FCC Should Conduct Regulatory Impact Analyses

This week, the Mercatus Center at George Mason University published a new paper by Jerry Ellig, the chief economist at the FCC. The paper is titled “Why and How Independent Agencies Should Conduct Regulatory Impact Analysis.” Earlier this year, the FCC, an independent agency, established the Office of Economics and Analytics, which is a step in the right direction towards improving its economic analysis of proposed rules.

Here are some of the steps Jerry Ellig recommends for regulators:

• Avoid “ready-fire-aim” rulemakings, in which decisions are made first, and then economists are expected to produce a cost-benefit analysis that supports those decisions. 

• Ensure the independence of economists (and other analysts) and give them incentives to conduct objective analysis. For example, have economists work in a separate office or bureau, and make sure they are not supervised by the policy staff who write the regulations that the economists will evaluate. 

• Establish agency-wide standards for regulatory impact analysis that outline the topics that the analysis must cover and establish expectations for quality.

• Explain how the economic analysis affected decisions about the regulation. 

• Invite the Office of Information and Regulatory Affairs (OIRA) to review the regulations and the accompanying analysis, just as it does for executive branch regulations. 

Improving the quality of economic analysis at the FCC will be an important topic of conversation at the Free State Foundation’s March 27 Telecom Policy Conference titled “Connecting All of America: Advancing the Gigabit and 5G Future.” Neomi Rao, Administrator at OIRA, will be giving a keynote address and likely will discuss how regulatory impact analyses help create effective policies.

See the rest of the agenda here and make sure you register!

Opposing the FCC's Use of Economics and Analytics Raises a Red Flag

Yesterday, the FCC voted to establish the Office of Economics and Analytics, which will help ensure that economic analysis is deeply and consistently incorporated as part of the agency’s regular operations. The decision was a party-line vote with Commissioners Clyburn and Rosenworcel dissenting, but why would any Commissioner vote against the FCC using more economics and analytics?

In a September 2017 blog, I said that opposing a cost-benefit analysis for proposed regulations is a red flag:

It is important that the FCC perform this cost-benefit analysis, because agencies, independent or not, should analyze how new rules will impact innovation, investment, job creation, and economic activity. It is reasonable to question the methodology that an agency uses when assessing the costs and benefits of a regulation. However, if an interested party offers only criticism of an agency proposal to conduct a regulatory CBA, this is likely a signal that the interested party fears that the costs will outweigh the benefits, invalidating its policy position.

I think the same rationale applies for anyone who opposes the FCC’s action to create the Office of Economics and Analytics. It will be important for consumers, businesses, and policymakers to question the methodology and results that this office will produce in the future, and I fully expect all Commissioners, at some point, to disagree with a methodology used by the office. However, opposing the implementation of additional uses of economics, analytics, and data science at the FCC raises a red flag. 

ISPs to SEC and FCC: Broadband Investment Has Declined

As the FCC has done for all proceedings since Chairman Ajit Pai took over in January 2017, the FCC released the Fact Sheet and Draft Order in the Restoring Internet Freedom proceeding three weeks in advance of its December 14 vote. In response to the release, Commissioner Mignon Clyburn published her own Fact Sheet and Glossary about the harms she believes the Order will create.

Here is her definition for “cost-benefit analysis:”

Cost-benefit analysis – Despite insufficient data and data to the contrary, the Chairman's Order draws conclusions by only accepting self-serving statements made by large broadband providers. It makes no effort to verify these claims against the statements these very same companies have made in filings before the Securities and Exchange Commission (SEC).

However, in the Draft Order, the FCC concluded that broadband investment declined by 5.6% since the adoption of the Title II Order. This figure, compiled by Hal Singer, uses data that comes directly from broadband ISP’s 10-Q and 10-K forms, which are required by the SEC. Even my blog estimating a $5.6 billion decline in broadband investment since the Title II Order, which also was cited in the Draft Order, uses data collected directly from these filings required by the SEC. Broadband ISPs are reporting figures to the SEC that are consistent with what they also are telling the FCC; broadband investment has declined since the Title II Order was adopted.

