Gigi Sohn recently was interviewed by The Verge and discussed her nomination process to become the fifth FCC Commissioner. It’s a fascinating read about the process of being nominated for a position that must be confirmed by the Senate. From the day she was nominated, Sohn was not allowed to talk in public during the long 500 days she was under consideration about issues considered by the FCC. She was first nominated for the position back in October 2021 and only recently withdrew as a candidate. As she describes it, it’s a dreadful process for anybody to go through.
Today’s blog isn’t specifically about Sohn but rather about the FCC and who controls it. In my opinion, Sohn was ultimately not considered because she has spent her career as an advocate for the public and for taking positions that favored small corporations and startups over giant corporations. It’s disheartening that somebody who has sided with the small guy over giant corporations in the past has little or no chance of becoming an FCC Commissioner.
By definition, regulators are supposed to be neutral arbiters that represent both the public and the industries they regulate. An FCC Commissioner (or a regulator at any federal agency) is supposed to equally look out for citizens as well as industries. It’s often been said that perfect regulation is one that leaves both sides a little unhappy because it considers what is best for both the public and industries in every decision.
I’ve written before about regulatory capture. Regulatory capture is an economic principle that describes a situation where regulatory agencies are dominated by the industries they are supposed to be regulating. Economic theory says that an industry has succumbed to regulatory capture when regulators predominantly side with the industries being regulated instead of the general public.
The concept of regulatory capture was proposed in the 1970s by George Stigler, a Nobel prize-winning economist. He described the characteristics of regulatory capture as follows. This list describes current broadband regulation to a tee.
- Regulated industries devote a large budget to influence regulators at the federal, state, and local levels. The general public does not have the resources to effectively lobby the public’s side of issues.
- Regulators tend to come from the regulated industry, and they tend to take advantage of the revolving door to return to industry at the end of their stint as a regulator.
- In what Stigler labeled as corruption, regulators tend to automatically side with the industries they are supposed to be regulating.
- In the extreme case of regulatory capture, the incumbents are deregulated from onerous regulations, while new market entrants have hoops to jump through.
The two best current examples of regulatory capture are the broadband and banking industries. There is no question that the power of the broadband industry is concentrated among only a few firms. Comcast, Charter, AT&T, and Verizon together serve 75% of all broadband customers in the country.
The FCC is a textbook example of a captured regulator. The FCC under Ajit Pai went so far as to deregulate broadband and to wash the FCC’s hands of broadband as much as possible by theoretically passing the little remaining regulation to the FTC. It’s hard to imagine an FCC more under the sway of the broadband industry than the last one.
There was no chance for the Sohn nomination to succeed because the big ISPs and the big broadcasters began attacking her as soon as she was nominated. Everybody who knows Sohn says that she is two things – extremely knowledgeable about the industry and fair-minded. That sounds like exactly who ought to be a federal regulator.
Perhaps the most telling part of the story is this was not political. Sohn was nominated by a Democratic president and was to be confirmed by a Democratic Senate. Sohn was supported by a wide range of folks including the ultra-conservative One America News (OAN). But the large ISPs and large broadcasters brought enough pressure that the nomination never even made it to the floor for a vote. Perhaps the ultimate measure of regulatory capture is when industries get to accept or reject their regulators.