Federal Regulatory Agencies
Federal Regulatory Agencies
News releases, reports, statements and associated documents from federal regulatory agencies ranging from the Securities Exchange Commission to the Commodities Futures Trading Commission
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SEC Issues Administrative Law Judges Order Involving Can-Cal Resources, China Fruits and SkyStar Bio-Pharmaceutical
WASHINGTON, Nov. 19 -- The Securities and Exchange Commission's Administrative Law Judges issued the following order (File No. 3-18017) involving Can-Cal Resources, China Fruits and SkyStar Bio-Pharmaceutical:In the Matter of Can-Cal Resources Ltd., China Fruits Corp., and SkyStar Bio-Pharmaceutical Co.
Order Following Prehearing Conference
Yesterday, I held a prehearing conference attended by counsel for the Division of Enforcement and Respondent Can Cal Resources Ltd.
We discussed whether Can Cal wished to waive its right to a hearing where witnesses would be called and cross examined and ... Show Full Article WASHINGTON, Nov. 19 -- The Securities and Exchange Commission's Administrative Law Judges issued the following order (File No. 3-18017) involving Can-Cal Resources, China Fruits and SkyStar Bio-Pharmaceutical: In the Matter of Can-Cal Resources Ltd., China Fruits Corp., and SkyStar Bio-Pharmaceutical Co. Order Following Prehearing Conference Yesterday, I held a prehearing conference attended by counsel for the Division of Enforcement and Respondent Can Cal Resources Ltd. We discussed whether Can Cal wished to waive its right to a hearing where witnesses would be called and cross examined andinstead resolve the case on the written record. The parties were directed to file a letter by November 25, 2019, apprising me of Can Cal's decision. If Can Cal waives its right to a hearing, the letter shall suggest a schedule for the submission of further briefing and evidence. If Can Cal does not waive its right to a hearing, the letter should include a proposed procedural schedule for the submission of witness and exhibit lists and for holding a hearing to commence sometime in January 2020 at a location agreed to by the parties.
James E. Grimes
Administrative Law Judge
SEC Commissioners Jackson Issues Letter to Rep. Maloney
WASHINGTON, Nov. 19 -- The Securities and Exchange Commission issued the following letter by Commissioner Robert J. Jackson Jr.:To: Carolyn B. Maloney, Chair, Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets, United States House of Representatives, 2308 Rayburn House Office Building, Washington, D.C. 20515-3212
Dear Chair Maloney:
Thank you for your July 15 letter regarding my research on the need for transparency in corporate political spending--and your leadership in urging the SEC to ensure that our rules protect American families who invest in public companies ... Show Full Article WASHINGTON, Nov. 19 -- The Securities and Exchange Commission issued the following letter by Commissioner Robert J. Jackson Jr.: To: Carolyn B. Maloney, Chair, Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets, United States House of Representatives, 2308 Rayburn House Office Building, Washington, D.C. 20515-3212 Dear Chair Maloney: Thank you for your July 15 letter regarding my research on the need for transparency in corporate political spending--and your leadership in urging the SEC to ensure that our rules protect American families who invest in public companiesthat spend investor money on politics. I very much appreciate the opportunity to share further details on this work. I first raised these concerns while serving as co-chair of a bipartisan group of scholars who petitioned the SEC to require disclosure of how public companies spend investor money on politics./1 More than 1.2 million Americans have written to the SEC to support that petition, and a bipartisan group of SEC officials has called our proposal a "slam dunk."/2 But Congress has used the appropriations process to block the Commission from requiring disclosure in this area.
Without disclosure, executives can spend shareholder money on politics in a way that serves the interests of insiders, not investors. That's why shareholders seeking accountability in this area often put political spending disclosure proposals on the corporate ballot. But working Americans whose savings are spent on politics don't vote on those proposals themselves. Instead, they invest their savings through large institutions who vote on their behalf. And while ordinary investors overwhelmingly favor transparency in this area, the biggest institutions consistently vote their shares to keep political spending in the dark. /3
In your letter, you asked me to review legislation that would require public companies to disclose whether and how they spend shareholder money on politics. As I have written before, such a requirement would bring much-needed accountability to corporate political spending./4 In responding to your letter, my Office conducted additional analysis of investor interest in corporate spending on politics. Our findings show why this area deserves further attention: * First, the case for requiring disclosure of corporate political spending is strong. Today, corporate executives are free to spend shareholder money on politics in a way that favors insiders' interests over investors'--for example, by directing spending toward causes that executives personally support. As in other areas where executives' interests conflict with those of the company's owners, investors can only hold insiders accountable for the spending of shareholder money on politics if that spending is disclosed.
* Second, although over 70% of ordinary American investors favor disclosure of political spending, their shares are nearly always voted against proposals to require transparency./5 The reason is that some institutions managing Americans' savings have chosen to vote against shining light on corporate political spending. Those institutions provide investors with either vague or nonexistent disclosure of that choice, raising the concern that investors don't understand how their money is being voted when it comes to corporate spending on politics./6 The legislation you asked me to review would give shareholders oversight of corporate political spending; it is crucial that ordinary investors understand how the institutions who manage their money would use that power.
Debates over corporate political spending invoke strongly held views about the Nation's political process. I am aware that many would prefer that the securities laws not address a subject as sensitive as this one. But as a Commissioner, those debates are beyond the scope of my work. My job is to give investors the information they need to hold those who manage their money to account--a charge that does not change because that information involves political spending.
The lack of SEC rules in this area leaves investors without information about how their money is spent on politics. For that reason, I support legislation requiring political spending disclosure. Moreover, some institutions consistently vote American families' money to keep corporate political spending in the dark, and I am concerned that investors are unaware of that fact. That's why today I'm calling upon those institutions to tell investors where they stand on transparency of corporate spending on politics.
I. THE CASE FOR REQUIRING DISCLOSURE OF CORPORATE POLITICAL SPENDING
For generations, our securities laws have evolved in response to changing circumstances and investor interests to give shareholders information they need about the companies they own. Because corporate political spending is not transparent under current law, investors need disclosure to hold executives accountable when they spend shareholder money on politics. A significant amount of corporate political spending is not disclosed under current law. That's because public companies contribute investor money to intermediaries that do not disclose who made the contributions or how much they contributed. A study I published in 2013 showed that just eight intermediaries spent $1.5 billion of investor money on elections over six years. Investors have no way to know whether companies they own were the source of that money./7
While other types of corporate political spending are disclosed under federal election law, those disclosures are not designed to protect investors./8 And those disclosures describe only companies' federal political spending; additional data, from a variety of scattered sources, are needed for investors to hold insiders accountable for spending on state-level politics.
The result is that most public-company political spending occurs under investors' radar. This would not be worrying if executives' interests in political spending were aligned with those of shareholders. But when it comes to politics, insiders' interests can diverge from investors'. Political spending has consequences beyond the firm's performance--like advancing insiders' preferred political views--and executives' decisions may be influenced by those consequences. Since shareholders do not sort themselves according to their political views, there will often be a divergence between insiders' and investors' preferences on political spending. And studies show that political spending is associated with corporate governance problems that affect firm value./9
The standard securities-law solution to conflicts like these is disclosure. That's why SEC rules require disclosure on corporate directors' decisions on executive compensation: directors have reason to favor executives in decisions on pay./10 That's why SEC rules also require public companies to give investors information about transactions between the company and insiders. /11 Just like in these areas, there is evidence linking corporate political spending to worse long-run performance. And just like in these areas, disclosure would help ensure that corporate political spending is aligned with the interests of investors--not corporate insiders.
