Conflict and Compromise Await New Congress in Telecom, Media, Tech

A new era of American history begins when the 116th Congress convenes in January 2019 with one of the most partisan classes in modern history. Depending on which side of the aisle they sit, the members’ mission will be either to balance the ship of state or continue full steam ahead. 

Conventional wisdom suggests there will be conflict. Optimists hope there will be compromise. The reality will be somewhere in between as the new Congress will have the opportunity to forge a unified path on things that matter to all Americans. With so many pressing policy issues facing the republic — immigration, healthcare, homeland security and more — it is a stretch to think telecom, media and technology (TMT) issues will top the agenda or lead the day.

But we know there will be several big issues in communications that will drive attention and action from the Commerce Committees of both Houses of Congress. Here are a few: 

FCC Oversight: Chairman Ajit Pai’s FCC has had the luxury of playing softball with House and Senate Republicans for the last two years. With a few exceptions, congressional leaders have not micro-managed the proceedings of the FCC, allowing the agency to pursue its own course.

All of that will change with Rep. Frank Pallone (D-N.J.) taking the gavel at the Energy and Commerce Committee. Pallone and Pai do not see eye to eye on most of things, and Pallone will be looking to make up for lost time in the minority. Everything from net neutrality, media ownership, privacy regulation, consolidation and spectrum will be on the oversight agenda. And Pai will find himself in the uncomfortable and unfamiliar position of having to justify his actions, rulings and procedures as part of heightened congressional oversight.

If nothing else, this will have the effect of diverting attention from the agenda to complying with congressional mandates. It also will arrest the deregulatory momentum Pai has gained since taking the chair. Obama-era FCC chairman Tom Wheeler will attest that responding to inquiries, letters, hearings, requests for documents and the other tedium of congressional oversight requires the FCC to devote a lot of time, talent and other resources. This leaves little room for senior officials to do much else, let alone advance deregulation.

Telecom: The dominant issue will be 5G. With AT&T, T-Mobile and Verizon Communications all vying for the title of first, fastest and best to market, there will be no shortage of activity to advance the fifth generation of wireless telecommunication services. This invariably involves policy debate on spectrum use and availability, along with the Internet of Things (IoT). 

Whether Congress is prepared to take on the future of wireless services in what promises to be a contentious two years is anybody’s guess. But with the global race for dominance and the U.S. already behind, 5G is a compelling area for congressional interest, if not involvement.

Closely tied to the future of 5G is the proposed merger of wireless firms Sprint and T-Mobile. Among its benefits, the companies cite a nationwide buildout of a true 5G network. But the 5G component of the merger is not likely to be the sticking point. The merger faces headwinds from a united front of consumer groups — Common Cause, Public Knowledge and Consumers’ Union — along with Dish Network, Altice USA and a few others who have long currency among congressional Democrats. Local governments have expressed opposition and the red herring of foreign ownership has also raised its head at a time when nationalist sentiments are strong.

In the end, the final decision will depend more on how the Department of Justice sees the market than the noise at the FCC.

On this point, it has become increasingly more difficult to read the DOJ tea leaves, simply because the administration’s antitrust policy is inchoate. Prior to its forceful reaction to the AT&T-Time Warner merger, the Antitrust Division played by a well-worn rule book, which would have allowed vertical mergers. But all of that has changed, so a horizontal tie-up such as Sprint-T-Mobile could face an even tougher rationale.

One bright spot in telecom has been the Congressional appreciation for spectrum. As a scarce, government-owned resource, spectrum commands not only big bucks in the commercial market, but it also contributes nicely to the U.S. Treasury. Auctions have become reliable sources of found revenue for Congress, and that is not likely to change anytime soon. With midband and high band spectrum auctions on tap, we should expect the Congressional appetite to grow unrequited.

Media: Broadcasters found a friend in chairman Pai, who reinstated the UHF Discount, brought back the non-attribution of joint sales agreements, and signaled that he might eliminate the national ownership cap. These actions have helped the broadcast sector feel better about its capacity to compete with the over-the-top (OTT) gang, with their deeper pockets and no regulations.

To compete, broadcasters need scale. Thus, the consolidation and shakeout in the industry is likely to continue. Whether Congress will remain on the sidelines on big (by broadcast standards) mergers like the ill-fated Sinclair Broadcast Group-Tribune Media deal is an open question. But there will be other big broadcasters seeking more scale and the new Congress is sure to have an opinion. Chairman Pai is not expected to take up the national ownership cap in a proceeding, although he will launch the quadrennial media ownership review by the end of this year, as he promised. Despite opposition from the usual suspects, broadcast M&A should not be a problem for Congress.

Everyone who loves television should embrace the progress on ATSC 3.0 — the next-generation TV standard. It promises to deliver Internet-like precision to broadcasters in advertising, programming and metrics. Once members of Congress come to understand how valuable ATSC 3.0 programming can be to political campaigns, they too will embrace it.

Speaking of scale, it has not been unnoticed that a few deep-pocketed private-equity players have been snapping up low-power television stations all over the land. Both Phil Falcone and Michael Dell, among others, have recognized the value of broadcast spectrum, either in its own right, or as a tradeable commodity for wireless adaption. These visionaries understand that 6 Megahertz are 6 MHz, no matter what classification it falls under at the FCC. Congress has not always done right by the low-power stations but there may be a happy ending when the repack is said and done.

But the move for more spectrum is not all hearts and flowers. The battle to allow tech companies to use TV white spaces may be fueled by a Democratic House and the overriding push for rural broadband could force a showdown between tech and TV on white spaces. There are compelling arguments on both sides and Congress may get involved in what has thus far been a little-known conflict.

“Broadly stated, a divided Congress is more likely to swing the policy pendulum toward consumer protection and away from corporate priorities.”

Tech: When it comes to tech policy, there is enough in the realm of privacy and data security to occupy lawmakers for a long time. The regulation of Facebook, Amazon, Apple, Netflix and Google (FAANG), among others deserves to be fully vetted. Such an inquiry would be a fitting analog to a full-bodied antitrust review. If there is any area where bipartisan compromise has its greatest chance, it is tech regulation. Both Democrats and Republicans have come to the same conclusion for dramatically different reasons, although privacy is a common denominator. Whereas legacy companies with a strong state and local presence might do very well in the new Congress, Big Tech could face an overdue comeuppance.

Broadly stated, a divided Congress is more likely to swing the policy pendulum toward consumer protection and away from corporate priorities. As Congress prepares for a contentious session, it should be guided by the words of a pre-presidential Abraham Lincoln 160 years ago: “A house divided against itself cannot stand.” In this environment, Congress needs to move past conflict and seek common ground. Everyone is watching with great expectations.

Adonis Hoffman is chairman of Business in the Public Interest. He previously served in senior legal roles at the FCC and in the U.S House of Representatives.