A Picture of Real FCC Reform
Even in successful industries such as communications, the government’s regulatory burdens have an adverse impact on innovation and growth. The cost of compliance is high and often passed along to consumers in the form of fees and additional taxes. On December 3, 2013, House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) announced that the committee would be undertaking a multi-year process to review the Communications Act of 1934 and subsequent telecommunications laws, with the intent to revise and update these laws and bring them into conformity with twenty-first century innovations.
The last two major updates to the 1934 law were the Cable Act of 1992 and the Telecommunications Act of 1996. The Cable Act was passed in response to cable television rate increases following deregulation, a lack of competition in the cable marketplace and the concern of broadcasters that their local stations would not be carried by cable companies. The Act imposed restrictions on multichannel video programming distributors (MVPDs), which provide programming through cable, satellite and fiber communications lines, from rebroadcasting or “retransmitting” commercial television, low power television and radio broadcast signals without first obtaining the originating broadcaster’s permission. Even though a larger group of MVPDs have been developed and provide competition in the marketplace, outdated rules such as retransmission consent, must-carry, compulsory licensing agreements, and non-duplication schemes continue in force.
The 1996 Act was enacted 12 years after the breakup of the Baby Bell companies in order to promote competition in the local exchange carrier (LECs) markets. Incumbent local exchange carriers (ILECs) were required to lease parts of their networks to competitors at cost and provide wholesale discounts to competitors for any service provided by the ILEC. The LECs also had to charge reciprocal rates for termination of calls to their networks and the networks of local competitors.
While the 1996 law addressed the state of communications at the time of enactment and included the Internet in broadcasting and spectrum allotments, it did not anticipate the dramatic changes that have occurred in the marketplace over the past 18 years. The convergence of voice, data, and video has created a new ecosystem that existing law is ill-equipped to address.
In addition to the 1934 Act, other laws and regulations that must be modernized include the Universal Service Fund; removing rules that require companies to retain legacy, out-of-date systems even as they provide modernized services; streamlining the application process for various programs and approvals at the FCC; and, allowing the free market to work in the spectrum auction process.
Several reform efforts are already underway. On September 9, 2013, H.R. 2844, the FCC Consolidated Reporting Act of 2013, passed the House by a vote of 415-0. The bill consolidates the FCC’s reporting obligations in order to improve congressional oversight and reduce the reporting burdens on the commission. The new “Communications Marketplace Report” will streamline numerous FCC reports into one that will detail the state of competition, review the deployment of communications capabilities, and explain whether laws, regulations, or regulatory practices pose a barrier to competitive entry into the communications marketplace.
On December 10, 2013, the House Energy and Commerce Committee reported H.R. 3675, the Federal Communications Process Reform Act of 2013, for consideration by the House. This legislation provides transparency and accountability at the FCC, as well as giving certainty to proceedings that have heretofore been left open without resolution.
On December 13, 2013, Reps. Steve Scalise (R-La.) and Cory Gardner (R-Colo.) introduced H.R. 3720, the Next Generation Television Marketplace Act. This bill would repeal mandatory carriage and purchase of certain broadcast signals by cable operators, satellite operators, and their customers; and eliminate “retransmission consent,” the Copyright Act’s compulsory licensing provisions, and ownership limitations imposed on local media operators. Without these outdated rules, the communications industry will be better able to evolve and adapt to today’s dynamic marketplace.
The committee plans to take its time to understand the requirements for reviewing and amending communications laws through hearings, papers and public comment, so the review will be an open process with input from all stakeholders. On January 8, 2014, the committee released the first of a series of white papers outlining the history and structure of existing communications law, as well as the challenges and uncertainty the current structure poses for communications providers. The first white paper seeks comments from stakeholders on the eventual structure of communications law; which provisions of the law should be either retained, adapted or eliminated; whether the jurisdiction of the FCC should be changed; how to build into a new communications environment the flexibility to adapt to a rapidly changing technological environment; and, whether information and telecommunications services should remain separate, and if not how the two services should be rationalized.
Compromise and disagreements will occur in such a major legislative overhaul and not everyone may be happy with the final end result. However, the process appears to be set up to provide for a thoughtful and open discussion about the future of communications.
