[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
IMPROVING FCC PROCESS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON COMMUNICATIONS AND TECHNOLOGY
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
JULY 11, 2013
__________
Serial No. 113-69
Printed for the use of the Committee on Energy and Commerce
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
RALPH M. HALL, Texas HENRY A. WAXMAN, California
JOE BARTON, Texas Ranking Member
Chairman Emeritus JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky Chairman Emeritus
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska ANNA G. ESHOO, California
MIKE ROGERS, Michigan ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania GENE GREEN, Texas
MICHAEL C. BURGESS, Texas DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee LOIS CAPPS, California
Vice Chairman MICHAEL F. DOYLE, Pennsylvania
PHIL GINGREY, Georgia JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana JIM MATHESON, Utah
ROBERT E. LATTA, Ohio G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington JOHN BARROW, Georgia
GREGG HARPER, Mississippi DORIS O. MATSUI, California
LEONARD LANCE, New Jersey DONNA M. CHRISTENSEN, Virgin
BILL CASSIDY, Louisiana Islands
BRETT GUTHRIE, Kentucky KATHY CASTOR, Florida
PETE OLSON, Texas JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia JERRY McNERNEY, California
CORY GARDNER, Colorado BRUCE L. BRALEY, Iowa
MIKE POMPEO, Kansas PETER WELCH, Vermont
ADAM KINZINGER, Illinois BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia PAUL TONKO, New York
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
Subcommittee on Communications and Technology
GREG WALDEN, Oregon
Chairman
ROBERT E. LATTA, Ohio ANNA G. ESHOO, California
Vice Chairman Ranking Member
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
LEE TERRY, Nebraska MICHAEL F. DOYLE, Pennsylvania
MIKE ROGERS, Michigan DORIS O. MATSUI, California
MARSHA BLACKBURN, Tennessee BRUCE L. BRALEY, Iowa
STEVE SCALISE, Louisiana PETER WELCH, Vermont
LEONARD LANCE, New Jersey BEN RAY LUJAN, New Mexico
BRETT GUTHRIE, Kentucky JOHN D. DINGELL, Michigan
CORY GARDNER, Colorado FRANK PALLONE, Jr., New Jersey
MIKE POMPEO, Kansas BOBBY L. RUSH, Illinois
ADAM KINZINGER, Illinois DIANA DeGETTE, Colorado
BILLY LONG, Missouri JIM MATHESON, Utah
RENEE L. ELLMERS, North Carolina G.K. BUTTERFIELD, North Carolina
JOE BARTON, Texas HENRY A. WAXMAN, California, ex
FRED UPTON, Michigan, ex officio officio
C O N T E N T S
----------
Page
Hon. Greg Walden, a Representative in Congress from the State of
Oregon, opening statement...................................... 1
Prepared statement........................................... 3
Hon. Anna G. Eshoo, a Representative in Congress from the State
of California, opening statement............................... 4
Hon. Robert E. Latta, a Representative in Congress from the State
of Ohio, opening statement..................................... 6
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 7
Witnesses
Larry Downes, Internet Industry Analyst and Author............... 10
Prepared statement........................................... 12
Answers to submitted questions............................... 137
Richard J. Pierce, Jr., Lyle T. Alverson Professor of Law, George
Washington University Law School............................... 37
Prepared statement........................................... 39
Answers to submitted questions............................... 141
Randolph J. May, President, Free State Foundation................ 49
Prepared statement........................................... 51
Answers to submitted questions............................... 143
James Bradford Ramsay, General Counsel, National Association of
Regulatory Utility Commissioners............................... 67
Prepared statement........................................... 69
Answers to submitted questions............................... 146
Stuart M. Benjamin, Douglas B. Maggs Chair in Law and Associate
Dean for Research, Duke University School of Law............... 87
Prepared statement........................................... 89
Answers to submitted questions............................... 149
Robert M. McDowell, Former FCC Commissioner and Visiting Fellow,
Hudson Institute............................................... 96
Prepared statement........................................... 99
Answers to submitted questions............................... 152
Submitted Material
Congressional Budget Office cost estimate dated March 19, 2012,
submitted by Mr. Walden........................................ 122
Letters of support, submitted by Mr. Walden...................... 124
IMPROVING FCC PROCESS
----------
THURSDAY, JULY 11, 2013
House of Representatives,
Subcommittee on Communications and Technology,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:35 a.m., in
room 2123 of the Rayburn House Office Building, Hon. Greg
Walden (chairman of the subcommittee) presiding.
Present: Representatives Walden, Latta, Blackburn, Scalise,
Lance, Kinzinger, Long, Ellmers, Barton, Eshoo, Dingell and
Waxman (ex officio).
Staff present: Ray Baum, Senior Policy Advisor/Director of
Coalitions; Sean Bonyun, Communications Director; Matt Bravo,
Professional Staff Member; Andy Duberstein, Deputy Press
Secretary; Neil Fried, Chief Counsel, Communications and
Technology; Kelsey Guyselman, Counsel, Telecom; Gib Mullan,
Chief Counsel, Commerce, Manufacturing and Trade; David Redl,
Counsel, Telecom; Charlotte Savercool, Executive Assistant,
Legislative Clerk; Phil Barnett, Democratic Staff Director;
Roger Sherman, Democratic Chief Counsel; Shawn Chang,
Democratic Senior Counsel; Margaret McCarthy, Democrat Staff;
Kara van Stralen, Democratic Policy Analyst; and Patrick
Donovan, FCC Detailee.
OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OREGON
Mr. Walden. I will call to order the subcommittee on
Communications and Technology and open our hearing on
``Improving FCC Process Reform.''
The communications industry is one of the few sectors still
firing on all cylinders in this economy, averaging $80 billion
a year in investment since 1996. It cannot continue to do so,
however, if faced with poor FCC process. As Blair Levin, a
previous FCC chief of staff and architect of the National
Broadband Plan, has lamented, and I quote, ``The FCC is
becoming more of a political institution and less an expert
agency.''
Former Chairman Genachowski did make progress in reforming
the Commission but there is more to do. The agency has fallen
short in the past under both Democratic and Republican
administrations. Without codification of certain protections,
it will undoubtedly do so again. Only statute can ensure good
process from the commission to the next commission. That is why
we are discussing two draft bills today designed to minimize
the potential for procedural failings, to curb abuse, and to
improve agency decision making.
The FCC Process Reform Act passed the House as H.R. 3309 in
the last Congress on a 247-174 bipartisan vote. Contrary to the
assertions of some, it does not change the public interest test
nor strip the FCC's authority to protect consumers and
competition. It merely asks the agency to do what we ask of
most grade-school students: show your work, to publish the
specific language of proposed rules, to identify a market
failure or actual consumer harm, and conduct a cost-benefit
analysis before regulating; to give commissioners, parties, and
the public an adequate opportunity to review proposed rules; to
publish the text of decisions promptly and examine whether
adopted rules are meeting their purpose; to set ``shot clocks''
to ``give the parties and the public more confidence that the
agency is acting with dispatch,'' as Commissioner Pai put it in
his recent statement on the Softbank-Sprint-Clearwire
transaction.
Many of these ideas can be found in President Obama's 2011
Executive Order on Improving Regulation and Regulatory Review,
which binds executive branch agencies but, unfortunately, not
to the FCC. And remember that in my state, public utility
commissions already operate under much of what is proposed in
this legislation. This is not unusual in America but it is in
Washington. The draft bill also requires any transaction
conditions to be narrowly tailored to transaction specific
harms and otherwise within the FCC's jurisdiction. This was in
the bill before Mr. Wheeler was nominated as FCC Chairman, but
his blog about the AT&T and T-Mobile merger reinforces the
need. In it he notes that the Communications Act does not
currently prohibit the FCC from, and I quote, ``imposing merger
terms and spectrum auction rules that might seem to be
regulation in another guise.'' This is precisely what the
transaction review process should not be used for: back-door
rulemaking.
Despite what you may hear, the bill does not dictate the
outcome of a transaction review or alter the public-interest
standard. The FCC can still find a proposed merger to be
inconsistent and against the public interest and it can deny
that transaction or adopt tailored conditions to remedy the
specific condition.
Now, some opponents argue implementing this bill would be
difficult and will lead to litigation. Well, that is not true
either. Most of the provisions rely on established definitions
and accepted concepts under the Communications Act, the APA,
and other law. And rather than micromanage the agency, the bill
largely establishes principles and gives the FCC flexibility on
how to implement them. I would nonetheless be happy to work
with anyone who has a good-faith interest in improving the
language as we did leading up to the final version of the bill
that passed the House.
Others say it would be unwise to apply these types of
reforms except government wide in the context of the
Administrative Procedure Act. Well, that would be fine with me,
but this committee doesn't have that jurisdiction over the
whole APA, and we need to start somewhere in Washington to
reform government. Since the FCC oversees a huge and growing
part of the economy, it seems a worthy candidate to commence
the discussion.
Now, the second draft bill, the FCC Consolidated Reporting
Act, passed the House as H.R. 3310 last Congress by voice vote.
The legislation looks to relieve burdens on the agency and make
its reports more meaningful. It does so by consolidating eight
statutorily mandated reports into one biennial review and
eliminates 12 outdated studies, like one on the telegraph
industry. The existing reports are cumbersome and often
unnecessary. A recent Government Accountability Office study on
the video competition report, for example, concluded that the
reports may not be needed on an annual basis, ``especially
given demand on FCC staff's time for other monitoring and
regulatory duties.'' The proposed consolidated report will help
break down siloed thinking and present a more useful picture of
the marketplace upon which to base policy judgments.
Now, I know there are some that have said there is no
reason for this committee to spend its time on these efforts,
and why would we take up these issues again when the Senate
probably won't agree. We are here to reform government. We are
here to make changes. We are not here to defend the status quo.
And if the United States Senate wants to continue to have the
Federal Communications Commission do its telegraph report,
well, fine with them, but that is not what we are about. The
last thing that we want to do is stifle an industry that is
continually growing and innovating. Yet that is exactly what
could happen if the FCC is not held to certain standards of
decision-making. The industry deserves an efficient and
effective regulator we can truly call expert, just as the
public deserves a transparent and accountable federal
government, and these reforms are a good place to start.
[The prepared statement of Mr. Walden follows:]
Prepared statement of Hon. Greg Walden
The communications industry is one of the few sectors still
firing on all cylinders in this economy--averaging $80 billion
a year in investment since 1996. It cannot continue to do so,
however, if faced with poor FCC process. As Blair Levin, a
previous FCC chief of staff and architect of the National
Broadband Plan, has lamented, ``[t]he FCC is becoming more of a
political institution and less an expert agency.''
Former Chairman Genachowski did make progress in reforming
the Commission but there is more to do. The agency has fallen
short in the past under both Democrat and Republican
administrations. Without codification of certain protections,
it will undoubtedly do so again. Only statute can ensure good
process from commission to commission. That is why we are
discussing two draft bills today designed to minimize the
potential for procedural failings, curb abuse, and improve
agency decision making.
The FCC Process Reform Act passed the House as H.R. 3309
last Congress on a 247-174 bipartisan vote. Contrary to the
assertions of some, it does not change the ``public interest
test'' or strip the FCC's authority to protect consumers and
competition. It merely asks the agency to do what we ask of
most grade-school students-to show its work. To publish the
specific language of proposed rules, identify a market failure
or actual consumer harm, and conduct a cost-benefit analysis
before regulating. To give commissioners, parties, and the
public an adequate opportunity to review proposed rules. To
publish the text of decisions promptly and examine whether
adopted rules are meeting their purpose. To set ``shot clocks''
to ``give the parties and the public more confidence that the
agency is acting with dispatch,'' as Commissioner Pai put it in
his recent statement on the Softbank-Sprint-Clearwire
transaction. Many of these ideas can be found in President
Obama's 2011 Executive Order on ``Improving Regulation and
Regulatory Review,'' which binds executive branch agencies but,
unfortunately, not to the FCC.
