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“Giulia McHenry and Wayne Leighton on the FCC’s Office of Economics and Analytics” (Two Think Minimum)

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Tom Lenard:

Hello, and welcome back to TPI’s podcast, Two Think Minimum. It’s Monday, December 14th, and I am Tom Leonard, President Emeritus and Senior Fellow with the Technology Policy Institute. And I’m joined by Scott Wallsten, TPI’s President and Senior Fellow. Today, we’re delighted to have as our guests, Giulia McHenry and Wayne Leighton, who are respectively Chief and Deputy Chief of the FCC’s Office of Economics and Analytics. The new office—OEA—is a major initiative of the current FCC and was established almost exactly two years ago. Giulia came to her current position after serving as Chief Economist at the NTIA. Prior to that, she focused on telecommunications issues at a well-known economics consulting firm. Giulia holds a PhD in Economics from the University of Maryland. 

Wayne previously served as Chief of the Office of Strategic Planning and Policy Analysis at the FCC, and as a Senior Economist at the Wireless Bureau and as a Wireless Advisor to Commissioner Deborah Taylor Tate. Outside of the FCC, he has worked as an economist for the Senate Banking Committee, an economics consulting firm, and as professor of Economics at the Universidad Francisco Americana in Guatemala. He holds a PhD in Economics from George Mason. 

Welcome to both of you to Two Think Minimum. Establishing a new office in the government is not an easy task. What do you think were the major challenges in setting up the office, and what do you think were the major accomplishments during the first two years? 

Dr. Wayne Leighton:

Very soon after he became Chairman… and in January of 2017, Chairman Ajit Pai gave a speech. It was April 2017, and this speech highlighted his interest in making economic analysis across the agency more consistent in its application, and he announced at that time he was interested in establishing a new office within the agency that would focus on economics and data. And from there, we spent the rest of the year, 2017, with a working group, looking at what it would take to establish an Office of Economics and Analytics. Then more importantly, looking at the problems that the Chairman had outlined in that April 2017 speech. It was essentially that economics was again, not consistently applied, which isn’t to say, wasn’t done well. It’s just that it can be applied well in one application and one rule making and not necessarily in another, also the economists were too easily placed into two silos within the agency. And so that would affect your ability to consistently integrate them into the agency’s work. And so, what the working group was trying to do is say, “Let’s look at the best practices across government and other agencies, how do they incorporate their economists? How do they take economic analysis and use it to make effective decisions?” And so that working group conducted a bunch of interviews, 32 interviews, I believe internally in the agency and about 48 externally, former FCC leaders, and also again, economists and managers at other agencies. And what we found was that there are essentially two basic models for how you could organize your economists. You could have them in a divisional organization where they are spread out in different divisions across the agency, or you could have them in a functional organization where they might be say in a separate office. And there are trade-offs to that, which we can talk about. But in evaluating that, we determined that what the Commission had been doing for the longest time, having the economists dispersed in different bureaus and offices across the agency led the creation of a certain amount of silos and the opportunity for economists sometimes to be ignored. And again, sometimes it would be integrated very, very well and still the decision was made to move them into a separate office. And it was named the Office of Economics and Analytics. That’s the short history for how we got through the first year, 2017. By the end of 2017, the working group had produced this report. It was released in January 2018. In the end of January 2018, the Commission voted to establish what is now known as the Office of Economics and Analytics. We spent the rest of 2018 going through the procedural hoops that are required working with the union, working with the opposite management budget, working with Congress. These are all big, big tasks. That was wrapped up by the end of 2018. As you mentioned, Tom, we just celebrated our two-year anniversary, and we also needed to find the right person to lead this office. Somebody with managerial skills and also a PhD economist, and we found that with Giulia. So, we were very fortunate with that. So, that is basically how we got to December of 2018 when the new Office of Economics & Analytics was up and running. 

Tom Lenard:

It’s not unknown for economics to be pushed aside, even if you have a separate economics office. Then, I realize it’s kind of early days to know ultimately how successful the office is going to be in getting economics more institutionalized and integrated into the FCC’s decision making process. But, you know, what would you say just on the basis of the experience thus far, in terms of the success of getting economics more fully integrated in all relevant decisions? 

