Chairman Pai’s Leadership a Refreshing Change for Small Businesses
By SBE Council at 10 February, 2017, 10:44 am
“Federal regulations have a disproportionate effect on small businesses — businesses that are often the linchpin of a more competitive marketplace and that don’t necessarily have compliance resources. Accordingly, I believe the FCC should be sensitive to the impact regulations can have on such businesses.” – Ajit Pai, Chairman, Federal Communications Commission, January 27, 2017
by Raymond J. Keating-
Positive change is under way at the Federal Communication Commission (FCC) under the leadership of its new chairman, Ajit Pai, and these changes show recognition of the simple fact that being pro-free-enterprise means being pro-consumer. Chairman Pai’s early reform moves demonstrate that he has a keen awareness that actions taken by the FCC can have a profound affect on the many entrepreneurs and small businesses that dominate, or innovate within, the telecommunications industry and digital economy.
Unfortunately, straightforward facts of economic life seemed to evade the previous FCC chairman, Tom Wheeler, while continuing to elude assorted elected officials and other regulators who have some very strange ideas as to what it means to be pro-consumer, pro-entrepreneur, and pro-innovation.
Internet Regulation vs the Telecommunications Act
In 2015, for example, Wheeler and his supporters apparently thought it would somehow be good for consumers to regulate wired and wireless broadband networks as if they were utilities under Title II of a law passed in 1934. The fact that such law was meant for a long-gone Ma Bell telephone monopoly, not the dynamic, ever-changing, competitive 21st century Internet, did not matter. Nor did it matter that there was no problem in the marketplace that needed to be fixed by government intervention.
Nor did the fact that such a regulatory grab by the FCC clearly went against the last piece of major telecommunications law passed by Congress (in the House by 414 to 16 (with 236 Republicans and 178 Democrats voting in favor), and the Senate by 91-5 (with 51 Republicans and 40 Democrats voting in favor), and signed into law by President Bill Clinton, which just happened to occur 21 years ago on February 8th.
The clear objective of the Telecommunications Act of 1996 was, as stated in the legislation, “To promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies.”
The FCC, under the leadership of Mr. Wheeler, missed or ignored the critical point that claiming the power to regulate pricing, business models, and so on would negatively impact small businesses, investment and innovation, and misallocate resources, in telecommunications.
Zero Justification for Investigating Free Services
And then there was a recent investigation launched by the Wheeler FCC of wireless providers AT&T, T-Mobile and Verizon. Known as zero-rating plans, these companies had the nerve to offer free streaming and downloads that do not count against data limits. So, in the name of protecting consumers, the FCC was stepping in to investigate and likely stop businesses from offering consumers lower prices. Free was somehow bad for consumers. Like I said, some very strange idea as what it means to be pro-consumer.
A New and Aware FCC Under Pai’s Leadership
Fortunately, early FCC actions by Pai point to a dramatic and welcome shift in telecommunications policymaking at the FCC.
Protecting Small Business. Pai’s first order as Chairman focused on entrepreneurs and the many small businesses and entities that deploy internet service throughout the United States. To the cheers of the small business community, his first order on January 27 extends the protection provided to small businesses against a burdensome reporting requirement embedded within the controversial net neutrality rulemaking. This protection, or exemption from compliance, had lapsed. Pai’s order mirrors SBE Council supported legislation that passed the House on January 10 (by unanimous consent), sponsored by Energy and Commerce Chairman Greg Walden (R-OR). As noted by Pai in a media release on the order:
“That lapse left thousands of our nation’s smallest and most competitive Internet service providers—mom-and-pop wireless Internet service providers (WISPs), small cable operators, municipal broadband providers, electric cooperatives, rural telephone companies, and others—worried that they would be subject to unnecessary, onerous, and ill-defined reporting obligations…Federal regulations have a disproportionate effect on small businesses — businesses that are often the linchpin of a more competitive marketplace and that don’t necessarily have compliance resources. Accordingly, I believe the FCC should be sensitive to the impact regulations can have on such businesses.
The order circulated by Pai would extend protection from enhanced transparency reporting requirements for small businesses (with no more than 250,000 subscribers) for an additional five years. A vote on the order is scheduled during the FCC’s open meeting on February 23, 2017.
