Minority Report

In his first extensive interview as the FCC’s new GOP commissioner, Ajit Pai explains why government should get out of the way of innovation 9/10/2012 12:01:00 AM Eastern

In his first three
months at the Federal Communications Commission, Republican commissioner Ajit
Pai has shown himself to be a solid ally of senior Republican Robert McDowell
in promoting the marketplace and pushing against what they see as government
overregulation. And while he talks of the general comity of the commission, Pai
has already dissented on two votes.

0910 Washington Pai chart In his first sit-down interview since being sworn in last May, Pai talks with
conviction about government getting out of the way of innovation and
initiative-a passion he attributes in part to the example of his parents, who
immigrated from India. He has also outlined a bold vision for the FCC,
including process reforms-such as shot clocks on decisions-and a bureau to
speed approval of new technologies. For now, though, he must press his case
from a minority seat.

Pai also spoke with B&C Washington bureau chief John Eggerton about
speeding FCC efficiencies, his reluctance to put over-the-top providers in the same
regulatory boat as other distributors and why the "demise" of broadcasting is a
misnomer. An edited transcript follows.

With the FCC's focus on broadband, broadcasters sometimes feel like the
stepchild medium. How important is it to preserve a free, over-the-air service?

To paraphrase Mark Twain, the reports of the broadcasting industry's demise
have been greatly exaggerated. I think broadcasting continues to play a vital
role in communities across the country. On the television and the radio side,
consumers still draw tremendous benefits from broadcasting, and I think that is
something that will continue into the future.

I read some reports that I consider an artificial apposition of broadband and
broadcasting, but I view them as complements, not as rivals. I think there is a
place to reach going forward. I'm optimistic about the future of broadcasting.

What is your view of the FCC's current media ownership rules?

I start from the proposition that, whatever the rules are, they should reflect
the current state of the marketplace. I think it is indisputable at this point
that the marketplace has changed tremendously since 1975, when some of our
rules were adopted and still exist to this day without alteration. My goal is
to review the record and discern how the rules should be reformed, if at all,
to reflect changes to the marketplace- particularly on the newspaper/broadcast cross-ownership
rule. At this point, my inclination is to say that the synergies that can
result from cross-ownership would outweigh the potential harms.

We're told there will be an item on spectrum auctions at the September
meeting. What does the FCC need to do to get spectrum auctions right?

I think it has to first commence the rulemaking process. But it should also
make sure that the rules of the road are reasonably simple, easy to understand
and easy to administer from an agency standpoint. I also think the commission
should do outreach to stakeholders early and often, both to hear their views on
what they think we should do and to share our views on how we think the statute
has to be implemented. I think that open dialogue could make for a much more
successful auction. And last, the auction should be conducted by June 30, 2014,
which is an ambitious deadline according to some, but given the needs of the
marketplace, I think it is reasonable.

What should the FCC do about indecency now that the court has kicked it
back to you with this backlog of complaints?

After the Supreme Court's decision, which didn't reach the merits of the
commission's policy, I have called for the commission to address the backlog,
which is about 1.5 or 1.6 million. We have to adjudicate them. Congress has
told us, by statute, to administer the prohibition that they set forth for us
and we have to do that to the best of our ability. We have to tackle those

You don't control the agenda, but any sense of where the FCC is in the

I have not been briefed by [chairman Julius Genachowski's] office or the bureau
on where things are, but I am sure he is actively thinking about what direction
to go and when to do it.

You laid out a pretty comprehensive vision for the FCC. First, could you
give us the CliffsNotes version, and second, what can you do about it from a
minority seat?

With respect to the big picture, I would divide it into process and substance.
From a procedural standpoint, the agency needs to act with more dispatch,
especially in the context of a regulatory agency charged with overseeing one of
the most dynamic parts of the economy. I think the commission has to act at the
same pace as this industry, otherwise it risks inadvertently impeding
innovation and investment.

Competition won't happen if the commission acts with undue delay. So, the
commission should do what it can to act more quickly.

What can it do?

One way would be to use sunset clauses and setting deadlines for acting on
applications for review and petitions for reconsideration.

