Reforming the FCC

The conduct of administrative regulation at the FCC over the last several years has underscored the institutional failings long cited by critics of the agency. In just the second half of 2007, three high profile and important proceedings-the open access rules imposed as part of the 700 Megahertz (MHz) auction, the proposed regulations on cable based on a finding of adoption of cable services by 70% of consumers, and the media ownership rules-illustrated the problematic nature of the how the FCC often operates. Taken together, the portrait of agency dysfunction raised by these proceedings illustrate the nature of the agency’s institutional failings, highlight how it can ultimately undermine the success of policymaking initiatives, and make a compelling case for institutional reform.

In the summer of 2007, the FCC debated and developed rules for imposing an open access obligation on a wireless provider as part of the auction of valuable “beachfront” wireless spectrum in the 700 MHz band.^[28] In stimulating this discussion, however, the FCC failed to suggest publicly that it had any particular proposal in mind, only stating in its Notice of Proposed Rulemaking (NPRM) the general possibility that it might take some action along these lines.^[29] Subsequent to the issuance of the NPRM, as Cynthia Brumfield described the process, “Chairman Kevin Martin floated an unofficial proposal (via USA Today no less),^[30] everybody scrambled, a circus ensued and a compromise, a clearly political compromise, was ultimately made.”^[31] Consequently, the debate over the proposal was hurried and conducted via vague and hard-to-follow ex parte filings after the official notice-and-comment period had ended, resulting in a decision that left open a number of issues for later resolution.^[32]

The rushed nature of the FCC’s deliberation and decision-making process gave rise to a subsequent shadow debate over the scope of the rules after they were formally adopted. In the wake of the agency’s decision, some parties apparently saw an opportunity for continued lobbying after the matter had purportedly been decided. Using its Policy Blog as a means of shedding sunlight on this development, Google Telecom Counsel Rick Whitt highlighted this very unorthodox tactic and noted with dismay that “it seems that a ‘final’ vote by a federal government agency is merely the beginning of a new phase in the process.”^[33] Ultimately, the FCC declined to change its rules in response to this effort.^[34]

The second proceeding that merits examination is the effort by to impose a wide-ranging set of prescriptive regulations on cable companies based on highly questionable information. Under the 1992 Cable Act, the FCC is authorized to develop more restrictive regulations of cable television providers if they reach a level of serving 70% of the country and have 70% of subscribers in that territory.^[35] The first figure was attained many years ago, but the FCC has never suggested that cable providers had reached the second one, generally suggesting that cable penetration reached around 55% of the population (with satellite TV and over-the-air TV serving the rest).^[36] In compiling its regular report evaluating the multi-channel video programming distribution (MVPD) marketplace, the FCC regularly asked about the reach of cable television providers, but this report was widely viewed as a fact-gathering effort and not as a prelude to adopting regulations.

In the fall of 2007, Chairman Martin proposed that the FCC conclude that the so-called 70/70 threshold had been met. To justify this finding, he suggested that the agency rely on a single source (a provider that later repudiated its own figure) and sought to suppress other relevant information.^[37] In so doing, the agency did not use an adjudicative process-or even the formal notice and comment process-to generate a factual basis for its actions or to discuss the issue. Moreover, in proposing to embark on a new course, Chairman Martin did not even alert his fellow Commissioners (let alone the public) of the specifics of the proposed rule changes or the questions related to the data that underlie them. In fact, as the House Commerce Committee majority report found, “[a]ll of the other data collected in response to the Notice of Inquiry was initially withheld from the other Commissioners, and the career staff was directed not to discuss it with them.”^[38] To some observers, this tactic merely reflected his operating style of keeping “his plans tightly wrapped, believing there’s a tactical advantage in springing them on other commissioners with little notice.”^[39]

In the case of the proposed regulations for cable providers, the agency ultimately refused to act in a secretive and hurried manner. Notably, in evaluating the relevant information, Commissioner Adelstein (who apparently was the swing vote) reported on the day he voted against the proposed order that:

