Lord of the Ringtones: Arbocks vs. Seelecks

Gregory Alan Bolcer gbolcer@endeavors.com
Wed, 09 Oct 2002 18:49:59 -0700


I got to see Powell talk in March 2001 at the beginning of his
reign at the FCC.  He said they were going to take a real
hands off approach, so it's funny that they would blame
the regulators for causing the collapse.  One thing he did
get right, is that he wasn't worried that the US was behind
Europe in the wireless licensing spectrum.  This is something
very prescient in that most of those licensors have had to
eat their lunch over the huge licensing costs they paid for
very little benefit.  His legacy was/is supposed to be
rethinking the FCC's role to stay out of the way in this
period of business innovation in the wireless space as he
didn't want the government forcing business models onto
the private sector.

His full transcript is here [1].  Interestingly enough I
got to see his speech in person as he was part of the whole
CTIA'2001 Las Vegas keynote series of speakers.  Clay and
I hoped a flight out of Ontario to Las Vegas to do demo support
for Craig Barrett [2].  His message was that there's no difference
between wired and wireless Internet--it's all the same thing.
Instead of scalable networks, we should be thinking about scalable
content (& using Magi he showed sending a blue man tv commercial
from a desktop to a laptop to an ipaq to a color smartphone with
the content scaling back for each target platform).

The best part of the whole trip wasn't hobnobbing at all,
but really the fact that the Venetian had ran out of rooms.
They decided to put us up in one of their $10,000/night high
roller rooms.  They put Clay in one and me in another.
The Venetian is known for having the largest hotel rooms
anywhere, but these ones were bigger than my whole house. 8-)

Greg


[1] http://www.fcc.gov/Speeches/Powell/2001/spmkp101.html
[2] http://www.intel.com/pressroom/archive/speeches/cb20010320.htm

Rohit Khare wrote:
> I can't believe I actually read a laugh-out-loud funny profile of the 
> *FCC Commissioner* fer crissakes! So the following article comes 
> recommended, a fine explanation of Michael Powell's extraordinary 
> equivocation.
> 
> On the other hand, I can also agree with Werbach's Werblog entry... Rohit
> 
>> A Trip to F.C.C. World
>>
>> Nicholas Lemann has a piece in the New Yorker this week about FCC 
>> Chairman Michael Powell.  It's one of the first articles I've seen 
>> that captures some of Powell's real personality, and the way he's 
>> viewed in Washington.  Unfortunately, Lemann ends by endorsing 
>> conventional political wisdom.  After describing how Powell isn't 
>> really a fire-breathing ideological conservative, he concludes that, 
>> in essence, Powell favors the inumbent local Bell telephone companies, 
>> while a Democratic FCC would favor new entrants.  I know that's not 
>> how Powell sees the world, and though I disagree with him on many 
>> issues, I think he's right to resist the old dichotomy.
>>
>> The telecom collapse should be a humbling experience for anyone who 
>> went through it.  The disaster wasn't the regulators' fault, as some 
>> conservatives argue.  But something clearly went horribly wrong, and 
>> policy-makers should learn from that experience.  Contrary to Lemann's 
>> speculation, the upstart carriers won't be successful in a Gore 
>> administration, because it's too late.  Virtually all of them are 
>> dead, and Wall Street has turned off the capital tap for the 
>> foreseeable future.  Some may survive, but as small players rather 
>> than world-dominators. 
>>
>> The battle between CLECs and RBOCs that Lemann so astutely parodies is 
>> old news.  The next important battle in telecom will be between those 
>> who want to stay within the traditional boxes, and those who use 
>> different models entirely.  That's why open broadband networks and 
>> open spectrum are so important.  Whatever the regulatory environment, 
>> there is going to be consolidation in telecom.  Those left out in that 
>> consolidation will face increasing pressure to create new pipes into 
>> the home, or slowly die. The victors in the consolidation game will 
>> cut back on innovation and raise prices, which will create further 
>> pressure for alternatives. 
>>
>> Lemann is right that policy-making looks much drier and more ambiguous 
>> on the ground than through the lens of history.  But he's wrong in 
>> thinking that telecom's future will be something like its past.
