When Michael Powell was named chairman of the Federal Communications Commission two years ago, Washington observers pegged him as an ideological right-winger. The image has stuck. Yet the real Michael Powell is something else entirely. He’s an earnest technocrat, out of place in the politically calculating Bush administration. In approach, if not in style or politics, Powell is the closest thing to Al Gore in official Washington today.
Granted, Powell’s views are to the right of his predecessors, Reed Hundt and Bill Kennard. He talks more about eliminating regulatory requirements than about promoting fair competition and a diversity of market participants. (Disclosure: I served as counsel for New Technology Policy at the FCC during Hundt’s and Kennard’s terms. Powell was named a commissioner shortly before I left.) But Powell’s not a fire-breathing conservative and shill for big business. Like Gore, he’s a wonk with an abiding interest in policy minutiae and a deep faith in technology.
Starting Feb. 20, Powell’s FCC will adopt a series of rule changes that could reshape the telephone and media industries. To implement the 1996 Telecommunications Act, Powell’s predecessors adopted rules that require local phone companies to share their networks with competitors. Powell wants to scrap some of those so-called “unbundling” requirements. As with most telecom policy battles, the details are obscure, but the winners and losers are not. “Baby Bell” phone companies like Verizon and SBC want to change the rules, and new local competitors like AT&T and broadband provider Covad want to keep them. Billions of dollars, and the fate of dozens of companies, hang in the balance.
Powell is with the Baby Bells, but he’s not really for them. The companies say they are itching to build wondrous new networks, but that doing so is counterproductive when their competitors can share the benefits. They promise that scaling back unbundling will spur new investment and help pull the telecom sector out of its doldrums.
Contrary to popular belief, Powell doesn’t buy this argument. Asked at a conference two weeks ago how he can trust the Baby Bells’ promises, Powell responded, “I have one rule: I don’t trust any companies.” He explained that he was focused on the coming transition to digital broadband networks and on pushing “facilities-based” competition. In other words, Powell hopes competitors will build their own networks or employ new platforms such as wireless, cable, and Internet telephony (used by companies such as Vonage). He wants to allow the market to move toward the technological transformation he foresees. The Bells will benefit in the short run, but to Powell that’s incidental.
Powell’s efforts hit a snag last week when his fellow Republican FCC commissioner, Kevin Martin, pushed an alternative plan. Opponents of Powell and the Baby Bells cheered, but the dust-up reinforces Powell’s maverick status. Martin, who is politically well-connected to the White House, wants to give state regulators more power to interpret the unbundling rules. It’s a classic conservative states’ rights argument. Powell is the one pushing for an energetic federal policy.
Since taking over at the FCC, Powell has shown that he’s not a libertarian true believer, hell-bent on dismantling regulation. In October, the FCC blocked the proposed merger of direct broadcast satellite competitors DirecTV and EchoStar, claiming it would harm competition. It was the first time the FCC blocked a media deal in 30 years. And Powell did it with gusto, acting before the Justice Department finished its review.
Rather than push to scale back the agency, Powell has done the thankless work of reinventing it. He’s beefed up the FCC’s technical and economic expertise by instituting training programs and hiring more engineers in the past 18 months than the FCC hired over the previous 20 years. He pushes FCC lawyers to craft their analyses to hew closely to judicial and congressional mandates.
The unbundling battle shows that Powell isn’t protecting monopolies out of a belief that bigger is always better. He’s looking to create a market where those monopolies will die if they don’t respond aggressively to new kinds of competition. That’s cold comfort to the companies who will suffer. And Powell may be wrong. Absent the current regulatory safeguards, the big players may indeed stomp out competition and raise prices. Correct or not, though, Powell is making a dramatic bet on new technology.
He’s made similar bets in other areas. A year ago Powell’s FCC authorized ultra-wideband, a radical wireless technology that, because is uses extremely low power, can coexist with existing services such as cellular telephony and TV broadcasts. The military, public safety groups, and broadcasters had delayed its approval for years. Powell also convened a spectrum task force that recommended major changes in the way the FCC regulates the airwaves, including greater support for unlicensed wireless technologies like Wi-Fi.
Michael Powell and Al Gore have one other thing in common besides their faith in the transforming effects of technology: Both are gadget lovers. Where Gore had a Blackberry wireless e-mail device, Powell has a Wi-Fi home wireless access point and TiVo digital video recorder. The latter toy got him in trouble at this year’s Consumer Electronics Show, where Powell expressed his desire to swap shows with his sister. The major media companies, who see TiVo and its competitors as threats to their advertising revenues, were outraged.
The TiVo incident shows one reason why Powell is so misunderstood: He says what he thinks. In a Washington dominated by message points and poll-driven agendas, honesty is perplexing. “Deregulation” has become a political code phrase to excite the faithful, like “tax relief.” When Powell points out, as he often does, that no implementation of the scores of rules set out in the Telecommunications Act could possibly be considered deregulation, he is met with blank stares. His supporters hear what they want to hear. They should listen more closely, or they are in for some surprises.