Reforming the FCC

The FCC has failed of late to commission, support, and use truly independent research. Over the last several years, this tendency has eroded both the intellectual credibility and legal validity of the agency’s rules. To address this failing, the FCC must commit to seeking out relevant sources of data and engaging in data-driven analysis as well as ending its habit of relying on single points of data that, in many cases, it avoids sharing for analysis and criticism. In so doing, the FCC should re-establish the tradition of an empowered Chief Economist and Chief Technologist, both of whom should be essential parts of an Office of Strategic Planning and Policy Analysis (OSPPA) that develops published working papers to inspire constructive discussions and farsighted analysis. In recent years, both positions have been filled only sporadically and very few OSPPA working papers have been published. Worse yet, the ethic of honest intellectual engagement is treated as a foreign concept, with a widespread belief that employees who “express an opinion, even if based on fact” are subject to being “demoted, reassigned, or hounded out of the agency.”^[142]

To begin on a positive note, it merits appreciation that two of the FCC’s signature achievements over the last forty years emerged from independent research commissioned from outside of the agency. First, consider the case of the Computer I decision,^[143] where the FCC sought to protect competition in the data processing industry and keep it free of regulation. To develop its rules in that case, the FCC contracted with the Stanford Research Institute to analyze the comments and develop a proposal for the agency’s regulatory strategy. Similarly, in the case of the Part 68 rules,^[144] which facilitated competition in the equipment market and ended the almost decade-long effort by AT&T to avoid the letter and spirit of the Carterphone decision,^[145] the FCC contracted with the National Academy of Sciences to define the relevant interface to the public switched telephone network for terminal equipment. In both cases, the FCC’s regulations were upheld by the courts and were a huge success in practice.

The Computer I decision is a remarkable FCC decision and an important guide to policymakers for a number of reasons. First, the agency examined in that case an issue in a pro-active fashion and sought independent analysis to guide its judgment. Second, the decision reflected a commitment to considering the interests of the innovator who is not before the Commission in a particular proceeding. (The same praise is owed to the FCC’s extension of the Part 15 rules to authorize the use of spread spectrum, ultimately leading to the development of wi-fi technology.^[146]) Finally, the FCC engaged in ongoing reassessment of the effects of the decision, ultimately revising it as the agency evaluated the relevant economic issue and technological changes.^[147]

Over the last several years, the FCC has encountered increasing judicial hostility and criticism for its management of research related to its decisions. Consider, for example, the FCC’s Broadband over Powerline decision.^[148] That ruling sought to move to an after-the-fact model of spectrum management, thereby evaluating interference between different users in practice rather than in theory. This effort to generate more real world data emerged from a flawed FCC decision-making process whereby the agency failed to make public the initial spectrum measurements that informed its judgment that this change in regulatory strategy was appropriate. Consequently, the D.C. Circuit reversed the FCC’s decision, underscoring that the Administrative Procedure Act requires that agencies make public “the ‘technical studies and data’ upon which the agency relies” to establish binding regulations.^[149] In so doing, the D.C. Circuit revealed some of its impatience with the FCC’s operating practices, noting that “[i]t would appear to be a fairly obvious proposition that studies upon which an agency relies in promulgating a rule must be made available during the rulemaking in order to afford interested persons meaningful notice and an opportunity for comment[]”^[150] and that “the Commission can point to no authority allowing it to rely on the [unpublished] studies in a rulemaking but hide from the public parts of the studies that may contain contrary evidence, inconvenient qualifications, or relevant explanations of the methodology employed.”^[151]

The last two media ownership proceedings revealed a similar missed opportunity to generate, evaluate, and utilize thoughtful research. In the 2003 effort to evaluate the optimal regulatory strategy for restricting media ownership, the FCC sought to develop a “Diversity Index” to structure its regulation of the broadcast industry.^[152] When the agency adopted its rules, it failed to provide parties a sufficient opportunity to scrutinize and provide feedback about the scope and nature of the Diversity Index. Consequently, the Third Circuit reversed the FCC in Prometheus Radio Project v. FCC,^[153] highlighting that:

As the Diversity Index’s numerous flaws make apparent, the Commission’s decision to withhold it from public scrutiny was not without prejudice. As the Commission reconsiders its Cross-Media Limits on remand, it is advisable that any new “metric” for measuring diversity and competition in a market be made subject to public notice and comment before it is incorporated into a final rule.^[154]

The FCC’s latest media ownership rulemaking (discussed above) did not heed this counsel and essentially repeated the mistake made in its earlier proceeding. In particular, the agency not only did not endeavor to rest its decision on more supportable grounds, it actually ignored the research that the agency itself was developing. As Mark Cooper described the most recent proceeding:

In its haste, the new research agenda devoted little attention to defining and operationalizing the goals of the Communications Act. This tunnel vision ignored efforts by the FCC to understand its policy goals in the period after the court remanded its new media ownership rules. The new agenda led to results-driven research projects. Simply put, the Commission started from the result it wanted and worked backwards.^[155]