I did not learn until after 7:00 pm last night that the FCC’s own 2006 survey found that only 54 percent of homes passed subscribe to cable. Similarly, the FCC’s cable price survey came in at 55.2 percent penetration. Based on these newly unearthed facts and the conflicting evidence on the record, I am unable to support a finding that 70 percent of homes passed subscribe to cable at this time. The data is inconclusive. If we were truly searching for the truth, it is inconceivable that our own data would be cast aside without mention.^[40]

Moreover, Commissioner Adelstein noted that the process used in that case-a failure to give sufficient notice to the other Commissioners-did not reflect any imperative for immediate action, but was merely a tactical effort to limit the opportunity for discussion and deliberation.^[41]

A third proceeding that merits notice is the Commission’s 2007 evaluation of the media ownership rules. In that case, Chairman Martin detailed his proposal in a press release and a New York Times op-ed (rather than in a Further Notice) only a little over a month before he asked his fellow Commissioners to vote on the proposal.^[42] Notably, this release was not only the first time the public heard of the particular proposal, but it was “also the first time the Commissioners were notified of the details.”^[43] In defense of this tactic, Chairman Martin stated that the FCC was neither required to, nor in the habit of, releasing the text of the proposed rules before voting on them.^[44]

In the media ownership proceeding, the Commission announced its decision in a twelve-page press release a week before Christmas 2007.^[45] At that time, Commissioners Copps and Adelstein both protested the substance and the process used to develop the rules. In particular, Commissioner Copps recounted that the FCC engaged in the last minute charade of pretending to allow input via a public hearing in Seattle (at which 1,100 citizens came with a week’s notice) and a last minute notice (after the outcry about the New York Times op-ed) while at the same time rushing to complete and vote on an Order without taking the public’s concerns seriously. In a telltale sign of the rushed nature of the proceeding, the process of revising the Order continued right up until the Commission was set to vote on it. As Copps recounted:

Then, last night at 9:44 pm-just a little more than twelve hours before the vote was scheduled to be held and long after the Sunshine period [when comments, even on an “ex parte” basis, can no longer be filed]had begun-a significantly revised version of the Order was circulated. Among other changes, the item now granted all sorts of permanent new waivers and provided a significantly-altered new justification for the [the relevant rules]. But the revised draft mysteriously deleted the existing discussion of the “four factors” to be considered by the FCC in examining whether a proposed combination was in the public interest. In its place, the new draft simply contained the cryptic words “[Revised discussion to come].” Although my colleagues and I were not apprised of the revisions, USA Today fared better because it apparently got an interview that enabled it to present the Chairman’s latest thinking.^[46]

Finally, in a practice that is all too common at the FCC, the agency did not release its final rules until almost three months after the vote,^[47] leaving affected parties to guess what the Order discussed, allowing a shadow lobbying process to attempt to influence the issue after the decision, and raising questions about the legitimacy of the decision that was ultimately adopted. In this context, moreover, the delay only underscored that the earlier rushed push for a vote did not reflect any bona fide urgency, but rather was a tactical effort by the Chairman to close a proceeding on his preferred terms.^[48]

In all three cases described above, the Commission treated the public as irrelevant to its institutional operation. In each case, interested parties (and even some Commissioners) were reduced to reading press reports (based on leaks) to gain insight into the issues before the agency. Commissioner Adelstein decried the agency’s approach to regulatory policy in the cable context, stating that “[w]e cannot cook the books to pursue a political agenda without dismantling our very institution. We simply must act like the expert agency Congress intended, and not squander our precious legacy.”^[49] Finally, agency staff persons have criticized the politicized manner in which the agency has operated of late, complaining, on one account, that they were “sick of what they experience as a super-politicized work life in which just about anything that they want to do has to get the go-ahead from the top[.]”^[50]