There were two positive developments yesterday for those, like me, who favor meaningful reform of the federal Universal Service subsidy programs.
First, the press reported that FCC Commissioner Robert McDowell has now voted to cap the high-cost Universal Service fund. The annual subsidy provided to support telecommunications service in high-cost areas is around $4.5 billion per year. The subsidy has been escalating rapidly in recent years, primarily because wireless carriers have been applying for and receiving support in ever increasing amounts. The cap, intended to be an interim measure, pending adoption of more comprehensive reform, is an important step in staunching the uncontrolled growth of the high-cost fund. After all, consumers already are paying an 11% surcharge (some would say, rightly, a tax) on all their interstate calls.
Commissioner McDowell has now provided the third vote necessary to implement the funding cap. In my view, he should have acted sooner in concert with the leadership that FCC Chairman Kevin Martin and Commissioner Deborah Tate have shown on the issue. But, as the saying goes, better late than never.
And the second positive development? At yesterday’s Free State Foundation seminar on USF reform, Neil Fried, senior counsel for telecom policy, House Energy and Commerce Committee, unveiled a Universal Service discussion draft bill, the “Universal Service Reform, Accountability, and Efficiency Act of 2008,” on behalf of Ranking Member Joe Barton. A full transcript of the seminar's proceedings, in which many good ideas were discussed, will be released in a couple of weeks.
Rep. Barton’s draft bill would accomplish fundamental reform in a way that, in my view, is consistent with recognizing what already has been achieved in making telecom services available to almost all Americans and consistent with acknowledging that new competition and constantly-evolving technologies have rendered the existing subsidy system wasteful and inefficient. Without elaborating here, it should be noted that Rep. Barton’s reform measure includes a permanent cap on the entire USF fund upon enactment, shifts the contribution mechanism to phone numbers rather than interstate revenues, focuses support on voice communications services, and relies on reverse auctions as a distribution mechanism, capped in each succeeding auction at the level of the previous winning low bid.
I will have more to say about Rep. Barton’s draft bill in the weeks and months ahead. For now, I will simply note that the draft received a generally warm reception at yesterday’s FSF seminar. For example, Colin Crowell, chief telecom staffer for Rep. Ed Markey, who chairs the House telecommunications and the Internet subcommittee, stated: “The draft is beneficial and positive to the debate….People are looking for reform of the system. . . . This helps contribute to the conversations we are having up here.” This was not intended by Mr. Crowell to be an endorsement of all of the ideas in the draft. But I took it to be a genuine and gracious acknowledgment that the Barton draft serves a very useful purpose in focusing on the tough choices that will need to be made if the country is to move towards a support system that is much more economically efficient – one that enhances overall consumer welfare -- than the regime we have today.
One of the choices highlighted at the FSF seminar by John Rose, President of the Organization for the Promotion and Advancement of Small Telecommunications Companies, is the extent to which subsidies for broadband services explicitly should be included in a reformed Universal Service program. Like the current regime, as a practical matter, Rep. Barton’s bill likely would not preclude support payments to winning reverse auction bidders from being used for broadband applications offered in conjunction with provision of voice communications. But, unlike the Joint Board and other proposals, it does not specifically direct funds to support broadband infrastructure.
So, Rep. Barton commendably has stepped forward and made an important contribution to the USF reform debate. (I know that Neil Fried, and most especially committee counsel Courtney Reinhard, worked very hard in putting together the discussion draft and they deserve much credit.)
I am pleased that Rep. Barton’s draft was unveiled at yesterday’s FSF event. And I am pleased that Commissioner McDowell yesterday provided the third vote at the FCC for the high-cost cap. All in all, a pretty good day on the long road to Universal Service reform.
Tuesday, April 29, 2008
Friday, April 25, 2008
The FCC Takes A Positive Deregulatory Step
Late last night, the FCC largely granted AT&T's request that the agency forbear from continuing to apply decades-old cost assignment rules that no longer serve and useful regulatory purpose. As I explained in this space yesterday in "Midnight Madness," the rules "were put in place when AT&T was the dominant carrier in a monopolistic environment." In that era, rates for various AT&T services were based on cost assignments, admittedly necessarily arbitrary, to various serivces. As I said yesterday, "this is no longer true in an era when rates are capped by both the FCC and the states."
