A Trip to F.C.C. World

Nicholas Lemann has a piece in the New Yorker this week about FCC Chairman Michael Powell. It’s one of the first articles I’ve seen that captures some of Powell’s real personality, and the way he’s viewed in Washington. Unfortunately, Lemann ends by endorsing conventional political wisdom. After describing how Powell isn’t really a fire-breathing ideological conservative, he concludes that, in essence, Powell favors the inumbent local Bell telephone companies, while a Democratic FCC would favor new entrants. I know that’s not how Powell sees the world, and though I disagree with him on many issues, I think he’s right to resist the old dichotomy.

The telecom collapse should be a humbling experience for anyone who went through it. The disaster wasn’t the regulators’ fault, as some conservatives argue. But something clearly went horribly wrong, and policy-makers should learn from that experience. Contrary to Lemann’s speculation, the upstart carriers won’t be successful in a Gore administration, because it’s too late. Virtually all of them are dead, and Wall Street has turned off the capital tap for the foreseeable future. Some may survive, but as small players rather than world-dominators.

The battle between CLECs and RBOCs that Lemann so astutely parodies is old news. The next important battle in telecom will be between those who want to stay within the traditional boxes, and those who use different models entirely. That’s why open broadband networks and open spectrum are so important. Whatever the regulatory environment, there is going to be consolidation in telecom. Those left out in that consolidation will face increasing pressure to create new pipes into the home, or slowly die. The victors in the consolidation game will cut back on innovation and raise prices, which will create further pressure for alternatives.

Lemann is right that policy-making looks much drier and more ambiguous on the ground than through the lens of history. But he’s wrong in thinking that telecom’s future will be something like its past.