Washington — All five FCC Commissioners appeared before the Senate Commerce Committee Wednesday for an oversight hearing. Amid questions peppered with discussion of accessing Denver Broncos’, Green Bay Packers’, and Minnesota Vikings’ games in different markets in Western states, the hearing covered a broad range of issues related to recent FCC actions.
Net Neutrality
On February 26, 2015, the FCC voted to establish Open Internet rules that sought to prevent practices like throttling, blocking, and paid prioritization threatening the concept of Net Neutrality. By classifying broadband Internet access service under Title II of the Communications Act, the FCC assumed greater authority over the transmission of traffic to and from Internet endpoints. The FCC sought to create defined rules of teh road that would allow the virtuous cycle of online innovation, consumer demand, and broadband deployment to continue.
However, the Order remains controversial as some Senators pointed out during the hearing. Senator Johnson (R-WI), as Chairman of the Homeland Security and Governmental Affairs Committee, released a report two days before this hearing, titled “Regulating the Internet: How the White House Bowled Over FCC Independence,” in which he sought to connect the FCC’s decision on reclassification with pressure from the White House. Johnson asked if FCC Chairman Tom Wheeler was aware that FCC staff were concerned about the “thin record” during the Open Internet rulemaking proceeding. Wheeler responded: “Boy I hope so. I hope that the lawyers are constantly second-guessing each other and me.” Wheeler explained that there was a “fulsome” debate by staff in developing what became the Open Internet Order, so staff wanted to make sure they had a full record as they anticipated lawsuits over the new rules.
Some Senators and Commissioner Pai claimed that the Open Internet Order has led to decreased investment in broadband networks. Wheeler responded that Pai was factually incorrect: “investment is up . . . fiber is up thirteen percent over last year. Usage of the Internet is up, and that has driven what you want to be up, which is increased revenue per subscriber for teh Internet companies.” Markey noted that since the Open Internet Order, sixty-eight percent of venture capital has flowed to Internet Innovators.
Set-Top Boxes
As a member of the Consumer Video Choice Coalition, CCIA has advocated strongly for the FCC to take action pursuant to its grant of authority from Section 629, which was added just over twenty years ago by the Telecommunications Act of 1996 (96 Act). Since Congress directed the FCC to pave the way for a competitive market in the 96 Act, an overwhelming number of consumers are still leasing set-top boxes from their pay-TV providers. Last summer, Senators Markey and Blumenthal (D-CT) released the results of a study noting that ninety-nine percent of customers lease set-top boxes from their cable providers. Incumbent cable companies have reaped at least $19.5 billion annually on leasing fees alone.
Last month, Wheeler released a proposal that would introduce competition into the set-top box marketplace that costs the average family $231 per year. The FCC voted two weeks ago to move forward with the Notice of Proposed Rulemaking. Chairman Thune (R-SD) and Senator Wicker (R-MS) raised questions about whether the FCC would be overstepping the bounds of its authority under Section 629. Commissioner O’Rielly, who was a Hill staffer while the 96 Act was debated, suggested that Congress’ intent focused on hardware. Chairman Wheeler explained that the FCC must consider the software aspect of set-top boxes: “[E]verything in the world is going to software. The networks themselves used to be run by hardware and are now run by software – that doesn’t mean that we don’t have jurisdiction over those kinds of activities.”
As noted in Project DisCo, O’Rielly’s boss during the 96 Act, Congressman Tom Bliley (R-VA), who co-authored Section 629, stated:
[The bill] seeks to ensure that we follow the competitive market model rather than the monopoly model. . . . A consumer should be able to choose [a set-top box] the same way he or she chooses other products, by going to the store, comparing the quality, features, and price, and buying or renting the best one.
Later in the hearing, Markey, who was the other author of Section 629 when he served in the House, stated that Congress sought to break down monopolies where consumers were forced to rent set-top boxes.
Although Wicker, Commissioners Pai and O’Rielly sought to paint the NPRM as focusing on “equipment,” depicting the set-top box as antiquated technology from another era, the fact remains that the vast majority of consumers still use a set-top box device to access pay-TV content. Therefore, even if MVPDs introduce apps to deliver programming, the vats majority of consumers would still be subject to ever-increasing box rental fees if the FCC does not act. Markey emphasized that “we’re still in the set-top box era,” and “to pretend otherwise . . . [would be] to ignore the real life experience of every single American” who subscribes to pay-TV. If the FCC were to open up the marketplace, incumbents would be forced to innovate and compete, and consumers would benefit.
Chairman Thune and Ranking Member Nelson (D-FL) reiterated concerns that Nelson raised in a letter to Chairman Wheeler regarding the effect of new rules on the distribution of content. Wheeler responded that anything put out by a provider will remain untouched because copyright law remains in place. Commissioner Clyburn also explained the difficulties that minority and independent programmers currently face in getting carriage by MVPDs and getting reasonable contract terms.
Spectrum and Broadband Infrastructure
Chairman Wheeler highlighted the fact that March will be a busy month for spectrum as the Incentive Auction will begin in three and a half weeks. Commissioner Rosenworcel noted that although the U.S. is the world-leader in 4G with one-third of the world’s deployment despite only having five percent of the global population, there is a lot of work ahead as networks move to 5G. She advocated for action on millimeter wave spectrum above 24 GHz; more unlicensed WiFi, which could be encouraged by a WiFi Dividend; and better infrastructure policies on Federal lands, promoting small cells, and adopting a “Dig Once” policy. Sen. Klobuchar (D-MN) touted her bill, co-sponsored by Sens. Daines (R-MT) and Gardner (R-CO) that seeks to establish a national “Dig Once” policy. Wheeler responded: “We need dig once, climb once, site once.”
Additional Issues
During his opening remarks, Thune announced his plan to introduce an FCC reauthorization bill and have the Senate consider it during a mark-up in a few weeks. Thune also acknowledged his MOBILE NOW Act, co-sponsored by Nelson, that the Committee will mark-up the next day. Nelson echoed Thune is supporting the confirmation of Commissioner Rosenworcel, who is a Democrat. Nelson urged swift action on Rosenworcel’s confirmation, noting that during O’Rielly’s (a Republican) confirmation process, then-Senate Minority Leader Mitch McConnell (R-KY) promised then-Majority Leader Harry Reid (D-NV) that Commissioner Rosenworcel’s confirmation would not face serious delays.
Sen. Fischer (R-NE) brought up the FCC’s recent decision to preempt state laws that prevent municipal broadband providers from providing broadband outside of their territories. This action has been appealed by the states of Tennessee and North Carolina, and it is currently before the 6th Circuit Court of Appeals.
Thune began his questioning by asking if Wheeler plans to follow “tradition” and resign at the end of President Obama’s term. Wheeler responded: “It’s probably not the wisest thing in the world to do to make some kind of ironclad commitment, but I understand the point you’re making.”