The Leader and the Damage Done

No sooner had the stardust started settling in Washington following the inaugural to celebrate George Bush’s second term in office when word came out that Michael Powell, chairman of the FCC during Bush’s first term, was retiring from his post. My initial response was, “Boy, that’s wonderful news, but about two years too late.” Powell has done more to set back the cause of competition in the telecommunications industry than any FCC chairman since divestiture.

In retrospect, it is understandable that Powell, being the son of his father (yes, that guy) was able finagle a Republican seat on the FCC during a Democratic administration. From Bill Clinton’s perspective, the original Powell nomination made political sense for obvious reasons. However, for Bush to elevate him to the chairmanship when he had so little leadership experience and had demonstrated such limited interpersonal skills was a major mistake. But when the powers that be were putting the first Bush administration together, the FCC post was not high up on the radar screen and time was of the essence. They chose the easy way out by promoting someone who had been approved by the Senate once before.

Outside the beltway, the Michael Powell legacy will probably be remembered in terms of his ardent and highly visible stand against indecency on the airwaves, including his reaction to the infamous Janet Jackson ‘wardrobe malfunction’ affair and Howard Stern’s antics. Inside the beltway, he likely will be remembered for a neverending series of political and administrative blunders committed while at helm of the FCC.

When he was nominated to be chairman, Powell was considered by many industry prognosticators to be in way over his head. And he went right on to prove his detractors correct as he managed to alienate other commissioners again and again with his ‘bull in the china shop’ approach to collegiality and human interaction.

Little-noticed nor long-remembered will be the devastating impact he had on the fate of competitive local telephone service. The fallout from his reign is just beginning. The next few years promise fewer competitors in the marketplace, coupled with less choice and higher prices for customers.

For most CLECs, he’ll be missed about as much as Darth Vader or Vlad the Impaler. From my observation post at the 50-yard line for a number of years, and in the bleachers lately, it is hard to imagine having had anyone worse for the interests of small and startup CLECs running the show than Michael Powell. Okay, maybe Ed Whitacre or Ivan Seidenberg, but some have argued that under Powell, they were effectively in charge anyway. Were it not for the brave stands of a number of other commissioners (including some from Powell’s own party) and the ability to regularly overturn his rulings in the courts, the competitive provision of local service could have been squashed by now. As it is, it’s on life support, particularly when it comes to the ability of small companies to compete. Looking out on the landscape today there seems to be little opportunity for them anymore.

Everything seems to fall back to the neverending argument over facilities-based competition. While this is the universally recognized long-term goal of the ’96 Telecom Act, Powell never seemed to accept the notion that there is more than one way to get there. When forced to contemplate a pro- CLEC policy, the Powell bias always has been towards the ‘build it now’ crowd. This approach has proven difficult to disastrous for many CLECs operating in an era where the ‘vision thing’ extends only so far as the next quarter’s numbers. Debt overload and pressure to achieve unrealistic timetables for success have proven to be a lethal one-two punch. Not only did they have to bulk up, but they also immediately must fill those pipes with traffic.

The other approach (and the one not favored by Powell) was to allow competitors to become viable by leasing, at significant discounts, unbundled network elements from the former monopoly providers until they reached a point where they could deploy their own facilities. Such competitors are better able to migrate to a facilities basis because they have cash flows and established customer bases ready to utilize their networks. This approach is particularly important if you want to create any opportunities for small businesses. Assuming you believe in this model - which Powell clearly did not - you have to have patience for it to play out. We had the model in long-distance. We knew it would take time. Instead, and due in large part to Powell-s unwillingness to find a way to make it work, we have abandoned the one form of local competition available to new market entrants that was actually growing and profitable - UNE-P.

What’s left out there for the startups? We seem to be on a path where, at best, handfuls of quasi (UNE-L-needy) facilitiesbased carriers may compete with the ILECs for business traffic on a regionalized basis. Residential consumers largely will be left out. Perhaps cable or wireless technology holds the key to robust local competition.

But, once again, the big boys seem to have locked up most of the facilities in those arenas, as well. What are we down to now - three or four national players in each market? How about VoIP? To me at this point, it’s still a roll of the dice. I just wonder if this technology has been stress-tested to the degree needed for reliability at least for business users. But I digress. Back to the man of the moment, Michael Powell. Most of the time, he just seemed to line up with the Bells. I have wracked my brain trying to think of instances when Powell favored the little guy.

I can think of times when he gave them lip service. I can remember him being finessed into supporting regulations that looked like he did. But without his active support they were doomed, either in the marketplace or the courts. I have often wondered why Powell seemed to dismiss the plight of the startups so easily. Of course, I understand Republicans have a welldeserved reputation as being the party of big businesses. But when did that translate into anti-small businesses? Don’t they realize that small businesses create most of the new job growth in this nation? Why couldn’t he have fashioned a policy that helped small competitors? Or maybe a policy that helped the big guys and the little guys at the same time.

Perhaps after reading this editorial, Powell or his apologists will send a letter to the editor listing all the outstanding initiatives he created or championed that were designed specifically to help small carriers compete for local service. Trouble is, no reseller I know will recognize them. If any of them are left to ponder the matter, that is.