The next group of witnesses will be here as a panel, Charles Ferris, Chairman of the FCC; Mike Pertschuk, Chairman of the Federal Trade Commission; and Susan B. King, Chairman of the U.S. Consumer Products Safety Commission.

TESTIMONY OF CHARLES D. FERRIS, CHAIRMAN, FEDERAL COMMUNICATIONS COMMISSION; MICHAEL PERTSCHUK, CHAIRMAN, FEDERAL TRADE COMMISSION; AND SUSAN B. KING, CHAIRMAN, U.S. CONSUMER PRODUCT SAFETY COMMISSION

Chairman RIBICOFF. This is the first time that we have had the privilege of the three of you appearing before this committee. While I don't know Ms. King, I know very well both Mr. Ferris and Mr. Pertschuk. They are without question two of the most knowledgeable men that have ever served on Capitol Hill and have a high degree of knowledge and sophistication about how Government works. It is my feeling that the President made some very happy choices in the appointment of you. I have followed your activities through the press. You are doing an outstanding job. My feeling is that you have much to recommend to this committee. Because of the time constraints, I would hope that you would each confine yourself to a résumé of your testimony, not to exceed 10 minutes. Then we will ask some questions. Your entire testimony will go into the record as if read.

I have it listed here in order; Mr. Ferris, would you start off first? Then Mr. Pertschuk and then Susan King.

Mr. FERRIS. Thank you, Mr. Chairman. I certainly appreciate those kind and generous remarks about our prior service here in the Senate. I hope I can be helpful to you and the committee for the duration of these bills.

In the interest of time, as you said, I will just highlight my prepared remarks on these two bills. I can summarize that testimony in the shortest possible time.

First, I would like to commend both the committee and President Carter for focusing attention through these bills on some critical issues of concern to me and to all Federal regulatory agencies. The goals of these legislative efforts are ones I strongly support.

We do need improved analysis of the economic costs and benefits of Federal agency rules, increased public participation in their formulation, better management of and reduction of delay in agency processes, regular review by agencies of their rules to eliminate those that are no longer needed, and reform of the administrative law judge selection process. Even where, in my testimony, I may express concern with particular legislative means chosen to address some of these concerns, I agree that these areas need attention by each Federal agency.

Regulatory reform is an important item on the Nation's agenda. Legitimate dissatisfaction among both the business community and the general public is created when Federal regulation imposes unnecessary costs and burdens. I do not believe this signifies a general wish that all Federal regulation to achieve public goals should cease. But there is widespread desire that agencies improve their processes and adopt rules only after an informed analysis of both the need for regulation and the costs it is likely to impose.

This committee's landmark study of Federal regulation identifies a variety of problems in the regulatory process. Some agencies, you have found, proliferate sometimes contradictory and often incomprehensible volumes of rules. Others cling uncritically to outmoded rules and policies and spurn input from the public. And some require unnecessarily formal, time-consuming and costly procedures to make changes in their rules.

Both bills focus on these divergent problems. We at the FCC have also been focusing on the same problems, in our own agency's context, over the past 18 months.

I would like first to focus briefly on what I consider to be those areas that hold the most promise for legislation. These address problems that are truly procedural or involve additional Federal personnel reforms beyond those beneficial changes enacted by Congress last year. These sections address overformalization, delay, and insularity in agency procedures for decisionmaking, selection of administrative law judges, and increased public participation in agency proceedings.

I would then like to discuss in greater depth those provisions requiring agencies to alter the substantive presentation of proposed rules. These sections, which call for a specific type of regulatory analysis, cause me more serious concern, particularly in the context of potential judicial review.

Finally, I will address those provisions that focus on agency management of its regulation-issuing processes.

In each area, I will try to give you some idea of how the FCC has already moved or is moving to implement the broad principles embodied both in these bills and in President Carter's recent Executive Order 12044.

