Powell's FCC: Let the private sector decide

Cable and commercial broadcasters are digging in for a long hard fight. Powell would be much less of an activist chairman. His core philosophy involves
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Cable and commercial broadcasters are digging in for a long hard fight.

Powell would be “much less of an activist chairman. His core philosophy involves letting the markets work as freely as possible.”

With George W. Bush now at home (finally) and starting his wild ride from the White House, change is obviously in the air within the federal government, and it's not all about tax cuts and campaign finance reform.

One change that's already taken place is at the Federal Communications Commission (FCC), where fellow Republican Michael Powell, who had served as a Commissioner, succeeded Democrat William Kennard as chairman earlier this year.

Aside from finding a successor to soon-to-depart Commissioner Harold Furchtgoth-Roth as well as to Powell's old seat (both of which will be filled by Republicans), his FCC is in the midst of “internal reform efforts” slated to make the organization “more efficient, more decisive and more responsive,” said a recent press release, to the whirlwind changes in the technology and telecommunications markets.

That's nothing too mind-boggling since people were expecting some political-speak right after a change in presidential administration. But they're also hoping something breaks concerning technical deadlocks that have plagued the broadcast industry. Externally, there are a number of issues on the table these days, notably concerning digital broadcast standards and cable must-carry.

New man in charge

One Washington industry source who requested anonymity remarked that there's no question Michael Powell has a different agenda than William Kennard.

“Powell will be more reactive than proactive in responding to issues,” the source said. “Kennard clearly had a social engineering agenda in terms of trying to adopt government mandated free time for politicians and launching a ban on hard liquor advertising (which he eventually dropped). But I think Powell will be much more cognizant of political sensitivity, in terms of how Congress reacts to what he does. He'll keep them in the loop. One of Kennard's problems was not consulting with Congress before proposing some of his activist agenda.”

Powell is already cultivating support from key members of Congress who can provide him political cover, agreed Ken Johnson, spokesman for Congressman Billy Tauzin's office (R-LA) who is the head of House Energy & Commerce Committee.

Johnson said Powell would be “much less of an activist chairman. His core philosophy involves letting the markets work as freely as possible. I don't think you'll see him meddling in the private business of companies like his predecessors, Kennard and Reed Hundt. Powell recognizes that the FCC is answerable to Congress and not the White House.”

DTV, or not DTV

The first source said Kennard did nothing to advance the DTV agenda and noted that Powell has already asked for Congressional direction on the issue. Today, the number of finished DTV installations stands at 185, including most big four (ABC, CBS, Fox and NBC) affiliates in the top 30 markets.

Powell offered what must have sounded like words of encouragement in a recent news conference, saying that the FCC will “do whatever it takes to clarify the legal and regulatory environment” so that concerned private sector businesses can “continue to make investments.”

Michael Petricone, vice president of technology policy for the Consumer Electronics Association in Arlington, VA, said he thinks the FCC has been supportive of DTV. “The train certainly hasn't derailed from our perspective. DTV sets are selling at a clip that's in line with historical sales of other new consumer electronics products when they were introduced to the market.” Those figures reveal that 625,000 digital sets worth $1.4 billion were sold in 2000, five times the amount from 1999.

The one thing that would be helpful, he said, is more content. “The vast majority being broadcast on digital stations is still upgraded analog, which is limited by the resolution of the source material. That's not a big consumer draw. Consumers want the best quality and, save CBS, it's slim pickins'.”

With the May 2003 deadline for all stations, commercial and public, to go digital, the problem isn't that the industry hasn't been on the ball, Petricone said, but technical issues that have caused problems — cable systems not carrying the digital signals being an example. Also, many DTV sets sold lack a DTV tuner.

Still, he sees a rosy horizon, noting a 40 percent price drop in the last year and a Zenith set on the market for less than $1000. “I suspect you'll see further reduction as the year goes forward, if history is any guide. And as price drops, functionality rises.”

Cable must-carry

The FCC has tentatively concluded that cable operators are not required to carry the digital signals of broadcasters. But that's still a top telecommunications issue Congress will be confronted with, with the cable and commercial broadcasters digging in for a long hard fight.

One observer said that he sees no problem with cable must-carry “since the cable industry is rolling out digital channel capacity on a rapid timetable. There's no evidence to suggest must-carry would be a problem. Cable operators would prefer carrying channels in which they own a financial stake, as opposed to local broadcast channels in which they don't.”

But only a handful of cable systems are carrying the digital signals of local broadcasters at present, he said, adding that two-thirds of all viewing on a cable system consists of local broadcast channels.

It's key that cable companies cooperate, Petricone added, pointing out that 70 percent of viewers get their signal via cable.

But the folks at the National Cable Television Association in Washington don't see it quite that simply. “For broadcasters to presume entitlement to a privately built infrastructure is inappropriate, especially when they bring nothing new to the mix,” stated Marc Osgoode Smith, senior communications director. “The physics don't lie. And if there's a legal mandate to carry programming that has yet to draw the attention of consumers, then certain networks and services like high-speed Internet, telephony and new digital video channels already on the market won't make it.”

“If our customers want all of these signals, it would be competitive suicide not to carry them,” he bluntly continued. “The government should not force an unknown business plan down the throats of consumers who are already enjoying the fruits of these new services.”

Smith added that broadcast networks are the predominant owners of cable programming, citing the example of CBS' corporate ties to Viacom and its MTV Networks, and Disney's ownership of ABC and its cable properties like ESPN and the Disney Channel.

Where will it end

“Consumers are stuck in the middle of an ongoing fight between broadcasters, cable operators and manufacturers. They all have different agendas,” observed Johnson. “But even consumers who aren't tech savvy understand that we're in a tech shakeout. No one wants to get stuck with a first-generation digital set that's outdated in sixth months.”

Programmers are reluctant to provide content, manufacturers build fewer sets and consumer scratch their heads. Where will it end?

No one knows, but Johnson still offered his long-term forecast. “This century, a TV should not be the centerpiece of our home entertainment center, but the centerpiece of our home information center.

“We're trying to get everyone moving in the same direction. Congress is making stations go digital, yet there's no business plan for them to make money. It's like Doublemint gum, but you don't double your pleasure, you double your expense. And now they don't know if they can get the digital signal on cable besides.”

Mark R. Smith is a freelance writer and has covered broadcasting and post production for a decade. He resides in Odenton, MD, and can be reached at msmith1277@aol.com.