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Transparency in Communications Regulation:

Suggestions for RATEL

Part I: Basic Concepts

Michael J. Marcus, Sc.D., FIEEEMarcus Spectrum Solutions

Paris France

mjmarcus@alum.mit.eduwww.marcus-spectrum.com

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Outline

• Why Transparency• Basics of Transparency• Why Waivers are Important

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Why? (1)

• Transparency encourages capital formation & investment - both domestic and foreign– May actually be necessary for significant

direct foreign investment• Investment/capital formation key to job creation

and GDP growth• National economies compete for DFI inflow• Important for technical innovation and improved

competitiveness

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Why (2)

– Discourages capital flight/exodus• Russian example shows how lack of

transparency discourages capital formation

• Lack of transparency can make– excess immediate consumption and – leaks of capital for more predictable foreign

markets a rational response!

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Macroeconomics of Telecom

• Telecom is a large industry in its own right

• Telecom is a basic commodity in today’s economies – its cost and efficiency can enhance or

decrease national productivity• New information/telecom services can

enable whole new industries– If not forbidden by overprotective

nontelecom regulations

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Legal System Issues

• US has common law legal system which differs from civil law (Napoleonic) model

• Some aspects of US transparency practice have been established by court decisions

• A civil law society would have to adopt such practices through a different mechanism

• Transparency issues should be considered on their merits, not how they were adopted

Seal of King John on original Magna Carta.

Magna Carta

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Transparency Approach

• Will use examples of personal familiarity– US practice– Former Japanese practice as observed while on exchange

to Japanese regulator in 1999

• US practice is appropriate for US environment and not fully applicable to other legal systems and environment

• Japanese system has evolved in recent years

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Woodrow Wilson’s 14 PointsAn Early Statement of Transparency

• “I. Open covenants of peace, openly arrived at, after which there shall be no private international understandings of any kind but diplomacy shall proceed always frankly and in the public view.”

January 8, 1918 http://www.lib.byu.edu/~rdh/wwi/1918/14points.html

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Basics of Transparency

• “Open regulations, openly arrived at, openly enforced” – Regulations should be publicly available

without special request– Adopted in open deliberations– Regulations should be comprehensive

enough to cover normal situations• Coverage of all situations impractical in practice

– Regulations should be enforced as consistently as possible

• Otherwise not credible

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Structural Issues

• Basic Issues:– Independent agency or not?– Scope of jurisdiction– Involvement in R&D

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Organizational Issues• Different

countries have various approaches to organizing NRAs

• R&D issue is important & controversial– Should

regulator fund R&D?

Country Agency Jurisdiction R&D?Ofcom Spectrum,broadcasting

telecomNo

総務省　 Ministry of Internal Affairs and Communications

Spectrum,broadcastingtelecom

Yes

Industry Canada Spectrum, nonbroadcast licensing, technical telecom issues

Yes

Canadian Radio-television & Telecommunications Commission

Broadcast ownership and content, telecom ownership and pricing

No

Federal Communications Commission

Non-Federal Government spectrum use, telecom, broadcasting

No

National Telecommunications and Information Administration

Federal Government spectrum use

No

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Structural “Checks & Balances”• US regulatory agency decisions can be

appealed to court system with consideration based on:– Constitutionality– Jurisdiction authorized by law– Were transparency steps follows– NOT (in theory and usually in practice) on

whether agency considered facts correctly• Appeal possibility discourages arbitrary

action & enhances transparency

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US Court Review of Regulatory Agencies

“A person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof…” 5 USC 702

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US Court Review of Regulatory Agencies

“To the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action. The reviewing court shall—(1) compel agency action unlawfully withheld or unreasonably delayed; and(2) hold unlawful and set aside agency action, findings, and conclusions found to be— (A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; (B) contrary to constitutional right, power, privilege, or immunity; (C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right; (D) without observance of procedure required by law;

In making the foregoing determinations, the court shall review the whole record or those parts of it cited by a party, and due account shall be taken of the rule of prejudicial error.” 5 USC 706

