Ajit Pai, Chairman of U.S Federal Communications Commission, delivers his keynote speech at Mobile World Congress in Barcelona, Spain, February 28, 2017. REUTERS/Eric Gaillard

WASHINGTON (Reuters) – The U.S. Federal Communications Commission plans to reverse an Obama era decision that allowed it to approve companies to offer government-subsidized telecommunications services to low-income families, the agency’s Republican head said on Wednesday.

FCC chairman Ajit Pai has said telecoms service providers exploited loopholes in the “Lifeline” program for their own gain and states should decide which companies provide the internet, mobile phone and fixed line services to poorer Americans.

Democrats say Pai’s moves are aimed at winding down the program, but Pai has said he just wants to reform Lifeline to prevent fraud.

On Wednesday Pai said the commission would not approve about three dozen pending applications from companies that wanted to join Lifeline. He said the agency would not defend prior FCC actions with regards the program in a case pending before the U.S. Court of Appeals.

Twelve states have challenged the FCC’s order before the appeals court allowing the agency to approve companies to offer services. Pai said the FCC would ask the court to send the case back to the agency so it can reverse the decision and let states take the lead on approving companies.

“Congress gave state governments, not the FCC, the primary responsibility for approving which companies can participate in the Lifeline,” Pai said.

Putting the approval process in the hands of state utility commissions is essential to police against fraud, he added.

A group of U.S. House Democrats said Pai’s decision was an effort “to inflict death by a thousand cuts” to Lifeline, which has provided more than $1.5 billion in annual subsidies in recent years.

“Through lawyerly maneuvering, the FCC is trying to disguise its efforts to eliminate a system designed to make it easier for anyone who needs access to broadband to get it,” they said in a statement.

In March 2016, the FCC voted to expand the $9.25 a month telephone subsidy to include internet access. Pai said over 3.5 million Americans were currently receiving subsidized broadband service through Lifeline from 259 providers.

The FCC has estimated that 95 percent of U.S. households with incomes of at least $150,000 have access to high-speed internet, while less than half of households with incomes lower than $25,000 have Internet access at home.

FCC Commissioner Mignon Clyburn said Wednesday Pai’s decision means “low-income Americans will have less choice for Lifeline broadband, and potential providers who want to serve low-income Americans will face greater barriers to entry and regulatory uncertainty.”

(Reporting by David Shepardson; Editing by Andrew Hay)

A conservative group funded by corporate interests and the Koch Brothers has asked FCC chairman Ajit Pai to answer its petition and move expeditiously to cancel the prohibition of data caps/usage-based pricing as a condition for FCC approval of Charter Communications’ acquisition of Time Warner Cable and Bright House Networks.

A number of pro-consumer deal conditions were included as part of the merger transaction’s approval, and won the support of a majority of FCC commissioners under the leadership of former FCC chairman Thomas Wheeler, appointed by President Barack Obama.

The Competitive Enterprise Institute (CEI) is hopeful that with Wheeler out of office and a new Republican majority at the FCC under the Trump Administration means the FCC will end requirements that Charter offer unlimited data plans, discounted internet access for low-income consumers, and start allowing Charter to charge fees to Netflix and other content providers to connect to its broadband customers. CEI has every reason to be hopeful, pointing out Chairman Pai is a fan of data caps on residential broadband service, opposes Net Neutrality, and recently effectively killed a Lifeline program that would have extended inexpensive internet access to the poor.

CEI:

As then-Commissioner Pai wrote in 2016, this condition is neither “fair” nor “progressive.” Instead, he called this “the paradigmatic case of the 99% subsidizing the 1%,” as it encourages Charter to raise prices on all consumers in response to costs stemming from the activities of a “bandwidth-hungry few.” Other problematic conditions include the ban on Charter charging “edge providers” a price for interconnection and the requirement that the company operate a “low-income broadband program” for customers who meet certain criteria.