It seemed to me this was an important test of the FCC willingness to recognize that outdated and costly rules which no longer serve a useful purpose in today's competitive environment should be eliminated. And, as I explained in two earlier pieces, "Bearing in Mind Forbearance's Purpose" and "Bearing in Mind Forbearance's Purpose-Part II," it was an important test of the Commission's willingness to use the forbearance authority contained in the Telecom Act of 1996 to accomplish such deregulatory purposes. It is very rare for Congress to include such forbearance authority in a regulatory statute. Recognizing the dynamic and fast-changing nature of technology and the communications marketplace, Congress included forbearance authority in the '96 Act for a good reason.
AT&T's petition asking the FCC to stop applying costly rules that no longer made any sense presented a paradigmatic case for the exercise of forbearance. There will surely be criticism from those who refuse to recognize the dramatic changes that have occurred in the marketplace, and who oppose any efforts to change the FCC's rules to recognize the new competitive realities. But FCC Chairman Kevin Martin, and Commissioners Deborah Tate and Robert McDowell deserve much credit for exercsing leadership and taking a worthwhile deregulatory step.
It seemed to me this was an important test of the FCC willingness to recognize that outdated and costly rules which no longer serve a useful purpose in today's competitive environment should be eliminated. And, as I explained in two earlier pieces, "Bearing in Mind Forbearance's Purpose" and "Bearing in Mind Forbearance's Purpose-Part II," it was an important test of the Commission's willingness to use the forbearance authority contained in the Telecom Act of 1996 to accomplish such deregulatory purposes. It is very rare for Congress to include such forbearance authority in a regulatory statute. Recognizing the dynamic and fast-changing nature of technology and the communications marketplace, Congress included forbearance authority in the '96 Act for a good reason.
AT&T's petition asking the FCC to stop applying costly rules that no longer made any sense presented a paradigmatic case for the exercise of forbearance. There will surely be criticism from those who refuse to recognize the dramatic changes that have occurred in the marketplace, and who oppose any efforts to change the FCC's rules to recognize the new competitive realities. But FCC Chairman Kevin Martin, and Commissioners Deborah Tate and Robert McDowell deserve much credit for exercsing leadership and taking a worthwhile deregulatory step.
Thursday, April 24, 2008
Midnight Madness
No, it’s not the traditional beginning of basketball season one midnight in mid-October. It’s tonight at the Portals, the FCC’s headquarters on 12th Street. Not having heard anything yet about the decision on AT&T’s petition seeking forbearance from the Commission’s cost assignment rules, which must be decided today, it wouldn’t surprise me now if the decision is made, literally, at the last minute.
It will surprise me, though, if a majority of the Commission that claims to be market-oriented doesn’t grant the petition. I have explained here and here that the cost allocation rules are a relic from a bygone era. They were put in place when AT&T was the dominant telecommunications carrier in a monopolistic environment. Rates for various AT&T services were based on cost assignments to various categories. This is no longer true in an era when rates are capped by both the FCC and the states.
Almost all economists will tell you that even in the old analog monopolistic environment in which multiple AT&T services used common plant the cost allocation rules necessarily were always somewhat arbitrary and, therefore, subject to manipulation. They are even less relevant and useful, as a practical matter, in a digital era characterized by convergence in which a “bit is a bit is a bit.”
The chief objection appears to be that, although the cost allocation data is not being used now for any important regulatory purpose, it might possibly be useful in the future. This seems a doubtful proposition to me.
For example, in today’s Communications Daily it is reported that the Tennessee regulatory authority says that AT&T accounting data might be useful in the future in evaluating competition, or might be useful if the agency should adopt a state universal service fund. It is hard to understand how cost data collected for regulatory accounting purposes, sliced and diced on a somewhat arbitrary and artificial basis, is necessary, or even useful, for evaluating competition. Information concerning number of existing and potential providers, locations and customers served, prices, and the like, are much more useful in this respect than accounting regulatory data.
