Wheeler, House Republicans at Odds on Auction Plans, Process Overhaul Progress

“Despite concerns from the wireless, broadcast, and unlicensed communities,” Wheeler “is recommending that the Commission adopt the duplex gap option” as part of incentive auction plans, the GOP memo warned. “Without sufficient coordination, broadcast and wireless operations adjacent to the borders could be at risk of substantial interference, diminishing the value of the licenses.” The memo worried about the state of coordination with Mexico and Canada and slammed the FCC’s overhaul of DE rules: “These reforms will permit a DE to obtain as much as a 35 percent discount on spectrum with no obligation to build network facilities and no restriction on the amount of spectrum it could lease. Critics of these changes charge that they create the potential for a set of spectrum arbitrageurs financed by taxpayer dollars with no competitive benefit to the market.”

It’s time to “make some hard decisions” on the auction, Wheeler will say, pointing to consideration next month of a public notice setting up the bidding rules and a reconsideration of the mobile spectrum holdings order. The DE overhaul “revamps our bidding policies to provide small businesses a better on-ramp into the wireless industry,” Wheeler will insist. “At the same time, our reforms will enhance the integrity of the FCC’s auctions and ensure large corporations can’t game the system.” Pai will side with Republicans and say the rules don't accomplish the necessary goal and also slam Wheeler’s duplex gap plans. That plan “is the symptom of a larger problem with current incentive auction design,” Pai plans to testify. “Specifically, the band plan that is on the table right now allows for too much variability and would put too many broadcast stations in the wireless portion of the 600 MHz band.”

“Under the new rules that the FCC recently adopted, the [DE] program encourages robust participation from bona fide small businesses while allowing innovative business models more in line with today’s dynamic wireless market,” Commerce Committee ranking member Frank Pallone, D-N.J., plans to say in his opening statement. Pallone also wants to “hear how the FCC can help our efforts to improve deployment to these areas where the economics alone are not enough,” referring to tribal lands; to learn about consumer protection, given “more needs to be done to crack down on unwanted commercial calls”; and to learn about what the FCC is doing on emergency communications.

FCC process also will remain a contested topic at the hearing. The subcommittee lawmakers repeatedly have slammed Wheeler’s operation of the agency for what they see as process shortcomings and partisan divisions. They drove through a series of agency process changes backed only by Republicans when clearing the FCC Process Reform Act from committee in June. Now Pai and committee Republicans worry process failings may hurt the auction.

“Notwithstanding outside requests, the Commission still won’t release all of the data pertaining to the staff’s simulations,” Pai will caution. “And again notwithstanding these requests, the Commission won’t conduct additional simulations. These are serious mistakes. We should not craft a future band plan based on only two simulations per clearing target and without making publicly available the data from those simulations. Instead, both Commissioners and interested parties should be able to evaluate the wide range of possible outcomes for each clearing target and see all of the relevant data.”

“Left unchecked, these departures from process could undermine the success of the auction,” the GOP memo said, saying “process failings persist” despite Wheeler’s commitment to improving practices.

Following a review of operations, “we have subsequently taken a series of efforts to create a leaner, more efficient, more productive, and more transparent organization,” Wheeler will argue. “Currently, there are ten active working groups, as well as teams tackling backlogs, streamlining, IT upgrades and many other process reform objectives within the individual Bureaus and Offices.” Wheeler special counsel Diane Cornell published blog posts about the internal efforts July 13 and July 21.

“In its most recent quarterly workload report” to House Commerce, committee Democrats said in their hearing memo, “the FCC indicated that since May 1, 2014, the total volume of items pending for more than 6 months has dropped more than 49%, with the total volume of licensing-related items pending more than six months [dropping] by more than 40%.”

“The Commission’s nullification of the FTC’s jurisdiction and entry into the sphere of consumer online privacy raises significant and immediate concerns,” Republicans said in their memo, blasting the “lack of clarity” for ISPs in this regard currently. “We committed in the Open Internet order to address issues of privacy implicated by consumers’ use of the Internet” and “will begin that process with a Notice of Proposed Rulemaking in the autumn,” Wheeler will say.

Wheeler's and Pai’s testimonies cover many other topics. Wheeler will “reiterate my concern with the lack of coordination among 911 call centers” and discuss the agency’s work on E-rate, Lifeline, robocalls and general enforcement actions. “To increase opportunities for additional competition in upstream markets, we have proposed a rule to give over-the-top video providers the ability to choose the same business model as cable and satellite providers, with the same program access rights,” Wheeler will testify on the agency’s agenda. “We expect to move that to a Report and Order this fall. This action should expand video choice -- and increase consumer demand -- for broadband.” Pai will discuss his concerns involving AM radio revitalization and stand-alone broadband support. The Democratic memo has sections on municipal broadband and industry consolidation. The hearing is scheduled for 10:15 a.m. in 2322 Rayburn.