FCC Bureaus, Offices Rescind Actions Taken During Wheeler Tenure

February 3, 2017–In actions taken at the bureau and office level today, the FCC has terminated investigations into the zero-rating and sponsored-data offerings of several providers and rescinded a notice of inquiry and various orders, reports, white papers, and guidance issued during the tenure of former Democratic Chairman Tom Wheeler—sparking sharp criticism from the agency’s only remaining Democratic Commissioner that no adequate explanation was offered for the rescissions. In addition to the zero-rating inquiry, issues covered by the rescinded items include the agency’s efforts to modernize its Lifeline and E-rate programs; cybersecurity risk reduction; guidance on the processing of proposals for broadcast shared services agreements; and 5G wireless network and device security.

Most of the actions and items rescinded were only a few weeks old, but rescinded letters stemming from the zero-rating investigation date back as far as late 2015, and the guidance on broadcast sharing arrangements dates back to March 2014. The rescissioning began yesterday when the Media Bureau set aside an order on reconsideration aimed at promoting broadcast ownership diversity adopted in early January.  The bureau said that it has concluded that petitions for reconsideration to which it was responding would be “more appropriately handled at the Commission level” (TRDaily, Feb. 2).

Today, FCC Chairman Ajit Pai explained that the rescissions were in response to the adoption of “midnight regulations” under his predecessor.  “In the waning days of the last Administration, the Federal Communications Commission’s Bureaus and Offices released a series of controversial orders and reports. In some cases, Commissioners were given no advance notice whatsoever of these midnight regulations. In other cases, they were issued over the objection of two of the four Commissioners. And in all cases, their release ran contrary to the wishes expressed by the leadership of our congressional oversight committees. These last-minute actions, which did not enjoy the support of the majority of Commissioners at the time they were taken, should not bind us going forward. Accordingly, they are being revoked,” Chairman Pai said.

Commissioner Mignon L. Clyburn, the only Democrat remaining on the Commission, criticized the actions. “Today is apparently ‘take out the trash day.’ In an eponymous episode of the West Wing, White House Chief of Staff Josh Lyman stated: ‘Any stories we have to give the press that we’re not wild about, we give all in a lump on Friday . . . Because no one reads the paper on Saturday.’ Today multiple Bureaus retract—without a shred of explanation—several items released under the previous administration that focus on competition, consumer protection, cybersecurity and other issues core to the FCC’s mission,” she said. “In the past, then-Commissioner Pai was critical of the agency majority for not providing sufficient reasoning behind its decisions, citing specifically to the Supreme Court case Fox v. FCC which states: ‘[T]he requirement that an agency provide reasoned explanation for its action would ordinarily demand that it display awareness that it is changing position. An agency may not, for example, depart from a prior policy sub silentio,’” she added.

“It is a basic principle of administrative procedure that actions must be accompanied by reasons for that action, else that action is unlawful. Yet that is exactly what multiple Bureaus have done today. The Bureaus rescind prior Bureau actions by simply citing a rule that allows them to do so, when in prior invocations of that rule there have been oft-lengthy explanations for the reasoning behind the actions.” Commissioner Clyburn said.

“My office requested more than the allotted two days to review the dozen items released today. We were rebuffed. Then, we simply asked to have the Bureaus comply with the reasoned decisionmaking requirements of the [Administrative Procedure Act]. No deal. It is disappointing to see this Chairman engage in the same actions for which he criticized the prior Chairman. I am hopeful that in the future this Commission, consistent with our shared commitment to increased transparency, will heed the APA’s requirement for reasoned decisonmaking. The American public deserves no less,” she concluded.

The rescissions won approval from House Energy and Commerce Committee Chairman Greg Walden (R., Ore.) and communications and technology subcommittee Chairman Marsha Blackburn (R., Tenn.), who said in a joint statement, “We commend Chairman Pai for yet another step toward much-needed reform at the FCC. 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.”

“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,” they added.

In late 2015, the Wireless Telecommunications Bureau and Wireline Competition Bureau began inquiries into certain providers’ wireless data and fixed streaming video service offerings that exclude certain content from counting against subscribers’ data usage (TRDaily, Dec. 17, 2015).

Today, Wireless Bureau acting Chief Nese Guendelsberger wrote to Verizon Communications, Inc., AT&T, Inc., and T-Mobile US, Inc., informing them that the bureau had closed its inquiries regarding the companies’ respective FreeBee Data 360 sponsored data offering, Sponsored Data and Data Perks programs, and Binge On program.“Any conclusions, preliminary or otherwise, expressed during the course of the inquiry will have no legal or other meaning or effect going forward,” Ms. Guendelsberger told each firm.

Meanwhile, Wireline Competition Bureau acting Chief Kris Monteith wrote to Comcast Corp. that her bureau had closed its inquiry into Comcast’s Stream TV Service.  “Any conclusions, preliminary or otherwise, expressed during the course of the inquiry will have no legal or other meaning or effect going forward,” she said.

