Former FCC Chairman Powell now talks cable

CHICAGO--Michael Powell left the communications sector six years ago when he finished his term as chairman of the Federal Communications Commission. Now he's back.

In March, the National Cable & Telecommunications Association hired him as president and CEO to advocate on behalf of the cable industry.

Powell, who served as the FCC chairman from 2001 to 2005, helped bring FCC regulation into the broadband age. Under his leadership, the FCC began dealing with communications move from voice to data services. And he helped push for more powerful digital applications and away from antiquated analog ones. Powell also pushed the FCC to look more for market driven solutions to promote consumer interests.

CNET sat down with Powell here at The NCTA Cable Show this week to talk about some of the issues facing the cable industry. Below is an edited excerpt of that conversation.

Q: There has been a lot of talk here at The Cable Show about Netflix and the threat of so-called over-the-top video providers. Do you think Netflix poses a real threat to cable?
Powell: Netflix is clearly a new entrant in the market. And it offers elements that might make it an alternative for some. But when you dissect the kind of alternative that it is, you see it's not really competitive. Netlfix offers an older library of content that most programmers may not have had any other way of monetizing. There's no window for the most current movies to be streamed. So if you're someone who wants to see all the nominated films before the Oscars, this isn't a good option.

What about Google and Apple? Are they cable's friends or foes?
Powell: Everybody is everybody's everything right now. This is a multifaceted space. And one part of the business may be doing a deal while another part of the businesses are fighting. Look at Comcast and Skype as a perfect example of this. This week here at the show, Comcast and Skype struck a deal to offer Skype through Comcast. What's ironic about this is that Skype was one of the companies that attacked Comcast on Net neutrality. And today they are doing business.

Google is a fantastic company. Facebook is a great company. So is Comcast. They each have their core strengths and weaknesses. I think they see each other as much as compliments as threats. In the case of Skype, they were looking to get into the set-top box. And they did.

I can honestly say that I don't think any of the CEOs in the NCTA are averse to a deal, if they can get it right, with any number of companies, including Apple and Google.

There has also been a lot of talk about "TV everywhere" here at The Cable Show. It seems like programmers and cable operators want to offer video on all kinds of devices like tablets and smartphones. But they can't seem to completely agree on how to negotiate those rights or if those rights should be negotiated in the first place. For example, Viacom is suing Time Warner Cable because it claims it doesn't have the right to allow Viacom content to be streamed on an iPad. Time Warner thinks this is perfectly legitimate--just another screen. What's your take on all this?
Powell: Well, we don't really have a position on this. I can't say whether I know the answer to who has what rights. I have not read Glenn Britt's (Time Warner Cable's) contract (with Viacom). I doubt many people have read it.

But the bottom line is that they will work it out. There's a lot that's happened since many of these deals were struck. And some of these technology transformations have helped unglue previous relationships that need to be re-glued.

I think this is a temporary issue. And after we do it once, it won't be such a big deal after they come to an understanding. Neither the programmers nor the cable companies have a doubt that this needs to be resolved. They all know they have to get content on the iPad. They may trip a little here and there as they do this. But they know it's imperative that they innovate quickly. If you want TV to reach the next level you had better get there and get there soon.

We've seen this play out in the music industry. Microsoft has spent years talking about DRM. And then there was Napster and it took a while to figure out how to sell music online.

Yes but it took the music industry too long to react and they're a mess.
Powell: You are right. Music made a terrible fatal mistake. They went after their users to protect content. Look, this industry has had the benefit of not being first. They could watch the music industry. And as you see, we aren't suing our users looking for pirated content. The industry knows this is something that people want and they had better give it them. And you have to remember that the music industry was first when it came to all this stuff. Sometimes it stinks to be first.

How do you think wireless technology fits into the cable industry?
Powell: That's a good question but it's hard to make a blanket statement for the whole cable industry. There is a wide variety of approaches. There's definitely some experimentation going on. Some cable companies are entering the market with a quad-play offering that includes cell phone service, which has them competing directly with traditional wireless. Others don't want to make that investment. They may be more focused on unlicensed spectrum, such as Wi-Fi. They're using wireless in the home to put programming on iPads and iPhones. So there's a wide spectrum.

With so many of your cable members doing something different when it comes to wireless, how can you advocate on their behalf?
Powell: Well, we've publicly said that we support incentive auctions to get more spectrum on the market. And we've supported the notion that making more spectrum available is necessary. And we've said that some of that spectrum should be reserved for unlicensed use.

Would you consider 4G wireless broadband services as a replacement service for cable?
Powell: I think it could be competitive on the edges. But if you add up all the spectrum from lowest band to the highest band, it would never equal the capacity you can get on fiber. So I don't think it's realistic to think that 4G wireless can replace a service like the one offered by Comcast or Time Warner. Just look at the amount of bandwidth HDTV consumes. It might work on 4G if it's just me. But imagine trying to access that content on my phone while thousands of people around me are also trying to watch "Madmen" in HD. I think the carriers would tell you to be careful. I don't mean to pick on them, but you look at the soon-to-be largest wireless carrier and the challenges it's had due to iPhone data consumption.

In fact, I just got a coupon in the mail from AT&T, my cell phone service provider, encouraging me to buy a femtocell. Why would they do this? They want me offloading my data traffic while I am at home onto my broadband connection instead of their network.

One of the issues that came up at The Cable Show during the general sessions was the affordability of cable services. Time Warner Cable's CEO Glenn Britt said that there is a "growing underclass of consumers that can't afford (cable service)." What should the cable industry be doing to address this issue.
Powell: Cable companies are legally bound to offer a basic tier of broadcast service that is less than $40 a month. I think it may even be between $9 and $15 a month.

What about plans that offer a little more than basic, such as some sports or CNN. Is there any way they'll offer a low-cost tier that still includes some important cable channels?
Powell: Well, that's difficult to offer--a super-cheap tier that offers super-expensive programming. If ESPN charges X dollars per subscriber, you can't really ask cable operators to sell that that to consumers for pennies. That's the just the reality of how this business works. And programming is expensive. In fact, the price of programming has gone up two times faster than the consumer rate increases. So the cable operators aren't even passing on all the costs of increases.

That said, I think this is an industry committed to finding lower priced, more affordable packages for consumers. Some of them are definitely looking at that. But we are still doing much better than our competitors. Satellite's lowest tiers often start twice as high as the lowest priced service from cable.

But as a nation we are right be concerned. And we have to think about how much disposable income the average family has.