Still Burning Witches at the FCC

Still Burning Witches at the FCC

April 08, 2011
Originally published in Forbes

It seems that things are never quite perfect enough these days for the Federal Communications Commission to elect to leave competitive communications markets alone.  When the last step has to be first, nothing can move as far as getting this impossible-to-placate agency out of anyone’s hair.

Although by no means the heaviest regulator, the FCC merits singling out in today’s information economy.  The FCC spent an estimated $439 million to enforce regulation during FY 2010. (Meanwhile the Environmental Protection Agency spent vastly more, at $5.9 billion, which alone accounts for over 10 percent of all expected regulatory agency expenditures, according to the Wiedenbaum Center and the Regulatory Studies Center at George Mason University.)

Of the almost unbelievable 4,225 rules in the regulatory pipeline, 147, or 3.5 percent, were in the works at the FCC. The level of rules from the FCC is up 5.7 percent over the past five years. Since 2006, the subset of FCC rules that have impacts on small business has risen four percent.

The agency enjoys outsize influence today given the importance of technology and communications. In the unfortunate tradition of adopting political predation as a bureaucratic imperative and regarding free enterprise as a loophole to close, the FCC just this week voted to impose data-roaming “you-must-strike-a-deal-with-competitors” mandates on mobile carriers like AT&T and Verizon.

Analyst Tim Lee points out three problems: the Communications Act disallows treating mobile service providers as common carriers, voluntary markets for “data roaming” already function, and compulsory roaming agreements encourage piggy-backing rather than one’s own infrastructure investment.

One can also call it price control for the Internet, in a certain respect.

Liberalizing communications markets requires an ongoing, conscious, meticulous effort to shift “regulation” of pricing and access of emergent services from the historical control of FCC to the discipline of competitive markets. It can’t possibly happen automatically, and today’s debates reflect absence of any such inclination on FCC’s part to minimize future interventions.

A hyper-regulatory stance remains in fashion at the FCC despite massive innovations in telecommunications and in customized, consumer-oriented, and user-driven multimedia–as well as despite the increasingly obsolete nature of the FCC’s original mandate to police both allegedly public airwaves and scarcity of the radio spectrum.

Today’s robust and duplicative communications markets are not fragile, silken threads that break without allegedly impartial governmental care and feeding. Yet FCC insists on top-down rulemaking with respect to most technological advances.

Recent FCC activities have included a broad notice of inquiry to examine the broadband industry practices of the communications sector and to make rules about it; the injection of itself into journalism with a “Future of Media” proceeding; and a prominent December 2010 ruling mandating certain “net neutrality” requirements on Internet service providers (to the consternation of many in Congress who hadn’t delegated such authority to the agency).

Indeed, far from embracing a hands-off stance let alone a pro-liberalization agenda, the FCC has occupied itself in the 21st Century communications era with contemplating new rules for multicast must-carry regulation, cable à la carte, media ownership restrictions, “indecency,” video game content, violence portrayal and wireless net neutrality.  The latter, while not a commandment in the neutrality order, seems to be the end game. Otherwise what will the agency do with itself in, say, 2020?

In the mobile and wireless space Droids, iPhones and all the rest are barely here. Premature bureaucratization of fresh industries is a major cost and insult of the knee-jerk regulatory state.  Markets exist to create information–about scarcities, unserviced areas, and about ways to expand and lower costs to impatient customers in the face of competition. “Rent controls” for wireless help undermine both that ground-level process, and the next (unseen and thus unreleted) evolutionary phase that would otherwise have come after.  The FCC proclaims a love for full-service broadband but its actions are those of institutionalizing non-service narrowband, compared to what we’d have in store if it gets out of the way.

It can’t be overstressed that not everything happening in the business world is a legitimate public policy issue. Most controversies belong in the realm of competitive enterprise.

The FCC clearly doesn’t agree. Its premises are that markets and shareholder capitalism do not disperse economic power, and that political bodies do not concentrate economic power.

These are the opposite of reality, illustrated a bit in the FCC’s ironic simultaneus 5-0 approval of lowering fees on utility pole attachments access for telecommunications firms. Fixed-infrastructure price controls persist owing to a century of siloed regulation of great network industries as dinstinct from the cross industry partnerships that might otherwise have been underway for decades to resolve such “disputes”; And now, the false-adversarial model is being extended to wireless.

The radical egalitarianism with respect to rural service can impede technological advances and dealmaking needed to explode services in those areas. (And I’ve pointed out that I get zero service in southside Virginia).

Technologies proliferate; nowadays you can’t give away a VCR.  Youngsters born today may never know a world of of driving a car with no phone or GPS.

We must choose either liberalization of telecommunications or avenues for new centralized regulatory oversight and protracted legal battles. But with respect to the latter the burning of witches at the stake ended when the authorities stopped gratifying that desire. In this case the witches are the large service providers. It’s clear now that only Congress can restrain the FCC. The pending “resolution of disapproval” on net neutrality is a start, but more obscure issues like the data roaming mandate reveal how much work remains.