Policy

Powell to the People

4/09/2012 3:01 PM Eastern

On April 25, National Cable & Telecommunications Association president and
CEO Michael Powell will mark the end of his first year running the cable trade
association.

As the NCTA prepares for The Cable Show 2012 in Boston (May 21-23),
Powell sat down with
Multichannel News Washington bureau chief John Eggerton
to talk about the challenge of getting regulatory certainty in a divided
Congress and from a Federal Communications Commission that is sometimes
reluctant to act definitively.

Powell said he thinks his members share his enthusiasm about the
direction in which the NCTA is headed. Cox Communications president
Patrick Esser, chairman of the NCTA’s board, certainly sounds excited.
“Kyle McSlarrow did a great job at the NCTA and was a tough act to follow,
but Michael didn’t miss a beat,” Esser said. “He has jumped in and
put his own leadership stamp on an already highly respected organization.
Michael’s experience and thoughtful approach have helped direct
strategic thinking and continue to steer the industry on a positive path.”

Comcast chairman and CEO Brian Roberts, who also sits on the NCTA
board, said Powell “has more than met the high expectations we had for
him. He quickly mastered the critical issues unique to cable and has fi lled
the role of the industry’s chief advocate with passion and vision.”

While Powell does not see major FCC reform making it through Congress,
he said it is time for Washington regulators and policymakers to start
connecting more with the digital present and future. Powell, a Republican
FCC commissioner under Presidents Clinton and George W. Bush and the
agency’s chairman during Bush’s first term, speaks with some authority
about trying to regulate such a moving target.

He said cable is doing well on the diversity front, but could do better, and
that he’s doing his part to make the NCTA look more diverse.

Powell, who manages to look unrumpled — and unruffled — as he fields
tough questions in shirtsleeves, parked in a comfy corner-office chair, talked
about the challenges and opportunities of that future, and said he thinks the
industry is kicking into an extra gear. An edited transcript follows.

MCN: How would you assess your first year
atop the NCTA?

Michael Powell: At a personal level, it has
been enormously satisfying. It has exceeded
expectations.

I think that we knew we were coming into
an excellent association, but it still was a
place poised, much as the industry is, to find
a fifth or sixth gear, and look for a more challenging
and bolder vision of itself.

We’re all very excited about where we are
and I think the leadership of the industry is
really excited with what we’re doing.

On the policy front, we do fairly well. I
think we still benefit from the process we
talked about last year of being very practical
and very focused on the things that concern
us. And I think we get greater respect and attention
as a consequence of it.

MCN: You said “fairly well” on the policy front.
Why did you qualify it?

MP: My parents [Colin and Alma Powell]
taught me never to say “never,” and never to
say “always.” Someone will find an exception. I
wouldn’t make too much of that. I think there
are things we always wish there was less of in
terms of the regulatory state.

MCN: For example?

MP: I fundamentally remain anxious that
Washington has not fully caught up with
the extraordinary and dynamic way the
communications and entertainment marketplaces
are unfolding, and how [they]
in some ways [are] radically different they
are from the original predicates on which
so many of the rules today are still built.
I mean, if you look at every cable rule —
maybe not every one — but there are two
enormous buckets that refl ect 1992 [the
year the Cable Act was passed].

One was that cable was this big, vertically integrated
monopoly. Th ere were no satellite-TV
providers; there was no telephone video competition;
there were
no overbuilders;
there were no alternate
pay platforms.
And at the time,
most cable operators
shared ownership
of almost 60%
of programming.

That number is
way down on the
vertical-integration
front. On the horizontal
integration
front, we’ve had the
arrival of lots of other
choices, and that
is before we had
the layer of dynamism
that comes
with what the Internet
makes possible,
whether it’s Hulu or
Netflix or others.

Yet we still spend
our day with provisions
that I think
reflect judgments
that are increasingly
incongruous
with reality.

MCN: Are the program-access rules one of
those things?

MP: I think so. Things in the program-access/
program-carriage space are fundamentally premised
on that predicate: “Oh, this is an industry
that must be vertically integrated, will favor its
own, is the only path to reaching a consumer.”

MCN: The NCTA has tended to stay out of
the fi ght over the retransmission-consent
regime.

MP: I don’t put a lot of confi dence in the idea
that the commission is going to change the challenge
of the relationship between programming
costs and operator costs.

I think that they have done a lot with each
other on the business level to try to keep, on behalf
of the public and consumers, this thing in
relative balance.

MCN: Do you think anything will happen in
Congress on retransmission consent?

