FCC Creates Office of Economics and Analytics over Democrats’ Dissents
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Tuesday, January 30, 2018

FCC Creates Office of Economics and Analytics over Democrats’ Dissents

Over the dissents of Commissioner Mignon L. Clyburn and Jessica Rosenworcel, the FCC’s Republican majority today voted to establish an Office of Economics and Analytics, with four divisions: economic analysis, industry analysis, auctions, and data.

In doing so, it eliminated the existing Office of Strategic Planning and Policy Analysis and will move the Wireline Competition Bureau’s Industry Analysis Division and the Wireless Telecommunications Bureau’s Auctions and Spectrum Access Division to become divisions in the new office.

The agency said that the action will “help ensure that economic analysis is deeply and consistently incorporated as part of the agency’s regular operations,” but Commissioner Clyburn said she feared the office’s findings would be used to justify pre-determined deregulatory outcomes, and Commissioner Rosenworcel expressed frustration that she had been unable to obtain basic information about how many employees would be housed in the new office and how many would be shifted from existing units of the FCC.

The office will “provide economic analysis for rulemakings, transactions, adjudications, and other Commission actions. It will manage the FCC’s auctions program, and it also will manage significant FCC data collections such as Form 477. It will develop policies and strategies to manage the FCC’s data resources and establish best practices for use throughout the agency. In addition, it will conduct long-term research on ways to improve the Commission’s policies and processes,” the agency said in a press release.

During a press conference following the agency’s meeting today, staff told reporters that the OEA would have just under 100 employees, most of whom would be economists, along with a few lawyers from the Wireless Telecommunications Bureau’s Auctions and Spectrum Access Division as well as a few technologists.

During a subsequent press, Commissioner Rosenworcel noted that she had heard the staff response to the reporter, but that “my staff asked [bureau staff] directly and repeatedly and was not told the answer.”

Chairman Ajit Pai first unveiled the proposal last spring, with the name of the new unit envisioned as the Office of Economics and Data (TR Daily, April 5, 2017).

Subsequently, a Commission working group studied the issue and prepared a report to the Chairman that was released when he circulated the draft order in Managing Director 18-3 among his fellow Commissioners in advance of today’s meeting (TR Daily, Jan. 9).

In her dissenting statement, Commissioner Clyburn said, “By establishing an Office of Economics and Analytics within the FCC, one might conclude that the Commission is laser-focused on integrating neutral economic analysis into the work of this agency. But what the current Administration is actually doing, is putting in place a mechanism to justify its own interests, while disregarding any analysis that runs counter to their views.

“For example, where was the balanced, detailed economic analysis on the impact [on] edge providers, small businesses, and consumers when the FCC majority gutted net neutrality protections last month? What about the analysis the FCC majority relied on when they deregulated the $45 billion business data services market? And the recently adopted order authorizing use of the Next Gen TV standard? Where was the enhanced, deep analysis there? These orders represent three colossal market-changing shifts that were devoid of any cost-benefit analysis, weighing the costs to consumers — both in the loss of services and access costs — against their flimsily philosophical, touted benefits. And where, pray tell, in this three-page Order, is the detailed economic cost/benefit analysis that justifies reshuffling economists from their current positions within the various Bureaus and Offices to this new Office of Economics and Analytics?” Commissioner Clyburn continued.

She said, “My sense, is the majority will continue to mix and bake this deregulatory feeding frenzy, with the new Office serving as icing on the cake.”

In her dissenting statement, Commissioner Rosenworcel said, “Improving the day-to-day function of the agency is a laudable goal. I am hopeful that the new Office of Economics and Analytics will positively contribute to the work of the agency. But I am dismayed that my most basic questions about what this office will entail have not been answered.

“How many people will the agency have in this office? Are we talking about 50 or 100 or 150? No one will answer. What does it mean to ‘generally shift the functions’ of certain divisions? Does it mean disbanding some we have today? No one will answer. Will we be hiring new experts for this office or simply relying on moving around those we have? No one will answer,” she continued.

