Stakeholders Consider Enormity of Potential Communications Act Rewrite

Cheerleading for a Communications Act rewrite began to be tempered with more muted consideration among industry stakeholders and observers Wednesday. They questioned current congressional tensions, timing and the choice of legislative vehicle for communications updates. On Tuesday, House Commerce Committee Chairman Fred Upton, R-Mich., and Communications Subcommittee Chairman Greg Walden, R-Ore., said they plan hearings and white papers in 2014 to reevaluate the 1996 Telecommunications Act and then legislation to change it in 2015 (CD Dec 4 p1). Speaking Wednesday at a Hudson Institute event on retransmission consent (see separate report below in this issue), Walden reiterated his desires for a flexible rewrite and cooperation with the Judiciary Committee on changing the compulsory licensing system.

The rewrite announcement inspired widespread statements of approval in the immediate hours after. Industry associations, individual companies and the two Republican FCC commissioners spoke favorably of the need to end what they called outdated laws. The proposed timeframe is “reasonable and allows for thoughtful exploration of the policy issues in a bipartisan, bicameral manner,” said Verizon Senior Vice President-Federal Government Relations Peter Davidson in a blog post (http://vz.to/18hTARN).

Sen. John Thune, R-S.D., ranking member of the Senate Commerce Committee, is “glad” House Republicans have begun “the necessary work to update our antiquated communications laws,” he told us in a statement. “Earlier this year, Subcommittee Chairman Walden and I discussed the need for such updates as a result of significant transformations in our nation’s telecommunication sector.” Thune plans to work with Walden and Upton in “making our communications policy more flexible, market-based, and consumer-focused,” he said.

With the broader IP transition and possibility of IP transition trials in 2014, “the timing is perfect,” Robert McDowell, a Republican FCC commissioner until May and now a visiting fellow at the Hudson Institute, told us. These IP “test beds could help direct how legislation should be written” and “weave a trail of evidence” for policymakers. McDowell has backed a comprehensive rewrite of the Communications Act for a long time and joined Upton and Walden Tuesday during their Google Hangout announcement of the rewrite process. McDowell has talked to lawmakers, including Upton and Walden, as well as industry officials, consumer groups and others since joining the Hudson Institute to examine communications legislation, he said.

McDowell called Walden’s willingness to “surgically open a small part” of intellectual property law in revisiting the compulsory licensing system with House Judiciary “courageous” and “realistic,” despite the difficulties of doing so in a narrow way amid other issues like digital piracy. That willingness on Walden’s part is “huge,” McDowell said.

But multiple stakeholders suggested not waiting for a comprehensive rewrite to make more particular updates, pointing to changes that could accomplished through other legislative vehicles, like Satellite Television Extension and Localism Act reauthorization or amending the 1992 Cable Act. The American Television Alliance, which calls itself “a voice for the TV viewer,” would prefer Congress act faster than via “a multi-year process involving many Congressional committees, while consumers are being forced to endure a record number of television blackouts,” it said in a statement. ATVA cited “true bipartisan support and momentum for reforming retransmission consent immediately” and said House Commerce members “have called for retrans reform within STELA and we urge Chairman Upton, Rep. Walden, and the rest of Congress to continue down that path.”

Rep. Steve Scalise, R-La., wants focus on the Cable Act. A Communications Act rewrite “should not distract us ... from acting on the foundation already laid during our subcommittee’s multi-year examination of video policies,” said the Communications Subcommittee member in a statement. The “obsolete” Cable Act comes “from a different era,” Scalise said, saying he still strongly backs the broad review and update Upton and Walden announced.

CEA Vice President-Congressional Affairs Veronica O'Connell judged it “premature” to say which legislative updates may actually go into any Communications Act rewrite. She doubts any major legislation next year but said she suspects the hearings and white papers will set the stage for 2015. It will be difficult to get major changes through the Senate, so a bipartisan rewrite would be best, O'Connell told us. CEA Vice President-Regulatory Affairs Julie Kearney agreed and said most in the industry recognize that this will be a staged process taking place over many months.

One communications industry lobbyist suspects the rewrite process will provide a good exercise for all parties involved, she told us, wondering whether it will be a complete overhaul or simply tweak certain parts of the law. Walden and Upton don’t seem to have judged winners and losers, she said. The lobbyist doubted certain smaller bills will go forward -- House Communications Subcommittee ranking member Anna Eshoo, D-Calif., plans by next week to formally introduce the discussion draft she released earlier this year, which calls for more FCC statutory authority in retransmission consent disputes, and Scalise is also expected to introduce this month his video bill dealing with similar issues, according to the lobbyist. Both members are seeking cosponsors, she said. Neither office commented on the possible introductions. The lobbyist expects those bills to stall and get swallowed up in the larger effort of the rewrite, though she did point to a CableCARD bill of Vice Chairman Bob Latta, R-Ohio, as a bill she heard may be moving forward. The rewrite effort won’t substantially affect her lobbying, she said -- next year is still all STELA, though with less angst now that Walden has said he doesn’t want to address retrans consent as part of its reauthorization.

