Economics Bureau Seen as Likely Part of FCC Restructuring Under Pai
New Chairman Ajit Pai is likely to restructure the FCC to create an economics bureau, or something similar, industry officials said. The focus on economics comports with the long-standing Republican focus on cost-benefit analysis of orders and other agency actions. Pai, in his first news conference on his new job, said Tuesday he hasn’t made any decisions on process reform or agency restructuring (see 1701310056).
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Mark Jamison, a member of the Trump landing team for the FCC, cited the need for an economics bureau at a USTelecom event last week (see 1701260031). Industry officials said they consider the launch of the bureau likely. Republican Commissioner Mike O’Rielly repeatedly urged a more rigorous cost-benefit analysis for FCC rules before they’re adopted (see 1701090037).
“It's about time!” emailed Berin Szoka, president of TechFreedom. “Pai can and will transform the FCC from the 'economics-free zone' created by [former Chairman Tom] Wheeler into a serious agency. Smart Democrats should cheer the way, and start engaging with the FCC on substance, on what actually serves consumers to rather than Wheeler's empty slogans.” Wheeler didn’t comment.
Phillip Berenbroick, senior policy counsel at Public Knowledge, told us he has heard a lot about an economic bureau and wouldn’t be surprised if one were created as part of an FCC restructuring. “It’s very frustrating to sort of hear the FCC referred to as a place where they don’t do rigorous economics or rigorous economic analysis,” Berenbroick said.
Berenbroick said one need look no further than the docket on Wheeler’s broadband data services proposal. “Weekly, it seemed like there was a new economic analysis introduced into that docket by one or more parties,” he said. Under the Communications Act, the FCC has a responsibility to do what’s in the public interest, he said. “The idea that you would replace that, sort of willy-nilly, with simply a rote economic analysis, cost-benefit calculation is totally at odds with the intent of Congress and the statute.” Pai removed from circulation a draft BDS order last week (see 1701280001).
Doug Brake, telecom policy analyst at the Information Technology and Innovation Foundation, said the FCC would benefit from hiring more economists and more engineers. “I’m not sure that a separate bureau designed around performing routine cost-benefit analysis would be ideal, though,” he said. “What is important is to get technical experts involved early on in any rulemaking process, both at the staff level and in decision-making at the eighth floor. Any restructuring should take that into account.”
Other industry allies cheered the idea of an economics bureau. “It's both an important and a welcome change to give the economists more influence in FCC proceedings,” said Daniel Lyons, associate professor at Boston College Law School. “The agency is primarily a sector-specific business regulator and therefore it should be positioned to understand the economic consequences of its decisions.”
“A new FCC economics bureau would be a big improvement because it would focus the FCC on real economics, the economics of scarcity, and not the fake economics of abundance that purposefully ignores huge fixed infrastructure costs and total costs, so it can imagine a near-zero marginal-cost Internet commons,” said Scott Cleland, chairman of NetCompetition. “An economics bureau would know that an FCC ... ban, like no paid prioritization, is a de facto regulated price of zero with no cost recovery, which is, by definition, uneconomic.”
The Administrative Conference of the U.S. said the FCC is the most prolific producer of rulemakings of any independent federal regulatory agency, noted Larry Downes, project director of the Georgetown Center for Business and Public Policy. “Without doubt, basic economic analysis of proposed regulations, and alternatives, would go a long way to restoring the FCC’s reputation as a true expert agency rather than a political tool of the White House.”
If Pai “rescues the FCC from the brink of political oblivion, and returns the commission to an economy-economics-based rulemaking process, the world will be a much better place,” emailed Seton Motley, president of Less Government. The FCC may not need a stand-alone bureau, he said. “A simple application of existing law -- including adhering to the Paperwork Reduction Act before rather than after the rules making process -- will do wonders to restore a cost-benefit emphasis and sanity to the work of the commission.”
“The idea of creating an economics bureau in some form makes sense as a way of concentrating and highlighting what ought to be an increased reliance on solid economic analysis in the agency’s decisionmaking,” said Randolph May, president of the Free State Foundation. This doesn’t mean a few economists wouldn’t still be based in other bureaus and offices, he said. “It would mean a core of credentialed economists would be in one office so they can more readily examine marketplace realities regardless of the legacy techno-functional constructs and service distinctions that largely remain in the agency’s regulations and in its mindset,” May said. May also said the FCC shouldn’t add to its personnel head count. “There is always a bureaucratic imperative at work to grow the size of the bureaucracy,” he said. “If Chairman Pai intends to get rid of unnecessary regulations, and I think he does … I don’t think he’ll want to expand the size of the agency’s staff.”