The Powell Doctrine

FCC Chairman Talks Policy with xchange

That's the day the commission took a big step forward in its multifaceted broadband initiative by announcing a notice of proposed rulemaking (NPRM) that could radically reshape the way broadband services are regulated. There was a good deal of confusion over what the commission's intentions were, insofar as the actual NPRM had not been released when this publication went to press. But Powell made it clear in an interview with xchange magazine prior to the announcement that he means to push the envelope when it comes to setting a new course under the confusing and controversial regulatory regime of the '96 Telecom Act.

That course involves shifting the way broadband Internet access services over telecommunications lines are regulated by determining that such services are information services "with a telecommunications component," rather than purely tele communications services under the common carriage domain of Title II of the Telecom Act.

Clearly, with Congress in gridlock over what to do about telecom and a rising clamor inside and outside the Beltway for action to get broadband moving, the FCC has the mandate to do something big. But the question some observers are asking is whether Powell is going to go too far, effecting policies that ultimately won't withstand court scrutiny and end up creating even more confusion and regulatory drag on progress than already exists.

"Michael Powell has declared his intention to do whatever he wants," asserts Mark Cooper, director of research for the Consumer Federation of America. "There's a process established under the Telecom Act in Section 706 by which the FCC is empowered to make clear and specific findings as to whether to relax various restrictions. But he's not going to go that route. Instead, he's going to backdoor this stuff."

Such views, however, are a misreading of how things work in Washington in general and with Powell in particular, says James DeLong, senior fellow with the Competitive Enterprise Institute, a conservative voice on regulatory issues. "The FCC always responds to political pressure; it's always the handmaiden of Congress," DeLong notes.

With Congress undecided but desiring action, Powell will get out ahead of the pack only if there is enough pressure coming into Washington from other channels, DeLong adds. "A lot of what Powell ultimately does depends on the kind of push he gets from the technology sector," he says. "He's sending signals that he's ready to move if they'll push."

We have a situation where telecom continues to suffer, there are more and more bankruptcies, and cap-ex spending is down. At the same time, the need for broadband connectivity has risen on the radar screen in Washington and is considered a matter of urgency that could contribute to the country's economic health. What do you see as the FCC's role in all of this? What can be done here?

Powell: [The broadband initiative] is the No. 1 key central communications policy objective we're pursuing here at the FCC ... We're rigorously examining ... all our rules and all our flexibility to see if we can lower costs by lowering regulatory costs or harmonizing them in a way that will give people a better opportunity. That's all we can give is an opportunity for them to invest and prosper through those investments in those technologies ... And I would emphasize that that has positive implications for both competitive carriers and incumbents.

What role is the White House playing in the broadband proceedings and efforts? Is there any crossover between the FCC and the White House in trying to set a policy agenda?

Powell: Candidly? Not particularly. I don't have discussions with the White House per se on our broadband policy ... These things were at work here at the commission even before this latest set of urgencies.

Qwest's CEO Joe Nacchio says VDSL has now reached a cost point where he would deploy it across Qwest's territories if he had rules that he thought provided a level playing field with the cable industry. Is there anything that the FCC can do to address his concerns given that the Telecom Act is already in place? I mean, does the Telecom Act have to change before Nacchio goes ahead and competes?

Powell: The proceedings that we have introduced and are currently introducing tee up many of the kinds of questions he's referring to and will provide us an opportunity to consider whether a kind of disparate regulatory treatment is indeed a disincentive. And then, if it is, to what degree we can fix and harmonize it.

We have cable proceedings that are proceeding on a simultaneous track---you know we have cable open access, cable definitional issues that we're doing. What I've done internally here is, we have integrated them as an overall broadband set of issues; and while they are currently in a separate proceeding, they are a coordinated and managed activity so that we can try to reach similarly situated judgments about both of them.

Final point, though: you have to be careful about taking this point too far. There are differences. My least favorite phrase in the world is 'level playing field.' The impulse is right, but the notion of it is just not really correct. There are a lot of things where you have disparate experiences, different legacies, different architectures and different legal regimes that don't necessarily mean total parity and equality is the same thing as being fair. Sometimes all you do is institutionalize an advantage by saying we'll treat you all the same, even though you have all these benefits.

