Will Congress increase funding for an agency that not only fails to grasp a general understanding of the policies it mandates, but also harms consumers and innovation while enforcing its outdated rules? Taxpayers got an early hint last month, when the Federal Communications Commission brought its new record-setting budget request before the House Appropriations Committee.
The FCC’s $530 million budget request represents an increase of $84 million, or about 20 percent, over the current allocation. It is a 450 percent increase over the budget from 25 years ago. At a previous hearing on March 4, FCC managing director Jon Wilkins had said budgetary constraints were holding back the agency from “moving ahead.” If the commission’s demonstrated detachment from everyday Americans is any indicator, that’s not necessarily a bad thing.
You’re probably familiar with the popular debate about net neutrality, and whether this agency has the authority to impose Depression-era telephone regulations on the Internet. But that is not by any means the only problem in FCC-land. Arguably, the FCC’s disconnect with evolved technology and consumer interests is even more evident in its own misunderstanding of a hidden TV tax pushed on consumers in the form of something called the Advanced Television Systems Committee patent pool.
The ATSC is a standard mandated in all televisions sold in the U.S. Rights to the standard are owned by MPEG LA, a for-profit Colorado company that charges a $5 fee for each television in which it is used. That cost gets passed on to TV buyers at the point of purchase.
That might not seem like a big deal to most consumers, but collectively it adds up to $200 million each year. In other countries in Europe and Asia, similar technology costs about a dollar. One study found American consumers pay between $20-30 more per set than consumers in other countries due to these kinds of licensing fees.
What’s more, nearly a quarter (22.4 percent) of the patents bundled into the ATSC standard are expired. It’s hard to argue consumers are getting much value out of that charge when many of the products are outdated. And many consumers, who in droves are “cutting the cord” and using their televisions to view Internet content, have no need for the ATSC standards at all, as they only relate to traditional digital cable feeds. Yet they have no option to opt out, since the standard is mandated by the FCC.
The FCC persistently refuses to address these hidden fees, either because it is misinformed or content to turn a blind eye. Last fall, Rep. Mike Pompeo, R-Kan., sent a letter asking FCC chairman Tom Wheeler to explain how the ATSC standard is administered and what the agency is doing to “ensure that American consumers aren’t continually abused to the tune of $200 million a year in fees.” Mr. Wheeler’s response was fraught with basic factual errors.
Mr. Wheeler states that “the ATSC patent pool fees include the patent royalty for the MPEG-2 decoding standard.” Not true. In fact, a separate license fee of $2 is required under MPEG-2 Video and Systems patents. MPEG LA’s own website states, “the ATSC Patent Portfolio License does not include a portfolio license to patents that are essential to MPEG-2 Video and Systems.” It is no coincidence that MPEG LA is the exclusive licensor of MPEG-2 standard as well, so they receive at least $7 for every television sold in the U.S.
Mr. Wheeler adds that “other venues — including the Patent and Trademark Office and the International Trade Commission — are viable options for entities seeking resolution of patent fee issues.” Again, that is not correct. If an individual or business claims it is being charged an excessive royalty, there is nothing that the USPTO can do about it. And they can’t take the complaint to the ITC except by refusing to pay and then being sued by the patent holder as a delinquent.
The FCC’s demonstrated ignorance to their own policy here is reason enough for lawmakers to think twice about granting the agency an unprecedented budget. If the Federal Communications Commission can’t look out for everyday Americans, there is no reason everyday Americans should go any further to fund the commission.
Andrew Langer is president of the Institute for Liberty. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions for editorials, available at this link.