Dr. Wayne Leighton:

Let me lay out kind of what the working group recommended in terms of arrangement, and then Giulia could then lay out how well that’s been done. The working group, in this report, again it was issued in January 2018, recommended focusing on the structure, the authorities, and the practices that would be used to establish the new office structure. How’s it going to look? What’s going to be a separate independent office? Authority is extremely important. The rules established in the new office gave OEA specific authority to review all rulemakings that are produced by the FCC, and this is extremely, extremely important. And then finally, practices. These are the formal and informal, kind of cultural aspects, of setting up a new office. All three of those are important. How you put the office together, what authorities you give that office, and then the informal and formal practices you have across that office and across the agency, how you interact with others in the agency. And maybe this would be a good opportunity for me to kind of pitch it to Giulia, to talk about how we’ve done that. Although, I will say since she probably won’t herself, she’s done an extremely good job in handling those issues and the rollout over the last two years, and I’ll throw out a few examples to build on.

Dr. Giulia McHenry:

Thanks, Wayne. I appreciate you saying that. I think when we got started, we knew that we were basically starting a new institution within the FCC. And to do that and to get to a point, and we knew we sort of had two years under Pai where we really had to set up whatever the practices are, and kind of institutionalize ourselves in terms of getting us built into all of the sort of standard practices of the Commission, right? Because the Commission, like any large body, large agency, has sort of a standard way that it works, and we knew we needed to integrate ourselves into that. And in integrating ourselves, we knew we really had to create a benefit for everybody, rather than sort of just be another cog in the wheel or another bottleneck. And so upfront, we focused first on communication and really opening up lines of communication and those relationships, those are informal practices and informal relationships with all of the bureaus and offices. So, we started, essentially at all levels of leadership, from me, the head of the office, on down, through to the division chiefs, communicating almost daily with the other bureaus and offices on economics and on the rulemaking. And then, using those relationships, we essentially set up best practices. And part of that was to do economics well, and to ensure that economics isn’t just a rubber stamp, you need to do it early, right? So, you need to be doing the economic analysis along with the rulemaking. And we recognized early, some of the biggest wins that OEA would have would probably not be seen. They would be impacting the policy direction early on, or sort of informing the early policy direction well before we get to the rule-making stage. We knew that, and we worked with the bureaus and offices to set up processes with respect to all the sort of key policy making bureaus, wireline, wireless, and media, that established when and how they would get us involved. And then within the economists, we set up practice areas. So, we took the economists who had come from, say Wireline, and assigned them to a wireline practice area. That’s not to say that’s all they did, but so that when the Wireline Bureau had new rulemaking, they would know who to reach out to. Establishing those processes were huge in terms of getting ourselves integrated, and then also at the same time, ensuring that what we were doing, ensuring that the economic analysis we did was both relevant and objective. So, we really focused on ensuring that the economists could work independently, but that they were taking the right things into account when it came to doing the economic analysis, and very early on, we realized you actually have to establish, as constraints to economists, the law, right? Legal regulations, what is allowed by mandate. And so, we worked within that to establish some internal practices in terms of what makes a good economic analysis that would assist the bureaus and inform rulemaking. And so, it was a struggle early on, particularly in those early days, the Economic Analysis Division was reviewing something like sixty items in a month because we were trying to catch up, and we’re trying to get earlier and earlier in the process. At the same time, we’re reviewing everything that had kind of been coming down the pike, and so it was a real struggle. It was a lot of just stuff to process, but I think we’ve gotten to the point where we are reviewing just about every rule making that goes up to the Commission, and even those that where we don’t do any heavy economic analysis, we’re aware of them, we know what they are, and we know that there’s no economic analysis in them. So, I think that’s one of the big successes, and then if you talk to the economists at the staff level, they all do feel empowered to do objective analysis, and that was a big part of the success of the office. The economists think that it’s worked out for their benefit and that they do feel like they’re still read in, they’re read in more, and they’re allowed to do what they think the relevant economic analysis is, as opposed to kind of what simply sort of just supports whatever the attorneys want to say. So, I think in the end, you know, obviously we’re still getting going. We’re about to go through a big transition, particularly for our office, but getting those processes and those institutions and those formal connections and informal communications, all right, early on, was critical to making sure that we continue to be aware of everything and have a hand in performing economic analysis in all of the rule makings.

