TRANSCRIPT OF CONVERSATION BETWEEN
FCC CHAIRMAN MICHAEL K. POWELL
AND SAM DONALDSON

NAB 2001 CONVENTION
Las Vegas, Nevada
April 24, 2001

Sam Donaldson:  What we were laughing about  it was my high school picture.  
Ive never looked better.  Im delighted to be here.  Preston Padden has sent me, actually, 
to drive out all the radicals in this room.  You know who you are, so if you would just 
leave quietly and save me the trouble.  I see.  Thats what I told him, its going to be a 
tough job, Preston.  But, were not here to talk about that.  

Were here to talk to the Chairman of the FCC.  You know Michael Powell.  He is 
a retired Army officer.  He served in the Pentagon as a special advisor.  He, of course, is 
a lawyer who served in private practice with emphasis on telecommunications policy.  He 
served as Chief of Staff of the Antitrust Division of the Justice Department.  You know 
that he joined the Commission in 1997, and became Chairman this year.  It sounds 
wonderful.  But he is not a man without some critics out there.  For instance, ladies and 
gentlemen, I give you the man who says he doesnt care if cable prices rise.  I give you 
the man who says on-the-air broadcasting may soon go the way of the dodo bird.  I give 
you the Chairman of the FCC, Michael Powell.

Mr. Chairman.  Welcome.  Its nice to see you.

Chairman Michael Powell:  Thank you.

SD:  We can leave the business about cable rates, I think, until later.  But weve 
got to start with your explaining your suggestion that on-the-air broadcasting and 
telecasting may soon go the way of the dodo bird.

MKP:	For the record, I never said dodo bird.  

SD:  Thats right.  That was my added . . .

MKP:	I wouldnt be caught dead using that word.  No, what youre referring to 
are statements I made, which I think are important when people are willing to be self-
examining and pick up on persistent trends that are likely going to present challenges for 
them.  Its one of the themes that were being quite insistent on following at the FCC.  
That is, I have no idea what the future is, but I understand that I can work hard to pick up 
persistent and continuing trends that are going to raise significant questions for my 
business, in the form of regulation.  I think similarly for all the businesses in the midst of 
this great digital and information revolution.  Each year we watch a certain percentage 
more Americans who are willing to pay for television.  Its just a fact.  I think the current 
fact is 80% to 84% of Americans are paying for one or the other of multichannel services.  
Broadcasting is an important presence there, but nonetheless that trend should have far-
reaching implications for not only the regulatory paradigm, but how people will run their 
businesses.  And I think that its important when we see trends like that to be able to sit 
back at an early stage and say well, what will we need when the day arrives, if it does, 
that 90% or 95% or 98% of Americans are willing to pay for their news, information and 
entertainment?  What will that mean for free over-the-air TV?  It shouldnt mean that 
its dead, necessarily.  It shouldnt mean that the enormous value that broadcasting 
provides wont find a place in that space, as well.  But I do think that its sort of nave not 
to be identifying, watching, examining and thinking long and hard about what those 
trends may mean in a fairly short amount of time.

SD:  So, youre talking about people willing to pay, but then youre not talking 
about not using an over-the-air signal.  Or are you?  Are you saying that the internet and 
cable will replace the over-the-air signal?

MKP:	Well, I think nothing is off the table.  For example, its not irreconcilable 
that people pay for things that are over-the-air, too.  You know, you look at the wireless  
telephone industry thats rapidly pursuing internet pay services.  I assure you they intend 
to make you pay for the use of them.  But, I think that therell be any combination of 
things.  I dont personally believe that free over-the-air TV will ever be dead.  I think 
there will always be a service for that form of digital broadcasting as we transition into 
digital.  But I also think that, given the new environment, youll have to sort of 
understand the new and changing behaviors of consumers and understand how youre 
going to serve them in digital space.

SD:  Lets talk about digital.  Everyone that Ive talked to says theres not a 
chance of meeting the 2006 deadline to convert completely to digital.  Bob Wright of 
NBC as you know has said it is out of sequence.  You would never meet it.  And theres 
the 2002 deadline to start the digital service for television stations, although I understand 
theyd keep their analog signal.  If thats right, youre going to have to slip the deadlines, 
right?

MKP:	Well, conceivably.  First of all, let me be clear about which deadlines I 
own and which ones I dont.  [laughter]  I do not own the 2006 deadline.  Thats one 
established by Congress and one that has, in itself, a trigger that will limit the 
consequences it would have normally triggered  the return of the analog spectrum.  
Clearly, Congress set out that there would have to be an 85% penetration in terms of the 
number of Americans able to receive the signal, or the consequences wouldnt default.  
So, it has the seeds of its own modification to some degree.  