II. HOW LARGE INSTITUTIONS HELP KEEP CORPORATE POLITICAL SPENDING IN THE DARK
Since there are no SEC rules in this area, investors have used the shareholder proposal process to demand disclosure on a company-by-company basis. That's why political spending disclosure is the second-most common subject of shareholder proposals at U.S. public companies. Although shareholder support for these proposals has doubled over the last decade, and given that the overwhelming majority of investors favor disclosure of corporate political spending, support for these proposals is lower than investor preferences would suggest./12
The reason is that the average American investor doesn't vote shares directly on these issues. Instead, they save for education and retirement through large institutions who vote shares on their behalf--and three of the largest institutions in America almost never support proposals that would require disclosure of corporate political spending. To better understand investor preferences in this area, my Office extracted voting data for hundreds of the largest institutional investors over the last fifteen years. I then examined how those institutions--especially the four largest--vote on shareholder proposals regarding two corporate-governance issues: executive pay and political spending. Figure 1 describes both how often the institutions vote "yes" and how their votes vary by company and over time:
FIGURE 1. INSTITUTIONAL INVESTORS' VOTES ON CORPORATE GOVERNANCE MATTERS. /13 Figure 1 shows that these institutions take a similar approach to voting on executive-pay proposals. To be sure, they vote to support such proposals at different rates--BlackRock votes "yes" much more often than Vanguard, for example. But all of the institutions' votes vary by firm and over time, reflecting the company-specific consideration that such proposals require.
Political spending proposals are different. On those proposals, three of the largest four institutions vote "yes" less than five percent of the time--even though, as my coauthors Lucian Bebchuk, James Nelson, Roberto Tallarita and I show in recently released research, other institutional investors frequently support those proposals. /14 Even more strikingly, for the largest institutions there is virtually no variance by company or over time, although one could imagine the strength of the case for disclosing political spending to vary depending on the circumstances. In short, regardless of the company or situation, three of the four largest stewards of ordinary Americans' retirement savings almost always vote to keep corporate political spending in the dark. /15
I was surprised to find that--despite investors' clear preference for transparency--these institutions have so unanimously voted against disclosing corporate political spending. Given the strongly held views on the subject, I wondered whether ordinary investors were aware of these facts. So my Office examined the largest institutions' proxy-voting guidelines, which tell investors how to expect their shares to be voted at each institution.
The evidence shows that, in most cases, these institutions offer little or no transparency to ordinary investors about their voting record on corporate political spending./16 For example, Vanguard has voted investors' money against disclosing such spending across 817 shareholder proposals without ever voting in favor of transparency. That record suggests that Vanguard has determined, as a matter of policy, to vote against such proposals. Yet Vanguard's proxy-voting guidelines do not disclose such a policy; indeed, they say nothing on this subject./17
Of course, this evidence does not establish that any institution should vote differently on any particular shareholder proposals./18 It does, however, raise the concern that ordinary investors do not understand how the institutions managing millions of American families' money vote on disclosure of corporate political spending. Contrary to those investors' preferences, three of the largest institutional investors in the United States consistently vote to keep corporate political spending in the dark. American investors deserve to know that.
The legislation described in your letter, by requiring public companies to disclose how they spend shareholder money on politics, would help investors hold executives accountable when they engage in corporate political spending. Because a significant amount of political spending currently occurs under investors' radar, disclosure is needed for investors to know whether, and how, corporate insiders are spending their money on politics.
Without an SEC rule in this area, investors have filed shareholder proposals at hundreds of public companies demanding transparency of corporate political spending. Those proposals are overwhelmingly popular with ordinary investors. But the institutions who manage millions of American families' savings vote to keep corporate political spending in the dark on a one-sizefits-all basis--without making that clear to investors.
While I know that corporate spending on politics raises strong views about our political process, in my view your letter reflects a basic principle underlying the SEC's mission. Our laws should give investors the information they need to know how their money is being spent and voted--even when it comes to corporate political spending. That's why the legislation you asked me to review could be so helpful to our work. And that's why I am calling upon institutions who manage ordinary Americans' money to be clear with investors about how they vote on this issue.
Thank you again for your letter--and for your work to ensure that the SEC gives ordinary investors the information they need on how their money is used and voted on political spending. Should you have any questions, or if your Staff would find further information helpful, please do not hesitate to contact me.
Robert J. Jackson, Jr
Footnotes:
1/ Letter from Comm. on Disclosure of Corporate Political Spending to Elizabeth M. Murphy, Sec'y, U.S. Sec. & Exch. Comm. (Aug. 3, 2011) [the Petition].
2/ See Dave Michaels, SEC Should Require Political-Spending Reports, Ex-Chairs Say, BLOOMBERG (May 27, 2015); Letter to SEC Chair Mary Jo White from William Henry Donaldson, Arthur Levitt, and Bevis Longstreth (May 27, 2015).
3/ MASON-DIXON POLLING & RESEARCH, CORPORATE POLITICAL SPENDING: A SURVEY OF AMERICAN SHAREHOLDERS 6 (2006) (finding that some 73% of American shareholders believe that corporate political spending is undertaken to advance the private interests of executives rather than the interests of the company).
4/ Lucian A. Bebchuk & Robert J. Jackson, Jr., Corporate Political Spending: Who Decides?, 124 HARV. L. REV. 83 (2010); see also Lucian A. Bebchuk & Robert J. Jackson, Jr., Shining Light on Corporate Political Spending, 101 GEO. L.J. 923 (2013).
5/ MASON-DIXON POLLING & RESEARCH, supra note 3, at 4.
6/ My concern is not that any particular institution has run afoul of its legal obligations by failing to disclose their position on these matters more clearly to investors. Instead, my claim is simply that these institutions can and should do more to make sure that ordinary American investors understand how their retirement savings are voted on corporate political spending.
7/ Bebchuk & Jackson, supra note 4, at 932 & tbl. 1 (2013). One might argue that investors can simply assume that public companies make contributions of this kind and price that expectation into investment decisions. But that's not possible: the scant evidence available in this area makes clear that there is substantial variance among public companies with respect to political spending through intermediaries. See id. at 934 (describing evidence that "there is substantial variance among companies" of similar industry and size with respect to political spending).
8/ For example, corporations that choose to provide indirect support to candidates for office are required to disclose that support under federal election law. See 2 U.S.C. Sec. 434(f)(1), (4).
9/ See, e.g., Rajesh K. Aggarwal, Felix Meschke & Tracy Yue Wang, Corporate Political Donations: Investment or Agency?, 14 Bus. & Pol. 1 (2012) (firms with worse corporate governance engage in more political spending); Marianne Bertrand, Matilde Bombardini, Raymond Fisman & Francesco Trebbi, Tax-Exempt Lobbying: Corporate Philanthropy as a Tool for Political Influence (NBER working paper 2018).
10/ See, e.g., 17 C.F.R. Sec. 229.402(b) (mandating disclosure on boards' executive-pay deliberations). 11/ See id. Sec. 229.404(a); see also John W. White, Director, Division of Corporation Finance, U.S. Sec. & Exch. Comm'n, Remarks Before the Society of Corporate Secretaries and Governance Professionals (Oct. 12, 2006) ("I have heard very intelligent people assert, quite emphatically, that a charitable donation cannot trigger required disclosure . . . . I respectfully disagree. . . . Imagine [a] company makes a sizeable . . . donation to an environmental organization [that] employs the CEO's son?").
12/ MASON-DIXON POLLING & RESEARCH, supra note 3, at 4.