In terms of substance, No. 1 is spectrum-getting more spectrum into the commercial
marketplace and doing what we could to make the use of spectrum more efficient.
No. 2 is infrastructure investment, clearing out some regulatory barriers and
maximizing private sector incentives to develop and deploy next-generation

What do you do about the delays that are systematic to the FCC's
politics? For example, opening up a docket as a signal to the industry but with
no plans to close it?

I think there are a number of ways to deal with that. One way, as I said, is to
establish a deadline for commission action. That propels the agency, one way or
the other, to resolve the proceeding. Another way is analogous to the Supreme
Court cert process. If a bureau issues a decision and a party to that decision
seeks full commission consideration of an application for review, they can't go
to court until we act. One of the things I have proposed is that if the
commission doesn't act within 60 days, the decision of the bureau is affirmed
using the reasoning adopted by the bureau unless one commissioner objects, in
which case the full commission would review the matter and reach a decision.

That is a small procedural change, which by the way is consistent with the
Communications Act and the Administrative Procedures Act, that would allow us to
dispose of a lot of applications for review that may or may not be
controversial. At least it gives some sense of certainty to the parties in the
proceeding and to the general public, and it allows people to go forward.

I think there are things the commission could do that are not partisan or
especially politically controversial that could help us become more responsive
in closing these proceedings.

How do you work from the minority seat to convince others it's the right

Having an open dialog with the chairman and majority commissioners, as well as
with agency staff. One of the hallmarks of this commission- not just under the
current chairman- is it has a culture of openness and receptivity to new ideas.

The cert process, for example, is an idea that we got from [longtime Media
Access Project attorney] Andy Schwartzman. I have talked to the chairman
personally about it, and he seemed intrigued. That is a good example of one
[proposal] that doesn't redound to the benefit of one political party or even
one commissioner. And I think that's an area where we can work together to
establish new procedures to make the commission more efficient.

You have worked in the FCC's general counsel office. What are the FCC's
odds of defending the Tennis Channel decision, which has been stayed by a

I leave it to wiser minds like former general counsels to opine as to what is
going to happen in the D.C. Circuit. [Editor's note: Pai's chief of staff,
former FCC general counsel Matthew Berry, sat in on this interview.

My own position, as outlined in our joint dissent [with commissioner McDowell],
is that I took a look at the facts, and as best I could tell, no other major
MVPD carried Tennis Channel as broadly as Golf Channel or Versus. Therefore, I
didn't think that a discrimination finding could be sustained against Comcast
under [the program carriage rules]. So, I would have come out a different way,
but I guess we'll see what the court does.

So would one of the ways of speeding the FCC process be to come up with
more legally defensible decisions?

That is certainly one way to look at it. But I think on a lot of high-profile,
controversial issues one can legitimately go in this or that direction. So I
guess it is up to the lawyers in the general counsel's office to come up with
defensible legal strategies that will hold up in court. But I am not so sure
that plays as significant a role in the speed with which the commission acts.

My goal, and I think the goal of my fellow commissioners, is to reach the right
result. By and large, things operate around here on consensus. Well over 90% of
[votes] are unanimous. We try and reach the right result first, and ideally
that result is going to be consistent with the statue.

You talked in your confirmation hearing about revisiting the Cable Act.
What needs revisiting?

That question has to be directed to Congress. It is a matter for legislative,
not administrative, discretion, but a lot of folks in Congress and the industry
have said the marketplace has changed, and not just in the cable context.
Convergence is a reality, not an abstraction as it was 20 years ago [when the
Cable Act was passed]. Whether and how to change the Cable Act or the
Communications Act more generally to account for the changing marketplace is
something they will have to consider, if not in this Congress then future

Should the FCC take action in the open retrans docket? And what should
you do?

This is one area where the commission's authority is somewhat circumscribed. We
have authority to enforce good faith negotiations between parties, but beyond
that the statute doesn't give us tremendous latitude.

In the docket, the FCC suggested coming up with clearer standards for what is
or isn't negotiating in good faith would be helpful.

To the extent the commission has such authority, and doing so would provide
more guidance to the parties-and hopefully avoid some disputes or resolve them
more quickly-that is something I would be open to considering.

What should the definition of an MVPD be?