As for concerns expressed by Tennessee and a few other states that they might possibly need data in the future, say, if they decide to establish universal service funds, it seems to me that such speculation is not a good reason for maintaining in place a regulatory relic. The FCC’s outdated rules should not be held hostage to speculations about potential future needs that haven’t yet materialized and most likely never will.
Finally, in my view, if it turns out certain states, on an individual basis, decide they want to collect certain cost assignment information relating to intrastate services provided within their states, I see no reason why they would not be free to do so on a focused basis, as long as the information relates to a valid regulatory purpose within the ambit of the state’s lawful jurisdiction.
For that matter, and importantly, I see no reason why the FCC, if it grants AT&T’s petition in the exercise of its forbearance authority, cannot, on a proper record, subsequently change its mind if circumstances warrant. In other words, the FCC could reinstitute whatever cost assignment regulations it deems necessary if it has a rational basis for doing so. A grant of forbearance is not necessarily a decision to forbear forever.
What is not rational is for the Commission to refuse to employ the deregulatory tool that Congress put in place for situations like this when rules that are no longer necessary should no longer be applied. While it may be unlikely that Democratic Commissioners Michael Copps and Jonathan Adelstein, with their pro-regulatory inclinations, will vote for forbearance, it will be disappointing if the three Republicans, Chairman Kevin Martin and Commissioners Deborah Taylor Tate and Robert McDowell, don’t.
It will surprise me, though, if a majority of the Commission that claims to be market-oriented doesn’t grant the petition. I have explained here and here that the cost allocation rules are a relic from a bygone era. They were put in place when AT&T was the dominant telecommunications carrier in a monopolistic environment. Rates for various AT&T services were based on cost assignments to various categories. This is no longer true in an era when rates are capped by both the FCC and the states.
Almost all economists will tell you that even in the old analog monopolistic environment in which multiple AT&T services used common plant the cost allocation rules necessarily were always somewhat arbitrary and, therefore, subject to manipulation. They are even less relevant and useful, as a practical matter, in a digital era characterized by convergence in which a “bit is a bit is a bit.”
The chief objection appears to be that, although the cost allocation data is not being used now for any important regulatory purpose, it might possibly be useful in the future. This seems a doubtful proposition to me.
For example, in today’s Communications Daily it is reported that the Tennessee regulatory authority says that AT&T accounting data might be useful in the future in evaluating competition, or might be useful if the agency should adopt a state universal service fund. It is hard to understand how cost data collected for regulatory accounting purposes, sliced and diced on a somewhat arbitrary and artificial basis, is necessary, or even useful, for evaluating competition. Information concerning number of existing and potential providers, locations and customers served, prices, and the like, are much more useful in this respect than accounting regulatory data.
As for concerns expressed by Tennessee and a few other states that they might possibly need data in the future, say, if they decide to establish universal service funds, it seems to me that such speculation is not a good reason for maintaining in place a regulatory relic. The FCC’s outdated rules should not be held hostage to speculations about potential future needs that haven’t yet materialized and most likely never will.
Finally, in my view, if it turns out certain states, on an individual basis, decide they want to collect certain cost assignment information relating to intrastate services provided within their states, I see no reason why they would not be free to do so on a focused basis, as long as the information relates to a valid regulatory purpose within the ambit of the state’s lawful jurisdiction.
For that matter, and importantly, I see no reason why the FCC, if it grants AT&T’s petition in the exercise of its forbearance authority, cannot, on a proper record, subsequently change its mind if circumstances warrant. In other words, the FCC could reinstitute whatever cost assignment regulations it deems necessary if it has a rational basis for doing so. A grant of forbearance is not necessarily a decision to forbear forever.
What is not rational is for the Commission to refuse to employ the deregulatory tool that Congress put in place for situations like this when rules that are no longer necessary should no longer be applied. While it may be unlikely that Democratic Commissioners Michael Copps and Jonathan Adelstein, with their pro-regulatory inclinations, will vote for forbearance, it will be disappointing if the three Republicans, Chairman Kevin Martin and Commissioners Deborah Taylor Tate and Robert McDowell, don’t.
