Genachowski Says FCC Has Highest ROI of Federal Agencies

On May 9, 2012, FCC Chairman Julius Genachowski addressed the Senate Subcommittee on Financial Services and General Government in a hearing about the FCC’s 2013 resource needs. Genachowski delivered a hard sell about how the FCC has the highest return on investment of all federal agencies, but eventually revealed that the FCC needs to collect $346,782,000 in 2013 “to implement our responsibilities under the Communications Act.” This amount is 2% more than 2012’s $339,844,000, which Genachowski claims is “essentially flat adjusting for inflation.” The budget “will be derived entirely from fee collections.”

Genachowski took the opportunity to update members of the Subcommittee, including Senator Dick Durbin (D-IL) and Senator Jerry Moran (R-KS), about the FCC’s plans for spectrum incentive auctions. According to Genachowski, “Incentive auctions are an opportunity to unleash vitally needed additional spectrum for mobile broadband and create tremendous value for American consumers, while raising billions of dollars for deficit reduction. It’s a key part of the puzzle to unleashing the mobile broadband opportunity.” He continued, “Incentive auctions are unprecedented. The U.S. will be the first country in the world to conduct them. It will be a complex task affecting major parts of our economy and involving many challenging questions of economics and engineering.” One translation: incentive auctions will be a very expensive undertaking, and it is currently uncertain exactly how much money will be earned for the U.S. Treasury.

Genachowski also updated the Subcommittee about progress in implementing the National Broadband Plan—which includes incentive auctions. Genachowski commented, “We have been working hard on implementing the broadband plan. Together with my colleagues at the FCC, we have made tremendous progress in the past three years, taking many steps to unleash investment, innovation, and job creation. These include freeing spectrum for both licensed and unlicensed use, modernizing and reforming major programs like the Universal Service Fund, and removing barriers to broadband buildout.”

After a long list of other FCC accomplishments and initiatives, Genachowski dropped the news about needing to increase the budget by 2%. While $7m is by no means an extraordinary amount of money for a federal agency, it should be noted that the 2% increase will come from regulatory fees, which will come from your companies—and ultimately your consumers’ pockets.

Also this week, the FCC released a Notice of Proposed Rulemaking about the 2012 regulatory fee collection target of $339,844,000. The FCC proposes very few changes to the regulatory fee collection methods. The FCC plans to release two additional NPRMs this year seeking input on reexamining the regulatory fee system.

800 MHz Broadband to be Considered; Webinar on Lifeline Pilot Program Also on Schedule

The FCC announced its tentative agenda for the May 24, 2012 open meeting. The items include:

• Deployable Aerial Communications Architecture (DACA) Notice of Inquiry: The Commission will consider a Notice of Inquiry examining the role of deployable aerial communications architecture (DACA) in facilitating emergency response by rapidly restoring communications capabilities in the immediate aftermath of a catastrophic event.
• Medical Body Area Networks (MBANs) Report and Order and Further Notice of Proposed Rulemaking: The Commission will consider a Report and Order and FNPRM to establish service rules and an allocation for Medical Body Area Networks and seek comment on the selection of an MBAN coordinator.
• Removing Barriers to Broadband Deployment in the 800 MHz Band Report and Order: The Commission will consider a Report and Order that will provide EA-based 800 MHz licensees with the flexibility to better utilize spectrum to transition networks from legacy 2G technologies to advanced wireless technologies.

The final item, Removing Barriers to Broadband Deployment in the 800 MHz Band, could be the item to watch for the rural telecom industry. Perhaps more exciting than the agenda itself is that this could be the first open meeting to feature the new commissioners Ajit Pai and Jessica Rosenworcel. The entire telecom industry is on needles and pins awaiting the first moves by these new commissioners.

In a separate item, the FCC will host a webinar on May 14 about the Broadband Adoption Lifeline Pilot Program (discussed here by JSICA).  According to the FCC, “The Webinar will feature short presentations by three experts who specialize in project design of field experiments, and a discussion by the experts on designing pilot projects for the Broadband Adoption Pilot Program.” Interested parties are encouraged to participate remotely, and the Bureau will be available for questions. It will be interesting to see what they say about the field experiment component of the pilot program. On the surface, it appears as though the FCC is trying to put telecommunications providers in the business of social experimentation, which could be beyond the resources and capabilities of the smallest rural telecom providers.

Will the Rural Telecom Industry Find Allies in the New Commissioners?

Almost one year to the day since former FCC Commissioner Meredith Attwell Baker announced her departure and over five months since former Commissioner Michael Copps resigned, the FCC is finally getting some new blood. Ajit Pai (R) and Jessica Rosenworcel (D) were initially nominated by President Obama in October, but their road to the FCC has been fraught with barriers. Senator Chuck Grassley (R-IA) famously blocked the commissioners from taking their positions for over five months while he struggled with the FCC over documents about LightSquared. On April 27, 2012, Grassley reluctantly released his hold on the nominees, although insisted that his LightSquared inquiry was not over. Finally, on May 7, the Senate confirmed the nominees.

Broadcasting & Cable reported that the nominees were approved in the Senate with no objection, and the new commissioners could be sworn in as early as this afternoon—but “Usually it is, at most, a few days between confirmation and installation.” Broadcasting & Cable added that Pai and Rosenworcel “will face some big decisions early on, including media ownership rule review, the definition of multichannel video provider and the framework for spectrum incentive auctions.” Additionally, the new commissioners will be thrown into the depths of USF reform, with many decisions still to be made about the Connect America Fund as well as the recently-undertook contributions reform.