For a more accurate assessment of the FCC’s proposal to conduct a cost-benefit analysis, see this July 2017 Perspectives from FSF Scholars by FSF Senior Fellow Ted Bolema. 

Opposing Cost-Benefit Analysis Raises a Red Flag

In its Notice of Proposed Rulemaking (NPRM) for the Federal Communication Commission’s Restoring Internet Freedom proceeding, Chairman Ajit Pai proposes that the Commission perform a cost-benefit analysis (CBA) of the FCC’s Title II regulation of Internet service providers. Free State Foundation scholars endorsed the FCC’s proposal in their filed comments as a welcome development for improving the quality of economic analysis at the FCC. However, in the initial round of comments, some pro-regulatory organizations were skeptical of the FCC’s proposal for performing a CBA. Notably, the comments from these groups appear to have been intended to discourage the FCC from performing any cost-benefit analysis.

Requiring regulatory agencies to conduct CBAs has a history of bipartisan support. A 1993 executive order issued by President Clinton and followed by every administration since requires that executive branch agencies perform CBAs before implementing economically significant regulations. The FCC is not required to perform CBAs because it is an independent agency. However, other independent agencies, including the Federal Trade Commission and the Securities and Exchange Commission, have adopted internal rules requiring CBAs to help inform their regulatory decisions.

There should be little support for a regulation when its costs outweigh its benefits because adoption of that regulation will usually slow economic activity, destroy jobs, and often harm the parties the regulation is claimed to help. Cost-benefit analysis is an important tool that helps regulatory agencies evaluate in a systematic way whether a course of action is worth pursuing. Shortly before joining the FCC as Chief Economist, Jerry Ellig documented how the quality of SEC rulemaking improved after the agency, in the middle of the Obama Administration, adopted a requirement for conducting cost-benefit analyses.

Performing a cost-benefit analysis of a regulation requires an agency to address several important questions that it might otherwise fail to consider. Does the regulation address a market failure or systemic problem? If it does, how does it correct the perceived market failure? Are there other less intrusive regulatory approaches that would solve this market failure? And finally, do the benefits of the regulatory solution outweigh the costs of imposing new regulatory requirements? Needless to say, the FCC did not ask these important questions when it adopted the Open Internet Order in February 2015, but Chairman Pai is proposing that the Commission perform a CBA before repealing Title II regulation. Regrettably, some groups that support Title II regulation are skeptical.

In the initial round of comments of the Restoring Internet Freedom proceeding, Free Press and INCOMPAS criticized the NRPM for a lack of guidance for how the CBA should be conducted. But as we responded in our reply comments, “paragraph 106 of the Notice is clear in proposing that the FCC follow the same guidance in Section E of OMB Circular A-4, which has been used by executive branch agencies since 2003, while inviting comments on whether that is appropriate or whether the Commission should modify its approach.” Moreover, we added:

Also significant is the fact that neither INCOMPAS nor Free Press provide any guidance whatsoever to the FCC on how to better perform a cost-benefit analysis. Thus, their comments can only be interpreted as opposing the Commission performing any cost-benefit analysis at all. The FCC should not be an “economics-free zone.” Instead the Commission should improve its use of economic analyses, including cost-benefit analysis, so that it can make better regulatory decisions.

Free State Foundation Senior Fellow Theodore Bolema published a July 2017 Perspectives from FSF Scholars entitled “An Assessment of the FCC’s Proposal to Conduct a Cost-Benefit Analysis,” which was attached to FSF’s initial comments as Appendix A. In that paper, Dr. Bolema addresses the important questions pertaining to a cost-benefit analysis of the FCC’s Open Internet Order.

Does the regulation address a market failure or systemic problem? If it does, how does it correct the perceived market failure? Dr. Bolema says:

Significantly, the Open Internet Order regulations can only pass a cost-benefit test if they are addressing a clear market failure than can only be resolved by the FCC regulation. If there is no market failure or other systemic problem, then government action will likely do more harm than good. The FCC justified the 2015 Open Internet Order in large part on conjectured harms that might occur in the future, but had not occurred to date under regulatory oversight that was considerably less heavy-handed.

