Sunday, December 14, 2008

Reforming the FCC: New Organization

The recommendations I outlined in Reforming the FCC: New Capabilities will only bear fruit in a suitable institutional setting. This post suggests some organizational responses to the challenge of managing 21st century communications in the United States.

In-house expertise

All participants in a complex adaptive system, including regulators, have to innovate to keep pace with ever-changing circumstances. However, change carries risks. The system will adjust to new rules as soon as they are promulgated, and there’s no way to turn back the clock.

The variability and unpredictability of adaptive systems means there cannot be a single, fixed, optimal strategy. The only viable approach is continuing learning and adaptation. As society and technology change ever faster, the institution has to learn faster and plan better. The FCC needs to be a learning organization which adapts at a much faster rate than was required in the past.

The FCC needs to have a strong, in-house basis for understanding the state of play, and anticipating developments. This is necessary both to make smart decisions about how (and whether!) to intervene through rule making, and to make smart/robust rules. Learning and planning are tied together through simulation and other safe-to-fail experiments.

Simply depending on the adversaries in proceedings to provide technical information is not sufficient; even if the input were not biased, one would still need in-house expertise to make informed choices. The Commission has this level of expertise in wireless technology, but perhaps not to the same degree in internet/web technology. Staff can make nuanced judgments about the likelihood and mitigation of radio interference, but has less experience judging network management claims, the implications for consumer privacy of data aggregation and behavioral advertising, or the most effective way to implement law enforcement surveillance on the internet.

With strong in-house capacity, the FCC could make effective use of outside consultants, which have employed too rarely in recent decades. It could also find ways to exploit the goodwill and expertise of volunteer experts in academia and society at large.

The multiple uncertainties of adaptive systems mean that every institution needs a long memory. Slow variables are often the ones that trigger radical change, but they can only be observed with prolonged attention. The institution needs a strong, constantly renewing base of career officials that can bridge across the terms of political appointees. There has been a renewed awareness in recent years of the degree to which the tenure of career professionals can be vulnerable to political processes.

Individuals matter. The interlinking of activities at various layers of a complex system means that in-house entrepreneurs (and reactionaries) can have disproportionate influence, particularly when a system is in flux. It’s important to foster independence and adaptive management skills, particularly in the American setting where top leadership is politically appointed, and changes frequently. Secondments like Chief Economist and Chief Technologist are an important tool, and should be complemented with fellowships from industry and academia at middle and entry levels in the organization.

New Structure

Developing an open, adaptive and principles-based approach to policy making, and building the capacity to perform new functions, will require changes in the institution’s organization.

The FCC is currently organized, in large part, to reflect the Titles of the Communications Act(s): the Wireline Competition Bureau is responsible for wire-based telephony; the Wireless Telecommunications Bureau oversees spectrum, including cellular telephony; the International Bureau covers satellite and international matters; the Media Bureau regulates radio and TV services. However, the mapping to statute is not exact, which suggests that organization by Title is not a necessity: a re-organization does not require a new Communications Act.

Such a structure cannot effectively address questions that cross industry boundaries – which, in the 21st century, is most of them.

A more effective and stable structure would be organization by policy mandate. This would replace the industry-oriented bureaus by departments with responsibilities for (1) public safety, (2) consumer protection, (3) the protection of culture and values, (4) economic vitality, and (5) the raising of revenues – regardless of industry or technology.

The rudiments of such an organization already exist; the Public Safety & Homeland Security Bureau is responsible for public safety across industries. Other bureaus would have to be split up among domain-oriented departments. The responsibilities of the departments replacing existing bureaus would include:
  1. Public Safety: Access to emergency services, law enforcement surveillance, data retention, and child safety

  2. Consumer Protection: Privacy, fraud, fair trade terms, access for those with disabilities, device certification, universal service, digital inclusion

  3. Culture & Values: Control of speech (obscenity, violence in media), advertising rules

  4. Markets: Economic vitality, anti-trust, allocation of resources (numbers, spectrum), market analysis

  5. Revenue: Taxes, fees, levies, subsidies
No reorganization is perfect, or without cost or risk. However, there are many benefits of this re-arrangement:
  • An alignment with policy mandates will be more stable over time than one based on technology or industry segmentation, which is in constant flux.

  • An organization structures by public interest mandate would require and enable the Commission to take a big picture approach in every case, and not limit staff to supervising or nurturing a particular, soon-to-be-obsolete industry category.

