Outgoing FCC Chairman Powell Talks Telecom, Networking

Editor's note: At the recent Silicon Flatirons conference in Boulder, Colo., Federal Communications Commission chairman Michael Powell held a wide-ranging discussion with a small group of reporters, covering topics ranging from the achievements of his tenure atop the FCC, as well as the future of telecom regulation. The following are Powell's responses to questions and topics posed by the group of reporters:

On the Verizon-MCI deal:

Since the recent string of big mergers all still need to be reviewed by the FCC, Powell said he "reserves judgement" on individual deals. However, he did say that "there has been an expectation for a long time that there would be [telecom] market restructure."

Where the government erred, Powell said, was in not allowing such "vertical" mergers (between local and long-distance providers) to take place earlier.

"My view is that years ago, the government erred in restraining these kinds of mergers," Powell said. "If the statute hadn't prohibited it, we might now have four or five such competitive players in the market."

The planned mergers and their money totals, Powell added, shows how the overall telecom market has changed dramatically in the past few years. Comparing the $35 billion total of the Sprint-Nextel agreement with Verizon's almost $7 billion buyout of MCI represents a "hell of a change" from when wireline businesses were dominant, he said.

"That [the deal sizes] tells you a lot about [market] valuation," Powell said.

On technology's ability to help shape telecom regulation reform:

"I'm incredibly optimistic, bullish and excited," Powell said. "There's another player in the room and it's called technology. It's not a person, it doesn't have a soul, and it doesn't care that it's ripping up the way we've done it. And there's nothing to stop it."

Technological innovation, Powell said, can and will change the market even if legislators and regulators resist.

"The laws of physics keep tearing things apart," Powell continued. "I don't think that [regulatory] change is dependent on lawyers. We do need some [regulatory reform] but even if we did nothing the world is going to change anyway. You're not going to stop a Shawn Fanning, or a Jeff Citron -- it's an innovator's paradise. You can either catch the wave, or get run over by it."

While Powell did agree that being an innovator like Fanning (with Napster) or Citron didn't guarantee success, he argued that successful or not, their work had changed things in ways that laws or regulations couldn't stop.

"The early innovators don't always end up as the big winners," Powell said, noting that Microsoft has done pretty well as a follower of early innovation. "But Shawn did change music forever."

On whether or not Congress can comprehend the changes in telecom and the need for regulatory reform:

"It's generational," Powell said. "This stuff is not for us. We may have laptops and PDA phones but the first real digital generation is our children. And they are just arriving."

In Congress, Powell said, age will make a difference in the types of legislation created.

"If you look toward younger members, like John Sununu, or Maria Cantwell, who worked at RealNetworks, you will see a sea change," Powell predicted.

Powell also noted that the Supreme Court has "a lot of young clerks," who do a lot of the research, especially on new technology issues.

"It's not just Sandra Day O'Connor figuring this stuff out, it's [also] the young people who work there," Powell said. "We're in a 5-year window. When the kids who are 15 today turn 20, nothing will be the same."

On whether or not service providers will embrace his call for Net Neutrality, and allow other applications to run freely over their networks:

"Culture is really important," said Powell, claiming that a mind shift could be more effective than regulation.

"It would be better over time if they [service providers] agree this [network neutrality] is a good thing to do," Powell said. "Cable companies, as they learn, get more confident [in opening their networks]. Their own fears come down."

While many people think the FCC "has the power to bring big companies to their knees," Powell said that direct confrontation is not often an effective path, especially against large corporations with armies of lawyers and lobbyists.

"If we went directly at them, we'd be fighting them for a long time," Powell said of large telecom companies. A better way to the future, Powell said, is through understanding the companies' needs, and trying to convince the companies that those needs indeed do match those embraced by public policy changes.

"You'll be much more successful that way," Powell said.

On what worries him most about the future of technology:

"Security scares me the most," Powell said. "Openness is cool. But as you ask the country to be more dependent and reliant on networks -- I do my banking online, we encourage people to do this -- viruses and spam become much more than a nuisance."

Microsoft, Powell said, has been pressured into investing more heavily in security, "and that's good. They deserve [the criticism]." But government has a role as well, he added.

"There's a thing I call technology hygeine," Powell said. "In the analog world of the past, my mother told me to wash my hands. I don't know that we are doing a good job of teaching kids to do the same thing in the digital space."

Sloppy or careless online behavior, Powell said, could lead to significant harm in the future for victims of cybercrimes, such as identity theft.

"Kids don't know about this because right now they don't have much to lose," Powell said. "They put it all out there [on the Internet]. But what happens when they turn 25, have a kid, have a bank account, or have a mortgage? Those bad [digital] habits could matter a lot."

On the accomplishment he's most proud of at the FCC:

"For 100 years, the FCC had one client -- now it's like playing 3-D chess," Powell said. "I take the biggest pride in transforming the commission, to understand technology, and what I call the "digital migration." Our policies are now much more on the front edge [of technological change]. We re-focused our interest and that makes me proud. That's where the future is. We weren't on that course before."

On the U.S. falling behind other countries in broadband deployment during his term as chairman:

"I don't buy into those comparisons," Powell said. "Sometimes we do things differently and they take longer, but they are better in the long run. In a marathon, sometimes it's better to run in third place. If we did things like have unregulated betting online, maybe we'd get more bandwidth quicker. Or, if we had fewer choices. Instead, we are pushing more [access] choices, like broadband over power lines. And if broadband over power lines takes off, we could be way ahead."

On why he's leaving now:

"I've been here [at the FCC] almost 8 years, and that's pretty long for a commissioner," said Powell, who was named to the FCC by Bill Clinton in 1997 and then promoted to chairman by George W. Bush in 2001. Most chairmen, Powell said, spend about 3 years in the position. Powell plans to leave the FCC in March, probably soon after the commission's monthly meeting, he said.

"The other option [to leaving] was to stay for the remainder of the second Bush term," said Powell, who added that he wasn't asked to leave. "Then that would be [almost] 12 years. In between the terms seemed like a natural time to leave. I felt like I did what I came to do, now I'll let someone else come in."

On who his replacement might be:

"I have a favorite, but I'm not telling you."