Lack of Economic Analysis at FCC Harming Innovation, Economists Find in CALinnovates Report

Economists, Among Them the Former FCC Chief Economist, Call on Congress to Require Data-Driven Analyses by FCC in Making Decisions

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CALinnovates

Jul 11, 2016, 06:00 ET

SAN FRANCISCO, July 11, 2016 /PRNewswire-USNewswire/ -- The Federal Communications Commission's (FCC) refusal to engage in data-driven economic analysis as the basis for several significant rulemakings is the hallmark of an agency that no longer has a core mission and is instead trying to create a role for itself in the digital economy, according to a groundbreaking report by leading economists, one of whom is the former Chief Economist at the FCC.

Former FCC Chief Economist and Wharton Professor Gerald R. Faulhaber, PhD and Hal J. Singer, PhD, the authors of "The Curious Absence of Economic Analysis at the Federal Communications Commission: An Agency In Search of a Mission," highlight how other federal agencies routinely embrace economic analysis and encourage Congress to require the FCC to do the same in light of the significant part of the U.S. economy impacted by the FCC's rules.

"We must get back to the practice of basing regulations on thorough analysis rather than populist rhetoric," said Mike Montgomery, executive director of the tech advocacy group CALinnovates, which commissioned the report. "Economics will inform policy decisions that foster innovation rather than stymie it."

The economists explain that the U.S. Department of Labor, the U.S. Environmental Protection Agency and the Consumer Financial Protection Bureau all conduct rigorous cost-benefit analyses ahead of regulatory decisions yet the FCC does not. According to Faulhaber and Singer, the lack of economics in regulation could have a chilling effect on innovation.

"The FCC threatens this innovative arc as it lashes about for a new mandate. It is time for a rebirth of economics at the FCC. Based on our diagnosis of what ails the agency, Congress will have to right this ship," authors Gerald R. Faulhaber and Hal J. Singer note in the paper.

The authors highlight several current rule makings pending before the FCC in which they believe the FCC is poised to adopt rules that fly in the face of sound economic principles. Highlights from "The Curious Absence of Economic Analysis at the Federal Communications Commission: An Agency In Search of a Mission":

Privacy: The FCC's suggestion to impose asymmetric regulation on only one set of market participants will partially immunize edge providers from ISPs making competitive inroads into the online advertising market.
Set-Top Box (STB): The FCC's proposal is predicated on a fictitious factoid about the consumer costs to rent STBs and ignores the impact the proposals will have on programmers and copyright holders, including programmers of diverse content.
Net Neutrality: 2015 Open Internet Order (OIO): The FCC conducted no economic analysis of the impact its proposed rules would have on consumers, innovation or investment, and instead justified its regulations with unproven assertions about the positive economic benefits of the OIO.

CALinnovates agrees with the conclusions drawn by the authors that Congressional action is sorely needed to both clarify the FCC's mission and to codify a requirement for the Commission to conduct thorough analysis as the foundation of all rules affecting the innovation ecosystem.

About CALinnovates
CALinnovates is a coalition of technology leaders, startups and entrepreneurs serving as a bridge between the thriving and fast-paced tech communities based in California and the public policy communities in Sacramento and Washington, DC.

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SOURCE CALinnovates