Monday, April 21, 2008
Bearing in Mind Forbearance's Purpose - Part II
A couple of weeks ago in this space I took note of AT&T's pending forbearance petition in a piece entitled, "Bearing in Mind Forbearance's Purpose." The piece explained why the FCC should grant AT&T's petition asking the agency to forbear from applying its cost assignment rules now that they have become largely irrelevant in an era in which the FCC and the states have abandoned cost-of-service regulation in favor of price caps. You can read the blog for a more complete explanation.
But I was interested to see the item in today's Communications Daily [subscription required] reporting that the public staff of the NC Public Utilities Commission is urging the commission to eliminate a PUC rule requiring incumbent carriers to submit cost studies for new services. The reason? According to Communications Daily, the public staff, which represents consumer interests before the PUC, said that because all incumbents now are under price caps and face competition, "cost studies mean little." The public staff pointed out that the incumbents' competitors faced no cost study requirement.
From press reports, it appears that Republican Commissioner Robert McDowell may be questioning whether AT&T's forbearance petition should be granted. The petition is scheduled to be acted upon this week. This should not be a difficult call for Commissioner McDowell, who is generally supportive of reducing unnecessary regulation, or, for that matter, for all the other commissioners. The cost assignment rules that are the subject of AT&T's petition are a relic of a bygone regulatory era. If the public staff of the NC Public Utilities Commission can see the need to jettison outdated rules in the context of cost studies submitted to the state commission, the FCC ought to be able to do the same with respect to its rules.
But I was interested to see the item in today's Communications Daily [subscription required] reporting that the public staff of the NC Public Utilities Commission is urging the commission to eliminate a PUC rule requiring incumbent carriers to submit cost studies for new services. The reason? According to Communications Daily, the public staff, which represents consumer interests before the PUC, said that because all incumbents now are under price caps and face competition, "cost studies mean little." The public staff pointed out that the incumbents' competitors faced no cost study requirement.
From press reports, it appears that Republican Commissioner Robert McDowell may be questioning whether AT&T's forbearance petition should be granted. The petition is scheduled to be acted upon this week. This should not be a difficult call for Commissioner McDowell, who is generally supportive of reducing unnecessary regulation, or, for that matter, for all the other commissioners. The cost assignment rules that are the subject of AT&T's petition are a relic of a bygone regulatory era. If the public staff of the NC Public Utilities Commission can see the need to jettison outdated rules in the context of cost studies submitted to the state commission, the FCC ought to be able to do the same with respect to its rules.
Thursday, April 10, 2008
Good News on US Internet Infrastructure
The NYT article on the just-released Global Inforamtion Technology Report done on behalf of the World Economic Forum begins this way:
"Contradicting earlier studies, conventional wisdom and politicians’ rhetoric, European researchers say that the Internet infrastructure of the United States is one of the world’s best and getting better."
I would not put too much stock in any one study, but this one, which employed 68 variables including market factors, political and regulatory environment, and technology infrastructure, is a useful antidote to uncritical acceptance of the OECD reports that are always trumpeted by those in the "talking broadband down" crowd. The TBD crowd is always looking for opportunities to propose more regulation for the Internet.
This study indicating that the US Internet infrastructure is healthy and getting better ought to be a warning to US policymakers not to heed the siren call of public utility regulation of broadband Internet providers in the guise of net neutrality mandates.
"Contradicting earlier studies, conventional wisdom and politicians’ rhetoric, European researchers say that the Internet infrastructure of the United States is one of the world’s best and getting better."
I would not put too much stock in any one study, but this one, which employed 68 variables including market factors, political and regulatory environment, and technology infrastructure, is a useful antidote to uncritical acceptance of the OECD reports that are always trumpeted by those in the "talking broadband down" crowd. The TBD crowd is always looking for opportunities to propose more regulation for the Internet.
This study indicating that the US Internet infrastructure is healthy and getting better ought to be a warning to US policymakers not to heed the siren call of public utility regulation of broadband Internet providers in the guise of net neutrality mandates.