Scott Wallsten:

A big part of any economic analysis, of course, is cost benefit analysis. What were some of the costs you thought about when standing up this office? What were the costs for the FCC, and how have you dealt with them, or did they turn out to not come up at all? 

Dr. Wayne Leighton:

One of the fun things that we had to do in this process was talk to a lot of people who’ve been through this before, who have organized economists in other agencies. It was fun to talk to former heads of, you know, OMB or OIRA or the Bureau of Economics at the FTC and this sort of thing. You get this sense that there’s a trade-off in choosing between the kind of visual organization or a functional organization. And so, for example, if you have the economist in a separate office, which we were leaning to do, and we had not been doing before, you put them in a separate office, they’re going to feel empowered. They’re going to have more independence, but there’s going to be a risk that they’re siloed. You stay with what you have, the economists in their division, they’re more integrated. They’re right down the hall from the people that were working on this wireless and wireline or media issue, what have you. It’s also easier for them to be ignored. So, we had to balance it. It wasn’t like there’s one obvious right answer, but after a lot of consideration, we decided that what other prominent agencies were doing with the separate office, that seemed to be the way to go. So, we moved forward with that. Then the costs you’re referring to, what kind of costs are set up, as I mentioned, almost all 2018 was consumed with negotiating with the union, negotiating with… basically letting Congress and OMB know how this is working and making sure they were comfortable with that, and making decisions. So, one example of a decision we made is that each of the largest policymaking bureaus, the Immediate Bureau, the Wireline Competition Bureau, and the Wireless Telecommunications Bureau, had a Bureau Chief Economist. And we initially thought we will leave those folks in the bureaus and move everybody else to the Office of Economics & Analytics. As we started to stand it up, we realized we needed those folks in OEA. We didn’t have enough senior level people who could manage and really understand the economics at the highest levels. We couldn’t lose those folks. We had to bring them in, but that was the trade-off too because you also need folks back in the policy-making bureaus who understand economics, and we’re still talking about that. Who is the right person to leave back in the bureaus to manage that relationship? So, two years on, we are still fine tuning that to make sure that those relationships that Giulia mentioned, which are so critical, are working. So, the 2018 lift, if you will, was all of these processes that we had to work through: getting the people, getting the org chart, working with the Office of the Managing Director to establish our budget, our authorities, all of that. And then once we were launched, it is, as Giulia described, maintaining those relationships, maintaining the workflows and communications at all levels, which of course is imperfect because we’re talking about human beings here, but that cost, the management costs of getting it right, is really, really important.

Dr. Giulia McHenry:

What Wayne doesn’t tell you is, is a lot of that work in 2018 was done by Wayne, very patiently, and it was a lot of hard work. And so, I think to get from vision to implementation in the government can be incredibly difficult, and people don’t realize how challenging that is. You really need someone determined to make it, and patient enough to make it work, which Wayne was a huge piece of that. In terms of opposition, you know, I think there certainly was, and Wayne can speak to this more. With respect to the union, for example, there wasn’t opposition, but there were concerns about what this meant for the staff, for the union employees. There was concerns that they would maintain their position or higher, that they would maintain essentially the same roles or more sort of critical roles than they had. And I think there was really some concerns internally, what would happen? Would we be siloed? Was this just the way to put all the economists into a box and then ignore them? And so that was a big piece of what we spent a lot of time doing, is focusing on ensuring that wouldn’t happen. I think that’s where most of the opposition, obviously people can argue about how important economic analysis is, but I think in terms of the biggest concerns were really would the office do what it set out to do, or would it just sideline us?

