Is the FCC Captive to Media?
As I watched last week's Senate hearings on media ownership, I was amused to hear Senator John McCain remind other Committee members' of the FCC status as an independent agency and Congress' need to let it do it's business without undue interference. The Senator is of course right to remind us of this important fact, especially after what happened to his campaign finance reform law. The independence of government agencies is meant to shield bureaucrats from undue pressure by special interest and their politically elected allies, the same pressure that helped the major media and telecom groups write the 1996 Telecommunications Act. In contrast, the independence of the Federal Reserve is often credited with creating decades of sound & prudent monetary policy.
But independence is no guarantee that the regulatory cannot be 'captured' by special interest, allowing them exert an undue role in the formation of public policy. Noted economist George Stigler in fact provided the foundations to understanding how "regulation is acquired by the industry and is designed and operated primarily for its benefit." This is in part because there is no such thing as absolute independence. Some, for example, have argued that Fed Chairman Greenspan's sudden warming to a looser fiscal policy after George Bush's election was simply a pragmatic move to keep his job. Nor should one forget that most commissioners and agency staff go on to work in the same industry they were regulating. The fact is that independence is only skin-deep.
The regulator process itself may inherently be prone to capture, especially in highly innovative sectors. As Patrick Massey explains in 'Competition and Policy and Regulatory Reform in Public Utility Industries', "a regulator simply does not and cannot know as much about the business as the regulated firm(s). Regulators are therefore heavily reliant on regulated firms for information. This allows regulated firms to manipulate regulatory decisions in their favor. Thus, over time regulators tend to identify with the regulated industry and end up defending it rather than policing it."
This problem is reinforced by a lack of access to government agencies by the public that cannot afford DC lobbyists and industry 'experts' that get face-time with commissioners & staff. While Chairman Powell may counter that the commission has received a record number of comments - 18,000 comments of which over 17,000 were from individual Americans - the fact that they are nearly all, except for those from industry, against changing the ownership rules appears to have escaped him.
That's why, while it is important to ensure the independence of government agencies from undue political pressure, it is equally important that the regulatory process be as transparent as possible. That's what members of Congress as well as Commissioner Copps and Adelstein have requested of the Chairman. For once the proposed rules are to be voted on on July 2 and barring a court order, there is now no going back. They are final and will be soon followed, if press speculation on the proposed rules are correct, by a frenzy of acquisitions, mergers and swappings such as we have never seen.
Ironically, one of the textbook examples of regulatory capture happens to be the FCC during the Ma Bell days, when the commission served primarily as a rubber stamp to AT&T's whims. With the break up of ATT and introduction of competition, the commission placed great effort in replacing that appearance of capture with one of serving the public interest. Seems like those good old days are back!
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