Monday, April 07, 2008
Tech Tax Repealed and Internet Spending Website Adopted
There is good news on two fronts as the Maryland General Assembly ends its regular session. The legislature repealed the 6% tax on all manner of computer services that was scheduled to take effect this July. The tax was adopted hastily without public debate in last fall’s special legislative session. And the Assembly has adopted a bill requiring the state to establish a free, easily searchable website that will enable the public to track state spending and contract activity.
The Free State Foundation urged repeal of the computer services tax almost before the ink dried on the legislature’s handiwork. And FSF was an early – and initially fairly lonely – voice urging adoption of the transparency bill when this particular effort to bring more accountability for state government spending was viewed as quixotic in Annapolis.
On the computer services tax repeal, for example, see my This Maryland Tax Doesn’t Compute and Maryland Computer Services Tax Malfunction pieces, my testimony submitted to the General Assembly, and FSF Senior Fellow Cecilia Januszkiewicz’s Random Acts of Taxation commentary in the Baltimore Examiner. All explained that targeting computer services for a new sales tax is surely counterproductive as Maryland tries to encourage the growth of a high-tech sector in competition with neighboring states. As I said as soon as the tax was passed:
The types of services that would be impacted by the new tax are integral to the installation and maintenance of high-speed broadband networks upon which so much of today's information economy depends. By virtue of their importance in enabling the efficient and less costly delivery of other goods and services, computing services have a positive multiplier effect on the economy at large.
The repeal legislation replaces the projected $200 million “revenue loss” with an income tax surcharge on those individuals earning above $1 million, a reduction of $50 million in the transportation trust fund for five years, and a direction to the Governor to cut an additional $50 million from the state budget by July 1. It would have been preferable for the legislature to implement further spending cuts to fill the projected revenue gap, rather than further increasing taxes. Like computer services firms, Maryland’s citizens can move to Virginia too. But when all is said and done, the repeal of the computer services tax is a positive action for which the legislature and the Governor deserve credit.
And the enactment of Maryland Funding Accountability and Transparency Act is another positive action deserving of credit. Last year, when a virtually identical measure requiring creation of an easily searchable website tracking state spending over $25,000 was introduced by two Republicans, Delegate Warren Miller and State Senator Alex Mooney, it received little support, and almost none from Democrats. I published an early commentary, Bring Accountability and Transparency to Maryland Government, in the Baltimore Sun on March 20, 2007, urging enactment, and several blogs as well.
In addition to more writing on the subject over the past year, I submitted testimony this past February in support of the reintroduced measure. This year the bill passed both houses with overwhelming bipartisan support, certainly a tribute to the work of Delegate Miller and Senator Mooney.
Presumably it is also a triumph of the simple but fundamental notion that, in this digital age, citizens ought to be empowered to easily obtain information about how their government spends their taxpayer dollars. While there is a cost to be sure in establishing and maintaining the new website, when other states and the federal government have established such sites the costs have been minimal. For example, when the federal government recently established its spending website, www,USAspending.gov, the database was created for less than $1 million and the software costs about $600,000. Whatever costs are incurred in setting up and maintaining the new portal most likely will be exceeded in short order by the cost savings realized as citizens become more vigilant in monitoring the way the state spends its money. This is the “accountability” part of the bill’s title. Surely legislators and executive branch officials will be more sensitive about spending, grants, and contracts that may not easily withstand public scrutiny.
Indeed, now that the Maryland Funding Accountability and transparency Act has passed, the legislature and Governor should not rest on their laurels. There is much other information impacting the state’s fiscal situation and operation that is not posted (or easily found) on the state’s website. For example, reports from various state commissions often are not posted. There is no reason why, in this day and Internet age, a citizen should have to travel to Annapolis and root through paper files to find and read such information.
The Free State Foundation urged repeal of the computer services tax almost before the ink dried on the legislature’s handiwork. And FSF was an early – and initially fairly lonely – voice urging adoption of the transparency bill when this particular effort to bring more accountability for state government spending was viewed as quixotic in Annapolis.
