Yeah, Who DOES Need the FCC?

A counterpoint to Mitchell Lazarus’s similarly-titled, but philosophically different, post.

[Blogmeister’s Note: When we posted Mitchell Lazarus’s item concerning the need for the FCC, we anticipated push-back. And sure enough, our colleague Jon Markman has stepped up. The views expressed in the post below are Jon’s alone. As was the case with Mitchell’s post, others here at FHH may share some or all of Jon’s views; some may not. Ditto for our readers. We again encourage anyone who agrees or disagrees with Jon to let us know by sending along a comment.]

In a recent post here on CommLawBlog, my colleague Mitchell Lazarus addressed some core functions of the FCC that make it “not only valuable, but indispensable to how we live”. With all due respect to Mitchell – who has forgotten more about the FCC, spectrum, and telecom law in the last month than I could hope to learn in a decade – I would like to offer a different take.

The government shutdown prompts a conversation on just what are the “essential” tasks of the Federal government (keeping in mind that the Federal government is just one of the many levels of government we have in the U.S.).

In his post, Mitchell alluded to some of the extreme posturing inspired by the government shutdown, such as claims that the shutdown demonstrated the irrelevance of the Federal government and proved that smaller government is good and no government is even better. I tend to believe that this was mostly rhetoric used by one side to rally their base and/or strengthen their bargaining position in the budget negotiations; I suspect that the speakers in fact support much of what the Federal government does. But insofar as they were representative of honest beliefs, they are indicative of a far more extreme position than the norm.

In fact, most small-government advocates (e.g., libertarians) are different from no-government advocates. The two are as different from one another as believers in the regulatory state are different from Communists or dictators who advocate total government control over all aspects of life. Beliefs about government lie along a complex spectrum, not a binary. At least one poll (taken in 2010) indicates that most Americans believe that the existing Federal government is larger than is necessary or ideal, even though they implicitly favor at least some government to provide some level of services.

I think that most people, even many who work at the Commission, will admit that some of the FCC’s work is unnecessary, either because the regulatory initiatives weren’t a good idea in the first place, or because the world has changed and they are no longer necessary. Some of the more egregious examples, like the comparative hearing process, have been eliminated, but others remain. Even a fan of the regulatory state should be able to admit that there are ill-advised, outdated or unnecessary FCC regulations that can and should be jettisoned. But in the spirit of fairness, I’ll take the three core functions of the FCC which Mitchell highlighted in his post as my focus here.

Licensing.  As Mitchell pointed out, “if everyone transmits at once, no one can be heard.” But the same is true of land: if everyone tries to use the same land, no one can use it at all. That’s why we have private ownership of land.We could have set up a complex Federal agency to license land to various entities for a few years at a time, sometimes via billion-dollar auctions and sometimes for just an application fee, sometimes allowing the license to be bought and sold and sometimes not. But we didn’t, and now that idea would seem silly. There’s no reason why the licensing function of the FCC could not be replaced by a private ownership of spectrum rights, which would be analogous to private ownership of real estate.

How could this work in practice? Congress could, at least in theory, pass a law (shocking, I know) granting actual property rights in – as opposed to mere licenses to use – the spectrum, probably based on the way the spectrum is currently allocated. If you operate a radio station licensed to broadcast at a certain frequency in a certain place, under my theoretical law you would own the right to do that, not just a license to do it. If you want to sell that right to whomever you please, be they a foreigner or a felon or someone who already owns 17 radio stations in that city, you wouldn’t have to get the FCC’s permission; you would, as Nike would say, just do it.

Some might respond that this would be the death of all but the most profitable enterprises, that more and more of the spectrum would be taken for use by mobile broadband operators. Arguably, what people are willing to pay for something is the way they show how important it is to them, so the profitability of a business is a decent proxy for its value to the public. But putting that aside, the real estate analogy still has an answer.

If I buy land in downtown Washington, DC, I’m not allowed to put a skyscraper or a garbage dump or a cement factory on it just because I own it. Zoning laws and other regulations routinely limit what you can do with your property. Similar limitations could apply to spectrum ownership.  

Congress could allocate parts of the spectrum to particular uses (radio, television, radio astronomy, etc.) and allow other parts to be more open, letting the market make decisions within each area and generally in the open bands. Some parts of the spectrum could also be reserved for general, unlicensed public use, such as for Bluetooth, Wi-Fi, or public safety transmissions, much like a park or other public space is available for such use. If, in the future, Congress decided to reallocate some of the reserved spectrum (remembering that the open spectrum will do this via the market) for a different use (as it is now doing with the complex incentive auction), it could simply do what a zoning board does: change the rules for future construction, but grandfather in existing uses. That allows for the new use, lets the change occur gradually and with less disruption, and allows the current occupants to be the ones who profit from the change. Allowing the market to allocate the spectrum to its most profitable uses might mean a lot more mobile broadband and Top 40 music today, but tomorrow, it might mean something else entirely.  

Technical Rules. Mitchell is of course correct when he notes that interference is a serious problem – but so are trespassing, theft, and other violations of property rights. If we treated spectrum the same way we treat land, we would not be abandoning industries and users to the Wild West. Spectrum owners would still have access to courts to protect and enforce their rights. The judicial system may, at the moment, be overloaded and not equipped with the technical expertise to handle these types of cases en masse. But there are specialized courts which handle bankruptcy, immigration, military, patents and other technical and complex issues – surely there could be one to adjudicate radio interference issues (particularly if Congress would fully fund the Courts).

