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Commissioner McDowell Testimony, FCC Oversight Hearing

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Released: July 10, 2012



STATEMENT

OF

COMMISSIONER ROBERT M. MCDOWELL

FEDERAL COMMUNICATIONS COMMISSION





BEFORE THE

UNITED STATES HOUSE OF REPRESENTATIVES

COMMITTEE ON ENERGY AND COMMERCE

SUBCOMMITTEE ON

COMMUNICATIONS AND TECHNOLOGY





OVERSIGHT

OF THE

FEDERAL COMMUNICATIONS COMMISSION












JULY 10, 2012




Thank you Chairman Walden, Ranking Member Eshoo, and Members of the
Subcommittee for inviting us to appear before you today.

The FCC’s “to do” list is lengthy. Among the many tasks that face the agency
are, in no particular order: implementing the new spectrum auction law; completing
universal service contribution or “tax” reform; modernizing our media ownership rules;
determining a path forward in the wake of the Supreme Court’s recent ruling regarding
our indecency policies; and turning back international efforts to regulate the Internet.

First, as the Commission works to implement the new spectrum auctions law, we
should do so with simplicity, humility and restraint. History teaches us time and again
that over-engineered or micromanaged auctions and spectrum policies inevitably lead to
harmful unintended consequences such as interoperability complications, reduced
investment and less revenue generated at auction for the Treasury. Band plans and
auction rules should be minimal and “future proof” so no innovation is preempted by
government action and no market player is excluded from the opportunity to bid.

Second, to help put more spectrum into the hands of American consumers, we
need to find new ways to encourage the Executive Branch to relinquish federal spectrum
for auction, as well as help create a policy framework to encourage technological
advancements and investments in spectral efficiency – that is, how can we squeeze more
capacity out of currently available airwaves.

Third, although the Commission has completed most of its work on the spending
side of the universal service ledger, we are overdue for an overhaul of the “taxing” side.
As this automatic tax increase skyrockets into unprecedented stratospheric heights, we
have an obligation to finalize fiscally prudent reform as soon as possible.


Fourth, in 1996, Congress directed the FCC to clear away unnecessary regulations
in the media marketplace as competition takes root. Although complicated by several
appellate rulings, the Commission owes it to Congress, the courts and, most importantly,
the American people to modernize our rules to reflect the competitive realities of the new
media age. In my view, the newspaper broadcast cross ownership rule is outdated, is
contributing to a loss of voices in the media marketplace and should be largely
eliminated.

Fifth, as the father of three young children, protecting them from inappropriate
content is a high priority for our family. The Commission should act with all deliberate
speed to clarify its indecency policy in the wake of the recent Supreme Court decision on
this matter and work to process the roughly 1.5 million indecency complaints, some of
which have been pending for 9 years.

Lastly, I would like to thank this Subcommittee once again for raising the profile
of the international effort to regulate the Internet. The May 31 hearing was watched
literally around the world and delivered a loud and clear message that not only is it the
strong bipartisan policy of the United States to ensure that the expansion of
intergovernmental powers over the Net never takes place, but that failure to prevent this
effort would harm developing nations the most.

Thank you again for having us before you today, and I look forward to answering
your questions.


* * *

2

FCC Commissioner Robert M. McDowell

Supplemental Statement and Analysis

July 10, 2012


America’s future is bright when it comes to putting the power of new
communications technologies into the hands of consumers. Our nation has always led the
world when it comes to wireless innovation, and as I have said for some time, we are in
the early days of the Golden Age of mobile broadband. If we adopt the correct policies,
we will further strengthen America’s global leadership.


The United States has approximately 21 percent of the world’s 3G/4G subscribers
and approximately 69 percent of the world’s LTE subscribers even though the United
States is home to less than five percent of the global population.1 Investment by
American wireless providers is higher than that from their international counterparts. For
example, in 2011, over $25 billion was invested in United States’ wireless infrastructure2
versus $18.6 billion invested in the 15 largest European economies combined.3


The American mobile market also enjoys more competition than most
international markets. According to the most recent FCC statistics, nine out of ten
American consumers have a choice of at least five wireless service providers.4 In
Europe, that number is around three.5 As a result, American consumers benefit from
lower prices and higher mobile usage rates as compared to consumers in the European
Union (EU) – 4 cents per minute versus 17 cents generally in the EU.6 Wireless
subscriber usage on average in the United States is often three to seven times as much
compared to some countries.7 At the same time, American consumers pay at least one-
third less than consumers in ma
f the world.
ny other parts o
8

