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The Loyal Opposition

Republican FCC Member Ajit Pai Gives His Take on ‘Competition, Competition, Competition’ 3/21/2016 8:00 AM Eastern
Senior Republican FCC commissioner Ajit Pai
(Photo by John Eggerton)

Ajit Pai is the senior Republican commissioner on the Federal Communications Commission and, if a GOP candidate wins the White House later this year, would likely be the interim chairman (unless current chairman Tom Wheeler does not follow custom and retains the seat — when prodded by Republican legislators, he did not promise to exit when President Obama does next January).

 

Pai, the son of Indian immigrants, grew up in Kansas but has practically lived his entire professional life in the nation’s capital. He’s seen how laws are passed (or, as they say in D.C., how the sausage is made), working at the Justice Department, on Capitol Hill and at the FCC in an earlier stint in the general counsel’s office — where he once squared off against the late Dan Brenner, then the policy chief of the National Cable & Telecommunications Association, in court.

 

In fact, Pai calls himself the “Forrest Gump” of the legal profession: He set out on a peripatetic course that led him to the FCC seat without a plan for that progression, but grateful for the opportunities and the outcome.

 

Affable and known for his willingness to listen, the 43-yearold Pai is nonetheless passionate in his defense of the free market. He’s also known for his colorful statements — including the dissents — often peppered with references to music.

 

A top Washington communications attorney said Pai has a brilliant legal mind and the courage of his convictions. Those convictions favor a market free of what he sees as innovation- and investment-chilling regulations, which causes some friction when they butt up against the convictions of the current chairman.

 

And though the friction with Wheeler was evident in a recent hearing on Capitol Hill, the two commissioners teamed up for a duet at a recent holiday party — Tommy Tutone’s 1981 hit “867-5309/Jenny.”

 

“I had the honor of calling Ajit Pai my distinguished colleague for about a year,” former FCC senior Republican commissioner Robert McDowell said. He called Pai a “highly intelligent and hard-working public servant who has a creative command of the English language, as well as an irresistible and fun personality. Knowing Ajit was going to be a highly effective commissioner for several years made it easier for me to decide to step down in 2013.”

 

Pai took time from prepping for an FCC oversight hearing in the Senate Commerce Committee March 2 and an oversight hearing in the House Communications Subcommittee on March 22 to talk with Multichannel News Washington bureau chief John Eggerton about set-tops, his view of “competition, competition, competition,” and a certain up-and-coming lecturer who was at the University of Chicago Law School when Pai was a student there. An edited excerpt follows.

 

MCN: What is your principal concern with the way that the minority GOP commissioners are treated at the FCC, in terms of access to information or responsiveness to your issues and concerns? We know that has been a bone of contention.

Ajit Pai: It has been an issue. My principal concern is that the commissioners — who, after all, have been appointed by the president and confirmed by the Senate and therefore are responsible for setting commission policy — aren’t given the full range of information and/or the options that they deserve in order to make an informed decision.

 

We have seen time and time again, when minority commissioners ask for information from either the chairman’s office or one of the subordinate bureaus, information simply isn’t forthcoming, whereas for majority offices typically that information is given without question.

 

MCN: Have you discussed this with the chairman?

AP: I have repeatedly asked my office, which has repeatedly asked his office, as well as the bureaus, for all kinds of information. Typically what we were told is, “That is not something that is done around here.” Depending on what the request is, we can identify previous cases where that’s not true.

 

MCN: You dissented from Title II. What should the FCC have done after the court remanded the old rules?

AP: This entire issue has been a distraction from what Americans really care about, which is promoting broadband deployment and greater competition.

 

Instead of trying to parse through the [U.S. Court of Appeals for the D.C. Circuit’s] previous opinions and trying to fit this square peg of the marketplace as it is today into the round hole of the FCC’s regulatory framework that dates in some cases back to the 1930s, we would be much better off, as would American consumers, simply increasing broadband deployment. And I think that is being borne out now, if you look at how much time and eff ort has been spent by the agency and outside parties debating and litigating this issue.

 

If we had put all that energy into reducing the regulatory barriers to infrastructure investment, we would see much greater deployment on the fixed and wireless broadband side, and we would see greater entrepreneurship and innovation on top of that platform.

 

MCN: Why do you think the FCC is so reluctant to say that the market is competitive?

AP: I think it is pretty simple. Number one, the section of the Telecommunications Act that charges the FCC with making an assessment about the state of competition in the broadband marketplace, which is Section 706, suggests according to the current FCC that a negative finding would justify some unknown quantum of increased power, and I think the current agency is determined to arrogate for itself as much power as possible to structure the marketplace as it sees fit.

 

That is part of the reason why this has become an exercise in Kabuki theater. Everybody knows, and it’s no secret, that the majority is going to find this marketplace to be uncompetitive. And that is not necessarily because the facts justify it, or because the law requires it, but more that they want to reach a politically motivated decision.

 

MCN: Let’s say a Republican wins the White House and you are named interim chairman. We assume your mantra would echo Chairman Wheeler’s mantra of “competition, competition, competition.” If so, how would you define that differently?

