Mr. Chairman and members of the Committee, thank you for
inviting me here today to testify on the urgent need for reform of
the Federal Communications Commission. My name is Adam Thierer, and
in my capacity as a regulatory policy analyst for The Heritage
Foundation, I have spent the last decade studying communications
and computing policy issues.
Toward that end, I have worked on several projects related to
FCC reform, both on my own at Heritage and with other public policy
researchers and academic experts. I hope to present for you here
today a few conclusions and proposals for FCC reorganization and
reform that have come out of these efforts, the vast majority of
which have still not been undertaken by the FCC or enacted into law
by Congress. I should stress, however, that the views I express in
this testimony are my own and should not be construed as
representing the official position of The Heritage Foundation or
any other organization I have worked with on this matter.
The Urgent Need for Reform
Let me begin with just a few brief words on why it is absolutely
essential that Congress takes steps to reform and downsize the FCC.
Let's begin with what I believe is a shocking paradox: We live
in an age of deregulation, but the FCC is larger and more powerful
than ever before.
Mr. Chairman, as you know, Congress took important steps under
the Telecommunications Act of 1996 to deregulate this marketplace.
Yet, while companies in this industry have been forced to begin a
demanding transition to a competitive marketplace, nothing has been
done to simultaneously ensure that the FCC reforms itself or
downsizes in any way.
In fact, FCC spending and staffing are at all-time highs. The
FCC has requested total gross budget authority for Fiscal Year (FY)
2001 of almost $280 million ($279,595,000) and total staffing of
1,975 FTEs. By comparison, ten years ago, FCC spending stood at
$108 million ($107,550,000) and staffing was 1,734 FTEs. In other
words, the FCC's budget has essentially doubled over the past
decade and the agency has hired roughly 250 additional bureaucrats
over the same period.
This is a situation virtually without historical precedent, both
domestically and internationally. On the domestic front, when other
important industries such as airlines and trucking were
deregulated, the agencies which oversaw them were forced to
radically downsize and in most cases were eliminated shortly after
deregulation was initiated. This has not been the case with the FCC
as the telecom sector has been deregulated.
On the international front, other countries pursuing telecom
liberalization have tended to also greatly curtail, or even end
outright, the meddling of their regulatory agencies in the affairs
of industry. Again, this has not been the case with the FCC in
America as our country has pursued reform of this sector.
Frankly, this situation is now becoming unbearable. There is
simply no development within the communications marketplace today
that is not scrutinized under the FCC's regulatory microscope. No
major decision or development within this sector goes forward
without the FCC's somehow casting judgement on the matter.
I would suggest that this sort of intrusive behavior is
inconsistent with the intentions and framework Congress put forward
in the Telecom Act of 1996. And while FCC officials will claim that
the bulk of their increased workload and oversight activities are
related to deregulatory activities, one must ask: Does the FCC
really need to take any steps to achieve deregulation? Why
can't they just step aside and stop micromanaging the day-to-day
developments in this fast-paced sector?
Congress should reject the logic some FCC officials seem to put
forward that only they can make this market competitive through
their vigilant oversight and constant micromanagement of the
affairs of industry. The logical retort to that is simple: If FCC
oversight is so virtuous, why is it that the least regulated
sectors, such as cellular phones and Internet services, are the
most competitive and the fastest growing?
Moreover, Congress downsized and then abolished previous
regulatory agencies such as the Civil Aeronautics Board (CAB) and
the Interstate Commerce Commission (ICC) precisely because
lawmakers knew that real competition would not blossom so long as
companies could come to Washington and plead their case for special
treatment with captured regulators. Real competition will
develop only when companies stop competing inside the Beltway for
the allegiance of regulators and start competing in the marketplace
for the allegiance of consumers.
This, more than any other reason, explains why it is absolutely
essential that Congress begin taking steps to reform and downsize
the Federal Communications Commission.
A Simple Strategy for Reform
So what should Congress do to begin to rectify this situation?
Well, a simple question deserves a simple answer. Therefore, I want
to outline for you a very reasonable strategy to downsize the FCC
in a sensible fashion while the industry is being deregulated.
Let's call it the "cut and peel" strategy.
The first objective under the "cut and peel" strategy is for
Congress to establish a few straightforward benchmarks or
objectives which you hope to achieve over, say, the next three
years. Let me suggest three such goals:
(1) a 30% cut in FCC funding;
(2) a 30% cut in FCC staffing; and
(3) the consolidation of FCC's 16 existing bureaus and offices
into 3 streamlined divisions or units.
And again, you should demand that these goals be achieved in 3
years. With this 30-30-3-3 framework in mind, you should then
demand that the FCC achieve these objectives by shedding many of
its redundant or obsolete powers and transferring remaining
responsibilities of importance to other agencies. This is the
"peel" portion of the "cut and peel" strategy. Let me suggest 4
specific FCC responsibilities which could immediately be peeled off
and given to other agencies to help achieve these objectives:
(1) Spin off all antitrust oversight functions to the
Department of Justice and Federal Trade Commission, which have more
expertise in these matters anyway. I should also note that the FCC
has no statutory authority to be reviewing communications
industry mergers, so you will be essentially returning powers to
the DOJ or FTC which did not belong to the FCC in the first
(2) Transfer and consolidate all spectrum management
authority and responsibilities to the National
Telecommunications and Information Association (NTIA) within the
Department of Commerce to end this unnecessary separation of
federal spectrum management.
(3) Transfer all international responsibilities to the
State or Commerce Department, both of which are in a better
position to deal with global trade and investment matters.
(4) Devolve all universal service responsibilities and
subsidy programs to state and local officials who are in a better
position to target these efforts to those most in need.
Mr. Chairman and members of the Committee, may I be so bold as
to suggest this is not an unreasonable plan. Indeed, I view it as a
very moderate proposal in light of the fact that the FCC has been
given a lengthy reprieve by Congress when it comes to regulatory
reform and agency downsizing. Given the central role communications
plays in today's global economy, the costs and inefficiencies of
unneeded FCC regulation can ripple throughout the U.S. economy and
mean higher prices, lower quality, and fewer choices for American
families. The time has come to rectify this situation, and this
sort of simple "cut and peel" compromise strikes the right
I thank the Committee for the opportunity to testify, and I
would be happy to take any questions if time permits. Thank
Adam. D. Thierer is a former Alex C. Walker Fellow in
Economic Policy at The Heritage Foundation.