Michael Powell's fateful speech about the FCC's future

Now that we know who's going to be the next president, we can start guessing who's going to be the top federal official regulating service providers in the next four years.

The Federal Communications Commission is not a cabinet agency and its five members are appointed for staggered terms that are allowed to cut across presidential administrations. But once he takes office, President-elect George W. Bush does get the right to designate which member of the FCC serves as chairman during his term. So it's certain that current Democratic chairman William Kennard won't be running the show much longer.

Though there are no assurances, the smart money right now for the next FCC chairman is riding on one of the two current Republican commissioners, Michael Powell. He's a former Justice Department lawyer who's shown a strong independent streak at the FCC. Not incidentally, his father is Secretary of State-designate Colin Powell.

Earlier this month, Michael Powell gave a fascinating speech to the Progress & Freedom Foundation (PFF) that was unlike anything I'd heard in Washington for quite some time. For years, FCC officials' speeches have been constrained inside a tight little box labeled: Let Us Now Praise the Telecommunications Act of 1996. No observation that maybe the 220-page act was an ungainly beast filled with contradictory clauses each meant to assuage one or another industry segment could stop FCC officials from treating the law as an article of faith and the holy writ revealed.

Powell is the first government communications official in years whose career wasn't built around conceiving, writing, negotiating, implementing or lobbying for the Telecom Act of 1996. Because he doesn't have this vested commitment to the statute, he's free to say what others can't and try to move beyond the debates of recent years. Powell told PFF that while he endorses the stated pro-competitive principle of the law, "the act, at its heart, is a political compact between local phone companies and long-distance carriers" to replace the previous regulatory scheme called the Modified Final Judgment administered by the late Federal Judge Harold Greene.

"Furthermore," he added, "the statute left unchanged the balkanized regulatory treatment of different technologies and industries that existed in the Communications Act of 1934." So what should policymakers do now? Again he states, "Our challenge is not simply the faithful implementation of the statute, but one that requires us to use the principles of the statute to adapt to a more dramatic shift taking place in communications."

Powell lays out that shift in a way that'll be familiar to anyone who's attended a computer trade show keynote address but is hardly ever heard in Washington. Quoting everyone from late economist Joseph Schumpeter to Cisco CEO John Chambers (whose name I've never heard mentioned at the FCC), Powell touts the arrival of "disputive technologies" and "creative destruction." And he criticizes the usual Washington policymaker approach to "reform" as "a relatively pedestrian, incremental notion."

The implications of Powell's approach are potentially profound. Though he doesn't quite say it, he implies that industry segments tend to use talk of "reform" as only a change in regulation, not deregulation, and that each uses one part of current law as a defensive shield against enemies.

For example, Bell companies often hide behind the good-sounding concept of "universal service" and the inability of competitors to provide it as justification for their own subsidies. Legacy long-distance carriers often use the reasonable-sounding rules for Bells to get into long distance as a battering ram against them, demanding endless investigations of RBOC back-office systems before they can be freed up. Some CLECs use their rights to resell Bell services as an excuse not to make their own investment in new and better services. Cable companies use the differences between the cable and telephony portions of the 1996 act as an excuse to bar access to their systems.

Powell also delivers a veiled gibe against the habit of Kennard's FCC to rail against apparently anti-competitive mergers but then approve them with a sheaf of "conditions" that strive to force carriers to do things they really don't want to do and end up doing half-heartedly. Maybe a Powell FCC will just say "yes" or "no" to mergers and leave it at that: "We must avoid the temptation to 'shape' the development of markets and instead let the market mechanism make those decisions."

So is Powell saying to all service providers: Either you build a better mousetrap or you die? Nothing in the complex world of telecommunications and the Internet is ever that simple, and I'm sure Powell realizes that one person's "deregulation" is another person's blank check for dominant carriers." Perhaps we will have the chance soon to see how a new FCC era will play out.

This story, "Michael Powell's fateful speech about the FCC's future" was originally published by Network World.

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