>>
>> Friday, October 04, 2002
>> 11:17:11 AM  comments {0} 
> 
> 
> ==============================================================
> http://www.newyorker.com/printable/?fact/021007fa_fact
> 
> THE CHAIRMAN   
> by NICHOLAS LEMANN
> He's the other Powell, and no one is sure what he's up to.
> New Yorker, October 8, 2002
> 
> Last year, my middle son, in eighth grade and encountering his first 
> fairly serious American-history course, indignantly reported that the 
> whole subject was incomprehensible. I was shocked. What about Gettysburg 
> and the Declaration of Independence and the Selma-to-Montgomery march? 
> Just look at my textbook, he said, and when I did I saw his point. His 
> class had got up to the eighteen-forties. What I expected was a big 
> beefing up of the roles of Sacagawea and Crispus Attucks, and, in-deed, 
> there was some of that. But the main difference between my son's text 
> and that of my own childhood was that somebody had made the disastrous 
> decision to devote most of it to what had actually happened in American 
> history. There were pages and pages on tariffs and bank charters and 
> reciprocal trade agreements. I skipped ahead, past the Civil War, hoping 
> for easier going, only to encounter currency floats and the regulation 
> of freight rates. Only a few decades into the twentieth century did it 
> become possible to see the federal government's main function as 
> responding to dramatic crises and launching crusades for social justice, 
> instead of attempting to referee competing claims from economic interests.
> 
> Even now, if one were to reveal what really goes on behind the pretty 
> speeches and the sanctimonious hearings in Washington, what you'd find 
> is thousands of lawyers and lobbyists madly vying for advantage, not so 
> much over the public as over each other: agribusiness versus real 
> estate, banks versus insurance companies, and so on. The arena in which 
> this competition mainly takes place is regulatory agencies and 
> commissions and the congressional committees that supervise them. It's 
> an insider's game, less because the players are secretive than because 
> the public and the press—encouraged by the players, who speak in jargon—
> can't get themselves interested.
> 
> One corner of Washington might be called F.C.C. World, for the Federal 
> Communications Commission. F.C.C. World has perhaps five thousand 
> denizens. They work at the commission itself, at the House and Senate 
> commerce committees, and at the Washington offices of the companies that 
> the commission regulates. They read Communications Daily (subscription 
> price: $3,695 a year), and every year around Christmastime they 
> grumblingly attend the Chairman's Dinner, at a Washington hotel, where 
> the high point of the evening is a scripted, supposedly self-deprecating 
> comedy routine by the commission's chairman.
> 
> Of all the federal agencies and commissions, the F.C.C. is the one that 
> Americans ought to be most interested in; after all, it is involved with 
> a business sector that accounts for about fifteen per cent of the 
> American economy, as well as important aspects of daily life—telephone 
> and television and radio and newspapers and the Internet. And right now 
> F.C.C. World is in, if not a crisis, at least a very soapy lather, 
> because a good portion of what the angry public thinks of as the 
> "corporate scandals" concerns the economic collapse of companies 
> regulated by the F.C.C. Qwest, WorldCom, Adelphia, and Global Crossing, 
> among others, are (or were) part of F.C.C. World. AOL Time Warner is 
> part of F.C.C. World. Jack Grubman, the former Salomon Smith Barney 
> analyst who seems to have succeeded Kenneth Lay, of Enron, as the 
> embodiment of the corporate scandals, is part of F.C.C. World. In the 
> past two years, companies belonging to F.C.C. World have lost trillions 
> of dollars in stock-market valuation, and have collectively served as a 
> dead weight pulling down the entire stock market.
> 
> This year, an alarmed and acerbic anonymous memorandum about the state 
> of the F.C.C. has been circulating widely within F.C.C. World. It evokes 
> F.C.C. World's feverish mood ("The F.C.C. is fiddling while Rome burns") 
> and suggests why nobody besides residents of F.C.C. World has thought of 
> the commission in connection with the corporate scandals. The sentence I 
> just quoted is followed by this explanation: "The ILECs appear likely to 
> enter all l.d. markets within twelve months, while losing virtually no 
> residential customers to attackers since 1996, and suffering about 10% 
> market share loss in business lines to CLECs." It's a lot easier to 
> think about evil C.E.O.s than to decipher that.