The draft bill also requires any transaction conditions to
be narrowly tailored to transaction specific harms and
otherwise within the FCC's jurisdiction. This was in the bill
before Mr. Wheeler was nominated for FCC Chairman, but his blog
about the AT&T-T-Mobile merger reinforces the need. In it he
notes that the Communications Act does not currently prohibit
the FCC from ``imposing merger terms and spectrum auction rules
that might seem to be regulation in another guise.'' This is
precisely what the transaction review process should not be
used for-back-door rulemaking. Despite what you may hear, the
bill does not dictate the outcome of a transaction review or
alter the public-interest standard. The FCC can still find a
proposed merger to be against the public interest and deny the
transaction or adopt tailored conditions to remedy specific
concerns.
Some opponents argue implementing this bill would be
difficult and will lead to litigation. But it's also not true.
Most of the provisions rely on established definitions and
accepted concepts under the Communications Act, the APA, and
other law. And rather than micromanage the agency the bill
largely establishes principles and gives the FCC flexibility on
how to implement them. I'd nonetheless be happy to work with
anyone who has a ``good faith'' interest in improving language.
Others say it would be unwise to apply these types of
reforms except government wide in the context of the
Administrative Procedure Act. That would be fine with me. But
this committee does not have jurisdiction over the APA and we
need to start somewhere. Since the FCC oversees a huge and
growing part of the economy, it seems a worthy candidate to
commence the discussion.
The second draft bill, the FCC Consolidated Reporting Act,
passed the House as H.R. 3310 last Congress by voice vote. The
legislation looks to relieve burdens on the agency and make its
reports more meaningful. It does so by consolidating eight
statutorily mandate reports into one biennial report and
eliminating 12 outdated studies, like one on the telegraph
industry. The existing reports are cumbersome and often
unnecessary. A recent GAO study on the video competition
report, for example, concluded that the reports may not be
needed on an annual basis, ``especially given demand on FCC
staff's time for other monitoring and regulatory duties.'' The
proposed consolidated report will help break down siloed
thinking and present a more useful picture of the marketplace
upon which to base policy judgments.
The last thing that we want to do is stifle an industry
that is continually growing and innovating. Yet that is exactly
what could happen if the FCC is not held to certain standards
of decision-making. The industry deserves an efficient and
effective regulator we can truly call ``expert,'' just as the
public deserves a transparent and accountable federal
government. These reforms are a good place to start.
# # #
Mr. Walden. With that, I would yield back the balance of my
overused time and recognize my friend from California, Ms.
Eshoo for an opening statement.
OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Eshoo. Thank you, Mr. Chairman, and good morning to
you, and welcome to all of the witnesses. Former Commissioner
McDowell, it is always a pleasure to see you and have you with
us.
Just 2 weeks ago, Mr. Chairman, we had bipartisan consensus
on the need to focus on how federal agencies use spectrum.
Today, we are returning to legislation that this subcommittee
has debated for 3 straight years. It hasn't nor in my opinion
will it go anywhere. Administrative law experts tell us it
would tie the FCC up in years of litigation, and I think it
really contains some policies that are not good policies. This
proposed process reform, in my view, is a back-door way of
gutting some of the FCC's very important authorities.
Congress created the FCC to safeguard the public interest.
Big corporations, as we know, are well equipped to advance
their private interests, and they have every right to do so,
but consumers need advocates and competitors and innovators
need a referee to level the playing field.
As we all know, the FCC faces an enormous set of challenges
in the coming years including the upcoming voluntary spectrum
auction, the transition to IP and the modernization of the e-
rate program in our Nation's schools and libraries. Our role as
a subcommittee, I think, should be to ensure that the agency is
equipped with the tools to meet these challenges while ensuring
that the FCC can continue to protect the public interest and
preserve competition. I am going to repeat that: preserve
competition in the communications marketplace. If we really
want to accomplish meaningful reform, I think we should start
with a proposal that enjoys nearly universal support including
that of the acting chairwoman of the FCC, Commissioners Pai and
Rosenworcel, and former FCC Commissioners Abernathy, Copps, and
McDowell.
The FCC Collaboration Act of 2013, H.R. 539, is bipartisan,
it is bicameral, and it will allow FCC commissioners to more
easily collaborate with one another outside of public meetings.
As the FCC increasingly responds to complex, highly technical
issues, I think now is the time to get this legislation passed
and signed into law. We just shouldn't delay anymore. It is
really a source of embarrassment. Everyone is for it. We can
get it done.
Secondly, I support allowing commissioners to appoint the
electrical engineer or computer scientist to their staff that
some of them have asked for. This is a bipartisan proposal
offered in the last Congress by former Representative Stearns.
Third, I support the creation of an online searchable
database of consumer complaints, an idea advanced by the
ranking member of the full committee, Mr. Waxman, in the
previous Congress, and finally, I agree that there could be
opportunities to streamline many of the reporting requirements
that Congress has placed on the FCC. We are now in the seventh
month of the 113th Congress, but only one bill has moved
through our subcommittee. Instead of working on legislation
that creates billable hours for Washington telecom lawyers, I
think that we need to work together to craft policies that are
actually going to move, that will create jobs for innovators,
promote investment in infrastructure across our country, and
technological advances that will help American families.
So I thank each of our witnesses that are here today. I
know that we tried to get some of the opposite sex to show up.
I know that they are alive and well out there, but for one
reason or another, they couldn't, but I want, if the public is
listening in, not to think that we have overlooked that, and
again, I want to thank you for working with our subcommittee to
help drive competition, promote innovation and protect
consumers.
And with that, I will yield back the balance of my time,
Mr. Chairman.
Mr. Walden. I thank the gentlelady, and I am going to ask
for a moment of personal privilege now to acknowledge the
service of our committee chief counsel, Neil Fried, who will be
leaving the subcommittee soon to work for the Motion Picture
Association of America. Neil has rendered outstanding service
to this subcommittee for 10 years. He served as subcommittee
counsel under full committee Chairmen Townsend, Barton and
Upton, and subcommittee Chairmen Upton, Stearns and myself. He
has been part of rewriting the Satellite Home Viewer Act so
many times that well, he is going to avoid it this time, I
think. Three times he has been there to help rewrite the Home
Viewer Act. As a legislative rock star for the committee, his
knowledge and expertise will be missed, but I know he will
become a legal movie star for the MPAA. Neil, thank you for
your service to this committee and to this country. I would
have hoped on his final day here we would have him actually at
the witness stand so we could have him under oath.
I thank the committee for that indulgence, and now I would
recognize the vice chair of the committee, Mr. Latta, for 5
minutes.
OPENING STATEMENT OF HON. ROBERT E. LATTA, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OHIO
Mr. Latta. Well, thank you, Mr. Chairman, and I will not
take my 5 minutes, but I want to thank you for holding this
hearing on ``Improving the FCC Process'', and I appreciate our
witnesses for being here today. I really appreciate that.
The cost of regulation to American businesses and hence our
economy is too great to ignore. Regulatory burden is the number
one issue I hear from everyone that I visit in my district, and
it is amazing when you have all the different issues out there,
the number one issue from everyone, and I have done 250 visits
in my district of factories and businesses since the last
August work period, it is regulations.
Unfortunately, these job creators, many of them small
businesses, are holding back from doing what they do best, and
that is driving the economy and actually creating jobs, in part
because of the burdensome regulations that are imposed.
I have reintroduced my FCC ABCs Act from last Congress
requiring the FCC to perform cost-benefit analysis on
economically significant rules, and I appreciate the chairman
including this idea in his discussion draft. Additionally, my
bill would also reform the Commission's forbearance authority
and biennial review of regulations by adding an evidentiary
presumption in order to empower the FCC to arrive at more
deregulatory decisions.
With the telecommunications industry driving a significant
portion of the economic growth in our country, as Members of
Congress, we should make sure that the FCC does not produce
regulations that will hamper this sector of the economy, and
again, Mr. Chairman, I thank you and I yield back the balance
of my time.
Mr. Walden. The gentleman, I think, wants to actually yield
to the gentleman from Texas, Mr. Barton----
Mr. Latta. I am sorry, and I yield to Mr. Barton.
Mr. Walden [continuing]. For such time as he may consume.
Mr. Barton. I thank the gentleman from Ohio.
I think it is about time that Neil got a real job. We wish
him well. Honestly, he is a great guy.
Mr. Chairman, I have introduced FCC reform legislation in
the last three Congresses, two Congresses ago, as the ranking
member in the minority and last Congress with a subcommittee
Chairman Stearns, and of course, I am happy to be on these two
bills today.
I seldom disagree very strongly with the ranking minority
subcommittee leader, Ms. Eshoo, on too many issues, but I do
disagree with her on this. I fail to see how more openness and
transparency, which is primarily what these two bills do--I
mean, there are other things in the bills--but it is basically
an attempt to get more certainty in the rulemaking process and
more openness and transparency so that the stakeholders can
understand what the commissioners at the FCC are doing. I don't
see that as a negative. I see that as a positive.
So as you pointed out in your opening statement, Mr.
Chairman, one of these bills passed the House and maybe both of
them in the last Congress, so maybe this is the year of the
Congress that we actually get it through the Senate and the
President signs it. If you look at what has happened at NSA and
you look at what is happening with the IRS and you look at what
has happened at the Justice Department, I would think those
that are interacting with the FCC would want bills like these
two because I think they are much better for the American
people if we modernize and make more transparent their actions.
With that, I will yield to somebody else or yield back my
time.
Mr. Walden. I think Ms. Blackburn had requested----
Mr. Barton. I will yield to the gentlelady from Tennessee.
Mrs. Blackburn. Thank you so much, and I want to welcome
our panel because we are appreciative that you would take your
time and be with us.
And Mr. Chairman, I want to thank you for so diligently
pursuing FCC reforms. It is needed. I will tell you, only in
Washington, D.C., does it seem to be acceptable for federal
agencies to be careless or reckless or unaccountable for
taxpayer dollars or to oppose reforms or efficiencies or ways
that are going to allow the customers, the end users to be
better served. So I do look forward to this.
We have all heard and have grown weary, it seems like there
is a scandal and misuse of taxpayer funds every week, whether
it is the IRS or Department of Labor or Department of Justice.
The list goes on and on--EPA. So putting this issue forward is
appropriate, it is timely, and we appreciate that you all would
be here to give us your best thoughts and recommendations, and
I yield back.
Mr. Walden. The gentlelady yields back. All time is expired
on our side. We will turn now to the gentleman from California,
Mr. Waxman, for an opening statement.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you, Mr. Chairman. I want to begin by
also thanking Neil Fried for his service on this committee, and
I wish him well in his new position. I hope at the MPAA he will
have occasion to visit my district more often and understand
the problems of real people.
Mr. Walden. You two can travel together.
Mr. Waxman. Today the subcommittee revisits a topic that
deeply divided our committee last Congress: the so-called FCC
process reform. Supporters of this legislation assert that this
bill will make the Federal Communications Commission more
transparent and efficient. From our perspective, it is
transparent that this legislation is an effort to undermine the
agency's ability to adopt new rules, protect consumers, and
promote competition, and the only efficiency gained is the
speed with which communications lawyers could find new ways to
take the FCC to court.
The bill circulated by Chairman Walden earlier this week
includes the same defects as the legislation from last
Congress. It still undermines the ability of the FCC to act
quickly and efficiently by putting in statute a dozen new
mandatory process requirements, with each one subjecting the
FCC to new court challenges. And it still alters fundamentally
the agency's authority to impose conditions during its
transaction review process, effectively eviscerating the
public-interest standard that has guided the FCC for nearly 80
years.