I am one of those who is pretty openly critical that the date, as originally 
envisioned, will in any way be realized.  And frankly, its quite out of sequence with, or 
inconsistent with, what weve seen historically with development of other technologies 
and other products of similar transition.  It takes a long time to transition consumers and 
consumers are going to be asked to bear a significant burden of this transition in terms of 
the cost to replace sets.  Some 94% of American families have television, a lot of families 
average three to four televisions, thats a long transition.  We have to be sure we know 
what were going to give them before we ask them to do this.  And there is a little chick 
in the egg.  Itll have to be sort of a little bit here and a little bit there.  But I think that one 
of the things you want to make sure is that we transition efficiently in a way that 
consumers find the value so they dont choke on the service in its initial rollout.  I think, 
unfortunately, were potentially setting it back even further.  

The other deadline is one that we have some control over.  I would note that 
weve had two previous deadlines already.  In the top 10 markets, the first deadline some 
year ago.  And we have another one recently in November of 1999.  In each one of those, 
weve had some slippage, but weve had a vast majority of broadcasters required to meet 
those deadlines meet them.  Which were thankful for.  My view is that 2002  just like 
I talked about trends, I know what the trend lines are.  I know that when that date arrives 
were going to have questions about whether there are stations that havent been able to 
meet the obligation, whether the conditions have prevented them from doing that.  Well 
have to work through that as partners, as we would in any case.  I also wont sit here and 
pronounce now that were going to waive the deadline in advance.  I think its important 
to keep driving toward the objective as efficiently as we can.  

SD:  Well, if I understand that though, because I received an email from someone 
that owns two small stations to be sure and ask about this, because if . . . first of all, I 
dont have the money to come to the convention and second, we dont have the resources 
now to meet that 2002 deadline.  It sounds to me like youre saying to that small station 
owner, not to worry, were not going to put you out of business, if in fact it makes sense 
to let you have a little more time.  

MKP:	Well, I would say you dont necessarily have to worry that were going to 
be unreasonable when taking those kinds of things under consideration when that day 
comes.  But I do think you have to worry because its an expensive transition that the 
industry is committed to.  And, ultimately, that station and everyone else are going to 
have find a business model, the case for the investment, the approach thats going to 
provide value to consumers in a way to allow them to function in a healthy way in the 
new digital environment.  So, I think its a real serious challenge.  I think the government 
part is only one part of it, but trying to make sure that you find the business thats going 
to be adequate to sustain oneself in the digital environment is the bigger question  one to 
which I would say to that broadcaster, you will need to probably do some worrying.

SD:  A little worry.  But let me press you some more.  Because I think this is a big 
issue, here.  You, yourself, brought up the fact that theres a marketplace out there.  At 
the moment I dont have the figures, but it must be very low the number of sets in use 
that can receive digital signals.  How can you ask stations, or how can they be asked to 
put it in the passive, to meet this kind of deadline if their customers really arent prepared 
to accept the signal?  And in that connection, are you exploring the possibility of 
requiring manufacturers . . . it has to do with the fact that there arent digital sets out there 
to receive this signal which youre going to require stations by the year 2002 be able to 
send.

MKP:	Well, the reality is the transition has hundreds of variables  any one of 
them could disrupt the pace of the transition and the efficacy of it.  The broadcasters have 
a substantial part of the responsibility, consumer set manufacturers have a significant part 
of the responsibility.  The regulatory model has a significant part of the responsibility.  
Congress, consumers, whether people have carriage on cable systems or DBS systems 
ultimately  All of that is going to go into the soup of whether this transitions well or 
not.  Part of my view is that, all of that when looked at soberly is why you understand 
that maybe the timelines are quite aggressive.  With that said, its a little . . . I guess we 
say thats the chicken and egg problem.  Some people do have to drive in the form of 
leadership.  Any in many ways it was the great work of broadcasting that invented high 
definition television.  It took the lead.  It took a leadership role with the government in 
driving the policy that would facilitate the transition.  And I think that they sort of nobly 
will stay at the lead and will need to be out front in terms of being able to ensure that 
theres a distribution platform for content providers to write to, for consumers to tune 
into.  And I assure you any one of those groups  I go to all the conventions, I can sit at 
the electronics show and the question will be, Well, how can you ask us to do that if 
they wont do that first?  The question is, everybody has to keep moving.  We have to 
try to keep this whole thing moving in this sort of fashion.  And I think that broadcasters 
have always taken a leadership role.  Theyve asked the government to have confidence 
in their leadership role, and I think theyre going to continue to meet it.

SD:  Youre a great believer in the marketplace, and the marketplace forces.  But 
in the marketplace forces that weve been talking about, there may be some losers.  