> 
> 
> Even in good times, F.C.C. World pays obsessive attention to the 
> commission's chairman. In bad times, the attention becomes especially 
> intense; and when the chairman is a celebrity F.C.C. World devotes 
> itself to full-time chairman-watching. The current chairman, Michael 
> Powell, is a celebrity, at least by government-official standards, 
> because he is the only son of Colin Powell, the Secretary of State. 
> Unlike his father, he has a kind of mesmerizing ambiguity, which 
> generates enormous, and at times apoplectically toned, speculation about 
> who he really is and what he's really up to. Powell is young to be the 
> head of a federal agency—he is thirty-nine—and genially charming. 
> Everybody likes him. Before becoming chairman, he was for three years 
> one of the F.C.C.'s five commissioners; not only is he fluent in the 
> F.C.C.'s incomprehensible patois, he has a Clintonesque love of the 
> arcane details of communications policy. He's always saying that he's an 
> "avid moderate." And yet he has a rage-inciting quality. One of his 
> predecessors as chairman, Reed Hundt, quoted in Forbes, compared Powell 
> to Herbert Hoover. Mark Cooper, of the Consumer Federation of America, 
> calls him "radical and extreme." Just as often as he's accused of being 
> a right-wing ideologue, Powell gets accused of being paralytically 
> cautious. "It ain't about singing 'Kum-Ba-Yah' around the campfire," 
> another former chairman, William Kennard, says. "You have to have an 
> answer." One day last spring, Powell, testifying before a Senate 
> subcommittee, delivered an anodyne opening statement, and the 
> subcommittee's chairman, Ernest Hollings, of South Carolina, berated 
> him. "You don't care about these regulations," Hollings said. "You don't 
> care about the law or what Congress sets down. . . . That's the 
> fundamental. That's the misgiving I have of your administration over 
> there. It just is amazing to me. You just pell-mell down the road and 
> seem to not care at all. I think you'd be a wonderful executive 
> vice-president of a chamber of commerce, but not a chairman of a 
> regulatory commission at the government level. Are you happy in your job?"
> 
> "Extremely," Powell said, with an amiable smile.
> 
> 
> One cannot understand Powell's maddening effect, at least on Democrats 
> and liberal activists, without understanding not just the stated purpose 
> of the commission he chairs but also its real purpose. The F.C.C. was 
> created by Congress in 1934, but it existed in prototype well before the 
> New Deal, because it performs a function that is one of the classic easy 
> cases for government intervention in the private economy: making sure 
> that broadcasters stick to their assigned spots on the airwaves. Its 
> other original function was preventing American Telephone & Telegraph, 
> the national monopoly phone company, from treating its customers 
> unfairly. Over the decades, as F.C.C. World grew up into a comfortable, 
> well-established place, the F.C.C. segued into the role of industrial 
> supervision—its real purpose. It was supposed to manage the competition 
> among communications companies so that it didn't become too bloody, by 
> artfully deciding who would be allowed to enter what line of business. 
> In addition to looking out for the public's interest, the commission 
> more specifically protected the interests of members of Congress, many 
> of whom regard the media companies in their districts as the single most 
> terrifying category of interest group—you can cross the local bank 
> president and live to tell the tale, but not the local broadcaster. 
> According to an oft-told F.C.C. World anecdote, President Clinton once 
> blocked an attempt to allow television stations to buy daily newspapers 
> in the same city because, he said, if the so-and-so who owned the 
> anti-Clinton Little Rock Democrat-Gazette had owned the leading TV 
> station in Little Rock, too, Clinton would never have become President.
> 
> 
> F.C.C. World may have been con tentious, but it was settled, too, 
> because all the reasonably powerful players had created secure economic 
> niches for themselves. Then, in the nineteen-eighties, the successful 
> breakup of A.T. & T.—by far the biggest and most important company the 
> commission regulated—deposited a thick additional sediment of 
> self-confidence onto the consciousness of F.C.C. World. A generation 
> ago, for most Americans, there was one local phone company, one 
> long-distance company, and one company that manufactured telephones, 
> which customers were not permitted to own—and they were all the same 
> company. It was illegal to plug any device into a phone line. By the 
> mid-nineteen-nineties, there were a dozen economically viable local 
> phone companies, a handful of national long-distance companies competing 
> to offer customers the lowest price and best service, and stores 
> everywhere selling telephone equipment from many manufacturers—and 
> millions of Americans had a fax machine and a modem operating over the 
> telephone lines. A.T. & T. had argued for years that it was a "natural 
> monopoly," requiring protection from economic competition and total 
> control over its lines. So much for that argument. Over the same period, 
> the F.C.C. had assisted in the birth of cable television and cell phones 
> and the Internet. It was the dream of federal-agency success come true: 
> consumers vastly better served, and the industry much bigger and more 
> prosperous, too.