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• FCC also permits “petitions for review” and “petitions for reconsideration”– Any action taken by the staff under

“delegated authority” can be - and often is - appealed to the full Commission

– Any action by the full Commission may be appealed based on new information

• For example, final rule may address details not fully covered in proposal and which raise new issues

Structural “Checks & Balances”

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• While Japan, for example, allows similar reviews, cultural and institutional issues discourage most appeals– FCC participates in 2-4 court appeals each

month• Effective review and appeal process is

important to transparency

Structural “Checks & Balances”

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“Open Regulations” (1)

• What regulations apply on a specific date?– When US federal government regulatory

role expanded in 1933+ “New Deal”, one of the first decisions was to establish Federal Register and Code of Federal Regulations

– FR, a daily publication, contains new regulations and effective date

– CFR, updated annually, gives “snapshot” of all regulations

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“Open Regulations” (2)

– Allow ready determination of effective rules on a specific date

– With Internet, other options are possible BUT will lose credibility unless implemented with absolute integrity and accountabilit y

• Needs a clear and credible “audit trail” to keep credibility similar to paper technique

• Concern: Surreptitious modification of regulations

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“Open Regulations” (3)

– Why should regulations be available without special request?

• Need for special request or viewing only at government offices is intimidating and damages credibility - Why does government want to know who is viewing regulations?

– Why not publish only basic issues and then maintain flexibility for administration?

• Destroys credibility

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“Open Regulations” (4)Observations from Previous Japanese Practice

• Before recent advances in transparency, Japanese agencies published regulations (shourei and seirei) and “judgment standards” (shinsei kijun)– Regulations were very vague addressing

issues like new radio licenses should not cause interference

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“Open Regulations” (5)Observations from Previous Japanese Practice

– Under Japanese law, “judgment standards” were available for inspection - but only at offices of regulator.

• Asking for document may raise suspicions• Bureaucrats not educated in legal requirement

for public inspection and so intimidated people seeking document

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“Open Regulations” (5)Observations from Previous Japanese Practice

• But “judgment standards” did not even give the real criteria– Focused on what data and analysis had to

be submitted, e.g. power contours and D/U ratios

– Bust what was acceptable D/U with respect to an existing station?

– Was in a 20 years old committee report!– Do applicants know it? - “Some applicants

know, some don’t”

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“Openly Arrived At”

• Creating new regulations in a transparent way

• Public petitions for change should receiver some real consideration

• Rule changes should be proposed with explanation of why they may be needed, nature of proposed change, and sincere interest in public comment

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“Openly Arrived At”

• Allow reasonable time for public comment and possibly “reply comments” - comments on comments of others– FCC usual minimum 30 days and 15 days,

• US law does not require reply comments• Some agencies have only one round of comments• Reply comments usually help clarify issues

– Usually longer for complex issues– Including specific questions in proposal can be

helpful

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“Openly Arrived At”

• US law does not require full details/text of proposals be published– Often impractical to give full text due to

pending questions– Proposal should be clear enough to permit

effective comments– Practice varies within parts of FCC

• Technical proposals usually complete

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“Openly Arrived At”• Website use for comments• In US all comments must be made public promptly

with rare exceptions– UK allows comments to be with held– FCC allows both web-based comment submission and

physical submission– FCC comments posted on website within a few hours

• After review for spam and obscenity• In rare cases of massive e-mail campaigns, repetitive

comments are not posted online but available for review at FCC

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• Ex Parte Procedures– Unlimited ability of interested parties to

discuss pending decisions with agency personnel outside of public view may undermine agency credibility

– Need to balance reasonable access to public and transparency

– Although not required by US law for rulemakings, all US agencies adopted ex parte rules in 1970s

“Openly Arrived At”

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• Ex parte procedures– For some legal issues no verbal

discussions allowed, all contact much be in writing

• Applies to “adjudications”: enforcement actions, license awards, challenges to licenses, etc.

