Internet Order, increasing spectrum, and infrastructure deployment.

Chairman Walden (R-Ore.), in his opening statement, expressed the importance of the subcommittee’s oversight powers over the FCC, and the subcommittee’s recent legislative efforts to reform the FCC with the FCC Process Reform Act of 2015, which passed the House by voice vote on Monday night.  The bill would require that the FCC complete a rulemaking to adopt procedural changes to its rules, set minimum comment periods during rulemakings, develop performance measures for evaluating the effectiveness of rules, and mandate that the FCC conduct various inquiries and studies.  Walden also expressed his concerns regarding the FCC’s Downloadable Security Technology Advisory Committee (DSTAC) process, which was required by Congress, the FCC’s recent preemption of state laws regarding municipal broadband, and the media ownership rules.  

Set-Top Boxes

When STELA was reauthorized last year, Congress, led by Congressman Latta (D-OH), repealed the “integration ban,” which had facilitated support for third-party, set-top boxes. Congress also mandated that the FCC convene the DSTAC to develop a new solution.  The DSTAC held seven open meetings this year, and developed a report with two major recommendations, the Competitive Navigation Solution and the Apps Approach.  The FCC requested public comments on the proposals and is currently reviewing those comments.  CCIA has been very active on this issue, filing comments and reply comments.

During this hearing, Latta said that the DSTAC failed to achieve Congress’ intended purpose because the FCC allowed the DSTAC to address questions about additional issues, like user interfaces.  However, the STELA Reauthorization Act mandated that the FCC form the DSTAC “to promote the competitive availability of navigation devices in furtherance of Section 629 of the Communications Act.”  In Sec. 629 of the Telecommunications Act of 1996, Congress tasked the FCC with “adopt[ing] regulations to assure the commercial availability . . . of converter boxes, interactive communications equipment, and other equipment used by consumers to access multichannel video programming . . . from manufacturers, retailers, and other vendors . . . .”  Ranking Member Eshoo (D-CA) stressed that Sec. 629 is specific in its intention to give consumers a choice regarding which devices they use.  Indeed, responding to a question from Eshoo, Wheeler stated that under Sec. 629, the FCC must “assure” the availability of competitive navigation devices.  He also stated that the FCC will review comments and reply comments on the DSTAC report and decide how to proceed.

Competition has remained elusive in this marketplace.  As Senators Markey (D-Mass.) and Blumenthal (D-Ct.) found in a recent study, 99% of customers lease their set-top boxes from their pay-TV provider.  The average household spends $231.82 a year on set-top box rental fees, which generates $19.5 billion in revenue for the industry.  Eshoo stressed the importance of competition to the Communications Act and communications policy in the 21st century by referencing an article from Columbia Business School professor Eli Noam, who concluded “entrepreneurial firms exist in [the telecom] sector not despite of government but rather because of it.”  Prof. Noam also noted that “without entrepreneurship policy only little actual business entrepreneurship would survive in telecommunications.”  Eshoo stated that a key aspect will be ensuring that consumers can buy set-top boxes from “someone other than their pay-TV provider.”  Citing the Markey-Blumenthal statistics on the lack of competition in the set-top box marketplace and high consumer rental fees, Eshoo said, “Why we allow this to continue – I don’t know.”  

Congresswoman Blackburn (R-Tenn.) equated the DSTAC’s Competitive Navigation Solution to AllVid, but Wheeler responded that “AllVid was an idea from half-a-dozen years ago – the world has moved on substantially.”  Responding to a similar question from Congressman Butterfield (D-NC), Wheeler emphasized that the Competitive Navigation Solution developed by the DSTAC is not AllVid.  Butterfield and Blackburn also asked about the effect of the Competitive Navigation Solution on licensing and copyright, to which Wheeler emphasized: “I can assure you that it is no one’s goal to thwart the security that protects the sanctity of copyrights.”  CCIA addressed this issue in its reply comments:

[T]he Commission’s decision (on the DSTAC Report) will affect neither copyright nor contract law.  Device manufacturers, of course, cannot violate contracts to which they are not a party.  Should a party breach contracts into which they have entered, content licensors will remain free to enforce those terms.  Similarly, copyright law will continue to govern under what terms devices can handle content.

