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The Dangers of Regulating the Wireless Industry in the 'Public Interest'

Harold Furchtgott-Roth

I recently received a notice about a program on May 23 in Washington, D.C., entitled, “From Broadcast to Broadband: New Theories of Public Interest in Wireless.” The program will be co-hosted by three think tanks: the New America Foundation, Public Knowledge and the Rutgers Institute for Information Policy and Law. Those interested in hearing one perspective on the future of the wireless industry may want to listen.

While I do not share them, many of the views that will be expressed at the conference are part of a growing chorus seeking greater concessions from the wireless industry to the federal government.  Part of the reason that some seek greater concessions from the wireless industry is the “public interest.“  The Communications Act of 1934, the federal law governing communications including the wireless industry, uses the term “public interest” more than 100 times.  But the law never defines “public interest.” The term has evoked debate.

“Public interest” is a term admired from a wide range of political views.  Public Interest was an intellectual journal edited for decades by the late Irving Kristol. Great thinkers wrote for and read Public Interest.  Market-oriented economists such as Milton Friedman were among its contributors. Most articles in Public Interestchampioned the individual and viewed invasive government actions more with skepticism than admiration.  To market-oriented economists, “public interest” in the context of regulation is an admonition to do it as little as practical.

But the term “public interest” is far from the exclusive province of market conservatives. “Public interest law” often means legal efforts to have the government take an active rather than a passive role. To some regulatory observers, “public interest” is a code for the quid pro quo of private parties doing business at the grace of the government. Under this view of the “public interest,” the government in turn can and must seek corresponding concessions from the private firms as the price of doing business. Of course, a wide range of views of the “public interest” compete for the attention of regulators, and the views of “public interest” have evolved as technologies and markets change.  As the May 23 program invitation asks: “[D]o we need to reexamine what it means to make sure that wireless licenses serve ‘the public interest, convenience and necessity?’”

At least at the FCC, “public interest” has often been interpreted as an elastic clause enabling the Commission to regulate even where the statute is silent.  Thus, over the past many decades the FCC promulgated rules based on little more than the “public interest” on ways to slow the development of cable industry, broadcast ownership, the “Fairness Doctrine,” and on a wide range of other topics. Sometimes courts strike down adventurous regulations; sometimes courts defer to the FCC as an expert agency; sometimes the agency changes its rules on its own.

Regardless of whether courts allow the FCC to engage in expansive regulation under the “public interest” standard, the results for those regulated are all too often devastating. The broadcast industry would likely be in decline even without any federal regulation, but with excessive “public interest” regulations, the decline has been accelerated and chaotic. Amazingly, looking at the financially distressed remnant of a once proud industry, some call for yet more regulation of broadcasters.

For much of the past 25 years, the wireless industry has been the test bed at the FCC of less rather than more regulation. The FCC has typically imposed fewer regulations and made fewer demands on the wireless industry than other industries under its purview such as the broadcast industry, the wireline industry, and that satellite industry. Of course, lighter regulation is rarely appreciated.  Many if not most businesses in the wireless industry view themselves as over-regulated.  In an absolute sense, they are.  But compared to other industries, the wireless industry is only lightly regulated.

Success in business tends to bring more rather than less government scrutiny. The wireless sector is now by far the largest, and arguably least regulated, sector in the communications industry. While some may dispute the causal relationship, few can miss the increasing drum beat to regulate more the industry.

The asymmetry in the FCC’s regulations may well be unstable.  Sooner or later, either the wireless industry will likely be regulated more intensively like other industries, or other industries will be regulated less intensively like the wireless industry. The choice under the “public interest” to a market-oriented economist is obvious: regulate all industries less. But the choice to those who practice public interest law may be quite different.

If the wireless industry were just another mature or dying industry, few outside the industry might mourn its loss to over-regulation.  But the wireless industry is and ought to be at the center of much new and innovative technological change in America.  Regulate it too much, even in the name of the “public interest,” and the crippling effect will be felt not only in the wireless industry but throughout the American economy.

The lesson is not that the federal government should regulate innovative industries such as wireless less than older industries.  Industrial policy that segregates industries into those to be punished with more regulation and those to be redeemed with less regulation is despicable. Rather, the lesson should be that all industries, and our economy as a whole, should be redeemed with a lighter touch to regulation. That would be the “public interest” for the wireless industry and the entire economy.

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