Ajit Pai has been in charge of the FCC for about a month, and everyone’s still wondering what he’s gonna do with the place. Is he going to go full deregulation? Scale back here and there on his predecessor’s achievements? Focus on bipartisan issues?
So far we haven’t heard all that much from him on his plans, but on Wednesday, Pai stopped by CNBC’s Squawk on the Street for his first hard-hitting interview as chairman (he also spoke with Fox Business the other day, but it was much less eventful).
Squawk anchors David Faber and Jim Cramer got in six questions with Pai, during which he gave some vague but occasionally telling answers. You can watch the full interview below, but we’re also annotating some key parts of Pai’s answers to get a better sense for what he’s actually looking to do.
Questions are heavily paraphrased, answers are condensed.
Questions 1 & 2: When are you going to dismantle Title II protection of net neutrality? No seriously, when?
Pai: “That's one of the things we're discussing. But I think the end goal is to preserve the free and open internet that we had for two decades, starting in the Clinton administration. ... For two decades the proof was in the pudding that the consumer was best served with light touch regulation, and I think that's the end result that we're hoping to achieve.”
Translation: It sounds pretty clear here that Pai doesn’t just want to pull back on some of the heavier net neutrality protections, but actually revert back to the old regulatory regime, removing the Title II designation his predecessor used to ensure strong open internet protections. Pai has long said that he thinks some of the things net neutrality protects can be done simply by encouraging competition, and he’s advocating here for going back to a time when internet providers could more or less do what they wanted without the FCC getting involved. How will he do that? It’s not clear, but he says he’d like it to happen “on a bipartisan basis.”
Question 3: Do you think Congress or the FCC will act on net neutrality first?
Pai: “Both houses of Congress are actively considering that issue, and I certainly stand ready to assistant them in their efforts. The other thing they're considering, which is important, I think, is including broadband as part of an infrastructure package, and I very vigorously proposed that.”
Translation: I don’t know, but it would be nice if internet providers got tax cuts to build things.
Pai’s “gigabit opportunity zones” require Congress, and not much from the FCC
Question 4: How should a broadband infrastructure package work?
Pai: “[I proposed] creating what I've called ‘gigabit opportunity zones’ to give the private sector the maximum incentive to deploy in low income, rural, and urban areas. I've also talked about things the FCC can and should do to remove some of the regulatory barriers to infrastructure investment.”
Translation: Tax cuts for internet providers, specifically in areas where the average household income is below about $40,000. Pai’s plan would also require towns to enact policies that make it faster and cheaper for internet providers to set up shop — though he doesn’t go into detail on what those are. Notably, little of this plan can be accomplished by the FCC; it’s pretty much all up to Congress to make this happen.
Question 5: Are you going to let Sprint and T-Mobile merge?
Pai: “I can't forecast how I would view market structure in the context of a proposed transaction, but what I can say is the marketplace right now is extremely competitive. ... We'd have to look at a particular transaction and the particular facts in order to make a determination, but at the end of the day, our goal is to meet the public interest.”
Translation: This is interesting for what Pai isn’t saying. His predecessor, Tom Wheeler, said again and again that four nationwide wireless carriers were needed to maintain a truly competitive environment. (And history appears to have proven him right.) Pai doesn’t seem to have adopted that view, which at the very least says that he hasn’t categorically crossed off the possibility of letting two major internet providers merge.
Jim Cramer’s final question for Pai got the best response out of the whole interview and really illustrates the principles he’s operating on, so I’m printing his answer in full.
Question 6: You keep saying “light touch regulation.” What does that mean?
Pai: “Some people think that the government should preemptively regulate every marketplace, regardless of whether there's a market failure. Others might say that the government should have no role whatsoever. And my own view is that ‘light touch regulation’ means that we create broad regulatory frameworks to protect consumers, to ensure an overall competitive marketplace, but we shouldn't micromanage how these companies operate their businesses in the absence of evidence of a market failure. And so light touch regulation in this context means we let this dynamic industry — arguably the most dynamic the free market has ever known — develop, and if there are targeted cases where action might be necessary and that the FCC has authority to act, we take action. But otherwise, we don't sit in judgement from Washington, DC. My own view is that the internet should be run by technologists and engineers and businesspeople. Not by lawyers and bureaucrats here in the nation's capital.”
Translation: I love this answer because it’s the most straightforward and detailed thing we’ve heard from Pai yet, and it probably doesn’t even need much translating. But since that’s how this article is formatted... I’ll try to give you something here.
Pai generally sees the wireless and wired internet markets as being in good, healthy, consumer-friendly shape. That means he sees things like Title II as preemptive — stopping a threat that he believes doesn’t exist. Of course, these issues do exist, we already see them happening. But Pai’s position is to more-or-less kick back and wait until something is big enough of a problem that he’s required to address it.
And that’s really what’s concerning about Pai’s position. There’s a very good argument to be made that the market for internet service is frequently anti-consumer and anti-competitive. New York state says that Time Warner Cable (now Charter) straight up lied about internet speeds. And when Comcast tried to buy Time Warner Cable, it actually bragged that the two companies didn’t at all compete; that’s true for much of the cable industry — most households are only given a single choice of provider. If Pai doesn’t think that’s a problem, where does he draw the line? We’re not sure. But he clearly likes what’s happening today.