13/ To estimate the confidence intervals in Figure 1, I first calculate the average fund support for proposals in each area and then calculate the standard error of that mean. Because of the large number of fund-year votes, the assumption of homoscedastic standard errors results in severely downward-biased estimates due to the potential correlation of residuals across funds and time. Assuming homoscedastic standard errors in this setting produces confidence intervals so small that they are visually indistinguishable. Thus, clustering produces more realistic standard error estimates, for the reasons given in Mitchell A. Petersen, Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches, 22 REV. FIN. STUD. 435 (2009).
14/ See Lucian A. Bebchuk, Robert J. Jackson, Jr., James D. Nelson & Roberto Tallarita, The Untenable Case for Keeping Investors in the Dark, 10 HARV. BUS. L. REV. ____ (forthcoming 2020) ("Furthermore, an analysis of mutual funds' voting shows that in 2018 most of the 115 mutual fund groups indexed in the Fund Votes database consistently supported shareholder proposals calling for disclosure of corporate political spending (although the largest fund groups, Vanguard, Fidelity, and Blackrock, traditionally vote against or abstain on such resolutions). In particular, 53 fund groups supported at least three quarters of the election spending disclosure resolutions voted upon and 34 of them supported all such proposals. In contrast, only 23 groups failed to support a single political spending disclosure proposal."). Solely for your reference, I have attached a current draft of this study to this letter as Annex A.
15/ My Office studied institutional votes on 817 shareholder proposals on lobbying and political spending over a fifteen-year period in the Institutional Shareholder Services Voting Analytics database, which covers the largest 300 fund families and issuers in the Russell 3000 index (with slight variations in coverage in that period). According to that database, BlackRock voted in favor of these proposals less than 2% of the time. Even more strikingly, Vanguard never voted in favor of any of the proposals my Office examined.
16/ Of the four voting guidelines my Office examined, only BlackRock had an explicit proxy voting policy regarding corporate political activities. See BlackRock Proxy Voting Guidelines for U.S. Securities 1 (2019) ("We generally believe that it is the duty of boards and management to determine the appropriate level of disclosure of all types of corporate activity, and we are generally not supportive of proposals that are overly prescriptive in nature.").
17/ It could be argued that Vanguard views political-spending proposals as "environmental and social proposals," on which their guidelines say the firm will vote on a "case-by-case" basis. See VANGUARD FUNDS, PROXY VOTING GUIDELINES FOR U.S. PORTFOLIO COMPANIES 10, 13 (2019) (explaining that a "fund will vote caseby-case on all environment and social proposals"). If so, that seems even more unclear, because it is hard to see how investors could understand a "case-by-case" voting policy to lead to zero "yes" votes on 817 proposals.
18/ For a thoughtful and forceful case for why these voting patterns can raise concerns about the legitimacy of corporate spending on politics, see Leo E. Strine, Fiduciary Blind Spot: The Failure of Institutional Investors to Prevent the Illegitimate Use of Working Americans' Savings for Corporate Political Spending, 97 WASH. U. L. REV. ____ (forthcoming, 2020).
FTC Issues Agency Financial Report for Fiscal Year 2019
WASHINGTON, Nov. 19 -- The Federal Trade Commission issued the following news release:The Federal Trade Commission issued its Fiscal Year 2019 Agency Financial Report (https://www.ftc.gov/system/files/documents/reports/agency-financial-report-fy2019/ftc_agency_financial_report_fy2019.pdf), which describes the agency's strong fiscal management and key program performance during the past year. The report highlights the FTC's accomplishments in furtherance of its missions to protect consumers and promote competition, and reaffirms the agency's commitment to responsible stewardship of resources and ... Show Full Article WASHINGTON, Nov. 19 -- The Federal Trade Commission issued the following news release: The Federal Trade Commission issued its Fiscal Year 2019 Agency Financial Report (https://www.ftc.gov/system/files/documents/reports/agency-financial-report-fy2019/ftc_agency_financial_report_fy2019.pdf), which describes the agency's strong fiscal management and key program performance during the past year. The report highlights the FTC's accomplishments in furtherance of its missions to protect consumers and promote competition, and reaffirms the agency's commitment to responsible stewardship of resources andsound financial operations.
Prepared in accordance with OMB Circular A-136, this report includes annual audited financial statements, as well as the Office of the Inspector General's assessment of the FTC's key management accomplishments and opportunities for performance improvements. The FTC's FY 2019 independent financial statement audit marks the agency's 23rd consecutive unmodified opinion, the highest audit opinion available.
The report is being submitted to Congress and the Director of the Office of Management and Budget, as required under the Chief Financial Officers Act of 1990 (amended by the Reports Consolidation Act of 2000), the Government Management Reform Act of 1994, the Accountability of Tax Dollars Act of 2002, and the Annual Management Reports under the Government Corporations Control Act.
The Commission vote to release the Performance and Agency Mission Challenges sections of the report was 5-0. (FTC File No. P859900, the staff contact is David Rebich, Chief Financial Officer, 202-326-2201.)
* * *
The Federal Trade Commission works to promote competition (https://www.ftc.gov/about-ftc/bureaus-offices/bureau-competition), and protect and educate consumers (https://www.ftc.gov/about-ftc/bureaus-offices/bureau-consumer-protection). You can learn more about consumer topics (https://www.consumer.ftc.gov/) and file a consumer complaint online (https://www.ftc.gov/complaint) or by calling 1-877-FTC-HELP (382-4357). Like the FTC on Facebook (https://www.facebook.com/federaltradecommission), follow us on Twitter (https://twitter.com/FTC), read our blogs (https://www.ftc.gov/news-events/blogs), and subscribe to press releases (https://www.ftc.gov/stay-connected) for the latest FTC news and resources.
FDIC Proposes New Rule Codifying Policy on Section 19 Hiring
WASHINGTON, Nov. 19 -- The Federal Deposit Insurance Corporation issued the following news release:* * *
- Agency seeks comment to provide greater employment access for individuals with minor criminal offenses
* * *
The Federal Deposit Insurance Corporation (FDIC) today published a proposed rule to formalize a longstanding agency policy related to individuals seeking to work in the banking industry with minor criminal offenses.
"Since joining the FDIC, I have heard a number of stories about individuals that committed minor criminal violations when they were young and have been barred from ... Show Full Article WASHINGTON, Nov. 19 -- The Federal Deposit Insurance Corporation issued the following news release: * * * - Agency seeks comment to provide greater employment access for individuals with minor criminal offenses * * * The Federal Deposit Insurance Corporation (FDIC) today published a proposed rule to formalize a longstanding agency policy related to individuals seeking to work in the banking industry with minor criminal offenses. "Since joining the FDIC, I have heard a number of stories about individuals that committed minor criminal violations when they were young and have been barred frombanking," said FDIC Chairman Jelena McWilliams. "We will always strive to protect the integrity of our banking system, but section 19 should not be a barrier to entry for individuals who have committed minor crimes in the past, paid their debt to society, and reformed their conduct, and are now seeking to gain employment with a financial institution."
Section 19 of the Federal Deposit Insurance Act prohibits, without the prior written consent of the FDIC, any person from participating in banking who has been convicted of a crime of dishonesty or breach of trust or money laundering, or who has entered a pretrial diversion or similar program in connection with the prosecution for such an offense.
In 1998, the FDIC issued a Statement of Policy on Section 19, setting forth a set of criteria for providing relief for individuals with convictions for certain low-risk crimes that constituted de minimis crimes, forgoing the need for an application for a waiver of Section 19. The FDIC is now seeking comment on a proposed rule to codify and amend its 1998 policy.
