Online Extra: O'Rielly on Incentive Auctions, IP and Aereo

New FCC Member on Why He’s ‘Staying Strong for Freedom’
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WASHINGTON — An edited excerpt from Multichannel News Washington bureau chief John Eggerton’s exclusive interview with new Federal Communications Commission Republican member Michael O’Rielly. For the rest of the interview, see the March 17 Cover Story.

MCN: You were involved in crafting incentive-auction legislation. What would be your definition of a successful auction?
Michael O’Rielly: First and foremost, my obligation is to implement the statute correctly, which means trying to entice existing broadcasters to either channel-share, give up their license or move from VHF to UHF so we will free up spectrum for new wireless services. That is success. Can we entice broadcasters to even close an auction? What kind of spectrum are we actually making available so they can increase service?
But it is also to protect broadcasters that decide not to participate, that they are continuing to serve their market and are protected, and their service replicated as the statute requires.
And unlike other auctions, this actually has a tie-in to revenues. Under the statute we are obligated to meet certain goals, trying to provide for FirstNet [the interoperable broadband network the Obama Administration has budgeted at $7 billion]; we have deficit-reduction numbers that are in the statute; [the Next Generation 911 initiative] and other things that are part of the equation for a successful auction. That is important to me. You have a number of members who think FirstNet will be very successful. I hope that’s the case.
We don’t have a great role in that here, but I did spend some time as the statute was being drafted and so I am really interested in making sure we can try and meet our revenue targets.

MCN: The H Block was the first of three auctions. Do you have any issues with the way that was conducted?
MO: I don’t want to talk about that auction itself, but I have concerns any time an auction is less than pure in its use of market forces. Here, we’ve kind of manipulated the outcome for purposes that may be meritorious. They happened before I was here so I can’t judge all the details and factors that went into that. But I worry any time the commission manipulates an auction.

MCN: What are your views on the quadrennial media ownership review and the item teed up for the 31st?
MO: I have deep reservations about the efforts underway to limit [joint service agreements]. I have spent a lot of time reading the record, which shows that JSAs have been extremely beneficial to communities. Some broadcasters wouldn’t be able to produce local news and diverse programming without these agreements. And we are going to find a way to harm diversity and local news?  It seems like a backward step in my opinion and I don’t see why we would spend our time doing this.

MCN: What about the other parts of the item, including the retransmission-consent proposal and not loosening any ownership regulations?
MO: I have to look closer at the retrans proposal (and other elements) and the underlying authority provided to the commission.  My first obligation is the statute.  

MCN: What’s your position on not loosening any of the cross-ownership regulations?
MO: I have a deep problem with because similar to 706, I was there for 202(h) negotiations which created the biennial — then quadrennial — media-ownership rule review], and 202(h) was meant to go one way. We wanted to put some things in statute to make the commission review its media-ownership rules to reflect the current media marketplace. And 202(h) was intended to deregulate. But if it plays out this way, there will be new burdens and no relief.
I think the marketplace has changed. I want to be thoughtful about this. I think there is room to modernize our rules to reflect the current marketplace, but do it in a way that doesn’t harm localism, competition, diversity or the public interest. I think the commission can do this. It does require work. The commission here seems not to be doing the part it should be doing and that is really harmful, in my opinion.

MCN: You used the phrase “stay strong for freedom” at the end of your nomination hearing and again at the end of your first FCC meeting. It had some people worried it was some kind of secret conservative Republican rallying cry.
MO: It is not intended to being anything more than a simple, benign phrase. It started very innocuously when we were doing the reauthorization on the Internet Tax Freedom Act. There were a bunch of staffers and we were called the Freedom Corp. Part of that was we are moving the Internet Tax Freedom Act and we would always end the conversation with “stay strong for freedom” because freedom was Internet tax freedom.
Move forward a little bit and I became legislative director for John Sununu and I made my signature line on my e-mail to “Live Free or Die.” I took a lot of grief for that, because it seems a little bit strong in terms of its directive. But it is the motto of New Hampshire and I was working for a New Hampshire member.
Well, things being as they are, the 2008 election didn’t turn out exactly as I would have liked, or my boss would have liked or a lot of people would have liked. I was comfortable with disassociating myself with New Hampshire, though I love New Hampshire, but at that time I was a little annoyed. And so I changed it to “stay strong for freedom,” or sometimes just “SSFF.”
It is not meant to be offensive to anyone or a hidden agenda. It’s a very innocuous line. And how could you not be for freedom? It’s what our nation was built on.