Tom Lenard: 

One of the most significant things that you’ve done, or that the Commission has done, is to impose a regulatory impact analysis requirement, essentially a cost-benefit analysis requirement, for all major regulations. It’s really the same type of requirement that is imposed on executive branch agencies by executive order, but those executive orders don’t apply to independent agencies like the FCC. But you’ve kind of done that, or the Commission has kind of done that, internally, and tasked the OEA with preparing the regulatory impact analyses. It’s kind of spelled out in a memo that you, Giulia, wrote with the General Council just in the last month, I guess, explaining what a good RIA should contain and procedures. That seems to me to be fairly unique. I’m not aware of, maybe you can tell me, I’m not aware of any other independent agency that has anything similar. Is there one?

Dr. Giulia McHenry:

So, actually there is. Actually, a big part of what that memo was modeled after, and I will also say—there was a lot of work by a lot of people, I certainly did not write that thing on my own, and really great work—but actually that memo was modeled after something from the Securities and Exchange Commission. So, the SEC has a similar memo, similarly public, that essentially is the general counsel and the economists laying out what makes a good regulatory impact analysis, and why it’s so critical from a legal standpoint. I think that’s an important part of what that document really outlines: why good economic analysis is critical to ensuring securing ourselves against lawsuit. And that really came from that model. But I think it is critical to laying out the importance for the office.

Dr. Wayne Leighton: 

To its credit, the Securities and Exchange Commission had lost a couple of prominent cases in court and very much needed to do that memo. In this case, the Federal Communications Commission under Chairman Pai’s leadership had said, “We could better incorporate economics. It would be useful to do that. We would have better policies as a result. Let’s do that.” So, there wasn’t really a forcing action other than a vision, and that vision [inaudible], and as a friend of mine pointed out recently with the FCC, we don’t have two examples, so we’re working towards a trendline here. 

Tom Lenard:

So, have you done RIAs?

Dr. Giulia McHenry:

Yeah. Essentially, what we do is a full regulatory impact analysis or full cost benefit analysis, that really, we do on any essentially significant—any rule-making that really has over a hundred million dollars in impact annually—and so you’ll see in several of those, and all of those, I think there are only eight this year, but those have full-blown cost benefit analyses, but additional items, you know, below that, it’s really at… we have to do the economic review. It’s at our discretion, how much cost benefit analysis we do, and in just about all of those, we have some cost benefit analysis. And so, it really has become standard in our operating procedures too, and just about every item to do as much of a cost benefit analysis as number one, is required, but then also as we have data to do.

Tom Lenard:

So, you indicated earlier that most of the effectiveness of the office might not be visible. It might come at the early stages. Maybe I should know this, are the eyes public?

Dr. Giulia McHenry:

Mostly they aren’t. Some amount of the cost benefit analysis, typically what we try to do is in many cases, we will actually set up essentially a strawman to ask questions as part of the notice of proposed rulemaking. So, in addition to asking questions about the cost and benefits, in some cases, we’ll actually set up what we think might be kind of the beginnings of a cost benefit analysis and see comment on it, which is a great way for commentors to either tell us tell us that we don’t know what we’re doing or hold their piece. And then in the actual report and order, we will typically have a strong cost benefit analysis. So, a couple of really good examples of that the 988, the suicide hotline that we went to order on earlier this year, maybe late last year, in fact, had a nice, you know, had a long, very clearly laid out cost benefit analysis. The supply chain rulemakings actually has one, both for the order and one for the NPRM. So, most of those items, there are of course, a couple of exceptions: anything USF, we do not have to. It’s exempt by the ‘96 Telecom Act.

Scott Wallsten:

The Universal Service Fund is explicitly exempt from cost benefit analysis.

Dr. Giulia McHenry:

Exactly, and then something like an auction, where the auction is essentially a cost benefit market mechanism, we don’t necessarily have to have a formal cost benefit analysis, but just about all of them have some. Sometimes they are an explicit section, other times they’re so sort of integral they’re weaved throughout the order, and sometimes they’re a little more subtle than that. 

Scott Wallsten:

Do these analyses… is there some specific way that the FCC is supposed to take them into account? Maybe because in every administration, every head of an agency, there’s always been times that they want something that isn’t going to pass the cost benefit analysis. I mean, it’s not unique to a party or a person. What is their obligation to take into account the CBA?

Dr. Giulia McHenry:

So, this is when I get on my soap box as an economist. And I’ll start by saying, when I went to college, I had a government professor who once literally told me that it wasn’t about the economics. It was like stop thinking all of government is about the economics. So, I finally tried to internalize that.

