November 28, 2011 4:33 PM

The FCC's Thanksgiving Week Charade

Last week was a short week for most Americans . . . a time to relax, and enjoy time with friends and family.  While most Americans were doing just that, political types in Washington--like our friends at the FCC--had nothing to do but play politics . . . and play politics they did.  However, what was no doubt intended to be a political game of "chicken", turned out to be just another "turkey" in a week devoted to the turkey.

Here's what happened.  Last Tuesday, on the 22nd, the Commission apparently decided that they had seen enough of the proposed AT&T/T-Mobile acquisition, and circulated a draft order expressing conclusions of "Commission staff" that the proposed acquisition was just bad juju and needed to be rejected by the FCC on "public interest" grounds (assuming the Antitrust Division failed to prove the merger would lessen competition).  The alleged draft order would have required an Administrative Law Judge to hold a hearing in order to validate the harms the "FCC staff" had already identified.  

Stealthy Regulation

Aside from the Commission's pre-holiday timing, the FCC also surprised the merging parties themselves--calling to notify them only hours before going "public" with its announcement.  Perhaps, "going public" is not quite the best characterization of the decision, as the FCC's web page fails to mention this development.  Apparently, only those reporters that could be trusted to keep a secret were privy to the press briefing.  Every seemingly-firsthand report announcing this "news" also includes "boilerplate" similar to this language from the Infoworld article, "FCC officials said in a press briefing in which they spoke under the condition they not be named." 

This Commission has made "open and transparent decision-making" a point of distinction.  While the meaning of this term is open to debate, what is clear, however, is that access to "open and transparent decision-making" is an earned privilege, and not a right.

Jobs Creation: Identity of Investor vs. Amount of Investment

Along with the self-evident statement that would be true of every previous wireless merger the FCC found to be in the "public interest" (that the merger would result in an "unprecedented concentration" in the wireless industry), the anonymous FCC officials explained further that AT&T had failed to prove that the merger was necessary to increase rural broadband coverage, or that the merger would create jobs, and/or prevent job losses. 

The "unnamed" FCC officials, appeared to base their reasoning on a variation of the established principle that "[i]f you have five dollars and Chuck Norris has five dollars, Chuck has more money than you." See generally, Chuck Norris Facts.  But, an FCC that isn't even comfortable "publicly" disclosing their own names at a press briefing cannot be expected to be candid, or cavalier, enough to disclose that they relied on reasoning derived from a "Chuck Norris fact" to further the agency's political interest. 

If this assessment seems a little harsh, let me explain.  Only four days prior to the secret commissioner's other briefing, the FCC issued a very public self-congratulatory statement on their recently-adopted Connect America Fund Order ("CAF Order"), explaining that a broadband development fund not to exceed $4.5 billion dollars/year (comprised of rate-payer "contributions") would generate approximately 500,000 jobs over the next 6 years.  So, the FCC plans to "invest" (through direct subsidies) between $24-$27 billion over the next 6 years to create 500,000 jobs.

On the other hand, AT&T has publicly stated--and the Commission could require--that it will invest an additional $8 billion (above their normal cap-ex budget) over about the same period of time.  It's puzzling that, even by the Commission's self-serving "recovery math", it can't give AT&T credit for its claim that its investment (1/3 of the Commission's total) will produce a comparatively modest 100,000 jobs. After all, if the FCC converted that $8 billion investment into an additional $8 billion subsidy, the same amount would produce about 167,000 jobs over the next 6 years. 

Even if the Commission believes that private investment is significantly less efficient than FCC-directed subsidies, it's hard to believe that AT&T's investment couldn't potentially create at least 60% of the jobs the Commission could produce using an equivalent CAF subsidy. On its face, it would seem as if the FCC is using one set of assumptions for CAF subsidies, and another for AT&T wireless infrastructure investments, but yet this explanation would suggest inconsistent treatment of similar issues--the opposite of open and transparent decision-making.

Why the FCC would use one investment-to-jobs multiplier for its CAF Order, and then--only 4 days later--tell the public that AT&T's substantial incremental merger-related investment would not create jobs is unclear. The only consistent rationale that would allow both claims to stand would be something along the lines of "if the FCC invests $5 in rate-payer funded subsidies, and AT&T invests $5 in private capital, the FCC will create more jobs."  

Not only is this logic tortured, but it borders on Chuck Norris pop culture heresy.  The Commission's fundamental error is in using a Chuck-specific mathematical principle to justify a transparently specious political agenda.  With this information in hand, it is easier to understand why the FCC officials insisted on anonymity at the press briefing.  Unfortunately for the FCC officials, any student of Chuck Norris facts can tell you that, if Chuck knows where Carmen Sandiego is (and, according to the Internet, he does), Chuck will certainly find the FCC officials . . . and the results will not be pretty. 

Even worse . . .

Not only is it bad enough that the FCC wouldn't even publicly disclose who was (indirectly) briefing the "public" in a press briefing, and failed to apply its own investment-to-jobs creation formula consistently, but the Commission compounded these problems by reverting to its  all-too-common "modus operandi" of obtaining its objective through an act of omission. By designating its "concerns" to an indefinite administrative hearing process, the Commission signaled its intent to effectively derail this proposed transaction by outright delaying consummation past the September 20th "drop dead" date.  

Pathetic?  You bet; but this is precisely why there are a number of Chuck Norris facts web sites, and exactly no "FCC facts" web sites . . . .  The Commission should be giving thanks that AT&T and DT saved some piece of the agency's dignity by seeking to withdraw their license transfer request on Thanksgiving Day.  The FCC should hope Chuck will be that gracious.

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