MKP:	There are always losers.  I mean the test of your principles are when they 
yield results that are difficult to stomach.  But principles are not designed for the 
moment.  Theyre designed for the long-term general welfare of the population.  I often 
get asked questions on television and they say well, youre for market and consumer 
groups say that means youre anti-consumer, and I find that to be the most ridiculous 
thing Ive ever heard.  I dont know of another economic system in the history of the 
world thats produced as much consumer welfare for its citizenry as American capitalism 
has.  You name to me the state central plan system that better served the maximum 
consumer welfare of its citizens as the free market did in American stock capitalism?  I 
think thats the penultimate conclusion of the end of the 20th Century that not only did 
democracy prevail, as a social value and political value, but the capital economy 
prevailed as the leading environment for the welfare of citizens and for the ferment of 
innovation and revolution.  Bill Gates and the great innovators  many of them in this 
room  can only be born in this sort of environment.  And I think that we sometimes are 
cynical about these things for the wrong reason.  And youre right, sometimes markets 
fail and sometimes government needs to step in.  I have no problem with that at all.  I 
also think that sometimes it visits unfortunate circumstances on different parts of the 
population.  Im not always happy and comfortable about that.  But that doesnt mean, to 
my mind, that you suddenly revise the principles, change the paradigm, dramatically for 
what happens on the ends of the spectrum of the main effort.  And I think that this area, 
more than any, can demonstrate its successes in the use of markets more than you can 
demonstrate the successes of rules that were intended to do the same.

SD:  While were talking about consumers, lets move on to that other famous 
quote, which I also may have mangled, but you can correct it.  Which is a Powell quote 
that you dont really care if cable prices rise for the consumer.  

MKP:	Do you care?  I care about a lot of things.  

SD:  Does your heart bleed?

MKP:	But what Ive learned about you is  reporters, when they report this 
stuff, they never report the question.  And the question to me on that statement was, do 
you think theyve risen to justify re-regulation?  No.  Not to my mind they dont.  Do 
you care?  Yeah.  You know what, Im one of the people who pay this additional 
expense.  I care quite a bit.  But whether I think its the order of magnitude that would 
justify regulatory or governmental reintervention, absolutely not.  And I think that . . . 
you know, one of the things Im finding is that people have short memories about 
environments that have only recently been passed.  This is not a cable show, but if one 
were to look back at the health of cable companies at the height of regulation, and looked 
at the staleness in innovation and the prices you were paying for limited services, I do not 
believe that you would make an objective case that that was a better environment than the 
one that exists today.  You just couldnt make that.  But we forget about that in the 
current time frame.

SD:  Well, let me play the devils advocate on this.  A Mays, a Fritts, a 
Donaldson, a Powell.  We can . . . another few dollars a month, we can pay that.  A lot of 
people, it may be the margin.

MKP:	Let me tell you something Im extremely proud about.  At the FCC, you 
really do have a front seat at the revolution and our portfolio is enormous.  We operate in 
the area of television, cable television, wireless telephony, regular telephone service, 
satellite service, aspects of the internet.  Every one of the services which I work with is 
the most price-competitive of the kinds of utilities provided to Americans in the world.  
Whether it be free  in the form of television  average cable rates dont even come close 
to comparing to what you pay for gas or for electric service.  My electric bill is by an 
order of magnitude higher than my phone bill ever is or ever will be an order of 
magnitude higher than my cable bill, and certainly television.  Certainly, my wireless 
phone is cheaper than my air conditioning services.  So, yes, in a market where prices are 
part of the fluctuation that calibrate services, there are prices where people cant pay and 
prices where people can.  But the truth is, despite what everyone wants to talk about, by 
isolating a price in almost every one of my sectors that I just described, were talking 
about 90+ percentage penetrations for American consumers.  Heres an interesting 
statistic  more Americans in this country have television than have indoor plumbing.  
[laughter]  Thats an absolute truth.  Now thats saying something. . .  That is value 
[laughter]

SD:  Lets move on to another interesting subject.  Does the phrase 35% rule 
mean anything to you?  Read my lips.

MKP:	It does to them.

SD:  Yes, indeed.  So, what about it?  What are you going to do?  Youre 
evaluating it now a court has sort of said . . . youve got to take another look at this?

MKP:	Well, at the moment I think its in a holding pattern because the court said 
its going to take another look at it, and apparently its going to take a hard look at it.  For 
those of you who may or may not know, the 35% national audience cap for broadcasting, 
which has been around for quite some time, is before the United States Court of Appeals 
for the DC Circuit.  CBS Viacom actually sought a stay in the context of their merger for 
having to divest stations which would have put them over the cap.  The court recently 
issued a stay, which means that we are prohibited from requiring them to comply with the 
condition until the court has the opportunity to rule on the cap.  Many people see that as a 
grave sign for the life of the rule for two reasons.  The first is not so many weeks ago the 
court struck down horizontal limits in the cable context  potentially signaling sort of 
similar skepticism about this rule.  Secondly, for those lawyers in the room who do know 
this, others may not, but a stay, part of the condition is likelihood to prevail on the merits.  
So in the courts judgment, not only is the harm potentially irreparable, such that it 
doesnt want the action to go forward, it has made already some judgment that there is a 
likelihood to prevail on the merits of the petition.

