Remarks by Commissioner Harold Furchtgott-Roth
 Before the Federalist Society, Telecommunications Practice Group
              Federalist Society National Convention
                        November 12, 1998

It is a pleasure to be here at Federalist Society.  Some say that this is a hot bed of
conservatism.  Of reactionary antigovernment types.  Of people hostile to
centralized government itself.

Nothing could be further from the truth.  Your very name, and your very emblem of
James Madison, are proof that you are indeed the champions of a government based
on the rule of law.

If you were as anti-centralized government as your detractors claim, you would not
be the Federalist Society.  In fact, you might be the Antifederalist Society.

Perhaps you have a penchant for history, and for Virginia itself.  You could have
chosen George Mason, or Patrick Henry, or Governor Randolph to lead your charge
against the excesses of Washington.  But you chose to be the Federalists, the big
government advocates of their day.  The representatives of the interests of the urban
elites, allied with the media interests.  And you chose James Madison as your
mascot so to speak.

It is sometimes difficult for American society, 210 years after the fact, to understand
that, at the time of the Constitution, Americans could be divided into two groups:
those who wanted a weak central government, and those who wanted an even
weaker one.  You have chosen the advocates of the relatively stronger central
government.

Separation of powers

I have come to talk about a matter that is at the core of the Constitution, the
separation of powers.  It seems a modern custom to pay homage to the Bill of Rights
as being at the heart of the Constitution. 

It was James Madison who crafted the Bill of Rights in response to fears by the
Antifederalists that the centralized government would be too powerful.
Indeed, the Bill of Rights was written to provide predictability and certainty that the
new centralized government would not trample on the rights already enjoyed by
citizens and by States.  It did not create new rights, but was an effort to preserve
existing rights from the threats of a potentially powerful and arbitrary central
government.  The predictability and certainty provided by the Bill of Rights helped
ensure ratification of the Constitution. Despite contemporary gloss to contrary,
much of the Bill of Rights seems to have been buried alive years ago, particularly
the 9th and 10th Amendments, ironically, the bulwark against an overly powerful
central government.

No, I believe Madison's greatest achievement in the Constitution was not the Bill of
Rights but the structural concept of the separation of powers -- three distinct
branches of government, each with its own independent authority.

The separation of power was not born with the U.S. Constitution.  It had long been
championed by political philosophers, and it had long been in practice in the
American colonies and in the States formed by the Revolution. Indeed, there were
many local models for the U.S. constitution, particularly Virginia's.  Madison's gift
to the U.S. constitution was, thus, as much eloquence as originality.

Why is separation of powers important?  Because the centralization and
embodiment of government in a single organ is indistinguishable from an abuse of
power.

A law enforcer who also supposed to write laws, has little incentive to bother
writing laws; how much more convenient to make them up as you go along.  Worse
yet, even when rules are written down, there is no certainty or predictability so long
as the enforcer can change them later.

A judge who also writes laws or enforces laws is not a likely source of independent
justice.  Why appeal an enforcement to the same person who enforced the law?  Or
why appeal a law to the same person who wrote it?  There is no certainty or
predictability in law if judges are indistinguishable from legislators or executives.

When governmental powers are separated, individual citizens can have equal
standing before each element of government.  Citizens seeking changes in laws can
appear before lawmakers without fear of favoritism or retribution from law
enforcers or judges.  Those who appear before law enforcers can do so without fear
of an adverse effect on lawmakers or judges.  And those who appear before judges
can do so without apprehension of adverse affects on other matters before
lawmakers and law enforcers.

It is very difficult to have such equality of standing when power is concentrated. 
The lawmaker, who is also judge and law enforcer, will inescapably be aware of,
and consider, matters of enforcement and judicial review in dealing with outside
parties.  Where there is a possibility of intermingling law, enforcement, and its
review, the temptation and the result are inevitable.  The process in one element of
government is susceptible to corruption in consideration of another process in
another element; indeed, commingling and corruption seem inescapable; and the rule
of law vanishes.  

