WEBVTT - FCC Commissioner Carr on Net Neutrality Decision (Audio)

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<v Speaker 1>Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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<v Speaker 1>day we bring you insight and analysis into the most

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<v Speaker 1>important legal news of the day. You can find more

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<v Speaker 1>episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud,

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<v Speaker 1>and on Bloomberg dot com slash podcasts. Yesterday, the FCC

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<v Speaker 1>revoked net neutrality by a three to two vote as expected.

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<v Speaker 1>Joining me now is FCC Commissioner Brendan Carr, who was

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<v Speaker 1>nominated with the commission by President Trump. He voted to

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<v Speaker 1>repeal net neutrality. Thank you for being here, Thanks for

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<v Speaker 1>having me. I appreciate it. Well. The FCC is going

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<v Speaker 1>to be defending against many lawsuits. New York Attorney General

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<v Speaker 1>Eric Schneiderman announced to lead a multi state lawsuit against

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<v Speaker 1>the f SEC. Washington a G. Bob Ferguson will also

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<v Speaker 1>sue Schneiderman's investigation and a few research studies showed that

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<v Speaker 1>millions of public comments submitted were fake, and nineteen state

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<v Speaker 1>a G s and others quested a delay in the

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<v Speaker 1>vote to investigate it. Why didn't the commission grant that delay?

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<v Speaker 1>What was the rush to push this through? I think

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<v Speaker 1>a lot of what you're hearing is misinformation about what

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<v Speaker 1>the FCC ended up doing. Again, a lot of people

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<v Speaker 1>are claiming that we quote ended net neutrality or ended

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<v Speaker 1>the Internet as we know it simply not the case.

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<v Speaker 1>We went back to the regulatory framework that governed the

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<v Speaker 1>Internet that year and for twenty years before consumers were protected.

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<v Speaker 1>The Internet flourished under that framework. We simply went back

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<v Speaker 1>to that same regulatory framework. Yes, but the whole point

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<v Speaker 1>is there was a comment period which is required because

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<v Speaker 1>you revoked a rule and the the a g S

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<v Speaker 1>lawsuit is going to be based on a failure to

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<v Speaker 1>follow the Administrative Procedure Act, and so my question is,

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<v Speaker 1>what was the rush in doing that vote? Why not

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<v Speaker 1>wait and investigate? We followed the administrati Procedure Act absolutely.

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<v Speaker 1>In April is when we opened up this rulemaking proceeding,

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<v Speaker 1>we saw over four million vilenes get submitted in the

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<v Speaker 1>SEC's record. We released the document more than three weeks

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<v Speaker 1>before the FECs votes, So there's a tremendous amount of

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<v Speaker 1>transparency here and anybody and everyone that wanted to participate,

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<v Speaker 1>we're free to submit filings, and we reviewed the record

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<v Speaker 1>and based our decision on the public's feedback. The there

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<v Speaker 1>was enormous public feedback against this though. Yeah, and there's

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<v Speaker 1>a threshold legal question that we have to answer at

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<v Speaker 1>the FCC, which is a technical one, which is is

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<v Speaker 1>this a Title to telecom service or is it a

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<v Speaker 1>Title one information service? And that's a legal determination that

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<v Speaker 1>we have to make, and we looked at the record,

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<v Speaker 1>looked at the law and our precedent, and we made

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<v Speaker 1>that determination. As you point out, there's a separate policy

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<v Speaker 1>debate as well, and again, I think a lot of

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<v Speaker 1>what you're seeing is sort of this perception that by

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<v Speaker 1>repealing Title two that we are giving I s p

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<v Speaker 1>s free reign to dominate consumers online experience. That's not

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<v Speaker 1>what I want to see and that's not what our

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<v Speaker 1>vote did. We kept strong consumer protections in place. So

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<v Speaker 1>I think a lot of what you're seeing is fear

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<v Speaker 1>that I s p s are gonna have no legal

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<v Speaker 1>restraints on what they do, whether we're gonna somehow move

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<v Speaker 1>into some balkanized version of the Internet. Again, that's not

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<v Speaker 1>the case. We are putting strong protections in place to

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<v Speaker 1>make sure that we continue to have a free and

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<v Speaker 1>open Internet. Well, broadband providers say they'll not block or

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<v Speaker 1>throttle legal contact content, but they may engage in paid

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<v Speaker 1>prioritization or prioritize their own content or content from their partners.

