FCC’s New Regulatory Frontier

Critics have heaped scorn on the Federal Communications Commission (FCC) recently.  On one side of the aisle, proponents of the current regulatory state are clamoring for FCC’s wholesale control of the telecommunications industry.  And they are using the proposed merger between AT&T and T-Mobile as a vehicle to move into a new regulatory world where the federal government picks winners and losers, and even controls prices.

Several recent reports have cited efforts to impose onerous new regulations on telecommunications providers, and perhaps dictate prices.  These reports aren’t fanciful; FCC has a rich tradition of making demands.

During merger talks in the 1990s, then-Attorney General Janet Reno proclaimed, “This merger threatens to undermine the competitive gains achieved since the [Justice] Department challenged … monopoly of the telecommunications industry 25 years ago.” 

Past is prologue.  Senator Al Franken today, “We should not let an effective duopoly dictate the rules of the road for wireless networks, and I fear that will happen if this merger is approved.”

Someone should remind Attorney General Reno and Senator Franken that wireless prices have fallen 33 percent since 1999.  “Duopolies” and “monopolies” haven’t reigned over the telecom world and pesky statistics won’t stop regulatory proponents from pleading for more rules.

Some suggest imposing ad hoc requirements on AT&T and T-Mobile; anything short of meeting them would mean the deal fails.  Regulators were happy to add those requirements during the AT&T/BellSouth merger and the recent Comcast/NBCU merger (remember so-called “net neutrality”?). 

These requirements could include divestitures, more “commercially reasonable” roaming agreements with other carriers, and the forced sale of existing spectrum licenses.  Even worse, opponents have raised the specter of price controls if FCC and DOJ approve the merger.  Regrettably, there is precedent for these actions as well.

During the 2005 merger between Verizon and MCI, FCC mandated a temporary price freeze and imposed other conditions.  Today, telecom experts expect even more stringent controls if FCC and the Department of Justice (DOJ) approve the deal.

FCC, as an independent regulatory agency, isn’t strapped for power these days.  From regulating media content to imposing fines, and even making its first foray into the wireline broadband world, the Commission is hardly on a deregulatory hot streak.

Bestowing more powers to FCC won’t help the telecommunications industry flourish and it won’t create new jobs.  Even the left-leaning Economic Policy Institute estimated that the AT&T/T-Mobile merger “could plausibly create an additional 55,000 to 96,000 job-years of work.”  If accurate, that figure is roughly the total net job creation of the entire U.S. economy from May and June of this year.  

If it is FCC’s stated goal to support “the nation’s economy,” which scenario is more beneficial: a heavy-handed regulatory approach that imposes prices controls and restricts choice, or a move that has the potential to create tens of thousands of jobs?  That should be an easy answer, even with our elaborate regulatory apparatus.