The mere citizen who encounters the government only in the context of law
enforcement has much less to trade off, much less to exchange, than the more
powerful element of society that has not merely one law enforcement issue with the
government, but a whole host of law enforcement issues, as well as legislative and
judicial issues.

Where power is concentrated rather than separated, there can be no rule of law. 
There can be no limitation on the excesses of law.  There can be no predictability or
certainty of the processes of law

Lord Acton wrote that "Power corrupts, and absolute power corrupts absolutely." 
His insight applies equally well to the scope of power as to the degree of power. 
Indeed, in law, scope and degree of power are almost indistinguishable.

A powerful, centralized government is precisely what the American colonists feared
most.  The separation of powers, not a written bill of rights, is the cornerstone of the
rule of law.


The public interest

But you have not come here today to listen to a amateur historian expound on
American history and the separation of powers.  You have come to hear an FCC
Commissioner speak about the public interest.  In my view, however, it is all the
same.

I believe that the public interest is predicated on a rule of law, a rule of law that is
predictable.  And to that end, the public interest requires some respect for the
separation of powers.

You may begin to think that I am going to talk about delegation of authority to the
FCC and whether we commingle elements of the legislative, executive, and judicial
branches in one body.  I will leave that for some of your other panels to discuss. 
Today I would like to focus more narrowly on the concept of the public interest and
how it might be applied.

Horror Stories

Many conservative lawyers, indeed many of you here today, have horror stories
about the abuse of the public interest doctrine at the FCC.

It is axiomatic in some conservative circles that the public interest standard is
nothing more than a synonym for wholly arbitrary regulation.  To these
conservatives, the public interest standard is completely captured by regulators who
love power and who dislike the rule of law.

One frequent reaction is that Congress needs to rewrite the Communications Act to
expunge the concept of the public interest.  Or at least define it more narrowly, by
legislative prescription.  Frankly, I believe Congressional action in this area is
unlikely any time soon.  It is difficult for Congress to legislate; witness the more
than 60 years that elapsed before a major rewrite of the Communications Act of
1934 took place.

Another reaction is that the FCC should just ignore the public interest standard.
But ignoring the law, even one that seems incomprehensible, is never the right
prescription for a government agency.  Once a government agency can decide which
laws and which sentences are to be enforced and which are not, there remains no
rule of law.

I think that we can neither ignore the law nor afford to wait for it to be rewritten. 
Rather, we must learn to understand it, and to articulate how it may best be applied. 
That is what I wish to speak about today.

Historical Origins

The concept of "public interest" is not to be found in the Declaration of
Independence, the Constitution, nor even the Gettysburg Address.  It is a common
law concept first articulated in the late 1600s by Lord Hale to reflect limitations in
absolute property rights where public usage is important, as with respect to
wharves.

Significantly, the concept of the public interest was not invented to give one or more
branches of government new arbitrary and unpredictable authority.  Its property
common law articulation, as much as anything, appears to have formalized practice. 
If anything, the English common law has always led to more rather than less
certainty and predictability in the market.  The public interest standard in English
common law was an extension of the rule of law, not an insult to it.

The concept of the public interest was apparently introduced to American federal
jurisprudence by the Supreme Court in Munn v. Illinois in 1877.  That case upheld a
state law regulating maximum rates for grain elevators.  Again, the thrust of the
Supreme Court decision was not to create new, arbitrary, and unpredictable powers
for a government agency, but rather to sanction the exercise of a duly elected
government to place some limitations on the exercise of absolute property rights.  

While some, including myself, might prefer simpler, unencumbered property rights,
the limitation on such rights by a State government operating under the rule of law
with separation of powers and with due process is not so scary as the limitation on
such rights by a highly concentrated federal government with little or no
predictability and little or no due process.

