Scott Wallsten:
Welcome back to the Technology Policy Institute’s podcast, Two Think Minimum. I’m your host, Scott Wallsten, President and Senior Fellow at TPI. I’m joined by TPI Senior Fellow Sarah Oh. Today, we’re excited to have Communications Daily Executive Editor Jonathan Make with us for what is becoming our annual year in review and discussion of what to pay attention to next year. Jonathan, thank you for joining us.
Jonathan Make:
It’s great to be here virtually. Hopefully, next year we will do it in-person. It’s certainly been a crazy year, to say the least.
Scott Wallsten:
It has been. Maybe next year, we’ll be a little bit more normal. We’ll see.
Jonathan Make:
Don’t jinx it though.
Scott Wallsten:
No, that’s true. Before we turn to what we think we need to pay attention to next year, let’s take a little look back. I guess the biggest look back is not just over the past year, but past few years. FCC Chairman, Ajit Pai, is on his way out. What do you make of his tenure?
Jonathan Make:
Well, in terms of what the commentators and observers and whatnot are saying? I mean, I don’t think anyone has said that he hasn’t been effective and for the most part made quick decisions, and the staffs seem to have high regard for him, always a good sign at the agency for the chairperson to be held in high regard, even by the career staff. He certainly got a lot done on spectrum. There are some things as with any FCC that will go over into the next, in this case administration, and the next FCC media ownership has continued to be intractable. There are some outstanding issues on the Lifeline subsidized broadband service, some pretty big and potentially costly issues on the Universal Service Fund. That’s many, many billions of dollars a year in subsidies to phone companies to provide subsidized phone and broadband service. There are also expectations that with the next FCC, come January 20th or so, that there will be some rollbacks to the Pai Commission’s rollbacks to net neutrality.
Scott Wallsten:
Re-rollbacks.
Jonathan Make:
Indeed. So, that seems like a pretty sure bet that there would be something on that. And right now, presumably will be done by the time he leaves. There is an auction of the so-called C-band where satellite companies are vacating a swath of mid-band frequencies and wireless carriers are, right now, bidding for them. The value of the auction last we checked, last night, was above $20 billion. And I believe that that is in addition to… so those would be the proceeds that the government would get. However, there’s another 10 or so billion dollars, maybe a little bit more, that would be on top of that, that presumably has already been raised in the option to pay for these relocations of the satellite providers and compensate other users who would be affected. So, that will be interesting, and presumably there will be more auctions of spectrum and also more spectrum items by the next FCC.
Scott Wallsten:
You know, one thing that strikes me about the FCC, this FCC and the ones before it, is a lot of things really continue across administrations, Democrat or Republican. I mean, obviously the Title II and net neutrality debates are pretty, pretty vicious. But the spectrum auctions that you’re talking about, and how we manage spectrum, those have continued along the same trajectory really since maybe Bill Kennard or Reed Hundt, and the party of the chairman hasn’t really mattered that much. And over Pai’s tenure, I think he’s mostly done a pretty good job of staying outside of all of the chaos caused by anything Trump ever does. And whether that was lucky or by design, I don’t know, until maybe the Section 230 business.
Jonathan Make:
I think that’s a very important thing to talk about, and I’m sure we’ll get to that. That is Section 230 of the Communications Decency Act, where the President did get directly involved. And then the NTIA and the executive order of the President, which is part of the Commerce Department, petitioned the FCC to try to clear up the law on what tech platforms need to do in order to have a liability shield when it comes to content that’s on them, content moderation. We don’t know if Pai will do anything on it before he leaves. It is thought that one reason, or the main reason, why the sitting FCC Commissioner Michael O’Rielly did not get, or rather his reappointment was withdrawn, after it was sent to the Senate…. the reason why that’s thought to have happened is due to something related to this proceeding. And then there’s a new FCC Commissioner, Nathan Simington, who we don’t know a whole lot about. He is a little bit new to some of these circles, and he has taken the slot that was held by Commissioner O’Rielly.
Scott Wallsten:
What do we know about him? I mean, we know he’s connected to the 230. That’s how we sort of learned about him, in connection with the Section 230. I don’t think many people know much about him beyond that. You know, he might turn out to be great… or not. What have you heard?