MP: Certainly not in 2012. And I think Congress
is increasingly trying to look at the issue the way
I am suggesting, which is that if we are going to
have a conversation about any one of these elements,
lets have a conversation about an entirely
new regulatory marketplace.

My own guess is that after this election, 2013
will be the year where there is much more serious
conversation about the post-1996 [Communications
Act rewrite] world.

MCN: How important to cable broadband Is
mobility, and is Wi-Fi the answer?

MP: I don’t know what my house would be like
without Wi-Fi. I don’t know how many devices
in my house are operating and connected just because there is a Wi-
Fi connection driving
stuff into the broadband.
It’s also good for
the [Internet-service
providers] because it
took what you’re paying
for, your broadband
service, which
used to be something
that could go to one
machine. If I have to
pay $50 for broadband
and its one computer,
that’s one thing. But if
I am paying $50 and it
is seven computers, I will argue that the value is
exponentially higher.

I think the cable industry is increasingly
coalescing around [Wi-Fi] as an absolutely critical
part of extending the cable experience. I
think that is the real story of the cable company/
Verizon [Wireless] deal. (A consortium of cable
operators earlier this year sold their Advanced
Wireless Spectrum bandwidth to the nation’s
largest cellular provider; the MSOs and the
cellular provider will also cross-market each
others’ services.)

MCN: Should the country be afraid of Verizon
Wireless buying cable spectrum?

MP: Big to a public-interest advocate
may mean bad or evil, but it also
means they are serving a huge number
of consumers who want improvement
and innovation in their service.
You can’t forget that.

And whether we like it or not, the
government controls this input. It is
a diffi cult input. It’s not like Verizon
can go drill for spectrum. It can’t go
dig up where the dinosaurs died and
find new reserves. This is something
that has a restraint on it. I don’t know
an analyst on the planet who does not
suggest some ruthlessly scary roller
coaster of demand in this space.

If anything, I am worried that the
country thinks the spectrum will
solve the problem, and it never will.

MCN: With regard to the future of a
converged business, cybersecurity is
really hot these days. Are we doing
any better at protecting what you
have called the Achilles’ heel of the
Internet?

MP: I think from a year ago, the
awareness level of the nature, type
and seriousness of these threats is
dramatically higher and much better
understood by policymakers and companies.

The evidence increasingly indicates we are
targeted all the time, all day — sometimes by
very sophisticated criminal elements, sometimes
by hacktivists, sometimes by foreign
governments. So, this is not like a terrorist
attack that is coming. It is already widely infiltrated.
There is a little bit of a war that goes on
from morning to night all across our networks
of things getting in, being pushed out, blocked,
counterattacked. I think, speaking for the telecommunications
industry, this is our very bread
and butter. We sure as heck better be good at it.

Now, when you start talking about law and
regulation, it is very complex. These things
change by the day. And if there is one thing we
know about really prescriptive rules, they can
run the risk of being obsolete the day they pass
and they don’t grow very quickly. A minute ago,
we talked about an act written in 1992 that
governs our behavior in 2012. You can’t have
a regime around cyberthreats like that.

MCN: The NCTA was part of the recent
agreement on the voluntary cybersecurity
code of conduct. Was that an effort to head
off regulation?

MP: I think, from our perspective, it is an
effort to head off cyberthreats. I have had the
blessing and the curse of being involved in
some of the biggest threats to networks in the
modern era. I had to manage the Y2K transition
in 1999 for the administration; I had
to manage the [impact of the] 9/11 [terrorist
attacks] on Verizon’s network, and I have had
other pretty serious network challenges.

One of the things I came to see up close is that
the model that works is when the government
and industry understand that we have a collective
need to be in league with a common enemy.

That requires a breathtaking amount of
trust and proposals that try to create a response
built on true partnership: “Come join
my army,” rather than “come explain yourself.”

The minute you introduce an adversarial regulatory relationship, there is another player
in the conversation, the general counsel: “Well.
I don’t know if we should do this, boss, because
if we do this, it could subject us to this.” I have
seen it and it interferes at a really fundamental
level with getting the job done. We need to join
the same army against the same threat.

MCN: The NCTA supported the piracy legislation
that failed to pass in the last Congress.
How important is it to get some kind of bill?

MP: The idea that you might have something
great but you lose the value because it was stolen,
I think should remain a national concern.
I think there is a lot of clumsiness to
go around about how this unfolded, but I
don’t think it should overshadow the valid
concern. And to give them credit, the
opponent, at least the most credible of
them, Google, almost always began their
statements with: “We see the importance
of this. It is important.”

I don’t know that I expect another legislative
effort anytime soon. I think there
are a lot of “lessons learned” that ought to
go on and a re-evaluation of the best approach.

