Sunset the FCC

Reforming telecommunications law is a favored subject in the halls of Congress this year. Hot issues include streamlining video franchising and addressing the "net neutrality" access concerns of application and content companies. But don’t let Congress fool you: It’s not interested in real reform. If it were, the discussion would be less about single issues and more about how to reform the institution that implements and enforces communications law — the Federal Communications Commission.

The FCC exists almost as it was when it was established way in 1934. Of the three major telecom reform bills circulating in Congress, none has addressed institutional reform at the FCC. The draft bill of Rep. Joe Barton, Texas Republican, and that of Sen. John Ensign, Nevada Republican, address pertinent issue areas like video franchising that certainly need reform. A bill by Sen. Jim DeMint, South Carolina Republican, is the most deregulatory of the three, relying as it does on antitrust principles instead of public interest regulation, but it still leaves in place a fully intact FCC.

As a result, all the telecom reform bills both overappreciate and underestimate new Internet communications. They go too far to apply new laws to Internet services, yet don’t go far enough to strip away at core institutional regulation in light of the growth and of these Internet services. Watching policymakers neglect or mangle telecommunications reform gives the impression they wouldn’t recognize deregulation if it was on fire and rollerblading naked past them.

If ever an economic sector needed a coherent vision for substantial liberalization, the massive telecommunications marketplace is it. If we were starting from a clean slate in today’s world, we wouldn’t create a Federal Communications Commission with command over price, entry and services. Internet technologies have been among mankind’s most liberating technologies; erasing distance, making broadcasters of thousands. Today’s communications landscape has given individuals a freedom of speech that the framers could never have imagined

When Republicans swept Congress in 1995, they proposed abolishing several agencies. But the implementation of the Telecommunications Act of 1996 entrenched the FCC. Today’s telecom reform agenda seeks new realms to rule, even as the very need for regulation evaporates. In the latest Unified Agenda of Federal Regulations, 146 rules originate from the FCC. The FCC’s budget has increased 24 percent from five years ago.

Public interest and airwave scarcity rationalizations have long justified telecom regulation. But in today’s world, a large government bureaucracy inhibits new infrastructure development, options and freedom of speech. A study by economist Jerry Ellig finds government telecommunications regulation has cost consumers up to $105 billion annually in higher prices and foregone services.

Yet a pro-regulatory discussion dominates Washington. Every special interest wants something. Application and content companies like Google want net neutrality legislation forcing network providers to provide free access. The movie and recording industries want the FCC to institute a broadcast flag to guard against piracy. There are groups wanting the FCC to regulate content according to indecency standards, limit the size of media companies, and the list goes on.

Indeed, the telecom sector remains one of the most heavily regulated and taxed segments of the U.S. economy. That’s why the most pressing business is to reform regulation by striking at the heart of the administrative burden. Instead of creating justifications for new laws that will out of date in a few years, if not months, reform needs a sunset agenda, a phaseout of the FCC.

Regulation of the communications industry wouldn’t disappear without the FCC, but it would be more decentralized. States would continue to enforce consumer protection and rights of way laws; and federal antitrust rules remain. The Federal Trade Commission already has the authority to strike down the kind of vertical restraints of trade that some ear would occur without net neutrality legislation.

The goal of reform is to move toward competitive discipline, or at the very least, competition-based regulation of general applicability that avoids the costs of a centralized bureaucracy. Such power invites costly lobbying battles which delay new technologies and hurt consumers.

Importantly, reform needs a policymaker to champion it — an Alfred Kahn equivalent for communications. Although reform bills so far only change one bulb for another, there’s hope someone in Congress will one day propose turning out the lights at the FCC.

We’ve seen the phaseout of the Civil Aeronautics Board and the Interstate Commerce Commission. It’s only a matter of time until it’s the FCC’s turn to transition public interest regulation to the marketplace.