Pai FCC Rolls Back Wheeler Actions Over Clyburn Protests

FCC bureaus Friday afternoon undid numerous orders and other items (see 1702030058) enacted under former FCC Chairman Tom Wheeler, reversing actions on zero rating, media ownership, video streaming and other matters. Commissioner Mignon Clyburn criticized it as “Take out the trash day” and a “Friday news dump.” The reversed items are all “last minute actions” that weren't supported by a majority of commissioners when they were taken and that “ran contrary to the wishes expressed by the leadership of our congressional oversight committees,” said Chairman Ajit Pai in a statement Friday. "In some cases, Commissioners were given no advance notice of these midnight regulations." The actions also were a subject of our earlier story (see 1701240020).

Clyburn's office was rebuffed on requests for more time to consider the reversals and for the bureaus to explain the reasoning behind the decisions, she said in a statement. “It is disappointing to see this Chairman engage in the same actions for which he criticized the prior Chairman.” Along with zero rating, the FCC rolled back an inquiry into video streaming, a 2014 Media Bureau public notice on mergers involving sharing arrangements, recent admonishments over TV political file violations, a report on modernizing E-Rate and proceedings on cybersecurity and 5G security.

Former Commissioner Michael Copps also criticized the timing of the reversals. Responding to Pai's characterization of the items as “midnight regulation,” Copps referred to the actions as “Friday Afternoon deregulation.” He contrasted the reversals with Pai's recent move to increase transparency. “This was done without any advance notice and some of these rules are things that affect the advance notice,” Copps said. Opposing political parties shouldn't “play ping-pong” with regulations when they take over the FCC, Copps said. Pai should at least wait until a full commission is seated to roll back so many rules, Copps said.

“It is a basic principle of administrative procedure that actions must be accompanied by reasons for that action, else that action is unlawful,” Clyburn said. Reversing a prior administration's rules is not uncommon at the FCC, said Wilkinson Barker broadcast attorney Rosemary Harold. “It's not unusual for new leadership when there's a party change in the White House to take a look at things that were done by previous leaders and decide to change or undo some of them.”

Hill Reacts

House Republicans lauded Pai's move, with at least one Democrat objecting.

“For too long, the commission has used the ability to delegate authority to its bureaus as a way to bypass the hard work of coming to consensus on difficult issues," said Commerce Committee Chairman Greg Walden, R-Ore., and Communications Subcommittee Chairwoman Marsha Blackburn, R-Tenn., in a joint statement. "Chairman Pai’s readiness to rescind those hastily issued bureau decisions is an encouraging turn for the better, and we’re confident that the new FCC will work quickly, efficiently, and transparently to resolve any questions that remain." Blackburn issued a separate statement praising the agency for "moving forward to reverse the ownership reporting requirements for non-commercial and educational television," she said of that issue, the subject of legislation she introduced in January (see 1701170061). "The burden posed by those regulations to non-profit, non-commercial stations will be appropriately considered by the full commission.”

“It is clear that net neutrality is public enemy number one for Chairman Pai, and he is starting his campaign by protecting harmful zero-rating plans," Sen. Ed Markey, D-Mass., said in a statement. "Zero-rating plans can allow ISPs to favor their own content while putting everyone else at a competitive disadvantage. Instead of siding with big corporations, Chairman Pai and the FCC should explore how to fully enforce the Open Internet Order and ensure a free and open internet for everyone.”

Pai is “showing his true stripes” through “these strong-arm tactics,” said Free Press Policy Director Matt Wood in a statement. “This Friday-afternoon release is a phenomenally hypocritical maneuver in light of comments Chairman Pai made earlier this week pledging increased transparency at the agency. It took him just two days to break that promise.” The decision to rescind the items undoes “important work that promised to bring the benefits of broadband to low-income families, to put vertically integrated ISPs on notice against prioritizing their own content, and to send a message to broadcasters that covert consolidation won’t be tolerated,” Wood said.

Zero Rating

The Pai FCC took care of a key piece of unfinished business from the Wheeler regime, notifying wireless carriers they're no longer under investigation for violating zero rating rules based on the 2015 net neutrality order. The Wireless Bureau set aside a January report, also by the bureau, which raised questions about some of the offerings.