The red tape created by this legislation is astounding. The
Congressional Budget Office estimated that implementing the
legislation from last Congress would require 20 additional
staff positions at the FCC and cost the agency millions of
dollars every year. I don't see that there is an abundance of
extra funds to devote to this purpose. And the updated draft is
even worse than last year's bill. It contains new provisions
that would further incapacitate the agency.
Ranking Member Eshoo and I asked committee staff to consult
with administrative and communications law experts to
understand the impacts of the legislation. The overwhelming
consensus from the independent experts we spoke with was that
adoption of this legislation would be a serious mistake that
would slow the FCC to a crawl. They told us that the FCC-
specific mandates in this bill would remove the Commission from
the well-established precedents of the Administrative Procedure
Act, which could lead to decades of litigation and breed
uncertainty and confusion. The agency would be tied up in knots
and unable to do much of anything except report to Congress on
its adherence to deadlines.
I am pleased we will be able to hear from two of these
experts today: Professor Richard Pierce of the G.W. Law School
and Professor Stuart Benjamin from Duke Law School. Professor
Pierce is one of the leading authorities on administrative law
in the nation. He literally wrote the textbook on this topic.
Professor Benjamin brings to us a unique perspective as an
expert in both telecommunications law and administrative law
who has spent time working at the FCC as a Distinguished
Scholar. I also welcome back to the Committee Mr. McDowell, Mr.
May, and Mr. Ramsay.
Let me reiterate what I hope is obvious. Democrats are open
to improving federal agency operations and efficiency, and the
FCC is no exception. We proposed several reforms last Congress
and will do so again this Congress. If there are sensible ways
to make the agency more efficient and nimble, we should join
together to do so. But we seriously disagree about the wisdom
of the current effort, and I hope the majority will reconsider
its plans to push this through the House. We do far too many
message bills that go nowhere in the Senate.
We have a real opportunity to enact meaningful bipartisan
legislation that modernizes our communications and technology
laws but every day we spend arguing over this bill, which is
going nowhere fast, is another missed opportunity.
Thank you, Mr. Chairman.
Mr. Walden. Will the gentleman yield for just a second on
the APA issue?
Mr. Waxman. Yes.
Mr. Walden. Because if you look at the last section of the
draft bill, we don't change anything on APA except for the
Sunshine Act, that you all support. Just as a matter of
clarification, nowhere else in the Act do we change the APA
directly. It is only the Sunshine Act.
Mr. Waxman. Well, Mr. Chairman, I will be pleased to listen
to what the witnesses, who are suggests in this area, have to
think about what changes there are in the APA. This would be a
serious matter, and I seem to sense that you think it is
serious as well.
Mr. Walden. I would just direct you to line 5, page 25,
section 6, effect on other laws: ``Nothing in the Act or the
amendment made by this Act shall relieve the FCC from any
obligations under Title V, U.S.C. Code, except where otherwise
expressly provided,'' and that is the Sunshine Act.
Mr. Waxman. Mr. Chairman, reclaiming my time, as I
understand it, it removes the Administrative Procedure Act from
the FCC and creates another set of laws under which it would
operate that is similar to the Administrative Procedures Act
but is different, and I want to get that point clarified in
this hearing. I think this is why we have hearings.
Mr. Walden. That is exactly why we have hearings, and even
for bills that go forward.
Let me suggest that we have 11 minutes left in the vote, so
rather than start with one person's testimony, I would
recommend that we recess the committee now until after votes.
So I know you are all poised and ready to go, and we appreciate
it, but I think it is probably best for the flow of the
testimony that we recess until we return from votes
immediately. Thank you.
[Recess.]
Mr. Walden. If we could have everybody take their seats, we
are going to restart the hearing and hear from our witnesses. I
apologize for the delay, and they do expect votes again right
around noon, so hopefully we can at least get through the
statements of our distinguished panel members, and we will
start off with Mr. Downes, who is an Internet industry analyst
and author, and we welcome you to the Subcommittee on
Communications and Technology, and go ahead and turn that mic
on, pull it up close, and we look forward to your testimony on
this matter. Thank you, sir.
STATEMENTS OF LARRY DOWNES, INTERNET INDUSTRY ANALYST AND
AUTHOR; RICHARD J. PIERCE, JR., LYLE T. ALVERSON PROFESSOR OF
LAW, GEORGE WASHINGTON UNIVERSITY LAW SCHOOL; RANDOLPH J. MAY,
PRESIDENT, FREE STATE FOUNDATION; JAMES BRADFORD RAMSAY,
GENERAL COUNSEL, NATIONAL ASSOCIATION OF REGULATORY UTILITY
COMMISSIONERS; STUART M. BENJAMIN, DOUGLAS B. MAGGS CHAIR IN
LAW AND ASSOCIATE DEAN FOR RESEARCH, DUKE UNIVERSITY SCHOOL OF
LAW; AND ROBERT M. MCDOWELL, FORMER FCC COMMISSIONER AND
VISITING FELLOW, HUDSON INSTITUTE
STATEMENT OF LARRY DOWNES
Mr. Downes. Well, thank you, Mr. Chairman and Ranking
Member Eshoo and members of the subcommittee. I appreciate the
opportunity to testify today on the importance of reforming
processes at the FCC. My name is Larry Downes. I am based in
Silicon Valley. I am an Internet industry analyst and the
author of several books on the information economy, innovation
and the impact of regulation. I have also written extensively
on the impact of communication policy on the dynamic broadband
ecosystem and in particular the role played by the FCC.
As the nature technological innovation has both accelerated
and mutated in the last decade in particular, the FCC's
inability to eliminate needless roadblocks for consumers,
entrepreneurs and incumbents alike has reached a breaking
point. The agency continues to tinker with a 21st century
communications ecosystem using a 19th century toolkit. Many of
the FCC's processes are badly in need of reform and structure.
They lack economic rigor, transparency, expediency and
consistency.
As Nobel Prize-winning Ronald Coase famously wrote, ``If
you torture the data long enough, nature will always confess.''
That, in a nutshell, has become the FCC's unintended modus
operandi. The agency collects the data it needs to make wise
and efficient decisions, but in the absence of clear guidelines
and the most basic economic tools, the Commission cannot resist
the urge to abandon the logical conclusions compelled by their
own data in the service of vague, idiosyncratic, transient and,
often, unarticulated policy goals.
These problems devalue much of the good work of the
agency's staff and subvert the often admirable goals of the
FCC's Chairmen and Commissioners. They have created an epidemic
of side effects, including reports that fail to reach obvious
conclusions supported by the thorough data collection the staff
performs, limiting their usefulness as policy tools to advance
the FCC's longstanding charter to promote communications to all
Americans; rulemakings that torture their analysis and data to
justify what appear at least to be ex ante conclusions to
regulate regardless of the need or cost; painfully slow reviews
of license transfers aimed at avoiding an imminent spectrum
crisis which when approved are rendered incoherent by laundry
lists of unrelated conditions, many of which become
counterproductive or mooted by technological advances years
before they expire. In approving the Comcast-NBC University
merger, for example, which took the FCC nearly a year, the
agency imposed 30 pages of conditions including a requirement
to run certain commercials on certain channels at certain times
for a period of 5 years; and finally, past and now future
spectrum auctions poisoned by similar interventions weighed
down with so many strings attached, they either fail to achieve
minimum bids or leave billions of dollars on the table.
Given rapid changes in the broadband ecosystem, the FCC
needs some measure of flexibility to complete its statutory
mission. But applying that flexibility ungrounded by neutral
principles, guidelines and analytic processes invariably does
more harm than good. Worse, the lack of structure has left the
FCC with the mistaken impression that the agency can predict an
increasingly unpredictable future and design what it calls
prophylactic remedies for consumer harms that have yet to
occur.
In effect, the Commission's decision-making process is at
war with the agency's own data. Congress can easily ameliorate
the worst symptoms of this breakdown. The two discussion draft
bills before you provide many commonsense, modest, apolitical
repairs imposing needed structure on the FCC's processes.
As those of us in the technology industry have learned the
hard way, the pace of change has long since outrun our ability
to predict the future even in the short term. The FCC must be
cured of its addiction to micromanaging markets that are
evolving even as the Commission's deliberations meander along,
and it must focus its remedial and regulatory efforts on
relevant consumer harms that are tangible and solvable with
both precision and measurable efficacy. That minimal level of
regulatory process has been mandatory for executive agencies
since President Clinton ordered it in 1993, an order amplified
by President Obama in 2011. President Obama also made clear he
expected though he could not require the same basic tools be
applied as a matter of course by independent regulatory
agencies including the FCC. Indeed, most independent regulatory
agencies, according to a recent longitudinal survey by the
Administrative Conference of the United States are already
required by law to conduct some level of cost-benefit analysis.
The FCC is one of the very few who do not have such mandates in
their implementing statutes, and perhaps the only agency that
doesn't do it anyway.
There is also nothing novel or difficult about the added
requirement the FCC consider as an alternative to specific
interventions the possibility that high-tech markets will cure
their own ills more quickly and efficiently and with fewer
unintended side effects. That was, for example, precisely the
approach taken by the Department of Justice in its separate
review of the Sirius-XM satellite radio merger. In a 4-page
statement closing its review, the Antitrust Division sensibly
found that new forms of competition driven by emerging Internet
technologies would be more than adequate to discipline the
combined entity, and they have been proven abundantly correct.
By contrast, it took the FCC 17 months and a 100-plus-page
order laden with conditions to reach the same conclusion.
Thank you for the invitation to appear today. I look
forward to your questions.
[The prepared statement of Mr. Downes follows:]
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Mr. Walden. Mr. Downes, we appreciate your testimony.
We will go now to Mr. Richard J. Pierce, Jr., Lyle T.
Alverson Professor of Law at the George Washington University
Law School. Mr. Pierce, thank you for being here today, and we
look forward to your testimony, sir.
STATEMENT OF RICHARD J. PIERCE, JR.
Mr. Pierce. Thank you, Chairman Walden, Ranking Member
Eshoo and members of the subcommittee. It is a privilege for me
to be able to appear before you today to discuss the proposed
Federal Communications Commission Reform Act of 2013.
I have taught administrative law for 36 years. I have
written over a dozen books and 120 scholarly articles on
administrative law. My books and articles have been cited in
hundreds of judicial opinions including over a dozen opinions
of the United States Supreme Court. I am also a member of the
Administrative Conference of the United States.
I will discuss the provisions of the proposed Act that
relate to the procedures the Federal Communications Commission
is required to use to issue rules. I will not discuss the
provisions that relate to the substantive principles the FCC is
required to apply in its decision-making. I am not an expert on
communications law, so I lack an adequate basis to discuss
proposed changes in the substance of communications law.
The proposed FCC Process Reform Act would add 12 judicially
enforced mandatory steps to the notice and comment rulemaking
procedure required by Section 553 of the Administrative
Procedure Act. Those new mandatory, judicially enforced steps
are: a minimum 30-day period for submitting comments; a minimum
30-day period for submitting reply comments; a mandatory notice
of inquiry issued within 3 years of the issuance of the notice
of proposed rulemaking; mandatory inclusion of the language of
the proposed rule in the notice of proposed rulemaking; an
identification of the specific market failure the proposed rule
addresses; a determination that the benefits of the proposed
rule exceed its costs; a determination that market forces or
changes in technology are unlikely to address the specific
market failure addressed by the rule; advanced provision of a
list of the available alternative options to all Commissioners,
provision of the language of the proposed rule to all
Commissioners well in advance of any meeting scheduled to
consider a proposed rule; publication of the text of the
proposed rule in advance of the meeting; adoption of
performance measures for any program activity created or
amended by the rule, and a finding that such performance
measures will be effective to evaluate the activity created or
amended by the rule.