SD:  If I may interrupt, its even non-lawyers now who know that rule.  You recall 
the Saturday that the Supreme Court stayed the counting in Florida . . .

MKP:	Well, thats true.

SD:  . . . on the likelihood that George W. Bushs petition would win on the 
merits.  And, indeed it did, 5 to 4.  Go ahead.

MKP:	So, thats where we are.  My own view is I think that we will need to see 
in a way what the specific guidance is that comes out of that ruling.  Because any 
examination of the rule that we might do is going to need to fit within the confines of 
whatever the court says, just as our attempt to revalidate the cable rules are going to have 
to fit squarely within the context of the courts. 

SD:  But, if anyone looks at your record and listens to your words this morning 
and all of the other times youve spoken  again, as a free market guy, as someone who 
believes that these forces out there are the best way to have the system work  it seems to 
me that deep down in your heart youd like to do away with this rule.  

MKP:	Well, for people who know me, too I dont pre-pronounce anything Im 
going to do until Ive actually examined the proceeding, have a record and have some 
basis to make an informed opinion, and not make it on the basis of just hyperbole and 
discourse over the value of rules.  But I make no secret . . . Im skeptical, generally, 
including of this rule, of the straight, prophylactic prohibitions on ownership or reach.  
My experience with them both in antitrust and in this context are that they almost always 
are poorly calibrated and impossible to actually calibrate.  That is, they always catch 
people you wish they wouldnt, and they always dont catch some people you wish they 
would.  And yet, you have this sort of absolute rule about it which I think doesnt always, 
as its predicted to, really average out the balances.  I think its very difficult if you talk 
about concentration to make broad pronouncements about how much is too much, in a 
rule-like sense, as opposed to more case-specific evaluations.  

Theres a reason, for example, that the Sherman antitrust statutes are case-by-case 
examinations.  The antitrust division would never attempt to declare in advance that no 
automobile company could own more than 35% of the automobiles on the road at any 
given time, because even in antitrust, a monopoly is not illegal all by itself.  Its what the 
effects of that concentration are.  And so rules tend to have a tension there.  I also think 
that, which I think is whats gotten the courts attention, when youre talking about media 
space, youre talking about, speaking of the First Amendment, entanglement with that 
value.  That is, think about the way the national ownership cap is written.  I know on the 
local level there are real reasons why people are concerned about the relief of the cap.  
The cap says you cant talk to any more than 35% of the national audience  you cant 
talk to them.  You can own as many stations as you want, depending on what your reach 
is, but you cant talk to more than that many Americans.  And there is something 
somewhat offensive to First Amendment values about that sort of limitation.  I think 
thats what the court is intrigued by and I think thats going to be the substance of their 
examination.  

Now, the third thing there . . . one  the First Amendment upper limit on what you 
can do, and secondly my view that rules like that are not good for concentration purposes  
 the third is the one thats the hardest, which is this value of diversity  the idea that 
we like multiple voices.  We like localism.  We like the things that are produced.  We 
recognize that theres tension that if you didnt have such a rule, you might have an 
increasing nationalization of broadcasting outlets.  And thats something we have to think 
about and reconcile.  On the other hand, you have some dimensions of that already with 
larger and larger radio groups, larger and larger television groups who then themselves 
have new kinds of market power.  All of thats to say thats why we will look at it.  
Thats why well get a record and see what we can do.

SD:  Well, Congress has now lifted the cap on radio ownership.  Do we have 
enough experience yet to know whether thats made any difference?  Radio really . . . the 
bulk of stations come down to two large companies anyway, without that.  

MKP:	Thats interesting.  I dont know if we do or dont.  It depends on what 
were focusing on.  I think that you could objectively examine what the effects are on 
advertising rates and markets to see whether you think, in an antitrust sort of sense, the 
markets become too concentrated.  And I think that thats principally the efforts of the 
antitrust division of the FTC in examining.  Secondly, though, whether it has an effect on 
the diversity of the medium is really the question that most occupies the Commission, I 
think.  And heres where it really just gets hard.  We dont know, exactly, and weve 
never had an effective way to exactly measure that.  I could say somebody has so many 
stations, but does that mean, on its face, its less diverse?  I think we have enough 
experience to say, no, not necessarily.  Just like . . . not necessarily . . . if each and every 
station was owned by very different owners, it doesnt necessarily mean, from the 
perspective of the consumer, that theres actual diverse choice either.  I think that people 
argue about what kind of diversity they like.  The only kind to me that seems to make 
sense and has a legitimate role in government is the kind that consumers perceive.  I 
dont have as much interest as some as to whether this wealth class or that wealth class 
gets to own property, in and of itself.  But I do think there are values associated with who 
they are and how much theyre concentrated from a consumers perspective.  There are 
even theories that suggest that with some level of concentration, you get more diversity  
given that an owner who is trying to maximize eyeballs or maximize years will try to 
program in a way that captures the most amount of those interests as possible.  

