**Remarks of**

**Michael K. Powell**

**Chairman**

**Federal Communications Commission**

**At the**

**Associated Press Annual Meeting and**

**General Session of the Newspaper Association of America Annual
Convention**

**April 28, 2003**

**"Hear Ye, Hear Ye Read all About it!"**

1\. INTRODUCTION

It is a great honor to come before the nation's publishers

> Speaking before this august group, I feel enormous pressure to
> generate a headline. I may not have a ready-made headline, but I do
> have a story to tell, or I should say a substitute for the
> communications story that dominates the pages of our thinking.
>
> I have the distinction of overseeing the communications industry. The
> FCC is an agency like no other. Its portfolio is breathtakingly wide
> and deep and seems to grow larger each day, despite all the spirited
> talk of deregulation. We regulate television, telephones, satellites,
> cable, mobile phones, public safety spectrum, radio, and we even
> dabble in the Internet. In a nutshell, if an electron or photon
> glances off something carrying information, there is a good chance we
> regulate it.

II\. THE SAME OLD STORY

> With all this talk of electrons and photons, you would think that
> communications players are space age cowboys and that communications
> policy is forward looking, cutting edge stuff. Regrettably, it is not
> as much as it should be. Rather, it is too often governed by an old
> and increasingly tired story that seems to endure through the ages.
> When you read stories about our industry it seems like a bad political
> campaign in which everyone has gone negative on the other guy---the
> mud flies. Someone is always evil, and someone is always claiming
> moral supremacy as the true promoter of the public interest. Welcome
> to my world. This popular, and at times pathetic, story deserves a
> little background.
>
> In the early 1900s, the first lines of today's communications play
> were written. There were really two components that make up the whole
> story: How we would regulate telephone service, and how we would
> regulate broadcasting.
>
> In the telephone world, the government bought the view pushed by Ma
> Bell that there should be one really big phone company and that was
> the best way to guarantee that all Americans would get phone service
> at affordable rates. The public good would be achieved by this
> exclusive grant from the government. In exchange, the industry would
> be heavily regulated to ensure it did what we wanted and would not get
> too carried away with making money, which was its nature to do. The
> regulation was often arcane, complex, and mind-numbing. It produced a
> lexicon, jargon and acronyms that the Pentagon could envy, ensuring
> regulation was an experts game---not one for the uninitiated or faint
> of heart.
>
> In the same era, commercial broadcasting was born. Government seized
> complete control of the airwaves and, in turn, passed licenses out as
> it saw fit to the worthy---in effect controlling the supply of this
> critical commodity and serving as the guarantor of the public
> interest. The "scarcity" of the spectrum became a justification for
> the government to demand that those who had it use it for the public
> interest. This has continually included some government meddling in
> broadcast content, a fate that newspapers thankfully have avoided.
>
> The common carrier telephone model and the broadcast model long ago
> framed communication policy and produced the regulatory ethos that
> still dominates today. At the core, the idea is that the public good
> is served by a few producers, who are governed strictly by a powerful
> regulator. The result is that large companies and the government stand
> at the center of communications policy. The evolution of electronic
> communications in this country is an unending clash between the two.
> Like Hegel's philosophy of history, there is a thesis, inviting an
> antithesis, resulting in a clash that produces a new synthesis and it
> starts over again. This is how communications progresses. Political
> clashes between competing wants and desires of industry and
> government---each purporting to act on behalf of otherwise uninvolved
> and passive consumers.
>
> This dynamic is a very cozy one. It makes life simple. If there is a
> concern, you can push a handful of companies to do what you want.
> Those companies would often yell, - and it was their fiduciary duty to
> do so --- but they were the yelps of Brer Rabbit, pleading not to be
> thrown on the briar patch, for the companies would always be able to
> extract some benefit from their governmental patron.
>
> Telecom is a noisy sector---lots of screaming. Incumbents fight to
> retain their privileged place and special interest groups fight to
> maintain a regulatory system that gives them one-stop shopping to
> force socially desirable outcomes. This "clamoring supplicants
> approach" has riddled communications policy with political interests
> that masquerade as the public interest.
>
> Indeed, this cozy dialectic model has led the government consistently
> to stifle change that would probably accrue to the enormous benefit of
> our citizens, but upset the time-honored rules of the game. Like the
> golf club at Augusta, new members were unwelcome for they might upset
> the unique chemistry of the place.

