Saturday, November 18, 2017

REPOST: FCC Chairman uses management theory to improve agency decision-making

Monday, April 10, 2017

FCC Chairman uses management theory to improve agency decision-making

FCC Chairman Ajit Pai wants to increase the quality of economic analysis done by the FCC staff:

...he explained that economic analysis, primarily in the form of cost-benefit analysis, is largely ignored. Actually, it is probably worse than that: Those types of analyses aren’t even done. For example, significant areas of the agency’s work in recent years ... contained nothing that would pass as economic analysis.

So how to do this?  Chairman Pai wants to change the organizational structure from an M-form (with economists mixed in with attorneys) to a functional organization, with economists in their own division.

Some middling economists had suggested exactly this in an article titled "The Economics of Organizing Economists."

... a functional organization has a couple of advantages over a divisional form. First, a functional organization is more likely to keep up with new methodologies and so be able to apply them to enforcement questions. Second, since the staff economists and attorneys produce information, not traditional goods or services, there is an advantage to the independent analyses done by attorneys and economists. Without two separate memos, the decentralization of decision making in a divisional organization is likely to result in less information reaching the ultimate decision makers.


  1. very informative post for me as I am always looking for new content that can help me and my knowledge grow better.

  2. Functional leadership of an organization means that their leaders have a high technical knowledge over their area, bringing a specialized function to the company. Functional structure encourages a high control framework and high concept of specialization, leading to cost efficiency. Picking a functional structure over a divisional structure would mean the employees and leaders would have less overall knowledge of the business processed that they are not directly involved in. The main strength of the divisional structure is that it is very adaptable to fast changes and to differences between products, geographic locations or customers. Also, it involves collaboration between various functions, which leads to innovation.
    The FCC has numerous goals including modernizing the organization, and restructuring would assist with that process.
    The FCC has committed itself to making the fundamental changes necessary to become a more responsive, efficient, and effective agency capable of facing the technological and economic opportunities of the new millennium. While these changes have begun with an agency-wide reorganization and dedication of resources to recruiting, training, equipping, and deploying an expert workforce, much remains to be done as the agency seeks to capitalize on its competencies in:
    Promoting competition, innovation, and investment in broadband services and facilities,
    Supporting the Nation's economy by ensuring an appropriate competitive framework for the unfolding of the communications revolution,
    Encouraging the highest and best use of spectrum domestically and internationally,
    Revising media regulations so that new technologies flourish alongside diversity and localism, and
    Providing leadership in strengthening the defense of the Nation's communications infrastructure.

    With Chairman Pi looking to change the organizational structure to functional, keeping independent analysis’s of certain departments may mean goals will be met quicker due to the highly specialized teams attention only being on one outcome. When looking to make the decision to switch the organizational structure, expected costs and benefits can be evaluated to combat uncertainty.

    “Strategic Plan of the FCC.” Federal Communications Commission, 8 Oct. 2015,

  3. In an M-form (multidivisional) firm divisions perform all the tasks necessary to serve customers. These firms have the advantage of higher flexibility. Also, they improve coordination across functional departments and take advantage of expertise. (Froeb et al) Another pro is decision making is sped up. There is a loss of expertise in the work people perform in this structure.
    A functionally organized firm is one in which various divisions perform separate tasks. There is an advantage as people perform tasks where they have expertise and can easily share information within their division. (Froeb et al) They also tend to be well aware of their field so keep up with new information and technologies. The major difficulty is ensuring that the functional divisions are working toward a common goal. Decision making is slower in these firms.
    It seems that it would be beneficial to stick with a functionally organized as you could depend more on the work and data provided. Those with expertise would be more equipped to investigate and then recommend a strategy or direction in performing a task. Results may also be achieved faster as they can do the work faster.

  4. I find it disturbing that many individuals have no idea what Net Neutrality is when you bring up the topic about the FCC getting rid of it. Net Neutrality is a big deal and it will affect everyone that uses the internet. If you are not familiar with Net Neutrality in short it’s the principle that ISP (Internet Service Providers) must treat all information on the internet the same. So if Net Neutrality goes away then ISP companies can speed up, slow down or restrict traffic. (Net Neutrality, 2017)

    Again for those who do not are not familiar with Net Neutrality Ajit Pai is the FCC Chairman and can be viewed as the one with the most influential power of getting rid of Net Neutrality. Prior to being Chairman of the FCC he worked at Verizon as the Associate General Counsel. (Ajit Pai , 2017) This brings up the first economic concept of Moral Hazard. A Moral hazard can be viewed as two parties coming to an agreement that gives them an opportunity to gain from. (Froeb, McCann, Shore & Ward, 2016) Yes, the FCC is the one who is voting on getting rid of Net Neutrality, but it’s ironic that Ajit Pai is the one who has pushed for the removal of Net Neutrality and used to work at Verizon. ISP companies such as Verizon are the ones who will gain from the removal of Net Neutrality. As this article shows Ajit Pai will do anything to convince us that the removal of Net Neutrality is a positive thing.

    Shirking is the next economic concept that comes into play when looking at Ajit Pai. “Shirking is a type of moral hazard caused by the difficulty or cost of monitoring employees.” (Froeb, McCann, Shore & Ward, 2016) Just in the last few days FCC Commissioner Jessica Rosenworcel came forth and accused the FCC of withholding evidence of fraud. (Cameron, 2017) A FCC Commissioner shouldn’t have to come forth like this with evidence of fraud when there is a FCC Chairman such as Ajtit Pai that should be practicing good business ethics.


    Net Neutrality: What You Need to Know Now. (n.d.). Retrieved December 11, 2017, from

    Froeb, L. M., McCann, B. T., Shor, M., & Ward, M. R. (2016). Managerial economics a problem solving approach. Boston, MA: Cengage Learning
    Ajit Pai. (2017, October 13). Retrieved December 11, 2017, from

    Cameron, D. (2017, December 08). FCC Commissioner Blasts Her Own Agency for Withholding Evidence of Fraud. Retrieved December 11, 2017, from

  5. I really appreciate your skilled approach. These square measure items of terribly helpful data which will be of nice use on behalf of me in future.