AP: Certainly, I would say it. But I would also mean it. I would adopt policies that were designed explicitly to promote greater competition in every marketplace in which the FCC has jurisdiction. And with respect to broadband, for example, I would embrace the IP transition to ensure that certain telecom carriers don’t have to maintain the fading copper infrastructure of yesterday. They can focus on providing next-generation fiber.

 

I would focus on making sure that wireless Internet-service providers had much greater business incentive to deploy infrastructure. That means making the siting of infrastructure easier. That means getting more 5-Gigahertz spectrum out into the marketplace to allow [providers] to deliver better and faster and cheaper Internet access services to their customers. And I would ensure that, where possible, we relax some of the legacy regulations that simply aren’t as necessary in an all- IP world of intermodal competition.

 

Those are the kinds of things that the current agency has not done that would actually promote competition, [rather than] simply saying we want the marketplace to be composed of this many actors and declare every marketplace to be uncompetitive. Those are the kinds of statements that generate good press among some, but don’t actually deliver when it comes to the actual facts on the ground.

 

MCN: Do you think the retransmission-consent regime needs reforming as part of the review of “good-faith” retrans negotiations?

AP: It is one of the issues the chairman has teed up and we are in the process of reviewing the record compiled in response to it. I haven’t reached any determination about what reforms, if any, would be appropriate.

 

MCN: The chairman has put reclassification of over-the-top video providers as multichannel video programming distributors (MVPDs) on the back burner. Do you agree with that?

AP: I do not think we should adopt the proposal that was originally suggested. This marketplace, of all the many that we have taken a look at over the past couple of years, is a great example of the innovation that is delivering value for the American consumer. It seems like every single day we hear about some new over-the-top service that is experimenting with a different business model and is allowing the consumer to truly enjoy the bounty of the golden age of video.

 

And so the last thing I think we should do as regulators is to interfere with that marketplace by classifying some or many or all over-the-top providers as video program distributors with all the attendant burdens, and potentially benefits, that go with that kind of classification.

 

MCN: Speaking of over-the-top, Congress did tell the FCC to create a competitive market for set-top boxes and 99% of consumers, if that’s the correct figure, are still leasing them from their MVPD.

AP: I think that what most American consumers want is not to unlock the box, but to eliminate the box. That is why I think the agency should be doing everything it can to encourage the industry to migrate away from this clunky, expensive hardware that nobody wants towards an app-based approach that would save consumers money and deliver a better consumer experience.

 

After all, with an app that can cost anywhere from $0 to $5, you can transform any device in your house, from a smartphone to a tablet to a TV, into a navigation device.

 

Instead, the FCC decided once again to plant its flag on 1990s technology, declare a marketplace that is a product, after all, of intrusive government regulation a failure, and simply layer on top yet another technical mandate that I don’t think is going to deliver for the American consumer.

 

MCN: We get the sense that this proposal leaves a lot of questions unanswered, including about how it treats privacy. The chairman has signaled that privacy would be protected. Do you have any worries?

AP: Without question. That is one of the reasons why I suggested early on, as did commissioner O’Rielly, that we release this document, as we should all documents that ultimately the commission is going to vote on at our open meetings. The devil really is in the details.

 

Instead of having dueling talking points where the chairman might say, “Well, the privacy issues are addressed and we say they’re not,” let’s let the document speak for itself. That’s one way for the American people to be able to reach a much more informed judgment about what the agency’s about to do.

 

Secondly, if you actually did look at the document, you’d see there are no requirements, for example, with respect to advertisements. The document suggests that we will leave to market forces the determination of how ads included in the programming stream be protected. But there is nothing in the document that prohibits a third-party box manufacturer, for example, from plucking the advertisements out of that stream and/or inserting their own advertisements.

 

That is just one example of one of the gaps that I think the agency simply hasn’t filled. With respect to privacy, the argument has essentially been, “Well, we can rely on enforcement actions against multichannel video programming distributors, who will then have to get certifications from third-party set-top box manufacturers that those third parties are complying with the rules.”

 

This kind of vicarious enforcement regime is something that I think might well be of dubious legality, and from a policy perspective, it’s extremely difficult to justify. Those are just a couple of the gaps that I think the American public should really think about, in addition to the fact that we are delegating this entire enterprise to an open-standards body that is unlikely to reach any kind of definitive agreement in the near term.

 

MCN: Do you agree with those who say this set-top proposal is basically a gift to Google?

AP: I’m not sure who it is a gift to. But I can say it is ultimately going to be a lump of coal for the American people who are expecting on day two, after the FCC’s grand announcement on day one, to be able to get competitive set-top boxes.

 

MCN: What issues, if any, do you have with the FCC’s inquiry into zero-rating plans?

AP: As I understand it, the staff is currently in conversations with various companies — T-Mobile, Comcast, AT&T and Verizon [Communications] — about some of the offerings that they have that generally can be classified under the rubric of zero-rating. We have requested to be a part of that investigation, at least to be able to sit down in meetings and understand what questions are being asked. But that request is being denied.