Attachments:
Fact Sheet (https://www.fdic.gov/news/section19.pdf)
FDIC's Notice of Proposed Rulemaking (https://www.fdic.gov/news/board/2019/2019-11-19-notice-dis-b-fr.pdf)
FDIC Chairman Jelena McWilliams' statement (https://www.fdic.gov/news/news/speeches/spnov1919e.pdf)
FCC Issues Order on Lifeline, Link Up Reform & Modernization
WASHINGTON, Nov. 19 -- The Federal Communications Commission issued the following order (WC Docket Nos. 11-42, 09-197 and 10-90):In the Matter of Lifeline and Link Up Reform and Modernization
Telecommunications Carriers Eligible for Universal Service Support
Connect America Fund
ORDER
Adopted: November 15, 2019
Released: November 19, 2019
By the Commission: Commissioners Starks and Rosenworcel dissenting and issuing separate statements
I. INTRODUCTION
1. In this Order, the Commission addresses the petition of CTIA and others (collectively, Petitioners)/1 seeking a waiver of the Commission's ... Show Full Article WASHINGTON, Nov. 19 -- The Federal Communications Commission issued the following order (WC Docket Nos. 11-42, 09-197 and 10-90): In the Matter of Lifeline and Link Up Reform and Modernization Telecommunications Carriers Eligible for Universal Service Support Connect America Fund ORDER Adopted: November 15, 2019 Released: November 19, 2019 By the Commission: Commissioners Starks and Rosenworcel dissenting and issuing separate statements I. INTRODUCTION 1. In this Order, the Commission addresses the petition of CTIA and others (collectively, Petitioners)/1 seeking a waiver of the Commission'srules updating the Lifeline program's minimum service standard for mobile broadband usage, which otherwise would take effect on December 1, 2019./2 Petitioners also seek to halt the phase-down of the support amount for Lifeline service that does not meet the broadband minimum standard,/3 which will decrease from $9.25/month to $7.25/month on December 1, 2019.
2. We find that, given the unexpectedly large growth in mobile broadband usage over the past three years and the resultant unexpectedly large increase to the minimum service standard that results from the formula the Commission adopted in 2016, good cause exists to partially grant CTIA's petition on this issue. Specifically, we waive the rule to the extent it would establish a minimum service standard greater than 3 GB per month, beginning on December 1, 2019. In contrast, we further find that Petitioners have not shown that good cause exists to halt the scheduled phase-down of support for Lifeline voice service, and we therefore deny that portion of the Petition.
II. BACKGROUND
3. In 2016, the Commission made several changes to the Lifeline program. One such change was the implementation of minimum service standards for Lifeline-supported services,/4 including mobile broadband,/5 to ensure that Lifeline subscribers receive the type of "robust service which is essential to participate in today's society,"/6 and to allow them to subscribe to the services which have "been subscribed to by a substantial majority of residential customers."/7 The minimum standards were also created with the hope of striking "a balance between the demands of affordability and reasonable comparability."/8
4. The 2016 Order set forth a formula to calculate the updated minimum service standard for mobile broadband usage based on certain data regarding consumer broadband usage./9 To give Lifeline participants and providers time to adjust to the new minimum service standards, the Commission specified the minimum usage allowance for mobile broadband service for the first two updates of that standard, with the standard increasing in each successive year. As a result, the minimum standard for mobile broadband usage was set at 500 MB/month beginning on December 2, 2016, increased to 1 GB/month on December 1, 2017, and then to 2 GB/month on December 1, 2018./10 The next update to this standard is scheduled to take effect on December 1, 2019. On July 25, 2019, the Wireline Competition Bureau (Bureau) released a Public Notice announcing that, beginning December 1, 2019, the minimum standard for mobile broadband usage would be 8.75 GB/month as calculated using the formula from the 2016 Order./11
5. The 2016 Order also set out, with limited exceptions, a scheduled phase-down of the support amount for Lifeline offerings--including Lifeline voice-only offerings--that did not meet the broadband minimum service standards. The Commission concluded that a forward-looking Lifeline program would be better served by focusing on broadband services meeting certain minimum criteria,/12 and as part of shifting the program's focus to broadband, the Commission concluded that support for Lifeline service not meeting the broadband minimum service standards would be reduced to $7.25/month on December 1, 2019, then reduced again to $5.25/month on December 1, 2020, and thereafter eliminated in most areas on December 1, 2021./13
6. On June 27, 2019, Petitioners sought a waiver of both the Commission's December 2019 update to the minimum service standard for mobile broadband usage, and the Commission's December 2019 phase-down, to $7.25, of the support amount for Lifeline-supported voice service. On July 1, 2019, the Bureau issued a Public Notice seeking comment on the Petition./14 The Bureau received 16 comments in response, along with multiple ex parte letters.
III. DISCUSSION
7. On the basis of the record before us, we grant the Petition in part and otherwise deny it. As a general matter, "an agency must adhere to its own rules and regulations."/15 Strict application of a rule may be justified "to preserve incentives for compliance and to realize the benefits of easy administration that the rule was designed to achieve."/16 To warrant consideration for waiver, a petitioner must "plead with particularity the facts and circumstances" which warrant the granting of the requested waiver./17 In evaluating good cause for waiver,/18 the Commission may exercise its discretion to waive a rule where the particular facts make strict compliance inconsistent with the public interest./19 In addition, the Commission may take into account considerations of hardship, equity, or more effective implementation of policy on an overall basis./20
8. Minimum Service Standard for Mobile Broadband Usage. Our review of the record convinces us that an increase in the minimum service standard from 2 GB/month to 8.75 GB/month, as provided for under the Commission's primary methodology for updating the minimum service standard for mobile broadband usage, risks upsetting the careful balance the Commission struck when establishing the Lifeline minimum service standards in the 2016 Order. In that order, for example, rather than simply applying its primary methodology to set the initial minimum service standard for mobile broadband usage in 2016, which would have yielded a standard of 2 GB/month, the Commission instead set the initial standard at 500 MB/month and then set a gradual transition to increasing it at a rate of no more than 1 GB/month each year./21 Among other measures reflecting its overall balancing approach, the Commission "cho[se] to adopt a more gradual phase-in of this standard," "in order to allow the Lifeline market an appropriate period to adjust to the introduction of mobile broadband into the program."/22
9. In practice, however, the primary methodology for updating the minimum standard for mobile broadband usage under the Lifeline program's rules yields a far larger year-over-year change than we believe the Commission anticipated. The largest year-over-year increase in the mobile broadband usage minimum standard under the Commission-specified transition was a 1 GB/month annual increase, which stands in stark contrast to the 6.75 GB/month annual increase specified by that methodology for 2019. And indeed, we do not believe the Commission foresaw such growth in mobile broadband usage--as the Commission then noted, subscribers' mobile data usage had increased by only 18.1% from 2015 to 2016./23
10. Though the record contains no clear evidence on the extent of additional costs, which makes it difficult to precisely quantify the likely effect of an increase in the minimum usage allowance,/24 we find it reasonable to anticipate that a more than four-fold increase in the minimum usage allowance would require substantially greater network resources,/25 and, in turn, the associated costs would be passed along to resellers and/or end-users. Absent a more substantial transition period, the large increase in the minimum standard for mobile broadband usage could unduly disrupt service to existing Lifeline subscribers. We thus find that the potential benefits of a significantly increased mobile broadband usage standard are outweighed by the possible hardship that could be imposed on Lifeline subscribers./26
11. Indeed, the significant increase in the standard from 2 GB to 8.75 GB/month is inconsistent with the Commission's apparent vision for increases in minimum standards. When it implemented the mobile broadband usage standard in 2016, before allowing the formula to set the mobile broadband standard in 2019, the Commission established an annual and predictable incremental increase by increasing the minimum standard from 500 MB/month to 1 GB/month for the second year and then increasing that amount again by 1 GB/month for a total of 2 GB/month for the third year. This stair-step approach to increasing the standard not only allowed Lifeline carriers time to plan for the increase and adjust their Lifeline offerings and operations accordingly, but it also established the precedent of no more than doubling usage from one year to the next.
