Cable Operators

NCTA’s Powell Vows to Fight On

Making Cable’s Case Against Title II — Forcefully 5/04/2015 8:00 AM Eastern

National Cable & Telecommunications Association president and CEO Michael Powell seemed relaxed — at least for a man two weeks out from a major convention revamp — and looked Mad Men-dapper in a sport jacket and open collar. But as soon as he sat down for an interview with Multichannel News Washington bureau chief John Eggerton, he sounded more like a man ready to fight than to recline for a nice chat.

 

Powell, cable’s top lobbyist, argued that Federal Communications Commission chairman Tom Wheeler has unjustly regulated the industry by treating cable’s broadband Internet product as a common-carrier service under Title II of the Telecommunications Act; and that free enterprise — not the heavy hand of regulation — created the flourishing Internet we have today. He also explained why cable is the gateway to a bright broadband future, rather than the Internet’s gatekeeper.

 

MCN: Given recent decisions and rhetoric out of the FCC, do you think chairman Tom Wheeler has a vendetta against ISPs? (Editor’s note: The interview was conducted before the FCC signaled its rejection of the Comcast-Time Warner Cable merger, about which Powell declined to speak.)

 

Michael Powell: I don’t know if I would go that far. Unfortunately, we hear too much language that seems to adopt the kind of negative, superficial language of advocacy groups. We’re not behemoth gatekeepers, villains, which I hear a government agency using to describe an industry that they regulate. I don’t have a high degree of respect for having the industry described in those terms.

 

I do think that there isn’t a full and often fair enough recognition that an enormous part of the [broadband] miracle they want to celebrate has been brought to them by private industry in the private markets using private capital, and that that is consistent with the public interest as well.

 

You know, if the government were building the Internet and trying to deliver on the promise of that platform and wanted to build the infrastructure that allows Google and Facebook and Amazon and Etsy today, at the price of their IPOs, they would be awful far from their goal if it weren’t for the actions of private Internet companies who have been delivering on that promise aggressively and forcefully for 15 years. I don’t know how much more you can ask of the private sector than what it has delivered over the last decade completely with private capital and without governmental subsidy or support.

 

I frankly believe they deserve to be described and treated as a partner in the country’s broadband ambitions and not somehow an obstacle. Just in the time that this administration has been in office, we have seen dramatic increases in speeds and services, deployment and adoption, in new applications and services deployed by the software community.

 

It’s a curious approach, it seems to me. I don’t know if it’s a vendetta, but it’s certainly not particularly constructive.

 

MCN: Is Title II so bad if it is defined as the chairman says it is — which is a way to legally support rules you have pretty much said you support — or is it only a disaster if it’s the so-called camel’s nose under the tent?

 

MP: It is a disaster because the Federal Communications Commission is fundamentally, if not violently, rewriting the national policy of the United States without congressional direction.

 

Congress in 1996 knew what the Internet was when it passed the 1996 Telecom Act. It full well knew it, because it defined it in the statute and it defined two different regulatory approaches. And they intended as a national policy that dynamic, information-oriented services like the Internet would not be regulated under a regime that was developed and reserved for a world in which you had a very straightforward telephone system with a single national company being managed by a federal judge as the result of an antitrust divestiture and needed to be managed to competition in a way that was due to its unique history.

 

That history is not the history of the Internet. I don’t think there is a single member of Congress who ever contemplated or intended that Internet access would be telephone service, which is what the commission has fundamentally concluded.

 

The disaster is that you have shifted the national policy from one in which engineers, entrepreneurs and everyday people govern the Internet from the bottom up without the intervention of a regulator, to a world in which now lawyers and bureaucrats from the top down will spend countless hours and money and time fighting about every way the Internet evolved. You have already seen in the newspapers companies like Cogent openly talking about going in to file complaints.

 

What happens now is that every business decision, every new service in a competitive market that your competitor doesn’t like, or somebody thinks you are going to get an advantage or you’d rather see it a different way than Cox decided to do it … now there are all kinds of avenues to bring complaints. You can now — no matter what the chairman says — bring a broadband rate complaint to the FCC, so it is entirely possible that anybody who doesn’t like the next price change or price plan that Comcast comes up with for broadband will take that to the Federal Communications Commission, who will have to initiate a proceeding, which will mean we will have to send lawyers in there to file comments.

 

Every single transit provider or content company could theoretically now bring an interconnection dispute. And you have to ask yourself: Is there really a regulatory problem, or do they just have a business preference and they are just trying to use the government to get it?

