Posted March 17th, 2011 by Jonathan Baker - Chief Economist
To provide context, I want to begin with what the FCC accomplished in terms of process during its Comcast/NBCU review:
The success of the FCC’s review process is particularly striking given that the transaction presented a wide range of important and complex issues, including novel and difficult competitive questions raised by the deal’s potential impact on nascent competition in online video distribution.
Against this backdrop, let’s look at Commissioner Baker’s concerns. The first is with the statutory mandate for the FCC and the antitrust enforcement agencies to review competition concurrently. Comcast/NBCU highlights the advantages of Congress’ design. Working together, the FCC and DOJ are often more effective in addressing competition issues than either would be working alone. The FCC brings industry expertise and a greater practical ability to review and address concerns about a merger’s impact on potential competition. Through collaboration, moreover, both agencies were able to conduct an extensive, careful, and cooperative review of that transaction without delaying the process. Not surprisingly, the two agencies addressed competition problems by imposing similar conditions.
In addition, Commissioner Baker raises concerns with the costs of a long merger review process. Yet she also recognizes the need for careful review. The FCC should not hold up the consummation of mergers that are in the public interest or allow merger reviews to languish, but, equally, it cannot cut corners when undertaking those reviews. No responsible agency can simply assume that every communications merger proposed in the free market is in all respects beneficial to the public. Nor can the FCC compromise on the procedural protections that administrative law confers on interested parties. Based on my experience working at both antitrust agencies as well as the FCC, I would say that the length of a merger review is determined primarily by the complexity of the competitive issues, not whether the reviewing agency is the FCC, FTC or DOJ. (Other major vertical mergers reviewed recently by DOJ, such as Ticketmaster/Live Nation, have taken as long as Comcast/NBCU to reach a consent settlement.)
Commissioner Baker also questions whether the FCC at times goes too far afield when imposing conditions to assure that mergers serve the public interest, leading it to impose some conditions that may be unrelated to the transaction. The wide range of conditions in the typical merger order is easy to explain: it is the natural and foreseeable result of the statutory “public interest” charge to the agency. In furtherance of that mandate, the FCC takes on competition concerns – in the Comcast/NBCU order, two-thirds of the pages on conditions sought to protect or foster competition – but it also addresses other public interest issues that Congress has put front and center in the Communications Act, such as diversity of viewpoints, localism, and deployment of advanced telecommunications services. My sense is that most disputes over whether specific conditions are “transaction-related” are not mainly about the integrity of the merger review process but are really about a basic policy question – whether the Commission should continue to pursue the longstanding public interest goals identified by Congress in the Act. If so, process reforms are unlikely to stop the criticism.
Even a successful process can be improved. It is possible, for example, that the FCC could do better in developing and testing evidence by introducing more adversarial elements into its administrative merger review process. (A similar issue comes up in comparing the antitrust review of mergers in the US and Europe.) The FCC experimented with one such procedural innovation in Comcast/NBCU: the staff conducted an economic workshop, bringing together economists for the parties to the transaction and third parties for a structured discussion placed on the adjudicative record. In future reviews, the FCC staff could also consider deposing merging firm executives as the antitrust agencies often do; this process may, for example, help the FCC staff evaluate merging firm documents.
In Comcast/NBCU, Chairman Genachowski was determined to ensure a model transaction review process – and through the dedicated effort of the transaction team led by John Flynn and staffed from throughout the agency, particularly the Media Bureau, the Office of General Counsel, and the Office of Strategic Planning and Policy Analysis, he succeeded. I had little exposure to FCC merger review in the past. But after working on Comcast/NBCU and other transactions during my time at the FCC, I think of the agency’s merger review process more as a source of pride than as a source of concern.