Ajit Varadaraj Pai was previously a partner at Jenner & Block LLP. According to a White House press release from October, 2011, Pai’s past includes stints at the FCC, Senate Judiciary Committee, and Department of Justice. His industry experience includes General Counsel at Verizon Communications. Pai earned his law degree from the University of Chicago, and a B.A. from Harvard University. Pai’s Jenner & Block bio explains, “He draws on extensive experience gained in several senior public sector jobs involving communications, administrative, and constitutional law.” In his position of Deputy General Counsel at the FCC, Pai “supervised more than 40 lawyers, handling a wide range of regulatory and transactional matters involving the cable, Internet, wireless, media, satellite, and public safety industries.”

Pai hails from Kansas, which could be a good omen for the rural telecom industry (although only time will tell). In December, Senator Jerry Moran (R-KS) introduced Pai at the nomination hearing, where he said that Pai will be a great leader at the FCC, and “The FCC also needs commissioners who are committed to the needs of all Americans, including those who live in rural America, so its innovators can compete in the marketplace along with those in urban areas. A native of Parsons, Kansas, Ajit will bring an understanding of the challenges facing our part of the country at this vital time for the future of telecommunications.”

Jessica Rosenworcel’s most recent position was Senior Communications Counsel for the U.S. Senate Committee on Commerce, Science, and Transportation under Senator Jay Rockefeller (D-WV). She also has considerable experience at the FCC, serving in various positions from 1999 to 2007. A White House press release states that Rosenworcel was a communications associate at Drinker Biddle and Reath in the late 1990s. She earned her law degree from New York University School of Law, and her B.A. from Wesleyan University. When she was nominated last fall, Politco reported that “Rosenworcel is known for her thoughtful approach to telecom matters from FCC reform to net neutrality, and carriers many of the same policy values of Rockefeller and Copps.” Rosenworcel will take Copps’ position, and Copps commented that “Her dedication, intelligence and practical good judgment make her an ideal choice for commissioner.” As Rockefeller is typically a strong advocate for rural telecommunications, this could be another good omen that the rural industry will find allies in the new commissioners.

Early reactions from the industry expressed relief that Pai and Rosenworcel are finally able to take their seats at the FCC:

• NTCA ceo Shirley Bloomfield expressed satisfaction, stating: "With the ongoing implementation of complicated modifications to the Universal Service Fund and intercarrier compensation support systems, a full complement of commissioners is essential to ensure thorough debate, careful review of facts, and an outcome that serves the best interests of consumers. We’re hopeful that the addition of Rosenworcel and Pai will enable the commission to seek sensible and balanced public policy that sustains broadband investment and operation by small, community-based providers. We look forward to working with them on the challenges and opportunities that small, independent telecom companies face in serving rural consumers and their communities.”
• America Cable Association president and ceo Matthew Polka stated, “I am confident that both [Pai and Rosenworcel] will continue the FCC’s long heritage of fact-based decision-making that promotes competition, stimulates private investment and innovation, and protects consumers and the public interest values we all cherish as Americans.” ACA points out that the new commissioners have an understanding of “smaller markets and rural areas.”
• NCTA president and ceo Michael Powell commented, “We know that they will each prove to be valuable additions to the Commission, and we look forward to working with them to promote continued investment and innovation in the communications marketplace.”
• Free Press ceo Craig Aaron stated, “We’re pleased that the long delay in the Senate is over, and that we will have five commissioners at the FCC once more.”
• CTIA president and ceo Steve Largent congratulated Pai and Rosenworcel, and said “their experience in Washington will make them great assets for the Commission. I look forward to working with them on key wireless issues, including the bipartisan and bicameral spectrum issues, to ensure the U.S. wireless ecosystem retains its global leadership position.”
• AT&T senior vp-federal regulatory and chief privacy officer Bob Quinn stated, “All of us at AT&T are enthused that they’ll be joining the FCC, where we expect them to have an immediate and constructive impact.” Quinn added, “Our nation’s communications policy framework is in dire need of modernization to reflect today’s technological innovations, consumer demands, and competitive needs…We look forward to working with the full Commission to ensure the continued investment in America’s infrastructure.”
• Rural Cellular Association president and ceo Steven Berry said, “Chairman Genachowski should be very pleased to have two bright, well-informed individuals join him…Rosenworcel and Pai will be a real plus to the FCC as they address some of the most difficult policy issues on the table, and we look forward to working with them to ensure competitive connectivity.”

Pai and Rosenworcel's new colleages at the FCC also extend warm welcomes. Commissioner Robert McDowell commented, "Now that we have a full five member FCC, I look forward to all of us rolling up our sleeves and getting to work on several important matters facing the Commission for the benefit of American consumers, including but certainly not limited to: implementation of the new incentive auction legislation, finally putting the power of unlicenced use of the TV “White Spaces” into consumers’ hands, adopting sensible universal service contribution reform, modernizing our media ownership rules to reflect the competitive marketplace of the Digital Age, important transactions requiring expeditious review, and much, much more."

All eyes will be on Pai and Rosenworcel as they embark on their careers as FCC commissioners. Do you think the new commissioners will be rural telecom industry friends or foes?