While trespass of land or chattel is certainly easier to visualize and understand than radio interference, existing laws could still be tweaked to deal with the latter. In the radio context, interfering transmitters could be identified with relative ease and their owners or operators served with cease-and-desist letters. In the case of interfering devices, Congress or the courts could create a civil action against manufacturers of interfering devices (if existing tort remedies did not already afford adequate relief). There would likely be situations where interference would be hard to trace, but in those cases, the FCC would be no better equipped to stop the interference than private bodies or the courts.

Preapproval of devices and the technical standards which the FCC promulgates are a tougher question.  Mitchell – based on considerable experience – points out that manufacturers may cut corners and cause interference without some regulator looking over their shoulder. But there are very few areas of life where the government is the one who tells manufacturers how to make their products work with one another or has to approve products before they go on the market, even if there is potential harm if they’re not made well. Children’s toys, bikes, most food products, even cars are subject only to statutory or regulatory requirements and post hoc rule enforcement to keep us safe. Private organizations, rather than the government, impose their own regulatory-like order. 

For example, ICANN coordinates the Internet’s domain name system. The Institute of Electrical and Electronics Engineers is responsible for setting Wi-Fi standards. Bluetooth SIG sets standards for Bluetooth technology. Other standards-setting bodies establish rules and standards, and manufacturers voluntarily comply so that their products will be compatible with what the user already owns, and therefore easier to use. Sometimes this leads to bad outcomes, but generally it allows for lower costs and much greater innovation, flexibility, and choice in the market.

International Treaty Negotiations.  Even a libertarian will tell you that one of the core functions of the government is to deal with foreign countries.  We expect our government – not private companies or individuals – to handle outsiders, whether militarily or diplomatically.  The State Department generally does a pretty good job of that on its own when it comes to lots of tricky, complex, technical treaties.  Resolution of the particular issues involved with radio treaties might require the formation of a group within the State Department (to include engineers, communications lawyers, and economists); but it does not require an entire agency of the power and size of the FCC.

Reliance on State Department representatives, rather than the FCC, to deal with international negotiations would still be a use of government power, rather than a true delegation to the private sector. It might thus be viewed as merely a re-branding, a substitution of one government regulator for another. But by narrowly circumscribing the authority of a department within an agency (like the State Department) through clearly limited delegation of power, we could ideally prevent the gradual accretion of power that can occur in a stand-alone independent agency.

I believe that many if not all of the current functions of the FCC could be performed by private actors and existing government institutions. Are there good things that the FCC does? Of course. Are there excellent, hardworking people there? Absolutely.  But questioning whether a government agency’s role is essential need not be a criticism of the agency, its employees, or its conduct.

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Comments (5) Read through and enter the discussion with the form at the end
Curtis J Neeley Jr - October 23, 2013 10:18 AM

Well, I agree with much of these answers to three functions Mitchell Lazarus Esq listed but I feel these three functions do not ever marginally address the core critical duty the FCC stopped doing when broadcasting of communications began to occur in the wire medium in the early 80's.

Both Mitchell Lazarus Esq and each failed to address the policing of radio broadcasts and wire broadcasts.

It is easy to forget what the FCC was created for because they have not done this since 1978 or so.

J Clifford Curley - October 23, 2013 12:44 PM

I wont comment on the plusses or minuses of the two arguments,(viewpoints) save to say I can find areas of my personal agreement with both, if not some new ways to consider the "business of boradcasting" as outlined by Jon Markman... but i truly enjoyed reading the outlook by informed folks on a truly throughful and interesting topic. Please do more of this, and I may be able to look at this question (or others) from my own perspective as a former broadcaster and now broadcasting consultant.

James C. Wolfson - October 23, 2013 12:53 PM

Both Mitchell's and Markam's comments are thought provoking. Maybe some of the mechanical/operational functions of the FCC could be handled by a private company and one of those functions could possibly be the ULS. I don't know but the ULS already may be handled by an outside contractor rather than by FCC employees, which would prove my point. Parts of the government do work relatively well and the ULS is one of those functions. At least I believe so from my and my staffs experience. I am sure there are war stories of problems or issues with the ULS and my comments will probably cause responses stating so. Oh well nothing is perfect especially computer programs.

Louis J Cutrona Jr - October 23, 2013 1:03 PM

From a macro-economic standpoint, this is like wrestling with a bag of Jello. Push down government involvement here, it pops up as increased government involvement somewhere else, especially when the courts are the final arbiters of contractual disputes.

It's not clear that piecemeal solutions reached by private parties will, writ large, be less expensive or better by some other measure.

It's also not clear how long it might take to amortize the cost to the taxpayer-consumer (who, in the end, foots the bill for everything) of a changeover. As always, the devil is in the details.

Harold Hallikainen - October 23, 2013 8:11 PM

Many years ago, I wrote an article advocating spectrum leasing. It's at http://www.hallikainen.org/ijclp/ijclp_webdoc_6_5_2000.pdf

Harold

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