Given the remarkable record of innovation, investment, and choice of new services offered to customers before the Open Internet Order regulation was imposed, it is highly unlikely that any such market failure can be found.

Are there other less intrusive regulatory approaches that would solve this market failure? Dr. Bolema contends:

If the FCC does identify a market failure, perhaps based on market power for some parties in some places at some times, then it must also consider whether less intrusive alternative approaches are sufficient to address the market failure before resorting to public utility regulation of a broadband market segment. These alternative approaches include increased antitrust enforcement, new consumer protection regulations, or minimum quality standards.

OMB Circular A-4 requires that executive branch agencies consider less intrusive regulatory approaches as part of their cost-benefit analysis. Even if the FCC concludes that a market failure exists in its baseline scenario, that does not mean that the only alternative is the full Title II regulation imposed by the Open Internet Order. Instead, the FCC must then consider other case-by-case regulatory approaches that are different from the pre-2015 regulatory environment.

Ted Bolema’s Perspectives also considers some of the regulatory uncertainty and costs imposed by the Open Internet Order, specifically opportunity costs. For example, Free Press claims in its comments that broadband investment has increased since the Open Internet Order, despite convincing evidence discussed in our initial comments and reply comments that investment has declined. But even assuming, hypothetically, that investment has increased, the relevant question is did it increase less than it otherwise would have absent the regulation? This is the premise of my May 2017 analysis which ultimately finds that broadband investment declined by $5.6 billion since the Open Internet Order was adopted.

Dr. Bolema performed an additional cost calculation in his Perspectives, following the methodology the FCC proposed in its NPRM:

Applying this multiplier to the Free State Foundation estimate by Michael Horney of a $5.6 billion reduction in broadband investment over 2015 and 2016 produces an estimate of $7.0 and $9.8 billion in lost economic activity attributable to the Open Internet Order, with a midrange estimated economic impact of negative $8.4 billion. Horney’s estimate showed that the gap between the baseline investment and actual investment was growing. If this trend continues, as is likely, the economic impact of the Open Internet Order will only become greater, in a negative direction, over time. 

It is important that the FCC perform this cost-benefit analysis, because agencies, independent or not, should analyze how new rules will impact innovation, investment, job creation, and economic activity. It is reasonable to question the methodology that an agency uses when assessing the costs and benefits of a regulation. However, if an interested party offers only criticism of an agency proposal to conduct a regulatory CBA, this is likely a signal that the interested party fears that the costs will outweigh the benefits, invalidating its policy position.

Given the persuasive evidence showing a large negative impact on broadband investment, it is likely the Open Internet Order is more costly than beneficial to consumers and entrepreneurs. For this and other reasons addressed at length in our initial and reply comments, the FCC should conduct the proposed cost-benefit analysis. And if the results from the CBA are as we expect, the FCC should repeal the Title II classification of broadband Internet service providers and return to a light-touch regulatory approach.

Jerry Ellig named FCC Chief Economist

Today, FCC Chairman Ajit Pai announced the appointment of Jerry Ellig as FCC chief economist. Dr. Ellig currently serves as a senior research fellow at the Mercatus Center at George Mason University (GMU). Dr. Ellig was a professor and colleague of mine while I was a student at GMU and a graduate fellow at the Mercatus Center. Together, we coauthored a paper entitled "Preventing a Regulatory Train Wreck: Mandating Regulation and the Cautionary Tale of Positive Train Control."

Dr. Ellig is an expert on cost-benefit and regulatory impact analyses. His expertise will go a long way towards achieving Chairman Pai's goal of implementing stringent economic analyses into the FCC's rulemaking proceedings.

Great choice by Chairman Pai and congratulations to Dr. Jerry Ellig!