1 See INFORMA TELECOMS AND MEDIA (WCIS Database) (Dec. 2011).
2 See CTIA-THE WIRELESS ASSOC., CTIA SEMI-ANNUAL WIRELESS INDUSTRY SURVEY (2012),
http://www.ctia.org/advocacy/research/index.cfm/AID/10316; see also CTIA-THE WIRELESS ASSOC.,
SEMI-ANNUAL 2011 TOP-LINE SURVEY RESULTS 10 (2012),
http://files.ctia.org/pdf/CTIA_Survey_Year_End_2011_Graphics.pdf (providing cumulative capital
investment numbers).
3 See BOA/MERRILL LYNCH EUROPEAN TELECOMS MATRIX Q112 (Mar. 30, 2012) (GLOBAL TELECOMS
MATRIX Q112) (estimating €14,368 YE 2011. Conversion at $1.2948/1€). The European countries
included in the Matrix: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Netherlands,
Norway, Portugal, Spain, Sweden, Switzerland, and UK; there are 27 members of the European Union
(EU).
4 Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993, Annual Report
and Analysis of Competitive Market Conditions with Respect to Mobile Wireless, including Commercial
Mobile Services, WT Docket No. 10-133, Fifteenth Report, 26 FCC Rcd 9664, 9669 (2011).
5 See GLOBAL TELECOMS MATRIX Q112.
6 Roger Entner, The Wireless Industry: The Essential Engine of U.S. Economic Growth, RECON
ANALYTICS, at 1 (May 2012), http://reconanalytics.com/wp-content/uploads/2012/04/Wireless-The-
Ubiquitous-Engine-by-Recon-Analytics-1.pdf ).
7 See GLOBAL TELECOMS MATRIX Q112 at 71.
8 See id.



Consumers in all demographic and socioeconomic categories are choosing to
access the Internet through mobile devices. Having the freedom to be online while on-
the-go is fueling a dramatic spike in global Internet traffic. For instance, Cisco recently
released the following projections regarding global Internet trends:9

 IP traffic per capita will reach 15 gigabites in 2016, up from four gigabites per
capita in 2011;10
 Last year, only six percent of consumer Internet traffic originated with non-PC
devices; by 2016, this number will grow to 19 percent;11
 Between 2011 and 2016, mobile traffic will grow by 62 percent;12 and
 By 2016, 1.2 million minutes of video content will cross the Internet every
second.13 Or, put another way, by 2016, it would take one person over six
million years to watch the amount of video that will cross global IP networks
each month.

Combining the power of the Internet with the freedom that comes from wireless
mobility has created new opportunities that were unimaginable just six years ago when I
was first appointed to the FCC. Throughout my tenure, I have worked hard to maintain
America’s light touch regulatory policy for mobile communications, which has enabled
our wireless sector to flourish. Competition, private sector leadership and regulatory
liberalization throughout the globe have wrought a wonderful explosion of
entrepreneurial brilliance, investment and economic growth.

Against this backdrop, I will discuss the following initiatives that are before the
Commission: (1) implementing the new spectrum law; (2) working on ways to free up
spectrum held by the federal government; (3) fostering greater spectral efficiency; (4)
continuing reforms of the universal service fund; (5) working on FCC process reform; (6)
seeking comprehensive and detailed data of the special access marketplace; (7)
modernizing media ownership rules; (8) determining how to implement the Supreme
Court’s recent indecency decision; and (9) discouraging international efforts to regulate
the Internet.

9 Cisco Visual Networking Index: Forecast and Methodology, 2011-2016 (rel. May 30, 2012)
http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns827/white_paper_c11-
481360.pdf.
10 Id. at 1.
11 Id. at 2.
12 Id. at 10.
13 Id. at 2.

2


THE FCC SHOULD IMPLEMENT THE NEW SPECTRUM LAW WITH SIMPLICITY,
HUMILITY AND RESTRAINT.




As discussed above, Americans are increasingly relying on sophisticated mobile
devices. While the popularity and power of mobility have wrought vast consumer
benefits, new and advanced wireless services have increasingly strained our spectrum
capacity. As you know, Congress passed historic and bipartisan legislation in February
that originated in your Committee, which includes a voluntary incentive auction to yield
more spectrum from our nation’s television broadcasters.14


The Commission has started its work on implementing the new law. The
spectrum auctions that will ensue will be the most complicated in world history. Given
this complex task, I am hopeful that the Commission will undertake its work with an eye
toward simplicity, humility and restraint. In the past, regulatory efforts to over-engineer
spectrum auctions have caused harmful, unintended consequences. I hope that we will
avoid such missteps by implementing the law with regulatory humility. I will work to
ensure that the new auction rules be appropriately minimal and “future proof” to allow
for uses that we cannot imagine today as technology and consumer preferences evolve.
For instance, the auctions should include band plans that offer opportunities for small,
medium and large companies to bid for and secure licenses without excluding any
interested participant.

THE FEDERAL GOVERNMENT SHOULD RELINQUISH MORE SPECTRUM FOR AUCTION.






In addition to making television broadcast spectrum available for new and
innovative service offerings, I look forward to continuing to work with you to identify
opportunities to move federal government users into new spectrum bands. As our
colleagues at the National Telecommunications and Information Administration (NTIA)
reported in March, various federal government operations are employing spectrum
located within the 1755 – 1850 MHz range that could be made available for commercial
uses.15 As you know, the NTIA report concluded that while it is possible to repurpose all
95 megahertz of the band, various agencies allege it would cost about $18 billion and
take over ten years to move current government users off of that spectrum. I thank my
friend, Larry Strickling, and his team at NTIA for their thoughtful and comprehensive
report.