Jonathan Make:
I can’t even say I have heard that much because much of the focus wasn’t so much on him as an individual, but how his nomination was proceeding, and would the full Senate vote on it before Congress adjourns for the end of this Congress in preparation for the next Congress or the next administration? He has a background as a lawyer, I think, at a couple of different private firms. He came from NTIA, which as we mentioned, was involved with this social media tech platform liability petition to the FCC. And he just started this week. He has not announced any staff yet. So, he seems like a little bit of an unknown quality. And that’s not to say that some previous commissioners may have also been unknown individuals, although he does seem a little bit less known to the communications bar than your typical new FCC member.
Scott Wallsten:
What are the Vegas odds on who’s going to be the Chair?
Jonathan Make:
You know I wonder if there is a market in this.
Scott Wallsten:
Sometimes, we forget how small our world is. I don’t know if there are enough people to bet on it.
Jonathan Make:
You know, you’d be surprised, right? I would say this too is a lot of speculation. Jessica Rosenworcel is the senior person there and Commissioner Starks is not, so that could play a role. People certainly think that Commissioner Rosenworcel has wanted to be Chair for some time. It’s even possible that she, or he, could even become the permanent chair. You know, that’s not something you need Senate approval for. It’s just getting that third Democratic member in, and there’s obviously plenty of speculation about who that might be. You know, we’re looking into it now, but look, a lot of these predictions, unless you hear it from someone who’s on the transition team or something like that, you know, the people who often are contractually bound or otherwise bound not to really reveal that to any stakeholders, it’s certainly hard to get concrete information, but it does lead to a lot of guessing.
Scott Wallsten:
To jump back a little bit, what do you think was the most important development or thing that happened in the past year? Not necessarily in telecom, it could be tech also, Supreme Court rulings, new regulations that passed or were rolled back. What’s the most significant thing that happened?
Jonathan Make:
That’s such a great question. And maybe one thing to say is that the impact of the pandemic in our area has been very significant and will have very long lived effects. And the other thing that’s very significant is the increased focus on diversity, civil rights, even criminal justice reform, because that also impacts, you know, this area very much. We, at our publication, just had a special report just a few days ago that we spent much of the year working on, about just this. You know, about the diversity challenges at the state regulators, at the FCC, within the communications bar. You’re seeing, you know, again, this isn’t strictly policy, but you see it in the policy realm, in the business realm, within these industries. You’re seeing every day, different diversity related announcements, initiatives, new people being named to, you know, head of diversity efforts at a particular association or company.
Jonathan Make:
So, I do think the impacts will be very long lived. And with the pandemic, you’re seeing an increased focus on the digital divide, certainly, and on all the different things that spring from it. Finally, I think the technology antitrust, TPI is much more of an expert on these things than me, the lawsuits, the CDA, Section 230, attention to that. Those are going to have very, very big ramifications because the power of the platforms, vis-à-vis the incumbent carriers, the ISPs, you know, the internet service providers has been growing. And it’s almost like the pendulum kind of swinging where the power or if you will, even maybe the political goodwill, which had very much been on the new tech or newer tech entrance side for many years, that’s shifting. And the impacts of that could play out in a New Telecom Act. They’re continuing to play out in court, and possibly the next session of Congress will get a National Privacy Law. A lot of attention has been given to what California already has done. They’ve already passed a law.
Scott Wallsten:
Sarah, what surprised you this year? What do you think was most important?
Sarah Oh:
Well, I was thinking that one outcome that would be really great from this year would be the digital divide problem. And if the next FCC really was committed to reforming USF, and really digging deep into the digital divide problems, that would be a great outcome from this year. I mean, maybe the next administration or next chair will want to re-visit like Title I, Title II. But actually, in terms of priorities, this is a great time to focus on USF reform. It’s very complicated. People are now understanding digital divide problems, but a lot more work can be done.