But I don’t think the country should
blink for one iota about the idea that the
protection is necessary to the country’s
well-being — not just these industries.

MCN: There seem to be a lot of bipartisan
issues that both sides agree on, like
piracy, privacy and FCC reform, until they don’t
and nothing gets done. Is that perception
correct?

MP: I think that happens in Congress; I think
that happens in regulatory agencies. Right or
wrong, make a decision. Make it on the merits,
make it clear, let us understand it. Business is
very adaptable. If it really understands the rule
and rationale and believes it was fairly treated, it
will move on. The other thing is finality. It is almost
like there is never an end to anything, and
when you finally do get it done, there are always
these constant collateral attacks.

One thing I am very complimentary of the
commission on is walking the line on [universal
service fund reform]. Did we get everything
we wanted? No. But am I really proud of what
they did. I am, because I know how hard that
decision was.

MCN: What about the move to close the
docket on Title II, the proposal to reclassify
Internet access as telecommunications service,
subject to common-carrier regulations?

MP: I am critical of this particular commission
for the ambiguity and the uncertainty
created by proceedings that get opened to examine
things and they stay open. They lumber
along and everybody interprets it to their
own self-interest.

Shoot me, or let me go. I have recourse. I’ll
fight you. I’ll go to court if I think you’re wrong.
But if you’re right and you have made a clear decision,
we’ll adapt and move on. But what can
anyone do when you are just in stasis, some perpetual
state of floating ambiguity because we
can’t make something get voted.

And this is what is taking over this city. We
don’t know that is happening in the judiciary,
because we can’t ever confirm a judge.

MCN: Or FCC commissioners?

MP: Or Jessica [Rosenworcel] or Ajit [Pai]. Your
life is on hold. It is a terrible way to live. It’s just a
terrible way to run a business. I have heard from
health-care CEOs to cable CEOs to automaker
CEOs who say, “For me to move forward, I just
need to know what the deal is.”

I felt very strongly about that as a regulator
and that is still my pet peeve with regulators.
You owe the country a decision.

MCN: Any worries about cord-cutting?

MP: I don’t like the term, because I don’t think
it reflects the depth of the question because our
guys are broadband providers. Anyone who is
selling broadband is going to get some benefi t
of that, too.

People love the idea of disruptive conflict. I
think this thing really gets out-argued a lot of
times.

[But] if you really look at the charts, the only
place cable customers in any meaningful way
is not to cord cutting but to other competitive
MVPDs who are doing well. Now, hats off to
DirecTV and [Dish Network] and FiOS TV and
U-Verse TV and other services that have entered
the market in the last decade and taken share
from us.

There are 100 million video subs and our
share of them has declined. And why shouldn’t
it? Back in that 1992 predicate, we had them all.

MCN: Any concerns that the must-carry rules,
rather than going away, will be extended to
over-the-top video services?

MP: I think that is another way of saying at some
point you are in Alice’s wonderland. I think the
courts would have a lot of problems if you tried
to expand must-carry to the world of the abundant
Internet.

A whole bunch of cable regulations were
premised on the idea that the government
was going to protect the economic
model of local broadcasting. No ifs,
ands or buts about it. There are a lot
of things we do not because we are
anticompetitive. A lot of what we do is
we are told to subsidize the broadcast
industry by the government because
they have this public trustee model that
they said has all of this value.

You do see cracks in that, which I do
think are going to increasingly raise
questions. When the government goes
to Congress and says it thinks there is
a higher, better use for spectrum than
broadcasting and it’s broadband. In
my lifetime, that is the first time I have
heard the government state that so emphatically.

And broadcast networks provide very
valuable, highly sought-after content. But you
start to ask yourself, when are you really just another
cable network if only 14% of Americans are
getting their content over the air, and the vast
majority are getting it over pay platforms? And
more and more of those providers are getting
paid no differently than Discovery or ESPN are.
Apparently the free, over-the-air compact that
leads to this government protection of interest
seems to be to be cracked, if not intellectually
unraveling.

MCN: How is cable doing on the diversity
front?

MP: Well, but it needs to do better. Here at
NCTA, we certainly increased our own commitment
to hiring. I think we are quite a bit
more diverse. I find it remarkable that we’re
an industry that goes to New York for an entire
week to provide workshops and opportunity,
and study and celebration and fund-raising
all around this topic.

Now, you still want the results. We’re OK;
we’re not world-leading yet. But no industry
should get a higher mark for dedicating itself to
working on it. I think we are doing much better,
but what we’ve really got to do is make sure all
that eff ort gets hooked up to real production.

September