That said, the underlying message is disappointing primarily because other
Executive Branch agencies did not provide NTIA with the granular data and analyses
necessary to support many of the report’s assumptions and conclusions. The thrust of the
report seems to indicate that the Executive Branch will resist relinquishing more

14 Middle Class Tax Relief and Job Creation Act of 2012, Pub. L. No. 112-96, §§ 6402-6404, 126 Stat. 156,
224-230 (2012).
15 U.S. DEPT. OF COMMERCE, AN ASSESSMENT OF THE VIABILITY OF ACCOMMODATING WIRELESS
BROADBAND IN THE 1755-1850 MHZ BAND (Mar. 2012) (“NTIA Report”).

3

spectrum, even though the federal government occupies about 60 percent of the best
spectrum. Clarity in the underlying cost assumptions would go a long way to create
greater market certainty as we attempt to attempt to satisfy longer-term commercial
spectrum needs.

THE GOVERNMENT SHOULD ADOPT POLICIES THAT WILL ALLOW FOR ACCELERATED
IMPROVEMENTS IN SPECTRAL EFFICIENCY.




While we think through the complex issues that will arise as we implement the
new spectrum legislation, I will continue to call for an increased focus on technologies
and strategies to improve spectral efficiency. In practical terms, even if we could easily
identify 500 megahertz of quality spectrum to reallocate today, we should expect the
better part of a decade to transpire before consumers could enjoy the benefits. As history
illustrates, it takes time to write proposed auction rules, formulate band plans, analyze
public comment, adopt rules, hold auctions, collect the proceeds, clear the bands, and
watch carriers build out and turn on their networks.

A heightened emphasis on and better education in this area will improve the
ability of mobile service providers, engineers, application and content developers as well
as consumers to take better advantage of the immediate fixes already available in the
marketplace. Service providers have a greater urgency to deploy more robust enhanced
antenna systems and improve development, testing and roll-out of creative technologies
where appropriate, such as cognitive radios and smaller cells. These types of options
would augment capacity and coverage, which are especially important for data and
multimedia transmissions. I am pleased that the Commission has undertaken educational
efforts in this area.


We are also beginning to discuss the concept of “spectrum sharing.” Although
the term “sharing” has yet to be defined in the context of current deliberations, I have
consistently supported FCC efforts to promote some forms of sharing where technically
feasible. For instance, I have strongly encouraged the Commission’s work to: promote
unlicensed use of the “TV white spaces” within the 700 MHz Band,16 clear the way for
use of medical devices in the 400 MHz Band,17 and promote growth for our nation’s
information infrastructure in the 5 GHz Band.18 Consumers will seamlessly enjoy higher

16 See, e.g., Unlicensed Operation in the TV Broadcast Bands, ET Docket No. 04-186, Additional Spectrum
for Unlicensed Devices Below 900 MHz and in the 3 GHz Band, ET Docket No. 02-380, Second
Memorandum Opinion and Order
, 25 FCC Rcd 18661 (2010) (using unused and under-used spectrum held
by licensed and unlicensed commercial incumbents for the purpose of developing new low power wireless
services).
17 Amendment of Parts 2 and 95 of the Commission's Rules to Provide Additional Spectrum for the
Medical Device Radiocommunication Service in the 413-417 MHz Band, ET Docket No. 09-36, Report
and Order
, 26 FCC Rcd 16605 (2011) (sharing spectrum with federal government users for the purpose of
developing and employing implantable medical devices that have a wide range of operations, including
restoring movement to paralyzed limbs).
18 See, e.g., Revision of Parts 2 and 15 of the Commission's Rules to Permit Unlicensed National
Information Infrastructure (U-NII) devices in the 5 GHz Band, Memorandum Opinion and Order, ET
Docket No. 03-122, 21 FCC Rcd 7672 (2006) (sharing spectrum with federal government users for the

4

speeds and expanded coverage once these sharing protocols are introduced into the
marketplace. Moreover, the new services stemming from these instances of sharing have
the potential to add many billions of dollars to the U.S. economy and to become essential
components of the mobile broadband arena. For instance, unlicensed use of white spaces
could serve as an “off ramp” for traffic congestion on licensed wireless channels in the
same way as Wi-Fi functions today.


Nonetheless, because “spectrum sharing” can have different meanings depending
on one’s perspective, policymakers should be careful when using the term. Furthermore,
spectrum sharing should not be seen as a substitute for auctioning more spectrum,
especially federal spectrum. Spectrum sharing is not a panacea. For instance, when
referring to the private sector sharing spectrum with federal users, many questions
abound, such as: Are federal users given priority of use over private sector users? How
would shared use of federal spectrum be determined? Through a unique technological
protocol? By time of day? Geographically? On an ad hoc basis? Should consumers
expect their use of shared federal spectrum to be interrupted with or without notice?
What would the value proposition be for various spectrum sharing scenarios?


