August 20, 2008 | By Richard Esguerra

The FCC and Regulatory Capture

Earlier this month, Internet users welcomed the FCC's ruling against Comcast for interfering with BitTorrent uploads, celebrating the action as a victory for net neutrality. Reigning in Comcast's dishonest behavior was the right thing to do in this case, but many observers are worried that the FCC is establishing a dangerous habit of interfering with the Internet, especially since the FCC has a spotty history when it comes to serving the public.

For those looking for more background, a great panel discussion/podcast from the Technology Liberation Front explores the series of decisions that brought the FCC to the forefront of the net neutrality debate and covers why those decisions are unprecedented. Commenting on the FCC's action, law professor Susan Crawford writes:

The [FCC] is in completely uncharted waters, using this idea of 'ancillary authority' to carry out whatever it feels like. [...] Although in the short term condemning Comcast is certainly a good idea, the notion that case-by-case, wholly discretionary adjudications like this one are possibly a good idea for all aspects of internet policy is nuts.

But it is technology scholar and journalist David Robinson who reaches the root of the problem looming beyond the horizon: "[The Comcast decision] also preserves the Commission's ability to make bad choices in the future, especially if diminished public interest in the issue increases the odds of regulatory capture."

A regulatory body like the FCC is created by the government to police entities (like Comcast or AT&T) that left alone, may not be adequately answerable to the forces of market competition or interested in serving the public. But over time, companies and organizations can pry the regulatory body away from its responsibility to regulate in the public interest by exerting influence through paid lobbyists, lawyers, think tanks, and so on. This tendency on the part of bureaucracies to regulate on behalf of the industries that are supposedly being regulated, rather than on behalf of the public, is so pervasive that it has a name: regulatory capture.

Technology history wonks are well aware that the FCC has often acted as the incumbents' guard dog, tossing up barriers to new technologies at the behest of established corporations. Skeptics may dismiss these battles as inter-industry bickering, but even when the public loudly supports a particular course of action, the FCC frequently ends up unable to shake the influence of the industries it's supposed to be regulating.

For instance, consider the media consolidation battle that has raged around the FCC for the last seven years. When the FCC first loosened media ownership limits that kept corporations from dominating broadcast and print communication, the Commission was met with widespread opposition from the public, academics, and public interest non-profits (similar to today's broad coalition of net neutrality advocates). Thousands of citizens signed up to speak out against media consolidation at official FCC hearings across the country and the FCC reviewed over 167,000 comments on the issue. But instead of making efforts to preserve media diversity, the Chairman unleashed large corporations, allowing them to own both newspapers and TV stations in the same market. Opposing the Chairman's decision, FCC Commissioner Jonathan Adelstein lamented the effects of capture in a statement:

By moving forward now with relaxation of the newspaper-broadcast cross-ownership rule, the majority ignores the repeated pleas of the American people and their representatives in Congress. [...] As we solicited the views of citizens across the country, we did not hear a clamor for relaxation of the cross-ownership rules. We only hear that from media company lobbyists inside the Beltway.

Having been captured on media consolidation, the FCC would have ignored the public completely if not for the intervention of the courts in 2003's Prometheus v. FCC decision, and this years' Senate resolution. It took a stern smackdown from Congress to put the brakes on media consolidation, despite the years-long grassroots effort to address the FCC directly.

All things considered, the halls of the FCC are far from a level playing field. The FCC policy machine is led by unelected Commissioners, often able to ignore public opinion. The telephone and cable companies have deep, long-standing relationships with the FCC and lobby heavily to neuter, derail, or otherwise reverse the course of regulation that goes against their agenda. Many FCC officials treat their time at the Commission as a way station, looking forward to careers lobbying on behalf of the companies they are supposed to be regulating. Meanwhile, Internet companies have far less experience and influence; entrepreneurs and individuals essentially have none. In this environment, can the FCC be trusted to preserve the values of the Internet?

One thing is certain — the Comcast decision is just the beginning of this fight.


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