FCC's Ajit Pai too focused on deregulation
© Greg Nash

Federal Communications Commission Chairman Ajit Pai has drained the swamp more in his first 100 days than any other official in the Trump administration. With ample preparation, legal skills and a majority voting bloc, the chairman has aggressively chiseled away both regulatory underbrush and tall trees. His commitment to “light handed” regulation translates into unwavering fealty to the marketplace regardless of whether adequate competition exists to force necessary self-restraint by powerful incumbents.

Chairman Pai exudes charm even as he operates an aggressive deregulatory weed wacker that favors arcane administrative safeguards for phone companies over other matters, such as the long past due reduction in extortionate calling rates paid by prison inmates. Paradoxically, the chairman has more compassion for procedural due process rights of telephone companies than for families seeking a fair price for telephone calls priced in an unquestionably noncompetitive marketplace. The chairman instructed his legal staff not to show up at a court hearing on the matter and has announced no plans for finding ways to solve the rip-off in a legally proper manner.

ADVERTISEMENT
Chairman Pai has undertaken an effective charm offensive promising greater transparency, reliance on facts and application of sound economic principles. Who could quibble with that? But anyone looking at the output of the Pai offensive can see a remarkable paradox. The chairman has clear deregulatory goals and will shape the evidence, statistics and economics to achieve the desired result.

 

For example, Pai has succeeded in reactivating a 1985 policy that distinguishes the marketplace impact of UHF television broadcasters from their VHF counterparts. The rejuvenated policy will help incumbents like Sinclair Broadcasting acquire more stations without exceeding the 39 percent ownership cap by reducing the quantitative impact from UHF station acquisitions.

In 1985, later to market television broadcasters had to operate on higher frequencies offering inferior signal transmission not fully offset by the signal parity provided by cable and satellite carriage. In 2017, broadcast stations have no frequency advantage, or disadvantage. How ironic that Chairman Pai rails against application of antiquated regulations when he gladly reactivates one here. Worse yet, he might gain widespread support for removing broadcast ownership caps. Instead of that forthright and transparent objective, Pai resorts to subterfuge and hypocrisy.

For someone keen on fact-based decision-making, voodoo economics and flawed data provide the intellectual basis for much of the Pai agenda. Consider the chairman’s longstanding opposition to regulated neutrality in consumer access to broadband network access. The chairman asserts that broadband infrastructure investment recently declined 5.6 percent and that mandated neutrality triggered the downturn. Broadband carrier capital expenditures can vary year over year based on a variety of factors including whether current technologies approach obsolescence. Additionally, carriers might have a different investment focus independent of a single regulatory requirement. Both factors come into play now.

Wireless providers have invested billions of dollars in new 4th generation broadband technology and in additional radio spectrum to accommodate robust demand for video. These investments are accruing ample returns, temporarily foreclosing the need for more investment until yet more broadband demand triggers the need to deploy 5th generation technology.

Just about every incumbent carrier has invested billions over the last few years to expand and diversify services, based on the prudent assumption that combining conduit and content will enhance shareholder value. Notwithstanding ample evidence that incumbent carriers have ample incentives to make and buy, Chairman Pai validates the false premise that regulation has caused an unprecedented downturn in carrier investment.

Paradoxically, Pai also appears keen on mandating light-handed, pro-marketplace approaches on a one size fits all basis. On the matter of consumer privacy protection, he believes carriers will voluntarily respect subscriber privacy without the need for FCC oversight. Additionally, his desire for deregulatory parity translates into the view that if content providers like Facebook can secure privacy abandonment from subscribers, then conduit providers should have identical opportunities. Such equivalency makes no sense: Facebook provides something of apparent great value for subscriber abandonment of privacy, while a carrier, such as Verizon, can require such abandonment for the privilege of becoming a paying customer. Free of consumer privacy safeguards, carriers do not have to offer a discount, despite having identified a valuable new profit center that costs nothing to tap.

Pai toiled in the vineyards as a minority commissioner during the Obama years. During that time, his frequent statements reeked of sanctimony and righteous indignation. However, in one dissent, then Commissioner Pai remarkably aligned with consumers than ever more powerful companies. On the matter of whether consumers should have the opportunity to own cable television set top boxes, he envisioned a world free of hefty monthly fees.

What would be best for consumers? My view is pretty simple. Our goal should not be to unlock the box; it should be to eliminate the box. If you are a cable customer and you don’t want to have a set-top box, you shouldn’t be required to have one. This goal is technically feasible, and it reflects most consumers’ preferences—including my own.

Chairman Pai apparently has refined his views on set-top boxes, but he remains steadfast in his conclusion that consumers have sufficient sovereignty, freedom and competitive alternatives to support the wholesale abandonment of safeguards. Inconvenient facts and the old-fashioned smell test dispute that conclusion.

Rob Frieden holds the Pioneers Chair in Telecommunications and Law at Penn State University.


The views expressed by contributors are their own and are not the views of The Hill.