Senators Ask FCC to Update Data in BDS Analysis

On Tuesday August 2, 2016, a group of nine U.S. Senators from rural states submitted a letter to FCC Chairman Tom Wheeler asking him to use the most up-to-date data when analyzing competition in the business data services (BDS) market. The Senators stated: “As you work toward a final rule, it is especially important for rural states like ours that the Commission use all the available data, including the data submitted earlier this year by the major cable operators, to both measure competitive markets accurately and ensure that the regulations for noncompetitive markets are based on the real cost to provide service.” They added that regulations adopted through the use of outdated or inaccurate data will harm robust investments in BDS and “rural constituents will face significant challenges in accessing the 21st century global economy.”

In June 2016, I wrote a Perspectives from FSF Scholars entitled “The FCC Cannot Proceed in the BDS Proceeding with a Flawed Analysis,” where I raised concerns about the inaccuracy of the FCC’s BDS data collection and its poor analysis in which it estimates how competition among BDS providers impacts BDS prices but fails to acknowledge the impact that consumer demand has on BDS prices.

Additionally, FSF scholars submitted comments regarding the FCC’s BDS proposal and President Randolph May and Senior Fellow Seth Cooper co-authored a Perspectives from FSF Scholars entitled “The FCC’s Special Access Proposal Is Infected With Special Pleading,” where they discuss how the FCC’s proposal is essentially regulatory-capture by a few BDS competitors pleading to obtain special rent-seeking treatment. 

More FCC Rules with Flawed Analyses Likely on the Way

In August 2015, I wrote a blog entitled “FCC’s ‘Gatekeeper’ Theory Is a Flawed Market Failure Analysis,” explaining how the FCC’s 2015 Open Internet Order fails a basic cost/benefit analysis and how it misuses data in order to support its claim that competition in the broadband market is lacking. Then, in January 2016, FSF President Randolph May and I wrote a blog entitled “Mobile Broadband Is a Substitute for Fixed Broadband,” where we state that the FCC continues to misrepresent competition in the broadband market by refusing to acknowledge the extent to which mobile broadband, for an increasing segment of the U.S. population, is a substitute for various fixed broadband services.

In a Hill article on January 20, 2016, Mario Trujillo reported that advocacy groups have been pressing the FCC to adopt Internet privacy rules. In a letter to the FCC, the advocacy groups say: “[Internet service providers’] position as Internet gatekeepers gives them a comprehensive view of consumer behavior and until now privacy protections for consumers using those services have been unclear.” The letter urges the FCC to “move forward as quickly as possible on a Notice of Proposed Rulemaking proposing strong rules to protect consumers from having their personal data collected and shared by their broadband provider without affirmative consent.”

The longer the Open Internet Order is in effect, the more people will realize that the regulatory costs imposed by the Order are stifling innovation and investment from both Internet service providers and edge providers. (See my October 2015 blog and Randolph May’s December 2015 blog for more on this.) However, there is reason to worry that if the FCC continues to misuse data to claim that “gatekeepers” eliminate choices for consumers, that switching costs create monopolies, and that mobile broadband should not be included in an analysis of broadband marketplace competition, then the FCC will be able to use these claims to justify adopting more Internet regulations.

Regardless of how Internet privacy rules would positively or negatively impact consumers, it should be concerning that the Commission could (and likely will) use misguided analysis to adopt such rules. In evaluating whether Internet privacy rules (and other regulations) benefit competition, consumers, and economic growth, it is imperative that they be supported by accurate data and valid cost/benefit analyses. But if the data and analysis used to inaccurately describe the broadband market during the Open Internet proceeding is used to draft Internet privacy rules, then the proceeding will start off on the wrong foot.

FCC's "Gatekeeper" Theory Is a Flawed Market Failure Analysis

When analyzing the cost-effectiveness of a regulation, the first questions that should be asked are: Does the regulation address a market failure or systemic problem? If it does, how does it correct the perceived market failure? And do the benefits of the regulatory solution outweigh the costs of imposing new regulatory requirements? The Federal Communication Commission’s (FCC’s) February 2015 Open Internet order failed to properly address these questions.