> 
> The next big step was supposed to be the Telecommunications Act of 1996, 
> one of those massive, endlessly lobbied-over pieces of legislation which 
> most people outside F.C.C. World probably felt it was safe to ignore. 
> Although the Telecom Act sailed under the rhetorical banner of 
> modernization and deregulation, its essence was a grand interest-group 
> bargain, in which the local phone companies, known to headline writers 
> as "baby Bells" and to F.C.C. World as "arbocks" (the pronounced version 
> of RBOCs, or regional Bell operating companies), would be permitted to 
> offer long-distance service in exchange for letting the long-distance 
> companies and smaller new phone companies use their lines to compete for 
> customers. Consumers would win, because for the first time they would 
> get the benefits of competition in local service while getting even more 
> competition than they already had in long distance. But the politics and 
> economics of the Telecom Act (which was shepherded through Congress by 
> Vice-President Gore) were just as important. Democrats saw the act as 
> helping to reposition them as the technology party—the party that 
> brought the Internet into every home, created hundreds of thousands of 
> jobs in new companies, and, not least, set off an investment boom whose 
> beneficiaries might become the party's new contributor base. Clinton's 
> slogans about the "information superhighway" and "building a bridge to 
> the twenty-first century," which, like all Clinton slogans, artfully 
> sent different messages to different constituencies, were the rhetorical 
> correlates of the Telecom Act, and Gore's cruise to the Presidency was 
> supposed to be powered substantially by the act's success.
> 
> The F.C.C. had a crucial role in all this. The arbocks are rich, 
> aggressive, politically powerful, and generally Republican (though like 
> all important interest groups they work with both parties); they 
> immediately filed lawsuits, which wound up tying the hands of their new 
> competitors in the local phone market for more than three years. Through 
> rule-making, enforcement, and litigation, the F.C.C., then headed by 
> Reed Hundt, who was Gore's classmate at St. Albans, was supposed to keep 
> the arbocks in their cages, so that not only long-distance companies 
> like A.T. & T. and MCI WorldCom but also a whole category of new 
> companies, "see-lecks" (the pronounced version of CLECs, or competitive 
> local exchange carriers), could emerge. This entailed the regulatory 
> equivalent of hand-to-hand combat: the see-leck is supposed to have 
> access to the arbock's switching equipment, the arbock won't give the 
> seeleck a key to the room where it's kept, so the see-leck asks the 
> F.C.C. to rule that the arbock has to give it the key.
> 
> Partly because Hundt assured the see-lecks and other new companies that 
> he would protect them, and partly because of the generally booming 
> condition of the economy then, investment capital flooded into the 
> see-lecks—companies with names like Winstar, Covad, and Teligent—and 
> into other telecommunications companies. Even not obviously related 
> technology companies like Cisco Systems benefitted from the telecom 
> boom: demand for their products was supposed to come from the see-lecks 
> and other new players. There would be no conflict between the interests 
> of the new telecom companies and those of consumers; as one of Hundt's 
> former lieutenants told me, "Reed used to joke that my job was to make 
> sure that all prices went down and all stocks went up."
> 
> 
> The years following the passage of the Telecom Act were the peak of the 
> boom. Wall Street had its blood up, and that meant not just more 
> startups but also more mergers of existing communications companies: 
> Time Warner and AOL decided to throw in together, and A.T. & T. and 
> Comcast, and so on. (Surely, WorldCom and the other telecom bad guys 
> believed that their self-dealing, stock-overselling, and creative 
> accounting would go unnoticed because the market was so undiscriminating.)
