Genachowski Endorses Obama Stance on Regulation

"The President’s directives are consistent with the values and philosophy we apply here at the FCC, an independent agency,” Genachowski wrote. “The goals described in the order and memoranda are the ones that led me, as one of my first actions as Chairman, to appoint Mary Beth Richards as Special Counsel for FCC Reform.” Genachowski circulated with the e-mail a copy of the Executive Order on Improving Regulation and Regulatory Review, the Presidential Memorandum on Regulatory Flexibility, Small Business, and Job Creation and the Presidential Memorandum on Regulatory Compliance.

"We will continue our work to promote innovation inside and outside government and to spur economic growth and job creation, while ensuring that the benefits of our rules outweigh the costs and burdens,” Genachowski said. “Accordingly, I expect all Commission Bureaus and Offices to perform their responsibilities consistent with the principles in the three new executive documents.”

Some critics say the FCC under Genachowski has been overly regulatory, while others say it’s struck the right balance. Some on the political right point to net neutrality rules the commission approved 3-2 in December after a lengthy debate. Critics on the left, meanwhile, saw the rules as not going not far enough. New regulations are possible in other areas as well, especially bill shock and data roaming. On the media side, the ongoing media ownership review and proposed AllVid rules requiring all pay-TV providers to connect to consumer electronics video devices also could mean more regulation.

The FCC has sought comment on regulation in other areas as well, such as special access pricing, but nothing at this point appears to be pending from Genachowski. “We … believe what the president said is right and it builds on what we have been saying,” said Josh Gottheimer, an aide to Genachowski.

But “thus far, with some exceptions, the commission has shown a preference for more regulation rather than less,” said Republican Commissioner Robert McDowell. “Be it the prelude to more regulation of the wireless industry through the findings of the wireless competition report and proposed new rules covering billing practices, to the Internet network management mandates, the bulk of this commission’s work has been regulatory.” McDowell is hopeful commissioners could agree on more initiatives to curb regulation such as the cell tower order, he said. “Going forward, the commission could, on its own, start some forbearance proceedings to clear out unnecessary underbrush."

A second FCC official said the chairman’s office likely welcomes the administration’s focus on investment. “I think they love this message,” the official said. “It bolsters their fundamental view of the world."

Genachowski has been slow to embrace new regulation, two senior FCC officials stressed in an interview last week. They said he’s given many speeches stressing his commitment to spurring economic growth and that any proposed regulation is reviewed carefully by the chairman’s office. “If anything, the chairman has been accused in his first two years of being too much of a centrist and not doing enough on the regulatory front,” one of the officials said. “The chairman, both in the language he has used and in his agenda, has been one of the most pro-business, pro-investment … of all the administration officials in his first two years.” The second official noted that just because the agency asks questions about possible regulation doesn’t mean new rules are on the way.

Industry Watching Closely

Industry officials we spoke to said they're watching closely to see whether Genachowski and other top officials at the agency make any chances as a result of broader administration pressures.

"It is difficult to predict the impact of the president’s increased focus on reducing regulatory burdens on economic growth, but my sense is that this will not have a significant effect on the FCC’s consideration of these issues,” said Robert Atkinson, president of the Information Technology and Innovation Foundation. “What the president talked about was reducing regulations that hurt job growth. I would expect the FCC to argue their regulatory interventions would spur job growth or at least be neutral toward them."

Free State Foundation President Randolph May said the FCC as much as any agency in Washington shows why regulatory reform is critical. “The commission’s new net neutrality rules are primo example No. 1 of the failure to apply the type of rigorous cost-benefit analysis that the President suggests he now supports,” he said. “The agency adopted the net neutrality regulations based on a few isolated instances of alleged abuses, without attempting any showing of market failure,” May said. “I don’t know whether President Obama is really serious about wanting agencies to pare back unnecessary and costly regulation. But we'll see soon enough whether the FCC itself takes seriously the president’s message.”

Public Knowledge Legal Director Harold Feld questioned whether any regulatory proposals now before the commission should excite much opposition. “What the FCC has on the table now, with the exception of bill shock, are proposals that are supported by various industry players as pro-competitive,” he said. “Is data roaming, for example, a ‘burdensome regulation’ or a ‘pro-competitive regulation’ that will get us to 98 percent wireless broadband coverage? It depends who you ask. The same is true for things like special access reform.”

