Subject: [NEXTEL-1] Politically correct Chairman Powell

From: Marcel <[email-masked]>
Date: Mon, 10 Feb 2003 18:59:58 -0500

Politically correct Chairman Powell

      By Tam Harbert
      2/1/2003

      Electronic Business

      Like any good politician, Michael Powell talks a good game.
One would hardly expect less, given his lineage as the son of
Secretary of State Colin Powell. And some might even say that
Michael, who has been chairman of the Federal Communications
Commission for the last two years, has a harder job than his
father when it comes to balancing the interests of many disparate
groups in an attempt to reach a fair compromise. After all, he
doesn't have the Armed Forces to back him up.

      And yet he's trying to settle squabbles among industry
forces that are sometimes as much at odds with each other as
President George W. Bush and Saddam Hussein. Broadcasters, phone
companies, cable companies, network equipment companies and
electronics providers all lobby him to try to get favorable
regulatory treatment for their particular industry. That's because
the policy decisions before today's FCC-the telecom meltdown,
broadband deployment, the digital TV debacle and wireless spectrum
management-hold the potential to make or break these industries.

      During his first two years as chairman, Powell has impressed
many with his formidable intellect and keen understanding of the
technology industry. He has made great speeches about the
potential of these new technologies, and about the steps that
regulators can take to facilitate them, say observers. But, so
far, he hasn't walked the walk, they say.

      "Powell is a very political, consensus-oriented person,"
says Tom Hazlett, a former chief economist at the FCC and now a
senior fellow at the Manhattan Institute, a think-tank in
Washington, DC.

      He's viewed by many as a status-quo chairman, unable or
unwilling to rock the boat. "It's the thanklessness of a
high-profile government job," says Gary Arlen, president of Arlen
Communications Inc., a consultancy in Bethesda, MD. "Even if he
were to be an activist chairman, how much could he get away with?"

      He most definitely is not an activist chairman, says Scott
Cleland, CEO of The Precursor Group, an independent
telecommunications research firm in Washington, DC. "Remember, a
Republican, market-forces-oriented chairman isn't going to do a
lot of new things," Cleland points out. Rather, Powell has had to
spend the last two years "trying to clean up a huge legal and
economic mess that he inherited."

      Powell also is "more of a lawyer" than his predecessors,
says Cleland. Rather than mapping out his own legal and political
policies, as some previous chairmen have done, he defers to
Congress and the courts.

      Although lauded for his people skills, Powell prefers to
spend time studying policy and trying to solve problems rather
than meeting with industry lobbyists, legislators and others. "He
wishes he didn't have so many external demands on his time," says
Cleland. "Thousands of people want a chunk of him."

      Technologists praise him for having both an intellectual and
personal understanding of technology and the benefits it can
bring. However, "the ability to use a WiFi card does not map with
an incentive to do things that are politically risky," says
Hazlett. "As a regulator, you don't want to create political
risk."

      Some FCC watchers think that Powell simply and quietly has
been laying the groundwork for some heavy lifting he wants to do
in 2003. "Any assessment right now is premature," says Blair
Levin, telecommunications analyst at financial services firm Legg
Mason Inc., Washington, DC, and former chief of staff of the FCC
under Reed Hundt. Several major proceedings are likely to be
concluded in 2003, he notes. "What he's going to do in the next
nine months is going to be much more than what he's done in the
last two years."

      Broadband on the brink
      The issue of broadband access may be the single most
important issue now before the FCC, at least from high tech's
point of view. The combination of the telecom economic meltdown
and the lack of regulatory relief from the FCC has left many
companies struggling to survive.

      "The regulatory situation is killing us," says Doug Cooper,
director of regulatory and market development at Catena Networks
Inc., a four-year-old DSL equipment start-up in Redwood Shores,
CA. "Because of the uncertainty, carriers have stopped capital
expenditures, and it's killing the vendors." Cooper left the FCC
in 2000, after serving 10 years at the agency.

      The "situation" is this: Under the 1996 Telecom Act, the
telephone companies are supposed to allow their competitors to
access their networks at very low rates. In the area of providing
broadband access to the home, this means that the phone companies
would invest in the network elements to bring broadband to the
home, only to have to give their competitors access to those very
capabilities. Thus, phone companies have not invested much in
these services.

