STATEMENT OF COMMISSIONER ROBERT M. MCDOWELL FEDERAL COMMUNICATIONS COMMISSION BEFORE THE SUBCOMMITTEE ON COMMUNICATIONS AND TECHNOLOGY COMMITTEE ON ENERGY & COMMERCE UNITED STATES HOUSE OF REPRESENTATIVES MAY 13, 2011 Thank you, Chairman Walden and Ranking Member Eshoo, for inviting me to join you today. As you know, Congress created the FCC in 1934, almost 77 years ago. In that year, Babe Ruth signed a contract for an “eye-popping” $35,000 a year. Donald Duck made his movie debut. The average new house cost less than $6,000. The entire federal budget was only $6.5 billion. And a gallon of gas cost 10 cents. How times have changed. Although a few amendments have been made to the laws the Commission operates under since then, many of the regulatory legacies from 1934 remain in place. The technologies we take for granted in today’s communications marketplace were unimaginable to even the most creative of science fiction writers when existing mandates were written. Against this backdrop, it is fitting for this Committee to examine ways to reform the FCC to make it more efficient and relevant to modern realities. I operate under the philosophy that Congress should tell us what to do, and not the other way around. Given your solicitation of suggestions, however, I will start by raising several possible statutory changes to improve the FCC before moving on to possible procedural reforms. Twenty-first Century consumers want to have the freedom to enjoy their favorite applications and content when and where they choose. Whether such material arrives over coaxial cable, copper wires, fiber or radio waves is of little consequence to most consumers so long as the market’s supply of products and services satisfies demand. Legacy statutory constructs, however, have created market distorting legal stovepipes based on the regulatory history of particular delivery platforms. While consumers demand that functionalities and technologies converge, regulators and business people alike are forced to make decisions based on whether a business model fits into Titles I, II, III, VI, or none of the above. As Congress contemplates FCC reform, it may want to consider adopting an approach that is more focused on preventing concentrations and abuses of market power that result in consumer harm. Other statutory changes could include modernizing the Sunshine in Government Act to increase our efficiency and spirit of collaboration while preserving openness and transparency. Furthermore, ideas from outside the Commission also deserve serious consideration. For instance, Randy May, President of the Free State Foundation, has called for building on the deregulatory bent of Sections 10 and 11 from the Telecommunications Act of 1996 by adding an evidentiary presumption during periodic regulatory reviews that would enhance the likelihood of the Commission reaching a deregulatory decision. Additionally, various statutory provisions require the Commission to file annual reports on various topics; such as, the Wireless Competition Report, 1 Satellite Competition Report, 2 Section 706 Report, 3 and Video Competition Report. 4 As you would imagine, preparation of each is a monumental and costly undertaking. I would respectfully propose that, rather than requiring that the Commission submit these reports annually, Congress might consider amending the Act to require biennial submissions. For example, filing each sometime within the first quarter of odd- numbered years would allow each incoming Congress to have fresh data at hand for any possible legislative considerations. Moreover, this amendment would remove the Commission from what sometimes seems like perpetual reporting mode. 1 See The Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103-66, Title VI, § 6002(b), amending the Communications Act of 1934 and codified at 47 U.S.C. § 332(c). 2 See Pub. L. No. 109-34, 119 Stat. 377 (2005), which amended the Communications Satellite Act of 1962 and is codified at 47 U.S.C. § 703. 3 See 47 U.S.C. § 1302(b) (2010). Section 706 of the Telecommunications Act of 1996, Pub. L. No. 104-104, § 706, 110 Stat. 56, 153 (the Act), as amended in relevant part by the Broadband Data Improvement Act, Pub. L. No. 110- 385, 122 Stat. 4096 (2008), codified in Title 47, Chapter 12 of the United States Code. See 47 U.S.C. § 1301 et seq. 4 See Pub. L. No. 102-385, 106 Stat 1460 (1992). Congress imposed an annual reporting requirement on the Commission in the Cable Television Consumer Protection and Competition Act of 1992 (“1992 Cable Act”) as a means of obtaining information on “the status of competition in the market for the delivery of video programming.” See also 47 U.S.C. § 548(g). 