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<v Speaker 1>For example, A T and T already has its direct

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<v Speaker 1>Now video streaming service to bypass mobile subscribers data limits,

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<v Speaker 1>so that may happen. No, not at all. So right now,

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<v Speaker 1>under Title too, all of that activity that you describe

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<v Speaker 1>blocking websites, paid priorization, throttling is lawful under the Title

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<v Speaker 1>to framework. The d C Circuit made that clear when

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<v Speaker 1>they reviewed the FECs rule. Now that we're appealing title to,

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<v Speaker 1>the Federal Trade Commission is empowered again. They lost their

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<v Speaker 1>authority over I s p s during this two year

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<v Speaker 1>experiment with Title two, and they're strong legal checks and

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<v Speaker 1>place Section one of the Sherman Acts Section two of

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<v Speaker 1>the Sherman Act. So if an I s P entered

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<v Speaker 1>into an anti competitive agreement to do those things that

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<v Speaker 1>you just talked about, those would be a violations of

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<v Speaker 1>federally any trust law. Again, it's a shift from the

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<v Speaker 1>FCC being the lead enforcer here to the FTC. It's

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<v Speaker 1>not a shift from having laws and restraints against I

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<v Speaker 1>s p s towards which there are no restraints, but

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<v Speaker 1>the FTC takes care of problems after the facts. The

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<v Speaker 1>enforcement happens after the fact, and its authorities under question

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<v Speaker 1>at the Ninth Circuit. So that's the first part of that.

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<v Speaker 1>That's the same framework we have at the FCC. We

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<v Speaker 1>had net neutrality rules and then people file complaints. In fact,

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<v Speaker 1>some alleged that we had fifty thou complaints, and then

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<v Speaker 1>the FEC takes enforcement action. Our rules are not self enforcing.

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<v Speaker 1>That's the same world we're going into with the Federal

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<v Speaker 1>Trade Commission. They have standards, whether it's Section one or

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<v Speaker 1>Section two, and then the question becomes enforcing those standards.

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<v Speaker 1>There's no shift in that respect, and that's the FTC

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<v Speaker 1>is jurisdiction. There was a panel decision at the Ninth

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<v Speaker 1>Circuit about a year ago that called their question and

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<v Speaker 1>do UH called their authority in a question? That pain

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<v Speaker 1>decision has now effectively been vacated by the full Ninth Circuits.

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<v Speaker 1>The law to Land today is the Federal Trade Commission

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<v Speaker 1>is fully empowered to take enforcement actions against I s P.

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<v Speaker 1>The only thing that was holding them back before was

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<v Speaker 1>the FEC Title two decisions. Well, there is going to

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<v Speaker 1>be an non bank hearing about that. So the Ninth

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<v Speaker 1>Circuit is still going to rule. But let's move on

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<v Speaker 1>the FCC order block states from making their own net

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<v Speaker 1>neutrality rules, and one California state center said he's going

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<v Speaker 1>to introduce a bill to impose net neutrality rules. There

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<v Speaker 1>the attorneys general can sue, saying the f CC doesn't

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<v Speaker 1>have authority to preempt state consumer protection rules and also

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<v Speaker 1>the Commission did not ask for questions on that issue.

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<v Speaker 1>Do you see problems there? You have about forty five seconds. No,

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<v Speaker 1>not at all. So there's actually two types of state laws.

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<v Speaker 1>What are generally applicable consumer protection laws that consumers benefit from.

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<v Speaker 1>Those are expressly not preempted by the FCC's decision to

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<v Speaker 1>center their state laws that would look to mimic federal

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<v Speaker 1>net neutrality laws simply by operation of law, our decision

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<v Speaker 1>p M. So those uh, those laws. But again there

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<v Speaker 1>will be state consumer protection laws that will continue to

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<v Speaker 1>apply after this decision. All right, well, you are in

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<v Speaker 1>for a lot of lawsuits and uh we will keep

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<v Speaker 1>following them. Thanks so much for being here on the show.

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<v Speaker 1>That's FCC Commissioner Brendan Carr Walt Disney's deal to buy

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<v Speaker 1>a chunk of twenty one Century Fox for roughly fifty

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<v Speaker 1>two point four billion dollars is a tie up that

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<v Speaker 1>concentrates Hollywood movie making and sports broadcasting. The acquisition would

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<v Speaker 1>make Disney the number one studio owner with more than

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<v Speaker 1>a third of the market, and give a control over

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<v Speaker 1>Fox's FX cable channel. It would also put Fox's regional

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<v Speaker 1>sports networks under the same roof as Disney's ESPN. It

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<v Speaker 1>will need approval from US ANTI Trust officials, who have

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<v Speaker 1>a March nineteenth court date to stop a T and

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<v Speaker 1>T s plan take over of Time Warner. In an

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<v Speaker 1>interview on Bloomberg TV, Disney Chief executive and chairman Bob

