The FCC’s New Playbook

Since Donald Trump won the U.S. presidential election, pundits have been predicting what his win will mean for everything from tax reform to immigration policies. While uncertainty is still the name of the game, recent announcements about the president-elect’s transition team and members of his cabinet have provided some hints as to how his policy agenda may unfold.

One area where we have heard very little from Trump — minus one or two tweets over the past few years — is the telecommunications industry and the agenda pursued by the Obama administration and Federal Communications Commission chairman Tom Wheeler. Many of the Wheeler FCC’s key rules were passed on party-line, 3-2 votes with strong GOP opposition. The assumption is that with a Republican president and a GOP-led FCC, many of those rules and policies will be reversed. The announcement that Jeffrey Eisenach, Roslyn Layton and Mark Jamison — all vocal critics of current FCC policies — would lead the Trump FCC transition team has done little to dispel this assumption.

While a change in policies at the FCC appears to be in the cards, how that gets carried out is a little more complicated. Two of Wheeler’s landmark rules at the FCC — the network-neutrality rule and the recently passed broadband privacy rule — would be a target of a GOP-led FCC, but would require a formal rulemaking process to “reverse.” This means going through the Administrative Procedures Act process of a notice of proposed rulemaking, a public comment period and an FCC vote to approve any changes.  

A GOP-led FCC would have the votes to change the rules, but the rulemaking process would be played out in the public with strong opposition from those that originally supported them. This politically charged rulemaking environment may draw attention away from the Trump administration’s higher-priority issues.  

Another less drastic — and less political — mechanism a GOP-led FCC could use to lighten the impact of the rules is to take a more laissez-faire approach to enforcement. The net-neutrality rule has been in effect for nearly two years and was recently upheld by the U.S. Court of Appeals for the D.C. Circuit. While the FCC has sent letters of inquiry to several companies about whether their practices might violate Net Neutrality, no significant enforcement actions have been brought. A GOP-led FCC could take an even more hands-off approach to enforcement of the rule.

The broadband privacy rule has a staggered effective date over the next 18 months, with initial elements going into effect in six months. It has been criticized as creating an unlevel playing field between entities subject to the FCC rule and those subject to the Federal Trade Commission’s more-lenient rule.  Once again, a GOP-led FCC could take a lax enforcement approach to the rule, but the rule is in the books and the FCC would have to enforce any clear violations. Amending the rule to address the discrepancy between the FCC and FTC approaches can only be accomplished through the rulemaking process noted above.

A legislative solution is another much-discussed option to roll back the impact of the net neutrality and privacy rules. Over the past several years, there have been several proposals from the GOP to put some type of net-neutrality requirement into law, but at the same time remove the FCC’s ability to regulate broadband under Title II of the Communications Act. All of those proposals were pulled under the threat of an Obama veto.  

With a Republican in the White House, the GOP may decide to press ahead again with a legislative solution which would address both net neutrality and privacy. Both rules are based on the FCC’s decision to reclassify broadband providers as common carriers, subject to regulation under Title II.  Without the Title II reclassification, both rules would be without statutory authority. New legislation undoing reclassification would potentially remove the legal underpinning of both rules and the FCC’s Title II oversight of broadband. This would also put the FTC back in the role of the primary privacy supervisor for broadband providers, once again leveling the privacy playing field.

Could such legislation pass? This does not appear to be a high priority for the GOP or the Trump administration, which are are focused on tax reform, trade policy, immigration and health care as priority areas early in the president’s first term. The GOP also does not have the 60 votes needed in the Senate to break a filibuster, so it might be difficult to pass legislation unless there is some Democratic support, which may arrive if there is a view that a compromise is the only way to maintain Net Neutrality. The other strategy for the GOP may be to wait until after 2018, when 10 Senate Democrats are up for re-election. The GOP could potentially have a filibuster-breaking majority after 2018, when they could push through the legislation they want.  

It seems clear that change is coming for how the telecommunications industry will be regulated. As with every change of party in the White House, the Trump administration will want to put its imprint on the industry. It is just not clear at this point on what that mark will be or how long it will take.  

David Sapin is technology, media and telecommunications risk and regulatory leader at PwC.