WASHINGTON-At a time when policy makers are wrestling with how best to reform the Federal Communications Commission in the Digital Age of Competition, the agency is quietly undergoing a transformation that may be turning an agency of spectrum managers into fiscal managers with broad portfolios.
Today, in addition to traditional licensing and spectrum management duties, the FCC finds itself running multibillion dollar auctions; litigating bankruptcy lawsuits; arbitrating disputes over federally subsidized school Internet grants; mediating zoning disputes between wireless carriers and local zoning boards; acting as a collection agency for fees increasingly extracted from regulated telecom firms; exercising Justice Department-like antitrust authority over telecom mega-mergers; and serving as a consumer watchdog second only to the Federal Trade Commission.
The FCC even has a chairman who sits on the board of a congressionally created private venture capital firm that invests in telecom startups. Though FCC head William Kennard does not have a direct hand in choosing how the Telecommunication Development Fund’s $25 million (generated from interest on upfront auction payments) is invested, his participation on TDF’s board of directors has an uncomfortable awkwardness about it.
Likewise, the FCC has close ties to the Universal Service Administration Co., which awards grants to schools and libraries for discounted Internet access and inside wiring. The FCC does not decide which entities get the grants but when a dispute arises, like a controversial one in Tennessee, the FCC is called to arbitrate the matter. Is it an appropriate role for the FCC?
Awkward and potentially problematic, too, is the fact most of the FCC’s budget comes from the regulatory fees it collects. A big concern about the FCC moving to a self-funding regime has always been that such an arrangement could influence how the agency would oversee telecom firms generating the fees.
What has caused the FCC’s mission to creep into such unlikely directions and what are the implications for telecom policy making?
The transformation began in earnest in 1993, when Congress authorized spectrum auctions, and continued with the enactment of the 1996 telecom act. Coinciding with this FCC transformation has been the explosion of the telecom industry generally and the wireless sector in particular.
For the most part, the GOP Congress that wants to downsize the FCC is the same one that mandated some of these new FCC enterprises. In some cases, these novel FCC endeavors have created potential conflicts and thrust regulators into new roles for which they may not be suited.
For example, some observers have suggested FCC lawyers-while good at defending the agency on telecom law-may be out of their league when it comes to complex financial matters.
Indeed, the FCC stumbled early by not protecting its interest in some personal communications services licenses it sold and later suffered a major defeat in the Texas bankruptcy court that wrote off most of the $1 billion General Wireless Inc. pledged to the FCC for C-block PCS licenses.
FCC lawyers prevailed in bankruptcy litigation brought by Pocket Communications Inc. and last week were awaiting word how they fared in the NextWave Telecom Inc. bankruptcy case in Albany, N.Y.
Not that the FCC hasn’t tried to shed some of these new duties. A few years back, the FCC reportedly was rebuffed after asking the Treasury Department to be responsible for collecting auction payments. Now, Kennard is lobbying Congress for legislation that would keep wireless licenses out of bankruptcies. Critics argue such a change would deny business people their rights under bankruptcy law.
At the core of many of the new FCC forays is money. Not far behind, and closely related, is politics. The question is: Has the massive infusion of big-time money and politics fundamentally changed FCC policy making?
Increasingly, wireless firms are losing licenses not because they’ve broken FCC rules but because they couldn’t pay back the U.S. government on time for them.
In some cases, Democrats who have run the White House and the FCC since 1992 have pushed programs-to the extent allowed by the Supreme Court-to make a path for women, minorities and small businesses that account for a good chunk of the nation’s makeup but remain heavily under represented in a telecom industry dominated by behemoths and dominated by white men. That’s what the then-Democratic Congress directed in 1993.
Republicans say the FCC should not be in the business of social engineering.
Women and minorities lost auction discounts after the Supreme Court curbed affirmative action in 1995. Later, after a couple big C-block PCS*auction winners filed for bankruptcy, the FCC killed installment payments.
Thus, slowly but surely, spectrum auctions have become a game for mostly Fortune 500 bidders. Meanwhile, the kind of wireless ownership diversity once envisioned by Congress has vanished. Despite increased competition, wireless licenses are becoming concentrated in handful of operators.
Some FCC watchers wonder when the FCC will get back on course. Others say the course has forever been changed.
