I was privileged to testify yesterday at a hearing held by the Senate Committee on Homeland Security and Governmental Affairs. The title of the hearing was: “The Administrative State: An Examination of Federal Rulemaking.”
Given the burgeoning growth of the administrative state – especially with the increasing number of rules issued during the last seven years – and the economic impact of these regulations, the subject of the hearing obviously is an important one.
I was asked by the Committee to focus particularly on the FCC’s net neutrality rulemaking, which is what I did. No worries! The net neutrality rulemaking offers plenty of opportunities for discussing problematic rulemaking areas, some of which are typical of concerns present across the range of federal agencies and some of which are particularly relevant to so-called independent agencies like the FCC.
If you are interested in the Administrative State and federal rulemaking, please take a look at my complete written testimony. But for the “quickie” version, here is the testimony summary:
"The Committee’s identification of the Federal Communications Commission’s net neutrality rule as deserving of examination is wise. The Commission’s rulemaking is instructive regarding the ways in which a faulty rulemaking process enables the growth of the burgeoning administrative state and adversely impacts the economy – while, at the same time, compromising rule of law norms. I want to highlight four areas in which the FCC’s net neutrality rulemaking is problematic.
First, the net neutrality rulemaking truly is a case of the proverbial “solution in search of a problem.” Or as FCC Commissioner Ajit Pai put it recently, the rule “was a 313-page solution that wouldn’t work to a problem that didn’t exist.” To put it bluntly, in this case there was no meaningful evidence of an existing market failure or consumer harm that required the Commission to adopt rules applying Ma Bell-era Title II public utility-like regulation to today’s Internet service providers. The dynamic, competitive marketplace in which Internet service providers operate today is far removed from the staid monopolistic markets for which public utility-type regulation was devised.
Second, as a result of the direct and indirect costs and burdens imposed on Internet service providers, the rule’s adoption most likely will have a deleterious economic impact by chilling investment and innovation. Indeed, there is some persuasive evidence that it is already doing so. Of course, diminished investment and innovation mean diminished jobs and consumer welfare.
Third, at a minimum, the manner of President Obama’s direct involvement in the FCC’s net neutrality rulemaking, and the aftermath of his involvement that resulted initially in confusion at the Commission and then, shortly afterward, in an abrupt change in course, raise questions about the FCC’s supposed independence. The manner in which the rulemaking was conducted serves to undermine the notion that the FCC’s decisions are primarily based on its specialized communications law and policy expertise rather than political considerations. And this, in turn, jeopardizes the public’s confidence in the soundness of the Commission’s decisions and the agency’s institutional integrity. Just last week, the White House released a high-profile statement urging the FCC to adopt a specific course of action in the agency’s controversial video navigation device rulemaking. Repeated high-profile presidential interventions like this further undermine the notion that the FCC acts independently and free from executive branch control.
Finally, aside from issues relating to President Obama’s involvement, there are aspects of the net neutrality rule, specifically including the vague general conduct standard and the enforcement regime the rule creates, that call into question compliance with accepted rule of law and due process norms. These norms require that law be predictable and knowable in advance of the imposition of sanctions, which in the case of the net neutrality rule is not the case. Failing to adhere to these norms also threatens to undermine the public’s confidence in the agency’s institutional integrity."