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Should regulators have a future?

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Should regulators have a future?

The National Association of Regulatory Utility Commissioners (NARUC) will hold another of its frequent meetings this weekend in Austin. These gatherings have been an opportunity for nervous state commissions to consider ways to reinvent themselves now that competition in telecommunications is eliminating the justification for utility-type regulation in this sector.

U.S. Senator Ted Stevens, chairman of the Commerce Committee, has an answer. He has suggested that service quality and consumer protection might best be handled locally in the future. That would give state commissions something to do. What about the FCC?

“The only outlandish proposal is that we should keep it,” wrote Peter Huber in Law and Disorder in Cyberspace: Abolish the FCC and Let Common Law Rule the Telecosm (1997). If service quality and consumer protection can be handled by the states, as Stevens says, what does that leave?

A group of experts recently studied this question and came to the conclusion that the FCC will be needed in the future to manage interconnection and competition matters, that is, to make sure that competitors get a fair shake. The courts, the Federal Trade Commission and the Antitrust Division have too many other things on their plate and take too long, this group reasons, and don’t possess the “expertise” of the hundreds of economists, engineers and lawyers who work at the FCC.

The group of experts probably understood that it is difficult for many people to imagine a world without the FCC. The same was probably true of the Civil Aeronautics Board and the Interstate Commerce Commission, both of which were terminated by Congress. Somehow, the airlines, railroads, trucks, busses and other previously-regulated entities survived.

To be sure, there is an exemplary corps of professionals at the FCC. But no group of human beings can predict the future, and large bureaucracies can’t move very quickly. Take the history of cellular telephones, as noted by Huber. Conceived in 1947 and first operated by AT&T on an experimental basis in 1962, “the FCC did not issue the first cellular licenses until 1983. Nationwide cellular service could have been in place at least a decade earlier; consumers lost at least $85 billion because it wasn’t.”

There is another institutional dynamic that bears careful consideration: As long as the FCC is around, there will be efforts to expand it. Indeed, the same group of experts is proposing to give the FCC “regulatory jurisdiction over all electronic communications networks and services” in order to ensure competitive neutrality, that is, to protect competitors.

Whether now is the time to terminate the FCC or not is an interesting question. But Congress ought to begin thinking about a glide path toward its eventual elimination as part of its consideration of a re-write of the Telecommunications Act.