The group is optimistic Pai will oversee the unwinding of Charter’s deal conditions largely pushed by former FCC chairman Thomas Wheeler, after Pai recently led the charge to revoke another condition required of Charter in return for merger approval – a commitment to expand its cable network to pass at least one million new homes that already receive broadband service from another provider.

Pai also opposed the low-income internet program, calling it “rate regulation.” The CEI claimed the requirement will “undermine Charter’s ability to price its services in an economically rational manner.”

“Hopefully, the FCC’s new leadership will seize this opportunity to take a stand against harmful merger conditions that have nothing to do with the transaction at hand—by granting CEI’s petition,” the group wrote on its blog.

Pai

As a result of the multibillion dollar cable merger between Charter Communications, Bright House Networks, and Time Warner Cable, the three companies involved freely admitted: your cable bill was unlikely to decrease, you won’t have any new competitive options, there was no guarantee your service would improve, or that you would get faster broadband service than what Time Warner Cable Maxx was already delivering to about half its customer base.

While shareholders and Wall Street bankers made substantial gains, top Time Warner Cable executives walked away with multimillion dollar golden parachute packages, and Charter took control of what is now the country’s supersized, second most powerful cable operator, regulators also required the dealmakers share at least a tiny portion of the spoils with customers.

Then President Donald Trump’s FCC chairman — Ajit Pai — took leadership of the telecom regulator. Now all bets are off.

Pai is reconsidering the settled deal conditions imposed by the FCC under the last administration, and wants to give Charter Communications a free pass to let them out of their commitment to compete. Last week, Pai circulated a petition among his fellow commissioners to roll back the commitment Charter acknowledged to expand its service area to at least one million new homes that already get broadband service from another cable or telephone company.

Former FCC chairman Thomas Wheeler sought the competition requirement to prove that cable operators can successfully run their businesses in direct competition with each other, potentially inspiring other cable companies to face off with incumbent operators outside of their own territories. A paradigm shift worked for Google, which inspired ISPs to boost speeds in light of its gigabit Google Fiber service, which reset customer expectations.

The FCC order approving the merger deal was hardly onerous, requiring Charter to compete head-to-head for customers in places the company can choose itself. Lawmakers eliminated exclusive cable franchise agreements years ago, but established major cable operators like Charter have gone out of their way to avoid competing in areas that already receive cable service. While Wheeler may have hoped some of that competition would be directed against fellow cable companies, Charter CEO Thomas Rutledge quickly made clear to investors and the FCC Charter would continue to avoid direct cable competition, instead promising to expand service into non-cable areas that already get DSL service from the phone company or no broadband at all.

“When I talked to the FCC, I said I can’t overbuild another cable company, because then I could never buy it, because you always block those,” Rutledge said. “It’s really about overbuilding telephone companies.”

Charter’s CEO believes most phone companies are not competing on the same level as cable operators and are unwilling to make the necessary investments to upgrade their aging wired infrastructure to offer faster internet speeds. That makes competing with telephone companies like Windstream, Frontier, and Verizon’s DSL-only service areas a much better proposition than trying to compete head-to-head with Comcast, Cox, or Cablevision.

Rutledge’s clear views about Charter’s expansion plans apparently never made it to the American Cable Association, a cable industry lobbying group that defends the interests of independent and smaller cable operators. Despite Rutledge’s public statements, the ACA and its members are afraid Charter could expand on their turf anyway, potentially forcing small cable operators to compete with the same level of service Charter offers. The horror.

The ACA’s arguments found a sympathetic audience in Mr. Pai and now he wants to let Charter off the hook, at the expense of competition and better service for consumers.

Under the proposal circulated by Pai, Charter would still be required to expand its cable broadband service by at least one million new homes, but those homes would no longer have to be in areas outside of Charter’s existing service footprint. In practical terms, this would mean Charter would focus on wiring areas not far from where it provides service today — ‘DSL or nothing’-country. Charter would also be able to fritter away the number of expansions required by counting newly constructed neighborhood developments it would have likely wired anyway, as well as upgrading its remaining shoddy legacy cable systems — some still incapable of offering broadband or phone service.