Scott Wallsten:
I agree. I mean, it’s both been encouraging and discouraging to see all of the new focus on the digital divide. It’s encouraging because people outside of telecom experts suddenly worry about it, and notice it, and recognize that it’s a big, huge problem and want to do something about it. It’s a little discouraging, to me, to see people so unwilling to examine what works and what doesn’t. There’s appetite to spend money on programs, and no appetite to spend even a tiny fraction of that amount of money on experiments or studies. I mean, obviously I’m biased because I like doing studies, but I also really think we should be learning what works and what doesn’t. We’re not seeing much of that. And I wish we would, but I agree that for the first time the digital divide is something in the broader, popular understanding in that conversation. And that’s got to be a good thing.
Jonathan Make:
I think the impact on schooling, which certainly some of the Democrats, not just Democrats, but some of the Democrats, Commissioner Rosenworcel, point to pretty frequently, that seems to really bring things to focus for just your average consumer. And yeah, you know, just going to the USF, the kind of surcharge on phone bills is above 30% right now and it continues to rise. It too, is a little bit intractable because the only way to spread out this cost so that telephone users aren’t the only ones bearing it would be very controversial, and not even just politically. It could be very controversial with consumers themselves, and certainly the companies don’t want to pay it. Then that is imposing it on broadband, on other things that could be constituted, or are right now, as an information versus a telecommunications service. There too, has been a sort of deadlock on that between stakeholders. And one of those folks who was on one side of this was Commissioner O’Rielly, who just left the commission. And he had said, “There’s just an impasse here, and we’re not able to do anything.” Whether it gets solved, you know, in the next session of Congress or by the next FCC, that’s so hard to tell. But that is part of many, many billions of dollars a year in trying to fund some of these efforts. And then of course you have, as you mentioned, the measurement problems with the data, the mapping…
Scott Wallsten:
There are a lot of issues. I mean, how they raise revenue for universal service, you’re right and Commissioner O’Rielly is right. It seems so intractable right now, but it’s such an important problem to solve. I mean, you said that the rate is up to 30%, but it’s, you know, it’s worse than that because it’s on only certain types of telecommunications, like you said. That’s long distance, mobile. And long distance isn’t really a thing. It’s mostly a thing for very poor people and immigrants, people who buy long distance calling cards. So, it’s a hugely regressive tax. You know, the more you raise it, the more you’re actually hurting low-income people too. Something’s got to be done about it, and there just doesn’t seem to be appetite for doing that something.
Jonathan Make:
Maybe in between the two of you right now, you could kind of talk a little bit about what could be done on the data collection side, on the mapping side, and on the more pilot programs side. The one thing I’ll add that there’s a lot of momentum for, and there was even momentum before the coronavirus, is tele-health and experimenting with it. The government funding it in various ways, including the FCC, but certainly I’m sure there’s a lot more experimentation that could occur.
Scott Wallsten:
It seems wrong to say that there’s any positive result from the pandemic, because it’s so awful and so terrible in so many ways, but it did allow jumps forward in certain things like telemedicine. Telemedicine is a kind of thing that would seem to have always been just around the corner, and then suddenly it happened out of necessity. And we saw lots of rules and regulations rolled back that were actually functioning as barriers to entry to telemedicine and other things. And we’ll see whether those are reinstated or not as the pandemic ends. And also, I don’t want this to be sort of an anti-regulation rant, because there are rules that matter, and there’s going to be a lot of thinking on which of those are important and which of those really were just protectionism. And I wonder, and maybe you think this is completely wrong. I wonder if it’s going to have an effect on the net neutrality debate. And here’s why: all of a sudden people are talking to their doctors on the internet, their kids are going to school on the internet and everybody gets stuck with frozen zoom calls, bad quality, and it’s not because of the bandwidth that comes into their house. It’s because of God knows what’s happening somewhere. It might be in their house, might be somewhere else. And one of the things that might be good for that, is guaranteed quality connection, paid prioritization. Not that that has a specific definition, but suddenly you can see the benefits of it. What if, you know, you could have a guaranteed high-quality connection from your kids to their school. That might be worth something. And I wonder if that will start to change people’s minds, at least in terms of what they think are sort of the absolutes about what must and must not be allowed.
Jonathan Make:
Sarah, do you have other kind of solutions or things that we should be doing on experimenting?
