The Consistency of Kevin Martin and the Faith Based FCC

So many people are mad at Kevin Martin these days, but for so many different things. He is either a “tool of industry” or “interfering with the market,” depending on whom you ask. And no one seems more confused about this than the ranking member of the House Commerce Committee, Joe Barton (R-Tx).
Mr. Barton understands all bout de-regulating. That’s what good Republicans do, after all. But he cannot understand why Mr. Martin is making such trouble for the “highly competitive” cable industry. As reported in this article:

“It’s been said that consistency is the hobgoblin of little minds,” said Rep. Joe Barton, R-Texas, the committee’s senior Republican. “If that’s the case, we could use a few hobgoblins at the FCC.”

Barton complained that Martin plans to ease the cross-ownership ban while doing little on other media ownership restrictions and is attempting to limit the number of subscribers one cable system can reach.

“It baffles me how the same FCC can appropriately eliminate regulations for some segments of industry because of increased competition, and at the very same time refuse to deregulate or even impose more regulation on segments of industry that are creating that very competition,” he said.

Democrats, of course, accept that Mr. Martin as a Republican should be a tool of industry. To the extent they wonder about any apparent inconsistencies, they attribute it to Martin being a shill for the telcos. This, of course, does not explain why Martin denied Verizon’s request for deregulation in six major cities or why Martin told Verizon to bugger off on modifying C Block. But if he isn’t an industry tool, why did he ram through the sale of Tribune and waive FCC regs so that Tribune could appeal in the DC Circuit and try to get the entire newspaper/broadcast cross-ownership ban repealed?

While armchair psychology and analysis based on shreds of available information is always a perilous past-time, I will argue below that Kevin Martin is actually extremely consistent in his decisions and his management style. I say this neither as a criticism or as praise. But pivotal to understanding the actions of the FCC and therefore to exercising my stock in trade of effective advocacy is trying to make some guess on what actually drives the current FCC Chairman in making decisions. Feld’s Second Law of Public Policy states: “Public policy is made by human beings.” (OK, I know Clausewitz said it first about war, but the principle still holds.) So understanding the human beings making policy is a critical step in influencing policy — even if we understand them poorly.

Besides, it’s fun.

Guesses below . . .

I have often criticized those who confuse a deregulated market with a free and competitive market as worshiping the Gods of the Market Place, placing their trust in a blind ideology that ignores any evidence to the contrary. On the other hand, I admit my own religious bias (Congregation of the Progressive Capitalist) that public policy must include non-economic as well as economic principles, and that the purpose of public policy is to foster the optimum trade off among competing principles and goals such that “all shall sit under their vine and fig tree, and none shall make them afraid.” (Micah 4:4) Recognizing, of course, that since public policy is made by human beings, the results will always fall short of the goal. Still, as we like to say where I come from “the labor is not yours to finish, but you are not free to abandon it.” (Ethics of the Fathers 2:21).

So what, then is Kevin Martin’s public policy “religion.” Here’s my guess, First Church of the Market — Reformed.

Like most Republicans, Kevin Martin is all about the deregulated free market. But unlike many Republicans (who, lets face it, really don’t understand jack about this except for what the get from bumper stickers they pick up at CATO events and reading the back cover of the Penguin Edition of Wealth of Nations) Martin recognizes that (a) empirical data matters, and (b) there are things that won’t happen that should happen, even if a market is “competitive” for most other purposes.

Under this yardstick, Martin’s actions on the policy side attain a striking consistency. Take the open network conditions imposed on the “C Block” for the upcoming spectrum auction. On the surface, this is so utterly inconsistent with deregulation, market competition, serving the interests of Verizon, etc., etc. that no one could believe Martin was serious about them. Everyone concluded they must be a token or fig leaf, although a token or fig leaf for what or to whom was never clear. After all, it cost Martin serious political points in his own party to make it happen and make it stick. And while the Congressional Dems were certainly happy about it, there wasn’t nearly the support for it one would have hoped for. Certainly the Congressional Dems were not pushing for mandatory wholesale of capacity, so C Block “open network” wasn’t a compromise or sop to us for political reasons.

But Martin decided to do it, because we in the public interest community and the Silicon Valley guys convinced Martin that without taking some kind of action, we would never see open wireless networks and that would be an economic catastrophe. So Martin looked at all the evidence and said “yeah, the existing wireless companies only compete against each other, and as long as they don’t have to open their networks, they won’t. So lets give them a push.”

Such a thing is heresy to the Church of the Market, because (a) regulation is inherently bad, and (b) there are multiple companies offering service in the market, so the market must be competitive. The only reason we don’t see open networks is because the market doesn’t want it or it isn’t efficient, or the market would have already done it or will get there eventually. So trying to force it is inherently bad. Q.E.D.

But the First Church of the Market Reformed (FCOTMR) looks at the real world marketplace and considers a broader array of factors and takes a more macro-economic view: the players in this market are all uniform and with common interests, they can control all customers so the market is not contestable, the critical asset is under government control, and the broader marketplace would benefit by moving the ability to compete down the value chain. Therefore, says Martin’s Church of the Market Place — Reformed, some modest government intervention is necessary.

