It should come as no surprise
that the Federal Communications Commission will substantially change its
regulatory approach, wingspan and philosophy under a Trump appointed Chairman. One can readily predict that the new FCC will
largely undo what has transpired in previous years. However, that conclusion warrants greater
calibration.
As a
threshold matter, the new senior managers at the FCC will have to establish new
broad themes and missions. They have
several options, some of which will limit how deregulatory and libertarian the
Commission can proceed.
Several
ways forward come to mind:
1) Channeling
Trump Populism—the FCC can execute President Trump’s mission of standing up
to cronyism and rent seeking, even when it harms traditional constituencies and
stakeholders.
2) What’s
Good for Incumbents is Good for America—the FCC can revert to the
comfortable and typical bias in favor of incumbents like Comcast, Verizon,
AT&T and the major broadcast networks.
3) A
Libertarian Credo—the FCC can reduce its regulatory wingspan, budget and
economic impact by concentrating on limited core statutory mandates, such as
spectrum management.
4) Humility—without
having the goal of draining the FCC’s pond, senior managers can temper their
partisanship and snarkiness by refraining from mission creep.
Each of the
above scenarios hints at major and equally significant, but unpublicized
changes at the agency. A populist FCC
equates the public interest with what the court of public opinion
supports. For example, most consumers
like subsidies that make products and services appear free. A populist FCC responds to consumers by
interpreting network neutrality rules as allowing zero rating and sponsored data
plans.
However, a
populist FCC risks overemphasis on public opinion that stakeholders can
energize as occurred when companies like Netflix and Google used their web
sites for 24/7 opposition to the Stop Online Piracy Act and when Jon Oliver motivated
4 million viewers to file informal comments favoring network neutrality on the overburdened
FCC web site.
On the
other hand, a populist FCC can remind rural residents of how much they count in
this new political environment. The FCC
can validate rural constituencies by refraining from modifying—if not
eliminating--inefficient and poorly calibrated universal service
cross-subsidies. Most telephone
subscribers in the U.S. do not realize that they are paying a 10%+ surcharge on
their bills to support universal service funding, most of which flows to incumbent
telephone companies. Consumers would
quickly contract compassion fatigue if knew about this sweetheart arrangement.
The
favoring incumbents scenario has a long and tawdry history at the FCC. If the new FCC reverts to this model, the
Commission will largely give up fining companies for regulatory violations. Additionally, it might purport to reintroduce
economic analysis to its decision making by adopting incumbent-advocated, but
highly controversial templates. For
example, incumbents have touted the “Rule of 3” to support further industry
consolidation. This rule is nothing more
than an advocacy viewpoint that markets with 3 competitors generate most of the
consumer benefits accruing from markets with more than 3 competitors. Having only
3 competitors may work if 1 of them does not collude and match the terms,
conditions and prices offered by the other 2.
But in many markets—think commercial aviation—having only 3 operators
risks markets organized to extract maximum revenues from consumers with little
incentive to innovate and compete.
An incumbent
friendly FCC likely will approve mergers and acquisitions with limited, if any,
conditions and negotiated conditions.
This kind of FCC will approve AT&T’s acquisition of Time Warner despite
President Trump’s disapproval. The FCC probably
also would have no problem with a wireless marketplace duopoly of AT&T and
Verizon controlling 90+% of the national market, because the Commission will
have largely abandoned the use of a specific market penetration caps and other
indices (such as the Herfindahl-Hirschman index) to identify dangerously concentrated
markets.
Many press
analysts assume the FCC will embark on a libertarian bent, possibly leading to
the elimination of the agency. I believe
the press has misread advocacy items written by Trump Transition Team members
who couldn’t easily pitch a short term gig at the FCC and who readily
acknowledge the perennial need for core functions performed by the agency. A libertarian FCC strictly limits its
statutory interpretations and does not seek to expand its regulatory
wingspan. However, the national interest—surely
including the corporate interests of incumbents—requires the FCC to participate
in global standard setting, radio frequency allocation and Internet
governance. The national interests
suffers if the FCC does not attend intergovernmental forums and does not forge
alliances with other governments keen on reigning in the motivation of global
forums to favor specific governments and expand its reach and significance.
Last, but
not least, the new FCC could emphasize humility and bipartisanship using its
independence and expertise to determine what best serves the public
interest. This requires abandonment of
results-driven decision making and creative statutory interpretation. I really like this option.
1 comment:
I think your analysis is inciteful and thought provoking.
I believe future actions by Trump led agencies are
unpredictable so we will have to see it unfold. I
can't see monopolistic mergers being approved.
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