October 2012 Archives

October 15, 2012 9:25 AM

Regulation Can Promote Investment and Consumer Welfare (You Just Might Agree With Jim Cicconi)

Whatever you think might be the purpose for which the FCC was created, you're probably wrong.  Congress explains the purpose of the Commission in one gigantic, and barely comprehensible, run-on sentence contained in Section 1 of the Communications Act of 1934.  To make it easier, I'll break it into a couple sentences.

The goal of the Act was to ensure that citizens had nondiscriminatory access "to rapid, efficient, Nation-wide, and world-wide radio and wire communications services" with "adequate facilities at reasonable charges."  Radio and wire communication services are to be made available at reasonable charges for the "purpose of national defense" and to "promot[e] the safety of life and property."

The first few times you read it, this provision sounds reasonable; if only because Congress uses the word "reasonable" twice in the same really long sentence.
 
Now that you know the purpose of the Act, what do you think this FCC thinks its purpose is?  If you didn't have the context of the Act and you only looked at the Chairman's bio, you would be forgiven for thinking he was the Chairman of some kind of mini Federal Reserve Bank for the telecommunications industry.  The notion of promoting investment is mentioned more than any other single concept, and "job creation" is also listed prominently in the first paragraph. 

To be fair, there isn't anything flatly antithetical to the FCC's official purpose in any FCC Commissioner's literature, speeches, or statements.  This is the problem.  The breadth of the Act's purpose almost certainly ensures that no two FCCs will define their focus or their actions in any consistent way.  The only person I've ever heard offer a solution is Jim Cicconi of AT&T.

His point is so non-controversial that it's easy to miss.  All he says is that the FCC should be "re-chartered" by Congress to focus on consumer protection.  The problem, he argues, is that the public--and many members of Congress--expect the FCC to act whenever a consumer issue arises. 

But, he explains, because the legislatively-defined purpose is not well-suited for the public's expectations of the FCC, "it leads [the FCC] into some adventurism in interpreting their own statutes."  Here is a report of his quote in 2008, again almost 4 years later at a Phoenix Center event, in his own words here, and again in May of this year here.  
 
You know what's weird about this statement?  I've only heard it from Cicconi.  I must have spent more than 5 hours looking at Internet search results to try to get some other cite for this idea.  But, I couldn't find anything by anyone saying anything similar.  It's just him! 

The better question is why no one else has raised this point?  My guess is that most people think that the official "purpose" of the FCC is written so broadly that Congress wouldn't need to change a thing for the FCC to focus on consumer protection.  Again, this is a problem. 

Look back at what the Chairman says is his focus. Is it any wonder that it's become cliché-like for someone on every side of telecom policy debates to argue that the FCC should decide in their favor because it "promotes investment?"   Likewise, the statement that a regulatory policy "promotes investment" has become almost boilerplate in every major FCC Order over the past few years. 

But, "investment", or "promoting investment" can never be meaningful regulatory goals,   because these terms offer the regulated firms no transparency of purpose or predictable consistency across political administrations.  Regardless of whether the regulator sides with one industry group or another, in a carrier-centric scheme the regulator can always say it is "promoting investment" by the "winning" side.  Changes in technology, as well as changes in political dominance, virtually guarantee an artificially-distorted regulatory environment.

The value of the last point cannot be understated.  Because a carrier-centric regulator will necessarily create policies with disparate effects on competing companies, these disparities in regulation will always find a political voice. 

The result is what we have now--unproductive partisan bickering over the economic interests of competing firms.  The voice of the consumer gets lost in this cacophony, if it ever finds its way into these quarrels at all. 

On the other hand, if the regulator is charged with the clearer obligation to focus on protecting the interests of communications consumers, regardless of the "regulatory classification" of the offending firm, then regulated firms can more easily discern the future expectations of the regulator. 

The almost zen-like paradox of Cicconi's proposal is that the regulator cannot promote investment by focusing its decisions on the investment of the regulated firms.  Rather, the regulator must have some transparent focus on something other than the business models of competing firms.

An explicitly consumer-focused regulator would have the ability to redress consumer harms perpetrated by any company that contributes to a communications service that consumers purchase.  Not only will consumers enjoy greater protection, and less confusion as to which state or federal agency can resolve their concern, but communications firms will benefit from a certainty not possible today, and both the FCC and Congress will also enjoy the same clarity of focus.