Congresswoman Matsui (D-Calif.) reiterated that the process surrounding the set-top box issue should serve the public interest.  The FCC now has a chance to assure that innovators can create new devices and finally give consumers more options for accessing pay-TV.

Special Access

For over ten years, the FCC has been reviewing how it should act on “special access,” which refers to high-capacity, broadband lines that are often used by ATMs, libraries, shopping centers, in addition to cell phone towers.  Eshoo stated the the FCC needs to act “decisively to reform the market and stop anti-competitive practices” in this $40 billion market.  Congressman Doyle (D-Penn.) pointedly asked Chairman Wheeler whether consumers benefit from the incumbents using their market position to charge anti-competitive rates, and whether broadband infrastructure investment increases or decreases in competitive markets.  Wheeler responded simply “No” and “it increases,” but he also commented that “special access” is a misnomer: “Boy, there’s a term that doesn’t say anything.”  Instead, these are “services that are necessary for competition” because cell densification and improved networks that facilitate the Internet of Things and 5G require backhaul, for which “special access” is necessary.  Responding to a question from Congresswoman DeGette (D-Colo.), Wheeler affirmed that the Special Access proceeding will remain a priority for the FCC through next year.

Broadband Infrastructure

Chairman Wheeler, in his opening statement, highlighted broadband deployment as a key issue for the FCC and Congress.  He outlined three key principles about infrastructure policy, clarity, consistency, and completion, or “The 3 Cs.”  Commissioner Rosenworcel advocated for more consistency across the country regarding deployment policies, and she highlighted the so-called “Dig Once Bill” as a small change that could have a big impact.  Rosenworcel also stressed the importance of identifying existing federal facilities for broadband deployment because the federal government owns one-third of land in the country – often areas with the most sparse coverage.

Spectrum

Eshoo advocated a balanced spectrum policy that recognizes the importance of unlicensed and licensed spectrum.  Eshoo raised the issue of how the Congressional Budget Office scores legislation involving unlicensed spectrum.  Commissioner Rosenworcel explained that the CBO favors valuing licensed spectrum, which is auctioned off, in its scoring.  She continued that unlicensed spectrum use is responsible for over $140 billion of economic activity annually.  Matsui asked what else the FCC and Congress could do to identify new, higher frequency bands.  Commissioner Rosenworcel responded that combining higher frequency with dense networks and small cells will be very important as the rest of the world looks at higher band spectrum for introducing 5G.  Wheeler said the rulemaking on spectrum above 24 GHz will be closed by the summer, and then the FCC will take up another rulemaking on higher bands.

Cybersecurity

Some members discussed the Paris attacks and what that means for cybersecurity.  Addressing reports that the terrorists may have planned the attacks during conversations while playing games on Playstation 4, Wheeler noted that this technology is “outside the scope of anything ever considered in [the Communications Assistance for Law Enforcement Act] CALEA,” under which the FCC has some enforcement authority.   Some discussions during the hearing addressed whether it would be necessary to change CALEA.

Enforcement Bureau

The FCC’s Enforcement Bureau has come under fire recently for issuing multi-million dollar fines, its efforts to reduce a backlog of complaints, meeting performance metrics and complying with the Government Accountability Office’s (GAO) recommendations from 2007, and the FCC Chairman’s decision to close more than half of the Bureau’s field offices.  Last month, the Republican Leaders of the Energy and Commerce requested that the GAO investigate the management of the Bureau.  At the hearing, Commissioners Pai and O’Rielly took to describing their difficulties with obtaining information from the Bureau and criticized what Pai called “selective prosecution.”  Chairman Wheeler responded that the Bureau releases information judiciously because it handles “sensitive information and info that can move markets.”

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