News

Powell Throws His Weight Around

12/22/2002 7:00 PM Eastern

Washington— It seems that regardless of political party, every chairman of the Federal Communications Commission has enormous leverage over vulnerable companies — and the temptation to use that power proves irresistible.

A classic case came about in 1995, when Westinghouse Electric Corp. needed FCC approval to acquire CBS Inc. FCC chairman Reed Hundt, a Democrat, held up the deal until Westinghouse chief Michael Jordan "volunteered" to air more children's educational programming.

CBS caved, while the rest of the industry opted to continue fighting FCC-imposed "kidvid" time quotas — a battle that was lost.

What's now happening in regard to the FCC's efforts to advance the digital-television transition has some in the cable industry wondering whether they've been penciled in to play the role of Michael Jordan, and must now bow to pressure from current chairman Michael Powell, a Republican.

Two weeks ago, at Powell's urging, a gaggle of cable and broadcast-TV executives met at a New York City hotel in a bid to hammer out an agreement on cable carriage of DTV signals, an issue the FCC has let fester since 1997. National Cable & Telecommunications Association president Robert Sachs and Edward Fritts, president of the National Association of Broadcasters, were both at the table.

One industry source said Sachs and Fritts met individually several times prior to the New York session, and decided the time had come to broaden the discussion by including top executives from both camps.

Everyone who participated has pledged to maintain radio silence.

"We came, we talked, no one threw anything at each other. I can't go beyond that, or they will revoke my club membership," said Association for Maximum Service Television (MSTV) president David Donovan, who had a seat at the table, advising broadcasters.

The cable industry is under no compulsion to carry DTV signals until TV stations have surrendered their analog licenses, and no one expects that to occur for many years. Cable's position has been — and remains — that if stations want DTV carriage, they need to secure it at the negotiating table.

Transitional carriage?

But Powell is urging cable to drop the hard line and implement some kind of transitional digital carriage program. If cable does not "volunteer" soon, the FCC is prepared to move with its own carriage rules, agency and industry sources said.

At least one commissioner — Republican Kevin Martin — believes the better approach is for the FCC to clear up its DTV polices first and let the private negotiations work from there.

The FCC, for example, has failed to state definitively whether cable operators are required to carry analog and digital TV signals during the transition, or whether DTV stations that elect for must-carry status are entitled to carriage of multiple programming services.

When cable and broadcasters sat down for the DTV powwow, it was abundantly clear who was playing Michael Jordan: the cable industry.

"It is a move worthy of Reed Hundt," a cable-industry source said of Powell's pressure campaign. "He is definitely pursuing an agenda that is not necessarily bound by the four corners of the law, which is strange. And it's happening on lots of issues."

Other cable-industry sources stressed that Powell's intervention has been helpful. It forced all sides to bargain in earnest, and cable's political capital in Washington soars when deals such as last week's digital plug-and-play agreement with the Consumer Electronics Association are announced.

Still talking? Good

One MSO source last week said it was unclear how long the DTV talks would last before a deal was reached. The source declined to speculate about the kinds of compromises cable operators would be willing to make.

"The talks are continuing and that's an important thing," the MSO source said.

Few in the cable industry want to test Powell's will. Last April, the chairman unveiled a DTV transition program that called on each player to bend somewhat.

When the CEA balked at installing off-air DTV tuners in almost all new sets rolling off the assembly line, Powell responded by adopting rules forcing its members to do just that. The CEA has since filed suit against the FCC.

There are two theories about Powell's approach to the DTV transition. One is that a majority of the five FCC members, Powell not included, wants to impose DTV carriage mandates on cable operators, and Powell has used his prerogative as chairman to block release of the order.

The other theory — substantiated by comments Powell has made — is that even the most deregulatory-minded FCC member can't escape the fact that the DTV transition is a government-mandated industrial policy at its core, and the FCC's job is to push the process along, either by rule or through intimidation.

Implicit in compulsory voluntarism is that privately negotiated agreements shape the FCC's rules. Some think it should be the other way around, with the expert agency crafting rules to shape the outcome of privately negotiated agreements.

"There is nothing intrinsically wrong with what [cable and broadcasters] are doing," said Andrew Jay Schwartzman, president of the Media Access Project, a public-interest law firm. "The problem is when the deal is struck among some but not all of the parties.

"You have two parties here dividing up the world, while there are other players that have to accept what they do."

Wiley backs Powell

Richard Wiley, a former Republican FCC chairman who guided adoption of broadcast's digital TV standard, disagreed. Powell took a moribund DTV transition and revived it through a plan that called on all industries to cooperate, he said.

"It was dead in the water. The thing wasn't coming together," Wiley said.

It's "appropriate" for the FCC to seek industry cooperation, Wiley added, because the agency does not have all the answers. FCC adoption of industry agreements is not automatic, and regulators can fill in gaps, he said.

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