I first heard the notion of the diocese as the fundamental unit of the church back in the 1980s from my bishop. But I never heard a reasonable theology that supported his claim. Practically, I recoiled at this absurd idea thrust upon the church by the bishops who had, under this rubric, either lost touch with reality or suffered form significant amnesia. Anybody with any sense knows that the fundamental unit of the church is the local congregation. The local parish is the place where the people are, and as we all know, the baptized faithful are the church.
I tried to find a theology that justified the Bishop's idea. I "googled" theology of diocese" and came up with nothing. But I do believe that I remember correctly that the notion that the diocese is the fundamental unit of the church arose accidentally from the 4th century Roman political organizational system. After Constantine made Christianity the official religion of the Roman Empire, the church continued to flourish and grow, and therefore, needed to organize itself to fit the growth. The church thus adopted the Roman form of administrative organization which was the diocese. An early definition of the word diocese means to dwell, occupy, manage, derivative of oikos house.
In the New Testament the first churches were house churches, relatively small, probably attended by no more than 50 people. Think about that when we consider that an early definition of the diocese was a derivative of the word "house." Jewish Christians also met in synagogues. As the church grew, they used bigger houses and some of them were donated by wealthy Roman citizens who were Christians. This made them "churches" in the modern sense of a public building set aside for worship.
The early church in the British Isles had no diocesan system. Celtic Christianity was organized around a monastic tradition where the Abbot was more powerful than the bishop. This was a spiritual community united through a communion of friendships and alliances between spiritual leaders and their monasteries. The diocese as an administrative principle in British Christianity was not adopted until after Augustine of Canterbury arrived on British soil in 597 A.D., establishing sees at Rochester in Kent and East Saxon (London).
Parish priests and their people know that the local parish is the fundamental unit of the church. This is where the baptized faithful assemble for worship, prayer, discipleship and ministry. Our catechism puts it this way: The Church is described as the Body of which Jesus Christ is the Head and all baptized persons are members. It is called the People of God, the New Israel, a holy nation, a royal priesthood, and the pillar and ground of truth. This basic statement says nothing about organizational and administrative structure, but to me implies that the local assembly is the organizing principle of the body.
While the diocese is the traditional judicatory style of Anglican and Roman Catholics, there is no practical or theological justification for the notion that it is the fundamental unit. Ecumenically it doesn't hold water either. The Methodist are organized in conferences. The Lutherans have their Synods. Ecumenical charity demands that we recognize these and other Christian organizational structures as just as valid as the diocese.
What planet are the bishops who believe this living on? The local parish has always been the fundamental unit of the church. This is where the action is. If the local parish did not exist, there would be no diocese. The diocese depends on us, not we on them.