“This is striking. When I last voted on big institutional changes—the reorganization of our field offices—we had exacting numbers. We knew precisely what these changes would mean for the agency, its staff, and its workload,” Commissioner Rosenworcel said. “Having been refused this basic information, I dissent,” she said.

Commissioner Rosenworcel suggested that the new office be guided by three principles: “[W]e need to be mindful that we have legal duties that can be at odds with simple cost-benefit analysis,” such as ensuring service to rural, high-cost areas; “we need to put a premium on peer review” of economic studies; and “we need more transparency … about how much of the economic data presented to the FCC is advocacy. … to champion a desired outcome.” Toward that last end, she suggested that those who file economic studies be required to disclose who they are representing.

In his statement, Commissioner Mike O’Rielly said, “I am exceptionally pleased to support today’s item, which adopts a key process reform idea I have long advocated: creating an office within the agency focused on economics and analytics. Since receiving the Chairman’s draft item, I have worked with two goals in mind. First, guaranteeing that this office has enough weight and authority to ensure that it is successful from the outset. Second, ingraining it into the agency procedures to ensure that it outlasts the current Commission and remains effective for years to come.”

Commissioner O’Rielly added, “When the draft item was circulated, I made several proposals, which Chairman Pai graciously accepted, to add additional responsibilities for the new Office. Paramount to my changes is requiring OEA to prepare and review a rigorous, economically-grounded cost-benefit analysis for all rulemakings deemed to have an annual effect on the economy of $100 million or more.

“But, ensuring that a cost-benefit analysis is conducted is only a partial victory. We must also ensure that such an analysis is credible and accurate. To achieve this, I advocated requiring OEA to follow the guidelines of OMB Circular A-4, which standardizes the way benefits and costs are measured and reported across executive agencies. However, due to the Commission resources this may involve, I understand that it may be more prudent to get the Office established before taking this important step. To that end, I look forward to continuing to work with the Chairman’s office and Commission staff to get the Office up and running and well positioned for us to incorporate Circular A-4 into our rules down the road,” Commissioner O’Rielly added.

He said that the Chairman also accepted his proposal “to add a requirement that, like the Office of General Counsel, OEA must confirm that it has reviewed each Commission rulemaking to ensure it is complete before it is released to the public. Doing so will ensure that its work is not ignored or sidestepped on the way to Commission consideration. As a practical effect, this can be accomplished through the Commission’s eBARF [electronic Bureau Agenda Release Form] signature process,” which tracks meeting items between adoption and release.

These changes mean that “OEA will play a role on the front end in the original drafting of all cost-benefit analysis and play a role on the back end by signing off on each item. I believe that this heightened level of participation will help ensure that OEA gets quickly integrated into the Commission’s processes and that future Chairmen less interested in economics and analytics will be unable to turn a blind eye to the real burdens that many of our rules impose,” Commissioner O’Rielly said.

He added that he has been assured by “the Chairman’s team … that the FCC will not increase its FY19 budget request as a result of establishing this Office, and that new hires made pursuant to this Office, if any, will be offset by departures in other places.” In his statement, Commissioner Brendan Carr said, “Today’s Order might be the most important two and [a] half page decision the FCC has issued.”

Commissioner Carr noted that the staff working group “conducted at least 80 interviews with a broad range of stakeholders—both within and outside the FCC—and held meetings with every FCC bureau and office that has an economist. Their research found that FCC economists are not uniformly incorporated into our decision-making, do not have regular opportunities to offer their opinions on policy matters, and have limited opportunities to collaborate with their peers. These structural failings only make it more difficult for us to reach decisions that further the public interest.”

Like Commissioner O’Rielly, he pictured a role for the OEA similar to the Office of General Counsel, serving as the agency’s “economic gut check” as OGC serves as its “legal conscience.”

Before being nominated and confirmed as a Commissioner last year, Mr. Carr was the agency’s general counsel.