The Wireless Bureau had issued a report last month stating that offerings by AT&T and Verizon “present significant risks to consumers and competition in downstream industry sectors because of network operators’ potentially unreasonable discrimination in favor of their own affiliates.”

Regarding the termination of the zero-rating investigation, Chairman Pai said, “Today, the Wireless Telecommunications Bureau is closing its investigation into wireless carriers’ free-data offerings. These free-data plans have proven to be popular among consumers, particularly low-income Americans, and have enhanced competition in the wireless marketplace.  Going forward, the Federal Communications Commission will not focus on denying Americans free data. Instead, we will concentrate on expanding broadband deployment and encouraging innovative service offerings.”

Commissioner Mike O’Rielly said, “Today, the Commission finally puts an end to the past Commission’s zero-rating inquiries and recommits to permissionless innovation. 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.”

The action drew criticism from Sen. Edward J. Markey (D., Mass.), who said, “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. 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.”

In a statement responding to the closing of the investigation into AT&T’s service, Joan Marsh, the company’s senior vice president–federal regulatory, said, “Today’s announcement is a win for the millions of consumers who are reaping the benefits of services made available through free data programs. We’re pleased that these innovative products will be able to continue to flourish in the marketplace.” Verizon spokesman Rich Young said, “We’ve always believed that our free data programs like ‘FreeBee data’ benefit consumers, and we’re very encouraged that the FCC agrees.  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.”

Among the other items rescinded by bureaus and offices today, the oldest is a March 2014 Media Bureau public notice offering guidance on how the bureau would process pending and future proposed broadcast TV transactions.  The bureau said that it would “closely scrutinize” future and pending broadcast assignment and transfer applicants that proposes that two or more stations in the same market will enter into both “an arrangement to share facilities, employees, and/or services or to jointly acquire programming or sell advertising” “and “an option, right of first refusal, put/call arrangement, or other similar contingent interest, or a loan guarantee” (TRDaily, March 12, 2014).

Today the Media Bureau said in a public notice that it was rescinding, “in its entirety and effective immediately,” the March 2014 guidance. In a statement, National Association of Broadcasters Executive Vice President–communications Dennis Wharton said, “NAB is pleased that Chairman Pai is eliminating unlawful and arbitrary processing guidelines governing broadcast joint sales and shared service agreements. 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.”

Among the actions taken late in Chairman Wheeler’s tenure that were rescinded today was a staff progress report on modernization of the E-rate program (TRDaily, Jan. 18).  Among the finding in the report were that changes adopted by the FCC in its two 2014 E-rate modernization orders has led to support for Wi-Fi services in schools and libraries moving from zero in the funding years just prior to the orders to commitments for all Wi-Fi support requests in the subsequent years.

Today in a joint order, the Wireline Competition Bureau, the Wireless Bureau, and the Office of Managing Director “set aside and rescind[ed] the Report.  The Report will have no legal or other effect or meaning going forward.”  The report, the order adds, “is hereby RETRACTED.

Also rescinded today were two orders designating nine carriers as Lifeline broadband providers (LBPs) (see separate story), a notice of inquiry on 5G network and device security, a white paper on cybersecurity risk reduction, a paper on improving the nation’s digital infrastructure, and two orders that addressed a dozen political file complaints.

Free Press Policy Director Matt Wood criticized today’s moves. “With today’s action, Chairman Pai is undoing 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,” he said. “With these strong-arm tactics, Chairman Pai is showing his true stripes. The public wants an FCC that helps people. Instead, it got one that does favors for the powerful corporations its chairman used to work for.

“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,” Mr. Wood added.

In addition to praising the rescission of the guidance on joint sales and shared services agreements, But NAB EVP Wharton praised today’s orders on political file complaints. “The FCC made the correct decision today to rescind the Media Bureau’s unlawful order from earlier this year. The appropriate place for consideration of new rules and regulations is at the Commission level and not through orders applying to individual parties,” he said.

Some former FCC officials and regulatory attorneys told TRDaily today they didn’t remember a new Chairman rescinding so many items released under his  predecessor as soon as he took over. “The new Chairman has been fast and furious in revoking bureau-level items and investigations undertaken on more political issues, especially policy papers and proceedings released post-election.   The extent to which the bureaus and offices undertook these actions on the way out — and the speed with which they’ve now been removed on the way in — has been unprecedented, facilitated by the immediate elevation of a sitting commissioner to Chairman,” one former official said.

But another said that Mr. Wheeler had abused his “power in the final days by pushing through highly partisan items without any Republican support — in an effort to skirt the democratic process.  Elections have consequences.  The FCC rules allow for revocation.  The only thing unusual here was the Wheeler power gasps at the end of the administration.”

“It isn’t so much that it is unusual to have these items rescinded as it is that the Media Bureau was pushed by the last Chairman to issue last-minute controversial decisions,” said a broadcast industry attorney. “They really left Chairman Pai no choice.” —Lynn Stanton, lynn.stanton@wolterskluwer.com, and Paul Kirby, paul.kirby@wolterskluwer.com

Courtesy TRDaily