Reboot the FCC

We'll stifle the Skypes and YouTubes of the future if we don't demolish the regulators that oversee our digital pipelines.

By Lawrence Lessig

Newsweek
Dec 23, 2008

Economic growth requires innovation. Trouble is, Washington is practically designed to resist it. Built into the DNA of the most important agencies created to protect innovation, is an almost irresistible urge to protect the most powerful instead.

The FCC is a perfect example. Born in the 1930s, at a time when the utmost importance was put on stability, the agency has become the focal point for almost every important innovation in technology. It is the presumptive protector of the Internet, and the continued regulator of radio, TV and satellite communications. In the next decades, it could well become the default regulator for every new communications technology, including, and especially, fantastic new ways to use wireless technologies, which today carry television, radio, internet, and cellular phone signals through the air, and which may soon provide high-speed internet access on-the-go, something that Google cofounder Larry Page calls "wifi on steroids."

If history is our guide, these new technologies are at risk, and with them, everything they make possible. With so much in its reach, the FCC has become the target of enormous campaigns for influence. Its commissioners are meant to be "expert" and "independent," but they've never really been expert, and are now openly embracing the political role they play. Commissioners issue press releases touting their own personal policies. And lobbyists spend years getting close to members of this junior varsity Congress. Think about the storm around former FCC Chairman Michael Powell's decision to relax media ownership rules, giving a green light to the concentration of newspapers and television stations into fewer and fewer hands. This is policy by committee, influenced by money and power, and with no one, not even the President, responsible for its failures.

The solution here is not tinkering. You can't fix DNA. You have to bury it. President Obama should get Congress to shut down the FCC and similar vestigial regulators, which put stability and special interests above the public good. In their place, Congress should create something we could call the Innovation Environment Protection Agency (iEPA), charged with a simple founding mission: "minimal intervention to maximize innovation." The iEPA's core purpose would be to protect innovation from its two historical enemies—excessive government favors, and excessive private monopoly power.

Since the birth of the Republic, the U.S. government has been in the business of handing out "exclusive rights" (a.k.a., monopolies) in order to "promote progress" or enable new markets of communication. Patents and copyrights accomplish the first goal; giving away slices of the airwaves serves the second. No one doubts that these monopolies are sometimes necessary to stimulate innovation. Hollywood could not survive without a copyright system; privately funded drug development won't happen without patents. But if history has taught us anything, it is that special interests—the Disneys and Pfizers of the world—have become very good at clambering for more and more monopoly rights. Copyrights last almost a century now, and patents regulate "anything under the sun that is made by man," as the Supreme Court has put it. This is the story of endless bloat, with each round of new monopolies met with a gluttonous demand for more.

The problem is that the government has never given a thought to when these monopolies help, and when they're merely handouts to companies with high-powered lobbyists. The iEPA's first task would thus be to reverse the unrestrained growth of these monopolies. For example, much of the wireless spectrum has been auctioned off to telecom monopolies, on the assumption that only by granting a monopoly could companies be encouraged to undertake the expensive task of building a network of cell towers or broadcasting stations. The iEPA would test this assumption, and essentially ask the question: do these monopolies do more harm than good? With a strong agency head, and a staff absolutely barred from industry ties, the iEPA could avoid the culture of favoritism that's come to define the FCC. And if it became credible in its monopoly-checking role, the agency could eventually apply this expertise to the area of patents and copyrights, guiding Congress's policymaking in these special-interest hornet nests.

The iEPA's second task should be to assure that the nation's basic communications infrastructure spectrum— the wires, cables and cellular towers that serve as the highways of the information economy—remain open to new innovation, no matter who owns them. For example, "network neutrality" rules, when done right, aim simply to keep companies like Comcast and Verizon from skewing the rules in favor of or against certain types of content and services that run over their networks. The investors behind the next Skype or Amazon need to be sure that their hard work won't be thwarted by an arbitrary decision on the part of one of the gatekeepers of the Net. Such regulation need not, in my view, go as far as some Democrats have demanded. It need not put extreme limits on what the Verizons of the world can do with their network—they did, after all, build it in the first place—but no doubt a minimal set of rules is necessary to make sure that the Net continues to be a crucial platform for economic growth.

Beyond these two tasks, what's most needed from the iEPA is benign neglect. Certainly, it should keep competition information flowing smoothly and limit destructive regulation at the state level, and it might encourage the government to spend more on public communications infrastructure, for example in the rural areas which private companies often ignore. But beyond these limited tasks, whole phone-books worth of regulation could simply be erased. And with it, we would remove many of the levers that lobbyists use to win favors to protect today's monopolists.

America's economic future depends upon restarting an engine of innovation and technological growth. A first step is to remove the government from the mix as much as possible. This is the biggest problem with communication innovation around the world, as too many nations who should know better continue to preference legacy communication monopolies. It is a growing problem in our own country as well, as corporate America has come to believe that investments in influencing Washington pay more than investments in building a better mousetrap. That will only change when regulation is crafted as narrowly as possible. Only then can regulators serve the public good, instead of private protection. We need to kill a philosophy of regulation born with the 20th century, if we're to make possible a world of innovation in the 21st.

Lessig is a professor at Stanford Law School and the author of five books, including most recently "Remix: Making Art and Commerce Thrive in the Hybrid Economy."

© 2008