Before implementing any spectrum sharing initiatives, these questions, and many
more, will need to be answered thoroughly.

THE FCC SHOULD PRESS AHEAD WITH UNIVERSAL SERVICE CONTRIBUTION REFORM.



Prior to last fall, the prospects of the Commission reforming the universal service
fund (USF) and the intercarrier compensation structure seemed dim. But, after years of
fact gathering and analysis, last October, the FCC voted unanimously on a
comprehensive reform order which modernized the intercarrier compensation system and
the high cost portion of the USF. As a result, we were successful in flattening the
spending curve on a federal entitlement by imposing a strict budget on the former high
cost fund.


The USF high cost fund has historically supported traditional voice
telecommunications services and has not directly subsidized broadband deployment.
And, over the years, the program has steadily grown without ensuring efficiency in the
system. To put this growth in perspective, the high cost fund grew from $1.69 billion in
1998 to over $4 billion by the end of last year.19 During that time, multiple providers
have received high cost fund support for the same locations. Even worse, the old
structure permitted providers to receive subsidies to serve areas that were already served
by unsubsidized competitors. In sum, the Commission tackled these issues, among many

purpose of developing and employing Unlicensed National Information Infrastructure (U-NII), which
provides short-range, high-speed wireless connections).
19 Similarly, the aggregate amount spent on all USF programs grew from $3.66 billion in 1998 to over $8
billion through 2011. Sources: Federal Communications Commission and Universal Service
Administrative Company.

5

others, and transformed the high cost fund into one that will support next-generation
communications technologies, while also keeping a lid on spending.20


Additionally, this past January, the FCC took initial steps to reform the USF low
income program (Lifeline/Linkup) by approving some necessary measures to eliminate
waste, fraud and abuse in that program.21 Pursuant to that Lifeline/Linkup order, the
Wireline Competition Bureau has been directed to prepare several progress reports
analyzing whether these new reforms are working and whether they are effectively
meeting the projected savings. The first bureau report is due soon.


Reforms to the high cost fund and the low income programs are just part of the
effort, because only the distribution, or spending, side of the USF equation has been
addressed thus far. Just as imperative is the need to fix the contribution methodology, or
the “taxing” side of the ledger.


By way of background, the USF contribution factor, a “tax” paid by telephone
consumers, has risen each year from approximately 5.5 percent in 1998 to a historic high

20 Congress has given the Commission broad authority not only to repurpose subsidies to support advanced
services, but it has imposed upon the FCC a duty to do so as well by the plain language of section 254. In
section 254(b), Congress specified that “[t]he Joint Board and the Commission shall base policies for the
preservation and advancement of universal service on [certain] principles.” 47 U.S.C. § 254(b)(emphasis
added). Two of those principles are particularly instructive: First, under section 254(b)(2), Congress sets
forth the principle that “[a]ccess to advanced telecommunications and information services should be
provided in all regions of the Nation.” 47 U.S.C. § 254(b)(2). Second, with section 254(b)(3), Congress
established the principle that “[c]onsumers in all regions of the Nation, including low-income consumers
and those in rural, insular, and high cost areas, should have access to telecommunications and information
services . . .
” 47 U.S.C. § 254(b)(3) (emphasis added).
Also, section 254(b)(7) instructs the Commission and Joint Board to adopt “other principles” that we
“determine are necessary and appropriate for the protection of the public interest, convenience, and
necessity and are consistent with” the Communications Act. In that regard, in 2010 the Federal-State
Board on Universal Service recommended to the Commission that we use our authority under section
254(b)(7) to adopt a principle to “specifically find that universal service support should be directed where
possible to networks that provide advanced services.”
Some contend that the definition of universal service under section 254(c)(1) muddies the water because it
does not include “information service.” Instead, that provision states that “[u]niversal service is an
evolving level of telecommunications services . . . taking into account advances in telecommunications and
information technologies and services.” But, it is also relevant that the term “telecommunications service”
is qualified by the adjective “evolving.” Even if section 254 were viewed as ambiguous, pursuant to the
well established principle of Chevron deference, the courts would likely uphold the FCC’s interpretation as
a reasonable and permissible one. See Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S.
837 (1984).
As part of this USF order approved last fall, the Commission agreed with the Joint Board recommendation
and adopted “support for advanced services” as an additional principle. Moreover, even if any of the
statutory language in section 254 appears to be ambiguous, the Commission’s reasonable interpretation
would receive deference from the courts under Chevron.
21 Funding for the Lifeline/Linkup program has steadily increased over the years. In, 1998, the total
support for the program was $464 million, and in 2010, the total support was over $1.3 billion. See
UNIVERSAL SERVICE MONITORING REPORT, CC Docket No. 98-202, Table 2.2 (2011), available at
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-311775A1.pdf.

6

of almost 18 percent in the first quarter of this year.22 This trend is unsustainable and is
therefore unacceptable. Simply put, the vague language on consumers’ phone bills
coupled with the skyrocketing “tax” rate, has produced a new form of “bill shock.” We
must tame this wild automatic tax increase as soon as possible.