 

I am not sure where things go next. But I predicted on Feb. 26, 2015 [when the network-neutrality rules were passed] that the Internet conduct standard would be tailor-made for creating uncertainty in the broadband marketplace.

 

With the chairman having blessed T-Mobile’s offering in November as “highly competitive and highly innovative,” and then having followed that up with an investigation in December by the agency’s bureaus, every rational private sector actor would wonder, “What are the rules of the road?” And unfortunately, there is no answer to that question — just as there was not an answer on Feb. 26 when we were told, “We don’t know where things go next.”

 

MCN: President Obama is the son of an immigrant and went to Harvard Law School and taught at the University of Chicago Law School. You are the son of an immigrant, went to Harvard as an undergraduate and went to Chicago Law School.

AP: I still remember seeing him in the hallways when he was teaching there. He was a relatively young lecturer at the time. There was a lot of buzz about him even then, though I don’t think anyone would have foreseen he would be the president of the United States.

 

MCN: And yet from seemingly similar experiences you have very different political philosophies. What do you think, in your experiences as a minority growing up in America, led you to the Republican Party?

AP: For me, one of the things that really influenced the development of my political views was watching my parents’ example.

 

They came to the United States in 1971 literally with nothing more than a transistor radio, $10 and a willingness to work extremely hard. From buying dishes at Goodwill in Buffalo in the early 1970s to my mother making glue with rice, which I still remember from when I was in preschool, I saw the fact that they were willing to do literally anything for me and my sister to have an opportunity to succeed.

 

Now that I have become a parent myself, I can understand the impetus they had for making sure my sister and I were provided for. That kind of sense of responsibility and dedication and willingness to embrace the opportunity this country provides without complaint, it is something that I am so grateful for.

 

And on a macro level, I would hope that most Americans, regardless of their political affiliation, would appreciate that this country really is unique in so many ways. That the children of lower-middle-class Indians — one grandfather operated a spare auto parts store and the other was a fi le clerk for an oil company — could come to the United States and succeed, and that their son could be nominated by the president of the United States for a position like this is just something I can’t imagine happening anywhere else in the world. I guess that is the driving force in my political thinking.

 

MCN: Most people don’t aspire to be FCC commissioners as children. How did you get from there to here?

AP: I didn’t even know I was going to be a lawyer when I was a child. My parents are both physicians. Almost everybody in my family is either a physician or an engineer or something in the sciences. So, law school wasn’t even something on my radar.

 

I was already in college when I realized I didn’t want to go to medical school. I started thinking about the law, primarily because I enjoyed the debate team and humanities courses and research and writing. All of that seemed to lend itself to law school. Even when I got to law school, I didn’t know what I wanted to do afterward. I really enjoyed antitrust law. And I took some sage advice from the judge I clerked for in New Orleans, who suggested I apply to the Department of Justice’s honors program in the antitrust division.

 

I ended up in Washington and that started almost a decade and a half across the different branches of the government sector. And then the opportunity arose for me to be considered for this job.

 

That is why I have often called myself the Forrest Gump of the legal profession. I jumped from one position from the other without a definitive view of what the end goal was. But, now that I am here, I am so grateful to the president and the Senate for the opportunity.

 

MCN: And now your end goal is “real” competition, competition, competition.

AP: It really is shaped by some of the things I learned at the University of Chicago and, before that, in my economics courses at Harvard, which is that the government does best by the American consumer when we set the conditions for vibrant competition and let the private sector compete vigorously. That is ultimately the best guarantor of consumer welfare, as compared to pre-emptive regulation that essentially freezes in place the marketplace at a moment in time.

 

SIDEBAR: Remembering Justice Scalia

Federal Communications Commission member Ajit Pai recounts a particularly meaningful meeting with one of the people he admired most: the late U.S. Supreme Court Justice Antonin Scalia, who died on Feb. 13.

 

“I had the opportunity to meet Justice Scalia several times,” Pai recalled. “Typically, it was thanks to Judge Martin L.C. Feldman of the U.S. District Court for the District of Louisiana, who was a good friend of the justice. For instance, Justice Scalia came to the judge’s 30-year anniversary/clerk reunion in 2013, where I had the chance to chat with both of them.

 

“I also crossed paths with the justice at the White House Correspondents’ Association dinner.

 

“But the meeting I’ll remember the most was in 2011, when Judge Feldman came to Washington to discharge his duties on the Foreign Intelligence Surveillance Court. He asked me to meet him one evening; I of course eagerly accepted. When I got there, the Judge informed me that we would have a surprise visitor — one Justice Scalia.

 

“My skepticism dissipated only when the Justice himself arrived,” Pai remembered. “For the next hour or so, I enjoyed a warm, intimate conversation with two of the judges I’ve admired most. We talked about everything from Major League Baseball to the justice’s dissent in Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451 (1992), a brilliant opinion that drew me as a law student toward antitrust law (and which he recalled immediately).

 

“It’s an honor to meet a Supreme Court Justice in any setting. But it was a particular privilege to spend so much time with a jurist whose work so profoundly shaped the American legal landscape. I’m grateful to Judge Feldman for that wonderful evening and to Justice Scalia, both for his repartee and his service to our country.”

— John Eggerton

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