That is an open question, as you know. I start from the premise that
over-the-top distribution has been of tremendous benefit to consumers. I think
it has entered the marketplace in a way that could not have been anticipated to
this extent even five years ago. So as a general matter, I don't think the
commission should erect artificial barriers that are going to prevent
innovation. That said, I haven't made a firm decision as to how over-the-top
distributors should be classified.

In the context of a concrete proposal. I would have to study the record.

Do you have any concerns about the FCC's authority if it starts applying
carriage or access rules on over-the-top? Isn't that getting into content
regulation of the Internet?

That is certainly one of the issues I would have to consider in the context of
a fully developed, concrete proposal.

You tweeted a picture of yourself with Rep.-now VP candidate-Paul Ryan.
What was that meeting about?

I met with Congressman Ryan a month ago to talk about ways this agency, working
collaboratively with Congress, could create a regulatory framework that could
maximize incentives for job creation and economic growth, which is something
very high on his agenda. I listened to his views on what Congress is hoping to
do with respect to broader economic questions.

I found him to be very engaging, very bright, and very well-versed in all these
issues, and extremely personable. I think those qualities will serve him well
in whatever capacity he finds himself in in 2013.

You also tweeted
pictures of yourself at the Google and Netflix offices?

When I was out in Northern California about a month ago, I
wanted to visit a broad cross-section of companies to get a sense of what
drives innovation and investment in that industry and what the FCC could do to
facilitate that. So I visited those and other companies, including Apple and

At Google, we focused on spectrum, on different spectrum
possibilities and getting more commercial spectrum into the marketplace. They
also displayed some of the new technology, including the Google glasses. Which
on the right side of the lens shows a virtual world that would react in real
time as you looked up and down and I think would eventually include a browser.
It also has a video camera and a static camera.

At Netflix, it was looking at changes in the content
distribution market, in particular their Open Connect proposal.

You have talked
about FCC reform, and strike us as someone who favors less bureaucracy. But you
have proposed creating a new Office of Entrepreneurial Innovation.

What I have proposed is repurposing a current office, the
Office of Strategic Planning and Policy Analysis and focusing it on
entrepreneurship and innovation. So, OEI would focus on getting services and
products that have to be approved by the commission into the commercial
marketplace more quickly.

It would also focus on making sure that other regulatory
proposals being considered don't stand in the way of innovation and investment,
so it would have input, ideally, on a broad range of rulemakings, [meaning]
that whatever the commission was thinking about doing was pro-competitive.

So it is not a new
regulatory silo, but an attempt to break down some of them?

Ideally within the statutory constraints that we operate
under, it would do exactly that, so in an era of convergence, it would make
sure we were being as pro-competitive as we can. It wouldn't have any net
positive budget impact. It would be an existing office, with existing staff
from the wireless bureau and the Office of Engineering and Technology contributing
their expertise.

You are the first
Indian-American commissioner. Is that something that you celebrate?

People are free to talk about it if they want. It didn't
even occur to me until one of the commissioners mentioned it at a public
meeting. But, yes, I guess I do draw pride in it-not so much from the macro perspective
but from the micro perspective. My parents came to the U.S. with very little
other than the ambition to work very hard and a medical school education. Every
day when I come to this job and many of the jobs I have had in my career, I try
to think about: What can I do to make them proud and be worthy of the sacrifice
that they made? It is very gratifying.

Does your parents'
work ethic and sacrifice inform your political philosophy about getting
government out of the way of entrepreneurship and initiative?

Absolutely. Their approach to life is that when an
opportunity presents itself, you should work as hard as you can to take
advantage of it. They encouraged me from an early age, whether it was playing
the violin at age 5, or entering the spelling bee in fourth grade*, or applying
to colleges [Pai graduated from Harvard] and even beyond. They have already
encouraged me every step of the way. I take the same approach as a general
regulatory matter that if we remove some of the regulatory barriers to
opportunity, risk takers in the private sector will take advantage of it and
deliver cutting-edge technologies and services.

* Pai says he won the
fourth-grade bee, though not the school-wide contest, which he went on to win
in seventh grade.

E-mail comments to
jeggerton@nbmedia.com and follow
him on Twitter: @eggerton

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