None of these procedures are in the Administrative
Procedure Act. Every one of them is an add-on to the procedures
in the APA. In my opinion, the proposed Act would not improve
the FCC decision-making procedure. As I explain in greater
detail in my written testimony, the proposed Act would have two
serious adverse effects. First, it would be a significant
departure from the wise decision Congress made in 1946. After
15 years of debate and an unprecedented amount of empirical
research, Congress unanimously enacted Section 553 of the
Administrative Procedure Act. That statutory provision creates
a uniform set of procedures that all agencies are required to
use when they issue rules.
The APA was one of the most thoroughly debated and
carefully researched statutes ever enacted. It was premised on
the belief that creation of a uniform set of procedures
applicable to all agency rulemaking was critically important to
the Nation. The Supreme Court has spent the last 67 years
resisting the periodic attempts to return to the confusing,
uncertain and ad hoc world that preceded the passage of the
Administrative Procedure Act, yet that is exactly what this
bill would do. It would move us back in that direction.
Second, it is a bad idea to add 12 mandatory, judicially
enforced procedures to a process that is already long and
resource intensive. The proposed Act would add many additional
procedures to the FCC rulemaking process, so many mandatory
procedures that the agency would be able to issue, amend or
rescind few, if any, rules. It would slow down the decision-
making process dramatically. That is exactly the opposite of
what you want to happen in a highly volatile market like
telecommunications. As I discuss in detail in my written
testimony, great jurists like Chief Justice Rehnquist and D.C.
Circuit Judge Cavanaugh have urged rejection of similar efforts
to impose such burdens on the rulemaking process.
That concludes my testimony. I would be glad to answer any
questions you might have.
[The prepared statement of Mr. Pierce follows:]
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Mr. Walden. I appreciate your testimony, Mr. Pierce, and we
will now move to Randolph J. May, who is the President of the
Free State Foundation.
Mr. May, thanks for being here today. We look forward to
your comments.
STATEMENT OF RANDOLPH J. MAY
Mr. May. Thank you, Mr. Chairman. I would like to borrow
Professor Pierce's booming voice for my testimony.
Chairman Walden, Ranking Member Eshoo and members of the
committee, again, thank you for inviting me to testify today. I
am President of the Free State Foundation, a nonprofit research
and educational foundation. FSF is a think tank that focuses
its work primarily in the communications law and policy and
administrative law areas. I have been involved for 35 years in
communications policy in various capacities including having
served as Associate General Counsel at the FCC. I am a past
chair of the American Bar Association's section of
administrative law, and I am a public member of the
Administrative Conference of the United States. So today's
hearing on FCC process reform is at the core of my longstanding
experience and expertise in communications law and policy and
administrative law.
I appreciated the opportunity to testify before this
committee a bit more than 2 years ago. Though H.R. 3309 and
3310 both passed the House, unfortunately they died in the
Senate. Reform measures such as those embodied in the present
discussion drafts are needed now more than ever. In my June
2011 testimony, I generally supposed the proposed reforms, and
I do so again today because the FCC's decision-making needs to
change so that in today's generally dynamic competitive
telecommunications marketplace, the agency will be less prone
to continue on its course of too often defaulting to regulatory
solutions even when there is no convincing evidence of market
failure or consumer harm.
The FCC still operates today with a pro-regulatory
proclivity pretty much as it did in 1999 when the Clinton
Administration's FCC Chairman Kennard called for the
reorientation of the agency's mission to account for the
increasingly competitive environment evident even then. After
having served at the FCC from 1978 through 1981, when President
Carter's FCC chairman was initiating efforts to reduce
regulation in light of the new forms of competition already
emerging then, I believe that regulatory reform measures like
those embodied in the discussion drafts and the few additional
ones that I advocate in my testimony deserve bipartisan
support.
In the time that I have, without taking anything away from
the significance of some of the other proposed reforms, I want
to highlight the rulemaking requirements and transaction review
proposals because they are especially important. It is true, of
course, that as some of the bill's opponents charge, new
Section 13(a) would require the FCC to make additional findings
and undertake additional analysis beyond that presently
required before it imposes new rules. For example, the FCC
would be required to analyze whether there is a market failure,
and it would be required to perform a cost-benefit analysis,
and the Commission would be required to provide a reasoned
explanation as to why market forces and technology changes will
not within a reasonable time period resolve the agency's
concerns. Frankly, in today's communications environment, you
would hope the FCC would be doing these things anyway, but the
reality is, that it often doesn't. There is nothing inherent in
sound principles of administrative law that suggests Congress
should not impose particular sector-specific analytical
decision-making requirements when circumstances warrant. While
general theories of administrative law are nice and can be
relevant, in general they are not necessarily applicable to a
specific marketplace sector or regulator, and this is
especially true in this particular marketplace sector, which
due largely to rapid changes in technology is generally
competitive.
Indeed, I urge the committee to go a step further by
specifying that the reasoned determination required concerning
whether market forces or changes in technology are unlikely to
resolve the Commission's concern must be based on clear and
convincing evidence. This change will not prevent the
Commission from adopting new regulations, and it is not
intended to do so. It simply requires the agency to meet an
evidentiary burden before adopting or revising regulations.
The transaction review provisions contained in Section
13(k), especially the addition that allows the Commission the
conditional approval of a proposed transaction only if the
condition addresses a likely harm uniquely presented by the
specific transaction would go a long way towards combating the
FCC's abuse of the transaction review process. The agency often
has abused the process by delaying approval of transactions
until the applicants ``voluntarily'' agree, usually at the
midnight hour, to conditions that are not narrowly tailored to
remedy a harm arising from the transaction or unique to it.
I also suggest the committee reform the forbearance and
periodic regulatory review process by in effect requiring a
higher evidentiary burden to maintain existing regulations on
the books. Actually, I understand from what Representative
Latta said that maybe he agrees with that. Absent clear and
convincing evidence that the regulations at issue should be
retained under the existing substantive statutory criteria,
regulatory relief should be granted. Similarly, I propose
adoption of a sunset requirement so that all rules will
automatically expire after X years absent a showing based on
clear and convincing evidence that it is necessary for such a
rule to remain in effect to accomplish its original objective.
Again, thank you for inviting me to testify today. I will
be pleased to answer your questions.
[The prepared statement of Mr. May follows:]
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Mr. Walden. Thank you, Mr. May. We appreciate your
participation in our hearing.
We now turn to James Bradford Ramsay, who is General
Counsel for the National Association of Regulatory Utility
Commissioners. Mr. Ramsay, thank you for being here. We look
forward to hearing from NARUC.
STATEMENT OF JAMES BRADFORD RAMSAY
Mr. Ramsay. Thank you so much, Chairman Walden and Ranking
Member Eshoo, for inviting me and giving me the privilege of
testifying today.
I am enthusiastic that there is again a focus on reform at
the FCC. I guess I wanted to say since I am hearing the
perspective, everybody is telling where they are coming from, I
am coming from the perspective of a 23-year practitioner before
the agency who actually has to deal with these procedures on a
daily basis, and I am representing a group of people who are
directly impacted by these procedures daily: the tate public
utility commissions in all 50 states, each one of your tates.
In my 23 years at NARUC, I have had the privilege of
working with nine--the privilege and sometimes the frustration
of working with nine different FCC chairs. I started with Al
Sikes was chair, and of course, I am here for Mignon Clyburn,
my really good friend. And without exception, I think they have
all been dedicated public servants, really trying to do what
they thought was in the best interest of the country. Mignon,
when she came up here, Chairman Clyburn when she came up here
before her confirmation as FCC chair, I was talking to her at
the NARUC offices, and she just looked up, and we were talking
about the confirmation hearing process. She said no, I don't
really care about all this, Brad, I just want to do the right
thing. And I think that is what all FCC Commissioners try to
do. I think the staff over at the FCC is among the most
professional and hardworking of all of the federal agencies
that I deal with here in Washington, but that doesn't mean that
there aren't process abuses at the FCC, and the process abuses,
it also doesn't mean that Congress shouldn't be looking at some
ways to correct the process abuses at the FCC. There have been
process abuses at the FCC every year that I practiced before
the agency before both Democratic and Republican
Administrations. There have been problems, problems that
unnecessarily increase cost to taxpayers--that is your
constituents--problems that increase the regulatory risk
unnecessarily for FCC policy pronouncements to be overturned on
process issues that we shouldn't even be talking about,
problems that directly undermine rationale decision making. I
mean, if you look at some of the provisions in this bill, they
are designed to make sure that the other FCC Commissioners have
adequate time to look at the record and consider things that
are put in the record later in the process before they make
their decision. Those provisions I think are useful.
There are also problems I think that the discussion draft
will actually go a long way towards correcting, or at least
certain provisions in the discussion draft. Is that draft
perfect? There is no such thing as a perfect piece of
legislation coming out of Congress, but there are some pieces
and, you know, NARUC endorses very specifically certain aspects
of this legislation. It provides a good framework from NARUC's
perspective for bipartisan action going forward at FCC that are
in there that are supported by both sides.
I think it is worth pointing out here that like the
committee and Congress, NARUC is bipartisan. The people that I
represent, unlike the other witnesses on this panel, are in-
state experts whose interests align precisely with each
representative in this room. These are commissioners that
reside and work in your state, and there is not another
stakeholder in the telecommunications sector that cares more
about what happens to the infrastructure in your state and to
the services and your state and the impact that the FCC
decisions have on that than the people that I represent, and
there are also few people that have the same level of
appreciation of what that impact means and the expertise to
provide input. I think it is significant that those same
commissioners from your states have for years, almost a decade
now, supported many of the specific provisions that we endorse
in this discussion draft, and when I look at process reform,
there are so many reasons that you should be considering this
carefully. One of them is that if you fix it so that the record
is better, if you put in these provisions, my belief is,
publishing the rule ahead of time, making sure there is an
opportunity to reply to late ex parte filings and studies that
have been in the record fairly close before the deadline for
advocacy drops, if you give an opportunity for people to
respond to these, if you give the Commissioners more time to
consider things that they are given, then you will get a better
decision and you will get a better decision because there is a
better record. If you don't put in some of these requirements,
and I will mention just three of them, the rule to publish the
text of the rule in advance, to require minimum comment cycles,
which is crucial for state commissions because we have limited
resources and we can't act as fast as others can, and to
effectively require time for reasonable consideration of the ex
partes, if just those three requirements, you get a better
record. If you don't do those requirements, the people that get
disadvantaged are the people that I represent and small
businesses in your states and the consumer advocates in your
states. We are the ones that don't have the resources and can't
respond quickly. But no one benefits if we all end up in court
arguing about process instead of policy.
I can see my time is running down here, but I will just
say, if you look in my testimony, I point out, I am litigating
right now in the 10th Circuit over a decision that came from
this Administration. There are examples from all the
Administrations of process problems. There I think we have a
reasonable chance of coming back, bringing the entire
reformation of the federal university service regime
accomplished by the agency in 2011 back to the agency just on
process issues, and if those provisions that I mentioned had
been enacted into law at the beginning of 2011, I wouldn't be
litigating those issues today.
So I think the bill provides a useful vehicle, and I
encourage you to seize the opportunity to move forward with
reform. Thank you very much.
[The prepared statement of Mr. Ramsay follows:]
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Mr. Walden. Mr. Ramsay, thank you very much for your
helpful comments. We appreciate that.
We will turn now to Mr. Stuart M. Benjamin, Douglas B.
Maggs, Chair in Law and Associate Dean for Research at Duke
Law. Mr. Benjamin, thank you for being here.