> 
> By the time the outcome of the 2000 Presidential election had been 
> determined, the telecom crash was well under way. Nonetheless, the 
> chairmanship of the F.C.C. remained one of the best jobs, in terms of 
> influence and visibility, available to a career government regulator. 
> Three Republicans emerged as candidates: Powell, who was a commissioner; 
> Harold Furchtgott-Roth, the farthest-to-the-right commissioner; and 
> Patrick Wood, the head of the Texas Public Utility Commission and, as 
> such, a George W. Bush guy. In Texas, however, Wood had crossed the most 
> powerful person in the arbock camp, Edward Whitacre, the C.E.O. of 
> S.B.C. Communications, which is headquartered in San Antonio. This meant 
> that the arbocks didn't want Wood as head of the F.C.C., because he 
> might be too pro-see-leck. (Wood is now the head of the Federal Energy 
> Regulatory Commission.) Michael Powell had to signal the arbocks that he 
> wasn't as threatening as Wood, while also signalling the conservative 
> movement that he was only negligibly farther to the left than 
> Furchtgott-Roth.
> 
> Powell did this deftly. For example, in December of 2000 he appeared 
> before a conservative group called the Progress & Freedom Foundation and 
> gave a very Michael Powell speech—whimsical, intellectual, and 
> free-associative (Biblical history, Joseph Schumpeter, Moore's Law)—that 
> began by making fun of the idea that the F.C.C. should try to keep new 
> telecom companies alive. "In the wake of the 1996 Act, the F.C.C. is 
> often cast as the Grinch who stole Christmas," Powell said. "Like the 
> Whos, down in Who-ville, who feast on Who-pudding and rare Who-roast 
> beast, the communications industry was preparing to feast on the 
> deregulatory fruits it believed would inevitably sprout from the Act's 
> fertile soil. But this feast the F.C.C. Grinch did not like in the 
> least, so it is thought." Thus Powell was indicating that if he became 
> chairman he didn't expect to administer first aid to the see-lecks as 
> part of the job. He was appointed to the chairmanship on the first day 
> of the Bush Administration.
> 
> Twenty months into the Administration, nearly all the see-lecks are dead 
> or dying; nearly all long-distance companies, not just WorldCom, are in 
> serious trouble; cable companies have lost half their value; satellite 
> companies are staggering. The crash has had an automatically 
> concentrating effect, because as new companies die the existing 
> companies' market share increases, and, if the existing companies are in 
> good shape financially, they have the opportunity to pick up damaged 
> companies at bargain prices. During the Bush Administration, as the 
> financial carnage in communications has worsened, the communications 
> industry has moved in the direction of more concentration. If the Bells 
> wind up protecting their regional monopolies in local phone service, and 
> if they also merge, the country will be on its way to having a national 
> duopoly in local service: Verizon, in the East, and S.B.C., in the West. 
> And these companies could dominate long distance as well, because of the 
> poor health of the long-distance companies.
> 
> The cable business also seems close to having two dominant national 
> companies, AOL Time Warner and Comcast. Unlike the phone companies, they 
> don't have to share their wiring with other companies and so can more 
> fully control what material they allow to enter people's homes. As part 
> of the complicated bargaining with interest groups that led to the 1996 
> Telecom Act, the limits on concentration in the radio industry were 
> significantly loosened, and in the past six years the number of 
> radio-station owners in the United States has been cut by twenty-five 
> per cent; today, a large portion of local and national radio news 
> programming is supplied by a single company, Westwood One, a subsidiary 
> of Viacom.
> 
> In this situation, many Democrats and liberals think, the F.C.C. should 
> be hyperactive—the superhero of government regulation, springing to the 
> rescue of both consumers and the communications industry. It should try 
> to breathe life into the see-lecks and other new companies. It should 
> disallow mergers, maintain ownership limits, and otherwise restrain the 
> forces of concentration. It should use the government's money and muscle 
> to get new technology—especially fast Internet connections—into the 
> homes of people who can't afford it at current market prices. (An 
> analogy that a lot of people in F.C.C. World make is between telecom and 
> the Middle East: the Clinton people blame the bloodshed on the Bush 
> people, because they disengaged when they came into office, and the Bush 
> people blame it on the Clinton people, because they raised too many 
> expectations and stirred too many passions.)