He also noted that the FCC is increasing its “reliance on auctions outside the traditional context of spectrum, including in the upcoming CAF II proceeding. So it only make sense to incorporate this group of talented professionals [from the Auctions Division] into the new office.”

In his statement, Chairman Pai said, “When I announced plans to strengthen the role of economics at the FCC, I identified several problems I thought it was important to address. First, staff economists weren’t guaranteed a seat at the policy-making table. Second, notwithstanding a rapidly converging marketplace, economists worked in policy silos. Third, cost-benefit analysis was too often ignored. And fourth, data was not particularly well collected or managed across the agency.”

He said that the creation of the OEA “is the first official step toward remedying each of these problems I mentioned. Notably, this reform has a bipartisan roster of support from people who care about incorporating economic analysis into policymaking. For example, the former head of President Obama’s Office of Information and Regulatory Affairs (and my former professor), Cass Sunstein, has cited our plan to create the Office, calling it a ‘[p]romising idea from [the] FCC.’ And his predecessor in the Bush Administration, Susan Dudley, has called the OEA’s creation ‘an important first step . . . [toward] improving the basis on which the FCC makes its decisions.’”

Chairman Pai added that “the plan for achieving our goals goes beyond a mere organizational change. As explained in the Working Group report released three weeks ago, we also will adopt new operational practices to make sure economics does in fact play a larger role at the FCC. For instance, much like at the Federal Trade Commission, the OEA will provide Commissioners with a memorandum discussing economic issues implicated by all circulated items. And we’ll now conduct a rigorous cost-benefit analysis for rulemakings estimated to have over $100 million of economic impact. Behind the scenes, we’ll also be working hard to integrate OEA staff into the day-to-day policy work of the Bureaus.”

The Chairman continued, “I also look forward to reigniting the culture of big-picture policy thinking that used to be so common among economists at the FCC. With most economists working closely together in the same office, I expect there will be unique opportunities for intellectual exchanges. In that environment, I want the Commission’s economists to be able to ponder the next set of difficult issues and consider how economic insights might help address them. White papers represent one way they could do that. Traditionally, our economists have drafted white papers that have been significant drivers of major policy innovations, like the incentive auction and price cap regulation. Since 1980, FCC experts have submitted nearly 90 papers. Since 2012, that number is zero. Our aim is for the new Office to have a culture of inquiry in which long-range policy research is valued as much as bread-and-butter analysis of current proposals and orders.”

He defended the action against suggestions that “our commitment to conducting cost-benefit analysis is somehow an attack on the public interest standard set forth in the Communications Act,” saying that “thoughtful cost-benefit analysis has historically been a bipartisan tradition.”

He added, “Additionally, some may say that if certain costs or benefits are hard to quantify, we shouldn’t even try. But that view deeply misunderstands cost-benefit analysis. Far from rejecting the public interest standard, cost-benefit analysis allows us to intelligibly apply it. And the alternative to trying to quantify costs and benefits is far worse: It’s essentially putting your finger in the wind and making it up as you go along, which is no basis for reasoned, evidence-based decision-making.”

Mobile Future Executive Director Margaret McCarthy said in a blog post, “The OEA has the potential to put empirical economic analysis at the forefront of the FCC’s considerations, rather than the belated after thought it has been in the past. This new office will have real authority in the rulemaking process and is empowered to be an important check against regulation driven by politics. Of course, a change in structure alone will not produce the promised benefits of the new Office. The OEA must be sufficiently provided with the independence it needs to provide effective input into the deliberative process.”

In a statement, the Internet Innovation Alliance said it “supports today’s FCC action that spotlights the importance of data in crafting fact-based decision-making for our nation’s communications marketplace. Making future analysis — based on effectively managed data and economic marketplace realities — an integral part of the Commission’s organization and processes will help enable the agency to promote sound policies and regulatory outcomes aimed at advancing the public interest.” —Lynn Stanton, lynn.stanton@wolterskluwer.com

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