With Democrats capturing the White House and strengthening their control of Congress on the same day that federal regulators approved two major telecom deals, wireless policy changes could be in store as lawmakers, federal regulators and the incoming Obama administration take measure of an industry that continues to consolidate, and grapple with thorny consumer issues raised in legislation, regulatory proceedings and class-action lawsuits.
But as President-elect Barack Obama transitions from campaigning to governing and Democratic lawmakers jockey for position to chair key congressional committees in the 111th Congress, there is a risk of overreaching if they hastily pursue a path of re-regulating a wireless sector – one struggling like others in an unstable economy – that’s arguably the most dynamic part of the telecom industry today. It will be delicate balancing act likely to play out in coming months as policy agendas take shape in Congress and in the Obama administration.
Though names of possible successors to Federal Communications Commission Chairman Kevin Martin have been bandied about for months, it is unclear – if not doubtful – that anything resembling a short list of candidates has yet to materialize. Indeed, given the priority attached to high-level cabinet appointments and White House staffing, it could be months before individuals are nominated to head the FCC and the National Telecommunications and Information Administration – the two top telecom policy agencies.
Copps, Adelstein roles
One possible scenario could have Michael Copps, the senior Democrat on the GOP-led FCC, serve as acting chairman of the agency until Obama settles on a permanent appointment.
Copps and fellow Democratic commissioner Jonathan Adelstein offered what could be a glimpse of what’s ahead for the wireless industry in their critical assessments of the agency’s approval of Verizon Wireless’ $28 billion acquisition of Alltel Communications L.L.C. Both wanted stronger roaming conditions than those ultimately agreed to in the FCC action. Moreover, the two FCC Democrats viewed the impact on roaming as a symptom of what they regard as broader, structural problems exacerbated by the Verizon Wireless-Alltel deal.
“The combined entity will have an enormous geographic footprint, and the combination of the two networks will substantially reduce consumer choice,” Copps stated. “In the short term, of course, the transaction may bring increased data speeds and handset choices to some rural areas. But in the long term, I continue to worry that all the reductions in competition we have seen in recent years translate into lower-quality service and higher prices for American consumers. That’s not the direction we should have been heading.”
In statements accompanying the Verizon-Wireless and Sprint Nextel Corp.-Clearwire Corp. deals, Copps called for a rulemaking to establish a policy on spectrum limits given the 1993 repeal of the spectrum cap and the ever-changing ‘spectrum screen’ currently employed in FCC antitrust analysis of wireless mergers.
The FCC has received petitions to re-establish a spectrum cap and to investigate exclusivity arrangements between national wireless providers and handset manufacturers.
“Not only does this [the Verizon Wireless-Alltel merger] threaten consistency in service across the country, with fewer carriers in each market, but roaming rates can easily rise and the costs may ultimately be passed on to consumers,” said Adelstein. “This will undercut the remaining competitive carriers, potentially resulting in reduced competition in the local and national retail market. I would have preferred that the majority adopt transaction-specific, pro-competitive conditions to address these very legitimate and specific competitive harms.”
More congressional scrutiny?
In addition to likely facing more intense scrutiny by Democrats who’ll be in charge of the FCC, as well as Congress and the White House, next year, the wireless industry could find it difficult to secure a national policy on early termination fees that expands federal pre-emption. Instead, industry could face stepped-up efforts by Congress to pass wireless consumer protection legislation that retains limited state jurisdiction. Sens. Amy Klobuchar (D-Minn.) and Jay Rockefeller (D-W.Va.) are co-sponsors of just such a bill. With reigning Senate Commerce Committee Chairman Daniel Inouye (D-Hawaii) taking over the Senate Appropriations Committee next year, Rockefeller is positioned to assume control of the commerce panel.
In the other chamber, a fierce fight has already erupted over control of the House Commerce Committee in the next Congress. Rep. Henry Waxman (D-Calif.), chairman of the Committee on Oversight and Government Reform, wants to oust Rep. John Dingell (D-Mich.) as chairman of the commerce panel.
Meantime, the Obama transition – the foundation for which was laid during the campaign, according to sources – has entered the implementation phase. Teams and working groups have been dispatched to federal agencies – cabinet level and independent alike – to get a lay of the land on their policies and immediate challenges.
Two former telecom officials from the Clinton administration were named to the transition team of President-elect Barack Obama, another possible signal that telecom and high-tech issues could have high-level visibility when executive branch power shifts to Democrats in January.
Among those serving on the transition team’s advisory board are Julius Genachowski and Donald Gips.
Genachowski, a Harvard Law School classmate of Obama, was former chief counsel to former FCC chairman Reed Hundt. Genachowski also is special adviser to Greenwich, Conn.-based General Atlantic, a private-equity investment firm. In addition, he is managing director of Rock Creek Ventures, a venture-capital firm. Genachowski, who also serves on the boards of various high-tech companies, was a senior member of the Obama campaign’s tech-telecom policy team.
Gips is group VP for corporate strategy and development at Level 3 Communications, an international company headquartered in Broomfield, Colo., that operates one of the largest communications and Internet backbones in the world. Gips specialized in domestic and international technology and telecom issues as chief domestic policy adviser to former VP Al Gore. Gips also served as chief of the FCC’s International Bureau and as an executive manager at international management consulting firm McKinsey Co.
Former Democratic FCC commissioner Henry Rivera reportedly will focus on the telecom agency and its issues as part of the Obama transition. Rivera, who works at the same law firm that once employed the current FCC chairman, and the Obama transition team did not return calls for comment.
According to a source familiar with the transitions process, Rivera likely would not play a major role in decisions about staffing the FCC with a new chairman and bureau chiefs. The FCC chairmanship decision is apt to be made at a later date by Obama advisors focusing on key personnel. The Obama-appointed FCC chairman, who would be subject to Senate confirmation, would pick their bureau chiefs.