Date: Jan 02, 2017
The Enforcement Bureau
The FCC’s enforcement bureau is led by Chief Travis LeBlanc, who has drawn the ire of industry representatives and Republicans on Capitol Hill for what some senators called “seemingly arbitrary” and massive fines. The bureau under LeBlanc’s leadership has issued proposed fines of $100 million (to AT&T Mobility for allegedly misleading consumers about mobile broadband data); $49 million (for apparent Universal Service Fund compensation violations); $48 million (to T-Mobile to settle an investigation into unlimited data plans); $21 million (for allegedly abusing the rural healthcare program); and several slamming and cramming violations that collectively exceed tens of millions of dollars. We expect LeBlanc to step down in early 2017 and we anticipate that his replacement will not be as aggressive in issuing headline-grabbing fines.
Last year, the FCC adopted net neutrality rules that prevent internet service providers (ISP) from blocking traffic, throttling traffic or entering into paid prioritization arrangements with content providers. The rules were challenged and upheld on appeal. This was not the first time the commission attempted to impose net neutrality obligations — courts struck down the two prior attempts. However, it is the first time the commission embraced subjecting the internet to regulation under Title II of the Communications Act (i.e. public utility regulation), though it exercised its forbearance authority and refrained from imposing certain provisions of Title II as part of its net neutrality rules. Republicans, including the two GOP commissioners, aggressively opposed the new rules. Commissioner O’Rielly scolded the commission for “Internet Regulation and Fauxbearance,” while Commissioner Pai released a laundry list of problems with the rules. It is fair to say that the agency’s net neutrality rules are squarely in the crosshairs of the Trump administration.
Business Data Services
The FCC has been investigating for more than a decade whether the rates charged by price cap ILECs for special access services (ex. DS-1 and DS-3) are “just and reasonable.” In 2012, the FCC suspended its rules that enabled price cap ILECs special access pricing flexibility after determining that the triggers for pricing flexibility in the rules were a poor proxy for competition. The FCC has spent the intervening years collecting and analyzing data on both TDM and Ethernet-based dedicated access services. In May of this year, the agency released its Tariff Investigation Order and Further Notice of Proposed Rulemaking finding unlawful or questionable many price terms in ILEC volume pricing plans and proposed a combination market-based and technology-neutral approach to regulating TDM and Ethernet-based special access services. Despite the significant resources spent as part of collecting and analyzing data to assess competition in the marketplace for special access services, we do not expect this proceeding to be a priority for the new administration.
Universal Service Fund Reform
Like the BDS proceeding, the FCC has “actively” considered reforming the Universal Service Fund for a number of years. As the USF contribution factor rises, the agency has considered whether, when, and how to expand the base of USF-assessable revenues. The FCC also has considered reforms that could streamline USF reporting processes. In its 2015 Open Internet Order, the FCC stated that contribution reform is being assessed in a separate proceeding. It is fair to assume that the FCC’s new leadership may seek to refresh the record in this proceeding and will likely start from scratch when considering USF reforms.
The FCC under President Obama has aggressively focused on deploying broadband to rural, underserved and unserved areas. In 2015, the commission granted petitions filed by the Electric Power Board of Chattanooga (TN) and City of Wilson (NC) requesting that the FCC preempt state laws that acted as barriers to broadband infrastructure investment. The commission agreed — over the dissent of Commissioners Pai and O’Rielly — and preempted certain provisions of laws in both North Carolina and Tennessee (though this preemption was overturned on appeal). We expect President Trump’s FCC to also focus on broadband deployment, but look for them to take a different approach. It is highly unlikely that a GOP-controlled FCC would preempt state laws to promote municipally provided broadband service. Instead, we expect the commission to focus on deregulation, reduce barriers to market entry and look for ways to reduce infrastructure costs to promote private deployment of broadband service.
The FCC’s spectrum policy in recent years has focused on (i) generating revenue for the federal government through auctioning spectrum to the highest bidder (the AWS-3 Auction generated more than $40 billion for the Treasury); and/or, (ii) relaxing limitations on spectrum use to promote consumer broadband applications (ex. Citizens Broadband Radio Service at 3.5 GHz). We expect the latter trend to continue under President Trump as part of a few active proceedings. The first proceeding is part of the commission’s review of its rules for various spectrum bands above 24+ GHz, known as the “Spectrum Frontiers” proceeding. The FCC has already proposed making additional licensed spectrum available in the 28, 37 and 39 GHz bands. It also proposed providing an additional 7 GHz of spectrum available for unlicensed use in the 64-71 GHz band. We expect the FCC to continue searching for ways to open up additional spectrum bands for new uses. Similarly, we expect the commission in 2017 to expand the universe of entities eligible to access the 4.9 GHz band. The band currently is available for use only by public safety entities, but we expect the commission to propose allowing electric utilities, oil and gas companies, and other critical infrastructure companies to share the band on a co-primary or secondary basis.
We expect the commission to undergo substantial changes in the next several months starting with new leadership and quickly followed by new priorities and a heightened focus on deregulation. Some policy areas may not change significantly (ex. spectrum policy), but we expect many to change dramatically. And if rumors are true that a GOP-controlled Congress will look to rewrite the Communications Act, then the only constant for the communications industry over the next four years may be constant change.