Wheeler Off to Solid Start, But Next 100 Days Are Crucial

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By Bryce Baschuk

Feb. 10 --Federal Communications Commission Chairman Tom Wheeler's next 100 days will determine whether or not he is capable of encouraging economic growth and consumer benefits from what he calls the “fourth great network revolution.”

The three items that are most likely to define Wheeler's legacy are the Internet protocol (IP) transition, net neutrality and the forthcoming broadcast spectrum incentive auctions, FCC observers said. The commission plans to oversee the transition from copper telephone lines to IP networks, address the commission's authority to regulate broadband Internet access and hold at least three auctions to sell spectrum for commercial mobile broadband use, among other issues.

Lawmakers, former FCC officials and agency observers told Bloomberg BNA that they have been impressed by Wheeler's thoughtful, inclusive and decisive approach to agency matters during his first 100 days in office. They noted how Wheeler began his tenure by clearly outlining a conceptual framework through which he would address agency matters and has since propelled the FCC into action on regulatory matters facing the commission.

Clear Regulatory Vision

Shortly after being sworn in on Nov. 4, Wheeler articulated his vision of addressing agency matters through three prisms:

• encouraging competition, innovation, and job creation,

• upholding the basic values between those who own networks and those who use them, and

• enabling the best possible use of the nation's networks.

 

“In terms of laying the foundation of a great chairman, Tom Wheeler has used his first 100 days better than anyone I have ever seen,” said Blair Levin, the former chief of staff to FCC Chairman Reed Hundt.

Former Rep. Rick Boucher (D-Va.) told Bloomberg BNA, “There is clearly a renewed sense of vigor and energy at the commission and there is a clear focus that the big things that need to be done are at the forefront of the agenda.”

“Tom Wheeler's 100 days have been like the first 200 days for most of the FCC's chairs since the days of [former FCC Chairman] Newt Minow,“ said David Honig, president of the Minority Media and Telecommunications Council. ”Since Tom was sworn in, none of us telecom policy wonks has had a night with eight hours of sleep. We're all tired but very happy.”

Former FCC Commissioner Michael Copps said: “I'm encouraged by his outreach, openness to the public and the team he is surrounding himself with. He's made lots of good initial moves. Of course, the big tests are ahead.”

IP Transition

“There is a real expectation that the IP Transition is now actually moving forward as a real thing where the agency will actually decide things rather than defer things,” said Public Knowledge Senior Vice President Harold Feld. “Everyone expects the FCC to make decisions on the incentive auction in the next few months. And although the net neutrality decision has complicated matters, people expect Wheeler to actually propose a definite way forward.”

In January, the FCC unanimously approved an order to begin a series of pilot projects that will help determine the regulatory implications of modernizing the nation's network of traditional telephone landlines to IP-based networks. For years, telecommunications carriers like AT&T Inc., and Verizon Communications Inc. have sought to retire their traditional landline telephone equipment, which is based on time division multiplexing (TDM), in favor of IP networks. Wheeler said the goal of the trials is to understand what impact networks based on IP technologies will have on competition, consumer protection, universal access and public safety.

“Wheeler has started very wisely with a demonstration project to evaluate problems and ensure a rapid transition to IP networks,” Boucher said. “By initiating IP trials, Wheeler can account for what can go wrong and put protections in place.”

Richard Bennett, a visiting fellow at the American Enterprise Institute, said: “Tom Wheeler's focus has been on changing the role the FCC plays in the innovation ecosystem from micro-manager to accelerator,” said “He's given several speeches emphasizing competition and industry self-regulation that seem to be aimed at changing the FCC's culture.”

Spectrum Auctions

Wheeler has focused much of his energy on preparing for a congressionally mandated broadcast spectrum incentive auction of the 600 megahertz (MHz) band. This year, agency officials will develop rules for a reverse auction that will enable TV broadcasters to voluntarily release their spectrum in return for a portion of the proceeds from a subsequent forward auction of the relinquished spectrum. The remaining revenue generated from the forward auction of the spectrum to wireless carriers will fund the $7 billion development of FirstNet, a nationwide interoperable communications network for first responders, and help pay down the nation's debt.

In December, Wheeler made the decision to delay the reverse auction until mid-2015 to provide more time to perfect the operating system and software that are being developed to run the complicated endeavor. Wheeler said the delay was intended to prevent technical disruptions like those that bogged down the administration's rollout of the HealthCare.gov website. Since entering office, Wheeler said he has spent more time working on spectrum auctions than on any other issue facing the commission.

