Washington in Review - January 26, 2018

As Washington recovers from government shutdown whiplash, and braces for another round of budget negotiations, Big Tech continues to face tough questions from Congress and the public over its involvement in the 2016 election. Prior to the congressional hearings on Jan. 17, some of the world’s largest technology companies announced major changes to the algorithms that push news and content to their users. While some technology companies have announced that they will refocus on content shared only by “friends and family,” others have expanded their news reporting features, updating their algorithms to push unrequested news alerts to users’ devices. At the same time, media platforms continue to experiment with varying strategies to flag potential “fake news.” Already, UK Prime Minister Theresa May signaled that she is unconvinced by these efforts and stated on Jan. 25 that governments should hold online media companies liable for content on their platforms.

The question going forward will be whether social media companies’ efforts to self-regulate will eliminate or reduce the need for formal regulatory action. Another approach being discussed is a collective, industry-led approach that would establish and enforce “responsible innovation” or other standards relating to the influence of big technology. As one example of the collective approach, the Incorporated Society of British Advertisers (ISBA), the UK’s largest advertising trade association, released a statement on Jan. 23 calling for technology companies to adopt common policies regulating the detection, monitoring and removal of inappropriate content. In addition, the ISBA advocates that the world’s largest social media companies “thrash out some common principles” over content moderation and removal that could be adopted and enforced by an independent body, which they would fund. This self-regulatory body would be designed to ensure that the needs of all stakeholders, including media companies, investors, and users are met responsibly. Our sense is that we are moving into a trial-and-error period during which we will discover whether do-it-yourself regulation or collective self-regulation will work to address the concerns of policymakers and the public. If the answer is no, the next step will likely be a more formal regulatory response from policymakers around the world.

Here are some of the other developments we’ve been tracking:

• States are increasingly taking a stand against the repeal of net neutrality
• Congressional Republicans have unveiled three bills directly aimed at boosting rural broadband infrastructure investment
• The FAA released a report detailing a list of law enforcement needs and preferences when it comes to evolving drone technology
• The US Supreme Court announced it will hear arguments on whether states can impose sales taxes on out-of-state online retailers fulfilling in-state purchases
• The FCC will vote on Jan 31 on two items that modernize telecom compliance: the elimination of paper filings of contracts and ownership documents and the removal of rules related to analog TV broadcast
• Our latest updates on trade relations, including ongoing NAFTA and Korus negotiations, steel and aluminum investigation report findings, and impending Bombardier tariffs

What happened?

As legal challenges mount against the Federal Communication Commission’s (FCC) repeal of net neutrality, the governors of Montana and New York have introduced a new tactic to promote net neutrality principles for internet service providers (ISPs) while circumventing the FCC’s state preemption authority. Governors Bullock and Cuomo have each signed executive orders restricting their contracting offices from engaging ISPs who block, throttle, or prioritize internet traffic. These orders coincide with 50 US Senators attempting to exercise Congressional Review Act (CRA) authority to reverse the FCC’s repeal. As CRA action requires a presidential signature, President Trump has preemptively announced that he would not sign the measure.

What does it mean? 

• While legislation at the state level conflicts with the FCC’s federal authority, contracting requirements are entirely within the purview of the state executive. Other governors will be closely watching the reactions to these orders to gauge the effectiveness of this strategy.
• ISPs with state government customers may be forced to choose between taking advantage of the federal deregulation or revenue from state governments. This calculation will depend on the relative size of their collective state government contracts versus the revenue opportunities from deregulation.

What happened?

In the course of negotiating an omnibus infrastructure bill, Congressional Republicans have unveiled three bills directly aimed at boosting rural broadband infrastructure investment. The bills represent the first phase in a tripartite plan and attempt to “clear the barriers to broadband deployment” by loosening siting regulations, developing a common application for easements, and gathering an inventory of federal assets that could be used to speed rural construction.

What does it mean? 

• Telecommunications providers may be able to take advantage of subsidies and proposed incentives to augment and expand their networks, but the yet undetermined size and qualifications requirements will play a key role in that business decision.
• Technology companies that rely on connectivity will likely be strong proponents of these digital infrastructure efforts as they deploy their products to more markets across the country.