Ideally, the FCC would have reformed both the spending and taxing sides at the
same time. Instead, our effort was staged separately. Nevertheless, I was encouraged by
Chairman Genachowski’s subsequent launch of a further notice of proposed rulemaking
on contribution reform which was approved by the Commission several months ago. I
am eager to work with my colleagues and all interested parties to develop a practical and
equitable solution to lower the tax rate while broadening the base in a manner that is
within the authority granted to us by Congress. Hopefully, the Commission can complete
this reform effort this fall.

Similarly,
I have had a long-standing interest in the FCC completing its reform of
the rural health care program. Of the four USF programs, this is the only program that
has yet to be reformed even though the Notice of Proposed Rulemaking has been pending
since 2010.


Finally, I must underscore that USF reform is an iterative process. I am
committed to constantly monitoring its implementation, listening to concerns, and
quickly making adjustments, if necessary, especially if there are legitimate points raised
regarding the use of flawed or incomplete data in the implementation stages.

WORKING ON FCC REFORM EFFORTS.




Congratulations regarding the recent House passage of the two FCC reform bills
which originated in your Committee. Those bills include many positive and constructive
reforms.


Modernizing the Sunshine in Government Act to increase the FCC’s efficiency
and spirit of collaboration while preserving openness and transparency makes good sense.
Also, requiring the Commission to include in its rulemaking process cost benefit analyses
to justify new rules will produce a more targeted rulemaking process. I look forward to
working with all of you on your continued efforts to streamline and improve FCC
procedures.


On a related note, I share with you an interest in ensuring that unnecessary,
outdated or harmful rules are repealed. While I have supported the Commission’s efforts
to eliminate outdated or harmful rules, I think more can be done to ensure that future
changes are substantive and meaningful.

22 See Proposed First Quarter 2012 Universal Service Contribution Factor, CC Docket No. 96-45, Public
Notice
, 26 FCC Rcd 16814 (OMD 2011).

7


SEEKING COMPREHENSIVE DATA IN THE SPECIAL ACCESS MARKETPLACE.


The Commission’s special access rules are once again back in the headlines. In
particular, the FCC had before it three special access price flexibility petitions which the
Commission allowed to be “deemed” granted pursuant to the current FCC rules. In my
view, that was the proper outcome. The petitions were filed under existing rules which
were adopted during the Clinton Administration. The petitions met the Commission’s
long-standing criteria for providing regulatory relief and they were granted in accordance
with the law and facts.


Also, a special access rulemaking proceeding has been pending before the
Commission since 2005. Regarding that proceeding, for several years now, I have
repeatedly called upon the FCC to seek detailed and up-to-date special access market
data, in part, so any change of the special access rules would withstand appeal. I have
maintained that this data must be collected from all players in the special access market,
and it needs to be sought on a granular basis to include building-by-building and cell-site-
by-cell-site information. The Department of Justice was able to collect and analyze data
in such a detailed manner during its reviews of the Verizon-MCI and SBC-AT&T
mergers in the last decade.


It is my hope that the Commission will move forward with a mandatory data
collection soon so that it will have the adequate information to make responsible and
fully-informed decisions as to whether the current special access rules should be changed
and, if so, how they should be changed.

OUR MEDIA OWNERSHIP PROCEEDING GIVES US AN OPPORTUNITY TO MODERNIZE
OUTDATED RULES.

As is required by Section 202(h) of the Communications Act, I am hopeful that, in
the coming months, the FCC will modernize its media ownership rules to reflect the
current economic realities of the marketplace and eliminate any and all unnecessary
mandates.23 In particular, there is a growing body of compelling evidence that the 1975

23 Section 202(h) of the Telecommunications Act of 1996 states that:
The Commission shall review its rules adopted pursuant to this section
and all of its ownership rules quadrennially . . . and shall determine
whether any of such rules are necessary in the public interest as the
result of competition. The Commission shall repeal or modify any
regulation it determines to be no longer in the public interest.
Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56, 111-12 § 202(h) (1996); Consolidated
Appropriations Act, 2004, Pub. L. No. 108-199, § 629, 118 Stat. 3, 99-100 (2004) (amending Section
202(h) of the 1996 Act). In December, I concurred to the majority of the December 2011 notice of
proposed rulemaking, because the Commission appears to be prepared to accept a regulatory status quo.

