FCC Economics Office Plan Garners Praise; Independence, Leadership Seen Key to Success

The OEA would create "a critical mass to institutionalize economic analysis" that currently is "scattered around the agency," said economist Jeff Eisenach, American Enterprise Institute visiting scholar and former Trump transition team member. "It's a major reform and over time will have a major impact." Pai's plan is "courageous and inspired," emailed Joshua Wright, executive director of the Global Antitrust Institute at George Mason University and a former FTC commissioner. "It is sure to improve decision-making by adding an independent voice dedicated to analyzing the costs and benefits of FCC actions."

Even some frequent Pai critics conditionally gave good marks to his proposals, which drew from a report by a staff team. It's "a reasonable plan," emailed Public Knowledge Senior Vice President Harold Feld, who met with staff: "They definitely listened to the input." He cautioned economics shouldn't trump social mandates in communications law. The OEA "will be particularly useful if it can generate and analyze data on the costs and benefits of proposed rules on an objective and not result-driven basis," emailed Michael Calabrese, director of the Wireless Future Project at New America's Open Technology Institute. Increasing FCC use of cost-benefit analysis is "unduly burdensome for nonprofits, small business" and the public, he said. "Hopefully, an OEA will allow the agency to generate its own objective and transparent cost-benefit data and analysis.”

Others said how the OEA is used will be more important than the restructuring. "I don't think the structure of the office makes that much difference. ... I think it's more about how it's implemented," said Michael Katz, economics professor emeritus at the University of California, Berkeley, School of Business, and FCC chief economist under Chairman Reed Hundt in the mid-1990s. "It all comes down to whether the chairman sends the message that the staff needs to take economics seriously or not."

"I don't think this is a radical change necessarily," said George Ford, Phoenix Center chief economist. "What is critical is for the organization to create independence and be a group that is expected to make its case even if it conflicts with that of the chairman." The real question is: "What good is this office under a Chairman [Tom] Wheeler?" Ford said. "It's not what it's going to do under Chairman Pai. He's thoughtful, conscientious, and interested in economics. Wheeler would put a lawyer to head [OEA] and wouldn't pay attention to it if it doesn't do what he wants it to do. ... I just don't think in the long run it will be used in the way Chairman Pai uses it." Wheeler declined comment.

Creating an OEA " is not a bad idea on paper, but if it's just used to paper over Chairman Pai's bad ideas and preconceived notions then it's obviously not a step forward in reality," emailed Free Press Policy Director Matt Wood. "We've seen this chairman ignore economic evidence when it suits him to do so, most notably but not solely on the role of Title II." The FCC "already does a fair amount of diligent and sound economic analysis -- or at least it once did," he added.

Trade-offs

The OEA would seek to ensure "economic analysis is deeply and consistently incorporated into the agency's regular operations," said the draft. "The problem isn't what one charges the Office with. It's whether the rest of the FCC is charged with taking economics seriously," emailed Tim Brennan, professor of public policy and economics at the University of Maryland, Baltimore County and chief economist under Wheeler. Brennan wrote a September blog post skeptical about the proposed new office, and said he hasn't studied the plan's details sufficiently to determine its merits: "Creating a separate Office in and of itself doesn't ensure that economists are involved with proceedings at the beginning, middle and end of matters."

The staff report said economic and data analysis isn't systematically incorporated into policymaking and economists "work in silos" around the agency. Experts consulted agreed that a centralized model that concentrates economists, a disaggregated model that disperses them, and hybrids all had advantages and disadvantages, disagreeing over which was better on balance. The report recommended largely centralizing economists and data functions in OEA, with bureaus retaining their own chief economists and chief data officers. Staffing won't be determined until after the vote, said an FCC spokesman. Other commissioner offices didn't comment.

"Every structure has trade-offs," emailed Blair Levin, a Brookings Institution senior fellow and FCC chief of staff under Hundt. The Pai "approach has the advantage of a more consistent policy and the disadvantage of not having economists embedded with the group that has the initial drafting task. Either approach can produce good policy. But the more important point is that policy making is a relay race. The first three runners can do great but if the final runner (in this case, the 8th floor) gets lazy or otherwise messes up, the team loses."

Katz said the Hundt FCC looked at centralizing economists but decided against it. Almost every outside economist urged the regulator to follow the DOJ and FTC model and create a separate office, he said. "If we put them all in one office, it's too easy for the next chairman to get rid of it or ignore it. ... We thought it was better to embed them throughout."

Plaudits, Caveats

"This is a strong step in bringing quality economic analysis to the fore at the FCC," said economist Mark Jamison, another AEI visiting scholar and former Trump transition team member. "In the past, a chairman could ignore or slant economics. Now any such attempts will be obvious and more easily halted. Chairman Pai and his colleagues are to be commended for their political courage. Subjecting their views to rigorous analysis will make their lives harder. But the country will benefit."

Pai deserves credit for following through on his proposed new office, said Scott Wallsten, Technology Policy Institute president, who lauded a proposed emphasis on research: "The FCC's White Paper series has historically offered fantastic ideas that may have seemed unrealistic when first written but ultimately generated large, real benefits over time," he emailed. "Two key difficulties ... are how to remain truly independent and how to stay relevant," he said. "Being independent means the office must be free to disagree with the Chair when the analysis suggests a proposal would yield net costs, while being relevant means the Chair (and others) must be willing to take its opinions into account. Those twin characteristics are difficult to retain over time as Chairs change."

"It is great that the FCC is promoting economics and data analytics," said Greg Rosston, director of Stanford University's public policy program and a deputy chief economist under Hundt. "Empowering the new office to move forward with rigorous economics and allowing academic researchers access to the all of the data ... would move the commission toward the cutting edge."

The proposal "makes sense for an agency that is increasingly using more, and more sophisticated, economic analysis in its decision making processes," emailed economist Coleman Bazelon, Brattle group principal. "Issues of spectrum policy, network practices, effective universal service and competition generally, as well as increased use of formal Cost Benefit Analysis, requires solid economic analysis to inform policy. Centralizing the economists will promote interaction and help to cultivate expertise." Economic analysis, while critical, is not a "substitute for active and engaged policymaking," he said. "Not all questions are solely economic."

The report recommended OEA produce a "non-public" memo on economic issues to accompany items circulated to commissioners, which would encourage bureaus to collaborate and OEA to be candid. "I don't think there's any reason to believe these things would stay nonpublic," Katz quipped.