OPINION
Note to Obama: The FCC Needs Transparency

This week, the House Energy and Commerce Committee released a report accusing Kevin Martin, the chairman of the Federal Communications Commission (FCC), of being deceptive and opaque in his management of the agency's affairs. That a politician would pull such moves is no surprise, but the report should send a strong signal to the incoming Obama administration.

"Chairman Martin withheld important and relevant data from the other Commissioners during their consideration of the 13th Annual Video Competition Report in an apparent attempt to enable the Commission to regulate cable television companies," the report states.

This finding was one of many pointing out how the Chairman wielded his power inappropriately.

'War on Cable'

It is common knowledge that Chairman Martin personally dislikes the cable companies. This animosity seems to be what drove his reintroduction of a rule to require a 30-percent market share cap on cable companies. In 2001, the U.S. Court of Appeals struck down a similar cap; since then, competition in the video services market has skyrocketed.

When asked why Chairman Martin would reintroduce a rule already rejected by the courts, Joy Sims, a spokesperson for the National Cable and Telecommunications Association, simply said, "Look at the House report issued today."

One man's vendetta, the report reveals, has the ability to influence an entire industry. To those who marvel at that reality, Berin Szoka of the Progress and Freedom Foundation explains that "the FCC is one of the most unaccountable agencies. The problem is not isolated to Chairman Martin, but was probably worse under him because of his war on cable."

Szoka recently coauthored an amicus brief for the D.C. Circuit in Comcast's challenge to the FCC's cap on the maximum size of a cable operator's nationwide subscriber-audience. The 1992 Cable Act is severely outdated, he argues in the brief, because "cable is no longer the unique 'bottleneck' or 'gatekeeper' that it was in 1992."

Content Competition

It's true that over the last decade or so, cable has lost significant market share to satellite and other alternative video delivery systems -- a trend that looks likely to continue with the growing availability of online video services.

Services like Hulu, Netflix and Apple (Nasdaq: AAPL) TV all offer users online video content, and in the case of Hulu, all of it is free (and legal). Phone companies are now offering content services as well. Indeed, just this November, Verizon announced a new strategic alliance with UK-based Velocix.

The new content delivery network will be used to distribute content that Verizon contracts for directly with content owners like movie studios, TV networks, video rental sites and entertainment services, and also to distribute content from content owners with which Velocix has agreements of its own -- all at competitive speeds and costs, according to the companies.

Politics vs. Market Demand

Clearly, the nation's video rules have failed to keep pace with technological reality. Add to this a politician who dislikes the industry, and consumers who want more video choice could face tough times. Such problems seem to be exactly those the tech-savvy folks involved with President-elect Obama are looking to tackle.

The FCC has problems with transparency, so now is the time to open things up to greater public scrutiny. It is also questionable whether the FCC should have as much power as it does over the marketplace. At a time when bankers and automakers are lining up to surrender chunks of control to government bureaucrats, everyone should consider the potential consequences. The results of political decision-making, as opposed to market demand-based decisions, often yield disastrous results.

Just read the House report on Kevin Martin.