8

newspaper-broadcast cross-ownership ban should be largely repealed.24

Over the past decade, broadcast stations and daily newspapers have grappled with
falling audience and circulation numbers, diminishing advertising revenues and resulting
staff reductions,25 as online sources gain in popularity.26 This trend has led many
prominent daily newspapers to declare bankruptcy, while others have faced more dire
circumstances. In fact, over the past five years, an average of 15 daily papers, or about
one percent of the industry, have shuttered their doors each year.27

Although newspaper circulation numbers continue to decline, the number of
unique visitors to newspaper websites has been increasing.28 In fact, the 25 most popular
U.S. news sites – two-thirds of which are operated by traditional news organizations –
experienced a 17 percent increase in visitors in 2011.29 This development has led many
dailies to experiment with new business models, such as moving to online-only formats30

24 Although the Commission has offered up a relaxation of the ban on newspaper-television ownership for
the largest markets and considers eliminating restrictions on newspaper-radio combinations, my
preliminary view is that these proposals are anemic and do not reflect marketplace realities.
25 Although some sectors of the news industry have experienced a slight resurgence, newspapers continue
to face decline with both advertising and circulation revenues continuing on a downward path. In 2011,
network and local news viewership increased for the first time in years; however, local TV station
advertising revenues still experienced a decline. See PEW RESEARCH CTR’S PROJECT FOR EXCELLENCE IN
JOURNALISM, THE STATE OF THE NEWS MEDIA 2012, KEY FINDINGS,
http://stateofthemedia.org/2012/overview-4/key-findings/ (last visited Mat 14, 2012) (“THE STATE OF THE
NEWS MEDIA 2012”); THE STATE OF THE NEWS MEDIA 2012, LOCAL TV,
http://stateofthemedia.org/2012/overview-4/key-findings/ (explaining that some of this loss is due to a
reduction of political and automotive advertising from 2010 and that these revenues will rebound during a
busy election cycle.
26 In fact, the White House’s Council of Economic Advisors has found that newspapers are one of
America’s fastest-shrinking industries losing approximately 28.4 percent of its workforce between 2007
and 2011. Online publishing job growth, on the other hand, increased by more that 20 percent in the same
time period. See, e.g., ECONOMIC REPORT OF THE PRESIDENT TOGETHER WITH THE ANNUAL REPORT OF
THE COUNCIL OF ECONOMIC ADVISORS 188 (February 2012) (citing a LinkedIn study), available at
http://www.whitehouse.gov/sites/default/files/docs/erp_2012_complete.pdf">http://www.whitehouse.gov/sites/default/files/docs/erp_2012_complete.pdf; Matt Rosoff, Newspapers Are
The Fastest Shrinking Industry In The U.S.
, BUSINESS INSIDER (Mar. 8, 2012),
http://articles.businessinsider.com/2012-03-08/tech/31135175_1_linkedin-job-growth-
newspapers#ixzz1us0z9Urf.
27 THE STATE OF THE NEWS MEDIA 2012, MAJOR TRENDS, http://stateofthemedia.org/2012/overview-
4/major-trends/.
28 Newspaper Web Audience, NEWSPAPER ASSOC. OF AM. (Apr. 25, 2012),http://www.naa.org/Trends-and-Numbers/Newspaper-Websites/Newspaper-Web-Audience.aspx"> http://www.naa.org/Trends-and-
Numbers/Newspaper-Websites/Newspaper-Web-Audience.aspx.
29 THE STATE OF THE NEWS MEDIA 2012, DIGITAL, http://stateofthemedia.org/2012/digital-news-gains-
audience-but-loses-more-ground-in-chase-for-revenue/ (based on unique monthly visitors).
30 Currently, 172 newspapers have launched online subscription plans or placed content behind a paywall.
This represents a 15 percent increase since January alone and more papers are expected to follow suit in the
coming months. Papers with Digital Subscriber Plans/Paywalls, NEWS & TECH (May 10, 2012),
http://www.newsandtech.com/stats/article_22ac1efa-2466-11e1-9c29-0019bb2963f4.html">http://www.newsandtech.com/stats/article_22ac1efa-2466-11e1-9c29-0019bb2963f4.html (last visited May
14, 2012); THE STATE OF THE NEWS MEDIA 2012, NEWSPAPERS,
http://stateofthemedia.org/2012/newspapers-building-digital-revenues-proves-painfully-slow/ (stating that
roughly 150 newspapers have instituted a “metered model”).

9

or partnering with online distributors.31 The most recent example being the
announcement that, in a cost-cutting effort, the 175-year-old daily New Orleans Times-
Picayune
– which won a Pulitzer Prize for its coverage of Hurricane Katrina’s aftermath
– would print only three times per week starting this fall in order to focus on online
news.32

Regardless of any rule changes we may implement, it is clear that traditional
media owners are choosing to invest in new, unregulated digital outlets rather than
acquire more heavily-regulated traditional media assets. These business decisions, along
with newspaper bankruptcies and closures, is probably a response, in part, to the
challenging economic climate, but also may be a consequence of the FCC’s failure to
modernize our rules to adequately reflect the emergence of competition from new media,
such as online and mobile platforms. We must ensure that the heavy hand of government
regulation does not distort the marketplace or limit the options of broadcasters and the
newspaper community to attract investment, increase efficiencies, and share the costs of
news production.