In January, Wheeler made his strongest public pitch to urge broadcasters to participate in the auction, during a keynote speech at the 2014 International CES in Las Vegas. Many broadcasters have hesitated to participate because of changing dynamics in the broadcast marketplace and what they say is a lack of specificity from the FCC as to how the auction will proceed. FCC officials said they will continue outreach and education programs specifically intended to encourage TV broadcasters to give up their spectrum in exchange for money from the auction sales.

“Wheeler quickly sized up dynamics surrounding FCC's incentive auction preparation, moved the date back to mid-2015 and laid out an action plan/timeline for regulatory deliverables,” said Jeff Silva, a senior policy analyst at Medley Global Advisors. “Doing so should help diminish risk for prospective bidders, broadcasters, national public-safety network funding and the U.S. Treasury. While valuable additional spectrum won't be coming to the mobile broadband sector as soon as originally anticipated, the ultimate outcome likely will be better for all stakeholders than if the FCC had rushed to meet an artificial deadline.”

“We are very pleased with the firm schedule and considerable work that the FCC is accomplishing on the spectrum incentive auction process and other spectrum issues,” said Julie Kearney, vice president of regulatory affairs at the Consumer Electronics Association. “Chairman Wheeler and his team are moving forward, keeping everyone informed and seeking guidance from all interested stakeholders.”

Net Neutrality

Wheeler's forthcoming response to a recent court decision that threw out key elements of the FCC's net neutrality rules is bound to reverberate in the telecommunications industry and further define his legacy for good or ill. The U.S. Court of Appeals for the District of Columbia Circuit ruled Jan. 14 that the FCC's open Internet rules may not prohibit broadband Internet service providers (ISPs) from blocking or discriminating against Internet content transmitted across their networks (Verizon Commc'ns Inc. v. FCC, D.C. Cir., No. 11-1355, 1/14/14. Wheeler has said the commission will “consider all available options,” which might include a legal appeal of the case or possibly reclassifying broadband Internet under Title II of the Communications Act.

Though Wheeler has not offered his proposals yet, he said the agency is weighing new “generic concept rules” to govern how Internet service providers operate following the decision. Wheeler said the commission may also be inclined to address alleged net neutrality violations on a case-by-case basis to determine whether a regulatory response is needed in cases in which ISPs are acting anticompetively or abuse consumers. In a Feb. 10 speech, Wheeler said the agency's response will be issued in the coming days.

“While Chairman Wheeler vowed to fight to keep the Internet open in the aftermath of the D.C. Circuit ruling, it doesn't appear he's going to make the issue the kind of cause celebre that can invite undue attention from Capitol Hill and force considerable political capital to be expended,” Silva told Bloomberg BNA.

Scott Blake Harris, managing partner at Wilkinson Barker Knauer LLP said: “When the D.C. Circuit threw Wheeler a curve ball in the net neutrality case, he didn't bail out of the batter's box. He took a hard look at the ruling and began planning how best to work with it.”

Seton Motley, the president of Less Government said: “It seems to me like Wheeler is keeping his powder dry for the net neutrality decision. He know that whatever he decides to do in this is going to be major.”

Free State Foundation President Randolph May said: “The jury is still out concerning how Wheeler will handle the D.C. Circuit's decision tossing out the agency's net neutrality mandates,”

“I'd like to see him acknowledge more explicitly, without caveats, that, absent proof of market failure, the marketplace is in a better position to protect consumers than the commission,” May said. “The next 100 days will be important in determining the ultimate success of Wheeler's chairmanship, because if he gets sidetracked on net neutrality, then the rest of his agenda suffers.”

Lobbying Criticisms

Wheeler has generally distanced himself from early criticism that the former head lobbyist of the cable and wireless industries would not be an effective representative for consumers.

Industry observers noted how Wheeler brokered an agreement with CTIA-The Wireless Association, where he was president from 1992 to 2004, to permit consumers to circumvent the firmware on mobile phones and tablets that prevents them from using their devices with other carriers. Wheeler has also sought to preserve what he described as the “network compact” between providers and consumers by ensuring that consumers continue to expect the same basic values offered by communications networks even as those networks undergo fundamental changes.

Wheeler has further made his impression as the people's chairman by advancing public safety rulemakings aimed at ensuring citizens can remain connected to first responders, despite recent and proposed network changes.