• Agency may permit on a case-by-case basis with justification

• Prohibition does not apply to rulemakings

“Openly Arrived At”

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• Ex parte procedures for rulemakings– All contact between agency personnel and outsiders who

have a position on outcome of proceeding must be documented in the public record

– Does not apply to status inquiries – Does apply to outside agencies, except agencies with

overlapping jurisdiction, and legislators– Most agencies document the contact with a memo written by

agency staff but FCC requires outsiders to file memo by the next working day.

“Openly Arrived At”

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• Ex parte procedures for rulemakings– Enhances credibility of transparency– If new issues are brought up in discussions

or new data provided the public disclosure enables others to review new material and rebut it if necessary

– Speeds convergence of parties as everyone knows what the current debate is

“Openly Arrived At”

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“Openly Enforced”

• Enforcement of rules should be consistent, fair, and objective– But a transparent approaches to

waivers/special cases is essential also to make the whole process work

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• Same rules should consistently apply to all entities all the time

• Enforcement is more credible if enforcement personnel are more isolated from politics than policy makers

• Enforcement should encourage confidential complaints as well as public complaints– And adequately protect source of confidential complaints

“Openly Enforced”

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• Enforcement actions should be subject to reviews and appeal like policy deliberations

“Openly Enforced”

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Waivers

• Waiver - allowing dispensation from a stated rule under special circumstance

• But aren’t waivers just a contradiction of “open enforcement”?

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• Waivers are not specifically authorized by US law, but since US has a “common law” legal system the concept was created by the courts

• Concept also applicable and important to civil law systems but has to be created consistent with basic legal system concepts

Waivers

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• Regulatory system faces a delicate balancing act– Be clear enough to be transparent– Be flexible enough to handle all cases -

including cases that evolve from rapidly changing technology and other circumstances that could not have been reasonably expected when rules were drawn

– Transparent rule development is always slow

Waivers

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• " A regulation which is not required by statute may, in appropriate circumstances, be waived and must be waived where failure to do so would amount to an abuse of discretion" NTN Bearing Corp. v. US 74 F3d 1204,1207 (Fed. Cir. 1995).

Waivers - Court Decisions

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Waivers - Court Decisions• "The court's insistence on the agency's observance of its

obligation to give meaningful consideration to waiver applications emphatically does not contemplate that an agency must or should tolerate evisceration of a rule by waivers. On the contrary, a rule is more likely to be undercut if it does not in some way take into account considerations of hardship, equity, or more effective implementation of overall policy, considerations that an agency cannot realistically ignore, at least on a continuing basis. The limited safety valve permits a more rigorous adherence to an effective regulation…. We have examined the significance of the waiver procedure and pointed out that it is not necessarily a step-child, but may be an important member of the family of administrative procedures, one that helps the family stay together." WAIT Radio v. FCC, 418 F.2d 1153, 1159 (D.C. Cir. 1969)).

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• FCC waivers must articulate an "appropriate general standard," show special circumstances warranting a deviation from the general rule, and show such a deviation will serve the public interest. Northeast Cellular Telephone Co. v. FCC, 897 F.2d 1164, 1166 (D.C. Cir. 1990) citing WAIT Radio v. FCC, 418 F.2d 1153, 1159 (D.C. Cir. 1969)).

Waivers - Court Decisions

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• Simplest reaction to flexibility issues is to keep rules vague and have staff interpret them “creatively”– But this is inconsistent with basic

transparency goals• Challenge is to bring in flexibility while

maintaining transparency• Similar issues apply to

interpretations/questions on rules

Waivers

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• In FCC practice waivers can be specifically requested or considered sua sponte if agency decides that a pending request is inconsistent with rules but worthy of consideration due to special circumstances

• Multiple waivers on same issue indicate a rule problem that must be addessed

Waivers

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• While agency does not have to ask for public comment on waivers, in practice comments are requested on waivers that set a significant precedent or will have a broad impact– Also minimizes threat of court review

• Text of waivers (and rule interpretations) are made public

Waivers