News

Powell Heads for Exit

1/23/2005 7:00 PM Eastern

Washington— Federal Communications Commission chairman Michael Powell — loved by some, loathed by others — announced his resignation last Friday, ending a reign that struggled to realign old media rules while coping with the stresses imposed by Internet-age technology.

In a statement, Powell said he planned to leave “sometime in March” and take some time off “before taking up my next challenge.” He did not say he would remain at the agency until a successor had been confirmed.

Powell FCC Milestones
Highlights from the outgoing chairman’s tenure:
Source: MCN research.
Mergers:
Approved: Comcast-AT&T Broadband
Approved: News Corp.-DirecTV
Rejected: EchoStar-DirecTV
Cable:
Retained program-access rules for five years
Failed to adopt new cable-ownership rules
Declared cable VoIP an interstate service
Rejected a la carte sale of cable networks
Warned cable against broadband discrimination
Media Ownership:
Relaxed national broadcast cap
Relaxed newspaper-broadcast cross ownership
Relaxed TV station ownership in same market
Retained repeal of cable-TV station cross-ownership ban
Broadband:
Deregulated cable-modem service
Deregulated Baby Bell fiber deployment
Advanced broadband over power lines
Freed spectrum for wireless broadband
Indecency:
Fined Viacom $550,000 for Super Bowl nudity
Digital TV:
Called for more HDTV
Adopted DTV tuner mandate and broadcast flag
Adopted cable-ready DTV rules
Endorsed plan to end DTV switch by Dec. 31, 2008

Rivals for the FCC’s top post include current Republican FCC member Kevin Martin; Michael Gallagher, head of the Commerce Department’s National Telecommunications and Information Administration; Rebecca Armendariz Klein, former chairwoman of the Texas Public Utility Commission; and Janice Obuchowski, a telecom consultant and former NTIA head under President George H.W. Bush, according to Legg Mason telecom analyst Blair Levin.

Powell, 41, joined the FCC in 1997, a Republican nominee of President Clinton, who had previously appointed him chief of staff of the Justice Department’s Antitrust Division.

President Bush elevated Powell to FCC chairman a few days after his 2001 inauguration. Later, Powell was confirmed for a five-year term, ending June 30, 2007.

Powell said it was time to leave the FCC “having completed a bold and aggressive agenda” designed “to get the law right in order to stimulate innovative technology that puts more power in the hands of the American people …”

Powell, son of Secretary of State Colin Powell, followed his father into the U.S. Army, but a devastating Jeep accident in Germany ended his military career. He became a lawyer, joining the FCC at 34.

He quickly became known for his market-oriented speeches and opinions that questioned regulators’ capacity to keep pace with technological change.

But Powell’s record was not that of a reflexive deregulator. He believed some mergers were good and others bad. He supported rules and merger conditions that spoke to real but not conjectural harms, and he advocated coming down hard on companies that violate FCC edicts.

OK’D COMCAST DEAL

Powell’s FCC let Comcast Corp. take over AT&T Broadband to become a cable giant with 21 million subscribers. It permitted News Corp. to absorb DirecTV Inc., sending chills down cable’s spine that Rupert Murdoch was about to use satellite technology to raid cable’s subscriber base.

But for the first time in recent memory, the FCC blocked a merger, the proposed combination of EchoStar Communications Corp. and DirecTV. While some saw the deal as a run-of-the-mill horizontal merger between entities that lacked cable’s market muscle, Powell viewed it otherwise.

“The combination of EchoStar and DirecTV would have us replace a vibrant competitive market with a regulated monopoly,” Powell said in October 2002.

Powell’s biggest controversy came in June 2003, when he approved new broadcast ownership rules that allowed one company to own three TV stations, eight radio stations, the cable system, and the dominate daily newspaper in the country’s largest markets.

The ruling sparked outrage among public-interest and consumer groups, and many Capitol Hill lawmakers felt the FCC has pushed too far.

A federal court rejected the rules, and Congress passed a law setting the national TV broadcast ownership cap at 39% of TV households after the FCC had moved the cap to 45% from 35%.

