Trump’s New FCC Chief Is on a Mission to Radically Revise Agency’s Policies

Ajit Pai FCC

One of the few comments that Donald Trump has made publicly about the FCC — either during the campaign or during his six-week-long presidency — came in September 2015. Hours after the National Review’s Rich Lowry told Fox News’ Megyn Kelly that one of Trump’s primary opponents, Carly Fiorina, should cut Trump’s “balls off with the precision of a surgeon,” Trump, as he is prone to do, tweeted back, “He should not be allowed on TV and the FCC should fine him!”

That tweet reflects a typical, if misguided, impression that much of the public has about the FCC: that it is dedicated to policing the airwaves. The agency, set up in the New Deal era to bring order to radio networks’ rush to command the new medium, does have oversight of indecent content over the airwaves. But a big part of its focus in recent years has been how it defines itself in the digital era, including issues such as net neutrality.

Given how little Trump has said about the FCC in the years before he was elected, the direction he intended to take the 83-year-old organization was in question. But his selection of commissioner Ajit Pai as chairman of the panel resolves that uncertainty — to a degree.

While outgoing chairman Tom Wheeler had presided over an activist commission, ready to act on marketplace trends that would seemingly threaten competition, Pai is convinced that the best approach is one that is largely hands-off. He has signaled a willingness to target regulations that he sees as stifling investment.

Jilipollo for Variety

“We need to fire up the weed whacker and remove those rules that are holding back investment, innovation, and job creation,” Pai said in a December speech, as it was clear that he was among the names in contention by Trump for the FCC chairmanship.

Yet Trump’s populist campaign rhetoric may conflict with Pai’s laissez-faire approach, particularly when it comes to big media mergers. Pai already has said that the FCC would not weigh in on the AT&T-Time Warner combination. That would leave the Dept. of Justice as the sole agency to assess the deal. But the FCC, which reviews transactions to determine if they are in the public interest, would have an easier path to block the merger than would the DOJ, which, more narrowly, weighs whether a combination conforms to antitrust law.

Peter Navarro, the Trump-appointed head of the National Trade Council, said during the campaign that Trump “would never approve such a deal” as AT&T-Time Warner because it “concentrates too much power in the hands of the too and powerful few.”

Given that Pai’s tenure is up later this year, he will have to be renominated by Trump, as will two additional commissioners for FCC vacancies to fill the five-member panel. “Everything is an audition right now,” says one source close to the commission. “But there are two different factions in the White House. One wants to deregulate the hell out of industry. The other thinks that big media is bad, big telecom is bad.”

Pai met with Trump at the White House on Monday, and he will testify this week before House and Senate committees that oversee the FCC. An advantage that Pai has is that he comes to the chairmanship knowing how the agency works.

Former FCC Chairman Reed Hundt, who served during President Bill Clinton’s term, said that Pai “is actually off to a very good start. By all accounts he has set a very constructive tone with all the bureaus in the agency. He has met with them all individually. He has been very open, and everybody is reacting very positively.”

Here are the coming flashpoints at the commission.

Net neutrality
The FCC’s rules that were adopted in 2015 are meant to prevent internet providers (whether they’re cable, telecom, or wireless firms) from giving preferential treatment to any content.

Pai and his fellow Republican on the FCC, Michael O’Rielly, are no fans of the FCC’s rules. They voted against them and continue to rail against the agency’s approach. But Pai can’t simply sign the regulations away. First he has to open a new proceeding and put repeal up for public comment, a prospect that will be a call to action among activists, public interest groups, and many internet firms.

The Internet Assn., which represents firms like Facebook, Amazon, and Google, appears ready to fight against any effort to weaken the current regulations. “Internet companies and consumers expect strong, enforceable net neutrality rules and they will not accept anything less,” says spokesman Noah Theran. “The internet works best when ISP gatekeepers cannot pick winners and losers online.”

Added Ellen Stutzman, senior director of research and public policy for the Writers Guild of America West, “We are going to do everything we can to stop” a rollback of the rules.

Indeed, the pushback will be fierce. The FCC’s existing rules came about after nearly a year of amped-up rhetoric, including demonstrations in front of the agency. Some activists even showed up at Wheeler’s home. The debate over the rules set a record for agency comments — almost 4 million people weighed in, most in favor of robust regulation. Rep. Ed Markey (D-Mass.) says that if Pai moves to roll back the rules, the outcry will make 4 million “look like a minuscule number.”

Pai also would likely face a court challenge, because it’s been only two years since the rules were put in place. He’d need to find concrete claims that companies have withheld investment in the internet because of regulatory overreach.

But he may be laying that groundwork. At his first FCC meeting as chairman, Pai announced the formation of a Broadband Deployment Advisory Committee, tasked with advising the agency on how to speed up the deployment of high-speed internet access across the U.S. That includes making recommendations for “removing regulatory barriers.”

In a speech in Barcelona last month, Pai said that his approach “will not be zero regulation, but light-touch regulation, rules backed by long-standing principles of competition law.”

Along with O’Rielly, he would have the votes to set in motion a repeal of the net neutrality rules. That could spur Democrats to sit down with Republicans on Capitol Hill and come up with a legislative compromise — as has been suggested by lawmakers like Sen. John Thune (R-S.D.), the chairman of the Senate Commerce Committee.

