What the FAA-FCC Fight Can Teach Us About Our Approach to Risk

The Federal Aviation Administration (FAA) has released a list of 50 airports that it contends will need “buffer zones” for 5G cellular spectrum, the latest in a months-long and escalating public fight between the agency and the Federal Communications Commission (FCC). Rather than a mere regulatory turf battle, the differences this internecine spectacle illustrates in how these two agencies think about risk and understand the purposes of regulation reflect basic divisions that run throughout our politics.

On the surface, the fight between the FAA and FCC is a technocratic disagreement about the use of spectrum in the 3.7GHz band for 5G wireless services. The FAA, backed by Boeing and Airbus, is concerned that allowing cellular carriers to use this spectrum will interfere with avionics systems on some aircraft. The FCC, which spent years studying the issue, has developed usage rules that it believes address interference concerns. The FCC’s rules are similar to those that have been used by wireless carriers in Europe without incident and seek to accommodate the aviation industry’s concerns.

But the real fight is not really about technical rules for wireless spectrum; it’s about agency attitudes toward risk and responsibility. The FAA is a risk-averse agency (one of many). This is the same FAA that spent years arguing that passenger use of cell phones posed a threat to planes, even while they were on the ground. After years of pushback, use of cell phones on planes has been allowed for the past several years without incident.

Risk aversion does have its place. But in seeking to minimize risks to the aviation industry, the FAA does not consider the costs its policies impose on those outside the industry, or even on consumers within the industry. The problem is that the FAA has no incentive to care about those costs. The agency and its leaders get no credit for factoring those costs into their decision-making, but they would face intense scrutiny for any kind of safety incident that in hindsight could have been avoided.

This same attitude of extreme risk aversion could also be seen over the past two years in the Centers for Disease Control and Prevention (CDC) and Food and Drug Administration (FDA) responses to the COVID-19 pandemic. From the earliest days, our health agencies have sought to protect Americans by subjecting pandemic-related policies to assiduous agency control. This led to the disastrous initial rollout of testing, with the agencies prohibiting use of independently developed COVID tests in favor of a CDC-developed test that did not work. For its part, the FDA slowed the approval of life-saving vaccines. Even now, while peer nations around the world have made at-home tests broadly available at low-cost, Americans have had to make due with tests that are costly and difficult to procure.

Or consider the Federal Trade Commission’s (FTC) recent move to block a major semiconductor merger between Nvidia Corp. and Arm Ltd. Putting aside the dubious merits of the agency’s challenge — the challenged deal is a vertical merger that is unlikely to substantially reduce competition — here again we have a case where one agency is aggressively pursuing its mandate without consideration of the broader social costs of its action. The pandemic and global supply-chain disruptions have shone a bright light on the need to strengthen our domestic semiconductor industry; the Biden administration has made this a priority; yet the Biden administration’s own FTC is challenging a merger that would help accomplish that goal. 

Risk aversion unchecked by consideration of costs becomes risk minimization. Too often, that becomes the de facto policy guiding our regulators and what we come to expect of them. We expect the government to provide certainty and safety in an uncertain and unsafe world. But this stultifies our abilities to live with risk, makes it imperative that the government deliver on the impossible promise to eliminate risk, and increases the costs we face when that imperative fails.

Exacerbating this problem is the incentive structure of technocratic regulation, which encourages bureaucrats to push risk out of their narrow area of focus and inevitably just moves it into some other area. Regulators do not bear the costs that their decisions impose outside of their spheres of regulation. And this problem is endemic throughout our institutions, not just in our federal agencies. 

This is a key reason that it is so difficult to build infrastructure in America. We have sprawling bureaucracies designed around substantive proceduralism. They ensure every individual participant is treated fairly and does what is expected of them. But this system is incapable of ensuring that the outputs of those individual participants add up to the promised whole. The goal of bureaucracy is to adhere to its own proceduralism, but without consideration for the costs that those procedures create for society.

Gus Hurwitz is the director of law & economics programs at the International Center for Law & Economics. His email address is ghurwitz@laweconcenter.org.