The concept of the public interest was incorporated in the statutes establishing
federal regulatory commissions in the early 20th Century, particularly in the area of
common carriage. 

Perhaps few if any federal agencies are as dedicated to the public interest as the
FCC.  I recently took an electronic version of the Communications Act and did a
word search for "public interest."  I was astonished at how much of the Act was
permeated with the concept.  It appears in many if not most sections.


Make no mistake: it is not there by accident nor merely as an historical artifact.  It is
used time and again by Congress.  It must mean something.

Unclear Meaning

What it means, however, is far from clear.  The Commission has never defined it
precisely, nor have the courts.  In 1943, in the National Broadcasting case, the
Supreme Court upheld the use of the public interest standard by the FCC.  For the
majority, Justice Frankfurter wrote that it was not an entirely arbitrary standard but
in some sense a Congressional response to a changing new technology.  He also
wrote that the public interest standard is not necessarily narrowly limited, yet he did
not elaborate on the extent of its outer boundaries.  Nor has the Commission since.

It  might not be entirely inappropriate for Congress to provide an agency with a little
extra flexibility where the course of technology is unpredictable.  Good laws should
not necessarily become obsolescent with changing technologies. (Some people
might argue that bad laws should.)  In that sense, the public interest could include a
little flexibility to allow an agency narrowly to cope with circumstances and
technologies unforeseeable by Congress.

Except where it explicitly calls for another party to make a public interest
determination, the statute and the courts appear to leave those determinations up to
the Commission.  But we have never made such determinations explicitly.  

I have some suggestions on how we might approach the problem in the following
areas:  examining the statutory context of the phrase "public interest"; maintaining
the separation of powers; ensuring that decisions are predictable, not arbitrary; and
ensuring that the application of the public interest is non-discriminatory.

Contextual Meaning

The FCC should look to the letter of the law, gain understanding from the context of
each reference to the public interest, and interpret the public interest in a manner
consistent with the rule of law and with a predictable and certain application.


Much can be learned by examining the context in which the "public interest"
appears in the Act.  Some advocates of a broad, and expansive, and arbitrary
interpretation of the public interest standard argue it always has a broad meaning in
all circumstances.  A casual review of the dozens of times it appears in statute
explodes the myth of a single meaning of the public interest, however.

Sometimes it appears with "public convenience and necessity;" sometimes not.
Sometimes it is to be determined by the FCC, other times by States, and still other
times by licensees.  It is used in many different sentence structures with many
different subjects, verbs, adjectives, and adverbs.

Consider, for example Section 303, which grants the FCC broad authority to
regulate the wireless industry.  This grant of authority, however, is available to the
Commission only when the "public convenience, interest, and necessity requires" it
(emphasis added).  A requirement is a difficult showing.  Has the Commission ever
demonstrated an unambiguous requirement that something terrible would otherwise
happen, before employing Section 303?  I have yet to find a compelling example of
a Commission showing.  Perhaps someone knows of such a showing.

Separation of Powers

I return now to the original concept of the separation of powers.  How does it apply
to the public interest standard at the FCC?  Consider that the FCC embodies powers
of all three branches of government.  We promulgate rules, we enforce them, and
we resolve disputes under them.

But the Commission's authority in each of these areas is far from absolute.  Our
rulemaking authority is limited to interpretations within the four corners of statutory
authority given by Congress.  Some aspects of our enforcement actions are often
done through other government agencies.  And our dispute resolutions are always
appealable to courts of law.

In an ideal world, even these limited functions would not be combined in one
governmental body.  But to the extent we have them in one agency already, and the
Supreme Court has upheld such arrangements, we should be careful to keep
decisions and processes for each type of activity within the Commission separate. 
Enforcement must not become rulemakings, and dispute resolutions must not be
predicated on rulemakings or enforcement.

Where the public interest standard is invoked in rulemakings to expand or contract
Congressional statutory directives--or worse, to contravene Congressional intent--
the separation of powers and the rule of law are undermined.