Mind you, the FCOTMR still considers regulation evil. But its second heresy from Orthodox Church of the Market is that regulation is at time a necessary evil that can, with proper safeguards and precautions, be used to serve the interests of the market. Thus, Martin also spurned the proposals of the Public Interest Spectrum Coalition and Silicon Valley advocates as being too regulatory for what he perceived as a narrow market failure — and ended up giving us the regulatory nudge that is C Block.

Check this theology against other positions and watch the inconsistencies vanish. Indecency? A clear case where the market will never produce what Martin thinks is needed to protect children, so regulation becomes necessary. Cable v. Telco v. broadcast? Martin has clearly concluded that cable has market power, as evidenced by the fact that rates keep going up even when this translates directly into increased profits rather than compensating for costs. That is the classic sign of market power, the ability to raise prices above the “competitive price” without regard for consumer behavior, because not enough consumers can/will switch at the margin to make the difference. Other signs of cable market power include the ability to foreclose popular programming (such as Comcast squeezing out the Nationals games until ordered to go to arbitration), the continued deterioration of independent programming,and numerous other factors. In addition, as the world knows, Martin thinks it would be a good thing for a variety of reasons (both economic and non-economic) for cable companies to sell programs on an a la carte basis. But, as with the case of cell phone companies opening their networks, the market on its own will never create such a result — even if a large number of consumers really want the option.

So Martin first tried the orthodox approach of deregulating telcos to make it easier for them to get into the video business. When that didn’t work, he started to push to crack down on cable market power directly, as well as going after the various bundling arrangements in the programming industry that keep the market from being competitive even if (or rather, precisely because) it is unregulated. But at the same time, he denied Verizon the phone deregulation it wanted, because the empirical evidence did not show sufficient competition.

It also explains his completely contradictory stand on media ownership. Newspapers are dying, says Martin. How can they have market power? We should free them to make more deals. Martin is not nearly as concerned with the diversity arguments as with the market issues, and doesn’t believe that allowing more deals will just create a bigger mess. But the same logic does not apply to television and radio, where the survival of the industry is not in question and where the political price for further deregulation is extremely high. (The FCOTMR is a pragmatic theology in all respects — including consideration of political factors.)

And it also explains Martin’s positions on broadband, the Skype Petition, special access, roaming, and so forth. Unless there is a huge mound of clear evidence demonstrating market failure or exceedingly strong proof that market competition in the relevant sector of the media/telecom market will still produce negative macroeconomic impacts by foreclosing certain kinds of additional competitive economic activity, then Martin won’t act. So while it is true that the evidence shows (in my view) that letting telcos and cable cos freely play with content is an invitation t a disaster we cannot cure, and we therefore need net neutrality, Martin refuses to regulate prophylacticly. Because the First Church of the Free Market Reformed is still a Church of the Free Market, in which you never predict that the market will fail. Only when the market demonstrably has failed can you even consider whether to use the inherently-evil-but-occasionally-necessary tool of regulation, and then only to the minimum extent possible.

Those who believe in an orthodox creed may find this somewhat more pragmatic religion inconsistent and baffling. And, of course, sometimes there are genuine inconsistencies. “There is no man so righteous that he does not sin.” (Eccl. 7:20). But coming from a rather pragmatic public policy religion myself, I recognize a fellow policy wonk of faith, as it were, and am not troubled by the fact that our differing faiths lead us to look at the same data and reach utterly opposite conclusions on more than one occasion, while leading us to the same conclusions at other times on different issues. And since the Congregation of the Progressive Capitalist contains a fair amount of free market economics (so that the powerful engines of capitalism may be harnessed to the Fiery Chariot of Public Policy to bring us to the Great Day when prosperity and freedom are genuinely open to all, not promised to all but the provenance of the few), I am always hopeful of finding some common ground, while recognizing that most of the time we will be fighting tooth and nail.

Mind you, I might feel differently if I had to negotiate directly with Martin on a regular basis. I have enormous sympathy for the recent display of testiness and hostility displayed by the other Commissioners after yet-another-marathon negotiation session before an open meeting. Martin has a tendency once he has settled on a course of action (such as dropping the newspaper cross ownership restriction, which he has supported dropping since he was a Commissioner) to remain utterly committed and implacable in his efforts to make it reality. Heck, he has surprised me by being willing to continue to take on the cable industry and ownership limits, after I predicted he would lay off rather than risk another political beating.

As with so many things, this determination has good points and bad points. A man unwilling to take serious heat and stand up for what he believes in has no business leading. But a man willing to drive things through at all costs eventually runs up a huge bill. Martin is already seeing some of the return with interest on his determination to drive through critical issues before it becomes too close to the election for him to push them through. And, like anyone who follows his own sense of right and wrong, he ends up with just about everyone pissed at him over something. Hence the apparent paradox of a supposed industry tool with just about every industry mad at him.

Will Martin find that he has stepped on too many toes, rammed too many things through, held too many FCC proceedings close to the chest, to get his policy goals accomplished? Or will his determination win him the day on the issues he has decided really matter? Assuming, of course, that I’m actually right that this is about religion (well, ideology and public policy).

Don’t know, but ’08 should be quite a ride.

Stay tuned . . . .

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