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Development, the American Way
Politics
Development, the American Way
Is this regulatory agency leading the charge on Trump’s Golden Age?
Consensus is in short supply in modern America, to hear the political scientists tell it: polarization along geographic, educational, class, and sexual lines; media fragmentation; the collapse of civil society. Everyone is suspicious, lonely, and cooped in small, strange ideological silos. We still call it the United States, but you say the first word with a bit of a gulp.
Strangely, though, there has been a sort of convergence on one of the great public left–right, blue–red battlegrounds of the last century: political economy. Both major parties seem to agree that something has gone terribly wrong, and that the something has to do with our ability to build things. From Infrastructure Week to the CHIPS Act, both Rs and Ds have blundered into the arena to try to prod the American industrial base back to life. The reasons for this vary depending on the flavor of person you’re talking to—or, in the case of the politicos, the flavor of audience they’re talking to: restoring manufacturing jobs, national security, vague patriotic aspirationalism. A recurring idea is that, in the absence of hardheaded political decision-making, our economy has become basically frivolous, a phantasm of app development and healthcare services.
Let’s accept that critique, and say that something needs to be done about American industry. Of course, like begetting a child or cooking a steak, industrialization can be achieved in more pleasant ways or less. In bare numerical terms, one of the most successful industrialization campaigns of the last century: Stalin’s. Soviet industrial production increased by (give or take) 50 percent under the first Five-Year Plan. In the long run, though, the Soviet system didn’t work terribly well in ways that do not need to be dissected for readers of The American Conservative. It also killed and brutalized millions of people along the way. The specter of the planned economy is viewed with suspicion for good reasons.
There are intermediates between the glorious science of Marxism–Leninism and the aimless proliferation of social media platforms. In states that are not classically communist or ideally libertarian, what does a development regime look like? This question can be cut up into a number of constituent questions, the foremost of which is, How does development happen? And, almost equal with it, What do you want the government to do?
The second question can be used to answer the first. Broadly speaking, the government can do three things: It can tax, it can subsidize, and it can regulate. Crudely put, the much-touted Asian model uses these tools aggressively to choose winners and losers. The state works closely with large firms—the zaibatsu in Japan, the chaebol in South Korea, the massive state-supported concerns in China—to achieve strategic economic goals. In these systems, development happens because the state orders it. Eyeing China’s conspicuous successes, some commentators, even on the right, have hinted that the U.S. would do well to imitate its approach. This is for a variety of reasons unappealing to many, probably most, Americans, not least because of the implicit or explicit limits on economic freedom such an approach demands. Historically, the U.S. has had a different model of development: free markets fostered and protected by the state. Given the opportunity to build the goods the national interest demands, market actors will rise to the occasion. If there is a disjunction between the national interest and the American industrial engine, it is because something has gone wrong in the way the state is fostering and protecting those markets.
What is President Donald Trump’s developmental model? What will his second administration do—and what is it already doing—with the toolkit of tax, subsidy, and regulation? The first of these has grabbed the lion’s share of headlines in the first six months of Trump 47; the administration has shown an unparalleled willingness to throw its weight around with taxation in the form of an aggressive tariff policy. The end goal is to give American firms a competitive edge by hook or by crook, whether by renegotiated trade agreements or by simple protection. (Whether this will work remains to be seen.) Subsidies are a tougher nut: Congress still holds the power of the purse, and the American fisc is in sorry condition after 40 years of Republican tax cuts and Democratic spending. A January executive order charging the Treasury to investigate the establishment of a sovereign wealth fund for domestic investment may bear fruit, but in these early days we don’t know when or how much. Are these efforts tilting more towards the Asian model or more towards the old American model? It is hard to say at this inchoate stage.
That leaves regulation, which Congress has largely abdicated to the agencies of the executive branch. And it is here, in bland office buildings in Northwest Washington, DC and amid the technical weeds of federal rulemaking, that a coherent model—a coherent and American model—championed by the administration is coming into view.