Sarah Oh:
Well, the FCC, they have a new economics office, and so they’re kind of ramping up on bringing together all their economists. And hopefully that would be a place of experimentation that they could run experiments. But you know, for us looking from the outside in, there are plenty of places where the FCC can provide test beds for experiments or pilots. They’re just resource constrained, I think. Why not do more experimentation with USF funding? Another thing with USAC, the administration company that manages the USF, you know, it’s a huge bureaucracy. They have huge overhead costs, but they’re not really doing much to study the program. They administer it. So, there’s just a lot of room for improvement, especially administering checks and payments. Now with technology its much cheaper, overhead costs aren’t that high to cut checks out and track them anymore. So, you kind of wonder, why is there so much overhead for a $10 billion fund? Can some of that go towards improving the programs? If it were a private company spending $10 billion a year, you would think that they would learn how to reshuffle the money. That’s me ranting about USAC and USF.
Jonathan Make:
USAC is a fascinating entity, the Universal Service Administrative Company, and they do things I think many of the USF, as you said, administration, they’re, I believe technically a non-profit. My understanding of the situation there, and how they interact with the FCC, is the FCC kind of gives them orders and gives them data, and then they have to figure out how to make it work. And apparently, it’s not always as straight forward as we think it might be.
Scott Wallsten:
Right, I’m first in line to criticize the Universal Service Fund, but they are under huge political pressures. And that seems to determine so much of where the money goes, and how it operates, that it’s not like USAC itself is trying to behave that way. You know, I think there’s sort of a function of the politics of institutions all around it. It’s actually, Jonathan, I’m curious. So, we have a new administration coming in. You’ve been a journalist for a long time. Part of being a journalist is developing sources and knowing who’s doing what and where. We’ve got a whole new group coming in. How do you go about building up your new sources and learning what’s going on in a new environment?
Jonathan Make:
I think that’s a good question because it ties into the pandemic. And often when we are talking about normal times, that is where the bar association’s events and TPI Aspen, which will continue in person, and CES and the NAB Show, you know these are all different sorts of gatherings of people, and that is where you get to chat with people informally and then often continue in other forums. I can’t reveal too much about sources, and you know, methods, as they say, but yeah, that can be a little bit of a challenge for all the different stakeholders, not just the media.
Jonathan Make:
Another thing that’s been interesting about the pandemic, just in the FCC-land is it’s kind of shown some interesting patterns with who might be accessible to the media, who might not. And it’s something we’ve written about. You see it each month, the FCC has a monthly meeting of commissioners, and there have been months where very few of those five commissioners have taken questions from the press and that’s involved too. And just to throw in something, when we did this a year ago, we were talking about Julius Knapp who had just retired, and I just want to throw this in super quickly, from the commission. He was a lifelong engineer and a career staffer who would run the engineering operations of the commission for very long time.
Scott Wallsten:
And respected by everybody.
Jonathan Make:
Exactly. And unfortunately, just this week, we lost a former PR person from the commission named David Fiske. And the reason why I wanted to, briefly, bring him in is he was there doing PR over multiple administrations, multiple chairmen, both political parties, until I unfortunately wrote his obituary yesterday. I did not even know that he had worked for a Republican member of Congress, meaning I never even knew what his political affiliation or party might’ve been. And indeed, because this goes such a way back, this was in the 1970s, I believe there is certainly a possibility that he wasn’t even a Republican at the time. I just bring him in because he was more emblematic of the somewhat non-partisan, less hyped up, less throwing zingers and all that at each other, than we have seen in recent FCCs. And so with the meetings now of the commissioners, and this’ll be interesting, very interesting to see how it plays out in public and in private, because it will help determine what things move forward. Do they get adopted unanimously? Are there dissents? Dissents, as we know, can be cited in court opinions and legal filings and all sorts of other things that could help to undercut or make the case for different stakeholders and initiatives. So, it’s going to be very interesting to see if the next iteration of Commissioners, particularly once it is five of them, are they too always one party is hassling the other so much of these monthly meetings is just subtext after subtext of that? So anyway, David Fiske, may he rest in peace, he is emblematic of this earlier time where things were just a little bit less partisan and people think now, looking back, that there was less of an influence, an active influence of Capitol Hill and even of the President. And we’ve seen this with certainly Trump and Obama, and we don’t know if we’ll see it with Biden. There was less of that political influence on the institution.