On the computer services tax repeal, for example, see my This Maryland Tax Doesn’t Compute and Maryland Computer Services Tax Malfunction pieces, my testimony submitted to the General Assembly, and FSF Senior Fellow Cecilia Januszkiewicz’s Random Acts of Taxation commentary in the Baltimore Examiner. All explained that targeting computer services for a new sales tax is surely counterproductive as Maryland tries to encourage the growth of a high-tech sector in competition with neighboring states. As I said as soon as the tax was passed:
The types of services that would be impacted by the new tax are integral to the installation and maintenance of high-speed broadband networks upon which so much of today's information economy depends. By virtue of their importance in enabling the efficient and less costly delivery of other goods and services, computing services have a positive multiplier effect on the economy at large.
The repeal legislation replaces the projected $200 million “revenue loss” with an income tax surcharge on those individuals earning above $1 million, a reduction of $50 million in the transportation trust fund for five years, and a direction to the Governor to cut an additional $50 million from the state budget by July 1. It would have been preferable for the legislature to implement further spending cuts to fill the projected revenue gap, rather than further increasing taxes. Like computer services firms, Maryland’s citizens can move to Virginia too. But when all is said and done, the repeal of the computer services tax is a positive action for which the legislature and the Governor deserve credit.
And the enactment of Maryland Funding Accountability and Transparency Act is another positive action deserving of credit. Last year, when a virtually identical measure requiring creation of an easily searchable website tracking state spending over $25,000 was introduced by two Republicans, Delegate Warren Miller and State Senator Alex Mooney, it received little support, and almost none from Democrats. I published an early commentary, Bring Accountability and Transparency to Maryland Government, in the Baltimore Sun on March 20, 2007, urging enactment, and several blogs as well.
In addition to more writing on the subject over the past year, I submitted testimony this past February in support of the reintroduced measure. This year the bill passed both houses with overwhelming bipartisan support, certainly a tribute to the work of Delegate Miller and Senator Mooney.
Presumably it is also a triumph of the simple but fundamental notion that, in this digital age, citizens ought to be empowered to easily obtain information about how their government spends their taxpayer dollars. While there is a cost to be sure in establishing and maintaining the new website, when other states and the federal government have established such sites the costs have been minimal. For example, when the federal government recently established its spending website, www,USAspending.gov, the database was created for less than $1 million and the software costs about $600,000. Whatever costs are incurred in setting up and maintaining the new portal most likely will be exceeded in short order by the cost savings realized as citizens become more vigilant in monitoring the way the state spends its money. This is the “accountability” part of the bill’s title. Surely legislators and executive branch officials will be more sensitive about spending, grants, and contracts that may not easily withstand public scrutiny.
Indeed, now that the Maryland Funding Accountability and transparency Act has passed, the legislature and Governor should not rest on their laurels. There is much other information impacting the state’s fiscal situation and operation that is not posted (or easily found) on the state’s website. For example, reports from various state commissions often are not posted. There is no reason why, in this day and Internet age, a citizen should have to travel to Annapolis and root through paper files to find and read such information.
Friday, April 04, 2008
The Clock Keeps Ticking on FCC Reform
The clock keeps ticking on FCC reform. It has now been over eight years since then-FCC Chairman William Kennard released a draft strategic plan titled, “A New FCC for the 21st Century.” The plan stated that in five years, “[t]he FCC as we know it today will be very different in both structure and mission.”
For the most part, the predicted change in structure and mission hasn’t happened yet. But in light of the competitive marketplace and rapid technological developments that have occurred since 1999, reducing the need for traditional forms of regulation, certainly changes in structure and mission ought to be implemented. In my view, the FCC probably should not go the way, say, of the now defunct Interstate Commerce Commission and Civil Aeronautics Board. But the agency should undergo institutional reform if it is to be transformed into a regulatory entity in which its structure and practices match its 21st century mission.
