Thursday, January 29, 2009

Top Ten List of FCC Regulatory Reforms—Part Two

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.