The January report found a “substantial possibility that some of AT&T’s practices” in its Sponsored Data program “may violate the General Conduct Rule.” The report said Verizon’s FreeData 360 service also raises net neutrality questions since Verizon also offers its own zero rated go90 service (see 1701110070). The report largely blessed T-Mobile’s Binge-On service. Commissioner Mike O’Rielly said then the report appeared “inappropriate and rushed to fulfill a particular outcome.”

Nese Guendelsberger, acting chief of the Wireless Bureau, dealt with the issue in a brief order. “Today, the Bureau sent letters to AT&T Mobility, T-Mobile, and Verizon Wireless closing the inquiries into each company’s sponsored data and zero-rating offerings, taking no further action,” the order said.

“These free-data plans have proven to be popular among consumers, particularly low-income Americans, and have enhanced competition in the wireless marketplace,” an FCC spokesman emailed. “The [FCC] will not focus on denying Americans free data. Instead, we will concentrate on expanding broadband deployment and encouraging innovative service offerings.”

AT&T and Verizon hailed the decision. It's "a win for the millions of consumers who are reaping the benefits of services made available through free data programs,” said Joan Marsh, AT&T senior vice president-federal regulatory, in a blog post. “We’re pleased that these innovative products will be able to continue to flourish in the marketplace.” Verizon "always believed that our free data programs like ‘FreeBee data’ benefit consumers, and we’re very encouraged that the FCC agrees,” a spokesman emailed. “We’re quite certain our customers feel the same way, particularly those who plan to watch the big game over the weekend -- free of data charges.”

“While this is just a first step, these companies, and others, can now safely invest in and introduce highly popular products and services without fear of Commission intervention based on newly invented legal theories,” O’Rielly said in a statement. He said the regulator "recommits to permissionless innovation."

Broadcast Actions

Though Pai said many of the items rolled back occurred in “the waning days” of the Wheeler administration, the Media Bureau's guidance on transactions involving sharing agreements dates from 2014. Pai and Commissioner Mike O'Rielly were both strongly critical of it then.

By promising stricter scrutiny for broadcast deals that involved sharing arrangements or contingent financial deals, the guidance led to companies preemptively agreeing to unwind sharing deals and divest stations before bringing a proposed deal to the Media Bureau, numerous broadcast attorneys told us. It's not clear what practical affect removing the guidance has, since the rule making joint sales agreements attributable over 15 percent is still in effect, but it does signal this FCC's intent to loosen broadcast ownership rules, said Fletcher Heald broadcast attorney Frank Jazzo. He also thinks the reversals indicate delegated authority will be used less under Pai. The reversals are “redefining the barriers” between items that should be considered by the full commission and by the bureaus, Jazzo said. Since shared service agreements aren't yet attributable, it's possible that the removal of the guidance could lead to more transactions that involve such arrangements, said broadcast attorney Jack Goodman.

“NAB is pleased that Chairman Pai is eliminating unlawful and arbitrary processing guidelines governing broadcast joint sales and shared service agreements," said a spokesman in a statement. "These regulations unfairly punished smaller broadcasters attempting to conserve resources to reinvest in localism and high quality programming. Broadcasters vying to compete with increasingly consolidated pay TV giants should not be stymied by overly-burdensome regulation.”

The Media Bureau also set aside numerous admonishments it had issued against broadcasters for violations of rules requiring disclosure on the purchasers of political advertisements. “We conclude that those matters are more appropriately addressed at the Commission level,” the bureau order said. The bureau used the admonishments in January, and they were supported in numerous filings from transparency and public interest groups.

The admonishments were “nothing more than a slap on the wrist,” but still served to warn broadcasters they should comply with the rules, said Angela Campbell, co-director of the Georgetown Law Institute for Public Representation, who represented the petitioning groups in the matter. Pai indicated the admonishments would be revisited when they were passed, but said then he largely supported them. That suggests the matter could be taken up at the commission level, Jazzo said. “The FCC made the correct decision today to rescind the Media Bureau’s unlawful order from earlier this year," said NAB. "The appropriate place for consideration of new rules and regulations is at the Commission level and not through orders applying to individual parties.”

Lifeline

Lifeline actions also were undone, to the consternation of Clyburn.