DECENCY CHAMP

Powell was a First Amendment purist who had to change course in response to the proliferation of reality TV programs with crass sexual content, shock jocks with toilet mouths and a Super Bowl with a soft-porn halftime show finale.

Although Powell’s preference was to let the media run wild under its First Amendment free speech protections, he also recognized that the FCC had broadcast indecency laws to enforce.

When signer Janet Jackson bared her breast in front of millions of Super Bowl fans last February, the FCC fined Viacom Inc.’s CBS affiliates a record $550,000 for crossing the indecency line.

But Powell didn’t leverage concern over indecency to police all media distributors. Asked to regulate indecency on subscription satellite radio, where Howard Stern is heading, Powell had his staff issue a response quashing that idea.

Powell used his bully pulpit to effect change.

Early in his tenure, the transition to digital television was moribund. TV stations were defaulting on their commitment to beam DTV signals and the production of HDTV content was growing but hardly in a robust manner.

In April 2002, Powell promulgated a voluntary plan designed to push the transition along. The effort was such a success that the FCC today is considering a plan to terminate the transition by Dec. 31, 2008.

Cable, TV stations, and the major broadcast networks got the message that Powell’s plan was “voluntary” in name only: If they did not comply, they knew the hammer was going to come down.

One group — the Consumer Electronics Association — didn’t get the message. It balked at the Powell’s DTV plan. As a reward, Powell slapped CEA with requirements to install DTV tuners in nearly all new TV sets by July 2007, even though the vast majority of consumers will never use their DTV sets for off-air reception.

BIG TIVO FAN

A techie who once called TiVo “God’s machine,” Powell was committed to ensuring that regulations adopted in a monopoly era did not infect the dynamic Internet-protocol arena that promises market-supplied choice and competition on a scale no bureaucrat could replicate.

In that regard, he deregulated cable-modem service in March 2002, calling it an information service. He wanted the same for the Baby Bells’ digital subscriber line services, but litigation over the cable ruling stymied that effort.

Last year, the FCC classified one voice-over-Internet protocol service as an unregulated information service and another VoIP product as an interstate service. Both decisions ensured that the FCC would dominate VoIP regulation, not the 50 states and District of Columbia.

“Michael Powell has been a truly outstanding FCC chairman and a true champion of competitive market forces,” said National Cable & Telecommunications Association president Robert Sachs.

Powell had many critics and they enjoyed lobbing personal attacks at him to highlight policy differences.

Sen. Fritz Hollings (D-S.C.), now retired, once upbraided Powell at a Senate hearing when Hollings feared the FCC was headed in the wrong direction over media ownership and broadband deregulation of the Baby Bells.

At one point, Hollings said Powell was better equipped to run a chamber of commerce than a federal agency, but Powell bowed his head and kept his cool.

Consumer groups and other watchdogs indulged in all kinds of alarmist rhetoric to portray Powell as an instrument of big-business interests determined to put their profits over the public interest.

Powell decision to retire gave his critics yet another opportunity to blast his record.

CHESTER SEES 'BIAS’

“Powell came to power with a pre-existing abiding intellectual bias that, in our view, blinded him to the realities of the U.S. media marketplace,” said Jeff Chester, executive director of the Center for Digital Democracy.

“Michael Powell had the right goal — expediting the introduction of advanced technologies. He had the wrong mechanism — letting the big boys do it,” said Andrew Jay Schwartzman, president of Media Access Project, a group that helped block Powell’s media-ownership rules. “He was good at philosophy, but bad at execution. He is a fine speechmaker, but a poor politician.”

If Powell had a base of support, it came from free-market think tanks that railed against FCC dithering over the deregulation of broadband facilities and services of the Baby Bells, as well as the agency’s slowness at harnessing the power of IP technology to crush entry barriers that have existed for decades.

“I believe the FCC still has a long way to go, but the agency under Michael Powell has begun to draw a line in the sand regarding new broadband services such as VoIP that should spur new investment and benefit consumes,” said Ray Gifford, president of the Progress and Freedom Foundation.