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FCC's New Economics Office Signals Change

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FCC's New Economics Office Signals Change

February 9, 2018

The Federal Communications Commission recently approved Chairman Ajit Pai’s plan to create an Office of Economics and Analytics. The office will bring economics analysis to the forefront of policy decision-making at the FCC.

The objective of the OEA is to “deepen the use of economic analysis into Commission policy making, to enhance the development and use of auctions, and to implement consistent and effective agency-wide practices and policies.”

The OEA will have four divisions: Economic Analysis, Industry Analysis, Data, and Auctions. The Economic Analysis Division will provide analytical and quantitative assistance to bureaus and offices within the agency. The Industry Analysis Division will design and administer relevant data collections and serve as the agency’s main resource in this area. The Data Division will develop and implement best practices for data management.

The Auctions Division will be responsible for administering spectrum auctions for wireless telecommunications and broadcasting, alongside relevant bureaus. It will also advise on policy relating to auctions and competitive bidding.

In a speech at Hudson Institute, Chairman Pai noted that the FCC used to be a leader in the use of economic analysis in policymaking. The chairman acknowledged the rich contribution of economists to reforms in the past. He gave the example of the late University of Chicago professor Ronald Coase, whose ideas led to the use of auctions for spectrum licenses, which is commonplace today within the agency.

Unfortunately, now economists are not consistently involved in the policy-making sphere, often getting enlisted late in the process. They also tend to work by themselves, instead of in concert with the rest of the agency. To address these and the other issues, Chairman Pai commissioned a working group to come up with recommendations.

The working group suggested bringing economists from the different bureaus and offices within the agency and having them placed in the OEA. The reasoning behind this is that with the authority the OEA will carry in rulemaking, economists within the office will have more influence in the process. This recommendation was incorporated into the final draft.

Another problem the chairman noted is that cost-benefit analysis is not given proper consideration in the rulemaking process. To solve this issue, the OEA will assess the economic effects of potential FCC rules by conducting a cost-benefit analysis for every rule that is estimated to affect the economy by $100 million or more. These analyses will lead to improved decision making, which will translate to better, quality services for consumers and cost-savings for taxpayers.

Finally, data are poorly collected and used within the agency. Hence, the creation of the Data Division. The OEA is also tasked to work alongside other bureaus and offices in areas such as data management and data analysis. This is a beneficial directive because the FCC contains diverse bureaus, ranging from Public Safety & Homeland Security to Wireless Telecommunications. Inter-departmental cooperation will enhance the FCC’s work and ensure consistent standards of analysis across the agency.

The result will be a more effective process for deciding which projects should be executed, and which should not be pursued further.

There is a perception that organizational changes within the bureaucracy lack teeth, meaning the changes end up not having any real effect. The FCC addresses this issue by elevating the OEA to the same status as the General Counsel. The General Counsel operates as an independent body that provides legal advice to the Commission and is involved in every decision-making process. The OEA will have a similar function in economic analysis and be required to review every Commission rulemaking prior to its release to the public.

This is a meaningful step in the right direction for the FCC, returning the agency to the days when economic analysis produced innovative policies.

Isai Chavez is a contributor to Economics 21.

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