Monday, January 24, 2005 - The Progress & Freedom Foundation Blog

On the next Chairman...find the next Fred Kahn

Michael Powell is leaving; long live Michael Powell! At some point soon, I hope to reflect here about the Chairman's tenure, even though Adam Thierer has capably beaten me to the punch and James Gattuso has some helpful advice on choosing the next Chairman.

To pick up and expand upon Kyle's discussion of the proper temperament for the next FCC Chairman, who the administration needs to find is the next Alfred Kahn. Kahn is the model regulator and a properly modulated deregulator.

Fred Kahn brought three qualities (at least) to the Civil Aeronautics Board (CAB) under President Carter in the late '70s: credibility as a serious mind engaged in the regulatory issues, political savvy and the proper temperament to head a regulatory commission.

First, Fred Kahn was eminently qualified to head the CAB. As an academic, he studied regulatory economics and authored the classic Economics of Regulation, a well-worn copy of which sits in my bookshelf. As Chairman of the New York Public Service Commission at perhaps the most tumultuous time in regulatory history, Kahn introduced marginal cost pricing principles to regulated industries, thus beginning to give a more principled basis for utility ratemaking. With marginal cost pricing, Kahn gave both a legal guidestar to "public interest" ratemaking and made pricing more efficient. Thus, in contrast to the often demi-qualified political appointments made to regulatory commissions, Fred Kahn was arguably the most qualified regulator to ever sit on a federal commission.

Second, Fred Kahn had the political wherewithal to navigate the politics of deregulating the airline industry. Working in concert with Senator Kennedy and his counsel, Stephen Breyer, Kahn laid the political groundwork to make deregulation palatable. He did this by showing that deregulation would benefit consumers, particularly less well-off consumers and that the airline regulatory scheme benefited only the regulated carriers, not consumers. He could do this, in part, because of his bona fides as a regulator. The next FCC Chairman needs to be able to make a similar case with regard to communications regulation. Contra the naysayers who want to keep the old regulatory superstructure and service distinctions, the next Chairman needs to be a good Schumpeterian who can explain that the competition that is happening is for the next market, in a IP-packet-based world.

Third, the next Chairman needs to emulate the temperament of Fred Kahn. This is a hard quality to pin down, but is partly intellectual and partly moral. For one, the intellectual curiousity and playfulness of Fred Kahn should be a standard. He was (and still is!) genuinely interested in the inquiry and is not predisposed to an ideological answer to a given question. Just as important is the issue of integrity. The Chairman must have the intellectual openness to follow an inquiry where it leads, but then also display the resoluteness to stand firm regardless of political consequence. Political pliability for its own sake is anaethma. Thus, the regulator must regulate not to preserve his station or to establish his next move up the professional ladder, but in fidelity to law and consumer interests. A tall order, to be sure, but the catcalls from the so-called consumerist left had to be loud during airline deregulation, and will only be louder with communications.

So, in the end, this choice is all very easy: identify who among the current crop of seekers best exhibits the qualities of Fred Kahn, appoint, and give that next Chairman the mandate to enact his or her agenda with cooperative fellow commissioners. Do that, and the Bush administration can be proud of its communications legacy.

Michael Powell exhibited many of these qualities, but was saddled with a statute and commission that frustrated realizing some of these gains. The next Chairman deserves better: a better statute and a better commission.

posted by Ray Gifford @ 11:25 AM | The FCC