The O’Rielly Factor - Broadcasting & Cable

The O’Rielly Factor

The newest FCC commissioner’s voice could help shape issues from regs to retrans to auction legislation
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Michael O'Rielly seems younger than a 20-year veteran of the congressional lists, with an earnest manner, a firm handshake and a tendency to look directly at you when he speaks.

And the recently minted FCC commissioner— sworn in last Nov. 4—appears still to be getting his sea legs, boning up on the myriad tough issues before the commission, including the IP transition and spectrum. But he promises to use his bully pulpit to make a difference once he has settled in.

Though he is new to the FCC, O’ Rielly is hardly a stranger to telecom policy. He was a House and Senate Republican staffer for most of those two decades and was in the room when the 1996 Telecommunications Act was being hammered out.

He calls it “disgraceful” that the FCC has not concluded its 2010 quadrennial media ownership review and reported back to Congress. And having been there when legislators drafted key provisions of the 1996 law, he also believes the FCC and the courts have gotten it wrong.

In his first Q&A since joining the commission, O’Rielly spoke with B&C Washington bureau chief John Eggerton about retrans, cross-ownership and more. An edited transcript follows.

Talk about the quadrennial media ownership review and the joint sales agreement item teed up for a vote at the commission on March 31.

I have deep reservations about the efforts underway to limit JSAs [joint sales agreements]. I have spent a lot of time reading the record, which shows that JSAs have been extremely beneficial to communities. Some broadcasters wouldn’t be able to produce local news and diverse programming without these agreements. And we are going to find a way to harm diversity and local news? It seems like a backward step, and I don’t see why we would spend our time doing this.

What about the other parts of the item, including the retrans proposal and not loosening any ownership regs?

I have to look closer at the retrans proposal [and other elements] and the underlying authority provided to the commission. My first obligation is the statute.

And on not loosening any of the crossownership regs?

I have a deep problem with that because, similar to [Section 706, requiring the FCC to report annually on whether broadband is being deployed to all Americans in a reasonable and timely fashion], I was there for 202(h) negotiations, and 202(h) [which created the biennial—then quadrennial—media ownership rule review] was meant to go one way. We wanted to put some things in statute to make the commission review its media ownership rules to reflect the current media marketplace. And 202(h) was intended to deregulate. But if it plays out this way, there will be new burdens and no relief.

I think the marketplace has changed. I want to be thoughtful about this. I think there is room to modernize our rules to reflect the current marketplace, but do it in a way that doesn’t harm localism, competition, diversity or the public interest. I think the commission can do this. It does require work. The commission here seems not to be doing the part it should be doing, and that is really harmful in my opinion.

You were involved in crafting incentive auction legislation. What would be your definition of a successful auction?

First and foremost, my obligation is to implement the statute correctly, which is trying to entice existing broadcasters to either channel share or give up their license or move from VHF to UHF, so we will free up spectrum for new wireless services. That is success. Can we entice broadcasters to even close an auction? What kind of spectrum are we actually making available so they can increase service?

But it is also to protect broadcasters that decide not to participate, that they are continuing to serve their market and are protected, and their service replicated as the statute requires. And unlike other auctions, this actually has a tie-in to revenue. Under the statute we are obligated to meet certain goals, trying to provide for FirstNet [the interoperable broadband network the Obama administration has budgeted at $7 billion]; we have deficit reduction numbers that are in the statute, NG911 and other things that are part of the equation for a successful auction. That is important to me. You have a number of members [of Congress] who think FirstNet will be very successful. I hope that’s the case.

We don’t have a great role in that here, but I did spend some time as the statute was being drafted. And so I am really interested in making sure we can try and meet our revenue targets.

OH, REALLY?

So, when O’Rielly is not regulating—or more likely, trying to deregulate— TV, what does he watch?

“I watch a wide variety of programming. I was joking with public broadcasters that I don’t watch a lot of public broadcasting, but my fiancée has me watching Rick Steves and his traveling of Europe. I happen to like a lot of programs on FX. I think Justified is one of the greatest shows on TV, and Archer. But I am also fond of How I Met Your Mother—we’re into the last three episodes.”

