Earlier this year, the FCC announced that it would not permit towns and cities to set their own prices for pole access or technology deployments when it came to 5G networking technology. Now, the head of the House Commerce Committee, Frank Pallone (NJ-D) has sent a letter to Ajit Pai asking for information regarding the FCC’s communication with the industry it’s intended to regulate as it relates to this decision — and whether the FCC deliberately encouraged companies to challenge the ruling.
The letter states:
It has come to our attention that certain individuals at the FCC may have urged companies to challenge the Order the Commission adopted to game the judicial lottery procedure and intimated the agency would not look favorably towards entities that were not helpful. If true, it would be inappropriate for the FCC to leverage its power as a regulator to influence regulated companies to further its agenda in seeking a more friendly court.
The Initial Situation
To explain what’s going on here, we need to jump back in time a bit. The FCC’s original order was hotly contested by various cities. The FCC’s decision to mandate a single price that cities were allowed to charge for urban right-of-way access — specifically an up-front application fee of $100 and an annual $270 fee per small cell — was criticized both for being too small and for preventing local municipalities from making their own decisions about how best to roll out and charge for network support. The FCC’s rule also mandates that cities must act on carrier applications for access within 60-90 days. If a municipality misses a deadline, they can be sued for noncompliance by the telco in question. The old per-antenna fee was $500 on average, according to Statescoop.
Both rurally located towns and larger cities were upset about the order, which amounted to a $2B nationwide reduction in the fees companies like Verizon, AT&T, and Sprint were expected to pay to deploy 5G. As we’ve previously discussed, 5G is a distinctly different technology than LTE, with more small cell deployments expected to be required in order to provide effective service. Cities argued that they need this income to cover the costs of 5G service and deployments. The FCC was unpersuaded.
The Carriers File Suit
Given that the FCC’s order reduced the fees the telcos were expected to pay for 5G deployments, you might think the companies in question would be thrilled about it. Instead, they filed lawsuits and complaints in multiple different federal circuit courts, arguing that the FCC’s order didn’t go far enough. One oddity, however, is that cases were filed in four distinct circuit courts — First, Second, Tenth, and DC, rather than within a single circuit.
In its filing with the DC Court Circuit, AT&T argues that the FCC should have declared that ISPs are automatically granted access to install equipment in any situation in which a city or town fails to grant such access within the afforded 60-day period. Because it wasn’t granted this power, the company sued, claiming that the rule was “arbitrary, capricious, inadequately reasoned, or otherwise contrary to law.”
In other words, AT&T took the FCC to court for not giving it even more power than it had already been handed. Sprint, Verizon, and the Puerto Rico Telephone Company also petitioned for review.
Did the FCC Encourage Telcos to Game the Court System?
The Register, which has covered the FCC’s decisions extensively, states:
Due to the concentration of Californian legal challengers, the issue would naturally expect to be heard in California’s Ninth Circuit. The Ninth Circuit has a long history of striking down efforts by the federal government to impose its will on the state. As such, the FCC could reasonable expect its order to be challenged – and possibly lose which would delay and possibly derail the whole program.
Enter the telcos. All the main four mobile operators challenged the order with their own lawsuits. It was an approach that baffled observers, including ourselves… It is noteworthy that the companies sued in four different circuits: First, Second, Tenth and Washington DC. As a result, the various lawsuits were consolidated and under the legal system’s way of handling such disparate appeals, a lottery was held. That lottery in November led to the cases being moved to the Tenth Circuit – which covers the middle of the country – Oklahoma, Utah, Colorado, etc – and the appellants were told to migrate their cases accordingly. In short, if the plan was to get the case out of California, it worked.
Twenty-four cities filed their own lawsuits against the FCC on October 30, in the 9th Circuit, seeking to halt the FCC order — but this came after the four telcos had already filed suits on October 25. The implication is that the FCC directly leaned on the carriers themselves to file the suits, with the ultimate goal of invoking a judicial lottery. When cases are filed in more than one circuit, the court to hear the cases is determined randomly from all the courts in which cases have been filed. This provided an opportunity to move the case out of the 9th Circuit and into a friendlier venue. This kind of tactic is standard operating procedure; patent trolls have an infamous relationship with the Eastern District court in Texas precisely because it’s notoriously friendly to their particular type of business “innovation.”
What makes this situation unusual is the accusation that the FCC itself suggested that the carriers file suits in order to move the case into a friendlier venue. This kind of hand-in-glove relationship between a government regulatory body and the companies it purportedly regulates is known as regulatory capture. It leads to the firms’ interests being prioritized over the interests of the public or the public good.
The FCC under Ajit Pai has embarked on a campaign to dismantle consumer protections, including net neutrality, transparent billing practices, and privacy rights. It has pushed to end support for programs that help low-income and rural citizens buy broadband and wireless access, even when its own effort has been opposed by major industry operators. It has restricted the manner by which citizens can file a complaint with the agency without paying a fee. It went to court to fight for the right to declare a market with one operating ISP to be “competitive” and won.
It has often justified these moves by claiming they would lead the companies in question to invest in 5G wireless deployments or in networking technology more generally. It has continued to cling to these talking points, despite the fact that the much-forecasted boom in 5G deployments and overall capital expenditure in wireless did not materialize. AT&T and Verizon, which began 2018 by pledging to spend more on 5G deployments, ultimately didn’t do so.
Does the pursuit of a deregulatory agenda prove that Pai is working directly on behalf of the industry he’s supposed to monitor for abusive practices and fraud? No. But his refusal to acknowledge the complete failure of his own economic predictions and his destruction of consumer protections and privacy regulation do not lend themselves to an optimistic interpretation of the evidence at hand. Directly collaborating with the companies you are supposed to regulate in an attempt to help them game the court system would be a perversion of the FCC’s fundamental mandate. Pallone’s letter reads like he may have a whistleblower whispering in his ear. One wonders if T-Mobile might have something to say about the situation, given that AT&T, Sprint, and Verizon all filed suits, while they did not.