Monday, April 01, 2013

Reconciling Regulatory Certainty and Market Unpredictability

At the Free State Foundation's Fifth Annual Telecom Policy Conference on March 21, Blair Levin delivered the Closing Remarks. As most know, Blair, now a Fellow with the Aspen Institute's Communications and Society Program, is the former Executive Director of the FCC's National Broadband Plan effort. 
Over the years, Blair has spoken at several Free State Foundation conferences and seminars, and I am grateful for his participation again this year. As usual, his remarks were perceptive and thoughtful. Although I sometimes disagree with Blair, even on some significant issues, he usually causes me to think hard about what he has to say. 
A video link to Blair's remarks is here and below. 
But before you watch the video, I want to share my own reaction to one of Blair's key points. He observed that, at past conferences, there has been much talk about the need for regulatory certainty, while, at this year's conference, a major theme was the problematic nature of regulating at a time when it is so difficult to predict the future direction of dynamic markets. In other words, there is a certain tension between two competing claims – Blair put it in terms of "oscillation" between the two. On the one hand, the benefit of regulatory certainty and, on the other, the benefit in not regulating fast-changing markets whose parameters are difficult to predict. 
I find the way Blair presented the notion of the supposed tension between the two "oscillating" claims thought-provoking. It is surely true that we sometimes hear, especially from parties subject to the FCC's regulatory reach: "Just tell me what I can do or not do, one way or the other, so I'll know how to plan my business." As Commissioner Pai and I discussed during our Conversation, this notion regarding the desirability of certainty is captured by one of Yogi Berra's famous sayings, "When you come to a fork in the road, take it." 
Nice aphorism. 
But I think the tension between the oscillating claims is exaggerated, and even may completely dissipate, in this sense. While there may be a certain value in regulatory certainty, no one seriously argues that ill-conceived or unnecessary regulations are not harmful and costly. In other words, we don't want the FCC to adopt ill-conceived or unnecessary regulations just for the sake of imposing some notion of certainty. 
The answer to resolving the supposed tension lies, I think, in the FCC explicitly adopting a considerably more modest regulatory posture in recognition of the existence of an increasingly more competitive, more dynamic communications marketplace environment. In other words, in a sense that may not have been true even a decade ago, the current acknowledged unpredictability inherent in a changing marketplace – which Blair doesn't seem to dispute – should cause the FCC to tilt in the direction of regulatory restraint. 
During my Conversation with Commissioner Pai, I couldn't resist quoting another Yogi Berra saying: "Predictions are tough if they involve the future." Another relevant one: "The future ain't what it used to be," which certainly calls to mind the communications marketplace environment. 
As appealing as they are, I am not suggesting we look to Yogi Berra's aphorisms to set regulatory policy. But I am suggesting this: Now that it is widely acknowledged that unpredictable communications markets, driven by fast-paced technological changes, are increasingly competitive (even though the degree of competitiveness may be subject to debate), the FCC's default position, more often than not, should be to forbear from imposing regulation. For many years now, I have been suggesting that, absent clear and convincing evidence of market failure or consumer harm, the Commission's default position should be "do not regulate" – in much the same way that we now understand the default position of the almost 2500-year old Hippocratic Oath: "First, do no harm." 
To put a point on it, regulatory uncertainty may impose some costs, but ill-conceived and unnecessary regulations almost always are more harmful and costly than uncertainty. The best way for the FCC to reduce, if not eliminate, the tension somewhat inherent between the two oscillating claims Blair presented is for the Commission to default – consistently and explicitly – to the "do not regulate" position in the absence of convincing evidence of market failure. In other words, the bounds of the agency's all-too-often unbridled administrative discretion should be narrowed in the cause of regulatory restraint. This would respond to the need for as much certainty as possible while, at the same time, avoiding the imposition of regulatory mandates in the face of fast-changing markets. 
A decade or two ago, this default deregulatory position may not have made sense. But it surely does now. 
Well, you can see that Blair once again provoked my thinking with his constructive comments, which is exactly what I anticipated. Watch the video, and you can decide for yourself.
PS - Blair also commented favorably on Sen. Marco Rubio's keynote address, especially commending its "spirit of optimism." If you were not in attendance, and haven't yet seen the video of Sen. Rubio's speech, I certainly commend it to you for its spirit of optimism, and for much more in the way of sound telecom policy.