One thing I do reject is that I dont think that there isnt a commercial motivation 
for diversity.  I believe pretty strongly in diversity.  I just reject the idea that the only way 
you get it is by government fiat, or that a programmer or a station owner themselves 
dont have a bottom-line, selfish, greedy, Adam Smith invisible hand reason to serve 
consumer interests.  And I dont know that I think television or radio would look that 
different with the rule or with market dynamics.  And I just think we have to be ready to 
test those propositions.

SD:  All right.  Lets talk about low power FM radio.  A lot broadcasters dont 
want to see these stations take away from them, particularly if theyre in the margin, 
some listeners.  Whats going to be the bottom line?

MKP:	Well, right now the bottom line has been established by Congress which is 
we have been required by statute to conduct a pretty exhaustive technical examination of 
low power FM.  That, as the statute seems to be written, would require real world 
experiences.  That is, not just laboratory testing of the potential interferences, but some 
actual demonstration in the context of real and operating stations.  Congress also reversed 
the Commissions judgment about what level of spacing protection will be required and 
so licenses that are issued will be issued with third adjacency protection instead of 
second, which was the original determination.  The ultimate effect of that, as everyone 
knows, is that there will be many fewer of them that are possible to license in that 
context.  So, in many ways, were just going to follow through on what weve been told 
to do.  Which is, right now we are in the process of completing the letting of the contracts 
for purposes of the technical examinations.  Filing windows have been opened on the 
service, and we will ultimately have stations that are in operation to which the 
Congressionally mandated test can be applied.  And well see where we end up.

SD:  Lets talk about the internet and broadband  two interrelated subjects  but 
perhaps some separate questions there, too.  The internet, at the moment, is proceeding in 
an almost completely unregulated fashion.  You dont even charge sales tax on it.  Do 
you see the day when the Commission will step in and begin trying to make regulations 
concerning activities on the internet?  And, what about the off-shore quality of this 
medium?

MKP:	Thats a great question.  Let me speak not as the FCC, but the 
Government, the way I think it will roll out.  The first is, its a mischaracterization in 
some ways to say the internet is not regulated.  The internet rides on an infrastructure that 
I assure you is very heavily regulated.  The telephone line that you use to dial up your 
local ISP with 56K is heavily, heavily regulated.  The terms and conditions of 
compensation between your internet service provider and the telephone company is 
heavily part of the regulatory environment.  The backbones on which long-haul internet 
traffic is transported is in the hands of the largest long-haul telephone companies, in 
essence, with the U-Net, PCINet, Sprints network, AT&Ts network, the global network 
 all are a part.  And architecture matters in the new environment.  That is, the regulatory 
conditions over architecture have a direct impact on the kind of services that will ride 
over the top of the layer.  

What isnt regulated is content, in essence.  And I think that thats the thing that 
should always stay unregulated or the burden should be extraordinarily high as to why to 
regulate it.  I make the same argument just as passionately about television, or any other 
medium that has a platform that puts content over the top of it.  Yes, the difference there 
is sort of the internet is the golden regulatory child.  Which is, Congressmen and 
regulators are falling over themselves to prove that theyre the most committed to not 
regulating the internet which, in effect, really is not just less regulation its actually an 
implicit subsidy an implicit subsidization of internet commerce.  When you say that other 
goods in the society are taxed but those on the internet dont, I wouldnt call that 
unregulated.  Thats actually, in a way, a subsidization of this growth.  Youre not 
subjecting it to the rules of other similarly situated things.  Many of our rules that govern 
compensation could be characterized as implicitly subsidizing ISP growth and services.  

I think that that will largely stay the same because I think the economics of 
internet architecture are very price aggressive.  That is, in their normal operation in the 
market, there are services that get driven to cost very aggressively.  See NASDAQ.  And 
sometimes they get driven under.  But the economics are very, very good in the internet 
space.  I mean, without any government price subsidies, like we do in telephones, you 
know the average person pays anywhere from $9.95 to $19.95 for unlimited internet 
access, even getting on anytime, any where.  And, in some cases, you even have free 
access.  So thats pretty price-competitive.  As long as the economics, I think, maximize 
consumer welfare in that way, the government wont be overly invited to intervene. 

 But heres the part we shouldnt lose sight of.  The revolution may have changed 
digitalization and technology, but it didnt change the human machine that much.  That 
is, your eyes have the same band width level, our human relationships are similar, the 
way we hear is similar.  The internet will be all of these wonderful things, but its also 
going to be all of the bad things we dont like in society.  Its not just going to be a 
library, its going to be a crime scene.  And its going to be a place where pornography is 
transited.  Its going to be a place where people are defrauded and their money is stolen.  
I assure you, as this service becomes more ubiquitous, and people become increasingly 
dependent and trusting in it to their liability, they will cry out to their governments and 
others when these things happen to them.  If your bank account vanishes one night, I 
assure you youre not gong to want to hear me say, well, let the markets work.  Its all 
okay.  Sorry.  