The ACA’s talking points prefer to emphasize the David vs. Goliath scenario of a big bully of a cable company like Charter being forced to compete (and likely obliterate) existing small cable operators:

“The overbuild condition imposed by the FCC on Charter is stunningly bad and inexplicable government policy,” said ACA president and CEO Matthew Polka, in a statement. “On the one hand, the FCC found that Charter will be too big and therefore it imposed a series of conditions to ensure it does not exercise any additional market power. At the same time, the FCC, out of the blue, is forcing Charter to get even bigger.”

The real goal here is to minimize direct competition at all costs. The FCC’s deal conditions already included the need for more rural broadband expansion. Wheeler’s second goal was to introduce a new model — cable company competing against cable company — fighting for new customers by offering consumers better service and pricing. The existence of such competition would belie the industry’s claim that cable overbuilds and head-to-head competition is uneconomical. Wildly profitable, perhaps not, but certainly possible. Historically, the traditional way cable operators dealt with the few instances of direct cable competition was to buy them out to put them out of business. Rutledge was certainly thinking along those lines when he complained that the FCC’s order to compete did not include permission to eventually devour its competitor, effectively making competition go away.

Had Charter chosen to compete with cable companies not afraid to spend money to upgrade service above and beyond the anemic broadband speeds Charter offers, it would likely find few takers for its maximum 300Mbps broadband service that comes with a $200 install fee.

“Why would we go where we could get killed?” Rutledge admitted.

Industry claims that the cable business is already fiercely competitive are also countered by Rutledge’s own statements making clear direct competition with brethren cable companies on the cusp of speed-boosting DOCSIS 3.1 upgrades was bad for business. Instead, he would focus on competing with inferior phone companies, which he characterized as mired in debt, still skeptical about the financial wisdom of fiber optic upgrades, and the only competitor where dismal 3-10Mbps DSL service presented a ripe opportunity to steal customers away.

Clyburn – A likely “no” vote.

Charter’s merger approval and its conditions are a sealed deal that was acceptable to Charter and its shareholders and at least offered small token treats to ordinary consumers. Mr. Pai’s willingness to reopen and undo those commitments is just one reason we’ve referred to his regulatory philosophy as irresponsible, nakedly anti-consumer, and anti-competitive. Mr. Pai’s willingness to embrace things as they are comes at the same time most consumers are paying the highest broadband bills ever while also facing an epidemic of usage caps, usage billing, and increasing service and equipment fees. Mr. Pai’s other actions, including ending an effort to introduce competition into the set-top box market, curtailing customer privacy, ending inquiries on usage caps/zero rating, threatening to eliminate Net Neutrality, and reducing the FCC’s already anemic focus on consumer protection makes it clear Mr. Pai is a company man, on a mission to defend the interests of Big Telecom companies and their lobbyists (that also have a history of hiring friendly regulators for high-paying positions once their government job ends.)

That conclusion seems apt considering what Mr. Pai said about Chairman Wheeler’s vision of improving broadband: “one more step down the path of micromanaging where, when, and how ISPs deploy infrastructure.” Missing from his statement are consumers who have spent the last 20 years watching ISPs govern themselves while waiting… waiting… waiting for broadband service that never comes.

Mr. Pai’s proposal needs just one additional vote to win passage. That extra vote is unlikely until President Trump appoints another Republican commissioner. Pai’s proposal isn’t likely to win support from the sole remaining Democrat commissioner still at the FCC — Mignon Clyburn.

As your AT&T wireless bill soars to new heights, the phone company is spent your money on an exclusive inside-the-beltway private soirée to help win approval of its merger deal with Time Warner, Inc.

