Friday, February 03, 2017

Thinking Things Through XI: On Weed Whackers, Partisanship, and Regulatory Philosophy

I expect the Federal Communications Commission under new Chairman Ajit Pai to do well by getting the agency to do less. But before the agency can do less, in one sense it has to do more. That is, more in the way of curtailing existing regulations that either shouldn’t have been adopted in the first place or that are no longer necessary or cost-justified.
At his address at the Free State Foundation’s Tenth Annual Gala Conference on December 7, 2016, Chairman Pai made his deregulatory intent clear, stating that, “[i][n the months to come, we also need to remove outdated and unnecessary regulations.” Perhaps with only a bit of hyperbole, he declared: “We need to fire up the weed whacker and remove those rules that are holding back investment, innovation, and job creation.” I’m pleased that he added immediately thereafter: “Free State and others have already identified many that should go.”
Chairman Pai is off to a good start. He’s pulled from current consideration two significant draft orders prepared under former Chairman Tom Wheeler’s direction. One would have imposed ill-conceived, costly regulatory mandates on TV set-top boxes at a time when the video marketplace is undergoing rapid change in the direction of increased consumer choice and competition. And, in the process, the proposed regulation would have undermined the ability of content creators to protect their copyrights and their contractual interests in video programs.
The other draft order would have re-regulated the rates – in effect, forced them lower – for business broadband services offered by the former “telephone” companies. This would have come at a time when new entrants like former “cable” companies increasingly are gaining a competitive foothold. In other words, the Wheeler proposal would have made it more difficult for new facilities-based (emphasis on facilities-based!) entrants like cable operators to compete, hindering the development of a more competitive market.
Chairman Pai also withdrew a draft “Section 706” report prepared under Mr. Wheeler’s direction. Under Chairman Wheeler, these broadband deployment status reports regularly had been used as a means to the end of justifying more broadband regulation. No matter how speedy the pace of deployment, or the increase in available bandwidth, the Wheeler Commission refused to determine that deployment is occurring, in the words of the statute, “in a reasonable and timely fashion.” The goalposts kept moving – so that the Commission somehow could avoid finding broadband deployment reasonable. I suspect that under Chairman Pai the Section 706 reports will be grounded in marketplace realities rather than in preconceived notions.
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Now, all that said, I want to suggest this important point regarding regulation and regulatory agendas at the FCC. It would be a mistake, and na├»ve, to assume, as some are suggesting, that there won’t any longer be partisan splits on votes on major items under a Pai Commission. I expect there will be – and there is nothing inherently wrong with this to the extent that commissioners’ votes are grounded in differing philosophical principles or perspectives. After all, there are real differences in philosophical perspective between the parties with which the commissioners identify regarding the proper role of government regulation.
It is blinking reality to suggest communications policy is somehow immune, or should be, from application of different regulatory perspectives that, at least at times, are rooted in different partisan affiliations. Especially with regard to formulating communications policies, consistent with congressional delegations of authority, that are dependent on criteria such as the extent of existing and potential competition, the rate of technological change, the forecast evolution of consumer demands, and so forth, there are no ironclad Newtonian laws that govern, no E=MC2. Many times the “right” answer in evaluating competition or competitive impact, for example, won’t be found in some mathematical equation, not even a Herfindahl-Hirschman Index.
The FCC is established as a bipartisan agency, not a nonpartisan one. Unlike the Federal Election Commission, for example, which by law must be composed of an equal number of Democrats and Republicans, the five-member FCC may have no more than three members from the same party. And the President designates the FCC chairman, so, as former President Obama famously reminded us early in his first term, elections have consequences. There is no reason not to acknowledge forthrightly that Ajit Pai and Michael O’Rielly adhere to a more deregulatory perspective than the more pro-regulatory one of, say, Tom Wheeler, Mignon Clyburn, and Jessica Rosenworcel.     
Now, I do not mean to suggest for a moment that efforts should not be made at the FCC to minimize partisan differences, especially on contentious items. I expect that Chairman Pai will make such efforts to seek compromises where possible. Just engaging in such efforts often can lead to sounder decisions. After all, a multimember commission like the FCC is grounded, at least in part, in the idea that good-faith collaborative discussions among commissioners with a genuine receptivity to considering opposing viewpoints will produce better decisions, even if not unanimity.
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Finally, in acknowledging the legitimate role that differing philosophical perspectives necessarily play in the realm of formulating communications law and policy, I don’t mean to suggest – and don’t want to be misunderstood as suggesting – that in reaching particular decisions, whether in the context of adjudications or rulemakings, careful consideration of actual record evidence is not of utmost importance. Of course, it is. And any FCC commissioner who fails to accord a proceeding’s evidence proper consideration is derelict.
But it serves no useful purpose to deny that when decision-time comes, the conclusions to be drawn from the evidentiary record may differ. Again, particularly when it comes to matters based on judgments regarding the extent of existing market competition and future prospects, or predictions concerning the rapidity of technological advances, or of prospective consumer benefits or harms, there are no mathematical formulas to apply.
It is in this context, and especially, say, when the evidence is roughly in equipoise, or seems to be – or as the economists say, “well, on the one hand this, but on the other that” – that it is perfectly proper for a commissioner with a deregulatory orientation, as a matter of philosophical principle, to resort to a default presumption in favor of not imposing a regulatory mandate. In other words, as I have recently proposed, in the absence of clear and convincing evidence to the contrary, and within the confines of the Communications Act, in today’s Digital Age marketplace environment in which competition and consumer choice have become increasingly ubiquitous, employing a deregulatory presumption is entirely proper.
In sum, Chairman Pai’s regulatory “weed whacker” surely has its uses. Otherwise, as he put it in his Free State Foundation address, unnecessary regulations will hold back “investment, innovation, and job creation.”