Spectrum Issues, Mergers Point to Need for Telecom Probe, Rockefeller Says

"We'll do what’s gotta be done,” Rockefeller told us after the weekly Democratic senator’s policy lunch. Revamping the act now is important because “we've got to deal with spectrum … and we've got some mergers,” he said. Kerry said it may be tough to find time for amending the act. “I don’t know” how much will be done by November, the Communications Subcommittee chairman said. “We've kind of got to get a feel for what the schedule will allow. I mean, that’s tricky. I just don’t have a measurement at this point."

Hill Republicans were caught off guard by the announcement, said two Senate Republican staffers. E-mails from the media and industry provided the first heads up, said a staffer: “If they're looking for a bipartisan process, they certainly didn’t start things off that way.” Republicans had heard the Democrats were thinking about bipartisan briefings, but the news (CD May 25 p1) that they were moving “full speed ahead” caught the minority by surprise, the staffer said. While Republicans may not like how the announcement came down, it’s likely many will say they prefer the legislative approach to Title II reclassification by the FCC, said the second Senate Republican aide.

"Congress is stepping in to address this issue because without our intervention, the FCC’s proposed regulations could stifle future investment in broadband services, said Senate Commerce Committee Ranking Member Kay Bailey Hutchison, R-Texas. “I look forward to being an active participant as we move forward on crafting a bipartisan update to the Communications Act.” Action to update telecom laws “is a clear signal to Chairman Genachowski to stand down on his recently announced plans to reclassify broadband services,” she said. “Instead of an antiquated regulatory scheme imposed by the FCC, Congress will work to develop a legal and regulatory framework appropriate for our modern communications market.”

"I always welcome the opportunity to work with my colleagues, and look forward to discussing how we can continue to promote investment, innovation, and jobs,” Communications Subcommittee Ranking Member Cliff Stearns, R-Fla., said late Monday. “My hope, however, is that ‘update’ is not code for ‘expand.’ Our communications markets are outgrowing the Act because of the great strides we have taken in technology and competition. In many cases, that probably means we need less regulation, not more. At a minimum, any legislation should be targeted to a specific problem, and government should demonstrate a market failure before intervening."

Not all Hill Democrats had seen the chairmen’s plan yet, either. “We haven’t see any detail on the Communications Act effort yet,” said a spokesman for Rep. Jay Inslee, D-Wash., a member of the House Communications Subcommittee. “However, all those involved in the press release [Monday] including Chairman Waxman have similar views as Jay, and therefore we look at it as a positive sign for consumers and the ability of the FCC to do its job.”

Commerce Committee member Sen. Claire McCaskill, D-Mo., told us she hadn’t looked at the proposal yet. Senate Communications Subcommittee Ranking Member John Ensign, R-Nev., is “encouraged” that his colleagues want to update the act, he said Tuesday: “With the Chairmen clearly signaling their intent to revisit the Communications Act, the FCC should abandon its misguided attempt to upend settled and successful Internet policy by reclassifying broadband service as a common carrier.” Ensign hopes the Democrats are “serious about having a truly open and bipartisan process,” he added. “We need to find pro-consumer, pro-investment, and pro-market reforms that have consensus support, rather than ramming through partisan or big-government policies. I look forward to learning more about the chairmen’s plans, and hopefully working with them constructively to reform the Act."

An industry source said the announcement that top communications Democrats in the Congress would examine the act has to be seen in context of a letter from 74 House Democrats from across the U.S. raising concerns about reclassification. “I think it really reflects a lot of concerns about what the FCC is doing from a power grab perspective,” the person said. “They feel this is an agency that’s overreaching. … They may not be against net neutrality, but they are against a regulatory power grab."

Waxman is believed to want to keep the rewrite limited to shoring up FCC authority over net neutrality, while Rockefeller may be interested in tackling Universal Service Fund reform, several lobbyists said. If the rewrite deals only with net neutrality, the perceived goal by Waxman to get Hill action this year could be met, they said. Support for such action is likely to be limited to Democrats, and not even all of them, as net neutrality continues to be an issue where legislators are divided along party lines, the lobbyists said.

As with some at the FCC, Monday’s announcement was a surprise to media and telecom lobbyists who hadn’t expected Hill action now on net neutrality. Commissioners’ offices weren’t briefed on the plan by Rockefeller and Waxman before they publicized it, FCC officials said. Some industry lobbyists had expected the House and Senate Commerce committees to eventually tackle net neutrality, just not now. Action may take years unless it’s tightly focused, which will be a challenge even though Rockefeller and Waxman both seem to want a narrow bill, industry lobbyists said.

The possibility of losing seats in November’s elections may have spurred action now, some speculated. “If the House turns in November, then all bets are off, so maybe this is to make sure they're not in limbo,” said a communications industry lobbyist. The intended legislation would give Genachowski “the suspenders he needs to get this thing done,” the lobbyist said. Broadcast lawyer David Oxenford of Davis Wright sees legislative passage this year as unlikely, though “with the Congressional elections looming in November, action in 2011 is not out of the question,” he wrote Tuesday. “With so many fundamental issues raised by the changes in the communications industry since 1996, Congress may well be in a mood to consider these issues sooner rather than later.”

Monday’s letter to Genachowski (CD May 25 p9) shows that there’s division on the issue within that party, which will make it harder to get legislation passed, lobbyists said. That letter was circulating on the Hill for members’ signatures well before Monday, they noted. AT&T, Verizon and NCTA had sought letters and another one opposing reclassification from 37 Senate Republicans, analyst Craig Moffett of Sanford Bernstein wrote investors Tuesday. Carriers hope “a legislative solution would be more surgical in nature than the blunt instrument of Title II reclassification,” he said. “The participation of Congressman Waxman and Senator Rockefeller is critical. It was arguably in response to their letter to the FCC a few weeks ago that Chairman Genachowski initially adopted the Commission’s Title II stance."

"A re-write of the 1996 Telecommunications Act would be a long and arduous process and could potentially introduce even greater uncertainty into the re-regulatory process,” said Moffett. “Nevertheless, the hope of carriers” is “a legislative solution would be more surgical in nature than the blunt instrument of Title II reclassification,” he said. “At the very least, a bipartisan commitment from Congress to address telecom re-regulation complicates the picture for the FCC. In essence, the FCC’s Title II reclassification approach was a workaround in the absence of a clear mandate from Congress. The fact that Congress is now promising to explicitly express its will now makes it more difficult for the FCC to proceed with reclassification."

"We believe the House Democratic letter will encourage Republican legislative efforts to try to block the FCC’s Title II move,” Stifel Nicolaus said Tuesday in a research note. “We doubt those efforts will succeed this Congress, particularly in light of the political cover the commerce committee chairmen recently gave reclassification, though there could be a close vote in the House, possibly on an appropriations measure. We note Republicans could score electoral gains this November, complicating FCC reclassification if it drags out.”