McDowell, Genachowski Trade Letters On FCC Reform

Call for financial and ethics audits of FCC and "related entities"

FCC Commission Robert McDowell has renewed his call for a financial and ethics audit of the FCC and "related entities," including the Universal Service Fund, as well as suggesting the FCC needs to look more closely at its contracting process and a regulatory fee-collection process that he says might have overcharged by $20 million over the past couple of years.

That came in a letter to FCC Chairman Julius Genachowski dated Monday, July 20.

For his part, Genachowski in response said he would be glad to work with the commissioner. He also said he had already charged Mary Beth Richards, special counsel for FCC reform, as well as the agency's general counsel and managing director, with performing a "thorough review of the FCC's existing processes and to make recommendations for improvement and reform."

In his letter, McDowell made numerous recommendations for FCC reforms, pointing to Genachowksi's pledge for a more open and collaborative commission. McDowell offered up some similar suggestions in a Jan. 29 letter to then newly named acting Chairman Michael Copps.

McDowell likened the proposed audit to Genachowski's recent request for a review of the FCC's safety preparedness. McDowell said he would "envision the audits as an examination akin to a due diligence review of a company as part of a proposed merger or acquisition."

He suggested seeking public comment as well as allowing commission employees to file comment anonymously.

McDowell said that it was "critical" to make a review of the FCC's contracting process part of that review, saying the FCC should consider a full commission review of significant contracts or "other large transactions."

The commissioner said the FCC should also look into the possible overcharging for regulatory fees of $10 million per year over the past two years, and as much as $25 million more in administrative fees after McDowell said the commission has already fully funded its operation via those regulatory fees.

In his response to McDowell--both letters were made public Tuesday--Genachowski said he had begun meeting with managers in all the FCC's bureaus and offices to get ideas on retooling the agency. He also said an internal web site, had been launched internally to solicit reform ideas from all FCC staffers. He said the site would eventually be public so that everyone could weigh in on reforms.

The chairman also said that the review by Richards and company would address the issues McDowell identified in his letter.

Those included updating the FCC's strategic plan, possible reorganization and restaffing of the agency, better external communications including publishing meeting dates several months in advance, and building better relationships with other parts of the government, particularly in consumer protection, homeland security and technology.

The tone of both letters was cordial. McDowell praised Genachowski for the steps he had already taken to rebuild the agency. In turn, the chairman thanked McDowell for his "willingness to work collaboratively to improve the FCC's ability to meet its statutory mandate and to serve the American people.

The American Cable Association praised McDowell for taking aim at the regulatory fee issue.

"ACA agrees with Commissioner McDowell that the FCC needs to reform its regulatory fee methodology," said ACA President Matthew Polka in a statement. " Small, independent cable operators are staring at large increases this year if the agency sticks with the status quo. Moreover, cable operators have historically paid higher per-subscriber regulatory fees than satellite providers despite the fact that the two entities compete against each other for the same customers.

ACA asked the FCC In 2008 to fix the disparity betweenen cable and satellite operator fees by adopting a uniform, sub-based fee sytem.

“If the FCC is overcollecting from regulatory fee payers by more than $10 million a year, then why is the agency continuing to seek higher regulatory rates, particularly on smaller providers who will play a vital role in deploying broadband to areas in need?" said Polka.