STATEMENT OF STUART BENJAMIN
Mr. Benjamin. Thank you, Chairman Walden, Ranking Member
Eshoo, members of the subcommittee. Thank you for the
opportunity to testify today.
My academic career has centered around the FCC. I teach
telecommunications law, I coauthor a telecommunications law
casebook, and I teach and write in administrative law and the
First Amendment. From 2009 to 2011, I was the inaugural
Distinguished Scholar at the FCC, and I thank co-panelist Rob
McDowell for coming up with that job title for me. True story.
So I should also say I have no clients, paid or unpaid, nor
have I had any clients or consulting relationships since I
became an academic in 1997. All right.
I think I understand the concerns that motivate the FCC
Process Reform Act, and I think there are quite legitimate
questions about FCC processes and standards. I do have concerns
about the bill as drafted, though, for several reasons. First,
as has already been touched on, the bill contains many new
requirements that are unique and would bring the FCC into
uncharted territory. So there are neither agency nor judicial
precedents that would provide guidance and clarity, and these
new requirements could be the subject of litigation; that is to
say, one could bring a lawsuit based on them. For instance, in
addition now to being able to challenge a rule as arbitrary and
capricious, which one is already able to do, one can challenge
the adequacy of any or all of the new findings required. My
concern is, this runs the risk of the bill being a jobs program
for lawyers. If I were in private practice in D.C., that might
be great. As a citizen, I am not sure that it is so great.
And then this uncertainty created by new provisions is
exacerbated by the fact that the provisions apply only to the
FCC, and that brings me to the second concern which is, as Dick
Pierce has pointed out, the great strength of the
Administrative Procedure Act is that it applies the same rules
to all agencies allowing for consistency and fairness, and this
bill would undermine that consistency by creating a special set
of rules for the FCC. My own view is, if the bill's proposals
are good ideas, I think they are worth applying across the
board. If they are not worth applying across the board, I am
not sure why they should apply only to the FCC.
The third concern I want to raise involves merger review.
As I detail in my written testimony, the requirement of narrow
tailoring--narrow tailoring is not found in the U.S. Code, it
is found only in strict judicial scrutiny--and the requirement
of uniqueness of harms will, I think, make it difficult, if not
impossible for the FCC to impose any meaningful merger
conditions. If Congress's goal is to eliminate the FCC's merger
review, my suggestion would be, you should simply repeal the
FCC's merger authority. That would save everyone--companies,
citizens, FCC staff--a huge amount of time, energy, and money.
If, on the other hand, Congress wants the FCC to play a
meaningful role in merger review, I think the legislation
should use somewhat less forbidding language than this stark
language of strict scrutiny.
My fourth reservation arises out of provisions that would
diminish the chairman's authority. This is something I got
great insight into when I was at the FCC. In my time there, I
came to recognize the great value arising out of the clarity of
lines of authority, of having a clear hierarchy, and reducing
the chairman's authority would undermine that clarity,
potentially creating confusion and inefficiency within the FCC.
I understand the arguments for allowing, for instance, a
majority of the Commissioners to place an item on the agenda.
One thing that particularly jumped out at me was a proposal to
empower a minority of commissioners to block actions taken
under dedicated authority. I think that is a different matter.
The Commission makes thousands of decisions every year, and
businesses and individuals rely on the predictability and speed
of the FCC's decision-making process in resolving those
matters. So changing that process may unsettle a lot of
reasonable expectations.
Fifth and finally, the bill creates additional procedures
that I fear will confer little, if any, benefit. Notices of
inquiry, which of course don't appear anywhere in the APA and
only one provision of the United States Code, sometimes make
sense, and the Commission sometimes uses them, but requiring
notices of inquiry will further ossify the rulemaking process,
and I think the same is true of the requirement that proposed
rules be issued with a notice of proposed rulemaking. The
Commission already sometimes or often puts out proposed rules
with its notices of proposed rulemaking, but requiring them, I
think, adds cost and very uncertain benefit. And it will push
rulemaking even more into a rule-adopting process in which all
the important decisions are made before the APA process even
starts. That is to say, the danger is that the APA process
becomes kabuki theater and public comments arrive after all the
meaningful decisions have been made. So the concern is, in
general these provisions will not make the FCC regulation
better, just more laborious.
I see that my time is up so I will stop there.
[The prepared statement of Mr. Benjamin follows:]
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Mr. Walden. All right. We will get to you on questions, I
am sure, and you will have a chance to elaborate. Thank you for
your testimony and your participation in the hearing, Mr.
Benjamin.
We will now go to the Honorable--I guess we still call you
that even though you are out of office now--Robert M. McDowell,
former Federal Communications Commission member, and Visiting
Fellow at the Hudson Institute. Mr. McDowell, we really
appreciate your coming in today to give us your unique
perspective as a former commissioner and now outside of the
portals can speak freely as you did when you were inside the
portals. So we welcome your testimony, sir.
STATEMENT OF ROBERT M. MCDOWELL
Mr. McDowell. Thank you, Mr. Chairman and Ranking Member
Eshoo and all the members of the subcommittee. It is terrific
to be back before you, my first time back since the leaving the
Commission just about 7 weeks ago. And I did want to also make
a special note to thank Neil Fried for his many, many years of
public service. I have had the privilege and the honor of
working very closely with Neil on I can't even count the number
of issues over the years, and he has been a terrific colleague
and a friend, and we wish you well in the movie business, so we
will see at the movie theater, I guess.
So currently I do serve as a Visiting Fellow at the Hudson
Institute's Center for Economics of the Internet. Having said
that, all of the views I express today are purely my own, and
they may be very lonely ideas if no one else agrees with them,
but I will say them nonetheless.
FCC process reform is not necessarily the most glamorous of
topics but it is an important one, and I commend the
subcommittee for its ongoing work in this area. The FCC after
all regulates about one-sixth of the American economy, and
really indirectly affects the rest. Just as important, the
Commission also serves as a regulatory template for countries
across the globe. The ways in which the FCC considers proposed
regulations and goes about shaping their substance has a direct
effect on the U.S. economy and ultimately not just American
consumers but consumers around the globe. In short, to
paraphrase Chairman Emeritus Dingell, those who control the
process also control the outcome. Accordingly, it is prudent
for Congress to cast a bipartisan oversight eye on the
processes of all administrative agencies. Chairman Walden and
other members should be commended for sparking this
conversation with the legislation from the last Congress as
well as this year's discussion drafts.
But before going further, I would be remiss if I did not
mention the need for a fundamental rewrite of our Nation's laws
regulating the information, communications and technology
sector. Such a comprehensive rewrite has not occurred since
1996, and even that left in place legacy stovepipes that
regulate technologies rather than just market conditions.
Today, consumers don't know or usually don't really care if
their data is transmitted over a coaxial cable, fiber optics,
copper or wireless platforms. In fact, usually data is being
transmitted over hybrid networks that we are not even aware of.
It is seamless to the consumer. Instead of directly focusing on
whether the marketplace is experiencing a concentration of
power, abuse of that power, and resulting consumer harm,
today's regulations draw their authority from the nearly 80-
year-old Communications Act of 1934. The FCC will celebrate its
80th birthday next spring. And that Act is based on 19th-
century-style monopoly regulation, which rests on an even older
foundation. Therefore, having different regulations based on
the type of technology used and their history rather than on
current market conditions is likely distorting investment
decisions. For the sake of improving America's global
competitiveness, I respectfully urge Congress to move ahead as
soon as possible with a comprehensive rewrite of our
communications laws with the aim of promoting investment and
innovation while protecting consumers.
Putting some of this into tangible terms, in 1961 when
consumers had a choice of one phone company and three broadcast
TV networks, the FCC's portion of the Code of Federal
Regulations filled just 463 pages. In 2010, the FCC's rules
filled 3,695 pages, despite the bipartisan deregulatory
mandates of Congress as codified in the Telecommunications Act
of 1996. Today, the Commission's rules fill 3,868 pages despite
President Obama's call in 2011 to pare back unnecessary rules.
In short, in a marketplace that is undeniably more competitive
than it was in 1961, the FCC's regulations grew by more than
800 percent as just measured in the number of pages with a
nearly 5 percent increase just since 2010. In contrast, the
American economy has grown by a much smaller number since 1961
by about maybe 370 percent.
Some of these rules are necessary but are all of them?
Shouldn't the Commission have the authority to weed out all
outdated rules the way it can and must for rules affecting
telecommunications services under Title II as mandated by
Sections 10 and 11? Forbearance authority should apply to all
platforms and industries, not just traditional telecom
services.
Along those lines, as my fellow witness Randy May has
advocated for quite some time, requiring the Commission to
justify new rules with bona fide cost-benefit and market
analyses would help better inform policymakers and restrain
them from issuing unnecessary rules. Exercising discretion and
regulatory humility while being patient with markets can create
a better experience for consumers. Similarly, new rules should
sunset after a definitive period, and the renewal should be
justified from scratch in new proceedings with public notice
and comment. The continuation of old rules may be absolutely
necessary, but let us test that premise every few years.
I see I am running out of time. In fact, I am way out of
time. But other ideas to explore should include, just for
respectful mention here, limitations on unnecessary merger
conditions that have nothing to do with the attendant
transactions, shot clocks with exceptions, consolidation of
industry reports, and regulatory fee reform, among many others.
Lastly, I would like to end with a bipartisan applause
line: Let us have Sunshine Act reform so more than two
Commissioners can meet to discuss substance without having to
call for a public meeting. Let the record reflect there was
thunderous applause on both sides of the aisle after that.
Thank you for the opportunity to speak before you today,
and I look forward to answering your questions.
[The prepared statement of Mr. McDowell follows:]
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Mr. Walden. Mr. McDowell, as always, thank you for your
testimony, as entertaining as it always concludes. We
appreciate all of the witnesses. I will start out with some
comments and questions.
First of all, picking up on your last comment, I know the
desire of the agency to be able to have Commissioners, more
than one, meet together without a public setting. The irony
coming from the State of Oregon that pioneered meeting
requirements both for its legislative assembly and its agencies
is that that is the one piece of this bill that would actually
allow activities to occur in private that are otherwise public
today, and it is also the only provision, and correct me if I
am wrong, that actually amends the APA itself. So the irony is,
my friends who object to these other reforms and requirements,
alleging that somehow this committee would only be affecting
the APA for one agency, want to affect the APA for one agency
to allow members of the Commission to meet in private without a
public setting and do their business. Is that not correct, Mr.
McDowell, with all due respect to the applause lines?
Mr. McDowell. Yes, Mr. Chairman, I agree with that.
Mr. Walden. Thank you.
Now, having put that on the record, let me go to the
expenditure piece, and I would put in the record with unanimous
consent the Congressional Budget Office cost estimate from
March 19, 2012, which looked at the predecessor bill and I
think was referenced by the distinguished gentleman from
California.
[The information appears at the conclusion of the hearing.]
Mr. Walden. The CBO also went on to say that assuming
appropriations and necessary amounts for personnel and
information technology, under current law, the FCC is
authorized to collect fees sufficient to offset the costs of
its regulatory activities its year. Therefore, CBO estimates
that the net cost to implement the provisions of H.R. 3309
would not be significant, assuming annual appropriation actions
consistent with the agency's authorities. Yes, it does require
a few more people. Guess what? Open processes do.
Mr. Ramsay, I would like to go to you as representing the
public utility commissions around the country. As you know, my
senior policy advisor, Ray Baum, behind me, chaired the Oregon
Public Utility Commission. Much of what we are proposing here
is actually already accomplished by many public utility
commissions in their processes, is it not? Don't they require
rules to be published in advance? Don't they almost prohibit ex
parte contact? Don't they require a much more transparent
process, which is what we are getting at here?