Tom Lenard:

What persuaded you to go to graduate school?

Dr. Giulia McHenry:

She was not the one who did, but she definitely said, “If you’re going to go, economics is probably the way to go.” But so, the economics and our economic analysis is there to inform the policymaking. And one of the key things about having OEA be an independent office from the panel sitting bureaus is it means we have sort of an equal voice to the Chairman in terms of actually informing the decision with economics. That said, all we’re doing is informing the analysis. We are economists, we are civil servants. Our goal is to provide an independent analysis of the situation and provide that information to the Chairman. And of course, you know, they, as the appointed leaders of the Commission, ultimately decide what the right direction is. And they may incorporate a wide variety of other factors into their decision making that, as economists, we aren’t. And I think this is key to the independence of the office, and to essentially the future of the office, to maintain this independence. Our goal is to perform the economic analysis. There is nothing to say that the Commissioners and the Chairman has to do what we think, essentially have to go in the direction that the economic analysis points in. It’s just to inform that. And I also think there’s a subtlety there too, right? Which is, again, getting in early, there may be individual marginal decisions that we can inform, even if at the end of the day, the Chairman is doing essentially the policy that they believe best for the nation.

Dr. Wayne Leighton:

Could I add to that? Just in terms of this economic analysis, and if there are different options that the Commission might be considering: Option a, Option B, Option C. And we’re looking at which one has the highest net present value, for example. If Option B has the highest net present value, as Giulia said, we are informing the analysis. And I’ve had this conversation with Commissioners, and they are the President appointed, Senate confirmed political decision makers. They can say, “Thank you very much, OEA. That’s a very helpful analysis. When I consider that analysis and other factors outside of the model that you have presented here, I am inclined to choose Option C and not Option B, for these reasons.” And of course, we have not [inaudible] in any way, shape or form. We have, as Giulia said, informed their analysis and of course they can consider other factors outside of the model we presented them. 

Tom Lenard:

That gets a little bit to the question I was asking before about the public nature of the RIAs. For example, you perform an RIA which shows costs are a lot greater than the benefits. When it gets to the political decision makers, they decide for other reasons, they want to go ahead. Doesn’t that create an awkward situation.

Dr. Giulia McHenry:

So, there certainly is some leeway in the Chairman’s office and the Commissioners for drafting purposes. It’s not always the case that all of the cost benefit analysis necessarily ends up, and it’s not always for those reasons. There are a number of other reasons that we may not want to put every piece of economic analysis we’ve done into the order. But it is true; it’s not a perfect system. I’ll admit that, but it works for the Commission. And one of the reasons it works so well for the Commission is, those who don’t know the Commission may not know that essentially the Commission works… is the Chairman is really the deciding factor and really drives most of the policymaking. And OEA, in order to perform an objective analysis, we need to be able to have an internal discussion, which isn’t necessarily public. Otherwise, we would essentially be in a position, you know, I think be forced to be changing our analysis before we sent it up to the Commission. So, I think allowing for open communication is more beneficial than potentially the flip side.

Dr. Wayne Leighton:

And in the previous model, and other agencies as well, under previous models, the economics would have been capped at a much lower level and just not presented to the top decision makers. What we have now means they will be receiving this information. Again, they can make their own decisions, but the information, the economic analysis, will be presented to them independently. 

Scott Wallsten:

Thinking about the future of the Bureau, sometimes an innovation by one administration is something that the next one doesn’t want anything to do with. And sometimes they continue, like auctions have been popular through Democratic and Republican administrations. Where do you think OEA falls? Do you think it’s something that has been sort of accepted by both sides as an objective analytical group that will continue? Or is there some risk that a new Chair might not appreciate it?