SD:  What about content?  Let me stop you right there.  Have you logged on to 
nakednews.com?

MKP:	I have not.

SD:  Well, I just wondered.  

MKP:	I just read about it.

SD:  I wonder what the Commissions position would be if they suddenly got a 
raft of letters from a particular community saying an over-the-air telecaster was doing 
naked news, in which the news starts with a young lady completely clothed, but by the 
end the young lady . . . I have logged on only for research purposes. . . [laughter]  At the 
end, the young lady standing frontally nude to the camera, making no lewd gestures, but 
standing there frontally nude and finishes reading the news.  What would the 
Commission say about that?  Let all flowers bloom?  [laughter]

MKP:	I know your ratings are low, but dont go there.  [laughter]  

SD:  As I said to a group yesterday, even in my prime, it would have been a 
terrible site.  But, its a serious question.  You just said youre going to have deal with it 
if my bank account vanishes.  What if Im horrified when my children see this.  Because 
youve just said on the internet all these things are happening, maybe at some point 
people would cry out to government.

MKP:	I dont think the Commission probably, given who they would be at that 
time, would like that.  I dont think Congress would like that.  Im not so sure the public 
would like that.  But heres the interesting thing, which is, I think as we move forward 
and have a proliferation of medium where people can go for news, entertainment and 
information, who have very different regulatory environments. . .  and by the way, this is 
where I get most passionate about the First Amendment, different First Amendments . . . 
if I wanted to do something about this on broadcasting, the First Amendment and its 
jurisprudence might let me.  If I tried to stop this on cable, it probably wouldnt let me, or 
it would be a close call.  If you tried to stop it on the internet, you would lose.  The 
Supreme Court of the United States, the very one that sometimes seeks to sanction the 
greater intrusion in  broadcasting, voted 9 to 0, without question, on the communication 
indecency act when it moves to the internet.  There is a phenomenal sort of tension 
between the firebreak they have drawn on the First Amendment rights on the internet 
space and what theyve historically done in the context of broadcasting, I have a whole 
theory about its the clerks who are internet savvy who write the opinions.  

You know, the great cases of the 70s, when the court was dealing with obscenity, 
you know the whole story about these folks going down to watch dirty movies and the 
clerks, you know. . . but this really is  this is something the court has staked a flag and 
said Were going to master the internet.  Were going to guard it.  When the 
government starts playing around and what comes over and were going to be pretty 
aggressive.  I mean 9 to 0 liberals and conservatives alike.  So, but you know, my 12 
year-old increasingly . . . his world is a seamless world.  I mean, I hate to tell you this, but 
I dont think any of my children would know what broadcast is versus anything else they 
watch.  I dont think that they even make that many distinctions between their Nintendo 
and the computer.  Theyre just experiences to them.  And they are becoming fluent in 
how to achieve them.  And Ive watched my child get on Napster and Ive watched them 
go to . . . you know, the thing that I like watching is they buy the video games, then they 
go on the internet to find how to cheat on the video games.  You all know this.  My 6 
year-old searches the internet for all the codes to break the game so he can play at the 
levels.  And to him, thats all part of the sort of seamless way hes entertaining himself.  
And the TV is on at the same time.  So, as a parent and as a regulator and as a 
government policy . . . I can talk about drawing these firebreaks.  Like this world well 
keep clean.  The reality is that society, you understand, has to start to adapt to the fact 
that, just like I wish I could, but I cant, my child walks out into the real world every 
morning.  And you know what?  Im not capable of keeping him from the multitudes of 
ways he learns things.  What I find is, me trying to draw that break is not what works.  
Its getting in touch with his life, knowing what he does and being able to be a trusted 
voice to him so that when I say not this one, hell believe me.  Trust me, Ive listened 
to more Dr. Dre rap than I care to, trying to know what attracts him.  And I have to yield 
on things I wouldnt want to yield on.  Not because I dont like them, but he does and 
Ive got to have some credibility.  Its not so different in regulation, really.

There are times where I think as a society were going to want outrage.  Were 
going to say, thats enough.  But I think that if we want the moral high ground and 
credibility to do that, we cant nit-pick at things that are silly, because you know someone 
can just do the exact same thing with no transition possible.  And so, volume matters.  
And where you make your noise and where you take your stand matters.  Nakednews  I 
dont know.  

SD:  Recently you know that a man was arrested in Paris suspected of shooting 
Dr. Schlepin, one of the doctors at an abortion clinic in upstate New York.  And 
concurrent with that, not in the same day, the Ninth Circuit Court ruled against the idea 
that a website which targets these doctors puts a Wanted sign under their picture and  
that they are committing crimes against humanity and should be brought to justice.  
Thats free speech, according to the Ninth Circuit.  I guess as a preamble to listening to 
what you say, Mr. Chairman, about todays fast-paced life and mores, the courts and how 
they have, and the Congress, looking at this with heavy emphasis on the First 
Amendment.  That that old faded blue book, which talked about the public interest 
convenience and necessity and Red Lion Case and all of that.  I should just tear that up  
hmmm?

