FCC Chairman Powell

TERENCE SMITH:

Michael Powell is chairman of the Federal Communications Commission, the agency that oversees the telecommunications, broadcasting, and Internet industries. A former Army officer, lawyer, and Justice Department official, Mr. Powell has been a member of the Commission for nearly four years and was named chairman by President Bush earlier this year.

Since then, the Commission has granted waivers affecting two rules: one that prohibits companies from owning more than one broadcast network and a second that limits companies from owning newspaper and broadcast outlets in the same market. Mr. Powell and the Commission will also review a rule prohibiting one company from owning television outlets that reach more than 35 percent of the national audience. At 38, the Chairman is not the only member of his family in the Bush administration. His father is Colin Powell, the Secretary of State. Michael Powell, welcome.

MICHAEL POWELL:

Thank you. It's good to be here.

TERENCE SMITH:

The Democratic Congressman, Ed Markey, once said when explaining the difference between the two Powells, he said Michael is the one with the power to affect the world. He may have been joking a little bit, but I wonder if it doesn't reflect the importance of the Commission today and where is it, sort of at the crossroads of the information revolution?

MICHAEL POWELL:

Yes, I don't think it's necessarily an underestimation. Traditionally, regulatory agencies often perform ministerial function, but this is the most unique period in the history of the Federal Communications Commission. Every single area that we have regulatory oversight for is in the midst of its most profound revolution ever — whether it be television or transition to high definition television — whether it be the deployment of broadband services over cable infrastructure – the increased use of satellite, television competition, telephone competition; all of those areas are at their most significant crossroads and inflection points. Whether we like it or not, we're right in the center of this information revolution for consumers.

TERENCE SMITH:

The decisions you and the Commission have taken and especially the things you have said publicly seem to reflect a different philosophy about how to approach regulation than your predecessors. Articulate that for us.

MICHAEL POWELL:

Well, my view is the economic system that world history has demonstrated maximizes consumer welfare more than others are those that make efficient use of market mechanisms – American market capitalism has proven consistently to maximize consumer welfare to a great degree. And, more importantly, which is critical in an information revolution, technology revolution, is it fosters innovation, invention. It is the home in which Bill Gates can come into being. It is the place where entrepreneurs and innovators can take great risk, reap those rewards and provide new and cutting edge services to consumers.

I don't think that actually there's a great change in philosophy. I think it has the central American philosophy of economic policy and one that has to be considered and applied effectively and faithfully in the context of a revolution that's marked by invention and innovation.

TERENCE SMITH:

So for Michael Powell, the market is often the answer?

MICHAEL POWELL:

The market is often the answer but it is not the exclusive answer. I would not be a government official if I didn't understand that markets could fail, if I didn't understand that the public interest is sometimes served by government intervention. And I'm not naïve. I spent years in the antitrust division and in private practice, and I understand that commercial actors act principally in their self-interest. More often than not sometimes, that self-interest can be concomitant with the interest of consumers. But it's never done out of the goodness of anyone's heart, and it's our job to ensure that when those self-interested acts accrue to the negative benefit — or negative effect– to the consumer that we do something about it.

TERENCE SMITH:

Then you step in. You've used a phrase about rules and rules that work and rules that don't work. You've said that your role is to validate the rules that work and eliminate those that don't work. Is that a fair summation?

MICHAEL POWELL:

It's a fair summation. My view is that it's a statement that says I accept responsibility intervening in the normal functioning of the economy; that it is my responsibility as a regulator that if I make a decision, it is not the subject of a whim, or it is not my subjective preference that I'm imposing on the consuming public; but it's based in rigor and analysis and fact, and that if I can't demonstrate the necessity of an intervention, then I'm not empowered to impose it, in my view.

I don't think that's a suggestion that we should deregulate just because rules lack certain kinds of foundations. But I do think that I have a profound obligation to be able to articulate why we're intervening, and, if I can't do that, I think I have to answer the question why we have the rule.

TERENCE SMITH:

Let's look at one specific decision you took when you allowed, you, the Commission, allowed Rupert Murdoch's news corporation, which owns the Fox Network, to go ahead and acquire 10 more television stations around the country. That gave it 41 percent of the market, rather than the cap of 35 — and you granted a waiver for that. And it gave him two television stations, and, of course, he owns a newspaper in New York City. Tell us about that decision and what you …why you did what you did.

MICHAEL POWELL:

Sure. One thing that's hard to get across is that transactions are very case specific. Whether they benefit the public or they harm the public is very dependent on the circumstances of the market that's at issue and the facts of the particular companies involved.

TERENCE SMITH:

Well, here we have the specific.

MICHAEL POWELL:

Here we have the specific. New York City is, without question, the most diverse media market in America. It enjoys more newspapers; it enjoys more television stations. It enjoys more alternative language television stations, alternative music stations and radio. The robustness of that in New York and its diversity mitigate against an intervention in that particular market. Interestingly enough, about a couple of weeks later, in another transaction involving Hartford, in which the diversity was much more limited, we did not reach exactly the same judgment in that context. Indeed, we compelled divestitures on a more aggressive timeframe because we believed that the lack of diversity in that market required a greater scrutiny on our part.

So in many ways the facts of the Fox merger are the facts of the New York market. And the additional incremental concentration, in our best judgment, did not adversely harm diversity and localism for consumers and would allow the kinds of efficiency to have stations run well and provide quality programming.

TERENCE SMITH:

You know, the point is often made that these various ownership caps and rules were made years ago or originally made years ago, and of course, the marketplace has changed a great deal since then. But is there still a purpose, in your opinion, for caps on let's say ownership of television and outlets around the country?