Yesterday, I had the good fortune to moderate a panel sponsored by the ABA’s Section of Administrative Law and Regulatory Practice. The panelists were John Duffy, Professor of Law at George Washington University; Sam Feder, now a partner in Jenner & Block’s Washington office and the FCC’s immediate past General Counsel; Andy Schwartzman, President and CEO, Media Access Project; and Joe Waz, Senior Vice President of External Affairs and Public Policy Counsel, Comcast. Perhaps not surprisingly, with the experience and expertise represented by this group, what ensued was an extremely thoughtful, informative, and wide-ranging discussion. I commend to you the excellent reports of the event in yesterday’s TR Daily and Multichannel News, and today’s Communications Daily and BNA Daily Report for Executives. [Subscriptions required].
A lot of ideas were put on the table, some of which would require congressional action, others of which are more modest, in the nature of process reforms, which could be accomplished by the agency itself. I want to offer some selected observations from the panelists that I think are worth noting, at least in the interest of provoking discussion (again, while urging you, if possible, to look at the more complete press reports until the transcript becomes available.)
John Duffy suggested that the way the FCC operates today bears little resemblance to the theoretical and aspirational vision expressed by its congressional creators. Rather than an “independent” institution in which decisions are made by true experts insulated from politics, much of the agency’s policymaking is and always has been political in nature. John proposed splitting the FCC’s policymaking and adjudicatory functions, with the policymaking function moved to the Executive Branch under a single administrator, where the president ultimately would be politically accountable for the policy decisions. The adjudicatory function would remain with a multimember agency resembling the current agency.
Next was Joe Waz. Joe offered suggestions for what he called more immediate moderate reforms that would make the FCC operate in a more transparent fashion. The suggestions include making rulemakings more focused so that they are about adopting specific rules and not wide-ranging inquiries; restricting the ex parte process so that the actual comment period would once again be meaningful; subjecting some draft agency reports to peer review and public comment before being acted on by the Commission; releasing a semiannual agenda that lists what actions the agency anticipates taking during the next six months; notifying the public of agenda items three weeks in advance of agency meetings; and adhering to a “shot clock” to ensure that agency decisions are made on a timely basis, especially in merger proceedings.
Following Joe, Andy Schwartzman looked up from his always ubiquitous crossword puzzle to ask: “Does anybody know a three-letter word for an agency that does as well as anybody could do in a difficult job?” His answer: “The FCC.” Despite this, Andy agreed with much of what Joe Waz suggested regarding process changes, especially changing the way the current ex parte process works. He suggested the FCC needs to require more detailed summaries of meetings in order to make the process more transparent. While agreeing with Joe’s notion of a shot clock to bring Commission proceedings to close in a timely fashion, he would exempt merger proceedings from the requirement. He would also require that the Commission issue the texts of decisions reached at open meetings within 10 days. Finally, rather than moving towards a single administrator for policymaking, Andy would reverse the decision made in 1982 to reduce the Commission from seven to five commissioners.
Sam Feder completed the initial presentations. He said that before coming to the agency, he believed many of its orders were incoherent. Once he got there, he said, he began to understand why this is so, with the compromises necessitated by five commissioners with differing views. Sam volunteered that John Duffy’s idea of putting the agency under the control of a single administrator made a lot of sense. While stating that the FCC was doing a good job operating under the current law, Sam stated there is a need for a new law to provide more congressional guidance in light of changed circumstances.
There was more, and a lot of intelligent back-and-forth discussion among the panelists and the audience. But the above will give you a good sense of the session’s tenor and some of the specific suggestions advanced for modest and not-so-modest institutional reforms.
The issues raised in thinking about reforming the FCC go way beyond the actions of any particular chairman or commissioner, past or present, or any political party. Indeed, they are independent of such. The focus should be on matching the institutional structure and practices to the agency’s mission going forward in a competitive environment that already is much changed from the one envisioned even in 1999.
The panel deserves much credit for advancing the discussion.
For the most part, the predicted change in structure and mission hasn’t happened yet. But in light of the competitive marketplace and rapid technological developments that have occurred since 1999, reducing the need for traditional forms of regulation, certainly changes in structure and mission ought to be implemented. In my view, the FCC probably should not go the way, say, of the now defunct Interstate Commerce Commission and Civil Aeronautics Board. But the agency should undergo institutional reform if it is to be transformed into a regulatory entity in which its structure and practices match its 21st century mission.
