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FCC Stuck in ‘Holding Pattern’ Waiting for Biden to Name Chair

Oct. 13, 2021, 9:01 AM

The Biden administration’s historic delay in appointing someone to lead the Federal Communications Commission is costing Democrats the ability to proceed on big-ticket policy items, even potential bipartisan ones, former officials said.

The commission has been operating without a permanent chair for the longest period in its history. Acting chair Jessica Rosenworcel can only stay on the commission until the end of the current congressional session.

If she departs without the Senate having taken any further action, the FCC would have a Republican majority with two commissioners, Brendan Carr and Nathan Simington, while there would be only one Democratic commissioner, Geoffrey Starks.

The agency is waiting for a fifth commissioner to also be appointed, depriving Democrats of the majority they need to move forward with their telecommunication policy priorities.

President Joe Biden provided a road map for Democratic priorities in a July 9 executive order, including restoring net neutrality rules under Title II of the Communications Act; reviving broadband consumer labels with pricing and performance information; and ending exclusive deals between landlords and internet service providers that limit tenants’ choice.

The FCC launched a public inquiry last month to refresh the record on exclusive deals between landlords and internet service providers. However, to take a final action after the inquiry wraps up—imposing new requirements on landlords, for example—Democrats will need a majority.

The FCC did not respond to requests for comment. A White House spokesperson said there are no updates to provide.

Net Neutrality

Meanwhile, reclassifying internet service providers under Title II is stalled. It’s expected the FCC will act on Biden’s recommendation to restore net neutrality rules under Title II once a Democratic majority is in place, former officials said.

Under former Republican FCC chair Ajit Pai, the agency repealed net neutrality rules, which Democrats believe are essential for preventing internet service providers from slowing down or blocking online services for consumers.

Several former officials said broadband industry players and Republicans may push FCC Democrats to pursue watered-down net neutrality rules under Section 706 of the Communications Act instead of Title II.

Classifying internet service providers under Title II would mean companies would be treated as common carriers, which the FCC has the authority to more heavily regulate by, for example, imposing net neutrality rules. The statute allows the FCC to judge internet service provider actions based on whether they are “just and reasonable.”

Under Section 706, the FCC’s judgment of internet service provider actions would have to be based on whether they are “commercially viable.” The statute does not specify whether commercially viable means to the interest of the company or the consumer.

For the broadband industry, Section 706 is the lesser of two evils, and companies are likely to push for it instead of no regulations at all because “you can’t kill something with nothing,” said former Democratic FCC chair Tom Wheeler.

Unlike Section 706, Title II would leave the FCC the option to impose rate regulations. Wheeler first pursued net neutrality rules under Section 706 but eventually landed on Title II because it provided sturdier legal ground, he said.

The FCC also will have to sort out how its new net neutrality rules are going to play out with existing laws in states such as California, Colorado, Maine, New Jersey, Oregon, Vermont, and Washington. Other states also have introduced net neutrality legislation, including Connecticut, Kentucky, Missouri, New York, and South Carolina.

The FCC won’t want to disturb state net neutrality laws it likely agrees with, former GOP FCC commissioner Robert McDowell said.

The FCC’s preemption of a state’s net neutrality law may also set a precedent that would allow a Republican-controlled FCC to leverage in the future, McDowell, a partner at Cooley LLP, added.

California’s law is being challenged by internet service providers who, among other arguments, say the state law is preempted by the federal government’s repeal of net neutrality rules.

However, former officials said even though there may be agreement between Democrats in the federal government and states over net neutrality rules, turf wars may still come into play.

The FCC has authority over interstate telecommunications, while states have authority over intrastate telecommunications.

“Once a determination is made that broadband is a telecommunications service, then the states will argue they still have a role to play in regulating broadband the way they have a say in regulating plain old intrastate phone service,” former FCC legal adviser and Hogan Lovells partner Ari Fitzgerald said. “The FCC will have to recognize that there’s a role for the states and for the federal government.”

Bipartisan Agenda Takes Hit

The FCC’s current composition even affects bipartisan priorities like spectrum auctions, former officials said.

Auctions for the 3.1-3.45 GHz spectrum band are expected to be a huge lift. The FCC will have to negotiate the spectrum with the Defense Department before it can begin transitioning it for commercial use.

“If you look at all the stakeholders in Washington, D.C., the Pentagon is the toughest negotiator,” former Democratic FCC official Blair Levin said. “If you have someone that’s going to be there for three more months, they’ll laugh and just say no. Temporary chairs can’t project long-term importance.”

It also is imperative for the Biden administration to appoint someone to lead the National Telecommunications and Information Administration at the Commerce Department for spectrum coordination, former officials said.

“It’s extraordinarily unhelpful to the FCC and to the U.S. government writ large for there not to be someone tapped for that position,” Pai said. “The NTIA administrator is the point person for the entire executive branch on spectrum policy.”

NTIA’s most recent permanent chair was David Redl, who resigned in 2019 days after criticizing U.S. 5G deployment.

Having a strong head of NTIA is especially useful for handling objections that could arise from various agencies “like a teacher in an unruly classroom saying, ‘don’t everyone raise your hand and start blabbing all at once,’” Pai added.

Overhauling the Universal Service Fund is another item on the FCC’s agenda that is stalled, former officials said. Congress directed the FCC to modernize the Universal Service Fund in an infrastructure bill that could be close to the finish line. Telecom industry players have long called on the FCC to overhaul the fund.

Carol Mattey, who led Universal Service Fund modernization efforts, said it was “an extremely difficult and complicated process.” Mattey carried out the efforts from 2010 to early 2017, spanning the tenures of former FCC chair Julius Genachowski, former interim chair Mignon Clyburn, and Wheeler.

The FCC under Pai largely carried out those efforts, and it could continue to move forward on a bipartisan basis, Mattey said. Commissioner Carr, the senior Republican on the panel, has expressed support for updating the fund’s contributions base to include big tech companies, Mattey noted.

However, she added, “acting chairs typically do not start major initiatives; they keep the trains running until there is a permanent chair.”

“With this 2-2 split and no nominations, we’re in a holding pattern,” Mattey said. “It’s very unfortunate. Time is of the essence, and we’re basically wasting a year.”

To contact the reporter on this story: Maria Curi at mcuri@bloombergindustry.com

To contact the editors responsible for this story: Kibkabe Araya at karaya@bloombergindustry.com; Keith Perine at kperine@bloomberglaw.com

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