Laws and Rules: A Critical Structural Relationship

The relationship between laws and rules is an important element of any restructuring plan for the telecommunications market. Whether the government seeks an elaborate or a minimal regulatory process, there almost certainly will have to be some regulatory oversight (or similar government management) of the telecommunications market during the period of its most radical transition.²² Immediately relegating the regulatory process to the role of supplying the insignificant details that cannot be included in legislation is, almost certainly, a serious mistake. Regardless of the form and structure of the proposed government oversight, the structure of and reasons for the oversight process should be considered and developed with great care. Such attention is warranted whether the government envisions an elaborate, independent, and extremely public regulatory system, such as the one that exists in the United States, or a very private and consultative approach, such as is followed by the various involved ministries in Japan, or a quasi-public institutional arrangement, such as the one that the United Kingdom established with the Office of Telecommunications (Oftel). Though there is certainly no universal solution to the problem of structuring the relationship between laws and rules, it is clear that a lack of attention to the relationship, and to the purpose of the regulatory structure adopted, will produce substantial problems in the long term. (In the discussion that follows, the term "rules" used is a short-hand reference for various nonlegislative decisions, including ministerial ordinances, regulatory policy statements, and other similar actions that vary from one jurisdiction to another.)

Should laws adopted by legislators define broad goals, and rules adopted by regulators supply the details?

In general, this is an approach that has been taken in the United States. The Communications Act is a broad, flexible piece of legislation implemented by the rules that the FCC adopts. Significant benefits of this approach include the following:

Frequent legislative action is not required. New and amended legislation is difficult to enact in a free society because consensus is difficult to achieve. Interest groups seek to press their own points of view, often paralyzing the legislative process. With a broad, flexible legislative framework, changes can still occur through action by the regulator. With relatively few legislative changes, the United States (at the national level) has moved from a heavily regulated, monopolistic market to a substantially deregulated, competitive market.
Details are supplied by the expert agency, instead of by legislators who do not and cannot focus their attention on specific communications issues on a regular basis.
As discussed in Section II, the regulatory agency is somewhat removed from political pressure. This allows communications policy to be developed without the direct influence of political objectives.

The benefits of having an independent regulatory body to implement the expansive policies of flexible legislation must be balanced against the danger that legislation may be so general as to be almost inconsequential. Legislation must establish some general guidelines, such as the essential interests to be preserved and protected. For example, the general objectives set out in the law might indicate whether the needs of users or service providers are to be paramount, how the demands of the business and the residential sectors are to be balanced, and whether the government will serve as an impediment to, or a proponent of, market entry.

The law also should at least outline the process by which rules will be adopted and violations redressed. In other words, the regulatory agency should be a creation of the law.

The distinction between laws and rules should not be taken to suggest that rules may have only a narrow focus and be concerned only with detail. In fact, rules themselves may define broad policies that are consistent with the broader commands of applicable legislation. Other more specific rules may serve simply to implement legislative policies. Thus, regulators, acting within the general framework set up by laws, may themselves adopt certain goals. With other rules, the regulators may define the tools to be used to achieve such goals.

What is an example of an expansive goal or objective in the United States that appears in the Communications Act and that is implemented by the FCC's rules and policies?

Perhaps the most common example of such an objective is the concept of the "public interest, convenience, and necessity," which is central to the Communications Act. The Communications Act generally requires that the FCC, as well as facilities and service providers, act in ways that will advance the "public interest." The term itself, however, is not defined.

The FCC is given the responsibility of defining this term, in light of comments that it receives from the public. So long as the FCC's decisions appear to be promoting the "public interest," as expressed in public comments, the courts will tend to support agency decisions that are challenged in court. Congress also generally will support the agency, so long as it concurs in the FCC's perception of the public interest.

During the 1980s, for example, Congress repeatedly expressed its concern that the FCC was deregulating too quickly. In other words, although the FCC perceived deregulation as consistent with the public interest, Congress generally feared that excessive deregulation would be contrary to the public interest. Many members of Congress expressed their concerns about rising prices and lower quality service, and they suggested that to the extent deregulation produced these results, continued deregulation was not consistent with the public interest. According to these legislators, the "public interest" demanded attention to the goals of affordable, reliable, high-quality service; such goals should take precedence over any desire for a less regulated marketplace. To these legislators, the FCC had become obsessed with promoting a free market, regardless of the results that the market would produce. As a result, Congress questioned whether competition, at all costs, was in the "public interest." As Congress and the FCC clashed over these issues, a contentious period of policy making in the United States ensued.

For some, the controversy reflected a breakdown in the process. Critics argued that Congress was trying to regulate and to exert excessive control over the FCC.

For others, however, the debate illustrated the extent to which Congress and the FCC can interact to determine national policy, without the need for legislative action. Although disagreements between Congress and the FCC sometimes stalled market development, eventually the process moved forward. Congress did not adopt laws that would prevent future change. The FCC responded to congressional inquiry by moderating some of its policies.

Are there other similar goals that U.S. law prescribes to direct the development of U.S. communications policy?

