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Minority Report - Broadcasting & Cable

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
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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.


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.

0910 Washington Pai chart


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 complaints.

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

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 networks.

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 path?

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 court?

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 Congresses.

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 Mozilla.

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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