On Jan. 31, the commission approved an order to encourage wireless carriers and text message service providers to permit consumers to send text messages to 911 emergency responders. Wheeler has also teed up a commission vote on a proposed rulemaking to encourage wireless providers to deliver accurate location information so that first responders can find citizens who dial 911 from their mobile phones. Most recently, Wheeler announced a set of fundamental changes to the E-rate program aimed at directing funding for high-speed Internet connectivity to U.S. schools and libraries.

Despite Wheeler's effort to shed his former work as a lobbyist for the cable and wireless industries, some critics remained unassuaged. “I'd like to see more daylight between the Chairman's office and the corporate clients he used to represent as head of two major industry lobbying groups,” said Sascha Meinrath, director of the Open Technology Institute at the New America Foundation.

Congressional Support

“Chairman Wheeler's first 100 days are notable for his commitment to consumer protection and welfare,” said Rep. Henry Waxman (D-Calif.), Energy and Commerce Committee ranking member. “From cell phone unlocking to providing future-proof broadband capacity to our nation's schools, Mr. Wheeler has demonstrated strong pro-consumer leadership at the FCC,” Waxman said.

Sen. Mark Pryor (D-Ark.), the chairman of Senate Commerce, Science, and Transportation Committee's Communications, Technology, and the Internet Subcommittee, said: “Setting goals and a timeline for the broadcast incentive auction and moving forward with the IP transition trials are both steps in the right direction. I'm also pleased to see that he's heeded my calls to tackle location accuracy for 9-1-1 callers and that he's shown a commitment to ensuring all consumers, including those with disabilities, have access to advanced communication services.”

Sen. John Thune (R-S.D.), the ranking member of the Senate Commerce, Science, and Transportation Committee said: “With so much on the FCC's plate, I'm encouraged by Chairman Wheeler's willingness to engage with Congress and key stakeholders. I will continue to urge the chairman to exercise a light touch, particularly with regard to the agency's reaction to the recent net neutrality decision.”

Rep. Greg Walden (R-Ore.), the chairman of the Energy and Commerce Subcommittee on Communications and Technology, said: “Chairman Wheeler should be applauded for his focus on improving the Commission's processes, implementing the spectrum incentive auctions, and advancing the IP transition. However, concerns remain with the chairman's insistence on implementing net neutrality, which will have a chilling effect on jobs and innovation.”

Early Controversy

The Wheeler commission has not operated without controversy, some agency observers noted. Of all Wheeler's proposals since becoming chairman, few have garnered as much criticism as his proposed rulemaking to determine whether there are any technical reasons why the FCC should continue to bar airplane travelers from making mobile phone calls above 10,000 feet. The proposal was met with an immediate backlash as lawmakers, consumers and even Wheeler himself said they overwhelmingly preferred not to permit mobile phone calling on airplanes, despite the fact that the practice is commonplace on some international flights.

Wheeler argued that it is not the role of the FCC to determine whether airplanes should permit mobile calling on airplanes; rather its role is to determine the technical feasibility of in-flight calling. The proposal is aimed at “cutting away the technological underbrush” by seeking to remove laws that have become unnecessary through the advent of new technologies, Wheeler said. The matter may ultimately be settled by Transportation Secretary Anthony Foxx who said his department will now look into prohibiting in-flight calling due to safety and other concerns.

Levin said the brouhaha over in-flight mobile calling is unlikely to mar Wheeler's legacy. “Every chairman makes some early mistakes,” he told Bloomberg BNA. “This was the least important and, on substance, Tom was totally right.”

While Wheeler considers the best way to oversee the quickly changing telecommunications industry, he has also sought to modernize the way the FCC operates. Since his first week in office, Wheeler has made it a priority to tackle the regulatory process of an agency that has been long criticized for its siloed management approach to regulation. With the help of his special counsel, Diane Cornell, the commission identified more than a hundred proposed procedural changes that could improve the agency's work.

“Tom is doing so many small things that people I know who work there see,” Levin said. “They are invigorated and empowered by him. They are being asked the right questions and are being given the right direction.”

“It's been impactful not just for what he's done but what he's signaled he's likely do,” said Paul Gallant, managing director and telecommunications policy analyst for Guggenheim Partners. “Updating E-Rate for 100 gigabit per second connections and getting the IP transition going are legacy-level items. And his commentary on net neutrality, media ownership and even wireless market structure make it pretty clear this will be a consequential chairmanship.”

To contact the reporter on this story: Bryce Baschuk in Washington at bbaschuk@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com