Top Ten List of FCC Regulatory Reforms—Part One

10) Honesty is the best policy.

At the risk of anthromorphizing a regulatory agency, at the very least the FCC has not told the complete truth, or put itself in a position not to know the truth. The FCC has contributed to debates about what constitutes credible facts and statistics, and what this data means. For example, soon-to-be former FCC Chairman Kevin Martin asserted as the gospel truth his factual conclusion that cable television operators collectively have a 70% market share of the total video program distribution business, a trigger point for more regulation. His expert regulatory agency did not reach this conclusion, so Chairman Martin had to resort to the finding of a commercial venture which itself doubted whether such market share remained sustainable.

The FCC should acknowledge that it may not know all the facts.

9) Use the “Notice and Comment” process to augment the fact finding process rather than control it.

While FCC managers have done just about everything they can do to encourage a brain drain, there remain plenty of staff resources capable of finding the truth. Instead FCC management has demonstrated an inordinate reliance on the filings made by stakeholders, and their sponsored researchers, for the formulations of decisions and policies. The FCC assumes as facts what stakeholders present as assertions. Without in-house analysis, and better yet independent peer review, the conclusions of interested parties, are nothing more than unproven assertions.

8) Stop using politics and economic doctrine as a template to manipulate the facts.

Without a doubt, the FCC has engaged in results-driven decision making. Managers reach a conclusion and work back from that conclusion. In other words if the Chairman thinks the Commission should approve a merger, he directs the staff to come up with rationales supporting the merger. Political and economic doctrine rather than facts have driven decisions, rather than empirical data.

7) Stop imposing conditions on mergers that perhaps should apply industry-wide.

Because of the drive to approve any and all mergers and acquisitions, FCC Commissioners use their vote as leverage for the imposition of company-specific conditions, or the solicitation of “voluntary” concessions by the acquiring company. This brokering occurs behind the scenes in manner that violates both procedural due process and expectations of government in the sunshine. The FCC should decide if the conditions, so necessary for an acquiring company, are appropriate industry wide, e.g., AT&T’s “voluntary” agreement for conditional and time limited compliance of network neutrality principles to secure approval of its acquisition of BellSouth.

6) In a deregulatory environment reporting requirements become increasingly important.

The FCC seems to think that it should eliminate reporting requirements in tandem with the onset of deregulatory initiatives. The Commission has a greater need for data when it increasingly relies on anticipated market self-regulation. For example, the FCC should require lightly regulated Internet Service Providers to report on network use, outages, and congestion episodes, with an eye toward seeing whether price and quality of service tiering initiatives end up hurting consumers. Network neutrality opponents claim no need for regulatory intervention, but only with honest reporting requirements can the FCC determine whether certain types of price and service discrimination are not collectively harmful.

5) Determining the public interest requires listening to the public.

I am pretty sure at least half of the current FCC commissioners loathed having to take a road trip to hear the irrational and emotional opinions of the common man and woman. Even with Comcast allegedly paying homeless people to wait in line for seating, the Commissioners got an earful from people who clearly did not see the world in the same way. Maybe the unwashed public collectively has wisdom and insights unavailable from the currently closed process used to make decisions. The Commission should make more road trips, encourage public participation and actually listen to what indirect public stakeholders have to say.

Universal Service Reform

An increasing number of players—including the incoming Administration—have expressed interest in reforming the process by which the federal government seeks to promote wider and more affordable access to telecommunications services. Currently wireline, wireless and now many Internet telephone subscribers contribute over $7 billion annually to universal service funding, most of which goes to incumbent wireline carriers. The process is quite flawed and vulnerable to arbitrage. For example, a rural wireline telephone company in Iowa offers “free” teleconferencing (previously “free” calls to European locations) just by calling into their switch. For wireless callers with “unlimited nights and weekends” the additional out of pocket cost is zero, even though the carrier making the inbound call incurs charges of several cents per minute instead of the thousands of one cent typically charged by so-called “terminating carriers.”

I have written extensively on the subject of universal service reform and suggest the following “best practices”:

• True technology neutrality coupled with a willingness to fund well articulated and community-supported projects rather than limit support to a fixed list of existing carrier services;

• Capping government project funding to a percentage of total cost, thereby requiring project advocates to seek financial support from other grantors, or from bank loans;

• Emphasizing one-time project funding rather than recurring discounts;

• Creating incentives for demand aggregation among government and private users, particularly for broadband and data services;

• Promoting innovation and creativity in projects, including technologies that provide greater efficiency and lower recurring costs;

• Encouraging competition among universal service providers by auctioning off subsidy access; and

• Blending government stewardship and vision with incentives for private stakeholders to pursue infrastructure investments.