Dr. Giulia McHenry:

Certainly, every Chair, and knowing nothing about what’s going to happen now, I think every Chair has their sort of preferred bureaus and offices and gathers information however they want. So, who knows, really, how we’ll stack up in the next administration? But I think, one thing is, OEA, we’ve been talking all about the cost benefit analysis, but just to step back a little bit, OEA is we have the Economic Analysis Division, which is essentially the economic analysis. We also have the Auctions Division. We have what’s called the Industry Analysis Division, which is collecting essentially the Commission’s really largest and most significant data collections, including its broadband mapping. And we have a division devoted to, it’s essentially the data division. It’s devoted to data governance and working towards all of the open data related, you know, the Open Data Act and all of the related requirements coming out. So, OEA is much bigger than purely the economic analysis. And I think one thing is true, that government is moving towards evidence-based decision-making, and OEA, across all four, from the cost benefit analysis to the Data Division, it’s all about ensuring good evidence-based decision-making. So, any Chairman can sort of do what they want, but I think that is really bipartisan. You know, you saw that really frankly, with the Obama Administration too, a lot of evidence-based and a focus on open data and evidence-based decision-making. And in that respect, I think OEA certainly has a lot to offer to any administration because that is such a big part of our focus. I will also say I am a firm believer that cost benefit analysis is party neutral. You know, both parties, it’s again, the political decisions don’t necessarily always go along with the cost benefit analysis, but that really doesn’t swing towards one party or the other in my view.

Scott Wallsten:

That’s why no party likes economists.

Dr. Giulia McHenry:

On the one hand, on the other hand.

Dr. Wayne Leighton:

I will tell you all a story. When we were talking different people from different administrations, and we were very bi-partisan when we were trying to set up this office and talking to people. We had this wonderful conversation with Cass Sunstein, who had been Obama’s OIRA Director, and we were talking about cost-benefit analysis for the non-major items, so those foods are not a hundred million dollars or more, and how much effort should we put into it? And I still remember the great quote I walked away with from him was, “You have to do a cost benefit analysis on how much cost benefit analysis you’re going to do.” Essentially, we have to be good economists here, and good managers do this all the time and say, “You know, how much effort and how should we apply our resources?” But those resources should be applied to help drive better decision making, and that’s something that was consistent across the administration. And I think the appreciation for that can persist across the administration. 

Tom Lenard:

Have you had conversations with the incoming transition team about the office?

Dr. Giulia McHenry:

I don’t know how much we’re supposed to. There are all sorts of restrictions on what you can say, but there’s a landing team at the Commission. I think it’s a really strong team, all really former Commission employees and some people on it with a lot of experience with evidence-based rule making. So, we have talked to them and sort of the standard operating procedures, and I think the world of them all. So yeah, I really do think it’s a strong team.

Scott Wallsten:

Going back a little bit to the beginning, thinking about the name of the Bureau. People sometimes are very particular about their name. So, how did it come to be this? And also, relatedly, how did the data group come to be part of this? I mean, as an economist, as an empirical economist, I love that, but I imagine some others may not have.

Dr. Wayne Leighton,

Giulia can speak more about exactly how the Data Division works in a way now, but early on, if you go back to the Chairman’s speech in April of 2017, he says, “We’re going to establish a new office and it’ll be called something like ‘The Office of Economics and Data’, and as the working group was going through all the steps to put this new team together, and coordinating across the agency, we realized pretty quickly, well, OED is very close to OET, the already existing Office of Engineering and Technology. And people rattle off acronyms around the building all the time, and if you aren’t a native to telecom lingo, you’d be lost, and we realized that wasn’t going to work. So pretty quickly, we said, “Okay, Office of Economics and Data isn’t quite right.” And also it’s a little bit more than just the data. It’s how we’re looking at the data. So, Giulia mentioned that the Data Division, which is the smallest division within OEA, is a lot about governance. Right now, it’s two people and it will grow some, but again, it’s the smallest division. They’re not gathering all the data across the commission, of course. We have the Industry Analysis Division as the largest data collection across the Commission, and there’s data collection going on within the policy-making bureaus. So, we decided not to bring in every single person who touches data or helps collect data or process data across the agency. That would have been ridiculous. That would have been way too large of a new office. The new office might have been too large. So instead, what we got was an opposite. It brought in the economist and also people working in auctions, as you know, and people doing some of the data collection with the Industry Analysis Division, which had previously been in WCB. So, auctions had been in the Wireless Bureau, Industry Analysis Division had been the Wireline Bureau, and then we established a small division to talk about data governance and helped set kind of general policy for how this should work across the agency. So, we did that, and we realized, okay, we’re not actually doing the data collection, but we are helping. We’re doing a lot of the analytics and then a lot of the kind of good governance and rules internally for how we look at that data. So, Office of Economics & Analytics made a lot more sense, and that was what we recommended, and that’s what the Commissioner went with. 

