Tuesday, November 1, 2016

Direct and Indirect Ways the FCC Will Weigh in on the AT&T-Time Warner Merger

            Depending on your economic and political alliance, I have good, or bad news.  I fully expect the FCC to lend its regulatory “good offices” and provide binding or advisory opinion on AT&T acquisition of Time Warner.  In any event, we have a real time case study in the political economy of regulatory agencies and the incentive to expand reach, budget and significance.

The Direct Link

            The FCC has direct statutory authority to oversee a merger when one or more licenses require approval for a transfer of ownership and control.  Time Warner owns one television station and holds several satellite uplink licenses for remote news gathering.  Section 214 of the Communications Act requires FCC approval of a transfer, albeit on a pro forma, expedited basis. 

Several Indirect Links

            The FCC has available a number of creative and quite possibly lawful ways to assert ancillary authority.  Soon after the market debut of cable television, the FCC asserted jurisdiction, despite the lack of direct statutory authority.  The Commission created a regulatory hook based on the transitive principle in math: A is to B as B is to C.  Therefore A is to C.

            In application, the FCC reasoned that because it has direct statutory authority to regulate broadcasting, and because cable television has the potential to adversely affect broadcasting (e.g., thorough audience fragmentation), therefore the FCC can regulate cable television.  The Commission’s strategy passed muster with a reviewing court in the United States v. Sw. Cable Co., 392 U.S. 157, 178 (1968), but the strategy did not work for network neutrality

            The FCC also has exercised jurisdiction over media cross-ownership, with an explicit concern about content diversity and market concentration, including matters for which it does not have direct jurisdiction over one category of media outlet, e.g., newspapers.  The Commission established rules prohibiting cross ownership of a broadcast television station and a general circulation newspaper in the same market.

            Additionally, on several occasions, the FCC deftly leverages congressional mandate to investigate and report on marketplace conditions as the foundation for establishing rules, regulations and safeguards ostensibly to achieve a legislatively created goal.  For example, Section 706 of the Telecommunications Act of 1996 requires the FCC to assess marketplace conditions in advanced telecommunications capability.  That mandate has morphed into secondary legislative support for network neutrality.

            Lastly, I believe that formally or informally, the Justice Department will collaborate with the FCC--if only to spread the heat/blame if the ultimate decision is no, or conditioned in ways that are politically unpalatable.  The Justice Department has collaborated with the FCC before, even as each agency has a different oversight template: DOJ uses quantitative measures, such as Herfindahl-Hirschman Index of market concentration and the FCC uses qualitative, "public interest" measures.

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