There are many such goals. Not all are set out in the Communications Act. Some are embodied in the Constitution. Others are contributed by other federal laws. Still others are defined by the actions of the FCC and other government departments and agencies. The following list includes some of the prominent fundamental goals of U.S. communications policies and rules:

Commitment to free speech and self-determination: The First Amendment to the U.S. Constitution guarantees the right to free speech, which is considered an essential feature of a democratic society committed to self-governance. This goal has inspired rules and policies in favor of trusting listeners to make decisions on the basis of more, rather than less, information. Consequently, significant government limitations upon speech are relatively rare.
Private ownership of property: Historically, the United States has authorized private individuals and entities to carry out communications activities, including broadcasting, telephony, and other services. Communications facilities also are privately owned, although the government owns and operates many facilities to conduct its functions of governance. The goal of promoting private ownership and exploitation of property virtually precluded the development of a system in the United States where the government would own and operate the commu-nications network. In the area of radio frequency spectrum use, the dilemma between preferring private ownership and exploitation of property and recognizing that the radio spectrum was arguably a resource owned by all people, produced the "public trustee" concept of broadcast licensing. The government decided that although it wanted to encourage private individuals and entities to use the spectrum to provide broadcast service, it did not want to allow them to use this valuable public resource to serve purely private interests. The concern was particularly great because the government in the 1920s and 1930s considered spectrum to be a scarce resource. In the government's view, not everyone who wanted to use the spectrum would have access to it. Thus, the government decided to license the spectrum to private concerns and require the licensees to use the spectrum in trust for the public. Common carriage, which is discussed below, reflects a similar legal concept that requires private owners to act for the benefit of a broad populace.
Right of the public to share national resources: To provide nationwide service to as many people as possible, resources such as spectrum have been allocated among a variety of service providers throughout the country.
The public knows best what it wants: The government is ill-equipped to determine the needs and desires of individuals. For this reason, Congress requires the FCC to serve the "public interest." The FCC must determine what the public wants and must act to satisfy such needs. To assist the FCC in this process, the Communications Act and the APA require the FCC to solicit and consider the views of the public before making any policy decisions.
The government has a limited role: When private enterprise fails to serve the public interest, the government may need to become involved. Over time, as the public interest changes, the need for government intervention will change. For this reason, the United States has experienced periods of both intense regulation, when private enterprise was not thought to be serving the public, and intense deregulation, when government involvement was thought to be inhibiting the degree to which private enterprise would promote the public interest.
The government should reflect the will of the people: The U.S. system of government assumes that the more opportunities the public has to participate in decision making processes, the greater the likelihood that government action will foster the rights of the people. For this reason, the law requires public notice and comment on proposed agency actions, it prohibits regulators from making decisions behind closed doors, and it provides the people with the right to gain access to government records. Extensive access to the courts, where legislative and regulatory actions may be challenged, is another mechanism for public involvement in the decision making process. Finally, the electoral process provides the most fundamental right to determine who will make decisions about the direction of government and society.
States are sovereign: Because the states retain all powers not delegated to the federal government in the Constitution, the federal and state governments are often involved in determining the contours of broad policy matters. As discussed in Section II, this is certainly true in the communications area.

How are some of these goals reflected specifically in requirements of the Communications Act?

In providing a flexible structure for various services and service providers, and in outlining both procedures to be followed and actions to be avoided by the FCC, the Communications Act advances many of the policy goals summarized above. The Communications Act applies these general principles to matters related specifically to communications.

Without pretending to be an exhaustive list, the following concepts illustrate how the Communications Act encourages some of the broad goals summarized above: ²³

