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Top Ten List of Needed FCC Regulatory Reforms

10) Honesty is the best policy.

At the risk of anthromorphizing a regulatory agency, at the very least the FCC has not told the complete truth, or put itself in a position not to know the truth. The FCC has contributed to debates about what constitutes credible facts and statistics, and what this data means. For example, soon-to-be former FCC Chairman Kevin Martin asserted as the gospel truth his factual conclusion that cable television operators collectively have a 70% market share of the total video program distribution business, a trigger point for more regulation. His expert regulatory agency did not reach this conclusion, so Chairman Martin had to resort to the finding of a commercial venture which itself doubted whether such market share remained sustainable.

The FCC should acknowledge that it may not know all the facts.

9) Use the “Notice and Comment” process to augment the fact finding process rather than control it.

While FCC managers have done just about everything they can do to encourage a brain drain, there remain plenty of staff resources capable of finding the truth. Instead FCC management has demonstrated an inordinate reliance on the filings made by stakeholders, and their sponsored researchers, for the formulations of decisions and policies. The FCC assumes as facts what stakeholders present as assertions. Without in-house analysis, and better yet independent peer review, the conclusions of interested parties, are nothing more than unproven assertions.

8) Stop using politics and economic doctrine as a template to manipulate the facts.

Without a doubt, the FCC has engaged in results-driven decision making. Managers reach a conclusion and work back from that conclusion. In other words if the Chairman thinks the Commission should approve a merger, he directs the staff to come up with rationales supporting the merger. Political and economic doctrine rather than facts have driven decisions, rather than empirical data.

7) Stop imposing conditions on mergers that perhaps should apply industry-wide.

Because of the drive to approve any and all mergers and acquisitions, FCC Commissioners use their vote as leverage for the imposition of company-specific conditions, or the solicitation of “voluntary” concessions by the acquiring company. This brokering occurs behind the scenes in manner that violates both procedural due process and expectations of government in the sunshine. The FCC should decide if the conditions, so necessary for an acquiring company, are appropriate industry wide, e.g., AT&T’s “voluntary” agreement for conditional and time limited compliance of network neutrality principles to secure approval of its acquisition of BellSouth.

6) In a deregulatory environment reporting requirements become increasingly important.

The FCC seems to think that it should eliminate reporting requirements in tandem with the onset of deregulatory initiatives. The Commission has a greater need for data when it increasingly relies on anticipated market self-regulation. For example, the FCC should require lightly regulated Internet Service Providers to report on network use, outages, and congestion episodes, with an eye toward seeing whether price and quality of service tiering initiatives end up hurting consumers. Network neutrality opponents claim no need for regulatory intervention, but only with honest reporting requirements can the FCC determine whether certain types of price and service discrimination are not collectively harmful.

5) Determining the public interest requires listening to the public.

I am pretty sure at least half of the current FCC commissioners loathed having to take a road trip to hear the irrational and emotional opinions of the common man and woman. Even with Comcast allegedly paying homeless people to wait in line for seating, the Commissioners got an earful from people who clearly did not see the world in the same way. Maybe the unwashed public collectively has wisdom and insights unavailable from the currently closed process used to make decisions. The Commission should make more road trips, encourage public participation and actually listen to what indirect public stakeholders have to say.

4) Fairly Report the State of an Industry When Reporting to Congress.

Federal legislation regularly requires the FCC to provide Congress with annual updates on the health and competitiveness of various market sectors. FCC management has assumed the responsibility to provide Congress with the best possible assessment of marketplace conditions as opposed to a realistic one. For example, in the Commission’s assessment of the Commercial Mobile Radio Service, i.e., cellular telephony, the most recent Report to Congress disingenuously identifies a number of spectrum allocations possibly useable by new competitors to the four carriers that control 90+% of the market. Of course the Commission does not acknowledge that such spectrum currently provides no actual competition, nor does the Report notify Congress that incumbents would use litigation, lobbying and other strategies to prevent such possible competition.

The FCC should use Congressional reporting requirements to identify both successes and failures under the currently applicable laws. Arguably Congress should pass legislation more regularly instead of grand, “soup to nuts” reforms that typically need revision soon after enactment.

3) Put an End to Results-Driven Decision Making.

Too often an informed observer of the FCC’s machinations can detect exactly where Commission management, or at least the Chairman, wants to go in a notice of inquiry or rulemaking. Under such conditions the Commission simply goes through the motions, ostensibly to promote procedural and substantive due process. The FCC document may contain dozens of questions, but most stakeholders refrain from providing answers (as opposed to assertions) and the Commission’s final policy making document never gets around to examining the questions it previously posed.

Rather than start with an end conclusion firmly in mind, the FCC should start with the humble acknowledgement that maybe-just maybe-it does not know what would serve the public interest. Fair and lawful notice and comment proceedings requires the FCC to create a factual record, by encouraging all interested parties to participate, and to fully and fairly consider that record.

2) Use Peer Review.

In the academic world, peer review provides essential quality control by subjecting research and other contributions to close scrutiny by unbiased and unknown outsiders. When I write an academic paper, typically several reviewers consider the rigorousness, legitimacy and significance of my work. Neither author nor reviewer know of the other’s identity.

The FCC rarely uses peer review to subject its work product to outsider review, nor does the Commission use authentic, peer-reviewed research from academics, or consulting firms. The notice and comment pleading process does allow stakeholders to criticize each other’s work, but the material filed with the Commission would never pass muster with peer review in light of financial sponsorship that obligates the creation of a biased document in the first place.

The FCC should finance peer reviewed work to augment its in-house expertise and to provide an unbiased alternative perspective on the biased assertions of stakeholders.

1) Be Skeptical of Stakeholder Assertions of Facts and Findings.

Absent peer review, a full opportunity to consider the views of the general public and general open mindedness, the FCC regularly relies on the biased filings of stakeholders. The Commission regularly accepts as the gospel truth nothing more than assertions. If stakeholders make these assertions long enough and finance “rock star” academics to embrace these assertions, then it becomes quite easy for the FCC to accept assertions as fact.

Economists use this process with great success, because they can create unimpeachable “rules” and use math to support them. In telecommunications policy sponsored economics professors have stated with a straight face that regulation constitutes a confiscation of property, that carriers providing interconnection are entitled to retail price compensation including all “opportunity costs,” that just about every telecommunications market sector is robustly competitive and deserving of deregulation and that every merger or acquisition will promote even more competition. In conjunction with results-driven decision making such “research” provides cover and support for the FCC to conclude that the public interest coincides with the assertions of particular stakeholders.

The FCC should have a healthy skepticism that what’s good for a specific stakeholder is also good for the public in general. It might or might not. To determine the truth, the FCC needs to do its homework.

By Rob Frieden, Pioneers Chair and Professor of Telecommunications and Law

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