After Michael Powell
January 21, 2005; Page A8
The bad news is that we are told that Michael Powell, one of Washington's
better bureaucrats, is calling it quits today after four years at the helm
of the Federal Communications Commission. You read it here first. The good
news is that his exit affords the Bush Administration an opportunity to
re-evaluate its stepchild treatment of telecom policy.
Given the media coverage, you might think Mr. Powell's tenure has been
about little more than Janet Jackson's wardrobe malfunctions and Howard
Stern's potty mouth. In fact, Mr. Powell has spent the past four years
focused on much more substantive matters regarding the government's role in
overseeing a telecommunications sector that has never been more dynamic.
This is Mr. Powell's proper legacy, and if he failed to reach all of his
goals, some of the blame rests with a White House that never fully grasped
telecom's potential to drive economic growth. Between 1989 and 2001, labor
productivity in telecom grew annually by an average of more than 3%, versus
a 1.6% pace in the overall nonfarm economy. Information technology alone
was responsible for nearly two-thirds of the rise in labor productivity in
the late 1990s.
After the tech bubble burst and mild recession, however, billions of
capital investment dollars retreated to the sidelines. Only during the
final months of the Presidential campaign did Mr. Bush begin making noises
about clearing away "the regulatory underbrush" that was holding back the
venture capitalists and faster broadband deployment, among other things.
Mr. Powell's deregulatory instincts led him to make broadband development
and deployment a priority. By declaring cable modem an "information
service" in 2002, the FCC was able to block efforts to apply the entire
telephone regulation boondoggle to new broadband technologies. Last
November, the FCC accomplished a similar goal with respect to VOIP, which
enables consumers to make phone calls over the Internet.
The White House ultimately abandoned Mr. Powell when he tried to update
media ownership rules in response to a federal court decision that found
the current regulations "arbitrary and capricious and contrary to law." The
Administration agreed with the Chairman in principle but went soft after
Democrats and liberal interest groups complained that revisions might allow
Rupert Murdoch to own a couple more TV stations.
Mr. Powell's battle royale, however, surrounded his efforts to address the
make-believe "competition" spawned by the 1996 Telecom Act, which forced
the Baby Bells to unbundle their local phone networks and lease them to
rivals at discount rates. The requirements, supported by AT&T and others
that subsequently built business models around this subsidy, have depressed
investment and limited consumer choice.
The FCC unbundling decision last month split the baby; it phases out some
of these rules by 2006 but not all of them, so more litigation is a
possibility. And the ruling itself came at least 18 months too late, thanks
in part to opposition from Mr. Powell's fellow Republican Commissioner
Kevin Martin.
This brings us to the matter of potential replacements for the Chairman at
the five-member agency, and whether President Bush will squander an
opportunity to start taking telecom more seriously. The White House
decision last month to renominate Democratic Commissioner and Tom
Daschle-protege Jonathan Adelstein was not a good start, to say the least,
since he and fellow Democratic Commissioner Michael Copps are reliable
opponents of genuine competition.
Mr. Martin is gunning for Chairmanship, but his decision in the unbundling
fight to put personal ambition above good policy split the Commission and
helped extend the telecom depression. The last thing Mr. Bush should want
is to repeat the mistake of putting Republicans in a de facto minority
position at the agency. The next Chairman not only needs Mr. Powell's
instincts and vision but also a Commission that will follow his lead.
Other names mentioned for the post include Becky Klein, a former head of
the Texas Public Utility Commission; Michael Gallagher of the National
Telecommunications and Information Administration; and Janice Obuchowski, a
telecom consultant who served in the Commerce Department under Mr. Bush's
father. Someone like former Interstate Commerce Commission Chairman Darius
Gaskins or former Federal Trade Commission Chairman Jim Miller also would
be an excellent choice to keep the FCC on a deregulatory path.
Mr. Powell spent four years as an FCC Commissioner before taking over the
agency in 2001. So it's easy to believe that after eight years he's ready
for some new challenges, probably in the private sector. We hope the
Administration hasn't taken him for granted and is up to the challenge of a
worthy replacement.
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