Focus on Investment and Consumers, Not Regulatory Micromanagement. The new FCC has closed the investigation of the zero-rating plans offered by telecommunications providers. In his statement, Pai said, “These free-data plans have proven to be popular among consumers, particularly low-income Americans, and have enhanced competition in the wireless marketplace. Going forward, the Federal Communications Commission will not focus on denying Americans free data. Instead, we will concentrate on expanding broadband deployment and encouraging innovative service offerings.”
Well, how refreshing. That’s actually pro-consumer. And keep in mind that millions of small businesses as consumers are among the beneficiaries of such a shift in policy.
Transparency and Accountability. Pai has taken other positive, early reform steps. One is to bring greater transparency to the issues that the FCC is considering. As noted in a release, it was explained:
“FCC Chairman Ajit Pai today announced a pilot program designed to dramatically increase the transparency of Commission rulemakings. For the first time, the Chairman is releasing to the public the full text of documents he circulated to his fellow Commissioners for a vote at the FCC’s next Open Meeting on February 23. Traditionally, these documents, and the draft proposals contained therein, are circulated internally three weeks before an Open Meeting, but are not made available to the public until after the final vote.”
Other reforms being moved by Pai include reining in the “editorial privileges” of FCC staff who may go beyond making technical text changes to orders or proposals drafted during FCC meetings; ensuring that any consent degree settled by the Enforcement Bureau must now receive a vote by the full commission; plain English documents that outline proposals so that the public can actually understand them; substantive edits made to proposals between meetings must be proposed by commissioners not staff; and, unlike the previous Chairman, Pai will respect other commissioners by sharing matters with all commissioners before briefing the press or publishing a blog on such matters to be voted on at the FCC’s monthly meetings.
Midnight Regulation. Chairman Pai also announced the rolling back of assorted midnight regulations imposed by the outgoing administration. As Pai explained: “In the waning days of the last Administration, the Federal Communications Commission’s Bureaus and Offices released a series of controversial orders and reports. In some cases, Commissioners were given no advance notice whatsoever of these midnight regulations. In other cases, they were issued over the objection of two of the four Commissioners. And in all cases, their release ran contrary to the wishes expressed by the leadership of our congressional oversight committees. These last-minute actions, which did not enjoy the support of the majority of Commissioners at the time they were taken, should not bind us going forward. Accordingly, they are being revoked.”
The Regulatory Obsessed Still Don’t Get It
As for the matter of regulating the dynamic 21st Century Internet as if it were a 1930’s copper telephone monopoly, assorted politicians remain intent on supporting such obsolete and costly measures.
At a recent press conference, as reported by TheHill.com, Senator Edward Markey (D-MA) served up some 1930’s rhetoric: “The big broadband barons and their Republican allies want to turn back the clock and make big cable and big cellphone companies the gatekeepers for internet access.”
Senator Markey seems to have missed the fact that innovation, choice and competition have flourished throughout the telecommunications and Internet sectors due to a light regulatory touch by government. Entrepreneurs and innovators are responsible for the dynamism and amazing services and technologies it spawned.
As SBE Council has noted in countless comments over the years to the FCC and Congress, the telecommunications sector is overwhelmingly populated by small businesses – 83.1 percent of employer firms in telecommunications have less than 20 workers and 94.8 percent less than 100 employees. Small businesses also benefit from innovation and investment in broadband as content providers, and as consumers.
Unfortunately, Markey misses the essential point that broadband companies must work to serve both consumers and creators of content and services in order to succeed. Today’s telecommunication market is nothing like a monopoly electric or telephone company of the 1930’s.
Meanwhile, FCC Chairman Pai simply declared: “I favor a free and open Internet, and I oppose Title II.”
That’s statement is fully pro-entrepreneur and pro-consumer. Let’s hope that the absurdity of regulating dynamic, competitive broadband providers like they are 1930’s monopolies comes to a quick end, and that all commissioners embrace the refreshing openness and respect for small businesses and entrepreneurs that Chairman Pai has quickly brought to the FCC.
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP: The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.