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Friday, August 19, 2005

The FCC and Organization Development
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As reported in TRDaily [subscription required], comments on the FCC's draft strategic plan are as unsurprising as they may be unhelpful in the long run. As public choice theory predicts, parties did a good job of defending their regulatory interests. But they failed to shed much light on how the FCC can cope with or, better yet, conquer the challenges of regulating in the digital age. To accomplish these loftier aims, future commenters would do well to take some cues from the management and behavioral sciences, such as the field of "organization development" (OD). In the language of OD, future commenters should focus more on how the FCC can become more "effective" or more able to solve problems and achieve goals. Improving organizations' effectiveness is the central goal of OD.

The insights OD could have for helping the FCC to steward of digital communications going forward are probably too numerous to cover in this weblog entry. For now, it is enough to show how OD might make sense of some of the FCC's recent history, as well as suggest how the FCC might be made more effective in the future.

OD likely would describe the central challenge for the FCC as the need (or at least desire by Congress or the agency itself) to conduct several disparate regulatory "processes." These regulatory processes range from writing and enforcing rules, conducting adjudications and reviewing transactions, industry monitoring and research and consumer education. Moreover, these processes use highly-technical "functional expertise" to pursue various goals with respect to diverse array of communications "products or services." The functional expertise employed by the agency includes specialized knowledge of law, economics and engineering. And the services include the growing number of communications for consumers and businesses.

Historically, the FCC has attempted to address this challenge predominantly by relying on a "self-contained unit" organization. This organizational structure typically groups activities on the basis of products, services, customers or geography. Based largely on the insistence by the Communications Act that each classification of service be given a different regulatory framework, much of the FCC's regulatory work (as opposed to internal and other work) has been performed in one several bureaus or major offices (e.g., the Wireline Competition Bureau). Each of these entities has taken responsibility for most or all of the processes for regulating particular services.

More recently, however, it appears the FCC's predominant structure did not capitalize adequately on the possibility of making some regulatory processes more efficient. Specifically, as OD points out, self-contained unit organizations may duplicate and fail to achieve efficiencies in processes that are similar across products or services. For example, prosecuting rule violations and negotiating consent agreements often emphasizes similar skills, no matter what the service and applicable rules are. Similarly, understanding and educating consumers may involve similar skills even with respect to widely diverging communications offerings. This helps explain the FCC's decision, in the last few years, to consolidate many of these activities in an Enforcement Bureau and a Consumer and Governmental Affairs Bureau.

The FCC's predominantly "self-contained" structure also appears to have been adapted to begin recognizing the development of competition among services that use varying technologies. Perhaps the clearest example of this is the consolidation of most regulation of television (broadcast, cable and DBS) in the Media Bureau, which resulted primarily from the merging of the former Cable Services and Mass Media Bureaus. Another long-standing approach to addressing this issue has been to require FCC bureaus that regulate competing services to "coordinate" their analyses, a task ranging from merely putting other bureaus on notice to building consensus as to appropriate regulatory outcomes. But the success of this approach can sometimes be limited by such factors as each bureau's interest in maximizing its influence and the personalities of coordinating staff. So recently, the FCC has instituted various cross-bureau task forces, such as Wireless Broadband Access Task Force, which help mitigate the limitations of maintaining relatively self-contained bureaus.

OD suggests, however, that the FCC's structure may need to be adapted further to maximize the agency's effectiveness. Of course, what the FCC should be "best at" will depend on both the outcome of efforts to rewrite the Communications Act in Congress, as well as on the judgments of FCC leadership over the next several years. But even without full knowledge of these parameters, it seems clear that the agency will have to deal with the demands of continued innovation and convergence, i.e., the ongoing development of competition among new and existing communications service provided over flexible broadband platforms. In the short term, these forces are dramatized by growing competition among cable modem, DSL, fiber and wireless broadband Internet access service, and the FCC's wise decision to respect this development by crafting a consistent regime in the wake of its Supreme Court victory in Brand X. These forces also are illustrated by the growing acceptance of wireless and Internet voice services as viable alternatives to traditional phone service.

Innovation and convergence suggest that the FCC ultimately may increase its effectiveness if additional steps are taken to centralize certain regulatory functions. For example, to the extent Congress insists or the agency decides that growing competition in communications justifies a more targeted approach to addressing abuses of market power, it might prove efficient to consolidate such case-by-case analyses in an organization that specializes in adjudications or transaction reviews. Although the FCC moved in this direction in creating a Transaction Team within the Office of General Counsel, much of the work of reviewing transactions has continued to take place in the major bureaus responsible for regulating specific services.

Further research into and reliance on OD also could favor more fundamental evolution of the FCC's "self-contained" organizational structure. Such changes could include designing the agency's structure around specific regulatory processes, like rulemaking, enforcement and research (in OD terms, a "process-based" structure). Alternatively, one could consider giving the FCC a "network-based" structure common to some high-tech firms, in which the bureaucracy is disaggregated so that teams of personnel can be created and disbanded flexibly as specific needs arise. Such structures may be more difficult to manage initially but could offer important benefits both to regulatory effectiveness and staff cross-training in the long run.

There may be disagreement regarding the extent to which the developments discussed here undermine the need for regulation generally. There can be little disagreement, however, about the risks posed by assuming the FCC's organizational structure will remain the same indefinitely. As frequently discussed in this blog, technological convergence benefits consumers in the form of innovation and expanded competition, but it can make it more difficult to avoid inconsistent regulatory outcomes for competing services, even when the Act does not itself mandate such disparities. At least on the surface, the field of organization development may provide insights and even answers about how to minimize such risks and thereby maximize the FCC's effectiveness in serving American consumers.

posted by Kyle Dixon @ 10:17 AM | Broadband , Cable , Capitol Hill , Communications , Innovation , Internet , Mass Media , Spectrum , The FCC , VoIP , Wireless , Wireline

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