What Does ‘Competition’ Mean At The FCC?

Posted by | November 16, 2015 | Regulatory State, Wireless | No Comments

The question I would ask Federal Communications Commission Chairman Tom Wheeler at tomorrow’s congressional oversight hearing is, how does the agency define “competition”? The answer to this one question—the FCC does not have a definition of competition that it applies consistently—is a symbol of everything that is wrong with the agency.

Chairman Wheeler chose “competition, competition, competition” as his guiding principle without defining what “competition” means at the FCC. Relying on a guiding principle with no specified meaning is like steering a ship with no rudder: There is no telling where the ship (FCC) will end up after it leaves port (e.g., initiates a new regulatory proceeding).

The FCC’s rudderless approach to competition results in discriminatory regulations that erode public trust in the agency’s impartiality and the rule of law. For example, scholars on both sides of the aisle have long recognized that the FCC’s use of its merger authority “lead[s] to one set of rules for those who have merged and another set of rules for similarly situated parties who have not.” Even worse, discriminatory regulations that are adopted in the name of “competition” during FCC merger review are not practically subject to judicial review.

Unfortunately, the absurd results of the FCC’s undefined approach to “competition” policy are not limited to merger reviews. It’s just as impossible to reconcile FCC decisions regarding competition in the mobile wireless and cable market segments.

In its 2010 mobile wireless report, the FCC decided it’s too hard to define effective competition in the mobile wireless segment, so it stopped making any competitive determination at all. Any doubt that this change was motivated by the Democratic Party’s assumption of control over the agency, rather than expert decisionmaking, was dispelled by the statement of former Commissioner Michael Copps lauding the new approach. In his statements regarding the competition reports issued during the Bush Administration, Democratic Commissioner Copps argued that the FCC could “not do the job Congress gave” it unless the agency “establish[ed] a definition of ‘effective competition’ and a standard for determining when such competition exists.’” Copps repeatedly stated he could not “support the reasoning contained” in the Bush-era reports because, “without an articulated ‘effective competition’ standard, [a competition] Report is of limited use in providing an analytically solid foundation for Commission or Congressional action.” After control over the FCC shifted to the Democratic Party, however, Commissioner Copps said the mobile wireless competition report provided the agency “with a solid going-forward analytical foundation” despite its lack of any standard for effective competition.

The FCC’s claimed inability to define effective competition in the mobile wireless segment stands in stark contrast to its approach to the cable market segment, in which the FCC recently adopted a presumption that cable operators are subject to effective competition. The FCC has not presented any evidence that the market for cable video services is less complex than the market for mobile wireless services or any justification for treating its analysis of “effective competition” differently in these two market segments. Yet the FCC had no problem determining there is “competition, competition, competition” in the cable market segment.

The FCC admittedly based its decision in the cable deregulation order on an express statutory definition of effective competition in the cable market segment. But recognizing that Congress was capable of adopting a workable definition of effective competition in the cable market segment merely begs the question: Why doesn’t the FCC apply the same congressional definition to the wireless market segment?

I fear the answer is that applying the congressional definition of effective competition to the wireless market segment would require the FCC to find that the mobile market is effectively competitive—which is exactly why the FCC won’t do it.