December 8, 2000 10:50 AM PST

FCC's Powell calls for new regulatory approach

WASHINGTON--Federal Communications Commission member Michael Powell, the man many insiders say will be the next FCC chairman, Friday called for a move away from technology-centric regulation to a model that allows companies the flexibility to innovate.

Mere reform is too modest a step to solve the problems of regulating communications, Powell said at the Progress and Freedom Foundation conference here. Powell and others are "opening (their) eyes to the great exodus from legacy business models, technical infrastructures and graying federal regulations," he said.

Many insiders believe Powell will be named FCC chairman in a possible George W. Bush administration. His forceful speech, which in many areas called for dramatic change from the current regime under William Kennard, struck many in attendance as the public debut of what a Powell-led commission would be like.

In a brief interview following his speech, Powell refused to say if he was interested in being chairman, saying only, "I'm happy doing what I'm doing at the moment."

In his speech, Powell bemoaned the fact that the Telecom Act of 1996 "left unchanged the balkanized regulatory treatment of different technologies and different industries." In particular, he singled out the "continuing uncertainty over how to treat the multitude of services offered on a bundled basis over a high-speed cable" network.

The cable industry has spent nearly three years fiercely resisting having its cable pipes regulated under phone rules, for they then would be forced to open them up to competitors. The FCC is conducting an inquiry on the so-called open-access issue.

Powell was persistent in his theme that technology is driving a migration of companies and focused on the efforts of AT&T and WorldCom to separate themselves from long-distance service. "Species migrate to escape hostile conditions," he said.

Powell also noted that FCC regulations are "analog based," but digital technology is driving every sector of the communications market.

The FCC's role
Current commission rules "promote regulatory arbitrage," Powell said, noting that companies construct business plans to take advantage of quirks in regulations. The Bells argue local phone companies have been doing this when receiving fees for terminating calls from Bells with Internet service providers.

Powell also faulted companies that "seek shelter in regulations to protect themselves in the fierce storm of the market," yet often "attempt to use regulation to harm or burden their competitors."

He listed several approaches the FCC could take. For one, he said it should focus on promoting innovation, not price competition. He also said the FCC should not "prematurely rush to conclude we are witnessing a market failure that justifies regulatory intervention," suggesting a much more hands-off agency than the communications industry has seen in recent years.

Consumer protection is important, Powell said, but "it should not be a straw man" used to rationalize new regulations.

Finally, he said, the agency should move away from its current system by which companies must submit new technology and business models for approval. Instead, the agency should let companies act as they choose but inform them of the consequences if they break the law. "My view is if 98 percent of the time the answer is 'yes,' you don't need to do the up-front prophylactic review in the first place," he said.

Powell received a strong endorsement at the conference from Rep. Billy Tauzin, R-La., the odds-on favorite to be chairman of the House Commerce Committee next year.

"Michael Powell is my choice for FCC chairman," Tauzin told a luncheon crowd. He said Powell had the "intelligence and leadership" to guide much-needed FCC reform.

Tauzin promised a reform initiative of his own next year, including "substantial and accelerated deregulation." He said he and others on the Hill planned to work with the General Accounting Office to find ways to streamline the agency for the digital age.

 

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