Scott Wallsten:
It certainly seems to be symbolic of 2020 that we would lose David Fiske at the end of that year. We don’t see a lot of people like him anymore.
Do you think in terms of Commissioners answering questions after meetings and so on, how has having meetings virtually affected that? It’s much easier to not answer questions when you can just click “leave meeting,” rather than having to walk through all the reporters to leave the meeting. Has zoom affected the nature of the meetings?
Jonathan Make:
That’s a great question, and it’s not one I have thought about. And interestingly, even at the in-person meetings, the Commissioners will often either decline to answer questions, or they will only take one from each reporter with no follow-ups. There’s so many controls on things these days, and there’ve been incidents, even at the FCC of, you know, reporters being physically shoved or another seemingly one way or one sided altercations with security and other staff. In any case, one thing the FCC has done a great job of, everyone seems to agree, is continuing on with business of the FCC, even without being in a building and without meeting in-person, and so I do think that the meetings show that. It’s been very interesting technically because we’ve actually seen, albeit slow and halting improvements in: is there video, can people ask questions, how many people can participate at a time? So, I wish I had a more nuanced answer. Interestingly, there’s so many other challenges, as we all know in things these days that I hadn’t even given it any thought it’s certainly a good thing that they continue, or they have to continue to meet, and it’s a good thing that at least the public can still observe it.
Scott Wallsten:
What are you looking forward to this year? Either in a bad sense or a good sense? What do you think is coming up that you’re like, “Oh, we’re going to pay attention to this. This is going to be a big deal.”
Jonathan Make:
Well, again, just talking about the pandemic, this probably isn’t what most people want to hear, but in the next year slightly plus, we will certainly see some return to at least hybrid conferences. We have been talking to the organizers of the annual CES, which is, you know, one of the biggest trade shows in the world, and they will have at least some people there in January of 2022. I know that seems like an impossibly long time from now. It will be here before we know it, and while I’m not sure that we’ll see things like the National Association of Broadcasters gathering en masse, a hundred thousand plus people in person in Las Vegas this year, I assume we’ll see it next year. Just turning to the issues, I think a lot of people are very curious about net neutrality, both at the regulatory level and will there be any sort of grand legislative bargain? I’m not sure that there will be sort of a bargain. Clearly the tech issues, the tech antitrust, there are so many legal cases that could potentially result in the breakup of Facebook or possibly Google as well. That would have huge ramifications if such a remedy is upheld by a court.
Scott Wallsten:
I mean, that’s obviously a huge topic, and talking about breaking up those firms would be just a long, long legal process and it seems unlikely. But it does have short-term implications too. Do you think this attention will have an effect on proposed mergers? What companies decide about acquisitions, whether in the tech space, telecom space. Do we see that yet?
Jonathan Make:
That’s another good question, and something I have started thinking about, partly in preparation for us chatting, “Is what will we see with deals?” One thing that seems somewhat certain is that AT&T appears to be trying to restructure its ownership of DirectTV, which it didn’t buy that many years ago. So, it does seem somewhat likely that there will be, maybe a private equity firm takes a stake in it, or even control of it. That wouldn’t seem like that would be too controversial. Again, I don’t think this will be front page news for days and days, but the question of will there or won’t there be more broadcast deals. There have been a number of them, and there is currently one where Scripps is buying Ion. One question is, does that get approved by the outgoing FCC? It’s a possibility, I don’t have concrete information on it.
Scott Wallsten:
It’s on their docket already?
Jonathan Make:
The staff has been reviewing the deal. No, to my knowledge, there’s no decision that is being proposed at this time, but often outgoing FCCs do a lot of different things. Just like an administration might take various actions. It doesn’t seem like we’re going to have another T-Mobile buying Sprint, partly because there may not be candidates to buy like that within these industries.
Scott Wallsten:
There’s not a Sprint to buy right now?
Jonathan Make:
Yeah, and you mentioned tech. Certainly it seems like the antitrust focus will prevent any major transactions. We’ve seen some smaller ones, but again, it doesn’t seem like we’ll see something like when Facebook bought WhatsApp, that was a really big deal. It was many billions of dollars. It doesn’t seem like we’re going to get some new version of that by any of the major tech companies for the foreseeable future.