12. Nonetheless, we are mindful of our statutory obligation to ensure that Lifeline supports an evolving level of service,/27 that the Lifeline minimum service standards "must be updated on a regular basis,"/28 and that the wireless market has continued to evolve in the direction of larger data allowances./29 Indeed, according to the Commission's 2018 Communications Marketplace Report, the average smartphone subscriber used 5.1 GB/month in 2017, which was an increase of 275% from the average usage of 1.361 GB per month in 2014 that the Commission took notice of in the 2016 Lifeline Order./30 In fact, one reason for the large increase in the December 2019 standard is the mobile broadband formula appropriately relies on current mobile data usage, which has grown substantially in recent years with the increase in the number of unlimited data plans available to consumers./31 As the average smartphone user's data consumption increases, we are mindful of our statutory directive to ensure that all consumers, "including low-income consumers," have access to reasonably comparable services at reasonably comparable rates./32 And the Commission in the 2016 Lifeline Order specifically rejected the idea that Lifeline subscribers should be consigned to receiving a "second class" service./33
13. For these reasons, we find good cause to waive the increase in minimum standards but only in part. Specifically, we waive the revised minimum standard to the extent it would require mobile carriers in the Lifeline program to offer more than 3 GB per month from December 1, 2019 through November 30, 2020./34 We believe a 3 GB per month minimum standard balances the core objectives of bringing the mobile broadband usage available to our nation's most vulnerable consumers more in line with what other Americans expect and receive from their service, while maintaining a service that is affordable for low-income consumers./35 Increasing the standard to 3 GB per month is consistent with the Commission's past practice, as the Commission adopted a 1 GB per month increase from 2017 to 2018./36 And as TracFone argues, and CTIA agrees, while increasing the standard to 8.75 GB/month would "make services prohibitively expensive for Lifeline customers," an increase to 3 GB/month is feasible for Lifeline providers and would "best meet the Commission's objectives" for the Lifeline program./37
14. We disagree with commenters that argue that the minimum standard should not increase at all above the existing 2 GB/month standard at this time./38 As explained above, the Commission decided that Lifeline subscribers should not be given only "second class" service--and that the minimum standards were designed to "eliminate" low-quality services from the program (or, put another way, to "remove the incentive for providers to offer minimal, un-innovative services")./39 And we find that limiting Lifeline subscribers to a usage allowance of less than half of what other smartphone subscribers actually use today would be affording them only second class service--precisely what the Commission deemed unacceptable.
15. Several commenters argue against an increase of the mobile broadband usage minimum standard by suggesting that the current 2 GB minimum standard is sufficient. We disagree. More specifically, Q Link argues that Lifeline consumers only "need" less than 2 GB per month, and points to both data that Verizon customers only use between 1 GB and 2 GB per month and a recommendation from Consumer Reports./40 These comparisons are unpersuasive. We note that the cited Verizon data is from 2013 and thus does not account for the rapid growth in mobile broadband usage over the last few years. Similarly, the Consumer Reports recommendation cited by Q Link dates back to November 2018, but beginning August 1, 2019, the same Consumer Reports webpage has instead described "medium data use" as 5 GB/month per phone line, which allows a subscriber to engage in "a little bit of everything."/41 To the extent that Q Link argues the Commission should base its mobile broadband minimum service standard on current average usage by non-Lifeline subscribers, that amount would be 5.1 GB/month and would therefore support a significant increase in the minimum standards as compared to the previous year.
16. Even if the cited data were more up-to-date, the comparison between a Lifeline household's maximum usage allowance and the average usage of a non-Lifeline household is inapt. While the average data usage of non-Lifeline subscribers can provide some guidance to help the Commission understand when increases in the program's minimum service standards are needed to ensure low-income households have access to reasonably comparable service at reasonably comparable rates,/42 the better, most direct comparisons are between a Lifeline subscriber's usage allowance and a non-Lifeline subscriber's (often unlimited) usage allowance, or between the actual average usage of Lifeline subscribers (not clear from the record)/43 and the actual average usage of non-Lifeline subscribers (5.1 GB/month in 2017).
17. We also decline the request of the National Lifeline Association (NaLA) and Q Link to allow carriers to claim Lifeline broadband support for packages that include only 2 GB of mobile broadband data and 1,000 minutes of voice service./44 A Lifeline offering that includes qualifying voice service along with broadband that does not meet the broadband minimum service standards will only receive the applicable support amount set out in section 54.403(a)(2) of the Commission's rules./45 The Bureau has also previously clarified that a bundled Lifeline offering must meet the minimum service standard for the specific service being claimed for support, whether voice or broadband./46 We find that this Order's partial waiver of the updated mobile broadband minimum service standard strikes an appropriate balance. NaLA and Q Link have not demonstrated in their filing why their requested deviation would further the public interest.
18. Voice Support Phase-Down. Petitioners also request a waiver of the scheduled phase-down of Lifeline support for voice service (i.e., those services that do not meet the broadband minimum standards) until the Bureau completes the State of the Lifeline Marketplace Report./47 Petitioners and commenters fail to establish, however, that compliance with this rule would be inconsistent with the public interest, or that the effects of the voice support phase-down were uncontemplated by the Commission in the 2016 Order. In the 2016 Order, the Commission adopted the phase-down in Lifeline support for voice service to ensure that the Lifeline program is focused on supporting "modern service offerings" to help low-income consumers participate in an evolving economy./48 The record does not provide a basis to conclude that the scheduled $2 reduction in support for voice service is comparable in effect to the unexpected fourfold increase in the minimum service standard for mobile broadband usage that we discuss above. Indeed, providers have known for over three years that support for service not meeting the broadband minimum service standards would be reduced by $2 on December 1, 2019, and so they have had ample time to adjust their business practices, notify subscribers, negotiate contracts, and otherwise modify their business plans.
19. Additionally, neither Petitioners nor commenters have shown that implementing the proposed phase-down would result in harm to Lifeline subscribers that would justify a waiver of the Commission's rules. Petitioners correctly note that many Lifeline subscribers currently apply their Lifeline benefit to a qualifying voice service, but Petitioners do not show that the phase-down in voice support would result in unaffordable services or lead to de-enrollments from the program.
20. Q Link also asserts that the long-anticipated phase-down would increase the price for voice customers or require them to switch to a bundled voice and broadband plan but with a smaller data allowance./49 We are not persuaded by this argument. To the extent Q Link is effectively seeking reconsideration of the Commission's reasoned decision to phase down voice support, that request is untimely, and Q Link has identified no new circumstances that would warrant a waiver./50 NaLA also argues that a phase-down would be harmful because current non-Lifeline prepaid customers "must pay an average of $15-$20 for a plan that includes 1,000 minutes."/51 Other providers' comments show, however, that they are able to provide similar offerings that include at least 1,000 minutes, supported by a $9.25 reimbursement and no end-user payment,/52 and NaLA fails to show that the planned reduction in voice support would have harmful effects on Lifeline customers or would render Lifeline providers unable to provide the same voice service while receiving a $7.25/month reimbursement. Finally, NaLA and Q Link argue that "phasing out support for voice-only service endangers public safety."/53 We note that we are merely reducing, not eliminating, the support available for voice-only service, and that there is no evidence in the record that the long-contemplated decrease in support will have any negative impacts on public safety.
21. Ultimately, because Petitioners have failed to establish that the planned phase-down for Lifeline voice support would be inconsistent with the public interest (let alone surmount the hurdle that the Commission found in the 2016 Lifeline Order that this precise phase-down would be in the public interest), we deny that portion of their Petition.