The little people (ordinary Americans and AT&T customers) were barred at the door for AT&T’s “Stars and Stripes Reception,” celebrating the grand opening of the AT&T Forum for Technology, Entertainment, and Policy. The party was heavy on lobbyists, lawyers, executives, and lawmakers that Bloomberg News reported were bathed in cool blue light and amply supplied with drinks and avocado tartare with melon carpaccio. Added bonus: free photos with a blonde in a slinky white gown promoting “Ice,” an AT&T original show seen on DirecTV.

AT&T doesn’t throw parties just to have fun. Its army of 100 lobbyists and a budget of at least $16.4 million to match leaves very little to chance. Only one company – Boeing – spends more time and money influencing lawmakers. But even a household name aerospace company cannot match the success AT&T has had getting its corporate agenda through in Washington, especially when the Republicans hold the majority. The company has spent more than $213 million schmoozing elected officials since 1998 alone.

The smell of power brought some important names to AT&T’s party, among them, Meredith Attwell Baker, former Republican FCC commissioner who accepted a high-paying lobbying job at Comcast just a few months after voting to approve its own merger deal with NBCUniversal. She was photographed by Washington Life magazine with Peter Jacoby, a former longtime AT&T lobbyist now lobbying for UnitedHealth Group, Bryan Cunningham, co-founder and principal at Polaris Consulting, which has advised AT&T on all of its merger deals since 2009 (along with just about every other large cable merger in the last seven years), and Shane Tews, a visiting fellow at the American Enterprise Institute also associated with the Koch Brothers-backed Heartland Institute, and two other DC consultant groups catering to big businesses that need a guide to help navigate and influence Washington.

Having fun: On the right is Republican strategist Ivan Garcia-Hidalgo, Hispanic Communications | Run PAC

In short, AT&T’s Forum is the embodiment of the D.C. “swamp” President Donald Trump has vowed to drain. Yet it confidently opened for business just a few days before his inaugural. Bloomberg News called the event part of AT&T’s search for “friends in high places.”

The phone company remains concerned about Mr. Trump’s rhetoric on the campaign trail that a merger between AT&T and Time Warner, Inc. would concentrate too much power in too few hands and was “an example of the power structure I’m fighting.”

But not concerned enough to believe their $85.4 billion deal is dead. In fact, D.C. insiders predict the transaction is likely to sail to approval with the Trump Administration’s Justice Department. Few believe the likely next head of the agency that reviews corporate mergers on antitrust grounds — Sen. Jeff Sessions (R-Ala.) is going to be too tough on AT&T. The president has yet to appoint an assistant attorney general for antitrust, who will be responsible for most of the transaction’s review. But Trump’s team was still considering Joshua Wright, a law professor that generally believes mergers are pro-consumer and has promoted a strict laissez-faire philosophy on antitrust enforcement, which foreshadows almost no enforcement at all.

So why throw lavish receptions for the important people in Washington?

“All of this outreach, all of this cultivation, is ensuring you have allies,” Meredith McGehee, strategic adviser to the Campaign Legal Center told Bloomberg News. “You get to know people. You invite them. You do the receptions. You start to cultivate champions on the Hill, so if an antitrust action comes about you can turn to those champions and say, ‘Hey I need you to push back. I need you to write letters.’”

Most of that attention will continue to be tilted towards Republicans, which have traditionally been more favorable to AT&T’s interests. AT&T donated 62% of the $2.7 million in campaign contributions to the GOP in the last election. Most of AT&T’s lobbyists are Republicans that took a trip through D.C.’s revolving door between Capitol Hill and K Street — home of the city’s top lobbying firms. Almost 60 of the 100 AT&T lobbyists used to work for Republican lawmakers or affiliated groups. Another 30 come from Democratic backgrounds — most formerly working for the Clinton Administration or Democratic lawmakers.

Since President Trump began emphasizing the need for American jobs and investment, AT&T’s lobbying team has tailored its message accordingly. On inauguration day, AT&T took out a full-page ad in the Washington Post stating: “We employ more than 250,000 people.” AT&T CEO Randall Stephenson also reportedly emphasized AT&T’s investments in its network when he met privately with Mr. Trump in New York.