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Clad in his standard-issue navy suit with yellow tie, Michael Powell recently knelt down on a stage and did a somersault for the amusement of cable industry executives at a conference. The display was particularly impressive because Powell, though a competitive gymnast in high school, had his back and pelvis reconstructed in the 1980s after he had a serious Jeep accident while with the U.S. Army in Germany. Such displays of flexibility — though perhaps more mental than physical — might become a common part of Powell’s current job. The takeover of the Senate Commerce Committee by South Carolina Democrat Ernest “Fritz” Hollings poses a serious threat to Powell’s reform agenda. That spells trouble for the M&A community. Industry officials had thought this would be the year their calls for relief from FCC policies that inhibit dealmaking would be heeded. They saw a Republican president, House and Senate, and in Michael Powell, they had an FCC chairman sympathetic to many of their complaints. SIGNIFICANT COMPROMISES But experts said Powell’s deregulatory quest will be stifled by the Democratic takeover of the Senate, which puts Hollings back in power. They argue that Powell will have to accept significant compromises if he hopes to get anything accomplished. (On Tuesday, Hollings criticized proposed Powell policies.) “The chairman of the Senate Commerce Committee can be the best friend or worst nightmare of the FCC chairman,” said Reed Hundt, a senior adviser to McKinsey & Co., who was chairman of the commission from 1993 to 1997. “Through the power over the FCC budget and the power over legislation and the power of oversight, the chairman of the Senate Commerce Committee is more influential than anyone including the president,” he added. Asked if Powell could implement his reform agenda without the support of Hollings, Hundt shot back: “Can a camel pass through the eye of a needle?” Hundt is someone who should know about the trouble that can be caused by the opposing political party. He experienced the switch from Hollings to Sen. John McCain, R-Ariz., in 1994 when the GOP won control of Congress. Powell has yet to fully outline his reform agenda. But he is widely expected to champion several causes important to the dealmaking community, such as: Raising the cap on the percent of homes any single cable company may serve; Increasing the limit on the percent of households any single owner of television stations may reach; Dropping the ban on owning a television station and newspaper in the same market. MARKET-BASED SOLUTIONS He also wants to rationalize the agency’s approach to merger reviews. In a June speech to the Federal Communications Bar Association, Powell said he favors market-based solutions to problems because they invariably produce better results for consumers. “Contrary to the classic bugaboo that markets are just things that favor big business and big money, market policies have a winning record of delivering benefits to consumers that dwarfs the consumer record of government central economic planning,” he said. “Thus, if you are truly committed to serving the public interest, bet on a winner and bet on market policy.” His plans expand upon actions he already has taken. These include repealing the ban on the major broadcast networks from also owning a minor network such as UPN or WB and suspending a requirement that AT&T Corp. divest assets to get below the cable ownership cap. That latter decision was in response to a court ruling overturning the cable cap. Hollings, however, is adamantly opposed to reforms that increase concentration in the media sector. And he has a record of imposing his will on the agency, regardless of the view of the FCC chairman. Just ask anyone who follows Boston politics. Sen. Edward Kennedy, D-Mass., asked Hollings in 1987 to prevent Rupert Murdoch from owning both the Boston Herald and a local television station. The move received considerable attention because it was seen as an effort by Kennedy to punish Murdoch for some particularly critical coverage by the publisher’s New York Post. The deal eventually went through, but only after a court ruled that the FCC had to grant a waiver to the cross-ownership ban. POSITION OF INFLUENCE Hollings defended his rider prohibiting exemptions to the cross-ownership rule in a 1998 New York Times op-ed. “The objective merit of the cross-ownership rule is beyond dispute,” he wrote. “That rule prevents concentration of the media. It promotes diversity of opinion. And thereby it furthers freedom of speech and press.” In that same op-ed, Hollings argues that the government must closely oversee the airwaves. “The TV spectrum is scarce and enormously valuable,” he said. “It belongs to the people and the people’s representatives have a duty to safeguard freedom of speech and the public interest.” Andrew Schwartzman, president of the Media Access Project, said Hollings played a significant role in the late 1980s in restraining the FCC’s plan to let a single company own up to 24 television stations, 24 FM radio stations and 24 AM radio