MICHAEL POWELL:

Maybe. I think that there is still a role for government to consider the implications of concentration on the values we cherish — which are diversity and localism and a robust, competitive medium. There are many tools, though, in the government regulatory quiver that might advance those objectives. I am not one who gets overly wedded to one particular approach. Many of the approaches that we see in place today are judgments and approaches that were taken at a time when the media landscape was dramatically different, when three networks reigned, when the number of television, radio stations were substantially less — before cable television was even a service; today 84 percent of Americans get television from cable — before direct broadcast satellite offered an alternative, and before anybody even dreamed of something called the Internet or, for that matter, VCR's and Blockbuster and the kinds of entertainment explosion we've seen.

So, my view of this is that a legitimate and responsible policy is to be constantly reevaluating what the state of the marketplace is and the context and the value that consumers are getting and evaluate whether modifications or changes in the regulatory environment are necessary.

And I think that television — we're at a period it's particularly acute, because I'll say quite bluntly television is in trouble, in my professional judgment. I think that many of the exercises we're talking about are preservation of television, not deregulation of television. Television increasingly faces the competitive threats of cable, of direct broadcast satellites, of Internet. Television only enjoys one revenue stream. It gets advertising. If you think about it, cable television gets advertising and subscription revenue, and more and more, Americans are moving in that direction, and I submit if we truly care about the values that have always been associated with free over-the-air television, we ought to start caring very seriously about the economic models and the regulatory framework to make sure that that medium is preserved in our society and not stand on our principles and watch it slip below the waves.

TERENCE SMITH:

So you could imagine a moment, a time when it would be appropriate, in your opinion, to lift those limits altogether?

MICHAEL POWELL:

Well, I was taught to be an open-minded thinker. I can always imagine a time where the optimum solution to consumers could be intervention or the elimination of a constraint. You know, interestingly enough, it is presumed that these rules always are constraining activity that would be harmful and never themselves are constraining beneficial activity. I have often witnessed stations and newspapers go out of business, because the rules prohibited the more financially sound station or newspaper from purchasing that station, which would have preserved that service to that local community. Instead, because of the constraints of the rules, the station ceased to exist. A dead voice is not a viable voice from the perspective of consumers. And this is why it's a little bit of a red herring. Every commission – mine and every one that's preceded me – has granted waivers for every single one of these rules at one time or the other, and —

TERENCE SMITH:

And, in fact, the networks have gone into court, have they not?

MICHAEL POWELL:

Yes.

TERENCE SMITH:

To challenge this rule?

MICHAEL POWELL:

Yes.

TERENCE SMITH:

So the courts might decide this before the Commission does?

MICHAEL POWELL:

The court might, which is why I tend to prefer to characterize our challenge as preservation rather than deregulation. I think that the foundation of the media regulatory environment is on shaky sand. And increasingly the courts are putting a rigorous and scrutinizing eye and are asking the Commission to justify with much greater rigor than it's been capable of, why it's imposing these kinds of restrictions.

The thing that I think is often overlooked is the minute you talk about media concentration, you're talking about another cherished American value that gets implicated, and that's the First Amendment to the Constitution. The broadcasting industry, not just as a business but as a mouthpiece, as someone who sets the tone of what we hear and gives the vision of what we see, and that's what's required. The First Amendment speaks to the idea that the government should be hesitant and limited in its ability to control what we see and here. And these rules do have the effect of constraining the manner in which messages come across. Some people are comfortable with it, others less so.

But whenever we justify these rules, the truth is because of the First Amendment, the rigor we're required to advance is higher than it might be in say telephone concentration, because I need to explain to a court not only my rational basis but I also need to explain why in light of the burden on First Amendment speech it's justified. We need a better foundation to make that case.

TERENCE SMITH:

Let's look a little beyond television and the mass media to things like broadband versus wireless access. Which do you expect to catch on for the big public?

MICHAEL POWELL:

I expect all of it to catch on. I think that what we're witnessing, which is really one of the true great economic revolutions in world history, is as profound as the agricultural revolution, and the industrial revolution that preceded it – the information revolution is basically the notion that technology has matured to the point that it's a bit like an alphabet. Suddenly, the technological pieces are in place that you can make opuses. You can write whole books for technology. You can combine the tools of digitalization and broadband capability to deliver human communication to any of our senses over similar infrastructure. And I don't think any one is a winner. I think each of them will have unique and valuable contributions. Wireless is critical to mobility; cable can't do that. If you want to watch a video product while riding in your car, you're going to need wireless capability. If you're going to be sitting your home office, the cable pipe might be the optimum solution. I think what I see happenings is more and more technology will be invented and matured, and their places in the consumer life will be ones that apply to particular parts of the way we live. And I think the digital revolution; every industry has a slice of it.

TERENCE SMITH:

And, Michael Powell, are you a — is he a techie himself? I mean, do you – how many of these devices are part of your life?

MICHAEL POWELL:

Too many. I have everything probably, from cameras to video cameras to palm pilots to pagers, to two computers in my house, and a third laptop, and you name it and I have it. And it's interesting because I do enjoy the technology. I love to be immersed in the kinds of things that my job is going to affect the direction of. But just as importantly I love to sort of explore what its real impact is on human behavior, and I think that we have this tendency to get techno euphoric that just because we can do something, we will.

But human beings do not change and evolve as dramatically as technology does. And I think that we don't know what the future looks like, not because we don't see the trends in technology; we don't know what it is that the family that goes to soccer practice and works late and – dual-income challenges — how they're going to input these things into their lives and make them applicable to them just because — history is littered with technologies that were extraordinary that nobody ever warmed up to.

TERENCE SMITH:

We'll stay tuned to find out. Michael Powell, thank you very much.

MICHAEL POWELL:

Thank you very much.