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<v Speaker 1>Iger said the d is very pro consumer. What does

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<v Speaker 1>combination will do? As I said a moment ago, was

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<v Speaker 1>going to give the consumer opportunities not only to consume

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<v Speaker 1>far greater amounts of high quality content, but to do

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<v Speaker 1>so under extremely innovative, modern, modern circumstances. And we think,

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<v Speaker 1>at least from a regulatory perspective, they focus just on

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<v Speaker 1>the consumer that that's actually quite a positive thing. Joining

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<v Speaker 1>me is Bloomberg Senior litigation analyst Bloomberg Intelligence Senior litigation

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<v Speaker 1>analyst Jennifer ree Jen we've been talking about horizontal versus

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<v Speaker 1>vertical mergers a lot. Does this deal look more like

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<v Speaker 1>the deals that the Justice Department typically tries to stop

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<v Speaker 1>as compared to the A T and T Time Warner deal. Well,

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<v Speaker 1>it looks more like the kind of deals that that

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<v Speaker 1>are more easily uh, that can more easily affect competition

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<v Speaker 1>in a bad way, you know, because a horizontal deal

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<v Speaker 1>is just a combination of two competitors, so automatically, on

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<v Speaker 1>its face, it's concentrating a market, right, it's taking out

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<v Speaker 1>a competitor in more competitors are better. Period. So the

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<v Speaker 1>question then becomes how much is it concentrating the market,

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<v Speaker 1>and is it concentrating the market so much so that

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<v Speaker 1>it could be harmful? So so it's a much more

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<v Speaker 1>straightforward theory of harm than when you're looking at a

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<v Speaker 1>vertical deal in the way that might harm a market.

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<v Speaker 1>So what might be the sticking points here? Well, you know,

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<v Speaker 1>first of all, I think, again, it's a horizontal deal.

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<v Speaker 1>So we have two companies that have movie studios that

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<v Speaker 1>make movies and distribute movies. So you have an overlap

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<v Speaker 1>right there, and and typically the way those overlaps are

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<v Speaker 1>looked at, I think some people have said, wow, that's

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<v Speaker 1>so much content, you know, block big blockbusters and award

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<v Speaker 1>winning movies that may be coming out of Fox. But

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<v Speaker 1>typically the way the regulators will look at that is say,

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<v Speaker 1>what is a market share? And they put those shares

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<v Speaker 1>together and they do kind of a preliminary measure of

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<v Speaker 1>market concentration by taking a some of the squares of

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<v Speaker 1>those market shares and looking at what those numbers are.

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<v Speaker 1>This is called the Herfandal Herschman Index, and it's something

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<v Speaker 1>I knew that you knew that. It's well called the

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<v Speaker 1>h H I here going forward because it's much easier.

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<v Speaker 1>But this is something that's been used for many, many years.

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<v Speaker 1>It's within their guidelines. It's helpful to them because it

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<v Speaker 1>just gives them a first glance, a first initial measure

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<v Speaker 1>of whether it's concentrated. And you know, when you look

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<v Speaker 1>at the most recent share figures for Fox and Disney

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<v Speaker 1>and putting them together, those numbers don't look that bad. Really. Yeah,

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<v Speaker 1>I know, it's surprising that it's surprising because when you

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<v Speaker 1>hear about what's involved, it sounds like it would would

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<v Speaker 1>cause some problems. Well does the d o J as

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<v Speaker 1>I said, is trying to block the A T and

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<v Speaker 1>T Time Warner merger. Does their position in that suit

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<v Speaker 1>tell us anything about what they might do here? Well,

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<v Speaker 1>they're very different, and of course east each merger is

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<v Speaker 1>meant to be taken for its own facts and the

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<v Speaker 1>circumstances that apply to those two merging companies. But I

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<v Speaker 1>think if the A T and T suit tells us anything,

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<v Speaker 1>what it tells us is that where there's a vertical

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<v Speaker 1>issue and a possibility that it could be harmful, the

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<v Speaker 1>behavioral conditions may not are unlikely to be accepted, because

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<v Speaker 1>that's really what's happened there. In A T and T

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<v Speaker 1>Time Warner. They always expected to have to have a remedy,

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<v Speaker 1>but they thought it would behavioral, be behavioral rather than

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<v Speaker 1>selling assets. So in this Disney Fox deal there is

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<v Speaker 1>a slight vertical aspect to it too, as well as

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<v Speaker 1>the horizontal where they may be licensing their content. Let's say,

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<v Speaker 1>to some of these what we call the over the

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<v Speaker 1>top providers like the Netflix of the world, or you know,

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<v Speaker 1>the competitors, the other competitors that may be still up

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<v Speaker 1>and coming, and and to that extent, what we do

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<v Speaker 1>know from A T and T is, if there's a

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<v Speaker 1>problem with that, they may have to be ready also

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<v Speaker 1>to offer a structural remedy rather than a behavioral remedy.

