How to reform the FCC

In his June 7 Perspectives column, "Why the FCC should die," Declan McCullagh argues "it's time to abolish the Federal Communications Commission." I share the deregulatory impulse that is father to McCullagh's idea.

But as a practical matter, it's unlikely that Congress will abolish the FCC.

I've got another idea. Trim the agency's size to match what should be a reduced mission in today's competitive communications environment and move it to the executive branch, where there will be more political accountability for its actions.

McCullagh gives some good examples of how the FCC, usually at the behest of established market participants, has stifled entry by new competitors using new technologies, such as cell phones. And there are more: Broadcasters used the FCC to handicap cable companies; the old AT&T used the agency to stymie new long-distance entrants; and international communications providers using old underseas cables employed the FCC to stifle new global satellite systems such as Intelsat. I could go on.

But the key point is this: Putting aside tiresome debates about whether all the FCC's various command-and-control regulatory mandates could be justified in the past, they no longer can be. The principal justification for such a burdensome array of regulations decades ago was the need to protect consumers from Ma Bell's then-monopoly and listeners and viewers from a few broadcasters' dominance of local media markets.

In August 1999, then-FCC Chairman William Kennard boldly proclaimed: "In five years, we expect U.S. communications markets to be characterized predominately by vigorous competition that will greatly reduce the need for direct regulation." He was right, of course. The notion of telephone and media monopolies is outdated today, what with wireless operators, landline companies, cable companies, radio and television broadcasters, satellite TV and radio providers, VoIP, the Internet, newspapers and magazines, and others, all competing.

Chairman Kennard went on to say: "Over the next five years, the FCC must wisely manage the transition from an industry regulator to a market facilitator. The FCC as we know it today will be very different in both structure and mission."

Well, it isn't. Since 1999, the agency's budget has grown by more than half again to almost $300 million per year, and it has even more employees--now numbering more than 2,000.

Since 1999, the agency's budget has grown by more than half again to almost $300 million per year, and it has even more employees--now numbering more than 2,000.

While Congress is unlikely to abolish the FCC outright, it may not be wishful thinking to suggest the time is ripe for enacting reforms that create, in Chairman Kennard's words, an agency "very different in structure and mission." With the emerging consensus that its "industry regulator" mission should be severely curtailed, it necessarily follows that the size of the FCC's budget and staff can be reduced accordingly. But structural changes of a much more fundamental nature should be considered as well.

First, contemplate moving the slimmed-down agency into the executive branch where it would be politically accountable to the president for its policy-making activities. In its current manifestation, the five-member commission is one of the so-called independent regulatory agencies, like the Federal Trade Commission and the Securities Exchange Commission, that are free from presidential control. These multimember agencies were created to implement a particular Progressive-era and New Deal idealized vision that, with a bipartisan cohort of "expert" commissioners, the agencies largely would be insulated from politics in carrying out their missions.

The theory never really matched the reality. In any event, over time, most observers agree that political predilections, rather than specialized expertise, play an ever larger role in the FCC's decisions. And the trade-off for independence is attenuated politically accountability. When the head of an executive agency like the Department of Commerce makes a decision, we know the president is ultimately responsible for the policy and can be held accountable at the next election. Not so with the FCC. If the agency is placed in the executive branch, there is no reason why any purely adjudicatory decisions, such as individual licensing matters, cannot be insulated from inappropriate political interference.

Second, so that it can reach decisions in a more timely and efficient manner, the new FCC's decision-making authority should be concentrated in fewer hands. At a time when the agency needs to make important policy determinations regarding freeing newly competitive services, such as broadband, from traditional regulation, proceedings addressing these issues have dragged on interminably as the five commissioners have struggled to reach a consensus, and one that is often very muddled at that. Reducing the number of commissioners to three should speed up and improve the decision-making quality. And if the agency is placed in the executive branch, say, as a unit in the Department of Commerce, perhaps a single administrator should head it.

Now that we are in an era in which marketplace discipline for the most part can replace the regulatory mandates fashioned in an earlier era, Declan McCullagh is on to something in urging that it is time to kill the FCC. But assuming the agency doesn't go away entirely, it is high time for its mission and structure to be revised to comport with today's marketplace realities.