On August 6, 2015, thirteen economists from prominent universities and policy institutes submitted an amicus brief to the D.C. Circuit Court of Appeals demonstrating that the FCC’s 2015 Open Internet order failed to include a basic cost-benefit analysis. One of the main arguments in the amicus brief is that the FCC employed an inaccurate assessment of market failure. The brief states that “the FCC had no basis for its finding that, absent Title II, Internet Service Providers will utilize ‘gatekeeper’ power to harm consumers and content providers.”

So how does the Commission attempt to justify the Open Internet order? It makes a number of assumptions about ISPs and consumer preferences but it fails to provide any evidence to back up these assumptions. The Commission claims that ISPs are monopolies. It argues that ISPs are “gatekeepers” who control the point of Internet access between content providers and consumers. The Commission says that this relationship encourages ISPs to harm consumers by discriminating against content providers who do not pay for priority.

In reality, ISPs have no incentive to block or throttle content when consumers have a choice between multiple providers. But the Commission creates a false narrative that so-called “switching costs” (or the time and/or money spent in order to switch from one provider to another) are too high, creating monopolistic market power even when multiple providers offer access in a given area. The order claims that “once a consumer chooses a broadband provider, that provider has a monopoly on access to the subscriber.”

The amicus brief responds with the following: “The same ‘monopoly’ could be said to exist for customers who have entered a movie theater or restaurant.” The amicus brief also explains that competition within a local market creates consumer choice and “compels ISPs to offer high quality services at attractive prices to prospective consumers in the hope they become actual customers.” For example, if one provider in an area requires early termination fees for a contract, competitors in the area would likely offer a lower priced service to offset those fees and attract consumers to switch.

The amicus brief gives the following example of how consumers respond to what they perceive is harm: “Time Warner Cable’s losses of broadband subscribers during its dispute with CBS in 2014, even when that dispute was over access to television content, is indicative of how strongly and rapidly consumers respond to changes in content availability.”

The Commission’s “gatekeeper” analysis is completely inconsistent. The Commission claims that the requirements of the Open Internet order, which supposedly prevent ISPs from acting as gatekeepers, are especially important for “rural areas or areas served by only one provider.” But then the Commission claims that areas with multiple providers are also essentially monopolies. The Commission also manipulates its broadband competition analysis by stating that “mobile broadband is not a full substitute for fixed broadband connections.” This despite the fact that 10 percent of Americans have a smartphone but do not have a fixed broadband subscription, according to the Pew Research Center. The fact that 10 percent of Americans made this switch means that the valuation of switching costs and the substitutability of broadband technologies are subjective to the individual consumer and should not be objective determinations by the Commission.

The Open Internet order uses Title II public utility style regulation, which was created for telephone monopolies, so I can see why the Commission – wrongly – attempted to justify its action by claiming that ISPs are monopolies. But because the Internet access market is dynamically competitive among multiple technologies, these regulations create costs which will crowd out innovation and investment. And the burdens of these regulations are likely to harm smaller competitors even more than larger, more-established ones.

So then how does the Open Internet order correct the perceived problems of gatekeepers, high switching costs, and alleged broadband monopolies? It doesn’t. In fact, the Open Internet order creates the exact problems that it is supposed to fix. The order creates an Internet access gatekeeper – the FCC – which must first approve ISPs’ (and likely content providers’) decisions to innovate, interconnect, and invest. It ultimately creates a higher market concentration due to higher regulatory costs pushing out competitors. And the order creates higher switching costs because, as competition decreases, consumers will have fewer choices.

The Commission’s attempt to create a market failure or systemic problem was inconsistent and its analysis was inaccurate. Unfortunately, it seems as if the decision to regulate the most dynamic market in the world came before any assessment of a market failure.

Cautionary Considerations Regarding FCC Outage Reporting Regulations

The FCC is now considering a proposed rulemaking thath would impose cell tower outage reporting requirements on wireless carriers. The proposal is not yet public. But according to TRDaily (July 26), the FCC's proposal is similar to one made by Consumers Union. It would require carriers to report to the FCC "non-functioning cell towers in each county, and the percentage of the carrier’s cell towers in that county that the number represents.” Apparently, the FCC would make the information public.

