In terms of policy and regulation, the media and communications sector stands at a unique moment. The FCC has an aggressive agenda before it that includes opening up the set-top box market, reforming the business data services market, implementing a new privacy regime and possibly concluding the 600 MHz spectrum auction. Given that Republican President-elect Donald Trump is set to be sworn into office Jan. 20, 2017, Democratic FCC Chairman Tom Wheeler has limited time to act.
Ahead of this historic moment, S&P Global Market Intelligence spoke with Robert McDowell, who recently joined Cooley LLP as a partner in its Washington, D.C., office and who will be co-leader of the firm's global communications practice. McDowell previously served as a Republican commissioner on the FCC between 2006 and 2013. What follows is an edited transcript of that conversation.
S&P Global Market Intelligence: Some people, from both inside and outside of the FCC, have argued that the commission has become more partisan in the last few years. Do you think that's true?
 Cooley LLP partner Robert McDowell Source: Cooley LLP |
Robert McDowell:
There have also been complaints, especially from certain members of Congress, that there needs to be more transparency at the FCC. In particular, FCC Chairman Tom Wheeler has been criticized for providing only fact sheets on revised proposals rather than releasing the full text. Do you think the commission has indeed become less transparent over the last few years?
I think the debate is whether the FCC is issuing orders that substantially resemble the initial proposed rules on which it sought public comment. The fact sheets coming out are certainly helpful if they offer insight into what the majority of the FCC is thinking. But if the outcome is not similar to what was proposed, that's going to raise a lot of process and fairness questions in the minds of many. Having said that, it's virtually required that if someone is unhappy with an FCC order, that they cite the process as a concern in their court appeal. And it's a criticism that you see from both sides of the aisle. When Republicans are in charge of the FCC, Democrats say there's not enough transparency. And when Democrats are in charge of the FCC, Republicans say there's not enough transparency. And sometimes, they're correct.
The FCC still has a fairly hefty agenda ahead of it for the rest of the year. What are the issues you are most closely watching?
Certainly the spectrum auction and then the implementation and enforcement of the privacy order, as well as the net neutrality rules under Title II.
In terms of set-top boxes, have you been following that issue as well? Is it something that you think Wheeler will be able to get done in the next few months?
To a certain degree. It's a point of conflict for a variety of business interests. So I think it will be something we will talk about for years to come just because there are so many interests involved. And more than that, there are a lot of highly complex technical issues that are left unanswered here. I worked the CableCARD issue — now called the set-top box issue — when I was a commissioner and a lot of it boiled down to: What is the state of the art? Can it work? And how do you get it to work?
The idea was to try to spark the cable industry to develop downloadable security. From a cost perspective and a security perspective and for the ease of consumers, downloadable security would help solve a lot of these business conflicts and public policy conundrums. But then there are some other things that have been rolled into it, like copyright issues and things of that nature. That's causing a northern California and southern California split between the tech companies in Silicon Valley and the studios in Los Angeles.
So there are a lot of different dynamics at play, and it is very difficult for the government to mandate some sort of technical standard. If it were to try to do so, by the time it formulated one, it would be obsolete by the time it got to market. You want to make sure you are not freezing in place the state of the art today that we would have to live with five or 10 years from now. You also have to ask whether the market would be able to resolve a lot of these issues. Given the whole dynamic of over-the-top and people shaving the cord, there are a lot of competitive threats to the traditional cable business model to begin with. The question is: Does that maybe obviate the need for a new set-top box regulatory regime when people are watching their video on a tablet through an app? So there's a lot of big questions here. And if the FCC wants to continue in this space, it will have to keep coming up with answers to these complicated questions because this landscape changes by the minute.
The future of the Open Internet order is looking pretty uncertain at this point. Do you think it should be eliminated?
The FCC has been putting a lot of regulations on ISPs, and there's a debate over whether that actually inhibits capital expenditures and broadband deployment. Part of what I do for a living is answer questions from investors — from venture capitalists to private equity firms to hedge funds to sell-side analysts — and they all want to know how much this regulation affects investment. It's too early to tell for sure whether or not Title II in particular is inhibiting some risk taking, but it's definitely a question I get almost every day. So that uncertainty alone has an effect on the marketplace.