The Obama presidency and the FCC, under Chairman Tom Wheeler, have been among the more activist and ambitious in recent memory. There have been some big victories — successful spectrum auctions, innovative spectrum sharing and 5G initiatives, the National Broadband Plan — and some acrimonious proposals, notably around network neutrality and cable set-top boxes. Justice has been a bit mercurial: opposing major consolidation in mobile and broadband (AT&T/T-Mobile, Sprint/T-Mobile, Comcast-Time Warner Cable), but allowing Charter’s acquisitions of TWC and Bright House and Comcast’s acquisition of NBC Universal.
In a few days, there will be a new President-elect and transition teams will begin strategizing for the post-January 20, 2017 world. What might be the impact of the election on comms and media regulation? I’ll start with a broad view and then drill down to a few of the more prominent items.
Of course, who is elected President will potentially have a significant bearing on tech. Hilary Clinton has a pretty detailed and well-articulated platform, with a particular emphasis on expanding broadband availability. She is likely to continue many of President Obama’s initiatives and priorities. If Secretary Clinton is elected, it is likely FCC Chairman Wheeler stays on until July or so. If she is true to form, expect FCC Commissioners and senior-level FCC staffing to take on a ‘FOC’ (Friends of Clinton, and by that I mean Hilary and Bill) flavor. On the other hand, President Clinton could signal intent to bridge gaps with the Republicans by ensuring a balanced FCC. The current FCC has three Democratic and two Republican commissioners, but the Democrats (especially Commissioner Rosenworcel) have not always been in lockstep with Chairman Wheeler.
If Donald Trump is elected, things are more of a wild card. To begin with, he has said little about this sector during the campaign and there isn’t much to glean from his policy platform. Trump is likely to be much more hands off than President Obama (who was very hands on). He will also be more pro-business and anti-regulation, which is why his off-the-cuff remark about the proposed AT&T-Time Warner deal was surprising. If he ends up being Delegator in Chief, his appointments could have an outsized influence.
What happens in terms of control of the House and Senate, as well as the overall post-election ‘tone’, will also be important. If the temperature remains highly acrimonious, there will be contention and delays in the naming and confirmation of senior staff. This could affect the process, prioritization, and timing of some big ticket items on the FCC’s docket. The FCC has a lot going on already. The AT&T-Time Warner deal will land at least partially on its plate, at minimum as an important litmus test for network neutrality.
Here is a quick run-down of some of the issues a new Administration is likely to face.
Network Neutrality — This is something President Obama strong-armed through the FCC. So far, the FCC been fairly hands-off in its application of NN. For example, allowing zero-rating services such as T-Mobile’s Binge On. The AT&T-Time Warner deal will be an important test, given AT&T’s current practice of zero-rating DTV content for AT&T subscribers and plans to do the same with the upcoming DirecTV NOW service. I think the FCC’s tone will continue to keep the application of NN at a high, “B to B” level. For instance, ensuring combined distribution and content companies (AT&T-Time Warner, Comcast-NBC Universal) do not discriminate against new media and OTT players (Netflix, Amazon).
Spectrum — There is a lot going on in the spectrum department right now. The new Administration is likely to inherit the 600 MHz auction – both its final rounds and its implementation. It’s a complex undertaking. Hot on the heels of that is the re-auctioning of DISH’s AWS licenses. The 3.5 GHz ‘shared spectrum’ (CBRS) initiative also has some important milestones hitting sooner rather than later, such as selecting and certifying the Administrators and coming up with an auction framework and other procedures. There is still some opposition to the FCC’s April CBRS Report and Order that the next FCC will have to address to keep this moving forward.
Another priority will be keeping the early momentum going on 5G. This is important from the standpoint of the US continuing its leadership in advanced wireless networks. A lot of innovation and work needs to happen to make the millimeter wave bands usable for commercial wireless services.
Broadband — The National Broadband Plan was one of the signature tech initiatives of the Obama presidency. Its implementation has been somewhat of a mixed bag. Broadband availability expanded and average speeds steadily improved. But there was also a lot of squandered money, the broadband market is not very competitive, and US average speeds are still very much middle of the pack.
A Clinton administration would be more likely to keep the broadband gravy train going. Fixed wireless/5G and deployment of large numbers of small cells will become a bigger part of broadband evolution over the next four years. The FCC’s Mobility Fund II, which is wireless’ version (and contribution) to the Universal Service Fund, is part of the equation, too.
Business Data Services — These are the FCC’s new ‘special access’ rules, which would impose price caps on what telecom companies can charge other companies or businesses for bulk data connections — often referred to as backhaul. The FCC is racing to get this done by the end of the year. BDS is important to the evolution of broadband and 5G, because bigger pipes are needed to deliver the capacity required by those services. Backhaul prices can be prohibitively expensive in un-competitive markets. If the FCC doesn’t vote on BDS by the Inauguration, its status could be in limbo and/or its proposed rules could be revisited.
Set-Top Boxes — The vote on this controversial Wheeler initiative to open up the set-top box market to competition has been delayed, after FCC commissioners could not come to an agreement. The FCC could try to get this done by the end of the year and before a new Administration takes power in January (although the expiration of Rosenworcel’s seat in December adds a tasty plot twist). But it is equally likely this will land in the new Chairman’s lap. The direction of the winter of 2017’s political winds, plus the new Administration’s having to deal with the AT&T-Time Warner deal, could affect the direction of this proposal.
M&A and Industry Consolidation — The approaching election has certainly been a factor in the accelerated pace of tech M&A activity during the second half of 2016. The new Administration will have to rather quickly deal with the proposed AT&T-Time Warner deal. This will be an important litmus test for future deals because it touches on many fractious issues that both the DOJ and the FCC will have to deal with more broadly: cross-ownership of assets, media consolidation, and the Internet’s impact on traditional distribution channels.
I also believe the wireless industry will revisit the consolidation issue early-ish in the new term. Sprint and T-Mobile could try again to get a deal done, or one of them could get acquired by a cable company. DISH is also a factor here.
Congress might be on hold between November and January, but the FCC still has a lot on its plate. From a tech industry perspective, Obama’s eight years were certainly active on the regulatory front, which no doubt angered those preferring a more hands-off public sector. But Obama’s initiatives, particularly with regard to broadband and spectrum, will be almost universally viewed as laudable. There is a lot—a lot—going on in our sector and, regardless of who wins on November 8, we will need some minimal level of government effectiveness to keep our fast-changing market moving forward.