FCC Process Reform Underscores Need for Economic Review at Independent Regulatory Agencies

Mark & Samantha
By: Mark Febrizio and Samantha Day
July 24, 2018

Change at the Federal Communications Commission (FCC) moves at a “glacial pace,” but it is time for a transformation, announced Commissioner Michael O’Rielly at a June 28 Free State Foundation policy seminar at the National Press Club in Washington, DC. Other speakers discussed net neutrality and the First Amendment implications of municipal broadband, but Chairman O’Rielly focused his remarks on the next steps in the FCC’s process reform efforts.

Recent improvements are consistent with next steps

O’Rielly has made it his personal mission to improve FCC procedures since he joined the agency, and he believes that formalizing the Commission’s procedures is a critical step for enhancing FCC rulemakings. Establishing better processes is especially important for independent regulatory agencies because they are not subject to the same requirements for regulatory impact analysis as executive branch departments. O’Rielly’s rhetoric is consistent with recent improvements at the agency, such as establishing the Office of Economics and Analytics, which intends to integrate economic review of rules into the agency’s procedures.

To illustrate the Commission’s process reform efforts, O’Rielly highlighted five main ideas:

  1. Codifying Commission procedures
  2. Formalizing timeframes and timelines
  3. Eliminating the Administrative Law Judge (ALJ) process
  4. Shifting toward a deregulatory presumption
  5. Fixing the Commission’s enforcement process

Each of these changes should help the FCC become more organized, transparent, and efficient, resulting in better regulation and improved outcomes for individuals and businesses that work with the agency.

Detailing next steps for FCC process reform

Currently, the Commission operates with a minimal formal structure for procedures, resulting in a “how we’ve always done it” style of practice. O’Rielly believes putting working procedures down in word and integrating them into the Code of Federal Regulations (CFR) would have a powerful effect. Formalizing existing practices would create more certainty around agency processes and avoid unapproved “substantive revisions after an item’s adoption” by staff.

A specific way O’Rielly proposed to formalize procedures is for all FCC proceedings to adhere to appropriate timelines, since many get lost in the system and can drag out for years.[1] He stressed that the “180-day merger shot clock should not be aspirational,” but rather each step should have reasonable deadlines and predictable timeframes.

Relying on ALJs to decide which issues go to administrative hearing contributes to the phenomenon of long timeframes. The Commissioner described the lengthy process of holding initial proceedings, transferring matters to an ALJ for another hearing, and bringing the issue back for a vote by the Commission as “a waste of time and resources.” Instead, O’Rielly recommends paper hearings be used for factual discovery and information gathering purposes. The result would expedite cases without sacrificing due process or the option of judicial review.

More drastically, O’Rielly believes that the FCC should look for opportunities to “eliminate unnecessary regulation” and focus regulation on situations with “clear and convincing evidence” that competition is inadequate. When regulation is deemed necessary, the Commissioner argued rules should be put in place with sunset provisions or mandatory periodic reviews to ensure they remain effective.

Lastly, O’Rielly expressed the importance of revisiting the Commission’s forfeiture guidelines and setting up methods to “track the forfeiture collection process.” He emphasized that “increasing the transparency and legitimacy of our enforcement actions” would avoid inconsistent policies and prevent FCC proceedings from eschewing notice and comment. Without clear guidelines on what constitutes a violation, there is room for abuse.

The common theme: Improving regulatory processes

While most of the ideas O’Rielly presented are not directly related to economic analysis of FCC rulemakings, they are closely aligned with the goal of improving regulatory analysis. Executive branch agencies (e.g., the Department of Transportation or the Environmental Protection Agency) are required by presidential directives to analyze the costs and benefits of rules and submit them to the Office of Information and Regulatory Affairs (OIRA). But independent regulatory agencies like the FCC are exempt from the executive orders that govern regulatory analysis—thus, avoiding OIRA review.

Clearer procedures along with requirements for economic analysis can help ensure that FCC regulations have clear objectives and are net-beneficial to the public. When independent regulatory agencies elevate the economic analysis of rules, they take a step toward higher-quality rulemaking—as has been confirmed by empirical research.

Furthermore, formalizing economic analysis may be critical to achieving some of the ideas proposed by O’Rielly. For instance, documenting costs and benefits is essential for gauging the effectiveness of rules at achieving their objectives. But the lack of careful analysis of rules from independent regulatory agencies limits such evaluation. For the FCC to use tools like mandatory reviews to minimize unnecessary regulation, it should be conducting rigorous economic analysis ex ante so that it can also incorporate retrospective review of rules ex post.

O’Rielly’s suggested next steps for process reform are intriguing ideas that the agency should consider to formalize and improve its internal procedures. Significantly, these steps are consistent with the FCC’s attempts to improve rulemaking by elevating economic review in its regulatory analysis. Other independent regulatory agencies should take note and improve their own processes for benefit-cost analysis and retrospective review, working toward the goal of making better, evidence-based regulation.


[1] See, footnotes 4 and 5: “Remarks of FCC Commissioner Michael O’Rielly before the Free State Foundation.” June 28, 2018. https://docs.fcc.gov/public/attachments/DOC-352081A1.pdf.