Where the public interest standard is used in rulemaking to defer final rules until an
enforcement action, the separation of powers and the rule of law are defeated.
Instead, to maintain some separation of powers, the public interest should be
construed as narrowly as possible in the context of rulemaking and enforcement.
Rulemaking in particular is forward looking, and broad discretion in the public
interest affects all classes of individuals.  If there is any scope for greater flexibility
under the public interest, perhaps it should be in dispute resolution, where only a
small number of individuals will be affected. 

Unfortunately, at the Commission little attempt is made to segregate rulemaking,
enforcement, and dispute resolution.  The application of the public interest standard
is rarely if ever distinguished in each of these three areas.

Predictability 

One of the cornerstones of the rule of law is predictability of the application of law. 
This again argues for narrow applications of the public interest standard in both
rulemakings and enforcement.  Moreover, it also calls for statements of public
interest standards in advance of their application.

In particular, predictability of enforcement actions with a public interest standard
may be enhanced by the use of rebuttable presumptions.  That is, enforcement is
presumed to go in a stated direction with a burden of proof on the party seeking a
different outcome.

Another vehicle for greater predictability in limited rulemaking instances and in
enforcement actions would be the use of cost-benefit analyses.  Such analyses could
inform an initial determination of where the "public interest" lies, and where it does
not.  Such analyses are inherently imprecise and would serve more as a filter than a
final basis for a determination.


Sadly, the Commission rarely if ever defines public interest standards, whether ex
post or ex ante.  And there are no rebuttable presumptions.  All we have are
presumptions of uncertainty.

Nondiscriminatory Application of the Public Interest Standard

I have reluctantly come to the conclusion that the concept of the public interest may
be applied in different ways across different sections of the Act.  But I have not, and
cannot, conclude that it can mean different things in the same sentence and the same
section of the Act.  Specifically, it cannot be applied in one section in one way for
one licensee or applicant, and a different way in the same section for a different
licensee.

Consider, for example, granting the transfer of licenses under the public interest
standard in Section 309.  The Commission receives many requests for the transfer of
licenses.  The degree of scrutiny these requests receive varies substantially.  Many
are dispensed by the relevant bureaus, and only a few are considered directly by the
Commission itself. 

The degree of attention that these license transfers receive from the Commission
appears to depend on whether a merger or acquisition is involved and whether the
licensees are inside or outside of industries otherwise regulated by the Commission. 
These distinctions on the extent of review, however, are not to be found in statute. 
Indeed, they are not even to be found in Commission rules.

Many license transfers do not involve mergers and acquisitions, and these transfers
appear to receive less scrutiny than those involved in mergers and acquisitions. 
Moreover, transfers of licenses associated with large mergers of telecommunications
companies appear to receive the closest scrutiny. The Commission has interpreted
its authority to approve license transfers in the public interest as equivalent to an
implicit authority to approve or disapprove of mergers generally in the public
interest.  

Yet license transfer associated with mergers in other industries, for example,
railroads, do not receive the same scrutiny.  The Commission has not asserted
authority to approve or disapprove of mergers in the rail industry, the electric utility
industry, the airline industry, or any of the many industries that routinely have FCC-
issued licenses.

The Commission, in this instance, and in others, appears to have settled on a
discriminatory application of the public interest standard.  Specifically, under
Section 309 we hold licensees in certain industries -- those we happen to regulate
heavily -- to one public interest standard, while holding licensees in other industries
to a much more flexible and lower standard.  

The same standard should apply in all industries.  In my view, that standard should
likely be the one we have applied to other industries.

Conclusion

The Federalists had it right.  The central federal government can and ought to be of
great value to the people of the United States.  It is today, but it could be even more
so if the public interest standard were applied in a consistent manner, one that
respects statutory language, one that honors separation of powers, and one that
leads to predictability of legal process.  The Federalist Society can help contribute
to the proper application of the public interest through vigilance at the FCC.