The U.S. process is an extremely expensive, detailed, and cumbersome approach to regulation. Other countries probably do not need (and certainly would not want to fund) this elaborate process. Particularly because countries are moving toward more competitive structures for national telecommunications markets, there are diminishing needs for massive government superstructures to police the market.
To evaluate both the features of the U.S. process that may be worth importing and those that may be appropriately discarded, it may be useful to examine the regulatory process in greater detail.
What are the exact steps taken by the FCC in making a regulatory decision?
In general, the FCC initiates action on a policy issue by releasing either a Notice of Proposed Rulemaking (NPRM) or a Notice of Inquiry (NOI). An NPRM suggests a new rule, or a modification of an existing rule, and identifies issues for public comment. An NOI is a more general request for public comment about a concept, issue, or trend, where the FCC is not proposing a specific course of action. An NPRM may follow an NOI, if the FCC decides to propose specific action on the basis of the comments received in response to the NOI.
An FCC Notice typically includes at least four basic elements: (1) a general description of the subject to be covered; (2) background information; (3) the proposal(s); and (4) a request for written public comment. The comment period is at least 30 days, and it often is extended to 60-90 days or more for particularly important or controversial matters. All comments filed with the FCC are made available for public inspection. Interested persons are given time to respond to the initial comments.
By design, the decision making process is public, based upon evidence submitted to the FCC. If the FCC is involved in setting policy or making rules, instead of deciding a dispute, members of the public may present arguments or evidence to the staff and the Commissioners privately. However, a written summary of any such meeting must be prepared and added to the public record.52
Once all comments have been received, the FCC staff typically prepares a draft of the report that will be released to announce the FCC's decision. The report will be circulated within the FCC and to each of the Commissioners. Discussion and compromise often ensue, although private meetings involving a majority of the Commissioners are prohibited.53
Eventually, the written decision, in the form of a Report and Order, will be submitted to the Commissioners for a vote at a public meeting of the FCC. If a majority of the Commissioners approves the Report and Order, it is released to the public as a decision of the FCC. Such a report usually explains the basis for the FCC's decision, summarizing and addressing the comments received from the public, and setting forth the rule or policy being adopted.
Interested parties have a period of time specified by law (30-60 days from the date of the FCC's decision, depending on the type of action being appealed) either to (1) ask the FCC to reconsider its decision or (2) appeal the decision to a federal court. Court appeal is also available following a decision by the FCC on reconsideration.
The scope of the court's review is limited, as discussed in Section II. If a court concludes that the FCC exceeded its authority or acted arbitrarily and capriciously, the court usually identifies the problems in the decision making process and remands the proceeding to the FCC for further -- and better -- action. The court typically will not direct the outcome of the dispute; it will leave this job to the FCC, through the further administrative proceeding.54
This process can take months, even years, to enact a new rule or to change an existing rule. It can take even longer if the FCC is pursuing a policy that requires an amendment to the Communications Act; the FCC's rules cannot contradict the Communications Act. If the FCCdesires to act in a manner not permitted by the Communications Act, the FCC is empowered only to recommend an amendment to Congress; Congress must then decide whether or not to act. As noted in Section IV, legislative action often is extremely slow.
Is the same process followed to decide disputes?
The process is similar, but slightly more formal. Several differences should be noted.
First, the Commissioners (or, in some cases, judges who work for the FCC, known as administrative law judges) function as judges, not as legislators. For this reason, communications with the decision makers are forbidden unless all parties to the dispute are present.
Second, where appropriate, the agency may conduct a hearing, which is similar in some respects to a court proceeding. The testimony of witnesses is presented, discovery of documents is permitted, and legal briefs are filed before a decision is made. Hearings are not held in all disputes; often, the Commissioners (or the staff) take action on the basis of written submissions alone.