  • It would weaken the ability of incumbents to dominate all rule makings applicable to them by focusing on a single bureau.

  • A department focused on market issues would highlight the complements, overlaps and conflicts between the FCC and FTC in the anti-trust area.

  • The inclusion of spectrum allocation issues within a department charged with maximizing the economic value of national resources would call the question of the divided FCC/NTIA management of spectrum in the US, and may provide a path to the long-term resolution of this inefficient anomaly.
Enhancing capabilities like contingency planning, data analysis, and simulation could also lead to restructuring the Offices that serve cross-organizational roles. For example, a modeling group might logically be housed in either the Office of Engineering & Technology (OET) or the Office of Strategic Planning & Policy Analysis (OSP). One can make a case that combining the two Offices would reinvigorate staff in both. Both are tasked with providing expert advice, but OET focuses on radio engineering, while OSP houses lawyers and economists. The necessary cross-disciplinary work will be easier to accomplish in a single organization, even though inter-disciplinary incomprehension may be an obstacle in the early days. An invigorated cross-Commission data collection and analysis operation would be housed in OSP (or its successor), rather than distributed across the industry-oriented bureaus.

Is now the right time?

One needs to ask not only how to reform, but whether.

Reform is a phase in the adaptive cycle: it is the reorganization that follows the crisis of a release phase. (See Reforming the FCC: Etiology for a summary of the adaptive cycle.) While release and restructuring is necessary for the long-term health of a system, it can be painful.

Reform necessarily dissipates the capital accumulated during growth and maturity; it is not something to be embarked on lightly. Is now the right time to reform the FCC?

The goal of wise management is to keep disruptions from flipping a system into an undesirable state, while encouraging the innovation and experimentation that comes with reorganization – not vainly trying to stop restructuring from happening at all. Delayed re-organization amplifies the eventual crisis, increasing the risk of landing up in an unhealthy state; too frequent or premature re-organization never allows the full accumulation of the potential that can fuel the next restructuring cycle.

An accumulation of governance problems is not sufficient to drive a paradigm shift, as Thomas Kuhn demonstrated in the context of scientific revolutions; there needs to be a better alternative. Do we have a better alternative? I don’t know, and complexity science suggests that there’s no way to know for sure. The only way to find out is to try it.

Are the risks acceptable? One of the prices to be paid is that tools that one needs to manage the system are disrupted during reform. For example, trust is an important ingredient of self-regulation, which will be important in the new approach – but trust requires stability, which is reduced during a reform. Fortunately, industry is in a relatively stable phase at the moment, which can accommodate and smooth over disruption at the Commission level. This gives the FCC an opportunity to change while not endangering the stability of the whole system

A new Communications Act might trigger reform, but that is neither necessary nor likely. Congress will be the last to change in the face of the complexification of communications. Members, particularly influential ones, are typically long standing office-holders with entrenched patrons and perspectives. They will resist the threat to their patronage entailed by a re-organization of regulatory action. When they do act to reform, it will probably be in response to an existential threat to a powerful old-line industry – which will tend to entrench, or at best resist attempts at blurring, existing ways of doing things.

Re-organization will therefore have to be driven by the Chairman, with all the risks (and opportunities) of a process that depends on a single big ego. The choice of a new Chairman will therefore have far-reaching consequences for the effectiveness of the organization.


There is no a priori limit to the number of true statements one can make about a complex, adaptive system, and many of them will be at odds with one another. The role of a regulator is therefore not to establish the ultimate truth as the basis of a correct decision, but rather a never-ending quest to make the best possible call given what can be known at a given moment.

This reality has become more visible and more pressing as the stable world of 20th century communications gives way to the flux of the 21st century internet/web. Even while understanding grows that the FCC’s influence is limited, there is no doubt that it still has great influence, and important responsibilities. The addition of new techniques to its repertoire and a corresponding restructuring of its organization will be essential to wielding its influence wisely, to the benefit of citizens.

The new approach proposed here is premised on dynamics that affect not only the FCC, but all actors in the communications system. These arguments, and all debates about how to reform the FCC, therefore also apply to the broader question of governance of 21st century communications.

Further reading

Weiser, Philip J, “FCC Reform and the Future of Telecommunications Policy” (forthcoming, to be presented at Reforming the Federal Communications Commission, 5 January 2009)

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