FCC takes market turn with Powell

Newly appointed chairman Michael Powell outlines an agency that will leave companies free to compete, without regulatory burdens or unnecessary protection.

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Powell pushes market before government rules
Michael Powell, chairman, FCC
WASHINGTON--The federal government won't be in the business of picking market winners and losers if the new leader of the Federal Communications Commission has his way.

FCC Chairman Michael Powell Monday made his first public appearance since taking over the agency and outlined a philosophy that puts markets before government rules.

His tenure will be marked by a "greater reliance on deregulation" to better allow competition in the telecommunications and Internet markets, Powell said. But he warned that not all companies would welcome that approach. "Many companies want less deregulation than you might think," he said, noting that regulations can also protect industries from the full impact of competition.

Over the last decade the FCC has found itself involved in existing markets, such as phone service, and emerging markets, such as broadband high-speed Internet service. The agency's actions can dramatically affect corporate business plans, the flow of venture capital and the movement of markets. Powell, the first Republican to chair the FCC in eight years, said that even as an agency devoted to deregulation, the FCC will continue to play a central role in the industries it oversees.

The FCC "still owns an enormous portion of the regulatory environment," Powell said. The companies it regulates account for "a huge portion of the nation's GDP" or gross domestic product. He promised the commission would act quickly when market concerns arose. "Uncertainty is a greater danger than any decision we could make."

Powell explained how his approach to deregulation differs from that of his predecessor, William Kennard, who has argued there still isn't sufficient competition in markets such as local phone service to justify deregulation.

"I do not believe deregulation is a dessert you serve after you've eaten your vegetables," Powell said. "It's not a reward for competition, it's an incentive for competition."

Technology is the driver
Powell repeatedly pointed to technology as the central driving force of the economy and of competition. He refused to say how many entrants should be in this or that market, instead saying he prefers to look at how many differing technologies are being offered to consumers.

"We need to be well versed in technology" at the FCC, Powell said. "We need to become fluent in that language and independently assess technological principles."

He pointed to the role of technology in broadband, where the success of cable-modem services forced a decade-old DSL (digital subscriber line) technology onto the market.

This competition between DSL and cable modems was a direct result of the Telecom Act of 1996, Powell said. "I think it unleashed broadband."

Technology is but one factor in the development of wireless 3G services--what he calls one of the "critical three components" of broadband, in addition to DSL and cable. Wireless providers will face steep capital costs as well as high spectrum demands if they are to offer this service to consumers, analysts have said.

see special report: Digital Darwinism Powell said he was committed to 3G services and would do "everything possible" to help that technology become a reality, including assuring that "spectrum is not encumbered." He would not share his position on lifting the current cap on the amount of spectrum a wireless provider can own in a given market, an issue under review at the FCC for the third time in two years.

He praised the growth of the largely unregulated wireless industry and its multiple providers, however. "Wireless is leading the way" in growth and competition he said, offering a "killer app."

Powell also resisted taking a stand on the thorny issue of open access, where Internet service providers can gain access to proprietary systems such as a cable broadband network. However, his comments couldn't have warmed the hearts of open-access advocates.

"Openness is not always good," he said. Companies need to make a profit to survive, and he said it isn't clear whether industries such as cable, which have survived as closed systems, would continue to operate if opened.

"All you have to do is look at Nasdaq 2000," he said. "There is still blood on the floor" from companies unable to make a profit while operating in an open environment. "The Internet will be just an interesting experiment if the producers can't find a way to provide services to consumers while still making a profit."

His sympathy for struggling companies had limits, however. Asked if there was something the FCC could do to help the independent DSL providers that are struggling in the face of continued improvement by the Bells, Powell sounded downright Darwinian.

"Some of it is poor implementation, some of it is poor execution," Powell said of the DSL providers' struggles. He added that they were also victims of venture capitalists turned gun-shy after the dot.com meltdown.

"A lot of people show up at a gold rush," he said. "Not everyone leaves with the gold."

Powell also demonstrated a lot more humor than came from Kennard. He opened by noting that in the press his name "is often accompanied by 'son of Colin Powell.' I just wanted to warn you this is not a State Department briefing."

When asked what he wanted his legacy to be at the end of his service, Powell quipped, "I want to leave alive."