IV. ORDERING CLAUSES
22. ACCORDINGLY, IT IS ORDERED, pursuant to the authority contained in sections 1-4 and 254 of the Communications Act of 1934, as amended, 47 U.S.C. Sec.Sec. 151-154 and 254, and section 1.3 of the Commission's rules, 47 CFR Sec. 1.3, that section 47 CFR Sec. 54.408(b)(2)(ii)(D) of the Commission's rules is waived to the limited extent provided herein.
23. IT IS FURTHER ORDERED, that pursuant to the authority contained in sections 1-4 and 254 of the Communications Act of 1934, as amended, 47 U.S.C. Sec.Sec. 151-154 and 254, and section 1.3 of the Commission's rules, 47 CFR Sec. 1.3, that the request for waiver filed by CTIA, National Consumer Law Center, on behalf of its low-income clients, National Hispanic Media Coalition, OCA--Asian Pacific American Advocates, and United Church of Christ, OC Inc. is GRANTED in part and otherwise DENIED.
24. IT IS FURTHER ORDERED that, pursuant to section 1.102(b)(1) of the Commission's rules, 47 CFR Sec. 1.102(b)(1), this Order SHALL BE EFFECTIVE upon release.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
* * *
1/ National Consumer Law Center, on behalf of its low-income clients, National Hispanic Media Coalition, OCA--Asian Pacific American Advocates, and United Church of Christ, OC Inc.
2/ Joint Petition to Pause Implementation of December 2019 Lifeline Minimum Service Standards Pending Forthcoming Marketplace Study, WC Docket No. 11-42 et al. (filed June 27, 2019) (Petition).
3/ Throughout this Order, references to phasing down the support amount for "voice service" or "voice-only service" include a phase-down in support for Lifeline offerings that do not meet the Lifeline broadband minimum service standards.
4/ Lifeline and Link Up Reform and Modernization et al., WC Docket No. 11-42 et al., Third Report and Order, Further Report and Order, and Order on Reconsideration, 31 FCC Rcd 3962, 3989-97, paras. 73-98 (2016) (2016 Lifeline Order or 2016 Order); 47 CFR Sec. 54.408.
5/ 2016 Order, 31 FCC Rcd at 3994-97, paras. 91-98.
6/ Id. at 3988, para. 69.
7/ Id. at 3988, para. 70 (quoting 47 U.S.C. Sec. 254(c)(1)(B)).
8/ Id. at 3989, para. 71.
9/ Id. at 3995-96, para. 94; 47 CFR Sec. 54.408(c)(2)(ii)(A)-(D). The minimum service standard for mobile broadband is calculated by finding the product of: (1) The average number of mobile subscriptions per household; (2) the percentage of Americans who own a smartphone; and (3) the average data used per mobile smartphone subscriber. The product of (1)-(3) is then multiplied by 0.7, and the result is rounded up to the nearest 250 MB.
10/ 2016 Order, 31 FCC Rcd at 3995, para. 93; 47 CFR Sec. 54.408(b)(2)(ii)(A)-(C).
11/ Wireline Competition Bureau Announces Updated Lifeline Minimum Service Standards and Indexed Budget Amount, Public Notice, 34 FCC Rcd 6363, 6364 (WCB 2019).
12/ 2016 Order, 31 FCC Rcd at 3981, para. 52.
13/ Id. at 4003, para. 117; 47 CFR Sec. 54.403(a)(2)(i)-(iv). In census blocks with only one Lifeline provider, providers may receive reimbursement for qualifying voice service at $5.25 per month even after December 1, 2021. See 2016 Order, 31 FCC Rcd at 4004, para. 120.
14/ Wireline Competition Bureau Seeks Comment on Petition to Pause Implementation of December 2019 Lifeline Minimum Service Standards Pending Forthcoming Marketplace Study, Public Notice, 34 FCC Rcd 5234 (WCB 2019).
15/ NetworkIP, LLC v. FCC, 548 F.3d 116, 127 (D.C. Cir. 2008).
16/ Mary V. Harris Found. v. FCC, 776 F.3d 21, 28 (D.C. Cir. 2015).
17/ WAIT Radio v. FCC, 418 F.2d 1153, 1157 & n.9 (D.C. Cir. 1969) (WAIT Radio).
18/ 47 CFR Sec. 1.3.
19/ Northeast Cellular Telephone Co. v. FCC, 897 F.2d 1164, 1166 (D.C. Cir. 1990) (Northeast Cellular).
20/ WAIT Radio, 418 F.2d at 1159; Northeast Cellular, 897 F.2d at 1166.
21/ 2016 Order, 31 FCC Rcd at 3995, 3996, paras. 93, 95.
22/ Id. at 3995, 3996, paras. 93, 95.
23/ Id. at 3997, para. 97.
24/ For example, facilities-based carriers such as Sprint have not quantified the additional costs of an increase (for example, what opportunity costs Sprint would face with such an increase or what additional investment it would need to make to maintain sufficient capacity for subscribers), noting instead more vaguely that Assurance (its Lifeline brand) would need to develop a billing system for Lifeline service (and not quantifying those costs nor the costs saved by sharing a billing system with Sprint's other brands). See, e.g., Sprint Comments at 8, n.13. In turn, wireless resellers have not detailed how much they pay to their wholesale partners (either in total or on a per-megabyte basis) nor how much their customer base actually uses of the current 2 GB allocation (most consumers typically do not hit data caps imposed by carriers) nor how much usage would be expected to increase if the 8.75 GB minimum service standard were to take effect. Instead, they point to retail prices for services offering 5-10 GB, see Sprint Comments at 6; National Lifeline Association Comments, Attachment 1; TruConnect Comments at 3, and claim that an increase in the minimum standard would thus entail such costs for consumers. However, we have previously recognized the difficulty in comparing mobile wireless plans, Communications Marketplace Report et al., GN Docket No. 18-23 et al., Report, 33 FCC Rcd 12558, 12572, para. 18 (2018) (2018 Communications Marketplace Report), and find such a comparison especially inapt here. That is because a similar comparison for retail prices of mobile broadband services offering 2 GB/month shows prices that are roughly twice the existing $9.25 subsidy, see, e.g., National Lifeline Association Comments, Attachment 1--in other words, if such prices directly translated into costs, the free offerings of wireless resellers would already not be free, and yet they are.
25/ See, e.g., Connect America Fund; ETC Annual Report and Certifications, Report and Order and Order on Reconsideration, 32 FCC Rcd 1624, 1633-34, para. 27 (2017) (noting the "generally greater costs of deploying a higher capacity network at higher speeds").
26/ See Letter from Joshua S. Turner, Counsel to TracFone Wireless, Inc., to Marlene H. Dortch, Secretary, FCC, WC Docket No. 11-42 et al., at 2-3 (filed Oct. 30, 2019) (TracFone Ex Parte). See WAIT Radio, 418 F.2d at 1159; Northeast Cellular, 897 F.2d at 1166.
27/ 47 U.S.C. Sec. 254(c)(1).
28/ 2016 Order, 31 FCC Rcd at 3988, para. 69.
29/ Petition at 6.
30/ 2018 Communications Marketplace Report, 33 FCC Rcd at 12568-69, para. 12, Fig. A-8.
31/ Id. at 12570, para. 15.
32/ 47 U.S.C. Sec. 254(b)(3).
33/ 2016 Order, 31 FCC Rcd at 4000, para. 104.
34/ Although some parties urge us to extend any waiver to the minimum service standard that would be starting on December 1, 2020, we do not yet have any data on which to base such a standard, let alone a waiver of that standard.
