I'm Back--As Are Satellites

From three crazy days strategizing about and then assisting media coverage of Howard Stern's move to satellite radio. In my day job, I've been representing Sirius Satellite Radio from its inception. It's been consistently exciting--and consistently frustrating. Not the company--the problem lies with the administrative process.

Congress established the Federal Communications Commission (FCC) to review and grant licenses to use radio frequencies. 47 U.S.C. Sections 151, 301, 307, 308, 309 (2000). And "to encourage the provision of new technologies and services to the public," Congress directed the FCC to "determine whether any new technology or service proposed in a petition or application is in the public interest within one year after such petition or application is filed." Id., Section 157. Sounds like good policy--and it is.

But it doesn't work in practice. Sirius first applied to build a satellite radio system in May 1990, 14 years ago. It was licensed in 1997. The intervening seven years were a battle with traditional broadcasters, who argued that satellite radio would reduce their audience and profitability. The hearings and fair treatment mandated by U.S. administrative process gave incumbent licensees "an anticompetitive tool to delay the entry of new stations." Detrimental Effects of Proposed New Broadcast Stations on Existing Stations, 3 FCC Rcd 638, 640 (1988). Terrestrial broadcasters had no hope of prevailing--the Communications Act "does not entrench any particular system of broadcasting: existing systems, like existing licensees, have no entitlement that permits them to deflect competitive pressure from innovative and effective technology." Nat'l Ass'n of Broadcasters v. FCC, 740 F.2d 1190, 1198 (D.C. Cir. 1984). But they could--and did--stall.

The broadcasters were particularly effective because satellites are expensive (Sirius spent billions on its three-spacecraft system) and construction takes 3 years. In this environment, delay can be fatal:

In this dynamic and technologically innovative industry, a proposed venture may become obsolete in just a few years. Even without regulatory delay, a satellite firm is faced with the daunting prospect of time-consuming research and construction, which entail advance planning and risky lead time--and which may lead to naught. To delay a proposed project six months will increase capital cost and diminish technological advantage; to delay it a year or more may destroy its attractiveness as an investment.

United States v. FCC, 652 F.2d 72, 95 (D.C. Cir. 1980) (en banc).

Due process and administrative law postponed the public benefits of satellite radio for a decade. And broadcasters still squabble, recently insisting that the FCC and Congress forbid Sirius from transmitting traffic and weather reports to subscribers.

The administrative process was established for the best of reasons. But it's abused to freeze markets and technology. As Forbes Magazine said about the broadcasters, "If you can't compete, get a bill to outlaw the competition."

It's great for my job security. But Hayek was right--Administrative agencies can be the Road to Serfdom.