Mr. Ramsay. Yes, sir. Generally speaking, my experience has
been that the State regulatory process is more transparent and
less subject to processes lapses than the FCC and other federal
agencies.
Mr. Walden. And do you think it is right that a federal
agency can require as a condition of a merger quote, unquote,
voluntary actions that they could not require under their
statutory authority otherwise?
Mr. Ramsay. Well, NARUC hasn't taken a position on the
merger condition authority in the statute, so I----
Mr. Walden. All right. I will go to Mr. McDowell. Do you
think it is right that a federal agency can require two
parties, or three or five or however many in a merger, to do
certain things that it could not require them to do under their
statutory authority? And in fact, there are people maybe headed
to the FCC who believe that authority should be used that way
to affect the marketplace, and wouldn't that have an effect on
other players in the market not subject to the merger, and
would that be fair to them?
Mr. McDowell. That was a compound question so I want to
make sure I hit all parts of it. So yes, I agree that it is
problematic. I have been a long-time critic of imposing merger
conditions that are not related to the actual transaction. It
does start to enable the Commission to impose effectively a
rulemaking or other policies not envisioned by Congress so in
essence, the FCC is legislating through that type of process.
Mr. Walden. And Mr. Benjamin, I want to pick up on one
point on the notice of inquiry requirement that you objected
to. We should also, for the record, point out that is only a
requirement if in the prior 3 years the Commission has not done
work in that area. So it is not required every single time, it
is just to try and get some background information ahead of
time if they are going to act or they haven't acted before. Is
that not accurate?
Mr. Benjamin. Right. So I think the way it is written, you
have to have either a notice of proposed rulemaking, which
would have rules in it, or a notice of inquiry or a judicial
order. So one way or another, before you start the new NPRM,
you will have actually had a huge amount of process beforehand
through a notice of inquiry or through a prior set of rules in
an NPRM.
Mr. Walden. So our goal here is--many of you have had very
good recommendations about things you think could be done
better or differently, but our goal here--and we will take
those into account as we go into a markup at some point and try
to get this right. We don't want to hogtie the FCC. We don't
want to add to litigation. Believe me, I get a round of
applause in any town when I confess I am not an attorney. And
so I have no interest in adding to the legal establishment's
billing hours. I am actually trying to improve public process
and open this up and do what other agencies already do and do
what the President has suggested agencies not constituting the
FCC do, and we will continue to work on this until we get it
right but we will move forward.
So with that, my time has expired, and we have--oh, yes, I
have one other UC I need to do, which are statements of support
from various entities, the United States Chamber of Commerce,
the National Association of Regulatory Utility Commissioners,
the National Association of Broadcasters, USTelecom, Americans
for Tax Reform, Citizens Against Government Waste, National
Cable and Telecommunications Association, Comcast, NTCA, and
AT&T, statements in support of the legislation, unanimous
consent to enter into the record.
[The information appears at the conclusion of the hearing.]
Mr. Walden. With that, my time is expired.
Ms. Eshoo. Were they voluntary, Mr. Chairman?
Mr. Walden. You know, I will let you read them for
yourself, and yes, I think they are all voluntary.
Ms. Eshoo. Is it my turn now?
Mr. Walden. It is your turn. And I will turn to my friend
from California, who we have a little disagreement on parts of
this bill, but I would tell you, we have 12 minutes left in the
vote, so when she concludes, then we recess again and then come
back.
Ms. Eshoo. Thank you, Mr. Chairman.
To all of the witnesses, I just want to share the following
with you. In listening very carefully to each one of you, I
leaned over and I said to Mr. Waxman, isn't it so extraordinary
that we have the level of expertise that is represented at this
time in our country. It makes me feel very, very proud. Whether
I agree with some of your views or not is not the point but it
is really nothing short of remarkable, so thank you. I love
hearings, and I always learn a lot, so thank you for being here
and offering what you did in your testimony.
I just want to get something straight off the table so it
can be just yes or no. Do you all support a standalone action
on the FCC Collaboration Act as a way of allowing FCC
Commissioners to collaborate outside of official public
meetings? Yes or no. We will start with Mr. Downes.
Mr. Downes. I don't have an opinion on that.
Ms. Eshoo. OK.
Mr. Pierce. I think it is a good idea but I would like to
see it as an amendment to the government in the Sunshine Act
applies to all of the agencies that are run by collegial
bodies. There is no reason--again, I see nothing unique about
the FCC here. It is the same as the FERC or any other agency
run by a collegial body. This would be a big improvement.
Ms. Eshoo. I appreciate that. I think what needs to be
stated for the record, and I think the chairman may have
thought that it was the reverse of what takes place in his home
State. There is a requirement in this legislation that is
bipartisan and bicameral for transparency. So it is not that
Commissioners can go off in secret, the public never knows what
they have talked about and discussed and that it just remains
there in a secret bubble. That is not the way the legislation
is drafted.
So Mr. May, yes or no?
Mr. May. I can't answer yes or no.
Ms. Eshoo. OK. Mr. Ramsay?
Mr. Ramsay. Yes.
Ms. Eshoo. Mr. Benjamin?
Mr. Benjamin. I agree entirely with what Dick Pierce said.
Ms. Eshoo. OK.
Mr. McDowell. I don't have an opinion if it is separate or
together, but it is a good idea nonetheless.
Ms. Eshoo. Good. My sense of what really underlies more of
this effort surrounds one issue, and that is the whole issue of
the FCC's authority to review acquisitions and mergers, and I
think that that is where there is concern. I think that is
where there is disagreement. I think that is where there is
agitation. I think there is aggravation. And I think that is
driving this more than anything else, because there are some
smaller reforms that can be made that we can do on a bipartisan
and I think bicameral basis, but I do think that this is the
area that really causes the most heartburn, both pro and con.
Now, Mr. Pierce and Mr. Benjamin, I think that you made
references to this in your written testimony, and I want to
give you the opportunity to elaborate on it. I think that the
draft legislation only allows the FCC to impose conditions that
are ``narrowly tailored to remedy a harm that arises as a
direct result of the specific transaction,'' but these
transactions are huge in terms of their impact on the American
people, on consumers, on media consolidation, which I think it
really goes to the heart of democracy. So would either one of
you care to comment on what I just said?
Mr. Benjamin. Sure. What is remarkable to me about the
language is that it is the language of strict judicial
scrutiny, and narrow tailoring, when it is--if I were a judge,
I would think Congress chose this language for a reason. They
chose it because they were picking up on strict judicial
scrutiny because it is a term of art.
Ms. Eshoo. Well, it has been chosen for a reason. It didn't
create itself.
Mr. Benjamin. I understand, but just to be clear, when
courts apply strict scrutiny narrow tailoring, they require
that the government use the least restrictive means in order to
achieve a goal, and that is a very difficult standard to meet.
As Justice Breyer noted in dissent in a couple of cases, any
clever or creative lawyer or judge can come up with some other
less restrictive means. So I think as crafted, I think it will
be difficult for the FCC to have any meaningful merger
conditions. And a separate question is whether the FCC should
be in the business of reviewing mergers at all. My only
recommendation would be then just do it and avoid a lot of
confusion.
Ms. Eshoo. Well, I think that there are some here that
believe that they just shouldn't. I don't know how many but I
think there are some that hold that view, and they are entitled
to it. But I think it is very clear that there is a public-
interest standard that the FCC is charged with, and this has a
lot to do with the interest of the public and the country. This
isn't just about getting into some menacing details just to be
complex and complicated. Would you like to comment, Mr. Pierce?
Mr. Pierce. I didn't address this in my prepared testimony
because it struck me as an issue of substantive communications
law, and I am not an expert in that. I will change hats,
though, and tell you I am an expert in antitrust law. That is
another subject I have been teaching for the last 30-some
years, and I agree completely with Mr. Benjamin that it would
make a lot of sense to take the FCC completely out of this. The
FCC doesn't know much about antitrust law. The FTC and the
Department of Justice know a lot about antitrust law. They have
the power to impose conditions. They regularly impose
conditions on mergers. Those conditions are specifically
tailored to address the competitive issues that are raised by a
proposed merger. That is something the FTC and the Department
of Justice, Antitrust Division, know a lot about, and the FCC
knows very little about. So I agree completely with Professor
Benjamin that the far more sensible thing would be a statutory
change that would probably require about 10 words that says the
FCC has no power over mergers; that is exclusively the realm of
the DOJ and the FTC.
Mr. Walden. Mr. McDowell, I will go to you, but I have to
excuse our colleagues. We are down to 5 minutes.
Ms. Eshoo. My time is expired anyway.
Mr. Walden. Go ahead.
Mr. McDowell. On second thought, actually there is an
emerging headline right here, which is, I would agree.
Mr. Walden. You would agree?
Mr. McDowell. I would agree.
Mr. Walden. With what?
Mr. McDowell. Antitrust review is a form of public-interest
review. So DOJ or FTC under the antitrust review, they are
looking at harms to consumers, and the public-interest standard
of the FCC is really ill defined and that is why you get these
merger conditions which sometimes have nothing to do with the
emerging transaction resulting in any consumer harm. So we
might be on to something here.
Mr. May. I agree as well, Mr. Chairman.
Mr. Walden. All right. I have to cut this off right now
because we have got less than 4 minutes for the vote on the
floor. They expect a few votes thereafter like 15 minutes, so I
am going to suggest we will try and come back here about 1
o'clock, a little after 1:30, if that works. If there are
others who have questions----
Mr. Waxman. Mr. Chairman, I have an appointment at 1:30.
Otherwise, I am here and I wanted to get my----
Mr. Walden. OK. We will come back.
Mr. Waxman. At 1 o'clock?
Mr. Walden. I am just speculating that because they said
votes about 12:30, 12:45. By the time we get back, it will
probably be a little after 1:00. If we are back sooner, we will
start sooner, but to give them--you all plan 12:45. How is
that? And if we can get back here at 12:45, we will, because I
want to make sure other members have their chances to ask
questions of our distinguished panel.
With that, we will stand in recess.
[Recess.]
Mr. Walden. We will call back to order the Subcommittee on
Communications and Technology on our ``Improving FCC Process''
hearing, and we appreciate your indulgence. I hope you all had
a chance to get out and get a little lunch or something while
we were voting. You didn't? Uh-oh. Well, sequester strikes
again.
We are going to go now to the vice chair of the
subcommittee, Mr. Latta, for 5 minutes for questions.
Mr. Latta. Well, thank you very much, Mr. Chairman. I
appreciate that. And again, thanks for our witnesses. We have
had a few votes this morning, and I appreciate your willingness
to stick around.
Mr. May, if I could ask a question in regards to
forbearance reform at the FCC and get your thoughts on that?
Mr. May. Thank you, Mr. Latta. In my view, it was pretty
clear when Congress put the forbearance authority in the 1996
act that it intended it to be used when appropriate as a
deregulatory measure when competition warranted, and I think
the fact of the matter is--and that is also true of the
regulatory review provision that follows it, the periodic
regulatory review. The fact of the matter is that the
forbearance authority has just been little used as a
deregulatory tool. So what I have recommended, and I think you
have just introduced a bill which may be somewhat along these
lines is that without changing the substantive criteria in the
forbearance provision that is protecting consumers and
protecting the public interest, that none of that would be
changed, but that the Commission in order to maintain
regulations when it has a petition to forbear, that is bear the
evidentiary burden, in other words, there be a presumption that
the statutory requirements aren't met absent clear and
convincing evidence or some type of burden. And I think by
doing that, without changing, again, the substance of the
criteria, just as a matter of process and procedure, it would
leave the tool to be used more as I believe Congress intended
when it included it in the Act back in 1996.
Mr. Latta. Thank you.
Mr. McDowell, could I get your thoughts on forbearance
reform?
