House Appropriators Threaten FCC Funding Over 'Politically Charged' Net Neutrality Proceeding

FCC funding has been restricted to a “flat level since 2012, because we believe the commission can do less with less,” said House Appropriations Financial Services Subcommittee Chairman Ander Crenshaw, R-Fla. He said the commission has embraced “politically charged issues rather than the mission-critical work” of the agency, such as a report on the status of competition in the video programming market and a report on statutory and regulatory barriers to small businesses. Crenshaw asked how much energy, time and money went into the net neutrality proceeding at “the expense” of other priorities. “We have kept your funding purposefully low for a few years,” he told Wheeler.

“We have prioritized correctly, sir,” Wheeler said. Pai, as in repeated instances through the hearing, disagreed: “By definition, net neutrality took our eye off the ball of other critical priorities.”

Other lawmakers seized on the topic. “I really don’t understand the opposition to net neutrality and the rules,” said ranking member Jose Serrano, D-N.Y., early in the hearing, surprised at how quickly the topic came up. “I don’t understand what the argument is.” He doesn’t understand “the conspiracy theory” that the White House unduly influenced the order, he said, asking about the public input and open roundtable process.

“Are we raising the rates on grandma?” asked Rep. Jaime Herrera Beutler, R-Wash., mulling the general conduct standard and what it means for ISPs wanting to offer pro-consumer plans. She blasted the “hidden” FCC process and probed the commissioners for the timing “shift” when the agency decided on a Communications Act Title II-based net neutrality order. “The seminal moment was the president’s announcement on Nov. 10,” Pai said, referring to the White House backing of Title II reclassification, dubbing it the “defining feature” of the proceeding. Beutler called the reply “so disappointing.” Pai worried of the order’s unknowns and its potential effect on rates and innovators, with industry participants forced to “funnel through the regulatory bottleneck of the FCC” and worrying that “the time it would take to get an answer back from the FCC could be prohibitive” for companies trying to innovate. Wheeler addressed the question of raising rates for grandma later in reply to Serrano: “We’re not going to regulate rates.”

Rep. Kevin Yoder, R-Kan., believes “Congress really has to make sure this expansion of power does not occur” in what he feared is the “potential camel’s nose in the tent regarding future regulation” of the Internet. Yoder pressed Wheeler on the cost of net neutrality litigation, prompting Wheeler to defend the agency’s standing litigation staff. Pai said the litigation would have costs but so would subsequent rulemakings, adjudication of complaints and the issuing of advisory opinions. Yoder worried that Title II would mean broadband is eligible to be “taxed under the Universal Service Fund,” he said. “We did not make that decision in this order,” Wheeler said, arguing the “fixed” fund size “is set by the agency” and not Title II. Pai countered that the order “opens the door” to USF "taxes,” with writing “on the wall” given the direction of programs such as E-rate. Pai warned of state and local taxes the order may trigger. “The sentiment among my constituents is distrust,” cautioned Rep. Tom Graves, R-Ga.

Rep. Scott Rigell, R-Va., pushed back against Pai's assertion that throttling and blocking are not a reality. Those practices are “not a hypothetical,” Rigell said. “Is throttling and blocking something I imagined?” Wheeler brought up examples of Republicans on Capitol Hill and in the past at the FCC who criticize the practices and a recent instance of Verizon throttling wireless service. In letters last year to Sen. Patrick Leahy, D-Vt., ISPs “refused to say they would not prioritize for pay” Wheeler added. ISPs such as Comcast (see 1410310049), and Verizon (see 1410290053) told Leahy they had no interest in prioritization, and Leahy himself said all ISPs he surveyed showed no interest in prioritization deals (see 1412120064). Leahy was still disappointed that ISPs did not pledge to never prioritize in the absence of rules.

Crenshaw worried about the agency’s overall funding request: “A 21 percent increase is far more than most agencies have seen in recent years,” he said, considering fees “directly passed on to consumers as is the funding for the Universal Service Fund.”

“Yes, it’s up $84 million” but much is “unavoidable” and some costs come from items “you told us to do and did not fund,” Wheeler said. He said the FCC has the lowest number of full-time employees in 20 years at 1,708 and fewer contractors than in the past, “trending” to 435 by the end of FY 2016. “The big-ticket item, the big enchilada, is the move” to new FCC headquarters at $51 million, Wheeler said. “We need to move to smaller space and we need to pay less on a per-square foot.” The request would slate $17 million for IT upgrades, adjust the budget for inflation and provide an additional $1 million to the FCC Office of Inspector General. One plan “if accepted by my fellow commissioners, will lead to 16 field office closures and annual savings of $9 million without diminished productivity,” Wheeler testified.

Beutler cited concerns about field offices and questioned how the FCC would function in the Pacific Northwest with zero offices. Wheeler said that area is served by one staffer in Seattle drawing $190,000 and with the “second fewest cases of any person in the country,” roughly one radio frequency case a week.

The flat funding for the commission “is having serious negative effects on the FCC's enforcement capacity as well as its abilities to meet the demands of a rapidly changing environment,” Serrano argued in his opening statement. “The agency is now operating at its lowest level of personnel in more than 30 years. … The FCC has had to do much more with much less than is needed.” He judged the budget request “reasonable and necessary.” House Communications Subcommittee Chairman Greg Walden, R-Ore., has circulated draft FCC reauthorization language that would freeze FCC funding at $339.8 million for another four years (see 1503190048).