Consumer Confidential With David Lazarus
Column

New FCC boss doesn't look great for consumers: 'Seems like prices go up every time you deregulate'

Park La Brea resident Lydia Plona’s pay-TV bill has soared by 60% since Charter Communications took over Time Warner Cable, and she figures there’s little she can do to keep it from climbing even more.

President Trump’s pick to run the Federal Communications Commission makes that prospect even more likely.

Trump named Ajit Pai on Monday to take over as FCC chairman. Pai, a Republican, has served on the five-member commission since 2012, and no one questions his smarts or his grasp of complex telecom issues. Unlike some other Trump appointees, this one knows his stuff.

That said, Pai has a solid track record of favoring deregulation of phone, cable and broadband companies. It’s a sure bet he’ll adopt a more hands-off approach to overseeing the telecom industry than his Democratic predecessor, Tom Wheeler, who believed government regulators have an important role to play in consumer protection.

“Pai is the anti-Wheeler,” said Harold Feld, senior vice president of the advocacy group Public Knowledge. “Anything Wheeler tried to do, Pai would be the first to say it went too far.”

For consumers, Feld told me, a key change will be Pai renouncing Wheeler’s position that phone rules apply to broadband services — a stance that gave the FCC sweeping authority over high-speed Internet providers.

It may sound wonky, but it’s a very big deal. Under Wheeler’s interpretation of the rules, federal authorities were able to oversee broadband companies’ privacy policies and use of customer data. Strict limits were placed on how much access marketers were given to Internet users’ online activities.

Wheeler also required that broadband service providers treat all online businesses equally, thus preventing a Comcast, say, from giving preferential treatment to its own streaming videos or slowing the speed of rival Netflix. This is what’s known as net neutrality.

“The delivery of products and services that will define our future requires gatekeeper-free access to networks,” Wheeler said in a speech at the Aspen Institute this month.

Plona can relate to that. She and I chatted Monday about her bill for TV, Internet and phone service going from $96 a month to $154 after Charter’s Spectrum took over Time Warner Cable. I’ve heard from dozens of other Spectrum customers who said their bills have similarly soared as a result of the merger.

I asked Plona if she was encouraged by the idea of the FCC giving telecom companies a longer leash — that is, allowing the marketplace to work its magic.

She laughed.

“When you let these companies do as they please, all they do is raise our rates,” Plona said. “It seems like prices go up every time you deregulate.”

It seems that way because it’s true, at least for the telecom industry. After cable rates were deregulated at the federal level in 1996, monthly bills started rising at three times the rate of inflation, according to the U.S. Public Interest Research Group.

A 2015 study by Washington State University researchers found that, instead of boosting competition, cable deregulation simply increased industry consolidation.

Even so, Pai, 44, sees deregulation as a boon to the industry and the U.S. economy.

He said in a speech last month that “the regulatory underbrush at the FCC is thick,” and that “we need to fire up the weed whacker and remove those rules that are holding back investment, innovation and job creation.”

No one at the agency responded to my request Monday to speak with Pai.

Apparently, though, his regulatory roots run deep. He was born to Indian immigrants in Buffalo, N.Y., and moved to Canada when he was still a baby. His parents moved the family back to the United States after completing their medical residencies.

“One of the reasons why they wanted to come back to the United States is because they saw that the Canadian marketplace for doctors was highly regulated,” Pai told the Washington Free Beacon, a conservative website, in 2014. There was “much less opportunity for them to be doctors, and entrepreneurial.”

Former Republican FCC Chairman Michael Powell, who now heads the cable-industry lobbying group NCTA, praised Pai for having “consistently demonstrated a common-sense philosophy that consumers are best served by a robust marketplace that encourages investment, innovation and competition.”

In other words, he knows his place.

Feld told me the expectation among Washington-based consumer advocates is that Pai will simply stop enforcing many of Wheeler’s so-called Open Internet rules until the FCC can revisit the matter or until Congress can weigh in with new legislation.

It also appears that a Pai-led FCC will be much more amenable to AT&T’s proposed $85.4-billion acquisition of Time Warner (the media conglomerate, not the cable company). AT&T Chief Executive Randall Stephenson held talks with Trump this month. The telecom behemoth characterized the get-together as “a very good meeting.”

Craig Aaron, president of the advocacy group Free Press, said that Pai has “never met a mega-merger he didn’t like or a public safeguard he didn’t try to undermine.”

“Millions of Americans from across the political spectrum have looked to the FCC to protect their rights to connect and communicate and cheered decisions like the historic net neutrality ruling, and Pai threatens to undo all of that important work,” he said.

Pai shares one thing with the new president: A love of Twitter. He tweeted Monday that "there is so much we can do together to bring the benefits of the digital age to all Americans and to promote innovation and investment."

There’s nothing there about protecting consumers from greedy or unfair business practices.

Apparently we can rely on the robust marketplace for that.

 

David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send your tips or feedback to david.lazarus@latimes.com.

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