35/ TruConnect argues that Mozilla Corp. v. FCC, 940 F.3d 1 (D.C. Cir. 2019), impacts the Commission's authority to establish minimum service standards, insofar as the holding in that case raised questions concerning the Commission's authority to include broadband in the Lifeline program. See, e.g., Letter from Judson H. Hill, Counsel to TruConnect, to Marlene H. Dortch, Secretary, FCC, WC Docket Nos. 11-42, 09-197, 10-90, at 1 (filed Oct. 10, 2019). We note that the opinion in Mozilla remanded issues to the Commission related to its decision to classify broadband as a Title I service, and that the decision did not purport to disturb any rules relating to the Lifeline program. We further note that the mandate has not yet issued in Mozilla.
36/ See 47 CFR Sec.54.408(b)(2)(ii)(A)-(C).
37/ TracFone Ex Parte at 2-5; Letter from Matthew Gerst, Vice President, Regulatory Affairs, CTIA, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 11-42 et al., at 2 (filed Nov. 5, 2019) (CTIA Ex Parte).
38/ See, e.g., Sprint Comments at 9, NaLA Comments at 7, Q Link Comments at 4; Letter from National Hispanic Media Coalition, OCA--Asian Pacific American Advocates, National Consumer Law Center, and United Church of Christ, OC Inc., to Marlene H. Dortch, Secretary, FCC, WC Docket No. 11-42 et al., at 1-2 (filed Nov. 13, 2019); Letter from Judson H. Hill, Counsel for Telscape Communications, Inc. d/b/a TruConnect and Sage Telecom Communications, LLC, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 11-42 et al., at 3 (filed Nov. 14, 2019).
39/ 2016 Order, 31 FCC Rcd at 4000, para. 104, (quoting Lifeline and Link Up Reform and Modernization et al., Second Further Notice of Proposed Rulemaking, Order on Reconsideration, Second Report and Order, and Memorandum Opinion and Order, 30 FCC Rcd 7818, 7837, para. 34 (2015) (2015 Lifeline FNPRM)).
40/ Q Link Comments at 12 (citing "Making sense of data: How much do you need?," Verizon, available at https://www.verizonwireless.com/articles/making-sense-of-data-how-much-do-you-need/ (Dec. 12, 2013), and "Cell Phone & Service Buying Guide," Consumer Reports, available at https://web.archive.org/web/20190709235644/https://www.consumerreports.org/cro/cell-phones-services/buying-guide/index.htm).
41/ "Cell Phone & Service Buying Guide," Consumer Reports, available at https://www.consumerreports.org/cro/cell-phones-services/buying-guide/index.htm (last visited Nov. 6, 2019) (also describing 2 GB per month per phone as a "light data use" service).
42/ See supra para. 12; 47 U.S.C. Sec. 254(b)(3).
43/ Although Sprint states that its "Lifeline customer's average data usage is significantly below the current allowance" of 2 GB, it did not provide any data to support this assertion. See Letter from Norina T. Moy, Director, Government Affairs, Sprint, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 11-42 et al., at 1 (filed Aug. 19, 2019) (Sprint August Ex Parte).
44/ Letter from John S. Heitmann, Counsel to the National Lifeline Association and Q Link Wireless, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 11-42 et al., at 2 (filed Oct. 30, 2019) (NaLA and Q Link Ex Parte) (stating that "the Commission should also approve a mobile broadband bundle minimum of 2 GB and 1,000 minutes (3,000 units in total - the same as 3 GB) for $9.25 per month"); Letter from John S. Heitmann, Counsel to the National Lifeline Association and Q Link Wireless, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 11-42 et al., at 2-3 (filed Nov. 13, 2019) (reaffirming arguments raised in its Oct. 30, 2019 ex parte); Letter from John S. Heitmann, Counsel to the National Lifeline Association and Q Link Wireless, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 11-42 et al., at 2-3 (filed Nov. 15, 2019); Letter from Phillip Berenbroick, Policy Director, Public Knowledge, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 11-42 et al., at 1-2 (filed Nov. 15, 2019) (supporting this proposal); but see Letter from Leo Fitzpatrick, Policy Counsel, Free Press, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 11-42 et al., at 1-2 (filed Nov. 12, 2019) (expressing concerns regarding the proposal of NaLA and Q Link).
45/ See 47 CFR Sec. 54.403(a)(2).
46/ See Wireline Competition Bureau Provides Guidance Regarding Designation as a Lifeline Broadband Provider and Lifeline Broadband Minimum Service Standards, Public Notice, 31 FCC Rcd 10927, 10932-33, paras. 14-15 (WCB 2016).
47/ Petition at 6-9; see also Letter from Ken McEldowney, Executive Director, Consumer Action, to Marlene Dortch, Secretary, FCC, WC Docket No. 11-42 et al. (filed Nov. 8, 2019); Letter from Leo Fitzpatrick, Policy Counsel, Free Press, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 11-42 et al., at 1-2 (filed Nov. 12, 2019); Letter from Phillip Berenbroick, Policy Director, Public Knowledge, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 11-42 et al., at 1-2 (filed Nov. 15, 2019).
48/ See 2016 Order, 31 FCC Rcd at 3981, 4002, paras. 52, 110.
49/ Q Link Comments at 4, 14.
50/ For the same reasons, we reject the proposal by Prepaid Wireless Group and StandUp Wireless to continue providing $9.25 in Lifeline support for offerings that include 3,000 minutes of voice. See Letter from Jeffrey Carlisle, Counsel to Prepaid Wireless Group and StandUp Wireless, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 11-42 et al. (filed Nov. 8, 2019). Such a waiver would be contrary to the Commission's intent in adopting the phase down in voice support in the 2016 Order.
51/ NaLA Comments at 9.
52/ See TracFone Comments at 2; Q Link Comments at 8; TruConnect Comments at 3; Universal Service Administrative Company, High Cost and Low Income Committee Briefing Book, at 52 (July 2019), https://www.usac.org/_res/documents/about/pdf/bod/materials/2019/High-Cost&Low-Income-Briefing-Book-July.pdf (showing that 46.85% of Lifeline subscribers received a service that included at least 1,000 voice minutes in June 2019).
53/ NaLA and Q Link Ex Parte at 3.
Chairman Pai Names Members, Announces First Meeting of Precision Agriculture Task Force
WASHINGTON, Nov. 19 -- The Federal Communications Commission issued the following news release:* * *
- FCC Also Seeking Nominations for Four Working Groups
* * *
Federal Communications Commission Chairman Ajit Pai today announced the membership and first meeting date of the new task force assigned to explore ways to enhance the productivity and efficiency of the nation's farms and ranches through broadband-based technologies--a concept known as "precision agriculture."
Planned in close consultation with the U.S. Department of Agriculture, the first meeting of the Task Force for Reviewing ... Show Full Article WASHINGTON, Nov. 19 -- The Federal Communications Commission issued the following news release: * * * - FCC Also Seeking Nominations for Four Working Groups * * * Federal Communications Commission Chairman Ajit Pai today announced the membership and first meeting date of the new task force assigned to explore ways to enhance the productivity and efficiency of the nation's farms and ranches through broadband-based technologies--a concept known as "precision agriculture." Planned in close consultation with the U.S. Department of Agriculture, the first meeting of the Task Force for ReviewingConnectivity and Technology Needs of Precision Agriculture is set for Monday, December 9, at 9:30 a.m. in the Commission Meeting Room at FCC Headquarters. Chairman Pai has designated Teddy Bekele, Land O'Lakes Senior Vice President and Chief Technology Officer, to serve as Chair of the Task Force, and Catherine Moyer, Pioneer Communications Chief Executive Officer and General Manager, to serve as Vice Chair.
