Reading Powell's Record

Conservatives often thumb their noses up at "pointy-headed intellectuals," but in Michael Powell they finally have one they can call their own at the helm of the FCC. And after eight years of Reed Hundt and William Kennard, the cable industry is happy to hear Powell expand at length about such things as the "Schumpterian effect on policy and regulation."

A close reading of Powell’s opinions and public comments during his four-year tenure at the FCC shows a man with deep respect for free markets and a distaste for government intervention to prevent potential problems.

"The government has a role to play in stopping anti-competitive conduct, but it is a dicey business to do so based upon speculation about the future consequences in such a rapidly changing marketplace," Powell said in a September speech before the D.C. Bar Association.

Unlike Powell’s FCC Republican compadre, Harold Furchgott-Roth, the new chairman is no bomb-thrower. His bipartisan and pragmatic approach at the FCC has made him friends across the aisle. Hundt and Kennard’s terms were troubled due to constant second-guessing from Capitol Hill, but Powell should be in for a relatively free ride from a GOP Congress that also adores his dad, Secretary of State Colin Powell.

"I’ve witnessed his approach and style, and he’s a great listener — always willing to hear both sides of an issue before making a final decision," says Lorine Card of the Potomac Hudson Group and former director of the MediaOne Group’s Washington office.

That’s good news for cable executives who favor his cautious approach to regulation because attacks from activist opponents, such as Consumer Union co-director Gene Kimmelman, should have less bite if they feel Powell has given them a fair hearing.

(Powell made his first decision last week naming his former FCC aide Marsha MacBride as his chief of staff. MacBride, who left Powell’s office in June to lobby for Walt Disney, is an attorney and FCC veteran.)

A close look at Powell’s official opinions at the FCC and his public comments give an indication of how he might rule in the future on issues that are important to cable.

• Digital Television: At first glance, Powell’s comments on the digital must carry ruling that favored cable carries some warning signs for the industry.

While he voted against must carry, Powell added, "I sincerely hope cable operators will negotiate fairly in an effort to accommodate creative broadcast offerings … If the Commission’s construction of this statute should negatively impact the development of digital television, recourse to Congress for redress may be warranted, given that the statute clearly did not contemplate must carry in a digital world."

Some cable observers believe that’s nothing inconsistent with Powell’s philosophy of regulating only to correct, rather than to prevent a problem.

They say Powell’s position on must carry centers on a simple wish for broadcasters to provide compelling and innovative digital content before cable companies are forced to carry any of their digital stations.

"Clearly Powell thinks DTV must carry will come when there is compelling DTV programming," D.C. attorney Frank Lloyd says. "His first order of business will be to get broadcasters to deliver compelling content, just as Kennard’s was."

Matt Polka, president of the American Cable Association agreed, saying, "It’s not a question of carriage, because we’re all going to want to carry the stations sometime."

• The Internet and "Open Access:" The Powell doctrine of separating function from facility — treat, for example all high-speed data services the same, whatever network they come over — may see its greatest test in the area of Internet regulation and the open-access debate.

In a key December policy speech, Powell talked about how difficult it was to "rationally label and, thus, assign regulatory treatment to an innovative provider, product or service … A clear example is the continuing uncertainty over how to treat the multitude of services that can be bundled over high-speed cable plant."

However, cable hands again expect Powell will take a wait-and-see attitude on this topic.

"Given his basic preference, you’ve got to show that something has gone wrong in the marketplace before you regulate," says Beltway consultant Steve Effros.

Even with proper forbearance, Powell has said Internet regulation may be inevitable as long as it is done "responsibly in a manner that maximizes consumer welfare and does not stunt its infinite growth and innovation potential."

• Merger Reviews: One of the greatest impacts Powell will make at the FCC will be in easing back its power to review telecommunications mergers. Here he is likely to be especially effective given a friendly Congress.

"Powell is a champion of streamlining merger review and has a Congress that wants to do the same," Effros says.

The chairman laid out his philosophy is his comments on the AOL Time Warner merger review earlier this month, saying the FCC’s authority in reviewing mergers is extremely flexible in its scope and size.

"I believe we have moved much too far into the domain of other government institutions, namely the Antitrust Division of the Department of Justice and the Federal Trade Commission," Powell said in his opinion.

• Cable/Broadcast Cross-Ownership Rules: Powell likely will be more sympathetic to reviewing these rules, which prohibit cable companies from owning broadcast stations in their service areas. He has opposed them in the past, dissenting from decisions to retain them.

AT&T and AOL Time Warner have been looking for the Commission, Congress or the courts to repeal the 30-year-old rules, and in Powell they finally have a friend.

He calls them outdated since, as he said in the June biennial review of the rules, "There have been sweeping and pervasive changes in the local video programming market that warrant a more critical analysis of the benefits associated with this rule."

Given his stance on these rules, AT&T and AOL Time Warner may also have a better chance convincing Powell to repeal other ownership barriers, such as the cap preventing multichannel video providers from serving more than 30% of the market.

• EEO Rules: Powell is likely to be as sensitive to the racial issues facing the cable and broadcast industries. Powell supported equal employment opportunity rules drafted by the Commission early last year, saying they would help provide new opportunities in the television industry. Equal employment opportunity rules will likely come up again before the Commission, since an appellate court recently struck them down.

"First and foremost, we introduce a program that is squarely race and gender neutral and, thus, not constitutionally suspect," Powell said when the rules were reviewed last February.

The biggest change at the Portals will come from Powell’s friendly relations with Congress. This should do much to strengthen the agency’s reputation on Capitol Hill, which many say was damaged by Kennard’s reign as chairman.

Effros notes that Powell takes the reigns of the FCC with a clear mandate from the President and those on Capitol Hill, whereas Kennard was not the first presidential choice for chairman and was often resented by lawmakers for siding with the administration on most issues.

"Powell," Effros says, "will have support on both sides of the aisle."

Polka echoes Effros’ hope that Powell will help change the way the FCC does business.

"He’s in exactly the right spot to refine the role of the FCC and reign it in a bit," Polka says. "I believe the FCC will be better for it, and everybody will recognize that."