Parsing with Powell

As soon as Powell managed to eke out a 3-2 FCC vote in June that modestly relaxed regulations on owning newspapers, TV and radio stations, he became one of the most attacked men in Washington, D.C. The U.S. House of Representatives and the U.S. Senate unceremoniously overturned the new FCC rules, while left-leaning advocacy groups gleefully denounced Powell as a shill for big media.

To Powell supporters like President Bush, the criticism must seem unfair: Powell favors deregulation in general, and his aides point out that the FCC's June vote followed an extensive and detailed analysis of the state of the communication industry.

Powell's deregulation stance has an effect on a myriad of other areas too, such as tech advances in voice over Internet Protocol (VoIP), instant messaging and Internet wiretapping. Powell spoke with CNET News.com about these issues, the intricacies of FCC politics and why he remains committed to his job.

Q: What kind of VoIP regulations do you see as necessary? Should VoIP providers be treated just like Verizon Communications or other carriers?
A: We'll probably initiate something to look at it this fall. But let me emphasize that we're going to look at it. That doesn't say what we're going to do about it. We only know that it's a growing issue. Basically, the advanced platforms permit divorcing services and applications from the infrastructure. That's very different from the ancient telephone models, when the application was the same as the distribution.

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The real question for the country, for the market, for the innovators, the regulators, the policymakers and the politicians to figure out is: What are we going to do to reach the world we want to see--one in which applications are very separate and can be run over IP? What about video over IP or paging over IP--or anything you can send over IP? We're going to start a proceeding of inquiry to examine these issues probably at the beginning of the fall. But I really want to be cautious to say that it's not because we're sure it should be regulated--only that we're sure that it needs to start to be understood.

More traffic is going over IP, and IP isn't regulated. Does that mean that the FCC becomes less important--to the point that portions could shrink and eventually go away?
It's a very theoretical argument. It could happen some day, and that day isn't anywhere near close.

One reason I usually say you won't get rid of the FCC is that you always need some part of government to deal with spectrum.

But that presumes something far from clear--that Congress will allow communications to pass from its heavily regulated state to a virtually deregulated state. I don't know the answer to that question yet.

Voice communications in the United States use the old infrastructure and architecture, which is heavily regulated. If it's a data application over IP, and we let it pass into the deregulated space of the Internet, it basically crumbles the entire Title II regime (from the Communications Act of 1934). That may be OK. If it does happen, you won't need an FCC to do massive amounts of telephone regulation.

One reason I usually say you won't get rid of the FCC is that you always need some part of government to deal with spectrum. Spectrum has a kind of interference chaos problem, and you'll always need some branch of government involved.

Should the government require companies that offer instant messaging applications to interoperate with one other? As IM becomes more popular, will the FCC look at this more closely?
I don't see that as a market that needs government regulation. That has the tendency to stifle innovation. It may become a government issue if one client rose to such a dominant position that it became anticompetitive, but there's a healthy amount of innovation going on right now. You really have a battle in the marketplace for the hearts and minds of IM users.

On some votes this year, you've had a Republican defection and have been outvoted. Is this a shift in power at the FCC?
I think that's fun fodder for news stories. I don't think that's a particularly thoughtful way to describe how the agency really works. We vote every day, and you don't hear about the many, many unanimous or near-unanimous votes we hold.

At a recent conference in Aspen, Colo., you said you saw no need to act on a request from Microsoft, Amazon.com and other tech companies to regulate cable Internet providers that might favor some sites over others. You said at the time that you didn't "see anything that says we need a rule making." Has anything changed?

No. I would say that's another one of those areas where we think it's an interesting issue. We think it's the kind of thing we should be vigilant about. We should work with companies and industries to understand it and keep our eye on it. I think that companies like Microsoft and Intel who have concerns about this--it's good for them to talk to us.

But it seems to me far from clear that there's anything clearly going on in the market that requires a government regulatory response.

So if there's nothing that's anticompetitive now, why are Microsoft and other folks lobbying for a marketplace advantage? Are they crying wolf?
I can't speak for them. You'd have to ask Microsoft. I don't know all of Bill Gates' five-year strategy. He may have something in mind for the next round of products that this is heavily dependent on. He doesn't call me and let me know everything. (Laughs.) Sometimes he lets me know some things.

Do you anticipate a struggle with Congress over the broadcast flag? I'm thinking of Rep. Lamar Smith (R-Texas) saying a few months ago that the FCC should be careful.
I think it's hard to say. We've actually had more pressure from Congress to act than not, partly because it's just really been something the industry has been unable to solve. Let me be clear: We're not touching copyright. If you look at cable, what we're doing is regulating navigation devices under our authority to regulate navigation devices.

There have been two recent court decisions on the do-not-call list. But doesn't the FCC have more leeway to go ahead than the Federal Trade Commission does?
From the very beginning, we've been partners with the FTC. You hear about them a lot, because they run the database. The physical database is an FTC function. The appropriations for paying for that database are going to the FTC.

But frankly, of all telephone rules, the most significant and enforceable are ours. The FTC is not permitted to regulate common carriers. It's not permitted to regulate telephone services. If you didn't have a companion set of FCC rules, the FTC rules would have huge holes in them. We passed a huge body of rules at the same time, (and) we don't have that problem they had.

You're always going to have a serious substitution problem if you're going to lure customers off an infrastructure that provides high-level reliability and functions like E911.