Mr. McDowell. Yes, as I said in my written and oral
testimony, Congressman, I think it would be a terrific idea to
expand that to more than just telecommunications services,
which is what Congress did in the 1996 Act. Now, having said,
there is a little footnote, which is Section 336, for some
reason referred to as Section 202(h). So our quadrennial media
ownership review is also supposed to be a review and to
deregulate as more competition comes into the media space, but
beyond that, for cable, for wireless and other areas, the
Commission does not have forbearance authority. So I think it
would be constructive to expand that authority to all aspects
of what the Commission regulates.
Mr. Latta. Thank you.
Mr. Ramsay, if I could turn to your testimony. You state
something there that I mentioned in my opening remarks. You
state that ``Unquestionably, especially when there is certain
lapses that occur, unfortunately, when that occurs, those with
limited resources, small business, State commissions,
consumers, consumer advocates, are disproportionately
disadvantaged,'' and that is what I hear a lot back home from
all these smaller companies out there that, you know, they
don't have the resources. Can you just elaborate a little bit
on that, how you see that for those that would be disadvantaged
that have more limited resources?
Mr. Ramsay. Well, the problem is, if you have fewer
resources and you get--and again, I can go back to the
transformational order that revised the entire Universal
Service program at the federal level. There were literally
hundreds of items that went into the record shortly before the
deadline for further advocacy dropped, and if you only have one
or two lawyers, and in my case, it is one lawyer, there is no
way that you can go through and look at all of those materials
and respond really at all, whereas larger, better funded people
frequently can. In fact, larger and better funded people are
frequently the source of a lot of the last-minute filings. So
in this particular case, there are two or three provisions that
I cite in my testimony that would level the playing field a
little more for the consumer advocates, the State public
utility commissions and the small businesses and small
entities.
Mr. Latta. Because that would also really impact those
startups out there.
Mr. Ramsay. Yes, I would think so, the people with limited
resources.
Mr. Latta. And I have met with a lot of the smaller
startups and they are always concerned because, you know, they
are just getting started and all of a sudden they don't have
those dollars that they have to have to try to meet these
regulations that are in place.
And Mr. Chairman, I will yield back the balance of my time.
Thank you very much.
Mr. Walden. The gentleman yields back the balance of his
time. The chair recognizes the gentleman from California, Mr.
Waxman, for 5 minutes.
Mr. Waxman. Thank you very much, Mr. Chairman. Before I get
to my questions, I want to make a brief comment about the
subject that was raised before we broke, and that was whether
the FCC jurisdiction on the public interest is something in
addition to the role of the Department of Justice and the
Federal Trade Commission. Under the test, the FCC will approve
a transaction if considering the potential consumer benefits
and harms, it determines that the transaction is in the public
interest. That is a little different than just the antitrust
issues. For example, the FCC looks at the diversity of voices.
They look to see whether certain populations are being served,
low-income people, disabled people. They will look to see what
the impact is on jobs. They will look at questions of access to
telecommunications services. All of these are part of what the
FCC deals with when we talk about public interest.
The DOJ process is entirely confidential. The FCC process
is generally open with public comment and advocacy subject to
certain exceptions for proprietary information. So I don't want
to leave anyone with the impression that we all agree and maybe
you really don't all agree when you think about that the role
is duplicative or less than critical for the FCC to maintain
that power.
When Chairman Walden circulated the discussion draft
earlier this week that adds new provisions to the bill that was
passed by the House last year, I believe these provisions
further incapacitate the FCC, and I would like to ask our
witnesses questions about two of these provisions.
The draft legislation contains a new provision that
requires the Commission when considering a rule with an
economically significant impact--those are the words--to, among
other things, ``make a reasoned determination that market
forces and changes in technology are unlikely to resolve within
a reasonable period of time'' the problems the Commission
intends to address in the rule. In other words, the new
language requires the FCC to determine whether technology and
market changes will solve a problem and negate the need for
regulation before issuing a rule.
Mr. Ramsay, in your testimony, you suggest that this
provision seems, at best, unnecessary because regulators should
take a technology-neutral or functional approach to oversight
of any market sector. Do you think basic principles like
protecting consumers and promoting competition should be linked
to changes in technology and are regulators in a good position
to make predictive judgments about future changes in
technology?
Mr. Ramsay. I think the part of my testimony that addresses
that was focused on the fact that technology and technology
changes are only relevant to the extent that they actually
impact market forces. The reasons for regulations--and NARUC
has been on record for years. The reasons for regulation don't
change ever, and they don't change based on the technology that
is being used to provide a particular service. So in the case
of----
Mr. Waxman. Excuse me. Do you think this language is
important to have, or do you think----
Mr. Ramsay. I think the reference to technology is not
necessary. It is perhaps a little confusing in the context of
that Section 3 and it doesn't add anything to any type of
determination of the level of competition that exists.
Mr. Waxman. I thank you for that answer. I am going to move
on to some other issues.
The APA applies to all agencies, and this bill would accept
that, which the chairman pointed out to me, that his bill
specifically says that they are not excluding--``nothing in
this Act or the amendment made by this Act shall relieve the
FCC from any obligations under Title V, United States Code,
except where otherwise expressly provided.''
Now, Mr. Pierce, you have indicated that this adds another
layer of requirements on the FCC which could be litigated, and
what was once litigated under the APA may not apply when there
are new provisions. Is that a correct statement of your view?
Mr. Pierce. That is correct, and actually the provision you
were just referring to is a good illustration of that. I mean,
there is certainly nothing wrong with it. In fact, it would be
laudable for the FCC to look at the relationship between market
forces and technology and the need for regulation and look at
the likelihood, but as soon as you put that in the statute, you
have got more lawyers' work, and when it is an agency-specific
statute, the likelihood is that it will take 15, 20 years
before we get a settled judicial interpretation of what that
means, and I don't have any idea what that--and I don't know
what the triggering language will be.
Mr. Waxman. I thank you for that answer.
This draft legislation also contains a new provision that
would require advance notice to the Commissioners of any
decision or action taken at the bureau level, known as
delegated authority, and the provision empowers two or more
Commissioners to block any use of such delegated authority,
instead require that the issue be considered by the full
Commission. So two members can, in effect, hold hostage things
that are routinely done at the bureau level. Now, most of what
the FCC does in 2012, there are 165 items released by the full
Commission, in 2014, items released at the bureau level. That
means 92 percent of all the actions the FCC took last year were
pursuant to delegated authority at the bureau level. So my
concern is that if two Commissioners could block the exercise
of this authority and require what could have been a routine
matter to be addressed by all five Commissioners, that is going
to be an extra burden. It is sort of like the Senate that can
stop things from happening but putting holds on nominees or
requiring a threat of a filibuster.
Professor Benjamin, would you be concerned this might allow
a minority of Commissioners to frustrate the will of the
majority or the chairman's agenda, potentially adding weeks or
months of delay to routine actions supported by the majority?
Mr. Benjamin. Yes. The serious question would be, why would
you want to empower a minority that way? Because there really
are thousands of decisions that we are talking about, and right
now there are fairly clear lines of authority in the Commission
which makes for greater efficiency. So if I were a business
before the agency with a routine matter, I would be concerned.
Mr. Waxman. Thank you. My time is up. But Mr. McDowell
wanted to respond.
Mr. Walden. We will do that on Mr. Scalise's time, I think.
Mr. Scalise?
Mr. Scalise. If the chairman is so inclined, could I yield
to the chairman?
Mr. Walden. I would appreciate that. Thank you.
So I want to point out why we have added that provision,
and Mr. McDowell, as a Commissioner, please feel free not only
to weigh in on Mr. Scalise's time subsequently yielded but also
on what I am about to say.
So it is routine, Mr. Benjamin, that they have these
delegated authority and these things go through, but there has
also been a custom, I believe, of 48-hour notice for the other
Commissioners so they know what is going through on delegated
authority. Recently, there was a case where an item was put on
up on delegated authority on a Friday night triggering the 48-
hour notice over the weekend. Now, I don't think there was any
mischief in that, but at some point here you could have a lot
of mischief occur over a weekend. And so we are saying, you
know, two Commissioners could say wait a minute, whoa, whoa,
whoa, what are you doing on supposed delegated authority,
because I don't think that is always clearly spelled out.
But Mr. McDowell, are we hitting on something here?
Mr. McDowell. A little bit of history here. First of all,
it is rare for Commissioners to ask for anything that is being
done under delegated authority to be elevated to an 8th-floor
vote. It wouldn't be, with all due respect, akin to a hold in
the Senate. What it is, it is asking for an 8th-floor vote on
these things rather than the bureau issuing the role. And, you
know, before this hearing I polled some of my former staff to
ask them how many times did we actually ever want something to
be elevated to an 8th-floor vote, and we could count on less
than one hand the number of times in my 7 years there where
that would actually happen. So it wouldn't hold things up per
se. What it actually might do is in a way speed things up
because bureau decisions can be brought to the 8th floor
through petitions for reconsideration and other administrative
vehicles, and that takes time to get to the 8th floor, so you
could actually be short-circuiting that sort of appeals
process, and also keep in mind, it is very rare. And by the
way, in the past when it happened, I mean, one of the instances
had to do with a switch digital issue and set-top boxes during
Chairman Martin's tenure, and the other four Commissioners, two
Republicans and two Democrats, we were very concerned about the
direction that was heading in. It was an enforcement
proceeding. So it was a bipartisan issue, the same with some
other issues that I worked with Commissioners Copps and
Adelstein on during that era. So it is very rare and also----
Mr. Walden. Make it real quick because I am using up his
time. So let us go to Mr. Scalise. Thanks for your indulgence.
Mr. Scalise. Thank you for yielding back. Those are the
exact questions I was thinking of asking myself, Mr. Chairman.
I appreciate you asking them in a much more eloquent way with
that great radio voice that you have.
I am glad that we are having a hearing on FCC process
reform. I was little surprised at the beginning of the hearing
that there were some that were expressing objection or concern
about us taking up FCC process reform, and obviously, Mr.
Chairman, you have got two bills on this agenda that we are
talking about, and both of them deal with, I think, very
important reforms. But when you look--the IRS serves as a
poster child for what happens when a federal agency thinks that
they are no longer accountable to the American taxpayer, and
you just look at the abuses that are happening because they
weren't reform, because they didn't think that they had to
answer to anybody. And so when we talk about reforming
processes at the FCC, it is critical that Congress play this
role. And look, if the Senate doesn't think it is important to
have transparency and accountability and reform, let them go
out and defend it, but shame on us if we don't exercise our
responsibility in making sure that these federal agencies that
we oversee are accountable, because we have seen some troubling
examples at the FCC, and I think, Mr. Chairman, you pointed out
some real concerns, especially as we have seen with mergers in
the past and then the comments by Mr. Wheeler where he in
essence was tacitly condoning the practice of the FCC literally
just trying to hold up a merger unless companies would accept
regulations, de facto regulations that Congress didn't even
pass. So Congress said we don't think that this should be a
law, and somebody at the FCC who thinks they are unaccountable
says I think it should be a regulation anyway and even though I
can't get it approved, I will just hold up a company's merger
unless they agree to something that Congress doesn't even think
should be passed, and I think that is a major concern of a lot
of us. I think there is some real issues that need to be
pursued on that. We need to get involved congressionally and
stop them from doing this.
Commissioner McDowell, in my last few seconds here, I want
to ask you about it. First of all, I want to ask, does anybody
on the panel think it is oK for the FCC to shake down a
company, to hold up a merger over requiring them to accept a
regulation that Congress didn't even pass? Does anybody want to
defend that practice? I am glad to see, it is sort of like the
thunderous applause you had, Commissioner McDowell. Nobody
wants to defend it. But did you see it when you were at the
FCC? Did you see that kind of what I think is unethical
activity?