Scott Wallsten:
Kind of ironically, if it does have an effect on their willingness to buy companies, it will set up a nice test for whether bigger companies acquiring smaller companies, encourages entrepreneurship, or discourages it? We’ll have to wait several years to run that study, but we may get it.
Jonathan Make:
Yeah, this is a great time to be an antitrust expert, for sure. And there’s certainly going to be a lot more focus on that and again, a lot more focus on the supremacy, or trying to keep a lid on how big these companies can grow. We have it in the telecom space, there’s a variety of rules that can kind of cap those things. And in the media space, we’ll see what happens with tech. I would just pause it there. One other thing to watch in general, again, this is just pure speculation, is sometimes around the time of a change in administration, we see interesting changes at the top of, or even in some of the lobbying ranks of the various trade associations here in Washington. And there haven’t been a lot of very high profile, there’ve been some, but there haven’t been too many high profile changes, particularly among the traditional companies regulated by the FCC. So that will be something interesting to watch.
Scott Wallsten:
Do you have any hypothesis on why we haven’t seen it yet? Is it just too early, or is there something else going on?
Jonathan Make:
Yeah, one thing I can say that is just fact is a lot of these associations have renewed, which also is not infrequent, the contracts of their top people. And therefore what that means is not only the top people, but often those who are reporting to them will stay for a time. What will be interesting is when those contract expirations end, some of which is going into the incoming administration, will there then be a change? And you know, another takeaway from it, is that the leadership at a number of these groups NAB, for instance, which we’ve been talking about, the National Association of Broadcasters, they have by all accounts had very steady and well-respected leadership there. So, it tends to be when things are not going as well, that you hear more about it. I think it’s more a matter of how long do the people like Gordon Smith or Meredith Baker, who leads the Wireless Trade Association, Michael Powell, all of these people, by the way, are former regulators or legislators, Michael Powell’s of the Cable Association. It’s almost, how long do they want to stay? There tends to be a, just like with corporate CEOs, a kind of five, eight, 10 year type of shelf life on this. So, I just think that’s something interesting to watch. And also, we don’t know at all, where Chairman Ajit Pai, it seems like he may not know either, where Chairman Ajit Pai of the FCC will go, where Greg Walden, who is leaving the House and the House Commerce Committee will go, where commissioner Mike O’Rielly of the FCC will go. So, that’s always interesting to watch where these folks end up.
Scott Wallsten:
With trade associations, is it their tenure, and you know, some measure of how well they’ve done that matters, or do the trade associations try to match the party in terms of their leadership?
Jonathan Make:
That’s a great question too, and something that, of course, either we on the journalism side, are you on the data side could, definitively…
Scott Wallsten:
Right. It’s an empirical question.
Jonathan Make:
You know, measure. It’s so mixed. You don’t always see predictability there. I think on the whole, yes. As the administrations change and particularly Congress too, of course we all know about the Senate, but we haven’t really seen this huge switch in the, I was about to call the midterms, only because in terms of Congress, so far, there wasn’t any great watershed change. But in the elections we just held, you know, the fact that, “Oh my goodness, the Republicans didn’t take control of the House.” That could have been a significant thing. Or, “The Republicans didn’t really solidify control of the Senate,” or on the flip side, “The Democrats didn’t,” you know, they now have 53 votes or something in the Senate. It seems like those things too have an impact, at least at the lobbying level. And some of it is even with the firms, the lobbying firms and even the associations themselves subcontract out too. So I think we’ll have to see, I mean, this will be a great study.
Scott Wallsten:
I was just thinking that. A great paper.
Jonathan Make:
A great study. So this has been a lot of fun, and again, I will say a prayer, literally, that hopefully we can do this, at least in some safe, even, you know, we might be masked and socially distanced, but that it will be garden variety safe to do this next December in some in-person setting for the three of us.
Scott Wallsten:
Yes, that will be great. I’m as introverted as they come, but I can’t wait to be in a room with other people.
Jonathan Make:
For sure.
Scott Wallsten:
Jonathan, thank you so much for taking the time to talk with us. We really appreciate it. It’s always a lot of fun.
Jonathan Make:
Thank you so much, Sarah and Scott.