"We're not going to get a better act than we have now,” Free Press Policy Director Matt Wood told us. He cited the technology-neutral virtues of the 1996 Telecommunications Act and a Wednesday New America Foundation panel at which the CEOs of Windstream, EarthLink, XO Communications and tw telecom agreed there’s no need to rewrite the act: “We need to enforce it.” The IP transition should be governed by the laws on the books today, Wood said. He worried about industry incumbents influencing the rewrite and described “the very real risk” of a rewrite making permanent the idea that people do not need telecommunications. “The Internet’s great, but it still rides on telecommunications networks,” he said.

Other stakeholders reaffirmed faith in the 1996 act. The Broadband Coalition still believes in the act’s “policy architecture,” coalition spokesman Chip Pickering said in a statement. He’s a former Republican representative from Mississippi and was a Senate staffer helping with the 1996 Act’s passage. Upton and Walden “are both strong advocates for open markets and I would encourage them to keep competition policy as their guide and not be swayed by arguments that would favor one technology over another,” Pickering said. Comptel CEO Jerry James issued a statement expressing confidence “that the committee’s examination will confirm that the basic principles of the [1996] Act -- which enable entrepreneurial companies to compete in the marketplace, and provide consumers with greater choice and lower prices -- still remain relevant today.”

The House GOP “thrust would be to ease regulation of telcos, cable/satellite-TV companies, and broadcasters, in an attempt to ‘level the playing field’ in the broadband Internet era,” predicted Stifel Nicolaus in a research note, pointing to potential benefit for “the Bells,” including the end of “traditional phone regulation” and its wholesale and common carriage obligations. Stifel expects “pushback” from Senate Democrats who want “a new broadband framework that would include Internet interconnection, openness (net neutrality), and other requirements,” it said. The note said it’s likely Republicans will hold the House after the 2014 midterm elections but anticipates “a long and difficult process” in a rewrite, “probably extending past 2016.” The offices of top Senate Democrats as well as Eshoo declined comment.

Don’t expect legislation to be enacted before 2016, wrote analyst Paul Gallant of Guggenheim Partners in a research note. “We expect any such legislative changes to be broadly positive for major telecom and cable operators,” Gallant said. If Republicans control the House after 2014, it would be possible but still “difficult” to accomplish the rewrite before the 2016 election, he said.

Congress is divided and there are many questions about how a rewrite would play out, Wood of Free Press said. “This is not necessarily a two-year project,” he said, saying legislation on the floor in 2015 would be a “record pace” for an overhaul this size. It’s difficult imagining Congress moving any big legislation like this in the next two to three years, Wood said. Congress has had trouble passing even smaller bills “with even a hint of contention,” Wood added. He also pointed to the fundraising dimension to the proposed rewrite, in which the “legitimate interest” GOP lawmakers have in rewriting the act gets “mixed together” with political campaigns for 2014 seats, with industry interest in the hearings and potential for legislation: “It’s only the big companies that can play that game effectively.” Walden chairs the National Republican Congressional Committee, a GOP fundraising arm.

McDowell rebuffed worries of partisan divides. Major telecom overhauls, including the 1996 act, “don’t fall in partisan lines, nor should they,” he said. In the rewrite, lawmakers can likely start with areas of agreement, such as potentially the need to auction more spectrum. “Once you can find the common ground to help propel legislation, then you can start building on other pieces where compromise can be reached.” He called the goal of introducing rewrite legislation by 2015 “very achievable.”

It’s “important to commence the process” of a rewrite, but smaller updates, such as revision to the Communications Act Section 10 forbearance provision and Section 629 set-top box rules, should not wait for a comprehensive change, said Free State Foundation President Randolph May in a statement. May backed “a technology-neutral regime so that competitive services are not treated differently” and a requirement that the FCC’s “regulatory activity be tied explicitly to whether a market failure exists and whether demonstrable consumer harm is proven, not to vague, subjective, malleable notions of the ‘public interest.'” He criticized the FCC’s “authority to engage in overly broad, anticipatory rulemakings,” which should be curbed, he said. (jhendel@warren-news.com)