MKP:	I think they tore it up already.  

SD:  As a regulatory issue.

MKP:	I dont want to get too philosophical.  One, it still does exist in the 
regulatory structure.  Not the blue book, but to be candid, we still have rules that go to 
indecency and obscenity.  We still have rules that go to things that are inappropriate in 
television.  We still have policies that we advance that are designed to create a 
wholesome balance of programming for children and in other contexts.  We dont . . . 
were not in this nearly as intrusively as the Commission once was.  I think thats a good 
thing, frankly.  Because I dont know that three of five unelected representatives with no 
direct accountability to the people should subject the world to their value choices just 
because they hold the stick.

  But the First Amendment, and in a free society, this stuff gets tricky.  You know, 
when I was in Moscow I was also deeply hurt that the Klan can march in the street in 
Mississippi and thats the First Amendment.  Well you know what?  To me, thats the 
most offensive thing, the most scary thing, that I ever have to witness.  But my 
Constitution says they get to do it.  Or the Nazi marches in Skokie and the First 
Amendment says they get to do it.

  Now, what Ive always understood the framers brilliance to be is the First 
Amendment will have, like any rule, will be over-inclusive and under-inclusive.  Therell 
be times when you wish youd make an exception.  But we will tolerate those things in 
exchange for the enormous value and the enormous benefits to society of the rest being 
permitted.  And I could play this game all day.  I can find plenty of things that I will be 
outraged by.

  But then, as a rulemaker, what Im always frustrated by is Im the guy whos got 
to go back and put the pen to paper.  Im the one who . . . you know, I can be a critic too, 
but at the end of the day, whats it supposed to say?  And how do I not catch stuff that 
shouldnt get caught.  At the end of the day, one of the reasons that I restored my faith in 
the First Amendment, because Ill be honest with you  a month ago I hated it  its an 
irony you know.  In the other context of First Amendment theory, theres a liberal notion.  
Somehow in TV the liberal notions been the exact opposite.  Its okay for Skokie, but 
its not okay to let a broadcaster show what they want. 

But at the end of the day we have to be careful.  Because I dont think that its 
easy to draw that line, and you have to remember who is doing the drawing, that when 
your government starts telling you about which messages it prefers you see and which 
ones you dont, I think thats what kept Thomas Jefferson up at night.

SD:  You clearly stand with the late Justice Marshall who said, The First 
Amendment says no.  It doesnt say no but, no maybe, no sometimes.  It says no.  Lets 
talk about spectrum.  Youve got an auction coming up . . . one of many and once 
delayed.  Gonna make some money?  Gonna auction off the spectrum?  Still using it, but 
its all right.  How are you going to handle that?

MKP:	How are we going to make the money?

SD:  Well, no.  

MKP:	You know, spectrum is enormously challenging.  I think this is the area 
that probably gives me a headache much more than any because, particularly in this 
period of extraordinary intervention and technological advancement that increasingly is 
making really robust and reliable use of airwaves as a platform, the demand is 
dramatically higher than the supply and supply being only constrained, in essence, not by 
the technology, in my opinion, but by the commitment to protect against peoples uses 
and interference.  Just like the LPFM example.  At third adjacency, this many.  At second 
adjacency, that many.  I mean, where you draw the technical interference standards are 
critical to whether you can satisfy demand and whether everybody is happy with their 
services.  

Let me say something about auctions.  I believe deeply and strongly, though I 
dont know if everyone agrees, auctions have nothing to do with money, in my opinion, 
for the government.  I pretty much reject the notion that you should intertangle budget 
policy and monetary policy with communication policy.  Auctions are outstanding 
because theyre an excellent way to efficiently distribute licenses and airways to people 
who value them the most.  As the government, Im not a business.  I dont really care that 
much if I get $5 for it or $17 billion for it.  I know the budgeters do.  But, that to me is 
not a principle consideration in the way I look at spectrum issues.  Because I think when 
you start entangling that objective with policy, you can cause real problems.  For 
example, we are going to wrestle with Congressional mandates to auction spectrum that 
people in this room own.  Were going to auction encumbered spectrum.  How valuable 
do you think thats going to be to people?  And, even if they buy it, theres going to be 
some period of uncertainty about who is going to use it, and how theyre going to work 
out these arrangements.  That problem is a consequence of looking to these things as a 
way of increasing revenue  not because theyre the smart communication policy.  And to 
give you another example, Europe is going to crush itself over what it paid for third 
generation wireless spectrum.  And it paid too much and it wanted the money.  And a 
company like British Telecom is sitting on $35 billion of debt with no service and no 
customers and its not clear whether some of these huge companies are going to come 
out.  Somebody pointed out to me how dramatic that was.  For the same amount of 
money you could have wired every home in England with fiberoptic cable.  So, when the 
money, when the billions, becomes the stars in your eyes of communication policy, that 
can be a big mistake.  One that I try to hope that we avoid.