      Although they've rolled out DSL, they've done so only from
the central office. Much of the debate concerning broadband has to
do with unbundling "network elements," which means the boxes that
sit in the neighborhood and serve all the houses in that area.
Until there is guidance on whether the FCC will require phone
companies to make these network elements available to competitors
as well, phone companies are loathe to expand them.

      Last year, the FCC published a notice of proposed rulemaking
(NPRM) that tentatively classified wired broadband (DSL) as an
information service, not a telecom service. The distinction is
important because, under the 1996 Act, information services are
not regulated. However, the NPRM prompted a deluge of public
comment, and there's no word on when or whether the FCC will make
the ruling final, which leaves the issue in limbo.

      Secondly, the FCC has undertaken a broad review of the
regulations affecting broadband. Powell realized early in his term
that a lot of the rules regulating broadband were outdated, and
that the FCC shouldn't have different requirements for different
platforms that deliver broadband, says Cooper. But the deadline
for the end of the review, which was due by the end of 2002, has
stretched out. Industry now hopes that the FCC will end the review
and perhaps announce results sometime in Q1 2003, he says.

      "He says all the right things," says Gary Shapiro, CEO and
president of the Consumer Electronics Association in Arlington,
VA. Shapiro, along with many in the industry, just wishes he would
hurry up and do something about it.

      Meanwhile, the FCC has been slapped around by the courts on
what action it has tried to take on this issue. In May 2002, the
Court of Appeals for the DC Circuit threw out the regulations that
the FCC tried to put forward on unbundled network elements for the
platform. The regulations basically had tried to force telcos to
open everything up at very low prices. (Under the traditional
economic model-called TELRIC for total element long run
incremental costs-the incumbents would have had to make their
network element platforms available to competitors at a discount
of 55% or more, according to Cooper.) But the court said that the
FCC needed to consider that some pieces of the network already are
available on a competitive basis, and that the FCC shouldn't
require incumbents to provide those facilities that already are
available.

      Complicating matters has been a lack of coherence in high
tech's lobbying, says Hazlett. Some companies, such as Corning,
have lobbied for government subsidies for broadband to the home.
This is both unrealistic and self-serving, says Hazlett. "As long
as the industry engages in these unhelpful suggestions, it will
create a vacuum there and create no way to push policy forward."
Such lobbying causes confusion among the regulators "and out of
that confusion comes whatever politics rule the moment."

      But some of the tech industry has coalesced, uniting under
an umbrella organization called the High-Tech Broadband Coalition,
formed last spring. The group, which includes the
Telecommunications Industry Association, the CEA and the
Semiconductor Industry Association, favors categorizing telco
broadband as an information service, so that phone companies won't
have to unbundle their network elements. The group believes that
removal of such regulation will increase the investment needed to
spur broadband competition.

      The pressure is on for Powell to act quickly and decisively
to make some changes to ease the telecom depression and prompt
broadband growth. Last summer, Powell presented a six-point plan
for telecom recovery to the Senate Commerce Committee that was
long on rhetoric but short on specifics. "Powell's talked about
this for a long time, but he's done virtually nothing," says Steve
Rago, a principal analyst at iSuppli Corp., a market analysis
company in El Segundo, CA.

      But with the Republican victory in Congress last fall,
Powell's political stars may be aligning. Bills introduced in the
Senate to spur broadband access repeatedly have been stopped by
Senator Ernest Hollings, D-SC, chairman of the powerful Senate
Commerce Committee. But now Senator John McCain, R-AZ, a friend of
Powell and a promoter of broadband access, will head the
committee. Some believe that will pave the way for telecom reform
in 2003.

      Digital television doldrums
      Digital television is another issue that has prompted many a
Powell speech, but little action. And what action he has taken has
stirred up a storm of protest.

      In an effort to jumpstart the roll-out of DTV, Powell
unveiled the "Powell Plan" in April 2002 and created a DTV task
force to hold inter-industry meetings on various issues. The plan
called on broadcast networks to increase their digital
programming, on broadcast stations to increase their digital
broadcasts, on cable and satellite to increase their carriage of
digital programming and on equipment makers and retailers to
commit to make more digital cable set-top boxes available at
retail and include over-the-air DTV tuners in new televisions.

      But industry observers are quick to point out that the plan
is voluntary. "It doesn't mean anything if he doesn't enforce it,"
says Arlen. "He's saying all the right things, but he pushes and
the very rich and powerful guys on the other side push right
back."