Hearings, like civil trials in the United States, are glacially slow procedures. The FCC has begun to consider expanded use of alternative dispute resolution methods, including mediation, to expedite decision making. A number of state regulatory authorities have relied increasingly on these alternative approaches to resolving disputes, saving both time and money.
Is the process similar at the state level in the United States?
In many important respects, state regulatory processes involved in telecommunications are similar to those followed by the FCC. Each state has a regulatory body that, like the FCC, is an independent agency. Like the FCC, the state agencies adopt rules to fill in the details of the broad policy goals established by state law and to implement those policies. The agencies also define policies within the flexible framework established by state law.
As with the FCC, the rules and policies are adopted through carefully defined processes. New York State, like many other states, has essentially two types of processes:
Any decision ultimately may be appealed to the courts of the relevant state. The courts examine the decision to determine whether it (1) is consistent with the general commands of the law, (2) can be made by the agency, under the law, (3) has been made through due process, with all parties being given a fair opportunity to be heard, and (4) reflects a reasoned decision making process that takes account of the available evidence and/or comments.
In many countries, centralized oversight of the market has been problematic. In the United States, there have been many complaints about the split of jurisdiction between the FCC and state authorities. Is there some compelling reason to prefer a centralized or a decentralized approach to oversight?
As described in Section II, the division of jurisdiction between the FCC and the states is a unique result of the federalist system adopted by the United States and reflected in the U.S. Constitution. There is no reason to believe that it would make sense for other countries to import this jurisdictional split into their own plans for restructuring their national telecommunications markets. On the other hand, though, dissatisfaction with the results of the U.S. arrangement does not necessarily mean that a centralized process is the best approach.
Any decentralized process has some costs associated with it. Some of the costs of the split system that exists in the United States include (1) disagreement (usually resulting in a court battle) about whether the FCC can impose a uniform policy that preempts inconsistent state policies and (2) duplication of effort, as the FCC and the states adopt their own versions of similar rules and policies, and as each of the 50 states and seven territories and commonwealths duplicates a regulatory system.
Although a more centralized system might increase uniformity and efficiency, it would not necessarily produce a better market scheme. The give- and-take between the FCC and state authorities clearly impedes efforts to establish uniform national policies in the United States: unless the FCC is able to exercise preemptive power, 57 regulatory bodies must reach some consensus to establish a truly national policy. Not surprisingly, this consensus is difficult to achieve.
Decentralization, however, offers some very important benefits. State regulators can respond directly to the demands of their own constituents. In addition, each jurisdiction is free to experiment with different policies or processes. Others can then review the results of the experiment and decide to adopt, or modify, the policies or procedures followed in such experiments. In effect, each jurisdiction can operate as a laboratory.
Because a telecommunications network should be widely dispersed, capable of accommodating varied needs and interests, to be valuable in today's society, it probably would not make sense to pursue a structure that completely separated various jurisdictions and allowed each one to pursue its own objectives without any coordination or commitment to some common goals and principles. Even at the international level, where countries function as independent sovereign bodies, frequent multilateral and bilateral efforts are required to ensure the smooth functioning of a global communications network. Some combination of centralized oversight or coordination and decentralized decision making may be effective, particularly in those countries that have either a large land area or a dispersed and diverse population -- or both. In fact, it may not even be necessary to pursue a decentralized regulatory system. Other options may provide some of the benefits of decentralization, without fragmenting the government institution responsible for overseeing the market. Such alternatives might include the following:
In each case, the objective is to stimulate creativity, give the market sufficient flexibility to respond to varied local conditions, and establish an environment that encourages variety and experimentation. Such arrangements offer the additional advantage of fragmented authority, which forestalls the inertia and the "captive regulator" problems that often accompany a strictly centralized, unified governance arrangement.56
Should an independent regulatory agency have a particular number of decision makers? For example, why are there five FCC Commissioners?
The number of decision makers involves a balance of competing considerations. Originally, the FCC had seven Commissioners; now it has just five. Oftel, in the United Kingdom, has only one real decision maker, although the number of staff members has increased significantly over time.