> 
> But Michael Powell's F.C.C. has not been hyperactive. Powell has been 
> conducting internal policy reviews and reforming the management of the 
> F.C.C. and waiting for the federal courts and the Congress to send him 
> signals. (In mid-September, Powell finally initiated a formal review of 
> the F.C.C.'s limits on media concentration.) This doesn't mean he has 
> been inactive; rather, he has been active in a way that further 
> infuriates his critics—in a manner that smoothly blends the genial and 
> the provocative, he muses about whether the fundamental premises of 
> F.C.C. World really make sense, while giving the impression that he's 
> having the time of his life as chairman. At his first press conference, 
> when he was asked what he was going to do about the "digital 
> divide"—that is, economic inequality in access to the Internet—he said, 
> "You know, I think there is a Mercedes divide. I'd like to have one and 
> I can't afford one." At the National Cable & Telecommunications 
> Association convention, in Chicago, Powell, following a troupe of 
> tumblers to the stage, interrupted his walk to the podium to perform a 
> somersault.
> 
> 
> Not long ago, I went to see Powell in his office at the F.C.C. Until 
> 1998, when the commission moved to a new building in Southwest 
> Washington, near the city's open-air fish market, F.C.C. World was at 
> the western edge of downtown, where everybody would encounter everybody 
> else at a few familiar restaurants and bars. Today, the F.C.C. building 
> looks like the office of a mortgage company in a suburban office park. 
> Even the chairman's suite, though large, is beige, carpeted, and 
> fluorescent. Powell is a bulky man who wears gold-rimmed glasses and 
> walks with a pronounced limp, the result of injuries he suffered in a 
> jeep accident in Germany, in 1987, when he was an Army officer. Because 
> of the accident, he left the Army and went to law school, where he 
> became entranced with conservative ideas about regulation, particularly 
> the idea that the government, rather than trying to correct the flaws of 
> the market before the fact—"prophylactically," as he likes to say—should 
> wait till the flaws manifest themselves and then use antitrust 
> litigation to fix them. He worked briefly at a corporate law firm, and 
> then became a protégé of Joel Klein, the head of the antitrust division 
> of the Clinton Justice Department and the man who led the government's 
> legal case against Microsoft. (He was recently appointed chancellor of 
> the New York public-school system.) It testifies to Powell's political 
> skill that he is probably the only high official in the Bush 
> Administration who not only served in the Clinton Administration but 
> also maintains close ties to Bush's nemesis Senator John McCain, of 
> Arizona. One of the things about Powell that annoy people is his 
> enduring love of law school—"It's sort of like a law-school study 
> session over there," one Democratic former commissioner said. As if to 
> confirm the charge, Powell, when I arrived, introduced me to four law 
> students, summer interns at the commission, whom he'd invited to sit in.
> 
> I began by asking Powell whether he agreed with the founding assumptions 
> of the F.C.C. For example, could private companies have apportioned the 
> airwaves among themselves without the government being involved?
> 
> "I think we'll never know," Powell said. "I don't think it's an 
> automatically bad idea, the way some people will argue. Land is probably 
> the best analogue. We don't seize all the land in the United States and 
> say, 'The government will issue licenses to use land.' If my neighbor 
> puts a fence one foot onto my property line, there's a whole body of law 
> about what I can do about that, including whether I can tear it down. If 
> a wireless company was interfering with another wireless company, it's a 
> similar proposition. There are scholars who argue—indeed, the famous 
> Ronald Coase treatise that won the Nobel Prize was about this—that 
> spectrum policy is lunacy. The market could work this out, in the kinds 
> of ways that we're accustomed to."
> 
> Talking to Powell was fun. Unlike most high government officials, he 
> doesn't seem to be invested in appearing dignified or commanding. He 
> slumps in his chair and fiddles with his tie and riffs. He speaks in 
> ironic air quotes. He's like your libertarian friend in college who 
> enjoyed staying up all night asking impertinent rhetorical questions 
> about aspects of life that everybody else takes for granted but that he 
> sees as sentimental or illogical. After a while, I asked him whether he 
> thought his predecessors' excitement about the 1996 Telecommunications 
> Act had been excessive.
> 
> "I would start with a caveat," Powell said. "Look, I can't fault those 
> judgments in and of themselves, given the time and what people thought. 