 

Netflix wants a certain outcome that allows it to have zero costs for interconnection. I don’t blame them as a business for wanting that. What I blame is the government lending itself to be a vehicle for guaranteeing that.

 

MCN: And the process does not work the other way? An ISP can’t file a complaint against Netflix?

 

MP: The commission said, interestingly enough, that all of them are not subject to these things. Their order also exempts all kinds of classes of players that I don’t understand technologically.

 

MCN: For example?

 

MP: [Content-delivery networks] are not transit providers. Why? They do the exact same services. This commission has argued those things don’t count. Why, analytically, I don’t know.

 

You were talking about a prior chairman earlier. We’re going to blink and it’s is a different chairman. We’re going to blink, and it is a different set of commissioners. The majority of that commission is not going to be here 24 months from now, and yet they will put in place a framework that allows any future leader there to more or less reach any conduct they want.

 

So, there is just a dishonest description of what this commission has done. It has created a full-out regulatory platform that can be used by anyone who chooses, whether they are faithful to their word that they are not going to regulate rates. That’s only by their grace, which I will accept and respect and be grateful for. But it isn’t because they haven’t created the regime to do it. It is only because they have chosen not to do it.

 

That is the reality of what we’re dealing with. And I think that’s going to mean that the Internt — which has really blossomed by innovation without permission, as Silicon Valley likes to talk about it — [now is] going to be innovation by adversarial proceeding.

 

Because anytime anybody doesn’t like an innovation, they are going to come to the government. And I think the tech companies are going to realize they made a big mistake here, because they are engaged in a lot of activities and practices that consumers and activists will also find troubling and now will have a venue, I guarantee you, in which those companies are subject to claims at the FCC as well. And maybe this chairman won’t go after them, but somebody will.

 

MCN: Let’s pivot to municipal broadband. Are operators who support state laws limiting muni broadband just trying to prevent competition, as the chairman has suggested?

 

MP: I could tell you unequivocally that our view as an association is that we do not seek state legislation to stop municipal broadband projects. We don’t think that we should. We think that if the democratically elected people in a given state jurisdiction want to vote to use their resources that way, that should be their decision to make. However, I would equally say it is their decision to make if they don’t want to take on those obligations.

 

The commission seems to be willing to deny the democratic process in one direction and not the other. If the duly elected representatives of state government believe that they don’t want to put citizens on the hook for the debt, the bond, the pricing, having to manage a dynamic, expensive network over an infinite amount of time, and decide they don’t want their money spent that way, I don’t really understand why they should be told they can’t.

 

I think a lot of these municipal broadband projects are well-intended. I think a whole lot of them collapse. I think a whole lot of them stick taxpayers with debt obligations they wouldn’t otherwise have. And when there is a vibrant, private alternative, I’m not sure that’s the wisest use of public funds.

 

It is one thing to have a competitor; it’s another to have a competitor that gets to play by dramatically different rules than you are expected to play by. And government municipalities often grant to themselves special privileges not available to private companies. So that is not competition.

 

MCN: National Association of Broadcasters president and CEO Gordon Smith said in his speech at the NAB Show that stations have to work with policymakers to show their immense value to their communities. What is cable’s immense value to theirs?

 

MP: I think it is two-fold. One, they are builders of the platform that takes you to the world’s information. That is enormous value. I don’t know if there is any higher value in this world of communications you can deliver to the American consumer than to provide at a relatively low cost, given the value you derive from it, the ability to access the entire record of human knowledge. The ability to work from home. The ability to entertain yourself. The ability to publish and write. The ability to create. That’s what we provide.

 

If I went to your computer and unplugged the wire in your house and you went to Google, you’d get a big thing saying “no network connection found.” Nothing happens unless that happens first.

 

MCN: How important is WiFi to the future of your business?

 

MP: I think WiFi is tremendously important because it allows consumers to export their investment in a fixed broadband network and port it to all the devices that delight them. It is the glue that bridges physical fixed infrastructure to mobile infrastructure. And the way the Internet is evolving, and consumer electronic devices are evolving, that is essential. Because the current generation of tools we all want to carry around with us — phones, iWatches, Android devices, tablets, cameras with WiFi chips, digital recorders — everything wants to get its content out of the Internet and into the Internet, and licensed mobile services are not always enough.

 

So, I think that if I buy for $50 an Internet connection from Charter, that connection becomes ever more valuable the more I can port that purchase across more devices.

 

MCN: Why is an “aspirational” 25 Megabits-per-second speed target such a problem?

