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CAPITAL CURRENTS: Unethical behavior in Kevin Martin’s FCC

Sat, 01/31/2009 - 7:15pm
Jeffrey Krauss, President of Telecommunications and Technology Policy

Martin and his staff created distrust, suspicion, fear and turmoil at the FCC.

By the time you read this, Kevin Martin will no longer be FCC chairman, and we can all say good riddance. Late in his term, the Congress investigated reports of corruption and deceit at the agency. The result was a report full of name-calling – just like the FCC’s report of Comcast’s cable modem behavior – but no evidence of illegal activities. Martin and his staff created distrust, suspicion, fear and turmoil at the agency. Important FCC matters were handled secretly, rather Jeffrey Kraussthan openly and transparently. And he and his staff’s manipulation of the second “a la carte” report undermined the integrity of the career professional staff at the agency. Perhaps not illegal, but smelly. And certainly unethical.

The first FCC a la carte report was published in 2004 during the term of the previous FCC chairman, Michael Powell. The Commission studied offering channels on an a la carte basis and concluded that cable customers would not benefit. This finding confirmed the cable industry’s contention that a la carte would lead to higher prices and fewer programming services. That was, and still is, the industry’s position, except for Cablevision, which supports a la carte.

Upon becoming chairman in 2005, Martin directed the FCC staff to rewrite that report and reverse its findings. Martin’s agenda at that time was to order cable operators to offer programming on an a la carte basis so that parents could, if they wanted, order only “family friendly” channels. The 2004 report was a serious obstacle since it undermined Martin’s goal. Since mandatory a la carte pricing would require legislation, Martin commissioned a second report, to be submitted to Congress, that would show how consumers could benefit from a la carte pricing.

The Congressional investigation turned up solid evidence that Martin’s office told the FCC career staff what answer they wanted, rather than giving the staff guidance and allowing the data to determine the conclusions. The main culprit seems to have been Catherine Bohigian, Martin’s senior legal advisor and former law school classmate.

The Congressional report contains copies of e-mails between Bohigian and career staff economist Daniel Shiman, who was assigned to study the data and prepare the report. Poor Dan Shiman!

In e-mails dated July 8, 2005, he said, “Overall, I think pure a la carte would likely raise most cable bills, with fewer channels delivered.” He did admit that a la carte costs could be lower for consumers who watch only a few channels.

Bohigian’s response was, “The conclusion of this report is supposed to be that a la carte could be cheaper for consumers.”

Shiman responded that while the 2004 report contains some errors, nonetheless, “Prices are … likely to be higher under a la carte, and viewership for smaller networks will be lower as people decline to purchase them.”

Then Bohigian lowered the boom. “Daniel, the report cannot conclude that a la carte would likely raise most cable bills, with fewer channels delivered. If that is going to be the conclusion, we need to stop now,” with the implicit “if you still want a job here.”

There are no further e-mails until July 22, when Shiman responded to comments from another FCC staff economist. He noted that multichannel video program distributors (MVPDs) “would raise prices on a la carte items to make them unattractive.” This would lead to rate regulation. But he didn’t want to discuss rate regulation “since we are still trying to make pure a la carte look good.”

Finally, he said: “I agree that if we give the impression that pure a la carte is generally superior to pure bundling, we will hurt the Commission’s reputation. ... I hope we can press [the Office of the Chairman] to agree to a less definitive tone. ... Just making the case that the first report was flawed for not properly analyzing the issue ... would raise less concerns.”

But Shiman was evidently beaten into submission, and the second report, eventually released in February 2006, concluded that for cable households that already received digital service (40 percent at that time), a la carte purchasing was likely to lower the monthly bill for three out of four households.

The Congressional report reached these conclusions: “The chairman’s manipulation of the second a la carte report may have damaged the credibility of the Commission, and it certainly undermined the integrity of the staff.” Since the purpose of the report was to provide input to Congress, “Chairman Martin’s manipulation of the second report calls into question the reliability of telecommunications information and analysis provided by the FCC to Congress.”

By demanding that Shiman reach the pre-determined answer, were Martin and his staff acting illegally? No. Unethically? Yes.

As Martin departs the FCC, his personal staffers are also looking for new jobs. Some have already found them. Notably, in August 2008, Bohigian joined Cablevision Systems as its Washington, D.C.-based lobbyist. With her integrity and credibility now destroyed by the Congressional report, her success as a Washington lobbyist is uncertain at best.

Isn’t it time for people who are entrusted with power like she wielded to be held to a higher standard?

 jkrauss@krauss.ws

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