The ‘Welcome Return’ Of Economics At The FCC


By Mark Jamison

After several years of silence — at least that’s what it seemed like from the outside — FCC economists again have a voice. They have even published an economics paper in a scholarly journal, which is rare for government economists.

The communications industry and consumers will be the beneficiaries of this return of economic voices.

What happened to economic voices at the FCC?

Public use of economic analysis declined at the FCC during the latter years of the Obama administration. It would seem unlikely that the president had anything to do with that, but it is the time stamp.

How do we know that economic analysis declined? Economists Gerald Faulhaber, Hal Singer, and Augustus Urschel trace the evidence. They note that the FCC’s in-house think tank — originally called the Office of Plans and Policy — produced 46 working papers from the early 1980s to 2012, laying the groundwork for world-leading regulatory policies. Then the working papers stopped. The agency also held numerous economic symposia in earlier times — averaging 16 per year from 2010 to 2014 — and then held just four in 2015. They also examine the decline in quality economic rationale for agency actions during that time.

There has been a rebuttal of the Faulhaber-Singer-Urschel analysis, but the criticisms are largely ad hominem, complaining that the research was sponsored, the economists had appeared before the FCC in the past, and that the authors didn’t like the more recent economic work because it didn’t align with their preferences. I always keep in mind a lesson that attorneys at the Kansas Corporation Commission taught me when I started working there in the mid-1980s: When adversaries can’t refute your analysis, they attack you.

Why did economic papers stop and economic symposia decline? There are probably people who know, but I don’t and won’t speculate. What matters is that the deterioration occurred, that it had negative impacts, and that current FCC leadership is reversing the pattern.

Why are economic voices important?

FCC economists have been leading thinkers in regulatory economics. In 1985 economists Evan Kwerel and Alex Felker made it possible for the world to begin using auctions for licensing radio spectrum. In 1988 economist Robert Pepper foresaw the need for a paradigm shift in network regulation if broadband was to be allowed to succeed. Economist Jason Oxman demonstrated the importance of the light-handed approach to regulation of the internet.

It takes political courage for an agency to allow its economists to be out in front on issues. Kwerel and Felker were in a small minority when writing about the importance of auctions. Pepper was out of step with the regulatory community when he pointed out that cherished regulations were holding the industry and its customers back. In 2002 FCC economists published a paper in a leading academic journal explaining the economics of various important issues that the FCC was facing even though the economics did not align with some of the FCC’s policies at the time.

The decline of economic analysis affected the quality of the agency’s work. Former FCC chief economists Timothy Brennan and Michael Katz publicly pointed to flaws here and here in the FCC’s economic work in its 2015 Open Internet Order. The agency’s 2016 launch of set-top box regulations were based on analyses provided by Democratic Senators rather than FCC economists. Fortunately, that effort has since been aborted.

What’s happening now?

A new paper by FCC economists Jerry Ellig, Paul LaFontaine, Wayne Leighton, Eric Ralph, and Sean Sullivan provides an explanation of the economic rationale for the agency’s current work on the digital divide, innovation, consumer protections, broadband analysis, and net neutrality. It also explains the formation of the FCC’s new Office of Economics and Analytics.

Hopefully this new openness about and embracing of economic analysis will take us back to the days when FCC economists made the regulatory community uncomfortable by pointing out where present practices and forward-looking economics are out of step.

Mark Jamison is a visiting scholar at the American Enterprise Institute, where he works on how technology affects the economy, and on telecommunications and Federal Communications Commission issues. He is concurrently the director and Gunter Professor of the Public Utility Research Center at the University of Florida’s Warrington College of Business.

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