FCC's budget request does not recognize marketplace realities

Congress’ appropriators are starting to consider agencies’ budget requests for 2015. Many agencies are doing more with less. The Federal Trade Commission and the Small Business Administration have actually requested less funding than in previous years.

But the Federal Communications Commission wants an increase of nearly 10 percent — 14 percent above the agency’s sequestration level. This is alarming on a number of fronts.

I am a member of the Senate Commerce, Science, and Transportation Committee, which authorizes the FCC’s work. Too often, only members of the Appropriation Committee, which approves agencies’ budgets, will examine an agency’s budget request. Authorizers are left uninvolved. This is a mistake.

For one, the FCC’s funding mechanism is complex. The FCC’s funds come not from direct appropriations but from “regulatory fees.” The FCC raises its full budget from fees it collects from the companies it regulates. The companies pass these fees on to customers. The FCC over-collects by about 2% – or $10 million to $15 million – each year.

Over time, these over-collections have added up – they total about $82 million. Today, this money sits in limbo. It cannot be given to the FCC because appropriators have not approved spending it. It cannot be sent to the U.S. Treasury without action from an authorizer. If a member of Congress were to introduce legislation to send this money to the Treasury, the Congressional Budget Office would score this as a cost, even though the money has already been collected. Have I mentioned that Washington is dysfunctional?

Authorizers must resolve this situation, sooner rather than later. But even $82 million does not put a dent in the FCC’s most recent funding request of $375 million, the single largest year-over-year increase the agency has requested since the passage of the 1996 Telecommunications Act.

Through the 1996 act, Congress fostered competition by deregulating the communications sector. This worked, as we now have more choice and competition than ever. Yet the FCC’s budget has continued to grow, even while the industry it regulates has become increasingly dynamic, competitive, and thus less in need of government oversight.

Significant jumps in the FCC’s budget used to come from big priorities, such as implementing the switch to digital TV in 2007. The upcoming broadcast spectrum incentive auctions and IP Transition are certainly big-ticket items for 2015, but the FCC cites neither in support of its proposed budget spike.

The FCC also requests 39 new employees in the Wireline Competition Bureau. This is odd because, more than ever, people are cutting the cord and going wireless. The FCC’s statistics show that in 2003, 93% of households relied on a wired phone on the circuit-switched network regulated by the FCC. In 2013, only 28% of homes continue to use that network. Why does this bureau, responsible for regulating 20th century copper telephone lines, continue to grow?

Even if there is a logical explanation for this – say the FCC needs more staff to help with the IP Transition – that should be explained in the budget.

The FCC is important. It touches upon one-sixth of the American economy. The communications sector, however, is increasingly competitive. More competition means less need for regulation and less regulation means fewer regulators. Unfortunately, the FCC’s most recent budget request ignores this reality.