      The only part of the plan that he has forced on industry so
far is DTV tuners. In August, the FCC mandated that DTV tuners be
built into televisions by 2007 (see ELECTRONIC BUSINESS, "FCC
plays chip makers' tune," October 2002). That mandate was viewed
by many in the industry as a way to ensure that there were enough
TVs available to receive over-the-air digital broadcasts so that
the FCC could finally take the analog spectrum back from
broadcasters.

      "I think the approach was backwards," says Jenny Miller, a
CEA spokeswoman. Instead of pushing for cable compatibility, which
would be the most effective way of getting more DTV to people, the
FCC has chosen to mandate tuners in TVs so that it can get its
spectrum back, she says. The CEA has sued the FCC over the
mandate.

      "The mandate on receivers is just not farsighted," Hazlett
says. Rather than trying to push tuners into TVs, the FCC should
realize that cable and satellite-the means by which more than 80%
of the U.S. population receives its TV signals-are the perfect
vehicles for the digital TV transition.

      But the FCC has not issued any mandates on cable
compatibility-not yet, anyway. Because cable set-top boxes still
are based on proprietary architectures from companies like
Scientific America and General Instruments (now a division of
Motorola), these makers have a lock on the market, says Miller.
The CEA wants a standard architecture so that all manufacturers
can build set-top boxes for this market and sell them at the
retail level.

      A compromise on cable compatibility was announced by the
consumer electronics and cable industries in mid-December. In a
memorandum of understanding, 14 major consumer electronics
companies and seven major cable operators agreed to a set of
technical standards for cable systems and cable-ready DTV
products, and urged the FCC to adopt regulations to enforce the
plug-and-play standards.

      What prompted the heightened discussions that led to the
compromise? "A lot of it has to do with the leadership that the
Chairman has shown" when he issued the Powell Plan and launched
the DTV task force, says Miller of the CEA. But negotiations
really heated up after Powell issued his tuner mandate. "That was
a wake-up call for all industries," says Miller. With that, the
FCC showed it was willing to regulate these things, so if the
industries did not want to be regulated they had better work
harder at finding some compromises, she says.

      Even though the CEA doesn't agree with the mandate, "he's
doing what he should be doing," says Shapiro, CEA president. "He's
leading."

      Unleashing more spectrum
      Another area where the Chairman has talked a lot about
deregulation and market forces is in the management of the
nation's airwaves. A Powell-appointed task force last fall
delivered a report on spectrum management that excites many in the
wireless industry.

      The task force is proposing an overhaul of the way the FCC
manages spectrum. Contrary to some press and industry reports,
there is no shortage of spectrum, says the task force-it's just
inefficiently managed. More sophisticated technologies now coming
on the market, such as software-defined radios and smart-antenna
technology, can make more efficient use of the spectrum and reduce
the possibility of interference, says the report. The task force
recommends that the FCC adopt more market-oriented spectrum use
policies that will motivate users to adopt the best and most
efficient technologies. It also notes that new technologies can
now enable the FCC to consider time-in addition to frequency,
power and space-as a parameter in allocating spectrum. This would
allow time-sharing of spectrum among certain uses. It also
recommends that the commission shift from a "command-and-control"
mode of spectrum regulation to a more liberal, flexible approach,
making more unlicensed spectrum available for broader use.

      Industry welcomes the task force's findings. "This is a
great effort on the part of the Powell FCC," says Peter Pitsch,
director of telecom policy for Intel Corp. in Washington DC. "The
old command-and-control regime has become very expensive. This
will make it possible for spectrum to move from old technologies
to new." Specifically, Intel would like the FCC to make new rules
that will allow new technologies to operate in unlicensed
spectrum, as long as they don't interfere with other uses, he
says.

      In fact, in early December the FCC launched a notice of
inquiry, asking for public comment on the possibility of
permitting unlicensed transmitters to operate in certain parts of
licensed broadcast TV spectrum, and other parts of the spectrum,
when they are not being used.

      Perhaps this is the year that Powell will take action on
this and other issues. Only time will tell. So far, on these
hot-button issues, "Powell has said some good things, and very
little has happened," says Hazlett of the Manhattan Institute.

      Tam Harbert is Electronic Business' national editor. Reach
her at [email-masked].

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