Tale of Two Oversight Hearings

It was the best of oversight hearings, it was the worst of oversight hearings. Oh, who are we kidding – we’ll never pull off a Dickensian metaphor throughout this week’s roundup. But we did note the coincidence that the three agencies most responsible for extending the reach and affordability of broadband in the US were called before Congress for oversight hearings this week.

FCC Oversight Hearing
On May 16, the Senate Commerce Committee held an oversight hearing on the Federal Communications Commission – which just hours earlier had welcomed its two newest commissioners, Ajit Pai and Jessica Rosenworcel. (Ms Rosenworcel, of course, most-recently staffed the Senate Commerce Committee.) Upon being sworn in as FCC commissioners, Pai and Rosenworcel pledged collegiality. "I pledge to work with the Administration, the Congress, my fellow Commissioners, and the American people,” said Commissioner Rosenworcel, “to ensure that everyone across this country has access to the best, most reliable communications in the world. In the 21st century, these are the networks that impact everything we do; they are an essential part of our public safety, our economic security, and our civic life. They are the key to digital age opportunity." Commissioner Pai said, “I look forward to working with my new colleagues at the Commission to promote competition and innovation in the communications marketplace that will work for the benefit of all consumers."

Committee Chairman Jay Rockefeller (D-WV) framed the hearing as an opportunity for Committee members to convey their priorities and to hear from the FCC commissioners about their efforts to protect consumers and carry out the public interest. For Chairman Rockefeller, the top priorities are: the spectrum auction and public safety provisions of the Middle Class Tax Relief and Job Creation Act of 2012 and protecting E-rate funds. Responding to proposals that indicate the FCC will consider using E-Rate funds or authority to support digital literacy initiatives, Chairman Rockefeller stated, “Let me be clear – I support broadband adoption and digital literacy efforts. It is vital that we make sure that broadband is both widely deployed and adopted in rural and urban communities nationwide. But let me be unequivocally clear – I believe any digital literacy initiatives should not compromise the E-Rate program.” He got all five commissioners to commit to not using the E-rate fund to support digital literacy.

The day before the hearing, Broadcasting & Cable’s John Eggerton read through the FCC commissioners’ prepared statements to offer a preview. FCC Chairman Julius Genachowski, Eggerton predicted, would be focused on broadband and wireless. "At the FCC, our mission is to maximize the power of communications technology to grow our economy; create jobs; enhance U.S. competitiveness; empower consumers; and unleash American innovation, including in areas like education, health care, and public safety. Consistent with this mission, over the last three years, we have focused the agency on broadband communications -- wired and wireless," the testimony read. He pointed to these accomplishments over the past three years: “modernizing and reforming major programs like the Universal Service Fund, freeing spectrum for both licensed and unlicensed use, removing barriers to broadband buildout, and taking strong and balanced steps to preserve Internet freedom.”

Chairman Genachowski also pointed at his recently-announced Mobile Action Plan: an “all of the above” strategy that includes freeing up more spectrum for both licensed and unlicensed use; driving efficiency in spectrum use, including by increasing the efficiency of devices and networks; removing barriers to mobile broadband buildout; and pioneering innovative approaches like small cells and spectrum sharing between government and commercial users.

FCC Commissioner Robert McDowell, with six years of service by far the Commission’s senior commissioner, said “[W]e are in the early days of the Golden Age of mobile broadband” – and we will strengthen our global leadership if we choose the correct policies. They are:

  • implementing the new spectrum law enacted with an eye toward simplicity, humility, and regulatory restraint;
  • identifying and engaging in an aggressive and coordinated effort to free up spectrum held by the federal government; and
  • fostering greater spectral efficiency.

Commissioner Mignon Clyburn said, “I am also not ashamed of stating for the record that I am an advocate for smart, targeted regulatory action when necessary to promote meaningful competition in order to ensure that basic consumer protections are in place.” She noted the FCC’s work with industry and public interest advocates in tackling significant reforms of the Universal Service Fund, lowering the barriers to broadband adoption, and tackling consumer bill shock issues. She also pointed to Middle Class Tax Relief Act which, she said, equips the FCC to address America’s appetite for more mobile broadband solutions.

Commissioner Rosenworcel’s testimony gave a shout out to incentive auctions and the FCC's history of delivering the goods -- raising $50 billion for the treasury. She also says she is confident that the "right mix of engineering and economics," the incentive auctions can follow in that tradition and, so long as the FCC follows the law, be "fair to all stakeholders."

FCC Commissioner Ajit Pai wants the Commission to move swiftly to reclaim spectrum from broadcasters, as well as free up more bandwidth currently in government hands. Commissioner Pai also put in a plug for Universal Service Reform, saying it was a necessity, not a luxury, and pledged to roll up his sleeves on media ownership, saying "Our efforts must reflect the changing nature of our nation's media landscape while at the same time preserving the Commission's commitment to the core values of competition, diversity, and localism."