SD:  See, I dont know enough about the issue to even ask a follow-up question 
on this.  Im sure . . .

MKP:	I tried to take it that way.

SD:  Hes cleared very smoothly over what you guys really want to hear about.  I 
said, when we talked about the Internet, we talked about one side and broadband was 
another side, although they are interrelated.  The Telecom Act now, you believe, has 
opened the floodgates to now an increased speed and rapidity of going to broadband.  
What is your prediction, looking into the future as far as human eye can see?

MKP:	I dont like to talk about it, frankly, in terms of broadband or not 
broadband.  They are all relative terms.  What were talking about is whether youll be 
able to be delivered using certain protocol, voice, video, entertainment, at a level that is 
perceptible to your senses as real time.  

SD:  Its watchable, if I may, sir.

MKP:	Its watchable.  And whats interesting is . . . I think this is fascinating 
because a lot of people dont think about something as simple as how fast can your eye 
calculate visual images.  It turns out that that is a demonstrable number.  But some people 
would have you believe you need extraordinary amounts of bandwidth that the eye will 
never be able to take advantage of anyway in a given strain.  The ears can only hear at 
certain kilohertz, at the range limitations.  Getting back to first principles, like flesh and 
blood, what people can, and will do is really going to be critical as to how much these 
services,  its the Guttenberg bible or its a fancy experiment for a technophile.  But I 
think we get really euphoric about the technology for its own sake, without thinking long 
and hard about what it means for people and how they change your life.  Which is really 
the only factor that will determine the robustness and the value of its future.  

Now that said, I think it is here to stay.  And when I say here, I think its a 
confluence of two extraordinary revolutions that have finally come together and gotten 
married.  One is the communication revolution that was begun with the telegraph and 
telephone and the basic use of electromagnetic spectrum to transmit images and 
messages.  And that has grown and matured.  The phone system is the most extraordinary 
engineering experiment in the history of the world with beautiful reliability and its 
extraordinary.  But its very mature.  Its really sophisticated tin cans and string, just the 
way it was when it was first introduced.  But the other revolution is a microprocessing 
revolution, with the silicon chip and the transistor and Intels production of fast 
processors on silicon wafers.  And then Microsoft operating systems software.  These two 
things have sort of been coming at each other for the better part of the century and 
theyve slammed into each other  finally.  And processing power, now being brought to 
bear on information, can then actually process information.  So I can call you and now 
maybe I can call you in English and it comes out French.  Because the computer can be 
involved in the communications.  

And this coming together is embodied in what I think the Internet is.  The Internet 
is the first explosion of a product that took processing power and transmission power and 
blocked them together in this enormously powerful thing.  I think we are not even in the 
first inning of what that means.  But thats going to mean average consumers on a mass 
market level being somehow able to access communication medium at rates, enough not 
to take advantage of it,  Broadband.  Thats coming.  Its going to come.  It is 
unstoppable, in my opinion.  The only question is how long will it take and what will it 
look like.  Because even in the almost three and a half, four years, Ive been at the 
Commission, Ive watched things people told me couldnt be done already commercially 
deployed.  Oh you cant do broadband over satellites, ever.  Except companies are now 
offering that service to consumers.  You couldnt do . . . the wireless technology will 
never be an effective substitute for telephone service, except kids are rapidly getting cell 
phones and putting away their . . . and then theres . . . I havent said this in a while.  
Theres the thing we havent been introduced to yet, while were sitting here having 
breakfast, somebodys in some garage making.  Thats maybe the thing that makes this 
thing explode and we havent even had the slightest inkling of it.  Thats the mushy part 
thats exciting.  You couldnt have . . . you know, Im a student of technology history and 
what amazes me is that the great inventors are always the heretics.  The first time 
Einstein sat on a stage and talked about quantum mechanics, he was booed off the stage 
by the leading scientists of the age, except he was right.  Theres a tendency for us, as 
Gilder would say, to tilt at monsters.  These things, when they first come, look like 
heretics.  Theyre disrupting the paradigm.  You put them back in the box and get rid of 
them.  But I think you havent seen that fourth thing yet.  I think that fourth thing is 
probably whats going to take this thing into the mainstream of peoples lives.  And its 
not my generation.  Its no one in this rooms generation.  Its our little kids.  And my 6 
year-old already freaks me out with the degree to which . . . this is just his world.  He was 
laughing about me because he saw my record player the other day and had no idea what it 
was.

SD:  On that note . . . .  Chairman Powell, were out of time.  This has been a 
great conversation.  We thank you.

MKP:	Thank you, Sam.
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