The other thing that I'm always a little skeptical of is all kinds of carriers have both burdens and benefits. It's hard to sort of add up all the pro-phone things vs. the negative phone things, against all the pro-cable things and negative cable things. I understand the [level playing field] argument, and there's something there to be pursued, but we shouldn't say that a successful policy would mean that every rule, tit for tat, was identical from one infrastructure to another, because I'm not so sure that would actually be a 'level playing field' for fair competition.

We need to do what we can to lower costs, but the reason it's probably pulled up short of a perfectly harmonized regulatory structure is because if we can keep competitive forces going on in the market, you'll have no choice but to respond. I don't know many companies who actually sit by lightly in the face of having another competitive industry 'eat its lunch' --- take its core business away --- who aren't going to find a way or who aren't going to be deeply motivated to find a way to respond.

There seems to be a growing urge on the RBOCs' part to lobby against the unbundled network. Yet in the marketplace the UNE-P concept is starting to be embraced and generating some business. How do you look at it now that it's had some time to percolate out in the marketplace? Might it do something to foster competition, to really move things ahead? Or is it kind of in the way?

Powell: I guess the accurate answer is 'neither' because sometimes I think we over generalize.

Now we have never suggested...that somehow there should never be any unbundling, at least in this period of time, to any element of an infrastructure. I think that usually what's really being argued over is how many pieces and at what price. At one end you sort of have a UNE-P notion, which is sort of basically everything reassembled, and really is not functionally different from reselling service. It's actually sort of a legal construct, right? You get basically the incumbent's network for a cheaper price than you would get it by calling it resale and being something different.

So I think we have to look at [unbundling]. I think the statute is very precise in saying that we have to, because it says that unbundled network elements have to be 'necessary' or 'impair.' And we've already been remanded once by the court for not being fully faithful to that point.

So we will always be in the area of 'does an entrant really need this element' or 'can they go get it themselves?' I don't think anybody should have to argue about the proposition that if you can go get it yourself, at a reasonable price and availability, why should you get to get it from a competitor? Why shouldn't you have to go out in the market and get it? I think the statute says that, and I think that's what we wrestle with.

The problem I think we have in the law is we're always looking for a one-size-fits-all solution. The truth to it is the case for something like UNE-P is more compelling for certain kinds of markets and business models than it is for others. And what we're trying to do in our proceedings, like non-dominance, is to try to create more granularity in our policy judgments.

I'm not embracing this, but, for example, you might make a very compelling case that if you're trying to serve residential consumers you ought to have easy use of the UNE-P platform. But if you're competing with high-volume business customers why should you? I mean, that is a very competitive market with many assets available; it's a very different context.

So if I had my way, we'd have much more precision and I'd be able to say, 'In these kinds of markets, where this kind of carrier has this kind of dominance, we'll tend toward greater access to infrastructure because it's more difficult.' But where we see situations where we think carriers can bring their own facilities to the party and there's no real barrier other than they'd like to have a cheaper deal, you know that's not our business to do, to favor your model over someone else. You've got to go to the marketplace to solve that problem yourself.

Do you feel you have the latitude under the laws that now exist to make those kinds of distinctions?

Powell: We think so.

What we're doing is initiating the kinds of proceedings that allow us to ask those questions and develop answers to that. I think that inside the building there's sort of an impulse that believes that we can. But we need to ask those questions and get a record and examine how it would be done. We couldn't do it precipitously.

But look, we did it in long-distance. We needed dominance and non-dominance as principles for whether you had to tariff or not tariff. Isn't that kind of what we're about? Isn't that kind of, for example, even the incumbents' argument? You might say, 'well, we're dominant after this, but not dominant after this, shouldn't we have different treatment?'

Without agreeing with their argument or not, you can agree with the construct. You know, what is the government's justification if you weren't a dominant carrier for compelling access to your investment? The government, I think, would have a duty to answer that question.

Click Here to read the long version of this interview.

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