Pai To Boost Priority Of Economic Analysis

FCC Chairman Ajit Pai wants to create an Office of Economics and Data to bring a more rigorous cost-benefit analysis to regulations proposed for the communications industry.

In remarks prepared for delivery before the Hudson Institute in Washington today, Pai said: “Historically, the FCC had been a model for the use of economic analysis in federal policymaking. We hired and empowered a world-class economics staff. In turn, they’ve delivered policies that were a much bigger deal than a Cubs championship, unleashing hundreds of billions of dollars of consumer benefits.

“But despite this rich legacy, staff economists are not guaranteed a seat at the policy-making table. Increasingly during FCC proceedings, their views have become an afterthought, not an initial thought. Now is the time to restore the place of economic analysis at the FCC.”

Pai cited the commission’s recent spectrum incentive auction as “the most notable example of good economics guiding good policy at the commission, but hardly the only one.” While the use of reverse and forward auctions was initially proposed by an FCC staff economist, “the FCC’s first-rate economists are not always used optimally. It’s a serious opportunity cost for us and for the public.”

He said he sees four key problems:

• “First, economists are not systematically incorporated into policy work at the FCC. Instead, their expertise is typically applied in an ad hoc fashion, often late in the process. There is no consistent approach to their use.

• “The second big problem: economists work in siloes. This impedes their productivity and impairs agency efficiency. 

• “The third key problem I see with economic analysis at the FCC is that cost-benefit analysis is largely ignored. The public interest standard has become a free pass to adopt rules without a meaningful attempt to determine the net benefits. And the agency also hasn’t taken seriously its duty to conduct a Regulatory Flexibility Analysis during rulemakings to consider how our rules might affect small businesses.

• “The fourth big problem I see with economic analysis at the FCC involves a key to good economics: data. The FCC has often used data poorly. There’s a real opportunity to do better, both in how the data are collected, and how data are applied to make the best, most informed decisions possible.”

“To solve these problems, Pai offered a plan to fix the FCC’s economic analysis and data collection. “I am beginning a process to establish an Office of Economics and Data, or OED. This Office will combine economists and other data professionals from around the Commission. I envision it providing economic analysis for rulemakings, transactions, and auctions; managing the Commission’s data resources; and conducting longer-term research on ways to improve the Commission’s policies.

“To inform our thinking on the wisdom of this proposal, we are establishing a working group of economists at the FCC that will be charged with thinking about some basic questions. Who should be part of this office? Who should be on other teams? How should OED be structured and how should it fit with the rest of the commission? What should be the powers and responsibilities of the office?

“The working group will cast a wide net, seeking input from personnel at the FCC—including my colleagues, Commissioners Clyburn and O’Rielly — as well as stakeholders outside the agency. 

“Based on their findings, they will develop a plan of action by this summer. The commission will then carefully consider that plan. My goal is to have the new office up and running by the end of the year.”

Pai said he sees the new office playing four roles:

• Giving economists early input into the decision-making process. 

• Ensuring better management of data, reports, and analyses.
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• Incorporating strategic, long-term thinking into the FCC’s processes.

• By establishing an organizational structure—and culture—in which economists contribute meaningfully to the commission’s work and are valued for doing so, “we will continue to recruit quality talent to help us in our work on behalf of the American people.”