No House of Cards, the cynics’-eye-view of the Hill?

“I am behind on House of Cards, but I am about three-quarters through the first season. As someone who has spent a great deal of time in the Capitol and in politics, [I know] they do use their creative license well. There are a lot of things that are really interesting, but we never, ever would have considered [them] in my old job.”

The chairman has just announced his new take on network neutrality rules using 706 authority. What is your take on that approach and, if you could, give us a sense of what you think Congress meant when it gave Congress that authority?

First and foremost, I disagree with the court’s decision on the authority they believe 706 provides the commission.

Why is that?

As someone who was there in the room when the deal was struck on 706, and all the pieces actually—I was much younger and had fewer gray hairs—I have trouble, maybe, with what [recently] happened, but I remember those conversations. They are stuck in my brain because they were so important at the time.

I remember what the language on 706 looked like when it came out of the Senate and how we changed the language [in the House] and what our goals were.

And what were they?

Where I think the court erred, and where the commission erred—and hopefully at some point we will be able to turn back and get to the original intent—is that most people were comfortable with the language being read as congressional findings. It is very favorable language and does the best it can to say nice things about broadband, but gives no regulatory authority to the commission.

At worst, but at maximum, is you could use the language in a deregulatory manner. It would take you in only one direction. You couldn’t go the other direction. The absolute worst outcome is that the commission has gotten to the absolute opposite direction.

You have to put it in the context for when it was drafted. I know the courts don’t have that opportunity and I respect that. I disagree with their outcome, not how they have to analyze the situation. But, it was a Republican House and Republican Senate. We’re talking mid-1995. The hearings were in May and we actually signed it in February 1996. So, you’re talking less than a year after the election.

If people think the commission has broad authority to regulate the Internet in pretty much any manner it wants under an innocuous provision, I just find that hard to believe.

You have said you were concerned about regulatory spillover to edge providers.

I think there is ample evidence that content is king. You see that in other universes. He who has content has something that people want, and that’s a good thing, and you can figure out the market relationship for how to pay for that content and be able to service it. So I have always thought that the suggestion that the edge providers are always the weakest is a fallacy. Some of them are very strong companies. And that is good for America’s business.

Where I have trouble is when we believe that we need to help Google for some harm that hasn’t shown up yet. In very few instances has the commission been able to document something remotely akin to network neutrality violation if there was one. So, we are trying to regulate something we think might happen against providers who in most instances don’t need our help. That seems like something that can be addressed in the marketplace.

I’m willing to [see it] proved otherwise, but I haven’t seen it yet.

What about the recent linkage some are trying to make between network neutrality issues and Comcast’s peering deal with Netflix?

It is relatively new and I have not had a chance to study what the negotiation looked like. But my understanding is it has been portrayed as a paid peering arrangement. That has worked out in the marketplace in a number of settings. I’m interested in seeing how it plays out going forward. The chairman has even said on a case-by-case basis. So we will see what it looks like going forward. I don’t see a problem right now.

Should Internet Service Providers be able to block and discriminate?

I think that the question should be, do we believe any of those instances are going to happen. In my conversations, their practices are meant to be in the best interests of the consumer because they maintain revenue and business, so they try to serve consumers. They have no interest in blocking consumer’s access to websites. So I don’t see a scenario where they have that harm.

What about discrimination?

The use of the word discrimination is somewhat misleading and slanted. Network management, something most people would agree broadband companies need to do, is a reasonable and acceptable form of traffic discrimination. Based on my conversations and reviewing industry practices, I don’t see evidence that broadband providers discriminate against Internet traffic for competitive reasons, but rather that they do what is necessary to manage their networks to enable the best consumer experience. 

Let’s talk about mergers for a minute. Let’s say, hypothetically, that the FCC agreed to extend conditions from a former merger into the future, and expand them to another company to achieve various public interest goals, even laudable ones.

Well, I never talk about specific mergers. But I will say, in general, that I believe that if any merger should fall into the square boundaries of what is being applied for and when arguments are made that they should reach outside and grab different pieces that are unrelated to the merger, then that raises my red flag. I don’t know any particulars, but to the extent there are pieces that are unrelated, that runs into a questionable area.