With the Internet, geographical location becomes sort of fuzzy. Vonage users, for example, can pick whatever area code they want. Doesn't this make some of your existing rules a little squishy?
Absolutely. This is the stuff I'm excited and challenged by. This is what's coming. What it's going to do is start to weaken the foundations of the way we've done things for 100 years. Area code is a distance concept. It's a concept built around the public switched telephone network that was built in 1901. The telephone network is a very well built, sophisticated thing, but it is roughly the same basic thing it was 100 years ago.

How about E911 for VoIP providers? Could you see the FCC going in that direction and requiring it?
I could see the FCC going in that direction. I could see a company like Vonage seeing the importance of figuring out how to solve that problem as well. You're always going to have a serious substitution problem if you're going to lure customers off an infrastructure that provides high-level reliability and functions like E911. You don't want to show up and explain to someone why Grandma could have been saved if the phone had worked. It's a technical challenge, because E911 is engineered as a circuit-switched system.

Will it require additional regulations, or will VoIP providers be allowed to figure it out for themselves?
It's impossible to know. They may find that as they pursue a technical solution, all they need to do is plug into the E911 system and routers. The average police department wants to hear E911 calls. If there were a problem with that, we'd take action to fix it. But I don't think it's obvious that it's a problem.

There are proceedings under way before the FCC about how a 1994 wiretapping law will apply to VoIP providers. The FBI says it does apply. Should it?
I don't know yet. I think it's only another illustration of one of the things we're going to start doing. It's an important lesson for Congress as well. We're going to have to start being very thoughtful about how to apply existing principles to emerging architectures. A lot of these statutes are written toward phone companies. That's sort of the presumption about what it covers.

Are you going to be tapping IP-based computers or things that look like phones but are little teeny tiny computers? The FBI is very worried about them, and that's why they're asking us to look at them. But on the other hand, Congress was not crystal clear in the statute about law enforcement's ability to reach IP. That's a problem for the FBI and us and maybe ultimately Congress.

What happens if VoIP providers begin to offer end-to-end encryption? Does the FCC currently have the authority to say, "Don't do it, or if you do so, include a back door to the encryption for law enforcement"?
I've never looked at that. But I'm highly doubtful we have anything that would let us do that on our own initiative. I can't even begin to think of anything that would empower us to do that on our own--without a new law from Congress.

On media ownership rules, Congress is busy overruling your decision to slightly relax them. But I don't hear people on Capitol Hill talking about the court orders that say the rules violate the First Amendment. If you have to repeat the process, won't we end up here again?
The short answer is: Yes, that's a possibility. That's why they better be careful and thoughtful in what they do. I've been very clear on what I think about this. Congress writes the rules. We implement the rule in the discretion they give us. If nothing changes--it's the same review statute, same rules--all we do is sort of roll stuff back. I've said to them, and I'll say publicly: We won't do anything other than have the same mess extended for a longer period.

Look at where we're headed already. We have one circuit (court) that's overturned part of them. We have another circuit that has a stay (and is reviewing) all of them. We have a Congress that's playing around with them, and we have the FCC. In my own opinion, that's too many cooks in the regulatory kitchen. We could have a morass of conflicting mandates and decisions.

What scares me is the day someone walks into the D.C. circuit court and says, "For God's sake, your honor, Congress says one thing; the FCC says another; another court says something else. And as a First Amendment speaker, we shouldn't be subject to it." And the court agrees and trashes the rule.

The rules apply to something like half of one percent of stations nationwide. Yet you've had critics warning that the decision "wounded democracy," while The New York Times lauded the old rules as representing the "heart of our democracy." Do you ever get personally frustrated that they're making so much out of half of one percent?
What I get frustrated about is the enormous misrepresentation of this issue to our citizens. As a public policy official, if I'm going to tell my fellow Americans that democracy is imperiled, we ought to walk them through that.

I don't think it's helpful to substitute facts and thoughtful explanations with diatribes like the death of democracy and orgies of mergers.

My democracy was imperiled by Hitler. My democracy was imperiled by the Civil War. I'm not sure that my democracy is being imperiled by "American Idol."

There's an important issue here, and I think thoughtful people can disagree with me. But I don't think that it's helpful to substitute facts and thoughtful explanations with diatribes like the death of democracy and orgies of mergers. I have a whole book of these things now that seem to be quoted ad nausea.

All I would say is that if we're going to have a dialogue with our citizens, let's tell them that the difference between 35 percent and 45 percent (the portion of Americans any individual TV station would be permitted to reach) is four or five stations nationwide out of 1,400. Do you believe that democracy lives somewhere between 35 and 45? If it's 38, it's going to kill democracy? And if it's 36, then that's just fine? I'm going to be candid about it: It's preposterous.

Perhaps 37.5?
I don't know where it is. It does a disservice to democracy to suggest that it's so fragile that if a network adds three or four stations all across this country, that somehow, our government, our system, our society will die.

It sounds like you are frustrated after all.
I'm not personally frustrated. I'm only passionate and committed to trying to be a counter-voice to help the public understand what the truth of this is.

How long do you want to stay at the FCC?
I really want to be here at least through the end of the president's administration. The president saw fit to designate me the chairman. It's the greatest professional honor I've had in my life. And I'm having a very good time doing it. Technology is the most fascinating thing going on in the world. I have a front-row seat at the revolution.