The Wireline Bureau set aside two previous Lifeline broadband provider orders and revoked the LBP designations of Spot On Networks, Boomerang Wireless, KonaTel, STS Media (FreedomPop), Applied Research Designs, Kajeet, Liberty Cablevision of Puerto Rico, Northland Cable Television and Wabash Independent Networks. The bureau order in docket 09-197 returned the companies' LBP petitions to their status as pending and removed them from streamlined treatment. It noted a National Tribal Telecommunications Association petition for reconsideration asked the FCC to reverse the bureau's previous grant of some of the LBP designations for lack of notice to tribal authorities under commission rules (see 1701040033). Some designees said the rules didn't apply to LBP petitions, but the bureau found the parties didn't comply with the requirements, undercutting tribal-FCC coordination.

“We find that reconsidering the above-listed petitions for designation as an LBP would promote program integrity by providing the Bureau with additional time to consider measures that might be necessary to prevent further waste, fraud, and abuse in the Lifeline program," the order said, noting concerns raised by Pai's Lifeline investigations. "The December and January orders erred in finding that expanding the number of designated Lifeline providers to include Lifeline Broadband Providers will combat waste, fraud, and abuse absent further steps or time for the agency to consider measures designed to ensure those providers will comply with the Lifeline program rules." The bureau did establish some transition measures, including a 60-day revocation delay for Boomerang, to minimize disruption for subscribers already being served.

“Today, the agency reverses course on providing more competition and consumer choice for Lifeline customers," Clyburn said in a separate statement. "Rather than working to close the digital divide, this action widens the gap." She said the LBP revocations "undermined businesses who had begun relying on those designations. These providers include a minority-owned business, a provider enabling students to complete their homework online, and others serving Tribal lands. Given the serious policy concerns at stake here, I asked to have this Order considered by the full Commission. But, clearly the goal was to include this in the ‘Friday News Dump’, as my request was flatly denied. I remain hopeful, however, that this is not the final answer and that the providers’ requests will remain pending after today’s action. I implore the Chairman and the Bureau to consider these designation requests expeditiously. #ConsumersFirst.”

The FCC retracted an E-rate modernization progress report issued by staff in the final week under Wheeler (see 1701180086). "Pursuant to our existing delegated authority, including Section 1.113 of the Commission’s rules, the undersigned now set aside and rescind the Report. The Report will have no legal or other effect or meaning going forward," said an order Friday by the acting chiefs of the Wireline and Wireless bureaus and the FCC managing director.

Cybersecurity, Streaming

The Public Safety Bureau rescinded two cybersecurity items, including a white paper on communications sector cybersecurity regulation issued two days before Wheeler's resignation. The white paper said the FCC can’t rely on organic market incentives alone to reduce cyber risk. The federal government needs to assert “appropriate” regulatory oversight over ISPs’ cybersecurity practices in the absence of clear market incentives to drive improvements, said now-former Public Safety Bureau Chief David Simpson in the white paper (see 1701180082). Industry lawyers and lobbyists thought Pai wouldn't act on the white paper given the concerns he and fellow Republican FCC Commissioner Mike O'Rielly have about a lack of sufficient commission authority on cybersecurity matters (see 1701250077). The bureau also rescinded a December notice of inquiry on cybersecurity for 5G devices. Public Safety said then it was seeking comment on 5G cybersecurity to complement its larger cybersecurity agenda (see 1612160063).

The FCC removed from circulation a cybersecurity policy statement adopting the Communications Security, Reliability and Interoperability Council’s (CSRIC) 2015 report on recommendations for communications sector cybersecurity risk management (see 1503180056). The policy statement would have instituted a framework for the FCC to hold confidential meetings with communications sector executives aimed at providing assurances on the firms’ cybersecurity practices (see 1602220052). Wheeler was seen in the waning months of his tenure to be backing away from pursuing the policy statement, which began circulating in February 2016 (see 1611300063).

Meanwhile, the FCC letter rolling back the video streaming inquiry "speaks for itself," a Comcast spokeswoman emailed us. When Public Knowledge filed its Stream TV complaint in 2016 (see 1603030029), the operator argued Stream TV is a cable product, not an Internet one, so it couldn't violate any conditions that apply only to Internet content.

Stream TV and services like it "raise a number of legal and technical questions that, if left unresolved, could continue to create headaches and uncertainties for industry and the FCC," PK Senior Staff Attorney John Bergmayer told us, defending the Wheeler FCC's fact-finding investigation. "More broadly a regime where some online video services are 'Title VI' and considered exempt from broadband-specific rules, and can carry broadcast stations under the retransmission consent system, but competing online video services are not and cannot, seems like a bad outcome." Bergmayer said Comcast remains under a consent decree and FCC transaction conditions "that are highly relevant to this kind of service.”