A policymaker coming up with a development model in 2025 has significant disadvantages compared to his predecessors in prior generations. Technical advances have rendered every human endeavor far more complicated; farming, steelmaking, drilling for oil, driving, paying the electric bill, napping your child, checking the weather, and donating to your church’s collection are now mediated by computer chips and satellites. In particular, the defining characteristic of the modern world is the supremacy of telecommunications in every sphere. The Federal Communications Commission was formed in 1934
for the purpose of regulating interstate and foreign commerce in communication by wire and radio so as to make available, so far as possible to all the people of the United States a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges, for the purpose of the national defense, for the purpose of promoting safety of life and property through the use of wire and radio communication, and for the purpose of securing a more effective execution of this policy by centralizing authority heretofore granted by law to several agencies and by granting additional authority with respect to interstate and foreign commerce in wire and radio communication.
From its founding until 1982, the FCC’s foremost task was overseeing the Bell System, the national telecommunications monopoly. The Bell monopoly was a unique American solution to telecom provision—in contrast to European or Asian models—that fit into the constellation of similar mid-century companies that built the American Century. “The great corporate labs at RCA, IBM, GE, and the Bell System formed half of a public-private partnership, in which the government paid for basic research, but private capital took the risk of commercialization,” as David Goldman wrote in these pages in September.
“This was an alternative to what every other advanced country did during that period, which was nationalize the phone system, or build it out from the ground up as a state monopoly,” commented FCC Commissioner Nathan Simington. “I think it could be argued that nothing succeeds like success, and, while the Bell System certainly is not without its flaws, it’s also true that Americans enjoy generally better and cheaper wire-line services than in most European countries.”
Simington noted other advantages too, beyond pricing. “Plus we have that whole Bell Labs thing, which gave us transistors, lasers, communications, satellites, cell phones, all that good stuff. So it’s hard to look back at that Heroic Age of the FCC and say—you know, whatever constitutional questions we might have—40 years in the rear view mirror, that it wasn’t successful.”
In 1983, the Bell monopoly was broken up in the tide of deregulation, particularly under the pressure of new wireless technologies.
Dale Hatfield, a telecommunications specialist at the University of Colorado at Boulder, was heavily involved in writing the 1982 complaint about AT&T’s efforts to stifle competition from new wireless services, like those provided by the now-defunct MCI. For six decades, Hatfield has been at the heart of the FCC’s technical work; he served as the commission’s chief technologist and chief of the Office of Engineering and Technology, and still sits on the FCC’s Technology Advisory Council and on the Commerce Department’s Spectrum Management Advisory Committee.
“My career in radio communications goes back to when I was 15 years old, and I became a radio ham and was absolutely fascinated with it,” said Hatfield. “And from there, eventually, my interest was so strong that it led me into the spectrum world that I am now. So I’ve been involved in almost all the major spectrum matters since 1963.”
Ironically, Hatfield and his colleagues’ success against the Bell System deprived the FCC of its single biggest job. “The role of the FCC as an economic regulatory agency has, I think, been in question since 1982, and we’ve struggled to match institutional continuity with the proliferation of communications media that have flourished in the age of the post-breakup phone system, but then also in the early internet age, and now with the bewildering variety of communications and telecommunications media that we’ve got,” said Simington. The commission’s explicit brief, which has been substantially unchanged since 1934, is as broad as ever—broader, even, in the age of networking. It just may no longer be the best organ for handling everything in that brief.
“I’m not calling for the dissolution of the FCC—the Wall Street Journal is, I’m not—but it’s worth asking the question, at minimum, if the FCC is going to continue in its present form,” said Simington. “I know that Congress shows no sign of changing the Communications Act in any fundamental way. If the FCC is going to continue in its present form, how can [it] change to be more efficient?”
Here, one of the fundamental questions facing the federal government and, most acutely, this administration comes to the surface: What is the proper role of the administrative state? Here is the China temptation: picking champions and explicitly directing industry. Here also is the question of what exactly an administrative agency is supposed to be—an independent, technocratic organ beholden primarily to the Article I branch or an efflorescence of the executive from which its authority flows?
The Trump 47 FCC’s outlook is perhaps unsurprising. “When we talk about priorities of a Trump 47 FCC, we’re talking about priorities of the administration, as much as the actual regulatory agenda of the FCC itself,” said Simington. “So my question, looking at the FCC, is really to what extent are our policies consistent with, as opposed to pushing back against, the president’s policies in this area. We have to ask the question because our independence is no longer what it used to be. And we have to ask the question because the executive branch should speak with a sole voice, and that’s with the voice of the duly elected president, the only member among us who has true democratic legitimacy.
