The FCC Tries to Find Its Way

By
June 21st, 2010

Three months after the Comcast decision the FCC issued a Notice of Inquiry (NOI) asking, basically, “what should we do now?”  Not being a lawyer, I have a difficult time understanding, let alone caring, whether the FCC’s regulatory authority derives from Title I or Title II.  As an economist, however, I do care about the content of proposed regulations.

So what problem does this NOI seek to solve?  It does not propose directly any new rules industry must follow.  Instead, it seeks a framework in which the FCC can regulate broadband in the future.

In other words, this NOI does not address how industry should behave, but rather how the FCC itself should behave.  Somewhat ironically, therefore, this NOI asks how to regulate the FCC, and reveals an existential problem for the Commission: what is it supposed to do, and does it have the authority to do it?

The Commission is to be commended for laying out the legal issues, but the road forward it proposes is inherently flawed.  Consider that scholars of new institutional economics generally agree that in order to be effective, regulatory institutions must meet several criteria: they must be independent from short-term political influence, transparent, accountable, and have clear limits on the extent of their jurisdiction.[1]

The NOI highlights the problem the FCC now faces as an institution—it does not know the extent or limits of its jurisdiction.  Ultimately, the FCC cannot set those boundaries itself.  Instead, it is up to Congress to define the FCC’s mission and the Courts to define the extent of its authority within its legislative mandate.

The current confusion is not the FCC’s fault.  Our telecommunications laws are antiquated and no longer appropriate for the fast-changing world of broadband and information technologies.  No amount of reclassification, forbearance, or other fancy footwork can change that basic fact.

It is time for Congress to rewrite our telecommunications laws in ways that do not rely on arbitrary definitions of services, and instead create an analytical framework flexible enough to accommodate these rapidly changing industries.  A new telecommunications law could recognize, for example, the inherent antitrust issues in many current debates, such as the question of vertical relationships underlying net neutrality.

Such a rewrite involves risks, to be sure.  Every interest group will fight to influence the process for good and ill, nobody will end up entirely happy, and we could end up with laws worse than those we have today.  Regardless, we could at least rest assured that a new law would better reflect the will of the people, as expressed through their elected representatives, than would the FCC’s current attempt to fit a square peg in a round hole.

Congress already appears to be taking the beginning steps in rewriting the 1996 Telecommunications Act.  It should view the NOI as a cry for help and further evidence that it should take action.  A regulatory agency simply cannot function properly when it has to ask in a public notice what it is allowed to do and how.  The courts have attempted to define boundaries in recent decisions, but the Commission believes it must act to meet Congress’s objectives.  But only Congress can define its objectives, and the time has arrived for it to do so.


[1] See Noll (2000) or Wallsten, et al (2004) for discussions (Noll, Roger. 2000. Telecommunications Reform in Developing Countries. SIEPR Policy Paper. Wallsten, Scott, George Clarke, Luke Haggarty, Rosario Kaneshiro, Roger G. Noll, Mary Shirley, and Lixin Colin Xu. 2004. New Tools for Studying Network Industry Reforms in Developing Countries: The Telecommunications and Electricity Regulation Database. Review of Network Economics 3, no. 3: 248-282.)  See also Weiser (2009) for a discussion of institutional features of Internet regulation (Weiser, Philip J. 2009. The Future of Internet Regulation. Legal Studies Research Paper Series 09, no. 02).

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