New regulations that aren’t as easily portrayed as pro-consumer and pro-competition could face a tougher fight, Feld said. “It is not clear that the FCC will push ahead with certain recommendations of the National Broadband Plan to impose public safety obligations and reporting requirements on broadband providers,” he said. “While these are clearly of benefit to consumers, it’s a much more abstract consumer benefit than bill shock or ETFs. Similarly, I think it is possible the FCC might back away from AllVid.” Some agency and industry officials have said that pay-TV industry concerns on the plan have commission staff taking a more cautious approach in drafting the proposed rules.

Broadcasters’ arguments that they're regulated more than other media could be used as a basis for deregulation, said former FCC Chairman Richard Wiley, a Republican. “This is an opportunity for the FCC to step up and say `we think this is a time to look at lessening these regulations and let everyone compete on a level playing field,'” as the 3rd U.S. Court of Appeals considers the last ownership order, said Wiley. He represents broadcast and newspaper interests.

If the commission is “looking for some reforms” and an “opportunity to move” on them, it should impose fewer and more targeted conditions on deals that come before it, Wiley said. “The whole idea of this voluntary conditions thing I think has gotten a little bit out of hand” though deal-specific curbs are “fine,” he said. “It’s like earmarks -- you can get bipartisan agreement maybe that some of this has gotten out of hand."

Many issues before the FCC aren’t partisan, and so they may not be affected by political concerns, said Reed Hundt, a Democrat who was Genachowski’s boss when Hundt was chairman during the first four years of the Clinton administration. Hundt said the FCC under Genachowski “has been very prudent in the regulation-writing business.” The agency “has not sought to expand the scope or become microscopic in the details,” he said, adding that in telecom “there’s nothing like the huge transformation of the regulatory landscape that you see in healthcare.” Nor is a “wave of new regulation” that came after the 1996 Telecom Act on the horizon, Hundt said.

"The House Republicans should look at the FCC as a cash cow and they should milk it and not kill it,” Hundt said of the potential for an incentive auction of spectrum to be repurposed for wireless broadband. “Will Congress empower the FCC to conduct what could be the biggest single deficit reduction action in the next 12-24 months that any agency could contribute?” he asked. “I think the FCC will be regarded by the House Republicans as a deficit-closing agency,” which puts the commission in a good position on Capitol Hill, Hundt said.

President Bill Clinton made a similar move to the center in 1995 after Republicans swept to control of the House and Senate. A top FCC official at the time said the change had little effect on the commission. “In some ways the regulation at the FCC at the time was already kind of center driven,” the former official said. “It started with the Gore reinventing government effort, the focus on things like spectrum auctions as a different way of spectrum allocation. Some of that was already in process at the point. There wasn’t really a pure pivot,” the ex-official said. “But did the fact that Congress turned Republican have an impact? Probably.”

"The administration’s new tone may lead to a more modest FCC agenda on things like rebalancing the wireless market and consumer protection items,” predicted MF Global analyst Paul Gallant. “They're still the goals, but the agency will pick its battles carefully."

Hill Weighing In

At a recent hearing, Cass Sunstein, administrator of the Office of Management and Budget’s Office of Information and Regulatory Affairs, told members of the House Commerce Committee the administration’s executive order on regulation doesn’t apply to independent agencies like the FCC.

Sen. Kay Bailey Hutchison, R-Texas, thinks it’s “misguided” to exempt the commission from regulatory reforms, “especially because of the FCC’s areas of jurisdiction and the quickly evolving issues regulated by the agency,” said a Republican Commerce Committee staffer. House Commerce Committee Chairman Fred Upton, R-Mich, said recently he’s pursuing legislation (CD Jan 27 p5) so that no agency is exempt from the Obama executive order. Hutchison, ranking member of the Senate Commerce Committee, would support such a bill “in principle,” but would need to see the final bill, the staffer said.

But not all Democrats support removing the exemption. House Commerce Committee Ranking Member Henry Waxman, D-Calif. said it was a “bad idea.” A spokeswoman for Senate Commerce Committee Chairman Jay Rockefeller, D-W.Va., declined to comment.

Regulatory reforms “definitely” should apply to independent agencies, said Seton Motley, president of Less Government. He supports repealing the FCC’s net neutrality order. Motley called the executive order “a visual aid with no impact, and certainly no intent or meaning.” He added that it’s ironic that Obama would issue an executive order to reduce regulation after using every government agency at his disposal to ratchet up the number of regulations.