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Late last month, President George W. Bush announced his intention to renominate Michael Powell, recently promoted chairman of the Federal Communications Commission, to a second term. So it seems a particularly timely moment to try to “crystal ball” the FCC under its new leadership. If past is prelude, then Powell will be taking a studied, objective, and practical approach to his job. On hearing of his pending renomination, Powell stated diplomatically that “if confirmed by the Senate, the extension of my term beyond next June’s expiration date will provide a positive and helpful continuity to the important work that I, and the new commissioners who will be taking office later this year, will be engaged in.” And, to be sure, there’s a lot of work going on. The same day that Powell made that statement, the FCC released the following: an order on rules for compensating carriers of Internet traffic, a subject of significant interest to Internet companies everywhere; an order concerning the access and charges that local telephone carriers should allow and collect; and an order approving the transfer of certain licenses in connection with the merger of Germany’s Deutsche Telekom with two U.S. companies (VoiceStream and Powertel). On the preceding day, Commissioner Susan Ness announced that she would leave the FCC by June 1 to facilitate the president’s announced intention to nominate three new FCC commissioners. To gauge how Powell and the FCC will approach these and other important issues, it is helpful to consider his stated legal and policy beliefs. In a speech delivered to the Progress and Freedom Foundation on Dec. 8, 2000, shortly before his nomination to the chairmanship, Powell stated that the Telecommunications Act of 1996 “left unchanged the balkanized regulatory treatment of different technologies and industries that existed in the Communications Act of 1934. Our greatest challenges today at the FCC are definitional. With increasingly converged services, it is difficult to rationally label and, thus, assign regulatory treatment to an innovative provider, product, or service. This graying diffusion of the legal structure, smudged by technological change, is at the forefront of the challenges facing policy-makers.” Powell defined convergence in that speech as the result of “computer systems working in parity with communications,” which have “spawned the Internet and the advanced networks we see today that fully integrate satellites, telephones, wireless devices, broadcasting and cable over fiber-optic, broadband and wireless networks.” He concluded that the regulatory “challenge” is to “leap from analog-rooted regulations to ones that are applicable and relevant to the digital environment.” A PRACTICAL INSTINCT On one level, Powell might appear to be a “conservative” — a constantly evolving term in the American political arena — in regard to the role of the FCC within our three branches of government. At his first press conference as chairman, when asked about various social programs pursued by his predecessor, William Kennard, Powell responded, “Congress and the people’s representatives can debate it anyway they want to, and my job principally is to implement what they choose.” Thus, taking Powell at his word, it seems unlikely that the FCC will initiate a crusade to remedy the perceived problems of society ostensibly within the purview of the federal communications statutes. But on another level, as Powell must know, it is neither possible nor desirable to have Congress legislate everything. The FCC, with its new chairman and new members, therefore, will have some flexibility to approach its mandate creatively. Indeed, there is recent evidence that Powell recognizes the practical imperative to use his position to help create and not simply implement policy: Just last week, he announced that he is advocating that Congress adopt increased fines for local phone companies that unfairly attempt to keep out competitors. Among the complex issues potentially on the FCC’s agenda that Powell will hopefully approach with this practical instinct are: whether to regulate the Internet and, if so, how; whether to adopt rules dealing with industry convergence; whether to regulate broadband services; whether to extend the universal service concept to emerging technologies like the Internet; what role to play in mergers subject to FCC review; and how far to regulate international telecommunications. Powell seems to have a good understanding of the role that the FCC can play in grappling with these issues. In 1999, he called the Internet “one of the most profound developments of our time, for it affects the most fundamental tenet of human civilization –communication.” Significantly, with regard to how he sees his role, Powell also said that the “important public policy question is not whether to regulate the Internet or not, as if that were a realistic choice. Rather, it is how to regulate it responsibly in a manner that maximizes consumer welfare and does not stunt its infinite growth and innovation potential.” That same year, Powell noted that policy-makers are “fast approaching moments of truth in which we will have to decide whether services similar to those traditionally offered over one medium should be regulated in the same manner as new services offered over another medium — or whether new services should be regulated at all.” SEEKING THE OPTIMUM When Powell talked in December 2000 about the critical challenges to the FCC being “definitional” because of the convergence between traditionally regulated communications and new unregulated technologies such as the Internet, he appears to have been focusing on two broad policy issues: First, how, if at all, to reorganize the current FCC bureau structure, which has evolved largely based on technologies that Congress has regulated (e.g., telephone, cable, wireless). And second, whether to regulate new technologies in the absence of a congressional mandate. On the question of bureaucratic restructuring, the chairman recently confirmed that “we are in the process of systematically reviewing and thinking through what is the optimal, organizational model for the commission.” It is one thing to talk about restructuring an existing structure and another to ascertain the “intent” of Congress as to how the FCC should handle new technologies. Powell is seen as more politically independent of the White House than his predecessor. President Bush, consistent with his “MBA” management style, is not likely to tell Powell — or even suggest to him — what the politically correct direction should be. Thus, Powell to a certain extent may have a “blank slate” to fill in as he and his fellow commissioners (the majority of whom will be new) see fit, based on input from Congress and interested members of the public. Those interested parties should include — in view of the convergence of traditional and nontraditional communications technologies –Internet-related industries that to date generally have avoided Washington, D.C., but that now face the challenging task of competing for input into the federal legislative and regulatory process with the powerful Baby Bells and other incumbents in the communications world. Powell can be expected to undertake the requisite new policy and legal analyses consistent with his underlying belief in the importance of free markets and competition. The chairman does not appear to be an ideologue but, rather, seems to want to objectively analyze complex situations and identify relevant issues. The days of a nonregulatory federal government — if indeed such days ever really existed — are long gone. Whatever his politics, Chairman Powell seems to have arrived at the practical conclusion that the FCC does, and will, need to exercise its regulatory authority.

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