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The Business Roundtable Nails 130+ Theses to the Door of OMB

By 16 July 2010 One Comment

In October 1517, Martin Luther nailed a paper with 95 theses to the door of a church in Wittenberg, Germany, an event often characterized as the start of the Protestant Reformation.

The 95 Theses (From Wikipedia)

In June 2010, the Business Roundtable nailed to the door of OMB Director Peter Orszag a 54 page manifesto on Policy Burdens Inhibiting Economic Growth, which documents at least 130 separate policy and regulatory problems  (some are multi-part, so counting is tricky), grouped into the general areas of Energy; Environment;  Finance; Taxes; Trade; Health Care; Labor/OSHA; Immigration; Deficit; Research & Innovation; Consumers; Real Estate/Mortgages; Tort Reform; Education; and into the sector-specific areas of Pharmaceuticals/Biotech; Food; Agriculture; Communications; Insurance; Government Contracts.

It is unlikely that this document will start anything like the Reformation, even though it is a strong attack on the religious doctrine that all salvation must be sought through government, but it is still pretty interesting, for several reasons.

One is that it lacks the smarmy politeness that usually characterizes such communications. No “we applaud the Administration’s dedication to . . . .” It is direct, almost blunt. This is especially surprising because the Roundtable is generally regarded as the business organization that likes to play nice and be seen as a partner with the government.

A second point of interest is the length of the list, its diversity, and the intensity of the problems. BT is not whining about minor tweaks. For example, in the area of the Environment, subcategory Climate Change, the letter refers to a possible requirement that all coal burning electricity plants be converted to gas (p.12) – this single change would impose an estimated $750 billion dollars in capital costs, and would perhaps double the price of electricity, and it gets only 11 lines in a 54-page document because there is so much else that BT wants to take up.

Third, of course, is the substance, especially as it relates to the digital society. Not surprisingly, readers of this blog will find some familiar issues in the section on Communications. The letter introduces this topic with the comment:

While regulation is not intrinsically bad, its benefits must be very real to justify its costs. In contrast, several FCC proposals would generate huge costs and damage severely the vitality of an industry that brought tangible value to consumers during the economic downturn.

It is clear from the reaction of financial analysts and investors that just the announcement of an FCC initiative can create a high degree of uncertainty and fear of protracted litigation that could further chill economic investment. In light of this, we urge the FCC to carefully consider the importance of telecommunications in the modern economy; FCC regulations will have ripple effects far beyond companies they directly impact.

Companies’ concerns can be broken into 6 key areas of concern (in descending order of importance):  [Net Neutrality and Title II Classification; Frequency Spectrum; Regulations and Regulatory Structure; The Prepaid Mobile Device Identification Act; Universal Service High Cost Fund;  Intercarrier Compensation]

All the specific discussions of these topics are worth examining, but the one that caught my eye, because the problem was less familiar to me, was the following, concerning not just the FCC but the FTC:

Regulations and Regulatory Structure:

The FCC has proposed or is considering a number of regulations that will limit innovation or investment incentives. Examples include mandating wireless carriers provide data roaming services to any requesting carrier – even in areas where those carriers possess their own spectrum but have chosen not to invest in the capital infrastructure necessary to use it; and prohibiting commercial partnerships between carriers and handset manufacturers to develop and market innovative devices.

The FCC also recently issued a press release finding that consumers are routinely “shocked” by the amount on their wireless bills and contemplating that carriers undertake large scale overhauls of their billing systems and infrastructure to provide the tools the FCC deems appropriate. Initiatives to mandate onerous network outage requirements – designed and implemented for the legacy circuit‐switched world – and to require mandatory levels of backup power at every cell site similarly threaten to take wireless investment dollars away from meeting consumer needs and toward meeting regulatory mandates.

While we fully support the mission of the Federal Trade Commission (FTC) to prevent and punish unfair and deceptive acts or practices, we are concerned that provisions in Section 4901 of H.R. 4173, the financial services regulatory reform legislation, which would remove existing procedural safeguards on the rulemaking and enforcement capabilities of the FTC and would unduly burden the communications companies.

H.R. 4173 would couple unrestrained regulatory authority with new enforcement authority giving the FTC the power to seek immediate civil penalties for unfair or deceptive acts even if it had not issued rules or orders on the conduct in advance. Under current law, the FTC typically must conclude an investigation of acts or practices that may be deemed unfair or deceptive and then issue an administrative order to bring the party into compliance. If the party then violates the administrative order or rules, the FTC may impose civil penalties. This system has worked extremely well and it allows those acting in good faith to come into compliance without being put out of business by excessive penalties for behavior that was not a known violation.

The bill also would allow the FTC to seek such penalties without coordinating with the Department of Justice (DOJ). Independent litigating authority would eliminate the checks and balances that DOJ currently provides for FTC actions, removing an important part of the enforcement decision‐making process.

Further, it would allow the FTC to pursue companies that allegedly provide “substantial assistance” in an FTC Act violation, even without actual knowledge of the violation. Adding this new grounds for liability would make third party service providers such as broadcasters, advertising firms, and broadband access providers, and others responsible for a company’s marketing claims.

Taken together, these provisions grant the FTC sweeping powers. Given the extremely broad scope of the FTC’s jurisdiction the existing procedural protections remain necessary and appropriate in those cases when the FTC seeks to outlaw business acts or practices.

It will be interesting to see what response OMB makes to the communication, if any, and whether the response matters.  No matter what OMB thinks, many of these issues are within the ken of other agencies, and it is far from clear that OMB is anything but an interested spectator.

One Comment »

  • Paul William Tenny said:

    “Nailed to the door” is an odd way of putting it when the White House asked for the list in the first place. But let’s put it another way:

    But just like the advice the White House politicos are giving Obama about pressing forward with deficit reduction in the midst of a jobs crisis, the idea of loosening the reins on big business — at a time when the cost of deregulation has been so viscerally on display in the Gulf of Mexico — strikes some observers as spectacularly tone-deaf. Not just bad policy, but bad politics.

    “What we’re in the middle of is a string of regulatory failures that the Obama administration seems very insensitive to,” said Rena Steinzor, a law professor at the University of Maryland and president of the pro-regulation Center for Progressive Reform. She cited the financial crisis, the Massey Energy mine disaster, and of course the BP oil spill.

    Steinzor told the Huffington Post she suspects Obama’s political team is not motivated by the optics in this case, nor by an overwhelming devotion to the free market — but rather by money.

    “They want campaign contributions. They want to win,” she said.

    The last thing this country needs is to sign off on a deregulation wish list from Big Business. The last time Congress did that in the 90s it didn’t work out so well.