What’s overlooked in all of the speculation about what Pai may do is what he’s already done; and that may be just as important as any move to roll back the 2015 open internet order.

It all centers on something called the “zero rating,” which allows mobile network operators and ISPs not to charge customers for data used by certain applications or services. The FCC included a provision that gave it a role in policing how the zero-rating market evolves on a case-by-case basis.

“We need to fire up the weed whacker and remove those rules that are holding back investment, innovation, and job creation.”
Ajit Pai

Companies like AT&T have started to offer data plans that zero rate content provided by their affiliates, like that from DirecTV. What that means is that an AT&T customer can watch DirecTV content on an iPhone without worrying about exceeding their data caps.

Sounds great, right? Internet providers say they need the freedom to experiment with different business models — and that this is just the thing that can benefit consumers. To net neutrality advocates, though, it’s a giant loophole, since AT&T is showing favoritism to the content it owns at the expense of competitors.

In one of his last acts as chairman, Wheeler issued a report that concluded that the AT&T data plan was anti-competitive. In one of his first acts as chairman, Pai shelved the report.

Media ownership
Cable, telecom, and broadcast lobbyists are bullish on the new FCC — and that may be an understatement. TV stations in particular complained about FCC actions under Wheeler they say unfairly singled out their business.

Gordon Smith, president of the National Assn. of Broadcasters, calls Pai “whip smart,” and adds that the new chief has shown he is far more trusting of the “efficiency of markets versus regulation.”

Station groups and media companies have long wanted the FCC to relax policies that have restricted concentration of ownership. First and foremost, broadcasters expect that a rule barring a company from owning a TV station and newspaper in the same market will fall by the wayside. There’s already legislation pending in Congress, and the FCC would have to review the rules again in 2018. Moreover, the cross-ownership rule is the subject of a court challenge.

The question is how much further Pai would go in relaxing these rules, many of which station owners say are outdated and even unfair, given that cable and now internet entities don’t face the same restrictions.

Commissioner Mignon Clyburn, the sole Democrat left on the FCC, believes that it may be a mistake to repeal the rules without examination of their impact on minority and women ownership in broadcast media, which remain at about 6% — or far lower than the general population. “I don’t think we should make decisions in a regulatory vacuum,” she says.

Pai already has acted to sideline some of Wheeler’s initiatives, now allowing TV stations in the same market to jointly sell advertising time. Wheeler saw the practice as a way for station groups to circumvent restrictions on ownership; Pai sees it as a way for stations to become more efficient.

What is less clear is how Pai, in his anti-regulatory zeal, would respond to the next major media merger that comes down the pike. The AT&T-Time Warner merger may not trigger an FCC review, but it’s likely that some merger in the not-too-distant future will come before the agency for a ruling.

The wild card, though, is how the Trump administration views future media mega-deals, particularly if the approval of the AT&T-Time Warner deal leads to a spate of transactions. The FCC operates as an independent agency, but were Trump to speak out against some future deal pending before the FCC, it could lead to a flood of public comments opposing a combination. According to Breitbart News, Trump’s chief strategist, Steve Bannon, also opposes the AT&T-Time Warner combination, an indication that influential voices remain in the White House who are skeptical of the concentration of media ownership.

Regulatory ‘Modernization’
One of the favorite buzzwords among Republicans is that the FCC is due for a “modernization.” The meaning of the word doesn’t bode well for the regulator. Members of Trump’s transition team floated an idea to essentially scale back the agency, stripping it of some of its functions and handing them over to other agencies or eliminating them altogether.

Consumer protection and competition, for instance, would shift to the Federal Trade Commission. But rather than merely moving those functions from one part of the bureaucracy to another, the plan actually would have major implications.

Wheeler, shortly after leaving his post, said that such moves would be a way for companies to escape oversight, since the FCC has rule-making authority and the FTC does not. Moreover, such a drastic rule would require congressional approval.

“If by modernizing we are talking about defanging the FCC, there will never be bipartisan agreement on that,” says Gigi Sohn, who served as counselor to the chairman under Wheeler. She adds that such a move would raise the ire of the public as well.

Yet, independent of Congress, Trump could influence the FCC’s budget. An initial blueprint calls for big cuts to domestic spending, and a decrease in funding for the agency could impact how it enforces the rules on the books.

Talk of such a drastic overhaul has dissipated since Pai assumed the FCC chairmanship, and he has declined to say how he feels about such a plan.

Pai did say that he sees a role for the FCC when it comes to indecent content on broadcast TV, telling Fox Business Channel that the agency is “duty bound to enforce the law.”

Given the decade-long challenge to previous FCC efforts to crack down on fleeting expletives, which led to two trips to the Supreme Court, pursuit of such an agenda risks getting bogged down in First Amendment battles.

In short, Trump may have called for the FCC to crack down on foul language used against him during the campaign; in practice, like much of the FCC’s prospective agenda, it’s easier said than done.

Update: On Tuesday, President Trump renominated Pai to another five-year term. He will now face Senate confirmation.