TCS Daily

Conflict of Loyalties

By Bruce Fein - April 24, 2003 12:00 AM

Independent agencies inhabit an odd constitutional universe. They are independent of both the President and Congress, yet are executive branch creatures that exercise both quasi-legislative and quasi-judicial powers.

Agency chairmen characteristically command agency staff like generals command soldiers. The chairman appoints the general counsel and bureau chiefs, provides their marching orders in the preparation of items for agency consideration, and, is the decisive voice on promotions and bonuses. In other words, staff loyalty is more to the chairman personally than to the agency collectively.

A chairman's "first among equals" status is generally unproblematic when he sides with an agency majority. An awkwardness or conflict of loyalties may arise, however, when the chairman not only dissents but hopes to shipwreck the agency majority's handiwork. The temptation for an infuriated chairman to employ the general counsel and staff to work against the agency majority may prove irresistible in such circumstances. The fracturing of the Federal Communications Commission in addressing the unbundling obligations of monopoly incumbent local exchange carriers (ILECs) to competitive local exchange carriers (CLECs) highlights the problem of an agitated agency chairman in dissent.

The Communications Act establishes the F.C.C. Chairman, at present, Michael K. Powell, as "chief executive officer." He is empowered to represent the Commission in all matters relating to legislation, other government departments or agencies, and to organize and coordinate the work of the Commission in the name of promptness and efficiency. But that empowerment can prove mischievous if the Chairman is warring with the Commission majority, as is underscored by the agency's long and troubled ordeal in implementing the unbundling mandates of the 1996 Telecommunications Act.

It directs the Commission to set a floor on ILEC unbundling of local network elements for leasing to CLECs at reasonable rates. Unbundling is automatic for network elements that are either necessary or whose unavailability would impair the provision of a telecommunications service offered by a CLEC. The Commission's Local Competition and Line Sharing orders under the 1996 Act were successfully challenged in the United States Court of Appeals for the District of Columbia Circuit in United States Telecom Ass'n v. F.C.C., 290 F.3d 415 (D.C. Cir. 2002).

The issue later arose as to whether the USTA decision vacated both the Local Competition and Line Sharing orders. The Commission concluded that the former had not been vacated in In the Matter of SBC Communications, Inc., Apparent Liability for Forfeiture (October 9, 2002). The Commission stated (at fn. 55): "The recent D.C. Circuit Court decision in United States Telecom Association, et al. v. F.C.C., et al., 290 F.3d 415 (2002), does not undermine our analysis. The court did not vacate the UNE Remand Order."

Then came a surprise "O Henry" sequel. On December 4, 2002, the Office of General Counsel of the F.C.C. filed with the D.C. Circuit in the USTA proceeding an "EMERGENCY CONSENT MOTION OF THE FEDERAL COMMUNICATIONS COMMISSION TO EXTEND PARTIAL STAYS OF MANDATES" that somersaulted from its October 9 order regarding SBC Communications. The General Counsel declared that both the Line Sharing Order and the UNE Remand Order had been vacated and remanded by the USTA ruling. The General Counsel advanced no reason for the legal flip flop. And there was no indication in the filing document that a Commission majority as opposed to Chairman Powell alone had approved the General Counsel's renunciation of the Commission's October 9 decree.

On February 20, 2003, a sharply divided Commission voted generally to retain ILEC unbundling obligations, eliminate line sharing, and deregulate new fiber. Chairman Powell authored an impassioned partial dissent openly attacking the legality of the Commission's action. The Chairman protested: "The Majority apparently is a big fan of UNE-P, because it has contorted the letter and spirit of the statute and the court's interpretation of our responsibilities in an effort to ensure its indefinite preservation. What is remarkable about today's decision is that one looks in vain to find a clear or coherent federal policy in the choices made by the majority."

The Chairman detailed what he insisted were legal flaws that would require a reviewing court to upend the Commission's order: "I... dissent from the switching section of this Order, because I find a Commission majority for the third time in seven years substituting its preferences for a heavily permissive unbundling regime for Congress's judgment that no element should be provided unless the Commission can affirmatively conclude that a competitor is impaired without it...Today, the majority flouts the D.C. Circuit mandate [on unbundling]."

"The legal errors of today's decision are many to my mind...First, the majority places switching on the list without making an affirmative finding of impairment based on a thorough analysis of sufficiently granular criteria...I believe this to be reversible error."

"Moreover, the majority delegates its own responsibilities under the statute to the states, but fails to invoke any meaningful limiting principles in doing so..."

"This Order is legally suspect if for no other reason that it is nearly identical to the ill-fated UNE Remand Order of 1999."

The Commission's February 20 Order, which still awaits final release, is destined for challenge in the D.C. Circuit. Yet who can be trusted to defend the Commission's ruling? The F.C.C. General Counsel is the voice of the Chairman; and, the Chairman is implacably opposed to the Commission's unbundling mandate for ILECs. The General Counsel thus seems disqualified as the Commission's advocate because of a conflict of loyalties.

There seem no natural surrogates, however, to argue for the Commission majority. The Department of Justice is one candidate, but independent agencies like the F.C.C. are intended to operate free from executive branch influence. The Commission might hire outside counsel, but obtaining approval for the expenditure of such funds without the Chairman's approval seems problematic. Statesmanship and a concern for appearances ride in favor of Mr. Powell's approval, but the two are readily unhorsed when power and amour propre are at stake. Maybe Congress should enact a law to provide expressly for conflict of interest contingencies.

At present, however, when a chairman dissents, an agency majority may be thwarted by ill-motivated bureaucratic maneuvering.

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