So you have that challenge flag in your pocket?

You have to take each case as they come. There have been some instances, not in the current chairman’s term, but past lives where I have seen some mergers that I thought definitely had conditions that were way unconnected and unrelated to the merger and not helpful to what our job is here, which is what is in the four corners of our authority in the merger itself.

Is the broadband marketplace competitive?

It somewhat depends on how you define the broadband marketplace. Are you talking about residential or business; are you talking about fixed or wireless? That matters. In Washington D.C., and other metropolitan areas you have a number of fixed and wireless providers to choose from. In some parts of America you don’t have that. You have wireless in most instances but you don’t have a number of fixed wireline providers. In those instances that’s where the commission has tried to figure out how we get more broadband to those places where it doesn’t exist. We’re going to spend Universal Service Fund dollars trying to make that happen.

So, it depends on where you are talking about and what you are talking about.

The FCC has concluded in recent broadband reports that broadband is not being deployed on a reasonable and timely basis. Do you have issues with that conclusion?

I found the whole discussion about 706 very troubling. We already talked about how we got here. But to do a 180 for purposes of trying to find some scrap of a provision so they have authority, I disagree with. So, yes, I have difficulty saying [that] when we have a broadband market that is pretty dynamic and most people in the world envy, that is developing every day and companies are deploying and investing.

When would that [benchmark] be met? If not now, when is it ever going to get to that point? And even if we get to that point, we’ll just raise the speed [and say] “not everyone has a gig at their house. Not everyone has a gig to the garage.”

The H Block was the first of three auctions. Do you have any issues with the way that was conducted?

I don’t want to talk about that auction itself, but I have concerns any time an auction is less than pure in its use of market forces. Here, we’ve kind of manipulated the outcome for purposes that may be meritorious. They happened before I was here so I can’t judge all the details and factors that went into that. But I worry any time the commission manipulates an auction.

You used the phrase “stay strong for freedom” at the end of your nomination hearing and again at the end of your first FCC meeting. It had some people worried it was some kind of secret conservative Republican rallying cry.

It is not intended to being anything more than a simple, benign phrase. It started very innocuously when we were doing the reauthorization on the Internet Tax Freedom Act. There were a bunch of staffers and we were called the Freedom Corp. Part of that was we are moving the Internet Tax Freedom Act and we would always end the conversation with “stay strong for freedom” because freedom was Internet tax freedom. Move forward a little bit and I became legislative director for [former Sen.] John Sununu and I made my signature line on my e-mail to “Live Free or Die.” I took a lot of grief for that because it seems a little bit strong in terms of its directive. But it is the motto of New Hampshire and I was working for a New Hampshire member. Well, things being as they are, the 2008 election didn’t turn out exactly as I would have liked it or my boss would have liked it or a lot of people would have liked it. I was comfortable with disassociating myself with New Hampshire though I love New Hampshire, but at that time I was a little annoyed. And so I changed it to “stay strong for freedom,” or sometimes just “SSFF.”

It is not meant to be offensive to anyone or a hidden agenda. It’s a very innocuous line. And how could you not be for freedom? It’s what our nation was built on.

Justice just said in comments to the Supreme Court that whether a service like Aereo can ultimately get a blanket license to carry TV stations—a separate issue from whether it is now violating copyright—will have to wait for the FCC to define over-the-top providers. Shouldn’t the FCC be weighing in?

Truth be told, I haven’t had a chance to read the filing from DOJ. But I have spent a lot of time with what people now refer to as over-the-top. We called it IPTV. We called it lots of things through the years since probably 2005. I have spent a lot of time with these issues. I am sensitive to the innovation over-the-top providers might bring. I am excited about what they may be able to offer.

But doesn’t the FCC have to decide whether or not to apply MVPD regs to over-the-top since that is where the FCC is pushing video?

I’m not sure the commission is pushing video in any direction. In my time I’ve spent a lot of time on public safety and 911, so I haven’t seen the commission forcing video in that direction. I’m not sure we need to answer that anytime soon, but I’m willing to be convinced otherwise.

