Wheeler to Warn Congress of 'Severe Consequences' of Slashing FCC Budget

Congress is trying to negotiate new appropriations packages ahead of the Dec. 11 deadline, when government funding expires. A short-term continuing resolution has funded the agency since Sept. 30, the funding frozen at the same level as in FY 2015. A recently enacted two-year budget deal resulted in higher spending caps, which Republican appropriators told us could mean more money for the FCC in a new appropriations package (see 1511050029). The original funding bills cut the agency’s budget significantly. GOP appropriators also say net neutrality policy riders could still be on the table.

“Budget cuts will mean that the nation’s only federal network monitoring system, the Network Outage Reporting System (NORS) will continue to be vulnerable, as will the Disaster Reporting System (DIRS) that is essential to local public safety in times of emergency,” Wheeler will warn lawmakers. “At a time when networks are being mysteriously cut, we need reliable outage reporting. Similarly, when the next natural disaster strikes, it will be too late if the disaster preparedness information is not available. While the proposed appropriation has funds for conducting the spectrum auctions, it would not cover the costs of development -- such as identifying spectrum for auction, dealing with incumbent users, and making technical preparations -- a cross-bureau effort that is time-intensive, complex and requires staff with expertise and experience that is not fungible. Finally, the proposed cuts would also result in a degradation of overall IT infrastructure performance -- such as server uptime, security levels, and user desktop (VDI) capacity -- that could inevitably impact auctions and non-auctions activities alike.” Wheeler said without staffers and IT overhaul, “licensing will inevitably slow down.”

Lawmakers have many priorities they want to address, said staff hearing memos. The Republican memo cites concerns about the agency’s progress on the media ownership review process and its possible over-the-top video regulation. “From the outset, DSTAC [Downloadable Security Technology Advisory Committee] demonstrated internal conflict,” the GOP memo said, criticizing the approach it said was sanctioned by FCC staff. FCC preparation for the incentive auction is “plagued with criticism over the Commission’s transparency,” that memo said. The Democratic staff memo devotes much attention to net neutrality and spectrum as key telecom issues that Democrats watch.

Communications Subcommittee ranking member Anna Eshoo, D-Calif., will argue that competition means addressing set-top boxes and special access. “It means ensuring consumers can buy a set-top box from someone other than their pay-TV provider,” Eshoo will say in her opening statement. “The lack of competition in the set-top box space has left consumers paying on average a whopping $231 per year on rental fees alone. … When new competition is unlikely to emerge, such as in the $40 billion a year special access market, the FCC must act decisively to reform the market and stop anti-competitive practices.”

“Over the next several months, the staff will continue its bidder education efforts, which will include a series of webinars, tutorials and mock auctions,” Wheeler will say of the broadcast TV incentive auction planning. “We will also be releasing file format information for the forward auction that will enable potential participants to prepare for the auction.” He also will repeat his call to Congress to advance legislation on Next Generation 911.

Commissioner Mignon Clyburn will urge action on the Mobility Fund and Lifeline overhaul, according to her testimony, which also touts actions on inmate calling costs and spectrum auctions. Commissioner Mike O’Rielly will emphasize the need for broadband infrastructure upgrades and discuss foreign ownership and “mission creep” concerns. “The Commission’s strong interest in regulating privacy and data security practices is another troubling development for anyone who is interested in the tech economy, or indeed, anyone who is interested in any business that transacts with its customers online,” O’Rielly will testify. Commissioner Ajit Pai will laud the subcommittee’s recent review of broadband deployment legislation: “These might not be headline-grabbing topics -- but they should be,” he plans to say. “And that’s because this work in the weeds is exactly what’s needed if we’re going to spur private sector investment.” Pai will slam “regulatory roadblocks,” blast the FCC “quest” to regulate over-the-top video and criticize the state of FCC enforcement. “To be blunt, the FCC’s enforcement process has gone off the rails,” Pai will lament. “Instead of dispensing justice by applying the law to the facts, the Commission has focused on issuing headline-grabbing fines, regardless of the legality of its actions.”

Some Republican governors and attorneys general wrote separate letters to the committee in the past week to slam the FCC’s actions on municipal broadband. The agency has sought to pre-empt state laws in Tennessee and North Carolina that restrict municipal broadband network construction, moves currently being challenged in court. It’s “clearly, a state issue,” South Carolina Gov. Nikki Haley (R) wrote. Alabama Attorney General Luther Strange (R) also argued the FCC “overstepped” its bounds, attaching a court filing. Tennessee Gov. Bill Haslam, chairman of the Republican Governors Association, “would respectfully ask the subcommittee to consider appropriate action to reinstate and further protect the rights of states,” he told Subcommittee Chairman Greg Walden (R-Ore.). The FCC’s actions are “a clear challenge to State sovereignty,” Tennessee Attorney General Herbert Slatery (R) said.

The FCC should define what it means by competition, said Fred Campbell, executive director of the Center for Boundless Innovation in Technology, in a blog post. “The answer to this one question -- the FCC does not have a definition of competition that it applies consistently -- is a symbol of everything that is wrong with the agency,” Campbell, a former Wireless Bureau chief, said. “The FCC’s rudderless approach to competition results in discriminatory regulations that erode public trust in the agency’s impartiality and the rule of law.”