Common Carriage (advancing several of the policies noted above, including the commitment to free speech, the preference for private ownership of property, the right of the public to share resources, and the view that the public knows best what it wants): The Communications Act does not define a "common carrier," but the term has been interpreted by the courts to describe an entity that holds itself out as being available to provide service to all interested parties on like terms and conditions. Under the Communications Act, the FCC is directed, among other things, to ensure that all entities functioning as common carriers
1. "furnish communication service upon reasonable request therefor";
2. impose charges that are "just and reasonable";
3. avoid any "unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services";
4. publish their charges and changes to charges;
5. build networks that include only those facilities that the FCC, after due consideration, finds will further the "present or future public convenience and necessity"; and
6. maintain accounts and records in accordance with FCC requirements.
Historically, FCC regulation of common carriers was the tool used to promote expansion of and access to the U.S. telephone network. Since the 1980s, the FCC has regulated less and allowed carriers to respond more to market forces.
Special Treatment for Political Speech (advancing the commitment to free speech and self-determination and the view that the public knows best what it wants): The Communications Act requires that certain candidates for political office be given reasonable access to broadcast and cable television facilities.
No Censorship (advancing the commitment to free speech and self-determination and the view that the public knows best what it wants): The Com-munications Act prohibits the FCC from exercising the "power of censorship" over any radio communication or service. (Section 326).
Universal Service (advancing the right of the public to share resources and ensuring that private participants play a broad role in the market so that the government can play a limited one): The FCC has general authority "to make available, so far as possible, to all people of the United States a rapid, efficient, Nation-wide and world-wide wire and radio communication service with adequate facilities at reasonable charges . . . ." (Section 151).²⁴ This policy is augmented by a provision that directs the FCC to allocate broadcast channels to ensure that each state is allocated at least one channel. (Section 331).
Dual Jurisdiction (reflecting respect for state sovereignty): The Communications Act prohibits the FCC from regulating communication service within a single state and activities of carriers that involve solely intrastate communications. (Section 152(b)).²⁵
Encouraging New Technologies (advancing the view that the public knows best what it wants and the respect for self-determination): The Communi-cations Act encourages the exploitation of new technologies, stating that any person "who opposes a new technology or service proposed to be permitted . . . shall have the burden to demonstrate that such proposal is inconsistent with the public interest." (Section 157(a)). The FCC does not make investment or technological decisions, unless it determines, for example, that a company will be forcing users to pay for unwanted features or services.
Notice and Comment Requirements (advancing the view that government should reflect the will of the people): As discussed above, various provisions of the Communications Act prohibit the FCC from making a decision before the public has had a chance to comment upon the action being considered. This process is made complete by the various requirements of the APA and the availability of court review of FCC decisions, as discussed in Section II.
Special Programs for Special Needs (recognizing the preference that government play a limited role): The Communications Act provides for the expenditure of funds to develop public telecommunications facilities, educational television programming for children, and noncommercial (educational) television programming. The law also demands that licensees take certain measures to make communications services available to the disabled. In each case, private actions are either assisted (with funding) or directed (by rules); neither the FCC nor other government entities supplant private action.
Enforcement (preserving rights necessary to ensure that the system of private property is respected): The Communications Act authorizes the FCC to impose various monetary and other penalties for violations of the law and the FCC's rules. The penalties (or the mere threat that they will be imposed) are intended to ensure that private rights are respected. The Communications Act also prohibits the unauthorized reception or distribution of various types of communications available only by subscription. These include cable television service and subscription television service (whether through satellite, microwave, or broadcast frequency transmission).

Many of these provisions are general, consistent with the practice in the United States of writing and adopting broad and flexible legislation. These provisions, however, have been given content by FCC action and court interpretation.²⁶

How do the FCC's rules "give content" to these broad goals?

The rules set forth elaborate procedures to be followed, as well as the details of various standards and methods; the relatively brief Communications Act is supplemented by five printed volumes of FCC rules. The FCC also issues tens of thousands of pages of written decisions each year to explain its actions, examine various policies, and satisfy numerous legal requirements.

Some notable examples of rules that "give content" to the policy goals outlined in the Communications Act include (1) for common carriage, elaborate rules that instruct common carriers how to allocate costs and justify tariffs, and, more recently, rules that set forth the methods to be followed in calculating price caps; (2) rules that direct federal and state regulators to confer on issues that affect both intrastate and interstate activities; (3) rules that establish application forms and licensing procedures to be followed in seeking authorizations to provide radio and wire services, and that set out various standards and requirements intended to ensure that such services are made available widely and by a diverse group of service providers; (4) voluminous technical rules designed to ensure that the public receives high-quality service without interference and to encourage innovation by the private market; and (5) procedures for obtaining type-approval and registration of equipment, all of which permits the private market to meet demand subject to minimal government intervention.

As discussed above, FCC decisions that interpret such general concepts as the "public interest" also give meaning to the law. In addition, because they bear the weight of public comment, these decisions will provide different interpretations of such concepts over time, reflecting changing values and attitudes in society.

It is not possible to provide a precise formula for the relationship between the legal and regulatory systems that will govern telecommunications. The system will depend upon many variables, including the general goals and values to be furthered, the extent to which a regulatory process develops, the type of regulatory process desired, the extent to which public participation in regulatory decision making is desired, the role of the courts in the system, and the financial resources available to support the system. The U.S. system reflects the preferences of a country that has a long tradition of administrative procedure, a bias toward an open and elaborate regulatory system, an active court system, and a fairly substantial budget for funding regulatory activity.

In general, because legislation is difficult to enact and even more difficult to amend, laws should be liberally drafted to provide for flexibility. Narrow, specific laws can stifle development, particularly in a field as dynamic as telecommunications. The laws also should define or establish procedures that further the legislative goals. Thus, in the United States, there is a powerful, authoritative regulatory agency designed to further the public interest by following procedures that rely upon public participation.

Usually, rules provide the manner and details of implementation, thereby supplementing the broadly expressed goals of the laws. However, this relationship between the laws and the rules presumes some type of relationship between the legislator and the regulator.²⁷ In addition, to the extent that the laws require extensive supplementation by rules, a more active regulatory process -- and, possibly, a more expensive one -- may be required.

Rules need not be viewed solely as sources of ministerial detail. In fact, rules may provide significant policy direction, subject in all cases to the overriding mandate of the laws. Such an approach enables the regulatory institution to adopt more expansive goals over time, as market, social, and political conditions dictate. In any event, the relationship of the rules to the laws, and of the regulator to the legislator, must be carefully considered in structuring the law itself. The regulatory process is, in fact, an important tool to be used in the development and management of the telecommunications market; the process also may be a goal, in and of itself, to the extent that it may become a source of fairness and public empowerment.