What is your view of how the FCC is handling the IP transition trials?

From what I can tell based on the conditions the commission imposed on those that might be interested it is about what I expected. There are not a ton of people applying yet. In the first round you have one and a half bidders. We don’t know what we are getting in the second round.

I have expressed my concerns that the conditions the commission imposed would probably deter applicants and we’ll see if I’m right.

You are in the minority, but your predecessor, Rob McDowell, was able to use the bully pulpit to stake out issues like the multi-stakeholder model of Internet governance, and getting the fairness doctrine off the FCC books, and Republican commissioner Ajit Pai got plenty of attention put on the Critical Information Needs study.

I congratulate Commissioner Pai and former Commissioner McDowell for their great work. I understand Rob McDowell is still working in that space and I think that’s great.

From my perspective, I will be active and aggressively pushing items. Understandably, I spent the first couple months getting my feet underneath me and hiring great staff and getting to meet with everyone and getting what I call a lot of firsts in the job. Meeting a lot of folks internally and externally, a lot of folks want to come and make their case to me. So, I have enjoyed that process. But I will be very aggressive in articulating my views.

The chairman has dropped the Community Information Needs study, but the FCC still has a charge from Congress and the courts to both promote diversity and weigh the impact of its rules on ownership diversity. What was your view of the tabled study and how should it go about gauging diversity?

Let me start with the second question first. I don’t see, and no one made a compelling case that the CIN study had anything to do with furthering the needs of the statute—whether the quadrennial review or the Sec. 257 review. [Every three years, the FCC has to gauge the market barriers to entry for small businesses and entrepreneurs.] The argument was that the study was supposed to address both those. I spent a lot of time on the statute working on those provisions and I don’t see where this study fit into those goals. I’m not sure of the value-added of that study from the get-go.

Legitimate concerns were raised that I agree with and at that point the ship had sailed on the study, and it should have been pulled and the chairman pulled it.

So, what do you do to gauge that interest? The Third Circuit has said the FCC will need to better justify any diversity initiatives, and the FCC has some proposed diversity studies that seem to have disappeared down a black hole.

Again, I don’t want to predict what a court is going to do and I don’t know how that is going to play out. I have been kind of frustrated by some of the past decisions. I have difficulty with Prometheus [which concerned media ownership rules] because, as I said earlier, the provision is supposed to be one way and the court said otherwise. And I just disagree based on my experience. They believe you can go both ways with it. And if that is the case, then you really haven’t done anything with the provision. If the FCC can go both ways, then that is something the FCC can do anytime and the provision is not necessary to be in the statute.

To the other part of your question, I don’t know how we meet the court’s demands. I don’t know how we get above that threshold and finally move forward in the court’s eyes. We haven’t been able to move forward in our own eyes and act on the 2010 [rules]. We are four years late. I think it is a violation of the statute. I think it is disgraceful. I think it is our obligation to end things as it was intended in the statute.

I don’t know how we are going to finish 2014 in 2014. That to me is extremely problematic.

If you could reform any FCC processes, what are the one or two that you think would be most helpful?

Our compliance with items we are obligated to do under the statute—things that we do a very poor job on.

Like what?

Our regulatory flexibility analysis, our cost-benefit analysis and our paperwork reduction analysis. Those things have been given short shrift over a number of years, and I think that is a disgrace. I think we have an obligation to do further study and analysis and more work in those spaces.

Are you at all worried about the process reform report’s disclosure proposal that some are interpreting as requiring groups who comment to identify who is funding them?

I am trying to read what the chairman put out. That is certainly one way to look at it. If that is the way it was intended, then I would have deep problems with that and I will articulate that at the right time.

Michael O'Rielly seems younger than a 20-year veteran of the congressional lists, with an earnest manner, a firm handshake and a tendency to look directly at you when he speaks.

And the recently minted FCC commissioner— sworn in last Nov. 4—appears still to be getting his sea legs, boning up on the myriad tough issues before the commission, including the IP transition and spectrum. But he promises to use his bully pulpit to make a difference once he has settled in.

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