> They were not the only ones who were hysterical about the opportunities. 
> But, frankly, I've always been a little bit critical. First of all, 
> anybody who works with the act knows that it doesn't come anywhere close 
> to matching the hyperbole that was associated with it, by the President 
> on down, about the kinds of things it's going to open up. I mean, I 
> don't know what provisions are the information-superhighway provisions, 
> or what provisions are so digitally oriented, or some of the things that 
> were a big part of the theatre of its introduction. When one starts 
> reading the details, one searches, often in vain, for these provisions. 
> But, nonetheless, there was a rising dot-com excitement, and an Internet 
> excitement, and people thought this was historic legislation, and it 
> certainly was.
> 
> "But. We were sucking helium out of balloons, with the kinds of 
> expectations that were being bandied around, and this is before the 
> economy or the market even gets in trouble. It was a dramatically 
> exaggerated expectation—by the leadership of the commission, by 
> politicians, by the market itself, by companies themselves. It was a 
> gold rush, and led to some very detrimental business decisions, ones 
> that government encouraged by its policies, frankly. Everybody wanted to 
> see numbers go up on the board."
> 
> Powell began imitating an imagined true believer in the Telecom Act. " 
> 'I want to see ten competitors. Twenty competitors! I want to see 
> thirty-per-cent market share. Fifty-per-cent market share! I want the 
> Bells to bleed! Then we'll know we've succeeded.' " Now Powell returned 
> to being Powell. "I think that expectation was astonishingly 
> unrealistic, in the short term. They wanted to see it while they're 
> there. We were starting to get drunk on the juice we were drinking. And 
> the market was getting drunk on the juice we were drinking. There's no 
> question, we went too soon too fast. Too many companies took on too much 
> debt too fast before the market really had a product, or a business model."
> 
> How could the Telecom Act have been handled better? "We could have 
> chosen policies that were less hellbent on a single objective, and were 
> slightly more balanced and put more economic discipline in the system," 
> Powell said. "Money chased what seemed like government-promised 
> opportunity. The problem with that is there's a morning after, and we're 
> in it. And the problem is there is no short fix for this problem. This 
> debt is going to take years to bring down to a realistic level. In some 
> ways, for short-term gain, we paid a price in long-term stability."
> 
> Powell went on to say that it might have turned out differently if there 
> had been a more "reasonable" level of investment. "No, we wouldn't have 
> every home in America with competitive choice yet—but we don't anyway. I 
> don't think it's the remonopolization of telephone service. I don't buy 
> that. The Bells will prosper, but did anybody believe they wouldn't? The 
> part of the story that didn't materialize was that people thought so 
> would MCI WorldCom and Sprint."
> 
> Other local phone companies, he added, hadn't materialized as viable 
> businesses, either, and they never might. "Everybody's always saying, 
> 'The regulators did this and this and this.' But, candidly, the story's 
> quite the opposite. I think the regulators bent over backward for six 
> years to give them a chance. Conditions don't get that good except once 
> every thirty years, and it didn't happen. So, whatever the reason, we're 
> looking at a WorldCom that's teetering. We're looking at a long-distance 
> business that has had a rapid decline in its revenue base. A.T. & T. is 
> breaking itself up. Sprint has struggled."
> 
> Could the F.C.C. have done anything to make the long-distance companies 
> stronger? "At the F.C.C.? I think I'll just be blunt. My political 
> answer? Yes, there's all kinds of things we can do at the margin to try 
> to help. But I can't find thirty billion dollars for WorldCom somewhere. 
> I can't mitigate the impacts of an accounting scandal and an S.E.C. 
> investigation. Were I king, it would be wonderful, but I don't have 
> those kinds of levers. I don't know whether anybody does. At some point, 
> companies are expected to run themselves in a way that keeps them from 
> dying." Powell couldn't have made it much clearer that he doesn't think 
> it's his responsibility to do anything about the telecom crash. He has 
> demonstrated his sure political touch by making accommodationist 
> gestures—in August, for example, five months after disbanding the 
> F.C.C.'s Accounting Safeguards Division, Powell announced that he was 
> appointing a committee to study accounting standards in the 
> communications industry. But that shows that Powell is better at riding 
> out the storm than, say, Harvey Pitt, his counterpart at the Securities 
> and Exchange Commission, and does not mean that he plans to try to shore 
> up the telecom industry.