-   Bill McGowan, the founder of MCI had to find a clever way to
    circumvent FCC rules to become a competitor to AT&T, and eventually
    sue to create the first competitive opportunity in the sector. Now
    consumers enjoy cheap long distance rates as a consequence.

-   The FCC was very concerned about the introduction of cable
    television as a threat to the broadcast model and moved to regulate
    it, claiming it was necessary to protect free over-the-air
    television. Cable did survive and prosper and is now the preferred
    media platform of a significant majority of Americans.

-   When cellular telephone service came into the market, the FCC
    permitted only two licenses in a market and gave one to the existing
    telephone incumbent. Once these restrictions went away, we had an
    explosion in mobile phone penetration and there are now 6 nationwide
    carriers, and many more regional and local carriers. We see more
    minutes, equipment innovations and lower prices.

> Government regulators have become like zoo keepers \-\-- feeding the
> animals, ensuring the portions are fair, deciding how much freedom
> each will be allowed to have, but never wanting to let anyone roam
> completely free. The elephants and lions are the most restricted, kept
> in the stronger cages.

III\. THE REAL STORY

> This tired tale has gone on for decades and probably would continue
> for decades more if left to its own devices. Except, something
> life-altering has happened. We have discovered a warp in the Matrix.
> The penguins are swimming in circles.
>
> Did you follow that story? Last November, six newcomer penguins,
> formerly of Sea World in Aurora, Ohio, were added to the mix in San
> Francisco. Almost from their introduction, the entire group of
> penguins started swimming in circles, from daybreak until dusk when
> they would stagger out of the pool. The zoo's penguin keeper remarked:
> "We've lost complete control; it's a free-for-all in here. After 18
> years of doing this job these birds are making mincemeat of me."
>
> The same is true in the communications zoo---the penguins are
> swimming. Yes, something really different has happened and it is more
> than an aberration. We have, I think, witnessed the arrival of
> something new---a defining tenet around which to organize our
> thinking, our industrial activity, and our conception of the public
> interest. It is technology---not classic economics, not political
> science, not law, but physics, biology and chemistry.
>
> I know what you are thinking. We heard this talk before in the time of
> the great Internet boom. It flopped.
>
> Things looked wildly exciting just a few years ago as the Internet Age
> dawned. Penguins were swimming everywhere. Companies were changing
> their names to strange, glowing symbols of the new future. Bell
> Atlantic would not suffice. They combined Veritas and Horizon to
> produce Verizon! An accent on the future produced Accenture. "E"
> became the only letter that mattered in the alphabet. The Old Economy
> was suddenly New. And even that venerable punctuation mark, the
> period, got a hip make-over, becoming the "dot!" and rejecting as
> passé just being known as "the punctuation mark formerly know as
> period."
>
> It got crazy, like an office party that spontaneously turns wild and
> where people through caution to the wind, with workers dressing up in
> lamp shades and wearing weird hats. The music is loud, the buzz is
> good, you are in halcyon state and then Bam!, somebody flips the
> lights on (probably that guy Buffet, or Greenspan) and sobriety rushes
> back. The feelings of guilt, embarrassment and shame are unbearable.
>
> So now we are doing our penance. Back to fundamentals and sensible
> shoes. Any risk is unacceptable. Companies, policymakers, venture
> capitalists, technologists and the new age philosophers are whipping
> themselves mercilessly, like Arthur Dimsdale in *The* *Scarlet
> Letter*, tortured for having carried on with Hester Prynne. We
> secretly enjoy watching 25 year old millionaires crumble, and return
> to jobs at the Dairy Queen dishing out soft-serve cones.
>
> The zoo has quieted down again. But when you look over at the pool,
> the penguins are still swimming.
>
> While stock prices fall and debt balloons, technological advances
> continue relentlessly, undeterred by a sluggish economy, war or
> disease. It continues to sprout, like Bette Midler's rose, beneath the
> fallen snow, to use a really bad gratuitous simile.
>
> The microchip continues to increase in speed at an amazing rate.
> Memory continues to double and triple, while the cost of producing it
> all falls. Optical technology surges forward as photons continue to
> overtake electrons and take us into Mr. Einstein's speed of light
> world.
>
> The technology revolution is developing its roots. It is not a fluke.
> And, it is finally going to change the nature of how communicating and
> communication policy will evolve from here on out.
>
> Technology will break the cozy model so comfortable and familiar to
> members of the club, featured in the old story. It has unleashed a
> swift wind of innovation as the central driver producing constant and
> unending change that cannot be easily contained.
>
> IV\. DIGITAL MIGRATION
>
> Change is now inevitable. A digital migration has begun taking us from
> the old world---marked by analog technologies, narrowband
> infrastructure, and the monopoly regulation model---to the new world;
> marked by digital technologies, broadband infrastructure and a broader
> minded view of regulation, informed by listening to technology more
> than lobbyists. The changes brought forth by digital life will finally
> force a change in the decades old outlook of communications policy.
>
> A migration is defined as the movement from one place, region or
> country to another with the intention of making a permanent settlement
> in a new location. Yesterday's migrations---from the European
> migration to the United States during the World Wars to the Great
> Migration of African-Americans from the South to the
> North---fundamentally and profoundly altered the character and shape
> of our great nation over the last century and a half.
>
> Similarly, in the communications world, the digital migration---from
> old to new---will fundamentally change the way people communicate,
> work, learn and play in the 21^st^ Century. As this migration breaks
> the chains of the hundred-year stranglehold on the communications
> industry, profound benefits will flow to the American public and our
> economy.