A robust vision of political leadership guiding the agencies means they may have less power in themselves; it may, however, also free them to pursue actual policy more nimbly. The political portion of the body does policy, and the administrative portion again administers the policy.
“So, in other words, when people say, Well, what are your priorities? I say, well, let’s step back and look at what the administration’s priorities are. What did the president tell the secretary of defense? Shipbuilding, shipbuilding, shipbuilding. Okay. Do I have a role in that? Well, let’s look at the major shipbuilding powers in the world right now, which are China, South Korea, and Japan.” Simington cited a battery of facts about the role of 5G communications technology in foreign industry generally and in facilitating the manufacture of ships particularly, by way of contrast to the U.S., where 5G development has been primarily consumer-facing.
“And so, with all that said, my question is: What does 5G industrialization look like in the United States? And to what degree are we just path dependent on a path that doesn’t lead there?” Simington said. “So this in turn requires, I guess, analysis that’s a little broader than a typical FCC analysis. Normally we would look at industry, make sure that there’s no obvious regulatory thumb on the scale that serves to pick winners, and then say, ‘Well, you know, we’re technology neutral, we’re technology independent, we’re technology agnostic. We’re going to let them fight it out in the marketplace to the degree that they’re within a particular regulatory category.’”
And here is where the rubber meets the road: encouraging the pursuit of policy priorities without telling telecoms what to do. Are the regulations, as they exist, actually preventing the genius of the market from applying itself to the administration’s desired goal? “I find myself asking, increasingly, what does it look like to ensure that, if American industry wishes to execute a pivot towards greater [business-to-business] and industrial use of 5G, there’s a regulatory framework available for it to do that?” said Simington. “That is, have we implicitly locked the United States into a consumer-facing posture in a way that forecloses alternative uses?”
So the rise of wireless technologies like those that eventually developed into 5G—that is to say, technologies that use the radio spectrum—helped to bring down the FCC’s most significant ward, but it has also provided one of the preeminent and unambiguous spheres for the commission’s work in the years since.
“Radio spectrum is a limited resource, and like any resource that’s scarce, it has to be divided up among competing uses. And of course, today, we’re seeing a terrific explosion in different uses, ranging from your cell phone to government radars to your crib monitors,” Hatfield said. “It just is a tremendous number of devices using the spectrum, and somebody has to develop the rules. Who gets to transmit, who doesn’t, all of those sorts of things. And that’s where we are today—trying to sort out the highest value uses for the radio spectrum.”
The allocation of spectrum privileges is where the philosophy of development comes to the fore—what ways of using a limited resource best support the national interest? How many substantive conditions does the regulator want to place on the use of the spectrum? “There are four different ways that you can make the decision, and these are relevant today,” explained Hatfield. Those methods are the beauty contest, where different interests present the FCC with the case for why their use for spectrum space is the best; first-come, first-serve licensing, where the first interest to use a bit of spectrum gets to claim it; lotteries; and what Hatfield calls “market-oriented approaches to deciding,” which is to say, auctions.
On a crowded, 100-year-old common like the radio spectrum, concerns can arise from unexpected places. The FCC periodically reviews its regulations; the latest round was announced in March by a public notice with the provocative title “In Re: Delete, Delete, Delete.” The introduction to the notice read:
Through a series of Executive Orders, President Trump has called on administrative agencies to unleash prosperity through deregulation and ensure that they are efficiently delivering great results for the
American people.
By this Public Notice, the Federal Communications Commission (Commission or FCC) is taking action to promote the policies outlined by President Trump in those Executive Orders. Specifically, we are seeking public input on identifying FCC rules for the purpose of alleviating unnecessary regulatory burdens. We seek comment on deregulatory initiatives that would facilitate and encourage American firms’ investment in modernizing their networks, developing infrastructure, and offering innovative and advanced capabilities.
The announcement, combined with the renewed interest in restoring the commission’s power to auction off spectrum space, was greeted by a flurry of angst in a group you might not expect: amateur radio operators, or hams.
Title 97 of the U.S. Code of Federal Regulations defines amateur radio thus: “A radiocommunication service for the purpose of self-training, intercommunication, and technical investigations carried out by licensed individuals interested in radio technique solely with a personal aim and without pecuniary interest.” In layman’s terms, the amateur service is a sandbox for private individuals’ experimentation with and technical development of radio-spectrum technologies, from homebrew networking to building international communications relays.