> 
> I asked Powell if it would bother him if, for most people, only one 
> company provided cable television and only one provided local phone 
> service. "Yes," he said. "It concerns us that there's one of each of 
> those things, but let's not diminish the importance of there being one 
> of each of those things. That still is a nice suite of communications 
> capabilities, even if they aren't direct analogues of each other." 
> Anyway, Powell said, before long the phone companies will be able to 
> provide video service over their lines, and the cable companies will 
> provide data service over their lines, so there will be more choice. 
> "So, yeah, we have this anxiety: we have one of everything. The question 
> is, Does it stay that way?"
> 
> The concentration of ownership and the concentrated control of 
> information did not appear to trouble Powell, either. He said that 
> people confuse bigness, which brings many benefits, with concentration, 
> which distorts markets. "If this were just economics, it's easy. If you 
> were to say to me, 'Mike, just worry about economic concentration,' we 
> know how to do that—the econometrics of antitrust. I can tell you when a 
> market's too concentrated and prices are going to rise. The problem is 
> other dimensions, like political, ideological, sometimes emotional. Take 
> the question of, if everybody's controlling what you see, the assumption 
> there is that somehow there'll be this viewpoint, a monolithic 
> viewpoint, pushed on you by your media and you won't get diversity. I 
> think that's a possibility. I don't think it's nearly the possibility 
> that's ascribed to it sometimes."
> 
> Powell explained, "Sometimes when we see very pointed political or 
> parochial programming, it gets attacked as unfair. I see some of the 
> same people who claim they want diversity go crazy when Rush Limbaugh 
> exists. They love diversity, but somehow we should run Howard Stern off 
> the planet. If it has a point of view, then it becomes accused of bias, 
> and then we have policies like"—here his tone went from ironic to 
> sarcastic—"the fairness doctrine, which seems to me like the antithesis 
> of what I thought those people cared about. So when somebody is pointed 
> and opinionated, we do all this stuff in the name of journalistic 
> fairness and integrity or whatever, to make them balance it out."
> 
> 
> F.C.C. World abounds in theories about Michael Powell. One is that he 
> can't make up his mind about how to address the crisis in the industries 
> he regulates—so he talks (and talks and talks) flamboyantly about the 
> market, in order to buy himself time. Another is that he's carrying 
> water for the arbocks and the big cable companies. Another is that he is 
> planning to run for the Senate from Virginia (or to be appointed 
> Attorney General in a second Bush term), and doesn't want to do anything 
> at the F.C.C. that would diminish his chances. Another is that he's 
> waiting to move until there is more consensus on some course of action, 
> so that he doesn't wind up going first and getting caught in the 
> crossfire between the arbocks and the cable companies and the television 
> networks. (In F.C.C. World, this is known as the Powell Doctrine of 
> Telecom, after Colin Powell's idea that the United States should never 
> commit itself militarily without a clear objective, overwhelming force, 
> and an exit strategy.) And another is that he actually believes what he 
> says, and thinks the telecommunications crash is natural, healthy, and 
> irreversible, and more concentration would be just fine.
> 
> "This is why elections matter," Reed Hundt, who isn't happy about what 
> has become of his Telecom Act, told me. It's true that the F.C.C.—much 
> more than, say, the war in Afghanistan—is a case in which a Gore 
> Administration would be acting quite differently from the Bush 
> Administration. Consumers might have noticed the difference by now, but 
> there's no question whether communications companies have noticed. The 
> arbocks are doing better against their internal rivals than they would 
> have done if Gore had won. Next election, they'll help the party that 
> helped them. If the Republicans win, policy will tilt further in the 
> arbocks' favor. If they lose, perhaps the arbocks' rivals—the 
> long-distance companies and the telecommunications upstarts—with their 
> friends now in power, will stage a comeback. America's present is not 
> unrecognizably different from America's past.
> 
> 


-- 
Gregory Alan Bolcer, CTO  | work: +1.949.833.2800
gbolcer at endeavors.com  | http://endeavors.com
Endeavors Technology, Inc.| cell: +1.714.928.5476