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Wednesday, February 24, 2010

Will the FCC's Nat'l Broadband Plan Be "Full Employment for Lawyers"?
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Today I am attending, and speaking at, a terrific event in downtown DC sponsored by the Catholic University Law School on"Implementing the National Broadband Plan: Perspectives from Government, Industry, and Consumers." It's being held at the offices of the law firm of Wiley Rein LLP. Edward Lazarus, Chief of Staff to FCC Chairman Julius Genachowski kicked off the event with a nice keynote address talking about the broad goals of the FCC's coming National Broadband Plan. Lazarus broke the ice by joking with the crowd -- which is heavily made up of communications industry lawyers -- that "The FCC is doing everything it can to provide full employment for telecom lawyers. Whatever else we are failing at, we are succeeding at that." Again, it was a joke, so I don't want to make too much out of it, but... No, strike that, I do want to talk about that for a minute! Because this is actually a very important question: Exactly how much bureaucracy and deadweight loss to the economy (in the form of more lawyering and lobbying) is going to accompany the National Broadband Plan?

Two years ago, I posted an essay on "Lawyers, Lawsuits and Net Neutrality Regulation," in which I attempted to highlight the uncomfortable fact that Net neutrality regulation will likely lead to a bureaucratic nightmare at the FCC and a lawyer's bonanza once the lawsuits start flying in court. Of course, now we have Net neutrality regulations and a National Broadband Plan pending at the FCC, so the potential for bloated bureaucracy will only grow larger. Do you think I am exaggerating? Well, here are some facts to consider from our recent experience in the field of "telecom reform." In the years following passage of the Telecom Act, entire forests fell because of the thousands of pages of regulatory and judicial interpretations that were handed down trying to figure out what that word meant. In fact, let's take a quick tally of the paperwork burden the FCC managed to churn out in just three major "competition" rules it issued in an attempt to implement the Telecom Act and define the "cost" of unbundled network elements ("UNEs"):

* Local Competition Order (1996): 737 pages, 3,283 footnotes
* UNE Remand Order (1999): 262 pages, 1,040 footnotes
* UNE Triennial Review (2003): 576 pages; 2,447 footnotes

That's 1,575 pages and 6,770 footnotes worth of regulation in just three orders! This obviously does not count the dozens of other rules and clarifications the FCC issued to implement other parts of the Telecom Act. Nor does it include the hundreds of additional rules issued by state public utility commissions (PUCs), who actually received expanded authority under some of these FCC regulatory orders.

Again, this was all implemented following the passage of a bill (The Telecom Act) that was supposed to be deregulatory in character! But wait, it gets worse. This doesn't even begin to cover the tens of thousands of pages of legal filings, economic studies, consultant reports and other filings submitted to the FCC and state agencies by groups and individuals looking to have a say in the matter.

Lawyers, in particular, did quite well thanks to the FCC's endless stream of litigation-prone rulemakings during the 1996-2003 period. Greg Sidak of Georgetown University Law School found that the number of telecom lawyers-as measured by membership in the Federal Communications Bar Association-grew by a stunning 73 percent in the late 1990s. That was largely driven by a 37 percent hike in FCC spending and a tripling of the number of pages of regulations in the FCC Record in the post-Telecom Act period. Sidak argues, "If one assumes (very conservatively) that the average income of an American telecommunications lawyer is $100,000, then the current membership of the FCBA represents an annual expenditure on legal services of at least $340 million." And we all know that those lawyers were making a hell of lot more than just $100K, so Sidak's estimates are ultra-conservative and the deadweight loss of all this legal activity was much greater.

Even the lawyers admitted what a boon all this regulation was to their business. In the wake of one controversial FCC rulemaking in 2003, telecom lawyer Dana Frix of the firm Chadbourne & Parke told The New York Times that "Every word will be challenged... My children will go to college on this stuff. This is a lawyer's dream." That pretty much says it all, now doesn't it?

Look, I know that many supporters of a National Broadband Plan and Net neutrality regulation have good intentions. They really do think that The Plan and these rules will make the world a better place. But they need to acknowledge that regulation sometimes has unintended consequenses, especially when bureaucrats are asked to embark on grand "National Plans," or to interpret amorphous terms like "neutrality." Once the programs and laws get on the books, volumes of regulations are promulgated interpreting and implementing them. That is followed by still more regulations interpreting, enforcing, and expanding the earlier regs. And then the lawsuits begin. Followed by still more regs and then more laws trying to straighten it all out after the courts say its all hopelessly arbitrary. Pretty soon we forget what we were fighting over. It's all just about the paperwork and the lawsuits. And it becomes a grand sport for the armies of well-heeled laywers, lobbyists, consultants and economists who operate inside the parasitic economy we call "the Beltway."

So, as much I wish Mr. Lazarus really was just joking about the FCC "doing everything it can to provide full employment for telecom lawyers," the reality is that that is exactly what will happen following implementation of the National Broadband Plan and Net neutrality regulations. And that's why the room full of telecom lawyers sitting here with me today were really laughing when Mr. Lazarus delivered that punch line... Laughing all the way to the bank, that is.

posted by Adam Thierer @ 10:17 AM | Net Neutrality , Regulation , The FCC

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