Beyond Janet Jackson's breast

BUSINESS
Face value

Jan 20th 2005
From The Economist print edition

The case for Michael Powell, America's controversial media and telecoms regulator

BY ALL rights, Michael Powell ought to be thoroughly fed up. As head of the Federal Communications Commission (FCC), a regulator whose reach spans telecoms, media, the internet and everything in between, Mr Powell has endured one mortifying policy defeat after another. From a battle over America's media-ownership rules to a scrap about telecoms regulation, the courts, Congress, the media and even fellow Republican commissioners have taken turns sticking the knife into the FCC's soft-bellied chairman. Yet fresh from the ritzy Consumer Electronics Show in Las Vegas, Mr Powell seems as full of zest for public office as ever. Broadband internet use is spreading at “triple-digit rates”, he gushes. New sorts of digital content and communications services proliferate. Super-cheap, off-the-shelf internet phone services—called voice over internet protocol (VOIP)—are “very for real”. In short? America's digital revolution marches on.

Mr Powell's critics would counter that much of this onward marching is taking place in spite of the FCC's best efforts to impede it. Even his friends would admit that FCC policy has become oddly fluid under Mr Powell's stewardship. The agency's deregulation in June 2003 of America's media-ownership rules (which limit the freedom of firms with public-broadcasting licences to buy other media companies) got partially reversed by Congress (in December 2003), and then put on ice altogether by the courts (in June 2004). Mr Powell must now decide whether to appeal that ruling to the Supreme Court. Americans still await the publication of long-promised rules governing how telecoms firms may compete with each other in the market for local services. The courts struck down an earlier effort at rulemaking (passed despite Mr Powell's own opposition to his agency's new rules) last year. An FCC ruling exempting cable companies from the sort of regulatory micromanagement that telecoms firms must endure is also under judicial attack. Only the FCC's zealous crusade against indecency over the public airwaves has appeared to work for Mr Powell, as it has taken on offenders from radio-host Howard Stern to Bono and Janet Jackson's errant breast (so disturbing to some viewers of last year's Super Bowl).

Mr Powell, whose second (and most probably final) five-year term expires in 2007, amiably waves away these trifling setbacks. Last month, three of the FCC's five commissioners agreed to a new set of local telecoms rules, he points out. (This time, Mr Powell was among them.) The details should be out soon. As for his media-rules upset, Mr Powell maintains that he was right, but “too early”. New sorts of media are proliferating in America. Satellite radio, cable-TV and internet bloggers continue to undermine the legitimacy of the existing set of unduly restrictive ownership rules written when network-TV stations and radio companies dominated scarce broadcasting spectrum, he argues. Who can deny the influence of the blogosphere on America's presidential election last year, or the growing clout of satellite radio? Yet Mr Powell also has a bigger point to make about the Sturm und Drang at the FCC under his leadership. And it is in the context of this larger point that his real legacy may lie.

America's telecoms policies are built on a landmark antitrust ruling in 1984 which broke the AT&T monopoly into a long-distance carrier and several local “Baby Bell” operating companies. The authors of the 1996 Telecoms Act continued to pay homage to this local/long-distance distinction. Mr Powell's rulemaking last month marked the FCC's latest attempt to broker a settlement between the industry's two warring halves. In applying the 1996 act, the FCC has sought to make extra distinctions between different forms of transmission (copper telephone wire, cable TV, satellite, wireless) and of content (telephone calls, television, data). But the spread of digital technology is making all such distinctions moot. Cable-TV firms carry telephone and internet traffic over their digital networks. Wireless operators pipe e-mail and stream television broadcasts. Baby Bell telephone companies such as Verizon, meanwhile, are preparing to enter the television market. “Isn't everything broadband internet attached to some sort of appliance or device?” asks Mr Powell.

Moralising, up to a point

Mr Powell is equally irreverent about the way the FCC regulates America's media industry. Even as he attacks indecency over the public airwaves, Mr Powell is the first to admit that his policies lack coherence. As it is not broadcast over the publicly-owned radio spectrum, content on cable TV, satellite radio and the internet escapes the FCC's indecency rules. A true zealot (such as Michael Copps, a Democratic FCC commissioner whose ardour on the indecency issue may have forced Mr Powell's hand) would press to bring these other sorts of broadcasters under the FCC's rules as well. Mr Powell rejects this, sticking pointedly to highlighting the regulatory incongruity.

Someone more concerned about politics might have ducked such uncomfortable realities—as Mr Powell's predecessors did. The local-telecoms competition rules that the FCC wrestled with last month had been rejected no less than three times by the courts before Mr Powell got to them. Despite their ancient provenance (and many legal challenges) the FCC's media rules remained unreformed until Mr Powell took an interest. He has tried to inject a dose of reality into the closed world of Washington policymaking. The result may have been messy and chaotic. But it has also opened minds. Calls are growing louder in Congress for a new telecoms act that recognises the reality of the digital revolution—though not even enthusiasts expect one anytime soon. (Meanwhile, Mr Powell is doing his best to protect new technologies such as VOIP from the old rules.) If Mr Powell's legacy is to accelerate the passage of new legislation, Americans ought to remember him fondly and with respect. The 1996 act barely mentions the internet. It shows.

Copyright © 2005 The Economist Newspaper and The Economist Group. All rights reserved.