Both bills would allow agencies greater flexibility to expedite and simplify their formal rulemaking and adjudicatory proceedings. This would give a statutory imprimatur to rules of practice and procedure long followed by the FCC. We have had extensive adjudicatory experience with procedural features similar to those proposed, such as using summary decisions and prehearing conference techniques like oral argument, memorandums of law, simplification of issues, and admission of facts and stipulations.

For over 15 years, by authority of Congress, we have also used an employee review board for initial review of decisions rendered by our judges after hearing. Only a certiorari type of review by the Commission itself is used to pass on applications for review of final review board decisions. Giving other agencies the flexibility to adopt similar procedures might be useful to them.

SELECTION AND TENURE OF ADMINISTRATIVE LAW JUDGES

I particularly support the efforts of both bills to improve the process by which administrative law judges are selected. The administrative law judges I have worked with at the FCC are a dedicated, hardworking group. My advocacy of changes in the selection process of judges reflects in no way a concern with the quality of work produced by our judges.

I have, however, found that the existing system imposes severe restraints on our agency's ability to choose from a pool of applicants that includes minorities and women for judicial vacancies. It

is also far too restrictive to be required to select, as at present, from a certified list of only three names.

I hope this committee can go further than either bill does at present to address this problem. A list of five candidates is not a major improvement over a list of three candidates. I recommend that a complete list of all qualified persons-with qualifications more broadly defined-be submitted to an agency for any administrative law judge position, with full discretion given to the agency to choose anyone from it.

On the other hand, I am concerned with provisions that would transfer authority for examining and selecting administrative law judges from the Office of Personnel Management to the Administrative Conference, limit administrative law judge appointments to a specific term of years, and provide for bonus performance awards. I believe that the independence of the administrative judiciary may be compromised by these provisions. I urge serious study of alternatives to achieve the goal of improved performance by administrative judges.

PUBLIC PARTICIPATION IN AGENCY PROCEEDINGS

A major thrust of the regulatory reform effort is to make agencies accountable to the public. One of the most effective ways to insure that agencies will have an adequate record on which to judge proposed actions is to expand the role of the public during the decisionmaking process. Agencies that operate with full public awareness and involvement are likely to think more carefully before adopting new rules.

The FCC has developed several innovative public outreach programs during the past few years. During the past year, for example, our Consumer Assistance Office sponsored a series of public participation workshops in several cities across the country to teach the public how to file comments in our rulemakings and how our rules are made.

The FCC regularly publishes material especially designed to encourage public participation. FCC Actions Alert is a weekly twopage summary of pending significant rulemakings directed to, and written for, a much broader public than that normally reached by the Federal Register. On particularly important rulemakings, the Commission publishes "FCC Feedback" editions, which explain in two or three pages, in plain language, the details of a single rulemaking and tell citizens in lay terms how to file their comments. We have also experimented with publication of summaries of initial comments in rulemakings to help both industry and the public in filing their reply comments. If successful, this procedure could significantly reduce legal costs for searches of FCC docket files. This experiment was first tried in our pending inquiry on the need for financial reimbursement of consumer participation in rulemaking proceedings.

We are currently studying such a program, in which we might, where we felt it necessary to develop a full record, pay expenses for public participants who could add new data or perspectives to selected informal rulemaking proceedings. The public does participate in many of our broadcast, and sometimes our cable television, proceedings. But in many of our major common carrier proceedings

where the consumer has billions of dollars at stake there is little public participation.

I do believe, however, that each agency should be given maximum flexibility under any legislation to structure its own reimbursement program in light of its own particular functions and needs, as the administration bill apparently allows. Such a program is a means to help the agency itself reach a rational decision. As such, each agency should be given full, nonreviewable discretion to decide where and when such assistance is needed to achieve this result. This is particularly needed in light of the limited funds projected for this purpose.

Although a combined $20 million authorization for the many affected agencies may well be sufficient for the first year's program, on a pilot basis, I would recommend against freezing the total authorized at the same level for 3 years. This would allow for increases if experience warrants.

