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Let’s put the FCC’s Net Neutrality action into a broader context.
But the Federal Communication Commission’s overreach is an example of a dysfunctional federal regulatory process desperately in need of reform.
Without a single congressional vote, the FCC in February unilaterally chose to regulate broadband providers as common carriers under the antiquated Title II provisions of the 1934 Communications Act. Three unelected commissioners granted themselves the authority to regulate the entire broadband industry using an 80-year-old statute designed for telephone monopolies.
The Net Neutrality order stands in stark contrast to the nearly two decades of bipartisan support for a “light-touch” regulatory framework for broadband.
The House Communications and Technology Subcommittee held an oversight hearing with all five FCC commissioners. One of the topics addressed was Net Neutrality and the FCC’s role in governing the Internet.
Commissioner Ajit Pai testified that “[w]hen the FCC makes it less attractive for companies to connect the American people, those companies will find other places to put their money.” Commissioner Pai cited an 8 percent drop in capital expenditures by all major broadband providers in the first half of 2015 compared to the first half of 2014. He concluded “[t]his decrease represents billions of dollars in lost investment and tens of thousands of lost jobs.”
Commissioner Michael O’Rielly expressed concern that the FCC would act beyond its statutory authority in the policy spheres of privacy and security and its actions could encroach on the jurisdiction of the Federal Trade Commission. Commissioner O’Rielly, who has aggressively fought against the expansion of FCC authority over broadband, expressed his fears in an interview with Law360 that the FCC will inevitably seek to regulate the privacy practices of edge providers. Chairman Tom Wheeler stated his intentions at the hearing to initiate a rulemaking on privacy practices in 2016.
The FCC’s Net Neutrality order forces us to ask two questions about the Regulatory State.
1. How did we get to a place where an agency like the FCC can make sweeping fundamental changes to the economy essentially overnight?
The short answer is that for the most costly, burdensome, and complex regulations issued by agencies, like the Net Neutrality order, the regulatory process is critically dysfunctional.
2. How can Congress prevent and reign in massive regulatory power grabs such as FCC’s takeover of broadband regulation?
Two bills before Congress could prevent agencies from harming large sectors of the economy with sweeping regulations—the Regulatory Accountability Act of 2015 (RAA) and the Require Evaluation Before Implementing Executive Wishlists (REVIEW) Act.
Regulatory Accountability Act
The RAA will put the biggest, most burdensome regulations under heightened scrutiny. For rules having an effect of $1 billion or more annually on the U.S. economy—like the FCC’s Net Neutrality order--the RAA requires:
- Increased transparency from agencies
- A public hearing before the rules are adopted
- Agencies to make rules based on the best evidence and the least cost
- Federal courts to limit deference to agencies
In summary, the RAA will modernize the federal rulemaking process to restore the kinds of checks and balances on federal agencies that the Administrative Procedure Act intended to provide for the American people.
The REVIEW Act, which was introduced in both the House and Senate on August 4, 2015, would require federal agencies to postpone the effective dates of rules which cost the economy at least $1 billion annually, pending judicial review.
An example of the regulatory dysfunction that would be cured by the REVIEW Act is found in EPA Administrator Gina McCarthy’s statements claiming that regardless of whether EPA’s MATS Rule was struck down by the Supreme Court—which it was in Michigan v. EPA--regulated companies had already spent resources to comply before the court made a substantive decision.
The REVIEW Act would prevent companies, such as broadband providers, from bearing compliance costs for massive overreaching regulations that are subsequently thrown out by the courts.
The bottom line is that Congress can prevent the next massive FCC accumulation of regulatory power by requiring heightened scrutiny of the rulemaking process for the most expensive one to three regulations a year.
Congress should connect the dots between the fundamental problems with regulatory procedures and rulemakings such as the Net Neutrality order by passing the Regulatory Accountability Act and the REVIEW Act.