New FCC Chairman Ajit Pai: Hero and Regulator?

When it comes to government regulation, only one person in government ever earned my consideration for calling him a “hero.” During his administration, President Ronald Reagan oversaw the only stretch of time in the post-World-War-II era during which federal regulatory actions and costs significantly declined – a historic achievement.

Of course, after Reagan, the growth in regulatory costs resumed, with the Obama years being a time of hyper-regulation.

But now there’s a new hero in D.C. Well, perhaps we should not get too carried away. After all, this guy is still a government regulator. But make no mistake, the new chairman of the Federal Communication Commission, Ajit Pai, has served up a dramatically different set of principles to guide regulatory activity at the FCC. And these ideas can and should be transferred to all other regulatory bodies.

Pai has been an FCC commissioner since 2012, and has staunchly opposed the regulatory adventurism undertaken by the FCC during the chairmanship of Tom Wheeler. That included the Wheeler FCC’s 2015 decision, without any congressional authority and certainly no supporting experience in the marketplace, to regulate the Internet like an old-style telephone monopoly utility. Government micromanaging broadband, of course, is a recipe for reduced investment and innovation in broadband.

In direct contrast to Wheeler’s regulatory philosophy, Chairman Pai, on his new FCC bio page, offers five guiding principles for regulation actually rooted in sound economics and a proper, limited view of the power of regulators:

1) “Consumers benefit most from competition, not preemptive regulation. Free markets have delivered more value to American consumers than highly regulated ones.”

2) “No regulatory system should indulge arbitrage; regulators should be skeptical of pleas to regulate rivals, dispense favors, or otherwise afford special treatment.”

3) “Particularly given how rapidly the communications sector is changing, the FCC should do everything it can to ensure that its rules reflect the realities of the current marketplace and basic principles of economics.”

4) “As a creature of Congress, the FCC must respect the law as set forth by the legislature.”

5) “The FCC is at its best when it proceeds on the basis of consensus; good communications policy knows no partisan affiliation.”

This straightforward set of principles captures the realities of the marketplace not just in the telecommunications sector, but across all industries. The new Congress would be wise to put these five principle in the law as foundational considerations to guide all federal regulatory agencies and initiatives. The only changes needed to the text would be to replace “the FCC” with “each regulatory agency or entity.”

Such legislation would serve as a nice opening for much-needed regulatory reform.

It must be understood that inside and around government, incentives overwhelmingly point to increased regulation. For example, special interests have clear incentives to spend heavily and vote based on their preferred regulatory actions. Elected officials possess incentives to regulate versus other types of action or no action at all. Government regulators are incentivized to expand agency goals, and push for larger budgets and staff, and increased power and control. Meanwhile, few incentives exist for voters to understand the extent and cost of regulation.

These institutional biases in favor of more regulation need to be checked by reforms, such as sunsetting all regulations, and requiring congressional approval of all rules and regulations.

But as regulatory reform takes shape, codifying that all federal regulatory agencies consider and be guided by the regulatory principles laid out by FCC Chairman Ajit Pai would be a wise first step – a downright heroic move.