Steering toward the future

With the news that Commissioner Michael K. Powell will become the new chairman — and thus the new leader — of the FCC, there will likely be some rejoicing throughout the industry. My take on the political climate of my clients is that the wind had turned quite chilly for the Kennard agenda and that the new Republican chairman would receive a warmer welcome.

But despite any attempt at a honeymoon period, I am reserving my opinion and supplying guarded hope for the future. My years of careful jading in Washington lead me to an increasingly irritated view that the problems confronting our industry are not based in politics, i.e., (D) or (R). Rather, they lie in the conflict between spectrum management vs. industrial/economic policy wonking.

The past two chairmen had similar agendas that emphasized industrial/economic policy, including a reduction in the relevancy of the antitrust laws as they might be applied to the telecommunications industry. Therefore, we witnessed an easing of spectrum caps, license-assignment requirements and build-out requirements. There were numerous indicators that the agency was more concerned with commodity exchange of spectrum than delivery of services to the public.

In fairness, Chairman Powell did join — albeit sometimes reluctantly — in some of the past decisions to auction blocks of spectrum without providing for sufficient opportunity to simultaneously foster actual competition in the market. Yet, his dissents and speeches reflect a man who is wrestling with the issue of inclusion as it relates to his devotion to free-market ideals.

I sympathize.

Over the years I have also had difficulty reconciling the inclusion of a wider and more diverse universe of competitors with a desire to remove unnecessary regulatory restrictions. It is a complex problem that is further exacerbated by the government’s apparent dependency on auction revenues, or at least by its reluctance to seriously examine alternatives, technical and otherwise, to this method of spectrum distribution.

Diversity in ownership is certainly not served by FCC auctions that reward only a handful of the wealthiest companies. Nor is it served by rules that focus only on urban markets while ignoring or minimizing the delivery of services throughout an entire region. Nor will disaggregation or partitioning serve to increase competition, unless such methods exclude ad valorem tribute paid to auction participants who seek a favorable return on investment for use of “their” spectrum.

So, what can be done to promote a competitive marketplace that delivers services to the entire market? That is the $64,000 question with which the agency and Chairman Powell must now wrestle.

At present, the regulatory regime favors institutional structures for the purpose of delivery of services. Well-funded, publicly traded companies are responding to congressional edicts that have sought to streamline the functions of the agency to eliminate administrative responsibilities, while increasing visibility of purpose. Stated plainly, political headline-dandies are trying to get the FCC to act as though no problems are so complex that they cannot be handled by a one-page statement that says either, “We have let the market decide via auction receipts in the billions of dollars” or “The FCC will defer judgment on that matter to Congress and the Justice Department.”

The fact is, the FCC has a job to do and should be allowed to do it. The question is: What is that job? I believe the job should focus on issues of spectrum management and use to assure delivery of services to the public from a diverse and numerous universe of competitors that are encouraged by reducing direct or indirect barriers to market entry. Further, licensees should be allowed to succeed or fail based on performance and logical growth, rather than solely on those contributions to the U.S. Treasury that have begun to resemble insurance premiums against enforcement of the FCC rules.

For example: Will Chairman Powell recognize that there are wide and numerous rural areas that are unserved by the promises of the wireless revolution? Will he understand that these underserved areas will not receive the benefit of “3G” or “2G”or any “G” until auction winners have wrung every last dime out of urban consumers? Will he recognize that there is no incentive for one publicly traded company to accept from another, by disaggregation or partitioning, the responsibility to serve those rural customers? Finally, will he conclude that only by making spectrum resources available to local operators — who will exploit the service possibilities on a community-based level — will there exist any hope of implementation of new wireless services to rural communities, poor neighborhoods and other disenfranchised entities?

It is not enough to lean exclusively on the Universal Service Fund to provide incentives for delivery of service to rural areas. This method of delivery does not foster a competitive marketplace. Instead, it fosters growth by government hand-out and entitlement. It creates a system whereby the cost of gaining huge profits in urban areas is the introduction of a line item on urban consumers’ bills.

What is needed is a balanced approach that fosters true competition by providing those entities that will enter and serve the entire market with a necessary portion of radio spectrum to do the job — even if that means sacrificing auction dollars during a period of budget surplus. This solution will require courage, but I remain optimistic that the apple doesn’t fall far from the tree, and Chairman Powell will demonstrate that courage.

The event most likely to happen in 2001

Poll results from the January “In the Public Interest” column:

Schwaninger, MRT’s regulatory consultant, is the principal in the law firm of Schwaninger & Associates, Washington, which is counsel to Small Business in Telecommunications. Schwaninger is also a member of the Radio Club of America.