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House Commerce Panel Grills FCC Over Regulatory Agenda

Monday, July 16, 2012
By Paul Barbagallo

The new five-member Federal Communications Commission appeared before the House Energy and Commerce Communications and Technology committee for the first time July 10, and heard plenty of criticism of the agency's regulatory agenda under FCC Chairman Julius Genachowski.

The hearing featured the first appearances of FCC commissioners Jessica Rosenworcel and Ajit Pai before the panel since they were sworn in May 14.

It was also the first occasion that the subcommittee could question five FCC commissioners at the same time since Republican Commissioner Meredith Attwell Baker left the agency last May.

As expected, lawmakers focused their concern on the FCC's plans to hold voluntary “incentive auctions” of spectrum, the agency's reform of the Universal Service Fund and intercarrier competition systems, and an order proposed in June by Genachowski that would suspend petitions for “special access” pricing flexibility while the agency develops new rules.

Republican members of the committee in particular questioned why the FCC has decided to keep open a rulemaking docket that was opened in 2010 to reclassify broadband internet service as a basic utility subject to strict, telephone service-like regulation.

Genachowski told the panel that while no one at the FCC has been working on the docket, it remains open and would be “unusual” to close it.

In an effort to adopt net neutrality rules, Genachowski in 2010 proposed reclassifying broadband under a part of the original Communications Act known as Title II.

Under the act, the FCC has limited authority over “information services,” which broadband is now classified as, but has vast powers to regulate telephone utilities and “common carriers.” As part of his original plan, dubbed the “Third Way,” the commission would have reclassified high-speed internet service under the more-stringent title, but only the “transmission” component--not rates or content. But after the industry vehemently protested, Genachowski decided to scrap the plan.

To Republican Commissioner Robert McDowell, keeping the “Title II” docket open while the Obama administration is actively urging other countries to refrain from top-down governmental regulations of the internet and its functions, would be “hypocritical.”

Republican Commissioner Pai said leaving the docket open would only “chill investment.”

Genachowski disagreed, suggesting that the docket was opened to consider legal options for enacting net neutrality rules, which requires companies providing internet service to treat all sources of data equally.

On whether he will close the docket, Genachowski said he has “no plans” to do so.

“I believe very strongly in internet freedom,” Genachowski said.

Genachowski will likely keep the Title II docket open until at least the U.S. Court of Appeals for the District of Columbia rules on appeals of the FCC's net neutrality rules.

If the court hands down an unfavorable ruling, the FCC will be forced to consider new legal alternatives, and classifying broadband internet service under Title II would place net neutrality regulations on more solid legal ground.

No Timeline on Completion of 'Incentive Auctions.’
When asked about one the FCC's top priorities for 2012--incentive auctions--Genachowski expressed optimism that broadcasters will ultimately release some of their spectrum back to the government in exchange for a share of auction proceeds.

The FCC, in its National Broadband Plan released in March 2010, set a goal of reclaiming as much as 120 MHz of broadcast TV spectrum, which would then be auctioned off to mobile internet providers led by Verizon Wireless and AT&T Inc.

The Temporary Payroll Tax Cut Continuation Act of 2012 (H.R. 3630) stipulates that about $15 billion of the $30 billion extension in unemployment benefits will be paid for with the proceeds of incentive auctions. However, nothing in the measure will force TV broadcasters to relinquish their airwaves.

Though hopeful, Genachowski and the other FCC commissioners acknowledged that incentive auctions will be merely a part of a larger strategy to free up spectrum for commercial broadband networks.

“I can't believe incentive auctions alone will meet our wireless needs,” said Democratic Commissioner Rosenworcel.

Genachowski declined to speculate whether the FCC will be able to complete the incentive-auction process within three years, but said the agency will begin issuing notices in the fall.

Going forward, Genachowski said the FCC will share all useful and relevant information with Congress and the public.

Secondary-Market Transactions.
Commenting on broader issue of spectrum policy reform, Robert McDowell said the FCC should try to increase the time it takes to review and approve secondary-market transactions, which will put spectrum in the hands of companies that need it more quickly.

McDowell also said President Obama should consider issuing an executive order urging federal government agencies to give back spectrum for a future auction.

Rep. Cliff Stearns (R-Fla.), which is sponsoring a bill to require the Department of Defense to move off of spectrum in the 1755-1780 band, noted that the federal government currently occupies 60 percent of the “best” licensed spectrum in the United States, much of it used ineffectively.

A committee working group is currently looking into the matter.

Pai added that the FCC should move quickly to approve new rules to allow for more “flexible, terrestrial” use of spectrum reserved mainly for satellites.

In March, the FCC voted to begin writing rules that would allow DISH Network Corp. to use recently acquired airwaves--40 MHz--for both satellite and terrestrial uses.

Pai also said that the FCC should encourage greater use of unlicensed spectrum “where appropriate.”

FCC to Move on 'Special Access’ Order Soon.
One issue that attracted significant attention at the hearing was the FCC's special access order.

That the order would, among other things, suspend all petitions for “special access” pricing flexibility while the agency collects more data and drafts new regulations.

In many areas throughout the United States, only one telecom carrier maintains the high-capacity fiber-optic lines--special access--that provide huge volumes of phone and internet connections to businesses. For years, wireless carriers led by Sprint Nextel Corp. and T-Mobile USA, and other smaller market players such as XO Communications and Level 3 Communications, have alleged that AT&T Inc., Verizon Communications Inc., and Qwest Corp. charge too much to lease capacity on their lines.

These companies rely on special access connections to provide broadband services to business customers. The lines, also known as DS1s or DS3s, allow Sprint and other companies to backhaul their customers' voice and data traffic from a cell site to the communications network.

But AT&T and Verizon argue that their rates have actually decreased, and in some markets cable operators also offer such services.

Genachowski said he expects action on the order in the “very near future.”

Rep. Anna Eshoo (D-Calif.), ranking member of the subcommittee, said the FCC should overhaul the rules governing special access services, and make data submissions mandatory.

According to Genachowski, there is enough to data to show that the market is not working, but not enough to safely guide the FCC.

“When the communications ecosystem fails to protect consumers, the FCC must play a vital role,” said Democratic FCC Commissioner Mignon Clyburn, commenting broadly on the FCC's role as a 21st Century regulator.

Privacy Bill of Rights for Kids?
Though not garnering lengthy discussion, all five FCC commissioners, when asked by Rep. Ed Markey (D-Mass.), agreed that there should be an online privacy “Bill of Rights” for children 15 and under.

The FCC plays an important role in the ongoing debate on Capitol Hill about online privacy, as the agency retains jurisdiction over companies that provide internet service.


For more information on the hearing, including the FCC commissioners' prepared testimony, visit http://energycommerce.house.gov/hearings/hearingdetail.aspx?NewsID=9666.

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