Both the wireless carrier and wireless infrastructure industries have raised opposition to the FCC's proposed rulemaking – or any proposed rulemaking, at this time – in ex parte filings

Again, the precise content of the FCC's proposed rulemaking has yet to be unveiled. But on a related note, my Perspectives from FSF Scholars paper "The FCC Should Keep Broadband Free From Analog-Era Outage Regulations," addressed concerns about a 2011 FCC proposed rulemaking to extend legacy network outage reporting requirements to VoIP providers and broadband ISPs.

One of the points I made in that paper was that regulations originating in the analog era of legacy telephone service are often ill-suited to today's competitive and multi-layered digital communications market. For instance:

Unlike circuit-switched systems that establish a dedicated transmission path between end users, broadband packet-switched systems use no specific path but instead use numerous paths across networks. As a result, packet-switching can avoid the effects of problems in one part of a network and allow end-users to communicate with little or no discernable disruption. Furthermore, broadband networks have built-in redundancies in infrastructure and equipment such as fiber rings and routers that automatically reroute information-storing data packets in the event of network disruption. Redundant cell towers and fiber backhaul paths to switching centers are also among the network reliability features employed by wireless broadband ISPs. Backup power supplies are also routinely used by broadband ISPs.

From a consumer standpoint, imposing new regulatory requirements on wireless carriers or infrastructure providers for equipment or other network outages offers no benefit where consumers do not actually face any loss of service or significant degradation of service. But such regulations would impose costs on carriers and infrastructure providers, and those costs would likely be passed on to consumers in the long run.

One other concern I raised with the 2011 FCC proposed rulemaking on VoIP and broadband ISP outage reporting was the lack of cost-benefit justification. It remains to be seen if the FCC's proposed rulemaking regarding wireless outage reporting is accompanied by any cost-benefit analysis.

House-Approved SEC Regulatory Reforms Are Worth Repeating

On May 17, the U.S. House of Representatives passed H.R. 1062. This legislation was the subject of my blog post, "For Independent Agencies, SEC Regulatory Accountability Bill is an Act to Follow." Congratulations are in order for those who supported it.

But don't expect H.R. 1062 to be readily greeted in the U.S. Senate. Last week the White House issued a "Statement of Administration Policy" in opposition to the bill's final passage.

The SEC Regulatory Accountability Act may not make it into law this time around. Still, the legislators who sponsored the bill should be thanked for taking regulatory reform ideas seriously. Legislators should likewise be encouraged to continue pursuing regulatory reforms of this kind. H.R. 1062's cost-benefit analysis and look-back review provisions make the bill a model of reform for all independent agencies. 

For Independent Agencies, SEC Regulatory Accountability Bill is an Act to Follow

Everyone needs a reality checks sometimes, even "the experts." When so-called expert independent agencies consider regulating areas of our economy, shouldn't they check to make sure new regulations won't cause more economic harm than good? Isn't it worth double-checking the results once new regulations are in place?

For independent agencies, cost-benefit analysis should provide that reality check. And post-adoption "look back" assessments should serve as a double check. This is the basic approach of the SEC Regulatory Accountability Act (H.R. 1062). It's an economic-minded reform bill scheduled for consideration soon on the floor of the U.S. House of Representatives.

H.R. 1062 offers a constructive model for regulatory reform for other independent agencies – like the FCC. Provisions of the SEC Regulatory Accountability Act could form the foundation of a future "FCC Regulatory Accountability Act."

Absent market failure, regulation typically reduces economic efficiency and technological innovation. Regulation reduces the freedom of market participants to rely on their informational insights and skills to pursue new technological and service strategies to meet consumer demand. Freedom and knowledge is replaced by prescriptive government rules. Those come with compliance costs and are more likely to preserve the status quo. And regulatory costs to providers routinely reach consumers in the form of higher prices.