Scott Wallsten:

So, auctions was in the Wireless Bureau. Do you think bringing auctions over help with the reverse auctions now, which are not just wireless?

Dr. Giulia McHenry:

I think that was part of the reasoning in terms of bringing auctions in, was to acknowledge that we’re not just running spectrum auctions anymore. We’re running auctions across a number of different bureaus and offices, including the Universal Service Auctions. I certainly think it helps in terms of being able to communicate sort of equally and have, you know, a little less of the turf war in terms of one policy-making Bureau and another. I think it also helped to have closer communication amongst the economists, right? So, auctions has a fairly small group of economists, but there are some very famous economists at the FCC who spend a lot of time focusing on auctions. Very smart economists, I should say as well. So, you know, I think having us all under one office actually made that communication better. And I think that certainly has helped auctions in a number of ways, and really helped all auction design at the Commission. It’s subtle, but I think it’s really made a big impact on that communication, which is so essential to good auction design.

Dr. Wayne Leighton:

The auctions team was established with the Wireless Telecommunications Bureau in 1994, and over time, as Giulia said, it grew from doing spectrum license auctions to also doing auctions for licenses within the Media Bureau and, over time, reverse auctions for subsidies that were overseen by the Wireline Competition Bureau. So, it made sense to have that within OEA, where they could serve all of the different offices across the agency. So, if you think of the office as a consulting team, that’s serving all of the policy-making bureaus, you would want that auctions team in that office, the Office of Economics & Analytics. 

Dr. Giulia McHenry:

Now, I should also say the other thing because OEA has the Industry Analysis Division, which is collecting the broadband data and doing broadband mapping, that has also helped that communication, right? So, now we have the data collection, which essentially is what the Universal Service auctions are riding on, in the same office with the auctions that actually really helped with logistics, number one. But also, number two, I think in terms of thinking what’s the right data collection to inform the auction, that’s pulled back with location quite a bit too.

Tom Lenard:

You’re working on the new data collection, the new mapping efforts.

Dr. Giulia McHenry:

Yeah. Well, what’s now the Digital Opportunity Data Collection. It’s taking a long time for me to get that all in one breath. Yes. We’re continuing to work on that and whatever that is, as it stands up, that will be within OEA, an enormous amount of what we are doing, but it’s one of those areas and where having economists be in the same group with the data collection folks in terms of designing the collection so that it effectively does what we want it to do is really important.

Scott Wallsten:

So, you’ve had interesting careers. Giulia, you came from economics consulting and then NTIA, and then to the FCC. How was the NTIA different from the FCC? I mean, they do different things with telecommunications. How is working at these places different?

Dr. Giulia McHenry:

I mean, number one, I think both places have incredible staffs. So, both places have very hardworking staffs, really good people to work with, and I enjoyed working at each one of them. I should also say my role was a little bit different at each of them. So when I was at NTIA, I was like the only economist at NTIA. So, I spent a lot of time focused on the engineering. So, that was a little bit different. NTIA is very much focused on two things: on the executive branch and on spectrum management from the federal side. And that, it turns out to be much different from the FCC, which is much more outwardly focused. So, we are focused on industry and on ensuring access to spectrum for commercial and non-federal users. So, there are sort of institutional differences, like NTIA is a lot smaller, but the focus really is so different from those two. I also think FCC being a regulatory agency, there’s just purely so much more to literally get done in a year that you really have to be much more sort of deadline driven and focused on what the next rulemaking is and, you know, sort of rapid fire in a way that you don’t at NTIA. We have a little bit more time. The focus, I should say, one is looking internal to the government and one is looking external to the commercial sector for the most part, as well as the size changes the focus quite a bit.

Scott Wallsten:

Do you think NTIA needs more economists?