MCN: The Department of Justice just said in comments to the Supreme Court that whether a service like Aereo can ultimately get a blanket license to carry TV stations — a separate issue from whether it is now violating copyright — will have to wait for the FCC to define over-the-top providers. Shouldn’t the FCC be weighing in?
MO: Truth be told, I haven’t had a chance to read the filing from DOJ. But, I have spent a lot of time with what people now refer to as over the top. We called it IPTV. We called it lots of things through the years, since probably 2005. I have spent a lot of time with these issues. I am sensitive to the innovation over-the-top providers might bring. I am excited about what they may be able to offer.

MCN: But doesn’t the FCC have to decide whether or not to apply MVPD regs to over-the-top, since that is where the agency is pushing video?
MO: I’m not sure the commission is pushing video in any direction. In my time I’ve spent a lot of time on public safety and 911, so I haven’t seen the commission forcing video in that direction. I’m not sure we need to answer that any time soon, but I’m willing to be convinced otherwise.

MCN: What is your view of how the FCC is handling the IP transition trials?
MO: From what I can tell based on the conditions the commission imposed on those that might be interested it is about what I expected. There are not a ton of people applying yet. In the first round, you have one and a half. We don’t know what we are getting in the second round.
I have expressed my concerns that the conditions the commission imposed would probably deter applicants and we’ll see if I’m right.

MCN: The chairman has dropped the Community Information Needs study, but the FCC still has a charge from Congress and the courts to both promote diversity and weigh the impact of its rules on ownership diversity. What was your view of the tabled study and how should it go about gauging diversity?
MO: Let me start with the second question first. I don’t see, and no one made a compelling case, that the CIN study had anything to do with furthering the needs of the statute, whether the quadrennial review or the Sec. 257 review [Every three years, the FCC must gauge the market barriers to entry for small businesses and entrepreneurs]. The argument was that the study was supposed to address both of those.
I spent a lot of time on the statute working on those provisions and I don’t see where this study fit into those goals. I’m not sure of the value-added of that study from the get-to.
Legitimate concerns were raised that I agree with and, at that point the ship had sailed on the study and it should have been pulled and the chairman pulled it.

MCN: So, what do you do to gauge that interest? The U.S. Court of Appeals for the 3rd Circuit has said the FCC will need to better justify any diversity initiatives, and the FCC has some proposed diversity studies that seem to have disappeared down a black hole.
MO: Again, I don’t want to predict what a court is going to do and I don’t know how that is going to play out. I have been kind of frustrated by some of the past decisions. I have difficulty with [the ruling in Prometheus Radio Project vs. FCC] I because, as I said earlier, the provision is supposed to be one way and the court said otherwise. And I just disagree based on my experience. They believe you can go both ways with it. And if that is the case, then you really haven’t done anything with the provision. If the FCC can go both ways, then that is something the FCC can do anytime and the provision is not necessary to be in the statute.
To the other part of your question, I don’t know how we meet the court’s demands. I don’t know how we get above that threshold and finally move forward in the court’s eyes. We haven’t been able to move forward in our own eyes and act on the 2010 [study].  We are four years late. I think it is a violation of the statute.  I think it is disgraceful. I think it is our obligation to end things as it was intended in the statute.
I don’t know how we are going to finish 2014 in 2014. That to me is extremely problematic.

MCN: If you could reform any FCC processes, what are the one or two that you think would be most helpful?
MO: Our compliance with items we are obligated to do under the statute; things that we do a very poor job on.

MCN: Like what?
MO: Our regulatory flexibility analysis, our cost-benefit analysis and our paperwork reduction analysis. Those things have been given short shrift over a number of years, and I think that is a disgrace. I think we have an obligation to do further study and analysis and more work in those spaces.

MCN: Are you at all worried about the process-reform report’s disclosure proposal that some are interpreting as requiring groups who comment to identify who is funding them?
MO: I am trying to read what the chairman put out. That is certainly one way to look at it. If that is the way it was intended, then I would have deep problems with that and I will articulate that at the right time.

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