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Regulatory Spillovers
Post-Hurricane Katrina


By Kyle Dixon
September 28, 2005

The communications blackout caused by Hurricane Katrina (and exacerbated by Hurricane Rita) has spawned a number of spillover effects beyond the devastation of life and property by storm surge. Although most of these consequences have been negative, some have been mildly positive, such as the increased demand for satellite phones to enhance public safety, as well as the favorable press many cable and DBS providers have garnered by broadcasting recovery information to stricken areas and burgeoning evacuee shelters. But even these may not be unmitigated benefits to the extent the storm trails behind it a legacy of increased regulation for these services.

The worry is not so much that policymakers will respond to Katrina by seeking to impose more intrusive "economic" regulation to prevent abuses of monopoly or "market power." Satellite phones remain a costly, weaker competitor to mobile wireless phones for most uses, so providers of these phones have little market power to abuse or correct. And any economic regulation of cable and satellite, however ill-conceived, surely will continue to focus primarily on their traditional offerings to the bulk of viewers or these companies' partial reliance on their own programming.

But as policymakers at all levels rush to dodge blame and show how "responsive" they are, some will no doubt call for various mandates to promote "social" goals, such as public safety and homeland security. Some of these calls will address cable and satellite companies directly. For example, legislators could attempt to ensure that satellite phones and networks maintain enough capacity to handle gargantuan surges in usage during an emergency, and do so over several days when electricity and other communications services may be unavailable. And given cable and DBS companies' success in providing information and programming to shelters and relief workers, why not make such offerings mandatory?

Other calls for regulation would affect these companies, particularly satellite phone companies, as part of broader efforts. For example, the Senate Commerce Committee announced recently at a hearing that it would consider comprehensive disaster preparedness and, at that same hearing, FCC Chairman Kevin Martin advocated that satellites be part of that plan. Arizona Sen. John McCain recently advocated federal standards for equipment interoperability, an approach that likely would confine these companies to an arduous standard-setting process with providers using other technologies, all of which would have to share some level of compatibility. Another proposal, first offered by Michigan's Sen. Debbie Stabenow after the Sept. 11 attacks, was defeated primarily because some concluded it would provide new wireless equipment to local officials without bolstering the network infrastructure on which the equipment relies. Satellite phone companies also will risk more regulation indirectly to the extent their increased popularity makes them more of a competitive threat to other providers. Such providers are likely to insist that satellite phone companies face the same public safety and reliability requirements they do.

In sum, given that the main political risk post-Katrina is not championing public safety enough, leaders throughout government will tend to impose mandates first and ask questions later. Some of these mandates would be tailored for satellite and cable companies, whereas others would apply primarily because they apply to other companies. Either way, these deliberations will invite (along with truly effective measures) ill-fitting solutions, opportunism by parties interested in related issues and naked "rent-seeking" by companies attempting to use regulation to gain advantage (or lessen disadvantage) relative to competitors. And under the pressure to shore up systems that need improvement, few will stop to ask whether the same ends could be achieved without government mandates.

Policymakers can and should learn from horrible lessons like Hurricane Katrina so they can ensure that communicating in a crisis remains one of the primary benefits of America's vast and varied communications infrastructure. When it comes to the risk of encountering new regulation to do just that, however, companies should prepare to weather storms unrelated to wind and rain.

Kyle Dixon is Senior Fellow and Director of the Federal Institute for Regulatory Law & Economics, the Progress & Freedom Foundation. Mr. Dixon served in various capacities at the FCC from 1997 until 2004, most recently as Deputy Chief of the Media Bureau and Special Counsel to the Chairman for Broadband Policy.

Kyle Dixon is Senior Fellow and Director of the Federal Institute for Regulatory Law and Economics at The Progress & Freedom Foundation.

Reprinted with permission.



The Progress & Freedom Foundation