What happened?

In late December, the FAA released the report from its Unmanned Aircraft Systems Identification and Tracking Aviation Rulemaking Committee (UAS-ID ARC). As previously reported in the WiRe, the FAA-assembled panel disbanded last fall without coming to a consensus on how best to remotely identify and track drones. However, the final report offered important insights from the 74-member group on currently available technologies, as well as a corresponding list of law enforcement needs and preferences.

What does it mean? 

• The major catalyst to growth in this sector could be decisions by the FAA to address key security, privacy and safety issues, paving the way for a less restrictive framework for drone operations.
• One of the biggest items on the FAA’s docket is the remote identification and tracking of UAVs and their operators, a critical issue for law enforcement agencies across the country. With it, authorities could enforce other regulations, addressing the need for public safety by holding violators accountable for their actions.
• Remote identification could ultimately be the key to unlocking regulations that commercial operators are eagerly awaiting, like allowing flights over people and beyond visual line of sight, as well as implementing an unmanned aircraft system traffic management (UTM) system.

What happened?

The US Supreme Court (SCOTUS) will hear arguments on whether states can impose sales taxes on out-of-state online retailers fulfilling in-state purchases. This appeal dates back to the pre-internet era, yet will have a major impact on e-commerce. According to the Government Accountability Office, state and local governments could have collected up to $13 billion more in 2017 tax revenue if online merchants paid state and local sales tax.

What does it mean? 

• If the court reverses its 1992 decision, online retailers will lose one of their advantages over brick-and-mortar businesses already paying state sales taxes. Additionally, states would reap billions in revenue from out-of-state business, as they would likely pass these charges onto consumers.

What happened?

On Jan. 31, the Federal Communications Commission (FCC) will vote on two items that modernize telecom compliance. The first is a proposal to eliminate paper filings of contracts and ownership documents related to broadcasters. The second is an order to remove rules related to analog TV broadcast, which no longer apply after the national transition to digital broadcast that ended in 2009. Both items are likely to pass unanimously and without controversy.

What does it mean? 

• While these agenda items won’t garner much attention, they are among many modernization efforts undertaken to simplify the legal code and remove legacy compliance requirements.
• It’s worthwhile for companies to review how much effort they exert in compliance and engage regulators on low-hanging fruit that help their bottom line and present bipartisan wins for officials.

What happened?

Our continued tracking of developments in the trade space show that things are picking up steam, as we predicted in our report’s first edition for 2018. Major developments to watch include; ongoing NAFTA and Korus negotiations, steel and aluminum investigation report findings, and impending Bombardier tariffs. Additionally, the president’s “America First” agenda will be the centerpiece of his speech at the WEF this week, though the message will be unchanged from the one the he has been pushing for the past year. However, the real pressure is increasing on -- no surprise -- China:

• On Jan. 22, the administration used tariff-rate quotas to impose 30% to 50% tariffs on imported solar cells and washing machines, respectively. Some companies have already announced their intent to pass on these price increases to US consumers.
• The USTR issued reports claiming that the US made a mistake in supporting China's entry into the WTO 16 years ago, citing its failure to adopt open, market-oriented trade policies.
• President Trump made a statement that there will be a "very big intellectual property potential fine” against China, referencing the 301 investigation into China’s allegedly discriminatory IP and technology transfer practices.
• PRC investment in the US dropped by 35% in 2017. On top of that, the value of newly announced Chinese acquisitions in the US dropped by 90% in 2017 from 2016 levels.
• Meanwhile, China claims it will pursue negotiations of 10 free trade agreements and will investigate the feasibility for an additional 10 agreements in 2018.

In other trade developments:

• Round six of NAFTA negotiations will wrap up on Jan. 29. With a few new twists on labor and wages, the sides enter the sixth round with many chapters nearing an agreement.
• The Canadian government filed a request for panel review under NAFTA Chapter 19 dispute settlement procedures to challenge the ITC's Jan. 25 vote on a near 300% Bombardier tariff.