Net Neutrality, VZ, GOOG, & RegNeg
The recent Verizon-Google recommendation to the FCC on net neutrality, and indeed the whole recent round of FCC discussions with various net neutrality players, are, in some circles, regarded as somehow illegitimate.
In fact and au contraire, the idea that parties affected by rules should negotiate with the agency and with each other, and should even reach binding agreements, and that this will improve both the process and the final product, has an extensive and thoughtful history. The concept of RegNeg is even enshrined in the one of the better-kept secrets in the United States Code, the Negotiated Rulemaking Act of 1990 (5 U.S.C. 561-570), which established a procedure for federal agencies to engage in the activity.
The Act was the result of a decade of work by the Administrative Conference of the United States, which in 1982 issued Recommendation 82-4, to the effect that formal procedures for RegNeg should be established. The ACUS recommendation was the outcome of a thoughtful study by Prof. Philip J. Harter, published under the title Negotiating Regulations: A Cure for Malaise, 71 Geo. L. J. 1 (1982). ACUS issued an extensive source book on RegNeg in 1995: Negotiated Rulemaking Sourcebook (David M. Pritzker & Deborah S. Dalton eds., 1995). (Neither of these works seems to be easily available on the web, but a search will turn up purchasable versions in the legal literature.)
The basic theory of RegNeg was described in the preamble of Recommendation 82-4:
The complexity of government regulation has increased greatly compared to that which existed when the Administrative procedure Act was enacted, and this complexity has been accompanied by a formalization of the rulemaking process beyond the brief, expeditious notice and comment procedures envisioned by section 553 of the APA. Procedures in addition to notice and comment may, in some instances, provide important safeguards against arbitrary or capricious decisions by agencies and help ensure that agencies develop sound factual bases for the exercise of the discretion entrusted them by Congress, but the increased formalization of the rulemaking process has also had adverse consequences. The participants, including the agency, tend to develop adversarial relationships with each other causing them to take extreme positions, to withhold information from one another, and to attack the legitimacy of opposing positions. Because of the adversarial relationships, participants often do not focus on creative solutions to problems, ranking of the issues involved in a rulemaking, or the important details involved in a rule. Extensive factual records are often developed beyond what is necessary. Long periods of delay result and participation in rulemaking proceedings can become needlessly expensive. Moreover, many participants perceive their roles in the rulemaking proceeding more as positioning themselves for the subsequent judicial review than as contributing to a solution on the merits at the administrative level. Finally, many participants remain dissatisfied with the policy judgments made at the outcome of rulemaking proceedings.
Participants in rulemaking rarely meet as a group with each other and with the agency to communicate their respective views so that each can react directly to the concerns and positions of the others in an effort to resolve conflicts. Experience indicates that if the parties in interest were to work together to negotiate the text of a proposed rule, they might be able in some circumstances to identify the major issues, gauge their importance to the respective parties, identify the information and data necessary to resolve the issues, and develop a rule that is acceptable to the respective interests, all within the contours of the substantive statute. For example, highly technical standards are negotiated that have extensive health, safety, and economic effects; lawsuits challenging rules are regularly settled by agreement on a negotiated rule; public law litigation involves sensitive negotiation over rule-like issues; and many environmental disputes and policies have been successfully negotiated. These experiences can be drawn upon in certain rulemaking contexts to provide procedures by which affected interests and the agency might participate directly in the development of the text of a proposed rule through negotiation and mediation.
ACUS was put out of business in 1995 after it offended the powerful lobby of the Administrative Law Judges, which persuaded Congress to de-fund it. The agency, and the ideal of an honest broker of intellectual issues in the regulatory state, always had its supporters, however, including Justices Scalia and Breyer, and ACUS was resurrected in March 2010. But, lacking a champion, RegNeg fell into desuetude. The device has always had its opponents, in and out of government agencies, and, like any innovation, it is subject to the attack of non-panaceaism – the assumption that if an idea does not solve all problems then it must be of no use.
Nonetheless, RegNeg makes a lot of sense (see here, here, here), and net neutrality is a good place for its application – the area is complex technically and economically, has many participants with interests that are partly conflicting and partly congruent, and lends itself to packages of solutions in which the participants make tradeoffs among their varying desires.
But the topic of net neutrality also raises one of the most difficult RegNeg issues – the admission to the process of the “public interest” participants. One of the tenets of RegNeg is that no one will get everything it wants, so the final agreement must meet the criterion that for each signatory it is better than the BATNA (best alternative to a negotiated agreement). The problem is that “public interest” players often have no real stake so they have nothing to lose by a lack of an agreement. Indeed, failure of a negotiation may be desirable to keep a political or ideological plot boiling. Agencies have the power to exclude such players, but it is politically difficult.
So a really interesting thing about the Verizon-Google deal is that it represents a negotiated proposal developed by two major stakeholders to create a proposal that should be presented for further negotiation among all the players. This is sheer genius.
Disclosure: I came by all this arcane knowledge because I was Research Director of ACUS from 1978 to 1981, and commissioned the Harter project that started the ACUS effort. My initial instructions to him were along the lines of “There’s the nutty idea of negotiated rules floating around, and we need a paper to show what nonsense it is.” Phil’s conclusions were rather different, and the rest is history. But for years I happily described myself as “the father of RegNeg,” especially when Phil was in the room