Mr. McDowell. Sure. There are reasonable differences in
interpretation of what the public interest is. I have had a lot
of conversations with my colleagues over the years over this,
and some think that anything that benefits the public is the
cost of the transaction. I disagree with that. I think it has
to do with, is there a merger-specific harm to consumers that
needs to be cured. Others think that it is a broader
interpretation of a public-interest standard, but that is
precisely what the bill, I think, tries to address is to put a
fence around that, a definition around what the public-interest
standard would be.
Mr. Scalise. I think that would be important to have, so I
thank you, and I thank you, Mr. Chairman. I yield back.
Mr. Walden. I now recognize the chairman emeritus of the
committee, the gentleman from Michigan, Mr. Dingell.
Mr. Dingell. Mr. Chairman, I thank you for your courtesy. I
commend you for this hearing.
Like the chairman, I am very much concerned about the
somewhat curious functioning of the Federal Communications
Commission, so I performed a very thoughtful analysis of the
Commission Reform Act to see how it works, and one of my first
concerns it, it seems to affect in a curious way 67 years of
administrative law and related jurisprudence. It subjects only
one federal agency to unique administrative procedures that
will be different than all of the others and will open the door
to years of litigation and uncertainty, ultimately stymieing, I
think, rather than streamlining the work of the Commission.
My questions this morning are directed to Mr. Benjamin and
they concern only the draft Federal Communications Commission
Process Reform Act. I hope you will oblige me, sir, with yes or
no answers.
Mr. Benjamin, with respect to the Commission's rulemaking
authority, I note that Section 13(a)(2) of the draft bill
mandates the Commission to fulfill a number of new requirements
prior to amending or adopting a new rule. Is it your
understanding that a party could challenge the Commission's
completion of such new requirements in court? Yes or no.
Mr. Benjamin. Yes.
Mr. Dingell. Now, Mr. Benjamin, the practical effect of
such judicial review would be to slow or to hinder the
Commission's ability to promulgate new rules, yes or no?
Mr. Benjamin. Yes.
Mr. Dingell. And it would be a significant change in the
Administrative Procedure Act, would it not?
Mr. Benjamin. Yes, with respect to the FCC.
Mr. Dingell. Now, Mr. Benjamin, the new requirements in
Section 13(a)(2) contain undefined terms such as ``specific
market failure'', ``actual consumer harm'', ``burden of
existing regulation'' and ``reasonable period of time.'' Is it
probable that interested stakeholders will challenge the
Commission's application of such terms in the event
stakeholders disagree with the Commission's ruling on a
particular matter in court? Yes or no.
Mr. Benjamin. Yes.
Mr. Dingell. Now, Mr. Benjamin, again, the practical effect
of such challenges would be to hinder and to slow the
Commission's ability to agree on new rules or to amend or
rescind existing rules. Yes or no?
Mr. Benjamin. Yes.
Mr. Dingell. Now, so far it would seem then that one of the
draft bill's primary effects would be to sand the gears of the
Commission when it comes to rulemaking. I would like to turn my
attention to the draft bill's effect on the Commission's merger
review authority.
Now, Mr. Benjamin, Section 13(k)(1)(A) requires that the
Commission impose conditions on transactions and transfers that
are ``narrowly tailored to remedy a harm that would likely
arise as a direct result'' of such transactions and transfers.
Is it your opinion that this requirement will invite strict
scrutiny by the courts of merger conditions imposed by the
Commission? Yes or no.
Mr. Benjamin. Yes.
Mr. Dingell. And it would be a fine opportunity for repeal
and judicial review, right?
Mr. Benjamin. Sorry, repeal?
Mr. Dingell. The conditions and so forth would be a fine
opportunity for judicial review?
Mr. Benjamin. Yes.
Mr. Dingell. Now, Mr. Benjamin, is it your opinion that it
will be extremely difficult to craft merger conditions that
would satisfy Section 13(k)(1)(C) of the draft bill, which
specifies that such conditions address a harm ``uniquely
presented by the specific transfer of lines, transfer of
licenses or other transactions such that the harm is not
presented by persons not involved in the transfer or other
transaction.'' Yes or no?
Mr. Benjamin. I think I understand your question. Yes.
Mr. Dingell. That is a wonderfully complex sentence too,
isn't it?
Now, Mr. Benjamin, additionally, I note that Section
13(k)(2) of the bill prohibits the Commission from adopting
voluntary merger conditions that are not consistent with the
conditions I mentioned in my previous questions. Is it your
opinion that such prohibition would serve as additional
roadblock to merger approvals and to potentially diminish, if
not eliminate, the Commission's role in merger reviews? Yes or
no.
Mr. Benjamin. Yes, in combination with the other
provisions.
Mr. Dingell. I am running out of time and I apologize to
you.
Now, finally, is it correct that the draft bill provides no
additional authorizations of appropriations or personnel for
the Commission to comply with the new requirements of the
legislation which would impose a demand for new personnel,
money and so forth through the agency? Yes or no.
Mr. Benjamin. Yes.
Mr. Dingell. So the long and short of this is that the
draft bill then could conceivably hinder the Commission
rulemakings but also severely restrict its ability to approve
mergers. At this point I am rather distressed to note that the
bill would impose a kind of curious Magnuson-Moss rulemaking
requirement on the Commission which will not streamline its
processes or provide it with resources with which to comply
with the draft bill's new and more onerous mandates.
I say this to you, Mr. Chairman, with affection and
respect, in the hope that the committee will continue to seek
the views of stockholders and stakeholders about the draft bill
that will enable it to work to expeditiously conduct the
business of the Commission, and I would hope that the
thoughtful work of the committee will enable us to solve some
of the questions that appear here to stand in the way of
writing good legislation. I thank you for your courtesy to me.
Mr. Latta [presiding]. Thank you. The gentleman's time has
expired, and at this time the chair recognizes the gentleman
from Illinois for 5 minutes.
Mr. Kinzinger. Thank you, Mr. Chair, and thank you,
gentlemen, and you made it to the bottom row so you are almost
about to go home. Congrats.
Thank you for being out here. The discussion we are having
is important regarding the efficacy and efficiency of the
regulatory environment. In looking through the written
testimony, one statement that really caught my eye in Mr.
Downes' testimony was transfers delayed are consumers
underserved. That sums up a lot of this debate quite nicely.
We are all trying our best to complete work that will best
serve our constituents, but the problem is that overly caustic
and non-standardized regulations keep delaying the possible
benefits of the changes in the telecommunications industry for
our constituents. With the continuing advances of technology
occurring at such a rapid pace, I do believe that current FCC
process needs to be reformed to deal with such a unique
industry.
That brings us to the topic of today's hearing, the draft
legislation for FCC process reform and the FCC Consolidated
Reporting Act. We discussed similar legislation in the 112th
Congress, which actually passed the House in a bipartisan
manner, and I am happy to see that we are back today discussing
what I believe are much improved versions of those pieces of
legislation.
The FCC process reform draft will make great strides in
improving the predictability, efficiency, and most importantly,
the transparency of the FCC in its operations. Government
transparency is a major key to gaining the trust of the
American public, and this draft legislation includes a number
of provisions that will not only standardize many of the
actions of the FCC but will also make it more transparent to
the general public.
I would also like to add that I do appreciate the efforts
of former Chairman Genachowski and Acting Chairwoman Clyburn on
many of these issues. As I have said before, though, statutory
authority should be what drives the decision-making process at
the FCC, not the discretion of whomever may be the chair during
a specific period of time.
In response to some of the questions, however, that we just
heard, I would like to ask Commissioner McDowell, I am going to
give you a number of questions and we will do the yes-no thing
if that works for you. While most agencies are subject to the
APA, they don't all rely on procedures that differ to varying
degrees such that no agency actually has the same processes. Is
that correct?
Mr. McDowell. Exactly, yes.
Mr. Kinzinger. Do the new requirements in the bill
requiring the FCC to actually justify its actions prior to
adopting a rule constitute good government practices that will
result in better rules?
Mr. McDowell. Yes.
Mr. Kinzinger. Do stakeholders currently challenge most of
the Commission's significant decisions in court even when the
FCC is on relatively firm ground?
Mr. McDowell. Pretty much everything the FCC does gets
appealed, yes.
Mr. Kinzinger. Understood. Has poor FCC process and weak
analysis caused the litigation?
Mr. McDowell. It has, but again, everything gets appealed,
even when it is strong.
Mr. Kinzinger. All right. A lot of lawyers in this town.
Mr. McDowell. Yes.
Mr. Kinzinger. So is it fair to say the bill won't really
increase the amount of litigation but actually might reduce it,
do you think?
Mr. McDowell. I don't know if it will reduce it but it
could help make for better public policy.
Mr. Kinzinger. OK. Does the FCC itself often adopt
requirements that contain undefined terms?
Mr. McDowell. All the time.
Mr. Kinzinger. Does leaving some terms in the bill
undefined and allowing the FCC to define them provide
flexibility to the agency?
Mr. McDowell. It provides more certainty, and therefore,
for future Commissions would limit the sort of arbitrary nature
of whoever is in those chairs interpreting more ambiguous
terms.
Mr. Kinzinger. Thank you. Doesn't the bill leave the
public-interest standard intact and still allow the FCC to deny
transactions or impose tailored conditions such as divestitures
of certain assets?
Mr. McDowell. Yes, and real briefly, I think it actually
makes things more efficient in that regard. So if you are
narrowing the scope of merger approval process and the
substance of it, then you are actually, I think, speeding
things up, that there are a lot of extraneous things that could
not be examined because it is not specific to the merger.
Mr. Kinzinger. And lastly, is it your belief that there are
sufficient bodies at the FCC that some could be spared to help
implement this new law and that the improvement in policy would
be well worth the effort?
Mr. McDowell. I think the improvement would be well worth
the effort.
Mr. Kinzinger. Excellent. With that, I have got 50 seconds
left, I don't want to get into a new line of questioning, so
Mr. Chairman, I will yield back. Do you want----
Mr. Walden. If you don't mind yielding to the gentleman?
Mr. Kinzinger. I will yield to the esteemed gentleman.
Mr. Latta. The gentleman yields.
Mr. Walden. So Mr. McDowell, just in the final 40 or so
seconds here, we didn't get time to really get into chevron
deference and what agencies can do, and the courts have a
pattern of deferring to what agencies have done, if they have
done their work, correct?
Mr. McDowell. If they have done what? I am sorry.
Mr. Walden. Well, if they have followed their procedures
and they have shown how they complied, haven't courts also
given chevron deference to the FCC in matters?
Mr. McDowell. On procedure but also on the substantive
statutory language if they are following that and are faithful
to Congress's intent, yes.
Mr. Walden. Because again, back to the Oregon example with
the public utility commission, if you do your job, the courts
will generally--isn't this true, Mr. Ramsay--defer to the
expert agency?
Mr. Ramsay. Particularly on factual terms, yes, sir.
Mr. Walden. My time, your time is expired. I will let the
chairman wrap it up.
Mr. Latta. The gentleman's time has expired, and at this
time I defer to the chairman to see if there is any further
business to come before the committee?
Mr. Walden. I don't believe so. We want to thank our
witnesses, though, for your expert testimony. It is very
helpful. We realize we have a work product in front of us. What
you have suggested will help us refine that product and get it
right, and we will continue our efforts to reform this agency
in a way that makes it a leader for the other agencies, and
since we don't have full jurisdiction over the APA, we can only
do what we can do, but we are going to do it. So thank you all.
Mr. Latta. Hearing no further business before the
committee, the committee stands adjourned.
[Whereupon, at 2:00 p.m., the subcommittee was adjourned.]
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