Although the FCC commissioners seemed to be on the same page, FCC oversight hearings are often battlegrounds in the broader Washington debate over government regulation. The debate at this hearing centered over how far the FCC should go to advance its goals. Divided members of the Committee pressed FCC Chairman Julius Genachowski on a range of issues, Josh Smith reported in the National Journal. Sen Jim DeMint (R-SC), who is in line to become ranking member or chairman of the committee in the 113th Congress, criticized the FCC for enacting "arbitrary" rules like network neutrality regulations. He called the rules preemptive regulatory strikes at anticipated problems. DeMint expressed concern that networks and content providers were being treated as government property or services.

Sen DeMint asked Chairman Genachowski how many network neutrality complaints there had been since the rules went into effect last fall. The FCC had not received a single complaint in the six months since its Open Internet order went into effect. But Chairman Genachowski also said that if a court overturns it, he would urge Congress to codify it. He would not rule out classifying ISPs as a Title II service if the court overturned, but said he is on the record as saying "that it not the best idea." Commissioner Rosenworcel said she agreed with Chairman Genachowski, but pointed out that the FCC has been reclassifying services for a decade. Commissioner McDowell shot back that the FCC had never classified Internet access as a Title II service, and added that leaving a reclassification docket open had "devastating" implications internationally for the effort to push back on an International Telecommunication Union effort to regulate the Internet. Sen. John Kerry (D-MA) countered that the US should be sending a signal of openness to other countries. He asked how start-ups have been affected by the rules. Chairman Genachowski answered saying that it has been essential, and that predictability has translated to increased investment and innovation, as evidenced by a booming app economy and double-digit infrastructure investment.

Broadband Stimulus Oversight
Also on May 16, the House Commerce Committee’s Subcommittee on Communications and Technology held an oversight hearing examining the broadband stimulus programs created in the American Recovery and Reinvestment Act. The ARRA allocated $7.2 billion for broadband grants and loans.

Republican have expressed concerns about how the Broadband Technology Opportunities Program (BTOP) and the Broadband Initiatives Program (BIP) loans and grants are being spent, including to what degree they are being used to subsidize competition to existing service, and how the spending is being monitored by the government for waste fraud and abuse. The National Telecommunications & Information Administration (NTIA) oversees BTOP, while the Agriculture Department's Rural Utilities Service (RUS) handles BIP.

The hearing featured four witnesses:

  • Larry Strickling, head of the National Telecommunications & Information Association, which has been dispensing billions in stimulus package broadband aid;
  • Jonathan Adelstein, former Federal Communications Commission (FCC) commissioner and head of RUS, which has been doing the same;
  • Todd Zinser, inspector general of the Commerce Department (NTIA is under Commerce); and
  • David Gray, deputy inspector general of the Department of Agriculture.

They faced tough questioning from Republican members of the Subcommittee. Republicans focused on money that had been rescinded, what they saw as the slow progress of build-outs and spending, and complaints of overbuilding existing service, an issue near and dear to the hearts of cable operators. Communications Subcommittee Chair Greg Walden (R-OR) called overbuilding "a perennial concern" and Rep. Lee Terry (R-NE), vice chair, said it had been a question "since day one." Rep. Charles Bass (R-NH) said he wanted to make sure funds were being spent where they were supposed to be. He did not want to be holding "embarrassing" hearings at a later date about abuses in the program. He said the build-outs should be going where they are needed, not paralleling existing capacity. Subcommittee Chair Greg Walden (R-OR) said that RUS appeared to be funding the same kinds of programs as USF -- which is being migrated to broadband subsidies, and perhaps those efforts should be coordinated and consolidated.

Recipients of 233 National Telecommunications and Information Administration (NTIA) awards worth $4 billion have spent just $1.6 billion of it so far. Less than a dozen of the projects have been completed. Six of the awards worth $124.5 million have been returned or revoked. Recipients of 320 Rural Utility Service (RUS) awards worth $2.4 billion have spent $968 million. Five projects have been completed. As of July 2011, $124 million in grants and $35 million in loans have been rescinded or revoked. Allegations also persist that NTIA and RUS funds are not bringing broadband to unserved areas but instead are subsidizing competitors to overbuild privately financed networks.

Rep. Adam Kinzinger (R-IL) questioned Rural Utility Service Administrator Jonathan Adelstein as to why RUS projects have been delayed. Adelstein replied, “It has been a learning experience for me how difficult it is sometimes particularly on tribal lands to get all the clearances.”

Assistant Sec Strickling testified that NTIA grantees have:

  • Deployed or upgraded more than 45,000 miles of broadband infrastructure,
  • Installed more than 29,000 workstations in public computer centers,
  • Instituted programs that have led to more than 260,000 new broadband subscribers including some businesses, and
  • Approximately 300 interconnection agreements in the works.

