Abolish the FCC

by on January 8, 2009 · 18 comments

Regarding Stanford Law Professor Larry Lessig’s proposal to abolish the Federal Communications Commission: Adam covered the main points here and I’d like to add a couple minor points.

The idea of abolishing the FCC used to be a right-wing fantasy. But now Silicon Valley-booster Lessig is on board.

With so much in its reach, the FCC has become the target of enormous campaigns for influence. Its commissioners are meant to be “expert” and “independent,” but they’ve never really been expert, and are now openly embracing the political role they play. Commissioners issue press releases touting their own personal policies. And lobbyists spend years getting close to members of this junior varsity Congress. Think about the storm around former FCC Chairman Michael Powell’s decision to relax media ownership rules, giving a green light to the concentration of newspapers and television stations into fewer and fewer hands. This is policy by committee, influenced by money and power, and with no one, not even the President, responsible for its failures.

Relaxing media ownership rules was and is a good idea, but aside from that Lessig is absolutely correct. The FCC has a history of inhibiting innovation, protecting favored clients and persecuting politically-unpopular industry segments who stand up for their legitimate rights. But politics are nasty, so none of this should be surprising.

Lessig is also correct that

The solution here is not tinkering. You can’t fix DNA. You have to bury it. President Obama should get Congress to shut down the FCC and similar vestigial regulators, which put stability and special interests above the public good.

Yet, Lessig would create a new agency:

Congress should create something we could call the Innovation Environment Protection Agency (iEPA), charged with a simple founding mission: “minimal intervention to maximize innovation.” The iEPA’s core purpose would be to protect innovation from its two historical enemies—excessive government favors, and excessive private monopoly power …. With a strong agency head, and a staff absolutely barred from industry ties, the iEPA could avoid a culture of favoritism that has come to define the FCC.

Maybe it’s possible to establish a bureaucratic utopia, although the FCC was created in 1934 by idealistic New Dealers who thought they were establishing a perfectly expert, uncorruptible guardian of truth, justice and the common man.

And they failed.

Maybe the dream that mortals are capable of creating perfect governing institutions consonant with the Platonic vision of philosopher kings is a fool’s errand?

Maybe process and agency structure matter less than the temperament and integrity of the men and women whom the President appoints to lead agencies?

One of the core responsibilities of the iEPA which Lessig envisions would be to “reverse the unrestrained growth of … monopolies.”

But genuine (as opposed to imagined) “excessive private monopoly power” in telecommunications ended sometime between the late 1980s and the early 1990s. What we really have here is a problem of lagging empirical perceptions (see, e.g., what George Gilder and I wrote here) and the absence of a commonly understood definition of the term “monopoly.”

Some time ago, Professor Schumpeter observed that the term “monopoly” has become a catch-all phrase:

Economists, government agents, journalists and politicians in this country obviously love the word [monopoly] because it has come to be a term of opprobrium which is sure to arouse the public’s hostility against any interest so labeled. In the Anglo-American world monopoly has been cursed and associated with functionless exploitation ever since, in the sixteenth and seventeenth centuries, it was English administrative practice to create monopoly positions in large numbers ….

That practice made the English-speaking public so monopoly-conscious that it acquired a habit of attributing to that sinister power practically everything it disliked about business. To the typical liberal bourgeois in particular, monopoly became the father of almost all abuses—in fact, it became his pet bogey … And in this country monopoly is being made practically synonymous with any large-scale business.

In any event, if monopoly abuse is what we are concerned about, that’s what we have the Federal Trade Commission and the Antitrust Division of the Department of Justice for. We hardly need the FCC or an iEPA for that.

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