Little Consensus Emerging on Whether FCC Economics Office Would Mean Better Analysis
Critics of the FCC’s net neutrality order say it reveals problems with Chairman Ajit Pai’s proposed Office of Economics and Data (OED). Supporters of keeping in place the 2015 rules said the recently approved order appears to rely on industry analysis rather than the commission's existing economists, and it’s not clear that putting economists in a single office would have meant a more rigorous, independent examination of the economic implications. Supporters of the Pai moves on net neutrality said making the FCC more focused on economics will take time. The FCC hasn't released the Dec. 14 order (see 1712140039).
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Nicholas Economides, professor of economics at New York University’s Stern School of Business, questioned how much impact an OED would have. He challenged the rigor of the analysis in the draft net neutrality order. “This is written by lawyers who are trying to make their case,” he told us. “It’s more of an advocacy piece than an economic analysis.” Commission economists did no independent analysis of the economic effects of net neutrality, based on what he has seen, Economides said. “You can have many, many different offices, but if you don’t take them seriously or give them serious consideration, it doesn’t matter if you have them or not,” he said.
"After years of lamenting the lack of economic study at the FCC, it was stunning to see such a weak and incomplete economic analysis in Chairman Pai's draft net neutrality repeal order,” said Eric Null, policy counsel, New America’s Open Technology Institute. Republicans have stressed the importance of a cost-benefit analysis of major rules but did none on net neutrality, said Harold Feld, senior vice president at Public Knowledge. “The reason you didn’t do it was ... ?” he asked. “You’re incapable of doing that or it wouldn’t come out the way you wanted?” Too often “economics is much more of a buzzword than an actual thing,” he said.
But the FCC won’t be able to change overnight to an agency that looks more closely at economics, said Jeff Eisenach, American Enterprise Institute visiting scholar and member of the Trump transition landing team for the FCC. “It’s a long-range project; it’s not a quick hit,” he said in an interview. “There are something like 55 economists out of 1,500 staff at the FCC and they’re scattered across the bureaus and many of them are dedicated to specific tasks, routine tasks of generating universal service funding levels or whatever.”
“FCC economists were integrally involved in formulating the Restoring Internet Freedom Order,” an FCC spokesman said. Agency economists “reviewed the relevant economics literature in peer-reviewed journals on the effects of utility regulation on investment, two-sided markets, network externalities, terminating access monopoly, paid prioritization, and the effectiveness of antitrust as a deterrent,” the spokesman said. “They also carefully examined all empirical studies submitted for the record, even if they were not published in peer-reviewed journals.” Pai is committed to the launch of the OED and to making “sound economic analysis key to the commission's decisions in the meantime,” the spokesman said.
In the amount of time the FCC had to make a decision on the net neutrality NPRM, Eisenach said, he wouldn’t have expected independent economic research by the FCC. But there has been third-party research and, unlike the 2015 order, at least this time the FCC cited economic studies, he said. “I think the commission is signaling that economics matter,” he said. “If they do move forward with creating this office they’ll be building a foundation over time for economics to play a larger role.”
“Pai has set a ferocious pace for bringing the agency into the 21st century, both substantively and organizationally, operating within the limits set by Congress, which has been absent from the field for much of the last two decades,” said Larry Downes, senior fellow at the Georgetown Center for Business and Public Policy.
"The OED hasn't even gotten off the ground yet, so there's really nothing to criticize,” said former FCC Commissioner Robert McDowell. Pai already has done more than any of his predecessors to “formalize the role of rigorous economic analysis in the rulemaking and enforcement processes at the commission,” he said. “Just wait, there's much more to come."