Like many, I’ve had frustrating experiences with offshore call centers, repeating my account number to someone reading from a script who cannot solve my problem. So when the FCC proposed new rules to cap the percentage of customer service calls handled offshore, mandate English proficiency testing for foreign call center workers, and give consumers the right to transfer to U.S.-based representatives, my first reaction was, “good.”
My second reaction was, “wait, why is the FCC doing this?” The Commission regulates communications networks. It allocates spectrum, licenses stations, reviews mergers, and authorizes equipment. It does not regulate where companies locate their workforces or where they manufacture their products. Or at least it didn’t.
The call center proposal is not an isolated case. Under the Trump Administration, the FCC has been deciding where consumer electronics must be manufactured, where customer service workers must be located, and how the United States should achieve “drone dominance.” The FCC is becoming an agency focused on industrial policy, not communications.
What the FCC Is Doing
The call center NPRM proposes to cap the percentage of calls that telecommunications carriers can handle offshore, mandate English proficiency testing, require disclosure when calls are handled abroad, and give consumers the right to transfer to a U.S.-based representative. Even if one believes the FCC has the authority to regulate call centers, the way to do that is to regulate the quality of customer service, not how companies provide it. But the FCC’s proposal does not regulate the quality of customer service. It regulates where customer service workers are located. That is a workforce location mandate.
On March 23, the FCC added all consumer-grade routers produced in foreign countries to the Covered List, a tool historically reserved for specific bad actors like Huawei and ZTE.[1] The practical effect is that no new foreign-made router model can receive FCC equipment authorization, which means it cannot be imported or sold in the United States. The cybersecurity concern is real, given that foreign-produced routers have been implicated in the Volt, Flax, and Salt Typhoon cyberattacks. But the conditional approval process does not require a security standard. It requires a U.S. manufacturing and onshoring plan. That is industrial policy. And it is already being applied selectively, as industrial policy tends to be. The FCC granted Netgear an exemption from the ban, approving its foreign-made product lines without requiring the domestic manufacturing plan that was supposed to be the point of the conditional approval process. The FCC did not explain why Netgear’s routers manufactured in Southeast Asia are safe while identical products from competitors are not.[2]
An FCC public notice on drones continues down the industrial policy path. It declares that the FCC “is taking aggressive action to implement President Trump’s policy of American drone dominance,” asks how the Commission can promote U.S.-made drones to local law enforcement, and support “workforce development needed for American drone dominance.” The FCC is not even pretending this is communications regulation. It is openly describing itself as an instrument of industrial policy.
Industrial Policy Is New For the FCC
Using regulatory leverage to advance unrelated policy objectives is not new, particularly when reviewing potential mergers. Every FCC has exploited the Communications Act’s vague “public interest” standard to push past the competitive effects of the transactions under review. Ajit Pai, then a Republican commissioner, called the Wheeler FCC’s Charter-Time Warner Cable approval a “vehicle for advancing its ambitious agenda to micromanage the Internet economy.” Then-Commissioner Carr himself criticized the Biden NTIA for loading up broadband grants with “extraneous political goals that have more to do with ideology than they do with getting people connected.”
But, to my knowledge, every condition attached to merger approval and every FCC product requirement at least involved communications policy. Wheeler may have overreached on Charter-Time Warner Cable, but broadband deployment in a cable merger was at least within the FCC’s domain. The DTV tuner and hearing aid compatibility mandates told manufacturers what to include in their products, but at least those were communications functions. Ownership caps and must-carry rules reshaped the broadcast and cable industries, but at least they regulated who could own what within the communications industry. Directing where routers are manufactured and where call center workers sit is none of those things. That is a new function.
The fact that routers and call centers touch communications networks does not make manufacturing location and workforce location into communications policy. Taken to its logical conclusion, that reasoning would mean FERC could regulate the design of household appliances because they consume electricity, or the FAA could regulate airline catering because it happens on aircraft. Those are deliberately extreme examples. But they highlight the point that an agency’s jurisdiction over a network does not extend to every business decision made by firms that use that network.
Why It Matters
Industrial policy is almost always controversial. Often any given policy has legitimate arguments for and against. But it typically is done through an agency with some expertise. The FCC knows nothing about the effects of supply chain or labor market regulation.
The FCC is supposed to spend its institutional life thinking about spectrum and network interconnection. When it makes industrial policy, it is improvising. The router ban will raise the price of every router sold in the United States. Whether that cost is justified by the security benefit is a legitimate question, but it is not a question for the FCC to answer. The call center cap will raise the cost of customer service without any guarantee that quality improves. A domestic call center worker reading from the same inadequate script is not an improvement. The location of the worker was never the actual problem.
The FCC’s move towards industrial policy should concern people regardless of whether they like the specific proposals. Today’s FCC is using the “public interest” standard to advance onshoring and domestic manufacturing. A future FCC, with the same statutory authority and the same precedents, could use it to advance climate mandates on equipment manufacturers, prevailing wage requirements for network contractors, or whatever the next administration’s priorities happen to be. The tool is bipartisan even if the current application is not. If it can regulate where routers are made, where call center workers sit, what contractors are paid, and what corporate diversity policies look like, there is no logical boundary to its reach. We should not let a communications regulator become an industrial policy agency by accident, simply because it has leverage over firms that need something from it and a statute vague enough to let it try.
[1] The ban captures every major router brand, including U.S.-headquartered companies like Netgear (until recently recinded), Amazon Eero, and Google Nest Wifi, since virtually all consumer routers are manufactured in Asia. Supply chain origin is a legitimate risk factor; firmware from a manufacturer subject to foreign government compulsion poses risks that testing alone may not catch. But the FCC treats origin as the only factor rather than incorporating it into a broader security evaluation. The action does not affect previously purchased routers, and the FCC temporarily waived restrictions so already-authorized devices can receive firmware updates through March 2027.
[2] The Department of Defense, not the FCC, administered the exemption process, adding another layer of opacity to what is effectively industrial policy being conducted through a communications regulator’s equipment authorization process.
Scott Wallsten is President and Senior Fellow at the Technology Policy Institute and also a senior fellow at the Georgetown Center for Business and Public Policy. He is an economist with expertise in industrial organization and public policy, and his research focuses on competition, regulation, telecommunications, the economics of digitization, and technology policy. He was the economics director for the FCC's National Broadband Plan and has been a lecturer in Stanford University’s public policy program, director of communications policy studies and senior fellow at the Progress & Freedom Foundation, a senior fellow at the AEI – Brookings Joint Center for Regulatory Studies and a resident scholar at the American Enterprise Institute, an economist at The World Bank, a scholar at the Stanford Institute for Economic Policy Research, and a staff economist at the U.S. President’s Council of Economic Advisers. He holds a PhD in economics from Stanford University.
