Cable, Broadcast Process Reform Still Top O’Rielly’s Objectives

“We should blow up the franchise model for cable regulation,” FCC Commissioner Michael O’Rielly said on Wednesday, adding that the “mind-boggling … over-regulation of broadcasting needs to be shredded.”

And he was just getting started as O’Rielly described his goal “to deregulate legacy industries” as part of the sweeping process reform he has championed during his seven years as a commissioner. In remarks to the Media Institute's monthly Communications Forum in Washington on July 29 (speaking from his home via a webcast), O’Rielly also criticized the Department of Justice for “repeatedly and inexplicably” failing to evaluate the competitive landscape in the new digital ecosystem. He denounced the lethargic status of broadcast ownership diversity. He lamented slow decision-making to release additional spectrum. And, in an upbeat riff, he lit up when describing NextGen TV, emphasizing how “implementation of ATSC 3.0 can significantly update over-the-air products and services.”

Commissioner Michael O'Rielly on Media Institute Webcast

Commissioner Michael O'Rielly on Media Institute Webcast

“Notably, the NextGen TV process has been one of the few opportunities for broadcasters to make their own decisions about deployment without constantly looking to the regulator for permission,” O’Rielly enthused.

Focusing on the FCC's extensive process reform agenda, which includes industry realignment, O’Rielly said, “I remain hopeful we can close out all open media modernization proceedings by the end of the year.”

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He reminded the audience that he has been urging new rules to dispense with the cable attributable interest record keeping requirement and fix a loophole in the timing of program carriage complaints.

“However, from my conversations with members of the industry, these types of changes merely help around the edges and do not significantly reform the underlying regulatory framework,” O’Rielly said, complaining that “even such modest proposals receive pushback within and outside the agency.”

Lambasting entrenched industry interests as well as regulators, the commissioner lamented that “despite all the changes in the marketplace that are widely agreed upon, we still have great difficulty making even the smallest of reforms.”

“Grasping for relevance, backward looking officials and stakeholders refuse to lessen their grip on the remaining regulated industries,” O’Rielly said. He criticized the “thinly veiled guise of ‘local control’” that franchise authorities continue to use to “extract undue bounties” from cable operators.

“Amazingly, in some cases, local officials have even campaigned on promises of mandated network builds, additional tax revenues, and higher franchise fees, superficially promising the ‘preservation’ of local jobs,” O’Rielly explained, emphasizing his belief that these fees prevent operators from “using those funds to lower consumer bills and deploy new services.”

“It’s time to get local officials out of the business of harassing cable companies,” he said, suggesting that the process can start with removal of some “burdens,” such as ending local review of transactions, requiring common accounting practices, preventing rights-of-way discrimination, reducing PEG and INET mandates, and standardizing customer service requirements.

O’Rielly observed that the cable rules are “completely contrary to promoting network efficiencies and economies of scale, both of which are features that high-tech companies possess and use to compete head-to-head with legacy providers.”

Moving on to broadcasting, O’Rielly said current rules are “outdated” and don’t account for certain mergers “that are in the public interest and would provide increased local and live programming.”

Broadcasters Must Choose How to Use NextGen TV

O’Rielly repeated his enthusiasm for NextGen TV during the online Q&A session, emphasizing that it’s “inherent upon broadcasters” to determine what features and services to offer via the new digital platform. “There are lots of different basic directions they can go [to assure] stickiness and encourage audiences to stay with them."

Earlier in his prepared remarks, O’Rielly acknowledged, “We don’t yet know which NextGen business models will ultimately prevail” citing options such as broadcast targeted advertising and OTT-like functionality.

“The point is, here’s a real chance to let the market decide how a flexible standard can be utilized, based on what consumers prefer.”

In response to a later question about collaboration between broadcasters’ NextGen TV and wireless 5G development, O’Rielly envisioned - without details – possible partnership between 5G providers and TV station operators “to reach viewers during the pandemic.”

Embarrassing Diversity Record

Turning to ownership diversity in the broadcasting industry, O’Rielly confessed that, “Make no mistake: the dearth of African American ownership of local broadcast properties is beyond embarrassing, resting in the low single digits.”

“No one should be able to say with a straight face that our rules meant to promote diversity have been anything but a complete failure,” he said, contending that “removing our limitations would set the stage for more minority investment and ownership.” He cited FCC Chairman Ajit Pai’s effort to adopt a radio incubator program that would entice existing broadcast owners to partner with minority small business entrepreneurs. But he admitted that the initiative “was upended by a few squabbling industry participants” when the effort was expanded into television ownership.

“Absent Supreme Court intervention, it will be years before any action is even considered again at the Commission,” he said. “This represents a huge disappointment for the agency and a lost opportunity for society.”

O’Rielly declined to describe his plans to reevaluate the Ligado approval, which has led Sen. James Inhofe (R-Okla.) to hold back his Senate confirmation for another term as an FCC Commissioner. The Senate Commerce Committee approved O’Rielly’s re-appointment last week, but Inhofe has protested that the seven-year commission member’s support of the Ligado plan to use L-Band spectrum to support 5G and other internet of things services.

“I’ll work with his staff,” O’Rielly said, referring to Inhofe’s office. Emphatically, he insisted that “our job is to reform the rules to be in line with the marketplace.”

Related: Ligado to FCC: NTIA's Petition Fails on All Counts

During a wide-ranging Q&A session, O’Rielly fielded queries about 5G (which he had barely mentioned in his formal remarks), the escalating Communications Decency Act (“Section 230”) controversy, the post-pandemic regulatory outlook, diversity and payola.

In response to a Multichannel News question about Wednesday’s House hearings on high-tech, O’Rielly shrugged that, “The FCC doesn’t have a great deal of authority over high tech companies,” but he acknowledged that “sometimes they go into our space,” citing Amazon’s satellite project.

He briefly alluded that hearings would entail Silicon Valley’s opposition to Section 230 requirements, but dropped the topic saying that he has just begun to read the last documents from NTIA and other entities.

Related: Study: FCC Needs to Double Licensed Midband Spectrum for 5G

As for 5G, which he barely mentioned in his prepared remarks, O’Rielly acknowledged there is “No doubt that the pandemic has slowed development,” but he voiced confidence that the growth will evolve. He contended that this is “not just a race against China” for 5G dominance, citing a few other countries which intend to be very active 5G developers. He said he expects Open Standards to emerge for 5G.

“U.S. wireless providers are doing a wonderful job,” he said, “I believe they’ll continue to rollout 5G.”

Gary Arlen

Contributor Gary Arlen is known for his insights into the convergence of media, telecom, content and technology. Gary was founder/editor/publisher of Interactivity Report, TeleServices Report and other influential newsletters; he was the longtime “curmudgeon” columnist for Multichannel News as well as a regular contributor to AdMap, Washington Technology and Telecommunications Reports. He writes regularly about trends and media/marketing for the Consumer Technology Association's i3 magazine plus several blogs. Gary has taught media-focused courses on the adjunct faculties at George Mason University and American University and has guest-lectured at MIT, Harvard, UCLA, University of Southern California and Northwestern University and at countless media, marketing and technology industry events. As President of Arlen Communications LLC, he has provided analyses about the development of applications and services for entertainment, marketing and e-commerce.