Powell: FCC Needs to Get Out of Mergers and Into Giving Wireless Its Due

Weighs in on broadband, FCC reform issues at Brookings forum in Washington

By John Eggerton -- Broadcasting & Cable, 11/27/2012 3:41:15 PM

The FCC needs to be relieved of its merger review authority and made to understand that it needs to take wireless into account when it is looking at the competitive broadband market.

Those were some of the suggestions from National Cable and Telecommunications Association president and former FCC chairman Michael Powell at a Brookings Institution forum Tuesday in Washington.

Powell, who was on a panel entitled "Internet Everywhere: Broadband as a Catalyst for the Digital Economy," said he would not get the FCC out of the merger review business because it was not competent, but because it was duplicating the efforts of Justice and the FTC for "trivial gains compared with the cost of the exercise.

He pointed out that reviews of mergers in other sectors, like oil, gas or food, some of which he suggested were even more important that communications mergers, were not subject to a similar dual gauntlet.

He also suggested that the "dark side" of the FCC's merger review role was a sort of conditions "bazaar" created by the vague public interest standard.

While Justice and the FTC review deals for antitrust, the FCC's review extends beyond that to whether the deal is in the "public interest." Powell, formerly an antitrust attorney at Justice, said that the process becomes one of companies putting enough "goodies" on the scale to satisfy the FCC, even if they have nothing to do with a particular harm, even if they are not something the FCC could not have otherwise done, and even if it is not clear the FCC even has the authority to impose them.

And the fact that they are voluntary means they are not reviewable by the court. So, he said, the FCC has companies over a barrel, they offer up a laundry list of promises -- "which we all will do because we need to get it done," he acknowledged -- then those companies cannot complain to the court because they were voluntary.

Powell weighed in on the FCC's continued reluctance to include wireless broadband as a competitor to cable operators in its 706 report on communications marketplace competition, calling it "almost unconscionable."

Powell said he was flabbergasted that the commission did not recognize wireless as a big time, real provider of broadband services.

Powell got some pushback from panelist Blair Levin, now with the Aspen Institute, but formerly architect of the FCC's National Broadband Plan. Levin said that while wireless was a competitor for phone service, and that wireless broadband was obviously a big phenomenon, the broadband plan was skeptical that wireless would translate to cord-cutting, seeing most people as having both. He said he was not sure that, even with the incentive auctions, the FCC would be able to free up enough spectrum to allow wireless to compete in broadband, and added that usage caps could also make that competition problematic. Levin also said that.

Powell countered that the measure of whether wireless was a competitor should not be simply cord-cutting, but the degree to which it provided "price discipline" on cable service. "The antitrust measure of whether a market is healthy is not necessarily that you will completely drop service in order to completely use another service as a direct substitute. It could be that you use the second service sufficient to create price discipline and innovation incentives on the existing incumbent to keep that market healthy."

He suggested that everything he does on his iPhone that he is not doing via wired broadband can be thought of as one less unit of use that can supply "price discipline" and spur innovation investment. "We shouldn't be so quick to make the mark then to cut the cord and only then do I count it."

Powell pointed to the FCC's frequent citation of only 66% wired broadband adoption, frequently followed by the statement about that figure "particularly hits minorities." But he points out that minorities are "extraordinarily" high users of mobile broadband. "They may have made the substitutable choice we are talking about. We are treating them as a problem, but maybe they have found a device at a price point they are more than satisfied to take care of their information needs..."

Powell said he loved what the cable industry was doing in wireline, and that it did it well, and he was proud of it, but that in some cases wireless was not only an adequate substitute, but a superior one. "If I am on the ground, wandering by Starbucks and want to use Square to create a mobile payment opportunity for me, wireline broadband is not in my equation."

"The fact that the 706 report produced by the FCC refuses to account for wireless in its description of the health of the market I find almost unconscionable," he said.