REGULATORY ANALYSIS AND REGULATORY REVIEW

In contrast to the bill's true procedural reform efforts, discussed above, the sections of both bills that attempt to achieve reform in substantive agency decisionmaking contain more serious practical and conceptual problems.

The search for simple, uniformly workable approaches to substantive reform of Federal regulations that can apply to all types of agencies is difficult. There are approximately 90 different Federal regulatory agencies. Each has a different statutory mandate, different regulatory concerns and traditions, and equally diverse regulatory problems.

Rulemaking results from the subtle interplay of the enabling acts of these agencies, their internal procedure, and the people who are selected to administer and staff them. In many cases agency enabling statutes adopted decades ago can no longer provide sufficiently definitive guidelines. Adjusting traditional regulatory assumptions of, in many cases, the 1930's, to suit modern issues poses a challenge to Congress and to the independent regulatory commissions equal to the challenges that faced those who initially established them.

Both Congress and many independent agencies have started major efforts to respond to this challenge. The FCC, for example, has been engaged in a searching reexamination of its basic regulatory policies to determine when regulation is still necessary to attain the goals of the 1934 Communications Act. Let me give you a brief summary of our efforts.

The FCC has been given a mandate from Congress under the 1934 Communications Act to achieve for the American public the benefits of diversity and innovation, at affordable cost, that telecommunications services are capable of providing. The FCC has traditionally relied on regulation to achieve these public interest goals. In recent years, however, it has been, in fact, the unparalleled growth of both existing and new communications services and technologies-not regulatory fiat-that has most often made new services available to the public.

These developments have been straining the limits of the FCC's existing regulatory process. Because of these developments, distinc

tions between communications and data processing, broadcasting and common carriage, postal and communications regulation, State and interstate services, and monopoly and competitive services are eroding. Cable television, for example, is difficult to neatly contain in either the broadcast or common carrier sections of our act. And even older services like radio broadcasting are changing, calling for new regulatory flexibility.

Technology and new markets are proving in many cases to be far more dynamic than the regulatory structure the FCC has previously erected. We often find that our past regulatory restraints are retarding rather than promoting the basic goal of achieving maximum benefit for the American consumer. The FCC has therefore been seeking, to the extent feasible, to eliminate unnecessary restraints on competitive forces.

We have successfully completed several of our regulatory review efforts during the past year. We have opened competition in the telegraph market, ending Western Union's 40-year monopoly. We have ended the past cartel arrangement for international satellite television customers. We have speeded the introduction of new cable television services to consumers by abolishing the requirement that cable operators get a certificate from us before starting their operations. And we have eliminated over 70,000 annual license examinations formerly required to perform routine technical operations at AM and FM broadcast stations.

Elimination of the cable and license examination efforts alone saved taxpayers support of 30 person-years of effort by our bureaus, besides the significant paperwork savings for the public. In a longer term effort, the FCC has completed a multiyear regulatory review of all of our technical broadcasting rules, eliminating or modernizing over 800 obsolete rules. We are about to undertake a similar omnibus review of our substantive radio regulations.

We have additional studies underway to determine the need for our regulation of cable signal carriage and receive only satellite each terminals. We are looking also at new market-oriented policies such as improving UHF television and expanding AM and FM radio channels. These policies may naturally increase the program choices available to consumers, thus reducing the need for FCC regulation to achieve that goal.

We have also tried to simplify the rules we find still needed to serve the public. The largest radio service we regulate is citizens' band radio. Our rewritten CB rules were the first Federal regulations to be redrafted in plain English and were cited by President Carter as an example for other agencies to follow. We have also simplified in a similar manner the marine radio rules used by recreational boaters.

We have invested heavily in marshaling the resources we need for regulatory review. Economists now work along with lawyers in developing our policy. Our greatly strengthened Office of Plans and Policy adds a far greater dimension to our deliberations than in the past. This office has the primary mission of assessing the economic costs and benefits of FCC action or inaction in any policy decision we are asked to make.

While our own internal review is continuing, Congress has also been reviewing our statutory mandate to help to clarify our cur