Regulations. They’re what controls what’s allowed in our food and our water; they control what banks can do, how much pollution is allowable, and how our pharmaceuticals are tested; regulations are the only thing that controls natural monopolies, like power, landline phone, and cable services. There’s a tension between the regulator and the regulated, with the regulated trying to do as much as possible to expand their business and offer new services while the regulator assesses these new expansions and services for their suitability within the regulatory framework. Or at least that’s the way it is supposed the be, the way that it’s taught in freshman-level government classes. In practice, the regulated engage in more profitable rent-seeking behaviors, using their money not to expand their business and offer more services but to influence the regulators in their favor. Without transparency, and because those who could stop the practices also benefit from them, the regulatory agencies have become controlled – captured – by the industries they purport to regulate.
This essential formula is the same regardless of industry. Former “industry leaders” become regulators, with the reasoning that they know the industry better than anyone else so they should be in charge of regulating it. Every so often someone will actually become disgusted with shady practices and enter regulation in a push to clean things up, but much more frequently the new regulator helps out former friends with targeted regulation or selective enforcement. Former regulators find well-paying jobs in their industries, either in the companies themselves (on the board of directors or as directors of public policy most commonly) or working on behalf of the industry as a whole through lobbying groups, sometimes called trade groups. While those who have worked in the industry may know it best, they also know the people the best and are much more likely to help their friends stamp out competition from newcomers and to grab a bit more of that government pie.
A lot of lip service has been paid to the revolving door between regulatory agencies and the companies they ostensibly regulate, but without much effect. During his 2008 campaign, then-Senator Obama promised to “clean up both ends of Pennsylvania Avenue” with wide-reaching ethics reform. Yet just two FCC appointments alone have shown a lack of conviction.
- Meredith Atwell Baker worked for Cellular Telecommunications & Internet Association (CTIA), a lobbying group for wireless telecommunications from 1998-2000. She began working in government in 2004, and was appointed to the FCC as a commissioner by President Obama in 2009. She served until 2011, when she worked for more than two years as senior vice president of government affairs for Comcast-NBC Universal before leaving to become president and CEO of CTIA. Controversially, she had voted to approve the Comcast-NBC merger just before she left the FCC to work for Comcast-NBC. She has signed President Obama’s ethics pledge, however, ensuring that she will not lobby any political appointees in the FCC for the duration of the Obama administration, or any employee of the FCC for 2 years (through 2013). The ethics pledge does not bar lobbying members of Congress.
- Tom Wheeler was CEO for several tech companies, and from 1979-1984 as CEO of the National Cable Television Association (NCTA), a cable television lobbying trade group, and from 1992-2004 as CEO of CTIA, the wireless telecommunications trade lobbying group that former FCC commissioner Meredith Atwell Baker now leads. Tom Wheeler became Chairman of the FCC after being nominated by President Obama and unanimously confirmed by the US Senate.
- While not involving an appointment by President Obama, the current President and CEO of NCTA, one of Chairman Wheeler’s former homes, is Michael Powell. Powell served as Chairman of the FCC from 2001-2005.
There are countless agencies that have been taken over by the companies that it seeks to regulate. From the banking system to the FDA, regulators are being controlled. When this happens, new entrants into the market are regulated into oblivion, competition is eliminated, and each industry becomes its own cartel. It’s nothing more than corruption, but we give it an esoteric sounding name like “regulatory capture,” distancing ourselves from those other nations who have corruption, bribery, and nepotism. We do the same thing, and it doesn’t matter what name we give it.
While We Slept 