AT&T, NCTA Not Swayed by FCC BDS Peer Review Timing Despite OMB Language

Telco and cable interests continued to slam FCC procedures in releasing peer reviews critiquing a consultant's study of the business broadband market, which the agency estimates generates $45 billion in annual revenue. The release of the peer reviews came on June 28 just as comments were due in the agency's business data service (BDS) rulemaking and two months after they were submitted. AT&T suggested the commission violated the Administrative Procedure Act and NCTA suggested the agency didn't care about stakeholder input.

But the FCC's release of the peer reviews appears consistent with language from the Office of Management and Budget, despite a commission statement that seemed to promise quicker release. Several academics and others we contacted were skeptical of the APA criticisms, and some said incumbent telcos in particular are just trying to delay regulatory action and preserve BDS profits. Still others knocked the agency's actions and analysis.

The FCC proposed a new technology-neutral regulatory framework for BDS (special access) in a Further NPRM that included a white paper by agency consultant Marc Rysman, a Boston University econometrician who studied industry data and found evidence of ILEC market power (see 1605030001). In the FNPRM issued May 2, the agency promised to "release peer reviews" of Rysman's paper "when they are completed in the near future." Major cable companies then supplemented their deployment data, prompting an ILEC motion to strike the "flawed" previous cable data from the record and rescind related FNPRM proposals and Rysman analysis (see 1606170038).

The Wireline Bureau and Rysman stood by their fundamental analysis in a staff memo and modified white paper responding to the updated cable data and critiques from peer reviews (see 1606290045). Those documents and others were released (available here) June 28, the day initial comments were due on the FNPRM (see 1606280058).

The peer reviews were dated April 26 and April 28, seemingly contradicting the commission's May 2 promise to issue them when "completed." Although the FCC June 29 called it standard practice to release peer reviews with the bureau responses, AT&T blasted the "document dump" and said the peer reviews should have been released two months earlier, so comments could have incorporated the peer review analysis. "The FCC has been pushing aside the APA and due process in this proceeding," blogged AT&T Senior Vice President-Federal Regulatory Bob Quinn. "This is completely unorthodox and defeats the entire purpose of having a third-party study in the first place."

Asked about the apparent delay, an FCC spokesman Wednesday cited language in 2004 OMB guidance to agencies: "A peer review is considered completed once the agency considers and addresses the reviewers' comments." Under the OMB guidance, the Rysman paper's peer reviews weren't "completed" -- and released -- until the bureau's response June 28.

'Flunked' Review

AT&T didn't back off its criticism Thursday. "The FCC knowingly put out for comment an economic study that had flunked peer review," emailed Quinn. "That fact was never made public until the day that comments were due to be filed. The assertion that some vague OMB guidelines permit peer review to be over when the FCC says it is over is just an attempt at obscuring that simple fact. If the FCC intended to imminently release the peer review critique and agency response, it should have delayed the comment date. It’s something the FCC has routinely done in the past. Instead of doing that, the FCC took comments on an analysis that the FCC (and only the FCC) knew was flawed. Those actions are not transparent nor the type of fair and open process contemplated by the APA."

"We agree with AT&T," emailed NCTA, "that the decision to release the negative peer reviews, along with substantial new analysis by FCC staff, on the date comments were due does not seem like the approach of an agency that is interested in providing interested parties with a full and fair hearing on these enormously important and complex issues.” When the Wireline Bureau rejected an NCTA request, backed by USTelecom, to delay the comment deadlines, the cable group had said the denial reinforced "troubling indications" the "outcome is predetermined" (see 1606090037). AT&T and USTelecom have voiced similar concerns.

The FCC is "only halfway through the comment cycle," emailed the agency spokesman. "The Commission has made no decisions about how to proceed, and is open to all ideas."

Academics offered mixed views. "Under proper regulatory practice, agencies should consider all peer reviews of their studies and their response to those peer reviews before deciding what actions to take," emailed University of Pennsylvania law professor Christopher Yoo. "In this case, the peer reviews were not submitted until just before the proposed rule was released, and the FCC did not finalize its response until two months later. The timing suggests that the FCC could not have taken either into account when formulating its position even though both are considered critical to public acceptance of the agency’s actions. Getting the rules right is more important than rushing them through in an attempt to finish it before the end of the current Administration."

"There's definitely a sense that things are being hurried despite a pretty diverse set of sources saying there are huge issues here," said Geoffrey Manne, executive director of the International Center for Law and Economics, in Portland, Oregon, who's on the FCC Consumer Advisory Committee. There are "good reasons to be very critical of Rysman's analysis," though "it's considerably more neutral than a back-of-the-envelope, politicized analysis," he added.

Others Not Concerned

The peer reviews of Rysman's study "were hardly devastating," said Michigan State law professor Adam Candeub. "There's no smoking gun. There's no horrible thing they're trying to hide. They're normal peer reviews. ... We all live in a fallen world; econometrics maybe more so."

Public Knowledge Senior Vice President Harold Feld disagreed the FCC has made up its mind or is rushing. "How can there be a predetermined outcome when everyone is still negotiating? The FCC is 'rushing' because of the obvious reason that this has already gone on for nearly 15 years," he emailed. "Whining for endless delays is a fairly well-worn strategy of the incumbents reaping monopoly profits. ... If the incumbents had a case to speak of, they would not be so desperate."

Ex-Commissioner Michael Copps cited a "serious lack of competition" and "enormous profit-taking" in the special access market when he was at the agency. "This situation has dragged on for far too many years at far too excessive cost, and decisive FCC action is needed to remedy what has been going on. I was in favor of resolving this a decade ago, so I don't see how anyone could conclude the FCC is rushing to judgment. That's a ridiculous charge,” he emailed.

"Advocates who don't like the substance of an FCC action feel almost obligated to complain about process flaws, be they real or imagined," emailed another former senior FCC official. "Appellate courts are more inclined to strike down FCC orders on process grounds than on statutory or Constitutional grounds. So what's going on here is the construction of a record from which to launch appeals, sort of like Perry Mason making objections during his trials. Everyone knows that the FCC is going to regulate BDS a lot more, so the process-fouls objections are the ILECs' only hope."

APA Defense

Some said the FCC's unusual actions didn't violate APA, while even a critic welcomed the additional economic analysis.

"This is not an APA violation," Feld said. "Under the APA, the FCC has an obligation to release technical data on which it intends to rely. It is not obligated to release peer review comments at all" but is doing so voluntarily "in the interest of openness." Parties can still comment on the peer reviews and modified Rysman paper, he noted.

"I can't imagine a court is going to overturn this on APA grounds" as long as the data are made public and parties have a chance to comment, Candeub said. Commenting before the OMB language came to light, George Washington University law professor Richard Pierce called the FCC practices "poor but not a violation of either APA or due process."

Manne commended the FCC for doing economic analysis, given how "haphazard" its analysis normally is. "I can't think of when they've done the requisite amount of economic analysis," he said. While "pro-regulation" advocates believe demands for economic analysis are "a hidden way to curtail regulatory powers," he said the intent is to "curtail bad regulation" and benefit consumers.

FCC Chairman Tom Wheeler plans to act on BDS this year "regardless of any data issues," emailed CCMI Consultant Andrew Regitsky, who has both ILEC and CLEC clients. "He is supremely confident that he has the 3 votes at the Commission and has a favorable court to win any appeals," Regitsky said: The FCC's net neutrality victory at the U.S. Court of Appeals for the D.C. Circuit "gives Wheeler confidence" that BDS regulation will be upheld on APA grounds.