A full list of Task Force members appointed by the Chairman in consultation with the Department of Agriculture is available at DA-19-1187A1.pdf.
"There is an urgent and growing demand for broadband from America's farmers and ranchers," said Chairman Pai. "As I've seen for myself in places like Rifle, Colorado, King Hill, Idaho, and Charles City, Virginia, farmers and ranchers are using connected technologies to collect real-time data in the field, make the most efficient use of resources like water, fuel, and seed, and increase yields, all to the benefit of American consumers. Making modern networks available from coast to coast is the FCC's top priority. The Task Force's recommendations and reports will enable us to help America's food producers deliver more, better, and cheaper goods to the table."
Chairman Pai also announced four working groups for the Task Force and solicited nominations for them. For more information on the working groups and how to submit nominations, see DA-19-1188A1.pdf.
The Task Force is a federal advisory committee and was created by the Agricultural Improvement Act of 2018, which includes provisions directing the FCC to work with the U.S. Department of Agriculture to develop policy recommendations to promote the rapid, expanded deployment of broadband Internet access service on agricultural land where service is not available. Federal advisory committees were established by Congress to provide federal agencies with outside, expert advice on policy matters.
CFTC Commissioner Quintenz Issues Opening Statement Before Energy & Environmental Markets Advisory Committee
WASHINGTON, Nov. 19 -- The Commodity Futures Trading Commission issued the following statement by Commissioner Brian Quintenz before the Energy and Environmental Markets Advisory Committee:"Sadly, I am not able to participate in person due to a prior commitment, but I am looking forward to watching all the panels later via webcast.
"The Committee has a packed agenda before it today, exploring issues that are timely and pertinent to the intersection of the derivatives markets with environmental and energy developments. Historically, exchange-traded and over-the-counter derivatives products have ... Show Full Article WASHINGTON, Nov. 19 -- The Commodity Futures Trading Commission issued the following statement by Commissioner Brian Quintenz before the Energy and Environmental Markets Advisory Committee: "Sadly, I am not able to participate in person due to a prior commitment, but I am looking forward to watching all the panels later via webcast. "The Committee has a packed agenda before it today, exploring issues that are timely and pertinent to the intersection of the derivatives markets with environmental and energy developments. Historically, exchange-traded and over-the-counter derivatives products haveenabled producers, merchants, and users of energy and environmental products to manage and hedge their commercial risks. Today, the derivatives markets continue to be on the cutting edge of risk management by offering an ever-expanding suite of products designed to assist firms hedge risks related to climate, government-mandated emissions reduction targets, or fuel prices, including renewable fuels.
"As I have noted previously, I believe the robust energy derivatives markets in the United States have played a pivotal role in supporting our nation's energy independence as well as our country's unheralded reduction in carbon emissions. This fall, the U.S. Environmental Protection Agency (EPA) released its latest Greenhouse Gas Reporting Program data which found that reported U.S. greenhouse gas emissions have declined roughly 10 percent since 2011.[1] In 2018, greenhouse gas emissions were 13 percent below 2005 levels - the biggest reduction compared to 2005 among all the G-20 countries.[2] A significant part of this decline in emissions has come from an unlikely source: the shale oil boom. Let me explain.
"The energy revolution in the United States over the last 10 years provided by shale oil extraction has not only resulted in an 80% increase in oil production, but also a 50% increase in natural gas production. That huge new supply of natural gas has led to a 50% increase in the amount of electricity produced from natural gas which, in turn, has led to a 2.3 billion metric ton reduction in carbon emissions.[3]
"None of that progress - the benefits to national security secured from energy independence or the climate benefit from carbon emissions reductions - would have been possible without the explorers, innovators, and entrepreneurs behind the shale oil revolution, which, in my opinion, would not have been possible without having the world's deepest and most liquid energy derivatives and hedging markets to offset the risk of those exploratory efforts.
"In 2010, when the shale boom was just beginning, commodity price risk management in the futures markets enabled entrepreneurs to secure financing from banks, deploy capital effectively, and minimize cash flow fluctuations attributable to commodity price swings. The ability to largely insulate their firms from volatile price movements in the oil and natural gas markets enabled these entrepreneurs to access credit and continue to innovate and expand, resulting in the shale oil revolution.
"There is an important lesson to be gleaned here: the vibrancy and liquidity of the American futures and swaps markets have already played an important part in the reduction of carbon emissions related to electricity generation by serving as effective hedging venues that supported private sector ingenuity, discovery, and production of cleaner energy resources.
"Unfortunately, the status of those markets, particularly related to energy derivatives, is under significant threat.
"I have noted repeatedly my concerns that the Prudential Regulators' proposal to implement the standardized approach for counterparty credit risk (SA-CCR) methodology for purposes of calculating risk-weighted assets under the agencies' capital rule could have a profoundly negative impact on the derivatives markets and energy end-users specifically.[4]
"In 2014, the Basel Committee published a formula for SA-CCR calculations - without any supporting data or analysis - that penalized derivatives contracts through exaggerated risk weightings, particularly with respect to cleared futures and swaps. The Prudential Regulators' Proposal goes even further by cherry-picking the Basel Committee's highest "supervisory factor" from the various commodity asset classes and applying it to every energy-related derivative -including exchange-traded, margined, and cleared WTI and natural gas futures, as well as energy swaps. The result is enormously punitive treatment of oil and gas derivatives transactions on bank balance sheets that, according to some commenters, would increase a bank's exposure calculations under SA-CCR with an end-user counterparty by up to 460%.[5]
"Increased exposure calculations will result in higher capital charges to the bank, which, in turn, will either be passed on to the end-user in the form of higher transaction pricing or will simply cause the bank to withdraw from the market. As I have stated previously, I believe the Proposal should revisit the supervisory factors for all types of commodities to ensure they are appropriately calibrated to the actual risks of the underlying commodity and the maturity of the derivatives contract. Failure to do so may do irreparable damage to the energy markets, inhibiting or preventing altogether the next revolution in energy production.
"Similarly, I remain concerned that the proposal does not recognize non-cash collateral arrangements. Alternative collateral arrangements are frequently used by banks in commodity derivatives transactions with end-users to create "right way" risk and can be effective means of managing the credit risk of certain derivatives transactions. Allowing for the appropriate degree of recognition of these risk-reducing arrangements would increase the risk-sensitivity of SA-CCR and mitigate any increased transaction costs passed on to commercial end-users.
"In closing, I would like to reiterate my thanks to all of today's panelists and the EEMAC membership for their participation, as well as Commissioner Berkovitz for organizing this meeting."
* * *
Footnotes:
[1] Greenhouse Gas (GHG) Reporting Program, EPA, https://www.epa.gov/ghgreporting/ghgrp-reported-data#emissions-trends. This estimate is based on direct emissions reported to the EPA; statistics relating to total U.S. GHG Inventory are not yet available.
[2] Inventory of U.S. Greenhouse Gas Emissions and Sinks, EPA, https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks.
[3] August 2018 Monthly Energy Review, U.S. Energy Information Administration, https://www.eia.gov/environment/emissions/carbon/?src=email.
[4] Standardized Approach for Calculating the Exposure Amount of Derivative Contracts, 83 Fed. Reg. 64,660 (proposed Dec. 17, 2018) (hereinafter, the "Proposal"), available at https://www.federalregister.gov/documents /2018/12/17/2018-24924/ standardized-approach-for-calculating-the-exposure-amount-of-derivative-contracts.
[5] Comment Letter from Coalition for Derivatives End-Users at 5 (March 18, 2019).