Where regulation is suggested to remedy a perceived problem, cost-benefit analysis can help identify those situations where regulation is justifiable. This means an economically grounded assessment by the assigned government agency. Such an assessment can improve the likelihood that proposed regulations might outweigh the negative consequences often attached to government controls on markets.

Requiring a government agency to conduct a cost-benefit analysis prior to imposing regulation offers a check on bureaucracy. It is an informative procedure that can help stave off harmful overregulation.

The SEC Regulatory Accountability Act (H.R. 1062) would reform Securities and Exchange Commission processes for assessing, adopting, and reviewing rules. Among the legislation's provisions, two features stand out.

H.R. 1062's first standout feature is its requirements for agency cost-benefit analysis. Before issuing a regulation under the securities law, the SEC would be required to:

[U]tilize the Chief Economist to assess the costs and benefits, both qualitative and quantitative, of the intended regulation and propose or adopt a regulation only on a reasoned determination that the benefits of the intended regulation justify the costs of the regulation.

Also, "[i]n deciding whether and how to regulate," the SEC must assess costs and benefits of alternative approaches, "including the alternative of not regulating." The SEC must pick the approach that "maximizes net benefits."

H.R. 1062 lists components of such cost-benefit analyses. Those include whether the rulemaking: (i) "will promote efficiency, competition, and capital formation"; (ii) " is tailored to impose the least burden on society, including market participants, individuals, businesses of differing sizes, and other entities"; and (iii) "is inconsistent, incompatible, or duplicative of other Federal regulations."

H.R. 1062's second standout feature is its post-adoption impact requirements regarding "major rules." The SEC would have to track the consequences of new regulations likely to have an annual economic impact over $100 million or which result in "a major increase in costs or prices" for consumers or industries. When adopting major rules, H.R. 1062 would require the SEC to set out post-implementation metrics to measure their economic impact. 

Those metrics would form the technical basis of a required SEC "assessment plan" regarding major rules. The assessment plan would have to consider "the costs, benefits, and intended and unintended consequences of the regulation." That plan sets the groundwork for an assessment report, submitted by the SEC's Chief Economist within two years of the major rule's adoption. Within 180 days of an assessment report's publication, the SEC would be required to propose amending or rescinding the major rule, or to publish a notice stating no action will be taken.

In short, H.R. 1062 reform proposals are commendable and worthy of the U.S. House's full consideration.

And Congress should consider applying the SEC Accountability Act's cost-benefit analysis and post-adoption assessment requirements to other independent agencies. Both of H.R. 1062's standout features are suitable for application to the FCC and for inclusion in FCC reform legislation.

As observed earlier, the FCC is not required to attempt cost-benefit analyses before it imposes expansive regulations. For example, the FCC's decision to impose network neutrality regulation on broadband Internet access services was criticized on this count. The FCC lacked any cost-benefit basis for its sweeping regulatory intrusions. Its Open Internet Order was further criticized for dismissing any need to demonstrate existing or likely anticompetitive conduct or consumer harm before imposing regulations.

More recent FCC notices, such as its proposed rulemaking regarding spectrum aggregation, invited interested parties to explain likely costs and benefits of different agency actions.

But asking marketplace competitors to offer the assessments the agency should consider is not a serious accountability measure. And the FCC is vigorously defending its legal authority to impose net neutrality regulations without any cost-benefit analysis in the D.C. Circuit.

For that matter, the FCC has no empirically-based process for measuring and examining the results of its new regulatory undertakings. The FCC's two primary tools for removing outdated regulations – Section 10 forbearance authority and Section 11 biennial review authority – have been largely neglected by the agency.

In many instances, H.R. 1062's language could be lifted directly from the bill and made applicable to the FCC context. Other bill provisions would need only minor recalibration.

An "FCC Accountability Act" would help ensure proposed regulations are justifiable. And it would serve as a check against agency overregulation. Requiring the FCC to undertake cost-benefit analyses prior to adopting rules and to measure results post-adoption is sound policy. It makes economic sense too.