[Characteristics of the Narrowband, Narrow-minded World]{.underline}

![](media/image1.png){width="6.041666666666667in" height="4.53125in"}

The old world was dependent almost exclusively on that large monopoly
carrier.

> The platform on which communications traveled was integrated with and
> optimized for the application that was being offered. Twisted copper
> wire was used for voice communications and controlled by your phone
> company, and your state regulatory agency. Coaxial cable was used for
> multi-channel television and controlled by your cable company and your
> local franchise authority. Commercial airwaves were used for free
> over-the-air television and radio and controlled by the FCC.
>
> In each case, a monopoly or quasi-monopoly was explicitly or
> implicitly sanctioned in exchange for strong regulation. In this
> world, there are few competitive choices and where they exist, there
> is only the most modest product differentiation, given that
> competition is supported mostly by letting others resell the services
> of the incumbent to varying degrees. The incumbent remains at the
> center of that universe.

[Characteristics of the Broadband, Broad Thinking World]{.underline}

[Innovation Platforms]{.underline}

> The most important development is that platforms and application are
> now separated. Broadband platforms are not tied down to particular
> applications, but are a conduit for an infinite number of
> applications, which are simply software products. This means the dumb
> wires and dumb phones we are all accustomed to are supplanted by
> innovation platforms, on which any number of new and exciting products
> will rise. This makes innovation a hallmark of 21^st^ century
> communications.

[Real Competition]{.underline}

> We should not be surprised to find that we are moving past the
> one-pipe problems that justified the older model. For years, the phone
> company's control of the only communications pipe into your home,
> meant monopoly. It meant complex and heavy regulatory structures. It
> meant little opportunity for competition, since few could duplicate
> the enormous expense of constructing this type of network. Competitors
> had to live off a hostile incumbent and sell only what the incumbent
> had to sell.
>
> We are seeing a world emerging of spider pipes---multiple routes into
> the home, all connecting to the web. We already see Cable Modem, DSL,
> Powerline, 3G wireless technology, WiFi networks, Satellite broadband,
> and Fiber to the Home networks. More arrive each day and are showing
> us the potential for smashing another central pillar of yesterday's
> narrow-minded model. Healthy broadband competition may create a new
> dynamic for achieving the right price, availability and product
> differentiation, rather than the regulator. Competition will finally
> be transformed into a meaningful concept, rather than a moniker for
> the old ideologies.
>
> Because software applications are central in the new communications
> sphere, there will be many more competitors enhancing the
> communications dynamics. We will see Microsoft, Intel, Sun, Linux and
> many other software providers contributing to communications.

