Wednesday, June 09, 2010

Memos to Rep. Waters and OMB Director Orzag

I noticed that, according to a report in Communications Daily, Rep. Maxine Waters (D-CA) said earlier this week that the FCC's consideration of the Comcast-NBCU merger proposal "should not be rushed through an expedited review process." This was at the public hearing in LA on the proposed merger.

Memo to Rep. Waters: You can relax. There is absolutely no chance the FCC's review will be "expedited" within the ordinary meaning of that word. Comcast and NBCU filed the application seeking FCC approval of their proposed merger on January 28, 2010. No one expects the FCC to act on the application before the end of the year, if then. Action sometime after the one year filing mark is much more likely. Acting on a merger proposal one year after the parties file the application seeking approval will not put the FCC at risk of having its action misconstrued as rushing through the review process.

My worry is just the opposite of Rep.Waters.' In today's fast-paced technological and disruptive marketplace environment, a review that takes over a year to complete risks rendering the business rationale for the merger outdated by the time the Commission acts. (I'm not opining whether whatever business rationale is offered makes sense. I know not - but I do know that some of the biggest media mergers that have drawn fire from those "consumer" groups worried about too much concentration of control have not worked out in the marketplace. See, for example, the saga concerning the unhappy marriage and divorce of AOL and Time Warner, which drew such "concentration of control" fire, and then some.)

Some related observations.

There is a story in yesterday's Washington Post to the effect that Peter Orzag, President Obama's budget director, wants agencies to trim 5% from their upcoming budgets, especially focusing the green eyeshades on eliminating programs that duplicate the functions performed by other agencies. Not a new idea, but nevertheless a sound one. Orzag is quoted as saying "redundancy waste resources." Duh!

Putting aside whether OMB's directive to the agencies to come up with 5% savings technically applies to so-called independent agencies like the FCC, wouldn't it be nice for the FCC to take the message to heart? After all, we're all in debt together. There is no doubt that much of the FCC's review of proposed mergers duplicates the work of the antitrust agencies, the Department of Justice and the Federal Trade Commission. As I have argued for a decade now (for two examples, see here and here), even assuming the FCC is going to continue to review mergers under its vague "public interest" authority, the agency nevertheless could avoid wasting a lot of resources -- that's lots of time and money -- by relying on the analysis of the expert antitrust agencies to assess potential competitive harms. Now it spends lots of those resources to which Mr. Orzag is referring duplicating the effort of DOJ and the FTC, the government agencies with the most expertise and experience evaluating competition issues. Why can't the FCC, in the cause of government efficiency and as a matter of self-reform, act to eliminate this duplication?

I note the FCC already has hired yet another outside person specifically to oversee the Comcast-NBCU merger review. Didn't the Commission's Media Bureau have the requisite expertise? And I also note that Chairman Genachowski  has just submitted a budget request for fiscal 2011 that seeks almost $20 million above the 2010 appropriation, with the funding increase attributable primarily to hiring additional employees. It recites the requisite "with each passing day, communications has become increasingly essential to the daily lives of all Americans" mantra -- as have all such budget requests seeking increased funding over the passed decade. It may be true that communications has become increasingly important in our daily lives. But does it necessarily follow, as night follows day, that the FCC therefore must become increasingly big and more regulatory?

Memo to Peter Orzag: Please send a copy of your directive concerning agencies identifying 5% savings in their budgets, especially through the elimination of wasteful duplication, over to FCC headquarters, 445 12th Street, SW, Washington,DC.