Bruce Perens, a founder of the Open Source movement and an avid amateur radio operator, emphasizes that this is the fundamental value proposition for the amateur service. “Amateur radio is the only system where you can change the network of a wide area, network something that is a city or even international,” said Perens. “You could not do that on the phone system, for example. So this is where a lot of people learn the wireless technology and electronics.” The list of famous hams vindicates the point; it includes the Nobel-winning physicist Joseph Taylor, the inventor of the walkie-talkie Al Gross, and the Apple cofounder Steve Wozniak. (As mentioned above, Dale Hatfield’s long career also began on the amateur bands.)
During a period in which American industrial ambitions are heavily checked by the absence of a trained technical pool, such a space is invaluable. “That’s why Silicon Valley, for example, was started by radio hams, and that [still] goes on,” Perens noted. “If you look in the high-tech companies, they’re just a lot of people with these letters and numbers [i.e. amateur radio callsigns] after their name. And so we have to understand that this has a tremendous value as far as STEM education.”
The opening of the “In re: Delete, Delete, Delete” docket occasioned Perens with significant concerns.
“The problem I have with ‘Delete, Delete, Delete,’ is it comes from the assumption that regulation is bad. And in the case of FCC, regulation is not bad,” said Perens. “But we do need some changes to regulation, and they are mostly technical, and they are things that the average person would not understand or care about. For example, we want to be regulated by the bandwidth of our signal rather than the mode of our signal.”
Perens noted other examples of past regulation removal that were salutary—particularly the abolition of the Morse code proficiency requirement for hams, a move for which he was a leading advocate—but emphasized that spectrum regulation as a whole encourages the useful application of technologies, rather than stifles it. “There’s some point in deleting some regulations, but if we deleted everything, we’d be back to the Citizens Band radio with just nuttiness on every channel,” he said, referring to the anarchic radio service for unlicensed recreational users.
Perens was also skeptical of the prospect of spectrum auctions, which many hams fear will reduce the bands on which they may operate. “I don’t think that spectrum auction is a good way to [allocate use], because spectrum auction automatically says monopoly use of spectrum, whereas the alternative is shared use of spectrum with licenses and spectrum management,” he said. “And I think that shared use of spectrum is very important, because the United States is not homogeneous. When these guys are buying spectrum at auction, they are buying spectrum to deploy in a metropolitan area, and they will probably never use that spectrum anywhere else, and it is available for other users if it is correctly managed, but if it is auctioned off, it’s not.”
Perens fears that ham interests and amateur radio’s value proposition have been poorly represented, and the consequences could spell the end of the amateur service. “I think that the worst thing that could happen would be, you know, ham radio can be looked at as the the native people of radio spectrum, okay? And and then one day, someone comes in to cut down our forest. That’s the worst thing that could happen,” he said. “And, on the other side, we could have [the American Radio Relay League’s] comment heeded, which would make some small improvements, which are important, or no one could listen at all. … [Those] are the good outcomes. The bad outcome here is that the natives get sent somewhere else and someone takes over the forest.” (The ARRL, the preeminent amateur radio organization in America, did not respond to request for comment.)
Simington disagreed. “I’m not sure that the amateur radio community could have done much more than it did, considering that the FCC culture has shifted away from engineering somewhat and more towards economic regulation,” he said. “So if your general background is economic regulation, and you would be just as happy at the FTC as the FCC, then maybe ham radio doesn’t seem like a particularly special category to you, maybe more like an appendix or a historical curiosity. But I think that’s the wrong attitude. The FCC should reclaim its engineering heritage and its credibility in field enforcement.”
Non-enforcement of the correct use of spectrum space, a classic bugbear for hams, turns regulation into something that incentivizes bad behavior rather than guiding good behavior. “To the degree that we’re not enforcing that… it becomes a case where regulation chases out the legitimate users, where we put so many obstacles in the way, it’s doing things that people will just go into the many, many convenient, unregulated ways of doing those things and say, catch me if you can,” said Simington.
