Pai Picks Up Deregulatory Pace
Placing his deregulatory stamp ever firmer on US communications policy, new FCC Chairman Ajit Pai shepherded several key items through the Commission Thursday, including one controversial order that would broadly deregulate the business data services market and another that will likely lead to greater consolidation of broadcast TV stations.
In twin 2-1 votes conducted along partisan lines, the Republican-led agency approved both orders despite vociferous opposition from the lone Democrat left on the Commission, Mignon Clyburn. Both orders reversed major initiatives directed by former FCC Chairman Tom Wheeler when the Democrats were still in charge last year.
The business data services (BDS) order drew the most interest and heat because of a sharp dispute over whether the $45 billion market is too heavily regulated now or needs more effective regulation to make it more competitive. Under Wheeler, the then Democratic-led FCC had sought to use regulation of cable operators and other new market entrants to spur greater competition and keep service prices down for commercial customers. But, just as the Commission was preparing to vote on that proposed order in November, Wheeler gave up the effort when Republican Donald Trump unexpectedly won the presidential election. (See FCC Drops Business Access Reform.)
Under the sweeping order approved this morning, the Commission now finds that strong competition exists in the BDS market, thanks in large part to the entrance of lightly regulated cable operators and competitive telecom providers. The agency also concludes that the current regulatory regime for wireline incumbents is inhibiting the investment needed to convert legacy TDM-based networks to high-speed Ethernet connectivity in much of the nation.
As a result, the BDS order adopts a competitive market test to determine where pricing regulations should remain. Using this test, the FCC plans to drop the pricing restrictions when either 50% of the buildings in a county are within a half-mile of a location served by a competitive provider or 75% of the census blocks in a county have a cable provider present.
Among other things, the order also reduces the current price caps annually by 2% in areas where the pricing regulations remain in place.
Clyburn, who supported Wheeler's efforts to regulate the BDS market differently, voiced strong opposition to the deregulatory order. In her remarks before the vote, she denounced the order as "arbitrary and capricious" and "a dizzying departure" from long-standing Commission policy that would hurt small businesses, rural hospitals, schools and libraries and "deepen the digital divide." She also belittled the competition market test, noting that it doesn't require a second provider to actually be offering service in the locality under question.
But Pai and fellow Republican Commissioner Michael O'Rielly dismissed Clyburn's objections and voted to approve the order. In his comments, Pai argued that while "price regulation is seductive," it poses a threat to competition and innovation. "Each of these (regulatory) incentives is poisonous to consumer welfare," he declared.
In the other sharply debated move today, the FCC voted to reinstate the so-called "UHF Discount" rule for broadcast TV station ownership, just eight months after the Wheeler-led Commission had discarded the rule as outdated because of the digital TV transition. This rule permits broadcasters that own stations operating in the UHF spectrum to count just 50% of the TV households in the market toward the national TV station market cap. Under that cap, broadcasters can own stations reaching up to 39% of US households.
Leading the charge again, Clyburn argued that the reinstatement of the UHF Discount rule will allow broadcasters to own more TV stations and still stay under the cap. Pointing to reports that major broadcasters like CBS and Sinclair have already indicated interest in buying more stations, she predicted that the FCC's move would lead to more broadcast industry consolidation by effectively stretching the ownership cap as high as 78%.
But Pai and O'Rielly contended that the FCC was merely restoring the status quo that existed before the vote last August to eliminate the discount. Calling the issues "inextricably linked," Pail said that he, unlike Wheeler, intends to start tackling the bigger issue of the 39% national station cap later this year.
We’ll have more on the Commission's latest moves in follow-up stories.
— Alan Breznick, Cable/Video Practice Leader, Light Reading