One of the worst things you can do to a regulatory agency is politicize it. Politicized agencies bend to the ever-changing winds of politics, which creates problems for industry and consumers alike. This straightforward lesson is one I have taught government agencies around the world. They seem to get it. Meanwhile, our very own FCC still has to make the small but crucial first step required to start the de-politicization process.
The worst-kept secret in tech policy these days is that the FCC is deeply divided along political party lines. There have been 3-2 votes (3 Democrat and 2 Republican) on major issues, such as increasing subsidies for schools and libraries (0) (E-Rate), preempting state laws on whether and how city governments can get into the broadband business (1), favoring small businesses (2) in radio spectrum auctions, and whether Internet service providers should be re-regulated (3) as public utilities. There have been similar divides along party lines on issues of the possibility of regulating news content (4) and transparency (5) in decision-making. The FCC is also delaying the resolution of an important decision on how to release more radio spectrum for mobile broadband (6) in part because of disagreements along party lines. Adding to the political tension, or maybe because of it, is the belief that the White House has been pulling strings on issues such as net neutrality (7) and E-Rate. In fact, the White House took some credit (8) for the FCC’s E-Rate decision.
Why is politicizing a regulatory agency a bad idea?
We try to keep regulatory agencies at arm’s length from politics to ensure that economic decisions regarding critical industries do not become the victim of political rent seeking. Actually, this is why infrastructure regulation is typically placed in agencies like the FCC, which are designed to be independent. If we fail in this, then regulatory decisions are pushed one direction and then another by whichever way the political winds are blowing.
A recent example of politicized regulation is the distribution of government broadband subsidies (9) in the 2009 stimulus package. A study of the implementation of the subsidies found that decisions on who would receive funding was heavily influenced by party affiliation and Congressional committee assignments. Such politicization creates risks for investors and taxpayers, decreases infrastructure investment (10), hinders business decision-making, causes industry to become hesitant about offending political interests, and hurts customers.
How to de-politicize an agency
An agency becomes politicized when decision-makers have stronger loyalties to their parties, outside supporters, and the like than to the work of the agency. Thus, de-politicizing an agency requires a realignment of loyalties and generally takes effective leadership from the head of the agency, other commissioners, and people outside the agency.
While de-politicizing isn’t easy, it is not impossible. Examples I have come across in my own work include:
- An agency head from a developing country that foresaw his agency coming under political pressure from the opposition party. He disarmed the threat by increasing transparency: He provided the opposition party with the same information, insights, and deference that he gave to his own party.
- A state commissioner in the US made open, transparent dialogue the norm, thereby reversing a trend of increasing political tensions. Now the atmosphere in that commission is such that votes no longer divide along lines of party affiliation or outside relationships.
- Recognizing the importance of a stable regulatory environment, a US utility executive made sure his company always sided with the commission when it came under political pressure – even if his company could have benefited from a policy outcome different from what the commission was pursuing – in an effort to make it easier for the commission to withstand political pressure.
- A head of state publicly committed to never asking the regulatory agency head about an agency decision, thereby creating a non-political regulatory environment even through times of rapid economic and industry change.
Notice that in all of these examples, everyone in decision-making positions inside and outside the agencies had to view themselves as part of the problem of political divide and gave something up to solve it. This is the crucial first step towards de-politicizing an agency. It is necessary to make this acknowledgement because de-politicizing a commission is an adaptive problem, i.e. one where people have to adjust their expectations, alliances and behaviors in order for the problem to be resolved. Technical solutions, such as changing formal appointment processes and increasing transparency help, but at the end of the day, the people who embody the problem have to change themselves or leave.
Perhaps that sounds harsh. But I have had the opportunity to work with regulatory agencies in over 150 countries and have seen other methods repeatedly fail. Internal reflection, admitting fault, and working consciously to change behavioral patterns, on the other hand, have put regulatory agencies back on the right track.