Home >> February 2008 Edition >> An Auspicious Start To The New Year
An Auspicious Start To The New Year
by Tara K. Giunta

As we begin a new year, it is customary to reflect the challenges, achievements and lessons of the previous year and consider how they might influence 2008. In an election year in the United States (such as 2008), “politics” typically affect how legislators, policy makers, and industries view priorities and make decisions.

This election year, there is yet another interesting twist affecting – indeed, infecting – telecom policymaking and legislative oversight that has not been present in prior election years (at least not in recent – meaning 50+ years) memory. Specifically, Chairman Martin’s management style and leadership of the U.S. Federal Communications Commission (FCC or Commission) has invited such criticism and vitriol that it has become the hallmark, indeed the symbol, of the Bush Administration. As a result, this election year, the United States will not only grapple with rhetoric and stump speeches by candidates from both parties, but the telecommunications and satellite industries will be dealing with a lame duck FCC Chairman who is under active, bipartisan attack by the US Congress. It is a sordid tale.

It has become an unfortunate reality, widely acknowledged by those who practice before the Commission, that effective and efficient decision making has become an anathema at this Commission. Responsibility is unfortunately (but perhaps not completely fairly) laid at the feet of the FCC Chairman. While past Commissions have engaged in a certain amount of cronyism, partisanship, and politics, this Commission is generally viewed as having become incapacitated with internal bickering, consternation and conflict.

Regrettably, over the past several years, the Commission’s monthly meetings have become a source of amusement. Even though they are scheduled to commence at a certain hour, it has become customary for them to be delayed. Indeed, one recent FCC meeting started almost 12 hours after its scheduled start time. These delays are understood to be the result of one or more Commissioners not having received the proposals from the Chairman’s Office well enough in advance to participate in meaningful discussion during the meeting, and/or acrimonious disagreement, among certain Commissioners and their staff.

The criticism of the Commission became blatant in October 2007 when the Government Accountability Office (GAO) issued a report on the process by which the FCC gathers and releases information about important votes and other agency actions. In analyzing four rulemaking proceedings between 2002 and 2006, the GAO found that some “stakeholders” in those cases had advance access to inside information, which provided them a competitive advantage.

According to the GAO Report, several stakeholders reported having learned which items the FCC would vote on at an upcoming meeting weeks in advance — even though it is against Commission rules for that information to be released to the public (without authorization from the FCC Chairman). In contrast, other stakeholders advised the GAO that they were not made privy to this information. As recognized in the GAO Report, stakeholders who know which items have been scheduled for a vote know when to meet with FCC commissioners and staff – after all, “timing is everything”.

In brief, the FCC circulates information internally approximately three weeks before a public meeting in order to notify FCC staff of which items are scheduled for a vote at the upcoming public meeting. However, the agenda for each Commission meeting is publicly announced one week in advance. Once the agenda becomes public, the “Sunshine Period” begins and no one can lobby FCC officials about the proposed rule. As a result, those stakeholders with advance warning can take advantage of the time until the Sunshine Period commences to lobby the Commission, much to the disadvantage of those who are not made aware of the issues.

Problems at the Commission became decidedly more acute in December 2007 when, on December 3, 2007, John Dingell, Chairman of the House Committee on Energy and Commerce (HCEC) which has oversight responsibility for the FCC, sent a letter to Chairman Martin addressing an, “apparent breakdown in an open and transparent regulatory process,” at the FCC. Dingell cited a disturbing trend at the FCC: “[f]or instance, the [FCC] does not put the text of proposed rules out for notice and comment; there is little public notice of certain proposed Commission actions; and the Commissioners are often not informed of the details of draft items until it is too late to provide the necessary scrutiny and analysis that is so important to reasoned decision making.”

In an effort to stave off further action and assuage concerns, Chairman Martin instructed that all matters “on circulation” with the Commissioners be listed on the FCC’s website. Unfortunately, this move was insufficient, particularly given Chairman Martin’s further actions in December.

Specifically, the US Congress had warned Chairman Martin to postpone any FCC decision with regard to media ownership. Despite these admonitions, on December 18, 2007, Chairman Martin pushed through a vote in favor of his proposal overturning a decades-old ban on broadcasters in the top 20 largest media markets from also owning newspapers. Even though Congress had advised the Chairman not to proceed, Martin (with the support of the two other Republican Commissioners) approved the proposal, with the two Democratic Commissioners voting against it. The move received immediate and strong reaction in Congress.

Of particular concern were the accusations of the two Democratic Commissioners that Martin had made changes to his media ownership proposal “in the dead of night”, and at the last minute without affording all Commissioners adequate time to review, comment and make an informed decision. Of course, such maneuverings were the exact concerns noted in Dingell’s December 3, 2007 letter.

The result was the initiation of a formal investigation by the HCEC’s Subcommittee on Oversight and Investigations (“Subcommittee”). On January 8, 2008, a letter was sent by the bipartisan leadership of the HCEC and Subcommittee to Chairman Martin advising him of the investigation, “to determine if the FCC’s regulatory procedures are being conducted in a fair, open, efficient and transparent manner.”

The letter further advised that the Subcommittee investigators would be issuing a comprehensive list of documents to be produced and would be interviewing FCC employees and other witnesses in preparation for oversight hearings later this year. The letter then instructed Chairman Martin to notify all FCC employees of their right to communicate with Congress and reminded Martin that it is a violation of federal law to deny or interfere with that right, to interfere with a Congressional inquiry, or to retaliate against any “whistleblower”. Finally, the letter instructed the Chairman to immediately preserve all electronic records “including work e-mail and personal e-mail communications relating to official work of the Commission”.

So, what does this mean for satellite industry and their representatives? In short, with the exception of certain high-profile proceedings, such as the XM-Sirius merger, the Chairman and his staff will be heavily preoccupied with responding to document production. They’ll be meeting with counsel to prepare for interviews and Congressional hearings. They’ll be trying to contain any political fall-out (the old proverbial “damage control”), and generally trying to repair the image of the Chairman and his Commission. At a minimum, it means further delay in reaching informed decisions. Finally, the closer we get to the November 2008 elections, the less likely any material proceeding will be passed, and that’s certain to cause quite a quagmire.

Tara Giunta is a partner of the Washington, DC office of Paul, Hastings, Janofsky & Walker LLP. Ms. Giunta has extensive experience in advising clients operating in, providing services to and/or financing companies in the satellite sector. She has expertise in structuring international satellite projects and developing and implementing strategies for commercializing those projects on a global basis. She works on structuring strategic alliances, partnerships and joint ventures; negotiating the full range of commercial contracts; structuring projects to accommodate legal and regulatory requirements and obtaining required licenses and authorizations; and conducting due diligence, internal audits and compliance investigations and advising clients and their officers and directors on compliance in a broad range of areas, including regulatory and licensing and the foreign corrupt practices act and related laws.