By Roy Mark

January 21, 2005

UPDATED: Regulatory chief leaves controversial legacy on telecom and Internet issues.

UPDATED: Federal Communications Commission (FCC) Chairman Michael K. Powell announced today he is leaving the powerful independent agency in March. In his resignation letter to President Bush, Powell said he was stepping down with a “mixture of pride and regret.”

“Having completed a bold and aggressive agenda, it is time for me to pursue other opportunities and let someone else take the reins of the agency,” Powell stated in the letter. “The seeds of our policies are taking firm root in the marketplace and are starting to blossom.

“During my tenure, we worked to get the law right in order to stimulate innovative technology that puts more power in the hands of the American people, giving them greater choices that enrich their lives,” Powell continued in his letter. “Evidence of our success can be seen increasingly in the offices, the automobiles and the living rooms of the American consumer.”

He gave no indication of his future plans other than spending some time with his family. In addition to opportunities in the private sector, Powell has been mentioned as a possible Virginia gubernatorial candidate.

Powell was appointed to a Republican seat on the FCC by President Clinton in 1997, only one year after Congress passed the landmark 1996 Telecommunications Act. President Bush selected him as chairman in 2001, replacing Democrat William Kennard.

Powell and the Republican majority that gained control of the FCC following Bush’s 2000 election brought a different and often controversial approach to telecommunications and the Internet. Powell aggressively supported moving voice, video and data transmissions away from the copper legacy networks of the Bells to a variety of minimally regulated broadband platforms.

Often accused by consumer groups of serving the Bells’ interests, Powell said competition, particularly in the then nascent broadband industry, was better served by multiple platforms providing bundled packages than the Kennard approach to mandating that the Bells provide open access at government-mandated prices to all competitors. The courts repeatedly sided with Powell.

Word of Powell’s resignation spread quickly throughout Washington Friday morning and brought a flurry of both positive and negative statements on his four-year tenure as chairman.

“For four years, Chairman Powell fought hard to promote competition and deregulation in key parts of the telecommunications arena,” U.S. Rep. Cliff Stearns, a member of the House Subcommittee on Telecommunications and the Internet, said in his statement. “It was a difficult job that often made him a target for criticism, but I believe [his] leadership on many of these issues will serve the industry and American consumers very well in the years to come.”

Steve Largent, president and CEO of the Wireless Association, heaped similar praise on Powell.

“When Michael Powell assumed the role of chairman on January 22, 2001, there were roughly 130 million wireless subscribers in America. Today, there are nearly 175 million — more than half of the entire country,” Largent said. “Consumers were always Michael’s top priority, and he knew instinctively that they were best served when free and competitive markets were permitted to function. Michael did not allow the flawed policies of the past to burden our future, and for that he should be congratulated.”

Harris Miller, president of the Information Technology Association of America, said the Powell legacy would be marked by “diminishing choices” for both the IT industry and consumers.

“Though Chairman Powell has been an advocate for allowing new technologies to come to market, he leaves a far more consolidated communications marketplace than when he began,” Miller stated. “Business users and consumers have fewer alternatives because of his policies. Assuring affordable access to innovative services and applications over the resulting bottleneck networks will be a significant challenge.”

Under Powell the FCC passed rules classifying broadband via cable modem as an information service and not subject to the same heavy regulatory burdens of the Bells. The decision freed the cable industry from regulations that typically are applied to telecommunications services, including making access to their lines available to competing ISPs.

The Bells, ISPs and consumer groups almost immediately challenged the FCC ruling as giving preferential treatment to one competitor over another. The case is now pending before the U.S. Supreme Court.

A year later, the FCC gave the Bells a deal similar to the cable broadband break, granting the incumbent telephone companies regulatory relief from their sharing high-speed fiber broadband lines with competitors. The FCC, against Powell’s wishes, also said the Bells had to continue to lease their copper lines to ISPs at discounted rates for at least another three years.

Powell wanted to eliminate both the local service and broadband competition requirements on the Bells, a position also favored by fellow Republican Kathleen Abernathy. But Kevin Martin, also a Republican, denied Powell a majority on the five-person FCC when he convinced Democrats Michael Copps and Jonathan Adelstein to support his plan to give the state public utility commissions the power to make deregulatory decisions about the Bells’ local service requirements.

The courts ultimately rejected the line-sharing provisions of the decision, leaving the agency with its current task of bringing the incumbents and its competitors together to negotiate a new deal.

By 2004, Powell moved the FCC to clear regulatory hurdles to provide broadband platforms to compete against telephone and cable companies, approving rules for the commercial deployment of broadband over power lines (BPL) and making additional spectrum available for wireless broadband.

“We talk so often about competition,” Powell said after the decision. “Well here it is. All economists will tell you that magic happens when you find a third way. Just a few short years ago, critics argued that competition for the ‘last mile’ would never become a reality, because no one could duplicate or bypass the telephone line that ran from the curb into the home. BPL provides us with a potential new competitor in the broadband market.”

Powell has also been a champion of shielding IP-based services such as Voice over IP from traditional state and federal regulations. In November 2004, the FCC ruled VoIP an interstate service exempt from traditional state rules and tariffs.