Dr. Giulia McHenry:

I think they could definitely benefit from more economists. I think there’s a lot of really interesting things that they do. Number one, part of the mission of NTIA is in fact to be part of the Commerce Department, it’s supposed to be improving commerce, right? And having some economists who can help think through and look at those equities more would be really important. I think what people don’t know is, NTIA does a lot more than just spectrum management. They do internet governance, sort of internet governance issues more broadly, and having more economists in those discussions, I think would be incredibly helpful. And again, there’s sort of the spectrum side which could certainly use more economists thinking about some of the market trade-offs and cost benefit trade-offs, even if it’s not a market, just thinking about cost benefit in a new way could be incredibly helpful for all of NTIA. They also have a really cool CPS survey collection, which could use more economists.

Scott Wallsten:

That’s true. That’s an incredibly useful tool. Wayne, you’ve been at the FCC for a long time, and people generally hear about the revolving door between industry and government and debates about whether that’s good or not. But people, I don’t think realize, that sometimes people at agencies are involved in passion projects that have nothing to do with making money, and you’ve been involved, as Tom said in this intro, with this university in Guatemala, and I don’t know if you want to talk about that a little bit, because that’s a really interesting project. 

Dr. Wayne Leighton:

Sure! It is a very different project, very separate project, something I do on my weekends or free time, but have been doing for about 10 years. Before I came back to the Commission and then continuing in a different role and it’s called the Antigua Forum. And it is an annual gathering of entrepreneurs and business leaders and political reformers and experts in communications and strategy and big thinkers. And you take 50, maybe 60 people and you bring them to a beautiful mountain setting in Central America in Antigua, Guatemala, and you give them a very long weekend to talk about specific projects. Out of those 50 people, maybe 10 of them are having a project they’re working on to try and do some kind of reform, and I wouldn’t be personally involved in any of those projects, but the projects that people would pitch and work on are very much oriented towards advancing economic opportunity around the world in whatever country that the people are coming from. And the one tie, I guess I would say to the conversation we were having so far is, after 10 years of doing this, we realized that it really matters who the people are, who you bring together, that makes the people, the kind of people, just like it really matters who you are putting in charge of the agency. And it really matters the process that you have in place, meaning the rules of the game. In this case, this Antigua Forum gathering in Guatemala, what are the rules for engaging each other over a three-day weekend? But what we’ve been talking about for the last 45 minutes are, what are the rules for different employees and staff and managers within the FCC to engage each other and do economic analysis. So, you’ve kind of allowed me to draw a thread between what I do on my weekends and what I do at the FCC, and that helping people think about how much the rules of the game matter in any organization, whether it’s a non-profit, a government agency, a for-profit corporation or anything else, the structure in which you align people and the rules in which you allow them to engage each other. And if you do it right, you put the right rules in place, people find ways to engage each other and create value and beautiful things happen. So, it’s been a lot of fun to do that and watch that grow on the side. And then it’s been an absolute joy for the last three years now to be working on and standing up and helping Giulia run the Office Economics & Analytics. We haven’t done it perfectly. We could even spend another half hour talking about ways it could be done better. 

Scott Wallsten:

Like you don’t have anything to do for the next 30 minutes, right?

Dr. Wayne Leighton:

We have to go make it better, so we’re going to have to sign off here. There is certainly, you see how much rules matter, see how much, if you can take a step back and say “How can we create the right organizational environment for people to engage each other,” whether it’s over three days or whether it’s over the next decade or two. You can create some really good results because people are fascinating critters. You put them in the right set, and they do wonderful things.

Tom Lenard:

You guys, I think certainly are to be congratulated for what you’ve accomplished in the last two years.

Scott Wallsten:

Absolutely. 

Tom Lenard:

It’s a major accomplishment, and we appreciate your taking the time to tell us about it on Two Think Minimum.

Dr. Giulia McHenry:

I know organization economics is not always most interesting of subjects, but it’s been fun to talk to you guys about it, and we really appreciate the opportunity. 

Tom Lenard:

I think we’ve both been economists in government agencies, so we’re interested in how it works. 

Scott Wallsten:

All of us have been. 

Tom Lenard:

Thanks very much.