Subject: [NEXTEL-1] FCC chief warns of future shock

From: [email-masked]
Date: Mon, 08 Sep 2003 04:24:01 -0400

FCC chief warns of future shock

By Frank James
Washington Bureau

September 7, 2003

WASHINGTON

Michael Powell wants to save America, or more precisely, two industries crucial to
life as most Americans know it. Michael Powell envisions calamity for broadcast TV
and telephone service unless the country changes what he regards as outdated
regulations

The embattled, 40-year-old chairman of the Federal Communications Commission frets
about the future of broadcast television and the telephone business, two symbols
of American technological and economic prowess.

He says he has two fears. One is that free broadcast television could go down the
tubes, leaving only pay-television such as cable and satellite.

The other is that the U.S. telephone industry--long the world's standard for
reliability--could start resembling the nation's power grid, complete with service
outages.

Still, Powell believes it might be possible to keep both fears from being
realized. His solution for television would be to allow over-the-air networks to
own more local stations so they might better compete with cable and satellite
outlets.

That formed the basis of one of the FCC's revised media-ownership rules now under
attack in Congress and the courts. Last week, a federal appeals court temporarily
stopped the new rules from taking effect.

Powell's solution for the telephone industry, further deregulation, didn't even
get that far because he was unable to win a majority on the five-member commission
this year.

Many of opponents disagree with his assessment of the industries' future. They
have accused Powell, a self-described Republican moderate, of being anti-consumer
and of aiding large, powerful conglomerates.

One critic, apparently suggesting that the FCC chairman has an aversion to facts,
even quipped that Powell could have made a "great information minister" for
deposed Iraqi leader Saddam Hussein.

Powell seemed unfazed during an interview in his offices in the agency's sleek
headquarters near the Potomac River.

"I've never done anything in my life that I didn't think was pro-consumer," said
Powell, who has the handsome smile and charm that many associate with his father,
Secretary of State Colin Powell.

Michael Powell carries himself as a much older man. As a 24-year-old Army officer,
his Jeep rolled over, crushing his pelvis and breaking his spine. He spent a year
in the hospital recovering from the injury that ended his military career.

A crusader for change

For Powell and the Federal Communications Commission, the fragmentation of the
media industry has created a changing environment.

"I think free, over-the-air TV is dying," he said. "I don't care how much money
they made this year, they're dying."

All media companies are facing change as Americans choose from a widening
selection for news and entertainment: broadcast channels, cable channels,
newspapers, magazines, movie theaters, video games, digital video releases and the
Internet.

Broadcast television has a particular problem, said Powell, who became head of the
FCC in 2001.

"What's happening is more and more quality programming is migrating off of TV onto
cable," he said. "I think if your readers thought about it, they'd see it
immediately.

"If you're a sports fan, you have to have cable," he noted about the NBA and next
year's Masters golf tournament.

Part of the reason is economics. The cable networks have twin streams of revenue
to pay for programming: subscribers and advertising.

The same trend is apparent in children's programming, Powell said, noting the rise
of the Disney and Nickelodeon channels on cable television.

But he also cited cable's freedom from the federal indecency rules that broadcast
stations must follow. That has allowed cable networks to run edgier shows, such as
"The Sopranos" and "Sex and the City," that draw an increasing number of viewers.

"So what is left?" asked Powell. "Broadcast TV is now local news and sitcoms at
prime time." He left out the constant wave of reality shows.

"That has kept them going until this year," he said. But "this is the first year
in history cable viewership in prime time surpassed broadcast.

"Eighty-six percent of Americans have cable and broadcast satellite," he said.
"And it's 3 percent more each year. In 10 years, free TV is going to be
gone--absent any policy decisions trying to help."

Reason for rising cap

That's where liberalizing the media-ownership rules comes in, he said. The FCC
increased the percentage of viewers who could be reached by television stations
belonging to a single owner to 45 percent from 35 percent.

Powell's theory is that by owning more stations, the broadcast networks could add
to their viewership, firm up what they can charge for advertising and, therefore,
keep revenues high enough to pay for programming that is of high enough quality to
snag viewers.

It is the new 45 percent national cap under attack in Congress, with legislation
in the House and Senate that would restore the 35 percent limit.

Powell warns that rescinding the new rule would be a mistake.

"What you're really going to do is make a very hostile environment for
broadcasters and send them to cable," he said. "And I don't think people who can't
afford cable or who, during a hurricane, want to be able to turn on the TV [for
news and guidance] are going to be well-served."

The FCC chairman said he understands why many people dislike the revised
media-ownership rules. The changes included lifting the ban on one company owning
a newspaper and television station in the same large, media-rich market. Tribune
Co., owner of the Chicago Tribune, has lobbied for an end to the ban.

Powell, a former Justice Department antitrust lawyer, said companies that are too
big can be dangerous.

That's why the FCC maintained limits, he said.

Powell laments that the local broadcast ownership restrictions never get mentioned
in media reports. But in some ways they are more important than the national cap
and the FCC improved on them, he said.

For instance, in most television markets in the country, a single company could
own two stations but only one station can be among the top four in ratings.

Being big is not all bad, Powell said. Just as Wal-Mart provides a range of
products at reasonable costs, large media companies make it possible for people in
small cities to see quality programming.

"A big company produces `The Sopranos,' `The West Wing,'" he said. "Do you know
how much `Friends' costs? Can you be a mom-and-pop operation and pay Jennifer
Aniston the $1 million an episode that produces that formula?"

Painted as pro-business

Such comments make it easy for opponents to paint Powell as a shill for big
business.

"Here we have the chairman of the FCC trying to somehow protect four of the six
largest and most profitable media companies that dominate the news, information
and entertainment market in America today," said Gene Kimmelman, director of
advocacy and public policy at the Consumers Union.

Even before the furor arose this summer over the media rules, Powell was
unsuccessful in his bid to revise FCC policy regarding the telephone industry.

He backed a change that would have allowed regional phone giants such as SBC and
Verizon Communications Inc. to charge their local phone service competitors more
to use their facilities to complete calls.

Rather than building facilities, companies such as MCI and AT&T are piggybacking
on the equipment of the regional phone companies, "like sucker fish on whales,"
Powell said.

The long-distance companies are now offering customers popular packages such as
local and long-distance service on one bill at a reasonable cost, he said.

Under the current policy, there is little incentive for local phone companies to
make new investments in their networks, already hit by the sluggishness in the
economy. It also has added to the job losses at phone companies and equipment
manufacturers, Powell said.

The investment deficit is also what he fears will lead to a drop in the telephone
system's 99.9 percent reliability factor.

"The public network will start to fail," Powell predicted.

But his critics are not convinced.

"His entire philosophy reeks of corporate welfare for the wealthiest, most
profitable companies at the expense of competition," Kimmelman said.

Powell gets sympathy from Reed Hundt, a Democrat who chaired the FCC during part
of the Clinton administration.

"Michael is extremely able and amiable," Hundt said. "It's not Mike's fault and
it's his great misfortune that he has presided over the telecom industry during
not only the greatest recession in its history but the only one."

http://www.philly.com/mld/philly/news/politics/6709319.htm

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