If there are many decision makers, consensus may be impossible. As numerous viewpoints are expressed, it becomes difficult to resolve disagreement; and a written decision, required in the United States, may become meaningless if it is heavily qualified to appease the concerns of various decision makers. Reducing the number of decision makers accelerates the decision making process. Consensus is reached more quickly and expressed more clearly.
If there are too few decision makers, however, other concerns arise. For example, if just three people are involved, it may be too easy for two of the three to form a solid alliance that will enable them to adopt any rule or policy they want. The two, for example, may agree to do each other various favors, with each one supporting the other's favorite projects. The third decision maker will, in effect, become irrelevant to the decision making process.
When there is a single decision maker, decisions may reflect individual bias or lack the perspective and depth of analysis that result when the process involves various individuals. There is less danger of this when the sole decision maker has access to and relies upon a talented staff of supporting personnel who contribute expertise, contrasting views, and fora for the discussion and fermentation of ideas.
A decision making body of relatively small size should consist of an odd number of people. If there are an even number of decision makers, there is the distinct possibility that many issues will produce tie votes, with no action being taken at all.
Beyond these general guidelines, however, it is not clear that there is any proper number of decision makers for a regulatory body. Three may be too few; 11 or 13 may be too many. In between, there is probably substantial room for debate and experimentation. Five-person agencies appear to be reasonably common in the United States.
To the extent that a regulator negotiates an agreement with a regulated company, is there assurance that the public interest is being served?
There may be several ways to reach such an assurance.
One is to ensure that the regulatory body is independent. If regulators are not influenced by politics or economics, they should remain skilled and unbiased arbiters dedicated solely to furthering the public good. In practice, of course, it is difficult to maintain this consistent selflessness and independence.
A second approach is to permit, or to require, agreements to be scrutinized by other government authorities. For example, the agreements might be subject to court review, possibly at the request of a potential competitor, a subscriber, or another government agency. Of course, the law must have established the standards to be applied by the court in conducting the review. It might be feasible, for example, to require that the agreement be set forth in a reasoned document explaining the basis for the agreement. The court might then be asked to determine solely that the action was neither arbitrary nor capricious, nor contrary to certain fundamental policies (such as promoting widely available, affordable communications). Agreements also might be subject to automatic review by other government entities. For example, a government authority charged with prohibiting anticompetitive action might be required to review all agreements to ensure that they do not frustrate competitive objectives, as defined by law or the policies of that government entity.
A third approach would be to require every agreement to be subject to public scrutiny and comment. This is the approach followed in New York State. An agreement between the staff of the state regulatory authority and a regulated telephone company is made available for public comment for a specified period of time. If no objections are filed, the agreement is allowed to go into effect. If objections are filed, the state commission is required to render a decision about the agreement, and it may reject, accept, or modify the agreement. The commission's decision may then be appealed to the courts, like any other decision of an administrative body. The courts will seek assurances that the commission acted in accordance with its statutory authority, that its decision was reasoned, and that it considered whatever comments may have been filed.
Perhaps the most common factor in the U.S. regulatory process is that it simultaneously avoids giving substantial power to any single individual or group and prohibits decision makers from acting without first considering the expressed views of all relevant groups. Although the resulting process can be slow, confusing, and even frustrating, it is apparently open and fair. At the other extreme is the now widely rejected practice of permitting the monopoly company to regulate itself, primarily through the concentration of ownership and regulatory power in a single government ministry. Because telecommunications is an evolutionary business, change is inherent. A closed regulatory system, resistant to change, is static. Though decentralization and openness need not be so extreme as to produce chaos, some degree of confusion -- or at least diversity -- is probably desirable. The extent to which any particular process is fragmented or overlaid with public participation and independent review depends upon national traditions, cultural preferences, legal and political constraints and forces, and market characteristics.