stations. Under strong pressure from Hollings and other lawmakers, the FCC eventually increased the cap to 12 of each type of license, up from seven. “Hollings has used his position to influence the FCC in the concentration area and the cable ownership area rather aggressively,” Schwartzman said. William Kennard, Powell’s immediate predecessor as FCC chairman, said Hollings has substantial sway because he not only serves as chairman of the Commerce committee but also because also sits on the Senate Appropriations subcommittee with jurisdiction over the FCC’s budget. “Hollings has extra clout,” said Kennard, who is now with Washington-based buyout firm The Carlyle Group. PUBLIC POLICY Kennard said he expects Powell will consult heavily with Hollings and other lawmakers, which is standard practice for an FCC chairman. And he predicted the two would get along quite well, though that does not mean smooth sailing for Powell’s regulatory agenda. “They may like each other, but policy is policy,” Kennard said. “We have in Fritz Hollings a person who has been chairman before and has policy views that he will fight for.” Even when he was in the minority, threats by Hollings were taken seriously. Last year he vowed to attach a rider to an appropriations bill to prevent the FCC from approving Deutsche Telekom AG from acquiring VoiceStream Wireless Corp. That threat from a lawmaker whose party was not even in control was seen as so serious that the National Chamber of Commerce and the Communications Workers of America — two groups that rarely agree on public policy debates — mounted a joint effort to stop him. Hollings did eventually back down. But lobbyists for the Chamber of Commerce were so concerned that he would sneak in an amendment to one of the final appropriations bills that they were busily checking legislation long after the issue should have been dead. Hollings and Powell declined to be interviewed. But in a series of interviews and speeches, Powell has tried to downplay the significance of the change in control of the Senate, saying he is a nonpartisan regulator. “We take pride in the independence of the FCC,” he said in June at the Supercomm 2001 convention in Atlanta. “I am not a member of the president’s administration. I am not a member of Congress.” MUCH ALIKE Speaking in late May to a group of reporters, Powell emphasized how well he gets along with lawmakers, including Hollings. “I don’t think there will be a dramatic evolution in policy,” Powell said. In fact, Powell and Hollings are much alike, despite being of different generations and party affiliations. They both have military backgrounds; Hollings served in Europe during World War II while Powell was stationed in Germany in the 1980s. They both also have developed cordial ties with Democrats and Republicans. Hollings and McCain have a strong relationship, introducing several bills together within the past year including a measure that would have given the Department of Transportation the right to reject some airline mergers. Powell has many strong Republican allies, including McCain and House Commerce Committee Chairman Billy Tauzin, who lobbied personally for Powell to get the FCC chairmanship. Plus his father, Secretary of State Colin Powell, has sway with both parties. Michael Powell also served in the Clinton administration’s Justice Department, working as chief of staff to Joel Klein, the assistant attorney general for antitrust. James H. Quello, an FCC commissioner for 26 years who also served a short stint as chairman, said Powell can be effective in this difficult political climate by moving slowly and keeping members of Congress, especially Hollings, informed of what he is doing. NO SWEEPING CHANGES So far, that is advice Powell appears to be heeding. Despite a federal appeals court decision rejecting the cable ownership cap, Powell has yet to move to invalidate the entire regulation. Instead the agency has begun a comprehensive review of whether the ownership limit should be set higher. (Only Congress could eliminate the cap entirely.) He also pulled from the agenda of a recent meeting a proposal to lift the ban on owning a newspaper and television station in the same market. The plan is expected to resurface at the end of the summer as a notice of proposed rulemaking, which means the agency is asking for comment about what to do with the rule rather than suggesting specific regulatory language. A notice of proposed rulemaking gives special interest groups, including consumer advocates, early input into the shaping of a policy. Powell also needs to pay close attention to what Congress intended when it passed the various ownership caps, according to Quello. “I told him to remember that you are implementing legislative action, not legislating,” Quello said. Such a course appears to rule out sweeping changes that some in the dealmaking community had expected. Yet communications industry experts like Quello said it ensures that at least some of what Powell wants to accomplish may get done. Copyright (c)2001 TDD, LLC. All rights reserved.

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