Strickling and Subcommittee Chairman Greg Walden (R-OR) had a lengthy and pointed exchange over reports that a West Virginia grantee had overpaid for routers going to anchor institutions. The Charleston Gazette ran a series of articles recently saying the state had spent millions of dollars on high-end network equipment that the institutions had little need for it. The grants were to be used to build out physical infrastructure and for network equipment at so-called “anchor institutions” like schools, libraries, hospitals and university networks. Chairman Walden called it “pretty disturbing” that the state used $24 million of the $126 million grant to buy high-end Cisco routers, designed for networks with upwards of 500 computers, at libraries with only two or three computers installed. “Don't believe everything you read in the newspaper,” Strickland responded. Each router cost $12,000, he said, and some are going to institutions with heavy needs such as hospitals and universities. Determining capacity for every institution needing a router would cost more than purchasing “scalable, expandable gear,” he said. Some institutions may not ever need full capacity, but “many of those anchor institutions may benefit” from the routers, Strickland said. “The state made an economical decision that is well-justified by the facts,” he said.

Assistant Sec Strickling testified that its BTOP projects are "generally" on track, are creating jobs, and spurring economic growth. He said he appreciates the ongoing efforts of the Department of Commerce’s Office of Inspector General (OIG) in helping to oversee NTIA’s broadband programs and to prevent waste, fraud, and abuse of taxpayer dollars. NTIA and the OIG have worked closely and collaboratively to implement BTOP in the most responsible and efficient manner possible. The OIG has issued several reports that have provided valuable input to strengthen NTIA oversight, identify lessons learned for the future, and ultimately demonstrate that NTIA has managed BTOP with the highest degree of responsibility, efficiency, and vigor possible for a novel program of this size, scope, and speed of implementation. The Consolidated and Further Continuing Appropriations Act, 2012 provided $25.6 million for monitoring and administration of BTOP in Fiscal Year 2012. The Fiscal Year 2013 President’s Budget includes $26.9 million to support the administration of broadband programs. In terms of actual expenses for BTOP oversight and management, this represents a decline in overall spending for 2013 from 2012 by approximately $2 million. This funding request, and the staffing it supports, is critical to ensure that NTIA can continue its oversight and administration of grants, to ensure continued adequate levels of performance by recipients, and to prevent waste, fraud, or abuse of federal funds. As the grants move toward their completion, these resources will help to ensure project completion and the recovery of unused funds during the grant closeout period.

Department of Commerce Inspector General Todd Zinser also testified. He noted five areas of concern for BTOP moving forward:

  1. Slow awardee spending could result in unfinished grant projects;
  2. NTIA Is addressing program office monitoring issues but additional monitoring of equipment procurement may be needed;
  3. Issues with awardee grant match documentation require closer NTIA oversight;
  4. NTIA needs to assess the impact that the recently established First Responder Network Authority (FirstNet) program may have on existing BTOP public safety projects; and
  5. Funding questions about 2013 and beyond raise concerns over continued BTOP oversight.

On this final point, IG Zinter requested a waiver on a law which requires unobligated Recovery Act funds be returned to the US Treasury on December 31, 2012. Recovery Act funds were transferred to OIG to fund oversight of BTOP. However, OIG has managed its BTOP budget so that it will have funding necessary to pay for FY 2013–15 salaries and expenses of auditors and investigators. These expenses cannot be obligated in advance. Without a waiver, OIG will lose its dedicated funding for BTOP oversight up to 9 months prior to the projected September 30, 2013, completion dates for the last BTOP projects, and even longer before project closeout procedures are completed.

Assistant Sec Strickling also spoke to provisions of the Middle Class Tax Relief and Job Creation Act which authorizes and funds the building, deployment, and operation of a nationwide public safety broadband network. Title VI of the Act establishes the First Responder Network Authority or “FirstNet” as an independent authority within NTIA, and charges FirstNet with taking all actions necessary to ensure the building, deployment, and operation of the network. The Department of Commerce and NTIA are working to implement the Act’s directives as expeditiously as.

Assistant Sec Strickling defended the agency's decision to put a partial hold on seven broadband public safety network projects, including ones funded through broadband grants. He said NTIA is working to ensure that its seven BTOP 700 MHz public safety grants proceed in a manner that supports the nationwide public safety broadband network. The goal in this effort is to ensure that these much-needed investments remain in their communities and to avoid investments that might have to be replaced if they are incompatible with the ultimate nationwide architecture of the new public safety broadband network. The seven projects began a couple of years ago, but Congress earlier this year approved spectrum incentive auction legislation, part of whose proceeds will go to funding that national network. Given that the oversight board for that effort will not meet until August, and the FCC is not coming out with baseline interoperable standards for a few more weeks yet, Strickling said he did not want to continue spending $380 million in taxpayer dollars for state efforts that might be superseded by FirstNet. Strickling said NTIA is committed to working with all stakeholders towards the goal of meeting the communications needs of America’s first responders.

So, yes, there was wisdom; there was foolishness. There was light and dark. And, yes, so too shall it be next week when we'll see you in the Headlines.