Re-Invent the FCC

Published November 1, 2004

Eight years after the enactment of the landmark Telecommunications Act of 1996, Congress again is considering rewriting our communications laws. This time, in addition to providing more specific deregulatory direction in tune with today’s competitive marketplace realities, Congress should radically reform the institution–the Federal Communications Commission (FCC)–that implements the law.

When President Bill Clinton signed the 1996 act, he called it “truly revolutionary legislation” that “will help create a marketplace where competition and innovation can move quick as light.” In a similar vein, in August 1999, then-FCC Chairman William Kennard forecast that in five years the U.S. communications markets would be characterized predominantly “by vigorous competition that will greatly reduce the need for direct regulation.” He was right.

But Kennard also predicted, “the FCC as we know it today will be very different in both structure and mission.” On that point, he was wrong. The agency remains essentially the same Progressive Era institution it was when established in 1927 as the Federal Radio Commission.

One of the so-called independent regulatory agencies, the FCC has five commissioners. No more than three may be from the same political party, and unlike the heads of executive branch agencies, such as, say, the Department of Labor, the president may not remove commissioners on account of policy differences. The idea–or rather ideal–was that the FCC and similar independent agencies created around the same time would be peopled with a cohort of “expert” commissioners who would be insulated from politics.

Muddled Decisions

In large part because of drawbacks tied to its institutional legacy, the FCC’s implementation of the 1996 act has been problematic. In this quickly evolving digital age, the commission regularly issues muddled, fractious decisions that it takes months, sometimes years, to reach. Worse, those decisions are frequently overturned in court. Then the commission starts over again. Thus, proceedings that should quickly and decisively free new competitive services such as broadband and Internet telephony from traditional utility-style regulation, drag on interminably.

As a result, policies governing the communications and information services industries–sectors vitally important to the nation’s overall economic health–are not only overly regulatory, but in a constant state of flux. Far from fostering investment and innovation, FCC actions have done just the opposite.

In an era when less regulation is needed, the FCC needs fewer employees and fewer dollars. But since 1999, when Kennard emphasized reform, it now has 2,000 employees, and its budget has grown by more than 50 percent to almost $300 million per year. Congress should decrease the FCC’s budget and staff.

But institutional changes of a much more fundamental nature are necessary to achieve more coherent, consistent, and timely decisions. Decision-making authority should be consolidated, and the newly slimmed-down organization should be moved into the executive branch, where the president will be politically accountable for FCC policy-making activities. Political philosophy–such as a greater or lesser predisposition to rely on marketplace discipline rather than regulatory dictates–and not just idealized “expertise,” plays a legitimate role in fashioning communications policy. There is nothing inherently wrong with that if it is accompanied by political accountability.

When the head of an executive agency such as the Department of Commerce acts, the president can be held accountable at the next election. Not so with the FCC. (If the agency were placed in the executive branch, purely adjudicatory functions, such as individual licensing determinations, could be insulated from inappropriate political interference.)

Fewer Cooks Stirring the Pot

The new FCC should have decision-making authority concentrated in fewer hands. Partly as a result of the horse-trading compromises made to achieve a majority consensus among five commissioners, the agency’s orders now virtually invite judicial reversal for arbitrariness. With fewer decision-makers, and presidential accountability, it is unlikely we would have so many disagreements on major regulatory issues, such as whether broadband should be regulated. Reducing the number of commissioners from five to three would be a positive step. If the agency is, in fact, placed under presidential control, a single head should be considered, consistent with the prevailing model for executive branch agencies.

We are fortunate to live at a time when marketplace discipline can replace many of the old regulatory mandates fashioned for, and left over from, an earlier, more monopolistic communications industry. Along with revising the substance of our communications laws, it is time to reinvent the FCC and make it a more accountable institution, one better suited to rendering speedier, more coherent decisions.

In other words, make it a model agency for the digital age.

Randolph J. May ([email protected]) is senior fellow and director of communications policy studies at the Progress and Freedom Foundation in Washington. A version of this article was originally published in The National Law Journal.