A Proposal for Improving the FCC's Regulatory Reviews
by
Randolph J. May * and Seth L. Cooper **
[Below is the
Introduction and Summary to this latest
Perspectives from FSF Scholars. A PDF version of the complete
Perspectives, with footnotes, is
here.]
Introduction and Summary
The inauguration of a new President and Congress offers a renewed prospect for eliminating or modifying outdated legacy Federal Communications Commission regulations that no longer comport with digital age technological and marketplace realities. While it is important for Congress ultimately to substantially update the Communications Act to reflect today's marketplace, pending such an overhaul, the most significant opportunity to bring about needed regulatory reform in 2017 most likely belongs to the FCC. Indeed, the Commission possesses ample authority to eliminate or modify unnecessary and wasteful regulations that have outlived their usefulness and that are now injurious in that they discourage innovation and investment in broadband and other communications services and technologies.
In the Telecommunications Act of 1996, Congress gave the FCC the means to eliminate or curtail outdated, counterproductive regulations. Section 11, entitled "Regulatory Reform," is one of the 1996 Act's express deregulatory tools, albeit one that, by most accounts, has been underutilized. Section 11
requires the Commission periodically to review telecommunications regulations and to repeal or modify those determined to be "no longer necessary in the public interest as a result of meaningful economic competition."
In 2017, the reconstituted FCC should revitalize the Section 11 regulatory review process. By eliminating or modifying outdated, costly telecommunications regulations that no longer are necessary (if ever they were), the Commission can spur new investment and further innovation that, in turn, translate into more robust economic growth and more jobs.
Of course, the first order of business in this regard is for the Commission to conclude the current Section 11 regulatory review proceeding without undue delay. There are many regulations that are ripe for elimination if given a hard look. In the Section 11 review now underway the Commission should examine existing regulations with a seriousness of purpose that has been lacking in the reviews of past years. Fortunately, the soon-to-be reconstituted agency appears ready to do just that.
As FCC Commissioner Ajit Pai said
in his remarks at the Free State Foundation's December 7, 2016, Tenth Anniversary celebration, "[i]n the months to come, we also need to remove outdated and unnecessary regulations." Indeed, he declared, "[w]e need to fire up the weed whacker and remove those rules that are holding back investment, innovation, and job creation." Commissioner Michael O'Rielly made the same point at the Free Station Foundation event
in his remarks: "Another priority worth attention is clearing away the existing regulatory underbrush that is choking business and diverting resources away from new and improved products, better service, and lower prices for consumers."
Aside from completing the current regulatory review in a timely fashion, the newly reconstituted FCC should take a further step to help ensure that future Section 11 reviews are effective in achieving the elimination of unnecessary regulations in a communications marketplace in which competition and consumer choice are rapidly becoming the norm. The Commission should adopt a simple procedural rule to the following effect in connection with the implementation of future Section 11 regulatory reviews: "Absent clear and convincing evidence to the contrary, the Commission shall presume that regulations under review are no longer necessary in the public interest as a result of meaningful competition among providers of such service."
Establishing a procedural rule like this will not change Section 11's substantive criteria. And the rule is not outcome determinative. It merely puts into place a rebuttable evidentiary presumption that comports with today's widely-accepted market realities. By adopting this rebuttable presumption as a procedural rule implementing Section 11, the sensible deregulatory orientation, which is inherent in the very nature of the provision, will be more durable from one review to the next.
There is widespread agreement that, due to the continuing advance of innovative digital technologies and competition between the various technological platforms, whether fiber, cable, wireless, satellite, or whatever, many existing telecommunications regulatory restrictions no longer serve any useful purpose. The costs of complying with these outdated legacy regulations divert financial resources from investment in next-generation services and applications that otherwise would benefit consumers. But the FCC has clung far too long to far too many telecommunications regulations that were fit (if at all) for monopolistic analog copper-wire telephone networks.
A rebuttable deregulatory presumption like the one suggested above would require the FCC to marshal evidence that competition is lacking in telecommunications markets in order to retain legacy regulations. In the absence of clear and convincing evidence demonstrating noncompetitive conditions and public harm, the regulations under review would be repealed or at least modified. Without dictating the outcome of the review of any particular regulation, a procedural rule along these lines necessarily would create a more rigorous review process that accounts for technological advancements and market changes. Consistent with the rule, the Commission would find it more difficult to disregard, for instance, the competitive effects of cable operator entrants in voice services markets or wireless substitution for wireline.
If the FCC adopts a rebuttable evidentiary presumption, it would not be overcome by ambivalent findings regarding marketplace competition. Rather, there would have to be clear and convincing evidence in the record demonstrating that regulations are still necessary in the public interest. In instances in which the Commission is inclined to retain regulations, the higher evidentiary standard will increase the need for clear articulation of the connection between those regulations and contemporary market data. And the Commission will be cognizant that its decisions will be scrutinized by the courts under the new deregulatory standard.
With a new President and Congress set to be sworn in, the time to begin a meaningful, comprehensive overhaul of the Communications Act is ripe. Pending Congress's passage of legislation updating the Communications Act in a comprehensive way, the newly reconstituted FCC can begin eliminating unnecessary, costly regulations. In addition to completing the current Section 11 review in a timely fashion, the Commission should adopt a rebuttable evidentiary presumption that "regulations under review are no longer necessary in the public interest as a result of meaningful competition among providers of such service." This would be an important step in fulfilling Section 11's deregulatory intent.
* Randolph J. May is President of the Free State Foundation, an independent
, nonpartisan free market-oriented think tank located in Rockville, Maryland.
** Seth L. Cooper is a Senior Fellow of the Free State Foundation.
Read the complete Perspectives, with footnotes, here.
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