Posted October 6th, 2010 by Paul deSa
The Phoenix Center apparently thinks their latest paper is so good they named it three times. "Jobs, Jobs, Jobs" is a frothy mix of algebra and math jargon ("a 2 × 1 speed of convergence parameter vector, C is a matrix that defines the contemporaneous structural relationship among employment and investment expenditures, and et = [e1,t e2,t]' is a vector of mutually orthogonal structural shocks to these variables") apparently proving that investment creates jobs (or, "we have a one-way causal relationship, in a Granger causality sense, flowing from changes in capital expenditures to jobs"). So far, so obvious.
Less well supported is the headline of the accompanying (mercifully equation-free) press release "FCC's Regulatory Agenda May Have Serious Adverse Impacts on New Job Creation.” Perhaps there is a typo, as for all the evidence in the paper, an equally appropriate title would be "FCC's Regulatory Agenda May Not Have Serious Adverse Impacts on New Job Creation." In fact, maybe we could just compromise and agree on an alternative bipartisan title: "23 Pages of Theory Actually Says Nothing at All About the Practical Effect of FCC's Agenda on New Job Creation."
Indeed, rather than just asserting that "regulatory proposals under consideration at the FCC could have significant adverse affects on employment" our friends at the Phoenix Center might be well advised to descend from theory-world to look at the actual, concrete actions taken by this Commission over the last few months. FCC decisions in the Harbinger transaction and the Verizon-Frontier merger are already catalyzing billions of dollars in private investment and creating thousands of jobs. The FCC unleashed new spectrum for Super Wi-Fi technology that could enable entire new industries and grow America’s economy. And FCC actions on tower siting and pole attachments cut costs and red tape, making it easier for companies like AT&T and Verizon to invest in new infrastructure.
While it would no doubt be fun to wander over to the Phoenix Center to sip lattes while using "the estimates from the vector error correction model [to] conduct a variety of simulations to measure the effect on jobs from a change in capital expenditures," this Commission would rather do the hard work of implementing real-world policies that help incumbents and innovators create real jobs and investments to strengthen our nation's broadband economy today and for the future.
Posted June 25th, 2010 by Steven Rosenberg
Until today, we couldn’t have told you this: out of 97 million residential phone lines in the U.S., nearly 20% were VoIP subscribers. (Annoying technical footnote alert: this actually refers to “interconnected” VoIP, the most common form of VoIP service, which is voice service over a broadband connection that also allows users to both receive calls from and place calls to the public switched telephone network, like traditional phone service. We don’t track non-interconnected VoIP, which generally speaking, enables voice service between two computers on broadband only.)
Anyway, that VoIP fact comes from our latest Local Telephone Competition Report, which, for the first time, includes information about voice services delivered over broadband connections. Why, you may ask, has it taken so long for the Commission to get these numbers? Well, interconnected VoIP is a relatively new product, and the Commission is careful about imposing potential burdens, like data reporting, on nascent services. The Commission in 2004 began considering the idea of collecting VoIP data, and finally, in 2008, concluded that the time was right to collect those figures. While private data firms have for some time estimated VoIP penetration, the FCC now has hard data on VoIP subscribers, data that give us a more complete fact base for understanding voice services.
And why, you may ask, are we just now publishing December 2008 data? What took so long? There are a couple of reasons. First, any time we change collections, it takes a fair amount of time to update and cross-check the analysis, and then a bit more time to create the new report. In addition to that, the data in this report come from Form 477, the same form from which we created the High-Speed Services for Internet Access report. We focused first on the high-speed report and the related work in the National Broadband Plan before turning our attention to the Local Telephone Competition report. Now that the National Broadband Plan is done and we have the new report format and collection process down, subsequent Local Competition Reports should be timelier.
Of course we recognize that, even though this is the first report that draws on the new Form 477 data, there may yet be room for improvement. As we undertake an upcoming Notice of Proposed Rulemaking to discuss collection of data for broadband, we may have the opportunity to further improve the data collection for the Local Competition Report.
So take a look at the report. It opens a new window on the competitive landscape that should help the Commission make more informed decisions on behalf of consumers.
