Economist/Authors Call for Scaling Back FCC Authority

Argue that Government Policies Haven't Sufficiently Promoted Broadband

A pair of deregulatory-minded economists say that the FCC's policies have not been much help to the broadband rollout, that it has been too slow to auction new wireless spectrum, that the commission should get out of the merger review business, and that the regulatory silos need to come down in an era when the media are converging. They also say the fault is Congress' not simply the agency's.

That is according to Robert Litan and Hal Singer, co-authors of The Need for Speed, a new book on broadband telecom policy. They were being interviewed for C-SPAN's Communicators series. The book calls for narrowing of FCC authority in the face of competition as a way to drive even more competition and investment.

Singer said that the U.S.'s regulatory policy has not helped to spread and strengthen broadband. The book argues that U.S. policy has likely "gotten in the way." He cited, as one example, the net neutrality fight, criticizing the FCC for not allowing network providers to enter into agreements for priority delivery -- the FCC's network neutrality rules have a prohibition on discrimination. The book argues the FCC should have allowed for such priority deals, then police any abuses on an "after-the-fact" basis, the argument cable operators and other ISPs have made.

Singer also criticized the FCC's approach to speeding up new spectrum for wireless: "The FCC has been very slow at finding new spectrum and auctioning it to wireless providers.

Litan also took the FCC to ask for not treating the wireless and wired marketplaces as one market. The commission, for example, does not include wireless and wired together in its report on the competitiveness of the broadband marketplace. Litan said both Congress and the FCC need to recognize that industry regulation should not be siloed.

"And the FCC needs to recognize that it will have less to do in the current competitive marketplace," he said. "Its duties and functions need to be scaled back."

An FCC spokesperson was not available for comment at press time, but when FCC chairman Julius Genachowksi announced his departure two weeks ago, he listed a number of broadband-related successes during his tenure, including $250 billion in investment since 2009 (when he took the job); migrating phone subsidies to broadband; developing the incentive auction proposal; and the network neutrality rules, which the chairman has said "innovation and private investment."

Singer said that while the book criticizes the FCC, they recognize that Congress is partly responsible for the problems. "It is not to be meant as an attack on the FCC. The instructions come from Congress. 'Write me a report on competition in the wireless market.' This directive [from Congress] came over a decade ago and they are still doing it." He said that the notion the FCC is just going to "wake up and fix itself" is fanciful. "I think the direction is going to have to come from Congress."

Singer and Litan said the FCC should not be in the duplicative merger review business. Both the FCC and Justice/FTC review mergers, with Justice focused on antitrust and the FCC going beyond that to the public-interest benefits given that the mergers involve the transfers of licenses of public spectrum. Singer said that the extra review puts the FCC in the position of "giving away things to competitors who complain the loudest. So long as you vest the agency with that kind of power to move around millions or billions of dollars to special interests," he says, "you are going to get hoards of lobbyists walking the halls of the agency looking for a handout. We think on net that this is not good for society." He cited the Comcast/NBCU merger.

Singer said that they were not advocating for giving a pass to anticompetitive mergers, just that Justice or the FTC ought to be able to handle that review with input, though not a supplemental vote, from the FCC. "We don't need two votes when one will do," added Litan, a former prosecutor with the antitrust division at Justice.

Litan, who worked as an economist in both the Carter and Clinton administrations, was asked whether someone reading the book might interpret it as a call to deregulate the communications industry. He said that was a fair interpretation and that the facts and times have changed. In a world of convergence, he said, there is more competition and less need for regulation. He also pointed out that the Carter administration deregulated the airline and trucking industry, which he did because they were competitive: "Well, guess what, the communications industry has reached that kind of state. It is no longer heresy for a Democrat to say deregulate."

Litan also pointed out that the book made arguments that might not sit well with some Republicans as well. One of those, he said, is that they are concerned about vertical integration, and would put in place protections for aggrieved parties. They argue for FCC ALJ's -- there is actually only one -- making determinations of discrimination rather than parties having to go to federal court.

Asked who he would like to see as the next chairman, Singer said the real issue is changing the system by which that chair is lobbied. "Just getting the right commissioner right is not getting to do the trick." Litan said commissioners needed to recognize the world has changed and essentially asked Congress to narrow the FCC's authority because the world has changed.

Singer, formerly with the Securities & Exchange Commission, is a regulatory consultant with Navigant Economics, while Litan is director of research at Bloomberg Government, a for-pay info service that provides economic analysis of the business impact of government decisions.