Hatfield echoed concerns about enforcement, noting that it affects the entire common, not just amateurs. “The cyber attacks up the protocol stack … that gets a lot of attention. That’s occurring up at the application layers, where things are going in the network and the physical layer. Stuff that we’re talking about that happens down in the radio spectrum, that jamming and stuff, has just not gotten the attention that, in my opinion, it deserves. But it’s a tough problem,” he said, adding that enforcement prioritization is itself difficult. “Here again, you’ve got an allocation problem of money: Where does it go?”
Concerns about the efficient use of spectrum space also weigh heavily on the FCC. “That’s exactly the kind of thing that I think leads to the argument for having a regulatory agency with significant field enforcement and activity review powers; that otherwise we do see spectrum licenses being potentially opened to questions of this type,” said Simington. “As to how serious those questions are, though, I guess I would say that, in an age where we’ve generally required as much rural buildout as possible, specifically in wireless mobility, and where there have been explicit rural buildout conditions on major transactions such as the Sprint–T-Mobile transaction—then in that case, it’s hard to argue that the wireless mobility industry should be building less capacity and offering fewer services outside of major metros.”
Balancing difficult-to-value but clearly important interests like the amateur service against economic interests is the classic difficulty of managing a common. “It’s very difficult to get the solutions that satisfy everyone, which is precisely why we have a public process with notice and comment rulemaking for this kind of thing,” said Simington. “There are probably going to be people’s oxes gored by this, and even injustice is done, but, but on the whole, I think the FCC record on this is pretty strong.”
When you google news stories about the FCC, you see endless headlines about Chairman Brendan Carr’s high-profile jousting with media outlets over bias in news coverage, and understandably so. These brawls are flashy and certainly generate many clicks; nor are questions of soft censorship by any means insignificant. But the focus on this side of the FCC’s work seems to miss the underlying program or philosophy that emerges from the commission’s approach to the more technical issues, which seems to be nothing less than a defense of a particular vision of the American way of life.
What was implicit in Simington’s discussion of spectrum regulation and allocation became explicit when he spoke about the commission’s work fostering cybersecurity risk markets—markets that, he believes, will prompt more effective and innovative cybersecurity practices than checklists and mandates. “The idea behind the Cyber Trust Mark [program] is essentially that we’re going to leverage the insurance sector and private litigation to engage in price discovery on what the real drivers of cybersecurity are,” Simington said. “In other words, I’d like to surface the question, what the fully loaded cost of ownership, including security overhang, is for a device, so that we’re not price discriminating solely on a sticker price basis.”
This is the heart of the matter. “We say that we believe in capitalism. You know, that doesn’t just mean corporatism. It means that some companies are going to make the wrong bets and fail, and some are going to fail to assess risk and fail. We’re going to continue to create space for startups by allowing them to compete,” Simington continued. “On this basis, it would mean that the ability to quantify the drivers of risk within your organization and … within your wireless equipment manufacturer will suddenly have economic value, not just be a drag on hitting your sales numbers. And to the degree that we’re rewarding risk professionals for risk discovery in this area, I think we get to a rapid surfacing of superior cybersecurity practices.”
The commissioner contrasted this with a more top-down, rules-based approach: “If we don’t like it, then we should just give up and say, what we’re actually doing is red, white, and blue communism. I’m not a big fan of that, you know? I think that our free society only works if you believe in it.”
Hatfield echoed this sentiment. “The evidence strongly points to the fact that the United States has benefited greatly by using marketplace forces in how we determine spectrum management,” he said. “In Europe, they may use more of a command-and-control type system, and I think one of the reasons we’ve benefited is we’ve been much more open to competition. I think it’s very clear that our system is working pretty darn well when you compare it with other systems. Here again, there’s advantages and disadvantages, but it’s working pretty well.”
“I think very often what we’re really doing is we’re identifying places where price discovery was stifled before. And, you know, we have to, we have to believe that our capital allocation mechanisms are valuable,” said Simington. “I mean, the United States has more allocatable capital … than any country in the world. We have something like a third of the allocatable capital in the world. That’s an amazing feature of our system. It’s a proof that our system is the best for generating wealth and therefore human flourishing. And, you know, it’s very easy for this to get lost at a time of political upheaval, but this administration has deep commitment to this idea.”
Regulation that conserves and expands free and fair markets that support the national interest—call that development, American style.
The post Development, the American Way appeared first on The American Conservative.
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