2 With respect to procedural ideas, almost two and a half years ago, I sent to my colleague then Acting Chairman Mike Copps, a public letter detailing some ideas to improve our agency’s effectiveness. He and I agree on many reform ideas, such as modernization of the cumbersome and outdated “Sunshine” laws that prevent more than two of us from discussing Commission business outside of a public meeting (as noted above). Shortly thereafter, in July of 2009, after Julius Genachowski became a Commission colleague as well, I sent him an updated letter with additional ideas and suggestions within existing statutory constructs. Time does not allow me to enumerate all of them, so I have attached both letters to this testimony, and I respectfully request that they be made part of the record. I am delighted to report that some reforms have already been implemented. For example, many stale or ill-advised Commission action items awaiting votes contained on what we call the “circulation list” have been weeded out. A portion of the backlog of the 1.4 million broadcast indecency complaints that were defective on their face has been dismissed. Several of those complaints were older than some of my children, by the way. The FCC now relies more on electronic internal communications rather than paper deliveries. That seems fitting given our agency’s mission and name. And a beta version of a new website has been launched. I encourage anyone with an interest in communications issues to take it for a test drive and post your constructive suggestions and comments. Going forward, I’m hopeful that other FCC reform suggestions will be carried out as well. • I have long called for a full and public operational, financial and ethics audit of everything connected to the FCC, including the Universal Service Administrative Company (USAC). The erroneous payment rate in the High Cost Fund alone has been far too high, and we may need to make fundamental changes to fix the 3 problem. Only after a thorough due diligence review, however, will we have the information needed to make an accurate diagnosis. • Chairman Genachowski has made good progress on ensuring that notices of proposed rulemaking contain actual proposed rules. I applaud his efforts. I would encourage improving the process further by codifying this requirement in our rules. We would all agree that future Commissions, not to mention interested parties, would benefit from the certainty associated with making this change permanent. • The Commission should include proper market power analyses to justify new rules in notices of proposed rulemaking. If a market power analysis is not appropriate, the FCC should explain why. • When regulated entities are under scrutiny for alleged violations of our rules, such as broadcasters being investigated for airing indecent material, often they are not notified in a timely manner of the investigation or its effect on other matters before the Commission, such as license renewals. Similarly, entities are not always informed of when they have been cleared of wrong-doing. More transparency and better communication in this area would not only be a matter of appropriate due process, but good government as well. • To promote collegiality and efficiency, we could improve the productivity of all commissioners’ offices by routinely sharing options memoranda prepared by our talented career public servants. All commissioners should be able to benefit from the same advice and analysis enjoyed by our many chairmen over the years. Perhaps we could call this our “No Commissioner Left Behind” program. 4 • Both the procedural and substantive work product of the FCC’s transaction reviews are in dire need of reform. The Commission should not impose conditions that do not narrowly cure consumer harm arising directly out of the transaction. In the same spirit, the FCC should honor its 180-day merger review shot clock. • Taking a cue from our colleagues at the Federal Trade Commission, the National Labor Relations Board, the Equal Employment Opportunity Commission, the Federal Energy Regulatory Commission, and the U.S. Commodity Futures Trading Commission, the FCC should post its annual budget, performance and accountability report on the FCC website in a conspicuous manner. Easy access to our budget, the results of our regulatory actions and our financial performance would demonstrate to Congress and the public how the FCC accounts for the resources entrusted to it. Investors receive annual reports from mutual funds and companies in which they invest. There is no reason why the taxpayer should not have access to the same from government agencies. • Last but not least, we should constantly examine the FCC’s assessment of fees. The good news for the American taxpayer is that the FCC earns its own keep through the collection of fees, fines and auction revenues. The bad news is that the Commission has a history of collecting more in fees than its budget requires. This “tax” of sorts is ultimately paid for by American consumers. Many more ideas abound, and I look forward to discussing with you all suggestions. Thank you again for the opportunity to appear before you today. 5 6 Exhibit A Letter from FCC Commissioner Robert M. McDowell to FCC Acting Chairman Michael Copps (January 27, 2009). Letter from FCC Commissioner Robert M. McDowell to FCC Chairman Julius Genachowski (July 20, 2009).