 

MP: There is nothing wrong with it, aspirationally. There is everything wrong with it if you try to say that is the definition in the market. And I don’t really have any problem that the chairman of the FCC is saying, “Oh, I think people should have to have 25.” Now, I could debate whether that is the right number. But, it is absolutely not the right number at the competition metric.

 

MCN: Why?

 

MP: Because you have to look at the market as consumers find it, not as you wish it to be. Virtually everything that most consumers do on a daily basis can be done at speeds dramatically lower than that. Yes, 25 Mbps is nice, but you can watch Netflix movies at 5, which is the most bandwidth-intensive thing that most consumers do.

 

Even in Netflix’s quarterly call they said you could do HD 4K at 15 Mbps. That’s still less than the 25 that the chairman is talking about.

 

So, look, 25 is definitely the sort of cutting edge in terms of functionality. By that I mean that for what consumers are actually doing or want to do out there, I think 25 probably exceeds what is required. But, again, should we aspire to that? The cable industry definitely aspires to that and much more. So, that doesn’t bother us.

 

MCN: Do you think the chairman is trying to regulate the market more broadly?

 

MP: I don’t know if I would be prepared to say that. Look, I’ll just take the issues one by one because, on other things, I am very supportive. Like we just talked about with WiFi. He got that right.

 

But they owe the country honest assessments that are accurate and factually based, and I think that they do that most of the time. But when they are not I don’t think they should be above being called on it. It’s a simple matter. Does 75% of the country really only have one broadband choice? No, not by any layman’s definition. But the game being played is, “As I define it, picking a number I picked arbitrarily for this rhetorical purpose.” At least tell people that’s what you are doing.

 

MCN: Can you make the case for usage-based pricing?

 

MP: It’s fair. It should be the only issue. Look, the reality is that when the Internet first started off, there was kind of one thing to do: surfing. People used their Web browsers in the same way to get to sort of the same thing. The Internet has gotten much more sophisticated and increased its dynamic range of uses.

 

So, you know, I have relatives who sit on their Internet connections and Facebook all day long. I don’t do that. I know people who watch Netflix movies hours a day. My mother doesn’t do that. My mother does email. My mother posts things on low-intensity bandwidth uses. Why should she pay the same thing as a power user? Why should she pay the same as someone who is running a server in their home?

 

She shouldn’t. Usage-based pricing is nothing but price differentiation, which economics strongly sanctions and, in fact, is a hallmark of efficient markets. [Powell is a former top antitrust advisor at the Justice Department]. It is creating differentiated pricing so that you can get what you need and nothing more.

 

So, I don’t understand those who want to go apoplectic. You can go to a giant food store and you can buy brand-name cheese that costs $3.25, and you can buy the store brand that costs $1.52, and if you don’t like that, you can go to Costco. We differentiate prices in every facet of the U.S. economy.

 

And by the way, so does every software company in this debate. Go to Amazon and pay $99 a year and be a Prime member and you get your stuff sent to you within two days for free. Or you can be a different kind of user.

 

I just think we all have to calm down and stop acting like the communications space is Alice in Wonderland and all the rules don’t work that work everywhere else.

 

MCN: Let’s circle back to network neutrality. Is there a way for it to end well?

 

MP: I think it could very easily end well by Congress taking control.

 

MCN: You think this Congress can do that?

 

MP: I personally believe they can because I think that the most substantive part of the law [a Republican-backed bill that would prevent blocking, degrading or paid prioritization, but without Title II] has almost universal agreement. The ISP industry is not fighting net-neutrality rules. They will accept them. The Republicans, I think in a remarkable show of concession, are willing to give them to you. I think there is a real opportunity for Democrats and proponents to take a deal while they’ve got it and create net-neutrality rules that are permanent, that are not subject to litigation. End the litigation fight. Save money, save resources. If I were on the other side, I don’t know why you wouldn’t take this deal while you can get it.

 

MCN: And why should they take the deal?

 

MP: Because if any part of this order is overturned — it doesn’t have to be the whole thing. Let’s say the wireless part gets knocked off [for the first time the FCC is applying all the rules to wireless broadband]. Or the interconnection part gets knocked out. There will be no more deals to be had on the Hill.

 

The Republicans on the Hill will not do a deal if they get this thing beaten in court. And the Obama Administration is not going to be here in 24 months. So, there’s a very high likelihood that whatever happens in court gets remanded to a different government. And then what happens? So, I think it could end well for every single person involved for Congress to adopt this as a law.

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