Furthermore, evidence before the Commission demonstrates that in-market
combinations do not negatively affect viewpoint diversity33 and may actually increase the
quantity and quality of local news and information provided by commonly-owned outlets
to benefit the American consumer.34 Additionally, an analysis of the success rate of
newspaper-television cross-ownership operations demonstrates that many have not
survived, disproving the hypothesis that these arrangements confer extraordinary

31 THE STATE OF THE NEWS MEDIA 2012, OVERVIEW, http://stateofthemedia.org/2012/overview-4/ (stating
that Reuters is producing original news shows for YouTube; Facebook has entered into partnerships with
The Washington Post, The Wall Street Journal and The Guardian; and Yahoo! paired with ABC News to
be its sole provider of news video).
32 See, e.g. David Carr, Times-Picayune Confirms Staff Cuts and 3-Day-A-Week Print Schedule, N.Y.
TIMES (May 24, 2012), http://mediadecoder.blogs.nytimes.com/2012/05/24/new-orleans-times-picayune-
to-cut-staff-and-cease-daily-newspape/; Keach Hagey, Times-Picayune No Longer a Daily, WALL ST. J.
(May 24, 2012), http://online.wsj.com/article/SB10001424052702304840904577424352986964904.html.
33 See, e.g., Newspaper Association of America, Comments, MB Docket No. 09-182, at 18-20 (Mar. 5,
2012) (“NAA Comments”); Adam D. Renhoff and Kenneth C. Wilbur, Local Media Ownership and
Viewpoint Diversity in Local Television News, at 3, 15 (June 12, 2011), available at
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-308596A1.pdf (“[T]hese findings show that under
the proposed definition of viewpoint diversity, variation in television station co-ownership and cross-
ownership is generally found to [have] negligible effects on viewpoint diversity. However, it is important to
note that the data are limited to the degree of media co-ownership and cross-ownership currently allowed
under FCC rules.”).
34 See, e.g., 2010 Quadrennial Regulatory Review – Review of the Commission’s Broadcast Ownership Rules
and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, MB Docket No.
09-182, Notice of Proposed Rulemaking, 26 FCC Rcd 17489, 17519 ¶ 85, n.185 (2011); NAA Comments at
15-18; Diversity and Competition Supporters, Initial Comments, MB Docket No. 09-182, at 40-43 (Mar. 5,
2012); Adam D. Renhoff and Kenneth C. Wilbur, Local Media Ownership and Media Quality, at 3, 15
(June 12, 2011), available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-308504A1.pdf; Jack
Erb, Local Information Programming and the Structure of Television Markets, at 4, 27-28, 40-41 (May 20,
2011), available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-308508A1.pdf.

10

influence, market power and/or profits.35 These relationships, however, may allow some
television stations and newspapers the ability to stay in business. For these reasons, and
many others, it appears that the newspaper-broadcast cross-ownership rule is out of date,
counter-productive, and not in the public interest.

WE MUST DETERMINE HOW TO IMPLEMENT THE SUPREME COURT’S DECISION
REGARDING THE COMMISSION’S INDECENCY RULES IN

FCC V. FOX TELEVISION
STATIONS, INC

.

As the father of three young children, protecting them from indecent content is an
important priority for our family. As a matter of public policy, Congress has made it
clear that keeping the broadcast airwaves free from material that may be inappropriate for
children during the hours when they are likely to be watching36 is a high priority for the
directly elected representatives of the American people as well.

The FCC’s indecency policy has been the subject of appellate litigation over the
decades. Two weeks ago, the Supreme Court held that the Commission failed to provide
fair notice regarding the application of its indecency standards to fleeting expletives and
momentary nudity.37 Now that the Court has ruled, the FCC must expeditiously
implement the decision. Although the Court’s decision did not affect the Commission’s
authority to regulate indecency and assist parents in shielding their children from
inappropriate programming, this decision raises many questions that the Commission will
have to answer in the upcoming months.

Generally, how do we ensure that there is sufficient notice of the Commission’s
indecency policies? Justice Kennedy, in delivering the Opinion for the Court, stated that
“regulated parties should know what is required of them so that they may act accordingly
[and] precision and guidance are necessary so that those enforcing the law do not act in

35 John S. Sanders, Kill Newspaper-TV Crossownership Rule, Now, TVNEWSCHECK (June 26, 2012),
http://www.tvnewscheck.com/article/60424/kill-newspapertv-crossownership-rule-now.
36 18 U.S.C. § 1464 (“Whoever utters any obscene, indecent, or profane language by means of radio
communication shall be fined under this title or imprisoned not more than two years, or both.”). See, e.g.,
Public Telecommunications Act of 1992, § 16(a), 106 Stat. 949, 954 (prohibiting indecent programming
between certain hours); 47 U.S.C. 503(b)(2)(C) (setting forth the forfeiture amounts for obscene, indecent,
and profane broadcasts); Broadcast Decency Enforcement Act, Pub. L. No. 109-235, 120 Stat. 491 (2006)
(increasing the maximum forfeiture penalties for obscene, indecent, and profane broadcasts). See also 47
C.F.R. § 73.3999 (implementing 18 U.S.C. § 1464 and the Public Telecommunications Act of 1992);
Section 1.80(b)(1) of the Commission’s rules, Increase of Forfeiture Maxima for Obscene, Indecent, and
Profane Broadcasts to Implement the Broadcast Decency Enforcement Act of 2005, EB-06-IH-2271, 22
FCC Rcd 10418 (2007) (implementing the Broadcast Decency Enforcement Act).

