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Did I Call Rob McDowell a Marxist? No, but isn’t it curious…..

In reporting on something I said at a conference Friday, The Hill newspaper ran a story headlined “Ex-FCC official slams GOP commissioner for ‘Marx-Friendly’ policy.” Catchy headline.  But the story was clear, and I was even clearer in my comments, I wasn’t really calling Commissioner Robert McDowell a Marxist.

What I was really doing was asking for McDowell’s help in reforming the FCC’s universal service fund.  In his Wall Street Journal editorials and his Commission statements, he has stated his fervent commitment to capitalism and free markets.  I was hoping he would take the same analytic view of universal service.  After all, our current system of rate of return regulation—a system born more than a century ago designed to serve a completely different market–involves using the government’s power to assess consumers to subsidize private companies and insure their permanent profitability, no matter what changes in technology or consumer preferences there are in the market.  I am not sure how to characterize the system—one which McDowell has quietly watched hand out billions during his tenure–but you can’t call it capitalism or the free market at work.  

Not only should the expenditure of billions under such a system be anathema to any principled conservative (or liberal) on philosophical grounds, the practical result of our system creates an indefensible rural-rural divide.  To certain rural areas, our country effectively pays some carriers to spend enough to build a Maserati, for which they only have to produce a Mercedes, and, because of the subsidy, only charge their customers for a Chevy.  Meanwhile, to 15-20 million other Americans in rural areas, we say, you have to walk.

I have made this point in front of groups of rural telephone providers who are the beneficiaries of the current system.  They are not fond of the message but they are good people, doing their best to serve their communities.  They are understandably designing their business plans to respond to a system that gives them incentives to act in non-economic ways; a system that results in the country not spending on critical needs such as unserved communities.  It makes sense that they want to preserve the status quo.

I was hoping that McDowell, who like many Commissioners, has a history of inveighing against our “bloated and inefficient universal service system” while generally avoiding detailing the location of the bloat and inefficiency, would take a principled view and simply agree that it is time to have a transition to end rate of return regulation. 

Instead, he responded with one sentence that, in my view, neatly summarized everything that is wrong in the way the Commission has faced this (and other) issues.  When asked what he thought about rate of return regulation he said “everything is on the table.”

If Universal Service reform were a new issue, or Rob a new Commissioner, this would be appropriate.  But it is not and he is not.  The problems with the statement are many but the three biggest are these.

First, it sends a paralyzing message to the FCC staff.  I have had the honor of a managerial job in that institution on two occasions.  The staff is composed of outstanding public servants.  But the institutional incentive for staff is always to maximize options of both substance and timing–which leads to endless discussion but no action.  To govern is to choose but the staff, for good reasons, is reluctant to make choices.  The subsequent inertia embeds the status quo, no matter how outdated or non-responsive to current realities it becomes.

The whole point of having a Chair and Commissioners is not to feed that sensibility but to clarify direction, ensure a rapid and transparent process, and make the meaningful decisions–not of which high-sounding but vague rhetoric to employ, but of action–to improve our country’s communications platform.  The staff will hear “Everything is on the table”  as a signal that this year’s universal service reform effort will be full of sound and fury, but in the end, signify nothing.  

Second, it obscures, rather than clarifies the debate over universal service.  Commissioner McDowell rightly insisted on transparency for the broadband planning effort as to where our policy thinking was heading and we did so.  We did not say everything was on the table; to the contrary, we made clear in a series of public meetings and through various media where we thought the gaps were and were not, options for addressing the gaps, which options that we thought made no sense and which options we thought were preferable. 

If McDowell had ever given a substantive, detailed speech detailing how he thought Universal Service should be restructured, one could view his statement as demonstrating a willingness to negotiate, as opposed to a statement hiding one’s view.  But to my knowledge, he has never given such a speech.  Public policy debates should not be viewed as poker games in which the winner is often determined by who can best hide one’s real position; the only way for the public to win is if the players are honest about the trade-offs they think are in the country’s interest.  By saying “everything is on the table,” McDowell is not providing the public with any way to evaluate what he is really thinking about the largest program the FCC oversees (in terms of spending money.)

Third, it sends a horrible message to industry.  The most popular mantra among Commissioners is that “industry needs certainty.”  They often make this comment in situations in which the FCC is utterly powerless to provide such certainty.  But sometimes the FCC does have power to provide a measure of certainty, as it does with Universal Service. 

What industry needs now is for the FCC to clearly state what the end vision is as we move from the analog, monopoly voice-centric regulatory system to the digital, competitive, broadband regulatory system, and then set us on the path to reach it.  We tried to do that with the Plan.  My co-panelist, Jim Cicconi of AT&T, did an excellent job of outlining some of the elements of that end state vision, as have others.   

To do so, we have to take things off the table, including inefficient reimbursement schemes that are based in yesterday’s realities and don’t solve today and tomorrow’s problems.

Universal Service is a tough issue.  It will be a tough transition.  Mistakes will be made and course corrections will be necessary.  But it is time for decisions that clarify where the regulatory framework is heading.  The last thing we need is to take the position that everything is on the table.

So to sum up, I did not call Rob McDowell a Marxist. 

But isn’t it curious that he did not take Marxist solutions off the table? Just saying….

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