[Democratization of Technology]{.underline}

> As I have said, in the old world governments are central and
> monopolists are central. The most important thing technology is doing
> is placing consumers and citizens more squarely in the driver's seat
> of choosing and controlling their personal communications space. This
> is having profound implications for how consumers communicate, how
> they are informed and how they must be reached by the purveyors of
> news and information like yourselves.
>
> Small more powerful chips, advances in memory and storage, and
> improvements in battery life are creating personal technology devices
> that allow individuals to take the reins, using personal computer
> devices to select and control what they see, when they see it and how
> they see it. They increasingly can configure their own communications
> networks and set the parameters of their use.

[Cronkite to TiVo]{.underline}

> The trends of television are one example of digital migration. In the
> 1960s, broadcasting was a one-to-many medium---the epitome of mass
> communication. Everyone gathered around to watch a favorite program at
> a given time. We tuned in to listen to Walter Cronkite, or enjoy Uncle
> Milti. There certainly was a sense of community, but little diversity
> and little consumer control. Viewers were passive. Cable television
> presented a new chapter of media. It was able to create parochial
> television---channels dedicated to history, sports, shopping, arts,
> movies, education and more. Now we enter Act III of mini-media and the
> TiVo generation. Consumers demand the ability to do more programming
> themselves. They want "My Amazon, My Yahoo and My TV." Personalization
> and personal control will become more central, presenting enormous
> challenges to television producers trying to communicate with
> Americans.

[WIFI]{.underline}

> Spectrum has always been a mysterious ether that somehow was used to
> bring you television and radio. More recently, the wireless phone
> industry harnessed spectrum to give consumers mobility and freedom in
> their voice conversations. One's cell number is now tagged to them
> personally and not just to one's home or place of business. Consumers
> now know a little bit more about spectrum---discussing signal strength
> and coverage. WiFi networks are pushing further technology
> democratization. Consumers buy their own devices at retail. They
> install it themselves, setting up personal networks in their homes and
> use the natural spectrum, without needing a license, to communicate
> throughout their home. This model is revolutionary.

[Broadband Demands Broadminded Public Policy]{.underline}

> We must escape the regulated monopoly mentality. We need to center our
> policy on technology and promote and drive the possible, rather than
> give counsel to the fears of change, or worse the protection of what
> we have come to know.
>
> Just as the industry needs venture capital to finance this migration.
> We need venture policy to govern it---one that is focused on building
> innovation platforms and empowering the consumer and citizens of our
> society.
>
> V. THE POTHOLES ON THE PATH

[Money and Risk-taking]{.underline}

> First things first. Before we get carried away, we must get these new
> platforms built. Getting these networks constructed will be very
> expensive and require massive amounts of cash. This is particularly
> troublesome to incumbents that are already deeply invested in their
> existing networks of yesterday. Indeed, their great success in the old
> world makes it very difficult to take the risks necessary to radically
> change. Public policy must stimulate capital expenditures that flow
> into building innovation platforms that will bring our nation into the
> next century, and not just reinforce the same tired paradigm.

[Self-Doubt]{.underline}

> Anyone that has strapped on a Blackberry RIM pager, hooked up a new
> personal video recorder, or gotten a new digital phone knows the
> excitement and promise of technology. We are excited, but we also are
> frustrated and maddened. Things are a little less reliable, more
> complicated and more confusing than they should be. We ache for the
> simplicity and reliability of our old telephone. Consumers will ebb
> and flow from exhilaration of frustration and confusion. Companies
> will struggle to find ways to produce exciting innovation and will be
> fatigued by the effort. But, they must find ways to take risks for the
> long-term and not be tempted to turn back when the waters are rough.
> There is nothing to return to. All promise lies on the far shore.

[Politics]{.underline}

> Policy is made or affected by politicians. Yet the political system is
> optimal for giving voice to anxiety. A politician tends to respond to
> the worries and anxieties of the large incumbents, as well as the
> confusions and frustration of consumers. All of which will churn as we
> move down the path that technology has set out for us. We must try and
> make the transition smooth, but we must have the courage to stay the
> course and not throw regulations all over the emerging technology
> space in an effort to quell short-term anxiety, for like a wet
> blanket, it could smother the creative fire of this tech revolution.

VI\. CONCLUSION

> Yes, the penguins are still swimming, and signs of evolutionary and
> sustained change abound. It's time to do more than notice. It's time
> to embrace technology as our central organizing principle.

In the words of broadcaster Paul Harvey: "That is the rest of the story.
Good day."

\- FCC -