37 FCC v. Fox Television Stations, Inc., No. 10-1293, slip op. (U.S. June 21, 2012). The Court also denied
certiorari in FCC v. CBS Corporation, No. 11-1240, slip op. (U.S. June 29, 2012), bringing an end to the
litigation over the momentary exposure of Janet Jackson’s breast. In vacating the Commission’s order, the
Third Circuit held that the Commission’s decision was arbitrary and capricious, because the agency
departed from its policy of excusing the broadcast of fleeting moments of indecency. CBS Corp. v. FCC,
663 F.3d 122 (3rd Cir. 2011).

11

an arbitrary or discriminatory way.”38 He stressed that, “[w]hen speech is involved,
rigorous adherence to those requirements is necessary to ensure that ambiguity does not
chill protected speech.”39 Does the Commission need to take action to provide fair notice
of our indecency standards? Or, do the decisions in the Golden Globes order and others
provide sufficient notice going forward?40 How do we ensure that Commission decisions
in this area do not have the unintended consequence of chilling speech?

Further, the Court did not address the constitutionality of our indecency standard
and left “the Commission free to modify its current indecency policy in light of its
determination of the public interest and applicable legal requirements.”41 It noted that its
opinion “leaves the courts free to review the current policy or any modified policy in
light of its content and application.”42 We must ask ourselves: Should we generally
revisit and update our indecency standard? What should our indecency policy be for
fleeting expletives and brief nudity going forward? Would our current standard survive
scrutiny under the First Amendment? Additionally, we should ask: What is the most
efficient means to resolve pending complaints and renewals – both those that are
currently pending and those to be filed in the future? If we fail to review our indecency
standards and improve our complaint and renewal procedures, will the Commission face
yet another backlog of matters in the future?

These will not be easy questions to answer. In the interest of good government,
however, it is time to tackle these complicated issues. We owe it to American families
and the broadcast licensees involved to carry out our statutory duties with all deliberate
speed by acting on roughly 1.5 million indecency complaints involving about 9,700
broadcasts and approximately 700 station renewals that have been pending in light of this
litigation.43 I look forward to working with my colleagues to ensure that our indecency
standards are clear, that broadcasters have the requisite notice and that Americans,
especially parents such as myself, are secure in their knowledge of what content is
allowed to be broadcast.

38 Id. at 12 (citing Grayned v. City of Rockford, 408 U.S. 104, 108-109 (1972)).
39 Id. See also id. at 13 (“The Commission’s lack of notice to Fox and ABC that its interpretation had
changed so the fleeting moments of indecency contained in their broadcasts were a violation of §1464 as
interpreted and enforced by the agency ‘fail[ed] to provide a person of ordinary intelligence fair notice of
what is prohibited.’ This would be true with respect to a regulatory change this abrupt on any subject, but
it is surely the case when applied to the regulations in question, regulations that touch upon ‘sensitive areas
of basic First Amendment freedoms.’” (citations omitted)).
40 Complaints Against Various Broadcast Licensees Regarding Their Airing of the “Golden Globe Awards”
Program, File No. EB-03-IH-0110, Memorandum Opinion and Order, 19 FCC Rcd. 4975 (2004) (finding
that certain fleeting expletives are actionable under the Commission’s indecency policy). See, e.g., Young
Broadcasting of San Francisco, Inc., File No. EB-02-IH-0786, Notice of Apparent Liability for Forfeiture,
19 FCC Rcd. 1751 (2004) (finding that the licensee was apparently liable for a monetary forfeiture for
broadcasting momentary nudity).
41 Fox Television Stations, No. 10-1293, slip op., at 18.
42 Id.
43 These estimates include both television and radio matters. Some of the pending station renewals may
also be the subject to other enforcement proceedings before the Commission.

12


WE MUST REMAIN UNIFIED IN OUR OPPOSITION TO UN/ITU REGULATION OF THE
INTERNET.


Finally, all of us must stay engaged with respect to the well-organized
international effort to secure intergovernmental control of Internet governance. During
my appearance before your subcommittee on May 31, we discussed our mutual concern
regarding the action by some countries to arm the International Telecommunication
Union (ITU) with regulatory jurisdiction over all or part of the Internet ecosystem. Even
if new Internet regulations are not enacted at the upcoming World Conference on
International Telecommunications (WCIT) meeting in December, increased
intergovernmental Internet regulations will no doubt be on the agenda for international
conferences and discussions throughout 2013 and beyond. Given the high profile,
energetic and persistent efforts by some countries, this issue will not go away. Similarly,
I urge skepticism for the “minor tweak” or “light touch.” As we all know, regulation
only seems to grow. We must remain vigilant for years to come. Your hearing was
timely and I am grateful for Congress’s helpful efforts.


CONCLUSION




It is an honor to serve as a commissioner of the FCC, and it has been a privilege
to work with the Members of this Committee on our nation’s communications issues. I
look forward to answering your questions.


13

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