Yesterday, I had the good fortune to moderate a panel sponsored by the ABA’s Section of Administrative Law and Regulatory Practice. The panelists were John Duffy, Professor of Law at George Washington University; Sam Feder, now a partner in Jenner & Block’s Washington office and the FCC’s immediate past General Counsel; Andy Schwartzman, President and CEO, Media Access Project; and Joe Waz, Senior Vice President of External Affairs and Public Policy Counsel, Comcast. Perhaps not surprisingly, with the experience and expertise represented by this group, what ensued was an extremely thoughtful, informative, and wide-ranging discussion. I commend to you the excellent reports of the event in yesterday’s TR Daily and Multichannel News, and today’s Communications Daily and BNA Daily Report for Executives. [Subscriptions required].
A lot of ideas were put on the table, some of which would require congressional action, others of which are more modest, in the nature of process reforms, which could be accomplished by the agency itself. I want to offer some selected observations from the panelists that I think are worth noting, at least in the interest of provoking discussion (again, while urging you, if possible, to look at the more complete press reports until the transcript becomes available.)
John Duffy suggested that the way the FCC operates today bears little resemblance to the theoretical and aspirational vision expressed by its congressional creators. Rather than an “independent” institution in which decisions are made by true experts insulated from politics, much of the agency’s policymaking is and always has been political in nature. John proposed splitting the FCC’s policymaking and adjudicatory functions, with the policymaking function moved to the Executive Branch under a single administrator, where the president ultimately would be politically accountable for the policy decisions. The adjudicatory function would remain with a multimember agency resembling the current agency.
Next was Joe Waz. Joe offered suggestions for what he called more immediate moderate reforms that would make the FCC operate in a more transparent fashion. The suggestions include making rulemakings more focused so that they are about adopting specific rules and not wide-ranging inquiries; restricting the ex parte process so that the actual comment period would once again be meaningful; subjecting some draft agency reports to peer review and public comment before being acted on by the Commission; releasing a semiannual agenda that lists what actions the agency anticipates taking during the next six months; notifying the public of agenda items three weeks in advance of agency meetings; and adhering to a “shot clock” to ensure that agency decisions are made on a timely basis, especially in merger proceedings.
Following Joe, Andy Schwartzman looked up from his always ubiquitous crossword puzzle to ask: “Does anybody know a three-letter word for an agency that does as well as anybody could do in a difficult job?” His answer: “The FCC.” Despite this, Andy agreed with much of what Joe Waz suggested regarding process changes, especially changing the way the current ex parte process works. He suggested the FCC needs to require more detailed summaries of meetings in order to make the process more transparent. While agreeing with Joe’s notion of a shot clock to bring Commission proceedings to close in a timely fashion, he would exempt merger proceedings from the requirement. He would also require that the Commission issue the texts of decisions reached at open meetings within 10 days. Finally, rather than moving towards a single administrator for policymaking, Andy would reverse the decision made in 1982 to reduce the Commission from seven to five commissioners.
Sam Feder completed the initial presentations. He said that before coming to the agency, he believed many of its orders were incoherent. Once he got there, he said, he began to understand why this is so, with the compromises necessitated by five commissioners with differing views. Sam volunteered that John Duffy’s idea of putting the agency under the control of a single administrator made a lot of sense. While stating that the FCC was doing a good job operating under the current law, Sam stated there is a need for a new law to provide more congressional guidance in light of changed circumstances.
There was more, and a lot of intelligent back-and-forth discussion among the panelists and the audience. But the above will give you a good sense of the session’s tenor and some of the specific suggestions advanced for modest and not-so-modest institutional reforms.
The issues raised in thinking about reforming the FCC go way beyond the actions of any particular chairman or commissioner, past or present, or any political party. Indeed, they are independent of such. The focus should be on matching the institutional structure and practices to the agency’s mission going forward in a competitive environment that already is much changed from the one envisioned even in 1999.
The panel deserves much credit for advancing the discussion.
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