The FCC - Hubris and Legal Limits, An All Too Common Tale Well, the big story of the week is a US Court of Appeal striking down the Federal Communications Commission (FCC) attempt to impose a 'broadcast flag' on hardware makers. Last November the FCC produced new rules prohibiting the manufacture of computer and video hardware without a specific type of copy protection known as the 'broadcast flag'. What this meant was that that hardware devices should be made incapable of copying material that had this flag set, thus protecting the business models of the big media monopolies. Ostensibly, the purpose of the flag was to stop the re-distribution of TV broadcasts. Of course, you can copy TV broadcasts at the moment, but they are analog broadcasts, and each time you make an analog copy the quality degrades until, eventually, it's not worth watching. The coming of digital TV, however, completely changes the equation. If you copy digital media, the copy is an exact replica of the original, no degradation - as many copies as you like. The court was pretty definite in its views of the FCC's transgression. It said, "The broadcast flag regulations exceed the agency's delegated authority under the statute... The FCC has no authority to regulate consumer electronic devices that can be used for receipt of wire or radio communication when these devices are not engaged in the process of radio or wire transmission." Not much wriggle room there! How did this happen? How did the FCC come to exceed it's authority in this way? And how was it able to get so close to making its ruling stick? Well, actually, it wasn't an accident. Let me explain. The FCC is what we in the UK call a 'quango'. That stands for 'Quasi-Government Organisation'. There are loads of these around, doing different jobs. Often, they have some sort of regulatory powers and in some cases taxpayer money to dish out. What is common to all of them, though, is that the people who run them are unelected appointees of current ruling politicians. Usually the quango is only answerable to the government in the most general terms. Now, if we look at the regulatory quangos, we can see, across all of them the sort of mission creep that the FCC just got hammered for. There is a reason for this. It's because regulatory quangos have the power of life and death over companies operating in the sector in which the quango operates. You see, the problem for companies is that they have to go back to the quango at regular intervals to be re-licenced. The fact that the company has to go back to the quango opens the door for the imposition of new rules, often outside the scope of the quango's legal authority, on the companies. Of course, most quangos aren't so stupid as the FCC was, the new rules are purely voluntary recommendations, not regulations, and so are very difficult to challenge. Often they masquerade as something called 'best practice'. It's not compulsory to run your business that way, of course, but if you don't then there may well be questions as to your 'fitness' to hold a license when you apply for renewal. The FCC's mistake was twofold. First it made some real legally binding regulations that fell outside its remit. Secondly, and more importantly, the regulations affected a group of companies - the consumer electronics industry - over which it had no current financial hold. The result was a group of companies with nothing to lose from making a legal challenge to the authority of the FCC. There are other things that often happen with quangos, which are just as corrosive as the 'mission creep' problem. Two in particular are especially noteworthy. The first is that after a while you get a system of musical chairs played by the staff of quangos. Staff move from senior jobs in the quango to senior jobs in the organisations being regulated, and back again. It doesn't take very long to build up a professional cabal in senior positions in both the regulator and the regulated, who share a joint ideology and who are opposed to anything that might change the cosy relationship. The second thing flows out of the first. The staff in the regulator would have a lot easier time if the regulated industry was 'tidy'. The more companies there are in the regulated industry, the more difficult and hard work it is to regulate. Very soon, therefore, they start to promote industry consolidation, first as a general ideology, but then backing it up with the same informal regulation that I discussed earlier. The classic way of doing this is to start suggesting that the smaller players are too small to have long term financial viability, and therefore their re-licensing is in jeopardy. Needless to say the phrase 'long term financial viability' has no figures attached to it, so that the victims can't prove that they do not fall into that category. Ironically, of course, once an organisation is pushed into this category by the regulator, then its 'long term financial viability' is indeed in jeopardy - because of the actions of the regulator! Eventually, what you end up with is the regulator and a small, tightly knit group of large companies that fight to keep outsiders from breaking into the their field and rocking the boat. To paraphrase an old saying, 'Who will regulate the regulators?' http://newsletter.eetimes.com/cgi-bin4/DM/y/enlG0FypUC0FrK0DOC40Ee
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