The Federal Communications Commission (FCC) is holding an open meeting today, giving students of public policy a chance to observe an especially egregious arm of the regulatory state. If you want to see what's wrong with Washington, the FCC is as good a place as any to start looking: Since its birth in 1934, it has manifested three fundamental problems.
The commission is corrupt. I don't just mean the sort of corruption where the chairman loosens his tie, puts his feet up on his desk, and doles out favors to the companies that scratched the right backs—though you'll find plenty of that in the commission's history. Even when the body is being relatively transparent and above-board, it is beholden to politically connected lobbies. The FCC controls an important economic resource. Naturally, important economic interests try their best to influence its decisions.
The most flagrant example of this might be the welcome the commission gave to FM radio. The technology was an enormous leap forward: It allowed stations to broadcast without static, and it allowed more signals to coexist on the spectrum. It also worried RCA, which was investing heavily in the development of television; the company fretted that consumers might not pay for both a new FM radio and a new TV set. RCA didn't control the patent on FM, so it pressured the FCC to favor the other technology. The regulators obliged, and a series of roadblocks appeared in FM's path. The most destructive decision came in 1944, when the commissioners suddenly reassigned the FM broadcasters' portion of the ether to television, instantly rendering every FM receiver obsolete.
Sometimes the benefits of FCC corruption were more narrowly focused. The most infamous illustration might be the case of Lady Bird Johnson, whose broadcasting empire relied on the Washington connections of her husband, future president Lyndon Johnson. The Johnsons got rich off their stations, with the FCC smoothing the way whenever they needed an application approved and throwing up regulatory hurdles when someone threatened their monopoly on Austin's TV market.
Does such winner-picking still go on today? Decide for yourself. The commission intends to auction off some wireless spectrum soon. FCC chief Kevin Martin wants to impose some restrictions on how that spectrum can be used—restrictions that happen to dovetail with the business model of one well-connected startup. The business in question, M2Z, wants to build an ad-supported national broadband network, with additional tiers where consumers can pay extra for speedier connections; last year it asked the commission to grant it the spectrum outright. The regulators refused, and the company promptly sued to overturn the decision. But if the auction goes forward as planned, the commission will have effectively bequeathed the spectrum to the corporation anyway.
You needn't be fond of the incumbent wireless industry—not exactly free-market heroes themselves—to appreciate how inappropriate it is for the government to weigh the scales in any single firm's favor. Those incumbents have protested the plan, leading Martin to take his proposal off the agenda for today's meeting. But that doesn't mean the idea is dead: Martin says he hopes to introduce it next month instead.
Despite this unpleasant history, the FCC believes it is qualified to serve as a moral guardian for the rest of us. Which leads us to problem number two.
The commission is sanctimonious. For seven decades, the nation's scolds and censors have used the FCC as a tool to shape the sounds and images allowed on the airwaves. In 1952, for example, then-commissioner Paul Walker announced with satisfaction that his agency had "surveyed the programming of some of the television stations in operation, and found that some of them had reported no time devoted to broadcasts of a religious nature. We felt in view of this fact that regular renewal of their licenses would not be in the public interest." The stations quickly revised their schedules, and the commission agreed to renew their licenses after all.
These days the FCC is less likely to shoehorn something onto a station's schedule, but it's more than willing to slice something off the program. This practice also has a long history. It was the FCC that enforced Spiro Agnew's crusade against "drug lyrics," an especially vague stricture at a time when some fretful listeners managed to detect traces of narcotics in "Puff the Magic Dragon" and "Hey Jude" (for the phrase "let her under your skin"). Agnew himself believed the Beatles song "With a Little Help from My Friends" was a coded message in which "the 'friends' were assorted drugs with such nicknames as 'Mary Jane,' 'Speed' and 'Benny.'" Rock stations suddenly faced much more uncertainty about what they were allowed to play, and worried program directors reined in their DJs, hastening the decline of freeform radio.
More recently, the FCC under Michael Powell and then Kevin Martin has waged war on "indecent" material, stepping up enforcement even before Janet Jackson's infamous nipple slip in 2004 and ramping its penalties still higher since then. Now Martin wants to tell a company that intends to offer a free national wireless network that it'll have to filter out the porn if it wants access to the ether.
The company? M2Z, of course—or, to be precise, whoever wins the auction tailored to M2Z's business model. Don't expect any objections: The smut-free proviso was already present in M2Z's plans. The execs there understand what Washington wants.
And then there's problem number three:
The commission is technocratic. The next time someone tells you central planning is dead, remind him that there is an arm of the federal government that decides in advance how different chunks of the electromagnetic spectrum will be used, and that it also reserves the right to determine which entities will be allowed to use it. It's true the commission has adopted several market "mechanisms" in the last few decades: FCC-approved broadcasters now have the right to sell their licenses to other FCC-approved broadcasters, and spectrum is usually distributed by auction rather than pure fiat. But even an auction can be bent to the planners' will.
For evidence, look—again!—at the M2Z situation. If the auction goes forward according to Martin's reported plans, the bidding won't be open to just any telecom company. Applicants will have to use that spectrum for a particular sort of service. They will even be pushed to adopt a particular business model. There are phrases to describe such an arrangement. "Free market" is not one of them.
But that is how the Federal Communications Commission works. In theory, its job is to manage the nation's spectrum in the public interest. In practice, inevitably, that means its job is to pick and choose among the definitions of "the public interest" offered by rival industry lobbies and moralistic pressure groups. Corruption, sanctimony, and the conceit of central planning: That's the FCC—and Martin's pet auction—in a nutshell.
Managing Editor Jesse Walker is the author of Rebels on the Air: An Alternative History of Radio in America (NYU Press).