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<v Speaker 1>The antitrust breakup fee here is two point five billion dollars.

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<v Speaker 1>Does that mean that both parties view the antitrust risk

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<v Speaker 1>as high? You know, it's funny because I've seen people

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<v Speaker 1>interviewed and at one breath somebody will say, well, wow,

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<v Speaker 1>this is so high. This they must think, must think

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<v Speaker 1>this has massive risk, and somebody else saying, well, obviously

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<v Speaker 1>Disney thinks this has low risk because they're you know,

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<v Speaker 1>they're willing to pay to more. And that's exactly what

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<v Speaker 1>a high breakup fee tells you. It tells you nothing,

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<v Speaker 1>because it tells you that Fox is going to protect

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<v Speaker 1>himself itself just in case, which of course makes sense

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<v Speaker 1>in such an uncertain environment. But it also tells you

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<v Speaker 1>that Disney's lawyers have said, you should be confident that

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<v Speaker 1>you're going to be able to get this through because

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<v Speaker 1>you're putting this two point five billion dollars out there

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<v Speaker 1>and you're risking that. What did a lot of attention

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<v Speaker 1>yesterday was President Trump saying that the Disney Fox deal

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<v Speaker 1>would be good for jobs. Now, how does that factor

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<v Speaker 1>into the antitrust analysis and does it put pressure on

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<v Speaker 1>the regulators. Well, I'll tell you it's all very convoluted

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<v Speaker 1>because really horizontal deals don't end up usually in creating jobs. Now,

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<v Speaker 1>whether way down the road this could be job creating,

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<v Speaker 1>I don't know. But part of where you get those synergies,

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<v Speaker 1>and they're talking about two billion dollars worth of cost

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<v Speaker 1>synergies is because you have employment redundancies and people get

0:11:53.040 --> 0:11:55.800
<v Speaker 1>laid off, so they are they are job killers more

0:11:55.800 --> 0:11:59.400
<v Speaker 1>than they are job creators. And then the antitrust front, oddly,

0:11:59.520 --> 0:12:02.200
<v Speaker 1>that goes the pro column that's on the good column

0:12:02.240 --> 0:12:06.440
<v Speaker 1>in an antitrust analysis, because those pro competitive efficiencies that

0:12:06.559 --> 0:12:11.120
<v Speaker 1>gaining efficiencies internally by combining are are what is weighed

0:12:11.120 --> 0:12:14.560
<v Speaker 1>against the possible harm. Right, So sometimes those costs the

0:12:14.600 --> 0:12:17.520
<v Speaker 1>two billion and cost of finish efficiencies that are expected

0:12:17.640 --> 0:12:20.559
<v Speaker 1>which include layoffs, are looked at as a good thing,

0:12:20.640 --> 0:12:23.560
<v Speaker 1>usually by the regulators. So this is all very twisted.

0:12:24.960 --> 0:12:28.160
<v Speaker 1>In five seconds, how long before we know whether the

0:12:28.240 --> 0:12:30.520
<v Speaker 1>DJ is going to post this? Oh, it's going to

0:12:30.600 --> 0:12:32.160
<v Speaker 1>be a long time. I think we're looking at a

0:12:32.240 --> 0:12:35.000
<v Speaker 1>year at least. Really, Oh, yes, I think they'll scrutinize

0:12:35.040 --> 0:12:37.560
<v Speaker 1>this for a long time. Right well, thanks as always

0:12:37.600 --> 0:12:41.880
<v Speaker 1>for being here. Jen. That's Bloomberg Intelligence Senior Litigation analyst

0:12:42.080 --> 0:12:44.640
<v Speaker 1>Jennifer E. And for more of her analysis, you can

0:12:44.679 --> 0:12:47.400
<v Speaker 1>go to b I go on the Bloomberg Terminal. Thanks

0:12:47.400 --> 0:12:50.720
<v Speaker 1>for listening to the Bloomberg Law Podcast. You can subscribe

0:12:50.720 --> 0:12:54.000
<v Speaker 1>and listen to the show on Apple Podcasts, SoundCloud and

0:12:54.040 --> 0:12:58.520
<v Speaker 1>on Bloomberg dot com slash podcast. I'm June Rosso. This

0:12:58.880 --> 0:13:02.839
<v Speaker 1>is Bloomberg. He did the duck to the end in

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<v Speaker 1>Dundy